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Meeting of Commonwealth Finance Ministers, July 1949

Text of Agreed Recommendations to Governments

I

The Meeting of Commonwealth Finance Ministers welcomes the discussions which have taken place between United Kingdom, Canadian and United States Ministers and agrees that the aim must be the achievement of a pattern of world trade in which the dollar and non-dollar countries can operate together within one single multilateral system. The Meeting notes with satisfaction that further discussions are being arranged to take place in Washington early in September to consider the action required to carry out this aim for the mutual benefit of the dollar and sterling countries.

2. The Meeting considers that the achievement of this aim will require action by all countries concerned, which may involve important modifications in policy. The objective conditions in which a single multilateral system of world trade and payments is practicable do not at present exist. To establish them will require action by all countries both in concert and individually. The responsibility falls both on surplus and on deficit countries.

3. Accordingly the policy of all countries should be directed towards- (a) implementing their obligations under international agreements to take steps to promote full and productive employment, without which a high level of international trade cannot be sustained;

(b) facilitating the establishment of a world-wide pattern of production and international trade such as to make possible a system of international payments which is self-balancing;

(c) developing the agricultural and industrial resources of under-developed countries in order to increase their levels of production and consump- tion and to enable them to play their full part in the system of multilateral trade, and so contribute to full employment;

(d) exploring further the conditions, and the machinery, for the organisation of an adequate flow of international investment for all forms of productive development;

(e) restoring international monetary reserves generally to levels which can accommodate reasonable fluctuations in international balances of payments;

(f) collaborating in arrangements designed to ensure reasonable and stable

prices for primary products.

4. A major aspect of the present disequilibrium in world trade is the lack of balance between the dollar countries and the countries of the sterling area. In the past few years substantial financial aid from the United States and Canada has been necessary in order to balance the sterling area's dollar accounts. The object of policy is to achieve balance, without this extraordinary aid, on the basis of a high level of transactions and the normal working of the multilateral pattern of trade.

5. The achievement of a more reasonable balance between the dollar and sterling area countries can be facilitated by the development of trade between these two areas and other countries. Nevertheless, any such development will not of itself relieve the sterling area countries of the necessity to take direct measures to secure such a balance.

6. This balance in the sterling area's dollar account at a high level of trade therefore requires a large expansion in the dollar earnings of the sterling area countries, and the development in the sterling area of production at competitive prices which will reduce the need for abnormally large imports from the dollar

countries.

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7.T This suggests, the following course of actione 01 of 862

the sterling area. countrasts

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(a) To increase the supply of manufactured goods and primary products, competitive in price and quality, (i) to dollar markets, (ii) to appropriate sterling area and other markets at present abnormally - dependent upon supplies from the dollar countries;

(b) to increase the supply of dollar earning services, including tourist

services;

(c) to promote such adjustments in the pattern of production as are necessary

to achieve (a) and (b);

(d) to promote reasonable conditions designed to facilitate investment by

the surplus countries.

8. In order to sell at competitive prices sterling area countries should, where necessary, take measures to reduce their costs of production and should-

(a) bring any remaining inflationary elements in their countries under control; (b) bring the claims upon their productive resources both for investment and for consumption into line with the resources currently available to them, including external borrowing;

(c) encourage action designed to increase efficiency in production.

9. Action by the sterling area countries alone cannot create the conditions necessary to establish a multilateral trading system. This requires that all countries should carry out the policies in paragraph 3 above and all deficit countries should carry out the policies on the lines indicated in paragraphs 7 and 8 above. Moreover, the surplus countries should make their full contribution to the building of a multilateral system by-

(a) maintaining a high level of employment, income and demand;

(b) assisting and encouraging the purchase of goods and services from other

countries;

(c) encouraging international investment by their nationals and through national and international institutions, particularly under conditions which do not impose limitations on the area within which the funds can be spent;

(d) promoting the gradual transfer of resources within their territories from forms of production in which their costs are relatively high compared with those of other countries.

II

10. Emergency measures to stem the current drain on the sterling area's reserves are perforce negative and unconstructive. It is, therefore, all the more necessary to take, in the immediate future, any positive and practical steps that will lead towards the agreed long-term objectives. In this connection care should be taken to concentrate upon measures which would fit into the permanent pattern of world trade.

11. The Meeting considered that these steps should include—

(i) the speediest possible increase in the efficient and economic production within the sterling area of those commodities which can earn dollars or which the sterling area would otherwise have to purchase for dollars; (ii) co-operation to secure the most effective use of the resources available to the sterling area in the interests of the area as a whole, even where this involves some measure of sacrifice on the part of individual countries such as doing without sterling area goods that, in the common interest, should be sold for dollars;

(iii) the expansion of sales of sterling area goods in dollar markets, with special attention to prices, selling methods, and market requirements; (iv) an intensive effort to increase the sterling area's dollar earnings from

the provision of services of all kinds, including tourism. Page 201 of 662.

Meeting decided to set on foot immediately detailed examination of

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662 the application of the policy outlined above.