CLAUSE 1.—(Alteration of Customs duties on colonial sugar, molasses, etc.) (Hansard, 4 June 1934)

§ Sir ROBERT HAMILTON
I beg to move, in page 2, line 10, to leave out from "aforesaid" to "shall" in line 11.
Hon. Members will realise that this Amendment has been put on the Paper with the object of raising the question of quotas as applied to the production of colonial sugar and the importation of that sugar into this country. May I ask you, Mr. Chairman, whether I may refer to the next Amendment which stands on the Paper in my name?

§ The CHAIRMAN
I take it that the two Amendments in effect form one.

§ Sir R. HAMILTON
I thank you for that statement, which will make it easier for the Committee to appreciate the true bearing of the Amendment which I have moved. The first Amendment is to leave out the words "being sugar accompanied by a quota certificate," and the second Amendment proposes to leave out Subsection (2) of the Clause, which is the definition of the quota certificate. I always approach questions relating to sugar with great caution. For some reason or other sugar is always surrounded with a most peculiar set of rules and regulations of every description, with cartels and international arrangements which make it a subject of very great difficulty for the ordinary layman to understand. But here I think that the matter, on the face of it at any rate, is fairly simple.
Sugar is imported into this country from a variety of sources. Some comes from foreign countries, some from Dominion sources and some from colonial sources. From the sugar - growing Colonies, Mauritius and the West Indies, the imports during the last calendar year, 1933, amounted, I believe, to 560,000 odd tons. That sugar has been subject in the past to two different rates of duty. There is what is called the certificated sugar, that is sugar in respect 586 of which a quota has been granted, which comes in at a lower rate, and the uncertificated sugar which is subject to a higher rate of duty. The Bill proposes to vary the rates which were previously in existence. It is proposed to make a slight increase in the rate on uncertificated sugar, but on the certificated sugar it is proposed to make a large decrease in the duty. The old rate on the uncertificated sugar was 4s. 8.2d. and the new rate is 5s. 10d. For the certificated sugar the old rate was 3s. 6.5d. and the new rate is 2s. 4.7d., from which it will appear that the approximate difference between the two rates is 1s. 2d. on the old and 3s. 5d. on the new rate, which shows that there is a very big advantage now to be given to the quota certificated sugar.
At the same time the amount of the certificated sugar that is to be allowed in is very considerably increased. It is proposed now that the amount to be allowed in should extend to 360,000 tons. Coparing that with the amount of 560,000 tons, which was imported from our Colonial sugar-producing Colonies last year, it means that if the whole amount came into this country, 360,000 tons is to come in at the new lower rate, whereas 200,000 tons will be at a very much higher rate because it has not the advantage of the certificate. The amount to be imported is increased to 360,000 tons, and that is all to the advantage, because that amount will come in at a very much lower rate, and it is all to the good that our Colonial sugar should have the advantage of coming in at the lowest possible rate. But I really fail to see why the principle of the quota, which has been called "that insane instrument" which is used nowadays in making these arrangements for exports and imports between different countries, should be applied in this case. I know it has been suggested that this has been done to suit some arrangement by which sugar which would have come to this country will be diverted to Canada.
Frankly, I do not quite understand how that will work out, and the Committee will be glad to understand how the proposal will take shape. But what I really object to is that we should have a quota at all applied to the production of Colonial sugar. On what basis is the quota allocated to the different sugar-producing Colonies? Why cannot the 587 sugar-producing Colonies know exactly what the rate of duty here will be, and why should it not be left to them to make their arrangements accordingly? It is difficult enough, one knows, to meet the variations which may be made in duty, but when they have the variation in a quota also added that makes it still more difficult for the producers, who are possibly trying to raise large capital in order to extend the growth of sugar in our Colonies; it makes it more difficult for them when they do not know what quota may be applied in future years or on what basis it is to be applied. I do not wish to take up too much of the Committee's time, because there are a great many Amendments down to this Finance Bill, but I think the Committee ought to understand at the outset the effect of the working of this quota upon our sugar-producing Colonies. I have confined my remarks to the Colonies. I have left out of consideration sugar coming from the Dominions or foreign countries. I am concerned that our Colonies, so many of which depend almost entirely on their sugar production, should have the freest access to this market, which is the best market in the world. One would like to see those Colonies having the most unrestricted access to this market by the widest preferential door which this country can open.

§ The SECRETARY of STATE for the COLONIES (Sir Philip Cunliffe-Lister)
I understand that the hon. Gentleman has moved this Amendment in order to get a general explanation of these proposals. If we were to accept an Amendment in this form it would have the effect of giving the new preference of 6s. 9d., not to a limited amount of sugar but to all sugar which came from Colonial sources and would have the result of giving a much larger preference than the Treasury ever contemplated—larger, indeed, than would be at all reasonable—and it would also have the effect of diverting all Colonial sugar from other markets to which it ordinarily goes, to this market. I am sure that none of those things is within the intention of the hon. Gentleman and therefore I do not propose to say any more about the precise terms of the Amendment. I think I have said enough to show that its 588 results would be different from what the hon. Member or the Committee would wish to do.
Where I think the hon. Member has got into a difficulty or into a misunderstanding, which is perhaps not his fault as much as ours, is in the word "quota." This is a term which is used to signify a number of different meanings. It is not used here in order to suggest that there is any limitation in the amount of sugar which can come either from the Colonies or from the Dominions. There is no question here of saying "This is the amount of sugar which may come in and beyond that amount entry is prohibited." Sugar can be sent here without limitation. The only question is what is to be the rate of duty and the rate of preference applicable to the sugar which comes here. The Committee will remember that two years ago it was the intention of the House in the Finance Act of 1932 to give an added advantage to Colonial sugar because of the peculiar needs of the Crown Colonies. I need not go into the merits of that proposal. It was generally accepted in the House.
The way in which that benefit was given by the Finance Act of 1932 was to create in the first place a flat rate increase of 1s. in the preference on Colonial sugar, and, in the second place, to give a further 1s. per cwt. of preference on a specified amount of sugar coming from different Colonies and distributed among those Colonies in proportion to their relative production and export. It was contemplated when that was done that adding the 1s. preference would make the preference in the United Kingdom and the preference in Canada roughly the same and that, the two being on an equality, the advantage would be given to the Colonies without any diversion of supplies. The certificate system was deliberately designed in order that while each Colony might have that further benefit, at the same lime, by means of the certificate, which might either be used by a Colony itself or be negotiated and transferred to another Colony, there would be no diversion of the sugar exports from the ordinary channels.
In fact, while the certificate system has worked admirably as a piece of commercial machinery as between the different Colonies, it has not worked in the way we expected in relation to the Canadian 589 trade. There has been the depreciation in the Canadian dollar and there are certian other reasons, but what in fact happened was not what we expected or intended. The Colonial exporter found that he could get a better price here than in Canada, and therefore there was a marked tendency to divert supplies to this country which would ordinarily have gone from the West Indies to Canada. As I say, that was never intended and it is proposed here to give to the Colonies the same or an equivalent financial advantage, such as they would have continued to enjoy had the machinery of the Finance Act of 1932 continued in operation—the financial result will be approximately the same—but to give it to them without encouraging any diversion of sugar supplies.
We abolish the extra 1s. flat rate preference, and we abolish the old certificate system. That is the first step. We get back to a flat rate of preference which in effect means that the rate of preference for Dominion and Colonial sugar alike will be 3s. 9d. Then, in order to give the Colonies a financial advantage similar to that which they were enjoying before we give a certificate of 3s. per cwt. or £3 per ton on 360,000 tons. That will be distributed among the different Colonies in proportions on a formula which is based, first, on the actual advantage enjoyed in respect of certificated sugar in the past, and, secondly, on the aggregate export based on the best year of each Colony. That means that we shall give the same financial advantage to the Colonies, and we shall give it in a very convenient way, enabling the Colony which prefers sending its sugar to Canada to negotiate its certificate with another Colony which ordinarily sends sugar to this country. That will restore the ordinary flow of trade as between the West Indies and Canada while giving each Colony a financial advantage equivalent to that which it enjoys at the present time.

§ Sir R. HAMILTON
While thanking the right hon. Gentleman for his explanation which is I must say rather difficult to follow, may I ask him are these certificates freely transferable as between the different Colonies? I have seen some comments in regard to the working of this and I would like to know whether it means that a Colony can transfer any portion of its quota certificate which it does not use to some other part of the Empire?

§ Sir P. CUNLIFFE-LISTER
Certainly to any other Colony. It is all explained clearly in the White Paper. Each Colony gets so many certificates in proportion to its production. It can either use those certificates and attach them to its own export to this country, or, if it does not wish to export to this country, it can transfer to some other Colony. The certificate system, I may say, has worked admirably in practice.