MUST HAVE EXPORTS

Evening Post, Volume CXI, Issue 21, 26 January 1931, Page 8

MUST HAVE EXPORTS

As "The Economist" points out in this issue, the pressing problem of primary producing, debtor countries is to raise their exports to a level "which will supply them, in the aggregate, with * sufficient foreign money to meet external commitments." In saying that, "The Economist" is referring especially to Australia, Argentina, and Brazil. This need of "foreign money to meet external commitments" comes as something new, merely because for decades the courses of the loan markets and the commodity markets have been favourable to primary producing, debtor countries. By means of external borrowing, a primary producer like Australia may for a time —and did—conceal the blows dealt her by low prices for farm products. But not when the mopey market as well as the commodities markets turn against her. She cannot persis^ when farm products rule low and the lender says no. This turn of the tide, after a generation of plain sailing, presents the old rule—"balance your external trade and your Budget"— in a new and c6mpelling*"*light. It now becomes a matter of dire necessity to export enough to secure "sufficient foreign money to meet external /commitments." Cash-with-order rules when the borrowing stops. An adverse balance in external trade translates itself into" an adverse exchange rate. Consequences are double-edged. If a British woolbuyer in Australia finds there a currency depreciated to the extent of 25 per cent. —that is, 25 per cent, in his favour as against 6 or 7 per cent, in New Zealand —a new competitive factor against New Zealand wool (or the wool" of any other country similarly circumstanced) arises. How does this operate in that dire necessity—the hunt for exports —referred to above? To a certain extent, Australian wool export is helped; that is to.say, 'the exchange premium to exports helps Australia to send oversea goods to provide in London British money to meet Australia's external commitments. But *the same adverse exchange increases the weight of the external commitments themselves; for one thing,- the 25 per cent, depreciation of the Australian currency increases in similar proportion the burden of interest that Australia must pay in London. It would be better for New Zealand to suffer the competition of wool-selling countries with depreciated currency than to adopt their tactics and achieve a similar depreciation. Still, the competition arising under this head cannot be ignored. H. Dawson and Sons, wool-brokers, London, recently emphasised the comparative advantage, of a wool-buyer in South America (with 20 per cent, in his favour) against his fellow in New Zealand. And South America's depreciation has since then markedly increased. ';