11657-Economic Survey-Galley 19
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103. The aim must be to increase total export earnings by a very large sum. Within this aim the most urgent tasks are to maintain, and whenever possible to increase, exports to the dollar area-above all to Canada and the United States-and to increase exports to the Commonwealth and the Colonies. The Government is at present working out export targets for particular industries, and these will be discussed fully with the industries concerned. But it is clear that a strenous effort must be made, and even the limited objective of an overall balance in our overseas payments cannot possibly be attained without large reductions in supplies of many consumer goods to the home market.
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Regional Aspects
104. Assuming that the difficult task of keeping an external balance is in fact achieved, what is likely to be the geographical pattern of our trade and payments, and what are the problems likely to arise in different areas? As the figures in Table 17 show, very substantial changes have been taking place in the United Kingdom's balance on current account with the major areas of the world, and equally significant changes are likely in future.
105. The largest change will probably occur in the balance with the dollar area. If our increased needs of essential commodities are met, a fairly sharp rise in the United Kingdom's own deficit with the dollar area seems unavoid- able. (The implications of this for the dollar accounts of the whole Sterling Area are discussed below.) The surplus with O.E.E.C. countries may fall as exports tend to be deflected to areas of more urgent demand, but even so the balance of the Sterling Area as a whole with O.E.E.C. countries is likely to remain in surplus. With other non-sterling countries the United Kingdom is likely to continue in substantial deficit, and this deficit may possibly grow if it does, it will present some difficult problems. The rest of the Sterling Area will probably be in surplus with many of the countries in this group,() and this will help to keep the whole Sterling Area account with them in balance; there are others, however, particularly in the Middle and Far East, with which it may not be very easy to achieve a balance. It must be our object to encourage such countries to make the maximum use of their accruals of sterling in trade with other areas which tend to be short of sterling.
(1) This group includes Eastern Europe, non-dollar countries in South America, and most of the countries in the Middle and Far East.
106. The position of the United Kingdom vis-à-vis the Rest of the Sterling Area involves rather different considerations. With the big rise in prices of some of the most important Sterling Area raw materials such as rubber, tin and wool, it may be difficult for this country to prevent some decrease in its normal surplus on current account, despite the expected increase in its own export prices. The major difficulty, already discussed, will be to ensure that sufficient exports of consumer goods and others in relatively easy supply are available to make up for any unavoidable decline elsewhere. Even if this aim is achieved, however, and the United Kingdom continues heavily in surplus with other Sterling Area countries, their own balance of payments with the rest of the world as a whole (including the United Kingdom) is ́ likely to be in substantial overall surplus too. In other words, we must expect a further considerable rise in the external sterling assets held by these countries.
Sterling Area Gold and Dollar Accounts
107. Since the war and till recently the "dollar gap " has been the central economic problem confronting this country. Devaluation of sterling, restric- tion of dollar imports throughout the Sterling Area, the export drive, and booming raw material prices have all contributed to the major change which took place in 1950, culminating in the suspension of Marshall Aid at the end of the year.
An analysis of the gold and dollar accounts for 1948-50 is shown in Tables 20 and 21.
108. Rearmament is likely to have profound effects on this situation. As already mentioned, United Kingdom import requirements from the dollar area have risen greatly; so have the prices of these imports. A formidable increase in the dollar cost of imports is therefore in prospect for the United Kingdom, and to a lesser extent for other members of the Sterling Area. PAgainst ghisf hogvever, the very large earnings from RestPofoSterling A587 sales of essential raw materials can be expected to continue. In particular, the Colonies, whose 1950 dollar surplus was more than two and a half
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