The Great British Problem

The president of the American Chamber of Commerce in London, Wallace B. Phillips, returned to Manhattan last month to plead that the U.S. understand why Great Britain must continue the policy of "Empire preference" in her trade after the war. The short, chubby head of Pyrene Co., Ltd. thus gave many a U.S. citizen his first clear glimpse of Britain's major postwar industrial problem: how to in crease exports at least 50% above pre war levels.

For the three years before the war, United Kingdom imports averaged -L-930 million, and visible exports -L-540 million.

Her investment income of -L-200 million, plus shipping earnings, commissions and other receipts came within -L-40 million of balancing her payments. But the war has severely reduced her investments, has crip pled her ability to pay cash for imports.

British exports are necessarily made with imported materials: every increase in ex ports leads automatically to some increase in her purchases. And because of the war-induced rise in raw material prices, im ports now cost more. This further complicates the British problem.

For the first time in the war, the British revealed a fortnight ago that war has cut her export trade 51%, from -L-471 million in 1938 to -L-232 million in 1943. Many Britons fear she may never regain her lost markets. But many also believe they have some advantages: 1) the world will be crying for all kinds of goods after the war; 2) such competitors as Germany and Japan will be knocked out; 3) the U.S. is hampered in its efforts to compete by a sharp rise in its cost of production; 4) most nations have plenty of sterling exchange with which to buy, and little dollar exchange; 5) Britain will never again, as in 1925, make the mistake of overvaluing the pound.

But Wallace Phillips stated emphatically last week that British exports would decline if imperial preference is abolished. To close the gap between essential imports and essential exports, said he, the British are considering many plans distasteful to

American opinion, "including import licensing, export control, cartelization of industry and bilateral treaties.. .. The British problem is based entirely on the country's economy. If they don't export, they don't eat. This fact is lost sight of in some of the arguments heard here in America." The important question is whether Pleader Phillips is right or wrong about the effect of Empire preference. The objection to this--and to import licensing, export controls, cartels and bilateral deals --is that they are all barriers which will reduce the total amount of world trade and everybody's absolute share in it, including that of Britain. Setting the world back to the trade conditions of the '30s is not likely to promote either prosperity or world peace. The burden of proof that this will not happen rests on those who propose such measures.

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