BRITAIN’S DOLLARS

Bay of Plenty Beacon, Volume 11, Issue 42, 18 June 1947, Page 2

BRITAIN’S DOLLARS

PROBLEM TO BE SOLVED FINANCIAL DIFFICULTIES At present Britain is not exporting enough goods to pay for her imports. She cannot cut down these imports because if she did her people would go short of food. Her industries also would be starved- of the raw materials used in producing goods for export and also for the home market. Consequently, her only means of adjusting the balance is to increase her exports, says “Consumer News.”

Last year 42 per cent, of Britain’s imports came from the dollar countries, which took in return only 14 per cent, of her exports. Most of the balance of payments had to be made up from loans from the dollar countries, but this borrowing cannot continue indefinitely.

The “Dollar Countries”

Because the dollar countries have food and raw materials that are essential to Britain’s recovery from the war, Britain must find dollars, to buy from America, for example. The main countries .of the dollar area (United States and Canada), however, can provide most of the manufactured goods they need, and so there is not usually a large market for .British goods in those areas. Under the present conditions of trade Britain is selling only £150,000,000 worth of gods to the dollar countries, while she buys about £550,000,000 from them annually.

For many years American countries have sold more goods to Britain than Britain has sold to them, but the balance of payments has been met by the annual interests on Britain’s capital investments on those countries and by providing services such .as shipping, insurance and banking.

During the war Britain had to sell many of these investments and borrow dollars as Well. Now her investment income has gone and she owes interest on these loans. Furthermore, her shipping services have declined through war-time lossse. Britain’s Good Effort Britain’s over-all exports have reached pre-war volume, but it has been estimated that they will have to increase another 75 per cent, before she can meet her annual overseas commitments. She has to reach this position before the Canadian and United States dollar loans are exhausted. There is only £995,000,000 left in these American credits, so Britain’s immediate need is to conserve dollars in every way possible.

Normally, New Zealand spends more dollars than she earns, the balance being made up from Britain’s dollar resources. Last year the Dominion bought about £5,000,000 worth more in goods from the dollar countries than they bought from us. New Zealand urgently needed petroleum, tractors, manures, and essential equipment for post-war reconstruction—and only the dollar area could supply them at the time. These imports were not completely paid for by exports, because Britain needed our dairy produce and meat more than America did. The ultimate effect was a drain of £5,000,000 on Britain’s supply of dollars. Help From New Zealand How can we*reduce our drain on Britains dollar resources? One obvious way would be to export more New Zealand produce directly to America, but that would involve cutting down our own exports of foodstuffs which Britain urgently needs, with the result that she in turn would be forced to seek correspondingly larger imports of foods from the dollar countries.

The second way would be to import even less from America than we are doing now. In that case we might find that the only way to keep up our total supply of imported goods would be to import more from Britain. That, however, would embarrass Britain in her present need to direct as much as possible of her exports to the dollar countries.

This illustrates how closely New Zealand is affected by Britain’s present trade and financial problems, which can scarcely be solved by one or two countries working in isolation. That is why Britain is endeavouring to find a solution in cooperative action designed to expand world trade as a whole.

This article is a simplified statement of Britain’s complicated dollar problem, but it sets out the main features behind her need for “hard currencies,” particularly dollars, so frequently mentioned in overseas news.