FOREIGN OFFICE.

HC Deb 14 July 1924 vol 176 cc61-126

Motion made, and Question proposed, That a sum, not exceeding £92,594, be granted to His Majesty, to complete the sum necessary to defray the Charge which will come in course of payment during the year ending on the 31st day of March, 1925, for the Salaries and Expenses of the Department of His Majesty's Secretary of State for Foreign Affairs, including the News Department."—[Note: £85,000 has been voted on account.]

Mr. ASQUITH

The first observation which I would make, and which I hope and believe will be found to be in harmony with the general tone of the Debate to-day, is an expression of sincere congratulation to the Prime Minister that the prospective Conference which, during the last fortnight, has been exposed to many hazards, is going to assemble here in London this week. That in itself is, I trust, a milestone on the road of progress, so long and so fitfully pursued, so often interrupted and even broken up, to the goal of an international settlement. We have had, since the Treaty of Versailles was signed, exactly five years ago, many Conferences, each of them preceded by sanguine official predictions of complete international concord, but it is with a faith chastened by damping experiences, and hope over and over again cheated of fruition, that we witness this fresh adventure into the ocean of uncertainty. It has all our good wishes—from men of all parties and classes, not only in every quarter of this House and in this country, but throughout the Empire. Those wishes, I can assure him, the Prime Minister will carry with him in full measure into the council chamber of the world. It is, in my opinion, of primary importance that nothing should be said to-day which could tend to hinder or hamper him in a task of supreme difficulty, upon which momentous and far-reaching issues depend, and I shall try, in the few words that I feel it my duty to say, not to add to his embarrassments, still less in any way to impair his authority to speak on behalf of the country as a whole. But I think it is the right of the House of Commons—and I am sure the Prime Minister agrees with me—to discharge, with the same candour and freedom of speech that was shown last week in the French Senate, the duty of review, of criticism, and, if it so may be, of suggestion.

The origin, or at any rate the immediate occasion, of this Conference is to be found in the conversations which took place at Chequers on 21st and 22nd June between the Prime Ministers of this country and of France. Their object was—a most necessary and desirable object—to concert arrangements for putting into force the Dawes Report. The purport of what took place at Chequers, as understood by the British Government, is set out in the despatches in the White Paper, that of the Prime Minister to Sir Ronald Graham, and to Baron Moncheur, I think on 23rd June, and that of the Foreign Office from Sir Eyre Crowe to the Director of the French Foreign Office, of 24th June. In all these documents two things were clearly stated or implied, on behalf of the British Government: first, that the Dawes proposals go beyond the scope of the Treaty of Versailles; and, next, that the duty of declaring in the future whether there has been flagrant failure—that was the expression used—to comply with them, must be entrusted to some authority other than the Reparations Commission. A new Protocol, therefore, it was suggested, would be needed, a new Protocol, that is to say, supplementary to the Treaty of Versailles, the proper interpretation of which should, in ease of dispute, be submitted to some such body as the International Court at The Hague.

I pause here to say a word, if I may, as to this, the most recent, example of the methods of what is called the new diplomacy. I have seen a great deal in my day, a great deal, of the old diplomacy, and I know well both its merits and its defects, of which the one most frequently challenged was its habitual recourse to secrecy. But we are in essential respects, or I will put it in an interrogative form, are we in essential respects, and especially in this matter of secrecy, much better off under the reformed procedure which now prevails? During the War, and for a time after the War, it was necessary to give the go-by to conventional routine, and it became the practice, and I think it was an inevitable practice—I was more or less responsible for it myself—for the leading statesmen of the Allies to meet personally to discuss situations, to concert plans, to provide for contingencies. These exceptional conditions no longer exist, and I confess—I say it without any reflection upon anybody—I am coming to doubt whether we are not in danger of more harm than good from the substitution for the old system of ambassadorial interchange of this new procedure of the tea table and the railway station, tempered and supplemented by sporadic and often ambiguous communications to the Press. Under it you have neither full reticence nor full publicity, but often a misleading mixture of both. You have, as these recent happenings prove, understandings supposed to be arrived at which, at any rate, turn out to have a strong family likeness to misunderstandings, and you never know exactly where you are.

4.0 P.M.

Take what happened a week ago. I am not in the least blaming the Prime Minister or the Foreign Office; not at all. French opinion being what it is, and what for a long time we have all known it to be, I think it is a matter of surprise that Sir Eyre Crowe's letter to Count Peretti della Rocca was not followed by an immediate response of a challenging kind from Paris. That, I do not understand, nor, I think, does anybody. But French public opinion, whatever the French Foreign Office did or did not do, at once manifested itself in the most unmistakable fashion. I think, as I have more than once said in this House and outside it, that with the best will in the world, and in spite of the difficulties which M. Poincaré has put into our path during the last two years, our people here do not adequately realise the French feeling as to the sacrosanctity of the Treaty of Versailles. I am sure that is the case. We are apt to forget that that Treaty was originally supplemented and safeguarded so far as France was concerned by the two Pacts between France and Great Britain and France and the United States of America. Those Pacts have both gone, they have disappeared, and they cannot and will not, in that form at any rate, ever be revived. What is the result? France has nothing left to ensure her future security but the Treaty of Versailles; nothing left but the Treaty of Versailles, either to provide compensation for her War losses and sufferings, or to guarantee her future security. Unless you realise that you cannot understand, as we ought always to try, imaginatively, to understand—putting ourselves in the place of other people—French sentiment about the Treaty of Versailles. Further, the main safeguard—indeed, the only safeguard—given to her by the Treaty is the Reparation Commission, on which France has, and has had from the first, a permanent majority. I pass no reflection, certainly no adverse judgment, upon the admirable work—much of it has been admirable—done by the Reparation Commission, but it has been from first to last, as everybody knows, under the domination of the French Government; that is to say, the ultimate and deciding vote has been given by France. It is true that there was, I think for the first two years, an American. He was not a member of the Commission, because the United States have refused to be parties to the Treaty of Versailles; but there was an American observer, voteless, and I was going to add speechless, but about that I am not at all sure. At any rate, he had no vote, and he was there really without any kind of authority.

It is essential that those two things should be remembered. I am saying this, the right hon. Gentleman will see in a moment, not by way of criticism, but rather by way of commendation of the course which he ultimately took. It is necessary for these things to be remembered if we are to understand and do justice and fairness to the French position. The Prime Minister by his visit to Paris no doubt saved the domestic situation of M Herriot's Government. There is no doubt whatever about that. He also saved the existence, and, I trust, the effective activity of the Conference. By what concessions he saved it may be seen by a comparison between the so-called Chequers Agreement and the Franco-British Memorandum of last week.

The PRIME MINISTER (Mr. J. Ramsay MacDonald)

There was no Chequers Agreement.

Mr. ASQUITH

Well, the Chequers Conversations.

Mr. MASTERMAN

Accord.

Mr. PRINGLE

General agreement.

Mr. ASQUITH

I do not know what the proper English word may be. The new diplomacy requires a new vocabulary. Neither the French nor the English, still less the translation of one into the other, has ever been able to supply the word. Whatever you like to call it, if you compare the document—that is a neutral phrase at any rate—that emanated from the Chequers Conference and was communicated to Italy, to Belgium, to Japan, and also to the French Foreign Office, with the Anglo-French Memorandum of last week, the discrepancies and divergencies are too patent to require statement. The proposal for the substitution of the Reparation Commission by an impartial and independent authority has gone it is nowhere to be found in the Anglo-French Memorandum. There appears in place of it the suggestion—a very good suggestion—for the appointment of an American member of the Reparation Commission, and, if that turns out to he impossible and a difference of opinion ensues, the calling in of a person who must be an American to arbitrate.

At this point, I pause to address a question to the right hon. Gentleman. He need not answer it, of course, if he thinks it contrary to the public interest, but I think the House is entitled to know anything that he is at liberty to disclose. I should like very much to know whether he has any reason to believe that the Government of the United States, the Government either actually in power, or any of those contingent and uncertain claimants and competitors for its inheritance which sooner or later in the course of this year will take its place—whether either the actual American Government or any Government which he conceives is likely to take its place is or can be expected to be favourable to the appointment of an American member of the Reparation Commission, or—and that is the alternative—favourable to the nomination of an American arbitrator to determine in that event, as suggested, any differences that may arise? I do not know what the answer to that question may be, but in principle the French contention that the Dawes Report ought to be treated, not as a supersession, but ostensibly at any rate as an application of the principles of the Treaty of Versailles has been, I gather, accepted by the right hon. Gentleman. I am very glad that it has been. I only point out that the situation in the course of a week underwent a vital transformation.

Further, the French contention equally strongly held is that prima facie, at any rate, the Reparation Commission, strengthened it may be, supplemented it may be—it is extremely uncertain whether that can practicably be brought about—shall be the judges of default. Those two points, strongly emphasised in the original British presentation of the case—I will not use the word "accord" or "agreement"—as the result of the right hon. Gentleman's visit to Paris and his negotiations there have now completely disappeared. You have only to read, as I have been reading, and I advise hon. Gentlemen generally to read, the very remarkable speech made by M. Poincaré in the Senate—it is very long; I am not going to quote more than one passage—to sea what a difference that has made in France. The result is, and I am very glad of it, that the Conference which is to be held on Wednesday opens in a clearer and a more friendly atmosphere than a week ago could possibly have been anticipated. I purposely abstain, of course, from entering here and now upon the topics which will form the subject of the agenda of the Conference.

But there are two points of very great significance which do not touch, at any rate, upon the official programme of the Conference which I think here in this House we ought to emphasise. The Anglo-French Memorandum concludes in these terms: The two Governments have likewise proceeded to a preliminary exchange of views on the question of security. Observing how much—I am quoting from the document—public opinion desires complete pacification we are agreed to seek the best means of obtaining this end either through the intermediary of the League of Nations or possibly through any other channel and to continue the examination of the question and the problem of general security of nations until it has received a final solution. I think that is a very wise and proper course to take, and I wish to illustrate its importance and, if I can, to indicate the views which I and many others hold on the subject in a few sentences before I sit down. The first point is a very vital one to the future Anglo-French relations, namely, the evacuation of the occupied territory on the West Bank of the Rhine. The House, of course, is aware of the provisions on this point in the Treaty of Versailles. They are to be found in Articles 428 and 429. Let me just read the material parts of both. Article 428 provides: As a guarantee for the execution of the present Treaty by Germany, German territory situated to the West of the Rhine, together with the bridgeheads, will be occupied by Allied and Associated troops for a period of fifteen years from the coining into force of the present Treaty. That is, I believe, the authority, contained in that provision, on which our troops have now for the best part of five years been in the occupation of Cologne and that district. Then the next Article goes on to provide for the progressive evacuation of the occupied territory, and the material part, so far as we are concerned, is to be found in the opening words of Article 429: If the conditions of the present Treaty are faithfully carried out by Germany, the occupation referred to in Article 428 will be successively restricted as follows:— And here comes the material point for my present purpose— At the expiration of five years there will be evacuated: the bridgehead of Cologne and the territories north of a line— geographically described, which practically means the territory which has hitherto been occupied by British troops. Those five years will expire in the month of January, 1925. According to the provisions of Article 429, our troops will then cease to have a legal title to continue the occupation. The French, as the right hon. Gentleman well knows, take a totally different view. M. Poincaré has always taken a totally different view, and I will venture to read M. Poincaré's speech to the Senate last week which shows quite clearly—and this is very important—that he is still of the same mind. He said: The French Government have always declared until this moment that the date fixed by the Treaty for the occupation has not vet commenced to run, What about the first day the five years? That still has not arrived. That has been the contention throughout. I gather from his speech he does not know whether M. Herriot shares that view or not. I trust very much he does not.

Mr. AUSTEN CHAMBERLAIN

He does, he takes the same line. He said so.

Mr. ASQUITH

If he said that, then I am wrong. M. Poincaré, goes on to say the attitude of the British Government is absolutely "impenetrable." I trust it will continue so. This is a very serious question that will arise in the immediate future—in the month of January next—and you cannot, as the right hon. Gentleman knows, adjourn consideration of its examination until the end of the year. These things have to be anticipated and provided for in advance. I should like the House to be told what steps are or have been taken to arrive at a conclusion in the matter. Look at the consequences if you do not arrive at a conclusion. The British troops under what we regard as a Treaty obligation will evacuate Cologne. Under the evacuation contemplated by the Treaty it reverts not only to German sovereignty, but to German occupation and possession. I think it is our plain duty, a clear Treaty obligation, to carry out our word in that respect. It is impossible to do otherwise in view of the difficulties—and that is the mildest word which one can use, but it is an appropriate one—that will arise when that moment arrives, unless the right hon. Gentleman succeeds in coming to some arrangement with the French Government and the rest of the Allies.

There is another point, a final point which, after all, is of more serious importance. I mean the general question referred to in the final sentences of the Anglo-British Memorandum—Security for France. Although I am not complaining of it, that security is not included as part of the agenda of the Conference. I have always held, as I think the right hon. Gentleman holds, that this paragraph would not have been inserted in the Memorandum unless both he and the French Government saw hovering in the background and to a large extent conditioning any settlement of the Dawes Report which may be arrived at by the Conference, this question of security. I view it as of the greatest possible importance that the British point of view in this matter should be made absolutely clear. If the Committee will allow me, I will, in a few sentences, indicate what I myself and a great many of my friends—I do not suppose our views are limited by the confines of party; they are shared by a very large number of people in this country—hold with regard to that matter. To a large extent, the whole future of any international settlement depends on how you deal with this question of security.

What are the conditions under which we ought to proceed to attain that great purpose? First of all, in our view, any assurance or guarantee given to France ought to he given not as a separate guarantee to France but as part of this country's general undertaking under the Covenant of the League of Nations. Next the security offered, whatever it is, to France should be offered on equal terms to Germany. Thirdly, in order that that may be possible it is obvious that Germany must be admitted to membership of the League of Nations and also, through her representative, to a seat on its Council. To some extent you may say these conditions are negative. But that is not enough. The French will demand and will I think be entitled to demand something more. What I believe the opinion of this country is coming increasingly to believe is that the British Empire—not only this country but our Dominions—and I will say a word about them in a moment—the British Empire should undertake to guarantee both to France and Germany to use all its powers against either State which pressed a quarrel against the other, without calling into use the machinery of the League. It ought not to be a question of guaranteeing territories or the status quo. It ought not to apply to France or to Germany alone. It ought to be collective, general and indeed universal to all parties represented on the League of Nations, collective and universal as far as they are concerned, but general to the world at large against any Power resorting to force in breach of the Covenants of the League. That I believe many of us are coming increasingly to believe is the only effective and practical form, and certainly the only fair and legitimate form in which any guarantee of security can be given. That is going beyond the exact literal terms of the Tenth Article of the Covenant of the League of Nations, but it is only an amplification of that Article, an application and interpretation in the spirit in which it was conceived and for the purpose for which it was intended. At the meeting of the Assembly of the League last year, 1923, Canada, followed by all the Dominions who were there represented pressed an amendment limiting the obligations under Article 10 of the Covenant, ultimately to the discretion in any emergency of the various national Parliaments. I quite understand the sentiments which prompted the Dominions to adopt that resolution, and one must always bear them in view. We must carry them with us if we are to have the whole force of the British Empire arrayed on behalf of this general security intended for all nations. Therefore, I think the policy I have just been recommending ought to be submitted to and endorsed by the Dominions before it is possible to carry it into effect. If we can get that, and I am sanguine enough to believe we can, if we can get the joint authority of the Dominions to join with us in any such pact of security, not partial, not one-sided, not local, not temporary, but applying over the whole range of the Covenant of the League, we shall take the longest and the strongest step that has yet been taken or that is likely to be taken to obtain the real objects of the League, the prevention of unnecessary quarrels and the maintenance of the permanent peace of the world. I do not think that is irrelevant to the discussion in which we are now engaged. I will only say, in conclusion, the right hon. Gentleman has with him the hearty good will and fervent hopes of all parties in this country that this Conference shall take us further than any previous Conference has taken us on the road which we all desire.

Mr. BALDWIN

It is never an easy task to follow the right hon. Gentleman the Member for Paisley (Mr. Asquith). I do not know which is less difficult—following him after an attack or following him when he is developing an argument with which one is to a great extent in sympathy and upon which one has to speak. He doubtless will remember a very great man who lived some years ago, Dr. Barrow, who was always spoken of as "the inexhaustible Barrow," because when he had dealt with a subject, nothing remained to be said. That is very much how I feel this afternoon. But there are one or two points which must strike one who has been more recently responsible for dealing with this subject, and it is in that capacity I wish to make a few observations this afternoon. I have a number of questions to put-to the Prime Minister, and it will be of great interest to the Committee if he can answer them. He put a great many questions to me last year, and I will repeat to-day what he said to me last year, that if he says it is in the public interest that he is unable to answer this or that question in the circumstances of the day, we shall deem that as a satisfactory reason for giving no further reply.

I do not think that anyone who sits on these benches and behind me can be present at this Debate to-day without feeling how great a change has come over the vision of the dream of hon. Gentlemen opposite from the time when they sat in Opposition last year. Last year, in every speech they made, if there was one thing they were going to do when they came into power, it was to revise the Treaty. From the lips of the Prime Minister and the Lord Privy Seal during last year that was the one cry, and it was the cry at the Election, but, as soon as it became obvious that they might attain power, that cry dwindled to a whisper, and the last twittering swallow left over from the winter spoke at Burnley. We none of us know what notice was taken of that remarkable outburst, but it was never repeated, and we know from what the Prime Minister said on the 7th July in this House, that there is now no question of revision of the Treaty. That means that the Government have come into the maintenance of the full continuity of the foreign policy of this country with regard to their handling of the Treaty and the settlement of the questions arising out of it, and it means that they recognise that, in conjunction with France, all things are possible, but, if France and ourselves are opposed, no progress can be made.

That is a very great thing to have learnt and to have done. But there is one more thing I should like to say, and it is this. The Government have been extremely fortunate, blessed beyond all Governments, in the circumstances of the last few months. Just before we left office, we succeeded in obtaining the appointment of the Dawes Committee, and securing on that Committee American representation, with the full assent of the Allies—no mean performance—and all that the Government had to do was to sit still, say nothing, and wait until the experts reported. They had some months of breathing space, free from criticism, free from questions, and with nothing to do but study the subject, and make up their minds what their course of action would be when the Committee reported. They had, moreover, a change of Government in France. Not that I would criticise any Government in a foreign country, but I will observe that it was supposed that the temperament of the new Government would, possibly, make it easier for negotiations to proceed than that of the late Government. More than that, we had a new Government that was going to try new methods. It was the fresh mind and the new spirit, or, as an intellectual would say when he dislikes positives and superlatives alike, but deals in comparatives, it was the fresher mind and the newer spirit. There came a Conference at Chequers, and, as we all know now, a complete agreement was reached. The right hon. Member for Paisley said that for the new diplomacy you need a new vocabulary. I will observe—and the right hon. Gentleman will correct me if I am wrong—that I consider these words "complete agreement" the most perfect instance of the lucus a non lucendo.

What happened after the Chequers Conference? There was a storm—a storm in a teacup, the Prime Minister called it. It must have been an extremely potent brew in that teacup that made the Prime Minister, or, shall I say, gave him the power to talk in this House for three-quarters of an hour and leave the whole House more mystified when he sat down than when he rose. And, I may add, it must have been a very large teacup for the storm in it to send our Prime Minister, at a moment's notice, to Paris. No; we know now, having read the correspondence that was published after his speech, that there was a lack of wisdom in the character of that correspondence which very nearly slew the Conference before its birth. It arose in this way, and we rejoice to know that the Prime Minister has now convinced our Allies that the words in that corresponded, I do not always bear the literal meaning that might be attached to them. We know now the new diplomacy made our Allies think that we were contemplating the revision of the Treaty and the supercession of the Reparation Commission. I think the mistake arose in this way, that in more than one of the letters to our Allies other than the French, there is some such phrase as this, "the engagements to be undertaken by Germany go far beyond those imposed by the Treaty of Versailles," and the conclusion drawn from that was that the Allies would promptly withdraw their sanction, and the Reparation Commission could not be the authority to decide.

Now, was it wise at that moment to have issued a communication of that nature? You touch immediately on the two tenderest places in the French imagination. Remember, it was particularly dangerous for the party now in power to do that, having regard to their utterances before they came into office. It will be a great relief to our Allies, as to this House, to know now that the impression conveyed by those words was a false one. But if it was not wise with regard to our Allies, was it wise with regard to Germany? Because, at this moment, to point out to them that, in our view, the Report of the Dawes Committee was something outside the Treaty, could not have made it easier for the Allies to get that prompt acceptance of the Report at the hands of Germany which is essential at this time. The Committee will remember that the points raised in the communications to the French Foreign Office justified equally the popular fears that were roused in Paris on receipt of the letter—fear as to the revision of the Treaty, fear as to the supersession of the Reparation Commission. We realise only too well why the Prime Minister had to go to Paris, and we are glad to see in the reported agreement which appeared in the "Times" on the 10th July, and of which a White Paper has been issued this morning, that so far an agreement has been arrived at, that is to say, an agreement which will permit the Conference to be held, with every hope we on this side of the House feel, and everyone else does, that something may be accomplished; but it was not easy to do, and the new bondholders had to be introduced to ease the situation, and it was said that measures to create confidence in the new bondholders are not incompatible with respect of the dispositions of the Treaty of Versailles.

We have been able, I believe, to get out of the difficulty that way, but I wish to ask one or two questions about the succeeding paragraphs. I do not think they are questions which should not be put, and I think they are questions which can be answered, but, as I have said before, I am perfectly content to leave this in the discretion of the Prime Minister. It is not clear in sub-head (c) of the fifth paragraph if an American is to be appointed ad hoc, or as a regular member of the Reparation Commission. I should like to re-echo the question put by the right hon. Member for Paisley as to whether the Government have any indication of the answer they are likely to get from America. If there is a prospect of a favourable answer, I shall be extremely glad. I am not clear whether unanimity is to be required on the Reparation Commission as to default. If it is not, arbitration is to be the method of solution, assuming that an American arbitrator can be procured. There are one or two difficulties about that. In the first place, in so complicated and technical a matter, it is difficult for an arbitrator to be able to form a clear view and give a clear decision, if he has not that intimate knowledge which he would have acquired if he had been a member of the Reparation Commission. Moreover, there is this point of view. There are four members of the Reparation Commission. Supposing they fail to agree, with three on one side and one on the other, and the Arbitrator gives his decision in favour of the one as against the three, it is very difficult for me to imagine that a decision of that kind would prove to be a workable one amongst the Allies.

I should like to ask the Prime Minister if he has ever explored a plan, which, I think, would have been a better one, and which, I think very likely we should have suggested ourselves, had we been in when the Dawes Committee reported. Would it not be possible to appoint an ad hoc Committee to consider the question of default, a Committee to be appointed by the Reparation Commission, on lines exactly analogous to those on which the Dawes Committee itself was appointed? You would obviate, then, any difficulty about the body being outside the Treaty, and you would have a body which would be admirably qualified to do the work that would be put upon it. The next subparagraph contains a question which has given us some cause for anxiety, an anxiety which is somewhat allayed by the version in the White Paper issued this morning, which differs in one important respect from the report in the "Times" of the 10th July. It is the question of putting into force sanctions. In the "Times" of the 10th July the phrase was, "sanctions that the Allies shall have agreed upon." The phrase in the White Paper is, sanctions which the Allies "shall agree." The Committee will at once see the difference. I was afraid, and my Friends were afraid, that sanctions would be agreed upon and that there would be nothing to do, when the Arbitrator had given his decision, but put into force those sanctions previously agreed upon. I am quite sure the Committee are anxious to learn whether those sanctions are likely to be devised in the near future, and, if so, whether they will come before Parliament for examination and ratification; whether, in the case of any of the other Allies, they will come before their Parliaments; and, in any case, to have it made clear whether the sanctions are going to be devised before the question of default arises, or whether they will only be considered when the question of default has arisen and been decided upon?

Paragraph (g) is rather involved, and I think the Committee will like to know whether it means the distribution of receipts will be discussed at the London Conference, and, if so, whether the Spa settlement will still stand, and Whether any question of priority will arise. The Prime Minister has said something about the presence of Germans. I understand that the Conference will be opened without the Germans, but that in the event of agreement amongst the Allies at later period the Germans will be invited to attend. I think the Committee ought to pause for a moment to look at this aspect of the question—that is, the very great alleviation which has been offered to Germany by the Dawes Report. I mention that to show that there ought to be no hesitation on the part of the Germans in accepting the Report. I hope that it will be possible for the Conference so to conduct their business as to obtain this consent from the Germans with the least possible delay.

First of all, the Germans will get a stabilisation of their currency through the new proposed banking issue aided by a loan of £40,000,000 sterling. That is very remarkable treatment for a beaten enemy. I pause for one moment to touch upon a question which I think is of the greatest importance. If the Germans accept the Report, and if this loan is raised, a considerable portion of it will be expected to be raised in this kingdom. If it is to be a success that must be the case. But you cannot get away from this: that in setting Germany up in business you are restoring at one blow your own greatest and most formidable competitor. What are you going to do about that? This country has recently decided that it wants all the foreign goods it can get into this country; but it is just possible it will get more than it wants under this; it is just possible that unless people can be assured that this point is not lost sight of the loan itself may be a failure. I therefore ask the Prime Minister, if he has not already considered it, if he will consider this question, that if they get so far during this Conference he will take steps to see that German industry, by taxation or by any other means, shall be penalised to no less an extent than our own industry is at the present time, by the competition which is bound to result as a consequence of the loan that we, with a million unemployed, will be asked to make good.

The second alleviation the Germans have is this: that in carrying out the recommendations of the Dawes Report there is the minimum of interference possible in their internal affairs, less interference than has been the case in the resuscitation of Austria and Hungary in which this country has played so admirable a part. Thirdly, the regulation of the amount of reparation is to be decided by taking into account a newly devised index of prosperity, which means that the Germans themselves are protected against the fear of having too heavy reparation taken from them in times that would make it exceptionally difficult for them. They are considered at every point. The Committee will have heard with relief that at this first Conference, called for the purpose of putting the Dawes Committee's Report into working order, the question of the inter-Allied debts and of security is not to be raised. At least, I understand that. If that be so, I think it is wise. One step at a time, however small that step, is the only way in which you are going to make any progress which will lead to any result.

I would only say in conclusion that no one in this House in diplomacy would go back to the days of Bismarckian Blood and Iron. But there is a happy mean between Blood and Iron and Matthew Arnold's Sweetness and Light. Sweetness and Light? They very nearly brought the Conference to death before it was born! I hope with all my heart the Prime Minister will now succeed in exercising that happy mean. The Conference is going to meet. It has had a very narrow escape. We rejoice in this House that the fears which we formed a week or two ago have proved to be groundless. I can assure the Prime Minister, following my right hon. Friend the Member for Paisley, that, we on this side of the House wish him well in this most difficult task. If it should fall to him to achieve a success which has not fallen to the lot of his predecessors for some time past, there will be, at any rate on our side of the House, no grudging and no envy.

The PRIME MINISTER

I think it would be most unbecoming of me if I were tempted, beyond a very playful limit, to follow the somewhat controversial lines that my right hon. Friend the Member for Bewdley (Mr. Baldwin) has adopted, at any rate in certain parts of his speech this afternoon. I am profoundly grateful to my right hon. Friend the Member for Paisley (Mr. Asquith) not only for his kindly words at the beginning and the end of his speech, but for his very helpful speech, indicating, as it does, the lines upon which, whoever be here or whoever be responsible, the foreign affairs of this country must be conducted in relation to France, and French public opinion. My right hon. Friend the Member for Bewdley said, and said quite truly, that this is not our doing. We inherited some good things, and the Experts' Committee was an inheritance. I have never refrained from putting upon his head all the laurels he earned for the part that the Government which preceded this played in the appointment of that Committee. There is no doubt whatever that the fact that that Commitee was appointed, the fact that Americans were present on the Committee, contributed enormously to the possibility of beginning afresh friendly, or, at any rate, more friendly relations with France. The only thing my right hon. Friend can complain of is that we took the opportunity. I am not going into the question of why certain matters arose last week. For the moment that is closed; and I am far more interested in the day after to-morrow than in last Thursday.

The question of how far certain obligations imposed upon Germany by the Dawes Report may or may not go—there is no question that those who talk inaccurately about the Dawes Report being an addition to the Treaty of Versailles do not use accurate language—the only question is whether in respect to one or two points the Dawes Report does seek to impose upon Germany obligations which are not legally within the interpretation of the Treaty of Versailles. That matter has been referred to legal experts. There it will remain until the reports conic before the Inter-Allied Conference this week or next. This is the simple fact that remains quite evident; it was absolutely essential, after the publication of the Dawes Report, that negotiations between the countries should be preceded by conversations between the Prime Ministers and the Foreign Secretaries. That was done. It can be said that this was secret diplomacy, or that it was open diplomacy. I am not interested; not in the least interested in that. What I am interested in is this: that so far had things gone, so much out of touch had we got by delays of various kinds and by misunderstandings of various kinds, that before the Governments, as Governments, could get into sympathetic relationship, the heads of the Governments had to meet and to explore the field together and see exactly where their two Governments stood.

There is a phrase at the end of the first communique which talks about a "complete joint understanding." The right hon. Member for Bewdley chided me about that. Is that the first time he has come across a phrase like that at the end of a communique issued after the British Prime Minister met the French Prime Minister? How is it that he has discovered at this late hour that this is new diplomacy, and not old diplomacy? Did not ho himself in that remarkably abortive conversation he had with M. Poincaré—was this new diplomacy or was it old—issue a communique saying it was a complete success? Let the dead past bury its dead! There is one consideration that we must take into account. We may have been as human as some right hon. and hon. Members below the Gangway seek to make out we were. We may be as human as they profess to be. Nevertheless, this policy has been pursued by me from the very first day I crossed the threshold of the Foreign Office as Secretary of State. I did not believe, I do not believe, that there can be peace in Europe until Great Britain and France reach a measure of unity that has been remote from them for some years. I have purused that policy in every way I possibly could, and that is the policy for which I am responsible. In the pursuit of that policy, France, owing to circumstances, has come to regard the Treaty of Versailles as something akin to the Ark of the Covenant. Any suggestion to put it aside at once arouses fears which, if the suggestion is made innocently, simply amaze one, but there it is as a fact.

5.0 P.M.

There is another fact. To begin to suggest that the security which France thinks it now has from the operations of the Reparation Commission ought to be modified, to say nothing of it being removed, arouses the same feeling. My right hon. Friend the Member for Bewdley talked about a misunderstanding that arose on the publication of that document last week. Why? When this Government said not that there was French agreement on that point, but that when the Conference met the position of the Reparation Commission in relation to the new economic and political circumstances created by the Dawes Report would have to be reconsidered, why was that used, as I think so unfairly, by the Opposition Press in France creating something approaching a panic.

The right hon. Gentleman gave the most extraordinarily innocent account of my reference in that respect. Would he be surprised if the explanation was himself and his own Government? What right have right hon. Gentlemen opposite to come and accuse me of arousing suspicion in France because I have suggested we may have to consider the operations of the Reparation Commission? When did they change their mind? The fact of the matter remains that even now, supposing the case in favour of the consideration, say, of the composition, say, of the power, say, of the way of working of the Reparation Commission, is made out against France, and France were to allow its feeling to run away with it, rather than allow its thoughts to guide it, the explanation would be the action taken by the Government of which the right hon. Gentleman opposite (Mr. Baldwin) was the head. I have sent for the report of the Inter-Allied Conference on Reparation and Inter-Allied Debts in London and Paris in December, 1922, and January, 1923, and what do I find? I find on page 119, Schedule B, a Memorandum put in by the Government. What does it say? The right hon. Gentleman criticises me for raising the matter, and accuses me of bringing this most hopeful approach of the day after tomorrow to an untimely end, a sort of pre-natal death. What did they say when they were dealing with the same point? Whatever form of local control should lie decided upon, it should be responsible and independent—that is not subject to the Reparation Commission sitting in Paris. What more? It would be necessary to provide that the German Foreign Financial Finance Council should sit without the German Finance Minister, whenever occasion requires it, to exercise the executive powers at present possessed by the Reparation Commission and by the existing Committee of Guarantees. That is not my proposal, nor the Liberal party's proposal, but the proposal of the party opposite. This is the next paragraph: If the Reparation Commission is retained at all, it should be as a purely judicial body with such changes of constitution as may appear to be desirable. These are the innocents who, for the purpose not of giving me trouble—at any rate that I think was never intended—but for the purpose of this Debate, have changed their mind, and no longer stand by the documents for which I found myself responsible last week in Paris, because they had been the official suggestions of a Government in Britain. Again, perhaps we might let the dead past bury itself. In any event if that be not done, nobody has less cause to blame me for raising any doubts whether it is right or wrong, whether the cause is reasonable or unreasonable, just or unjust, and nobody else has less cause for accusing me than the right hon. Gentleman the Member for Bewdley.

There is another point. We have to remember that whilst we must give France every security about the Treaty of Versailles she wants, we must be exceedingly careful that France does not extend the legal provisions of that Treaty. That is not a new trouble. Whoever has had to handle, as the right hon. Gentleman opposite has had to do, the trouble given by the Rhineland Commission, knows perfectly well it is our duty, if we stand by the Treaty of Versailles, to stand by the actual Treaty, and not something which is over and above that Treaty. There is something more. It is quite true that the right hon. Gentleman opposite raised the question of the position of the Reparation Commission. It is quite true that it was further suggested that it should be raised by us for the purpose of discussion and put on the Agenda, and form part of the business for which we would be responsible when the Inter-Allied Conference met. But what are you going to do in reference, not to theoretical problems and questions that we might put to each other, but actual experiences. What I am very anxious to do is to secure that these questions should not have to be fought out and perhaps quarrelled about in advance of the Inter-Allied Conference, at which the Dawes Report and the Dawes Report alone should be considered and put into operation.

There are many points, but I will only deal with one. I do not think it is necessary to go into all the details, and the Committee will forgive me if I do not do so. The position is this, and I mention it to show the difficulties of the negotiations into which we are about to enter. When it was a question of the Allies on the one side, and the Germans on the other, and the Allies were imposing upon Germany economic or political disabilities in consequence of the Treaty of Versailles, the Reparation Commission, political rather than judicial in its mind, acted upon a majority—a majority at any rate theoretically obtainable by the French delegate voting twice, once as an ordinary member of the Commission and then as Chairman in case of a tie. Such a condition of things, such a machine cannot be acceptable. As a matter of fact we found it would not work. That is what is nine-tenths of our trouble now. It is that the Reparation Commission has ceased to work, and to all intents and purposes, certainly so far as the occupation of the Ruhr is concerned, it has been scrapped, and the decision and the initial and subsequent action has been taken, not by the Reparation Commission, but by the Governments, and the Governments, not acting together, but acting on their own individual initiative.

I put it to this Committee, and I am doing my level best to put it as effectively as I can to our French friends. Can that state of things exist consistently with two aims that I want to secure—first of all complete unity between them and us, not to be gained at this Conference but to be begun at this Conference; and secondly, favourable prospects, if they and we and the other Allies agree to go to the American investor, to the City of London investor, the Dutch investor, or—and I think this is essential—the French; investor, because I do not see why the French financier should not also take his risks; how can we go to the outsider, not to the man whose mind is inflamed by political feelings, but to the man who is concerned with putting £100 into something from which he is going to derive an annual income and say, "The security that Germany, as a going concern, gives to your investment of £40,000,000 can at any moment be worsened by a political act, taken by a majority of the Reparation Commission or even by an individual government acting by itself."

That is the trouble you have to face. We are almost on the horns of a dilemma. France says, and we sympathise with her—every word that the right hon. Member for Paisley said on that point finds an echo in my own mind—"We must retain the security of the Reparation Commission." The creditor says, "You ask us for the loan of £40,000,000. If we do not give you that money, you can pass as many Resolutions as you like about putting your Dawes Report into operation, but the Dawes Report will never be put into operation, and never can be put into operation until that money is forthcoming."

This is an essential element in the new situation created by the Experts' Report, and I will not go any further. I doubt if he will accept the security merely of the Reparation Commission. If he would, good and well, but the position I take up, the position which is quite clearly adumbrated in the agreement we came to in Paris, is that the creditor who is to be created should have a security which is satisfactory to him. That is a matter for negotiation. Perhaps if I do not answer all the questions that he has put to me, my right hon. Friend will remind me at the close of anything that I may have left out. Most of them, I think, related to this matter of the Americans. The right hon. Gentleman the Member for Paisley also asked me a question about that. At the moment I have nothing of a definite character that I can say. The matter is not being left until Wednesday, or Thursday, or Friday, but there is nothing settled, except that, I think, it is perfectly evident that in the first place an official representative of the American Government is quite impossible.

For one reason, I am informed that, before such an appointment could be made, legislation would have to pass through Congress, and that is out of the question. I am assuming that there is no political objection; I am assuming that Members on all sides would receive the proposal with open arms. I assume that, because, when I have assumed that, I have got to make this discouraging announcement, that it could not go through till August. Even then, the proposal regarding his position, so far as it has been made, is that, if he is going to be on the Reparation Commission, France undoubtedly will insist that his action upon the Commission—at least, I think so; such is the impression I gathered, not merely by recent talks with M. Herriot, but with the other political leaders whom I met in Paris the other day—France would insist that the extra appointment to the Reparation Commission, by reason of the fact that the Experts' Report can only be put into operation on the floating of a £40,000,000 loan, should have his duties confined to the safeguarding of the creditors of that loan, bat he would speak and he would vote.

With reference to the alternative proposal about arbitration, again, that is just put down as another possibility, because the Committee must remember that this gentleman who is mentioned, the Reparation Agent-General, is not likely to be exactly as described by my right hon. Friend the Member for Paisley. He is not an outsider. During all the working of the Dawes Report, he has his hand on everything that is being done. He knows, on account of his central position, his key position in the machinery that is created by the Dawes Report, how this control is working, how that control is working, and how the other control is working. He knows the state of the pool, he knows the payments that are being put in. He has got at his command every conceivable particle of information that would enable him to come to a judgment regarding whether this is a wilful default or whether it is a default of the nature of a breakdown. Such a man, if the creditors will agree, might very well be appointed as a sort of arbitrator.

Mr. AUSTEN CHAMBERLAIN

May I ask the right hon. Gentleman a question for the sake of making the matter perfectly clear? I understand that, if an American be appointed as a member of the Commission—that is the first alternative with which this paragraph deals—he would, for the particular purposes for which he is appointed, and those only, speak and vote as a member of the Commission, so that his vote would not necessarily be a decisive vote. He might be in a minority of one against the whole Commission. On the other hand, if an American be not appointed to the Commission under the first alternative, then the Agent-General is to be called in. The Prime Minister has twice used language that is not in this Paper—"as an arbitrator." Does that mean that, if there be a disagreement among the members of the Commission—if they are equally divided, or if they are three to one—the American comes in as an arbitrator, and his award is binding on all parties?

The PRIME MINISTER

As far as the document is concerned, the wording was left purposely vague, for final decision in connection with future consultation with the financial experts as to the nature of the guarantee that would be required. This comes up at the London Conference and the settlement will have to take place there. The point is this; The gradation—I quite undestand how it might be represented—the gradation is this: You are out for a satisfactory security for the creditors. That is the point. The minimum, the least change, would be an American on the Reparation Commission, with power to speak and power to vote when default was under consideration. Will that meet the creditors? Will that produce the £40,000,000? It may, or it may not. Supposing it does not, could we go a little step further, retaining, on the one hand, the Reparation Commission, at any rate as an effective organ in the decision, and yet going so far beyond the first proposal that it might just mean the difference between acceptance or repection by the would-be creditors and the financiers. The second suggestion comes in then, stronger than the first suggestion, and the purpose of the paragraph, as I am sure it is not necessary to explain to the right hon. Gentleman, is to indicate, so to speak, the line of thought and the line of exploration that would be pursued la London, and at the same time to indicate that such a line of exploration could be pursued without necessarily doing injury to French suspicions and violating French feelings too much.

That is the situation perfectly candidly. Then there is the other point—receipts and distribution. Will the Spa Agreement be reconsidered in London? No, certainly not. Then the other point was: Do we propose that a programme of sanctions should be settled now or immediately, or will we content ourselves by making a declaration of united interest in default in the event of our coming to an agreement? After coming to an agreement on all these points, will we then consider a programme of sanctions, or will we simply make a solemn declaration of union in interests, and then, in the event of default, meeting to consider what is the best thing to do in order to prevent it? The programme of sanctions can only be devised when you see in what circumstances the default has taken place. I know that some sections—perhaps I had better not specify closer than that—press me very much for a programme of sanctions, but the final and complete reply to an immediate pro- gramme of sanction is this: If they were published next week or the week after, what is the effect? It only means that that is giving to Germany a warning how, in the event of default, we are going to punish her. Nobody but a foolish person would ever think of doing anything like that.

Mr. PRINGLE

Do we never put a penalty in a Statute?

The PRIME MINISTER

This would not be a Statute; this would be an agreement. But the fact is, as I have said, that there is to be no programme of sanctions, but a united declaration in the event of an agreement. Always provided that there is an agreement, there will be a united declaration of common interest in seeing that responsibilities undertaken by Germany shall be fulfilled by Germany. There were two questions to which the right hon. Gentleman the Member for Paisley referred, upon which I think I had better say next to nothing to-day. They were both with reference to security. There were two observations regarding security, and, if I may say so, the line which the right hon. Gentleman took this afternoon is precisely the line that I have been taking all through. On one of the last occasions when I spoke here I anticipated that by saying that the only profitable line of thought, so far as I could see, was through the League of Nations. The pact, if you can call it such, cannot be a bi-lateral fact; it must be a general one. It must be a pooled security. As a great French military authority said to me the other day, "The British Government is perfectly right; the problem of French security is not a problem of French security. The problem of French security is the problem of European peace." I have done what I could to open up the way to get to it, and all I can hope is that the Conference which will begin on Wednesday will be regarded as a golden, and, maybe, not recurrent, opportunity, not only for the Allies to unite once more, but for them to reunite on the work of pacifying Europe.

Brigadier-General SPEARS

The international situation has undoubtedly had a rough passage lately. Our thanks are due to the Prime Minister for the energy he has displayed in endeavouring to put matters straight.

I cannot help saying, however, that I believe the Chequers interview will go down to history as a supreme instance of two Prime Ministers absolutely misunderstanding each other's point of view, and whilst being firmly convinced that they saw eye to eye. In fact, to use the Prime Minister's own lucid phrase, it is a magnificent example of a misunderstanding, which, if it was a misunderstanding, was purely a misunderstanding. I should like, although the question of the evacuation of occupied territories has been raised, to put a specific question concerning the evacuation of the Cologne bridgehead, which, under Article 429 of the Treaty of Versailles, we are bound to evacuate next January. I understand that, according to competent authorities, according to the terms of the Treaty of Versailles, a zone which has once been evacuated cannot be re-occupied unless a fresh default has been declared by the Reparations Commission. If that is the case, and if that is the view accepted by the Government, it means that if we evacuate the Cologne bridgehead it cannot be re-occupied by the French unless meanwhile a new default has been declared. Under these circumstances, what would be the position of the French troops, if there are any left in the Ruhr at that period? It is clearly impossible to imagine that these troops could be left there with their lines of communication undefended. I should very much like to know what the answer of the Government is concerning this particularly important matter.

There has been a great deal of talk lately about the Versailles Treaty. I think this House is entitled to know what the Prime Minister's view is concerning the Treaty of Versailles. In the French version of the Joint Communique the following sentences appear in paragraph 2: Furthermore, the violation of the provisions of the Treaty of Versailles would destroy both the basis on which a permanent peace has been so painfully built up and the confidence in the solemn undertakings of nations, and would be of a nature not to prevent but to foster future conflicts. Does the Prime Minister, or does he not, accept this view of the Treaty? It is important that we should know, as he has so often expressed his views in an exactly contrary sense. For instance, in an article which he wrote in the "New Leader" on 27th July last year, he used words which were phrase for phrase an exact contradiction of the sentences in the communique quoted above. He wrote: So long as the Treaty of Versailles lasts, with all its vindictiveness and injustice, peace in Europe will be precarious. Again at the Labour Party Conference in 1923, he moved a Resolution demanding a world conference, including Germany, to be called to revise the Treaties of Peace. The same demand was made in the Labour party's manifesto at the Election in 1923. The House is entitled to know what the Prime Minister's views are now concerning this important matter.

I regret that the Prime Minister did not answer one particularly important question which had been put to him concerning the date at which, in the opinion of the Government., occupation under the Treaty of Versailles begins.

We have had a lot from the Prime Minister as to the importance in his view of the question of French security, but I think he most completely misunderstood the situation until a very short time ago. For instance, he told us that he was going to solve all these important problems piece-meal. He made it clear in his speech on the Consolidated Fund Bill on 1st March of last year that he wanted only to deal with the question of reparations, and that all other matters should be pushed far away into the background until that had been settled. He said: His Majesty's Government decline to enter into any detailed exploration of the problem of security until it has first had an opportunity of exploring and settling the question of reparations.'' Again, specifically in the invitations sent to Italy and Belgium to the forthcoming Conference, it was stated: Such questions as security and inter-Allied debts are to be explicitly excluded. That was said last week, and to-day the right hon. Gentleman told us what great importance he attached to this very question of security. He has undergone a complete conversion. Of course it is quite true that you can only actually deal with one subject at a time, but before selecting the problem with which you are going to deal in detail, it is essential to decide on the broad lines of the frame within which you are going to build up your general settlement. So complete has been the Prime Minister's misunder- standing of the French mentality in this matter that he has told us over and over again that the problem of French security could be indefinitely postponed. I am stating nothing new when I say the problem of French security has been absolutely fundamental in the French mind since the peace. The Treaty of Versailles, from their point of view, was built on the solid foundation of a treaty of military assistance guaranteed her by Great Britain and the United States. France in the first instance had considered it absolutely essential to maintain an army on the Rhine, and she only bartered this positive guarantee in exchange for a promise of military assistance by America and England. When this guarantee lapsed, owing to the refusal of America to ratify it, the whole structure of the Treaty from their point of view became undermined; cracks in the edifice became everywhere apparent, and they have been striving ever since to patch up these cracks. The guarantee that had been promised them having been withdrawn, they have endeavoured to obtain security by other means, and this has led them to enter into arrangements with other European nations, arrangements which have proved so distasteful to opinion in this country, and which even to the French themselves has never given them a sensation of having obtained the equivalent security to that which they lost when the pact lapsed. This need for security has had a profound psychological effect on the French nation, so that very often when dealing with matters far removed from questions of security, reparations, for instance, they have more or less unconsciously endeavoured to twist the matter in hand into something that would satisfy their need. To many people in this country it has appeared as if France were deliberately provoking what she feared most, that is a spirit of revauche on the part of Germany. To many it has even seemed as if the French were impregnated with the spirit of militarism, and, in fact, the Prime Minister himself seems to have held this view. I wish he were here to listen to this. He said, in a speech reported in the "Daily Herald" of 16th July, 1923 France pursues this bitter policy to crush Germany, not because it is afraid that Germany may pick a quarrel and invade it, but because it wishes no possible rival to its policy to dominate the European Continent. I submit that this shows a profound misunderstanding of both French psychology and of the European situation. Of course, many people here and many French people also have felt that the holding down of Germany in a nervous grip was hound ultimately to lead to an explosion of which France herself would be the victim. To the extremist elements in France, however, this stranglehold has appeared to be an absolute necessity, and they have seen no other way but to hold Germany down until something else should turn up, until they saw a way out. But, strange as it may seem to many people in this country, although it may even seem an absolute contradiction, I know it is true that the French nation are profoundly pacific, and I myself would be prepared to stake my life on that assertion. If it had been understood by the Government how important the question of French security is, that question would have been discussed long ere now. To have given France security would have been the first step. But the right hen Gentleman completely separated the question of security and reparations and gave reparations precedence. In this connection it is very significant to note that M. Herriot, in his recent very fine speech in the Senate, in which he so admirably expressed the French point of view, declared that the question of security was far more serious than that of reparations. In fact, in his own words: Before knowing whether we shall live rich or poor, it is necessary to know whether we shall live at all. I am delighted to think that a French Prime Minister has at last been found who has had the courage to make a statement of which all were convinced, yet which none hitherto have dared to utter The Prime Minister has evidently seen that he has made a serious mistake in his estimate of the importance of security, for we are now told it is going to be discussed from now on until a definite solution has been reached, and it is a thousand pities that he did not come to this conclusion a very long time ago, because he might have avoided putting forward in the language he did those suggestions which were put forward in the invitations to the Conference, suggestions which caused so much suspicion in France. Had he realised how nervous the French are concerning the. Treaty of Versailles as clearly a few days ago as he seems to realise it now, he certainly would not have used the language he did in the invitations to the Conference, and the result has been that he has had to concede infinitely more than he otherwise would have had to concede had he understood the situation more clearly.

A certain amount has been said about secret diplomacy, and I wish to add my voice to that of others in saying it appears as if the extreme unwillingness of the Prime Minister to keep the public informed has greatly added to his difficulties, and this is all the more strange in view of his past utterances, before he was as in office, on this subject. This is what he wrote concerning secret diplomacy last year in the "New Leader" (August, 1923). He also talks about the Foreign Office, and he seems to have been as much in favour of open diplomacy then as he was opposed to the methods of the Foreign Office which he now champions. Referring I c secret diplomacy he writes: The Labour party are determined to change completely the method of conducting business with other nations. We propose to end the bureaucracy of the Foreign Office, with its queer mentality and subversive selection of agents, with its work in secret rooms and by strange people, for all the world as though it were some pursuit of alchemy conducted by mystic signs at astral times and by people selected by fate. We believe that the light and air of publicity would have a healthy and beneficial influence upon international relations. But in spite of this spirited declaration in favour of open diplomacy, our experience so far of the Prime Minister's idea of doing away with secret diplomacy seems to be merely that he himself should know the secret. Many of the discrepancies between the Chequers Communique and the Paris Communique have been dealt with fully by the right hon. Gentlemen who spoke before me, and the most important points in this connection have been very clearly set forth by them.

But there is one particularly important point I wish to emphasise, and that is in the question of action to be taken by the Allies when a German default has been declared. The position now is that France has reserved to herself absolutely the right to act alone in case of German default and impose what sanctions she may think fit. That is an all important matter for this country and unless that matter can be solved amicably we shall never get anybody to lend money under these conditions. M. Herriot, perfectly honestly, made a statement to the Senate that in the case of a German default having been declared France would reserve to herself complete liberty of action. I am a great admirer of Mi. Herriot, and so long as he is in power I feel sure that he would never think of taking isolated action, but how long will he remain in power, and what guarantee have we that another French Government will be of his way of thinking and would pursue his policy? What guarantee have we that we might not then have the Ruhr business all over again? What would the position of the bondholders be in that case?

There is another point which has not been raised so far to-day, and it appears to me to be an extremely curious one. It is really extraordinary and quite incomprehensible that the joint communique is apparently considered of so binding a nature that it calls for juridical interpretation of its clauses. That is all the more extraordinary in view of the trouble that the Prime Minister took last week to explain, concerning the suggestions for the Conference sent out with the invitations that he was most anxious to avoid in any way giving the impression that matters have been in the slightest degree settled beforehand between M. Herriot and himself without previous consultation with the Allies, and that no engagements of any kind have been entered into between them or even suggested. The point in connection with the communique to which I attach particular importance is the elect that it is likely to have in Germany and the United States. I have never posed as a champion of Germany. I am very anxious that Germany should pay everything that she can pay, but the fact remains that the Dawes Report has been built up on the provision that it is workable only if it is willingly agreed to and willingly worked by all parties. The German Government fought the elections on the programme of acceptance of the Dawes Report and endeavoured to get support in Germany by pointing out that there was to be a new spirit inaugurated by the Report in the matter of reparations. That this new spirit was accepted by the British Government was made clear to the world and to the whole of Germany by the fact that the correspondence after the Chequers Conference has been published and by the tone of that correspondence. I very much fear that the confidence laboriously built up by the German Government in the Dawes Report will completely disappear in view of the new situation which the text of the Paris communique reveals, and the result may well be that Germany will not accept an arrangement substituting for an agreed settlement an imposed settlement agreed upon between France and England in which the French view so largely predominates. If Germany accepts, but only under protest, the result as foreseen by the authors of the Dawes Report itself may well be that the scheme will be killed. The Government must be aware that as a result of the Paris communique the Nationalist forces in Germany and the reactionary elements in Germany have been enormously strengthened, and that the Government majority in favour of the Dawes Report has been seriously endangered. I do not protest against the Prime Minister having made concessions to the French point of view—you cannot avoid making concessions—but I do object to his having made concessions on absolutely vital matters, which may very well have the effect of endangering the whole of the Dawes Report.

A good deal has been said as to the appointment of an American representative on the Reparation Commission. An important fact as was pointed out by the Prime Minister is, that it will require an Act of Congress to enable an American to be appointed officially on the Reparation Commission. America cannot even be officially a party to the nomination of a representative. On the other hand, I believe there is nothing in the world to prevent any individual, American or Chinese or any one else being appointed by the Reparation Commission itself so that it is quite possible for an unofficial American representative to be added to the Commission and that he could vote. The point is will the American investors accept that as an adequate safeguard for their interests? If they accept that and are to raise huge sums of money, are they going to allow these huge sums to be placed at the mercy of a body of which they are not officialy represented, a body which is in the extraordinary position of being looked upon as a deity in France and a devil incarnate in Germany and in certain quarters in this country?

As for the alternative suggestion that in cases of differences on the Reparation Commission the agent for reparations payment should be called in as arbitrator, I do not see how that can be seriously meant. This high official might have to be a complainant to the Reparation Commission in case of default by Germany, so that if he is to be the arbitrator it would mean that he would be judge, jury and plaintiff all in one. That is clearly an impossibility, and I do not believe that the suggestion can be seriously meant. I was extremely glad to hear the Leader of the Opposition make a suggestion for the appointment of an independent and impartial body similar in character to the Experts Committee, which would report a German default to the Reparation Commission. That suggestion has been made upon previous occasions; I put it forward myself publicly some weeks ago, and it is very much to be regretted that the Government did not see fit to accept it. I cannot believe myself that the Government are not fully aware that the plan put forward in Paris is doomed to failure. Is it their policy to get the Conference started and then to hope that the pressure of events will prove to the French that their suggestions put forward in Paris are of such a nature that money cannot be raised if they are insisted upon, and that such an atmosphere will be created and such pressure will be brought upon the delegates that point by point they will concede back again those points that have had to be given away? That may or may not be a wise policy, but it appears to me to be a most dangerous one and one which may very well jeopardise the Dawes Report which we are all so anxious to see put in operation at the earliest possible moment.

Sir FREDRIC WISE

I do not propose to follow the hon. Member for Loughborough (Brigadier-General Spears) who has just spoken, because he has more or less dealt with the military and security side in connection with the Dawes Report. I propose to deal more or less with the financial side, and I hope that any- thing that I say will not be interpreted wrongly. I am a friend of France, and I am anxious that every penny that is possible should be got out of the enemy. We should thank the experts for their Report, which must have entailed hard work and very complicated work. International European finance is, indeed, a riddle. The more it is looked into the more difficult it appears to become. The point I want to put before the Committee is whether the Dawes Report is possible or whether it is impossible. Having studied it and looked into it most thoroughly, I contend that the Dawes Report is impossible. Perhaps I may be allowed to go back to what happened after the wars of 100 years ago, the wars between 1793 and 1815. At the end of 1815 this country was owed a big amount for those days, namely, £58,000,000. The largest debtor was Austria to the amount of £20,000,000. In 1823 we settled the Austrian debt for an amount of £2,500,000. Austria was the only country able to pay and the amount being £2,500,000, and she paid this by drawing hills on London, and those bills were discounted in the usual way.

Perhaps the Committee will forgive me if I give a little personal information regarding my experience in connection with reparations. I believe I was the first person to make a. Report to the Peace Conference on the financial and economic situation in Germany in March, 1919. I presented my report in April, 1919, but that Report was, more or less, not carried out or, I believe, considered. I suggested a moratorium, and I still contend that a moratorium is necessary. I suggested that at that time what was called the migration of securities had started and that Germans were sending their money abroad so as to he protected if disaster occurred and something should he done to stop this increasing. I also suggested, and perhaps the Under-Secretary for Foreign Affairs will bring this to the notice of the Prime Minister, that the Germans should enter the League of Nations, and I took a letter to the Peace Conference from the President of the German Republic, President Ebert, asking that they should be allowed to join the League of Nations. In reply to the hon. and gallant Member for Henley last week the Prime Minister stated that no application had been made by Germany to join the League of Nations. The application I refer to was not actually made to the League of Nations, but it was made to the Peace Conference. I am sure that. Germany is most anxious to join the League and it would be much better that she should be a member, because the Allies should have more control over her if she joined the League.

I also stipulated that Germany in regard to Reparations could pay between £1,000,000,000 and £2,000,000,000, subject to inflation, but that the main thing to do with regard to Germany was to give that country hope. That was in 1919. Then came the Treaty of Versailles. I was told that the original figures that were discussed was about £26,000,000,000, but eventually there was another figure considered at Versailles. It was generally thought that Germany could pay £11,000,000,000 and that, at any rate, £1,000,000,000 could be paid by May, 1921. That was quite impossible, considering what we had taken from Germany, and taken in a natural and right way. We took Alsace and Lorraine, we took the Saar coal for 15 years, we took her colonies, we took 75 per cent. of her iron ore, 34 per cent. of her hard coal, and 20 per cent. of her potash. [HON. MEMBERS: "Ships"!] I will throw in the Mercantile Marine as well. My main point is that no country could possibly pay £1,000,000,000 within two years after the signing of the Peace Treaty. There were many Conferences. I always welcome Conferences, because you get to know the people better. It is the only way in which international policies can be carried out by means of Conference.

Lieut.-Colonel J. WARD

They never do that.

6.0 P.M.

Sir F. WISE

I am afraid they do. Take the Treaty made in May, 1921. The Pact of London settled the figure of £6,600,000,000 to be paid by Germany. That figure is before us now. Until some reasonable figure is settled in regard to reparations, the Dawes Report or any other Report can hardly be carried through, except as a temporary measure. What has Germany paid? Up to the end of last December Germany has paid £421,000,000 to the Allies. All that has been paid by inflation. It has not cost Germany a penny. It is simply the foreigners, ourselves included, buying the marks which enabled Germany to pay this large amount. But I want the Committee to realise that it has not cost Germany anything.

Mr. MOREL

When my hon. Friend says that, does he suggest that the middle classes in Germany, who have been very largely ruined by inflation, have not paid a very large portion of that money?

Sir F. WISE

Of course, the middle classes and the credit of Germany are absolutely in default, or practically in default, hut it has cost the German nation nothing. There is a very great difference between the people and the nation. Coming now to the Dawes Report, it is required because of the breakdown—which I think the Prime Minister agreed to—of the Reparation Commission. The terms of reference of the Dawes Committee were to consider the means of balancing the Budget, and the measures to be taken to stabilise the currency. It did not touch the actual amount which Germany had to pay at all. That is what I want the Committee to realise, and even the amounts suggested, though there is no given large amount, and there is no period, to me appear to be quite impossible.

In the first year £50,000,000 has to be paid, of which £40,000,000 is the loan, the loan to which the Prime Minister referred. Where it is coming from I cannot conceive. Our total of foreign investments last year was £96,000,000, which is a large sum. How much are we going to subscribe to this loan? Last year we overinvested abroad. Are we going to advance half this amount to Germany quite apart from the security? The security probably is more important than the actual amount. In five years the amount is £125,000,000 a year and has to be paid by Germany, which is a minimum amount and not a maximum, and, as I said before, it does not even refer to the period. May I take two points. One is the ability of Germany to pay, and the second is inflation. The most important thing is for Germany to balance her Budget. It is estimated that this year the revenue will be £263,000,000, and the expenditure £253,000,000, so that there will be a balance of £10,000,000.

How can that be increased? That can be increased by taxation, and anyone who refers to the Reparation Report will find in Section 1 General Provision (231 to 244) that taxation has to be on the same basis as, or a greater basis than, the taxation of the Allies, and part of the Section states that Germany is required to pay for, and make as a charge upon her revenues prior to that service or discharge of any domestic loan, and secondly, so as to satisfy itself that in general the German scheme of taxation is fully as heavy proportionately as that of any of the Powers represented on the Commission. That provision has not been carried out so far. It was in the Treaty of Versailles, but I suppose that the inflation has been so great that it has been impossible to tax the Germans in the same way or in the same proportion as the Britisher or the Allies.

There is only one fund out of which this large amount can be paid. First of all, you must have the maximum revenue and minimum expenditure. The production must be greater than the consumption, but to pay any reparation you must have your exports greater than your imports. Looking at the position from this point of view, we find that from the let January to the 1st June the imports into Germany exceeded the exports by 1,308,000,000 gold marks. That does not look as if Germany will be in a position to pay even £10,000,000 this year. The transfer of money from one country to another is one of the most difficult things to accomplish. It is only an expert that really understands it. Some Members of the Committee may ask what happened in pre-war days. In pre-war days we were on a gold standard, and the franc only varied between 25.12 and 25.33, and the dollar only varied between 4.82 and 4.89, and if it went any way beyond that or even reached that, gold was shipped or taken back and the exchange righted itself. To-day we have not got that and it makes the transference of money all the more difficult.

People do not seem to realise that when they talk of £125,000,000 a year for reparations in five years. You may say that the debt to the United States is being paid by the British, and so it is, but it is a difficult thing to do, and the only way in which we can keep up the payments is by the Empire being the largest producer of gold in the world. We buy the gold in London and ship it across to the United States. That is one of the ways in which we pay our debt to America. We hear people say, "But what about the French debt to Germany after the Franco-German war?' You cannot compare these reparations with reparations after the Franco-German war, because that was not a world war, and France was able to borrow outside. Take the case of the Chinese-Japanese war. An indemnity of £34,500,000 was imposed upon China. She came and borrowed in the European market and she was able to do it. In the case of a world war it is almost impossible to borrow outside unless you have some agreement with all the Powers.

On the other point as regards inflation, the Committee must realise that there is practically no national debt in Germany and, what is very important, that the industries and most of the railways have no debt at all. The gold value of German currency is £2,000,000. I was reading a speech by a shipowner, made recently, which I may quote, as it is somewhat important. He said: Ninety-one well-known British shipping companies, owning altogether 7,030,000 tons of shipping, have a liability on debentures and loans of £41,000,000, or nearly £6 a ton. The fall of the mark has relieved German shipowners of a capital liability of £18,000,000 on the 6,000,000 tons of shipping in Germany. How are we to get over it? I am sure that one thing which we want is fair trade on the Continent, and I sincerely hope that the Prime Minister will have time to consider the suggestion that we should insist on Germany having the same internal debt as we have. This is besides the external debt. That debt would be guaranteed by the industrial and commercial firms in Germany, and coupons would be handed to the gold bank, but not cashed into foreign currency. If they were cashed you would return to inflation, but you always have the debt there, and the industries mortgaged in the same way and to the same extent as our industries. I hope sincerely that the Under-Secretary of State for Foreign Affairs will be kind enough to pass that suggestion on to the Prime Minister in the hope that there may be something in it, because if we have unfair trading, as referred to by the ex-Prime Minister, it is going to hit our industries and we shall have more unemployment than ever. Can the Dawes Report be carried into effect? I have here a little note by Colonel Ayres who served as technical adviser to the American members of the Dawes Committee. He is a very important man, and I agree entirely with what he states. He says: The new plan is a great advance over anything previously done, and it might be briefly characterised as a good plan, but the figures are really too large. I would say that the contemplated payments are too great, and that the plan, will break down if it is not amended. Those are entirely my views. I feel that it is not a business plan in the ordinary sense. The experts, I think, have not realised the heavy burdens of Germany, and the great difficulty of transferring money from one country to another. I hope sincerely that before long, even if this goes through as a temporary measure, we shall have a conference not only of the Dawes experts but with the Reparation Commission and the Allied debtors, with America assisting in it. You cannot divorce one part of this from the other. It is all dependent on the whole, and it is on that whole that Europe depends for peace, permanent peace, peace with security.

Mr. T. JOHNSTON

we have heard this afternoon certain speakers speaking from different sides of the House, who have given us their opinions as to how much Germany can pay, and that is the purpose of the Dawes Report. But I want to put another point of view. The point of view of the British working class as to how much Britain can afford to receive, and in what shape can we possibly take reparations at all. As I read the Report, pages 34 and 35, there is only one way of receiving reparations. The Dawes Committee say: While, therefore, we recognise the necessity for the continuance of deliveries in kind, we think that unless they can be confined to natural products of Germany, such as those specifically dealt with in the Treaty, coal, coke, iron, dyestuffs, etc., and in the second place to exports which do not entail the previous importation into Germany of a large percentage of their value, they tend to be uneconomic in time. Coal, coke, dyestuffs. We have tried them all, and every attempt to take coal, coke or dyestuffs as reparation in this country has resulted in a huge increase in our unemployment figure. Let me endeavour to show that this is not a wild heresy of mine, but that it was two years ago the considered opinion of the leaders in British trade and industry. Take the right hon. Gentleman the Member for Paisley (Mr. Asquith), leader of the Liberal party, who spoke in this House this afternoon. In a speech at Tonbridge, on 26th October, 1921, he said: Germany ought to be made to pay for the wanton injury she inflicted on her enemies and the world. She ought in justice to be made to pay, but it does far more harm to receive than to give. He said later: Germany cannot pay in depreciated marks, which are worth nothing; she cannot pay in promissory notes; she cannot pay in services, for you have taken away her mercantile marine. The only way Germany can pay is by the export to the indemnified countries of German goods. That means the importation into this country of goods for which we are not called upon to make exports of equivalent value. In other words, our markets are to be flooded, and our working class is to be thrown out of employment. The Glasgow Chamber of Commerce Journal, of February, 1921, said: We cannot have a large importation of free goods without jeopardising the labour position. The "Money Market Review" of 5th March, 1921, said: The German indemnity is a will-o'-the-wisp. It is not a case of heads I win and tails you lose, but rather of heads I lose and tails you lose also. The right hon. Gentleman the Leader of the Liberal party, speaking at Paisley on 2nd June, 1921, said: The indemnity ships have paralysed our shipping industry, while the German yards are busy.

I have a quotation here from Mr. Runciman, who was at one time the President of the Board of Trade and who certainly knows something about shipping. He said at West Hartlepool, on 25th January, 1922: What gave the shipping industry the knock-out blow was the payment of the German indemnity in ships. The financial advisers to the Government, Messrs. Samuel Montague & Co., have declared that— The diversion of German indemnity coal to France has spoiled our market in that country. The then Chairman of the National Industrial Council, Sir Oswald Stoll, declared in March, 1921, that the German indemnity coal to France had put 100,000 British colliers out of work. Mr. Arthur Chamberlain, the Chairman of Tube Investments, Limited, speaking at the annual meeting of that company in Birmingham in 1921, said: The chief, I had almost said the only, thing that we can do to help the situation, is to reduce the amount that Germany owes to us, which we can do by cancelling her indemnity, and, so long as there is any unemployment or under-production in the country, every sovereign's worth of goods we receive as indemnity from Germany is a less to our workpeople of the amount of labour that Germany has put in to produce it. I could go on for half an hour with quotations, but I do not see that there is any necessity to do so. Let me, however, give a, quotation from the "Manchester Guardian" of 29th September, 1921: The reparations from Germany seem at last to be coining in merrily. The payment of huge reparations by Germany has to mean a huge, steady, long-lasting flood of German goods of all descriptions into France, Belgium and England. All that the naked eye would see in our ports, markets and shops would be that extraordinary inundation of everything that Germans make and sell. The inundation has begun. With some excitement, people are remarking that in August there was an upward jump in almost all sorts of German imports to Great Britain. The value of the German iron and steel received rose by £73,000, that of dyes and dyestuffs by £37,000. We took £36,000 of reparation in toys—nearly double the haul we made in July. We made Germany pay up clocks, knives, stationery, chemicals, lamp chimneys and scissors far more briskly than in any previous month. Then the "Manchester Guardian" pointed out that, coincident with this importation of goods, the statistics of British unemployment were steadily rising. What is it that the Dawes Committee propose to do? They do not discuss how we shall be able to absorb reparations goods, but they say that Germany's capacity to pay is somewhere in the neighbourhood of £125,000,000 a year. The problem for us is not Germany's capacity to pay, but our capacity to receive. Can we take coal without throwing our miners out of work? No. Can we take dyes? No. Can we take anything?

Mr. A. M. SAMUEL

Manufactured goods.

Mr. JOHNSTON

Can we take any kind of manufactured goods for which we shall not be called upon normally to manufacture goods in payment, without at the same time sending our own workmen, who are making these goods for export now, out into the streets among the unemployed?

Mr. SAMUEL

I quite agree. The hon. Gentleman should remind his leaders of what was said by them at the last General Election.

Mr. JOHNSTON

What our leaders said or did not say is not for the moment under discussion. Does the hon. Member agree with me? If he agrees with me, he will not support the Dawes Report.

Mr. SAMUEL

I have come here to condemn it, if I should be called upon.

Mr. JOHNSTON

Come over here, then. At any rate, it was the political party with which the hon. Member has been associated that stumped the country in the 1918 Election and secured a Jingo verdict on the basis of making Germany pay the uttermost 6d. that could be extracted from her pockets, and secured a political triumph which, as we have learned since, they knew in their heart of hearts they could not honour. That was a dishonest operation, and if the hon. Gentleman wants to talk about political dishonesty he should turn his attention to the manifesto and the speeches of leaders of the Coalition party in 1918. If, as now appears, we are to have a considerable amount of support in this House for the view that the taking of reparations hurts the receiving nation more than the giving nation, we shall be entering upon a new phase in the discussion. There is the position of America. I know that it is argued that there is something wrong in this theory, because America is prosperous after having taken the British debt. I dispute that entirely. I believe that within a very short time it will be found that this payment of gold to America will so raise prices in the United States that it will be impossible for American goods to compete with European goods in the markets of the world. If civilised nations are coming to the conclusion that you cannot extract wealth from another nation without doing irreparable injury to your own working classes, then we are arriving at an entirely new point of view in international affairs. That was certainly discovered by Bismarck after the Franco-Prussian War Germany took about £200,000,000, but so grievous were the results to Germany that it was actually proposed in the German Reichstag that the £200,000,000 should be returned to France. A statement was made by the leader of one of the political parties in the French Chamber that he for his part would on no account have a return of the poisoned millions. After the Russo-Japanese War the Japanese economists recommended their Government not to take an indemnity.

I submit that if the leaders of all parties in this House, instead of wasting their time upon dummy and useless reports like this—if it is agreed to next week by all the European Powers they cannot operate it—if instead of wasting time discussing agreements about these reports and any other reports for the dumping of indemnity goods, we could sit down and make up our minds, first of all, whether or not it is possible to take any indemnity goods without injury to the British people, and if we discovered that we cannot so take indemnity goods, then honestly and straightly let us tell the British people that we are out to cancel all these indemnities, and let us see if by so doing we can set European trade firmly upon its feet again, and recognise that the only way by which we can become prosperous is by allowing our customers to become prosperous, and not by the process of endeavouring to crush them in the mire. I trust that before this discussion is ended to-night some hon. Member better qualified than I am to give a lead in this House, will boldly say that the attitude taken up by, and the recommendations of, the various political parties in 1918 and subsequently, were wrong and short-sighted, that they meant suicide for the working class of this country, and that We propose henceforth to explore new methods for settling the affairs of Europe. If that be done, we shall be doing a very much better day's work for the working class and all classes in this country than we shall be doing by continuing barren discussion of useless subjects such as this.

Mr. AUSTEN CHAMBERLAIN

The point of view which has just been expressed by the hon. Member opposite is one which I have heard put before in this House and which, I confess, even by repetition has not become more easy of acceptance by me. What is the hypothesis from which the hon. Gentleman proceeds? It is that for a nation burdened with debt like ourselves, involving the heaviest taxation on all classes of the community and, in particular, on our trade and industry, it is an advantage to set our most powerful pre-War competitor going again, without any debts of any kind, external or internal, and with the past capital charges on their undertakings wiped out. He doubts whether it is worth America's while to receive the interest on our debt. He is confident that if we continue to ship gold there prices must rise. We do not pay our debt only by shipping gold, or mainly by shipping gold, and these confident expectations of a rise in prices may perhaps be a little modified if the hon. Member examines what is actually taking place. No doubt there was a rise up to a certain point, but the Americans have found a not ineffective method of "sterilising" to a very great extent the additional gold which they receive. I should agree with the hon. Member that the possession of so much gold is of no value whatever to America, and might easily become an incumbrance, but I cannot agree with the hon. Member that it is an advantage to us to have to pay this debt and that really the more you can increase your obligations to pay to a foreign debtor the more flourishing you are.

Mr. T. JOHNSTON

I did not say that.

Mr. CHAMBERLAIN

I certainly do not wish to misinterpret the hon. Member, but I cannot see any other logical conclusion to his argument. He says we must not take any reparations, because it is a disadvantage to us to do so. Is not the converse true that if we have a debt to pay it is an advantage to us, and that the less we receive and the more we pay the better we are? I do not wonder that when we get to the end of this argument, to its logical conclusion, the hon. Member thinks I have misrepresented him.

Mr. DICKSON

Of course you have.

Mr. CHAMBERLAIN

I hope the next time the hon. Member speaks, he will show how he can evade that logical conclusion from the premises which be laid down.

Mr. MOREL

rose—

Mr. CHAMBERLAIN

I am sorry I cannot give way. I gave way to the hon. Member whom I was criticising, as I think I was in duty bound to do, but the Prime Minister has been good enough to make a point of coming in to hear what I have to say, and I know the right hon. Gentleman has another engagement. It is to meet his convenience that I rise thus early in the Debate. May I begin by observing that I think the Prime Minister was unduly captious about the very gentle criticism administered by my right hon. Friend the Leader of the Opposition (Mr. Baldwin). After all, the right hon. Gentleman in his salad days, was pretty free with criticism himself. He had nothing but the most openly and bluntly expressed criticism either for the diplomacy of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) or for the diplomacy of my right hon. Friend the Leader of the Opposition. All these people had blundered inexpressibly and incomprehensibly. All that was needed was the arrival of a plain man of good will and common sense to put things right. Well, the plain man of good will arrived, and he found that already the situation had taken a favourable turn. The diplomatists, whom he had so roundly condemned, had secured the appointment of the Dawes Committee and American co-operation in it. That was done before he came into office. Before he met M. Herriot at Chequers, the Report of the Dawes Committee had been received and accepted by all the Allied Powers.

That is not all. I do not want to lay undue, and what in a foreigner would be improper, stress on the consequences of a change of Government in France and of the disappearance of one man and the arrival of another. I think these are matters which we had better leave to be discussed locally without our interference: but who will deny that in the course of the months which preceded the Chequers meeting, there had been a sensible detente in French feeling, a more open mind, a greater readiness to consider things and proposals which at one time had appeared a priori unacceptable? That was the situation when the Chequers meeting took place, and the first result of the Chequers meeting was to endanger all that had been won from the meeting of the Dawes Committee onwards and very nearly to blow the whole concern to smithereens. Why was that? I do not want to be unduly critical, but I think the Opposition are entitled, if only for the avoidance of similar mistakes in future, to call attention to the errors that, were committed. I will not dwell upon them, but I will run through one or two of them.

In the first place, there was at Chequers, as I suspect, a great deal of loose talk without any precise definition about what any of it meant. This loose talk without definition was followed by a communiqué, which was very precise, but gave no explanation; and then the communiqué was followed by an invitation containing a whole series of propositions, and, when read in connection with the terms of the communiqué, nobody could avoid supposing that these proposals, put forward in the British invitation, were in fact proposals upon which "general agreement," or a "complete accord," as the case may be, had been reached at Chequers. It was not necessary to do that. It was not necessary to pretend in the communiqué that you had agreed to more than that a Conference should meet. It was not necessary in inviting the Conference to take pains to put down all the points on which you were most likely to differ from the French, instead of those on which you were most likely to agree, and it was not necessary, nor was it wise, to wrap the whole thing in an air of mystery which is only gradually being dispelled. If the Prime Minister on Monday last, instead of coming down here, and making a 50-minutes speech, which fogged us all, because he was fogged himself, had adopted the simpler process of reading one of these invitations, we should have known where we were, and perhaps his subsequent task might have been easier. Observe what the letter of invitation read with the communiqué—and the "general agreement" of the English phraseology was not confined to the meeting of the Conference, but applied to what was to take place—observe, how the letter of invitation, read with that communiqué, appeared to commit France, and to what extent. First place, it presented a solution.

The PRIME MINISTER

The first Chequers communiqué?

Mr. CHAMBERLAIN

Yes, the letter of invitation read with what I call the Chequers communiqué. What was included in the invitation? The letter presented a solution which, as my right hon. Friend the Leader of the Opposition said, the Prime Minister ought to have known would provoke immediate contradiction and disavowal. The Prime Minister says to my right hon. Friend: "Who are you to say this? Why, Mr. Bonar Law, in December and January, two years ago, did very much the same thing, and how does it lie in your mouth to blame me?" Why, for that very reason. It is not that the proposal was inherently unfair or absurd; it is that experience had shown that it was a proposal which no French Government would accept and which this French Government could not accept, and in the light of the previous experience, with all the knowledge spread out before him, the right hon. Gentleman repeats the error. I venture to submit that was a great and almost unpardonable blunder. He challenged the validity of the Treaty of Versailles: he repudiated the authority of the Reparation Commission, and he offered to Germany an excuse for boggling and haggling over the acceptance of the terms of the Dawes Committee.

As I say, the result was that the "complete accord" of Chequers disappeared in thin space. The Prime Minister hurriedly took the train to Paris and made a new agreement. Yes, but he had to pay a price; he has had to pay the price for claiming too much in the first instance. Just see what happened. In the first place, he re-establishes, and I am glad of it, the authority of the Versailles Treaty, not again to be questioned by any British Government. In the second place, he re-affirms and consolidates the authority of the Commission as interpreter of that Treaty in certain respects. In the third place, having first expressly separated Inter-Allied debts and security from the Conference, as a subject only to be taken up after the Conference and when we have agreed on the immediate problems of the Conference, he now has to agree that simultaneous conversations shall go on, not in the Conference—

The PRIME MINISTER

No, the only position I took up was that those two subjects should not be subjects of conversation in the Conference. As a matter of fact, conversations are open, but they will be detached absolutely from the Dawes Report.

Mr. CHAMBERLAIN

I think the result of the Paris agreement is to reattach them to the Conference. You may exclude them from the Council Chamber, but, if these conversations are going on at the same time, it is perfectly futile to tell me that the decision of the Powers, and of two Powers in particular, within the Conference will not be influenced by the progress, or the lack of progress, in the conversations outside the Conference on the subject of inter-Allied debts and securities. I think the right hon. Gentleman in some respects has revised his position for the better and taken up now a position which he ought to have taken up at first, but I think, in others, he has by the initial blunder tied his own hands to M. Herriot before they meet, and tied M. Herriot's hands to his Parliament before he comes to London. That is the point, and I think it is right and necessary to say so, but I also wish to say a word or two about the policy which my Friends and I would recommend to the consideration and attention of the Prime Minister for the future. After all, though it is perhaps not quite the time to accept the invitation of the Prime Minister to consider that all the acts of his Foreign Ministry up to the present, are the dead past, and may be left to bury themselves, we are more interested at the moment in the present and the future than we are in the past.

What is the policy which we would follow? In the first place, we would frankly accept and uphold the Versailles Treaty and its subsidiary or collateral Treaties as the basis, and the only possible basis, for the public law of Europe. In the second place, we would make the maintenance of the Entente with France the cardinal object of our policy. We would do that both to give confidence in the stability and the execution of the Treaties and to prevent fresh causes of difference arising between ourselves and our Allies. Let me say that, making that our aim—and so far, I think, I have not stated any policy which the Prime Minister would disavow—we should feel with him that there was a similar obligation on the part of our Allies to make the maintenance of that Entente the cardinal article of their policy and to meet us in the spirit in which we were prepared to meet them. Thirdly, we should make the observance by Germany of her obligations a not less cardinal feature of our policy in foreign affairs, and, in return, if Germany frankly accepted and loyally fulfilled the obligations as now presented, we should be prepared to respect the integrity of Germany and to welcome her back into the comity of nations; and always, like His Majesty's Government and like every party in this House, we should seek to secure, wherever it be possible, associations with the United States of America in such ways and under such conditions as may at any moment alone be possible to the American people.

May I say one word about the methods which the right hon. Gentleman, or, rather, the two Governments, have suggested in their last joint communiqués? The first evidence of the favourable turn of events was the acceptance and creation of the Dawes Committee. In our conception, I will not call it the Dawes Committee, but a Dawes Committee, is not merely an expedient, but it is something in the nature of a policy, and I venture to suggest to the right hon. Gentleman that possibly another Dawes Committee, appointed by the Reparation Commission, acting under the Reparation Commission, advising the Reparation Commission, may be a more hopeful way of securing American association and of attaining the results that are desired than those that are actually embodied in his proposals. The merits of this policy are that they respect the Treaty, they respect the Reparation Commission, they hold out a hope of American association, and they thus introduce a moderating and harmonising influence into the councils of the Allies, so preventing friction, facilitating agreement, and rendering easier German acquiescence in the terms which she must be called upon to fulfil.

My right hon. Friend said a few words on the character of the Dawes recommendations as they should be viewed from the German standpoint. Was there ever in history, will there ever be again, victor nations who are ready to adopt a scheme which begins with the feature of lending money to the vanquished, to set the vanquished on their legs? That is not incompatible with the Treaty; that is not a contradiction of the Treaty, but the Dawes conditions are an immense alleviation of the German position under the Treaty, and, if refused by Germany, if she hesitates to accept that offer, if she refuses them or shows bad faith in their execution, then, I think, we should be entitled to presume, and driven to presume, that she prefers bankruptcy and disaster to the fulfilment of the obligations she undertook or to making any reparation for the wrong which she has done. If that should come about, then I think all disagreements between France and ourselves would quickly be removed, for if we have differed as to means from time to time, if we have hesitated as to amount, we are as firmly determined as the French themselves that Germany shall respect her international obligations and, within the measure of her powers, now declared, not by the Allies, but by art impartial and an expert authority, shall make good the injury she did to civilisation.

Mr. ELLIS DAVIES

I wish to deal with the question of security. We are, of course, bound to the League of Nations, but the right hon. Member for Paisley (Mr. Asquith) suggested an association of nations outside or in addition to the Covenant of the League. There is no reason to think, however, that France would be satisfied, as the right hon. Member for Carnarvon Boroughs (Mr. Lloyd-George), at Cannes, made an offer of a wider pact for France, but that offer was refused, and to-day we are urged by France to give a wider pact and to enter into greater liabilities. The first reason for that desire on the part of France, it is said, is that of fear, but fear is not confined to France. France is not the only country in Europe which fears. France can be attacked only from the East, but Germany lies between France and Russia, open to be attacked on both sides. Lord Bryce, for instance, in his last book called attention to the fact that "Russia and Germany each feared the other, each dreaded a sudden attack by the other," and, said he, "let us allow to Germany the benefit of that consideration. They were in real bona fide terror of what Russia might do." But then comes the question: Is France really in fear? For my part, I question it, and I question it for this reason, that France knows quite well, and so does Belgium, that our self-interest will compel us to protect both France and Belgium in the future as we have done in the past. In a letter written by Lord Balfour to Lord Hardinge on the 4th July, 1922, he stated: I observed that M. Poincaré's memorandum implied that the French now attach but little value to the Pact, for he was at pains to point out that, if either Belgium or France were attacked, Britain would, of necessity, and from motives of pure self-interest, be compelled to come to their assistance. Not only that, but the French Prime Minister, in an interview later on with Lord Hardinge, said that in the form in which the pact was proposed by the right hon. Member for Carnarvon Boroughs, it was not of capital interest to France, who well knew that Great Britain would be found at her side if she or Belgium were again attacked by Germany, since in the future, even more than in 1914, any attack against the French frontier would directly imperil the equilibrium of the world and the safety of Great Britain itself. That is the view of French statesmen, but it is also the view expressed by the Belgian Foreign Minister, who said practically the same thing only a few days ago, that not on account of any treaty or of any pact, but for our own salvation, we should be compelled to defend her. What have we offered France? The then Prime Minister, at Cannes, offered the defence of their own soil from German aggression, but that was not satisfactory. Lord Curzon reported to Lord Hardinge on 5th December, 1921, that they "wanted an agreement by which we would render assistance in case of an indirect attack." By indirect attack, the French suggested that she might even be attacked by Russia attacking Poland, and that is a point of view which has been continually emphasised by the French representatives in Paris and here. What does it all mean? If a pact of that kind is entered into by us with France, does it not mean military conventions and agreements? They have made it clear that if such a pact is entered into they will require us to regulate our military strength in agreement with one another. Their complaint is that a pact or agreement is insufficient, because we may be late in arriving with our troops in France, and I would like to put this point: What do the French mean? Do they mean that we should maintain an army on the Continent and be there at all times, or that we should contribute to the maintenance of French troops? It seems to me that we are entitled to have answers to those questions before we are again asked to offer them a pact.

My contention is that France really is not concerned about security and about protection. She is concerned with a policy that savours of Imperialism. What has been the policy of France? The policy of France at present can be defined by the desire of Marshal Foch to have one frontier on the Rhine. Let there be no illusion on that point. It has been the foreign policy of France for 200 years, it ended, first, at Blenheim and then at Waterloo, and I have little doubt in my own mind that the more information we get about the origin of the last war the more we shall find that the reason and the object of France was to make the Rhine her eastern frontier. What has been our policy? Our policy has never been based on sentiment; it has always been based on our interests. We entered into the Treaty with Belgium in 1839 because we were interested in protecting Belgium in order to protect ourselves. Let there be no illusion on that point either, and if anyone doubts it, the evidence will be found in a letter written by the King of the Belgians to Queen Victoria in 1838.

7.0 P.M.

In this he said that in our own interests we were bound to protect Belgium against any foreign Power. The Treaty of 1839, which had such terrible consequences in 1914, was not a matter of sentiment, but a matter of our own interests. Take, again, our attitude towards Germany. It was one of fear. Germany was a menace to our naval and military power. An hon. Member says, "Commercial." I prefer to put it higher and say it was a menace to our military and naval power. We defended Belgium. We fought Germany in our self-interest, and I am going to submit that the time has come when we should revert to the policy of a hundred years ago, the policy of the greatest Tory statesman of that period. I am referring to Canning, who, I venture to say, was also the greatest Foreign Secretary this country has ever had. The policy of Mr. Canning was this, that we should look after our own interests, that we should defend our own interests, and enter into no obligations or alliances with those with whom we were not concerned. As he said: I think more of England and less of Europe. We should be ready at all times to throw the whole weight of the country, moral and material, according to the decision of this House, where we think it is most needed and most just.

Mr. T. DICKSON

The right hon. Gentleman opposite (Mr. A. Chamberlain) confessed himself somewhat confused at the logic of the hon. Member for West Stirling (Mr. T. Johnston) in that he expressed the view that indemnities and reparations could only be paid finally as expressed in goods and commodities, and that the receipt of those goods and commodities was not beneficial but the reverse to the workers of the country receiving them. It was somewhat amusing, at least to me as a mere back bencher, to hear from a right hon. Gentleman who looks upon foreign imports as something like the commodities of the devil, that goods coming in at nothing at all per ton are apparently very desirable things, but goods coming in a few pounds per ton cheaper than they could be produced in this country are apparently the worst possible thing a country could receive. That was exactly the issue before the country at the last election. Goods coming it a little cheaper than we can produce them here are something we ought to keep out, but goods coming in as reparations and indemnities and coming in at nothing per ton are apparently things desirable and are to put us on our feet. I suggest that a person who submits a double-barrelled case of that description has no right to quarrel with the logic of any Member in this House.

It seems to me that there has been too little said to-day from the point of view of the average working-class community. There has been a great deal of talk about the nation and about Britain and about France and Germany, but when I speak of Britain I think of the British people in the mass, and particularly those people who work for their living and produce the means whereby we live in this country. I want to submit this, that no indemnities or reparations can be paid unless they are finally paid in some form of commodity which is to-day either paid for by similar labour expressed in goods exported abroad or is directly produced by labour employed in this country. We have mention in the Dawes Report, as an example of the goods that may be sent here, of coal, dyes, cocoa and so on. If I am in order in taking Protection as a simile, we find this curious analogy between the Protectionist case and the indemnity. We could make a splendid case for the protection of any particular industry in any particular area. I could go to a steel area and make a splendid case for the protection of steel. I could go to an engineering area and made a splendid case for the protection of engineering. It immediately follows that if I am going to protect every industry similarly, then their prices are going to rise. My illustration is this: You can make out a splendid case for one person, provided you do not tell him you are going to do the same thing for other persons.

Mr. BECKER

It would not be a splendid case.

Mr. DICKSON

That was the only case. I could go to the coal areas and get patriotic miners who have read the glowing, magnificent and lurid speeches of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) and put the case to them: "Do you think Germany should pay?" and they would say, "Certainly." Remembering the speech of the right hon. Gentleman, that coal was the life-blood of industry, I would then tell them, "Coal is a vital thing, and we should get paid in coal." The miner would say: "Who are you trying to get at?" and I would say, "Why?" He sees, if indemnity coal comes in, he is going to get the sack. Then I go to the engineer who is in favour of indemnities and reparations, and he is in favour of getting them paid, but not in engineering. I go to Lancashire, and there see the so-called patriotic person who is in favour of indemnities and reparations but not in cotton. It comes to this, that everybody is in favour of indemnities and reparations provided always you get them in what someone else is producing and not in what he himself is producing. I agree that you cannot get indemnities and reparations payable finally but in goods. There is no other way. Even in gold there is no other way.

If you are considering the receipt of indemnities, you can have them whereby one particular section of the community benefits, but it is certainly not the working class, because the only channel through which it can obtain a means of livelihood is employment, and if you are getting goods of any character into this country in the form c-f indemnity the essence of indemnity is that no goods shall be manufactured in this country to be payment in exports. [An HON. MEMBER: "What about raw material?"] I have yet to learn that the people who produce raw materials produce them for fun. They produce them to send them to this country, because there is being produced in this country some manufactures which can be sent out for payment of the incoming raw materials. If that is conceded, that raw material, of whatever character, comes in, not as indemnity but as international trade, then obviously somebody in this country is being employed to pay for that import. If this raw material comes in not as international trade but as indemnity, the essence of an indemnity is that there shall be no export to go out to pay for that import. Therefore people previously employed are thrown open the streets and stranded.

I hope that our Front Bench will take courage. [HON. MEMBERS: "Hear, hear!"] They will probably get it on this side; they will not get it on that. I hope our leaders will take advantages of the only loophole of escape I notice in this Dawes Report. I think there is a chance by which we can decide how and in what circumstances indemnities and reparations can be received. I hope this country will decide that they will not take them at all under any conditions whatever, because they will paralyse our own industry—I have a whole sheet of quotations which I need not read. I am referring to some people who live by working. That may not appeal to some other people. We defy hon. Gentlemen opposite to tell us in what particular commodity they are going to receive these indemnities and reparations without penalising to some extent the workmen of this country. I hope, our Front Bench will have the courage for the lack of which the leaders of the opposite party have been distinguished since 1918 when colossally stupid figures were mentioned by the right hon. Gentleman the Member for Carnarvon Boroughs as being possible of receipt from Germany. Even the right hon. Member for Paisley (Mr. Asquith) did a double somersault on the same issue. We were all shouting the same about in 1918, because only very few had the courage to tell the people that this was a delusion. A few of us who were getting yelled at at street corners for telling people that this was industrial suicide have proved it to be so. I am glad the hon. Member for Penistone (Mr. Pringle) recognises me in his graceful way, and I hope he will raise his hat at this point. The right hon. Gentleman the Member for Paisley is now agreed that the receiving nation may be more badly hit in the receipt of indemnities than the nation Which produces them.

The right hon. Gentleman the Member for Paisley (Mr. Asquith) was asked by a heckler at Cupar, on 11th December, 1918—that is not so very long ago—when the right hon. Gentleman knew as well as he does to-day the economic effect of reparations, and when he knew as well as he does to-day the result of Franco-Prussian indemnity: Are you prepared to support Mr. Lloyd George in the demand for indemnity and full reparation for all the damage done? And he replied, not to be left out in the cold: I made that demand years ago, and said we should enforce it. There has not been up to now a statesman of front rank who has had the courage to come out and say, "You are deluding the people of this country, and we ask for a little common honesty."

Mr. PRINGLE

The right hon. Gentleman the Member for Paisley (Mr. Asquith) has done that.

Mr. DICKSON

I am quite glad to see anybody on the penitent stool before it is too late.

Mr. PRINGLE

He did it before any of the Members of your party.

Mr. DICKSON

Oh, no; he did not. Some of us were being yelled at at the street corners in Lanarkshire.

Mr. PRINGLE

The leaders of your party.

Mr. DICKSON

I am talking for myself. I hope this country is not going to be flooded by goods of this description to give some sort of fulfilment to the maddest promise ever made to the British people. I hope our Front Bench, who have gained, quite wrongly, a reputation for breaking promises, will take their courage in their hands and break this colossally stupid promise given to the country by the right hon. Gentleman the Member for Carnarvon Boroughs and those who believe with him.

Mr. A. M. SAMUEL

I agree with some things that the hon. Gentleman (Mr. Dickson), who has sat clown, has said. I do not agree with much of what my right hon. Friend the Member for West Birmingham (Mr. A. Chamberlain), in the earlier part of his speech, said. This is not a death-bed repentance. I expressed roughly what I express now in a signed letter to the "Times" on 20th September, 1923. I am not going to deal with that broad question of policy as far as Britain, France, Germany or the United States are concerned. I am going to deal with the financial problems.

The trouble will be for the hon. Member for Ilford (Sir F. Wise), the hon. Member for Stirling and Clackmannan (Mr. T. Johnston) and the last speaker to convince the French people of their views about the Dawes Report. I agree in the main with those three hon. Gentlemen. The Dawes Report seeks to put Germany on its legs for the purpose of her paying reparations to France and ourselves, and I believe it is being pushed along for the most part by the French nation. I have no tenderness towards. Germany, God knows! My family circle has lost more than any words can express, owing to the War. It is no good fooling yourselves or living in a Castle in Spain. This Dawes Report will not work for our benefit. If it be worked, the pivot on which it rests—and I will draw the attention of the hon. Member for Stirling and Clackmannan to this, for though we are opposed in politics we have many economic views in common—if you try to put this Dawes Report into operation, the first pivot on which it rests is a loan of £40,000,000 to put Germany on its legs. It is to be what is called a gold loan. That means setting up a gold mark, a dollar gold mark, and if you are going to have a dollar-gold-mark you may smash the sterling Bill. You will smash the sterling Bill, unless you put sterling on a gold basis before the alliance between the gold mark and the gold dollar assails the supremacy of sterling. At the present moment we are second to the dollar, we are second to the Swedish kronen, and we shall be probably second to the gold dollar mark if Germany gets this loan of £40,000,000. If we smash the sterling Bill we shall throw thousands of men out of work. The sterling Bill gives us insurance work, it goes to provide shipping work and banking work, it touches the cottage of the weaver and engineer, and the cottage of the docker; the sterling Bill to us is of the greatest possible importance. If you put the Dawes Report into operation and give the Germans this £40,000,000 loan you put the mark on to a gold basis before we are on a gold basis, and Heaven knows what the result will be.

Let me examine further the effect of the Dawes Report. It cannot possibly function until the Germans have got the £40,000,000 loan, and then the German currency will be put on a gold basis. What is the next point. You have to get for the purposes of the Dawes Report a sum of annual Reparations which is still indefinite in capital terms in a limit of time which is not yet fixed—a sum of up to £125,000,000 a year. I wish my right hon. Friend the Member for West Birmingham bad examined that point rather than talk about the ceremonial at Chequers or the diplomatic blunders which the Prime Minister may have made, or the follies which may have been expressed. Let us get down to brass tacks and let us see what is meant by putting the Dawes Report into operation. You seek to get £125,000,000 annually in gold values from Germany, and that involves a foreign trade for Germany amounting to £3,000,000,000 a year. We have roughly a trade, in and out, imports and exports, of something like £2,000,000,000 a year and the total foreign credits that we were able to secure out of that as a result of our foreign trade last year, as stated in the Board of Trade Journal, was £97,000,000. To get a credit of £125,000,000 in the same way, Germany must have a similar foreign trade of something like £3,000,000,000 annually. Where is it coming from? You cannot pull it out of the air. And it must be an addi- tional trade. The hon. Member for Lanark made use of the argument of having to resist the exports to us created by the Dawes Report. He was right, but he forgot the British exports to neutral markets that would be displaced by German exports.

How is Germany going to get a credit by her foreign trade of £125,000,000 a year? Is she going to send her goods here? Ask the Labour party if they would like that, and if they would like to see their friends and my friends smashed by it? Are the German goods going to America? Ask the Fordney tariff? It would soon be increased. Ask France if she is going to take the German goods. Why, she will not even allow Germany to renew her devastated areas! Italy will not take the goods. Belgium will not take them. Germany cannot pay £125,000,000 by the surplus of her visible and invisible exports until and unless she sells the goods. Where must they go? They must go to the neutral markets and those neutral markets must be in addition to the trade which at present exists. The additional demand does not exist. It is nonsense to talk about the German exports not displacing British exports. I came up on the railway this morning. I read an advertisement by the London and North Eastern Company asking people to go to Scotland by that route. I also read an advertisement by the London, Midland and Scottish Company asking people to travel by their route. No more passengers are created by going by one route rather than by the other. It is a case of trying to obtain existing trade from a competitor by means of advertisement. The hon. and gallant Member for Hull (Lieut.-Commander Kenworthy) solves the difficulty by triangular exchange. The words are a lingual cosmetic. They don't create more trade. After all, this remains, that if you set Germany on her feet she will do business with our neutral customers and oust us, and pay us with the profits of trade captured from us. She will sell her goods and with the exchange will buy cotton, tea, wool and rubber from our people in the Colonies and in India, and some Members say the triangular exchange will pay us. On Friday I was in Westminster Hall and heard people murmuring Xenobium tessalatum. It sounded so attractive; like triangular exchange, or the Alake of Abeocuta, or the winged victory of Samothrace. Lovely words. But murmuring "Triangular exchange" is not a substitute for the trade Germany will filch from us in neutral markets, although a current of triangular exchange will flow via Germany or Colonies and India and the neutral markets.

On the present basis of exchange we are doing business with the neutral markets and the Colonial benefit comes back through to London. The bases of your present triangle is, say, London-Manchester, but if Germany can only collar the neutral markets that base of the triangle will be transferred to Frankfurt and Dusseldorf and Chemnitz. The bon. Member for Central Hull seems to think we shall get more trade than before if the triangle's base is Frankfurt and Dusseldorf instead of Manchester and London. With an English triangle's base selling goods to, and doing business with, neutral markets we create the demands of Colonial and Indian markets, we enable our home market by means of the credit set up by one sales to neutral markets to buy tea and cotton and wool and other things. If the Germans get these credits by selling German goods to our neutral customers they will buy from our Colonies, but they will not create any more trade. They will simply take from our people the profits on German goods sold instead of English goods. The base will be transferred from our country to Germany. So much for the triangular exchange solution. Those who listen to fairy stories on reparations by this idealistic Prime Minister based on the Dawes Report must, I think, in order to save their own economic reputation, agree wit h what I said just now about triangular exchange not adding to the existing demand for goods. More demand is needed. It does not exist, and Dawes cannot create it.

Lieut.-Commander KENWORTHY

The hon. Gentleman has referred to me several times, but I suggest that mine is the sound proposition. Has it struck the hon. Gentleman that if Germany is prosperous she will be paying her debts?

Mr. SAMUEL

She can only become prosperous by taking existing trade out of the neutral markets, and, accordingly, as she becomes prosperous we become unprosperous. There is not in the world a fresh reservoir of £3,000,000,000 of annual foreign trade for Germany to draw upon to create £125,000,000 of annual foreign credit for reparations.

The Dawes Report will enable Germany to filch our trade, and, moreover, crush our equipment for production, and is so indefinite that the French are saying to us that if we claim payment of what France owes us, and she awes us £650,000,000, she will have to ask for a larger amount of reparations from Germany. May I point out the terms on which we lent this money to France? I am willing to do all I can to help France over her difficulties. I would strain every nerve to help her, but we have borrowed for her use from America £650,000,000, and we are now repaying that loan with interest; every taxpayer in this country is paying Income Tax, which ought to be borne by France, which represents probably 1s. in the £. In this inter-Allied debts controversy it is not a right thing for France to take the stand she has done. She borrowed this money from us un conditionally on Treasury Bills. No condition was laid down about her repayment depending on reparations. Although this question is kept apart from the Dawes Report it cannot be kept out of our discussions with France, and it should be made clear that we are not going to allow France to import into this question any fresh conditions as to how or at what time she will pay what she owes us I make a strong protest against allowing France to shift her ground in regard to her debt to us. The Committee has been very kind to allow me to say at some length what. I feel so strongly about the probable effect on us of the Dawes scheme. No doubt hon. Members opposite will make some party capital out of what I have said.

Mr. JOHNSTON

No, no. We have said the same thing.

Mr. SAMUEL

I am not going to stand silent and acquiesce in a financial policy laid down by the Prime Minister which I know is all bunkum. If hon. Members opposite can only convince the Prime Minister and if we can only convince the French nation of that folly of the Dawes scheme we shall have made a good step in advance. We want peace, friendship with France and a European settlement. The Dawes scheme will not provide it and the sooner the French public has its probable effect explained the sooner we can get a settlement in Europe.

There is one other point I would like to deal with because I see the Under-Secretary for Foreign Affairs is in his place. He was boasting the other evening that the Foreign Office was never supine. I put a question to him to-day as follows: If he will request the Brazilian Government to give the reason for the default, since 1920, on its contractual obligations towards the Great Western Railway Company of Brazil, in which £4,500,000 of British capital is embarked; and will he ascertain from the Brazilian Government whether it is contemplating an application to British investors for a loan within the immediate future? The Prime Minister gave me some sort of an answer, the best he could, but I gave him notice I should raise this matter at the earliest opportunity. I am going to ask the hon. Member for Stirling and Clackmannan to bear with me for a moment. The Arapuni Hydro Electric Undertaking of New Zealand has given a contract to Armstrongs and it is proposed that the money shall be raised here to pay for the machinery they will supply. We congratulate ourselves. New Zealand has always been, beyond all words, honourable and upright, and we wish every blessing to her. The lesson to learn is this. One set of English people put their savings into a loan called for by the need to pay Armstrongs, that is to say, a New Zealand loan. They find the money at 4 per cent. or 5 per cent., and Armstrongs find the wages and employ their men and export the hydroelectric machinery. It is the finest form of business we can do. But what about fair play for British investors who find money to pay for the goods? I have not a penny in this railway of Brazil, and I do not know that any of my friends have. We- built that railway, and one set of English people lent the money, and sent it out in the form of engines, trucks and rails. Now there comes along a set of circumstances, and the Brazilian Government is not able to keep its bargain with the lenders in England who built that railway. We have 4½ millions of capital lying dead and not a single sixpence of return for 10 years.

That sort of thing cannot go on. There are certain Members of this House who, with me, have made up their minds to badger and worry the Foreign Office to make up its mind to see that British capital is not thus abused when lent abroad. The Foreign Office must not sit down and be supine. It had done nothing about the default of Brazil until I raised the question in the House. The Foreign Office has to go to the Brazilian Government and say, "If you are going to maltreat British capital sent to you, we are going to look after British investors "they are mostly small investors—" and we shall make it very difficult in future for you to raise money by loans in this country." Hon. Members opposite must not talk sneeringly about bondholders, as they did the other night about the Russian bondholders. Those bondholders are not bankers, but people who have saved a little money. The average British investor's holding is about £500. It is the small investor who has put his money into these loans at 4 per cent., 5 per cent. and 6 per cent.—not very much more than he can get in British Government stock at the present time. The Foreign Office has got to take care of them. It must not be supine any longer. It has an Overseas Trade Department which works alongside—a Department we set up four or five years ago. Here is another case: Money was raised in England to put down telephones in Constantinople. The tolls of the Galata Bridge between Stamboul and Constantinople were pledged. They have been confiscated by the Turkish Government in the last two or three weeks. What is the result? It makes it very difficult for export industry to get capital from the investor in this country for payment of the manufacture of goods: when the investor is invited to lend money he does so because he feels he is doing some good for the employment of his fellow countrymen while getting a return on his own savings. It will make it very difficult later on to raise further money for industry. Day after day we read of the Foreign Office folding its hands when investors' capital is endangered. Remember the Decree of Moharren and the Treaty of Lausanne. Many bondholders of small means in England have been injured owing to the rearrangement of the Turkish Debt. In the last three or four days there has been the case of the Egyptian tribute loan, which ought to have been looked after by the Foreign Office, and of which there are large, numbers of holders in this country. Their security is in peril.

The Foreign Office has inherited a policy of despising trade. I have been in politics nearly 20 years, and in trade all my life, and I know how the Foreign Office looks at trade. I am one of those Chamber of Commerce men who have driven the Foreign Office to give us, practically, a small ministry of Commerce in the Overseas Trade Department. I do insist now on the Foreign Office looking after British investors abroad. I shall put down another question in a few days to ask what the Foreign Office has done with regard to the Western Railway of Brazil, and I would ask hon. Members, like the hon. Member for Merthyr Tydfil, to back me up to see that when money is asked for from the small investors of this country the Government shall take some steps to see that their rights and property are protected; that foreign Governments shall no longer be permitted to abuse British capital invested for the development of foreign countries, and usually at very low rates of interest.

Captain WEDGWOOD BENN

There are several preliminary observations which strike anyone who has sat, as I have sat, through every Debate on this subject since the Armistice was signed. The first is the spectacle of a Labour Government behind a Report—I am not condemning the Report—which enforces the denationalisation of the German railways, which lays upon the German nation a condition which means almost impossible railway travel, the abolition of rent control, and, according to the "Daily Herald," which has examined these proposals, the production of a surplus of 15,000,000 people in Germany who have either to starve, emigrate, or disperse themselves in some other way. The second preliminary observation is one of surprise that hon. Members opposite claim credit for this Dawes Report. The ex-Prime Minister spoke as if the Commission had been appointed by him. That is true, but when a Motion was brought forward last year by the right hon. Member for the English Universities (Mr. Fisher), and supported by the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), asking that that famous speech of Mr. Hughes at New Haven should be taken notice of, I remember the late Prime Minister, Mr. Bonar Law, treating very contemptuously our suggestion that, in the words of Mr. Hughes, "the avenues of American helpfulness cannot fail to open hopefully." He treated it very slightingly, and did not believe it offered a foundation of any good or useful work. But the proposal made at that time was the basis on which this Report was founded, and on which the success, so far as it has been a success to this point, has been achieved. I would like to make one or two observations on the Report itself, before I come to the question of its application to the Prime Minister's proposal.

Whereupon the Gentleman Usher of the Block Rod being come with a Message, the Chairman left the Chair.

Mr. SPEAKER

resumed the Chair.