The Evening Star TUESDAY, DECEMBER 11, 1934. IS BRITAIN WRONG?

Evening Star, Issue 21900, 11 December 1934, Page 8

The Evening Star TUESDAY, DECEMBER 11, 1934. IS BRITAIN WRONG?

Through her Government, South Africa has arranged to barter wool in return for German manufactured goods. Berlin now reports that Australia is negotiating for a similar arrangement. Last season Australia sold £8,300,000 worth of wool to Germany, and the latter’s virtual abstention as a buyer this season has been a matter of the utmost concern to Australia, for the absence of so important a buyer lessens competition and depresses prices. It is certain that this new development will be viewed with extreme anxiety in Britain. The more manufactured goods that arc bought elsewhere by the oversea dominions the less is Britain likely to export to them. There is thus a prospect of the good results attributed to the Ottawa Conference by Mr Walter Runeiman being nullified. He is cabled as having attributed a 23 per cent, rise in British exports (comparing the first ten months of .this year with those of 1932) as a result of trade agreements deriving from Ottawa. A set-back to Britain’s export trade after a period of gradual recovery would be little short of disastrous. And there is a possibility that the barter system might not be confined to wool. The producing interests in all the dominions are in a ferment over the disinclination of Britain to accept from them shipments of foodstuffs in excess of stipulated quantities. Goods are not destroyed by being kept out of Britain. One and all the dominions have rejected restriction of production as a policy of despair. If the British ■market is restricted the dominions must seek markets elsewhere. They will have to bargain for them, and the

counters in such bargaining are trade reciprocity. In Germany’s case reciprocity must be reduced to its most naked form —goods for goods of precisely corresponding value. Should Australia bring off a barter deal for some of her wool, why should she not extend it to meat? The Germans have been warned by their dictator that this winter is to be a period of belt-tighten-ing. If Australian meat could find entry into Germany without the necessity for the Germans to find foreign exchange and to pay for it, the glut of supplies of which Britain complains would be eased, and prices in Britain might advance, temporarily at least. And that is what the champions of British agriculture profess to desire, in our producers’ interests as well as their own. But at what an ultimate cost it would bo to Britain! Her export markets in the dominions. are worth more to her than even her agriculture. Before ever barter proposals, with any of the dominions as one party, were mooted, English economists have pointed out this very possibility ot twoway trade diversion as a result of Britain’s quota system. In particular a writer ’in the 1 Round Table ’-—a journal which is recognised as fairminded and as having no axe to grind —has declared that the present agricultural policy of Britain, though dictated by the best intentions and conducted with great energy and ingenuity, fails when true economic tests are applied to it. What is really wrong with British farming is that (like New Zealand farming) it is heavily loaded with mortgage debts in an era of low prices for products, and the land lias to bear crushing rates and taxes, among which latter the death and estate duties are “ penalising.” Instead of the obvious remedy being applied recourse is had to “ protection,”' whether in the form of tariffs, quotas, or subsidies. Broadly speaking, the quota system, present or prospective, traces back to Ottawa, and in the light of subsequent developments Ottawa (according to the writer quoted) has been a very partial success indeed, as well as a breeder of discord. The trouble was that Ottawa was not a decisive move towards genuine economic co-operation. Some of the dominions (ourselves included) went back on their bargain by currency depreciation as soon as it could be “ decently ” done. On that account they have the less ground for complaint that Britain, finding her agriculture in no better plight since Ottawa, suggests voluntary restrictions on our shipments, with quotas always in the background. When Britain was virtually forced off Freetrade by Continental and Asiatic dumping and currency manipulation she incorporated in her Import Duties Act the principle of a free. list for Empire products. But if a free list does not mean free entry, because of quotas, the concession becomes unreal. The position which will inevitably be reached if present or threatened policies are pursued to their logical conclusion is that Britain will be hurt as much as the dominions. So long as the wants of the poor go unsatisfied restriction of supplies is a vicious remedy; and in Britain's depressed areas there is desperate poverty and privation. As to those who are not so poor, there is bound to bo a deep-seated revulsion against marketing schemes which are allowed to become producers’ or middlemen’s monopolies aimed at raising prices through limitation of output or supplies. Both directly and indirectly prices of many necessaries are being raised to the British consumer. According to the ‘ Round Table,’ the total of direct subsidies to producers of foodstuffs is £18.000,000 a year. It is more difficult to state the extra cost to consumers through quota policies designed to raise prices through restricted supplies, but it is estimated at from £10,000,000 to £12,000,000 a year. Possibly a --ugh outline ■ of Ottawa decisions and both prior and subsequent developments in respect of various foodstuffs may afford a glimpse of Britain’s situation —and our own:—

In respect of meat, restricted Argentine supplies were not to be dutiable until November, 1936, but there was to be voluntary regulation of Australian and New Zealand supplies until June 30, 1934, when quotas were liable to be applied to them also. This is understood now to be imminent. The suggestion of a levy on imports of dominion meat was dropped, and, instead of being derived from that source, the British subsidy to her beef growers comes from the Exchequer—£3,ooo.ooo for the seven months ending March 31, 1934. This subsidy is an interim policy. The imposition of a quota on Danish bacon had curious effects. Danish prices leapt, while British over-supplies so crippled British curers that the Government advanced them a considerable loan. The position is still obscure. As to dairy produce, it was agreed at Ottawa that no quotas would be applied to New' Zealand or Australian shipments until November, 1935. Before long New Zealand suggested British quotas on Danish and other foreign supplies. Britain countered with a 10 per cent, reduction for New Zealand and a 20 per cent, reduction for foreign, which sot the New Zealand industry in an uproar. The interim British policy is a subsidy to her milk industry of £3,500,000, spread over two years, to ensure minimum prices of 5d per gallon in summer and 6d in winter for surplus “ liquid ” milk supplied to the pool, besides £1,750,000 in the same period to ensure purity and extend consumption of milk, as in the schools, etc. As to wheat, to guarantee a price of 45s per quarter (5s 7Jd per bushel) to the British grower a sum of £4,500,000 a year is derived from a tax on flour, whether imported or milled in Britain. The sugar beet industry is assists

£6.000,000 , a year direct subsidy, £2,500,000: and remission of Excise duty, £3,500,000. There are also marketing schemes for both hops and potatoes, dependent on limitation of home output and still more of imports. In place of ail the above the ‘ Round Table ’ advocates subsidies at U” of consumption (for instance, giving milk to school children) rather than at ,;l:c point of production: also an Empire policy of production based rather on expansion than restriction of supplies.