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War Economy

Termination of Reciprocal Aid

Termination of Reciprocal Aid

In July 1946 an agreement was signed between the United States of America and New Zealand, terminating the reciprocal aid arrangements between them.4 No payment was to be made by either country for goods or services supplied under the arrangement up to 21 December 1945. Subject to certain provisions about the transfer of munitions to any other country, each was to retain possession of goods supplied under the reciprocal arrangement. In addition it was agreed that New Zealand would purchase certain United States equipment which was then in the Pacific area for a sum of approximately $5,500,000, equivalent to about £1,700,000 in New Zealand currency. This sum was to be used by the United States Government to purchase real estate and construct United States Government buildings in New Zealand, and ‘for the furtherance of cultural relations of mutual benefit to the two countries’.

Elaborating on the purchase of surplus war property, the acting Minister of Finance, Mr Sullivan said:5

‘In addition to the discussions which have now been completed concerning mutual cancellation of lend-lease and reciprocal aid, negotiations have been in progress during recent months on the separate question of the purchase by the New Zealand Government of quantities of American surplus war material situated both in this country and in the Pacific. This includes items such as earthmoving machinery, steel huts and hangars,

4 Parliamentary Paper A–8.

5 Dominion, 11 July 1946.

page 520 civilian type aircraft, radio and navigational equipment, together with a large quantity of miscellaneous stores all in very short supply here, and which could not be obtained elsewhere. Satisfactory arrangements have been made to pay for this material without the necessity for immediate provision of dollar funds, by setting off the purchase price against contemplated expenditure by the United States authorities within New Zealand.’

Further details of the surplus equipment purchased were given by Mr Sullivan two days later:1

‘The items include civilian type aircraft, together with spares; the Minister stated that arrangements are also being completed for the purchase of aviation aids necessary for internal air services and in connection with the Dominion's responsibilities on the international air route and for Pacific regional services.

‘The surplus property purchased from the United States forces includes materials purchased in New Zealand and in the Pacific. The following are the principal items involved in the purchase. Earth moving equipment and plant of a similar type, $2,274,000; hand tools for carpenters, engineers, etc., $55,000; miscellaneous textiles, $55,000; timber, 862,000 board feet, valued at $38,000; miscellaneous steel buildings, $254,000; tyres and tubes, $250,000; miscellaneous stores of a general character taken over in New Zealand, $454,000; various items purchased outside New Zealand, $30,000. Spare parts for heavy equipment, $99,000; freight etc. on purchases ex-Pacific, $491,000.

‘These items make a total of $4,000,000.

‘In addition the New Zealand Government is acquiring certain aircraft of a civilian type, together with spares, at an estimated cost of $750,000….’

Some of the equipment purchased was of vital importance to New Zealand at a time when deferred civilian works needed to be put into operation quickly, and when supplies of suitable equipment in New Zealand had been depleted, and orders for new equipment might not be filled for some time. The final shipment of heavy equipment from the Pacific arrived in New Zealand in September 1946.

The accounting value of Lend-Lease aid from the United States of America was £105 million, and of Reverse Lend-Lease, supplied by New Zealand, £81 million. New Zealand achieved a greater degree of price stability over the war years, and, in terms of

1 Evening Post, 13 July 1946.

page 521 pre-war prices, the two would have been much closer in value.1 Nevertheless the mutual cancellation was a generous gesture by the United States Government.2 Both countries had gained a great deal from the easier movement of goods and services between them during the currency of the agreement. The contribution of each to the allied war effort was enhanced. In the words of the United States – New Zealand Mutual Aid Agreement of 1942, the war production and war resources of both nations had been ‘used by each, in the ways which most effectively utilise available materials, manpower, production facilities, and shipping space.’3

1 New Zealand's more effective stabilisation policy put her at a disadvantage in trading relations with the United States of America in much the same way as it did with the United Kingdom. In the case of the United Kingdom the situation was recognised by the Lump Sum Payments, but in the case of the United States of America most transactions took place under the Mutual Aid Agreement. Since there was to be no cash settlement of the differences, the accounting values of the transactions were of rather less importance, and there was no case for making adjusting entries. See also pp. 3268 and 3824.

2 Canada's equally generous gesture in writing off a balance of over £6 million at the termination of Canadian Mutual Aid is mentioned at p. 144.

3 Parliamentary Paper A–7, 1942, p. 1.