PROTECTION FOR BRITAIN.

New Zealand Herald, Volume LXVIII, Issue 20988, 26 September 1931, Page 8

PROTECTION FOR BRITAIN.

The abandonment of the gold standard by Britain has been followed by a precipitous fall in the value of the pound as measured by foreign currencies. The latest quotations represent the effects of only four days' experience under the new conditions, so that it is too soon to say whether the depressing influences have exhausted themselves or at what point stability will be reached. At present the pound is quoted in the American exchange at 3 dollars 89j cents, which is nearly 20 per cent, below parity, so that it has now a purchasing power in the United States equivalent to that of only 16s last week. The lowest point touched by the dollar exchange after the war was 3 dollars 20i cents in the spring of 1920 ; it is now as low as it was in the early part of 1921. Other exchanges display depreciation to approximately the same extent, though it is of special interest to New Zealand that the former relations to the currencies of Denmark and Argentina have altered very slightly. The popular reaction in Britain to these sensational developments has been a remarkable manifestation of enthusiasm and optimism. Judging by the cabled reports, the clouds of depression have been swept away by the economic blizzard that forced Britain to retreat from a position won by much patient effort and held by painful sacrifices. Commerce and industry have been animated by the realisation that, by this twist of fortune, a substantial barrier of protection has been raised against foreign imports and the cost of British exports in foreign markets has been drastically reduced. Theoretically, at least, an article of British manufacture which cost £l in America last week can now be imported for 16s. But the advantages of a depreciating currency arc not unqualified, and Britain is singularly vulnerable to the adverse effects, for the turning of the exchanges against her automatically raises the cost of the raw materials for which she is dependent on foreign countries to a large extent. As Sir John Siinon reminded the House of Commons, protection by currency depreciation operates without discrimination against luxuries, raw materials and foodstuffs. He was a little hasty in saying that it did not; allow for Imperial preference. In practice, since Australia, New Zealand and India are so definitely linked to sterling, they secure the full preferential benefit of the new conditions. Temporarily British industry will derive substantial advantages from the exchange situation, and the experience will certainly be long enough to constitute a practical test of protection. If the prospect of this experiment, necessarily clumsy in its operation, is sufficient, to revive confidence in Britain, there can hardly be any doubt that the nation would welcome the introduction of a full policy of scientifically designed tariff protection. Foreign pressure compelled Britain to defend herself in the monetary sphere ; bitter reflection upon the realities of the situation has converted the people to recognition of the need for defence of their commercial and industrial interests.