PROS AND CONS

Evening Post, Volume CXV, Issue 105, 6 May 1933, Page 10

PROS AND CONS

A BUTTER QUOTA

ARGUMENTS IIEVIEWED

IS THERE AN ALTERNATIVE?

MR. COATES'S STATEMENT

Aigumcuts for and against the application of a quota on tho export ol! butter from New Zealand to Great Britain wero reviewed in .a lengthy btatoment released for publication , today by 'tho Minister of Financo (tho lit. Hon. J. G. Cpates). In a foreword to the, statement, Mr. Coates said it was made as a basis for consideration and diseussiou and was not an, advocacy of any dogmatic view. "Suggestions for regulating the volume of our exports of butter to the United Kingdom raise new and complex problems,"'he stated. "They call for quiet and dispassionate thought in the light of the facts as they arc, not as we might wish them to be. If I have dwelt moro fully ou points that favour our aceeptauco of tho''quota, rather than on the difficulties and .objections, it is because I have felt .that up to tho present tho points thus" stressed have been' inadequately presented; and .I_ am' certainly not unaware of the- difficulties that must arise if tho principle of the quota is applied to our great staple exports. There is, however, need for us also to pay ,due regard to tho difliculities that will face us if other, alter-' natives are adopted, or if nothing at all is ilone.' ' ... "Whence came the present suggestion for a. butteV quota as far as Dominions' produce ,is concerned? , This is _ a straightforward quostipn, but one which is being ■ answered in a misleading and mischievously, inaccurate manner in a good deal of current controversy. Tho facts of the matter are that in January, 1933, the increasing supplies and the falling prices of butter in London caused concern to those in the trade, in.eluding the direct representatives of New Zealand exporters, .From. these trade quarters suggestions were made .for reducing the volume of imports from foreign sources. The New Zealand' High Commissioner supported tho request for official discussions/ and in these, -when they had been arranged by the British Government* attention was given to the whole position. "It was then made clear by British Ministers that, while they were prepared to recommend tho limitation of foreign imports in the *atio of two to. one compared With the limitation of imports from the Dominions, they were not prepared to impose'the desired reduction of foreign supplies while leaving the •Dominions' supplies wholly unregulated." POINTS SUMMARISED. Mr. Coates summed, up the objections to the-quota as follows:— _ f (1) Tho quota will involve reduction of exports to Great Britain; hence, unless other markets are found, restric* tion on production is threatened. _ (2) This runs counter to tie whole accepted policy of New Zealand, which rests on expansion. of production trom the land. ■ ' (3) The quota would be difficult to apply; it would involvo more control and interference in private enterprise. (4) Control of exports Would', lead to control and forward planning in production, and this would raise novel and difficult problems. Advantages of the quota, wore summarised as follows: — .. (1) The alternative is rum. Not merely a price-decline but a debacle is the immediate danger. This will enforce less production, so that tho fiist point above is an unreal one; we are threatened with less production, quota, or;no quota. . '",'', i . (2)- The raising.- of price-levels, ,cb* pecially for farm-produce,- is agreed by all to be urgently required; and regulation of supplies is a necessary step UI (3) The proposal "is generally in lmo with the efforts that are being made thq world over to bring order out ol cliaos. This spells the doom of laissez-tairo, and an increasing measure of control uml regulation. Theso efforts will not cease even though our producers hark back to the days ,of unregulated competition. Wo will have .merely the empty satisfaction. of protesting, of vainly seeking unregulate" competition in p. world that is everywhere turning to more complete orgainsation: (4) Today there ib a great contrast between the lack of organised control 'of production in agriculture, and the increasing . control in Other _ industry, in commerce, and in banting. The contract can itself be regarded as a sub-, stantial reason, for the unbalance in the world. If the. balance is to be restored, ■ this cannot be .brought about by destroying tho co-operation 'in industry and throughout the wholo world .of commerce, but only by bringing more organisation into agriculture. The quota is in keeping with that requirement. ■ " ' j, ' (5) Although today we arc free to reject quantitative regulation, this freedom will expire in little over two1 ■years' time. It is short-sighted policy to'bang the door against intelligent and reasonable organisation. We may decide to "meet tho market," and thereby decline ,to meet Great Britain. '(«) Finally, whether the quota will bring moro gain than loss is a question .that .must depend for its answer m the actual details as they are worked out; it cannot bo answered m the abstract, Tho possibilities of very great improvement, and of avoiding tremendous loss, are there. That it raises also novel problems which call for courageous action, and which .contain ominous possibilities if the situation js not wisely handled, has not been dsputod in theso pages. Tho correct attitude is to get down to details and examine the possibilities of the quota, accepting the fact that conditions have changed, and that new conditions call for now ways of thinking. OUTSTANDING PROBLEM. Tho Minister said the question whether the New Zealand Government and the dairy industry should .agred to the - quantitative regulation of exports of butter from New Zealand to Great Britain was one of first importance, and was indeed .one of the main problems that had arisen'in the course of fifty years./ The year 1932 and the Ottawa Conforenco were, tho time and place for tyie posting of the notice:— "English market full; saturation point reached or about to- bo reached.," After referring to the decisions of Ottawa, Mr.' Coates remarked that had it not been for these a restriction of butter and cheese would almost certainly bo imposed by the British Government forthwith. He proceeded:— "Ottawa left us in this position, thon: a quota on meat, including our .Dominion produce; and a tariff only, with no restrictions as to .quantity, on butter, cheese, fruit. We have thus had the two methods, the quota and the tariff, working side by side, and it is possible to somo extent .to compare their results.' What is the outcome to date? As definitely as could bo, responsible opinion (including, notably, "the opinion of the Now Zealand Moat Pro"duccrs' Board) judges the regulation of moat to bo a success. In November of 1332, when a. glut in meat supplies and a debacle- in London prices threatened, tho quota arrangements

were revised hy agreement amongst all countries supplying Great Britain, and tho market was maintained. It is i-iTtiiinly fair to bay lliat, so far as New Zealand is concerned, Iho permitted expoi-t ol! mutton and lamb to England (based as it is on tho 1031-32 peak year) has not required any reduction bolow tho figure that would otherwise have been probable. To this extent tho butter position is more difficult than the meat position. However, it is worth noting the outcome to dato of the meat quota. The opinion^ of those wbo can judge is that it is a success, and that,'to New Zealand produce; s and to ttho whole industry, it has given results which could not have been given by any tariff on foreign meat, unaccompanied by the regulation of supplies. And these favourable opinions have been formed by men who were extremely doubtful and critical of the qouta ou meat.' EFFECT OF EXPEDIENTS. "It is always difficult to measure statistically the effect of any change in tariffs 'or of any other expedient; so many conditions are altering that the consequences directly duo to one change cannot be isolated. Nevertheless, with this warning against drawing too precise conclusions, we may quote Board of Trade figures on tho volumo and value of certain imports into the .United Kingdom in the month of March, 1933: Compared with the same month of tho previous year, bacon imports declined by 24.3 per, cent, in1 voluino and by only l.< per cent, ill monetary value; butter imports increased in volume by 26.3 per cent.-- and their 'monetary value fell by 14.6 per cent. ' "If is at any rate clear that tho quantitative regulation of meat supplies has shown more satisfactory results than have been sjiown to date by the( tariff on foreign dairy products. This is not in itself nearly enough to establish the case for applying the quota principle to butter; but it does, suggest that we should at least pause before dismissing the proposal.' There is good reason for our looking patiently at the facts, and withholding judgment until theso ,have been examined." Figures (already published) _ showing the , tremendous increase in tho importation of butter into the United Kingdom since 1913 wero quoted by Mr Coates, who said that the increa"shig flood of supplies had se.it prices down. It followed that a necessary step in raising and sustaining prices was the regulating of supplies - The exchange aspect was dealt with by Mr. Coatca in dealing with the alternatives to a quota. "In glancing at some possible alternatives to tho quota, tho exchange rate must be mentioned," he stated. "It is, doubtless, true to suppose that a mood of disappointment has resulted since tho London-Jftw Zealand exchange rate was °a»ed in January, 1933 The promise of better .prices, through tho higher exchange rate, seems to some to have- failed to materialise. "The explanation is, of course, that P rice % at the other end of the world happened to slide still lower just at the time of our raising tho exchange rate. Tfiis amounts to saying that the advantage of the exchange rate has been .hown not in raising New Zealand nrices,, but in preventing them from falling even lower than they have in fact fallen. If -the pay-out for btattorfat is now 7d, this figure without the 25 per cent, premium would be barely Bid- (and gold prices would bo under 4d). The point is that, in fairness to tho exchange rate, comparison should be made between prices today and prices as they would havo been if the exchango rate had not .been raised. That is not tho comparison that will be made m popular controversy. The comparison will be between actual prices today and actual prices before tho exchango rise, and. ialse conclusions will be drawn accordingly. . "The exchange ra,t6" is thus apt to suffer an hi justice; but it is also iair to admit that, when Australia, New Zealand, and Denmark have all raised their exchange rates, and when all must pour their butter into the over-supplied English, market, tho ■ buyers there are able .to set- of ono •eller, against the other, and force down ;prices. It is a 'buyer's market,', and part of exportbounty in any forpn will, tend t» pass to buyers. In other words, the advantage-" from tin- exchange -rise is being defeated, in part at least, by the oversupply on tho-market; .and-this .links tho exchange rate with tho quota, or with somo other means of correcting 'tihe 'maladjustment -between supply and consumption. -'' ■■ . . - • > • "Whon tho exchange, rato w,as, adjusted, on tho Government's rpsponsibllity, a powerful argument' was that mjo feasible alternative was- .offering. The raising of the' exchange brought ita disadvantages; but the argument was that there was a net balance of gains over losses,- and .that. no other Temcdy was in .Bight." •v. ■. ■ ■ , , * SOME ALTERNATIVES. , .For- space reasons ,other alternatives of a, dealt with briefly.' One alternative mentioned by , Mr. Crates was a rocluiction of foreign supplies only. This I wafs not possible- as the British Government insisted' that it would • not reduco foreign supplies and leave the Dominions' free ,to expand without limit. New markets wero another alternative. The markets of the East wci'e a 'favourite' talking point these days, .buU the -market was only potential, and the surplus in the United Kingdom market was here and now. Referring to another alternative—an increase in consumers' buying powers— was' dealt with by Mr. Coates as follows:—'"Not much need bo said on this, oxcept a word to insist that it is a point of very great importance, whether regard be -paid' to [tho United Kingdom or to tho local market. But how is buying-powor to be increased? There can bo no magic trick in solving this problem, no simple. solution by distributing money.' /The possibilities by way of a'purely monetary approach are severely limited.- *' Thcro is, on tho contrary, need for proceeding with well-planned steps to restore economic health in our own and other countries; and the orderly, regulation of supplies on the markets of the United Kingdom is conceived as a step in this direction." On the question of marketing cooperation with Australia, Mr. Coates said if the irregularity of shipments was tho only cause for concern, that might be a promising remedy* but it was a-problem not merely or mainly of regularity of shipmcaits, but of tho total. Furthermore, there was good reason for avoiding, anything that could givtcven the appearance of being a pact by the Dominions antagonistic to the interests of tho United Kingdom and her farmers. An impriveincnt in quality might bo mentioned as another alternative, but it was difficult to give an affirmative answer to tlie question: AVould raising the quality of our butter solve the glut? • - {DEFINITELY TO BE DESIRED. After discussing other points, Mr. Coates proceeded:— "The conclusion, up to this point, inferred rather than proved, is that the deliberate'arrangement of a quota ou imports of butter into the United Kingdom, is definitely to be desired. The alternatives by .way,- of action are hopelessly inadequate; to deal with the crisis—and still more inadequate to cope with the future as it promises to Jovolop. The- alternative of doing nothing is a disastrous one. It must mean -ruin for a great body of producers. It will not bring victory to New Zealand over Denmark or to any country; it will ruin many producers in 'all countries, and will bring all producers nearer to impoverishment. For a lime tons of butter will bo produced,

cows will be milked, their milk separated, the cream cartel to factories, and endless hours of work will be poured iuto producing butter which will find no consumer. What could be more futile, what could be a more pitiful confession of failure? Tho quota has its difficulties, and it raises new problems; but it promises nothing so uncertain and futile ns the alternative. It means a btep towards deliberate organisation iind contiol where there has hitherto been no organisation. It will doubtless bo assailed, and appeals will be made to irrational prejudice and fear, on the scoro that it departs from the law of supply and demand, that it spells interference, that -it savours of Socialism and worse. But if regard bo paid to present realities," surely it is better to organise and to co-operate over a wid((r field than it is to drag all down ••o lower standards in a senseless price war. . . .\ "A point to be stressed in considering the quota proposal is that it is up to New Zealand to make a decision. Tho power to ehoqso is in our hands to an unusual degree. By reason of the Ottawa Agreement a quota on dairy produce cannot be applied by Great Britain until l!) 35 without our express consent. Thereafter, for the remaining two years, of the currency of the Ottawa Agreement, it may .be applied in consultation with the Dominions (this permits Britain then to apply the quota in spite of the Dominions' opposition). But for the moment we, control Britain's legislative power. If New Zealand says 'No,' the quota cannot be applied; if we'say 'Yes,' it may be— for Australia's assent is also required. "Tho clear indication's are that in or1 after. 1935, if not now, the , United Kingdom will apply the quota to all imports of dairy produce. The proviso in the Ottawa Agreements to permit this was carefully weighed in every word; and it was insisted upon by tho United Kingdom "representatives in the face of objections from all the Dominions.'? ' , • . :

Portsmouth prison,' 'England, -cloned 13 months''ago, i$ to be reopened for longterm ■ prisoners. ■ '