§ Mr. Gouldasked the Chancellor of the Exchequer what is his estimate of the United Kingdom's export competitiveness of the appreciation of the £ sterling from $1.57 to $1.70; and what effect this will have on the balance of trade, taking into account the impact on imports.
§ Mr. Robert SheldonAccording to the Treasury model, a rise in the sterling/dollar rate from $1.57 to $1.70 would ultimately lead, other things equal, to a fall in export price competitiveness of about 2 per cent. The actual impact on the balance of trade would depend crucially on the timing of exchange rate changes: very short-term fluctuations are probably of little significance in determining the volume of trade flows.
§ Mr. Gouldasked the Chancellor of the Exchequer, what has been the weighted average appreciation of the £ sterling from the low point reached in 1976; what, according to the Treasury formula for the effectiveness of exchange rate changes, would be the increase in imports of manufactures and the fall in exports of manufactures as a result; and what will be the consequences in 1977 on domestic credit expansion manufacturing output and employment.
§ Mr. Denzil DaviesSterling moved from an effective depreciation of 48.7 per cent. on 28th October to 43.2 per cent. on 13th January. Significant effects on trade volumes are unlikely to result from very short-term fluctuations in the exchange rate.