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Gold And Dollar Position

Volume 463: debated on Wednesday 6 April 1949

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We have certainly improved our gold and dollar position greatly since 1947, when we had a deficit of £1,024 million. We have now just completed the first year's operations under E.R.P., and in that period our gold and dollar deficit has been £358 million. The figure for the first three months of 1949 was £82 million, compared with £107 million in the second quarter of 1948; £76 million in the third quarter; and £93 million in the fourth quarter. Our E.R.P. allotments for the 12 months, together with drawings on the Canadian credit and other available resources, have been just enough to cover this deficit, although, of course, our visible reserves have in fact fallen because we have not yet received full reimbursement for our purchases of items which it has been agreed shall be bought out of E.C.A. funds.

At the end of last month, our reserves stood at £471 million, as compared with £552 million at the beginning of E.R.P. In very broad terms, therefore, we have succeeded in carrying out the policy I announced last year of restricting our dollar expenditure to what could be covered by our dollar earnings together with the aid at our disposal, and we intend to continue upon that policy for the rest of the E.R.P. period. If we were to go back on it our external financial position at the end of the period would not be strong enough to enable us to meet any emergencies that might arise, and to play our full part as the centre of the sterling area in a system of expanding world trade.

The remaining dollar deficit of £360 million a year is a vast figure, and it is this huge deficit which we must get rid of in the next three years. The size of the deficit, and the speed with which it has to be eliminated, must, I am sure, convince the Committee that we are still faced by a tremendous task.

For the first full fiscal year of Marshall Aid the Committee will remember that the O.E.E.C. recommended that we should be allocated 1,263 million dollars; for the second year—July, 1949, to June, 1950—we have asked for 940 million dollars. This indicates a reduction by 25 per cent. of our dependency upon aid; but it still leaves a very large figure, which is, however, the least amount that we consider necessary to enable us to maintain our full build up for recovery and development and, which is important, to help the other O.E.E.C. participants, who cannot succeed in their recovery without sterling assistance. We do not yet know, of course, how much aid will be voted by Congress for 1949–50, or how O.E.E.C. will finally recommend that the aid so voted should be divided up amongst the participating countries; but there is no doubt whatever as to the need for continuing aid.

The eventual solution of our dollar problem can be founded only upon firm and resolute action on our part, associated with an enlightened policy of importation in the countries of the Western Hemisphere. We have, during the past year, followed those lines of attack upon the dollar problem which were laid down in last year's Economic Survey, and which are repeated, many of them, in the Survey for 1949.

Home agriculture, with much better harvest weather, made great strides forward, and the numbers of livestock show large and most welcome increases. Overseas plans of development are going forward, in close consultation with the Governments of the Dominions and Colonies, and a great deal has been done to improve and expand our own production in the field of manufactures, especially where such expansion can earn or save dollars. We have succeeded in bringing down our imports from the Western Hemisphere from 46 per cent. of our total imports in 1947 to about the pre-war figure of 32 per cent. in 1948; this was due to the gradual restoration of production—or, in some cases, its increase—in the rest of the world. But we must not look upon this problem as one primarily of reducing imports. Our aim is to balance our trade with the Western Hemisphere at the highest possible level of exports and imports, and not at the lowest.

It is up to us, therefore, to concentrate our skill and energy of both production and salesmanship upon increasing our exports to the North American continent. Canada and the United States provide a large and prosperous market, which we are not yet cultivating as strenuously as we might. It is a difficult market for us in many ways, and the internal competition is intense. Nevertheless, I am convinced that we can, and must, do more to establish ourselves in these markets—not merely as a temporary device, to bring about a momentary balance of trade—but as a permanent factor in achieving once again the conditions in which multilateral trade in the full sense, and free convertibility of currencies, can operate. My right hon. Friend the President of the Board of Trade, who hopes, Major Milner, to catch your eye in the course of this Debate, will deal in more detail with this problem of our exports to Canada and the United States, and how best it can be tackled.