IMPORT CONTROL

Timaru Herald, Volume CXLVIII, Issue 21559, 23 January 1940, Page 4

IMPORT CONTROL

Operation Of Policy Dr. Belshaw’s Survey In the December issue of the ‘•Economic Record,” the journal of the Economic Society of Australia and New Zealand, Professor H. Belshaw. of Victoria University College, discusses import and exchange control in New Zealand. Professor Belshaw states that the export of capital from New Zealand was partly the result of more remunerative investment opportunities overseas, partly of the repatriation of funds left in New Zealand in 1933-35, and partly of the fears engendered among investors by the policy of the Government. In the circumstances of December, 1939, he states, it was necessary to reduce real income from overseas by curtailing imports, and to provide against future financial commitments of the Government by checking the flight of capital. Neither an increase in tariffs nor exchange depreciation would have suffered. Both would have temporarily discouraged imports and possibly discouraged the flight of capital, but they would not reduce it substantially. The only effective measure would have been a halt in the Government's expansionist policy or even a reversal. There was no prospect of either, and continued expansion would soon have caused imports to pour in over higher tariffs or depreciated exchange and capital expansion created additional uneasiness. Given internal credit expansion, there wa.s no alternative to the controls adopted. Some Alternatives Nevertheless, even in these circumstances, controls might have been less drastic and disturbing had they been imposed earlier when there were still ample London funds. Apart from the intention to build up local industries, which involved “goods” selection, and to give additional preference to the United Kingdom, a blanket form of licensing giving greater freedom and elasticity to importers might then have been applied. Exchange control and : import licensing might also possess merit as stabilisation measures if used to build up exchange funds in prosperity as a means of transferring real income from prosperity to depression. Even if exchange control be regarded as the prelude to socialisation, which is doubtful, there is still much to be said for the view that a distribution of resources based on comparative advantage would be more conducive to increased economic welfare than a policy which, in effect, though not in intention, prejudices the well-being of the individual as consumer, while endeavouring to further it as a producer. After noting the effects of the Government’s policy on imports and exchange funds, Professor Belshaw goes on to discuss the effects on prices. He says that since the total value of imports was not reduced during the first six months, the full effect of import control on prices was not yet felt. Further, the continued export of capital would retard the increase in prices. Nevertheless, some price increases occurred, especially in the case of commodities the import of which was restricted. Between November, 1938, and June, 1939, the index number of retail prices rose by 2.8 per cent, the main increase being one of 12. per cent in groceries. What Control Involves Proceeding to discuss the effects on importers and manufacturers, Professor Belshaw says: Since the advent of control, the daily Press has been full of the complaints and criticisms of importers. No doubt these are often exaggerated; but it is unavoidable that control should involve delays, uncertainties, irritations, inconveniences, and costs to importers, more especially as they were required to provide information not normally recorded in the course of business. Some of these arose from questions of administrative detail and were removed as things settled down. Others arose from policy, and in some cases could have been avoided without prejudice to its objectives. For example, refusal to permit unexpired portions of licences to be carried over to the second six months not only forced importers to invest capital in stocks before they were required, but also reduced London balances. Refusal to publish a list of prohibited goods or a statement of the extent of restrictions on different classes of goods until towards the end of April created unnecessary uncertainty and resentment, and probably increased the number of appeals. Still others are inherent in control in the circumstances of the time, or for the purposes for which it was intended. For example, the granting of exchange permits by instalments for the second period often made it difficult for importers to arrange the necessary finance with overseas firms, or impossible for them to adjust shipments to requirements, while the rigid application of licensing, and inability to transfer licences from one line to another, caused importers to be overstocked in some lines while others were in short supply. Effect on Business Professor Belshaw then said that certain other effects on importers would not be fully revealed until the full impact was felt towards the end of 1939. He proceeded: With reduced turnover, the burden of overhead will not immediately be absorbed in manufacture. Trade connections and goodwill built up over many years will be destroyed. Some of these effects have already been apparent, though a reliable measure of the disturbance is not yet possible. Staffs have been reduced, some businesses have closed down, and others have been forced to reorganise and close some departments. Discrimination is unavoidable, in that some will suffer more than others, even though no differential treatment is intended. In view of the large number of applications requiring consideration, absolute uniformity of treatment is hardly to be expected, and many examples of differential treatment have been quoted in the Press Larger concerns, which can afford to send a representative to Wellington to explain their position in person, are more likely to be successful in their appeals. . . . On the whole, manufacturers greeted the introduction of control with approval, indeed, with enthusiasm, though this has been tempered more recently by difficulties in obtaining supplies of raw materials through the “spread” of permits. The necessity in some cases of seeking supplies from new sources owing to the preferences granted to the United Knigdom over Empire and Empire over foreign goods has not been without its embarrassments. Some new businesses have been established and others have expanded, but it is no easier to estimate the extent of development than to measure the disadvantages to importers. Response to Manufacturers The raw material problem, the difficulty of obtaining finance, difficulties in obtaining labour, and uncertainties as to the degree of permanence of control have been factors delaying the

response of local manufacturers to the additional incentive. There are obvious dangers of over-expansion which emphasise the need for some measure of rationalisation. There are less obvious dangers and disadvantages which may prove to be no less important. Consumers are likely to suffer through higher costs and prices, which will also prejudice the export industries. It is more than likely that consumers will have to be satisfied with goods of inferior quality. There is also the more subtle loss arising from limitations on freedom of choice. The issues have been complicated by the outbreak of war. We may never be able to discover with certainty just what changes in the standard of living, what economic and social benefits or losses, or what changes in economic and social structure are due to import licensing and exchange control and what to Hitler’s designs on Poland.