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Thursday, 3 December 1936

Senator HARDY (New South Wales) . - On behalf of the Country party in the Senate I welcome this trade treaty with France as a sign of an increased export trade, although I am reluctant to see trade expressed in terms of actual law, and in the numerous articles which form the foundation of this treaty.

Although I admit the necessity, I regret that Australia has found it necessary to enter into bi-lateral trade agreements. Such agreements appear to me to degenerate gradually into haggling and bargaining; because, in weighing up trade between two countries, setting credits against debits, we must ultimately make another contribution towards the principle of economic nationalism. "Whilst I do not criticize the action of the Government in this particular agreement, I believe that every effort should be made to attack the problem on a much wider basis. Admittedly, the scope of the Government in this matter is limited. One of the greatest factors encouraging trade between nations to-day is the stabilization of currency. This agreement has become possible because France has devalued the franc, with consequent advantage to, not only itself and other nations, but also Australia. I had the opportunity to-day to check up certain figures in regard to world trade; they disclose that the volume of international trade has steadily increased during the past three years. One of the most encouraging factors in this connexion is that, for the first time since 1929, there has been an increase, not of the volume, but of the value, of world trade. Last year was the first occasion since 1929 that the value of world trade rose. Although a good deal has been said about stabilization, a further analysis of world trade shows that, in 1934, only 40 per cent, of the total volume was conducted, on a basis of stable currencies. Last year the position had considerably altered, and the figure rose to HQ per cent. That was a wonderful improvement. With the devaluation of the currency of the gold bloc countries, ir is anticipated that over 90 per cent, of world trade will be carried out on a stable currency. The explanation of our inability to increase out trade with gold-bloc countries, such as France - and the Minister in charge of the bill (Senator A. J. McLachlan) showed how that trade had depreciated - is that the currency barrier of those countries operated to cause trade restrictions, quotas, &c. The devaluation of the franc by France, followed by similar actions by Switzerland and Holland, is not only one of the brightest international events of the year, but is also an encouraging factor in regard to our external trade relations. The annual report of the directors of the Bank of New South Wales deals with the devaluation of the currency of these countries, and its likely repercussions in Australia. Honorable senators are apt to overlook the barriers which are raised through the medium of different and fluctuating currencies. One has only to analyse the Overseas Trade Bulletin to ascertain how much greater was the trade that France enjoyed a few years ago than it is to-day. What is the reason for the decline % The average person will contend that the explanation lies in the fact that France placed a number of quotas on imported goods, or hedged itself around with restrictions which other countries found impossible to break down. However, honorable senators must seek a further reason than that. They should ask themselves why these quotas were introduced in order to restrict imports. The action of France in imposing quotas is linked with currency itself. By its adherence to the gold standard, France followed a definite deflationary policy. That, in turn, meant a decrease of its exports, and, in order to prevent social unrest within their borders, the French, whether they liked it or not, were compelled to tread a path of economic nationalism. In 1925-26, exports from Australia to France exceeded £18,000,000; in 1934-35 they had declined to £4,000,000. Certain honorable senators have decried the failure of the World Economic Conference held in 1933; but I sometimes think, when people speak glibly of restoring international trade, that the effect, of stabilized currency is not truly appreciated. It is the actual foundation which must first be created, if trade is to be permitted to flow freely between nations. T have shown that, in 1934, 40 per cent, of the world's trade was conducted on a stable exchange rate, and, on this basis, it rose in the following year to 80 per cent. Without hesitation, I hail the decision of France to devalue the franc as one of the greatest events in world history during the last two years. It is particularly interesting to note that tha devaluation was carried out with the cooperation and assistance of two grim/. countries, Great Britain and the United States of America. Both of them are pledged to the principle of international trade, and both realize the value of that trade as the medium for world recovery. Their policies havebeen based on a realization of the fact that world recovery cannot be achieved until international trade is made to flow freely. In effect, Great Britain and the United States of America assured France that if it devalued the franc, they would not take any action designed to offset the advantages of that devaluation.

I direct attention to a. paragraph in the annual report of the Bank of New South Wales-

As measures likely to promote world trade still further, the depreciation of the French and Swiss francs, the guilder and the lira, and the accompanying stabilization agreement, are the most hopeful events of the past year. The countries which have devalued will reap obviousbenefits. Their export industries will be able to compete on better terms in foreign markets.

That is most important. France's export trade has steadily dwindled during the last ten years. In 1925 Australia imported nearly £4.000,000 worth of French goods; in 1934-35 that trade had decreased to less than £1,000,000. The paragraph continues -

Home industries will be relieved of the deflationary pressure, which was made necessary by the over-valued state of the currency, and will also share any increased prosperity accruing to the export industries. Capital willbe repatriated and used for productive purposes. Tourist traffic will be restored.

The tourist traffic means a good deal financially to France -

Government revenues will increase, lessening the difficulties of balancing budgets. The effects upon the economies of the gold bloc will be essentially the same as the advantages accruing to Australia and New Zealand through the raising of their exchange rates early in the depression, which was a similar step.

Sitting suspended from 6.15 to 8 p.m.

Senator HARDY - The extract continues -

As far as its wider aspects are concerned, the effect of the devaluation should be equally beneficial to the rest of the world. I think the rather narrow-minded view that, because currency depreciation gives a country a trading advantage, it must of necessity injure other countries, has been proved to be wrong. Ithas been a significant fact that British trade with countries that have allowed their currencies to depart from the old gold parity has improved, while trade with the gold bloc countries has steadily deteriorated. The reason is that the deflation thathas been necessary in the gold countries has so exhausted the purchasing power of these countries that they cannot afford to buy abroad. This in turn has led to trade restrictions in an endeavour to retain for local industry an increasing share of the shrinking local market, since export has become difficult.

I think that in the welter of adjustments which have occurred amongst the nations in the last few years the most outstanding has been the contraction of trade in the gold bloc countries. The contraction has been to an extent greater than we can realize in Australia, and it has been more directly responsible for the introduction of high tariffs and other trade restrictions than has any other factor. The effect of that trade contraction was felt in France, I think, more than in any other country. It is only recently that France has departed from the gold standard. The following is an authoritative table showing the economic position of France as one of the gold bloc countries in the last few years : -


Senator Collings - What bearing has that on this?

Senator HARDY - It has a definite bearing on the agreement which we are discussing. We are discussing trade with France, and I have advocated repeatedly in this Senate that the only way in which we can increase our export and import trade with that country is to remove currency disabilities. Many honorable senators would say that an ordinary Australian tariff rate of 25 per cent. British and 50 per cent. foreign does not create a barrier, but, if they work it out by comparision of the gold standard with the Australian currency, they will see that it does. The duty on that basis against goods imported would be 63.5 per cent. from Britain, 91 per cent. from the United States of America, 12.6 per cent. from Japan, which has a depreciated currency in relation to the Australian pound, and 211 per cent. from France, Switzerland and Belgium. Is it any wonder then that we have advocated constantly stabilization of currency by means of a resumption of trade on the basis of the 1925-29 figures. There is no reason to contend that because a "world economic conference failed once it would fail again. Last year 80 per cent, of the world trade was carried out under stabilized currency arrangements, and I trust that the day is not far distant when the currencies of the whole world will be stabilized.

Senator Brown - Does the honorable senator think that that would solve trade difficulties ?

Senator HARDY - It would solve some of them.

Senator Collings - Does the honorable senator want the world to return to the gold standard?

Senator HARDY - I do not, but the agreement shows that the result of the devaluation of the franc has been beneficial to the trade, not only of Trance itself, but also of all. other countries which trade with it. Its action has not only caused domestic expansion but has also removed the shackles on international trade which were imposed by its adherence to the gold standard. Immediately after the devaluation of the franc Prance removed the whole of the surtax of .15 per cent, which it had imposed on imports in order to make up tin; differences in exchange. I contend that France has done the right thing. It is interesting to note from the agreement that, prior to its departure from the gold standard, France had imposed a quota on 750 classifications of goods. Because of its operation, we were unable to participate in its trade in barley and several other primary products of which Australia, is a supplier. These classifications have now been reduced to 104. The French policy of reducing the number of classifications does not apply particularly to Australia, but is a part of the most-favoured nation treaty clause, and applies to all countries with which France is able to trade. This matter cannot be weighed in terms of actual trade- That is why I did not speak on the Trade Agreement (Belgium) Bill or the Trade Agreement (Czechoslovakia) Bill, because, the total trade concerned in those agreements was : Exports 6 per cent, and imports 1.7 per cent, of Australia's total trade. The significance of this agreement is that the volume of international trade is increasing, and I urge the Senate to consider the matter in that light. I point out to the Leader of the Senate (Senator Pearce) that this is the appropriate time to extend the application of the exchange adjustment legislation to remove the very great disability that exists in trade with foreign countries. A formula exists which gives the benefit of exchange . adjustment to British countries but not to foreign countries, and I contend that that is wrong in principle, because it represents a barrier to trade which must come down. If the Commonwealth acted as I have suggested, it would be making a gesture to foreign countries which would be appreciated.

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