The Timaru Herald THURSDAY, DECEMBER 6, 1945. British-U.S. Loan Talks

Timaru Herald, Volume CLVIII, Issue 23376, 6 December 1945, Page 4

The Timaru Herald THURSDAY, DECEMBER 6, 1945. British-U.S. Loan Talks

THE British-United Stales loan negotiations which have been running in Washington for the last three months and are now reported to be approaching a climax have an important significance in immediate post-war history, for they represent the first practical attempt at world economic reconstruction. The outcome will provide the nucleus for further recovery and set the pattern of future policy. The primary object of the talks is to solve the problem of the British balance of payments, the main obstacle to an early resumption of international trade; and in the rehabilitation of international trade the United States is as vitally concerned as Britain. During the war Britain so used up her overseas assets and her foreign exchange that she cannot operate during the next three years without a deficit of dollars. To this position she has been reduced because she gave her export trade and depended on lend-lease; the more completely to give her resources to the conduct of the war. Because of these sacrifices and the realisation that America has as much to gain, if not more, from the contemplated aid, Britain lias not gone cap in hand to seek one-sided favours. Primary gains for the United States from the granting of a loan are quoted by the “New York Times” as follows: “(1) British sterling area trade with the United States, now halted, for lack of dollars, could be resumed. In 1938 these countries bought from us around 300,000,000 dollars worth in finished manufactured goods alone. Total United Kingdom imports from the United States, it is estimated, will double the pre-war level and approximate 1,000,000,000 dollars in the first year of trade resumption. Britain has long been our best market. (2) Restrictions on the free movement of world commerce would be removed or minimised. Without American help, Great Britain would have to trade for some time within the sterling area, thus dividing the world into competitive trade blocs—a dollar and a sterling area —with inevitable economic warfare. There would be other gains of less measureable character, such as the continuance of the good will that has marked AngloAmerican relationships during the whole war period.” In.spite of these considerable advantages which will accrue to the United States through a Successful agreement, the Americans, with a characteristic admonishing finger, have sought to use their bargaining position to secure a modification of the Empire preference system. “Americans know full well,” says the “New York Times,” “that the credit advance will have to be conditioned upon agreement by the British to get rid of, if not eliminate, their Commonwealth preference system . . . which serves to keep a large part of Empire trade within a specific channel.” All Americans apparently do not know ' that in relation to Empire prefer- ’ ence, Britain is only one of a group ; of nations and in that context cannot make bargains for the whole. Fur- 1 ther, the Empire solidarity which ; prompts trade concessions lies deeper than the commercial surface and such a policy will not defer kindly to the strictures of a country whose ' own tariff cannot be described as ' liberal.

The Washington talks are now. reported to have reached a climax, with both sides putting all their cards on the table. It is unlikely that any crisis has been reached on the technical details of the loan, but rather on the inadequate concessions sought by America. This is indicated by the British reply to the American draft terms last week that Britain could not commit herself to a reduction of Imperial preference tariffs or to the sealing down of the war debt to the Empire without prior discussions. There is some justice in the American claim that Empire countries should also contribute to the international problem by adjusting sterling debts, but American sincerity in calling for a modification of Empire tariffs will be tested by her willingness to lower her own.

It must also be remembered that the American negotiators are faced with the problem of reaching an agreement which will be acceptable Io Congress and to the people, a condition which severely limits their academic detachment. Treatment of Britain which can superficially be construed as too generous is liable to arouse stormy protests in many circles and it is significant that “The Times” has at this late stage come forward with a rebuttal of rumours based on the presence of a Labour Government in Britain. It would seem expedient for Britain to make some concession for the loan, if only as a sop to prejudice. But concessions which would tie Britain and the Empire to the American financial chariot, “dependent on the future wisdom and stability of the American people.” are a price which cannot be paid with any optimistic assurance. The United States emerged after the last war as the world s principal financial power and its record has not earned it any high recommendation for. the role of economic arbiter in the troublous times ahead.