AMERICAN TRADE

New Zealand Times, Volume XLIV, Issue 10273, 7 May 1919, Page 7

AMERICAN TRADE

IN AUSTRALi&K FIELDS THE AYOELB'S COMMERCIAL EXCHANGE. The fact of Mr H. Y. Braddon, Trade Commissioner for the Commonwealth, having presided at a luncheon given in New York to a Mr S. C. Armstrong', prior to his departure for Austalia as representative of an "important financial group," may be accepted as an indication of Mr Armstrong's status, the importance of Ins mission, and of the standing of his principals (states the "Sydney Morning Herald"). 'Hie cable message published recently stating tli at Mr Armstrong's mission would be to "investigate the possibilities of co-ordinating banking facilities m America and'Australia and opportunities for the investment of Amerioan capital" doos not, however, convey very much to Sydney bankers —at any rate, as far as the first portion of the sentence is concerned. The co-ordination . of banking facilities is a rather vague phrase of which the meaning is hard to determine. Investigation of opportunities for invest- 1 nient must obviously be a matter of which the scope uud direction turn upon the character of the investments the investigator • has in view. On this point it may be said that, broadly speaking, Mr ■Armstrong will not be a pioneer, since during the last few months a number of American bankers and financiers have arrived in Australia with the object of extending their knowledge of Australia as a field for commercial and financial enterprise. POSSIBILITIES IN AUSTRALIA. One result of the war has been to widen the trading horizon of the United States. America is now keenly interested in extending her commerce to new countries and entering into closer trading relations with communities with which her merchants and manufacturers hart previously been in contact. Among these countries is Australia, and it is generally considered among commercial men that in the event of America increasing her demands for raw material, there are possibilities for a very considerable extension of commerce, mutually advantageous to producers and consumer:, m both countries. How far banking facilities will affect this relationship one way or the other is a matter tor speculation, but thero seems no reason to suppose that these facilities will not bo made sufficiently elastic to meet any demands made upon them. At present there is: no banking ; obstacle to American buyers purchasing extensively in Australia, or to Aixstrahao buyers discharging their obligations to American sellers." There are certain drawbacks, to such transactions in the exchange market, but these hinge upon the exchange value of the dollar, and will settle themselves in the ordinary way, apart altogether from " banking facilities." So long aa American trade with Australia and vice versa is done by London bills a certain difficulty-wiU present itself. For instance, the rate or exchange between America and LondOß before the war closed was 4>.76i dollars When t,he Armistice was declared the exchange committee in London met and decided not to control the market, but to let exchange look after itself. Ins rate then fell to 4.50 dollars. This rate is eauivalent to a discount of 7 per cent., and, put into other words, means tnat un Australian buyer of .€IOO worth of American goods would get only JISi worth. This uncertainty regarding es.change values manifestly .places restrictions upon trade between the two ( countries, and is independent of any 'banking facilities," ■ which may or may not exist, for carryine on the trade so affected. Problems connected with the banking ni<lo of transactions between the Uommonwealth and the. United States and Canada have been very fully investigated by bankers, and their arrangements for collections are as complete as are needed for the transaction of business,!- and sufficiently re&iiient to meet any conceivable eiteneion. CLEARING HOUSE OF WORLD'S TRANSACTIONS. London has hitherto been the clearing houso of tho world's transactions, these being carried- on by moans of bills of exchange drawn on London. Credits '(.have been maintained tin London through the ease offered by the banking svstem there of dealing with bills and investing funds from day to day and week to week. The Amerioan system knows nothing of this,, or rather ;does not embrace it. The consequence, is that a credit established in Now York of, say, a million dollars for trading purposes would remain practically "dead" until exhausted by meeting demands mado 1 upon it for settlement. In London the same amount would be a fluid asset, with its daily margin in continual use. TJio question of whether the United States hanking system will bo so changed in future aa to extend the operation of i acceptances is a detail which .can only bo answered by time and experience. The statement is sometimes made that New York will become the world's clearing house. The statement is frequently described as a flight of imagination. Ono well-informed authontj in Sydney said recently that ' they havo missed their c,hanoe." What ap pears to be certain is that, the American banking system would have to be niatoriallv changed before such a develop went could become possible. ■Tho question of what policy it is bettor for London bankers to follow in ordor lo retain London as the financial centre of the world has necessarily attracted considerable attention in England. There havo been differences of opinion. One class of banker has taken the view that tho proper course is to open abroad branches of their own bank, these competing with foreign banks in their own country. Another believes . the bettor plan i« to work from London in conjunction with the foreign banker instead of going into competition with him. One objection to tho former'course is that by establishing banks abroad the deposits of an English bank would bo used to aid narticulur industries in competition with English traders. Another is that lack of special knowledge would be dangerous. On the whole, this attitude is tho ono most fawmred. Against this has to Iwi placed tho fact that the foreign banker is in many instances establishing separate institutions for the purpose of meeting after the war conditions by creating hugo credits in various countries. German bankers have been very 1 aotive in this direction, though it is obvious that their calculations may bo subiect to substantial change. In America the War Finance Corporation, created for tho purpose of providing credit to assist in war finance, has a capital of .J2100,00(1,0fl0, and proposed to create loans and consequently credits to the extent of «£fiOO.<loo,ono. If this institution's, life and objects were extended to the purpose of assisting trade after the war it' would have a very powerful influence.