COMMODITY MARKETS AND PRICES.

Manawatu Standard, Volume LIX, Issue 98, 25 March 1939, Page 4

COMMODITY MARKETS AND PRICES.

WORLD TRADE. (By <r Penloo.”) International trade is once again affected as the result of tlie revival of political tension in Europe and it is doubted ( if anyone can predict the immediate future. Since economic laws will not tolerate an unbalanced position indefinitely, it can saiely bo predicted that an adjustment will bo effected, but this will take time. Trade between the three democracies of Britain, France, and the United States will continue uninterrupted, but even this business may be on a reduced scale. The United States is determined to cut out German trade, and that of Italy and Japan with the United States must be on a lower basis. If these countries cannot sell abroad they cannot buy abroad, and thus other nations become involved in a shrinkage of trade. It was the intention of the British Government to send the President of the Board of Trade to Berlin to negotiate, if possible, a trade pact with Germany, and that the visit is now not to take place is significant. Germany cannot get along without exports ; her economic structure would collapse were that the case. An important factor in bringing about the collapse of Germany in the Great War was economic. Her people were next door to starving, and there was the danger of an internal upheaval. That the tem-

per of the Germans had risen to the point of rebellion was proved by the fact that the Kaiser found it advisable to tlee to Holland. Germany can get from her occupied territories considerable amounts of war material, but it is foodstuffs that she will need, and she cannot obtain these entirely from her own resources. If Germany were unable to feed'" her people .in war-time her collapse would be inevitable for hungry people lose all sense of responsibility. Any restriction in world trade even by a single country would affect others for that country would be unable to purchase and so it has a cumulative effect. The trade of the world to-day is upset and it would he a delusion to believe that New Zealand can bo insulated or isolated from the effects. All the countries of the world arc neighbours and all are dependent upon one another for trade, being so constituted by Nature that the products of one country are wanted by others, and the development of quiet transport brings them closer together. No country rcallv wants trade to slow down, but events often prove too strong to prevent this. IMPORT RESTRICTIONS.

Many retailers who are also direct importers of merchandise are seemingly very anxious to know when the import restrictions will be lifted, and what volume of sterling funds the Government considers should be accumulated before exchange control is lifted. The questions cannot be answered by the Government or anyone else, for so much depends upon the trend of circumstances. If all interested hear in mind that New Zealand is a debtor

country with obligations to meet abroad, they must realise that the balance of payments must be in our favour; that is to say, our exports should exceed imports by about £lO,000,000 at the least in New Zealand currency. Our trade position, according to the latest official figures shows ; as under : < Year ended 1939 1938 Jan. 31 £ £ Exports ... 57,094,635 67,166,203 > Imports ... 54,561,056 57,079,636 1 ■: Export Excess £2,533,579 £10,056,567 ' The above figures illustrate the position quite clearly. For the twelve months to the end of January last ; the exports exceeded the imports by about £2s millions, while for the : twelve months to the end of January, 1938, the excess was £lO millions. Another aspect of the above figures is that while exports have declined by about £lO millions, imports have contracted by only £2J millions. Even had there been no import control imports would have to be greatly reduced. The fact is, there has been heavy importation in the past two or three years, largely warranted by the . expanding spending power ol the people. Now, although Government expenditure is being maintained, private expenditure is being curtailed because the national income derived from the sale of produce overseas lias contracted. To restore the balance of payments there must be drastic reductions in the volume of our imports. Our export trade is declining, partly because of lower prices and partly owing to lower production. How long it will take to restore the position is beyond prediction, but it is probable that it will take many months. EXCHANGE CONTROL. The increase in the sterling funds of the banks will depend upon how soon the imports are reduced. It docs not scorn possible for the Resen o Bank to accumulate a great deal ot sterling funds for it can only gam through the sale of dairy produce overseas. But the amount obtainable from this source is relatively small, and just now this little is being absorbed by tlie Government to pay for railway material, defence equipment, etc. The trading banks will strengthen their overseas Tunds and the question is whether the Government will consider lifting the ban on exchange when the Reserve Bank and the trading banks together hold, say, £l2 millions or £ls millions, or is the control ol exchange to bo a permanent policy ot tlie Government.