Wairarapa Times-Age TUESDAY, DECEMBER 26, 1939. RESTRICTIONS ON TRADE.

Wairarapa Times-Age, 26 December 1939, Page 4

Wairarapa Times-Age TUESDAY, DECEMBER 26, 1939. RESTRICTIONS ON TRADE.

OBSERVING that now that most of our exportable products have been' sold to Britain at favourable prices for the duration of the war, the position of sterling balances should be greatly improved, the Bureau of Importers has suggested that

the present would be a favourable time for Government to remove entirely the restrictions on importations from the United Kingdom with a view to assisting Britain in her wai ehoiL. The sterling position should so improve that rationing would no longer be necessary. This should enable control to reveit to the trading banks.

On some grounds, this might be thought. to be a reasonable view of the position. Of late the total volume of imports has shown an appreciable reduction.- For the eleven mentis o the end of November last the Dominion had an excess ot commodity exports of £8,230,000, as compared with £3,991,000 in (he corresponding period of 1938 and £10,(44,000 in the first, eleven months of 1937. This in itself .is a substantial measure of recovery and some other signs of improvement are visible. For instance, the latest weekly statement of the Reserve Bank shows an increase of over £2,000,000 in London funds and a corresponding reduction in the amount of advances to the Marketing Department.

Taking account, also of the fact that, the war, in its effect on the productive capacity of British industries and in othei ways, is likely to impose its own restrictions on trade, it ina\ appear that the Dominion would take no undue risks in relaxing the restrictions now in force. A number of factors besides those that have been mentioned enter into the matter, however, and greatly alter the total position and outlook.

In particular, account has to be taken of internal monetary inflation, of which evidence appears in the expansion ot the note issue, now standing at nearly £19,000,000 and doubling the figures of 1935, and in a tremendous expansion of borrowing by the State from the Reserve Bank for purposes other than those of the Marketing Deparlnicnt. Advances to the Marketing Department, include the amount of a deficit of more than £2,000,000 against which no asset, is meantime set. State borrowing from the Reserve. Bank for purposes other than marketing now amounts to over £18,000,000. It would be a remarkable optimist who would claim that the monetary expansion disclosed in the particulars oi the note issue and of State borrowing is or has been justified by the accompanying movement of production in the Dominion.

The actual position plainly is that monetary expansion within, the Dominion is so outpacing internal production that if the existing restrictions on import trade and external exchange were removed, the sterling balances now beginning to be built up would speedily he swept away and the country would he in greater difficulties than ever. 11 has to be considered, also, that, much greater animal sterling balances than sufficed in the recent past are needed now and will be needed for years to come in order that war charges may be met and to provide the means of dealing with large amounts of maturing debt.

Tn great part the root problems involved are internal rather than external. 11 is necessary above all to establish a just balance between internal production and the internal ox pansion of money and credit. Real recovery must depend largely upon the progress made in curtailing expenditure on public works, including Slate buildings of a iiou-prodiiel ive kind and turning it into channels of productive industry. All this being recognised, and whatever may he thought of the existing methods of trade and exchange control, a reversion at this stage to unrestricted trade evidently would be an extremely dangerous and probably disastrous policy