Britain's Changed Position in World Economy
Great Britain, for more than a century one of the world's great creditor nations, is now a debtor country. Heavy foreign borrowing during World War I did not rob Britain of her creditor position. In the present war, however, she has had to liquidate many of her foreign investments and incur a large new foreign debt. Obligations to other countries now exceed the assets in Great Britain's international portfolio.
Exports in Great Britain's Balance of Payments
Liquidation of the foreign investments involves more than loss of the income which the investments produced. It will deprive postwar Britain of the wherewithal to pay for a substantial share of that country's normal surplus of imports over merchandise exports. Reduction of revenue from shipping services, as a result of heavy losses of merchant tonnage from enemy action, will put another dent in the “invisible exports” formerly relied upon to make up the deficit in the nation's trade balance. Since the needs of the British people and of British industry make it impossible to wipe out the trade deficit by permanently cutting down imports, the country will have no practical alternative but to increase its exports. And the increase must be substantial. Government spokesmen and independent economists agree that postwar exports will need to be 50 per cent greater than the prewar exports of 1938.
In 1938 exports of United Kingdom merchandise had a total value of $1,880 million. Retained merchandise imports in the same year were valued at $3,432 million. Taking into account net exports of silver bullion and specie valued at $44 million, the excess of visible imports over exports amounted to $1,508 million. The important part played by invisible items in liquidating this large unfavorable merchandise balance is indicated in the table below.