CAB129-53 — Page 174

Page 174

Printed for the Cabinet. July 1952

SECRET

C. (52) 224

4th July, 1952

CABINET

Copy No. 57

EXPORTS FROM METAL-USING INDUSTRIES

MEMORANDUM BY THE MINISTER OF SUPPLY

I have been examining how the metal-using industries could, by expanding their exports, make an increased contribution to the solution of the problem of our balance of payments.

2. This examination involves detailed discussions with the numerous industries concerned and is not yet completed. However, my colleagues may care to know my preliminary conclusions.

3. The metal-using industries (excluding shipbuilding) are already exporting goods to the value of about £1,200 million a year, which represents over 40 per cent. of our total exports.

4. If a further expansion of exports from these industries is to be obtained, three measures require to be taken: --

(a) Increased quantities of military equipment of types already in production

for the Services should be released for export;

(b) the production of selected items in the defence programme should be cur- tailed or spread over a longer period in places where this will release capacity and labour which is capable of being switched over to export work within the same factory;

(c) more steel should be allocated to firms which are in a position to expand

their exports.

5. Action under course (a) offers the possibility of the quickest results. Exports of military equipment against orders already received will amount to about £20 million in non-sterling currencies during the second half of this year and about £33 million next year. Over and above this, we have received specific enquiries from non-sterling countries worth about £37 million for equipment which in the main could be supplied during the next 18 months without interfering appreciably with deliveries to the Services.

6. These figures relate only to equipment for which the Ministry of Supply is responsible. They include no allowance for the off-shore purchase of aircraft by the United States which, if the present negotiations are successful, might bring in substantial progress payments in dollars in 1953. Nor has any account been taken of the additional enquiries which would be stimulated by the knowledge that we were now in the position to supply more arms, and which might well result in exports worth a further £17 million to non-sterling countries over the next 18 months. (The detailed figures on which these estimates are based are given at Appendix A.)

7. I have referred above only to exports to non-sterling countries. As will be seen from the table in Appendix A there are also prospects of a substantial expan- sion of exports to the sterling area. An appreciable proportion of these sterling exports would in fact be "dollar-savers," in that they would replace dollar imports by the countries concerned.

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Page 175 The results to be expected from course (b) would not be so immediate. However, if the necessary policy decisions are taken this month, the benefits should already begin to be felt before the end of the year. For maximum benefit to be derived from the proposed diversions of steel, it is important that the firms should be given the earliest possible authority to seek additional export orders. Any delay would prejudice our prospects in the buyers' markets which are now develop- ing abroad. (Examples of products whose export could be expanded by switching capacity within the same factories from defence to civil production, are given at Appendix B.)

9. The impact of action under course (c) would be rather more gradual, but its effect during 1953 could be very considerable. In order to release the steel required for this purpose, it will be necessary to accept some postponement of cer- tain parts of the defence programme which consume steel most heavily. But this by itself will not be enough. Within the civil sector of the economy, a further diversion of steel to production for exports would certainly be necessary as well. A start should be made at once. In the fourth quarter of the year, at least an extra 150,000 tons of steel should be allocated to engineering industries capable of increasing their exports. (A list of the main industries concerned is attached at Appendix C.)

10. I accordingly recommend: -

(i) that the Service and Supply Departments, in revising their defence pro- duction programmes, should have in mind the specific object of assisting exports in the ways suggested in paragraph 4 (a) and (b) above;

(ii) that, in the case of selected items of defence equipment with good export prospects, the production programmes should not be reduced to the full extent required by the cuts contemplated in Service expenditure, thus leaving a margin available for sale abroad;

(iii) that in the fourth quarter of this year at least an additional 150,000 tons of steel should be allocated to firms capable of expanding their exports quickly.

Ministry of Supply, S.W. 1,

4th July, 1952.

D. S.