THE WORLD'S TRADE

Evening Post, Volume CI, Issue 49, 26 February 1921, Page 7

THE WORLD'S TRADE

AMERICA'S UNFULFILLED DREAM

EUROPE'S UNPAID DEBTS.

Although no country in the world prospered more than the United States during the war, that country, like tie countries of Europe, is now in difficulties, as a result of the chaog created in fianance and industry by the war. The American dream <-* capturing the world's trade, and particularly the trade which formerly belonged to Great Britain, Germany, and other manufacturing countries of Europe while they were slowly recovering from the crippling effects of the war has not been realised; and the present outlook (writes the London correspondent of .the Melbourne Age) suggests that there is no possibility of it ever being realised. As a result of the anomalous position created by the adverse exchanges as between the countries of Europe and the United States the export trade of the United States is stagnant, whereas the export trade of impoverished Germany is booming.

According to Senator M'Cumber, of the Senate Finance Committee, the deficit in the United States budget for fhe present financial year is already £250,----000,000, and by June next it will have reached £400,000,000, even if the revenue for the year reaches the estimated total of £1,000,000,000. But owing to the stagnation, of American trade the revenue from war taxation and other sources will be considerably below the total anticipated.

Europe owes America, so much money for loans raised there during the war, for war equipment supplied to the Allies, and for foodstuffs supplied during the war and since the war ended, that the exchange value of the dollar has risen considerably in every European country. In Great Britain the dollar is worth 5s 9d, as compared with the normal pre-war value of 4s Id. In France the dollar is worth 16f., as compared with sf. before the war. In Germany the disparity between the mark and the dollar is far greater. It is officially estiro,atejd that the average price of the dollar in fourteen of the chief countries of Europe is now 1 dollar 88 cents. The result of this inflation .is that American "goods sent to these countries have to be paid for at almost double the price at which they are sold in America.., On such terms impoverished European countries cannot afford to buy American goods. The inflated value of the dollar in Great Britain virtually raises in this free-trade country a protective tariff of about <X) per cent, against American goods. In other countries, such as France and Italy, the value of the dollar creates a tariff of several hundred per cent. It is the operation of the adverse exchange as between Europe and America which makes it impossible for Europe to buy American goods, and has crippled America's exoort trade.

On the other hand, the low value of German currency in European countries has stimulated Germany's export trade. In Great Britain the value of the German murk, which before the war stood at a shilling, has sunk to a little less than a penny. The result is that German goods are being sold in Great Britain in the retail shops at prices far below the actual cost of production of similar goods by British manufacturers. Of course, Germany's export trade is still far below its pre-war volume, because German industries hay« not yet recovered from the crippling effects of the war, and the naval blockade which deprived her industries of raw materials. And it is only in goods for which Germany can obtain the raw materials within her own borders, or from countries whose currencies hay© depreciated almost as much as her own, that she is able to ■undersell so completely Great Britain, America, and other manufacturing countries. When she has to import raw materials the low value- of her currency operates. against her industries, and cohipels them to pay abnormal prices, which prevent them competing with countries whose currencies are on a sounder basis.

The Allied coratries of Europe owe America, 9,580,823,677d01, for loans advanced by'the American Government between April, 1917, and November, 1920. On the pre-war basis, of exchange this amounts to> about £1,916,000,000 Great Britain is the chief debtor, her indebtedness .amounting to over £800,000,----000. Franca owes America nearly £600,----000,000, and Italy owes over £300,000,----000. The other European debtors include Belgium, Russia, Greece, Servia, Roumania, and Ozechoslavakia. Great Britain's debt to America was incurred in financing her Allies.. France owes Great Britain £514,000,000, Italy owes her £455,000,000, and Russia owes £568,000,000. It is to be feared that Russia's indebtedness will have to be written off as a bad debt, but if France cuid Italy paid Great Britain what they owe her Great Britain vrould be able to discharge her. obligations to America.

Up to the present no interest has been paid on the Allied debts to Great Britain or to America. The problem of how the principal is to be paid appears to be insoluble. There are only two ways in which, the debts of the Allies to America can.be paid, i.e., in gold or in,'goods. It is out of the question to pay in gold, as the aggregate stock of gold in the countries of the Allies would not liquidate the debt, and the gold depletion of Europe would bring about a financial panic which would soon embrace the whole world. It is equally impossible to pay in goods, for America does not want much from Europe in the way of manufactured goods, and maintains a liigh tariff to keep out such goods and protect American industries. The flood of European goods to America •which would be necessary to pay off the debts of Europe would ruin American industries if the goods were admitted to that country. It has been seriously suggested in America that these .debts of the Allies shonld be written off, partly as an additional contribution from America, to the assistance of the Allies who had to bear the brunt of the struggle for the freedom of the world against the attack of the Central Empires, but also as an important factor in reviewing America's trade with Europe. One effect of writing off these debts would be to raise the" value of European currencies, and in that way enable them to buy American goods. * But the Secretary of the American Treasury in his annual report to Congress ridicules the idea of transferring this burden of debt from the shoulders of European nations to those of American taxpayers. Jle declares that the proper course is "to fund the existing demand notes into obligations having distant maturity, at the- rate of interest equivalent to the interest paid on American Government bonds, with authority for the time being to defer interest payments.'.'

But while these debts are unsettled the value of the dollar will he inflated in Europe, and this will hamper the development of America's export trade with Europe. The huge war debt of the Allies to America is a burden which has a more depressing effect on the development of American trade than on the revival of prosperity in Europe.