THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY APRIL 30, 1936 SEQUELS TO THE GUARANTEE

New Zealand Herald, Volume LXXIII, Issue 22406, 30 April 1936, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY APRIL 30, 1936 SEQUELS TO THE GUARANTEE

The Government cannot stop at guaranteed prices for primary products. Even if it wished to proceed no further, it has taken a step that must be follovred by others if the balance of production is to be preserved. The Government is well aware of the lact and in its policy has provided ';hat planned production shall follow guaranteed prices. This sequel is not provided for in the Primary Products Marketing Bill but, given guaranteed prices, it is easily seen thet restrictions on production will b 3 inevitable. In the past supply has been governed by demand and the measure of demand is given by prices. Hence prices tend to regulate supply. Under the Government's ischeme, however, this regulator will no longer operate. The price will not be affected by demand, being more or less artificial. The farmer need have no care for markets or what his butter will fetch. In future that will be the Government's concern. He himself can concentrate on producing butter, cheese, pigs and calves to the economic limit set by the price fixed. If the latter is high, in relation either to London prices or to the returns from other branches of production,, such as sheep farming, then a marked swing to dairying will take place: and the Government will have on its hands a bigger export surplus to quit in shrinking world markets. From these difficulties of price adjustment ard embarrassing export surpluses, the Government proposes to escape by ascertaining domestic and export demand and regulating farm production to supply the required quantities. The economic governor of prices is to be replaced by State control. Not much has been said by Ministers about this corollary of guaranteed prices, and no legislative provision has yet been made for planning farm production, bul; it is an inseparable part of Labour's scheme for producers.

Prior to the general election Mr. Nash explained the party policy in a statement countersigned by Mr. Savage. So far the broad outlines of the scheme have been followed with remarkable fidelity and in his speeches on the present bill, delivered in the Souse of Representatives on Tuesdj.y and last night, Mr. Nash has given indications that he intends to presn on to the conclusion. On Tuesday, for instance, he spoke of his idea of concluding reciprocal trade agreements, allocating the credits from sales in particular countries to purchases from those countries. This proposal arises out of the necessity to Jiscertain demand, if production is to be regulated to avoid gluts. F:rst Mr. Nash intends to ascertain the New Zealand demand for particular commodities, not an easy tusk in itself. Then he proposes by reciprocal trade agreements to determine what quantities other countries will buy, encouraged by the offer of equal purchases on New Zealand's behalf. In other words, Mr. Nash is going to ask overseas customers, and principally Britain, to place orders in advance for butter, cheese, meat, wool and so on. He is to invite them to name their quotas. If he manages to complete negotiations —it will be miraculous if all the nations fall in with his plans—then he will be able to ascertain the demand for all these things by adding overseas orders to internal requirements. Supposing he succeeds in getting thus far, Mr. Nash will next be concerned with supply. He finds that he will need for home and foreign consumption, say, 150,000 tons of butter, 240,000,0001b. of wool, and so on. Prices will be guaranteed for these quantities and no more. If there is a surplus, the Government will sell it in other markets, the net return being paid to the farmer in the form of a bonus. Mr. Nash does not contemplate a shortage, but, if it should occur in a bad season owing to the failure to guarantee the weather, the farmer would apparently be the loser.

So far, at any rate, it is clear that guaranteed prices will involve the acceptance of national production quotas and of export quotas. It also seems certain that if the farmers as a whole do not keep within the national quotas, each farm will have to be allotted its individual quota. Otherwise how decide who is responsible for the surplus production over demand, production which carries no price guarantee? But whether the national quota has to be subdivided into farm quotas or not, Mr. Nash's scheme doe 3 mean an end of free development on the land. In future production will be cribbed, cabined and confined within the limits set by a State department in Wellington. That is a sobering thought, but, just as serious, there is a further consequence. Mr. Nash's reciprocal trade agreements involve the allocation of export credits to New Zealand's customers. Hence importers will no longer be able to study consumers' demand and seek to satisfy it by buying in the best market. They will have to work within the import quotas applying to particular countries. That is a position which, experience has shown, the overseas supplier may exploit to the prejudice of the New Zealand consumer. Citizens may be left to work out more fully the implications of import quotas. Meanwhile it is important that the farmers and everyone else should realise that the Government's policy does not and cannot stop at fixing prices; a great many other things must also be fixed, involving all the complex corollaries and sequences set out by Mr. Nash.