asked the Minister for Finance whether the terms of the Bretton Woods Agreement, dealing with the free convertibility of sterling current earnings, will affect our economic interests; and if so, (i) to what extent and in what respects, and (ii) whether any discussions have taken place between our Government and other Governments affected by the agreements, in this regard.
Ceisteanna—Questions. Oral Answers. - Convertibility of Sterling.
I take it that the Deputy has in mind not only the Final Act of the United Nations Monetary and Financial Conference, 1st July to 22nd July, 1944, generally referred to as the Bretton Woods Agreement, but also the financial agreement between the Governments of the United States and the United Kingdom, dated 6th December, 1945, generally referred to as the Washington Agreement.
The nations which adhered to the Bretton Woods Agreement undertook not to impose restrictions on the making of payments for current international transactions without the approval of the International Monetary Fund after a transitional period which might extend to five years from the date of the coming into operation of the fund. The fund began operation on 1st March, 1947.
Under the Washington Agreement Great Britain undertook to bring forward the date of free convertibility of current sterling earnings to the 15th July, 1947, with the proviso that this date might be postponed if, in exceptional cases, a later date were agreed upon after consultation with the United States.
The Government have had no negotiations with other Governments regarding these agreements and, as the Deputy is aware, we have not adhered to the Bretton Woods Agreement.
It is difficult to forecast in any exact manner how these agreements will affect our economic interest, but I see no hope of our dispensing with exchange control. I may say that if they had been in operation I doubt whether we would have used any more than the £30,000,000 worth of non-sterling exchange which we spent during last year, as the year was one of great difficulty in the procurement and shipment of essential supplies and of extremely high prices for both essential and non-essential commodities. The future effect depends not only on the convertibility of sterling receipts for current transactions but also upon other factors such as the volume of our visible and invisible exports, the availability of desirable goods and services and the prices at which they are offered. It also depends in a very vital way upon the willingness of creditor countries to accept the goods and services which the rest of the world has to offer in payment for current exports and in discharge of interest and dividends on past loans and investments.
Has the question of the convertibility subsequent to July 1st of current earnings into dollars been examined by the Government and has the Minister any information for the House as to the proportion of these earnings—100 per cent. or less—which will be freely converted? Is it true that we are certain to be able to get dollars for all those earnings or even for part of them?
I thought that my reply was fairly comprehensive.
It did not cover that particular matter.
I have informed the Deputy that the British Government have undertaken to bring forward the date of free convertibility to the 15th July of this year. The phrase is that they:—
"undertook not to impose restrictions on the making of payments for current international transactions."
The Washington Agreement refers back to the Bretton Woods Agreement as regards the definition of "current transactions." This is the definition of "current transactions" as given in Article XIX (i):—
"Payments for current transactions mean payments which are not for the purpose of transferring capital, and includes, without limitation:—
(1) All payments due in connection with foreign trade, other current business, including services, and normal short-term banking and credit facilities.
(2) Payments due as interest on loans and as net income from other investments.
(3) Payments of moderate amount for amortization of loans or for depreciation of direct investments.
(4) Moderate remittances for family living expenses.
The Fund may, after consultation with the members concerned, determine whether certain specific transactions are to be considered current transactions or capital transactions."
That, roughly, means that after the 15th July next, unless another agreement is arrived at in the meantime, Great Britain has undertaken not to impose restrictions on payments for international transactions of the ordinary type, payments for exports, payments of interest and dividends and payments in respect of normal personal family expenses.
If our exports, visible and invisible, are sufficient only to pay for the imports which we require from Great Britain and other sterling areas, where may we hope to get dollars to meet our purchases outside the sterling area if all current earnings as defined by the Bretton Woods Agreement are absorbed by the cost of our purchases in the sterling area?
That did not happen last year or the year before.
Did it not?
No.
What were our purchases from the sterling area as compared with our visible and invisible exports?
I think we purchased roughly about £40,000,000 worth in the sterling area.
And our exports?
Exports to the sterling area were not much less than that. They would be value for £2,000,000 less, so that our trade about balanced.
Where are we going to get dollars?
We had invisible exports also.
Our visible exports balanced our imports?
Our sterling imports. Yes, roughly.
And we are trusting to our invisible exports to meet our dollar requirements?
Yes.
I hope you are right.