TRADE WITH AMERICA.

Taranaki Daily News, 7 February 1920, Page 5

TRADE WITH AMERICA.

NEW ZEALAND'S POSITION. MATTER OF EXCHANGE RATE. (Auckland Herald). The question has been raised in certain quarters of the commercial world as to whether it is not possible for New Zealand to secure a better rate of exchange with the United States and Canada than at present. The New Zealand rate, of course, is always determined by the rate between London and America. In pre-war days the sovereign was kept at par by the shipment of gold whenever an adverse balance of trade occurred. At the present time the balance of trade against Britain is so huge that shipments of gold, to maintain the value of the sovereign, are beyond question, and therefore the rate of exchange has steadily, dropped until now Britain receives only 3.78$ dollars for the sovereign, against 4.806 dollars, the par value which was maintained before the war. It has been pointed out that the adverse balance of trade between New Zealand and America is not so great as to justify New Zealand shippers receiving only 3.78% dollars for the pound sterling, but they are compelled to pay this rate because London remains the clearing house of the banking world, and hence the London rate fixes the rate for New Zealand, as for the rest of the Empire. There are many New Zealand business men who hold the view that it is quite within the bounds of possibility that tlie Dominion might secure a much better rate of exchange than now obtains if a clearing house for New Zealand bills, sent in,payment for American goods, was established in America, and that still further improvements could be effected by New Zealand increasing her exports to America.

SERIOUSNESS OF PRESENT POSITION.

The seriousness of the present position to New Zealand importers of American goods may be gauged from the fact that motor-cars have been sold in Auckland at a loss to the importers or at no profit at all. The reason was that, these ears were sold for future delivery, based on a price fixed before the exchange rate fell to its present low level. A strike of dock-workers in New York delayed shipment, and every day's delay cut into tlie prospective profit, which eventually vanished in the case of a certain number of cars. Another excellent illustration of how the rate is operating against New Zealand was given by an Auckland business man, who, on account of business reasons some time ago, had kept an account in an American hank. Having no particular use for the money in America, he decided to have it. transferred to New Zealand, and thereby gain the advantage of the exchange rate. The result was that he made nearly £IOO by the mere act of writing out a cheque."

OBJECTIONS TO CLEARING HOUSE. Tn respect to the suggestion that New Zealand might, evade the high rate obtaining between Britain and America by establishing a clearing house in the latter country, there are business men who remain sceptical as to the feasibility of the plea. They fail to see how New Zealand, which uses exactly the same currency as Britain, can escape participation in the same rate, of exchange. They predict that, all sorts of weighty influences would oppose any effort to establish a clearing house for New Zealand hills in America, and they raise .the further difficulty that eveji if trade\between the two countries was equalised by New Zealand increasing its exports to America there was no possibility of shipping gold to balance the differences which were bound to occur. Discussing the subject, Mr. W A. Beddoe, Canadian Trade Commisrioner, advocated increasing trade both to and from Canada, wh'ere the exchange rate is now fixed at 4.11. "The more we buy from foreign countries the more likely is exchange to bo against us," said Mr. Beddoe. "I do not believe flint there will be much that will he favorable in the rate of exchange until the Empire buys less goods from foreign countries where the rate is against it. If yon regard this question from a contrary point of view, assuming that the United States owed us more money than we owe it, then, fiscal conditions being equal, it is reasonable to presume that the sovereign will be at a premium and American money at a discount. But, in my judgment, so long as the balance of trade is against us, so long will the rate of exchange be against us."

ADVANTAGES OF INTER-EMPIRE TRADE. Mr. Beddoe strongly advocated the advantages of trade within the Empire, urging that New Zealand should send its produce direct to Canada and buy direct from that Dominion. During his recent visit to Canada, he said, he found many articles produced in New Zealand .and consumed in Canada that were purchased from New York. This meant that the New Zealand shipper had sold to the United States, which had re-sold to Canada, not only at a profit, but with the added weight of extra transportation. This method tended to raise the exchange rate as between Canada and New York, whereas New Zealand, by dealing direct with Canada, would receive approximately the same money for her products without having to pay the extra exchange necessitated by dealing through New lork When he was in Canada, that country had to pay 4 per' eeiit ior American n'.ouey, which was merely a bank rate.

Speaking of the possibilities of New Zealand increasing its exports to Canada, Mr. Beddoe referred to the restrictions now obtaining. For instance, he said, butter could not be slapped to Canada at present owing to the control. He had made an attempt to secure the release of certain quantities of butter from New Zealand for shipment to Canada, and Mr. Massev, at his request, had cabled to the Food Controller in London, who had replied declining to release butter for shipment to any point .except Great Britain. "Jf this butter had been released," added Mr. Jled / >o, "I have no doubt that a better price could have been secured in Canada than is now paid ey the Imperial authoraits.' ' CANADIAN DEMAND FOR WOOL. "The Imperial authorities also control New Zealand wool," he continued "During the war 25,000 bales of New Zealand's output was allotted each season to Canada, this quantity being distributed to the mills. This year the Imperial Government is providing Canada with wool direct from England. Canada is willing to bitf N«w Zealand

sheepskins in large quantities, but the export of the produce is at the moment prohibited. Canada is also able to absorb immense quantities of hides. One tannery in fact requires more than the total output of the country to keep it going, but at the present New Zealanders. before shipping the exportable quantity of hides, must offer them for sale here. Canada is now going into the market for flax, and in future I hope that New Zealand kauri gum will go direct to the Canadian consumer instead of via New York, as at present." He mentioned that much of the kauri gum now shipped to Vancouver was destined for New York, whence it returned to Canada.

In respect to motor-cars, Mr. Beddoe said lie was making arrangements for Canadian-built cars to be sent to New Zealand, the situation being that the export of Canadian cars was being controlled by American interests, which, apart from one cheaper make, kept the New Zealand market supplied ' with American-made cars, thus obviating Canadian competition. All this meant that large sums of money were paid to the United States, and this tended to keep the exchange rate against New Zealand.