THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, MARCH 29, 1933 NEED TO FACE WAR DEBTS

New Zealand Herald, Volume LXX, Issue 21453, 29 March 1933, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, MARCH 29, 1933 NEED TO FACE WAR DEBTS

The British Ambassador at "Washington and the American Secretary of State have admittedly got only part of the way in their official conversations on behalf of their respective countries. In their joint statement they express gratification at the progress made in clarifying the views of officials of the two countries and expectation of continuing the discussions. Both probably realise that to be of maximum value these colloquies must go a good deal further. Tentative and preliminary, they have great possibilities. On the British side. Sir Ronald Lindsay knows at first hand the opinions of the British Government: for the United States. Mr. Cordell Hull speaks as the most, important member of Mr. Roosevelt's Cabinet. If they can come to mutual understanding on facts ( and policies, a great step forward will become possible in Anglo-American service to the whole world. As far as they have gone, the general economic situation appears to have been promisingly traversed up to a point qf critical importance, but it is not the most critical. They are obviously unable yet to make any statement concerning war debts. Unless they agree to leave their task half done, because they know a great gulf separates the British and American points of view upon this subject, they must come to it. It is understood that the British Government accepts Mr. Roosevelt's wishes with reference to the agenda of the World Economic Conference, and these wishes go in the direction of excluding war debts from discussion. On the other hand, there cannot be relinquished the British hope that the adjustment of war debts will shortly become a subject of amicable negotiation with America. For one thing, something must soon be done about the next British instalment, due on June 15. It was more or less clearly understood, when the December instalment was met, that review would be undertaken long before June. Mr. Roosevelt's announced intention of receiving a British delegation charged with powers of negotiation was confirmatory of this, and the recent utterance of his Secretary of State adds an implicit endorsement. To keep war debts out of the preliminary conversations of the Ambassador and the Secretary of State seems therefore to be practically impossible. Sir Bonald Lindsay, fully acquainted with the mind of the British Cabinet, may well feel in duty bound to press its views, and however reluctant Mr. Cordell Hull may be to "sit in," as he says, with representatives of Governments that have not paid their debts, he must know that discussion with Britain cannot be conclusive without some reference to those other Governments. Britain is bound, by the agreement reached at Lausanne, to I accept no terms that confer advantage over other European debtors. This undertaking will be honoured. The American Secretary of State knows it will be honoured. When Washington presses for trade concessions as the price of debt relief, this obstacle must be faced. Britain, in short, cannot and will not act alone. It is quite true that Britain owes more and has proportionately paid much more than any other debtor among the twenty nations concerned, yet this fact so far from justifying exceptionable treatment, will undoubtedly be used to give weight to the British argument for equable revision in every instance. When the position is traversed again, as the mere proximity of a date compels it to be, the principle of capacity to pay —a principle already given a large place in American comment on the debts—will certainly be invoked afresh. That comment has admitted the justice of the principle, with only one reservation, which is fallacious and inapplicable. It relates to European expenditure on armaments, and argues that nations thus devoting large sums could afford to pay their war debts, if they would curtail this expenditure, This contention misses altogether the fact that, while America requires payment in gold, armaments are purchased And maintained with domestic currency and domestic "credit. No new gold would be created by economies effected I through the cancellation of orders j for ships or munitions produced in j domestic shipyards and factories. ■ In the hesitation of Washington to get to grips with the realities of the war-debt question can be sensed a doubt upon the validity of the arguments hitherto popular there. On capacity to pay there can be little difference of opinion: America gave away long ago all logical right to object to it, when striking differential rates of interest in accordance with this very principle. On other aspects there may be a return to earlier contentions, such as that of the post-armistice date of a considerable portion of the loans. This portion at least, it is said, should be paid in full. As it amounts to nearly a third of the debt owing by Europe, the point is important; but it cannot be sustained. It is demonstrable that among the reasons prompting the post-war loans was a desire to safeguard American interests. When the war ended, the British Government withdrew its orders for American foodstuffs at: ruling wartime prices. Immediately, Mr. Hoover, as head of the United States Food Administration, wrote to President Wilson explaining how seriously this would affect America, which had enormous stocks on hand. "We shall have a debacle in the American markets," he said, "and be precipitated into a financial crisis." So new loans were advanced —to help Europe to confinue to buy American agricultural products. The instance is typical. As soon as review of war debts is begun, it cannot be logically stopped until the weakness of the American claim is revealed, and the time is fully ripe I for it to be begun.