§ How can we expect the balance of payments on current account to develop over the next year? First, provided that the world monetary system holds up, our exports would in any case have been likely to be helped during this year by an expansion of world trade. Devaluation will enable us to make the most of the opportunities presented by this expansion. Reductions in the foreign exchange prices of exports will enable exporters to expand their volume of sales and perhaps break into new markets, and improvements in the profitability of 256 exports will be an incentive to make and sell more goods for export, and to give betters sales service and thus gain export orders. The benefits of devaluation for our export trade will not happen all at once. The export figures are now including the clearance of cargoes delayed from last year, but cannot be expected to reflect much of the effects of devaluation. During the second half of this year, however, and through the next year the effects should be showing increasingly.
§ We are looking for large rates of increase. But they are not greater than we need, nor more than we can achieve. Other countries have achieved this sort if increase in their exports. Take the case of Italy: between 1963 and 1965—admittedly a good period for world trade—Italy's exports increased in volume at an annual rate of nearly 20 per cent., and she turned a current account deficit of 700 million dollars in 1963 to a current account surplus of 2,000 million dollars in 1965: a turnround of nearly 3,000 million dollars in two years. This was achieved without a change in the exchange rate. Our devaluation presents us with a greater opportunity to achieve similar results.
§ Now, Mr. Speaker, devaluation also means higher import prices in sterling terms. By itself this will tend to increase the import bill, as we have seen from the January and February trade figures. But the price rise relative to home production should encourage import substitution, offsetting the rise in the volume of imports that would normally have accompanied rising demand and output; this should lead to a much reduced growth of imports in the coming months.
§ Devaluation should also benefit our invisible earnings. Many of them arise in currencies which have not been devalued, and their sterling value is therefore greater. In some cases our debits will also cost more, but the effects of the Middle East situation on our oil costs should be much less adverse than in the second half of last year. On balance, therefore, the invisible account should gain. I have a small positive contribution to make here: the Finance Bill will include amendments to the exchange control provisions to remove a technical obstacle to the development of a market in sterling certificates of deposit, 257 which should be a useful addition to the range of services provided by the London banking system.