THE BALANCE OF TRADE.

New Zealand Times, Volume LXXI, Issue 4496, 25 October 1901, Page 3

THE BALANCE OF TRADE.

(By “Economist.”) Owing no doubt to the proposed Commonwealth tariff, a good deal of attention has recently been given by the press of the colony to the incidence of free trade or protection, and tho meaningless phrase “balance cf trade” has been resuscitated. Notwithstanding aj that has been written on tbo subject by political economists, notwithstanding what Cobdcu and his party have done, notwithstanding tho good effect of England's moiety of free trade, it ' would seem that protee-, tion has not yet received its quietus and that mankind r.ro as ignorant as ever on the subject. I should like to deal briefly with the peculiar meanings attached to the phrase “balance of trade.” It is contended that when a country buys more from another country than,she returns to that country, tho balance of trade is against her. Thus, if Noiv Zealand exports £70,000 worth of goods to America, and America exports £IOO,OOO worth of goods to New Zealand, America is .said to hold the balance of trade, to have the best of tho deal, and to bo rapidly making money at tho expense of. Now Zc:l.and. Protectionists have never yet explained how they arrive at this, extraordinary conclusion, for on tbo face of it New Zealand, having received more than sho sent away, would appear to have tho advantage, although as a matter of fact the gains arc equal, each having received a quid pro quo. But it is alleged that New Zealand, in order to square up tho transaction, would send sovereigns to America to pay for fhc excess of her imports over her exports. Nothing, however, is farther from the truth, for the reason that money (except perhaps in times of war) has never yet been exchanged between States in payment of goods. I am not awaro that there is any record of Now Zealand, for example, having exported money in the payment of her private .or public debts, beyond that which might bo can-icd in the purse of a passenger to meet incidental expenses. Exchange between States really consists of .commodity for commodity, not commodity for' money. 'Tho latter is physically impossible, because it is profitless. Example: ,Jf New Zealand, instead of receiving commodities for commodities, received money, she would have no use for it, beyond the comparatively ‘ infinitesimal amount required for the arts and the currency, and she would therefore have to send it away at a price cq»al to that which sho gave, so that her losses in connection with such a transaction would bo (Ij labour and time, (2) freight and insurance each way. Without looking at statistics, I may presume that New; Zealand annually in the aggregate exports more than she imports, which is unfortunate, notwithstanding tho fact that the “balance of trade” appears to bo in her, favour. The difference between exports and imports in favour of exports goes to pay interest on borrowed money, and it is worth observing that in, the absence of a national debt, or other disturbing influences, the exports would balanqe with tho imports of a country. It is wrong, however, in discussing this question, to single out any one country with which another country may exchange and say that the difference in amount between them is in favour of one and against tho other, .because trade knows neither Governments nor boundaries, and it only exists when each party has an equal advantage. It will be asked, “If New Zealand does not pay tbo balance ot trade in money to’ America, how does she 'pay it ?” As a matter of necessity, if Now Zealand’s ipiports exceed her exports to America, her exports must exceed her imports with some other, country or countries. If the excess is with England, then in that. case New Zealand would satisfy her American creditors through bills of exchange, by giving them orders on her English debtors. Tho American, instead of receiving money from England, would receive goods., The ordinary tradesman will understand that when ho pays his bills to a foreign creditor, his banking house manipulates the business in the way described for him. If any or’ every country prevented goods coming in, none would go out, and so proportionately as protective tariffs block imports they reduce exports. The ramifications of trade are infinitely multitudinous, but the principles are as stated above. So with*,'tbo Commonwealth of Australia; her protective tariff must reduce her exports. 'Were it possible to lay another Australia side by side on free trade principles, the difference would scon become as conspicuous as which existed between protected Victoria and free trade New South Wales. In the event of the Commonwealth continuing to pursue an irrational policy, New Zealand, with her potentialities, b»s it in her power, by the means of peace, by following natural laws, to partially ' depopulate and rise superior to the Commonwealth, and thus dominate the Pacific. Will the great man, Mr Sodden, still rise higher and embrace this opportunity? I maintain that, .while the . Commonwealth is stultifying itself, it is possible for New Zealand to move rapidly to the forefront. In conclusion, I have only to say that it could be, demonstrated that in the event of New Zealand’s joining the Commonwealth, and in the event of the proposed tariff jbecoming law, any additional market which we night find im Australia for cur products wenld he were than counterbalanced by a falling of in our exports to other countries.