CAB129-52 — Page 63

12. We must review the whole field of our overseas commitments, covering both our present military layout and the foreign policy and strategy on which it is based, and also our economic obligations both to the Commonwealth and Colonies and to our foreign creditors. I understand that the Foreign Secretary and the Minister of Defence have already initiated studies on some of these matters, and I ask authority to consult with them so that a comprehensive review of all of our overseas commitments can be set in hand and related to what we have the economic strength to carry out.

Imports

13. So long as our external position remains precarious we must retain control over imports and, within a strictly limited total, must see that the needs of pro- ductive industry are met. The regular review of our import programmes for the year 1952-53 has now begun and I expect to be able to bring it before my colleagues before the end of next month. Meanwhile I ask that we should agree that no further peicemeal additions should be made to the programmes already authorised.

Coal Exports

14. I make no apology for returning to this subject. It is a truism-but none the worse for repetition-that expanded exports of coal would not only be valuable in themselves but would have a profound political and psychological significance in the present circumstances, especially in European markets. In my judgment we ought to be ready to expand coal exports even if it involved risks and shortage to United Kingdom domestic and other consumers: but given the present stock position and the recent striking increase in the manpower working in the mines there should be no real fear of that. It is clear, therefore, that an early and continuing expansion of coal exports should be given first place in all Government policy.

Trade and Export Policy

15. Our export trade is in the hands of private enterprise: the Government does not export. We therefore have to depend heavily on industry and commerce, but the Government must do everything possible to secure conditions which will enable industry to produce a maximum flow of exports, especially to doilar markets, and to develop new lines of production which will meet the changing character of world demand. To discharge this responsibility is primarily a question of ensuring that the economy and especially the vital sector of metal-using industries--is not overwhelmed with other claims and that the financial climate at home is such that the export market becomes and remains relatively more attractive than the domestic market. It means that exporters must be able to rely on adequate supplies, particularly of steel. There should be other measures of assistance which the Government can give, e.g., the extension of the export credit guarantee system, encouragement to tourism, &c. There is also the question of specific financial incentives, on which many exporters feel strongly. I understand that the President of the Board of Trade will be submitting a separate paper about the export prospects and any specific measures of direct assistance which may be thought appropriate. I will therefore say no more at this stage.

Internal Financial Policy

16. Our internal financial policy must work in line with and not against the rest of our economic policy. I refer particularly to the special measures which I have suggested that we must take to put our balance of payments right and to maintain our influence abroad. In brief, this means that we must avoid inflation at all costs; by a continuation, and if necessary a strengthening, of the credit policy we have so far pursued; by working for continued restraint over wages and dividends; by making more use of the price mechanism, and by keeping to a minimum the claims which the Government itself makes on the national resources. The Bank rate, properly used, is a most valuable instrument in this struggle. It is flexible and can be raised or lowered without delay to meet the needs of a changing situation. We must recognise, however, that we cannot deal with inflation, or secure the adjustment of our resources to the changes required by events, without some increase in the numbers of those temporarily unemployed while changing their jobs.

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