The New Zealand Railways Magazine, Volume 7, Issue 5 (September 1, 1932)
Ottawa Compromise—Its Sound Wisdom—Trade in the Crucible—U.S. Anti-Slump Experiments—Princes and Sea Power
Critic Answers Critic.
The range of the work done at the Ottawa Conference was no more and no less than reasonable people expected. Those English free-trade critics who say that too much has been done, and those foreign observers who say that next to nothing has been done, may be left to argue it out; their arguments cancel each other. The truth lies in between. Britain was, from the outset, determined that help given to Empire trade should not connote ruin to foreign trade; and as she (and we) need both, who will blame her? Certainly the Dominion delegates have not done so. They received, and gave, concessions. What they received was partly Customs preferences, partly “quota.” Value of the trade thus won can be proved only by experience. Continuous observation of working results will win new knowledge.
Negotiations between Britain and the Dominions started with a 10 per cent. ad valorem duty imposed by Britain on certain foreign goods. This duty was due to expire on Nov. 15; its continuance was part of the British offer at Ottawa. Over and above that, Britain was prepared to give a greater preference than this 10 per cent. in certain cases. Consider butter. If Britain had confined her offer to continuing the 10 per cent. ad valorem, then, whatever the price of butter might be, Danish would pay 10 per cent. on value, and Dominion butter would enter Britain free. But Britain now gives Dominion butter a preference over foreign of 15/- per cwt. (not ad valorem), and this means a 15 per cent. preference when butter is at 100/- per cwt., receding to a 10 per cent. preference (as now) when butter is at 150/- per cwt.
“Quota” on Chilled.
When one remembers the interest of the British worker in cheap food, and the interest of the British people in Danish trade, the reasoning behind that butter preference (falling as price rises) is plain to see. If anyone says that the Mother Country should simply have given her whole butter market to the Dominions, well—would Dorman Long (whose employees eat butter) have secured that bridge contract in Denmark? While Britain gives no “quota” in butter, she does give a “quota” in meat, and in doing so she has done what some more cautious Britons thought she would not do—she has placed a limitation on the quantity imported of Argentine chilled, for which there is in Britain a popular preference.page 10
British capital in Argentina does not like this, but tells the Argentine people that the cure is to “buy British,” and thus reduce the unbalance of Argentine trade with Britain.
If Denmark, Argentina, and other nations that have for years exported largely to Britain—without importing as largely from her—take the lesson to heart and “buy British,” and if the Empire units do the same, returning prosperity may bring a new grouping of trade factors. Commerce is so mobile that it might have proved dangerous had Ottawa made large cast iron decisions. As things are, Ottawa has given a modest start to a great experiment—one that needs continuous observation, and one that the Empire should enter with a pliant mind. With some Ottawa help in the matter of dairy produce, meat and apples, the Dominion marches on to the possibilities of very direct Budgetary help in the interest field. The chief stranglehold on the Budgets of borrowing countries, in a time of gold appreciation, is the rigidity of interest. A loan conversion, on the British 2,000 million model, would help to correct those paralysing changes which raised the goods equivalent of external debt burdens by 50 per cent.
Russian and American marketing policies are a study in contrast. The American policy of holding wheat for a price was the result of confidence in capital strength, lack of which impelled the Russians to a policy of selling. If (as is alleged) Russian State capitalism pays only a food wage, and is concerned not about present living standards but mainly about securing foreign credits with which to buy agricultural machinery, etc., then the motive is plain. It is equally plain that America is very much concerned with maintaining standards, and that private and State capital in the United States have stood together in the long fight for better prices. Evidently the fight is far from being over, for President Hoover has just induced Congress to expand the Federal Farm Loan System with 125 million dollars new capital. A rise in wheat between now and the Presidential election would be claimed for Hoover as a tremendous win.
An Ottawa Formula.
In Britain, cheap wheat—and other food and raw material—from Russia is variously viewed. Some see behind it a new Soviet capitalism, which will eclipse the older private capitalism by sacrificing both profit and wage until the producing machinery of the world is captured. Others there are who deride the idea that the economic conquest of individually-free peoples can be accomplished by the cheap labour (or even the forced labour) of one. Partly in its political, but mostly in its economic aspect, “Russian dumping” came before the Ottawa Conference, and the British purchasers of Russian goods did not altogether share the antidumping zeal of those Dominions who sell rival commodities. If there is political poison lurking in cheap food from Russia, Mr. Ramsay Macdonald is not afraid to take the risk. However, the Conference agreed that dumping must not be allowed to frustrate Empire preferences.
Credit versus Slump.
In the United States, the fight to maintain standards—or, rather, not to lose them altogether—has led to a great Presidential programme of lending and spending. It has been called inflation. But inflation is a question of degree. Big as his anti-depression programme is, President Hoover can say that he successfully resisted a much greater inflation that had been endorsed by a Congress which, facing election, yielded to the old temptation to bribe the electors, and threw the onus of veto on to the President. In vetoing Bills sent to him, and in pointing out to Congress its own hypocrisy, the President said that those Bills would have created the greatest page 11 banking and money-lending machine in history. His own relief programme is in itself more than huge. It is estimated that Congress gives him 5,000 million dollars new credit to energise industry. But can State-authorised credit kill a world slump?
A “Free” Shanghai.
An even greater “trade crime” than dumping is the boycott. Chinese boycotting has led to one undeclared war with Japan, and may lead to another, for the Japanese allege that the boycott at Shanghai is being renewed with the support of the Chinese Chamber of Commerce, which support they would regard as strengthening the case for another armed intervention. It should be noted that for some time Japanese and Shanghai papers have been discussing a proposal that Greater Shanghai (not merely the foreign settlements there) should be made a Free City, with an independent status under the League of Nations, or with sufficient independence to secure for trade an open door. The Chinese nationalists, who wish to take back the foreign settlements, would be aghast at this new amputation. Dare they risk another boycott and another sanguinary clash?
The African Base.
The Princes' Mediterranean cruise emphasises the importance of sea power, and of Malta and Egypt. Egypt is the steppingstone to the Sudan, where they now grow cotton on the Gezira plain, which is being irrigated by the Sennar Dam, and which has an area almost as great as the whole of cultivated Egypt. Egypt was a base in the World War, and is to-day a base for such minor (yet potent) expeditions as the Royal Air Force operation against Arab tribes, who were controlled by about 500 men who flew from Egypt to the Bagdad region, and whose return was announced on the 17th August. Each troop-carrying aeroplane carried eighteen soldiers and a crew of about five. These big machines have been featured recently in the moving pictures (a new avenue of publicity with big possibilities). They have another sensation coming in Mollison's Atlantic feat, which the world applauds.