THE ONLY SOLUTION

Evening Post, Volume CXXVIII, Issue 30, 4 August 1939, Page 6

THE ONLY SOLUTION

A FREE EXCHANGE

AIDING THE PRODUCER

MARKET AT HOME

COMMODITY COUNCIL

SCHEME

. The view that New Zealand had a great deal to gain and nothing to lose By joining in the scheme of Empire commodity councils was expressed by Mr. W. J. Poison, M.P., in an ' address to the New Zealand Primary and Ancillary Industries Producers' Council yesterday. Mr. Poison reviewed at length the financial position of the Dominion, particularly as it affects primary producers, and reached the conclusion that the only solution was the freeing of the exchange rate. "At the November meeting of this council, which was specially convened for the purpose, the position of the London funds was the subject of examination and comment in my address to you/ said Mr. Poison. \ "I stated that the indications were that before very long, probably within the next twelve months, the London funds would be so seriously depleted as. to cause grave financial embarrassment to the Dominion, and that, coupled with the weakness of the present Government's finance in- the use of the Reserve Bank credit, must cause all thinking people seriously to consider the situation. "This crisis has arisen and has bern dealt with by the temporary expedient of obtaining an export credit from Great Britain, but this really amounts merely to a national overdraft. No real steps have been taken to correct the position, and it would appear that the Government is still carrying on in the same "way without any regard to a final solution of the problem. "The credit position of the Dominion is still in an expanded state, as it was when I drew attention to it in November, and the London funds have now shrunk to a figure which will only cover oar interest requirements in London. SUGGESTED ALTERNATIVES. "In November I pointed out that the correctives which could be applied were: —(a) Borrowing in London; (b) raising the exchange; (c) rationing of exchange or some form of import control; (d) reduction of expenditure; (c) allowing interest rates in New. Zealand to rise; and (f) stimulation of production. ."The first step on which I commented has been ruled out as I suggested it would be, as Britain has had enough to do to maintain her own financial position, and the fact that the Argentine was recently not able to raise a loan in England is an indication that that prophecy was justified. "The third corrective—the rationing of exchange—has been adopted, and coupled with a system of control of imports, and with it has been coupled a total disregard, for the wishes of the British Government in regard to the marketing of our produce, to which I shall refer later. It has had the drastic effect ; of our having had imposed pn us a cut of 3 per cent, in our meat quota. The action has not had the. effect o| arresting the drain on sterling funds,, and at the same time has given rise to a good deal of bad feeling and adverse comment in the Old Country. BURDEN ON PRODUCERS. "This policy of the Government can be expected to increase the difficulties under which the farmer labours, for ultimately it must react on the manufacturers, for they are dependent almost entirely on the farmer either to produce their raw materials in New Zealand, or to supply the sterling funds with which they can be purchased overseas. "So far as the other correctives which I referred to in November are concerned, interest rates already have been allowed to rise, and the Government is endeavouring to stimulate production in New Zealand; but this; . unfortunately, is confined to the manufacturing industries, while statistics demonstrate that it is the primary industries which are in need of encouragement, for their production has tended to decrease. "So far as the reduction of expenditure is concerned, the Government is shrinking from this course, but, unfortunately, as v I stated before, it is a method which must be employed directly or indirectly. There remains now only the corrective which this council advocated at its meeting in April of this year—the freeing of the exchange. THE EXCHANGE RATE. "New Zealand's trouble at the present time is that the external value of her money is altogether out of its correct relationship to its internal value, and it is essential that these two values be brought into line. There is today in existence in New Zealand a black exchange just as there is a black exchange in the totalitarian countries, and the rate of this black exchange is at least £NZI4O to £100 sterling. This means that for every £ 100 sterling worth of wool or meat the New JZealand farmer sells, he is being robbed of £NZIS. It is just as if the Government were to put a restriction on the earnings of anyone which were below the amount that the employers were willing to pay. In point of fact the farmer is making a present o- £NZIS per £100 sterling to all importers, and todayit may well- be said: that the farming industries are giving a direct subsidy of this amount to the manufacturers. "It- would appear" that resolute action by the Government is urgently required, and it seems also that the only solution left to them is the one which we previously indicated—the freeing of the exchange rate. "I would again emphasise that the need for a Reserve Bank independent from political control has now been thoroughly demonstrated, and if any further support is required for this, it will be found in the report of the directors of the Reserve Bank, which pointed out what I pointed out in my statement in November, last, that it was essential that local spending power and production must be related, and that the continued printing of money for the Government's needs was fraught with danger. COMMODITY COUNCILS. "Another matter which is of vital importance to the Dominion is, as I said previously, the question of commodity councils. Few people realise that we have no more right of free entry into England for our primary produce than . have' Australian dairy farmers the right of free entry into New Zealand for their butter. Our market in the Home Country has been j fcuilt up by good will and everything possible should be done by New Zea1. J+~ tliaf CfftTtrf Will.

"The councils, which would be pro-ducer-controlled and financed, would consist of the representatives of the | various Dominions and Britain, and their job would be to arrange among themselves, and with foreign countries concerned, the regulation of shipments so that there would be a regular flow of produce on to the United Kingdom market. This would tend to avoid gluts, and as one writer has.put it: 'Would render speculation less possible, probable, and profitable.' There would be councils for-dairy produce, mutton and lamb, poultry, and any other products for which the scheme was needed. Councils are already in existence for meat, fruit, and processed milk. "It was agreed in Sydney that there would be a separate council for mutton and lamb, and one for beef. As the idea was not accepted by New Zealand, the British Government enlarged the beef council and made it a meat council. The beef council had proved satisfactory over a number of years, but it has powers in excess of those envisaged by the Sydney resolutions. "The Empire Beef Couricil has power to impose restrictions. The way in which the beef council functioned was that the Empire representatives met, agreed among themselves, and then called the foreigner in. ; UNANIMITY A SAFEGUARD. "The following were the safeguards under the Sydney proposals:— (1) Decisions of the council had to be unanimous to be binding. (2) If there were to be rectrictions they had to be agreed on between the Governments of the countries concerned. (3) The councils were charged with the duty of making a continuing survey of the British and foreign markets and of exploring means of extending them. (4) When the surveys had been made and the possibility of foreign markets established, if it was found that there was an Empire surplus of any commodity the bargaining i power of the Empire as a whole i was to be used to try to open these markets to that commodity. "This is the first time that there has I been put forward the suggestion of using the combined bargaining power of the Empire. The British Govern- \ ment supported these proposals. One has only to contemplate the wonderful work which could be done by, say, a dairy commodity council in England, to realise what a power for good it could be. M "An Empire dairy products council could quite reasonably institute a campaign to increase the consumption of liquid milk in England, whereas it will be quite apparent that this could not be attempted by any particular Dominion on its own, and if the consumption of liquid milk in England can be steadily increased our problem of an expanding market for butter and cheese in England' is solved. This is only one example. "•Unfortunately, New Zealand did not grasp the opportunity offered her,' and we have, for the time being, at any rate, lost the advantage of the separate mutton and lamb council. I believ,e, however, that this can be regained if we act speedily. , FORCED RESTRICTION. "Sir Reginald Dorman Smith told us in Sydney that the British Government was determined that orderly marketing of primary produce should be inaugurated and that if. we would not join voluntarily we would be forced in. He further told us that, if the Dominions would not then co-operate, the whole matter would be handed over, to the President of the Board of Trade, who would impose an abritrary restriction. This has been done, "as we know to our sorrow, through the restriction of 3 per cent, imposed on our meat. We refused regulation and automatically chose restriction. "I believe that we should get busy and get this scheme implemented for' the following reasons:— "l.^The British Government desires it, and this should be a sufficient reason. We have done enough to antagonise the United Kingdom by restricting the entry of its products to New Zealand, and by falling in with the wishes of the British Government in this regard we can lose nothing. "2. The scheme would make for Empire co-operation and solidarity which was never more necessary than at fee present time. "3. We are- better to join in under the satisfactory conditions agreed on in Sydney, and on a voluntary basis, than to be forced in under arbitrary conditions in which we have no say. "4. There is no organisation or body in existence at the present time ■which is charged with the duty of exploring new markets for Empire surpluses. "5. The use of the bargaining power of the Empire as a whole would have great force, and could do a great deal towards achieving freer world trade. "6. If the British Government intends to "*impose restrictions on our produce our refusing to join in the scheme will not help us anyway. * "The Dominion has a great deal to gain and nothing to lose by joining in, and there is the further fact that out of their association in the councils there would probably arise an Empire farmers' organisation outside of official channels which would be charged with the duty of guarding the interests of the farmers of the Empire as a whole. '"

"We* have a great opportunity. Why not let us take it?"