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13 Minute by Robertson [1]

UNITED KINGDOM TRADE POLICY

The attached file is mainly composed of letters received by the
Department of the Treasury from Mr. Nimmo, the Australian
Representative on the Sterling Area Statistical Committee.

2. The letters are of a personal nature and do not attempt any
comprehensive survey of United Kingdom trade policy. The contexts
of the letters are rambling but do contain a fair amount of
information which confirms our recent views regarding United
Kingdom trade diversion policy and is indicative of possible
future trends in United Kingdom export-import trade.

3. The information contained in the letters may be conveniently
reviewed under the following headings-

(1) United Kingdom Import Policy
(a) From Dollar Areas. The United Kingdom appears to apply the
essentiality test when licensing imports from North America.

Restrictions imposed by the United Kingdom on imports of goods
from dollar areas do not appear to be as stringent as those
imposed by Australia and as an illustration it may be noted that
the United Kingdom is licensing imports of machinery and equipment
from the dollar area provided that these imports will result in
dollar savings within two years. As a further illustration I think
it can be said with certainty that the United Kingdom has never
yet cancelled an import licence once issued and does not show any
intention of resorting to a means so drastic although Australia
did not hesitate to cancel import licences in the latter part of
1947.

It should also be noted that although little information is
available as to the restrictions placed on importations from
dollar areas by other members of the sterling area, it is
suspected that other members of the sterling area have not adopted
restrictions as drastic as those of Australia. This is confirmed
by the unwillingness of New Zealand and Eire to discuss dollar
restrictions imposed by their Governments during sessions of the
S.A.S.C. although their objection thereto was made on the formal
ground that policy matters are outside the scope of the Committee.

(b) Section 9 of the U.K.-U.S. financial Agreement of December
1945. The letters do not furnish any evidence as to the extent
which the U.K. has excluded imports from sterling area countries
in pursuance of the non-discriminatory provisions of this section.

South Africa is, however, becoming apprehensive regarding the
possible effect of the Section on her exports to the United
Kingdom and the Crown Colonies.

(2) United Kingdom Export Policy
There are frequent references to the United Kingdom's export drive
and trade diversionary policy but the information is of a very
fragmentary nature. It is doubtful as to what extent the
Government's trade diversionary policy is being implemented by
export control. Statements made by Government officials in the
United Kingdom would indicate that there is little or no export
control exercised with the object of diverting goods to dollar and
other hard currency markets. However, export control may be
greater than the United Kingdom Government is prepared to admit
since certain Australian importers have, on inquiring from United
Kingdom manufacturers whether they can obtain goods which those
manufacturers have in stock, been informed that the goods have
been earmarked by export control authorities for specific markets.

The Australian High Commissioner in the United Kingdom has
broached [the question] [2] the effects on Australian industry of
the diversion of commodities in short world supply from Australian
markets to hard currency areas, but has obtained rather evasive
replies and few assurances that Australia will be able to expect
increased supplies of specific goods in the near future. He has
however been informed that Australia has recently obtained
considerable quantities of telephone equipment of which the United
Kingdom is herself short and large quantities of cotton yams and
thread. He was also informed that as Australia had obtained large
quantities of goods from the United Kingdom during the war years
she could not complain if the United Kingdom sought to re-
establish her trade with North America and other hard currency
countries to which the United Kingdom had exported very little
during the war years.

Australia has in recent months been surprised that increasing
quantities of goods of United States manufacture or processed from
raw materials obtained from the United States have been exported
from the United Kingdom to Australia. On inquiry from official
sources in the United Kingdom Mr. Nimmo ascertained that the
United Kingdom regards this entrepot [trade] as normal and
legitimate. Three particular commodities have come under notice
Cigarettes-Large quantities of cigarettes processed from American
tobacco are being exported by the United Kingdom to Australia. The
volume of exports appears to be growing and the United Kingdom has
stated that if under Marshall Aid large supplies of American leaf
become available to the United Kingdom none of the leaf will be
exported to Australia but plenty of cigarettes and processed
tobacco will be made available. The United Kingdom is quite
definite on this point.

Moulding Powders )
Accounting Machines) In both of these cases the attitude of the
United Kingdom appears to be that if Australia would be prepared
to import these goods from dollar areas there can be no objection
from a sterling area point of view to the United Kingdom supplying
these goods to Australia. Moreover the United Kingdom appears to
consider that there is no objection to the United Kingdom making
profits from this entrepot trade.

I think that the import of cigarettes and various other dollar
goods from the United Kingdom can only be justified if it is
considered that the practice affords the United Kingdom an
opportunity to reduce its large balances with other members of the
sterling area.

(3) Liaison Between the United Kingdom and Australia
The lack of effective liaison between the two countries has
rendered the United Kingdom trade diversionary policy very serious
from Australia's point of view. Despite the statements of the
United Kingdom officials to the effect that they do not exercise
substantial control over general export trade it appears certain
that some control must be exercised otherwise the United Kingdom
would be unable to fulfil commitments regarding the supply of
specific commodities in pursuance of the numerous agreements which
have recently been concluded by the United Kingdom with various
countries. The apparent unwillingness on the part of the United
Kingdom to be perfectly frank in this matter means that Australia
is often faced with an injurious fait accompli when agreements
have been concluded which entail the diversion of scarce
commodities from Australian to hard currency markets.

There are at present two sources of information open to Australia
from which some idea of the effect of the trade diversionary
policy can be gauged. These are-
(a) The S.A.S.C. Unfortunately there are strong grounds for
believing that this Committee was instituted so that the United
Kingdom could obtain certain statistical information from sterling
area countries and not with a view to integrating the industrial
and commercial relations of the Empire considered as a single
unit. The Committee is not empowered [to discuss] and several of
its members have strongly objected to discussing questions of
policy.

Certain information as to agreements concluded by the United
Kingdom is furnished at meetings of the Committee but this
information is very limited and as far as I can see of little or
no value.

(b) The text of the agreements concluded by the United Kingdom
with various countries. Generally the information as to specific
commodities which is given in abridged texts, such as cablegrams,
is incomplete and only two of these agreements, namely those
concluded with Argentine and the U.S.S.R., have been printed. Both
of these agreements include undertakings as to commodities of
which Australia is particularly short, but even here the
information is not sufficiently detailed.

(4) Future Trends
Many of the goods which Australia is particularly anxious to
obtain from the United Kingdom are now only available at very long
delivery dates and it is important to consider the possible future
effects on Australian industry of an intensified United Kingdom
programme of trade diversion and future monetary policy. [3]

Mr. Nimmo is of the opinion that the overseas trade of the United
Kingdom is moving away from the long established pattern. His view
is supported by the Canadian Representative on the S.A.S.C.

Neither of them however have any clear conception of the nature of
the changes which may ensue and base their assumption on recent
statements of United Kingdom officials. Mr. Nimmo considers his
opinion is strongly supported by the many recent references made
by the United Kingdom officials to the necessity for Australia to
curtail still further her imports from dollar areas and
exhortations to increase her exports, as for example dried fruits,
to dollar areas.

I am not sure whether available data supports Mr. Nimmo's views
nor am I convinced that the United Kingdom has any definite long
term policy towards empire trade. The following statement made by
a member of the British Treasury is however very disconcerting-
'There are various schools of thought in the Treasury. Some
officers think that each sterling area country should be required
to live within its current dollar income or requested to meet its
own deficit and be given freedom of action to do this. Others
disagree with this suggestion.'
The information contained in the letters when considered in the
light of the acute shortages of certain goods which Australia
formerly obtained from the United Kingdom and the growing tendency
of the United Kingdom to conclude bilateral agreements indicates
that it would be dangerous to delay any longer a discussion of
future United Kingdom - Australia trade relations. This discussion
should be carried out at the highest possible level so as to
obtain some definite statement from the United Kingdom as to her
future intentions. Arrangements should also be made for a senior
member of this Department to be stationed permanently in the
United Kingdom to act as a Liaison Officer between the Australian
Government and the British Treasury, Board of Trade and Bank of
England. Only a Departmental Officer with high status and an
intimate knowledge of Australian industry, overseas trade and
monetary policy could properly carry out the task and the
necessity for such an appointment is very urgent. [4]

[AA: A9879, 2911]

1 R.G. Robertson, Department of Trade and Customs.

2 Matter in square brackets inserted by hand by Robertson.

3 The last four words of this sentence have been struck out in the
copy on file.

4 An annotation was made to the minute on 5 May stating that the
Minister, Senator Courtice, 'has approved of a senior official
proceeding to London'.


[CANBERRA], 22 April 1948
Last Updated: 11 September 2013
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