Page 477
5.
January-February we lost only $1.5 million. In general the dollar deficit is likely to beaigher 80vfr48& next few weeks than recently. Page 478 of 488
24. E.C.A. reimbursements during the month amounted to $80 million, including $4 million to Eire. In addition we received aid under letter of commit- ment procedure and in the shape of commodities obtained from United States Government Departments amounting to $9 million, making a total of $89 million in all. We drew $10 million more from the Canadian credit, while India drew $24 million from the International Monetary Fund. Total available
esources, therefore, amounted to $123 million (£30 million) to meet a gold and dollar deficit of £21 million. The excess was reflected in an increase in our gold and dollar holdings which rose from £465 million to £474 million during February.
3
+
25. Sterling liabilities fell by £58 million in January, divided about equally between the sterling and non-sterling areas. India continues to draw heavily on her sterling reserves (they fell by £31 million during the month), while the drop in South African holdings has recently been accelerated. Declines were fairly widespread in the non-sterling area, though some countries, e.g., Italy and Sweden, showed a small increase.com ran
Import and Export Prices
VI. Prices
26. The new index numbers of import and export prices (1947-100) showed no change in January compared with December. The index of import prices rose from 107 in January 1948 to 115 in July and to 117 in January 1949. The index of export prices rose from 106 in January to 110 in July and to 113 in January 1949. Although there has been no further worsening in the terms of trade since July 1948, the continued rise in export prices will make it more difficult to sell our goods abroad.
Retail Prices
27 The index of retail prices (June 1947-100) was unchanged again in February at 109. The index of food prices increased to 109, and the index of clothing prices rose further to 117. There were no significant changes in the indices for other groups.
Wholesale Prices dan pentru să
* 28. The Board of Trade index of wholesale prices (1938=100) was unchanged again in February at 218. The index for basic industrial materials declined slightly owing to reductions in the prices of raw cotton, wool, fuel oil and rubber; but prices of jute, cotton yarns and cloths and wool noils increased. For the first time since September the index of non-ferrous metal prices showed no change.
Prices in the United States
29. The index of wholesale prices of farm products in the United States declined again in February from 253 to 245 (1948-100). Moody's index of staple commodity prices, however, has shown little movement since the middle of February. On 8th March the price of lead was reduced by 2 cents a lb. (about 10 per cent.), and this was followed a week later by a further fall of 14 cents. This represents the first serious break in the level of non-ferrous metals prices. The price of lead has been abnormally high and some reduction, had been expected as a consequence of the falling demand by the automobile industry.
VII. Wage Rates
30. The Ministry of Labour's index of weekly wage rates (June 1947 = 100) remained unchanged in February at 108.
31. Increases in wage rates which became effective in January added approximately £68,000 to the weekly wage bill of about 450,000 workers. The increases were spread over a
de range of industries. The principal groups of workpeople affected were those employed in the iron and steel and engineering industries, in certain branches of the textile industry and in milk distribution.
32. They cost-of-living review in the buildings771€ 48& taken place and an increase representing 1s. 10d. a week for craftsmen with
478 of 4 x-m
-mon
243
6
corresponding increases for other workers will operate from 7th February. Tha rise from 1080 1088 the Interim Index of Retail Brices in November will result in sliding scale increases in February in the hosiery trade and in the iron and steel and tinplate industries. The Railway Staff Tribunal has rejected the claim.
National Union of Railwaymen for an increase of 12s. 6d. a week for half a million workers which would have cost about £22 million a year. This follows similar decisions on claims against the Hotels Executive and London Transport Executive.
by the
33. The most important new claims presented in January concern the spinning and manufacturing sections of the cotton industry and the claim in the electricity supply industry for a general revision of the wages structure the first major wages claim since the industry was nationalised. This claim would result in increases of 5s. 6d. a week for the majority of employees. Wages were last increased by 5s. 6d. a week in March 1948. There is also a series of claims for various grades of employees in the Health Services.
O.E.E.C.
VIII. European Recovery Programme
34. As forecast in paragraph 38 of my last Report, the Ministerial Com- mittee of Nine met in February to consider the structure of O.E.E.C. It was decided that the Chairman of the Council should, whenever he considered it useful, invite the Government of each country which is a member of the Executive Committee to designate a Minister to form with him a Consultative Group to assist him in guiding the work of the Organisation. The Consultative Group would meet for a week at a time about every two months. It was also decided that the Council should meet at Ministerial level as frequently as might be necessary for the conduct of the work of the Organisation, and at least four times a year. The Consultative Group met in the first week in March and considered on the basis of a United Kingdom memorandum, methods to be adopted for carrying out the Plan of Action for 1949-50, which had previously been agreed by the Council at Ministerial level. The Plan of Action is based on the following eight principles, which are stated to be essential to the success of the European Recovery Programme:
I
(1) 1949 must be a year of financial and monetary stabilisation in Europe. (2) A rapid increase in exports and in invisible earnings, particularly from
tourism and shipping.
(3) Re-examination of current import programmes to curtail dollar imports
not vitally needed.
(4) Elimination of internal disequilibrium in Europe, assisted by an adequate.
system of intra-European payments.
(5) Investment and modernisation projects to be developed rationally and in
concert.
(6) A system to be devised for co-ordination of investments where practicable,
and for the exchange of information needed for common decisions. (7) A start to be made on the problem of surplus population in certain parts:
of Europe.
(8) Annual reports on progress achieved to be submitted for consideration
by the Executive Committee of O.E.E.C.
The Consultative Group reached decisions on the immediate steps to be taken, both by participating countries individually and by the Organisation, for giving practical effect to these principles. The decisons do not entirely correspond with the proposals put forward by the United Kingdom, which have been weakened in a number of respects, but the main lines of action which we believe essential to European recovery have been agreed.
Congressional Hearings
35. The Senate Foreign Relations Committee has now reported on the amending legislation, including proposals submitted by E.C.A, for an appropria-- tion for the fifteen months, April 1949 to June 1950. The Committee has not suggested a reduction of the figures, proposed by E.C.A. for all participating - countries, viz., $1,150 million for April to June 1949, $4,280 million for the year JulP1949 49 June 4850 and $150 million for long-teragprojetof 4Bhese proposals have, however, still to be considered by the Appropriations Committee.
Division of Aid for 1949-50
7
36. The question of the principles to be adopted in the flixisign of aige for 1949-50 by O.E.C. after the sum has been approved by Congress, and the date by which this must be completed, are at present under discussion in Paris and London.
United Kingdom Allotment of Aid for 1948–49
f
37. Every effort is being made to get the allotment of $1,313 million to the United Kingdom for the period of April 1948 to March 1949 fully committed by April 3rd, as there is a risk that any funds not committed by that date might have to be surrendered. A complete programme has been submitted to the Economic Co-operation Administration in Washington, but against this pro- gramme procurement authorisations to an amount over $150 million have still to be issued by E.C.A. The United Kingdom Treasury and Supply Delegation in Washington are doing their utmost to get E.C.A. to issue the authorisations in time.
Supplementary Loan Agreement
38. An agreement was signed on 16th February between the United Kingdom Government and the Export-Import Bank covering an additional loan of $3 million to the United Kingdom. The terms and conditions are the same as those applicable to the $310 million loan previously granted. This raises to $313 million the total of aid available to the United Kingdon on a loan basis out of E.C.A.'s first appropriation.
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Second Report on Operations
39. The Second Report on Operations, covering the fourth calendar quarter of 1948, has been issued as Cmd. 7654.
IX. Dollar Earnings of Colonial Commodities
40. In view of the heavy reliance placed on the colonial dollar surplus in the Long-Term Programme the recent trend in the prices and dollar earnings of the main colonial commodities is disappointing.
41. As the following table shows, the major part of gross colonial earnings of United States and Canadian dollars is derived from three commodities only, rubber, tin and cocoa. These are discussed below.
:
42. This table shows the value of United States and Canadian imports from the Colonies. A deduction, necessarily somewhat arbitrary, has been made for Malayan entrepôt trade in Indonesian rubber, since, although this was substan- tial before the war and in 1947, agreements since concluded with the Netherlands Government are likely to result in future in the resale to Indonesia of dollars earned in this way. In the case of Canada the value of sugar imports from British West Indies has been omitted, since sugar, unlike the other commodities included, is a net dollar import of the sterling area and not a net dollar earner. The figures are necessarily only approximate.
It is doubtful whether much more than another $10 million can be added for dollar earnings in American Account countries.
$ million
1937
1947
1948*
United States Canada
265
370
380
30
50
80
Total
295
420
460
of which Rubber
130
240
180
Tin
85
30
70
Cocoa
30
80
110
Other
50
70
100
Page 480...
295
420 Page 4806of 488
Based on figures for January/October (United States) and January/September (Canada).
2448
Rubber
a
Page Rubberfaccounts for something varying between third a half of total colonial dollar earnings. The amount of these earnings depends on three variables, the total purchases of natural rubber by the United States, the proper- tion of those total purchases supplied by British territories, and the price.
than in because,
in
rubber into the United States were about 728,000 total imports of natural
tons in as against 684,000 tons in 1947, the production of rubber in Indonesia greatly increased in 1948, and British territories therefore got a smaller share of the total supplies to the United States. Prices in 1948 were about 5 per cent. higher than in 1947 and about a third higher than in 1937. The current price, however, is about 15 per cent. below the 1948 average. The future of rubber prices and dollar earnings. from rubber depends very largely on the course of events in Indonesia. Continued recovery in rubber production there would further reduce our share in the United States market and if it goes far enough would bring rubber into surplus supply and so lead to a very sharp fall in price. A surplus of production over commercial consumption requirements does in fact already exist, but so far stockpile purchases by the United States (and perhaps the U.S.S.R. also) have filled the gap. If a surplus does arise it is doubtful whether under present conditions in Indonesia a restriction scheme could be effectively administered.
44. The rubber position would be much improved now or in the future if the Americans could be persuaded to cut back the production of synthetic and so allow a larger import of natural rubber. It will be one of the major objectives of the United Kingdom Delegation at the forthcoming meeting of the Rubber Study Group to press this policy on the United States Delegation.
Tin
1
45. The outlook here is brighter, since Malayan production has not yet fully- recovered from the effects of the war, and as it increases, sales to the United States should expand. It is true that a surplus of production over commercial con- sumption requirements is beginning to show itself, but whether or not there is some form of international agreement on tin United States stockpile purchases should cover any gap for several years ahead. The Americans may drive a hard bargain for these stockpile purchases, but we may hope that the increase in the quantity sold will more than offset the effect on earnings of lower prices.
Cocoa
!
.:
46. As a result of a spectacular increase in prices after the lifting of the Office of Price Administration ceiling, cocoa, which was relatively unimportant pre-war, was the second most important dollar earner in 1947 and 1948. This rise in prices is a result partly of the general increase in world demand and partly of decreased supply in the Gold Coast due to the spread of swollen shoot disease. This season, however, exceptionally good weather conditions have led to a very large crop and prices have fallen by a half. While they may recover with more normal crops in later seasons, the more extreme boom in cocoa prices seems to be over. Other fats and oils can, if necessary, be used as a substitute for cocoa butter and the fall in their price in the United States will set a limit to cocoa prices in that market.
Future Outlook
47. Any forecast is necessarily hazardous in the extreme. But on balance it seems probable that the decline in rubber and cocoa earnings will more than offset any increase in earnings from tin or other commodities. On the other hand, as production of sugar in the sterling area increases and purchases can be made from non-dollar sources, we may in a few years' time be net earners of (Canadian) dollars through our sugar transactions.
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