SUBSIDY ON EXPORTS

New Zealand Herald, Volume LXX, Issue 21448, 23 March 1933, Page 8

SUBSIDY ON EXPORTS

The determination of the Canadian Government to abstain from any artificial manipulation of the exchange value of the Dominion's currency has been again affirmed by the Minister of Finance in his Budget speech. There has been substantial pressure in favour of depreciation to parity with sterling, but trade relations with the United States are too important to be subjected to such a severe handicap as this would impose, and until a general reorganisation of the exchanges is effected, the Canadian dollar will apparently remain about midway between the United States dollar and the British pound. Nevertheless, the fact that the dollar is at a premium over the pound constitutes a disability for exporters to the United Kingdom and an impediment against the development of the Ottawa Conference policy. The Government now proposes some mitigation of this difficulty by the payment of a subsidy on a limited list of exports, representing only about 7 per cent of the total value of exports from Canada. The plan provides that exporters of these commodities shall receive a subsidy equivalent to the difference between the actual rate of exchange and 4 dollars 60 cents for every pound realised by their sale in Britain, this being at present about 50 cents, or 12 per cent, The scope of the scheme is small, and the cost of the subsidy is probably not serious. Moreover, it is obviously superior to the clumsy expedient of exchange manipulation. But it is only another example of the universal tendency to bring trade to a standstill by giving exporters assistance and encouragement to. meet competition by cutting prices. Theoretically, Canadian exporters will receive a bonus on present prices for meats, cheese, honey and eggs sold in Britain. They will display a unique fortitude if they do not use part of the subsidy to reduce their selling prices to the disadvantage of exporters of similar commodities from other countries, including New Zealand.