§ Motion made, and Question proposed, "That this House do now adjourn."—[Captain Margesson.]
§ 11.2 p.m.
§ Mr. O'CONNORI desire to raise the question of the discriminatory surtax which exists in France against British imports into that country. In doing so, it is not my intention or desire in any way to make any criticism of the President of the Board of Trade, or of his very able colleague my hon. and gallant Friend who has done all or nearly all that can possibly be done to make representations to France in regard to this very important matter. The House will know that we have no formal commercial treaty with France, but our trade with that country has been regulated in accordance with what is popularly known as the most-favoured-nation treatment. As far as France is concerned, the most-favoured-nation treatment has statutory authority by decree of the French Legislature. When we departed from the Gold Standard the French Government promptly passed a decree on the 12th November, 1931, whereby it imposed a 15 per cent. surtax upon British imports into France. It was not solely discriminatory against this country inasmuch as it also applied to other countries which were not upon the Gold Standard.
1313 The first point is that we adopted no comparable measure when France depreciated her currency. She did not do it under the accumulative effect of stresses such as forced us to leave the Gold Standard. She did it as a matter of deliberate and carefully devised policy which depreciated her currency, as we know, to about one-fifth of its previous value. When that took place we suffered a most severe and devastating competition from French exports to this country. Although at that time we had in the Safeguarding of Industries Act machinery by which we could have prevented that very severe competition we did not make use of it. We took the view that the most-favoured-nation treatment involved our not imposing anything in the nature of a selective duty against French exports to this country. Indeed, we held that view so strongly that in cases in which, on account of depreciated currencies, we felt it necessary to impose surtax or specific ditties against imports from those countries we made new treaties, as in the case of Austria and Czechoslovakia, in which treaties we took the specific power to impose duties of that kind. So that it is not unfair to say that in proposing a specific surtax of 15 per cent. on British manufactured goods the Government of France were at least treating us ungraciously. We were not the only nation against which the 15 per cent. surtax was made to operate.
I want to remind the House of what followed in the case of two other countries against which France also levied a 15 per cent. surtax. She did so in the case of Portugal, but Portugal was not slow to adopt retaliatory measures. She retaliated by a specific duty against French imports into Portugal, and the result was that the French Government immediately dropped the 15 per cent. surtax against Portuguese exports to France. Because Sweden adopted the sterling standard, France imposed a 15 per cent. surtax upon Swedish goods entering France. Negotiation took place between Sweden and France. One can only surmise what that consisted of, but the result is clear. Quite recently that surtax against Swedish goods was raised by the French Government, because no doubt the Swedish Government threatened retaliatory measures of the same kind.
The present position is this, that we export mainly manufactured goods to 1314 France. Those goods bear their ordinary duty on entry into France, which in most cases is about 6 per cent., but on the top of that they bear what imports from countries that compete with us do not bear, namely, 15 per cent., and that 15 per cent. is imposed not only upon the prime cost of the article but also upon the freight, transport and insurance of the article, so that when it reaches the French market it is burdened with a discriminatory tariff which effectively prevents us from competing with other countries, and especially with Germany. Let me give an example, of which my hon. Friend is well aware, because he has been in communication with me about it, which will bring quite clearly to the House how destructive to British trade the surtax is. France is an exporter of textiles, and in particular of lace, but France is not a manufacturer of lace machinery. Her lace machinery she imports from Great Britain and Germany. We are, therefore, in direct competition with Germany in supplying the French lace manufacturers with the machinery that enables them to export.
Our lace machines have to bear on entry into France the 6 per cent. ad valorem import duty plus 15 per cent. on account of the surtax, whereas the German machinery has no such 15 per cent. tax to bear. Here is how it worked out in a particular contract that was effected by a very important Nottingham firm only a few weeks ago. The total duty on the German machine which was in direct competition with the Nottingham machine was 31,755 francs, or about £365, at 87 francs to the pound. The total duty on the identical British machine was 56,216 francs, or £646 3s. 2d., so that there was a discriminatory tariff, call it a preference if you like in favour of the German manufacturer of £281 3s. 2d. The margins in manufactures are so narrow and the skill and capacity so equal that a burden of that character effectually destroys the market, and it is true that at the present time we are losing contracts every week with France owing to this discriminatory tariff, which is operating directly against this country. At the present rate it means that whereas the discriminatory tariff is 15 per cent. of the ad valorem duty, the actual ariff amounts to 77 per cent, of the total tariff which is paid upon goods entering the country.
1315 This matter, I know, has not been overlooked by the Board of Trade. I have had assurances from my hon. and gallant Friend that he has made representations quite recently to the French Minister of Finance when he was in this ccountry. But it has not been overlooked in France either. In the great textile district of Cambrai the matter has been taken up by the French Chamber of Commerce recently, and the Cambrai Chamber of Commerce instructed their president to make strong representations to the French Minister of the Interior, the Minister of Commerce, on the subject. One would like to know what steps the Board of Trade are taking at the present moment. They have protested, and have done so for some time, but as far as one can make out the protests have not had any great effect. Representations, I understand, were made to the French Finance Minister on his recent visit to this country. Can my hon. and gallant Friend tell us the nature of those representations, and what kind of response was made by the Finance Minister?
We are not powerless now as we were a few years ago. We enjoy a tariff system, and France is in a very vulnerable position. She exports to this country £19,000,000 per annum of goods which are all or nearly all goods we can dispense with, goods upon which, if we were to impose a duty, very few people in this country would suffer; sumptuary goods such as wines, and textiles and fine silks and laces, upon which we could with impunity, and with the support of public opinion, impose a tariff. We have an extremely valuable negotiating weapon. We can retaliate, and in my submission we ought to retaliate unless we get some redress. We have still another method. I understand that the French Government sent their representative over here a week ago for the purpose of negotiating a new commercial treaty with this country. That gives us our opportunity, and in my submission we ought to make it perfectly plain that we will not enter into a new commercial treaty until this tariff, which represents a preference in favour of Germany, and is discriminatory against us, is first removed. That should be a condition precedent to our entering into any 1316 negotiations with the French Government. I hope I have made it plain that the needs of our trade and commerce deserve prompt, decisive and vigorous measures in this matter; that we have machinery at our disposal, and that if we show that we are prepared to use it we shall find that we shall be able to dispose of the situation in the same way as other countries who have had the courage of their convictions and have been prepared to act.
§ 11.15 p.m.
Mr. LINDSAYI desire only to say a few words in support of what my hon. and learned Friend has said, but from a slightly different point of view. I happen to represent a Division which contains a very large smelting works, one of the largest in the world. That, also, has been very seriously hit by the operation of this taxation—not so much by the 15 per cent. duty as by the increase in the ordinary duty, which formerly stood at 2 per cent., and was increased to 4 per cent. At Vile same time, the duties were also increased against imports from Belgium, Sweden and Italy. The duty has been lowered to its old level, as against those countries, Sweden, Italy and Belgium, but it still stands at the new level of 4 per cent. against this country. In this particular industry, which creates a large amount of employment and is very largely dependent upon the French market, very serious loss has been caused by this action of the French Government, which action has in fact been discriminatory against this country. I thoroughly support what my hon. and learned Friend has said. We have now in our hands a very strong instrument of persuasion which ought to be used, and I would urge the Government, when dealing with the question of the 15 per cent. surtax, not to forget the increase which has been made in the ordinary import duty.
§ 11.17 p.m.
§ Lieut.-Colonel J. COLVILLE (Secretary, Overseas Trade Department)I am grateful to my hon. and learned Friend the Member for Central Nottingham (Mr. O'Connor) for raising this question. Although the hour is late and the time short, I am enabled to say a few words with regard to this taxation in France. Before I answer my hon. and learned Friend's questions I would like to run 1317 over the position briefly from the start. On 1st August, 1931, the French Government passed a decree imposing a surtax with the stated object of countervailing exchange differences, and, as my hon. and learned Friend mentioned, on 12th November in the same year a, surtax of 15 per cent. ad valorem was applied to imports of the United Kingdom. Representations were addressed at once to the French Government against this discrimination, but they refused to withdraw the surtax on the ground that it was simply a means of counterbalancing the indirect export bounty resulting from the depreciation of British currency, and did not in their opinion involve any breach of most-favoured nation rights.
Conversations with the French Government were continued, and the French Government expressed themselves willing to negotiate on the whole question of duties. But the British Government maintained that their right to most-favoured-nation treatment entitled us to exemption from the surtax. Exemption from the surtax was given for certain goods which are held to have a world price, for example wheat. After very strong representations had been made to the French Government at that time coal was added to the list of exempted goods. My hon. and learned Friend will remember that that was announced in the House at the time. But that is not all our case by any means. Yet it should be noted that that arrangement at any rate assisted a, large proportion of our imports into France. In 1931 coal represented 38 per cent. of our imports into France, and in 1932 not less than 42 per cent. So that the strong representations to the French Government did result in some benefit. On 13th July last, following the Lausanne Conference, an Anglo-French declaration was made that, pending negotiations for a commercial treaty, the two countries would avoid any action in the nature of discrimination by the one against the other. As it is important, I quote the actual words of Article IV of the Declaration:
Pending the negotiation at a later date of a new commercial treaty between the two countries, they will avoid any action in the nature of discrimination by the one country against the interests of the other.Immediately afterwards it was suggested to the French Government that it, would be most welcome to His Majesty's Gov- 1318 ernment if that could be followed by the immediate withdraw al of the 15 per cent. surtax. To this approach the French response was that they were not prepared to remove the surtax except as the result of a commercial agreement between the two countries, designed—and I use this phrase deliberately and it is the phrase which was used then—"to restore the balance in economic relationship between them." Let me briefly recall the attitude taken by the two Governments upon the question at that time. There has been a, tacit understanding for more than 50 years now, while there was no actual provision to that effect, that, in fact, most favoured nation treatment was accorded on both sides in Anglo-French trade. We have without exception given most favoured nation treatment to French goods during all that period and up to the time of the application of this tax and the same has been the case on the other side. The imposition, therefore, of a surtax on United Kingdom goods on, the ground of sterling depreciation was a departure from longstanding practice. We claimed that no duty or charge should be levied on imports into France of United Kingdom goods which was not equally levied on the goods of other countries. The French defence has been that no discrimination is involved, since all countries with depreciated currencies are treated alike, the only exceptions being in cases where agreement has been come to since the depreciation took place.In point of fact the French have held the view that the surtax could only be removed as part of a commercial agreement, and hon. Members may be aware that the surtax has, in fact, been removed from Portuguese, Swedish and Finnish goods in exchange for concessions on French goods. His Majesty's Government maintain that the surtax is discriminatory and that they are entitled to its removal unconditionally. I trust that I have made the view of His Majesty's Government clear, but I hope that hon. Members will allow me to comment on the position rather more generally before concluding. I want also to refer to the interesting point which my hon. Friend the Member for South Bristol (Mr. Lindsay) raised later. Hon. Members will recollect that the French Government at an earlier date were ready to negotiate with us in order to bring 1319 about a commercial agreement between the two countries designed to restore the balance of economic relationships between them. Perhaps it is not generally appreciated that as a result of duties upon imports which it has been necessary to make in this country, a policy the necessity of which I need not elaborate, French trade with this country has in fact been greatly reduced. In 1911 imports from France were £42,000,000 and exports of United Kingdom goods to France were £24,000,000. In 1931 the position was that imports from France were £41,000,000 and exports to France £23,000,000, a substantial balance in favour of France. In 1932, however, imports from France fell to £19,000,000, a drop of more than 50 per cent., while United Kingdom exports to France fell only from £23,000,000 to £18,500,000. One can see there a natural anxiety on the part of the French to discuss an agreement which would preserve a certain balance.
To that, the reply of His Majesty's Government is this—and I am glad to have the opportunity of stating it: We make it perfectly clear that we are not prepared to enter upon negotiations while the present discrimination is maintained against 'United Kingdom goods in France. It would be impossible for us to contemplate offering to the French Government a quid pro quo, in the shape of reductions of duty on French goods imported into this country which are part of the general tariff on all foreign goods, in return for the removal of the discriminatory tariffs now levied in France upon United Kingdom goods and which should, in our view, be removed as of right.
My right hon. Friend the President of the Board of Trade interviewed Monsieur Bonnet, the Finance Minister of the French Government, a few days ago—to be exact on the 18th March—and in that interview the question of a commercial agreement between the two countries was raised. My right hon. Friend took the opportunity to make it clear that we were not in fact prepared to enter upon general negotiations on the lines which the French Government would desire so long as the discrimination which had been mentioned existed. I think I should add that the discrimination not only takes the form stated by my hon. 1320 and learned Friend but, as the hon. Member for South Bristol has said, discrimination is also to be found in the case of the Import Tax which was raised from 2 per cent. to 4 per cent. in the case of semi-manufactured goods, and 6 per cent, in the case of fully manufactured goods, while the Belgian Government, by agreement with the French Government, came to an arrangement whereby the tax is only 2 per cent. in the case of Belgian goods. We therefore hold that there is discrimination in that case also as against United Kingdom goods.
My hon. Friend has asked what immediate steps will be taken. As I said, an interview took place on the 18th March, when the case was clearly put to the French Finance Minister. It is only right that we should give the French Government reasonable time to reply to that interview, but I sincerely hope that in the interests of the friendly relationship which has existed for so long between the two countries, the French Government will see their way to meet the wishes of His Majesty's Government in this matter. My hon. Friend has also referred to Section 12 of the Import Duties Act, which empowers the Government to apply duties up to 100 per cent. in the event of discrimination. That is a type of reciprocity which should only be used as a last resort, but we are fully aware of our powers in that regard also.
§ Mr. HOLDSWORTHI am in full sympathy with this question, but will strong steps be taken with Canada in regard to the Exchange Dumping Duty there?
§ Lieut.-Colonel COLVILLEThe hon. Gentleman no doubt knows the terms of the Section of the Ottawa Agreement under which it is the intention of the Canadian Government to remove that tax as soon as possible. His Majesty's Government in the United Kingdom attach the greatest importance to that engagement.
§ Adjourned accordingly at Twenty-nine minutes after Eleven o'Clock.