WHY QUOTAS?

Evening Post, Volume CXVIII, Issue 21, 25 July 1934, Page 13

WHY QUOTAS?

MODERN PERPLEXITIES

ECONOMIC NATIONALISM

A valuable and exhaustive review of the import quota problem confronting so many nations today (New Zealand among them) has been prepared by the Bank of New. South Wales. It .is pointed out that, whether for good or evil, quotas aro being imposed by various, countries to the disadvantage, sometimes serious, of other countries trading with thpm. The quota is now frequently regarded as. a weapon to be used in the interests of self-sufficiency. The "bank notes- that tho feeling in favour of self-sufficiency has its most powerful roots iv the widespread fear of war. _ It is believed that a reduction of international trading contacts to the barest minimum will diminish tho risks of sudden and overwhelming defeat. It may be doubted whether a general state of war would not in any case be so thoroughly disastrous, quite independently of any precautions which might be taken to ensure self-sufficiency in important food-supplies, as to render this particular method of protection ridiculously inadequate, but there is no dqubt of tho important part which the sentiment plays in moulding public opinion. PLANNING AND PRICES. Tho sentiment in favour of quotas is further strengthened by the baseless but widespread alarms about the dangers of a so-called "unfavourable" balance of trade, measured in relation to individual, countries. Further, though it should not be assumed without question that planning inevitably means restriction of foreign trade, many of those who are sympathetic towards the idea of planning are- inclined to jump to the conclusion that quotas imposed on imports would be a useful aid in achieving their ends. There is also niueh misunderstanding of the means appropriate for gaining the widelydesired end of higher prices. Restriction of supplies following upon quota regulations is likely .to raise prices in the countries which practise restriction. But the only thing which makes a higher price-level desirable is the fact that, .by improving the prospects of profit, it encourages entrepreneurs to undertake new activities in -which, at present, they are'reluctant to face the risks involved. There is an obvious inconsistency in attempting to encourago now production by a policy which is itself intimately bound up with a restriction of production. PRODUCTION ARRESTED. As a result of the world-wide trend in favour of trade restrictions Australia and New Zealand are faced by the danger of being compelled suddenly to reverse the policy of expanding production in industries which they have become accustomed to regard as the fundamental framework of their economic structure. Only three rational responses" are possible. Either they can endeavour to bargain, with a view to obtaining more favourable terms from the people. who wish to adopt policies which will restrict the traditional activities, or they can search for outlets for the same products in new markets, or discover new fields of activity to which they can apply the resources of production which have become superfluous in the old. These three kinds of action can be pursued simultaneously without the slightest inconsistency. There is no reason in the nature of things why we should not at tho same time encourage trade within tho Empire and trade with foreign countries, why we should not simultaneously expand both our external and our home markets. Instead of. thinking in terms of "oither . . . or," we should cast our thoughts iv terms of "both , . . . and." NEW MARKETS. Countries most' affected by quotas on their exports : to certain markets should bo constantly on tho alert in their search for new markets. Instead of thinking only of selling more to old customers they should be looking out for new. It would be a mistake to exaggerate the immediate capacity of the Vox Eastern peoples to absorb staple exports, but it would be- a more serious mistake to suppose that the present low level of purchasing power in those countries puts insuperable barriers in the way of expanding trade with. them. Ultimately the only satisfactory way of increasing thoir ( purchasing power is to encourage them to increase their production. Australia can play a part, here by displaying a greater willingness to purchase their products. New fields of work should be tried. There are many goods and services with which some countries are still inadequately supplied. When older industries, which catered for basic necessities, are being overdone, tho task of transferring resources which ar3 now superfluous there to new and relatively untried fields must be tackled. No genuine progress is possible if any country thinks only of reshuffling old markets, instead of making real additions to the stream of income. It is foolish to increase, production for markets already glutted; it is obvious wisdom to increase production1 of things of which so far a nation has been unable to get nearly enough.