Abstract
The world economy developed very gradually over the course of centuries. Until the 17th century, international trade centered in Western Europe and was still essentially bilateral in nature, influenced by the highly protectionistic policies of the Mercantilists. Around 1600 a few European countries, particularly Great Britain, Holland, Portugal, and Spain, expanded their trading operations overseas and slowly certain parts of South East Asia, the East Indies, Africa, and the West Indies, and finally North America, became an integral part of the world trading system. This colonial trade involved in the beginning the exchange of finished goods against foodstuffs and after the Industrial Revolution it turned into an interchange of manufactured products, mainly textiles, for agricultural raw materials. The increasing size of the world economy and the diversification of internationally traded products led to the creation of a number of multilateral routes of a certain permanence. The triangular trading routes connecting Western Europe, the West Indies, and North America, and these last two regions with Africa, are only two examples of a large number of similar relationships which flourished during the course of the 18th century.
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References
League of Nations, The Network of World Trade (Geneva, 1942), p. 24.
Ibid., p. 83.
See J. B. Condliffe, The Commerce of Nations (New York: Norton and Co., 1950), Chapter 10.
The pattern of invisible trade balances follows a more or less permanent course, “particularly freight payments, determined as they are by trade and the distribution of the world’s merchant marine, and interest, dividends, and amortization payments, determined by the location and ownership of international investments.” Furthermore, since imports are generally valued on a c.i.f. (costs, insurance, freight) basis and exports on an f.o.b. (free on board) basis, a large proportion of invisible trade is already incorporated and reflected in the merchandise trade balances. It is thus chiefly through the network of trade balances that these obligations are liquidated.
Tropics included Central Africa; the Tropical Agricultural and Mineral producing countries of Latin America; India, Burma and Ceylon, and the Rest of South East Asia. The Regions of Recent Settlement grouped together Canada, Oceania, and South Africa.
League of Nations, The Network of World Trade, See Diagram 6, p. 78.
Ibid., p. 80.
Ibid., See Diagram 10, p. 90.
Central Africa included the Anglo-Egyptian Sudan, Belgian Congo, Ruanda-Urundi, Kenya-Uganda, Tanganyika, other British East Africa, Nigeria, other British West Africa, French Cameroons, French West Africa, French Togoland, other French Africa, and Portuguese Africa. Tropical Asia consisted of India (Pakistan), Burma, Ceylon, British Malaya, French Indo-China, Neth. Indies, Philippines, Thailand, and other South East Asia.
If it were possible to consider gold as a commodity and include it under merchandise exports for the Union of South Africa then it seems that this country-would present enough trading analogies with Canada and Oceania to be discussed concomitantly. However, a division into monetary gold (in response to trade flows) and non-monetary gold (commodity export) presents insurmountable problems.
Included under Industrial Continental Europe were: Austria, Belgium-Luxembourg, Czecho-Slovakia, France, Germany, Italy, Netherlands, Sweden, and Switzerland. The non-industrial countries were: Bulgaria, Denmark, Estonia, Latvia, Lithuania, Finland, Greece, Hungary, Norway, Poland-Danzig, Portugal, Roumania, Spain, Turkey, Yugoslavia, and other Continental Europe.
It should be noted that from the standpoint of world trade 1956 was, in some respects, a less “normal” year than 1953, influenced as it was by a number of temporary factors such as the blockage of the Suez Canal and adverse weather conditions in Western Europe.
The contra-cyclical balances are shown as dotted lines in Diagrams 1 and 2.
In the same sense the 1928 pattern could be called permanent. It is, of course, obvious that permanence is used here in a relative sense.
See Diagrams 3 and 4.
Taking the following four major areas: North America, Western Europe and Japan, Primary producing areas and Centrally planned economies, a recent publication has shown conclusively that the trade of these areas, each taken as a group, was relatively more balanced in 1955 than before the war. The net balance of trade to other areas as a percentage of total exports to the relevant area had declined quite substantially for practically every interarea relationship between 1938 and 1955 (See U. N., World Economic Survey 1956, Table 7, p. 29). A corroboration of the first assertion can be found in Table 46 and in the section of Chapters IV and V devoted to the “Changes in the Pattern of Intratrade Balances”.
Exclusive of the Union of South Africa for the remainder of the discussion.
By contrast, Belgium consistently maintained an import surplus with the Congo.
It should be noted that the U. S. reported an import surplus with Asia in the early fifties but in 1956 this had been reversed into a substantial export surplus amounting to 287 million dollars (See Table 38).
Expenditures on development assistance and technical co-operation under ICA to Asia amounted to 167 million dollars during the fiscal year 1956 and were more than double those in the previous fiscal year. Agreements under Public Law 480 with Asian countries for the sale of U. S. agricultural surplus commodities reached 229 million dollars (excluding ocean transport) in fiscal 1956 as compared with 123 million dollars in fiscal 1955. The distribution of surplus agricultural commodities under emergency assistance rose from less than a million dollars in 1955 to about 32 million dollars in 1956. (See U. N., Economic Survey of Asia and the Far East, 1956, pp. 32–33.)
H. G. Aubrey, op. cit., p. 57.
Since the U. K. also reported a slight import surplus with Continental Europe of 48 million dollars it appears that the direction of the balance is debatable. However, Continental Europe definitely had an import balance on a f.o.b. basis.
The U. K. reported an import surplus of 896 million dollars and Continental Europe an export balance of 496 million dollars in 1928.
It was noted above that the U. S. had developed a positive balance of trade with Asia in 1956 so that the above statement is not strictly speaking correct for that year. However it was shown under point (2) above that an increasing part of the value of trade moving from the U. S. to Asia was made possible by such “non-commercial” items as the U. S. agricultural surplus disposal program.
League of Nations, op. cit., p. 80.
The U. N., Economic Survey of Asia and the Far East, 1957, (p. 2) analyzes Japan’s problem as follows: “A point of particular interest here is the way in which the very productive capacity of Japan’s economy creates a dilemma. If the maximum attainable growth of output is permitted, dependence on foreign raw materials creates serious balance of payments difficulties. Yet if potential growth is held back very much, not only is the standard of living kept from rising as fast as might be wished but serious unemployment or underemployment results. Given a large population, a technology which makes efficiency largely synonymous with labour-saving, a relative scarcity of natural resources and a difficulty in expanding exports in competitive world markets fast enough to pay for required imports, the problem that is Japan’s inevitably results.” See also Part II, Chapter II (pp. 56–63) of the above-mentioned publication for a detailed discussion of Japan’s trade position.
League of Nations, op. cit., p. 83.
The export surplus with Asia amounted to 126 million dollars while the trade surplus with Western Europe amounted to 22 million dollars, the positive balance with Continental Europe more than compensating for the very slight negative balance vis-à-vis the U. K. (See Table 38).
Reparations payments from Japan to Burma, Indonesia, and The Philippines will amount to about 100 million dollars annually. Therefore it appears that Japan’s positive trade balance with Asia would have to exceed that amount if multilateral interarea settlement is to take place.
See Sections on the “Changes in the Pattern of Intratrade Balances” in Chapters IV, V, and VI.
1 Robert Triffin points out that: “The bogey of a ‘high cost, sheltered area’ raised against EPU in 1949, is directly contradicted by the fact that the increase in European exports to the dollar area over these six years (1949–1955) (159 per cent) was more than twice as large as the increase in exports to the EPU area itself (76 per cent). See Triffin Europe and the Money Muddle (New Haven: Yale University Press, 1957), p. 265.
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Thorbecke, E. (1959). Developments in the System of Multilateral Trade. In: The Tendency towards Regionalization in International Trade 1928–1956. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-1053-0_3
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