TRADE WITH BRITAIN

Evening Post, Volume CXVIII, Issue 8, 10 July 1934, Page 6

TRADE WITH BRITAIN

- (To the Editor.) •Sir,-—ln his latest letter on the above subject, which appeared in your issue Of. the Stlujnst, Mr, G. Mitchell carefully evaded "my direct question, viz., whence came the "hard cash" with which he alleged our adverso trade balance with certain countries other ,than Britain was paid.. Ho now states that it was paid in "their currency," that is, the currencies of the- countries concerned," In order to illustrate the position Mr. Mitchell stated that if I bought £1000 sterling worth of goods from Japan I would" have to pay in sufficient to', the bank here to buy sterling, arid' tho ; bank in turn would pay Japan through London, There is no doubt that Mr. Mitchell's statement as set out above- is correct, but it is rather vague and leaves several important points to be cleared up. 1. How did the person or institution from whom I bought the sterling come in possession of it? The obvious answer to this is by the export and sale of New Zealand goods in Britain. .V 2. By what means or process would i the £1000 sterling with which the bank iii turn would pay. my Japanese debt'be! converted' into Japanese currency and transferred to Japan. The answer is: by the export of goods by Britain, either directly or indirectly, to Japan. To further illustrates''the position, let ■us assume that Mr. Mitelfel.l is' an 6kporter of New : Zealand • produce, and I am an importer of Japaueso goods. Mr. Micholl would export a quantity ■of butter to Britain. When' sold the proceeds from the sale would be paid into his account in a London bank. In order to pay for the Japanese goods which I had imported I would buy from Mr. Mitchell a sum in sterling sufficient.to settle the account.. In this transaction my "hard cash" would go to neither London nor Japan, but to Mr. Mitchell. We have now reached the point where I own a. sum, say, £1000, in sterling, in London and owe a debt of a- similar amount in. Japan, and the quostiohis how is this £1000 sterling to {be: converted into Japanese currency : and transferred to Japan? In the ordinary course this would bo done,'by tho export of British goods to the value of £10C0 sterling. /. "' ~ ... ,-.. ■-..;■"• Briefly put, the process would; be as follows:—Mr. Mitchell would export butter to Britain. I would import cotton goods from Japan, A British iron smelter would export -pig iron to Japan,. The. ultimate'result "would be that Mr. Mitchell would.be paid for his butter in New Zealand .currency^ from tho proceeds of the sale of my Japanese cotton in New Zealand. The- ..British iron smelter, would, be paid, in sterling from tho proceeds, of the' saldof Mr. Mitchell's butter iv Britain; The Japanese exporter of my cotton igoods would be paid from the proceeds of the sale of-the British pig iron in Japan; No "hard; cash.- whatsoever would have'passed between the-countries concerned, but the transaction . would, howovory have given an impetus tothe circulation of ''hard Cash -within those countries.' ■' ■ ■'..-. : ITV:v:-'; We now come to the question of the effect my buying Japanese instead of British cotton goods has had on British trade. The answer is that the- British cotton-spinner would have suffered, but the British iron smelter would be a gainer, the not results being the same. It makes no difference to Britain whether she pays for our produce in goods shipped directly here or in goods shipped to any. other country.—l am, etc., A. PAR-LANE. July 9.