The Evening Star WEDNESDAY, MAY 2, 1934. PLANNED TRADE NEGOTIATIONS.

Evening Star, Issue 21709, 2 May 1934, Page 8

The Evening Star WEDNESDAY, MAY 2, 1934. PLANNED TRADE NEGOTIATIONS.

Mb Coates admits to £20,000,000 of accumulated exchange surpluses in London and estimates the cost of reversion to parity with sterling. But he says the exchange rate will be kept at 25 per cent. —for how long he does not state —and in the meantime the surpluses will grow beyond £20,000,000 and the cost of reversion to parity with sterling will exceed £5,000,000. The Central Reserve Bank is to begin to function on August 1, and thenceforward, says Mr Coates, the rate of exchange' will be arranged by co-opera-tion between the bank and the Government. This is in accordance with the pamphlet which Mr Coates issued last December wherein he wrote : “ Th« Reserve Bank will exist to carry out such monetary policy as Parliament may enact.” In the* same place he stated that the establishment of the Reserve Bank does not mean that New Zealand will be bound to sterling at any fixed and unalterable ratio; pending more settled world conditions the relation of New Zealand currency to sterling is held over. The Reserve Bank Act defines the primary duty of the bank as to act so that “ the economic welfare of the dominion may be promoted and maintained.” The bank, however, is to be by no means the sole judge of what will be in the best economic interests of New Zealand. In theory Parliament is to collaborate with it, but in practice that means that the Government will be at' the bank’s elbow. That is the method adopted in England, the Treasury and the Bank of England conferring and deciding on policy. Are the more settled world conditions which Mr Coates stipulates as necessary prior to any unpegging of the exchange within sight? So far as New Zealand is concerned there has developed great unsettlement in respect of one of her main industries. Were it not for the low prices for dairy produce one might not be far astray in hazarding the opinion that there would be a healthier and more. immediate prospect of the rate of exchange being lowered, thus lifting a heavy addition to the interest load of the Government and local bodies for debts domiciled in London, besides permitting importation to reach a level more in harmony with actual requirements. The alternative of an export bonus or

subsidy' is scouted by Mr Coates—which may bo taken as a plain hint to the Royal Commission now investigating the dairying industry—and this view is the more justifiable because of evidence pointing to the fact that those in control have courted price declension by neglect to maintain the old standards of quality. Apart from that, Britain has a strong aversion to her own farmers having to compete with subsidised produce from abroad. Incidentally there can bo no doubt that the indirect form of subsidy arrived at per medium of an artificial exchange rate is not very differently regarded in Britain from a direct subsidy. Mr Coates has despatched a cable to London asking for suggestions as to the best way in which New Zealand may co-operato with Britain in price-raising measures which will enable production both here and there to become independent of subsidies in any form. There will bo in some quarters a good deal of trepidation as to the contents of the reply cable, but it is far better to face unpalatable facts than to go on trying to ignore them as some would have lis do.

Apart from the plight of British agriculture the main fact in the business is Britain’s trade balance. Years ago, when it turned adverse and began to grow in that undesirable direction, it was pointed out in these columns that, if such a trend continued, Britain would be compelled to become more self-supporting in foodstuffs, and some other market would have to be found for our output if it was going to increase as it had been doing. In 1933 Britain’s trade balance was adverse to the extent of about £4,000,000. This figure includes services (not necessarily profits) rendered by shipping, interest and dividends on investments, commissions and other miscellaneous receipts and payments. In short, the statement corresponds to a national profit and loss account for the year. Broadly the account for last year shows on the debit side £264,000,000 sterling, representing the excess value of imports oyer exports of merchandise and silver bullion and specie. On the credit side appear the gross earnings of shipping, which include disbursements by foreign ships in British ports, £65,000,000; the net income from foreign investments, £155,000,000; commissions, £30,000,000; and miscellaneous receipts, £10,000,000. The debit balance on this showing is, therefore, £4,000,000. On this showing there is no money available in Britain for investments abroad as a result of the transactions of ,1933. English commentators are not discouraged by the result, particularly as, despite the further decline in shipping’s revenue, the net income from Britain’s oversea investments was £10,000,000 more than in 1932. “On the whole,” writes one critic, “ the conclusion reached by mostmen of affairs will probably be that in a time of acute crisis throughout the world, when ‘ men’s hearts were failing them for fear,’ this country has so far come very well out of the ordeal. Let us hope for even better things in the future.” One can easily appreciate the reason why the British Government has functions to measures like quotas calculated to restore the balance of trade. Not every man of affairs approved the new tendency; many declared that all trade was the affair of private enterprise and regarded Government activities as unjustifiable interference. Such objections, however, are seldom heard to-day, for it is now generally recognised that the state of British, trade is of vital national interest and that the prosperity of the whole community is as .much dependent on commercial enterprise as is that of the manufacturers, merchants, bankers, shipowners, and their employees. Trade is the life blood of every nation, and to an overcrowded island community oversea trade is indispensable. It is therefore only in accordance with what might have been anticipated that as trade depression overtook the world, and the fight for markets in its industrial arenas became more intense, Governments everywhere have taken more direct interest in the struggle. Indisputably this is the case in New Zealand, and it appears as though control boards will be superseded, in all but name perhaps.