Patience is a virtue
In the light of the appalling July trade figures, few will be disposed to argue with the further downward revision by the National Institute of Economic and Social Research of its balance of payments fore- casts for this year and next. A deficit of £575 million is now forecast for 1968 and a surplus of £250 million for 1969. But what everyone should argue against is the policy conclusion the National Institute draws from this: the imposition of import quotas.
In order to meet the point that, in a world already moving dangerously towards greater protectionism, a move of this kind would inevitably provoke retaliation, the Institute naively adds that 'it would, of course, be essential to secure international agreement for such a policy.' Even in the unlikely event of such agreement being forthcoming, the massive precautionary importing that would occur while the international talks are taking place make this the foolproof recipe for an even bigger trade gap. But the basic argument against import quotas now, apart from the problem of fore- stalling, is that there can be no justification for such a policy being adopted by a coun- try that (on the Institute's own figures) ex- pects to move sharply into surplus within a matter of months as it is. This objection applies equally to other devices, such as prior deposits a l'iialienne, which are in any case utterly inappropriate and unworkable in the context of the sophisticated credit and banking system obtaining in the Ix.
It is no doubt frustrating that the move- ment into balance of payments surplus, brought about by the devaluation nine months ago, is happening more slowly than expected. But the immediate risk of a major financial crisis has been largely removed by last month's new Basle agreement, while a 'rephasing' of the repayment of our inter- national indebtedness will ensure that no outrageous levels of unemployment have to be endured. It simply means that Mr Jen- kins's 'two years' hard slog' will have to be three. This is the price of three years of the grossest mismanagement of the nation's economy since the 'thirties. Meanwhile, patience is the only policy.
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