THE OTAGO DAILY TIMES Friday, December 14, 1945. THE FINANCIAL AGREEMENT

Otago Daily Times, Issue 26026, 14 December 1945, Page 4

THE OTAGO DAILY TIMES Friday, December 14, 1945. THE FINANCIAL AGREEMENT

It is to be gathered that it is in a spirit of resignation that the British people prepare for the acceptance by the Government of the loan agreement proposals between Great Britain and the United States. There can be no enthusiasm over it. Opening the two-day debate in the House of Commons, the Chancellor of the Exchequer, Mr Hugh Dalton, made no attempt to conceal the fact that the offer was a disappointing one in so far as it was less than it had been hoped to receive. Congress, he said, had refused to consider an interest-free loan for which the British delegates thought they were entitled to ask. While the Chancellor considered that the proposals could be welcomed in that they would tend to stabilise exchange rates, essentially his attitude was that they must be accepted as there was no real alternative to them. There has certainly been no constructive criticism of the arrangement, and there must be disappointment over the weakness of the policy to which the Conservatives seem to have committed themselves in a decision to abstain from voting. Mr Boothby spoke of an “ economic Munich,” and complained that the Government “ had no mandate to sell the Empire for a packet of cigarettes,” but these phrases are more impressive as political gestures than as notable contributions to a vitally important debate. The only alternative that has been, put forward by the critics of the agreement is one under which Great Britain would retire within the sterling bloc, but this would involve the waging of a trade war in which Great Britain would be fighting under a severe initial handicap and of which the ultimate result would be doubtful. The matter is one, however, that cannot be discussed solely from the economic standpoint. Such a trade war would disrupt future hopes of that AngloAmerican co-operation which is the pre-requisite for all planning for international stability and peace. Even the modified plan, suggested by the Emfjire Industries Association would be open to this objection. This proposal was that the loan should have been confined to such an amount as could have been obtained on ordinary terms, and that Great Britain should determine to pull through for the rest with the help of the Empire and the sterling area. The facile optimism of an expectation that the extent of Empire resources might prove to be an agreeable surprise takes no account of the possible repercussions of unilateral action such as is suggested. The objection that the acceptance of the Bretton Woods agreement as a condition of the loan settlement involves the return to the gold standard is a matter on which two schools of thought appear to be in dispute. The one school is haunted by the bogy of the vast gold reserves of the United States—approximately 80 per cent, of the existing world supplies—whereas the other, for which Mr Dalton has so far been the chief spokesman, with, however, the support of Sir John Anderson, his predecessor at the Exchequer, contends that what is envisaged under the Bretton Woods agreement is not a return to the gold standard but recourse to a modified operation offering considerable elasticity. Apart from this contentious subject, there is a broad measure of agreement on the basis that is provided for the extension of the volume of international trade. On one question there has so far been no definite pronouncement. This is that of the fate of Empire preferences; and it is obviously a point of great importance to this Dominion. If the Ottawa agreement is to be in effect cancelled, what is to take its place? The future policy of the New Zealand Government must obviously be largely influenced by this circumstance. It has been stated in London that “it appears that we (the Empire) will have to accept some contraction of preferences,” and Mr Attlee has announced that he is prepared to agree to this provided that there is “ adequate compensation in the form of an improvement in trading conditions between the British Commonwealth'and the rest of the world.” New Zealand, however, is in the position of having its export trade confined to a narrow range of produce, and on the import side the preferences have served to protect the development of industries which might otherwise prove to be uneconomic. The Minister of Finance seems to be satisfied that the interests of the Dominion are adequately safeguarded, but the discussions at the forthcoming international conference on the related subjects of trade and employment must be awaited with great interest.