BALANCE OF TRADE.

Taranaki Daily News, 30 October 1920, Page 8

BALANCE OF TRADE.

AX 'UNUSUAL POSITION. ( (Wellington Post.) Some New Zealand business bouses have been rather perturbed on receiving advices from London or New York to the effect that banks decline to negotiate New Zealand drafts'," owing to the exchange position, unless and until letters of credit are arranged. It is understood that further shipments from Great Britain and the United States are made conditional only on the establishment of letters of credit. The action of banks who refuse to negotiate drafts except under the conditions named is entailing some inconvenience to importers who now have large quantities of goods arriving and on the way. Some of these, many in fact, are in execution of orders given a long time ago, in some instances as far back as eighteen months or two years, and given, too, at prices ruling at the time the goods were shipped, whatever that price might be. Manufacturers pleaded heavy pressure of British domestic business and immediate Continental demand as a cause of delay in despatch of eversea orders, and this led to accumulations which are now ] coming forward with a rush. In the

meantime buying in the Dominion Ims been returning to normal conditions and lias for some time been strictly conservative. At tlie same time there is a temporary reduction, in the amount of ready money available in London to meet all demands made for financing exports to Australia, and Xew Zealand. This will be adjusted as soon as exports of produce reach Home, and are there realisable or realised. The posi-

tion may be better understood, perhaps, when it is stated (if it is necessary to state it'i 1 hat imports into Xew Zealand are paid by exports of Xew Zealand pro. (luce, whether they go to America or to Creat Hritain. or elsewhere, whence imports come. The fiovernment Statistician furnishes the following figures for the eight months ended :iUt August on this subject:- ; S mos. 1020. 8 mos. 1910. £ ,-C I Imports --.. :!i>.510,31ij 10,777,013 [Kvporfs .... 31,0:17,818 3ii,:>39,734 I The greatest difference is sufficiently apparent without further comment. Simply put. the imports bought this year are X.A ,42:1,000 more than the exI uorts sold to pay for them. Incidentally, A-hile the imports of the first eight .months of 1020 amounted to £35,510,- ' 000, the total imports of the whole jtwelve months of 1019 were £30,671.098, or nearly ££,000,000 less fpr one whole

year than for the past eight months. But, as a leading financial authority has pointed out to The Post, the exports referred to will consist to a very large extent of British Government purchases of New Zealand produce—goods bought and paid for, and, probably the money Bpent already. The British Government purchases of wool, meat, and cheese, are ended. What remains of them in store; in New Zealand will not be exports in : the sense that they will represent so i much to the credit of New Zealand when : they have arrived at their destination. ' Again, it may have to be pointed o\it, they have already been bought and paid Ifor; statistically of course, they will ! still be exports when they leave the ! country. i The true set-off against imports will be the next season's wool, the "new" meat, the 1020-21 cheese and butter, and other produce. They are not realisable yet, for they have not been shipped or marketed and so turned into money. ' The woo! is largely still on the sheep's iback; the meat is still on the hoof.

It is believed that the British Government will buy the New Zealand exportable surplus of butter; but the transaction is not yet definitely closed, and none has been so disposed of. The cheese has been sold in some instances for a good price; but none has yet been shipped, i.e., not turned into money. In

the meantime, importing is increasing. That is the position, and it contains the kernel of the present mystery of the banks declining to negotiate drafts except on the establishment of letters of credit.