TRADE AND COMMERCE: JAPANESE COMPETITION.

HC Deb 28 July 1933 vol 280 cc3012-53

1.36 p.m.

Mr. ENTWISTLE

I want as briefly as possible to call the attention of the House to a matter of great importance to the Lancashire cotton industry, and that is the broad issue involved in the question of Japanese competition. This question is now very acute in the Lancashire cotton industry and in certain parts of our Empire, but it will extend rapidly to other industries, and will ultimately become an urgent matter for all countries with a reasonable standard of living. I want, if I might, for a moment or two, to deal with some of the broad economic principles which, I conceive, are in issue, in dealing with this question.

One school of thought, the old one, used to consider that all that mattered was to increase production with as low wages and as cheap a cost as possible, and to leave the necessary adjustments to take place automatically, and all would he well. That principle may have prevailed for a certain distance in our industrial development, but the fallacies of that school of thought, under present conditions, have been fully exposed. If wages are low and production high, it is obvious that goods can only be consumed at a very low price. Where the production increases rapidly, the price-falls are bound to be very steep, and the necessary adjustments become much too difficult. The result is that if there are severe losses, unemployment, and great hardships in the various industries, restriction schemes of production have to be adopted, and the net result is that a great deal of the benefits that should have accrued to humanity from the in- creased capacity of the world to produce are a total loss. That is one school of thought.

The other school of thought, mainly, I think, the socialistic school, concentrates upon purchasing-power, as represented by wages, to the exclusion of all other considerations. That may be arguable in a, socialistic world, but it would be fatal if carried to an extreme in a capitalistic system, because unless an industry can work with a fair margin of profit, it must rapidly cease, and the system will break down. I submit that the ideal economic system is, as is often the case, a combination of the two extremes. The highest possible wages should be paid consistent with a reasonable margin of profit. If that is done, the increased production can be absorbed with the least disturbance to price-levels, and a healthy and normal prosperity in industry is possible. President Roosevelt in America appears to be recognising these basic facts, although it may be that he is trying to work for too-quick results, by excessive governmental activity.

I have ventured to state these broad principles, which I think will command general agreement, in order to lead up to a consideration of the attitude of the Japanese on these important economic questions. I do not think that their attitude is based upon theoretical grounds but upon a determination, at all costs, to capture the maximum proportion of world trade. In their efforts to achieve this end, they are undoubtedly adopting the methods of the old school of thought, which I have just propounded. They have the advantage of the latest machines and all that is known of scientific management, and they are carrying on industry with those advantages at the lowest wage and cost levels that are possible. This is a quite intolerable position, and will ultimately break down the systems of all other countries and, in the long run, the Japanese system as well. The Japanese are not only pursuing this wrong economic principle, but they are deliberately adopting the weapon of currency depreciation to aid them in their efforts to capture world trade. That is clearly shown by the way in which heavy purchases of raw materials were made by the Japanese manufacturers while the yen was at its old parity with sterling and, in the latter part of last year, when the yen started to depreciate heavily, owing to the de- liberate policy of the Government, by the way in which purchases of raw material diminished very rapidly and the exports of finished manufactured goods increased at a tremendous rate, through the stimulus given by that currency depreciation.

In dealing with this question, it is necessary for this and other countries to say quite clearly to Japan that this is an intolerable position, and that, if these methods are persisted in, they will result not only in great difficulties, but in the possible breakdown of the industrial systems in other countries. Either Japan must conform to Western standards of living or her goods must be prohibited from entering those countries. I know that negotiations are proceeding with the Japanese Government at present, with a view to arriving at some possible basis of apportionment of markets by quotas. I can conceive that that is probably the most practical thing that can be attempted at the moment, and I hope that those efforts will be successful, but I urge upon the Government that, in order to enable them to have the best possible bargaining power during these negotiations, they should free their hands entirely of existing treaties. I have not time to go into the various treaties involved. There are the West African and the East African Treaties and, in particular, our own Anglo-Japanese Convention. India has denounced her treaty with Japan, and we have denounced that portion of the Japanese Treaty that deals with West Africa. The remainder of those treaties are still in being.

We are also handicapped by the most-favoured-nation clause, to which we are bound in our dealings with Japan. As far as I know, every responsible interest in this country has come to the conclusion, and has urged upon the Government, that we should denounce these treaties and abandon the most-favoured-nation clause. Even the Liberal party, in the speeches of the right hon. Gentleman the Member for Darwen (Sir H. Samuel), have advocated the abandonment of the most-favoured-nation clause—a very surprising thing, having regard to the right bon. Gentleman's strong views on Free Trade, and showing that he realises that under the existing conditions we must have our hands entirely free. I urge upon the Government that they should take these necessary steps to enable them in their negotiations to have a much better bargaining power than they have at present.

I want to conclude with few words on the question of Ceylon, which is of great importance to Lancashire trade. We know that Ceylon has refused to give the preference, which was undertaken on her behalf by the Colonial Secretary at Ottawa, on Lancashire cotton goods. I believe that the actual amount of preference which she was asked to give on cotton goods was only 10 per cent., that is to say, an additional duty of 10 per cent. on Japanese imports into Ceylon. This she has not given.

I read the Debate which took place in the State Council, and apparently the reason given in Ceylon for not putting this increased duty on Japanese goods entering Ceylon is that they did not think it would help the Lancashire cotton trade very much, and it would be adding to the cost of these goods and putting an additional burden on the poor of Ceylon. That argument, really, is nothing less than humbug, because, in the very Budget in which they refused to give this additional 10 per cent. on Japanese cotton goods, they increased the duties on sugar—which, surely, affects the poor as much as manufactured cotton textiles do—by as much as, I think, 55 per cent., and they put heavily increased duties on rice, which is one of the staple foods of the poor in Ceylon. Furthermore, I understand, and I would ask the Government whether this is so, that India has intimated to the Ceylon Government that, unless the preferences on Indian cotton goods are granted by Ceylon, India will withdraw the preferences which Ceylon's exports enjoy in her market. I would like to know whether that is so; I am informed that that has been done by the Indian Government. But I am still more concerned about the question whether we have in any way intimated to the Ceylon Government that unless this preference, which was undertaken on behalf of Ceylon at Ottawa, is implemented, we will withdraw the preferences which Ceylon enjoys in our market?

We are told by members of the State Council, with extraordinary ignorance, that the main export of Ceylon is tea, and that, as the tea estates are largely owned by British capital, they do not care a rap what happens to the preference on tea. Anyone who goes into the question knows, however, that the Ceylon Government cannot be indifferent to the preference on tea, and I only need state one or two facts to show the overwhelming importance of this preference to Ceylon. Ceylon's revenue is not only derived from import duties, but also from export duties, and 98.76 per cent. of the total revenue desired from these export duties in Ceylon is derived from exports on tea. Furthermore, 55 per cent, of Ceylon's total exports come to the United Kingdom, whereas, in 1931, less than one per cent. went to Japan; so that they are apparently refraining from putting a small extra duty on Japanese goods when their market in Japan is less than one per cent., thinking that they can with impunity disregard the effects on their enormous market in this country, amounting to 55 per cent. of their total exports. Moreover, the tea industry is esential for the maintenance in a solvent condition of the railways of Ceylon, which are State-owned.

I submit, therefore, that we have very strong weapons in our hands, and that, on the facts I have indicated which obviously are of paramount importance to Ceylon, this preference should be given to our textile goods. I use the words "of paramount importance," because, under the Constitution of Ceylon, the Governor-General can, if he considers it to be of paramount importance to Ceylon's interests, pass any legislation by his own fiat. In addition to that, we can withdraw the preferences which Ceylon enjoys. I now ask His Majesty's Government whether it is not time that some definite results were obtained from the representations which, as I understand, have been made by His Majesty's Government to the Ceylon Government, and that this preference, which was agreed to at Ottawa, should be brought into being at the earliest possible moment.

1.51 p.m.

Mr. ER ICBAILEY

In Lancashire we feel so strongly about this question of cotton because we know that, unless the Government follow a far more active policy in the matter than they are following, the great staple trade of our country is never going to see any recovery at all, far less a return to the conditions which it once knew. Of course, tile cotton in- dustry affects the prosperity of far more people than those who are directly concerned in it. Doctors, lawyers, tradesmen, almost all who are earning their living in Lancashire are affected by it in some degree. I do not want to waste time in preliminaries but I do feel that it is necessary to mention that elementary fact, because it seems to be so little realised in this House, and so little interest seems to be taken in it or in the welfare of that part of the country, the population of which amounts to one-sixth of the whole.

The cotton industry, since 1913, has seen a progressive decline. In that year we exported 7,000,000,000 square yards of cotton goods. Last year the quantity was 2,000,000,000 square yards, and in 1925 it was between 3,000,000,000 and 4,000,000,000. The decline has been progressive. There may be slight fluctuations one way or the other, but that decline is going on unless something is done, because the causes of it are deep-rooted, and are not within the power of the cotton industry itself to remove. Those causes are two-fold. In the first place, there is the fact that the different countries to which we were the sole suppliers of cotton textile goods are making for themselves what we used to make for them, and are putting up tariff walls against us. The second great cause is that the residual market, the export trade which is still left open, is being taken. from us by the ruthless competition to which my hon. Friend has referred. I will not call it unfair; it is perfectly fair according to the standards of the East; but it is ruinous to us. We see the Government standing by, having done nothing for a couple of years, and we resent it.

We need the assistance of the Government in this matter. I am reminded that there is not one Labour Member in the House at the moment, but I do not expect anything from them; I know that they do not care about the cotton trade. But it is just because we do see a little hope in the Government that we take the trouble to come here and make an appeal to them. What could they do? In the first place, there is the question of the Crown Colonies, and, when it is remembered that the Crown Colonies are dependent entirely upon England for their good government and for their standard of life, surely we are entitled to ask that they shall give substantial preferences to the Lancashire cotton industry. Those preferences are 'not substantial in many cases, and nothing is being done to atop Japanese goods coming in. It is not only the fault of the Crown Colonies. I do not think they are to blame. I think it is the apathy here. Jamaica has requested that something should be done. That request has fallen upon deaf ears. One would not care so much if one did not realise the amount of human suffering that lies behind that lack of response by the Government, and it is time that someone spoke plainly to them. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) the other day said things with which no one could agree, but he said one thing that was right. There is a lot too much self complacency on the front bench as concerns the welfare of the people in our part of the country, and other parts, too. They did very well in putting tariffs on for the first few months, but they cannot leave it there.

In regard to the cotton industry, what we ask is simply that the Government shall give the necessary notice, which ought to have been given two years ago, to denounce those treaties which stand in the way of our making arrangements with our Crown Colonies to keep Japanese goods out. Those treaties have not been denounced yet except in one case, that of the Anglo-French Convention. It is argued that we cannot denounce them because we get advantages from the other countries apart from Japan under the most-favoured-nation clause. The answer to that is that there is no reason why we should not renew those treaties bilaterally with the other countries concerned but alter them in relation to Japan. The Secretary of State for the Dominions has been repeatedly pressed to tell us what the Government are doing in the matter, and he has repeatedly replied that he is giving the matter his sympathetic consideration. He has done that for two years. It is possibly because he is so buss' considering the matter that he has not found it possible to be here to-day. For two years the matter has been considered. It rather reminds me of the late Lord Acton, a very distinguished historical scholar who was determined to write a history of modern Europe, but he was very anxious that nothing inaccurate should appear in it. Everything must be considered before anything was done. Unfortunately he did not live very far beyond 75 years of age and he died still considering that history.

Lieut.-Colonel COLVILLE (Secretary, Overseas Trade Department)

The hon. Member said the Secretary of State for the Dominions?

Mr. BAILEY

I meant the Secretary of State for the Colonies. I beg the pardon of the Secretary of State for the Dominions.

Lieut.-Colonel COLVILLE

The Secretary of State for the Colonies spoke only a few days ago on the subject.

Mr. BAILEY

I did not deny that fact., I merely referred to the fact that he is not here to-day. Are we going to get any action? The Government have been in office for two years. When are they going to do something definite, for instance, to deal with the request of Jamaica? Those treaties ought to have been denounced a year ago and negotiations entered into with the Crown Colonies and with Japan and bi-lateral agreements made with other countries. They will have to do it sooner or later. Meantime, we are suffering because they cannot make up their minds to do anything. Twelve months of close contact with Parliamentary Government has convinced me that we must devise some method of accelerating the pace of right hon. Gentlemen in these matters.

The second point that I should like to deal with is the question of Ottawa. The Canadian Government seem to have been suffering iron' similar failings to our own. The Secretary of State for the Dominions yesterday said it was not the fault of the Canadian Government that they had taken 12 months to appoint a tribunal. It was necessary to appoint persons who were impartial. I would only characterise that by the word that the right hon. Gentleman would have used if he had been sitting there—"humbug." It does not take 12 months to appoint three impartial people. It is ridiculous. It is because the Canadian Government have no intention whatever of putting into force, if they can help it, that part of the Ottawa Agreements which is unfavourable to themselves that this delay is taking place. The Agreement only has a currency of three years. It has taken 12 months to appoint the tribunal, and I suppose it will take another 12 months to consider its procedure. I ask that the Government, at any rate, in regard to the cotton trade, which has had precious little benefit from Ottawa, will make more strenuous representations than they seem to have been able to do in order to secure that Canada shall give us something more than expressions of filial piety and shall give us something tangible.

I come to another question. The cotton industry is bound up very largely with our trade in India. It was 3,226,000,000 square yards and it has shrunk to 600,000,000 square yards to-day. That is bad enough, but it may he worse. There is no doubt that, unless we can obtain a trade agreement with the Indian cotton industry, and a very long-term agreement of more than three years—I call that a short-term agreement—further misfortune awaits the people of Lancashire. I have discussed the matter with one or two persons from India privately, and they share that view. We export £3,000,000 to Ceylon and she exports £12,000,000 to us, and the balance of trade with India is in our favour. We have the weapon in our hands if we knew how to use it. [An HON. MEMBER: "Where is the Government? "] I do not know where it is at the moment, but we have a very distinguished representative of it here. The Indian trade will have the backing of Congress behind it when it comes to negotiate with Lancashire trade. In any 'conference that takes place with India—and I hope there will be one; in my view it is the only way—we must hold out the hand of friendship to them, and they to us. If there is to be a trade conference with India, which I hope will give us a quota, we shall have no chance whatever if we go into it without knowing whether our Government will support us and the Government not knowing what its policy is, because they will have the whole of their political forces behind them, and, when our cotton delegation goes to India, a united delegation, as I hope it may, I trust that by that time the Government will say, quite apart from constitutional questions," If you expect to trade with us you must let us trade with you." There must be an agreement of give and take on both sides, and we cannot get it unless we are supported by our political powers in the same way as they will be supported by theirs.

There is a big residue of foreign trade outside the Empire at all. In regard to that, we are being hopelessly handicapped by the same Japanese competition. What are our Government going to do? In Morocco, where we are at present doing 50,000,000 square yards—last year it was 60,000,000—we are being undercut and undersold by that same ruthless exploitation. France and ourselves have particular reason to be friendly in Morocco. There is no doubt that we shall find the French Government quite sympathetic if we approach them in the matter. I simply give Morocco as an illustration. All the world over, what are our Government doing for the cotton industry in the trade agreements that they are making? Nothing but eyewash. We may get 100,000 square yards here and 100,000 square yards there.

Mr. CROSSLEY

What single trade agreement up to now have the Government made which has involved a major market for the cotton industry? The only single one is the Argentine and the question is being considered.

Mr. BAILEY

It is just because the question is being considered that I am saying what I am saying before it is too late.

Mr. CROSSLEY

Then it is not right to say that nothing has been done?

Mr. BAILEY

I am judging by similar agreements which have been made, and if the hon. Member for Oldham (Mr. Crossley) knew the feelings of his constituents in the cotton industry as well as I know them, he would not have made the remark which he has just made.

Mr. CROSSLEY

The total cotton imports into Denmark, Norway and Sweden, in respect of which agreements up to now have been made, are so small that it is hardly justifiable to take them as a major consideration in agreements which clearly affect the coal industry. The agreement with the Argentine is a, different matter, and the cotton industry is being fully considered.

Mr. BAILEY

I am very much obliged to the hon. Member for his understanding, but I prefer, for accuracy, to accept the comments of the hon. and gallant Member for Bournemouth (Sir H. Croft), who knew about the cotton trade before the hon. Member was born. However, in regard to that matter I agree that the major opportunities still remain. The minor opportunities have been missed, and it is because I believe that the major opportunities will go the way of the minor opportunities, unless we take a very strong line in putting pressure upon the Government, that I am saying what I am saying to-day.

Lieut.-Colonel COLVILLE

The hon. Member has made a definite statement about opportunities being missed. Can he quote the figures of the importation of cotton goods into Denmark recently?

Mr. BAILEY

I was discussing the question of Lancashire.

Lieut.-Colonel COLVILLE

I will give the figures later.

Mr. BAILEY

I shall be very much obliged as I am always anxious for information. Members of the cotton trade, who know their business better than most other people, are profoundly dissatisfied with the Danish agreement. What about Canada? What is the total cotton trade with Canada? What is the total production in Canada, and what are we getting of that trade? I was delighted to hear that I was wrong in saying that the Government were not taking the interest in the matter they should take, and I shall have no cause for complaint when the major agreement comes. I am delighted to think that the attitude of the Government is not what I thought. I shall be only too pleased if the Agreement is a good one. I do not want the Government to make mistakes. Heaven knows they have made enough. I want to prevent them from making them. Provided the agreements are what we hope they may be, I shall be only too delighted to congratulate them. But I say that in regard to Ottawa the trade know—whatever is said here the trade cannot be blinded—that they have got no benefit, or very little, from Ottawa. It is because they know that fact that it is time someone said a few direct, plain words on their behalf.

There is another point which I should like to make. You cannot help the cotton industry by tariffs in the same way that you can help the iron and steel industry, because the cotton industry is a large exporting industry, and depends mainly upon foreign markets. It is as I have said the staple trade of Lancashire. I will suggest one practical way in which you can help it. The trade of the cotton industry was £60,000,000 in 1932, and it was £56,000,000 in 1931. There was slight fluctuation and improvement. The cotton industry could sell its products 10 per cent. cheaper abroad, which would make a vast difference, if the Government would give it financial help by a 10 per cent. export rebate. I suggest that that is a policy they should consider. I know that I shall be told that subsidies are alien to the principles of the party to which my hon. and gallant Friend and I belong, but they have not been alien to the principles of our party when a sufficient number of Members have pressed for subsidies. The sum of £24,000,000 has been spent on sugar beet since 1924. If you gave the subsidy for which I am asking to the cotton industry you could not compare, except it be because of vested interests, the importance of sugar beet with that of cotton. say, that for too long have not only this Government, but all Governments, whose basis has mainly rested upon agricultural support, neglected the claims and rights to some share of assistance of this great industry.

I am afraid that during the course of my few observations I have spoken, perhaps, with slight heat, and perhaps with a little more frankness than a private Member should speak about a Government of which he is a loyal supporter. The Government sit there. They may only hear the remarks of those who find it profitable to be pleasant to them. Members of the Government cannot have gone about Lancashire as I have done for the last year without realising what a tremendous human problem lies behind the neglect of our great industry. I am prepared to say here and now that if from whatever party, whether, Labour, Liberal, or Conservative, to which I belong, a proper policy in regard to the cotton industry comes, I shall support that policy whatever may be said by Lancashire Members who ought to he here to-day and are not, and who share the blame for the apathy of their Government.

Mr. BLINDELL (Lord of the Treasury)

How many times have you been here?

Mr. BAILEY

If the hon. Member will get the statistics which are available, he will be able to tell me.

Mr. BLINDELL

We have got them.

Mr. BAILEY

That is a personal question, and I did not want to introduce personal questions into this matter. How many times have I been here? I have been here sufficiently long to know what a lot of time is wasted. I admit my record, since it is a matter worthy of attack by a Minister, though I am surprised that he should descend to such petty personalities.

Mr. CAPORN

You attacked Lancashire Members.

Mr. BAILEY

I was not attacking them on personal grounds.

Mr. CAPORN

You were attacking them for not being here.

Mr. BAILEY

As far as the question of cotton was concerned, and I apologise for having said it. It is only the strength of my feelings upon the subject which made me say it, and I express my apologies unreservedly to hon. Members who, no doubt, I have grievously wronged. I cannot do more than that. My feelings are strong, because I feel that unless the Government take opportunity by the forelock, and if this House is to spend three times the amount of time on the question of Adelphi Terrace that it spends upon cotton in the Session, the opportunity here will be 'missed. Whatever happens to me and others, I, for one, propose frankly to put to the Government what is their duty, and what a large proportion of those who have been, and still may be their supporters, feel upon this vital matter.

2.13 p.m.

Mr. HAMILTON KERR

The hon. Member for Gorton (Mr. Bailey) has just delivered a violent attack, worthy of the traditions of Junius, upon the Government. My hon. Friend the Minister for Overseas Trade has listened with grace to similar debates on this subject, and, perhaps, by now he may feel about us Lancashire Members what Dr. Johnson said about the fellows of Pembroke College, Oxford, "We are a nest of singing birds."

We make no excuse for bringing up this subject once again to-day, because, as both the hon. Member for Bolton (Mr. Entwistle) and the hon. Member for Gorton, have so amply stated, it is a question of paramount and vital importance to this country. Both hon. Members dwelt with considerable clarity and interest upon the question of Japanese competition, but the problem is not a new one. One of the most remarkable achievements of history has been the rise of Japan during the last three-quarters of a century since Commodore Perry, as the first Emissary as Western civilisation, entered Tokio harbour. He found a country of armed knights and mediaeval institutions. To-day Japan possesses an army twice victorious on the battlefield of Manchuria, a navy third in the world, and a group of industrialists whose skill and ingenuity have enabled them to push their wares into every market of the globe. But what makes Japanese competition so outstandingly serious a factor in the world to-day is this: That in a period of unparalleled world depression, falling prices, and reduced purchasing power, Japan has been able, by severe rationalisation, by longer working hours, and by lower working conditions, to snatch from Lancashire the small pittance of a market that remains to it and in doing so, they have brought Lancashire to the verge of bankruptcy. In 1928 Japan exported 1,408,000,000 square yards of cotton goods. In 1932, after four years of unparalleled depression, she exported 2,031,000,000 square yards: a huge advance.

What are the causes, apart from an industrious population, which have prompted this huge advance? When we look at the population of Japan, including the mainland, Korea, Formosa, the Shantung Leased Territory and South Manchurian Railway Zone, we see that she has a total population of 91,000,000. Experts estimate that this population is rising by no less than 1,000,000 every year. Thus for Japan it becomes a vital necessity to find food for those hungry mouths. What are the alternatives? She can either embark on schemes of emigration or industrialise her population. It is notorious that Japanese do not readily emigrate. Extremes of heat and cold are unsuitable to their physique. Therefore industrialisation is the one avenue that remains open. Japan, for her industry, needs coal and iron ore and oil. She can only obtain those necessary raw materials by her exports. Yet even in 1932, when Japan exported far more than ever before at the expense of her neighbours, she had an adverse balance of 67,000,000 yen against her. Thus it is a vital and necessary thing for Japan to be able to export. For that reason Japanese competition is so serious, and to that end all the ingenuity of which the Japanese nature is capable is directed. Let me give one instance of this ingenuity. Visitors to Japan before the Russo-Japanese War noticed the Government were offering a bonus on rats' skins. The war broke out, the troops who besieged Port Arthur during the long winter of 1905 were clothed from head to foot in rats' skins. That is an example of the ingenuity of the Japanese, which we have learned to fear so much since in competition.

We can now either follow one of two courses. We can exploit and develop free new markets, or we can protect ourselves in existing markets. Fortunately a new and favourable factor has entered the situation. The silver-producing countries of the world, under the chairmanship of Senator Pittman, have agreed upon a formula for limiting the output of silver. If this device succeeds in raising the price of silver, it is deserving of our warm support. If Senator Pittman's scheme gives a fairer remuneration to the toiling peasants in the Yangtse Valley or Bengal for their rice crops, if it increases the values of the silver hordes which every household in the East gathers up against the rainy day, it cannot fail to benefit Lancashire. Did not Lord Snowden, when Chancellor of the Exchequer, say that, if one farthing could be added to the purchasing power of every Indian peasant, Lancashire would more than double her sales. A rise in the price of silver is the Aladdin's lamp which makes all things possible.

The Government should therefore be ready to spring upon every opportunity that a rise in the price of silver may entail. I was interested to see the other day that the China Committee of the League of Nations had been sitting in Paris, and that Sir Arthur Salter is now proceeding to China on a mission of advice and economic reconstruction. One of the most pertinent statements of the Lytton Report laid down that international co- operation in the reconstruction of China was one of the most vital necessities for peace in the Far East. Mr. T. V. Soong, the gifted Chinese Finance Minister, has recently been in this country in connection with the World Conference. He has made it plain that the policy of the Nanking Government will devote itself to the pacification of the Yangtse Valley. Now the Yangtse Valley has an area of same 750,000 square miles or four times the size of Germany and its population is 180,000,000, equal to the total estimated population of Africa. If order can be restored to this great area, and if a rise in the price of silver brings back purchasing power to its people, what an opportunity for this country ! China is naturally hostile to Japan at this moment. Mr. Soong said that she welcomes Western aid in capital, in machinery, and in reconstruction. We have a marvellous opportunity here to expand and develop a market most valuable for Lancashire piece goods. Sir Richard Jackson recently submitted to the Manchester Chamber of Commerce his Report on the increased use of Indian cotton, and he made it clear that Lancashire could find more uses than before for Indian cotton. She can use the coarser and medium counts, and he also made it clear that India can develop more of the finer counts. Mr. Mody, the President of the Bombay Millowners Association, has likewise been in Lancashire. I understand that interviews of the most amicable nature took place. These opportunities should be exploited to the full and co-operation encouraged in the face of Japanese competition.

My time is short, and I shall come to my last point. My hon. Friend in his last statement in this House when we discussed Japanese competition, talked about the allocation of markets. Without tying his hands in any way, or trying to pry into the secrets of Ministerial Despatch Boxes, can he give us some indication as to what lines these conversations would follow? Will they deal with markets on the trade figures of the present slump, or will they go on the basis of some date, like 1925, when Lancashire had a far greater share of the markets? Will there be any discussion on Japanese working conditions Some experts think that, if Japan would work one shift instead of two shifts, it might take away a, good deal of the present difficulties. Mr. Matsuyama, who recently published a pamphlet on Japanese competition, said he welcomed stability of the Yen. If that is true, it. would greatly help conversations at Simla. Lastly, I see by this morning's papers that the Empire has published a declaration on currency, and on the maintenance of a sterling group. This is another instance of Empire solidarity. Would it be too much to ask that, in this economic crisis, the Empire should maintain a united front? Mr. Rudyard Kipling, a poet now somewhat nut of fashion, in an interesting story called: "The Ship that Found Herself" described the voyage of the S.S. "Dimbula" from Liverpool to New York. Under the stress of the Atlantic rollers the capstan spluttered, and the high cylinder engines shouted abuse at one another, the deck beams complained. But when she reached New York a week or so later ail her parts had learnt to pull together and she had "found herself." I trust that these bad times will once again prove the value of solidarity, and that, in the discussions at Simla about Japanese competition, the British Empire will "find itself."

2.25 p.m.

Mr. PICKERING

One of the reasons why I rise to speak is because I have some experience of the foreign country which is very much concerned in this discussion. At the same time I must emphasise the fact that I have a peculiar interest also in the Lancashire cotton industry, because I began my career among the cotton spinners. I have a tremendous interest in them and affection for them, and I long to see Lancashire become prosperous again. When I paid my last visit to Lancashire and saw old friends, most of whom had worked in the mill, I found them suffering very severely and wondered what could be done to bring them back to something like the prosperous position in which I first knew them. It is not really fair to Lancashire to encourage Lancashire people to shut their eyes to facts.

One thing that I do not hear much of to-day in regard to the present depression of the cotton industry is the over capitalisation of the industry, which made my blood boil some 12 or 15 years ago. At that time I had some personal acquaintance with the movement which led to over-capitalisation. I knew of one family who had a mill, the share capital of which was valued at about £80,000, and they sold it and got something like £500,000 for it. Afterwards the mill had to be put on to the market, and on my last visit to Lancashire a year ago I found that that mill was having a terrible struggle to carry on because of the heavy burden of false capital which it had to bear. But the people have to be told something to explain the present depression, and they are told that the wicked Japanese are responsible for the trouble. So long as the Lancashire people think that, no good can come. There is nothing wicked about the Japanese competition. It is, on the whole, fair competition, and it is for Lancashire to face that fact. Lancashire will not recover by refusing to face that fact.

About a month ago I read in the "Manchester Guardian" a memorandum from a committee of the cotton trade, which referred to the extent to which Japan has ousted other cotton manufacturing countries from the world's markets, of the close co-operation between Japanese industrialists and the Government, the manner in which the Japanese cotton industry is assisted by the Government, the low labour conditions, the low wages the long working hours and the lower standards of factory legislation. That is said to be the cause of the depression in the cotton trade. Only last night the city editor of the "Evening News" spoke of Japanese goods as the product of cheap labour, long working hours, and the low standard of living of the Japanese working-classes. When I hear people speaking of Japan as if it were a sort of slave country or a country where people live wretched, miserable lives, almost on the level of animals, I feel that they ought to be told that they are hundreds, nay, thousands of miles from the truth.

When I was in Japan I realised that things were different from here, that the workers received lower wages than they receive hero and that the standard of living is not so high, but I also realised that the standard of living is continually rising and that the wages are rising. We are told about State subsidies of the cotton industry in Japan. The cotton industry is the most independent of the Japanese industries, and the most efficient. If it has ever received any help from the State it is not receiving any help now. Another factor which we must recognise is the depreciated yen, which cannot be attributed to the workings of the wicked Japanese. It is no advantage to a country to lower its currency in view of the fact that it has to import as well as export.

From what I hear from Japanese friends and from English friends in Japan the Japanese Government are very anxious to see the yen restored to something like its former value. The depreciated yen has certainly played au enormous part in the recent rapid increase of Japanese exports to India, but that is only a temporary factor and will be dealt with before long. Japan is not always going to have a yen worth only Is. 3d. in our money instead of 2s. Therefore, that matter is irrelevant to the main factor of the situation. The enormous increase in Japanese exports recently has been due almost entirely to the depreciation of the yen, and when the yen has appreciated that factor of competition will be removed. We are also told that in Japan there is sweated labour.

Lieut.-Commander ASTBURY

No.

Mr. PICKERING

Yes. Every newspaper that I take up refers to sweated labour in Japan and also to slave labour. That is a false idea. I admit that the wages in Japan are lower than they are here, but they are not so low as the Lancashire people are told they are.

Major PROCTER

What are they? They are less by one third.

Mr. PICKERING

In the cotton industry—not taking the yen at its present value in our money, which would not be fair, because its purchasing power in Japan to-day is the same as it was 12 months ago—the lowest wages paid are from 10s. to 12s. a week and the wages rise to about 42s. That is the actual value of the wages. [HON. MEMBERS: "No."] I went to see Mr. Matsuyama myself, because I wanted to verify the figures given in his book with regard to money wages, and he said that the lowest wages actually paid are from 10s. to 12s. a week. The highest rate of wage is somewhere about 42s. per week, or even more.

Major PROCTER

Does the hon. Member realise that the yen has depreciated. It is not what has happened in the past but what is happening now: To-day the Japanese worker is paid about 6s. per week for a 10 hours day and 6½ days in the week. If that is not sweated labour perhaps the hon. Member will tell us what is.

Mr. PICKERING

I have said that I regard the conditions in Japan as different from what they are here. The yen has not depreciated as far as the purchasing power of the workers in Japan is concerned. It has about the same purchasing power as it had 12 months ago, and it is no use insisting on the depreciated value of the yen in the matter of its purchasing power in Japan.

Mr. CROSSLEY

Will the hon. Member, in that case, tell us for what reason the Japanese wish to raise the value of the yen?

Mr. PICKERING

The purchasing power of the yen is about the same, but already there is a demand for an increase in wages and there is a tendency for the yen to purchase less.

Mr. CROSSLEY

Then the Japanese lose when their wages are increased?

Mr. PICKERING

The longest working hours are nine hours a day. I am not trying to justify all that is done in Japan. I ask the House to face facts and to realise that the conditions are not such that you can dismiss Japanese competition as being a competition which no decent industry ought to be called upon to meet. That is the point. The great thing about Japanese labour is that it is very skilled. A Bombay manufacturer, speaking on this matter, recognised the skill of Japanese educated workers. Japanese education is the most democratic in the world, all classes go to the same school, and girls, when they leave at the age of 14, are so capable that they impressed this Bombay manufacturer, who said that they could work eight looms profitably, while the Indian worker could only work two looms.

Mr. CAPORN

Do I understand the hon. Member to say that a Japanese girl of 14 years of age can work eight looms?

Mr. PICKERING

That is the statement of this Bombay manufacturer, show- ing the superior skill of the Japanese over the Indian worker.

Major PROCTER

Does the hon. Member know that girls in some cases work 40 looms a day?

Mr. PICKERING

Yes, automatic looms. I should like the House to realise that we have to deal with a class of worker who is well educated and who is becoming more and more conscious of his rights, whose wages are getting higher, and who is advancing towards a higher standard of living. Forty years ago rice was not even the diet of the workers, they had to live on something coarser still. Now they are getting beyond the rice stage, and they realise that if they wish to be strong and efficient they must get something better. They are now taking to beef and bread. The story is told that when The Duke of Wellington, during the Peninsula war, saw the British troops wavering as their Spanish allies fled, he harangued them thus: "You, who have been brought up on British beef and beer, are you going to run away like a lot of Spaniards who live on oranges?" In the same way, dietitic principles are influencing the Japanese. They are beginning to realise that if they are to do capable work they cannot live on rice but must have something better. The real factors we have to face in Japan are superior machinery and general efficiency. At the moment 75 per cent. of the looms are automatic looms, which makes an enormous difference to production costs. We must not shut our eyes to these facts.

I want to see Lancashire prosper and, therefore I ask Lancashire manufacturers to realise the competition which they are up against. They are not fighting a people of slaves, who are compelled to work in a way in which no human beings should work. They are competing with a people who in a short time will attain a standard at least as high as in this country. Let me quote from an article which appeared in the "Manchester Guardian" on 27th of this month. Speaking of Japanese competition the writer said: There must now he fewer in the cotton industry who believe that Japan's great advance in the world's textile export trade is solely the outcome of a planned attack on the markets of other countries by means of Government subsidies, servile conditions and wage rates in the industry, and deliberate depreciation of the yen as a means of fostering these exports, and apart from her general economic position. Still less acceptable is the theory that in cunning buying of raw materials on a huge scale when prices are low, mammoth production of main lines, and merchanting credit and banking systems which put all Occidental efforts in the shade lie the only reasons for her success. The evidence grows that while all these things have had a great part in the result, it has been achieved largely by sheer efficiency within the industry itself. Japan is not winning her way with inferior or second-hand machinery operated by workers of serf status. Her mill equipment is most modern; her labour is docile; and the statement of dividend payments which follows, taken from the Osaka Mainichi,' discounts the notion that her textile manufacturers are foregoing present profits for the huge gains receivable when Japan dominates the textile world. According to this newspaper, companies which have declared or are about to declare higher dividends this year than last include the Kinha Spinning Company, 9 per cent. against 8 per cent.; Kureha Spinning Company, 12 per cent. against 10 per cent.; Temma Weaving, 8 per cent. against 6 per cent.; Manchuria Spinning, 6 per cent. against 4 per cent.; and Toyama Spinning, 12 per cent. against 8 per cent. Japanese companies are prospering, and it is due to their great efficiency. Because of the serious competition of Japan, India has increased her tariffs, leaving Lancashire with a 23 per cent. tariff as against a 75 per cent. tariff against Japan. This, of course, is a serious blow to Japan and she threatens that if this sort of thing persists she will boycott the import of Indian raw cotton into Japan. People Flint their eyes to this and say that it is all bluff. Is it bluff? I read this from Bombay, dated 7th July: The Board of the East India Cotton Association has passed a resolution pointing out that the boycott by the Japanese Cotton Spinners' Association has resulted in a depreciation in the value of Indian cotton of about 15 rupees per candy, and calling on the Government to take steps to safeguard the Indian grower against the effect of the boycott. I have been reading the news from Japan, and I learn that the Japanese are quite serious about this boycotting of Indian cotton if the huge tariff against Japanese goods is continued. They talk of the same warfare against Australia. So it will go on. Even if Lancashire were to drive Japan out of the market of India by means of this 75 per cent. tariff, what would happen? Already the Indian people are talking about the Lancashire menace. They will do their best to fight Lancashire when Japanese competition has been removed and by that time, I suppose, Chinese competition will be a great menace. What 1 suggest is that we must face the facts, and instead of carrying on a ridiculous warfare try to come to some agreement with Japan. International understandings, despite the failure of the World Economic Conference, are a vital part of the new arrangements that must be made to employ the world's marvellous productive power to the utmost advantage. Only by such means can wages and labour conditions be improved. I feel that I shall have done a little to improve the position if I have persuaded my country that not only is Japan to be reckoned with, but honourably to be dealt with and bargained with.

I have inquired into this matter because I am greatly interested in it. My affection for Lancashire is very great. I want to see Lancashire prospering again. I am convinced that the Japanese are anxious and ready to come to terms with us. The Japanese manufacturers have been warned by their own countrymen for a long time that if they persisted in present methods they would have all the world against them. They do not want that. They must come into some agreement, and I think agreement is possible. The yen will not continue in its present depreciated state for long. The trade unions are getting stronger in Japan, and there are demands, for higher wages. Eventually Japan will find it necessary to agree. The Japanese are a people who can be dealt with. I have heard people speak with contempt of the Japanese sense of honour, and recent events in the Far East may have given us rather a bad impression of the way Japan keeps her word. But we must remember that militarism has very peculiar ideas of honour, and Japan is under militarism now. My own experience during four years' residence in Japan has convinced me that, although the methods of doing business there are different from ours, yet the essential honesty is there. We, the greatest civilised Power in the West, ought not to be backward in coming to an agreement with the greatest civilised Power in the East, and so make a beginning in setting the whole world on the high road to economic sanity.

2.50 p.m.

Lieut.-Commander ASTBURY

At this hour and on the day when the House adjourns I shall not speak for more than about 10 minutes. I do not cast the slightest reflection on any of my fellow Members from Lancashire for not being present to-day, for those of us who have been in the House for years know that on the day of the Adjournment every one is so bent on getting away that it is difficult to keep a full House. But I do complain in all seriousness that the Government might have done more for the great distress in which the Lancashire cotton industry finds itself to-day. The question of the cotton industry has never been thrashed out in this House. From the hon. Member who has just spoken we have had a very interesting history about Japan. I have been a manufacturer and merchant for 30 years, and I have had to face Japanese competition not only in this country but all over the world. Let me state one or two facts upon which the hon. Member has been misinformed. Our machinery in this country is as efficient as any machinery that the Japanese possess, and our operatives are as skilled as, if not more skilled than, any Japanese operatives. I do not say that Japan is using sweated labour, or that she is using the wrong quality. Japan is looking after her own industries, and if she is beating us by her competition throughout the world it is not her fault, but our fault for not looking after our own end of the stick. Japanese labour is not sweated labour from the Eastern point of view, for the standard of living is lower there, and 10s. a week is affluence.

We have to consider not only Japanese wages, but the low taxation in Japan. The Japanese are sending goods into this and other countries at a price 150 per cent. below our cost of production. If any business man can tell me how the Lancashire cotton trade can compete on any terms with such a state of things, he is cleverer than I am. This drastic Japanese competition started about 1925. Do not let us shut our eyes to the fact that for years and years we have been warned about the yellow peril. The warning was first with regard to war. The yellow peril is with us now, and in a far more insidious and dangerous way than in regard to war. If you are facing any one in the battlefield, you know what you are up against, but in the ease of this Japanese competition we find goods sold at any price in order to undercut British goods and drive them out of our own markets, our own Crown colonies. Unless the Government can take some action—it is not for me to suggest what —unless the Government strike at once, within five years you will not see a spinning mill or a calico printing works standing in Lancashire.

Let me refer to the Dutch East Indies. Up to 1925 Lancashire had practically the whole of the cotton trade with Java, Sumatra, Batavia and the rest of the islands. I personally did a big trade with Java and the other Dutch colonies. To-day I am not selling a single yard there. Only last week a Dutchman from Holland was in my office. He said "It is no good your sending a yard of cotton to any of the East Indies, because although they are supposed to be Dutch colonies, to-day they are Japanese colonies." I said, "Why don't you put up a prohibitive tariff to protect your own industry?" for the Japanese competition hits Holland too. He replied, "if we did that, within a short time we should have a Japanese fleet there." Practically, the Japanese would make war.

I come now to our own Colonies in regard to which the Colonial Secretary or the Secretary to the Overseas Trade Department may be able to help us. Before the Japanese incursion, we did a large trade with Kenya and Uganda. I am not going to trouble the House with many statistics—I am sure the Parliamentary Secretary to the Board of Trade knows the figures—but I wish to quote one specific instance of the present position of affairs. Japan last year exported to Kenya and Uganda 1,035,983 yards of artificial silk and the export of Lancashire artificial silk to Kenya and Uganda was only 5,224 yards. That indicates the extent to which Japan is exporting to our Colonies. That is progressive. Every day Japan is, in increasing degree, exporting more than Lacashire to these markets. There is only one policy that is going to do us the slightest good in this situation. It is no good putting up tariffs. No tariffs will keep out Japanese goods in the circumstances which I have described. The only policy is total prohibition. We want total prohibition for our home market and, where we can get it, in the Colonies. Surely we are en- titled to demand it even from Ceylon. Surely we are entitled to say to our Colonies, "We defend you from invasion by other countries who would have invaded you long before now had it not been for the British Fleet. Are we not entitled to do some business with you in return for the vast amounts of money that we are spending on your defence?"

Take the case of France. I never like to compare a foreign country with our own in these matters but what has France done? We cannot put one yard of cotton goods into Algeria, Tunis, Madagascar, or any of the other French Colonial possessions. France has barred us out absolutely by an enormous tariff. She has kept all her Colonies for her own productions. Surely it is possible for the Government to do something in this way and at any rate to give some hope to the Lancashire cotton trade. Mention has been made in this discussion of Denmark, but as a market for goods of this class Denmark is like a drop in the ocean. Denmark is not a market that is going to be of any substantial advantage to us. It is the great oversea market, particularly the market in the Colonies, that we want. With regard to Ceylon we have been told that certain safeguards have been put into the India White Paper. Surely safeguards were put into the Ceylon Constitution to deal with this matter. Are we not going to take advantage of those safeguards? If it appears that we cannot do so, then what can we hope for from any safeguards put into the India Constitution?

There is one other point that I would urge upon the Parliamentary Secretary. I have already been in communication with him on the question of sending a trade mission to Central and South America. The Central and Southern American States, Venezuela and others are very well disposed to this country and would I think be willing to do business with us, but the United States are already trying to get hold of those markets. A trade mission to those countries would cost comparatively little money, and if such a mission were to go there for three months and visit these people and make them realise that we are anxious to do business with them, I am sure it would do untold good to the Lancashire cotton trade. I believe that the Secretary to the Overseas Trade Department has this matter already under consideration, and I hope that he will not lose sight of it.

3.0 p.m.

Mr. LANSBURY

I should not like this Debate to close without saying something especially after the remarks of the hon. Member for Gorton (Mr. Bailey), who complained that so few Members, especially Lancashire Members, were in their places. I do not claim to be a Lancashire Member. I am just a Member of the House of Commons.

Mr. CROSSLEY

The hon. Member, as a matter of fact, pointed out that there was not a single Member of the Labour party then present.

Mr. LANSBURY

On the afternoon of an Adjournment it is not usual to have full benches, and I think the Members of this party attend as regularly as the Members of any party in the House. Whether we represent Lancashire divisions or not, this is a question in which we are all interested because if Lancashire is not prosperous other parts of the country are not prosperous. Lancashire does not live within herself any more than Poplar. We are inter-dependent one upon the other and we are all interested in the prosperity of Lancashire. This question which has been discussed a good many times during the Session is really in my judgment insoluble within the present arrangements whereby we carry on international trade. Japan owes considerable sums outside her own borders and these can only be paid if she sells goods either in the creditor country or in some other country which in turn helps to settle the payments which she has to make to her creditors. I listened to hon. Members saying that India must be told this and must be told that, but India must send more goods here than she takes in exchange, or else send silver or gold, because she has to make payments in this country for which she cannot get any return in goods. She has to pay for the British Army in India; she has to pay allowances to civil servants who travel backwards and forwards between here and India; she has to pay them pensions when they retire. Hon. Members seem to forget that factor in international trade relationships.

These invisible exports as they are termed, especially debt payment, seem to confuse hon. Members. Hon. Members talk about Japan as if Japan suddenly, like a mischievous imp, had rushed herself into the commerce and industry of the world to the bedevilment of everybody else. Japan learned her commerce from us. The Lord President of the Council in one of those remarkable speeches which he occasionally makes, dealt some years ago with the post-war world economic situation and pointed out that the one industry in Lancashire that was then doing well was the engineering industry which was manufacturing cotton machinery to go to Japan, India and the East generally. Lancashire to a small extent has gained on the swings what she has lost on the roundabouts. She must have made some money and given some employment in the manufacture of machinery, but the point that I want to make is that in all probability loans were raised for that, and if you stop Japan trading somewhere in the world, the people who hold those loans will not be able to get their payments. We have to face up to that question, and that is the problem of the Ottawa Agreements.

The right hon. Member for South Molton (Mr. Lambert) yesterday complained about butter dumped here from New Zealand or Australia. Those people do not love us and want to give us their butter for nothing. They have to pay their debts, and they can only do that by the transference of goods. Those goods must be transferred in some way or other. Hon. and right hon. Members who want to face up, as the hon. Member opposite said, to Japanese competition will have to face up not only to that, but to Eastern competition generally. It is not only Japan; you will have China commercialised directly. Japan is not in Manchuria for fun; she is there to develop China, to take up that market. She is there for the same purpose that our pioneers 150 years ago went out into the world. It is said that the Japanese are wonderful copyists. Well, they have copied us very thoroughly and learned every art, and they have added to what they have learned. They must have had something to give to the world, and they have added to what they have learned from us.

There is only one way out of this, and that is by international co-operation. That is why I have risen to-day, and I shall continue to say that until the nations of the world learn to co-operate, there is no way out of this business. The amazing thing to me is that, with all this production of the Japanese and with all our own power of production, we could not have over-production if all those who need the goods could get them. That is the problem before all the chiefs of industry in every country in the world, and what puzzles a man like me, almost at the end of life, is to see that the men at the head of affairs do not get at this fundamental truth, that the capitalist system, which has done marvellous things in the past—it has done this tremendous thing of conquering the power of production—has not conquered the problem of distribution; and, in my judgment, that cannot be done on competitive lines.

We keep on saying to one another that we must tighten up our machinery and become more efficient. I agree with the hon. Member who spoke just now in believing that we are one of the most efficient nations in the world, if not the most efficient. I have a profound admiration for those who organise industry in this country and those who carry it on, but you are up against an insoluble problem when you come to deal with it from the competitive standpoint. Japanese production and our own power of production are not too great when you think of the myriads of people in China and in India, many of whom are half starved and have not got the clothes that they need. They do not need many, God knows, on account of their climate, but they have not got even those, and as far as their homes are concerned, everyone knows how terrible they are. Yet we have had this Conference here in London, and no one there seemed to get down to this vital business of how to distribute the goods.

My view—and I hold it very strongly indeed—is that the competitive system, the fighting system, of obtaining markets is at an end, and just as I hold that within the nation we must have planned industry, so it must be planned internationally. I give the Government whatever credit is their due for trying to organise agriculture. They have made an effort, though not on the lines that I should have liked, to plan the production of petrol. But just as you have got to have planned industry in this country, you have got to have planned inter- national industry, and if you do not do it internationally, I am certain that this civilisation must crash, because you are not going to hold in the Japanese and the Chinese people and keep them within the circle. Just as we have taught them this business and competition in production, so the white races ought to show them how they can unite in a co-operative sense to bring about the distribution of their goods. Primarily, let us not forget that the fundamental cause of the terrible competition is often that a nation wants to balance its budget and wants to pay its debts, and sees no other way but to do as many a man in business does, namely, just tumble the goods out at any price in order that it may keep its head above water.

3.11 p.m.

Major PROCTER

I rise at this late hour to call the attention of the Government to the plight of Lancashire. This great county, which holds one-sixth of the population of England, has been for some time passing through great tribulations, and there is a feeling in Lancashire, whether right or wrong I cannot say, that the county somehow has not had the attention from the Government that it rightly deserves. I am not unmindful of the great help which indirectly has been given by the National Government. We are profoundly grateful for the policy in India which has resulted in the suppression of lawlessness and which indirectly has helped Lancashire in her cotton trade. We are also glad that employment in Lancashire has increased this year by some 20,000, but we cannot forget that there are still 152,000 unemployed there. They are the most skilful tradesmen with inherited skill in their fingers, who are desirous of work and who have cheerfully borne the sacrifices demanded of them. They are looking to us to put forward from time to time some concrete scheme which will benefit that great county. I remember as a boy going down the streets of the great Lancashire towns in the early dawn, when one could hear the music of the clogs. At the end of the day one heard the returning operatives going home laughing and joyful; and in the evening it seemed as if some fairy godmother had transformed the Cinderellas of the mills into the princesses of the towns.

But there is to-day a note of hopelessness among the operatives and a feeling of helplessness in the minds of the manufacturers. Therefore, if we speak feelingly, it is because we feel that no Government, this one particularly, can permit a great county, a great people who have contributed intelligence, invention and wealth in the past to the national pool, to drift and to perish through any inaction. We know that there is Japanese dumping that we cannot meet. We refuse to permit the cotton operatives to be starved into prosperity. We know that we cannot compete with Japan at the present moment and with girls who work 40 automatic looms and are paid 6s. 10d. a week. We know that we cannot compete if we are to preserve the standard of life which we believe is the right of the Lancashire operatives. We know that the Government cannot do that by a Free Trade policy—that weak miserable policy put forward this afternoon of allowing things to drift. If we carried out a Free Trade theory it would mean that we should allow one of our greatest industries to be destroyed simply because of the temporary depression and the depreciation of the yen, and I for one will not permit myself to be 'associated with a policy which says that because Japan is better equipped and able for a time to beat us therefore we should hand over the cotton industry to her.

Mr. PICKERING

May I ask if the hon. and gallant Member is attributing that view to me?

Major PROCTER

I do not attribute that view to you. All I attribute to you is that you exhibited a friendship for Japan that was really astounding.

Mr. PICKERING

I should like to correct the hon. and gallant Member on that point. My friendship is for Lancashire in this matter, and I wanted to put what I thought was the truth of the situation in order that Lancashire might benefit.

Major PROCTER

If the hon. Member is a friend of Lancashire then I say, in the words of the prophet, "Save us from our friends." Look at the inroads made in markets that at one time were particularly our own. Take the case of our oldest colony, Jamaica. Last year Japan increased her exports of cotton goods to Jamaica from 69,000 yards to 646,862 yards. This year in the March quarter she exported to Jamaica 1,540,000 yards, compared with 6,200 yards in the same quarter last year. In Ceylon in the four months ending April, 1933, of 10,618 bales and cases of cotton goods 7,653 came from Japan; and the story is the same right throughout the British Empire. I ask the Government why it was that at Ottawa we did not make some agreement whereby this competition, which we regard as unfair, should be prohibited altogether wherever the British flag flies. We cannot reduce the standard of life of our own operatives. The Government cannot permit our operatives to have a rice standard of life. We cannot compete with Japan if we have to pay trade union wages and observe trade union conditions. We are therefore entitled to ask the Government to give us protection at least in our own Colonies where we have not surrendered our power altogether—to give us that market and to preserve it for this industry before our people become unemployed altogether.

China is coming on. Take the ease of yarns. In 1913, the United Kingdom exported 86 per cent. of the yarns used in India or, 37,988,000 lbs. Japan only had two per cent. of the trade or 833,000 lbs., and China nil. To-day, the United Kingdom has only 38 per cent. of that trade while Japan has 20 per cent. and China 42 per cent. Some time ago I asked a question of the Secretary of State for India why it was that piece goods were not included in the Ottawa Agreements, and I was told that piece goods were under reference to the Tariff Board of India, but why were yarns left out? They do not come under the tariff schedules included in Part VII. Never at any time were they under the consideration of the Tariff Board. I therefore ask the Government immediately to do certain definite things. I am not like Mr. Dailey, who said "Not being an author, I am a great critic". In all modesty, as a back bencher, I want to put several things before the right hon. Gentleman who represents the Government this afternoon.

I want to ask him if he will do his best. to follow a programme that will directly benefit Lancashire. First, will lie endeavour to revise the Congo-Basin Treaties and the others of which we have heard from time to time? We have to start sometime; why not start by giving notice now? The second matter is the arrangement which is about to be carried out whereby British business men and Japanese business men are to have a friendly conference. I ask the Government. What does that really mean? Are the Government simply going to act like a referee at a prize fight, and to say: "Get into the ring together, and, if you fight each other, we shall simply see that you get fair play". Are they going to allow the business to conduct the whole of the negotiations? Are the Government going to give some guidance and take a hand in this discussion? I say to the Government: "The means are in your hands, and you are masters of the situation. You have the weapons. Make proper use of the colonies for Empire trade".

The Government should remember that Lancashire has empty factories. The cotton machinery is lying there, and a factory, if it is not going to pay rates, has to do one of two things—either to lift the roof off the factory, or take the machinery out of the building and sell it. Are the Government going to allow those machines to be sold and merely the empty shells of the factories to remain? Cannot the Government, by passing legislation, help local authorities to remit rates, on the mills where the idle machinery now lies? Can the Government not do something to prevent the drift of industry from the North to the South? Hundreds of empty factories are in Lancashire; they can be got for almost nothing. The workers are there, anchored to their homes. Labour is the most perishable of commodities because, when a moment of it is lost, it is gone for ever. It is also the most difficult to transport. Is there any body, like the London Chamber of Commerce, that directs foreign firms to go into the Slough district, or into the neighbourhood of garden cities, where in some cases there is not a road or a house, when up in the North you have these places empty, and operatives ready to work in them. Surely the Government can do something to direct foreign factories and new industries to the places where they are most required.

Will not the Government, also, give some directions to the banks, who at the present moment have a stranglehold upon our cotton mills. Our mills cannot get enough money to finance transactions, or even to buy raw cotton from week to week. I know of one that could work up to 100 per cent. capacity if it could have the money to buy raw cotton to weave into fabrics, but it cannot get it because of the stranglehold of the banks. Cannot the Government, also, assist in making legal what is now a "gentleman's agreement", namely, what is known as the more-looms-per-weaver scheme. The Government know what is happening; if they do not, let me tell them. That agreement is being violated by some unscrupulous manufacturers, who say to their operatives," You will work four looms, and will work them at the same rate of pay as those who are working six." The four-loom worker is paid 9s. 6d. per day, and the six-loom worker is paid 7s. per day, and some manufacturers are saying to their operatives, "We will carry on, but you must work four looms at 7s. per day." That gives such manufacturers a great advantage, because, in order to adopt the six-loom policy, it is necessary to have bigger shuttles and slow down the looms by at least 10 per cent. The result is that they are getting an unfair advantage over those who have tried to carry out the new policy. Lastly, will not the Government take a hand in reorganising the whole cotton industry of Lancashire—film MEMBERS: "No !"] I do not mean that they should lay the paralysing hand of the politician upon it, but I would ask them if they will call conferences and give direction and guidance, so that we can, by means of a development loan. start again, at least in the manufacture of cotton goods in those factories which at present are derelict, and so help our people to get an honest day's work at an honest day's pay.

3.28 p.m.

Lieut.-Colonel COLVILLE

It seems to be my privilege to wind up before an Adjournment on the subject of the cotton industry. Before the Whitsuntide Recess I was called upon to do the same thing, and, therefore, I take this opportunity of paying a tribute to the assiduity of the Lancashire Members in keeping this very important industry to the front. I think I shall be able to show them that the Government are no less concerned with the welfare of this industry A number of statements have been made in the course of the very interesting debate to-day, but I feel that some of them were based on incorrect knowledge of the situation. It is true that we have a very serious situation to face at the present time, mainly arising from Japanese competition, but I think it would be doing an ill service to the industry of the country to give abroad an impression, which might arise from certain observations that have been made to-day, that Lancashire as a producing county and Lancashire industry were in any way decadent.

Let me give some figures regarding unemployment in the cotton industry. In May, 1932, the percentage of unemployment in the cotton industry was 33.4 per cent. In May, 1933, it had dropped to 26.4 per cent. and in June to 24.3 per cent. I agree that when you have a high rate of unemployment of 24.3 in any industry, it is a subject for grave consideration to see what can be done, but I trust we shall not hear observations of the type that I have heard sometimes suggesting that the Government have done nothing at all to assist the industry having regard to these figures, which I think speak for themselves. The export of cotton piece goods in the past 12 months has improved considerably. It is true that in the last month or two that improvement has not altogether been maintained and I want to analyse some of the causes of that. It is partly due to the general conditions. No one who has been following international conditions can fail to see the difficulty of extending the export trade in any direction.

Hon. Members have put their finger on a point of great importance when they refer to Japanese competition, which undoubtedly is a major factor in affecting the exports of the cotton trade in many parts of the world. It is just because it affects them in almost every part of the world that it is such a difficult and complex problem. It has been suggested, both in the House and outside, that it might be dealt with by making a ring round certain countries. The problem is much too big for that. If you made a ring round certain countries, you would only drive the surplus product into others and you might lose more on the swings than you gained on the roundabouts. I hope hon. Members will give the Government credit, with the knowledge that they have, for taking all these facts into account in making the decisions that they are making.

My hon. Friend the Parliamentary Secretary to the Board of Trade gave a very important answer last Tuesday. He was asked if he could make a statement regarding the possible convening of a conference between British and Japanese industries with regard to trade competition. My hon. Friend replied that the President of the Board of Trade had sent a reply on 20th July to the note from the Japanese-Government on this subject. That note indicated that the Japanese interests concerned agreed, subject to certain limitations which they suggested and which have since been the subject of informal discussions. We naturally could not agree to certain limitations that were suggested and wished to discuss them so that our point of view would be fully safeguarded in the Conference.

The proposal now under discussion is that there should be a tri-partite discussion in India between representatives of the industries concerned in Lancashire, India and Japan, covering the whole field of all classes of textiles in which these countries are interested. I want to stress that point. The discussions will relate to the Indian market and to the colonial markets in which India is interested. Several hon. Members have referred to Ceylon. That is a very important point indeed which was referred to by the Secretary of State for the Colonies the other day. Hon. Members may rest assured that, in the discussions that take place in India, the question of Ceylon will be Fully considered, because that is one of the markets in which India is also interested and in the tri-partite discussions it will no doubt be very much to the fore. The proposal that a Lancashire team should go out to India almost immediately is made on the understanding that the discussions in India will be followed immediately by discussions in this country in regard to other textile markets between industrial representatives of this country and of Japan. His Majesty's Government sincerely hope that the Japanese Government will accept this proposal, and that by means of those discussions it will be possible for the interests concerned to arrive at a satisfactory agreement.

We may be asked, why take India first? It is because India is to some extent the key of the position. India is immensely important to Lancashire, and I do not need to stress it to a gathering of Lancashire Members. It is important that the beginning of this method of dealing with the Japanese problem should be in India, and Should take the form which we suggest of tri-partite discussion between the interests concerned. My hon. Friend was asked in a Supplementary Question whether the Government would also take part in the discussion round the table, and my hon. Friend who has just spoken raised the same question. It is not proposed that His Majesty's Government should intervene in the contemplated discussions between the industrialists of Lancashire, India and Japan in India at this stage, but they will be prepared to afford the representatives from this country such assistance as they usefully can, and to place at their disposal the services of His Majesty's Senior Trade Commissioner in India. His Majesty's Government feel—and they have given a good deal of thought to this question—that the best solution of the problem which these industries are to tackle in India would be one arrived at as a result of amicable arrangement in those industries. Therefore, they doubt whether they could usefully intervene, at any rate, before the outline of such an arrangement had been made.

I stress the fact that it is not the desire on the part of the Government to become merely a referee, as an hon. Friend suggested, and stand back and allow people to come together. It is because they feel that it is necessary to see what will emerge from the talks between the three interests, but His Majesty's Government will be closely advised of every step in the discussion, and, as I have said, the services of His Majesty's India Trade Commissioner, an officer of wide experience, and one who commands the confidence of the industry, will be placed at their disposal in India. I stress the point of India because I think that it is in the forefront of the cotton question. One hon. Member said' that one ought to be able to bring pressure upon India to buy more cotton goods from us because of the favourable balance which, he said, she had in her trade with us. That, I am afraid, is based upon a misconception. In point of fact, the balance of our trade with India is almost equal. I have the figures for a number of years, and our balance in that country might well serve as a model to some others with which we are trying to negotiate agreements. Let us remember that trade rests upon good will. I believe that with good will we can secure a larger share of trade in India if the method which is proposed at the present time is successful. The Government will watch every step of the movement in its initial development.

I would like to say that it would probably help to secure a larger sale of our goods in India if we could reciprocate by buying a larger quantity of Indian cotton. I know that there are technical difficulties. I do not pretend to be a technician in the cotton industry, but I am informed that there are technical difficulties which are being examined. I refer to an answer given a few days ago on the subject of the Indian Cotton Inquiry Committee. The present position is that the Indian Cotton Inquiry Committee are in communication with Indian cotton growing interests with view to the elucidation of technical and other questions affecting the use of Indian cotton in Lancashire and the Government are following with close interest the work of the Committee. If it will be possible to increase our purchases of Indian cotton, I hope it will result in benefit to us on the other side of the scale. The Government will certainly watch it with that intention and 'afford such assistance as is possible.

Let me say a word about the Colonies. I agree with hon. Members as to the position there. In some Colonies the competition is very severe, and in some of them we are at present bound by treaties which prevent us applying special methods to deal with Japanese imports. In one case we have given notice to end a West African agreement which, when it terminates, will leave us free to deal, if necessary, with special measures, with imports from Japan. But I would refer to what was said by the Secretary of State for the Colonies, who, after all, must deal with this question as a matter of policy in consultation with the Board of Trade of this country. He pointed out that he intended to get the industries round the table and discuss what could be done by friendly arrangement. He added: I sincerely hope that they will be successful. if they are not successful, the Colonial Empire will be prepared to take whatever steps are necessary in order to protect British interests. At the present time, except as regards West Africa, at the request of the President of the Board of Trade I have denounced the Angle-Japanese Convention in order to take Japan out of the ambit of the Anglo-French Convention which the trading interests are very desirous of maintaining vis-à-vis other countries."—[OFFICIAL REPORT, 20th July, 1933; col. 2140, Vol. 280.] I quote that passage to show that it is the policy of the Government to allow the interests to get together, but not to act as referee. They are ready to support them at a later stage if necessary. An agreement which is reached by agreement is very much more valuable than one arrived at by force. I believe we can by agreement usefully expand our trade. I could name some of the Colonies in detail, but on the general question the answer I have given would show that the Government are not unprepared to take what action is necessary, but it must depend upon the Colony. In the case of Jamaica, it has been pointed out that it might be possible to deal with Jamaica separately. It is not impossible to determine whatever treaty exists and deal with it as a separate issue, but, taken alone, it is a drop in the bucket, and it might have repercussions and effects which would damage the agreement which might be obtained over a larger area. We consider we are wise to adhere to the policy laid down in the speech of the Secretary of State, but we are watching developments, and we are conscious of what we can do to assist.

As to foreign markets, it was suggested by the hon. Member for Gorton (Mr. Bailey) that the Government had been unmindful of the cotton trade in any agreements they had negotiated. I should like to give some figures to show that, so far as the Government policy of negotiations with foreign countries has proceeded, we have not been unmindful. In almost every case where the Government have engaged in negotiations, marked improvement has taken place in the sale of cotton goods. Take the case of Denmark. In 1931 the total sales of cotton goods from this country amounted to 2,250,000 square yards. In 1932, without any agreement, but when we were working towards an agreement and the pressure to secure an agreement was there, the sales went up to 2,800,000 square yards. In 1933, with the agreement now in operation, we find a figure of 4,300,000 square yards.

Mr. SLATER

The hon. and gallant Member said it was a small increase.

Lieut.-Colonel COLVILLE

Relatively, compared with India it is small, but it is important, and I hope that when my hon. Friends go to Lancashire during the Recess they will let it be known that within the scope of these Agreements that we have negotiated we are doing our best to o assist and to improve cotton exports. Two other countries with which we have negotiated Agreements, or in regard to which we hope soon to reach agreement, are Argentina and Norway. With regard to Argentina, the Agreement is well on towards its last stages, and I hope that it will be satisfactorily reached very soon. In Argentina already, as a consequence of the influence of the coming Agreement, we are seeing an improvement. In 1931, in the first six months, we sent to Argentina 8,000,000 square yards of cotton piece goods, in the corresponding period of 1932 the amount was 12,000,000 square yards; and in 1933 it had risen to 13,000,000 square yards. Therefore, the policy of the Government in working towards an Agreement is already bearing fruit.

In regard to Norway, which is a smaller market, we also see an improvement. In the six-monthly period of 1931 we sent in 716,000 square yards, in the corresponding period of 1932, 1,000,000 square yards, and in 1933, 1,200,000 square yards. Therefore, hon. Members will see that when the Government have set themselves to work towards a Trade Agreement, the influence,of that Trade Agreement is shown to be helpful to the cotton industry. I must apologise to the House. I have been quoting the wrong figures. The figures which I have been quoting as six-monthly figures are the figures for the month of June only in each year. I will quote them again for the month of June only in each of the three years. In regard to Denmark, in the month of June, 1931, we sent 2,250,000 square yards of cotton goods, in 1932, 2,800,000 square yards, and in 1933, 4,300,000 square yards. To Norway, in June, 1931, we sent 716,000 square yards, in June, 1932, 1,000,000 square yards, and in June, 1933, 1,200,000 square yards. To Argentina, in June, 1931, we sent 8,000,000 square yards, in June, 1932, 12,000,000 square yards, and in June, 1933, 13,000,000 square yards.

Let me now give the six-monthly figures. To Denmark in the first six months of 1931 we sent 13,500,000 square yards; in 1932, 19,500,000 square yards; and in 1933, 25,500,000 square yards. Therefore, the increase is very considerable, from 13,500,000 square yards, to 25,500,000 square yards. To Argentina for the corresponding period of six months we sent in 1931, 42,500,000 square yards: in 1932, 50,000,000 square yards: and in 1933, 66,500,000 square yards. I think hon. Members will agree that these figures show considerable improvement.

Let me now turn to the Ottawa Agreements. One hon. Member suggested that no benefit had arisen from the Ottawa Agreements. I should like to point out what has happened in the case of South Africa.

Mr. SLATER

Will the hon. and gallant Member also give the figures for Canada?

Lieut.-Colonel COLVILLE

Yes. The figures with respect to British South Africa are that in June, 1931, we sent in 4,500,000 square yards of cotton piece goods; in June, 1932, 3,500,000 square yards; and in June, 1933, 7,500,000 square yards. To Canada, in June, 1931, we sent 2,500,000 square yards; in June, 1932, it dropped to 1,500,000 square yards; but in June, 1933, it rose to 3,000,000 square yards. Therefore, I think lion. Members may rest assured that all that can be done under the Ottawa Agreements by the Government is being done. I should like it to be known that there has been this improvement. In New Zealand and Australia there has been a slight decrease recently, but they are now above the 1931 figures. We hope to secure the benefit of these markets as well.

I have only been able to touch on one or two things which the Government are doing. It has been suggested that the question of Japanese competition must be dealt with by international agreement. It may be interesting to hon. Members to know that the Government are aware of the discussions which are proceeding between Lancashire and the cotton industrialists of Holland, with whom they have a kindred interest in many respects. The Government are watching these negotiations with sym- pathetic interest and have asked to be kept informed of their progress. As in the case of India, the Government think it preferable that they should not participate at this stage in these negotiations but we are watching them with sympathy and with close interest. It will be admitted, I think, by everyone that in a time of exceptional difficulty in world trade Great Britain is holding her own with amazing tenacity in almost all branches of trade. The cotton trade has had an uphill task. It has a particularly difficult problem t meet at the present time in Japanese competition because, although the hon. Member for Leicester West (Mr. Pickering) suggested that there was not any great disparity between Japanese rates and our own, while making all allowance for the efficiency of production in Japan, which we all admit and understand, there are, nevertheless, two other factors which must be taken into consideration, low wages costs and the heavy depreciation of the yen at the present time. The Government are fully aware of the problem and in the months in front of us, although the House will not be sitting, they will give what assistance they can to this industry. The House and Lancashire Members, who have again demonstrated their interest in an industry which is not a local one but of national importance, in the truest sense, can rest assured that the Government during the ensuing months will do all they can to assist this great industry.