TORQUAY CONFERENCE ON TARIFFS AND TRADE (Hansard, 20 June 1951)

§ THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD LUCAS OF CHILWORTH)
My Lords, in resuming the debate on the Motion standing on the Order Paper in the name of the noble Lord, Lord Balfour of Inchrye, I should like to echo the words of the noble Viscount, Lord Swinton, in saying how grateful we are to the noble Lord, not only for tabling the Motion but also, if he will allow me to say so, for making one of the most constructive speeches that I have heard from the other side of the House for some time. If I congratulate the noble Lord, I hope that he will not think that I have any sinister purpose in so doing. However, I would, first of all, join issue with him on one of the few things with which I did not agree in his speech—because the longer he went on the more difficult I found it to quarrel with much of what he said.
I would not write down the Torquay Conference as a failure. The noble Lord gave some bare arithmetic. My figures are somewhat like his. We received benefits affecting U.K. exports worth £70,000,000, in terms of 1949 trade; we had concessions withdrawn on trade worth £10,000,000; and we made concessions on U.K. tariffs affecting U.K. imports worth about £7,800,000. But the profit and loss account in hard figures is, surely, not the only thing to take into consideration. As the noble Lord quite rightly said, perhaps some of the critics 225 of Torquay forgot to take into consideration that this is the third Tariff Conference we have had since 1947, and that at each succeeding Conference concessions are more difficult to find. But surely other and valuable things were achieved at Torquay. First, we have the prolongation of the concessions of Geneva and Annecy, which are now, with relatively few exceptions, carried on until 1953. I am sure the noble Lord will agree that that is most valuable. We also hope to haw as new members Turkey, Peru, the Philippines, Korea, Austria and Western Germany. I feel that the noble Lord will agree that the inclusion of Western Germany is a step in the right direction; it brings her tariffs down; it is a step forward in the direction of the goal at which we are aiming, to have a world of lower tariffs; and it also makes Western Germany subject to the other provisions of the General Agreement, which are the code of commercial conduct. This is a subject to which I shall refer later. On balance, I think we have benefited even more than the Torquay landladies to whom the noble Lord referred.
Perhaps at this stage I may refer to the speech of the noble Lord, Lord Fairfax. I hope he will not mind my saying so, but I was really shocked at what he said. I was shocked because it illustrated the fact that he had not even troubled to read the White Paper before he made his speech, since the figures that he said he could not get are in that White Paper. He wanted to say that it was the fault of this country that Canada had given up the preferences she grants. Surely he should have acquainted himself with the fact that all the preferences we enjoy in Canada are non-contractual; that Canada has a sovereign right to give them up at any time without consulting anybody. As a matter of fact, she did consult us, and we were able to have the concessions she made at Torquay put in a manner which did not affect us greatly. But the important thing is this—and I am now quoting from a speech made by Mr. Abbott, the Canadian Finance Minister, in the Canadian House of Commons on May 8, 1951. Mr. Abbott said: This Government has never taken a rigid or doctrinaire position on the matter of preferences, either with respect to their retention or modification. 226 Mr. Abbott ended by saying: In the course of the Torquay tariff negotiations, as was the case at Geneva and Annecy, in order to obtain valuable concessions from United States. Western Europe and other non-Commonwealth countries we agreed to the modification, and in some cases to the elimination of certain margins of preference. But Mr. Abbott went on to say that, in spite of that, his Government were still adherents to the principle of Imperial Preference. If the noble Lord had acquainted himself with that, he would not have made the statement he did.

LORD FAIRFAX OF CAMERON
The noble Lord will not deny that Canada is moving closer to the United States and away from this country, and that is an exceedingly unfortunate development.

§ LORD LUCAS OF CHILWORTH
I will not trouble to deny that. One has to take into account the geographical position of Canada. But to say that it is the fault of His Majesty's Government in the United Kingdom that Canada gave up these preferences at Torquay, is something which is just not correct.

LORD FAIRFAX OF CAMERON
I think the past few years speak for themselves.

§ LORD LUCAS OF CHILWORTH
Now I will return to Torquay. I think perhaps noble Lords might be interested to know that the Torquay Protocol is open for signature until October 20, and that the concessions agreed at Torquay have to be brought into force by the signatories to the protocol thirty days after signature. It is the intention of His Majesty's Government to sign the protocol; and to give elect to the concessions made on the United Kingdom tariff as from September 1. That is the most convenient date for our customs administration. According to my present information, all except one of the Orders will be subject to the negative Resolution procedure. In addition, one change of duty has already been incorporated in the Finance Bill.
May I follow the noble Lord, Lord Balfour, in what he called the "failures of Torquay"? It was regrettable and disappointing to everybody that we could not reach an agreement with the United States, with Benelux or with Italy. I think both we and the United States were 227 very conscious of the unbalance of trade as between the United States and the United Kingdom, and every effort was made to come to an agreement. It is quite true that, in the negotiations as between ourselves and the United States, the question of Imperial Preference arose and the Commonwealth countries were consulted. We could not see our way clear, after these consultations, to make the concessions in the preferences which the United States wanted made. Having said that, if I leave aside for one moment the question of preferences, I may say that we should still have had very great difficulty—it would have been almost an impossibility—to reach agreement on the basis of the bare figures of the concessions that were going to be made on either side without any regard to preferences. Not only does the General Agreement on Tariffs and Trade talk about reciprocal concessions, but it also talks about mutually advantageous concessions. That is what we could not find between the United States and ourselves—anything to satisfy the criterion of mutual advantage. As regards Benelux, noble Lords know that they are a low tariff group of countries. They are countries which find it difficult to make any further concessions in their tariffs, and in view of all the circumstances we were quite prepared to have an unbalanced tariff agreement in favour of Benelux. But we could not obtain the assurances we felt were necessary regarding guarantees against import restrictions, and so we failed to come to any agreement. In the case of Italy, the failure to come to any agreement was due to the absence of concessions on their part which we felt were necessary.
I now come a little nearer to the point raised by the noble Lord. Lord Balfour of Inchrye, and also by the noble Viscount, Lord Swinton. It is true that the Torquay Conference was held under the auspices of the General Agreement on Tariffs and Trade, or G.A.T.T., as it is called. Now G.A.T.T. was intended to be a measure to take the place, in the interim, of the International Trade Organisation which was to be set up under the Havana Charter. The International Trade Organisation envisaged something far wider than "G.A.T.T."

§ VISCOUNT SWINTON
What is "G.A.T.T."?

§ LORD LUCAS OF CHILWORTH
It is a hateful word, but I used it to save my breath and the time of the House. It is an abbreviation of "General Agreement on Tariffs and Trade."

§ VISCOUNT SWINTON
I thought a "gat" was a gun. I thought it was a thing you carried in your hip pocket to use against another fellow.

§ LORD LUCAS OF CHILWORTH
I believe some people do, in another country.
The reduction of preferences or tariffs was only part of the policy behind the International Trade Organisation. There was a desire on the part of all who were parties to the Havana Charter to bring into existence a far better code of commercial conduct throughout the world. I am not going to weary your Lordships with all it expressed, but if you turn to Article I of the Havana Charter you will find the objectives clearly set out. Most-favoured-nation treatment is the very basis of the General Agreement on Tariffs and Trade, and it is the only sanction which that instrument can possibly have. If you do away with the most-favoured-nation clause in the General Agreement, you might as well tear up the General Agreement altogether. It was the intention of His Majesty's Government to recommend to Parliament, if conditions at the time were favourable, that we should ratify the Havana Charter; but our minds have changed. The reason for that is that we have now learned authoritatively that it is not the intention of the President of the United States to ask Congress to ratify the Havana Charter. That means that the International Trade Organisation will not come into existence; and it appears that American thought is that the General Agreement on Tariffs and Trade can be fashioned into an instrument to take the place of the International Trade Organisation.

§ LORD BALFOUR OF INCHRYE
May I ask whether His Majesty's Government agree with that view?

§ LORD LUCAS OF CHILWORTH
I am coming to that. This really brings into existence an entirely different situation and it is one to which we shall have 229 to give some very careful thought. The noble Lord, Lord Balfour of Inchrye, has almost taken the question out of my mouth. Can the General Agreement on Tariffs and Trade be made an effective instrument to carry out the objectives envisaged by the International Trade Organisation? Can it do those things? Well, my Lords, I should not like to say anything that would militate against the successful conclusion of any future discussion of this question, but any such discussion will have to be approached with some care. The Americans themselves may have considerable difficulty in pursuing what they think is the correct end. There is the matter of American internal legislation. There is the Reciprocal Trade Agreements Act, which, as we think, stands as something of an obstacle. We also think that the customs administration of the United States may have to undergo some drastic alteration if the General Agreement is going to take the place of the International Trade Organisation.
That, then, is the position at the present time; and I think noble Lords opposite will agree that this is not the best time to start once again an international conference on these issues when there are so many difficulties in the world upsetting trade in every country. But His Majesty's Government support the doctrine of multilateral trade on which the General Agreement on Tariffs and Trade is based. It is true, as Lord Balfour of Inchrye said, that our present obligation is such that we can withdraw from it on giving sixty days' notice. But the reason why we support the General Agreement is that we are a great trading nation. We are the greatest trading nation in the world, and as such, we have some very heavy responsibilities. I always listen with great respect to any words uttered on the subject of trade and commerce by the noble Viscount, Lord Swinton. He was four times President of the Board of Trade, and I suppose he knows more about this subject than any other noble Lord in this House. He would, I am sure, agree that the United Kingdom holds a very substantial position in world trade; that we have a very great contribution to make; and that, having been leaders in world trace for hundreds of years, we cannot forsake our position overnight.
230 I do not think it is necessary for me to remind your Lordships what our position is in Commonwealth trade. If the noble Lord, Lord Fairfax, had done me the honour to read the speech I made is this House on June 6, on the occasion of the Economic Debate raised on a Motion by the noble Lord, Lord Cherwell, he would not, I think, have said some of the things he did say to-day. I said in that debate: I need not remind your Lordships of the vital importance of our trade with the sterling Commonwealth. In 1950 we drew almost two-fifths of our food and little less than one-half of our raw materials from the sterling area, and we sent to them a little under one-half of our total exports A great expansion of our trade with the rest of the sterling area has been a buttress of our post-war economic recovery, and no efforts should be spared to reinforce this vast structure of trade, the greatest in the world. We must export somewhere and we must get our other imports from somewhere else than the sterling Commonwealth. I agree that we have not seen the last of the expansion of either our exports to sterling countries or our imports front them. But what are we going to do in the meantime? Lord Balfour of Inchrye said that on this matter he was not a subscriber to isolationism. We cannot, indeed, afford to be solationists. We have got to get our exports into every country in the world, and we cannot do that and be isolationist about the principles of the General Agreement on Tariffs and Trade. We have to keep up at all costs our dollar exports—certainly while our present unbalance is so serious.
I do not think, therefore, that the support of His Majesty's Government for the General Agreement on Tariffs and Trade is inconsistent with His Majesty's Government's policy on preference. Article 17 of the Havana Charter, while it calls for a reduction in preferences, also recognises their existence as legitimate and says that any negotiation that is entered into in that regard must be entered into on the basis of mutual advantage. There is nothing inconsistent in that. The noble Lord, Lord Balfour, was quite right in saying that the freezing of the preferences was one of the bargains in connection with the Loan Agreement of 1945, and it was eventually spelled out in the Havana Charter. The answer to the question he specifically asked me—I acknowledge the fact that with his usual courtesy 231 he gave me prior notice of the question —is "No." We cannot, under the freezing rule, create any new preferences, nor can we increase any existing preferences. That is why we cannot do it in the case that the noble Lord mentioned.

§ VISCOUNT SWINTON
The noble Lord has said that that was so under the G.A.T.T. (as it is called), which can be denounced on sixty days' notice. He also related it in some way to the American Treaty. I thought that I received the firmest assurance, when the American Treaty was going through, that we were in no way bound in the matter of Imperial Preference.

§ LORD LUCAS OF CHILWORTH
We cannot create new preferences and we cannot increase the preferences in existence at that particular time.

§ VISCOUNT SWINTON
Does the noble Lord mean that, as from the date of the American Loan—the original American Loan—we were not entitled to create any new preferences?

§ LORD LUCAS OF CHILWORTH
That is right. That is the answer to the question that the noble Lord asked me. I will now reply to the question put by Lord Swinton. G.A.T.T. recognises the existing preferences, and there is nothing to prevent us, if the need arises, from negotiating an agreement on the most-favoured-nation clause, with the usual exception for Imperial Preference.
There was another question which both the noble Lord, Lord Balfour, and the noble Viscount, Lord Swinton, asked me. After telling us what the policy of the Conservative Party is, they asked: What is the policy of His Majesty's Government on Imperial Preference? I think I can be just as plain as was the noble Lord. Speaking for ourselves—and we hope the other Commonwealth countries would take the same view, although I should point out that, so far as non-contractual preferences are concerned, they are entirely sovereign in the matter—this is our position: we would not cancel or reduce any preference which we granted unless we were satisfied that the corresponding advantage to be gained from the reduction of foreign tariffs really outweighed the advantages 232 of the preference to us and to the Commonwealth. Naturally, there might be occasions where we should have to look at the balance of advantage or disadvantage particularly from the point of view of the United Kingdom, but generally we always consult the Commonwealth and consider these matters in relation to the Commonwealth.
Through it all runs the principle of mutual advantage, and that is why, if I may stress the point again, the policy of His Majesty's Government is not inconsistent. It is no more inconsistent than was the policy of the Conservative Government in 1938, because the Conservative Government in 1938 did reduce some preferences. I will not weary your Lordships by reading them out; I have a substantial list here of preferences which were reduced in 1938, obviously because the counter concessions offered showed a balance of mutual advantage.

§ LORD BALFOUR OF INCHRYE
I should like to ask one question before the noble Lord leaves this point, because I want to be clear and to understand the reply that the noble Lord is giving us. As I understand what he says, the Government's policy is that they would be willing to negotiate the reduction of any preference if they saw a compensatory trade advantage to this country in some other direction?

§ LORD LUCAS OF CHILWORTH
And to the Commonwealth.

§ LORD BALFOUR OF INCHRYE
And to the Commonwealth. Therefore, in the Government's view, the door is open to the complete elimination of Imperial Preference, if sufficiently great compensatory advantage is obtained. That is the question I want to put.

§ LORD LUCAS OF CHILWORTH
The noble Lord is putting to me a hypothetical question.

§ LORD BALFOUR OF INCHRYE
No.

§ LORD LUCAS OF CHILWORTH
In his own speech, the noble Lord put many conditions, and he went so far as to say that there never could be a compensatory advantage.

§ LORD BALFOUR OF INCHRYE
In my view.

§ LORD LUCAS OF CHILWORTH
In your view—and those factors would have to be taken into consideration. I think perhaps the noble Lord went a little too far that way, but we say, quite definitely, that we should not cancel or reduce any preference which we give unless we were sure that the compensating reduction in the foreign tariff was—I will not say overwhelming, but on balance decidedly in favour of ourselves and the Commonwealth.

LORD HAWKE
Before the noble Lord leaves that point, may I ask him a question arising out of it? Suppose that an entirely new article of trade comes into purview—atomic energy tubes, for instance, or something like that. Are we precluded from giving a preference on a completely new article like that?

LORD LUCAS or CHILWORTH
At the present moment, as I said at the opening of my speech, owing to the fact that the Havana Charter will not now be ratified, and the International Trade Organisation will not come into existence, we have an entirely new set of circumstances arising, and the position of ourselves, America and the Commonwealth will have to be carefully considered. In those circumstances, I am not prepared to give the noble Lord any answer to that question.

LORD FAIRFAX OF CAMERON
May I ask the noble Lord this question?—I am sorry to interrupt him again. Do I understand that under the freezing of preferences we could create no new preference? Is that so?

§ LORD LUCAS OF CHILWORTH
Yes.

LORD FAIR FAX OF CAMERON
It is?

§ LORD LUCAS OF CHILWORTH
Yes. I think I said that. We cannot create any new preferences. That is the position in which we stand to-day. I have tried to be as plain as the noble Viscount, Lord Swinton, paid me the compliment of being. We shall go into these negotiations when they come (I do not know when that will be: when the conditions are ripe for them) because we think we have a great contribution to make. I repeat that this country has a great record. It has learnt a great deal in being not only the greatest trading country in the world but also for 234 a very long time the greatest creditor nation of the world. A country is not the greatest creditor nation of the world without learning many lessons the hard way. We have learnt those lessons, and we shall deploy all that knowledge and, I hope, wisdom, to the benefit of everyone else.

§ LORD BALFOUR OF INCHRYE
My Lords, I should like to thank the noble Lord for the courtesy of his full reply. I will not attempt to re-argue the case, but I must say that I thought it a depressing reply. The purport of his speech is that the Government continue to adhere to the most-favoured-nation clause; that the Government are willing to put Imperial Preference in pawn, to be redeemed by any bidder who will come up to their reserve figure. As to our freedom within the Empire family, the speech gave a depressing answer to my question asking whether or not we were able to increase existing preferences or to create a new preference. I thank the noble Lord for his frankness in a reply which to me, and to many other noble Lords, was extremely disappointing in that particular regard.
There are two points I want to put to the noble Lord. As I understand it, he said that the intention of His Majesty's Government had been to bring the Havana Charter before Parliament for ratification. That will not now be done because America is not going to ratify. The noble Lord said the question which the Government asked themselves was: Can the G.A.T.T. be welded into an effective instrument to do the job of Havana? My question is: Should it he done without Parliament having an opportunity of discussing those particular things which would have been discussed had the subject under consideration been the ratification of the Havana Charter? I hope the Government will take note that we on this side of the House, and Members on the Opposition Benches in another place, should feel that we were being side-tracked (and I know the Government would not wish to do that) if there were not an opportunity for Parliament to debate some of the provisions which we should have debated had the question been one of ratifying the Havana Charter.
The noble Lord announced that as from September 1 the Government are to adopt the Torquay proposals all of 235 which, except one, need a negative procedure. The one which takes the affirmative procedure, he said, was incorporated in the Finance Bill. This House cannot touch the Finance Bill, so it seems a little curious that the Government should put forward affirmative Resolution procedure, to use the words of the noble Lord, in relation to something that we cannot touch in this House. Perhaps the noble Lord will consider that point, and perhaps, through the usual channels, we might have some information on it, because the noble Lord is virtually saying that the Government are following a procedure which denies this House an opportunity of exercising its right.
If I may be allowed, I must raise a point that was made by my noble friend Lord Swinton. The noble Lord, Lord Lucas said that under the Anglo-American Loan arrangements we were bound to freeze existing tariffs and not to impose any new tariffs. In Column 801 of Hansard of December 18, 1945, my noble friend Lord Swinton said this: It is clear that we enter the Conference absolutely free. We shall only reduce or eliminate a preference if we get an agreement which is better for us and for our partners. We were absolutely free. But the noble Lord says we were not free. We cannot debate this matter any more this afternoon, but there is a direct conflict here. We understood from the Government that We were completely free. We now hear from the noble Lord that we were not free, in that we were unable to increase preferences and that existing preferences had to be frozen. As I say, we cannot pursue this matter any further to-day, but there is that conflict which I feel must be cleared up—and I am sure the noble Lord will welcome an opportunity to do that as much as we should. With those remarks, and thanking the noble Lord for his reply, and also my noble friends who have supported me in this debate, I beg leave to withdraw my Motion.

§ LORD LUCAS OF CHILWORTH
Before the noble Lord withdraws his Motion, by leave of the House I should like to say that I cannot conceive that Parliament will not have an opportunity of discussing any proposals for a revised General Agreement on Tariffs and Trade. In answer to his question about the affirmative Resolution procedure, I would 236 say that in order to increase a rate of duty one has to have an affirmative Resolution. We cannot debate this matter this afternoon, but I do not want it to go on record that I said that the rule about preferences was part of the Loan Agreement. What I said was that it was part of the bargain made at the time of the Loan Agreement. If the noble Lord will look up the whole history, he will see that it is a very highly technical business.

§ VISCOUNT SWINTON
My Lords, I can speak again only by leave of the House. I do not think the noble Lord, Lord Lucas, was in the House in 1945: that was our misfortune. But one of the most important issues raised in the whole of the debate on the American Loan, and one of the conditions on which we supported it, was that it was made perfectly plain to us that we were not committed on preferences in any way at all. That matter was raised in another place, and it was answered there by the Prime Minister. I raised it here and the noble Lord, Lord Keynes, said, if I may summarise it, that I was perfectly right: that there was no such commitment, and that it was very well understood in the State Department. We raised this specifically, because in regard to this matter the whole of the White Paper was very obscure. I raised it in the debate and the Lord Chancellor confirmed what Lord Pakenham had said—namely, that while We had agreed that we go into trade negotiations, the whole essence was that we were in no way committed in regard to preference that we and our Imperial partners were to be the sole judges of the merit of any agreement We should make; and that unless we were satisfied we would not make it.
Both Lord Pakenham and the Lord Chancellor made it perfectly clear to us, and quite frankly it was on the assurance given in that debate, and which I believe has been carried out ever since and has never been challenged in America, that we voted for the American Loan. It would be most unfortunate if there were now to be any doubt on any question in regard to that matter. There is a clause in the Agreement about import arrangements: that if you purchase from one country, equally you must purchase from another—I put it rather loosely. There was a question as to whether we could 237 buy anything in any quantity we pleased from our Colonies, and as to whether that applied also to the Dominions. That was quite a separate matter. That was a matter of the volume of imports and the limitation of imports. It had nothing to do with tariffs, and on tariffs we were to be absolutely free.