OVERSEAS TRADE

Evening Post, Volume CXIV, Issue 123, 21 November 1932, Page 9

OVERSEAS TRADE

MR. PAISH'S REPORT

PERIOD OF DEPRESSION

SMALL BRITISH GAIN

(From "The Post's" Representative.) LONDON, 13th October.

The depression of 1930 lasted throughout 1931, during which, writes Mr. L. A. Paish, H.M. Trade Commissioner in New Zealand, the overseas trade suffered from a continuance in the fall of prices for export produce. Mr. Paish's review of the economic conditions in New Zealand is up to April, 1932. In spite of an increase in the production of most primary products, shipments fell in value.from 44.9 million to 35.2 million in New Zealand currency, but as imports fell from 43.0 to 24.8 sterling, the year finished with a favourable balance of just over seven million sterling.

The adverse rate of exchange, in conjunction with a high tariff, has probably been the chief factor in bringing down imports, and it may be anticipated that in the near future the balance of trade will so adjust itself as to conform more closely with the results ' experienced during the last two years. The financial state of the country caused great anxiety during the summer of 1931, and ultimately resulted in the formation in September of a Coalition Government' supported by the "United and Beform parties. Previously the United Earty had been in power with a minority compared with the opposing Eefijrm and Labour, members. The Coalition Government was supported by a majority of the House, and was responsible for , the passage of the Fourth Finance Act of the year, and of the Customs Act Amendment Act.

-■In February last the Government appointed a Committee to examine and report upon the economic- and Budgetary position of the Dominion. ' The Committee consisted of the Kector of Canterbury College, the professors of Economics at Auckland, Melbourne, and Canterbury Universities, and the Secretary to the Treasury. The report was signed by all the members subject only to reservations by the . Secretary to the Treasury. The report does not make recommendations, but' discusses the cause of the depression and possible remedial measures. In particular, it discusses .the effect of the rate of exchange on the financial position, taking as examples a return to gold parity; parity with sterling; 10 per cent, above sterling, and 40 per cent, above sterling. The Committee came to the conclusion that parity with sterling is preferable to parity with gold. The main report asserts that, on the basis of an exchange at 10 per cent. above sterling, the Budget should not suffer any loss even if account be taken of the exchange charges on the external debt service, and that on the basis of exchange at 40 per cent.-above sterling there should be a net gain to the Budget. From these views i the Secretary to-'the Treasury dissents. ' BALANCE OF TRADE. The table showing the balance of trade, for last year with the various countries, sh6ws much the same characteristics asrin 1930.. The figures are as follows:— .■ ■■■ ' Country. Imports. Exports. '-. •'■ ;■ ■ ■ : . ■ £ . A United Kingdom 12,199,501 30,940,054 Canada 1,224,579 256,890 Australia 2,431,587 1,169,055 France- ....... ;.'., . 327,646 .418,484 Germany.-. ..... 574,500 309,847 Japan ........ 304,690 267,899 United States .. 3;884,570 921,229 Other countries.. 3,865,885 568,970 Total ...... 24,812,958 35,153,028 It. will be seen that, apart from a small favourable balance with Prance, the only country with which New Zealand has a favourable trade balance is the United Kingdom, whose purchases from New Zealand were more than twice the value of the goods which New Zealand purchased from the United Kingdom. Even if regard is had to the annual interest bill, '■ New Zealand still spends many millions of pounds, received for her produce sold to the United Kingdom, upon foreign goods,, a large quantity of which is competitive .with United Kingdom products. ■The steady increase in tho .United Kingdom's share of New Zealand's import trade during the last three years is to be noted, but this share is still under 5Q per cent. .FALL IN EXPORT TRADE. The slump in export values in 1930 as compared with those prevailing in 1929 continued throughout 1931 the index figures for the three years being--1929 1613; 1930, 1267j and 1931, 96si this fall.has, of course, been responsible for increasing financial stringency. The drop, in the value of the export trade, of over £10,000,000 was, however, more than balanced by an unprecedented fall in the-value of imports• actually the fall; from £43,025,914 to £24,812,958 (or over 42 per cent.), resulted in a favourable trade balance of £10,340,070. The position, however, is not so_ satisfactory as it looks from this point of view owing to the method Of valuation in the returns. .- Imports, as already explained, are valued at current domestic, value in the country of origin plus 10 per ccnt.j which is an: approximate percentage intended to cover freight, insurance, etc. From Ist October, 1931, imports invoiced other than in sterling are converted to sterling according to tho banking rato of exchange in force on the date of exportation to New Zealand. The vr.lue of imports, therefore, appears in the import figures as the value in sterling c.i-f.j New Zealand. The export figures, however, are the f.o.b. New Zealand values, i.e., they are in New Zealand currency, and to obtain the sterling values it is necessary to deduct one-eleventh with the exchange at 110, making tho exports approximately iust under £32,000,000, and the favourable balance just over £7,000,000 sterling. RATE OF EXCHANGE. "As New Zealand normally has to find some £9,000,000 sterling for interest payments in Loudon, it seems clear that the imports must still further be reduced unless exp&rts rise," says Mr. Paish. "If the gap, therefore, is not widened, the rate of exchange will, in the absence of other influences, rise and thus forco a more favourable trade balance. \ ■ . "This is poor reading for the United Kingdom exporter, but the events of 1931 have brought out clearly that the amounts of the imports as a whole into New Zealand are determined not so much by the New Zealand tariff, but by the amounts of the exports, and in the long run tho exports, less the interest charge will equal the imports. All this, of course, assumes no new oversea loans, and no oversea redemptions. "The departure of sterling from the gold standard has, of course, had the effect of increasing the price in New Zealand currency of all goods "from countries remaining on that standard, ana ruling price's in Now Zealand of many United States and Canadian goods have caused the practical cessation of business. In addition, the tariff liscrimination against Canada has seriously affected imports from that country. Taking tho two countries together the fall has been' over 50 per cent.

"There is a considerable volume of import trade into, New Zealand in goods which cannot be supplied from