Rayon – Banking – Commercial Treaties – Wheat Quotas

«The Economist», 26 marzo 1932, pp. 686-687

Turin, March 14

Shareholders’ meetings, banking developments and commercial negotiations have been interesting enough in the last two weeks, but they were insufficient to arouse interest in the stock exchanges, which remained dull, dominated by the usual current of continuous purchases by the saving public of fixed-interest-bearing public securities. The subscription to the first 150 million lire issue of 6 1/2 per cent, debentures of the Naval Credit Institute at 480 lire, with a net yield of 7.4 per cent., which should have remained open until March 15^th, were closed on March 8^th, as the required sum was heavily over-subscribed at that date.

The report of the Banca Commerciale Italiana has perhaps marked a turning point from which should date the final liquidation of past frozen assets, and the decrease of current commercial insolvencies. This impression was strengthened by another important shareholders’ meeting, that of the Snia Viscosa, the biggest Italian producer of rayon. The directors’ report stated that the world situation was better in 1931 than in 1930, production having increased from 195 to 215 million kilograms and consumption from 175 to 225, so that stocks decreased from 45 to 35 million kilograms. In this improved world situation, the Italian industry was well able to take its fair share; production increased from 30 to 34.6 million kilograms, or 15 per cent., exports from 19 to 21 million kilograms, and internal consumption from 10 to 12 million kilograms. As Italian exports in 1931 went as to 28 per cent, to China, as to 23 per cent, to Germany and 9 per cent, to India, the results achieved appear remarkable. They were possible only through reduction of costs – Snia Viscosa costs were reduced by 45 per cent, on the 1930 average, together with a reduction of 30 per cent, on salaries and wages. The 1931 accounts of the Chatillon Artificial Silk Company did not permit the distribution of a dividend, but 21.8 million lire were allocated to the amortisation fund. The company’s production increased by 20 per cent., while its costs decreased by 17.3 per cent, and its selling prices by 23 per cent. The Fiat Company also had to omit the distribution of a dividend for the year 1931, owing to a decrease of 43 per cent, in its production of motor cars, but was able to allocate a sufficient sum to reserve and to maintain at work a staff of 27,000 hands, some of them possibly on a short-time basis.

Two banking failures, that of the Banca Bergamasca di Depositi e Conti Correnti, of Bergamo, and that of the Unione Bancaria Nazionale, which, though medium-sized, had flung its net widely in the thickly industrialised districts of Bergamo and Brescia with 120 and 600 million lire deposits and correspondents’ accounts respectively, originated a short-lived panic among the customers of other banks. The panic was soon checked; the Banca Bergamasca offered to depositors payment in cash up to 79 per cent, of their credits, the remaining 21 per cent, to be paid in shares of a reconstituted bank; and authorisation was therefore given for the resumption of operations. The Banca di Gallarate, to which the panic was extending, was promptly absorbed by the Credito Italiano, which took full responsibility for its deposits.

Commercial negotiations have been rife in Rome during the past few weeks; new treaties have been negotiated between Italy and France, Germany, Spain, Austria and Hungary. All of them may be characterised as provisional, the contracting States reserving to themselves far more freedom to change custom duties than in older treaties, but all of them hope for more stable and general agreements in the future. The Italian Press was unanimous as regards the instability of the Successor States in the Danubian basin, and advocated stricter commercial relationship between them all, at least by groups of two, to be sponsored by France, Great Britain, Italy and Germany. The French-Italian modus vivendi, while maintaining tariffs at the present level, leaves to the contracting parties greater freedom to establish quotas for special reasons and special goods. Further negotiations between interested producers are contemplated for wine and motor cars, and conferences are already being held in Paris and Rome respectively. Dr. Schüller, the well-known Austrian economist and economic section-chief at the Austrian Foreign Office, is in Rome, as special negotiations have to be conducted in consequence of the cessation as from April 10th of the Italo-Austrian Clearing Agreement. As Italian exports to Austria were greater than Austrian exports to Italy, a debt was accumulating against Austria which it seemed inexpedient to let grow indefinitely, and, therefore, the clearing agreement was denounced by Austria. Something, however, will have to be substituted if trade is to continue.

As the quota system for imports of wheat and other agricultural products from Empire and foreign countries is under examination in Great Britain, present Italian experience may be of interest. A quota system was established last autumn, under which only 5 per cent, of foreign wheat could be milled, 95 per cent, being reserved to domestic wheat. The aim was to raise and stabilise prices at about 1,000 lire per ton. The price aimed at was reached; but the system soon proved unworkable, owing to the necessity of blending different sorts of foreign and home-grown wheat, in different proportions for different uses. Moreover, as the internal production was being gradually consumed, a higher proportion of foreign wheat was required. Unhampered by parliamentary delays, the Italian Government changed the quota proportions in a rapid series of Decrees, according to the requirements of trade. The last change is to take place on March 21th, when hard foreign wheat will not be allowed to exceed 80 per cent of total milled wheat. As to soft wheat, foreign imports may not exceed 50 per cent, in Northern and Central (excluding Latium) Italy and 30 per cent, in Latium, Southern Italy and Isles. It would seem clear that, should a similar plan be devised, the House of Commons should delegate to a Minister or a Commission the power to effect from time to time the needed changes in the quota; and that the problem will be made more difficult if the quota system should be the result of binding conventions between the Mother Country and the Dominions. The quota system could not have been made to work in Italy if legal proportions of foreign and domestic wheat were not promptly changeable, even by districts. Even so, the price has not been maintained at the 1,000-lire level which was deemed sufficient at the beginning, the level having gone up at present to 1,200 lire, with no small complaint from those agriculturists who have sold their wheat at or under 1,000 lire per ton. Clearly the quota system, if it is to work at all, is a case for free administrative regulations, as opposed to legislative acts or international conventions.