The Exports Query
By NICHOLAS DAVENPORT 'There is no doubt whatever,' said Mr. Barber to the bankers at Liverpool, 'that the oppor- tunities for British exports in 1962 are excellent.' There had been a surge of expansion in America and more growth was expected this year. After the slow-down in Europe in the middle of 1961, a further expansion was under way and he expected a recovery in Canada—of all places! 'Because these major industrial markets are likely to do so well, this in turn will benefit the pri- mary producing countries and we expect that this year their imports will recover the ground lost in 1961.' It is good to have a Minister so obstinately cheerful in outlook as Mr. Barber, but is the cheerfulness assumed as an uncon- scious reaction to the gloom-spreading of his deflationist colleagues or is it founded on reasonable expectation?
Our exports last year rose by only 3+ per cent. The whole of this increase occurred in the first quarter. Thereafter there was stagnation. Mr. Erroll, the President of the Board of Trade, attributed this failure to the fall in demand of the primary producers (responsible for nearly half our total exports) following on the weakness in the prices of the commodities they sell. Our exports to Australia, New Zealand and South Africa, our biggest traditional markets, fell by about 10 per cent. On the other hand, our ex- ports to Western Europe rose by 18 per cent. We sold in these expanding markets about £1,200 million worth of goods—nearly a third of our total exports. France has become one of our largest markets for machinery and Italy for machine tools. Our sales to the Common Mar- ket 'Six' have more than doubled in three years. Our exports to America began to pick up in the spring and by the end of the year were 30 per cent. up from the bottom. Mr. Erroll be- lieves that the American economy is going ahead fast and that our exports there should maintain the rapid improvement already begun. On this showing, and because they think that the pri- mary producers have turned the corner, both Mr. Erroll and Mr. Barber look for a substantial increase in our export sales this year.
There are two objections to this optimistic prognosis. First, there are no signs that the pri- mary producers will be much better off. The National Institute of Economic and Social Re- search forecasts a rise this year of about 5 per cent. to 6 per cent. in world industrial produc- tion outside Great Britain. On this assumption they look for no great change in the general level of prices of agricultural commodities and 'some further fall in the prices of metals.' Secondly, there is no certainty that the American expansion will be held in the second half of the year. If the budget for the fiscal year 1962-63 (beginning July 1) is balanced, as Mr. Kennedy promises, the recovery will probably slow down. That is a common American view.
The National Institute agrees that there is 'a reasonable chance' that exports will rise faster this year than imports because of the restrictions on home demand. They put the likely rise in exports at 6 per cent. But they do not think that the national output by the end of the year will be more than 1+ per cent. up on mid-1961. They also consider that by December 'capital expendi- ture will probably have begun to fall.' This is not nearly so rosy a picture as Mr. Barber would paint, but I believe it to be nearer the truth. Both Mr. Barber and Mr. Erroll imagine that British manufactures are so competitively priced that as soon as they have cut down home de- mand exports will automatically. rise. Past evi- dence is against that old Treasury theory. The National Institute is not so sure about our com- petitive prices, and in its last bulletin discusses the ways in which our competitiveness could be improved. The quick way is by devaluation (as the Israeli Government has just shown) or by fiscal incentives. There is a good deal to be said for devaluation, it adds, while there is spare capacity and while the immediate demand pros- pect overseas is favourable. The slow way is the Government's way—by holding back money incomes for a period, hoping that wages and prices will rise in the economies of our com- petitors. But this means a long stagnation and there is no certainty that our money incomes will be restrained enough or that our competitors (except possibly Germany) will oblige with the necessary inflation.
The joke is that if Mr. Barber's optimism turns out to be justified—that is, if there is a recovery in our exports to the primary pro- ducers—the opposition at home to our entry into the Common Market (which he so strongly de- sires) will be greatly strengthened. It will prove, Lord Beaverbrook will say, that our traditional markets in the Commonwealth are the ones on which we should rely. The markets in Western Europe will expand strongly only for a time— until saturation is reached in motor-cars, re- frigerators, television sets and the rest of our material goods. When Mr. Erroll speaks of the changes in the pattern of world trade—'the rapid growth in the interchange of sophisticated industrial goods by the developed countries'— he is referring to a phase which will endure for a time, but will inevitably come to an end. There is great danger, as I have pointed out and Sir Roy Harrod endorsed in this paper, in neglect- ing the underdeveloped countries and the primary producers overseas whose economic growth is the only permanent backing for a long-term expan- sion in the British export trade. If we jump on the European band-wagon and sacrifice the in- terests of these older customers it would be a disaster that should take the smile off Mr. Barber's cheerful face.
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