Dollar Shortage

Report Outline
The Dollar Crisis and European Recovery
Postwar Measures to Relieve Dollar Deficit
Attacks on Current Policies; Alternative Remedies
Special Focus

The Dollar Crisis and European Recovery

The widened gap between imports and exports in Western Europe's trade with the Western Hemisphere and the drop of $260 million in Britain's gold and dollar reserves during the second quarter of 1949 are forcing American and European governments to review again the postwar tangle in international trade. A sterling conference held by finance ministers of the British Commonwealth in London in July resulted in a decision to attempt reduction of imports from the dollar area by 25 per cent. The Organization for European Economic Cooperation, meeting this month in Paris, is weighing a British request for a substantial increase in Marshall Plan aid. Great Britain, Canada, and the United States will hold cabinet level conferences in Washington early in September in preparation for the Sept. 13 meeting of directors of the International Monetary Fund.

The year 1948 was “in all respects a year of remarkable progress,” in the opinion of the Economic Commission for Europe. Considerable gains in industrial and agricultural production throughout Western Europe were accompanied by a 30 per cent increase in the volume of overseas exports and a seven per cent reduction in imports. The United Kingdom even began to show a small export surplus in its balance of payments. Had the rate of growth of exports from Europe as a whole been maintained (assuming the prices and level of imports of 1948), E. C. E. estimated that the value of exports would equal the value of imports by the end of 1950.

In the first quarter of 1949, however, European exports to the United States and Canada fell off 12 per cent, while European imports from North America rose 10 per cent. This meant an increase in the quarterly deficit of the ten major exporting countries of Western Europe in their trade with the United States and Canada from $794 million in the last three months of 1948 to $949 million in the first three months of 1949. Increased production in Europe was more than offset by a decline in American demand for imports, due to the general decrease in economic activity. Preliminary reports indicate that Europe's trade difficulties were aggravated during the April-June quarter of this year.