Evening star., 1951-07-01

nlC history OF Cle pOStWdT years.
marked deterioration in the terms
of trade with the outside world.
1t took more and more dollars to
purchase the same physical VOL
ume OF primary products. AS a
result, there has been a vast
change in international trade and
balance of payments relations
since June, 1850.
Chonged Trode Pottern
The principal beneficiaries Of
these shifts in price structure
are the countries producing pri-
mary products. Increases in ex-
ports in terms of dollars from
these countries are largely due to
increases in prices rather than
increases in the volume. On the
other hand. the imports of these
primary producing countries from
industrial countries in 1850, al
Though greater in volume than in
l1949, declined in dollar values
principally because of lower prices
due to the 1949 currency devalu-
lation.
Thus, that year saw sweeping
changes in the pattern of inter-
national balances of payments.
The greatest change was a decline
of more than 81 billion in the
overall surplus of exports over
imports for the United States.
This was accompanied by a. re-
versal of Canada's position from
a surplus to a deficit position.
The counterpart was a rise of
$500 million in dollar and gold
balances of countries producing
primary products. In addition,
these countries also received from
the United States some $400 mil
lion in gold during 1850 as pay
ment for raw materials exported
to this country. Hence, there was
total improvement of $1.1 bill
lion in balance of payments posi-
tions of these primary producing
countries. Therefore, develop
ments in 1850 arising out of the
new inflationary forces set in mo-
ton by the Korean war had the
effect of strengthening foreign ex-
change positions of the primary
producing countries vastly more
than they did Western European
countries.
| Since these inf1ationary forces
are in fact g!obal, and since they
are transmitting themselves from
primary product countries to in
dustrial countries through huge
increases in prices for raw mate
trial imports, they are, for any one
individual country. largely exter-
NAL forces over which it has no
control. And it is because these
inf1ationary forces are threaten
ing to undermine monetary sta
bility in most European countries
that the U. N. Economic and So
Icial Council, in it's economic
survey of Europe. raises the ques-
ton Of whether a revaluation up
ward of European currencies
should not be undertaken.
AS long ago as last November.
articles appeared in the British
financial press advocating an up
ward revaluation Of sterling. The
general theory is that since de-
valuation solved the dollar short
age problem in 1949, when a buy
er's market was developing, q
revaluation upward at this time,
when a sellers market is develop
ing, should solve today's problems.
Effect Only Partial
On balance, the U. N. survey
says, it can be established that
the decline in the average level
i of Europe's overseas import
prices would be roughly two
thirds as great as tn percentage
reduction in European rates on
the dollar.
"In other words" the Survey
says, "if the rates on the dollar
were brought down by IS per
cent, overseas import prices
would fall by something like 20
Irer cent on the average, and
: smaller or greater changes in the
Exchange rates would have cor
respondingly smaller Oh greater
effect in reducing import prices.
The Articles of Agreement OF
the International Monetary Fund
, provide that any member may
propose a change in the par value
o. its currency to correct "fun-
, damental disequilibrium." Nc
, change shall be made, however
except on the proposal Of the
! member whose currency is affect.
ed, and then only after consulta.
, ton with the fund. In view o1
the obvious attempts now being
, made abroad to build d case fol
the existence of this "fundamen.
tai disequilibrium," it is not toe
unlikely that in the near future
|. the fund may be presented with
: proposal to revalue upward
sterling and other European cur.
rencies.
In commenting upon these de.
| velopments, Secretary of tht
1 Treasury Snyder says that, in hi
view, appreciation of currencies il
: not the solution for the presen
! world imitation. The problem, HI
e says, is not only common to tht
f whole free world, but it is causee
S by "the impact of the mutual de-
e fense effort To appreciate cur
= rencies now would merely give {
temporary advantage to a particu
lar area (the sterling area) to th'
detriment of the defense effort al
!. whole. as well as to the detri
q ment of the economy of the rest O
\ the free world.
r Fundamentally, the Treasur.