THE New Zealand Herald AND DAILY SOUTHERN CROSS. WEDNESDAY, AUGUST 11, 1920. THE BALANCE OF TRADE.

New Zealand Herald, Volume LVII, Issue 17546, 11 August 1920, Page 6

THE New Zealand Herald AND DAILY SOUTHERN CROSS. WEDNESDAY, AUGUST 11, 1920. THE BALANCE OF TRADE.

A situation long unfamiliar in the commercial records of New Zealand has developed during the past few months in the form of an - adverse balance of trade. For many years the external trade of the Dominion has shown an excess of exports over imports, the nominal trade balance rising in 1919 to the enormous figure of £22,000,000. The returns for the first six months of this year disclose a total trade of over £47,000,000 which indicates figures for the calendar year exceeding the record of £83,306,000 last year. But there has been a remarkable, and, in view of all the circumstances, a disturbing change in the character of the returns. It appears in the following comparison of the figures for the half-yearly periods: —

Exports. Imports. Excess. £ £ £ Ist Half, 1918 18,364,650 11,479,951 6,884,699* tod Half, 1918 10,108,847 12,753.993 2,645.146+ Ist Half. 1919 29.570,348 15376.502 13.693,846* 2nd Half, 1919 23,064,322 14.794,937 8,269,385* Ist Half. 1920 22,824,872 24,198,674 1.373,802* "Excess of Exports. tExcess of Imports. Exports in the first half of last year exceeded imports by 86 per cent. ; in the past six months there has been an excess of imports over exports, relatively small, but actually significant, since it has developed rapidly in the second quarter. The returns for the first three months showed exports greater than imports by £1,628,000, though this balance concealed an excess of imports in February of £227,700. The monthly returns show considerable fluctuations in the export trade, but the recorded value of imports has steadily increased from £2,944,000 in January to £5,228,000 in .Tune, while the adverse trade balance was £667,000 in April, £530,000 in May, and £1,788,000 in June, the excess for the quarter being £2,985,000. There, is little prospect of any material increase during the next six months in either the volume or the value of exports, while the indications are of larger and more costly importations, so that the year will probably show a substantial excess of imports over exports. The most satisfactory feature is the marked revival of trade with Britain. Any analysis of the official trade returns is embarrassed by the fact that whereas the recorded value of exports is reasonably accurate, those shown for imports are seriously under-estimated. The latter represent the values declared for Customs duties, the figures being determined by the addition of 10 per cent, to the fair market value in the country of exportation, and as this arbitrary method does not reflect the great increase in ocean freights and other charges it is estimated that the landed cost is at least 20 per cent- greater than the Customs entries. If this adjustment is made in the statistics for the past six months, the adverse balance is no less than £6,213,000. Commodities for which quantity statistics are collected display as large increases as the latter figure suggests. Tea is one of the most remarkable items. The imports in six months total 9.853,3261b, a quantity exceeding by 1,350,0001b the whole importation in 1919, and nearly equal to the previous record for the whole of 1914. In that year the imports were at the rate of 8.721b per head of population; already in six months the Dominion has laid in stocks equal to 8.841b per head. coffee, and chicory amount to 846,1231b, as against 992,3971b in the previous 12 months. Imports of dried fruits have increased tenfold—from 1,262,6331b in the first six months of 1919 to 12,624,9401b in the corresponding period of this year. Benzine, benzolene, and kerosene amount to 9,819,435 gallons, compared with 5,336,704 gallons in the corresponding six months of last year. Few of the important items infoodstuffs and manufactured goods are excepted from the general expansion of trade, whereas there has been a considerable shrinkage in the exports of some of the staple products of the Dominion. Notable among these is wool. In the first six months of last year the shipments totalled 517,186 bales and in the second 272,159 bales. This year only 248,508 bales have been exported. Butter and cheese shipments total 892,520cwt, as against 1,175,957cwt in the first six months of last year; frozen meat, however, has increased from 1,388,868cwt to 1,618,301cwt. The returns of trade in merchandise alone do not disclose the actual " trade balance" of the Dominion. Account must also be taken of the " invisible imports," of which the chief are interest on external debt and freights on both imports and exports. The public debt alone has increased by over £26,000,000 in the past six years, while the annual bill for shipping services is now far greater than it was before the war. Thus in normal conditions, the prosperity of the Dominion cannot be maintained without a considerable balance of exports over imports. Nevertheless the appearance of an adverse balance may for some time at least have no serious effectsDuring the war exports exceeded imports by such vast sums that there has been a considerable accumulation of credit in London on New Zealand accounts, and this fund can only be liquidated by importing merchandise. Yet, in comparison with the cost of manufactured goods, the London credits are limited and purchasing on the scale of the last three months may soon create difficulties in financing trade, especially as the new season's produce will not be realised for several months. It is therefore important that the trade statistics should be closely watched. The new situation emphasises the need for reform in the compilation of import values. For Customs purposes, an arbitrary valuation has been maintained, and for that purpose it is sufficient.

As an index of trade volume, however, the Customs entries are utterly misleading. " : The recent Imperial Statistical -Conference recommended that imports should be valued as at arrival, exclusive of landing charges, so that the records would disclose the actual cost, including insurance and freight, while exports should be recorded on the " free-on-board" basis. At present the official figures show exports valued f.o.b. and imports valued by a method that requires continual adjustment by a factor that has. been estimated at 20 per cent. Statistics should be so nearly accurate that all who rely upon their guidance may accept them as sufficiently approximate to the facts to be accepted.