British Demand for New Zealand's Exports

Abstract

The purpose of this paper is twofold. Primarily it is an attempt to isolate some of the structural parameters governing New Zealand's balance of trade during the inter-war period. A secondary end, a by-product of the first, is to throw some light on the controversy between “elasticity pessimists” and “elasticity optimists.” Born out of very real problems concerning monetary policy on the international level, and carried on by some of the most acute and productive minds among economists, this controversy has, I believe, been in general a good and highly fruitful one. If any criticism is to be made, it must be methodological, and concern itself with the statistical procedures used by one side, and the tendency of the other side toward a priori refutation instead of empirical investigation. I also believe that, while the statistical data are highly imperfect, the best possible use has not been made of what data exist, and that at this stage only more, and more carefully weighted, evidence can help us on. The present investigation offers only a little of the great amount of such evidence which is needed.Following a few theoretical remarks, three commodities—butter, lamb, and cheese—will be studied, in order to increase our information about New Zealand's trade balance. Only their behaviour in the United Kingdom market is analysed. This procedure immediately raises the question: how important are these goods as part of New Zealand's exports and how important is the United Kingdom market? The answer is that up to 1929 the sale of these three products in the United Kingdom made up about one-half of New Zealand's export receipts. Had wool been included, this proportion would have risen to about 70 per cent. After 1929 it declined somewhat, but never fell below 40 per cent. From this it seems to follow that whatever determines the demand in the United Kingdom for these three products affects significantly but not overwhelmingly New Zealand's balance of trade on the export side.