U.S.A. LOAN TO BRITAIN

Greymouth Evening Star, 8 December 1945, Page 5

U.S.A. LOAN TO BRITAIN

MR. ATTLEE’S STATEMENT EMPIRE PREFERENCE AFFECTED Adequate Compensation Required

LONDON, December 7. • “The statements make it clear that we, in pursuit of the objectives of Article 7 of the Mutual Trade Agree- i ment, are' ready to agree that the existing system of Empire preferences will be contracted, provided there is adequate compensation in the form of an improvement in trad- , " ing conditions between the Commonwealth and Empire and the rest of the * world,” said Mr Attlee in the i House of Commons, when he welcomed the United States proposals for an international conference on trade and employment. These proposals were issued in a Washington White Paper, with the announcement of the American loan to Britain. The Prime Minister added that the Washington talks preceding the publication of the United States document had been conducted on behalf of Britain alone, although close touch had been kept with the Common- | wealth partners during the conver- ! sations. “It is quite understood that each Government concerned will be able to approach the international discussions with full freedom of action,” he said. Mr Attlee added that the United States suggestions would be subjected to full discussions before a final agreement was reached, but the Government desired to express its agreement with the broad objectives, which were to draw up a code of conduct for international commerce and facilitate its expansion in order to secure as far as possible full employment, at rising standards of living in all countries participating in the scheme. Mr Attlee. declared that the document recognised the fundamental fact that it was essential to clear obstacles away from the British export of manufactured goods without abandoning the British right to control imports so long as this was essential to Britain’s balance of ternational payments. He pointed out that there was no question of the unilateral surrender of preferences. There must be adequate compensation for all parties concerned. It must be realised that some preferences were of particular importance to the economy of. certain parts of the world as some tariffs were important in others. The elimination of all preferences would be such a step as would require a substantial and widespread reduction in tariff and trade barriers by large numbers of countries. The Government earnestly hoped that all the countries participating in the international meetings would make concessions in their existing tariff barriers as a lead to mutual satisfaction. SIGNING THE AGREEMENT. LONDON, December 6. The agreement for the United States credits of 4,400,000,000 dollars to Britain was signed in Washington this morning. Lord Halifax was the signatory for Britain and Mr. Vinson, Secretary of the Treasury, for the United States. _ Mr. Vinson said: The BritishAmerican discussions have resulted in a happy conclusion, embracing many advantages for American businessmen, farmers, and workers.” Mr Clayton, Assistant Secretary of State, told the Press that the entire 3 750,000,000 dollars’ loan would indirectly in due course be spent in the United States. Furthermore, it would enable Britain to take full partnership with the United States in a policy of trading with many nations instead of making agreements with nations separately or drawing them together The Secretary of State (Mr. Byrnes), at the signing ceremony, commented that the financial and trade agreements represented an effort “to establish one world economically ” . , Lord Halifax said that BritishAmerican co-operation had n?* with the end of the war. Another h gh British official said: Fi , negotiations were not soo bad, we have not received as much as we wanted.” ~ , „ The Associated Press says that the British first asked for credits of 6,000,000,000 dollars, interest tree. U.S.A. WHITE PAPER WASHINGTON, December 7. The United States White Paper issued with the loan announcement proposes that me nations of the world act collectively to break down international trade barriers and promote full employment. , . r< Although conceding that no Government is ready to embrace free trade in any absolute sense,, the White Paper proposes that the nations make a determined start in that direction m the following ways:— (1) An international conference on trade and employment, to be convened next Summer undei United Nations sponsorship. ; (2) A permanent international trade organisation to be established undei the United Nations as a central agency for promoting world trade. The White Paper- says: Collective action to prevent economic warfare is a necessary supplement to the United Nations organisations efforts to prevent military warfare. “International trade is curtailed by four general factors: — (1) Government restrictions such as tariffs, export licenses, import quotas, and exchange controls; (2) restrictions by private combines and cartels which divide the world into exclusive markets,stifle competition, keep prices up, and keep production down. (3) Fear of violent sudden changes in the demand for, and supply of, certain primary commodities. (4) Wide fluctuations and the fear of these in production and employment. • The White ’Paper further proposes that negotiations for the widespread reduction of tariffs and other govern-ment-imposed barriers be started in advance of the international conference. • AMERICAN PRESS OPINIONS. NEW YORK, December 7. The “New York Times,” in a leader, says: The advantages to be gained by prompt ratification of the agreement are mutual. Riding high above all financial arid economic considerations is the overwehlming importance of maintaining in these critical, uncertain times, the closest . possible ties of friendship and cooperation among English-speaking peoples—between a Strong United

States and a strengthened Britain. The agreement is so broad in scope, so soundly conceived, and so beneficial in its purposes that it deserves the support of the American people and Representatives in Congress. We hope Congress ratifies the agreement by an overwhelming vote, both as a contribution to a world recovery and as an unmistakeable notice that close, confident co-opera-tion of the English-speaking peoples, achieved during the war, a life and death struggle, continues in peace. The New York “Herald-Tribune,” in a leader, points out that the lendlease debt has been wiped off and been paid in British blood. It says: “We are offering to make not a very onerous investment, first, in a British economic recovery, but more particularly in a restoration of a more or less free world market, relieved of exchange controls, trade barriers, governmental monopolies, and discriminations, and also totalitarian regimentations, which, otherwise, threaten to overwhelm us all. The attempt would, be worth while in our own interest in any case, but it is doubly so when it also operates to assist Britain, the one great Power with which our fortunes are most indissolubly linked, and which shares with us the responsibility for the future of democracy on this earth.” The “New York Times’s” Washington correspondent says: Probably the most important part of the Bri-tish-American agreement was the lend-lease settlement, in which the United States writes off approximately 25,000,000,000 dollars of lendlease, on account of mutual victory benefits. This follows a policy laid down by Mr. Roosevelt, whereby the United States, for the first time m history, writes off war debts. In all, the British Commonwealth has received 29,000,000,000 dollars of lendlease and has paid back 4,000,000,000 .dollars. About 20,000,000,000 was consumed either as food, clothes or ammunition. Lend-lease settlements for other parts of the British Commonwealth are still a matter for negotiation, but it can be expected that the lend-lease to these countries will also be written off. The Canadian Press Association says: The agreement sets a pattern for coming Canadian credits, because it is stipulated that Britain shall not arrange loans with any British Commonwealth country on terms more favourable than those granted to the United States. Official circles greet the British-American agreement with satisfaction. BRITISH DIVIDED OPINION. GAINS AND LOSSES. (N.Z.P.A. Special Correspondent.) (Rec. 10 a.m.) LONDON, December 7. The announcement of the BritishAmerican loan settlement overshadowed all other news for the moment. It was instantly clear _ that there were sharp divisions of opinion over its terms. Against the immediate advantages of relief provided by the loan and quicker relaxation of war-time severities are placed the long term effects and influence it will have on Empire trade and hence Empire relations. , Britain will give up the right to control and manage the sterling area, and the Empire dollar pool is apparently to be dissolved. There is to be full consultation with the Dominions before the International Trade Conference. Opinions here range from, if not wholehearted agreement with the proposals, at least relief that a common basis for action has been found with the United States, to a flat demand that both nations should reject the whole plan. The chief objection and uncertainty concentrates upon the fact that Britain will become a close partner in world economic plans, largely sponsored by America, and in the working out of which America is bound to play a dominate role. The world will become immediately open to American exports, which at present are greatly needed, but doubts remain of the eventual outcome. The question is asked by what means dollars are likely to be forthcoming for payment of interest and principal on American loans and the purchase of American goods. What will be the consequences of any abrupt American overseas trade due to domestic depression? It is pointed out that Britain’s average interest payment will be £36,000,000 annually for 50 years, or almost exactly the annual transfer which the Baldwin Government undertook in 1923 after the last war, and which Birtain had to repudiate. To-day, of course, Britain’s position as a debtor is worse. There is every indication that the Parliamentary debate on the subject and particularly the acceptance of Bretton Woods, will be heated and bitter. The issue cuts across party lines, but it seems unlikely that the request to take off the whips will be agreed to by the Cabinet. Even those least opposed to the proposals regard them at the best as a compromise with the alternative of an indefinitely prolonged period of austerity for this country, or an increasing trade war with America, the consequences of which would be difficult to estimate, and which few care to contemplate. MAKING THE~BEST OF IT. (Rec. 11.50 a.m.) LONDON, December 7. The point is we get the dollars necessary to avert further belt-tighten-ing, and ease for Britain’s transitional difficulties, says the Australian Associated Press financial correspondent. That point is foremost in the cross-section of official economic, financial and industrial opinion. A severely practical view is given that Britain’s dependence in the present straitened > circumstances is on external financial aid and there is no alternative to Britain’s' acceptance of the loan with the conditions. There is, nevertheless, not only disappointment at the apparent repudiation of the equality of sacrifice principle, which, if implemented, would have assured Britain of a squarer deal, but undisguised anxiety about Britain’s ability over a period to discharge obligations to both America and the holders of sterling balances. This is the line taken-in papers such as “The Times,” “Economist,” and “Statist,” in which it is pointed out everything depends on America’s foreign trade policy. The “Economist” says that the three documents —the loan agreement, Bretton Woods, and the principles of commercial policy—together make up a bitter pill to swallow

and cast doubts on the-eventual satisfactory operation of Bretton Woods. Other observers find it difficult to envisage any workable alternative to Bretton Woods. Whatever doubts were earlier held by the Ministers, such as Mr. Shinwell, Mr. Bevin and Mr. Bevan, the City now believes Cabinet is agreed on the acceptance of Bretton Woods. Rejection consequences (Rec. 10 a.m.) ‘LONDON, Dec. 7. The Chancellor of the Exchequer will face criticism of the loan agreement in the Commons next week, says the . Exchange Telegraph Agency’s political correspondent. As the Government sees it, disagreeable consequences which would follow the rejection of the agreement by Comgre'ss and the British Parliament include, firstly, a period of restriction and austerity for Britain, far more severe than anything in the war years; secondly, the inability of Britain to import such quantities of foodstuffs generally _ regarded as essential for preservation of the normal standard of life; thirdly, clothing shortage worse than at present, fourthly, practically nothing smokeable. These are doleful prospects on which the Government will invite critics to ponder before advocating rejection. BRETTON WOODS PROPOSAL. LONDON, December 7. The Press Association correspondent, commenting on the American loan, says: “It is regarded as the biggest of its kind ever'granted by one country to another, but critics in the House of Commons intend to raise the old question of the gold standard. They contend that by accepting the loan we agree to the Bretton Woods financial arrangements and the establishment of an International Monetary Fund, which constitutes a return to gold, with all the dangeis which that entails. “Government speakers, led by the Chancellor of the Exchequer (Mr Dalton), will take the view that it does not mean a return to gold in the old sense, there being consider - able elasticity about the arrangeMr. Morrison, Lord President of the Council, announced in the House of Commons that it would be necessary to pass by the end of next week a short Bill enabling the Government to take such action respecting the Bretton Woods financial . agreement as needed specific legislative authority. The Bill would be presented to-day. Mr. Norman Smith (Labour) protected against the House being asked to take far too rapid action on a tremendously important matter. Mr. Robert Boothby (Conservative; recalled repeated pledges by successive governments that no final, decision about Bretton Woods would be taken until the House had fully discussed it. . Mr. Attlee said that before a decision on Bretton Woods was taken the House would have an opportunity for full discussion during a two days debate on December 12 and 13. 1 think that is fully honouring the pledge,” he said. Mr. Stanley Evans (Labour) asked. “As many in the House and in the country regard Bretton Woods as economic strangulation for the British Commonwealth, will the Government consider taking off the whips next week? n Mr. Attlee replied: No. The fact that certain, people hold, certain °Pj n " iofis does not necessarily mean that we can take off the whips. TERMS OF BILL. (Rec. 10.40 a.m.) LONDON, December 7. The Bretton Woods Agreement Bill, which the Government expects to pass through all stages next week, was introduced in the Commons and read a first time. Its purpose is to give effect to the international agreements reached at Bretton Woods for the establishment and operation of an international monetary fund and an international bank for reconstruction development. The Bill provides for the payment of a subscription of approximately £325,000,000 to the fund and the same amount to the bank. Of the latter amount, only 20 per cent, can be called up in the first instance. All exchange operations between the United Kingdom and the international monetary fund will be carried out through the Exchange Stabilisation Account. Any charges arising from these transactions will be borne by that account. Subject to this any receipts from the fund or the bank are payable to the Exchequer. The Treasury may create non-interest bearing and non-negotiable notes in which under agreement the fund or bank may temporarily invest any surplus sterling in their hands. The original membership of the Bretton Woods system involves a signature agreement by December 31. If Britain signs the agreement she will do on behalf of all territories for which she is responsible. Australia, New Zealand, Canada, South Africa and India are entitled to be members in their own right. No direct financial liabilities are imposed by the Bill on any Government other than the United Kingdom Government. The Press Association says that within an hour of publication of the Bretton Woods Bill, two Conservative members, Mr. Boothby and Mr. Hollis, tabled a motion to reject it. They also put down a motion asking the House not to approve of the Bili and inviting the House to agree, to financial arrangements with America. BRITAIN’S LOW RESERVES . GOLD AND DOLLARS. LONDON, December 7. The gold and dollar reserves of the United Kingdom and other countries in the sterling area fell to only £3,000,000 in April, 1941. This was disclosed by a Government White Paper published last night, containing details given during the BritishAmerican loan negotiations of Britain’s huge financial contribution to win the war. The low ebb of £3,000,000 was reached soon after the passage of the lend-lease Act by the United States, and before its efforts could be .felt. Reserves to some extent have-since been built up again, largely because the pay of the United States forces in the sterling area brought in considerable dollar sums, but they are still below the pre-war level and “manifestly inadequate in relation to the immediate needs of the United Kingdom itself and to the problem of releasing accumulated balances.”

British export trade shrank to below a third of its pre-war volume, and could be expected in 1946 to cover not more than half of essential expenditure on a minimum volume of imports and other necessary overseas payments. It was explained during the negotiations that British merchant shipping during the war lost more than half its pre-war tonnage, and that in spite of new building it was now be-

■ / low three-quarters of the pre-war figure. The net income from overseas investments in 1945 would be less than half that of 1938. The White Paper stressed the magnitude of the overseas deficit likely before equilibrium is restored. It estimated that the volume of exports would be required to increase at least 50 per cent., possibly 75 per cent., over the pre-war figure, to pay for the prewar volume of imports and make up for the loss of other external earnings. It was hoped that actual cash receipts from exports would have attained the pre-war level early in 1947. The Government would also have to meet expenditure incurred in maintaining the/ occupation forces abroad. An estimated deficit in the balance of payments in 1946 of £750,000,000, which was reached “with a fairly large measure of uncertainty,” was that adopted as the starting point of any calculations as to the future position It was similarly estimated that there was likely to be a deficit of £500,000,000 both in 1947 and in 1948, with more modest deficiencies in 1949 and 1950, before the attainment of a stable eauilibrium. This left a cumulative deficit of at least £ 1,250,000,000. The White Paper emphasised that these estimates were precarious, in view of the uncertain conditions during the years immediately ahead. AUSTRALIAN COMMENT. mr: chifley’Fstatement. CANBERRA, December 7. Referring to the British-United States financial agreement, the Prime Minister, Mr. Chifley, emphasised that the Australian Government is not in any way committed to these agreement’ proposals. Australia, he said, would attend the United Nations’ Conference next year to consider these proposals, and also a preliminary conference to arrange for the relaxation of tariffs and o± trade barriers. Mr. Chifley said: “After the concellation of the Lend-Lease, the sterling bloc countries were compelled to reduce to the minimum any purchases involving dollars. This blocked the purchase of petrol handled by the American refineries, or carried in the American ships. A relaxation of the petrol rationing in the British Commonwealth has been withheld until the dollar credit negotiations between Britain and America had been completed. The loan agreement will ease the pressure on the slender existing dollar resources, with substantial benefits to Australia. The capacity of the sterling-owned petrol refineries is sufficient to meet all or the present sterling country demands, but the sterling countries lack tanker capacity. As the refinery facilities can be expanded, and as Empireowned tankers are released from war service, the British Commonwealth will become independent of any dollar country for liquid fuel.” An early review of the petrol rationing in Australia, with a view to relaxations, is likely to follow the U.S.A.-British agreement. Dealing with the preliminary trade conference, Mr. Chifley said that the more important trading countries, including Australia, would be asked io negotiate trade arrangements, so that plans for the relaxing of trade barriers could be submitted to the United Nations’ Conference. He added: “The Australian Government is ready to join in discussions of international trade, and to engage in bilateral negotiations on the basis of 'making concessions .in return for equivalent concessions by other countries, particularly by the United States. ' INDIA’S RECEPTION ... (Reed.* 10 a.m.) LONDON, Dec. 7. The Exchange Telegraph’s Agency correspondent in Calcutta says: The first reaction of India big business to the American loan was disappointment at the failure of the United States to insist on the immediate freeing of dollar assets held by India and other Empire countries. With the easing of the exchange position for Britain, Indians see no reason for an indefinite postponement of repayment of four thousand million sterling debt to India.