Taranaki Herald. SATURDAY, FEBRUARY 12, 1910. BALANCE OF TRADE.

Taranaki Herald, Volume LV, Issue 14133, 12 February 1910, Page 2

Taranaki Herald. SATURDAY, FEBRUARY 12, 1910. BALANCE OF TRADE.

lii another column will be found a letter signed “W.A.C.,” traversing some of the arguments used and conclusions arrived at in our article on Thursday on the subject of imports and exports. Oui- correspondent starts with a fallacy. He says in effect, that since lie received a “token,” convertible into sovereigns, when he had the use of money sent here from the Old land, and not merchandise, therefore that money did not come out in the shape of merchandise. By a “token” he presumably means a bank draft, a mere piece of paper, of ho intrinsic value whatever, and only used as a means of exchange between bankers. The party from whom the use of the money was. obtained would tell his banker in London that he wanted to remit a sum of money to New Zealand; he would hand that sum in some form, possibly sovereigns, to the banker. The latter would, however, nbt send the sovereigns out here. He would find that another banker in New Zealand wanted to remit a similar sum of money to London and the two >vould exchange drafts or “tokens,” so that in this particular transaction nothing more, might pass between the two countries than two pieces of paper, one of which would enable the banker in London to collect the amount it represented from a third party who was indebted to a client in New Zealand for wool, or frozen meat, or other produce, while the other would enable the banker in New Zealand to collect from some one who had to pay for importations of merchandise from London. It being undisputed that specie only plays a very small part in the exchange of trade,- it follows that if “W.A.C.”- received a sum of money from Home it must have come into New Zealand as an import of merchandise,! although that merchandise was exchanged into sovereigns or bank notes before it reached him. Then our correspondent-goes on to say that since England is a manufacturing and industrial country it must import largely of raw materials. Quite so, but it is not because she is a manufacturing country that her imports so largely exceed her exports. It is because she is a lending and not a borrowing country that the balance of trade is in her favour. A large proportion of her imports represents payment of interest on the, money she has invested abroad. New Zealand, on the other hand, is a borrowing country; it owes, publicly and privately, not very far short of £100,000;000, and must send away every year produce to the value of from three and a half to four millions to pay interest on that sum, as well as sufficient to pay for the merchandise imported into the country, and for the conveyance of onr produce to London and of the merchandise from London. If our exports are not sufficient to do all.this wo are getting further into debt; if they are more than sufficient we are “getting ahead of it a little.” If, as “W.A.C.” suggests, our wool exports next year happened to be worth £2,000,000 less than this year, our purchasing power would

be that much, less, and we should have to reduce our imports accordingly, or get further into debt. That is obvious, though it does not follow that if the value of our wool went up two millions instead we should have two million sovereigns coming in. The point we have contended for is that the extra two millions would come in the shape of merchandise, of imports, that is. If it did not come we should be paying off our debt, and if we were able to continue that process until all our indebtedness was paid it might be a good thing for the dominion in the long run, though, ms in the Case of an individual trying to pay an accumulation of debts, it would probably entail a great deal of self-sacrifice and very rigid economy for some years. Beyond that stage—and here is the point we argued in our first article—if after paying all our debts we continued to export largely in excess of our imports, as the president of the Christchurch Industrial Association seemed to hope, we should be impoverishing the country. In other words, we are enriched by what enters the country, not by what leaves it. We do not think our correspondent quite grasps the meaning of Ins own words. He says, in effect, what a fine thing it would be to pay off our indebtedness and be able to spend the millions now sent out of the country for interest upon further development, “thus increasing our earning and • exporting power.” Yet be hopes the day is far distant when our exports do not largely exceed onr imports. Can he not see that if we have no debts to pay and do not import at least as much as we export we shall ,uot be receiving what we earn, that, as a matter of fact, we shall be giving away the excess for nothing? Either that, or we shall be lending it outside the dominion, and in this case we must then soon begin to permanently import more than we export, or otherwise go without the interest on what we have lent.