A Reappraisal of the United Kingdom's Balance of Payments Problem under Full Employment

Abstract

The United Kingdom's problem in meeting her postwar import needs has been widely discussed; the debate on the United States-United Kingdom loan and the recent International Trade Organization meetings have brought it sharply to the fore again. The provisions of the loan requiring the United Kingdom to accept, partly through the International Trade Organization, a multilateral system of trading and to give up, within a year, the transitional controls and restrictions allowed under the Bretton Woods Agreements, calls for a review of the possibility of the United Kingdom's meeting the special demands of her foreign trade under a situation of full employment not only within the nation itself but over the world. It is largely accepted that if the world has a high and stable level of production and income, the problems of international trade will be at a minimum and will be more easily settled. The measures which are left to the United Kingdom in balancing her trade are based on the assumption that just such a condition will prevail and will allow domestic full employment and a higher standard of living. However, because of her normal excess of imports over exports of commodities and the still larger volume which will be desired in a fully employed economy, the United Kingdom must attain and maintain high levels of exports to balance her international payments and thereby not disturb her policies of domestic full employment. The special problem involved in reestablishing Britain's foreign trade is of primary importance to the correct solution of all transitional problems of international trade and to the establishment of a world-wide, long-run system to foster balanced expansion of world trade.' This paper takes up, in Part I, the problem of whether the United States-United Kingdom loan will make the