THE H.B TRIBUNE TUESDAY, NOVEMBER 1, 1932 PAYING FOR IMPORTS.

Hawke's Bay Tribune, Volume XXII, Issue 272, 1 November 1932, Page 6

THE H.B TRIBUNE TUESDAY, NOVEMBER 1, 1932 PAYING FOR IMPORTS.

In a recently received number of the London “Spectator” Mr. Arthur W. Kiddy, a journalist well known on the other side of the world, deals with an aspect or the economic position in the Old Country which he claims is not properly understood there and is certainly not fully appreciated here. What he seeks to point out and to emphasise is that the main problem facing the country is resolving itself into a question as to how it is to go on paying for immense and essential imports, firstly, of foodstuffs wherewith to feed its people and, secondly, of raw material wherewith to feed its factories and so provide wages wherewith to buy the food. Even the novice in finance, as he' says, will recognise that things purchased, whether at home or from abroad, have to be paid for and that, although this payment may take the form of money, it is really an exchange of goods and services. “If, for example,” he says, “I purchase a suit of clothes, I make payment'in money, but I am able to have money only because I have already sold either goods or services for which I have received payment in money.” So with international transactions payments abroad for food and raw material are made with money or from credits arising from goods and services sold or rendered.

The question therefore is as to how Great Britain stands with regard to her earnings abroad that can be made available for payment of her necessary imports, It is, of course, well known that Britain’s “visible” exports, mostly taking the form of manufactured goods, have for many years been insufficient, as expressed in money value, to pay for the money cost of her imports. Thus, in this respect, she seemed to be yearly going to the bad to the extent of some hundreds of millions sterling. Prior to the war, however, she was able to offset against this adverse balance the earnings that have come to be classed as “invisible exports,” a not altogether apt phrase, but useful for the purpose for which it was coined. The chief item in these earnings consisted in interest receivable on money invested abroad during the previous hundred years or more whether on loan to Governments or to private undertakings. Another important item was* found in the freights paid to British shipping for the carriage of foreign goods, while a big aggregate was made up from insurances, commissions, banking accommodation and sundry other, like sources. In the final result Great Britain found herself al; most invariably at the end of every year with a substantial cash balance that was in turn available for further investment abroad,

thus going to swell still further the volume of “invisible exports.” This happy annual outcome has, however, suffered a severe setback since the war. In the first place, an immense proportion of Britain’s foreign investments had to be realised in order to provide funds for the conduct of the war itself, thus very materially reducing the item of interest income. Beyond this, of more recent years there have been very serious defaults on the part of foreign borrowers, both Governments, municipalities and industries in the payment of interest on their loans. On the other hand, in considering interest there has to be taken into account some £3O-odd million a year payable to ’the United States in respect of war-debt. Then, too, stagnation in trade and increase in foreign shipping have combined to reduce British freight earnings to An extent that is but little understood by any but those connected with the business. The cumulative effect of all these, and some other, adverse factors has been that the Old Country in the mass is earning abroad very little, if any, more than is enough to meet the deficit arising as between “visible” exports and imports which continues to be very much what it was in better days. What all have to recognise, therefore, wage-earners as well as wagepayers, is the absolute necessity for producing exportable wares at a cost that will enable them to compete successfully on the wotld’s markets. What we here, as exporters of food to the Old Country, have to understand is that improvement in prices is very largely dependent on this purpose being achieved. Most certainly neither strikes nor lock-outs, at either end, are likely to help to its accomplishment.