Evening star. [volume] (Washington, D.C.) 1854-1972, 1962-02-04
BY HERBERT BRATTER
Contributing WritAr

SohtfAputiuk WIltcE
Behind the British governments
decision to apply for membership
in the European Common Market,
a momentous step. is the chronic
weakness Of the pound sterling.
long q "key currency" in world
business. Sterling's weakness in
turn reflects the great changes,
political as well as economic,
which have affected this impor-
tant nation in the last two dec
AIDES: The war, the postwar bur-
dens, the breakup of the Empire
and the deterioration of the
country's competitive position in
world trade. In 1949 the pound
was devalued.
Last year Britain had to
obtain substantial help from the
International Monetary Fund for
sterling: SIS billion in American
and other currencies. plus a $500
million standby credit. This was
the second time that the fund
had extended massive assistance
to the pound. Since World War
II, Britain has undergone re-
peated balance-of-paymentS crises
and has had billions of dollars of
direct United States aid-"inter-
i'm aid" the Marshall Plan, and
particularly the 81 billion British
Loan" of 1945, which was so
quickly dissipated to support the
pound at its then parity.
Britain's payments position has
deteriorated for various reasons,
some beyond its control. Income
from shipping has been reduced
by foreign competition. Oil reve-
nues from abroad have diminished.
Overseas aid and defense spending
has been burdensome, especially
in Germany. And Britain's COM
petitiveness in world trade has
steadily diminished, even while
British exports in the aggregate
have increased. In four years
through 1860 British exports rose
only II per cent, whereas West Ger
many's rose IS per cent. Britain's
share in world exports Of manu-
features went from % per cent in
1856 to 10 per cent in 1860, while
the European Common Markets
share rose from AZ per cent to 40
per cent.
Exports Losing Out
Even in the sterling area, where
tariff and other preferences give
British goods an advantage,
British exports have been losing
out to German, French. Italian
and other Common Market export
ers. The UKs share of imports Of
other sterling-area countries de-
clined in four years from SIS per
cent to 46 per cent while the share
supplied by the six Common Mar
ket countries rose from 81 per
cent to % per cent. The protected
British domestic market itself has
had to meet import competition to
some degree.
Why has British competitive
ness decreased?
One reason is that population
growth has Jagged behind the
rate on the Continent. There have
been more workers to compete
with the British.
Since there was more war de-
struction In Europe than in Brit
ain, after war there was more
reconstruction and modernization
on the Continent. much of it done
with Marshall Plan dollars and
technical aid. This reduced Euro
pean production costs, compared
to the British.
A major handicap for Britain
has been the much more agrees
Sive policies Of British organized
labor, assisted for many years by
the Labor government, than those
of Continental labor.
High British taxes have in
creased the burdens on British
export industries.
Competitive Markets
High costs, generated by the
wage-price spiral and by high
taxes, have tended to price British
goods out Of competitive markets.
The Organization for European
Economic Cooperation In a recent
report pointed an accusing finger
at British wage policies.
Another explanation: British
industry all too generally has
failed to roll up its sleeves and go
out after export business, despite
appeals by the government and
official export credit insurance.
The protected home market was
just too good; and the preferential
Commonwealth markets required
less selling effort. But markets in
the sterling area. including Can
ada-and also in the United
States - while growing, have
grown less fast than European
markets. By not catering to the
latter, Britain has lost trade posi-
ton.
Since summer the Government
has put on strong export drive to