REVENUE DEPARTMENTS.

HC Deb 01 March 1934 vol 286 cc1290-416

		£
Customs and Excise	…	1,900,000
Inland Revenue	…	2,400,000
Post Office	…	21,000,000
Total for Revenue Departments	…	£25,300,000
Total for Civil Estimates and Estimates for Revenue Departments	…	£153,005,000"

3.45 p.m.

The PRESIDENT of the BOARD of TRADE (Mr. Runciman)

For the purpose of concentrating on the subject of the Russian Trade Agreement, I do not propose to say anything at this stage in the Committee's proceedings on the Board of Trade Vote as a whole. No doubt it will be for the convenience of the Committee that we should devote our attention to the Agreement which is now under discussion. The relations of this country with Russia during the last few years are vividly in the memory of every Member of the House. They will, no doubt, also recollect that the trading activities with Russia have during that time fluctuated, sometimes rising to quite high figures and at others falling to a low ebb, until about 15 months ago, when we were carrying on business with Russia on a very large scale and the payments which we made for her goods delivered in this country far exceeded the payments which we received for British goods which we sold in Russia. But it does not do to accept any one year as a guide in this matter.

If the Committee will look at the volume of trade in the five years from 1929 to 1933 inclusive they will see that the total value of the imports into the United Kingdom from Russia, of goods and materials which are sold here came to a total of about £124,000,000, whereas, on the other side, what we sold to Russia came to a total of roughly about £40,000,000. These figures are, however, subject to adjustment and the £40,000,000, after allowance is made for invisible exports and some other items which must necessarily be added, would, in its adjusted form, be somewhere in the region of about £50,000,000. The gross figure is roughly £50,000,000. The House will see that Russia was actually not buying from us anything like as much as she was selling to us, and there were being created in the City of London large credits which were used not for Anglo-Russian trade but for other branches of their trade activities and financial commitments. That enormous preponderance of trade on one side naturally gave rise to a considerable amount of dissatisfaction in this country, and every effort which was made to redress the balance had so far failed up to a year ago. Even the figures of 1932 still remained most unsatisfactory.

It was therefore one of the first objects which the Government had in view to bring these two figures much nearer together. If the Committee will turn to the table which appears at the beginning of the Schedule, in paragraph (1), they will see the arrangements which have been made by which gradually over a period of four years there will be a proportionate reduction of the Russian imports into this country, or rather, as I should put it, a proportionate increase of the exports from this country to Russia, so that in 1938 the approximate balance of payments would be very nearly even. There is a slight difference—it would be in the ratio of one to 1.1, but as nearly as may be it would be even. The best way to describe the present situation and the agreement entered into by His Britannic Majesty's Government, is to go through the agreement itself. I would point out, in the first place, that this is a temporary agreement. It cannot be regarded as being of the same nature as a permanent commercial treaty. There are obvious reasons why it should be of a temporary and not of a permanent character.

We were anxious, in the first place, to get rid of the old most-favoured-nation Clause which appeared in the 1930 Agreement, which we found by experience was not working automatically, and certainly was not providing us with anything like fair play in Russia. It is impossible to work a normal most-favoured-nation Clause as an automatic piece of commercial policy when, on the one side, you have a private individual acting as a trader, merchant, broker, shipowner and so on, and on the other side a State which can control the whole of the commercial transactions into and out of a country.

It is quite obvious that, without any infringement of the most-favoured-nation Clause a State which is in that position is able to transfer its patronage from one country to another, to make its purchases where it pleases, to close down its commercial relations where it pleases, without any infringement of the most-favoured-nation Clause in its orthodox form. We felt that to continue on that basis was bound to be unfair to traders in this country and was not a necessary part of good relations between Russia and ourselves. Therefore in Article I, although we set out the old most-favoured-nation phraseology and retain as much of the advantage of that treatment as we can obtain from a temporary commercial agreement, we have at the same time taken steps which will safeguard us from some of the obstacles lying in the way of trade between the two countries.

The obligations undertaken to Canada at Ottawa to safeguard preferences against the creation or maintenance of low prices by State action also made it impossible for us to continue to give unqualified most-favoured-nation rights to the Soviet Union.

The Russians have now accepted our view that we cannot continue to buy largely from them while they buy so little from us. If the Committee will allow me to say so, I think that is a very handsome admission on their part, and it was absolutely necessary as the foundation of our negotiations during the last 12 months. The Agreement accordingly makes provision whereby the Russians undertake so to adjust business that there will be, after the initial period for change-over, an approximate balance of payments under which the money we get here for their goods will in the main be spent here. I do not imagine that in any quarter of the House there will be any objection taken to that provision. The Russians have acknowledged our right to prohibit their goods if they are offered at prices which interfere with the preferences in the Ottawa Agreement. There, again, I think we can express our gratification that they have been ready to accept our view.

The Agreement begins, like the 1930 Agreement, with the most-favoured-nation Article, which is, of course, subject to the qualifications which I have just mentioned to the Committee. As regards persons, it provides that the subjects, citizens, etc., of either country shall enjoy in the other country all trading facili- ties, rights and privileges accorded to the subjects, citizens, etc., of any other country. As regards goods, the goods of either country shall enjoy all the trade facilities, rights and privileges accorded to the goods of any other foreign country in all that relates to import prohibitions, restrictions and Customs duties. The procedure laid down in regard to preferences is that if either party represents to the other that preferences are being frustrated or home production detrimentally affected as a result of prices created or maintained by State action, there are to be negotiations. If the negotiations succeed, all is well. If the negotiations fail, the first party may intimate to the other that the most-favoured-nation treatment in respect of import prohibitions shall cease to apply to the goods in question. Such an intimation may be given to take effect at any time not earlier than three months after the representations have been first made.

It has been asked why there should be this interval of three months. The object of the three months interval is to allow for continuous contracts not being interrupted. It would be impossible to carry on commercial business through their departments there or by our individual traders here if the period was so short as possibly, quite unexpectedly, to bring the transactions to nought. Therefore, we must provide sufficient time for the normal working of commercial and international machinery. I have no doubt that we might have established a different period, but three months has been the result of a good deal of discussion, it is a compromise which has been reached by us, and we think, on the whole, it is a fair compromise. The difficulty was to protect home and Empire producers in the manner contemplated for the Canadian producer in the Ottawa Agreements, without doing something that was incompatible with security for Anglo-Soviet trade, and unless some security could be offered there was no incentive for the Soviet Government to meet our desire for balance of payments. The Committee will observe that we come back to our main aim, that of reaching so far as possible a balance of payments in nearly all the conditions laid down in the Agreement.

It may be asked why legislation is not introduced to take powers to prohibit or restrict imports from Russia in order to protect home producers and to safeguard our preferences against unfair Russian competition. The course that will be taken will not, I hope, require any fresh legislation. All that would be necessary if notice were given would be that we should enter upon negotiations. If it were impossible to reach agreement then we have retained powers which will enable us to bring the first Article of the present temporary Agreement to an end in three months. The notice would operate as from the date of the notice of complaint being given and not at the end of the failure to negotiate a settlement. The effect of that is that in the shortest possible time and with no undue delay any infringement of the conditions under which preference is given by which it might be frustrated could be brought to the notice of both parties and dealt with without delay, and the machinery is quite complete for bringing the first Article of the temporary Agreement to an end. I hope, however, that that will not be necessary. As far as we can anticipate there does not seem to be any prospect of the machine having to be operated, at all events in the present time or in the near future.

If the Committee will turn to Article 3 they will see that we there provide for the balance of payments which is covered in the first paragraph of the Schedule. I do not need to read that paragraph, because I have no doubt that it was one of the first things that was examined by hon. Members when they obtained the White Paper, but it does provide for Soviet payments bearing in each year an increasing ratio to Soviet proceeds. That appears to us to be the best way to meet what must be, in any case, a very difficult trade to conduct under two different systems. The second paragraph of the Schedule provides that, for the purposes of the Agreement, the Soviet proceeds shall be deemed to be the value of the imports from the Soviet Union as recorded in the United Kingdom trade accounts—a quite satisfactory arrangement for us, subject, however, to a deduction of 97 per cent. of the value of canned salmon, which, though consigned from Kamchatka in the Soviet Union, is really Japanese. The salmon catch of that area is produced by Japanese companies, and is operated with Japanese labour. The reason why we make it 97 per cent., and not 100 per cent., is that the 3 per cent. represents certain rents and taxes which are paid to the Soviet Government by the Japanese fishing interests. It may appear to be a small thing compared with the total volume of our trade, but I would remind hon. Members that last year the total imports of canned salmon from the Soviet Union worked out at £941,000, and it was thought necessary to take this fact into account in making the adjustment.

In what way are the Soviet payments to be made? We reach the total figure provided for in the Schedule by adding together the sum of the United Kingdom exports and re-exports to the Soviet Union as recorded in the United Kingdom trade accounts, less the value of any goods purchased on credits maturing after the end of the year; secondly, payments for United Kingdom exports and re-exports of previous years; thirdly, payments for the chartering of British ships; and, fourthly, 6½ per cent. of the total trade turnover of the year, that is to say, imports plus exports, to represent the excess of Soviet invisible payments, other than for shipping, over United Kingdom invisible payments. These items, it appears to us, cover the whole of the amount which ought to be taken into account and carried through this calculation. The arrangement that invisible payments should be assumed to be a fixed percentage of the trade turnover is intended to obviate the necessity of trying to arrive at the actual payments of the year, a computation which is always very difficult to adjust, and may be very difficult in their own case, and certainly lead to a good deal of controversy even in our own.

The invisible exports amount, as far as we can tell, to a comparatively small sum, but they must, of course, be taken into account. They cover interest on credits, insurance premiums, salaries of Soviet administrative staffs in the United Kingdom, commissions, brokerage and discounts, the effect of which is to reduce the actual proceeds obtained by the Soviet below the values recorded in the Trade Accounts. We put forward certain claims for allowances on our side, the most important being the expenses of British ships in Soviet ports. The questions whether each item was in principle admissible, and what allowance should be made for those that were, were discussed in great detail before the final percentage was reached. This percentage, I admit, is not a scientific figure, but it was the best that could be produced as a result of prolonged negotiation. We do not expect that in any one year the Soviet credits will turn out to be exactly equal to the amount which they should have reached. Paragraph 3 of the Schedule provides that if they are less than they should have been, the deficiency will be debited against them in the next year; in other words, their obligation to spend in the United Kingdom in the next year will be pro tanto increased. Conversely, if their payments are higher than they should have been, they will be given credit for it in the next year. Paragraph 5 provides that Soviet payments in any year are not in any case to fall short by more than 7½ per cent. of the amount which they should have reached.

I wish to inform the Committee very briefly as to the arrangement which has been made in regard to shipping. It was found to be impossible to arrange for any definite percentage of shipping to be allocated to Russian trade. The objection taken by the Russians to that figure being too rigid was that they naturally did not wish to put themselves, as they say, at the mercy of what might be a shipping ring. They agreed that they would allow shipping earnings to appear as one of the items which would be used in the calculation of the balance of payments. The inducement, therefore, to the Russian authorities to charter British ships is considerable, but, in addition to that, the trade representative of the Soviet Union in Great Britain wrote the following letter to us: In connection with the question regarding the utilisation of British shipping services raised by you during the negotiations, I have the honour to inform you that it is the intention of the Soviet Government for the duration of the temporary Anglo-Soviet Commercial Agreement to utilise in an increasing proportion British shipping services, provided that such services are available at the prevailing market rates. That arrangement as it stands must, of necessity, be elastic, but, as I say, there is a continuous inducement brought about by the operation of the balance of payment account for them to take on British ships, and I have no doubt that British ships will be as cheap as those of any other flag.

There are a number of questions which arise which have no direct bearing upon the trade agreement as a trade agreement, but to which I must make some reference. In the first place, I would point out that the Soviet Union have declared that they are prepared to accept—and it is so provided in the agreement—the jurisdiction of the United Kingdom courts in respect of transactions entered into by their trade delegation, and we have provided for our courts remaining the arbiters in all such cases which may arise. It is to the credit of the British courts that they should have been accepted so readily by those who are negotiating on the Russian side.

Another question which is rather outside the purview of ordinary trade agreements has to do with the limited diplomatic immunity given to the representatives of the Soviet trade delegation. By the first paragraph of Article 5 it will be seen that they have the right to establish a trade delegation in London, and by the second paragraph diplomatic immunity is accorded to the trade representative and his two deputies and to their offices. These privileges are rather less than are granted by some countries which have commercial agreements with the Soviet Government, but they appear to us to do all that is necessary, and they have been accepted as satisfactory by the Russian representatives.

I think that I have covered the main subjects which are dealt with in the agreement itself, but there are two other questions to which I must refer which are not incorporated in the agreement, which, naturally, must have a bearing upon the relations between this country and Russia. The first has to do with debts and claims. We have formally retained all our rights in respect to debts and claims. We were unable to obtain any satisfaction for our claims on the old pre-Soviet régime, but we found it necessary to hand to the representatives of the Russian Government the following declaration on the subject of debts and claims: His Majesty's Government in the United Kingdom remind the Soviet Government that there are debts and claims, both governmental and private, outstanding against them; that the existence of these debts and claims has been recognised on several occasions by the Soviet Government; that their settlement was one of the conditions for the resumption of diplomatic relations between the two States in 1929; and that the negotiations on this subject which took place during 1930 and 1931 were discontinued owing to the insistence of the Soviet Government that financial facilities should be placed at their disposal, before they would consider compensation for any categories of claims. His Majesty's Government in the United Kingdom desire to record that they maintain and assert both their own claims and those of their nationals. They trust that the Soviet Government are still animated by the desire which they have expressed on former occasions to settle this question by negotiation on a just and equitable basis at the earliest convenient opportunity. They consider that the negotiation of a permanent Treaty of Commerce and Navigation must be accompanied by a satisfactory settlement of these debts and claims; and they must therefore regard any commercial agreement which may be negotiated meanwhile as being of a temporary and transitional character pending a final disposal of this question. Having safeguarded ourselves for the future in that declaration, I now come to the Lena Goldfields, of which my hon. and gallant Friend the Secretary to the Overseas Trade Department, who has a very close and intimate knowledge, will give the full story. He has been in close touch with this matter for a long time. But on one thing, I think, I can assure my hon. Friend behind me, and that is that the representative of the Lena Company has gone out to Moscow with better hopes of arriving at a reasonable settlement now than he ever had before. But when the suggestion is made to me that we should postpone the signing of the agreement until these claims are dealt with, I would point out that, during the suspension of trade between the two countries, not only was Russia inconvenienced, but we also were inconvenienced, and, naturally, we were anxious to get back on to a normal trading footing as early as possible. The difficulties of the negotiations during the last 15 months have exhausted the patience, I have no doubt of the representatives of both sides, but, in the desire to reach a satisfactory and agreed settlement, we were prepared to spend a good deal of time consonant with the preservation of our trading relations with Russia as a whole.

Do not let us imagine that we are dealing with any very small matter in covering the ground which has been dealt with in this Agreement. The development of Russia is sometimes chequered, but, on the whole, it appears during the last two years to have gone ahead. It is possible, as far as we can tell from such information as we have, that there will be a considerable extension in the amount and character of the purchases made by the Soviet Government in this country. Only within the last few days Mr. Andreyev mentioned that there would be in their programme for the next five-year plans for relaying 40,000 kilometres of railways, an increase of sidings, for which 18,000 kilometres of rails would be required, and the construction of 5,000 engines including 450 electric engines. Second tracks are to be laid on a large number of lines, including the Trans-Siberian Railway and the railway to Archangel. There will also be 10,000 kilometres of new lines laid down and in other departments of national activity there undoubtedly will be large purchases made in the future. It is our desire that those who represent our interests in this country will be early in the field to obtain specifications and be able to draw up their estimates and submit their tenders.

I cannot imagine at this time of day anybody would wish to interrupt the normal working of trade between Great Britain and Russia, and certainly there will be no such disposition expressed by those who represent the herring fishing industry in this country. I will not go into the history of the herring fishing industry for 1932 and 1933 except to say that now that the Russian representatives are in the market to buy herring they find, somehow or another, that they have evaporated, or, at any rate, that the amount to be sold is so small as not to fulfil their total requirements.

Mr. BOOTHBY

Does the right hon. Gentleman realise that within the last 24 hours an offer of herring was made to the Soviet authorities, who said that they would not purchase them at a price over 25s. per barrel, which is far below the cost of production?

Sir MURDOCH McKENZIE WOOD

Is the President aware that the amount of herring cured in East Anglia during last season was fixed so as to be enough and no more as could be absorbed by other countries, excluding Russia; and that a special request was made to the Government that if this Agreement were signed earlier it would enable them to cure more?

Mr. RUNCIMAN

I think that we can trust Aberdeen to drive a good bargain. There is no doubt about one thing. The large amount of herring which we thought might be thrown on the hands of the fishermen is very much less than any of us had anticipated. I am glad to hear it. I am not so much concerned with the Russian purchases as I am with the Scottish sales, and there is no doubt that the Scots have not done so badly.

Sir M. WOOD

Is the right hon. Gentleman aware that practically every barrel of herring which has been sold this year has been sold at a loss?

Mr. RUNCIMAN

I am very much surprised to hear that. However, I hope that my hon. Friends will not interrupt any further and that they are quite satisfied with the Agreement. Turning away from herring, there are other matters of great importance which are directly affected by this Trade Agreement. We have sold during the five years 1928–32 nearly £500,000 worth of herring, but we have sold about £17,000,000 worth of machinery, and the demand for new machinery from Russia is likely to continue. It may not be on the same scale, but it will continue. The total of machine tools sold to Russia represents the bulk of our exports of machine tools during the latter part of the same period. We sold £3,250,000 worth of iron and steel and iron and steel manufactures, and I am sure that no one can complain of those purchases. Not only has the United Kingdom been able to obtain very valuable Russian orders, but the re-export of Empire products to the Soviet through London has been very valuable. In this period of five years Russia bought from this country £2,000,000 worth of tea, and £3,000,000 worth of rubber, and she bought direct from this country about £1,250,000 worth of raw wool. If the past is an indication of the future, I trust that we shall see considerable extensions of our sales in Russia without any detriment to the importing interests of this country.

The old Agreement had several outstanding faults. We have, we hope, avoided those which were greatly to our detriment. What is desirable in our trade relations with Russia is that they will order our goods and, having ordered them, will pay for them. It is necessary, therefore, I should say that up to the present in the credits which have been made for exports from this country to Russia there is not one penny of bad debt. All payments have been met promptly, and during the interruption brought about by the trial of the engineers last year every payment was met punctually. I have no doubt that that will continue. It is absolutely necessary if there is to be stable and continuous trade between this country and Russia that those who sell should be assured of punctual payment. The total amount which has been advanced through the Export Credits Department for the purposes of Russian trade runs out to a very large figure, and I am glad to say that the Export Credits Department has so far been able to make a profit on that turnover. There is a considerable amount standing to their credit.

Sir STAFFORD CRIPPS

Can the right hon. Gentleman tell us what the profit is?

Mr. RUNCIMAN

I am afraid not, and I do not think it would be advisable, but I shall be glad to communicate with the hon. and learned Member. The chief point in the new agreement is that we induce Russia to set her name to a relationship between us and them which is to our mutual advantage and which brings us a little nearer to a fair footing. We have for the first time arrived at a position when we can contemplate in the short period of four years reaching a fairly equal equipoise as between their trade and ours. If we can succeed in the objects we have in view, we do so with the full concurrence of the Russian Government, and I have no doubt that we shall see revived in that part of the world—one of the greatest potential markets in the world—great trade activity in which we shall have a full share.

4.25 p.m.

Mr. DAVID GRENFELL

I beg to move, "That Item Class VI, Vote I (Board of Trade), be reduced by £100."

After the lucid and clear exposition of the President of the Board of Trade we feel almost sorry that we have to move a reduction of £100 in the Vote he has presented to the Committee. We are grateful indeed for the way in which he has explained the Agreement in all its details, but nevertheless, we confess to a sense of disappointment. We did not find the right hon. Gentleman very enthusiastic in presenting the Agreement. The right hon. Gentleman has accomplished so much by way of agreement here and agreement there, covering a large part of the trade of this country, that one would have expected him to show a pardonable pride in this his latest achievement. But the right hon. Gentleman has had to have regard not to those on this side of the Committee whom he was directly addressing, but to hon. Members behind him who were waiting for any sign of weakness or sympathy he might display towards the Russian Government. The right hon. Gentleman has adopted the role of a negotiator who has to report on the result of his negotiations, and we will, therefore, excuse him abstaining from undue enthusiasm or sentiment.

It is at any rate some satisfaction to know that this Agreement, long delayed, has now been completed. The delay has occasioned great apprehension. There is no matter connected with the trade of this country which has received so much attention outside this House as the question of the restoration of trade with Russia. It has been discussed at every by-election by Members of all parties, and on more than one occasion the Government have claimed the confidence of the electors on the ground that the right hon. Gentleman and his colleagues were anticipating a successful result of these negotiations. Not only have the electors been led to expect great things from this Agreement but the trading interests of the country have been much interested and have made their representations. Not only the producers of herring and machinery, and ships and electrical goods, but those who are buyers and sellers of these commodities have joined hands with the producers in demanding an early restoration of trade relations with Russia. A statement appears in the "Times" to-day which is typical of the kind of communication hon. Members have been receiving. It is from one who must be regarded as an authority on Russian trade, from the chairman of Mather and Platt, who have had direct business communication as engineers for more than a quarter of a century with Russia. They have a great reputation in that country, there is no Russian engineer who does not know their name, and, strange to say, can pronounce it well because it is so frequently used. This is what Mr. M. D. Mather, the chairman of the company, said yesterday at their annual meeting: It has been a misfortune of the first magnitude that at a time when the country's export business was restricted the possibilities of trade with the Soviet Union have been hindered by the lack of proper trade facilities. In our own case we obtained no orders from Soviet Russia during the year under review, and in view of the considerable volume of Russian business which has helped to provide profits in the past eight years, it is fortunate that we have been able to show fairly satisfactory results with one large market entirely closed. There is the business interest, there is the voice of a business man who does know where good business can be done. He gives testimony that in the last eight years profits have been made from the business connection between his firm and its Russian customers. When I was in Russia eight years ago I heard the names of Mather and Platt, the British Thomson-Houston Company, Hornsby and Ransome's of Lincoln, and others, spoken of with respect and great familiarity, which gave great encouragement indeed for the future relations between this country and Russia.

The President of the Board of Trade has produced this Agreement, and I think he should be proud, because he has deliberately chosen to organise the trade of this country by agreements of this kind. The right hon. Gentleman and the President of the Board of Agriculture represent a very great departure indeed from the past trading policy of this country. The new system of trade agreements which has now been launched is being watched very carefully by everyone who is interested in the future trade and industry of this country. The right hon. Gentleman is the author of a New Economic Policy of planning. It is pretty well known in Russia. He is the author of a policy which bodes good or ill for this country. We are carefully watching all that the right hon. Gentleman does. We have some apprehension. We are not quite satisfied that his sudden departure from his lifelong tenets and his sudden adoption of new ideas, are sound. But the right hon. Gentleman has convinced us that he does know his mind, and that those behind him have not driven him quite as far as they expected he would go when he deserted the Free Trade faith and became the champion of planned industry. The right hon. Gentleman is not yet a Protectionist in the full sense of the word. We have some hopes of the right hon. Gentleman in that respect.

All these Measures will fit in very well with the plans which we shall have to develop when it becomes our turn to sit on the Government side of the House. But this policy of the right hon. Gentleman does fit in with the idea of planned trade. Strangely enough, a good many people have come to believe, with the right hon. Gentleman, that we have reached a phase in the history of the world when trade must be planned. While we doubt very much the efficacy of several parts of the right hon. Gentleman's plans, we respect his courage and consistency in insisting that trade shall be planned and that the utmost governmental encouragement shall be given to trade between this country and the rest of the world. We certainly are not quite satisfied that this Agreement contains all that is necessary for the fulfilment of the right hon. Gentleman's plans for the complete regulation and control of trade.

The right hon. Gentleman eloquently, if briefly, referred to the special position of Russia. It is a country very extensive in area, rather remote from us, and the right hon. Gentleman described clearly the kind of development which Russia is to undertake. He mentioned the transport development which is to be undertaken in the next few years. His statement was a revelation of the conditions existing in that country now, with its very meagre transport facilities. The right hon. Gentleman also referred to the very small volume of trade now being done by Russia and the opportunities for considerable expansion which existed. In the pre-War days, under the old regime in Russia, Russia's trade in this country was of very small volume proportionately. She sold to us then less than £40,000,000 worth of goods and took from us about £23,000,000 worth. The balance of trade was always against us. The volume of trade was very small in proportion to Russia's population.

If it is true that the volume of trade with Russia to-day is small compared with the volume of trade with other countries, it should be remembered that in relation to the trade of the world the amount of exports received from Russia in 1933 bore the same proportion towards our total trade as in 1913, and that the volume of exports to Russia in 1932 bore the same proportion to our total exports as in 1913, when there was no political quarrel with Russia. But Russia has been for long in a very special position. She went into the War and she came out of the War broken as no other country was broken. Devastated, bankrupt and denuded of all kinds of material and means of comfort, the Russian people were compelled to break away during the War in order to try to reorganise their national life and to substitute something for the chaos in which they found themselves.

There have been revolutions in Russia since the pre-War years. The consequences of those revolutions are still there. They must be met and recognised and acknowledged as a part of the world system in which we have to live with other countries. It is useless trying to maintain prejudices on political grounds between this country and that great community of 160,000,000 or 170,000,000, who buy from us now, and will buy for some time to come under the most favourable trade facilities, only a few shillings worth of goods per head. That amount we hope will be increased, so that when the relative volume of exchange of services between ourselves and that great country is reviewed, we shall see a considerable addition to the volume of our foreign trade, profitable to the whole country even as it has been profitable to Messrs. Mather & Platt in the past eight years. There is the opportunity for a large trade.

The post-War trade of Russia has been very small. The President of the Board of Trade referred to the figures for the last three years and they were not very gratifying. But the right hon. Gentleman knows quite well that the Russian people have not been given anything like the opportunities which they had a right to expect from us in the promotion of trade. There has been a limitation due to political influences, political prejudice, and lack of confidence, caused by the constant agitation against Russia in this House and outside. Hon. Members in this House have done all they could to destroy confidence, to destroy the possibilities of trade between this country and Russia. In every newspaper almost every day of the year there have been slanders and calumnies of all kinds against the Russian people and Government. Why then should anyone be surprised that the volume of trade has not been greater in recent years? The political influence, we hope, will now be dispelled by the appearance of the right hon. Gentleman on the stage with a temporary Agreement in his hand and with the prospect of a much larger development as a consequence of this very reasonable and generous beginning of trading relations between us and Russia. The history of the negotiations I shall not deal with. We know that in the last 12 months all kinds of petty, niggling questions have been raised in this House and outside. The hon. Member for South Kensington (Sir W. Davison), who sits in his place so watchfully in the interests of his own shareholders——

Sir WILLIAM DAVISON

I have no shares and I have never had any shares or interest in any of the companies to which I have referred.

Mr. GRENFELL

I was referring only to the hon. Member's paternal interest in the company which he has adopted. More than half the prominent people in that company are not Britishers. The hon. Member has personally contributed a great deal to the delay in the achievement of the settlement. The history of the negotiations has not been at all pleasant. There have been side issues and extraneous subjects raised. From the beginning all kinds of difficulties have been raised, and they have been maintained until the end. All that, we hope, is a thing of the past. We hope we shall hear no more of boycotts and suspensions, to the accompaniment of great cheers in this House from Members who do not realise what harm they are doing to their own country. Let us come to the present Agreement. I could not hope to emulate or to come anywhere near the descriptive capabilities of the President of the Board of Trade in outlining the Agreement. The Agreement is an attempt to make trading conditions possible.

There are a good many questions that we wish to put to the right hon. Gentleman. He insisted, as he rightly should, that it was his purpose to try to achieve a balance of trade between us and Russia. These new proposals, he said, are not at any time to exceed 10–17. That is to say, we are to receive 17 from Russia for 10 which we send to her, and the 17 is to be reduced so that in the course of five or six years we shall have achieved a perfect balance of 10–11 or 1 to 1.1 in all transactions with Russia. I do not think that that is an impossible condition. I believe that the Russians desire trade with this country and to give us a full return for all the goods they desire to buy from us. If the world is to undergo a planning system it is fair that a balance of trade should be struck. Under the system it will not be possible to allow a great disparity between the buyers and sellers in different countries.

There is one thing to which I would call special attention. The right hon. Gentleman rightly said that this is not the final word. We note an absence of specified quantities and descriptions of goods. How often the Ottawa Agreement crops up here, and how often everything has to be done to fit in with it. The right hon. Gentleman's hands are tied. His survey of the world's trading necessity is affected by the Ottawa Agreement, which was rather an embarrassment to him, I am sure, and has made very great difficulties for the Government. The right hon. Gentleman referred to the Ottawa Agreement time and time again. I have noted that in the Ottawa Agreement and in all the other Agreements there have been specifications. In this Russian Agreement there is no reference, even to herring, no reference to any kind of commodity which we are to receive from Russia or which she is to receive from us.

Mr. BOOTHBY

Does not the hon. Member think that it is much better not to specify commodities or aggregates in treaties of this kind?

Mr. GRENFELL

I think it is better not to specify either quantities or descriptions of goods but to allow the widest possible measure of freedom within the framework of the treaty. We would like to be assured that there will be opportunity for the utmost possible extension of trade and the utmost encouragement of every kind of trade that is beneficial to us and to Russia. That is one respect in which this agreement differs from previous agreements which the right hon. Gentleman has brought before the House. In the Danish, German, Swedish and Argentine agreements, quantities and descriptions of goods have been specified, conditions have been laid down and percentages, proportions and quotas have all been outlined. In this agreement there are no such specifications and, as I say, I am glad that the right hon. Gentleman has left the field open for the widest possible extension of trade provided he gets his balance as set forth in the schedule to the agreement.

There is the other point to which the right hon. Gentleman referred—that is the question of credits. He said that in the schedule there was a provision for 6½ per cent. of the value of the goods to be taken into account and he further said that provision is to be made for the payment of interest on credits supplied to Russia. When he was asked whether that had been found necessary, whether there had been losses and whether he would state the amount provided under these trade facilities, the right hon. Gentleman said that there was a profit but that he did not wish to disclose the sum. We wish to know, are credit facilities to be given to Russia and will due regard be paid to the convenience both of Russia and of our own traders? Are the facilities to be generous, or are there to be undue restrictions and is the late of interest to be such as is likely to prejudice the extension of trade?

Sir WILLIAM LANE MITCHELL

I think the hon. Member misunderstands the position. There is a guarantee which the bank discounts for the trader and there is insurance.

Mr. GRENFELL

We are not gaining any advantage if we have an insurance scheme which is making a profit for the people who are controlling it and if at the same time the volume of trade is being limited on that account. We wish to know if it is intended to give the utmost credit at the lowest possible rate of interest, not merely for the convenience of the Russians but for the convenience of those in this country who trade with Russia?

Mr. RUNCIMAN

I think the hon. Member is labouring under a slight misapprehension. We do not make any guarantees to the Russians. The advances are made to the British trader and the British trader is the person responsible for the repayment. The position is that the individual traders and not the Russian Government are those who obtain these facilities.

Mr. GRENFELL

If the guarantee is not being given at this end or if the rate of interest which is charged is too high, then the price of the goods must be higher and there must be an additional burden on those who are doing the trade. While I am not arguing in favour of dumping or anything of that kind, one would like to know that these are really trade facilities and not opportunities for people who finance these schemes to make money regardless of the amount of trade which is done. That is the point which has occurred to me in connection with this aspect of the question. I think the right hon. Gentleman ought to have some supervision over this matter. I hope that the rate of interest is not fixed and that he will be able to exercise some influence from time to time to see that credit is advanced at reasonable rates in order that the utmost measure of trade may be done between this country and Russia.

Credit in this country under present conditions does not belong to the Government. Owing to the capitalistic system of society a few people are in a position to mortgage our national assets, in the form of property of all kinds and to manufacture credit to suit their own convenience. They can make advances to Russia or to any other country at their convenience and they can also withhold that credit. It is not their credit however but the public credit which is pledged in all transactions of that kind. One would like to believe that these credits are to be a form of national assistance to national trade. In America, I understand that in order to promote trade with Russia an American-Russian bank has been instituted. I have only read sketchy references to it in the newspapers but apparently a banking system has been set up for that special purpose. One would like to believe that in our own case the nation's credit will be used for the promotion of trade with Russia and that it shall not be withheld without national reasons.

Sir ARTHUR MICHAEL SAMUEL

Is not the hon. Member misleading himself and unintentionally perhaps misleading the Committee in his mixed-up statement? Is it not the case that the English trader takes a bill accepted by the Russians? He gets it guaranteed up to a certain proportion by the Export Credit Scheme, for which cover he pays an insurance premium. He takes the bill into the market; it has, to some proportion, the backing of His Majesty's Government. That does mean that the guaranteed amount makes the bill the finest paper so far. The trader probably gets it discounted to-day at 1 or 1½ per cent. and that is all, and on Government paper terms.

Mr. GRENFELL

It is the insurance premium which I have in mind all the time.

Sir A. M. SAMUEL

It is not the same thing as the rate charged for turning the bill into money. He mixed the two.

Mr. GRENFELL

I hope that the Government will see to it that the cheapest possible form of insurance, if you like to call it so, is placed at the disposal of those who wish to trade with Russia. As regards the banking facilities which are being provided in the United States, I would point out that every country is now striving to increase its trade with Russia. The right hon. Gentleman wants to be early in the field but other people are there already with the richest offers which they can make, seeking the largest possible measure of Russian trade. We would like the right hon. Gentleman to use the weight of his influence in favour of completing this document and arriving at a treaty, so that the large harvest which he visualised may be reaped to the advantage of the traders and the people of this country.

This matter is also very important in its relation to the peace of the world. Certain hon. Members have run the risk of very grave disagreement between this country and Russia, time and time again. They have even run the risk of plunging this country into armed hostility with Russia because of their political prejudice. Russia is one of the most peaceful countries in the world. Since the revolution Russia has not made war on any of her neighbours and does not desire war. She has made declaration after declaration to that effect. If the right hon. Gentleman, with his ideas of planned trade, wishes to make a contribution to the peace of the world—and we believe he can do so by means of his trading agreements—he will listen to the words of M. Litvinoff speaking on behalf of Russia. M. Litvinoff is a diplomat who has earned world-wide respect for his methods and capabilities. He has been received in all the important countries of the world; his word goes very far indeed and he has said, in reference to these treaties: We are convinced that sincere and good relations between the Great Powers are not only a necessary condition but are a guarantee for general peace. It is expected that a temporary trade agreement will be signed shortly which, removing as it will certain misunderstandings, we may hope will make possible better relations between ourselves and Great Britain. Thus we see that the Foreign Minister of the Union of Soviet Socialist Republics desires better relations with Great Britain. Great Britain, I believe, desires good relations with Russia. The people of Great Britain desire good relations with the people of Russia as with all the peoples of the world. This country was never in a more peaceful mind, never desired peace more strongly than to-day, and these trade agreements are evidences of an intention to maintain stable and peaceful relations with all the peoples with whom we are brought into contact. Looking forward to the promotion and perpetuation of peace between this country and Russia, we welcome this agreement as a contribution to the general peace of the world. I dislike in a discussion of this kind bringing in considerations of peace and war and military considerations, but they loom in the background and cannot be ignored. Anyone who looks impartially upon the state of the world must recognise, that it is in the interest of this country to have a peaceful understanding with Russia.

If it is said that economic activities contribute to hostility between nations; if it is argued that economic activities are responsible, partially or mainly, for the armed rivalry existing to-day, then surely each gesture and each declaration showing that we desire peace in trade is a declaration in favour of general peace and freedom from armed hostility. Looking at the world to-day, it is difficult to assess the amount of danger which lurks in every direction. The world is in a melting pot from which no one knows what is going to emerge. Political systems and constitutions are all being thrown into that melting pot; there are changes and disruptions in all parts of the world the end of which we cannot foresee. We would receive this Agreement with great satisfaction if we were convinced that it would be followed up assiduously by an attempt to reach a full and clear diplomatic understanding with Russia.

We believe that a new world is in the making, in which competition and rivalry will play a much smaller part than they have played in the past. We believe that the new world must be a world of co-operation. Meantime the old world goes on dangerously, day by day, and if the crash occurs it will be the end of civilisation as we know it in our time. There will be a need then for gathering up the scattered and broken ends of that civilisation, wherever they can be found, after a catastrophe which may occur at any time and which is, indeed, almost within sight at the present time. In order that we may be saved from that catastrophe, from armed conflict in the world, we urge upon the Government to go forward with the making of these agreements, to come to reasonable understandings for the exchange of goods with nations in all parts of the world, to make trade easy and agreeable and profitable for all the parties involved. We ask the Government not to be satisfied with this Agreement, but to regard it as an instalment towards a larger and a fuller understanding which will cover not only the trade but all the relations between this country and Russia.

5.0 p.m.

Sir M. WOOD

The future prosperity of my constituency is so much bound up with increased trade with Russia that I am glad to have an opportunity of speaking on this Agreement. After the long suspense we have had, at last, an Agreement, and it will be accepted with relief even by many to whom it will come as a great disappointment. At about the time when the last Agreement was broken, I was speaking in the Debate on the Financial Resolution connected with the Ottawa Treaty, and I took occasion to warn the Government as to the result on the herring fishing industry of the breaking of the Agreement, but the right hon. Gentleman the Chancellor of the Exchequer would have none of my warning and said, with reference to myself: His whole argument in regard to the herring industry was based on the assumption, entirely fallacious and entirely without foundation, that the herring industry is going to be imperilled or endangered by anything that may arise out of this Resolution. I do not know if the Chancellor of the Exchequer thinks that the industry has not been imperilled since then, but I can assure him that everyone connected with the industry in any way would tell him that it has been imperilled and is to-day in the most dire peril indeed. The trade were largely pacified by being told to wait and that their long suspense would be made up for by the fact that the new Agreement would probably contain a Clause binding Russia to take a certain minimum quantity of herring every year. Now, after this long and weary wait, we have got the Agreement, but there is not a word in it about herring. I can understand the difficulties that the Government have had to encounter, and I have no doubt that they did their best to get a Clause of that kind.

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

Will the hon. Member say what official pronouncement was made to the effect that the Agreement would contain an undertaking to buy a specific quantity of herring?

Sir M. WOOD

There was no official announcement so far as I know, but the industry were led to believe, and did believe, that the new Agreement would contain such a Clause, and, as I say, they have been grossly misled, and they greet the Agreement now come to with the most bitter disappointment. The result of the Agreement is that, as far as the herring industry are concerned, they are back at the point at which they found themselves in 1932, when they were making real progress with Russia and when they had just made some considerable sales and had prospects of others. The right hon. Gentleman the President of the Board of Trade had something to say about the herring industry in his speech this afternoon, but I rather think he was under a misapprehension. It seemed to me that he wanted the Committee to understand that those who had been defending the interests of the herring industry in this country had been exaggerating the position, that they had been crying, "Wolf, wolf," when there was no wolf, but I am sure he is misled in that matter and is under a misapprehension as to the facts.

Last summer was one of the most disastrous fishings the herring industry had ever encountered, and one of the first things that I did, when I came back to London from Scotland after the long vacation last year, was to go round the Departments particularly concerned and impress upon them the necessity of something being done at once to try to get the Agreement signed in order to give the industry the benefit of the Agreement. I have no doubt that the hon. and gallant Gentleman did his best, as well as the Government as a whole, to get the Agreement signed as early as possible. I am not blaming them about that, but I am pointing out what the result has been. They failed to get an Agreement, and, of course, the industry had to take what steps they could to protect themselves.

As I tried to point out to the right hon. Gentleman during his speech, they deliberately restricted their cure last season to the quantity which it was estimated would be absorbed by the other countries besides Russia. That quantity, I may say, was probably the lowest within living memory: it was only about 40 per cent. of what had been cured as late as 1930. As a result of the delay in the signing of the agreement, however, the other countries imagined that they could probably, by making a ring or holding off and buying their day-to-day requirements only, get the fish at their own price. The result was that the fish lay there largely unsold, and the disaster which the industry had been encountering seemed likely to be greater than ever. When the signature of the agreement was delayed from week to week and from month to month, the situation became very grave indeed, and every Member of this House representing a herring fishing constituency was bound to do what he could to impress on the Government the gravity of the situation. We did so, and I am sure the hon. and gallant Gentleman will not believe that we have in any way misled him.

It was thought at one time that the industry had probably overestimated the amount that the other countries could absorb, but when there was word of an early signature of the agreement and when eventually the agreement was signed, the other countries realised that there was nothing to be gained by waiting longer, and they came into the market. The herring were very soon taken away at an increased price, but even although the price did rise, I would like the hon. and gallant Gentleman to realise this, and to convey it to the President of the Board of Trade as well, that the herring are being sold now, and have been for the last two or three months, at a price which is less than the cost of production. On every barrel of herring which they have been selling during the last few months, they have been losing money, and if the hon. and gallant Gentleman is not prepared to take my word for that—he seems to be sceptical—I would refer him to the Minister of Agriculture, whose officials will tell him, I am certain, that I am right. The industry's last fishing has been most disastrous, and it might have been saved from that disaster, or at any rate from the great gravity of it, had we had this agreement earlier.

The industry, as I say, are back at the point at which they were in 1932, and they will have to make the best of the future. They are certainly in a better position now than they have been for the last 16 months, because they know more clearly where they are. They can now start to build again as they were building before, and the only thing that they have to fear now is that the edifice which they are beginning to erect may be destroyed again as it was so ruthlessly some time ago. The industry require, like all other industries, certainty and stability. We want a better atmosphere if we are to increase our trade with Russia, and I am certain that we shall get this better atmosphere if the new agreement is given a fair chance.

I do not think the Agreements in the past have had a fair chance. We have had the hon. and gallant Gentleman getting up at that Box day after day and reading out to us figures of Russian trade which he knew perfectly well were not a full statement of the case. I think he ought to have explained, in giving those figures, that they were not a full statement of the case. It is wrong merely to take the figures of visible trade as being a proper index of the trade of the country as a whole. The fact that it is not a fair index of the trade of the country as a whole is shown by this Agreement, because the figures upon which it is based are not the figures of trade of that kind, but are the figures of visible trade and of shipping and all the other trade that we understand as forming invisible exports. The right hon. Gentleman the President of the Board of Trade had a great deal to say about the balance of trade and the adverse nature of the trade between us and Russia, but I do not think it was fair to give the figures for the last three years and leave it at that. As I understand it, Russia has always said she was prepared to do what she could to redress the balance of trade, and if you take the figures for the last year before the last Agreement was broken, say, 1932, you will find that the adverse balance was a very small figure indeed.

I have some figures here, which I think it is worth while bearing in mind. The British imports from Russia in 1932 were some £19,000,000 and the imports from Russia re-exported from Great Britain were about £3,000,000, giving those retained in the United Kingdom as only £16,000,000; whereas, if you take the British exports to Russia for the same time and deduct from them those that were re-exports, you get a figure of £10,000,000, which gives you an adverse visible balance of something over £6,000,000. If you deduct from that the value of the invisible exports during that year, you will find that the adverse balance is not nearly so considerable as we were given to understand from the President's speech was represented by Russian trade immediately before the Agreement was broken. If the Government in future will see to it that no official figures are given from that Box of such a kind as not to give a fair index of what is going on, they will assist the better working of the Agreement in the future.

The hon. Gentleman who preceded me referred to export credits. I think that Russia has a grievance in this matter. A question was asked some time ago in the House—I think by myself—and the Secretary to the Overseas Trade Department gave the figures for the cost of the export credits to Russia in this country and in Italy and Germany. He said that the premium paid by Russia in this country went as high as 10 per cent., whereas in Italy and Germany the premium was only about 1 to 2 per cent. That seems very remarkable indeed, and Russia has a right to complain of discrimination against her of that kind.

Sir GEORGE GILLETT

Is it really the fact that my hon. and gallant Friend ever mentioned the figure of 10 per cent.? All he said was that the figure was higher than in other countries.

Sir M. WOOD

The hon. Member is probably right. I have information from some other quarters, and the Secretary will no doubt be able to say whether the 10 per cent. is the figure or not. Other countries get a benefit of the export credits scheme as compared with Russia. I think you will find that Russia has to pay a higher premium, yet Russia is the only country which, since the beginning of the export credits scheme, has never defaulted. Inasmuch as the trade is in the hands of the Government it is probably impossible for the Government to default. I should have thought that ought to be reflected in the charge which is made for the credit given. There is a point of substance with regard to the working of this agreement for which in many ways the Government are not responsible, but it is germane to a discussion of this kind. If we are to get an agreement such as this to work, well we must have amicable relations with the country with which we are trying to trade, and if we are to have amicable relations with them, we must know as much as it is possible to know about the country. The Press of this country do not do as well as they can in this respect. The "Times," which is probably the premier newspaper in the world, has not a correspondent in Russia.

Sir W. DAVISON

Whose fault is that?

Sir M. WOOD

I am about to consider the matter if my hon. Friend will wait. I should have thought it was hardly consistent with the dignity of a great paper of that kind to take its news second hand from a place like Riga. I have made inquiries and have been informed that the reason is that there is a censorship in Moscow. The censorship, however, is only on telegrams and not on letters or articles. It is exactly the same as the censorship that obtains to-day in Berlin and Rome. There is no difference, so far as I can see, between the position in Moscow and the position in those other countries, or, if there is a difference, it is in the fact that Berlin and Rome, being nearer, are in better telephonic communication.

Mr. HANNON

Does the hon. Gentleman seriously tell the Committee that in Rome any kind of censorship is exercised on telegrams sent by the "Times" correspondent?

Sir M. WOOD

I am informed that the censorship which is in vogue in Moscow is no more and no less than the censorship which is in vogue in Rome and Berlin. That is my information, and I should like to have an authoritative denial.

Dr. O'DONOVAN

Would the hon. Gentleman tell us the source of his information?

Sir M. WOOD

I do not think there is any necessity to give the source of the information. I can assure my hon. Friend that the source is of a kind that justifies me in giving it to the Committee. The hon. Member must not assume that it is from Russian sources.

Dr. O'DONOVAN

I do not assume that the hon. Gentleman was not justified in giving it. I only wanted some assurance that the Committee was justified in accepting it.

Sir M. WOOD

If there were no justification for the Committee accepting it, I would not have given it. What I have said is right, and I would beg the Press of this country to do what they can to give us better information about what is going on in Russia. I do not want the Committee to think that this is all a matter of one side. No doubt Russia has a good deal which it might also do to improve relations. I feel certain that we will help her to help us by doing what we can to give the new agreement a fair trial. The wealth and prosperity of this country in the past has largely been drawn from the development of undeveloped countries. There are not so many undeveloped countries in the world to-day as there used to be, but undoubtedly Russia, stretching as it does from the Baltic to the Pacific, is one of the greatest fields for development for which a country like this can fine scope for its labours. This new agreement gives us another opportunity of getting scope for our activities. We need a field for our exports. Here is one surely to our hand. I hope that nothing will be done to allow political considerations, as has been the case in the past, to interfere with trade and amicable relations. If we can get this new agreement to work, we will have something which will be to the material advantage not only of our own country, but of Russia and, indeed, of the world in general.

5.25 p.m.

Duchess of ATHOLL

Before I come to speak of the Agreement, I should like to remind the hon. Member for Banff (Sir M. Wood) that the "Times" correspondent, although he may live in Riga, sends to the "Times" translations of all the most important decrees issued by the Soviet Government. Therefore, as everything in the country is in the hands of the Government, and there is no personal expression of news or views, he goes to the most reliable sources; and the news he sends, therefore, is much more authoritative than if he sent telegrams from Moscow where they would be censored.

Mr. BOOTHBY

Would the Noble Lady compare the information given by the "Times" under the present conditions with the information that is sent to the "New York Times" by Mr. Walter Duranty?

Duchess of ATHOLL

I read Mr. Duranty's articles—

The TEMPORARY-CHAIRMAN (Captain Crookshank)

I would remind hon. Members that we are discussing the Trade Agreement and not the Press of the world, and I hope that, the point having been made, it will not be pursued.

Duchess of ATHOLL

I agree that we are discussing a much bigger question than the merits of newspaper correspondents. While the general aim of the Agreement to get orders for British or Scottish herring or for British machinery must commend itself to us all, I submit that the Agreement raises questions very much bigger than the question of orders for a small number of industries, and that even with regard to these industries, we must try to get the facts as to what their prospects are likely to be under the proposed Agreement and under the present conditions so far as we know them in Russia. We have just been informed, for instance, that an order has not been given for herring because the Soviet Government will not give a remunerative price. The outlook therefore does not seem very hopeful for the herring industry.

Sir M. WOOD

The Soviet made inquiries last week with a view to buying herring, and they were informed that there was no need for them to buy the last season's catch, but that if they would turn their attention to the next season the fishing industry would be pleased.

Duchess of ATHOLL

I do not think that at all bears out what the hon. Member for East Aberdeen (Mr. Boothby) said. Nor can I understand any person in the herring industry refusing an order that would bring—

Sir M. WOOD

The herring are sold. This point should be made clear. A week or two ago a large quantity of herring was lying unsold. No later than last Friday I was approached as to the quantity that was lying unsold, and I got in touch with the Secretary of the British Herring Trade Association. He informed me that there were 14,000 barrels then lying unsold, but that they could be absorbed through the ordinary markets without Russia buying any. They would be pleased, however, if I would inform the Russian representative that if Russia would turn its attention to the next fishing they would be glad.

Duchess of ATHOLL

The fact remains that in Russia before the War we had a great market for the fishing industry of Scotland and that that has been to a large extent lost in post-War years. Nobody can dispute that. In regard to machinery, of which a greater part of our exports to Russia have consisted in recent years, we have to remember that one of the aims of the Five-Year Plan is to make Russia independent of the capitalist world. That was expressly stated by Mr. Grinko, Vice-Chairman of the State Planning Commission in the standard official account of the Five-Year Plan. I do not want to quarrel with that, for the Soviet Government have a perfect right to place that aim before them if they desire to do so, but I submit that we have to take note of it because it means that exports of machinery to Russia may well fall off before long. As a matter of fact, as recently as 10th February "Isvestia" recorded a statement by Mr. Rozengolz, Commissar for Foreign Trade, to the effect that "one of the principal successes which must be registered by the 17th Party Congress (the Congress of the Communist Party which has just been held) is independence of the capitalist world." He goes on to exult in the reduction of imports of paper and of fertilisers which has recently taken place.

Therefore, it seems to me that we blind ourselves unless we realise that Russia's purchases of machinery are likely to be short lived. That opinion was frankly expressed in a Memorandum on the proposed Trade Agreement drawn up last July by the Association of Chambers of Commerce, of which, no doubt, His Majesty's Government have a copy. That association explicitly stated that future orders for machinery might be much reduced, and they were anxious that any agreement should endeavour to open up a market for consumers' goods, that is, goods consumed by individual men and women, such as herring and many other things which the Russian people lack. They hoped that in the proposed Agreement there might be a definite undertaking on the part of the Soviet Government to make purchases of that kind. Therefore when we remember the pronouncement that one of the fundamental aims of the Five-Year Plan is that Russia should become independent of the capitalist world and able to produce her own machinery we have to admit that the President of the Board of Trade may be painting an unduly rosy picture in the expectations he expressed an hour or two ago, and we must try to ascertain what are likely to be Russia's needs and Russia's capacity to purchase more machinery.

Necessarily, very much is hidden from the eye of the tourist who goes to that tremendous country with little or no knowledge of it or of its language. But there will appear shortly a book, of which I have been allowed to see an advanced copy, of a Mr. John Westgarth, who for two years, from 1929–31, was consulting engineer to the Soviet Government for the iron and steel trades, and who is, therefore, in a position to throw light, as he does in one or two passages in his book, on how the Five Years Plan is being developed and carried on. His book is entitled "Russian Engineer." He tells us in regard to the works at Magnitogorsk that whereas nine blast furnaces, 28 open hearth furnaces and 16 rolling mills had been planned, which were all to be finished in the course of the Five Years Plan, by October, 1931 only one furnace had been built and this undertaking was not producing anything at all. He goes on to say that he could cite many similar instances of great and costly plans having been made and costly construction undertaken in connection with which there had been very great delays for one reason or another, delays which necessarily meant a great waste of money and often of material. And it is very significant that as recently as 28th August last the official Soviet newspaper the title of which, when translated, means, I believe, "To Industrialisation," stated that the Magnitogorsk factory, this great factory which was talked of as one of the main sights and the main wonders of the Five Years Plan, had not yet turned out a single ton of rolled metal. To the hon. Members who interrupt me I would say that we must consider the question of whether Russia will be able to pay if the Plan is not worked on an economic basis. It is no good our making advances and giving credits for the production of something which is not on such a basis.

Mr. JOHN WILMOT

The point which the noble Lady was making just now was that the increase in Russian home manufactures might soon bring an end to her need for imports, and now she goes on to say that the home manufacture is so unsatisfactory that nothing is being manufactured at all.

Duchess of ATHOLL

I did not say that. I said there were tremendous delays. Most of the machinery for the Five Years Plan has been brought in from the United States. The point here is that if things are not well thought out and not economically carried out an undertaking cannot be on an economic basis. Mr. Westgarth goes on to give an instance of a very badly thought out scheme which, after months of planning by highly paid American and other engineers, had to be abandoned. He says that "the whole fabric of the Plan is rotten from the top to bottom" and he expresses the gravest doubt whether the Soviet Government will be able in future to meet its obligations. All opinion to much the same effect is expressed by Professor Chernavin in the January number of the "Slavonic Review." He was a well known Russian professor of Ichthyology, who was imprisoned in one of the penal camps on the White Sea. In that article he gives a terrible and painful picture of conditions in the camps, and says that nearly all the Soviet undertakings are being run at a loss except those carried on in the penal camps under the administration of the Ogpu—the Russian Secret police—because in that case they can draw on practically unlimited convict labour, which is paid very little, and on which there is a minimum of expenditure for food and accommodation.

I bring these facts forward because it seems to me they have a very real bearing on the question of what orders we can expect from Russia in future. If Soviet undertakings, with the exception of those run by the Ogpu, are being run at a loss, how long can we expect to receive any orders of any magnitude from the Soviet Government? And it is significant, as bearing out the reality of this, that in the first 11 months of 1933 the imports to Soviet Russia were just about half in quantity the imports in the corresponding months of 1932. Russian imports are shrinking, and shrinking fast, and it is folly not to recognise the fact. We also have to remember that though for the last century we have sold a great deal of machinery to other countries and that after they had got our machinery they did not always need to buy more of it from us, yet the industrialisation of those countries generally meant a considerable rise in the standard of living, and they therefore began to take more consumers' goods from us. In contrast to that, the Five Years Plan has meant a greater and greater restriction of the importation of consumers' goods.

In proof of that I would refer hon. Members to the articles contributed by Mr. Martin Moore to the "Daily Telegraph" over a year ago, which shed a striking light on conditions in Russia—the shortage of food, clothing, furniture and other things. There are also the more recent articles by Mr. Malcolm Muggeridge, son of a gentleman who graced the benches opposite in the last Parliament, who has openly stated that he went out to Russia as a Communist full of hopes of what he would find in the new Utopia for the workers, and came back completely disillusioned and giving a most painful and terrible picture of conditions there, and of the lack of practically everything that men and women need in their daily lives. But my object is not so much to stress the conditions in Russia as to emphasise the fact that sales of machinery to Russia do not bring in their train that increased demand for consumers' goods which has hitherto come from other countries to which we have in the past supplied machinery.

Then, though it is quite true that on the credits already opened there has been no default in the payments to this country, I would ask my hon. Friend who is going to wind up the Debate if it is not the case that there have recently been some renewals of credits given by Germany, which seem an indication of difficulty in meeting payments. It would be interesting, also, if he could tell us the payments the Soviet Government are likely to have to meet in the current year. I believe very large amounts fall due this year. Again, it is significant to remember that the Association of Chambers of Commerce, which about 18 months before had shown itself favourable to the credit system, as a means of increasing orders, in its second Memorandum on this subject, the Memorandum of July, 1933, definitely stated that it would oppose the extension of the credit system in regard to Russia. And we have to admit that since that Memorandum was sent in the situation between Soviet Russia and her Far Eastern neighbour Japan has become more strained, and that if hostilities should break out between the two countries, that might very seriously impair the capacity of the Soviet Government to meet its obligations. It is also worth while noting that the United States of America, which have only recently embarked on the credit system with Russia—previously their orders were on a cash basis; they were much more highly favoured than we were—have so far announced credits of only £2,000,000, which is not a very large sum when we consider the size of that country.

I submit, therefore, that we ought to try to learn all we can as to the likeli- hood of orders materialising and of payments being punctually made, and that because the position seems so very uncertain it is imperative that we should ask no sacrifice of any other industries in this country in order that this Agreement may be carried out. France, which has recently concluded a trade agreement with Russia, has limited it to a year, clearly indicative of the fact that France wants to feel her way. She is not going to lull herself with optimistic hopes of what the agreement may bring her. No time limit, however, is to be found in our Agreement, and I think that a time limit might well have acted as an incentive to the Soviet Government to come to an understanding about the debts. Without such a time limit the Soviet Government may well postpone such a settlement. And if France regarded it as necessary to have a time limit it is much more necessary for us to have one, because I believe we have suffered much more than France from the dumping which has been so marked a feature of the Five Year Plan.

Lieut.-Colonel COLVILLE

This Agreement is subject to denunciation at six months' notice.

Sir W. DAVISON

So are all agreements.

Duchess of ATHOLL

I understand that the French Treaty definitely has a year's limit, and obviously that is a limitation which we have not got in ours. How much our agricultural industry has suffered from the dumping of Russian agricultural exports has not yet been made sufficiently clear to the Committee. The agricultural industry is not so well organised as are our manufacturing industries, and I do not think, it has succeeded in making the situation in agriculture clear to hon. Members in the same way that the manufacturing industries have put their case.

Most of us know, however, that since the inception of the Five Year Plan an enormous quantity of Russian cereals, butter, poultry and eggs has been sold on this market, and more on this market than in any other market of the world, at prices which, when one works them out, are almost always below the prices at which such products are coming to us from other countries. Year after year, Russian imports have dragged down prices of wheat, barley, oats, butter, poultry and so on, on our market. In 1932, dumping rather fell off, but it increased again in 1933, anyhow in regard to wheat, oats, barley and butter. British wheat is no longer affected, since the passing of the Wheat Quota Act, but Russian dumping of the three commodities that I have mentioned, barley, oats and butter, is causing grievous loss to our farmers. I remember, of course, that a very much higher duty than formerly is now imposed upon foreign oats, and Scottish farmers are very grateful for the fact, but last month a cargo of Russian oats came to Leith at £1 13s. 4d. per ton, which works out at only 1s. 8d. per cwt., or 5s. per quarter. Even if you add to that the new duty of 9s. per quarter, that only brings the full price of those Russian oats up to 14s. per quarter, which is an impossible price for the Scottish farmers to compete against.

Then in regard to barley. In 1933 Russia once more became our biggest supplier at prices below those of everybody else. In butter, in 1933, she actually sent us more than in the year 1931, which was, on the whole, her biggest dumping year. The prices of butter are so striking that I must give them to the Committee. In 1933, the average price at which butter came to this country from the Soviet Union was 60.6s. per cwt. That is less than 6d. per lb. The average price of Australian, New Zealand and Danish butter, on the other hand, ranged from 77s. to 84s. per cwt. Hon. Members will see what an enormous difference there is between the Russian price and the others. When one looks at the figures for January of this year, the discrepancy is even more amazing. The average price of Russian butter actually fell last month from 60.6s. per cwt. to 39.7s. per cwt., and though the prices of other supplying countries were dragged down, they were still far above the Russian, ranging from 65s. to 72s.

That is a very serious position. It is admitted by the Minister of Agriculture, I think, that the very low price that obtains for butter at present is one of the reasons for the very serious difficulties in which the milk industry finds itself, and as an agricultural Member I cannot forget that my right hon. Friend the Lord President of the Council gave the farmers an assurance at the last General Election that they would be made secure from dumping. That assurance I repeated on every one of my platforms and the farmers took great notice of it. The question, therefore, that we have to ask ourselves is, whether the minimum of three months' notice which has to be given under Article 2 of the agreement will enable effect to be given to that very much valued pledge. In so far as agriculturists have had an opportunity of expressing their opinion to me, they have said that they fear that, in those three months, large quantities of Russian products might be dumped on this market and might upset the price for many months subsequently.

A further doubt arises in my mind in regard to what can happen at the end of three months, even if the Government then take action. I notice, for example, that, under Article 2, the only action that can be taken is prohibition or restriction of imports. There is no mention of power at the end of three months to put on a special duty in order to bring the price up to a reasonable level. I shall be very grateful if my hon. and gallant Friend the Secretary to the Overseas Trade Department will inform me whether I am right in thinking that even at the end of the minimum period of three months there may be no power to impose a duty which will have a chance of being effective. I am told, however, that the three months' notice is a smaller period than is included in agreements with other countries. I submit that circumstances in this case, as shown by what the agricultural industry has suffered in the last two or three years, are wholly exceptional. A criterion of dumping very often is the sale of a product in a foreign market at a price below that at which the product would be sold in the country of origin. Never has there been a contrast between the export price and the home price such as is to be found in the case of agricultural products from Russia, due to the peculiar conditions obtaining in that country—forced labour, forced purchase at very low prices from the peasants and the fact that the Russian Government controls all exports and imports.

Russian wheat was being sold on this market last year at an average price of 4.7s. per cwt. Soviet statistics show that on the free market in Russia, owing to the great scarcity in 1933, wheat was being sold at about 300 roubles per cwt., that is, 100 roubles for 36 lbs. The price for butter here I have already given as 60.6 per cwt. The price last year on the free market in Russia I have seen given as 60 roubles per kilo, or roughly about 60s. per lb., assuming the rouble to have its full official value. Circumstances, therefore, are wholly abnormal, and seem to call for the Government to set up a precedent entirely of its own. It is no good, in considering whether three months are enough, to say, "It is less than we give in any other Trading Agreement."

I have thus very grave doubts as to whether the minimum of three months in itself will prove to be effective, especially if at the end of that time, there may be no power to put on a special duty, and I should like to ask the Secretary to the Overseas Trade Department if the Government consulted any body of agricultural opinion as to whether this three months' notice would leave them an effective safeguard. The effect on our Agreement with Canada at Ottawa also arises in this connection. Canadian wheat and timber are very much involved in the sale of Russian wheat and timber on this market. The President of the Board of Trade has referred to Article 21 of the Ottawa Agreement by which we are obliged to prevent the reduction in value of preferences to Canada by reason of the dumping here of goods the cheapness of which is facilitated by State aid. In this connection it is well to remember that Canada has power to impose a special duty at the port of entry upon any goods which may be shown to be offered for sale in Canada at a price lower than in the country of origin. The prevention of dumping does not depend on Government action, and still less on negotiations which may be protracted, between Governments. In Canada customs officers have power then and there to impose a special duty on dumped goods, and I cannot help wondering whether the Canadian Government will feel that Article 2 gives them the protection which the Ottawa Agreements have led them to expect.

It is worth while to remember that the Coalition Government of 1921 passed a Safeguarding of Industries Act, with an anti-dumping section in it, and that there was no three months' period of notice then. The Act required an Order in Council to be laid upon the Table of the House for a month, if the House were in session. If the House were not in session, the Minister could act upon the Order in Council provided he laid the Order as soon as the House reassembled. The minimum of three months therefore is just three times the maximum notice required under the Safeguarding of Industries Act, 1921, and the dumping to which this country was exposed in that year was nothing to what we have suffered in the last three or four years. It is also important to note that the Federation of British Industries have just issued a memorandum in which they urge the Government to arm themselves immediately with the powers necessary to act at short notice in order to prevent dumping. Evidently they are feeling anxious about present conditions, though they are concerned with manufacturing industries and not with agriculture.

Manufacturing industries also have an interest in this question of whether three months' notice is sufficient. The printed linen trade, for instance, is suffering severely from competition from Russia. This is a new industry in Russia, which is severely hitting the British industry. There were very large increases of Russian imports last year, at a price which bears no relation whatever to the price at which similar goods could be purchased remuneratively in this country. It has been pointed out to me by a member of the industry that the wording of Article 2 might not prove a very good criterion as to whether the industry were being injured by dumping or not. It was stated to me that an increase in building necessarily brings an increased demand for the furnishing trades, of which the printed linen trade is a branch. Article 2 would only allow the Government to take action if Russian imports were likely to affect detrimentally the production in the home industry, and it was said to me that we might have an actual increase in the home product even though dumping were going on, because dumping might prevent the increase being as great as the increase in the building trade would justify. I was extremely surprised, by the way, to hear the President of the Board of Trade say he did not think that Article 2 was likely to be invoked in the near future, because I understand that he has already had an application from the printed linen trade to give it the benefit, such as it is, of Article 2. When I was told this, I said to the person to whom I was speaking, "May I take it from that, that you think Article 2 will really be of use to you?" His reply was, "A drowning man clutches at a straw." Like men in other industries to whom I put the same question, he had grave fears that the market might be flooded during the three months' negotiation. Other trades that are suffering from Russian competition are the furniture and match trades. I have found in these the same anxiety as in the printed linen trade.

Now I come to another point, which seems to me to be a very big one. The Government are engaged in arranging trade agreements with various countries. If they give a minimum of three months' notice to a country from whose dumping we have suffered severely, will they be able to give less notice to other countries from whom we have not suffered so much? There are other countries from which dumped goods are coming to us with various forms of State aid. France is sending wheat flour at prices, I am told, which bear no relation to the price of flour upon the French market, and oatmeal is being dumped from Germany with State aid at prices which bear no relation to the home price. A man with great knowledge of the milling industry told me yesterday that no end of harm could be done in the milling trade if three months' notice had to be given in regard to the dumping of French flour. The market, he said, might be upset for from six to 12 months.

Last, but by no means least, the door industry, which about a year ago was suffering from the competition of Russian doors, is now, I am told, suffering severely from the competition of American doors sent over here at about half the price at which corresponding doors are being sold on the American market. This seems to me to be a very big question, because we know that the productive capacity of the American factories is enormous. I think I was told that America could turn out 70,000 doors a week, or some similar very large quantity. If we have to give a minimum of three months' notice under this Agreement, we may well find it difficult to refuse to give the same notice to other countries with a bigger manufacturing capacity than Soviet Russia has at pre- sent. It seems to me that that offers a very grave prospect for the future, when we remember America's industrial troubles, and the possibility that, aided by the depreciation of her currency, she may do all she can to expand her exports. We have also to remember the devastating competition to which we are at present exposed from Japan.

We must further remember that this dumping on our markets has not only injured British agricultural products and Dominion products in our markets, but has also injured foreign countries which are accustomed to do a considerable amount of trade with us on normal lines. Among those countries are Denmark, Sweden, Finland and countries with which we have lately concluded agreements and who want to buy more from us. But their purchasing power has been reduced by the dumping on this market, and it seems to me to be very important that we should do all we can to restore their purchasing power. There is a big difference between the manufacturing industries and the agricultural industry, in that the manufacturing industries have a choice of markets. They may hope to sell their goods, not only in Russia, but in every country of the world, because we know the prestige that British machinery enjoys; but for the British agriculturist there is only one market, and, if dumping is allowed in that market, he is knocked out of the only market in which he has a chance to sell anything. It seems to me, therefore, that it would be a wise policy for the Government to give more protection against dumping than this Agreement seems to me to give, if only in order to help to ensure that the purchasing power of other customers is restored. This Agreement therefore seems to me to raise some very big questions—the question whether it effectively safeguards the interests of our agricultural industry, which has suffered so severely; the question whether it safeguards our agreement with Canada; the question whether we are giving away powers which, in these days of great trade depression, when we may experience dumping of a more acute kind than has yet been attempted, it is vital to retain.

Finally, I would express my disappointment that this agreement does nothing to protect us from another kind of invasion—the invasion of propaganda. I know that the Trade Agreement concluded by the late Government in April, 1930, did nothing of that kind, but the development of wireless has created a new and immense opportunity for propaganda of a kind that we should never dream of indulging in in another country, but which is invading every home in Great Britain. I do not often have time to listen to the wireless but on Sunday last I listened for an hour—[Interruption]—I did this because I like to learn; I like to know what other countries are saying; and on Sunday, for the first time in my life, I listened to propaganda of which I had heard a good deal. For half an hour I listened to a talk the purport of which was to show the benefits and success that could attend armed uprising, and which seemed to give various hints about street fighting. No doubt it was so arranged as to time with the advent of the unemployed marchers to London; it seemed to come in very appropriately. The other part of the talk was a pronouncement by the Commissar for War in which he congratulated himself on the enormous additions made to the military, naval, and air forces of Russia since the year 1930 or thereabouts. He went into great detail as to the increased mechanisation of the Russian Army, the increases in aeroplanes, naval forces and so on, which seemed to me to be a very strange utterance for the representative of a Government which is taking part in a Disarmament Convention, and which, when it meets the representatives of His Majesty's Government, seems to be so full of talk about desiring to increase friendship between the countries, and purchasing everything possible from us. For these reasons I must say I regard this agreement with great disappointment, and in some respects with considerable apprehension.

6.7 p.m.

Mr. LOFTUS

I must claim that consideration which the House always so kindly grants to a new Member, and I think I ought to make a special claim for consideration because I am speaking very shortly after my election. I assure the House that I only do so because I feel that it is an absolute duty to my constituents. I welcome and support this agreement because it offers the only possible hope of salvation to the great herring fishing industry of England and Scotland. There is no possible method of saving that great industry from disaster except the conclusion of such an agreement. I recognise that the herring fishery is not an industry involving an immense amount of capital. In my constituency most of the boats are owned by men who have risen from the ranks—who have started as cabin boys and become skippers, and who have been financed simply on character alone as regards 90 per cent. of the purchase price of their boats. I think we might call the herring fishers the smallholders of the sea, the small men who have worked up to the position they hold. I submit to the Committee, however, that it is an industry which deserves every possible help and encouragement from the Government, first because of the type and quality of men it produces—a virile, courageous and healthy type of men; and, secondly, because of the immense services rendered by the fishing industry during the War, services as valuable in their way as those of the Royal Navy itself. I suggest that, if ever that terrible misfortune of entering into war should fall upon us again, we shall again require the services of the fishermen of the East Coast of England and Scotland.

To-day the industry is practically bankrupt, and, until the conclusion of this agreement, it was in complete despair. I have seen the figures of costs, which are open to inspection, I believe, by any Government auditor; I have seen mortgages on boats not worth a tenth of their nominal value. I can put the state of the industry to the Committee in this way, that at present 95 per cent. of the owners cannot possibly raise money by any means whatever for the purpose of replacing the nets and gear lost during last winter's fishing, or even of repairing nets and gear, and that it will be impossible for the industry to resume fishing next May and June unless it gets help, not by way of a grant, but by way of a loan from the Ministry of Agriculture and Fisheries. The disastrous state of the industry is due to one cause only, and that is the loss of the Baltic markets. As a result of that, during the past five years the catch and the amount cured have declined by some 50 per cent. The German market has gone, and I am afraid it has gone for ever. Germany has, by means of subsidies, built up a herring fishing fleet, and has increased her curing in the last 12 years from 43,000 to 430,000 barrels. Germany has also imposed a tax of nine gold marks per barrel. Therefore, I feel that the German market has been permanently lost. There only remain the Polish and Russian markets. The Polish market is closed by a tax of £1 per barrel, so that the only remaining possibility of export is to the Russian market. In the case of the herring industry, on which these thousands of men depend, 80 per cent. of the catch is exported, nearly all cured, and the only possible outlet to-day for that export is Russia. Therefore, on behalf of the herring industry of my constituency, I welcome the action of His Majesty's Government in signing this agreement.

A remark was made by the hon. Member for Banff (Sir M. Wood) to the effect that the herring industry has been grossly misled because there is no Clause binding Russia to take a definite quantity of herring. During the course of a rather strenuous by-election, I never suggested that priority would be given to the herring industry, but I did point out that believed that no priority would be given to any other British industry in preference to the herring industry. I also stated that I believed that the question of exports of British herring had been mentioned during the negotiations, and I trust and hope that we may get an assurance to-night that that question was brought prominently to the notice of the Russian negotiators, and that there are assurances that it will be considered in the increased purchases which Russia must make under the agreement. Perhaps I might mention the effect that the agreement has already had. During the last fortnight, the price of cured herring has risen by 9s. a barrel, from 20s. to 29s., and the hon. Member for Banff was quite right when he said that to-day in Lowestoft and Yarmouth there are only, at the most, 14,000 barrels of unsold herring.

I recognise that there is opposition to this agreement from various hon. Members of the House. The first ground of opposition is the fear of dumping. With regard to that I would suggest, in the first place, that Article 2 provides a remedy, which I think is a satisfactory remedy, against such dumping; and I would also suggest that, as the Russian Government buys more and more goods from us, as it will be forced to do, it will recognise, and does recognise to-day, that all international trade is an exchange of goods, and that therefore, in sending more and more goods to us to pay for the increasing quantities that it buys from us, it is obviously to its advantage to get the highest possible price for the goods it sends to us. I would suggest, therefore, that the tendency of this agreement may be to raise the prices of Russian products rather than to lower them.

A second objection is the putting back of debts, including commercial debts. You have this great fishing industry threatened with immediate disaster, not in the remote future but actually this year. Three-quarters of the owners would have been bankrupt and three-quarters of the men permanently out of work. Was it not right to put back, for the time being, the question of these commercial debts in order to save these men who did so much for the nation during the War? Many of us may object to certain aspects of Russian policy as set out by the Noble Lady who has just spoken, but the way to get better conditions is not by using the weapons of boycott and war. All history, especially the history of the early French Revolution, shows that to attempt to improve the internal conditions of a country, to remove methods that you disapprove, by boycott and war, only have the effect of increasing and intensifying those very methods which you are seeking to destroy. I feel that, if there are these features of Russian policy to which many of us object, when we get Russia back in equal fellowship in the comity of nations with increasing international intercourse, as the ideas of the rest of the world more and more filter into Russia, we shall get that improvement and that coming more into harmony with the ideas of the rest of the world. I welcome the agreement on these higher international grounds, but I also welcome it because it brings hope and opportunity to those fine fishermen who have been in utter despair, and now see before them an opportunity of better and more prosperous times.

6.19 p.m.

Sir W. DAVISON

I should like, first, to congratulate my hon. Friend very sincerely on the maiden speech he has just delivered. I am sure the House will look forward to hearing him again on many occasions, the more so that he, in a particular sense, represents the fishermen of the country, to whom this House recognises the deep debt that it owes for the services they rendered during the War, and also for the daily risks they run in supplying one of the staple items in the food of the country. I have seldom heard a reduction of a Vote moved which contained bouquet after bouquet of appreciation of the Minister. In fact I was at a loss to understand why the hon. Gentleman opposite moved the reduction at all. He had certain small objections here and there. Everyone must have objections to everything more or less. But, on the whole, he was lyrical in his praise. He went further than that, for the only blame that he cast on the President of the Board of Trade was that he had not commended the agreement to the House with more enthusiasm and, therefore, I am at a loss to know why the reduction of the Vote came from that quarter. I thought he would more fitly have left it to me. I should like it to be clearly understood that I shall press that reduction even though hon. Members opposite subsequently withdraw it.

I am sorry to say that, notwithstanding the conciliatory and plausible manner in which the President of the Board of Trade commended the agreement, I still see grave objections in it. My friends and I have repeatedly urged the Government to demand that the claims of our British nationals should be met, not as political claims in regard to loans made to Tsarist Russia. That is a matter with which, though I should certainly put it forward, I am not personally concerning myself. I have put forward the private claims of British citizens who have had their property taken since the War and have had no compensation. The hon. Gentleman suggested that we were imperilling the friendly relations between this country and Russia because we urged that our nationals should receive compensation for having money, which they had to their credit in the bank or for having some small shop which they had opened, confiscated. There are dozens of very small, poor people in addition to Lena Goldfields Limited, and, though the capital of that company is large, 80 per cent. of its shareholders are British people and many of them people with very small capital. Since I came into the House I have had a note handed to me from a French lady. I do not know who she is. Hon. Members seem to think that I am urging the claims of Lena as if I have some personal interest. This French lady sent a message in to say that she had invested money in Lena Goldfields because it was a British company, and she thought it would have the support of the British Government in carrying on its business.

May I summarise my objections to this agreement? I object to it, first of all, because it is really a permanent agreement. The President of the Board of Trade referred to it as a temporary agreement, but it is only terminable by a definite notice of six months, which is common form. Sometimes it is a year, but nearly all treaties have a clause enabling them to be terminated. It has every characteristic of a permanent treaty which can only be terminated on six months' notice on either side, and there are actually provisions in it which definitely contemplate that it will go on for some five or six years. Secondly, I object to diplomatic immunity being given to the officers of the trade delegation, and the three trade delegates, in view of the way in which that immunity was abused in the past. Thirdly, I object to the provision whereby the Soviet Government will not recognise agreements by their trade representatives. It is specially stated that it will not recognise agreements entered into by their trade organisation in this country unless they are initialled by two or three other persons. Look at the disability and the embarrassing delay that that throws upon our traders. Suppose one of the people who have to initial an agreement is not in the country at the moment. He might be in Moscow.

I strongly object to most-favoured-nation treatment even with safeguards, including the safeguard which has direct reference to the Ottawa Treaty, being granted to a State which is the sole trader, and can trade or cease from trading in any article at any time. I also object to the provision that the dumping of agricultural or other products can only be stopped after three months' notice. In that time our agriculturists might very well be ruined. We could have the place flooded with butter and other things. As in the case of France and the Irish Free State, if we find that commodities are pouring into the country and undermining the prosperity of our agriculturists, we ought to be able to give notice, and say this must be stopped forthwith. I deplore the omissions from the agreement, especially the fact that no provision is made for dealing with the claims of British nationals, nor any time limit fixed in the event of the Soviet Government continuing to refuse to deal with the matter. Lastly, I object in that there is no provision setting up procedure whereby a permanent treaty, as we are told this is only temporary, may come about. On Monday I asked the Minister representing the Board of Trade what steps were being taken in the matter to negotiate this permanent treaty. Nothing has been done. We know that steps are not even in contemplation.

May I now deal with the aide-memoire which is all that we have left to comfort these unfortunate British citizens who have had their businesses and their money appropriated without any compensation? When I spoke at the end of January, I begged the Government to give an assurance that they would not allow themselves to be hoodwinked in the same way that the right hon. Gentleman the Member for Clay Cross (Mr. A. Henderson) had been hoodwinked when he made a like demand on the occasion of the resumption of diplomatic relations, and I urged that no temporary or other agreement should be entered into without a fixed time limit being assigned within which some negotiations must be properly established by the Soviet authorities for dealing with this long outstanding matter of the claims of our nationals for property that has been taken from them. In spite of warnings and supplications, we find that this is a permanent treaty, and it is really misleading the Committee to suggest that it is anything but a permanent treaty, and the Government have in hand at the moment no plans for a final treaty with the Soviet Government.

I would remind the Committee how extraordinarily similar this aide-memoire is to what happened when the right hon. Member for Clay Cross was negotiating the resumption of relations in 1929. It is almost word for word what happened on that occasion. On 31st July, 1929, M. Dovgalevsky sent a Note to the Foreign Office complaining that the rapprochement which was then maturing between Russia and Great Britain was being imperilled because he understood that the Foreign Secretary was asking for a preliminary arrangement with regard to the claims of British nationals. On 2nd August, 1929, a communique was sent by the Foreign Office saying that it was absolutely necessary that the outstanding questions of claims should be dealt with immediately, and to this M. Dovgalevsky replied that the matter must be postponed pending the exchange of Ambassadors. On 6th September, 1929, a statement was made by M. Litvinov urging that negotiations should take place after the exchange of Ambassadors. Further negotiations took place, and the right hon. Member for Clay Cross said that the British people felt very keenly on the question of claims, and that they would lose control if this point were not settled. Finally, I think, that at some inn on the South Coast, he agreed that the Protocol should be signed. In the Protocol was a Clause which provided that immediately upon the resumption of diplomatic relations the question of claims should be dealt with. There was a further clause which provided that, not later than the same day on which the Ambassadors presented their credentials, the pledge with regard to propaganda should be renewed.

Under the Protocol the Soviet Government gave consent for representatives to negotiate with regard to these claims. Lord Goschen was appointed to represent this country, with some other gentlemen. They negotiated with the Russian representatives for nearly a year, and on 2nd February, 1932, I asked the Foreign Secretary how things were getting on and whether we were to have any settlement at all. In his reply he said, "I will publish a note setting out the facts." He published a note previously sent on 27th January, 1932, in which the Foreign Office pointed out that the Soviet Government had entirely failed to implement the undertaking which they had given to Mr. Henderson, the Foreign Secretary, and had declined to consider the question of debt settlement unless the British Government made the Soviet Government a loan out of which to pay the British nationals what was due to them. In those circumstances, the Foreign Secretary informed the Soviet Government that, in the opinion of the British Government, it would be futile to continue the negotiations any further. And there the matter ended. You see how closely the negotiations compare with what is happening now. We tried again to have the question of claims included, and we were told that the fishermen of Lowestoft and elsewhere were out of work, that we must hang on and that the claims must wait longer. I pass over the imprisonment of the British nationals which is still in the mind of the Committee.

Now we have this Trade Agreement which, as I have said before, is really a permanent treaty, and there is not a word from beginning to end on this question of the claims of British nationals. The only temporary thing about it is the word "Temporary" on the outside page. Let me remind the Committee of the assurances which were given to these people. When it got noised abroad last year that a new Trade Agreement was in course of preparation between the two countries, letters poured into the Foreign Office saying, "Now is your opportunity. Do not enter into an agreement until you have an assurance of some kind from the Soviet Government as to those claims which have been outstanding so long." It is not a question of Government claims. There is no question of any White Russians or claims for armaments or anything of the kind, but claims of ordinary private individuals in this country who had, say, £100 or £200 to their credit at the bank. Many of them are poor people with their savings, as a result of several years work, in Russia. These bank balances have been taken. Their money has been appropriated, and these claims should be dealt with. Letters came pouring into the Foreign Office from those unfortunate persons saying, "Now is your opportunity to look after our interests and see if you can get back again some of the money taken from us." So numerous were the letters, that a letter in common form was prepared by the Foreign Office, and a letter in like terms sent to each claimant. In this letter the following sentence occurred: It is the intention of His Majesty's Government to make it clear, in the course of the commercial negotiations with the Soviet Government, that they maintain and assert such claims, and that the negotiations for a permanent treaty with the Soviet Government must be accompanied by a satisfactory settlement of these claims; and that any commercial agreement made, pending a final disposal of the question, must be regarded as being of a temporary and transitional character. Is the agreement which we have here of a temporary or transitional character, and is there any evidence that such a permanent treaty is in course of preparation, or will be prepared in the near future? We are told that this agreement was urgent because of the need for putting some people into employment. One of my constituents whose letter I forwarded to the Foreign Office says: Why should this be achieved at the expense of other British citizens who have waited so long and so patiently for the British Government to take some practical action to secure their rights? Some of us are in desperate need of help, especially the invalids and the aged. It is not a letter from a capitalist or anybody like that. It is most humiliating to the prestige of this country to send out to its nationals a letter like the one to which I have referred, and not to put in a clause to say that it is only a temporary Agreement. Except on the front page, as I say, there is not a word about it being a temporary Agreement unless the matter of claims is dealt with in six or seven months or any reasonable period. The only claim, as far as I know, which has been dealt with is the claim made by His Majesty's Government for compensation for the furniture and fittings of the British Mission at Vladivostock. That has been demanded, and it has been recovered. Why should they make such a point of recovering the furniture and fittings of the Mission in Vladivostock when the Government attach apparently no importance to the bank balances and the other claims of so many unfortunate British nationals? For the benefit of hon. Members opposite I will give a few instances as to who are those claimants.

An hon. Member referred to my interest in Lena Goldfields. I will repeat again that I had never heard of Lena Goldfields until I was approached a year or two ago by one of the directors of the company who pointed out that all their property had been taken. As far as I am aware, neither I nor any of my relatives or close friends are interested in any property in any way connected with Russia. I should like to make that point quite clear. I look upon myself as a British citizen, and when I see that British citizens have had their property taken without adequate compensation being paid to them, it arouses my indignation. I hope that I have made the point clear. Lena Goldfields constitute a key case. There is nothing Tsarist about it. The Lena Goldfields Company were in Russia, and were turned out, and the Soviet Government not having made a success of the concessions which the company had held, they asked them to come back. Lena Goldfields said, "Once bit, twice shy. We are not going back. If we made a success of our operations again, perhaps we should be turned out again." They said, "We will only come back on an agreement in the most definite and precise terms that, if for any reason whatever we are turned out after carrying on our work successfully, our claims shall go before an international tribunal in Berlin with a German, a Russian and an English arbitrator." The Russians first of all appointed a representative, and then withdrew him. The other two arbitrators sat, and after they had heard all the facts, they awarded Lena Goldfields something like £13,000,000.

What had happened? The late Foreign Secretary, the right hon. Member for Clay Cross, advised that the directorate of Lena Goldfields should negotiate in Berlin with regard to the £13,000,000. There was nothing about which to negotiate; they simply wanted payment. All the facts had been found out by the tribunal. Pressed by the right hon. Gentleman, they went to Berlin and for three months negotiated and argued, and finally they said, "If you pay down in cash £4,500,000 out of the £13,000,000, we will accept it." But in the end all they could get was an offer of £800,000. They came back and reported to the late Foreign Secretary. Once again, in order to clear the way for the signing of a trade agreement, the directorate of Lena Goldfields are advised this time to go to Moscow to negotiate. What is there to negotiate? All they want is their arbitral award. But worse than that, without ever consulting Lena Goldfields, the British Government had informed the Soviet Government that they would advise Lena Goldfields to go to Moscow and that they should substantially reduce their previous minimum demand. It places the British Company in a most unfair and invidious position. I should say that the British Government also requested the Russian Government substantially to increase their previous offer. As their previous offer was only £800,000, there is a good margin for the substantial increase.

The Soviet Government wanted this question out of the way, because it was hanging up the signing of the Trade Agreement. To oblige the Foreign Office the Company said: "We will go to Moscow and they are at Moscow to-day and, according to the information I have received, the Soviet Government have offered them £1,000,000 out of £13,000,000. They have sprung £200,000 over the £800,000, and the negotiations are proceeding. I submit to the Government that those negotiations will proceed until this Trade Agreement is signed, and then probably they will drop. Meanwhile, the "Times" newspaper of last Tuesday, in its City news, stated that eight tons of gold from the Lena Goldfields and another mine has passed through Latvia on Monday en route for Berlin. That is gold mined and produced by machinery and appliances, put in with British enterprise and British capital. A substantial part of that eight tons of gold was from the Lena Goldfields and was on its way from Russia to Berlin.

Yesterday in the House of Commons we were told that, in spite of supposed shortness of cash, the Soviet Government were intending to lend £8,000,000 to foster trade between that country and Turkey. Another company, with which I am in no way connected, which has been shamefully treated by Russia, is Russia-Asiatic Consolidated, Ltd. They have spent tens of millions of pounds of British capital in buildings and plant, all of which in addition to their stocks of gold, their copper, and cash at the bank have been seized, and not one penny of compensation has been paid. I will take at random from the bundles of cases at my disposal particulars of poor working men and women who have had their property taken. Here are a few examples: Mrs. F. Governess in South Russia for 15 years or more. Saved 900 roubles, approximately £100, which was placed on deposit with a Russian bank. Confiscated in 1916. Miss N. Arrived in England in 1919, aged 66, having lived in Russia as governess to private families for 40 years. Lost everything by confiscation, including bank balance of £200 and personal trifles. Mr. J. H. Foreman in cotton factory for many years, savings, represented by deposit in bank, confiscated, approximately £400. Mr. W. P. Went out to Odessa when about 20 to tool repairing shop, which he eventually acquired. Shop and all contents confiscated. Mr. E. Foreman in paper mills. Lived in Russia 30 years. All savings confiscated. Mr. W. Went to Moscow on completing apprenticeship in City of London as saddler and harness maker. Built up a promising business over a period of many years. His business stopped and everything he possessed were confiscated. Mr. W. M. Clerk, Russian-English bank, Petrograd, for six years, 1911–1917, when obliged to leave Russia. Had approximately £200 on deposit, which was appropriated by Soviet Government and has never been repaid. There is no question of these people being White Russians or counter revolutionaries. There is no excuse for their treatment. There is nothing political in regard to them. It is merely a question that the private property of harmless British citizens has been stolen, without excuse, by a foreign State, and the British Government look on and do nothing. Then they make a fresh agreement with the very people who have appropriated these sums and offer them further British credits if they will be good enough to trade with us.

I am afraid that I have very feebly represented the claims of these people. I feel most deeply about it. I only wish we had a Gladstone, a Disraeli or a Bright here to stir the House into indignation with their eloquence at what I would describe as this craven sordidness. What is the selling of a few herring to leaving without aid these unfortunate British nationals. It is the first duty of a British Government to protect them, but their claims are unrepresented and undealt with. The Government say: "Why should we bother with these poor individuals? Have we not recovered compensation for the stolen furniture in the British Mission at Vladivostock? The claims of these people have been outstanding a long time. Leave the matter a little longer and perhaps the people will be dead, or their claims forgotten." That may be so, I hope that it will not be so, but, if so, dead too will be British pres- tige and British honour and the old British pride in succouring the weak and protecting those who are oppressed. The Government have refused us the opportunity of amending or expressing a direct opinion on this Agreement. I hope the Committee will register their protest in the only way at their disposal by reducing the Vote by £100.

Mr. HANNON

Owing to the large numbers of hon. Members who wish to address the House, may I, on a point of Order, express the hope that hon. Members will cut their speeches a little shorter.

6.52 p.m.

Major Sir ARCHIBALD SINCLAIR

The hon. Member who has just addressed the House has spoken with even more than the eloquence and fervour which we have been accustomed to expect from him. I shall deal with a number of his points in the course of my remarks, but I should like first to deal with one point which he urged so strongly and with so much obvious sincerity, namely, the claims of these poor people. He said that it had been said: "Why bother about them?" Who has said that? From what I know of the Secretary for the Department of Overseas Trade, he has not said it. From what I know of the President of the Board of Trade, he has not said it. It has not been said by any of my hon. Friends on these benches, and I do not think it has been said by anyone above the Gangway on this side. We all feel for these people. When the hon. Member goes further and says that there is nothing political about their claims, I am afraid that great political use has, unfortunately, been made of them in this country by people who wish to stop Russian trade. I cannot help thinking that the wisest course from the point of view of these people is the course which the Government have pursued in making this Trade Agreement, in improving the relations between this country and Russia, in encouraging trade between the two countries, and in that improved atmosphere and in the better understanding that will result from that trade, those claims will have a far better chance of being settled than by acrimonious and polemical discussions between public men in the two countries.

Despite the hon. Member's eloquence, the case was never weaker than it is to- day against an agreement with Russia. On the one hand we have a huge country with 160,000,000 population, which is increasing at the rate of more than 3,000,000 a year, able to send us every kind of raw material that we require for our industries, and eager for the manufactured goods which we in this country can supply. That is the picture of Russia on the one hand, a huge undeveloped market with an almost insatiable capacity for consumption and with an inexhaustible supply of raw materials, while on the other hand our factories are working short time, British capital is awaiting investment, and over 2,000,000 of men and women are unemployed. In 1930 the Soviet sales to Great Britain amounted to £30,000,000. If that happened in 1934, under the terms of this agreement the Soviet Government would have to buy £27,000,000 of goods from this country. Every other great industrial country has made agreements with Russia. The United States of America, so long the stock argument of those who opposed the trading agreement with Russia, has fallen into line; a country, incidentally, whose export trade is far less important to the economic life of the nation than export trade is to this country. It is satisfactory to find that even in the Conservative party in this country there has been a change of attitude on this question and the promotion of Anglo-Soviet trade now finds in that party many of its most forcible advocates, like the right hon. Member for Tamworth (Sir A. Steel-Maitland). I think that we may say for the first time that a Trade Agreement with Russia will command the support of the House of Commons as a whole.

The acceptance by the Government of the terms of this new treaty, well judged on the whole as I think that acceptance to be, makes their handling up to now of the problems of Anglo-Russian trade seem inconsistent and indefensible. Those who wish this agreement well must press the Government for an expression of their spirit of willingness to work it to the utmost. Is it to be the foundation of a great expansion of Anglo-Russian trade or is it to be merely a reed to be shaken in the wind of diehard rhetoric and broken by the Ottawa Imperialists? There was an Anglo-Russian agreement during the first 15 months of this Government's period of office. In 1932 they denounced it, with grave disadvantage to British trade and industry. How serious that loss was can be illustrated by two figures. In 1932 the exports of British merchandise only to Russia were valued at £9,250,000, but in 1932 they had sunk to £3,250,000 as a result of the denunciation of that trade agreement. If the action of the Government had been dictated by any desire to serve British interests, it would have been sheer folly. The old agreement could have been amended or a new one could have been negotiated while the old agreement was still in force. It was not necessary to denounce the old agreement with Russia in order to obtain a readjustment of the balance of trade between the two countries. That was made clear by no less an authority than the President of the Board of Trade who, speaking on 5th April of last year said: There seemed to us very little reason why we should not be put in the position of buying no more from Russia than Russia bought from us, or, if you like to put it in another way, that we will sell no less to Russia than Russia sells to us. That is a perfectly reasonable proposition and one which the representatives of the Russian Government were prepared to accept. No, the action of the Government was not a blunder but a crime against our fishermen and workers in our export trades, at the dictation of the Prime Minister of Canada and in the interests of the British Columbia timber exporters. I will leave other hon. Members to speak for the workers they represent. I speak for the fishermen, and I am proud to do so—those splendid men of whom the hon. Member for Lowestoft (Mr. Loftus) spoke so eloquently in his maiden speech. He paid tribute to their services in the War, which he said were no less than those of the Navy, and I was glad to see that the First Lord of the Admiralty nodded his assent. It ill becomes the Government of this country if they agree with that estimate of the value of the services of the fishermen, to sacrifice their industry to the timber exporters of British Columbia.

There the negotiations started. For 15 months they have dragged on; for 15 months propaganda was dragged in; debts was dragged in by our Government—the Lena Goldfields, the food of the British Ambassador and his staff in Moscow—all these things were used to delay the negotiations, and in the end all were abandoned or shelved. As regards debts, it is remarkable to find that those hon. Members who are most insistent about the payment of the debts which the Russian Government owes to our Government are the very ones who object most to dumping. Yet how do they expect those debts to be settled; how and in what form do they expect the payment to come, if not in the form of goods or services? The demand for the repayment of the debts is the demand for an increase in Russian imports into this country. So the negotiations dragged on, and it is permissible to doubt whether the negotiations with the representatives of the Soviet Government were the most difficult and delicate part of the negotiations and discussions in which the President of the Board of Trade had to engage before he could conclude this agreement. I should imagine that there were negotiations with some of his own colleagues and supporters which were at least as difficult as those with the soviet Government.

The agreement itself introduces two new principles. The first is the effort to prevent Government subsidised dumping into our markets. In this direction the President of the Board of Trade has been entirely consistent, for, long before he joined the present Government, he was associated with his other Liberal colleagues in denouncing subsidised dumping as an unfair and deleterious practice. My only source of the astonishment and regret which I have often expressed in this House and in the country was that the Government did not take a similar opportunity to that which presented itself at Ottawa to prevent British agriculture from being damaged by subsidised dumping from the Dominions. That is the only way in which it could be done: by agreement with the countries when you are making trade agreements, or with all the countries of the world at the World Economic Conference. It will indeed be interesting if the Secretary to the Department of Overseas Trade, in his reply, can give to the Committee some information as to how these provisions will work—as, for example, how the true Russian price will be distinguished from the alleged subsidised price. How will it be possible to tell whether, and to what extent, the price at which the Russian goods are offered in this market is a subsidised price? If he would give us some information on that point, I am sure that the Committee would be greatly interested. In so far as this article in the agreement gives protection to Dominion producers in the British market, I shall refer to it in a moment; but in so far as it is designed to prevent subsidised dumping on to our home market to the detriment of our home producers, I welcome it, not only as a safeguard against unfair trading practices by the Soviet Government—the unfair use of their State monopoly of foreign trade which makes such arrangements doubly necessary—but also as a deterrent to political agitation in this country against Russian trade.

The other new feature of this agreement is the endeavour to bring about a mathematical balance of payments. If I suspected that this Article represented a capitulation by the President of the Board of Trade to a large section of his present supporters, who hold the reactionary and barbarous opinion that trade between this country and other countries should be limited by the amount which each of our customers is willing and able to buy in our market—a reversion to the crude principle of barter—if I believed that this Article and Schedule were to form a precedent for other agreements, I should be foremost in denouncing it. I do not, however, believe that the opinions of the President of the Board of Trade have undergone such a fantastic transformation as that. I see in the Article merely an effort to deal with the situation which is created by the Soviet Government's State monopoly of foreign trade. The arbitrary power of that Government enabling it to use trade as too many other Governments with less adequate powers and with disastrous results are trying to use it, as an instrument of national policy, calls for some such control as this Article is designed to afford for the stabilisation of trade between the two nations.

I therefore welcome this agreement, and I come back to where I started in saying that everything will depend upon the spirit in which it is worked. I hope that this Debate will show that the House of Commons desires the greatest possible expansion of Anglo-Russian trade, and deplores the creation of obstacles to such trade. This spirit must be shown on both sides; it must be shown on the Russian as much as upon the British side. I am very sorry to hear that the Soviet trade representatives are trying to drive an unconscionably hard bargain with the herring fishing industry. The right hon. Gentleman the President of the Board of Trade seemed disposed to wash his hands of the herring fishing industry. He and other speakers have said that on the whole it was a good thing that herring were not mentioned in the agreement; that it was better to have greater latitude left for the negotiation of particular agreements dealing with particular industries after the conclusion of the main agreement. I am not sure; everything depends upon the course of the negotiations, upon what was said on both sides during them, on information which is not accessible to me. It is the Government's responsibility.

The President of the Board of Trade, however, far from appearing to accept that responsibility, said "Trust Aberdeen." Incidentally, many of the curers who have these herring to dispose of are not in Aberdeen, but that is a small point. I would suggest that a better slogan for the President of the Board of Trade and for the Parliamentary Secretary would be "Help Aberdeen." It needs help badly. Never has the industry been so depressed as it is at the present moment. Never have its difficulties been greater. It is true that the surplus barrels which were left over after the restricted fishing at Yarmouth last autumn—restricted to the amount of which it was thought possible to dispose—have mostly been sold and that there are very few left. The industry cannot, however, be maintained on the level which it reached at Yarmouth. That was a level of disaster. It must be raised to a much higher level if there is to be any hope of its survival. The Russians are only offering 25s. a barrel. We need the help of the President of the Board of Trade and his influence to get the Russians to improve on that offer to 30s. Let this message go out from the House of Commons to the representatives of the Russian Government in this country: that it would indeed be a poor start for this agreement if the Soviet Government failed to prove itself a good customer to the herring fishing industry, which has always striven so hard for the improve- ment of the economic and political relations between this country and Russia.

On the other hand, His Majesty's Government have prepared for the conclusion of this agreement by arbitrarily cutting down, under political pressure from the Canadian Government, the amount of timber which is to be imported from Russia in the present year from 435,000 standards to 350,000 standards. This is an ominous commentary on Article 2, which, we are informed, is designed to prevent the frustration of preferences under the Ottawa Agreements. Two results must inevitably follow from this restriction: first, a rise in the price of a raw material so important to the building industry and to many other industries in this country; and, secondly, under the article of this agreement which secures a balance of trade between Great Britain and Russia, there will be a reduction of British exports to the value of £1,000,000, which is the value of the Russian timber the entry of which has been prohibited by the Government. If the agreement is to be worked in that spirit, it will do little good to British industry.

The real test of the Government's sincerity in desiring to expand trade with Russia will be its handling of the question of credits. The average insurance premium charged by the Export Credits Guarantee Department has been 10 per cent. per annum on the guaranteed portion of the bill; that is on only 60–75 per cent. of the face value of the bill. Now there has been no single case of default on a Russian bill, and there can no longer be the slightest justification for charging on these Russian bills a higher rate than is charged on the bills of other countries. The Department is making money, and it is not making money out of Russia, as the Parliamentary Secretary or the President intervened to point out to some hon. Member who seemed to be under a misapprehension; it is making this money out of the British exporter. It is on behalf of the British exporter that we make this claim that the insurance premium should be reduced. In Germany the charge is only 2 per cent.; in Italy it is only 1¼ per cent., and the present practice puts the British exporter at a serious disadvantage as compared with his Continental competitor. Contracts have, in fact, been lost on that account.

Then, too, the duration of the credits is very important. The Germans and Italians give credits up to 54 months, and the restriction of credits here to 18 months, if continued, would effectively prevent an expansion of trade. Let us always in these Debates remember the unemployed. If the Export Credits Scheme could be revised it would give in these and in a number of other important respects—I do not wish to delay the Committee by going into the details of these respects, but there are a number of other very definite proposals which the British exporters have put to the President of the Board of Trade—it would give an immense and timely impetus to our export trade and to the reduction of unemployment.

This agreement is fraught with promise not only to British trade and industry but also for a better understanding between the Russian and British peoples and for the peace of the world. The right hon. Gentleman the Member for West Birmingham (Sir A. Chamberlain) said, in a speech delivered in this House on 3rd March, 1927: You cannot have, whatever the provocation, whatever your own interests, a sudden breach between this country and Russia without it having its repercussions on the whole European situation."—[OFFICIAL REPORT, 3rd March, 1927; col. 633, Vol. 203.] That was profoundly true, and the converse is equally true: you cannot have a reconciliation, a healing of that breach, a restoration of trade and good feeling between the peoples of Russia and of this country, without a profoundly helpful reaction upon the situation in Europe as a whole. If this agreement is worked in a spirit of co-operation and good will it will heal many sores. The auspices are better than those which have attended the signing of any previous agreement. The note of defiance and exultation is absent from the comments of the Russian Press, and in this country the agreement is welcomed by hon. Members and the Press of all parties. Good will is the impulse required to increase trade and prosperity, and thus to raise the standard of living of the people in both countries and to make this agreement a much needed bulwark of world peace.

7.16 p.m.

Sir ARTHUR STEEL-MAITLAND

I do not want to follow the right hon. and gallant Member for Caithness (Sir A. Sinclair) into a number of the points he has made, because there are a large number of Members who desire to take part in the discussion. It would be interesting to know how far the right hon. and gallant Member can substantiate a statement he made with regard to the Government's policy. He was in favour of the agreement, but, obviously, he was also ready to criticise the Government when he could. He said, of course, that their handling of the matter had been bad generally, although they had arrived at an agreement which he thinks has its redeeming qualities. He gave us one instance where he thought the Government's policy had been bad, namely, that it had denounced the previous agreement as he thought unnecessarily. May I ask him whether he has considered the nature of the agreement itself, and the effect of the most-favoured-nation Clause, and whether we could have possibly taken any action of the kind under the previous agreement?

Sir A. SINCLAIR

I do not suggest that we could have taken much action under the treaty, but I do suggest that it could have been amended by agreement and that negotiations could have gone on whilst trade was still being carried on under the old agreement.

Sir A. STEEL-MAITLAND

Obviously, notice has to be given to denounce any commercial treaty before you can start a new one. You give six months' notice, or whatever the period may be, to denounce a treaty, and during that period you go on with new negotiations in order that the new treaty may come into existence before the old treaty has lapsed. When you want to put something which is quite different in place of an old treaty you give notice of denunciation, and you start to negotiate a new treaty to take its place. It would be perfectly impossible to have pursued any other course. The original agreement was wholly inapplicable. The most-favoured-nation clause which found its place in it—I am speaking from memory—was perfectly apt in our arrangements with any other capitalist country, where individual citizens are free to make contracts, but it was wholly inapplicable, as the right hon. and gallant Member will understand, when you were dealing with a proletariat State where you had a State monopoly in foreign trade. Denunciation is not an act of unfriendliness. I explained this at the time to one of the representatives of the Russian Government. I pointed out to him that it was the ordinary method of procedure; and that is why we ought to be grateful for this present agreement, because it does act upon the only lines upon which a treaty can be made to give tolerably equal terms as between Russia and this country.

I am at one with the right hon. and gallant Member in this, that in normal circumstances I hate a barter agreement. I think it is the worst kind of agreement that you can possibly have between two countries. I am not certain that in normal times a quota is not almost as bad. I dislike all these for normal times, but they have to be done in abnormal times. In normal times under a tariff system we can put on a duty, but a duty is wholly inapplicable in the case of a country like Russia. It must have some relation to the cost of production, and there is no cost of production in Russia in the ordinary sense. Therefore, there is nothing to do except to go on the lines upon which this agreement has proceeded, and which strike me as being in their way quite admirable. I do not agree with the Noble Lady the Member for Perth (Duchess of Atholl). I find myself almost at the opposite end of the scale to my Noble Friend when it comes to complaining that a certain number of people have to put their signatures to an engagement on behalf of the Russian Government for it to be a binding document. It is a perfectly reasonable thing to do; and it is done by large firms. They cannot be bound by the signature of any particular employé; they have to have certain recognised agents and, therefore, this is only acting in a precisely similar way in regard to Russia.

From the point of view of results, it seems to me that there is no question of a triumph for either side. It is not a question of one country having scored off the other. What it really means for us is that it is a new departure, or at any rate that it is proceeding along other lines. We have freed ourselves from old trammels and are able to use our bargaining power in a different way from other countries. We have used our bar- gaining power in order to get better terms for our trade. When I look at the actual figures I am struck by the value which this bargaining power is to us.

Hon. Members are no doubt familiar with the figures of trade exports from this country to Russia and the exports from Russia to this country during the last three or four years. Our exports to Russia are only one-third or one-fourth of the value of the exports from Russia to this country, but some figures which I have procured and with which hon. Members may not be quite so familiar are most significant. They are figures based on Russian statistics of the course of trade between Russia and this country as compared with the trade between Russia and Germany and the trade between Russia and the United States. This is the net result. I take the average of the three years just before the breaking off of negotiations with Russia in 1927. In that case there was an excess of exports from Germany into Russia over what she bought from Russia of 19,000,000 roubles. There was an excess of United States exports to Russia compared with what she bought from Russia of 103,000,000 roubles. In the case of our own country it was the other way round, there was an excess of 53,000,000 roubles in the exports from Russia to this country as compared with what we sold to her. Taking the years after negotiations had been broken and up to the year of the slump, the results are even more striking. Germany had what is normally called a favourable trade balance with Russia of 37,000,000 roubles, the United States of America had a favourable balance of 158,000,000 roubles, but we had an unfavourable trade balance of 149,000,000 roubles. That was a situation which really did deserve to be remedied, and when I look at the schedule to this agreement I think it is designed to restore to this country that proportion of trade which we ought to have enjoyed had we exerted our normal bargaining powers.

There is one question I should like to put to the Secretary for the Overseas Trade Department. Our re-exports and our exports are added together as against the imports from Russia, in order to find the figure which is to make the total. The entrepot trade to us is, of course, very valuable, but nothing like so valu- able on the whole as the export trade of the produce and manufactures of our own country. I am sure that hon. Members would not wish what I call the re-export portion of that total to be higher than is necessary. We know that there are considerable consignments of raw materials and other produce which are brought into this country for re-export, if they are dutiable they go into bond and are not included, but if they are not dutiable they do not go into bond and are included. I would rather suggest that there should be some cheap bonding system in order to prevent the total being too great a proportion of the re-export trade as against the produce of British manufactures.

Broadly speaking, the question as between those who are in favour of the agreement and those who criticise it, either from this point of view or the other, is: do we want to trade with Russia or do we not? There are some points in which I could criticise the agreement, but one does not want to go too much into detail. I would like to amend some of the faults in the agreement in order that our trade with Russia may grow and grow more smoothly. The Noble Lady the Member for Perth would like the faults in it to be more numerous and more serious in order that the whole agreement might be denounced. That is where she and I part company. On the other hand, I put it seriously to the Minister, that if trade is to grow between the two countries, as I hope it will for the sake of both, one thing that is necessary is a real spirit of what I would call neighbourly dealings on both sides. I hope there will be neighbourly dealings on this side and on the Russian side too. I am not the less anxious for trade or to be friendly if I speak quite freely on that subject too. When I look at the American Agreement that has been recently made between Russia and the United States, I find this item enclosed in a letter from M. Litvinoff to the President: My dear Mr. President.—I have the honour to inform you that coincident with the establishment of diplomatic relations between our two Governments it will be the fixed policy of the Government of the Union of Soviet Socialist Republics … to refrain and to restrain all persons in Government service and all organisations of the Government, or under its direct or indirect control, including organisations in receipt of any financial assistance from it, from any act, overt or covert, liable in any way whatsoever to injure the tranquillity, prosperity, order or security of the whole or any part of the United States. It goes on very distinctly to indicate that it will refrain from propaganda not only by itself but by any organisation in receipt of financial assistance from it. Those in this Committee who remember former days will realise the trouble and the disturbance of good relations as between this country and Russia which were due to the propaganda of the Third International. So far as I have been able to trace I do not think there has been much propaganda of that kind in recent years. I hope it may never take place again, because it is perfectly obvious that it would disturb the neighbourly and friendly relations by which trade can increase. Another point is contained in the answer of the President to that letter from M. Litvinoff: I am glad that nationals of the United States will enjoy the protection afforded by these instruments immediately upon the establishment of relations between our countries, and I am fully prepared to negotiate a consular convention covering the subject as soon as possible. Let me add that American diplomatic and consular officers in the Soviet Union will be zealous in guarding the rights of American nationals, particularly the right to fair and public speedy trial, and the right to be represented by counsel of their own choice. I mention those two things because they occur in the most recent agreement made by Russia, that between her and the United States. I hope that before this temporary agreement is ratified or becomes permanent it will be possible for the Russian Government to give us similar assurances. Of course it is not possible for the House of Commons to amend an agreement of this kind. The two items I have referred to were contained in correspondence, and it should be possible for the Soviet Government to give similar assurances to this country. I believe that if that were done it would remove an amount of suspicion in this country, which is entertained on this side of the House and in many quarters. I believe it would cost Russia nothing, and I am sure it would conduce to a real friendliness of spirit, which would not only make the Agreement work smoothly but would result in a greater development of trade, and with a greater willingness behind it than might otherwise be the case.

Broadly speaking, I am all in favour of trading with Russia. I think it is a good thing to do, that it is a good thing for our employment, and that it is good for the Russians too, because ours is their great market. As has been said, if we recognise a country as a civilised country with which we have relations and where we have an Embassy, it is absurd and inconsistent not to do what is possible to develop trade relations with that country. What is more, as the development of the world goes on it is quite clear that no country or no Government is static. We in this country are gradually developing. Hon. Members opposite think that the development is in their direction. I think it is in a different direction. The fact remains, however, that no country is static. There is no question that the development of Russia and of Russian opinion is proceeding very rapidly indeed. The country that was Bolshevik in government and principles immediately after the revolution is not the same as that of to-day. From the point of view of action and reaction in trade the fact that people get to know one another has an influence which probably is all to the good in the long run. For that reason I say frankly that I hope this agreement will not be merely a temporary agreement, but will become a permanent agreement. I say that standing on the spot where my hon. Friend the Member for South Kensington (Sir W. Davison) a short time ago expressed the opposite view.

7.39 p.m.

Mr. LEONARD

The last remark of the right hon. Gentleman who has just spoken is appreciated by everyone who has listened to this Debate for any length of time. There could not be two attitudes so different as that of the right hon. Gentleman and that of the hon. Member for South Kensington (Sir W. Davison). When I was listening to the hon. Member for South Kensington I felt that if the trade of this country had to be carried on at all it certainly would not make much advance if that hon. Member's attitude was symbolical of the attitude adopted by those in charge of our trade. I was particularly interested in the hon. Member's denunciations with regard to the losses sustained by poor people in Russia. Russia is not the only place where poor people have been losing their money. Only a few days ago a question was put to the Front Bench opposite asking whether anything could be done to protect poor people in this country from losses they were sustaining because companies such as Debenhams and the Drapery Trust were writing down their capital by £9,000,000.

I regret that the Noble Lady for Perth and Kinross (Duchess of Atholl) is not present. I admit that she attends religiously to her duties in this House, and I am always pleased to listen to her because of the amount of detail which by some means she gathers in order to add to her knowledge. But I cannot always follow the line of reasoning that she attaches to the details. I always sense a tremendous and deep-rooted prejudice in her speeches. For instance, to-day she stated that the whole fabric of Russia was rotten. It is impossible to carry on discussions that will lead anywhere if one side to the discussion is of the opinion that the other side is rotten. We are not prepared to accept the Noble Lady's view. I am rather afraid that many Members of this House in the past have been of a similar belief to the Noble Lady, and have been hoping that Russia would go from bad to worse. She asked what could we hope to expect from trade with Russia, and to her own question she replied. She stated definitely that in Russia there was a shortage of everything that human beings needed. If there is such a shortage, that is a country where we should endeavour to get some trade.

With regard to dumping there have been general charges for a considerable time. I am not entering into a detailed argument now. The only thing I can suggest to the Noble Lady and others is that they should pay a little attention to British coal, and especially to its external cost as against its internal cost in this country. That is an illustration of dumping as practised by this country. I look upon this agreement as a recognition of facts that prejudice has held in check and smothered for quite a long time. I listened with interest to the intimate knowledge shown by the right hon. Member for Tamworth (Sir A. Steel-Maitland) with regard to the possibilities of a continuation of the previous agreement. In my humble way I cannot see, even if it was necessary to interrupt the agreement of 1930, why so much time should have been taken to bring another agreement into being. I am rather inclined to believe that Ottawa and the desires of Mr. Bennett had much to do with the denunciation of the previous agreement.

As far as I can ascertain the difficulties have been cleared up now. First of all there was the difficulty as to the proportion of Soviet trading proceeds that would be spent in the British market. The President of the Board of Trade in this House only last April made it clear that there was little difficulty so far as that was concerned. The difficulty then centred round the second point with regard to Ottawa. All this time there had been continuing losses of trade between this country and Russia. I think reference has been made to the fact that the trade of this country with Russia was only half what it had been in pre-War years and that since the denunciation of the previous agreement we lost millions of pounds worth of trade with Russia. It is no wonder therefore that now and again we have heard protests from responsible business men in this country and warnings of what would happen if action were not speedily taken in this matter. I shall only quote one illustration. We had the chairman of the Committee on Russia representative of the Manchester Chamber of Commerce protesting against the delay in getting something done. He said that while orders were again coming to Lancashire they were not as much as could be expected and he added that a large business would be lost so long as trading relationships remained in the unregulated state which presented itself at that time. Other industries were thinking on similar lines and there was much anxiety in regard to the Soviet-United States discussions…not because those discussions were taking place, but because we were not participating in similar discussions.

With regard to the Russian attitude, I have in my humble way endeavoured to follow the work of the Russian representative, M. Litvinoff. I think he has applied himself to the realities, as no other foreign commercial representative has done. He does not forget the importance of the recognition of some form of contract between one country and another in regard to the exchange of commodities. He has acted with purpose and no ulterior motive can be traced in his actions on behalf of Russia. We must not forget that Russia is now a fit and efficient part of an industrialised world. It is the one country whose standards of life are going ahead. It is not standing still, but is making progress year by year. A country of that description must be taken into consideration and recognised to a greater extent than it has been recognised in the past. Reference has already been made to President Roosevelt's pronouncements concerning the relationships between Russia and the United States. Among other things he said that the relationship must not merely be formal but that it had to be friendly. The relationships of this country with Russia should not be confined to the formalities of a temporary commercial agreement. That agreement should be the start of a friendly relationship between the countries such as has not existed in the past.

The National Government have been rather hesitant in adopting that attitude. We in this country have been blowing hot and cold in regard to Russia and matters have not been helped by the attitude of certain sections of the Press in this country. If responsibility for damage can be laid to the account of any section in this country, there is a section of the Press which must bear a tremendous share of that responsibility. The temporary nature of this agreement has been referred to and I have been rather amused at the assurance that it was made temporary in order to ensure that Russia would pay her debts. Surely we in this House cannot point the finger at any country or lecture any country about paying their debts. If any balance does accrue on the Budget this year it, in some measure, may be due to the fact that there are some debts which we owe and which we have not yet paid. With regard to the adverse balance of trade in the case of Russia I notice that during the Debate in January last the hon. Member for North Lanark (Mr. Anstruther-Gray) said: When you look at the list of imports into this country for the last year you find that no less than £1,700,000 worth of butter was imported from the Soviet, largely, I understand, by the co-operative societies."—OFFICIAL REPORT, 31st January, 1932; col. 379, Vol. 285.] I am not making any apology on behalf of the co-operative societies in regard to the purchase of butter or anything else from Russia. Our relations with Russia have been quite satisfactory and payments have always been made when they were due. I only touch upon this matter in order to correct an impression which may have been created and to state that the co-operative societies only took 14 per cent. of the total import of Russian butter that year. The remaining 86 per cent. was bought by private enterprise in the normal course of trade. With regard to wheat there is very little at present available and in so far as the co-operative societies are concerned—due perhaps to its unsuitability—they have not been large purchasers. That is a small point but I wished to make it clear since the matter was introduced in the previous Debate. I trust that the earnestness displayed in connection with this agreement augurs well for the future and that we shall go ahead with the establishment of proper relations with Russia more speedily than has been the case in the past.

7.53 p.m.

Mr. HENDERSON STEWART

Having listened to the whole of this Debate so far I seem to observe two groups of critics of this agreement. First there are those, like the hon. Member for South Kensington (Sir W. Davison) and the Noble Lady the Member for Perth and Kinross (Duchess of Atholl), who would have nothing whatever to do with Russia and who in their heart of hearts would like to denounce this agreement out and out. There is another group including some of my hon. Friends who sit on the benches below the Gangway who would like to deal with Russia but who give this agreement a grudging measure of support. It is difficult to understand the mentality of either group of critics. It seems to me they are both living in a world of make-believe. The first group, that represented by the hon. Member for South Kensington, appear to be so blinded with prejudice that no speck of reason comes within their vision. I am sure it would be just as easy to convince the hon. Member for South Kensington that he was a Scotsman as to convince him that Russia was a great nation with potentialities in trade which are almost illimitable. I cannot help feeling that to these hon. Members Russia appears as a kind of monster which if given the least encouragement will rise up in the midst of Moscow and hurl destruction upon the mansions of Kensington and the fair fields of Atholl.

What is it that these hon. Members want? I listened with the greatest interest and admiration to the vigour and sincerity with which the hon. Member for South Kensington expressed his views and I gathered from him that millions of British money are sunk in the Lena Goldfields. I was in a little doubt as to whether Lena was the name of the place or of the French lady who was referred to as having sent him a message and I was not sure whether or not it was the lady who said: "Once bitten, twice shy." At any rate we gather that there was a message and that there are millions of pounds of past debts and millions of British capital sunk in Russia and apparently the argument is that until those debts are repaid we should not deal with Russia at all and we should not give Russia any trading rights at all; that British capitalists and investors have been refused payment of their debts and have been cheated and that their claims must be met.

Sir W. DAVISON

I did not say that they must be paid, but I said that there should be recognition of these claims and that some machinery should be put into operation that would gradually deal with them. Some time ago I suggested the machinery that could deal with it. But I did not say that we must not trade with Russia until they had all been paid.

Mr. STEWART

That is a very important admission by the hon. Member because the impression given to me and I think to the Committee generally by his speech was that until these problems were settled he thought there should be no dealing with Russia and that he was prepared to press for a reduction in the Vote to show the strength of his conviction. What is the actual case? No one suggests, and the Labour party when they were in office did not suggest, that we should say to the Russians: "You cannot pay—that is a pity, but let us forget all about it." Nobody imagines that the Secretary to the Overseas Trade Department went along with M. Ozersky to a quiet hotel in the West End where they had some Russian tea, perhaps a little vodka, and said to him: "Never mind these debts, old chap; we shall forget all about them." That is not, of course, what happened. The House and the Gov- ernment recognise these debts as debts which must be honourably met. But it would be quite intolerable to hold up a commercial agreement and to sacrifice even for a week the prospect of work and wages for British herring fishermen, machine-tool makers and others, for the sake of individual private investors.

In any choice of courses which presents itself, the course adopted by this Government must always be that which leads to greater employment. In any clash of interests, the interest of the unemployed man must come first. There is no other alternative for the National Government. We should be prevented by every pledge that was given to the electors in 1931 from taking any course other than the course which has been taken here. The hon. Member for South Kensington also raised the question of propaganda, and had there been time I should have liked to have dealt with that. I will only say that while admitting that there was aggravating and irritating political propaganda some years ago, which very much upset the relations of Russia with every other country, yet I see a change in the last few years. I believe that that senseless interference in the organisation of other countries is not likely to be repeated. There is another group of critics to whom I have referred. They criticise the Government for having broken off the last Trade Agreement and for delaying the completion of this agreement. I ask the Committee to apply to that criticism the test of practical politics. For years past the balance of trade between this country and Russia has been lopsided. That has not been the case only since the National Government came into power. It was more lopsided six years ago than in 1932. Therefore it is an old problem and one which needed to be tackled.

That is not all. Apart from being lopsided, it is true beyond any possibility of doubt that, as the Noble Lady has pointed out with so much insistence, there was actual dumping of Russian goods here at prices deliberately fixed to undercut not only the Dominions but our home producers. I cannot believe that any hon. Member can say honestly that it is wrong to try to alter that state of affairs. I cannot imagine any hon. Member saying, "Well, this is a splendid arrangement. Send us your goods, as many of them as you can. We are very pleased to have them. Never mind if our goods do not go over to you; dump as much as you like." No hon. Member surely would take up an attitude like that, and yet that was one of the weaknesses, and a very important weakness, of the last agreement. The last agreement was ended because it, was unsatisfactory from our point of view. I noticed that the right hon. Member for Caithness and Sutherland (Sir A. Sinclair) criticised the Government for ending the agreement without, as he said, starting new negotiations. My right hon. Friend was misinformed. He had forgotten that the notice terminating the agreement was accompanied by a letter inviting Russia immediately to enter into new negotiations, and in fact new negotiations were entered into long before the six months' period was up. Therefore, there is very little point in that criticism.

But even if the last agreement was considered satisfactory by some of my hon. Friends, does anybody deny that the new agreement is a better one? That is the problem with which we are faced to-night. There are novel provisions in Articles 2 and 3—two principles that have never before appeared in a Commercial Agreement—which meet, in fact, the two major weaknesses of the 1930 Agreement. The first is, as the right hon. Gentleman brought out, the derogation by Russia of most-favoured-nation rights, in itself no paltry achievement to have persuaded Russia to sign. The second is the application of foreign exchange here for the purchase of British goods. I do not think any hon. Member can make a complaint of either of those two provisions. The first safeguards our home market for our workers and those of the British Empire. The second will have the result, I have computed after a good deal of care, of multiplying three-fold by the end of the period British exports to Russia.

One does not, of course, expect generosity in politics, but hon. Members might at least have recognised a very skilful piece of negotiation which won for this country these two advantages, and I am not sure that any Government other than a National Government could have obtained an agreement of this character with these advantages to Great Britain. I am not sure that any but a Government of the present complexion could have broken through the web of prejudice which has enshrouded our relations with Russia ever since the War, and I am certain that no Government of the complexion of the hon. Baronet the Member for South Kensington would have succeeded. The demands for a settlement of debts and the Lena Goldfields question, excellent in themselves, would have made practical agreement impossible. And, with great deference, I hardly think my hon. Friends opposite of the Labour party would have been any more successful. It is this kind of Government, able to take a new and a higher view, that has succeeded in carrying through this agreement.

I want now to say something about herring. I had not intended to refer to herring, but there have been remarks by my hon. Friends opposite which require some answer. They are, of course, entitled to make their own interpretation of a situation and their own explanation of what has happened in the last few years, but I think it would be a pity if either the Committee or the country were to accept their statements and explanations as being the only and the correct ones, and I say that with a great deal of respect to my hon. Friends, because I recognise their knowledge and their experience of the herring trade. They regretted that there was no mention of herring in the agreement, and I confess frankly to keen disappointment myself on that score. I pleaded in this House a few months ago, and I hoped that there would be included as a Clause in this agreement a definite undertaking by Russia to take a specified annual amount of herring at a quantity price.

That has not proved possible. If the Government were to blame, there would be some reason for my hon. Friends complaining of it, but I am satisfied, and I have made very careful inquiries, that the British representatives in these negotiations have made every endeavour to have such a Clause included. The reason for their failure is obvious and well known, I think, to my hon. Friends opposite. The Russian delegates said this: "We are prepared to take so many more million pounds worth of British goods in bulk, but we must reserve to ourselves the right to decide, from month to month and from year to year, what goods shall make up that bulk." They refused, therefore, to bind themselves to take herring, or machine tools, or anything else specifically, and I think it is ungenerous of my hon. Friends to suggest that the Government are responsible for the omission of that Clause.

Ten days ago I met, in Edinburgh, the appointed delegates of the herring trade in Scotland. I met the appointed representatives of the catchers, the curers, and the salesmen, and I am not sure that any hon. Member has seen these people since then. I, therefore, speak with a certain amount of knowledge of their views, and it is true that they are under the impression that there was a promise made to include such a Clause in the agreement. But when I pressed those delegates, I found that it was less in their minds a promise than a kind of understanding, and I am sure my hon. and gallant Friend the Secretary to the Overseas Trade Department, when he replies, will be able to make that point clear. It would be worth his while doing it, because there is an impression among the fishermen and their chief delegates—the vice-chairman of the Herring Producers Association in Scotland, for example—that a pledge was given. When I pressed them on the point, they rather withdrew, and if my hon. and gallant Friend will make that point clear, I think he will help a good deal.

Lieut.-Colonel COLVILLE

Will my hon. Friend say what the nature of the pledge was?

Mr. STEWART

I was saying that my right hon. Friend opposite had referred to the fact that the herring trade in Scotland was under the impression that a pledge was given by the Government that a Clause should be made part of this agreement having the effect that Russia would take a certain amount of herring per annum. I am satisfied that no such pledge was given, and we had the word of my hon. and gallant Friend earlier to-day that that was so, but these herring delegates are under that impression, and it would be a good thing if my hon. and gallant Friend could make that point clear when he replies.

I would also like to deal with the criticisms that have been made of the Ottawa Agreement, with its effect upon herring. It was suggested by my hon. Friends opposite that the Ottawa Agreement was principally responsible for the bad trade and distress of the herring industry in the last two years and this year. That is rather a far-fetched interpretation of what happened. The herring trade had been in difficulties with Russia long before the Ottawa Agreement was thought about. The Russian market for herring has gone up and down. Russia has bought one year and withdrawn the next year repeatedly, ever since the War, and therefore it is ridiculous to suggest that that trouble has only arisen in the last two years. The truth is that Russia since the War has been trying to find a new economic system, a new way of expressing herself. She has been trying to build up her own trade, and when she has needed outside herring she has gone to Norway, because the Norwegian herring are cheaper. In the many years when she has bought nothing from this country since the War, she has filled up her supplies from Norway. At any time in these years Russia would have bought at a price. If we had sold her the herring cheap enough, she would have bought them, but with the best will in the world Scottish herring fishermen and curers are not going to sell Russia herring at a loss consistently.

I would suggest now, as I urged in the Debate in December last, that, having got this agreement as a foundation, it is up to the herring trade themselves to negotiate with Russia and to secure a steady sale of herring over the next few years. The fishermen of the North of Scotland are prone to dwell upon their independence, and rightly so. Very well. Let them now show that they have the grit and the business experience to make them independent of the Government to whom they are so constantly turning. I regret, and I have repeatedly said so, that the Scottish herring fishermen should so often turn pleading to the Government, when many a time they could have got their difficulties settled themselves. I think there should be in the herring industry a central marketing board or council that would handle that industry, in the same way as other great food-producing concerns are handled now; and it is because I believe that this new Russian Agreement provides the conditions whereby that industry can develop and find new and steady markets that I support it on this occasion.

8.14 p.m.

Mr. LIDDALL

Of the many new trading agreements which, within recent months, under the wise direction of my right hon. Friend the President of the Board of Trade, have been concluded between foreign countries and ourselves, I consider this one with Russia to be of first-class importance, and because it is so vitally important to many of our home industries and to many thousands of our own workpeople, I hope the Members of this Committee will consider it without prejudice and, as stated in Article 4 of the agreement, will have regard "to financial and commercial considerations only." The mere mention of the name of Russia causes unrest in the minds of people inside and outside this House, and there is nothing remarkable in that. While, however, that mental unrest is mainly due to what has happened in Russia since the Revolution, it is not entirely due to the happenings under the Soviet regime. Many things happened in Russia prior to the Revolution which would not have been tolerated by a great democracy like ours. But they happened, and the result is that Russia has gone from one extreme to another. Whether Russia will be able successfully to carry on its State monopoly on the present huge scale, no one can say, but it is certain that it is impossible to keep a great country like Russia in an isolation ward, and it is ridiculous to suggest that we should not trade with Russia until the money owing to the Lena Goldfields Company has been paid.

My information is that most of the money spent in the last few years in the Lena Goldfields was spent in purchasing German and Czechoslovakian machinery, for which the Deutscher Bank stood guarantee, and that there is not more than £1,000,000 of English money in the concern. Be that as it may, I understand, as was hinted by the President of the Board of Trade this afternoon, that an arrangement has been arrived at for the Lena Goldfields Company, to discuss direct with the State Planning Commission of the Union of Socialist Soviet Republics the question of a settlement.

Mr. PETHERICK

I understand my hon. Friend to say that there is no more than £1,000,000 of British money left in Russia by the Lena Goldfields, and that the remainder was invested or guaranteed by the Deutscher Bank. Has my hon. Friend any information as to whether the Lena Goldfields Company is ulti- mately responsible for the guarantees given by the Deutscher Bank?

Mr. LIDDALL

I cannot answer that. All I can say is that my information is that, although millions have been quoted as owing to the Lena Goldfields Company, approximately £1,000,000 is all that is due to our nationals. As the "Times" pointed out, a boycott would only be effective if it could be made general, which is impossible. Even if it could be made effective it would hardly achieve any useful purpose. The worst features of Bolshevism are most likely to be mitigated by facilitating intercourse between Russia and the outside world than by attempts at boycott, especially when such attempts are bound to be futile. Nor need we fear any effect on our free institutions.

The practical problem is not whether we should trade with Russia, but how to find a satisfactory basis for trade with a country in which all foreign trade, and indeed all commerce and production, are a State monopoly. In dealing with a monopoly on such a huge scale individual firms are at a hopeless disadvantage, competing as they must for business with one another as well as with their rivals abroad. In this new agreement an endeavour is made to counteract that disadvantage by stipulating that the proceeds of Russian sales in Great Britain shall be spent in Great Britain in a gradually increasing proportion until, at the end of four years, an approximate equality of payments is attained between the two countries, including, of course, visible and invisible imports and exports. This should remove once and for all the fear that Russian trade with Great Britain merely provided the Russian Communists with funds to carry on anti-British propaganda.

In this agreement there is no change of policy with regard to export credits, and this provides the only grouse which I have heard from our manufacturers. They submit that so long as the Export Credits Guarantee Department have to act entirely in accordance with Government requirements and are not in a position to exercise any discretion, the Department cannot function properly as a business organisation. The principal complaint—and I think a perfectly just complaint—which our manufacturers have to lay against those responsible, whoever they may be, is the excessive cost of guaranteeing the credit on goods exported to Russia. This amounts to at least five times the amount charged by our French and American competitors, to say nothing of the German. It is obvious that this money must come out of the manufacturers' pockets, that it is a direct tax on them, and that it is a serious handicap to them when competing with French, German or American firms. I submit to the Government that there is no justification for this heavy charge, and, in view of the substantial profits made by the Department on its Russian trade, and admitted by the President this afternoon, I earnestly appeal to the right hon. Gentleman and the Secretary to the Overseas Trade Department to do something which will bring relief to our manufacturers in this respect. I understand that the Department recognises the justice of the manufacturers' claim that a reserve fund should have been established which would have enabled a much lower rate of premium to be quoted. Instead of such a fund being established, the profits have been handed over to the Treasury. I would also point out that this heavy premium has to be paid immediately the contract is signed, and that is no light matter when one considers that all the money for labour and material has to be found throughout the period of manufacture before any payment can be received from the buyers.

This is my only complaint. I am wholeheartedly in favour of this new agreement, and I congratulate the President of the Board of Trade and all concerned upon the conclusion of yet another Trade Agreement with a foreign country which will find employment for thousands of our people. It means, I hope and believe, the employment of several hundreds of men in the world-famous engineering shops of my own constituency, Lincoln City. I wish, too, that the timber trade were able to rejoice owing to this new agreement, because no one can deny that Russian timber is wanted in this country. It is better than any other timber, and I suggest that only the best is good enough to be put into the houses of our people. I hope the Committee will unanimously approve this new agreement, and that, as has been suggested by pre- vious speakers, it will be carried out in the spirit and in the letter by both sides to the contract.

8.27 p.m.

Mr. ANSTRUTHER-GRAY

I agree with my hon. Friend the Member for Lincoln City (Mr. Liddall) when he says that the problem before the Committee is not whether we should trade with Russia but how that trade should be conducted. As one of those who have been inclined to be critical of the Government for the delay in arriving at this agreement, I would now like to congratulate them on having obtained it; but I submit that there was justification in the criticism of the delay, because if we look at the schedule to the agreement we see that although in four years' time the balance of trade will be approximately equal, yet in 1934, the present time, when we want trade most badly, the balance is going to be 1 to 1.7 in favour of the Soviet. It seems to me obvious that the reason for that is that the Soviet have already placed their orders for the present year with other foreign countries, and I believe that if we had taken a firm stand, which we were in a position to do, we might have had the agreement signed six months ago, in which case a substantial number of those orders might have been placed here.

But I think the good points of the agreement far outweigh any disappointments. It is gratifying to see that the Government seized the unique opportunity they had when dealing with a State which has a monopoly over its foreign trade of insisting upon an equal balance of trade and, further, inserting, as in Article 2, a stipulation against dumping, and thereby safeguarding the home and Dominion producers. Again, I welcome the innovation, for I believe it is one in an agreement of this sort, of making a provision in respect of our shipping which gives a definite incentive to the Soviet to make snore use of British ships.

There is one point which I would like to put to the Government. Article 9 of the agreement lays it down that trading relations can only be broken off after the lapse of six months. This gives me anxiety, because I understand that it will preclude the Government from placing an immediate embargo on Russian trade if that should prove to be necessary. It was only last year that the Metropolitan Vickers' engineers were imprisoned in Moscow, and I believed at that time, and I still believe, that it was largely thanks to the prompt action of our Government in putting on an embargo right away that the position of those prisoners was not more uncomfortable than eventually turned out to be the case. I very much doubt whether an announcement that in six months time the Trade Agreement would be terminated—especially when we consider that there is no means of limiting the quantity of goods that might be dumped by the Soviet in this country during those six months—would be strong enough to convince the Soviet Government that the British Government were in earnest in insisting that our nationals, be they here or be they there, must receive fair play.

I know we could always terminate diplomatic relations, but, looking back on the case of the Moscow prisoners, I doubt whether that would have been of much benefit to them. One remembers the help which they received from the British Chargé d'Affaires, and I hardly feel that the unhappy state of a Briton imprisoned in Russia would be in any way improved by the knowledge that his friends in the British Embassy had left the country. Further, to break off diplomatic relations with a foreign country is a very grave step, and I submit that a Government would find it very difficult to take that step with the promptitude which, in the case of the embargo of 1933, had so much to do with the ultimate release of the engineers. When we are talking of a Trade Agreement and better relations with the Soviet Government, we all of us hope, of course, that the unfortunate incident of the Metropolitan Vickers' engineers will not be repeated, but we must remember that such things have occurred before in the Soviet Union, and I would ask the Government to give this point their most serious consideration.

In Article 5 of the Treaty I observe that the Soviet Government will only be responsible for the purchases of independent trading companies, among which, I take it, we may number Arcos and Russian Oil Products, on condition that the purchases are authorised and initialed by one of the Soviet trade representatives in this country. I would like to ask the Secretary to the Over- seas Trade Department, who I believe is replying to this Debate, if he can give us an assurance that export credits and Government money will only be guaranteed in cases where the trade delegation have backed the Bill with the whole of the credit of the Soviet Government.

Finally I welcome this agreement, if it is properly observed, as a step towards increasing our export trade without necessarily sacrificing more of our precious home market. I believe that it will be of benefit to British industry, and will contribute towards a reduction in unemployment. For those reasons, it should command the sympathy of every hon. Member.

8.36 p.m.

Mr. PETHERICK

A great deal of this Debate, in fact, the first three hours of it, were devoted almost entirely to a discussion as to whether it was advisable to trade with Russia. The overwhelming body of opinion in the Committee decided that, whether they were in favour of the present Russian system of government or not, it was advisable to make an agreement with Russia and to trade with that country, at least with the point of view of endeavouring to let some political light into it. A very small body of opinion, of which the hon. Member for South Kensington (Sir W. Davison) was perhaps the chief spokesman, thought it was inadvisable to trade with Russia. They took up an attitude that this agreement was not a temporary agreement but a permanent one, and almost in the same breath complained that the Government had taken no step to make a permanent agreement.

I do not propose to discuss the advisability of making an agreement with Russia. The Government have decided that it is advisable and they have come to an agreement after many months of extremely hard negotiation. It is rather in regard to certain details of the agreement that I propose to speak. My first point is a small, technical one, which does not apply only to this agreement but to a good many others. The agreement is headed "A Temporary Commercial Agreement between His Majesty's Government in the United Kingdom," and so on. I am not sure that that is constitutionally the right heading for any agreement at the present time. I know that there are many different headings to trade agreements and treaties with other countries, but I should have thought that it would have been more correct, in this sort of agreement with a foreign country, to head it, as has been done in some cases, "between His Majesty, in respect of the United Kingdom, and the Union of Socialist Soviet Republics." That is a small point, but I do not see why we should not have some general method of phrasing in such cases. The form that I have suggested carries with it a certain constitutional implication.

The matter of the agreement is, in the main, much better than most of us feared and not quite so good as some of us hoped. It was undoubtedly extremely difficult for the Government, over these long months of negotiation, to obtain everything that they or we desired. We can congratulate them on having achieved success, as is evidenced in the Schedule of the ratio of imports to exports. That is, I believe, very valuable, and is rather better than it might appear, as I hope to point out later on. Having given general approval to the agreement, may I point out one or two items which are not quite so satisfactory? The first of those is Article 4, which says that the trade between the United Kingdom, as regards exports and the Union of Socialist Soviet Republics, shall be eligible for consideration on the same basis as between the United Kingdom and other foreign countries as regards credits. The hon. Member for Lincoln (Mr. Liddall), and many hon. Members who have spoken, have rather said that instead of credits being restricted, they should be extended. I thoroughly dislike the system of export credits, root and branch, because they really mean that our national finances are taking bigger and worse credit risks than the ordinary commercial insurance company and I should like the export credits scheme to be scrapped.

Mr. HANNON

Does the hon. Gentleman know that if his suggestion were adopted by His Majesty's Government at this moment it would put out of employment I believe nearly 40,000 people in this country?

Mr. PETHERICK

That is an estimate. I do not know exactly the figure of exports which are covered, or are to be covered, by the export credits. Taking the long view, it is as I have said. We are guaranteeing a figure and a worse risk, that the ordinary company will not assume. I do not wish to press that point, but I propose to raise it upon another day if I am allowed to do so. There is no necessity for export credits in this agreement. The whole system envisaged by the agreement is that there shall be an interchange of goods, with a gradual levelling up until 1937, and until the exchange is as nearly as possible level. There is no possible necessity for any credit being given. Under this agreement some system of clearing house might have been set up by which the payments made by Russia would have been set against the payments made by this country to Russia. With that levelling up, there would have been no possible reason or necessity to give credits under the export credits scheme or, indeed, private credits given from banks to the Russians, because if you had an interchange as envisaged by this agreement would there be no necessity for such credits.

Let me pass on to the question of diplomatic immunity. I see that the Ministers who have been negotiating this agreement must have had a great deal of difficulty on this point. There is no solid ground on the side of Russia for claiming diplomatic immunity for her trade representatives. If they are, as they claim to be, trade representatives sent to negotiate sales to and purchases from this country, and if they intend to carry out that function, and that function alone, it seems to me that there is no reason why they should expect or claim or want more than the ordinary rights which a citizen of or a guest in this country desires. If, on the other hand, there is something behind it all, then His Majesty's Government, in my opinion, should not have granted diplomatic immunity. I take it that the Russian Government said that they were in a peculiar position, and our Government were so anxious to come to an agreement that they acceded, as I think, in this case, wrongly, to the request, in their anxiety to come to a final decision and save the negotiations from going on for months more. There is another point which I should be grateful if the Secretary to the Overseas Trade Department would explain, if he has time. It is a very small point, but it may be of some importance. Article 5 (4) says: The Government of the Union of Soviet Socialist Republics will not, however, accept any responsibility for the acts of State Economic Organisations which, under the laws of the Union of Soviet Socialist Republics, are exclusively responsible for their own acts. I do not quite know what that means—whether, for instance, it only applies to sales by some trust in the Union of Soviet Socialist Republics to this country, or whether there is anything more in it than meets the eye. I do not see anything in the Trade Agreement with regard to propaganda, and I do not know whether there is an implication that the Union of Soviet Socialist Republics will not accept responsibility for any propaganda conducted in this country by trusts in the Union of Soviet Socialist Republics which, under their own law, are beyond their control.

There is another matter of a purely technical nature which is also of some importance. Paragraph 2 (ii) of the Schedule refers to: the amount of credits repaid by the Government or trading organisations of the Union of Soviet Socialist Republics in that year. Those payments are one of four kinds of payments which have to be taken into consideration in assessing the imports by Russia of this country's goods. I should like to ask, in reference to this paragraph, whether the actual governing date is the date when the goods are shipped, or the date when the credits are finally repaid. For instance, supposing that under the Export Credits Scheme, in 1934, goods are sold and shipped to Russia, for which they have to pay in 1936, would the figure of, say, £1,000,000 go into the returns in 1934 or in 1936? I feel very strongly that it should go in when the bills are met, that is to say, in 1936, but I do not know whether that point has been considered by the Government. I should very much like to know, because it seems to me to be a matter of some importance. It is not much use selling goods to any country unless you are actually paid, and, in view of this agreement, it is very important to know whether the payments which Russia will have to make for our goods will be taken as relating to the year in which the goods are shipped, or to the year in which the money is paid.

Lieut.-Colonel COLVILLE

Perhaps I might answer that question at once. The date is the date when the money is actually received.

Mr. PETHERICK

I understood that that was so from another paragraph in the agreement, but it is a little obscure, and I am grateful for the assurance. There is a further technical point, which arises on Paragraph 3 of the Schedule. That paragraph provides for possible variations in the payments. If, for instance, Russia does not buy up to [...]er full ratio in any one year, it is carried over to the next year. To take a concrete case, supposing that Russia should fall short of the amount which she ought to buy from us in any one year by £1,000,000, then, under this paragraph, she has to make it up in the following year. Supposing that she does not, but in the next year again carries over the deficit of £1,000,000, and adds another £1,000,000, and a third £1,000,000 in the third year, there seems to be no machinery, as I understand it after fairly careful consideration of the agreement, for assessing that, short of making a demonstration to the Russian Government saying that it has not lived up to its agreement and denouncing the whole agreement as it stands. I do not think that that would be very satisfactory, and I am sure that the Government would not like to contemplate the possibility of doing it. I am sorry to have delayed the House with these rather technical considerations, because I think the wider questions have been sufficiently debated, but I think it is the duty of back-bench Members to try to find out such points and bring them to the notice of the Government. In spite of the rather critical attitude that I have taken up, I very much appreciate the final conclusions which have been come to, and sincerely hope that the agreement will lead to a better era of trade and political relations with Russia.

8.53 p.m.

Mr. DAVID EVANS

I intervene for a few minutes to express my views and in general my appreciation of the results of the Government's efforts to bring about this agreement. The hon. Member for Penryn and Falmouth (Mr. Petherick) has very properly drawn special attention to some important points in the agreement, and no doubt they will receive the consideration of the Minister. The hon. Member seemed to doubt whether, in view of this agreement, there was any necessity for continuing the present system which we have for providing export credits, but I entirely agree with the suggestion of the hon. Member for Moseley (Mr. Hannon) that, but for the existence of this system of export credits, things would have been very much worse in this country in the past than they have been. Those of us who have had personal experience of the conduct of international export trade in the last few years know how greatly this system of export credits has assisted traders. I cannot agree, therefore, with the hon. Member for Penryn and Falmouth that under this agreement they need not be continued. Even under this agreement, with the two-way trade traffic for which it provides as between this country and Russia, the kind of goods that we sell to Russia will be entirely different from the kind of goods that we buy from Russia. Therefore, traders will still require a system of credits for the purpose of exporting to Russia. Nor does it do away with the possibility of machinery being devised by which the risk of export credits is minimised, and possibly the degree to which credits have to be provided is lessened in the future as compared with the past.

With regard to the diplomatic immunity that is provided for, I do not see anything very unusual in it, or something which could not be given. After all, we have in our Embassies abroad people who represent the country in a commercial way, though not to the wide extent that these people do. We have our commercial attachés, who provide information and guidance, who have means of access to information which they would not get were it not for the fact that they were provided with diplomatic immunity. The fact of the existence of such officials representing the British Government abroad is of great value to traders in this country.

Mr. PETHERICK

I think the system of having commercial attachés abroad is quite different, because they are under the roof of the Embassy or the Legation as the case may be, whereas, in the case of these representatives, under the particular roof where they are working they have a large number of clerks who are not subject to diplomatic immunity, and you have the extraordinary anomaly that the leaders of the trade delegation are the subject of immunity, whereas the clerks are not.

Mr. EVANS

There is no real difference between them. I think, in principle, that diplomatic immunity should be granted to the principal trade representatives, even though their functions are wider than those of the commercial attachés who represent this Government in foreign countries. I can say from my own experience that from the point of view of our export trade no Department is more valuable than the Department of Overseas Trade, but they would be hampered in their efforts to stimulate trade and to inform British traders of the facts in foreign countries were their representatives abroad deprived of diplomatic immunity. I see no real difference in principle between the immunity granted to these members of the trade delegation and that granted to British representatives.

It has transpired in the Debate that those who have criticised the agreement have given different reasons for opposing it. The Noble Lady the Member for Perth and Kinross (Duchess of Atholl) endeavoured to link up the question of trade with Russia with an extraneous matter, namely, the question of propaganda. [Interruption.] Those who do that do not really appreciate the true value and object of the agreement. I am content to leave the question of propaganda and such matters to the executive Government to deal with. Propaganda can be carried to a point which might even be offensive, or not acceptable, to this country at all, but I am not sure that we are without guilt in that matter ourselves in some quarters. Do not, however, let us forget that the real object of this agreement is to increase British trade. We believe that it will increase British trade and thus provide much larger employment, and progressively increasing employment, during the next four or five years. If the agreement works as successfully as we hope it will, it should mean in time giving employment to at least 120,000 to 150,000 people.

An attempt was made by the hon. Member for South Kensington (Sir W. Davison) to link up the agreement with the claims of other people, and he deprecated the fact that the agreement, while in form temporary, was in fact permanent. Speaking for myself, and I believe for the majority of Members, I realise that the agreement is temporary in form because it is liable to be determined at six months' notice. I hope it is temporary only in form, but that is common form in almost all commercial agreements. I sincerely deprecate the view that because it can be determined on six months' notice it is in fact to be a temporary agreement. I believe the true value of the agreement can be got only by its continuation—by going on from year to year. There are important commercial agreements which have gone on from year to year for 10 or 15 years. The successful working of this agreement will depend on its continuation for years to come in a friendly, co-operative spirit.

There is another point to which perhaps my Free Trade friends would to some extent say there is an objection. It provides an opportunity for the creation of what might be called two-way traffic. We all know the theory of international exchange of trade, but in practice the money which Russia obtained by selling goods to this country in the ordinary course would provide her with credits to by goods maybe from other countries. That may be true, but I submit that it is no breach whatever of any Free Trade principle, if, in a case of this character, where the control of exports lies in the hands of a Government, efforts should be made to stimulate trade between the two countries. I see no difference between that circumstance and what takes place on the part of a great corporation when it endeavours to stimulate and extend its trade not only all over the world, but, it may be, for reasons of policy, to concentrate its efforts upon one country. There is no difference in principle between the efforts of a great corporation in trying to stimulate two-way trade, and a Government doing the same sort of thing.

We have had some remarkable figures to-night. The right hon. Gentleman the Member for Tamworth (Sir A. Steel-Maitland) gave some very startling figures to the Committee. I will give one or two figures in order to impress upon the Committee the importance of an agreement of this character. We all know the figures relating to this country because we have heard them so often. I will take three typical countries. In 1928 Germany's imports from Russia—I have converted the figures from marks into sterling—were £19,000,000 in round figures, and exports to Russia £20,000,000 sterling. In 1928 Germany imported £21,000,000 and exported £17,000,000. France in 1932 imported £6,418,000 and exported only £593,000 worth of goods, and in 1933 imported £5,800,000 and exported £5,100,000. The United States of America in 1929 imported £4,300,000 worth of goods from Russia, and exported £16,000,000 worth of goods to Russia, four times as much, and in 1930 imported £4,000,000 and exported to Russia £22,000,000.

Sir W. DAVISON

And no trade agreement.

Mr. EVANS

It is true that there was no trade agreement, but they have had to make one since, as we all know. I did not know that the hon. Gentleman objected to a trade agreement because it would bring about trade. I understand that he objects to any trade at all with Russia.

Sir W. DAVISON

Not at all. I welcome trade. My whole point is that we should have an acknowledgment of these debts and claims. I do not say that they can be paid at the moment, but every Foreign Minister has always, both on resumption of diplomatic relations and subsequently, claimed that we ought to have an acknowledgment, and I only say that in this agreement the claim of acknowledgment has been wiped out, and we have only an aide-mémoire.

Mr. EVANS

I understand the position of the hon. Member. If he believes, as, I think, every one in this Committee must believe, that the machinery provided by this agreement will mean an increase of trade with Russia, surely, it is all to the good. Although he admits that it may increase trade, is he saying that in some mysterious way the agreement is going to obstruct the settlement of the claims about which he speaks? There is nothing from the beginning to the end of the agreement which in any way militates against the settlement of claims in which he is particularly interested. The success of the agreement will depend upon its operation and working. We all hope that in due course we shall export more manufactured articles to Russia as provided for in the agreement.

I am in some doubt as to whether Article 6 in the Schedule on page 11 provides the machinery necessary to secure the balance of payment concurrently. I mean by that, from month to month or from three months to three months. The Article simply provides, I presume, that at the end of each year certain reports and information have to be submitted by the Russian Government to the British Government. That is too late. What is to happen if they are down by £1,000,000 at the end of the year, and if it increases to £2,000,000 at the end of the second or third year? There should be some clearing house as has been suggested by my hon. Friend the Member for Penryn and Falmouth to watch the operations of the agreement from month to month concurrently. This sort of thing is provided for in all private agreements between corporations and others. It is exactly the same as that which is adopted and followed in many Trade Agreements. I submit that point to the consideration of the Minister. In order that the agreement may work out satisfactorily, I suggest that some machinery of that character should be substituted.

9.13 p.m.

Mr. STOREY

I rise to welcome one aspect of the agreement which I do not think has had sufficient attention. I welcome the recognition which is contained in the agreement of our shipping services which are an export capable of expansion by means of such an agreement. Such recognition is long overdue. Our shipping services, after all, are our greatest export. We have been very slow in taking steps to protect them. We have been content to watch our export of shipping services decline from £94,000,000 in 1913, to £63,000,000 in 1932, and to £59,000,000 last year. I speak with feeling when I say that this recognition of shipping services and the attention which they should receive is long overdue, for I realise that the revival of shipbuilding depends entirely upon renewed prosperity in the shipping industry. As the representative of a shipbuilding town where during the last five years the insured workers in the shipbuilding industry have declined by no less than 27 per cent. and where of the remaining 73 per cent. not less than 86 per cent. are at present unemployed, I realise that it is a matter of the utmost urgency. I appreciate that it is difficult to take action to help our shipping, but it is not impossible. The adverse balance of our visible imports over our exports gives us a unique bargaining power so far as our invisible exports, such as shipping services, are concerned. That bargaining power has been used in obtaining this agreement with Russia, and I hope that the Government will go on with energy and determination to bring about further agreements on the same lines with other countries, that will be a benefit to our shipping in general. The country at large demands that the Government shall take energetic action to improve the shipping of this country, for it is realising more and more that the decline of our shipping is fraught with the greatest peril to our national security.

Too long have the Government sheltered behind the inability of the ship-owners to come to an agreement. They are now bereft of that excuse. The shipowners have come to a large measure of agreement, and have sent their recommendations to the Government. I only hope that in considering those recommendations and in the action they decide to take upon them, they will treat this matter as one of the utmost urgency, go ahead and work out other trade agreements with other countries on the same lines as this, which will recognise our shipping services as a valuable export. I also hope that they will not shrink, if necessary, to take steps, by subsidies or other means, to compel those nations which will not trade with us on equal terms to recognise that they will have to do so if they wish to trade with us.

9.18 p.m.

Mr. HANNON

I associate myself with the speech of my hon. Friend opposite. It is one of the most attractive phases of this Trade Agreement that shipping has been recognised in the way that the agreement contemplates. I should like to congratulate the President of the Board of Trade and my hon. and gallant Friend the Secretary of the Department of Overseas Trade on the valuable work they have done, in face of a great many difficulties and many embarrassments, to bring this Trade Agreement into the form in which it has been presented to the Committee. My hon. Friend the Member for South Kensington (Sir W. Davison) has given many months of anxious thought to the trouble between ourselves and Russia. He has from time to time championed with great effect in this House the interests of those poor people whose investments in Russia have been subject to confiscation at the instance of the Soviet Government, but, surely, that is not part of our discussion this evening in relation to this agreement. There is nothing in the agreement which excludes in the future discussion in this House and negotiation on the part of His Majesty's Government with the Soviet Government to secure all possible concessions with regard to the rights and privileges of British investors in Russia.

I have been associated with a group of industries which for many years have depended largely upon trade with Russia for the maintenance of their employment level in this country. Although I look with horror and repugnance upon certain aspects of the policy pursued in Russia since the Revolution, I am bound to confess that in their trade relations with this country the Soviet Government has discharged its obligations as regards the date of meeting those obligations under all the Trade Agreements that we have had with them for many years. I am bound to say that had it not been for our trade with Russia, some of our more important industries during the past five or six years would have had great difficulty in maintaining themselves and employing their people, in the exigencies of trade with which we have been faced. I think I am correct in saying that between 65 and 70 per cent. of the whole export trade of this country in machine tools during the past five years has been with Russia. In our high-speed steels and steel alloys had it not been for the Russian trade our manufacturers would have found themselves faced with many difficulties in maintaining those particular branches of our productive industries.

The President of the Board of Trade and the Secretary of the Overseas Trade Department have displayed great energy and great thoughtfulness in bringing the agreement to a successful conclusion. I am confident that it will be to the advantage of the trade of this country that we have concluded the arrangement with Russia. It will help the whole of our manufacturing community and I am glad that the arrangement has been arrived at in what I conceive to be a satisfactory way. I do not agree with my hon. Friend the Member for South Kensington that it is not a temporary agreement. It is obvious that the six months' notice embodied in Article 9 of the agreement makes it in fact a temporary agreement. It is particularly to be observed that His Majesty's Government have, under the provisions of Article 2, given themselves the right to determine any aspect of the agreement which may in its operation be prejudicial to any particular phase of our trade at any time in the future. On the whole, speaking as one who has been associated with many industries in this country depending for their commercial success on the expansion of the Russian market, I welcome the agreement and congratulate the Government on their courage in bringing it forward.

With respect to agriculture, it has been said to-night that by means of subsidies prices may be artificially maintained against this country. I think His Majesty's Government have under the terms of the agreement the fullest right in any case of that kind to intervene and prevent any artificially maintained prices on the part of the Soviet Government operating against the agricultural industry in this country. I think they have shown great wisdom in the terms of Article 2 which, it seems to me, are adequate for the protection of our agricultural industry. I would be a party to no agreement with Russia or any country which would enable the competitive power of that foreign nation to affect prejudicially the agriculture interests of this country. I think His Majesty's Government and the Secretary for the Department of Overseas Trade must have been in consultation with the Minister of Agriculture in making the necessary provisions in the agreement to safeguard the agricultural industry in this country against any unfair competition that might come from Russia. One would, perhaps, like to criticise the scale in the Schedule of the five-year relations in trade between the one country and the other.

My hon. Friend who sits on the Front Bench below the Gangway, whose mind is crammed with economic problems, who sees every sort of difficulty in the economic life of nations, and whose mathematical faculty is, I am confident, equal to any demand of the kind which can be made on it, will, I venture to suggest, be able to find only one criticism in this Temporary Commercial Agree- ment. That is the scale of figures set forth in the first paragraph of the Schedule relating to the balance of payments. I should like to see the balance of payments graded up a little more rapidly: from 1: 1.7 in the first year to 1: 1.2 in the second year. I should like to see this agreement make it imperative upon Russia that we should gradually reach an equal exchange of commodities between the second and the third years. We in this country have given Russia extended credits, and have assumed that she would discharge her obligations, but it would create great satisfaction in this country if the table set forth in the first paragraph were arranged on somewhat different terms from the equations, or ratios, which are at present therein.

During the last five or six years I have had experience of the continuous anxiety and interest of the Board of Trade to bring to some practical, helpful and wholesome conclusion the relations between this country and Russia. I am bound to observe that the Board of Trade, during those years, have made a substantial contribution towards helping British industry as a whole, and I am glad this evening to be in a position to congratulate my hon. and gallant Friend the Secretary to the Department of Overseas Trade on the part which he has played, in spite of many complexities, troubles, difficulties and criticisms, in bringing this Temporary Commercial Agreement to a successful conclusion. I look forward without any qualifications to a much more prosperous outlook in the relations between this country and Russia and to the development of our mutual trade in the future. Russia has immense possibilities. I remember, when I was on a commercial delegation to Denmark, meeting the head of the great Baltic Society, which did so much trade with Russia for so many years; he showed me a map on which he explained the immense economic resources of the whole vast region between the Urals and the Pacific Ocean. He said that that statesman in Europe who could develop a scheme which would bring to this vast area the possibility of production would have rendered the greatest service to mankind that any statesman had ever rendered in any age. I believe that my hon. and gallant Friend and the President of the Board of Trade are making, in the conclusion of this agreement, a very substantial contribution towards the achievement of better conditions and a better outlook for British trade.

9.30 p.m.

Mr. BOOTHBY

I am so happy to find myself in a position to congratulate the Government that I am sure my hon. and gallant Friend the Secretary to the Department of Overseas Trade will forgive me if I ask his permission to congratulate him on this agreement with unusual heartiness. It represents a very considerable achievement on his part, and also, as the hon. Member for Moseley (Mr. Hannon) pointed out, on the part of the officials of the Board of Trade. It is a striking milestone on the long and tortuous road of commercial relations with Russia over the past 10 years, a road strewn with muddles and blunders on both sides. I hope that we have reached the end of those obstacles, and that we shall see in the future an expanding trade between Russia and this country.

I want to deal for a moment with the present technical position of the herring industry, a subject which has been raised so frequently. I know that any expressions of opinion to which I may give vent on the subject of the herring fishing industry will be discounted, because I am prejudiced. As a matter of fact, however, there has been a slight upset in the industry during the last 48 hours. Some 7,000 or 8,000 barrels of the cure of last autumn in East Anglia were offered to the Soviet Government at 30s. f.o.b., which is not a bad price. The Soviet, in turning down the offer, said that they would not consider anything over 25s. f.o.b., and this answer has profoundly alarmed the herring fishing industry, because 25s. is much below the possible cost of production. I, myself, am not unduly alarmed by this development, because I never thought that the foundation of the future trade in herring between this country and Russia was ever likely to rest upon last autumn's fishing. First of all, the cured herring are by now getting very cured—to put it as nicely as possible—and, secondly, it is true to say, as my hon. Friend on the Opposition side pointed out earlier in the Debate, that the southern fishing last autumn was closed down owing to the lack of a Russian market. I shall judge the value of this Trade Agreement as far as herring are concerned by next year's catch and that of the year after.

The suggestion I should like to make to my hon. Friend, for him to put before the Soviet authorities, is that they might find it well worth while, being the sole importers into Russia, to make a contract over a period of years for, say, 100,000 barrels a year. If they were able to guarantee to the Scottish and English curers such an order every year over a period of years, the Scottish curers in their turn would be able to make them an altogether special price for those herring and give them the best herring somewhat below the market price, simply for the benefit of having this contract, as it were, at the bottom of the industry. The Soviet Government is in the position of a sole importer and, having absolute control of foreign trade, can make a contract to that effect. That is why this agreement is so enormously helpful: because it establishes a new principle in international trade, the principle of balanced payments in the aggregate by agreements between States.

It is all very well for the right hon. and gallant Gentleman the Member for Caithness (Sir A. Sinclair) to sigh for the old days of free markets, free competition, free trade and all the rest of it. He knows, or he ought to know, that those days will not come again for a long time, and that they probably will never come again. International trade in the future, as we all know if we face realities in this House, will be conducted very largely upon a basis of contract, by trade agreements covering aggregate quantities of goods, between Governments exercising control over both exports and imports. That is the sort of world in which we live. The world of my right hon. Friend and all his friends is a world of wild illusion. If they do not know it, at any rate the recent by-elections go to prove that others do.

I therefore regard this agreement as establishing an important precedent. There is one thing which I should very much like to mention at this juncture, and that is the point raised by the hon. Member for South Kensington (Sir W. Davison). The question of debts, private debts and the question of the Lena Goldfields which have bulked largely all through the Debate. I want to lay down a general pro- position, because I want to see this agreement turned into a permanent agreement. I think there is something to be said for the view—it is an unpopular view—that those people who invested money in Tsarist Russia, in pre-revolution days, did so at their own risk, and will have to face the consequences. Although the principle may be conceded that the debts are owing, yet, from a practical point of view, they have to face the consequences. You take the risk, in investing your money in foreign countries, of a revolution, and nobody will seriously maintain that we can expect the Soviet Government now or at any time in the future to pay debts owing to British citizens and nationals who invested money in Tsarist Russia. But I think the case of the Lena Goldfields comes under a different head. How many other countries have defaulted?

Mr. HANNON

Has this country in the whole of its history ever defaulted?

Mr. BOOTHBY

I never suggested that this country had ever defaulted. I was asking how many other countries have defaulted in their payments to this country. I do not think we can lay it down as a principle that we can expect to get full payment back for all private and commercial loans we have made all over the world.

Mr. HANNON

The only reason I interrupted the hon. Member was because I think it is an extremely dangerous thing to suggest that any nation can default in its obligations to the rest of the world. If so, international obligations will entirely disappear.

Mr. BOOTHBY

I am not suggesting that any nation has any right to default; my argument is directed to the fact that there has been a revolution in Russia, and that is a risk which I think private commercial citizens must run. That is why I attach great importance to the question of the Lena Goldfields. That was an obligation not incurred by the Tsarist Government but by the Soviet Government, and it is the one commercial and financial obligation upon which their conduct may be described as reprehensible. That is why I am anxious to see a settlement at the earliest possible moment by direct negotiations. It is the one question which makes it most difficult for those who advocate the maximum of trade between Russia and this country to defend the record of the Soviet Government as against the Tsarist Government; a record which in other respects has been irreproachable. I hope the Secretary for the Overseas Trade Department will be able to give the Committee some assurance on the question of the Lena Goldfields, about which there is considerable uneasiness simply on account of the fact that it is an obligation entered into by the Soviet Government itself.

On the general question, there remains little to be said except this, that nobody who examines the facts of the situation so far as international trade to-day is concerned, with the possible exception of certain Members of the Liberal party, can view the position of world international trade without very considerable apprehension. The volume of international trade has been steadily drying up for the last five years, and it has never dried up more quickly than during the last nine months. It is due to an outburst of economic nationalism. It has particularly dried up in Europe and in South America, and I do not anticipate that we shall re-establish any considerable export trade with the countries of Central Europe and South America for several years to come. That is why I attach such tremendous importance to this Russian Agreement, which I believe to be potentially the most valuable Trade Agreement into which this country has entered. We must have, and here I agree with hon. Members of the Liberal party, an export trade, and, particularly, we must have an export trade in capital goods, not merely in consumption goods.

If you survey the world to-day, where are the two fields for capital goods? Russia is one, and the best, and, secondly, though perhaps at a later stage, China holds out great possibilities for the extension of the export trade of this country. Those are the two countries, apart from the Empire which obviously comes first, which hold out the best hope for the exports of this country of capital goods upon which the volume of employment in this country depends. Russia, as the President of the Board of Trade has said, is about to embark on a tremendous scheme for transport development. It was railway development which really laid the foundations of the industrial strength of this country, that is railway development inside this country, and, secondly, in South America; and I am not sure that railway development in Russia may not now do more good to the export trade of this country than any other single development. We must remember that Germany from 1924 to 1929 was our successful competitor in the export trade with Russia. I repeat now what I have said on a former occasion, that we made a profound mistake in lending money to Germany, in giving credits to Germany ad libitum and in refusing money and credits at the same time to Russia, because in the end it was Germany which defaulted; Russia did not. Germany passed on these credits to Russia. We have now an opportunity to recover our export trade with Russia at Germany's expense owing to the fact that the relations between Germany and Russia are bound to be, for political reasons, bleak for some years to come.

May I make one brief reference on the observations made by the Noble Lady the Member for Perth (Duchess of Atholl). She made a speech as if this agreement gave us no advantages whatsoever. On the contrary, one might have thought that the Russians were entitled to dump any quantity of foodstuffs and timber, goods generally and raw materials, into this country at prices very much below world prices. My Noble Friend has a completely fallacious idea of the agreement and has not grasped its real advantages. She made one remark which I thought was revealing as showing her general attitude of mind to the Soviet Government. She blamed the Soviet Government almost violently for arming and boasting over the wireless that they possess a more efficient army and air force than they have had for two or three years. I would only say to her that if she were a citizen of Russia and found herself in existing circumstances between Japan on the one side and Germany on the other, she would think it wise to possess a certain amount of armaments. I do not think that we can make that kind of case against the Soviet Government. I do not believe that they are militant, but I am not at all sure that the military strength and particularly the air strength, of the Soviet Government during the last 12 months has not been a factor for peace throughout the world. At any rate, I think the situation of the world is sufficiently dangerous, as far as they are concerned, to make it difficult for us to throw stones at them for possessing armaments.

I am pleased with the agreement because it paves the way for much better general relations between this country and Soviet Russia. The root problem which faces us is how we are going to avoid a world war. If we are going to solve that problem we have to look to the nations and countries of the world whose prime interest it is to preserve peace. In looking for these countries, we look undoubtedly to the United States of America and the democracies of Europe, headed by France, and to the Union of Soviet Republics. II these elements in the international situation can get together and keep together war will be averted. It can be averted in no other way. That is why I attach such tremendous political significance and importance, quite apart from its trading possibilities, to this agreement.

9.45 p.m.

Sir NAIRNE STEWART SANDEMAN

I think the hon. Member for Eastern Aberdeen (Mr. Boothby) has been drawing a red herring across our track. I have been in this House for many years now and have heard a lot of talk about Russia. I hope that the optimists who have been loudest in their denunciations of Russia in the past when it suited them, will be right this time. They were right when they denounced Russia, and I hope that they will be right now that this agreement has been reached. I was always brought up to think that one is never "had" by the same man twice. One wonders now what is going to happen. We are to get a certain amount of trade perhaps, and the trade balance is to be brought down a little more in our favour. The best part of the whole thing is that we can get rid of it in six months if we wish to do so. We know perfectly well that the Russians do not like us. I rather fancy that they do not know us. I am confident that we do not know the Russians. The position is very different from what it was a few years ago, when we were all hating the Russians. I cannot understand such a sudden change of heart.

I have not a short memory, and, frankly, I am very suspicious. I hope I am wrong and that it may be proved that I am wrong. But what I want to know is, what about propaganda? We know that the Russians are all the time putting out propaganda against the Empire. There does not seem to be anything about it in the agreement. Is there anything about which we have not been told? Has any pressure been brought to bear on Russia to stop the propaganda which in every part of the Empire and even in this country is doing a great deal of harm? Do the Russians want to be friends and to trade as friends? I do not mind whether they are a Soviet Union or not, but are they going to play the game with us? If I were satisfied on that point I should feel that we were probably making a very good bargain by coming to this agreement.

9.49 p.m.

Major PROCTER

I dissociate myself entirely from the remarks of the hon. Member for Eastern Aberdeen (Mr. Boothby), who laid down a theory which I am sure would be disastrous to the continuance of international trade. He said he did not think we had a right to expect the Soviets to pay debts incurred during the Tsarist days. But if you can wipe out debts, if you can transfer the rights of property by revolution, surely the hon. Member is advocating the ethics of the highwayman. The highwayman transfers property by violence, and having established his claim by violence he holds on to it by sheer weight of force and possession.

Mr. BOOTHBY

I do think that people who invested their money in pre-War Russia ran the risk of a revolution, which was freely prophesied, and in fact, whatever principle may be set down, I do not think that we are in any way as likely to get back the money that we lost in Tsarist Russia as we are to get back the money that we are owed by the present Soviet regime. A revolution is a risk and it was inevitable in the circumstances.

Major PROCTER

I do not dispute the fact which the hon. Member sets out, but I do maintain steadfastly that his remarks are a very serious challenge to the ethical basis of international relations. Having said that, I would add that I approve of this agreement, not because I believe in the underlying principles of the Soviet Republic. The Russians are a nation who have set out, courageously and perhaps by wrong means, to solve five great problems that confront the modern world. They wish to remove five great fears—the fear of unemployment, the fear of poverty, the fear of disease, the fear of religion and the fear of death. While I profoundly disagree with the methods they have adopted for the destruction of religion, while I commend the remarkable progress they have made in the elimination of disease, whilst I disapprove of the methods they have adopted to overcome poverty and unemployment, I readily admit that that is the concern of the Russian people alone.

In the past there has been prejudice on these grounds in dealing with Russia, but it is time that every nation realised that there should be no interference in the domestic arrangements of other countries. Therefore so long as the Soviet Union is based on the will of the Russian people it is no business of ours to carry out propaganda in Russia, and in like manner it is no business of the Russians to use their wireless two or three times a week for Russian propaganda in the homes of our people here.

I hope that this agreement will be the beginning of new relationships between the two countries. Let Russia carry on her experiment. Let us hope that she may succeed in abolishing poverty, and that if her theories are correct they may be an example to the whole world. At the moment there is nothing to show that Russia has succeeded. The standard of her employed workers does not yet equal the standard of our unemployed here. At the same time while they are trying to do their best we in our turn are trying to solve our own problems in a manner that we think best for this country and the British workers.

This agreement means much for my own county of Lancashire. As far as I understand it, it will mean that over £9,000,000 worth of British engineering goods will be made in this country and give employment to British workmen. I am also glad to know that it will mean at least £3,000,000 worth of textile machinery being manufactured in Lancashire and transported to Russia to make clothing for the Russian peasants who need it. In my own constituency it is expected that work will be found for 1,200 men, who are at present out of work there, in one of the greatest textile machine factories in the world. Practical legislative achievement of this kind is better than all the Socialist propaganda in the world. I congratulate the National Government on having the good sense to transcend prejudices and its fears and on making an effort to cement again the good feeling that once existed between Russia and this country. I believe it will have results of a very fine and tangible nature and I feel certain that the country will commend the Government on the way they have tackled the problem and the splendid success which they have achieved.

9.57 p.m.

Sir S. CRIPPS

I am sure the Secretary for the Overseas Trade Department is beginning to feel slightly embarrassed. I do not think the Government have ever received so many bouquets as they have received to-night. That is not surprising, because this is probably the first sensible thing that they have done since they have been in office. Before I proceed to deal with the agreement I wish to ask the hon. and gallant Gentleman the date upon which the aide-memoire which has been read to us was delivered to the Russian Government. Was it quite recently and in association with the Trade Agreement, or was it a considerable time ago?

Lieut.-Colonel COLVILLE

The aide-memoire to which the hon. and learned Member refers is, I understand, that relating to debts. It was delivered in February, 1933.

Sir S. CRIPPS

I may take it then that it has no relationship to the present Trade Agreement. If it was delivered over a year ago, it had nothing to do with the conclusion of the present Trade Agreement. I was under the impression that such might possibly be the case but I thought the Committee ought to know that this is not a document which is associated in any way with the signing or delivery of the Trade Agreement.

Lieut.-Colonel C0LVILLE

It was handed over at a meeting in connection with the negotiations on the Trade Agreement.

Sir S. CRIPPS

And was it thereupon accepted, or was it dealt with by reply from the Russian Government or otherwise? The hon. and gallant Gentleman will no doubt tell us when he makes his speech. I was under the impression when the right hon. Gentleman the President of the Board of Trade read the aide-memoire that it was associated with the Trade Agreement, and I think the whole Committee were under that impression. I am sure that the hon. and gallant Gentleman has now corrected that impression. As regards the question of debts I agree with the hon. Member for East Aberdeen (Mr. Boothby) as to these particular Soviet debts. This position has arisen many times before with regard to many other countries. There is the outstanding example of the United States. After the Federation the old debts of the States were never paid, and the question has been raised almost academically from time to time since then of the indebtedness of those States to the people of this country and it has come now to be acknowledged that those debts will never be paid.

Sir W. DAVISON

I thought I had made it clear that I was not referring to State debts but to debts which have no political significance at all, and to bank balances of small people involving sums like £100 or £200. That is quite apart from the Lena and the Russo-Asiatic——[Interruption.]—My principal point was as regards the private debts of private individuals.

Sir S. CRIPPS

When one gets a change of this sort, just as at the time of the French Revolution, the debt position is completely altered. In that case old debts were wiped out and were never recovered. One has to accept that situation when profound changes take place in the structure of a State. One of the risks taken by every private trader and the private individual is that he may be adversely affected by such a change. Therefore, I agree with the hon. Member for East Aberdeen on that matter. As regards the agreement our Government is not in such a favourable position to enter into a Trade Agreement of this sort as the Russian Government. We have not yet achieved that essential control over our foreign trade which is almost a condition precedent to being able to arrange satisfactorily a barter system of this sort with any other country. But since they have been dealing with the matter within the capabilities of a Government which lacks that control, we can frankly congratulate the right hon. Gentleman and also the Russian repre- sentative on having arrived at this accommodation, though we think it has been delayed much too long.

I must add a word of caution in reference to what has been said several times to-night as to arriving at a two-party agreement of this sort on an actual balance of figures. There is bound to arise, sooner or later, the difficulty of tripartite trade and you cannot adjust an actual balance between two countries all the time. The area will naturally have to be spread. On the other hand, when one is initiating a system of controlled international trade it is no doubt necessary to begin with the smaller unit before you extend to the greater unit. This agreement has presented many difficulties in regard to the settlement of the proportions and other matters, but I think both countries ought to be satisfied that it is a very sensible act sensibly carried through. I hope it will give the final quietus to the hostile attitude which has been adopted by some people in this country towards Russia in the past. The fantastic views which have from time to time been put forward in this country by the Russophobes have, it is encouraging to note, practically disappeared in to-day's Debate. There are a few well-known people who always take up that attitude and no doubt always will until it is merged in their graves but as a whole it is obvious to-day that the Committee has adopted an attitude of welcome towards a full measure of co-operation with the Soviet Government which gives us the opportunity of entering a vast market.

The Noble Lady the Member for Perth and Kinross (Duchess of Atholl), picking up some little scraps of White Russian tittle-tattle, has been able to give a little story to show, first, that Russia is so powerful industrially that we can hope for no advantage in her market, and secondly that Russia is so failing in all her endeavours that she probably will not be able to pay her debts if she does buy things from us. It is interesting to notice what the growth in production in Russia has been in order to realise what a vast advance she has made in the last five years. The total production output in Russia, taking a level value of the rouble, has increased from 1929, when it was 21,000,000,000 roubles, to 1933, when it was 42,000,000,000 roubles. That is to say, in that period of time the national production has very nearly doubled, and it is into that tremendously vigorous market, which must be created with a great expanding production of that kind, that we ought now to find ourselves able to enter.

But, of course, Russia can only purchase goods in this country, as in other countries, so long as we are prepared to take her imports into this country. The whole basis of this agreement is that we are going to exchange commodities, and it is idle to expect to get the benefit of exports to Russia and at the same time close our markets to Russian goods, which seems to be the attitude which some people take up. Not only that, so far as Russia is concerned, as I understand it, having financed her trade in the past on the basis of credit, somewhat long-term credit, if the volume of trade is to be increased in this country, it will be essential to provide credit facilities, and it is in that direction that I hope the Government will take some more active steps than they have taken in the past.

As I understand the position at the moment—the hon. and gallant Gentleman will tell me if I am wrong—the present average rate of premium for these insurances of facilities is somewhere between 6 and 7 per cent. in this country, compared with the German 2 per cent. and the Italian 1 to 1.4 per cent., which are the figures I take from an answer that he gave, and I understand the French and the United States rates are at about the same level as the Italian, so that we are charging, if that be right, something like 5 per cent. more for the same insurance facilities for repayment of credits than the other countries with which our manufacturers will be in competition when they come to tender for these great railway, building, and other matters in the Russian market; and that addition of 5 per cent. which they must necessarily make to the price is something which may well hamper them seriously in getting that business. Unless they are able to get that business in competition in the Russian market, we shall find that this agreement merely leads to the cutting down of Russian imports and not to what we desire, namely, the expansion of the export trade of this country. I understand that so far the profit over the insurance of credits has resulted in a sum of over £1,500,000, on the Russian credits, accruing to the Treasury.

Lieut.-Colonel COLVILLE

indicated dissent.

Sir S. CRIPPS

The hon. and gallant Gentleman shakes his head, and he will no doubt give the correct figure to the Committee, but whatever the figure may be, everybody knows that it must be considerable, because there has been no case where any money has had to be paid up on the insurance. We know that the figure for insurance is somewhere about 6 or 7 per cent. on the actual money advanced on the bills, not on the face value of the bills, and, therefore, it must be a very considerable sum indeed which has already been earned through this insurance fund. I suggest to the hon. and gallant Gentleman that that might well be made the nucleus of a Government fund for the direct granting of credits for the purpose of encouraging trade under this agreement, in order to give our traders and our workers the best possible opportunity to take advantage of the position that is now open to them.

We hope, too, that this agreement is not only going to be used for the purpose of developing trade, but also for the purpose of developing good relations between the two countries in a general way. I agree very much with what the right hon. Member for Tamworth (Sir A. Steel-Maitland) said as regards the undesirability of interference in political matters of this kind by the Third International or any other body—[Interruption]—and similarly one ought to take up the same attitude as regards the Press of this country attempting to interfere with the internal conditions of Russia by the sort of propaganda that has been going on, which of necessity leads to interference between the two countries and to a depreciation of the efforts of the Governments of the two countries to bring about a better and fuller relationship.

I am sure that the Government would agree with us in this, that once these avenues of approach and the development of good will are actively pursued by the Governments themselves, it is a thousand pities if any other person or organisation tries to interfere with that channel of approach or tries to do anything which may make that approach more difficult. This agreement, we believe, ought not only to mark the development of good will between the two countries, but should do something even further than that. It should have a profound effect on the international relations of the world. Already, indeed, I think one can trace the development of better conditions between Russia and Japan to this agreement. The release of the six prisoners of the Chinese Eastern Railway and the re-entry into the negotiations by the Chinese Eastern Railway, with the possibility, to some degree at any rate, of allaying the terribly critical conditions of friction which exists in the Far East, may be traced to the rapprochement between this country and Russia, There are very many people who say, and say, I think, with considerable justice, that this country holds the key as regards the position in the Far East, and that if we could make it clear that we would not have any part with anyone who acted as an aggressor in the Far East, we might very well divert the possibility of war, which would undoubtedly lead to must tragic repercussions throughout the whole of Europe.

There is another matter on which the hon. Member for East Aberdeen touched towards the end of his speech, and on which I should like to say a word. Russia has now made Trade Agreements with the United States of America, with France and with this country. We thus have four countries, all of which are vitally interested in the preservation of the peace of the world, although interested, perhaps, for different reasons, America, of course, is trying her great experiment which must depend for its success upon the continuance of peace. Russia is trying her great experiment which depends, too, for its successful development on the maintenance of peace. We are a country primarily interested in peace; there is nothing we can possibly gain by war in any circumstances, and therefore we are vitally interested in peace. As for France, everybody must know to-day that the one thing of which she is afraid is the possibility of war. She is one of the most peace-loving and peace-anxious countries in the world to-day.

Now that these four countries have been knit together through a series of trade agreements, may it not be that they will form a suitable basis for a peace system of the world? We have already seen in some of the recent statements of the Soviet Government the desire they have to come into close relationship as regards the preservation of peace. Suggestions have even been made that Russia might now be willing to take her part in the League of Nations. Whether that be so or not, it does seem that this is an opportunity of laying a real basis for world peace upon the fact that a group of nations are not merely prepared to sign paper documents which they are equally prepared to tear up a few days afterwards, as has been done in the Far East by Japan, but are vitally interested and are prepared to do things and to act in order to preserve peace. It might indeed be that this agreement marks not merely the beginning of an era of more successful trade with Russia, but the beginning of the hope of a more peaceful settlement of world conditions.

10.17 p.m.

Lieut.-Colonel COLVILLE

It seems to be my fate or privilege to appear in every Debate on Russian trade, but this Debate differs from others in which I have taken part in that to-night we have before us positive measures for improving the trade relations between Russia and Great Britain. So far it has been the monopoly of Russia to have five-year plans, but to-night we put before the Committee our plan for improving the trade which we have with that country, a plan which we believe will, after four years, if it succeeds, bring us to a condition very nearly of balancing our payments with that country. Reference has been made to the trade agreements which Russia has with other countries, and I should like to correct one point. There are agreements between Russia and other foreign countries, but there is no Trade Agreement at the present time with the United States. The agreement with that country is of a different character. I should like to emphasise that in my belief the agreement that we are now considering is the most practical agreement that has yet been made with the Soviet Union.

The negotiations have been long and complicated. There have been difficult points to unravel, and we recognised that the undertaking which we sought from the Soviet Union to balance the payments and the admission which we sought from them that most-favoured-nation treatment in its ordinary form would have to be qualified in our relations with them were difficult departures from policy for Russia to make. None the less, these points were secured, and, if there was some impatience on the part of Members at the length of the negotiation, they should bear in mind that there were extremely difficult points to negotiate. Not the least part of our difficulty, if I may permit myself the satisfaction of saying so, was that too much interest was shown in our negotiations by outside bodies, and even by certain Members of Parliament.

Hon. Members who have taken part in business deals will bear me out when I say that the best atmosphere in which to conduct negotiations is an appearance of a complete lack of enthusiasm for anything that the other party has to offer. I can assure the Committee it was difficult to maintain that attitude of complete indifference when I had to answer questions in the House of Commons on two or three days a week as to the conduct of these negotiations. To give an example, it was impossible to maintain a completely indifferent attitude with a strong taint of herrings in the air. None the less, we worked our way to agreement. Since the National Government came in, and the policy of negotiating agreements with foreign countries was initiated, we have been associated with a number of negotiations—with the Argentine, Denmark, Iceland, Norway, Finland, Sweden, Lithuania, Latvia and Estonia; and France and Poland are now in prospect. In no case was so much public interest taken in the negotiations as in this case, and in pointing this out to the Committee I do it for the purpose of making a suggestion that in negotiations in other cases in which we are engaged it should be avoided. An atmosphere of excitement is not a good one in which to negotiate.

The Committee will forgive me if I go over the provisions of the agreement itself in some detail, as I am afraid from the Debate that certain hon. Members are not quite clear concerning them. First of all as to the form of the agreement: we rejected the idea that we should attempt to canalise our trade with Russia entirely through a clearing house. That has been suggested, but we felt it was likely to cause so much interference and irritation that it was a project not acceptable to the traders of this country. If Russia chooses to conduct her trade centrally that is her affair, but we in this country and the National Government would, I think, be embarking on a method of trade foreign to our ideas if we attempted to canalise all our trade in a similar way. We therefore decided to frame the agreement as we have framed it, namely, by securing undertakings which, we believe, will give better opportunities for our trade and at the same time give us the necessary safeguards against the risk of unfair competition.

The agreement begins, like the 1930 agreement, with a most-favoured-nation Article on the usual lines. This Article deals with both persons and goods, but those provisions by themselves would have prevented us from giving effect to Article 21 of the United Kingdom-Canadian Ottawa Agreement, and we had, therefore, to reserve the right, in the event of prices being created or maintained by State action, to restrict or prohibit imports of all Russian goods. It would have sufficed to carry out the Ottawa obligations if the right to restrict or prohibit had been confined to cases where such action was necessary to safeguard preferences granted to Canada, but it was recognised that we must also reserve the right to give home producers and producers in other Empire countries the same protection as we had undertaken to give to Canadian producers, and this is effected by Article 2. The procedure laid down is that if either party represents to the other that preferences are being frustrated or home production detrimentally affected as the result of prices created or maintained by State action, there are to be negotiations, and if the negotiations fail the first party may intimate to the other that most-favoured-nation treatment in respect of import prohibitions and restrictions shall cease to apply to the goods in question. Such an intimation may be given to take effect at any time within three months after the representations were first made.

This arrangement was reached only after the most prolonged discussion. I would like to elaborate the point in regard to the three months' notice, to make it rather more plain, as there seems to have been some doubt in the minds of cer- tain Members as to how it is to operate. From the way in which they have spoken in the Debate, some hon. Members seem to regard the three months' notice as running from the time when a complaint of dumping has been established. In point of fact, the three months run from the time when either party, having reason to believe that prices are being "created or maintained" and so on, gives notice to that effect to the other party with a view to negotiation. In other words, the first notice can be given on prima facie evidence, and the three months would run from that date, and not from the later date when negotiation was complete and the complaint established. That means that from the time when the first complaint is made the time runs on.

Now as regards the question, Why should notice be given at all? That point has been raised during the Debate. Why should not the British Government be free to apply an embargo without any notice? Had this country preserved a completely free hand to prohibit Russian goods on the shortest notice, there would have been no security for the Russian trade. Unless we had given to the Soviet Government freedom for their trade, what inducement could we have given them to meet our wishes as regards the balance of payments? I wish to make our position as negotiators clear. We had to offer some measure of security—a short measure of security—if we, in our turn, were to get the provisions that we desired regarding balance of payments. The Russians have recognised in Article 2 that the continuance of most-favoured-nation rights depends upon their selling with due consideration for the competing home and Empire producers. That creates a new situation in which we may reasonably assume that Russia will meet any well-grounded complaints in an accommodating spirit, and that the ultimate sanction provided in the Article will not have to be used. We have included the sanction for use in case it should be necessary. Recognition on the part of Russia that she must sell with due consideration for the competing home and Empire producers is a very important reservation, and I should like to call attention to it. The sanction is there, but I hope that it will not have to be used.

Duchess of ATHOLL

Will my hon. and gallant Friend be kind enough to tell me whether Article 2 means that the Government have power, if they find it necessary, to put on a special duty as well as to put on a prohibition?

Lieut.-Colonel COLVILLE

The method of restriction will be by prohibition, and not by special duty. We have certain powers, and there will be no difficulty about taking further powers if we need them. The method of restriction will be not by duty but by prohibition, in the event of the sanction having to be used.

Duchess of ATHOLL

May I ask whether the Government have consulted representative agricultural opinion as to whether Article 2 will adequately safeguard British agriculture?

Lieut.-Colonel COLVILLE

I propose to deal with agricultural questions later. There is provision as to safeguards for the preservation of Empire preferences, and the preservation of the home market from dumping. I will deal specially with the agricultural point separately if the Noble Lady will allow me. Now we come to the other side of the agreement, to the central point of it, namely, the undertaking to balance. In Article 3 the Soviet Government express their desire to apply an increasing proportion of the proceeds of the sale of their goods here to the purchase of goods in the United Kingdom and to the utilisation of British shipping services. Hon. Members have made reference to the fact that in the agreement British shipping services are specially mentioned. I should like to make it plain that in our negotiations we impressed upon the Russian Government the importance of using more British shipping, and the provisions which we have obtained in this agreement will, we believe, bring about a larger use of British shipping by them during the currency of the agreement. They undertook to give effect to the provisions set out in the Schedule as to balance of payments. The Schedule shows the scale of balances which has been agreed upon. In 1934—I would remind the Committee that the agreement begins to run as, from the beginning of this year—the ratio is to be 1 to 1.7; in 1935, 1 to 1.5; in 1936, 1 to 1.4; in 1937, 1 to 1.2; and in subsequent years the payments are approximately to balance, the ratio being 1 to 1.1. In four years, if the agreement continues, we shall reach an approximate balance of payments.

Then there are provisions as to the method by which these payments are to be calculated. The Soviet proceeds are deemed to be the values of imports from the Soviet Union as recorded in the United Kingdom Trade Accounts, subject to a certain deduction in respect of canned salmon. That was carefully investigated, and we decided that the deduction was justified. Soviet payments, for the purpose of the agreement, are to be the sum, first, of the United Kingdom exports and re-exports to the Soviet Union as recorded in the United Kingdom Trade Accounts, less the value of any goods purchased on credits maturing after the end of the year; secondly, payments for United Kingdom exports and re-exports in previous years; thirdly, payments for the chartering of British ships—that is the specific mention of shipping to which I have drawn attention; and, fourthly, 6½ per cent. of the total trade turnover of the year.

The only one of these subjects that requires further explanation is the fourth, which is the arrangement for invisible payments. The arrangement that invisible payments should be assumed to be a fixed percentage of the trade turnover is intended to obviate the necessity for computing the annual payment every year, which would have been a matter of very great difficulty, as I think hon. Members will appreciate. The expenses for which allowance has to be made are incurred in the export of goods as well as in the import of goods, and the allowance for those expenses is therefore assessed as a percentage of imports plus exports. That explains why the total turnover is taken for the purpose of assessing the figure. The principal items in respect of which allowances were claimed by the Soviet representatives and accepted by us as invisibles are interest on credits, insurance, commissions, brokerage and certain salaries of administrative staff, while we on our side made claims in respect of the expenses of British ships in Soviet ports and other similar claims.

We have been asked to give an approximate estimate of what the balance of payments has been as between the Soviet Union and ourselves in the last few years, and my right hon. Friend the President of the Board of Trade touched on this matter in his speech. It is not possible to make a very close estimate, but the available information suggests that, taking the five years 1929 to 1933 as a whole, the balance of payments in those years, according to the formula set out in the Schedule to the agreement—the one upon which we work—was considerably less favourable to us than the ratio laid down in the agreement for this year. In that period the Soviet payments to the United Kingdom were certainly less than half the Soviet proceeds, and probably considerably less. Taking the most conservative estimate, we have ground for confidence that there will be a considerable improvement in the payments under the agreement in the first year, because over the past five years the balance, taking all invisible factors into consideration, was in the ratio of considerably more than two to one.

I turn to further points in relation to the agreement itself. Paragraph 3 of the Schedule brings out the fact that, if there should be a deficiency—because there is no doubt that there will be difficulty in adhering exactly to the conditions of payment—it would be debited against the Soviet Union in the next year. In other words, their obligation to spend in the United Kingdom next year will be pro tanto increased and, conversely, if the payments are higher than they need be, they will be given credit for it in the next year. This is a just and right provision to make in such an agreement. An hon. Member asked what would happen if they dropped heavily into arrears. That is a hypothetical question, but, if it should take place, the six months' determination period would provide us with sufficient leverage to put the position right. I hope and believe, however, that such an eventuality will not arise. The remaining paragraphs of the Schedule deal with the question of arranging for the supplying of information by the Soviet Government in order that the fulfilment of their obligations can be verified. It was suggested by one hon. Member that it would be better to have monthly rather than yearly ascertainments. We have thought it better to have a longer period, but we shall watch the operation of the agreement very closely and, if the machinery is not adequate, I have no doubt that it can be satisfactorily adjusted.

Having dealt with the structure of the agreement, I come to some of the criticisms and inquiries which have been made. The right hon. Baronet the Member for Caithness (Sir A. Sinclair) hardly concealed his delight with the agreement. So far as I could see, his only quarrel with it was that it should have been made long ago. But I would remind him that it is only by the exercise of the tariff bargaining power that we have been able to make it. [Interruption.] I hope he will not deny that our present bargaining position has made it possible for us to reach a settlement. Hon. Members have asked whether the agreement would in fact limit the powers of the Minister of Agriculture to take any action necessary for the purpose of giving adequate protection to British agriculture in the limitation of dumped goods. There seemed to be some confusion in the minds of some hon. Members between the provisions of Article 2, which gives special rights in the matter of preventing imports at low prices, in which case action cannot be taken within three months of the first notification of complaint, and the general powers of the Government with regard to the imposition of quotas. While there are special provisions dealing with the creation of prices likely to have a detrimental effect on production, they will only operate after three months, but this has no bearing upon the general powers of the Government to impose quantitative restrictions and regulations in respect of agricultural products. If it were necessary, for example, to place restrictions upon the importation of any class of agricultural produce, it could be done under the normal procedure of the Agricultural Marketing Acts. Nothing in the agreement affects the powers of the Government in this respect and no interval need elapse between the decision of the Government that regulation is necessary and the putting into force of the necessary machinery. I think that clears up the point effectively.

Mr. HANNON

In order to make this perfectly clear, notwithstanding the terms of the agreement, the Minister of Agriculture, at any moment in the future, in the interests of British agriculture can make an order which will restrict the imports of any particular commodity from Russia which, in his judgment, will interfere with agriculture in this country?

Lieut.-Colonel COLVILLE

It must not be discriminatory to stop Russian produce, alone, unless there is the three months' lag, but he can make an order reducing imports by any quantity according to his scheme. His discretion is limited in other ways, but not by this agreement. He can reduce the total imports of the commodity concerned from all foreign countries. If there was a price difficulty, if the Russian imports were coming in at a much lower price than imports from other countries, then, if a lower quota were fixed, it would pay the Russian Government to obtain the best possible price for the limited quantity secured to them. I think that the Noble Lady and her friends need have no fear as regards the limitation placed upon the Minister of Agriculture in developing a scheme.

I turn to the point which has been made in relation to the question of diplomatic immunity. The suggestion has been made that the diplomatic immunity accorded to the Soviet trade delegation and trade premises is something unusual and, in fact, is not conceded elsewhere. I am informed that in all other cases where the Soviet Government have trade delegations abroad, they have this degree of immunity. I should like to make it plain that in a number of cases in London the commercial diplomatic officers of other foreign Powers have offices separate from the main Embassy, and there they have the same degree of diplomatic immunity. This question would not arise if the Soviet trade delegation were housed and operated within the premises of the Embassy. If they elect to have premises outside, they therefore ask for immunity to be extended to those premises. Our commercial diplomatic officers abroad—and we have them in all countries—when they are separated from the Embassy, as they are in many cases, receive the same treatment as if they were in the same building. There is nothing revolutionary in the undertaking to give diplomatic immunity to a trade delegation who happen to be in premises outside the Embassy. We seek the same privileges for our own diplomatic officers throughout other countries, and in all cases we have obtained them.

Mr. PETHERICK

Surely, the two cases are not parallel. In one case we have commercial attachés abroad acting on behalf of our own Government, and they are merely there to collect and disseminate information as to the commercial possibilities in those particular countries. In this case you have people who are, in effect, traders. They are acting on behalf of their country because the country has a certain monopoly of foreign trade. But they are traders, whereas if we send business men to Berlin or Russia they have no diplomatic immunity at all.

Lieut.-Colonel COLVILLE

They are acting certainly as traders, but they are acting for the Russian Government, and in that capacity they are acting as a Government mission. We have no doubt that it is in our interests with regard to the trade with Russia to make this concession, which it is not unusual to make.

I come now to the question of debts and the question of the Lena Goldfields. Much has been said to-night about the question of old debts. In the first place, the hon. and learned Member for East Bristol (Sir C. Cripps) asked when the aide-mémoire on the subject of debts was handed to the Soviet negotiators. It was handed over on 9th February, 1933, to the Soviet Ambassador at a meeting in connection with the negotiations. The Russian delegation maintained from their point of view that debts were not a question to be discussed in the trade negotiations, but they accepted the position that no permanent agreement could be negotiated as long as the debts were not settled. Therefore, we have made our position quite clear on that point. The hon. Member for South Kensington (Sir W. Davison) said that by coming to this agreement we have indefinitely postponed the possibility of reaching a settlement of the whole case. With that statement I cannot agree. The agreement is of a temporary character. The Russians would have preferred an agreement of a much more permanent character, and they still wish to get it, and we shall not lose sight of that fact. We have kept our position clear in this regard, and we cannot concede the more permanent agreement that they would desire unless we get a satisfactory settlement of this matter.

Sir W. DAVISON

Then what was indicated by the hon. Member opposite is not correct. He said that in the aide-memoire, the demand for dealing with debts had nothing to do with the Trade Agreement. The hon. and gallant Member has now made it clear, and it is made clear from a letter that I had from the Foreign Office, that it was definitely explained to the negotiators that these debts must be a material part in any permanent arrangement with the Soviet Union.

Lieut.-Colonel COLVILLE

Yes, that is the case, and it has been made clear. The question of the Lena Goldfields Company was also raised during the negotiations and was pressed by us. The Russian Delegation were left in no doubt as to the importance which we attach to that subject. The position is, that negotiations are now in progress and we hope that a settlement of this unfortunate dispute may be reached. The fact that a commercial agreement has been signed does not mean that His Majesty's Government are in any way indifferent to the progress of the negotiations between the company and the Soviet Government. On the contrary, a satisfactory conclusion of such negotiations is an essential factor in the consolidation of good relations between this country and the Soviet Union. More than that, while the negotiations are proceeding, I cannot be asked to say.

A number of hon. Members have raised the question of export credits and have criticised our rates of premium on the ground that they are rather too dear. The monstrous suggestion has been made that we are actually a Government Department making profit. I would like to clear the minds of some hon. Members as to how the Department operates. The Department administers the powers conferred on it by the Board of Trade under the Overseas Trade Act, and with the consent of the Treasury and in consultation with an advisory committee appointed by the Board of Trade they give guarantees in connection with the export of goods. What I wish to emphasise is that this is done in consultation with an advisory committee. In this matter of giving guarantees the Department are advised by a very competent committee of financial and business men, to whom the Government owe a great debt of gratitude for the disinterested way in which they give their services. Their advice to a business department has resulted—I do not want to use the word "profit"—in the successful operation of the Department over a period without loss.

If hon. Members have any further curiosity to follow up the matter, perhaps I can gratify it by saying that the annual trading accounts will be published to-morrow and will show the position in regard to the operations of the Department. I will not give any figures before publication of the accounts, but if my hon. Friends examine them I hope they will not say that because we have made a profit in our operations we are acting unwisely, having regard to the fact that we have considerable outstanding liabilities that must be borne in mind in any question relating to the rates of premium which we charge. It has been suggested that our rates of premium are higher than the premiums charged for Russian business by the German, Italian and other Governments. This is the case in certain foreign countries whose Governments, for reasons which no doubt seemed good to them, have provided special facilities for trade with Russia at especially favourable rates. His Majesty's Government, however, have always felt that this House would not approve special legislation designed to provide credit facilities for Russia superior to those offered by the Export Credits Guarantee Department to other countries. We are, in fact, prepared to open the doors of the export credits guarantee scheme, as we have been doing, to trade with Russia on the same basis as applies to the use of those facilities for trade with all other countries. We are not, however, prepared to go further. This means that business with Russia must be submitted to our Advisory Committee, who are responsible for the business working of the scheme and, as I have said, judge every transaction on its business merits.

Mr. BOOTHBY

Will the Government give this Committee formal advice of the conclusion of this agreement?

Lieut.-Colonel COLVILLE

The Committee are well aware of events of that nature. Undoubtedly the agreement will prove valuable to British trade and will provide more opportunities. I should like to refer for a moment to some of the trades which will benefit by the agreement, and as herrings have been referred to earlier in the Debate, I feel that I must refer to them again. In the first place, I must answer, a point made by one hon. Member. No pledge was given to any section of the herring industry that the agreement would contain a specific undertaking on the part of the Russian Government to buy a specific quantity of herrings. What was said was that the herring industry would not be forgotten in the negotiations, and I can assure hon. Members, having taken part in many meetings, that the herring industry was by no means forgotten, and took a very prominent part in the discussions. The position in regard to herrings is this. Shortly after the signature of the agreement, Soviet buyers came into the market for the purpose of buying herrings, but in fact the greater part of the available stock was purchased by other buyers. I have been told by the Chairman of the Soviet Trade Delegation in London that Soviet buyers are still in the market, and that, if they are unable to purchase any considerable quantity from the stock left over from this season, they will be in the market for a more considerable amount in the coming season. I venture to suggest to the House that this proves that the herring industry has not been forgotten in the negotiations. That opportunity being open, it is up to the industry to follow it up, and I believe that this opportunity afforded by the return of Russia into the market will be of benefit to the herring industry, having regard to the fact that she is bound, under the scale of the agreement, to place larger orders with this country. I hope that the herring industry will follow up the opportunity closely.

I should like to refer to another aspect of the agreement. Many trades stand to benefit by the agreement; in particular, I have in mind that one of the greatest problems in Russia is the improvement of her transport plant. She will require to place orders for large quantities of material for all kinds of rail, road and other forms of transport. What country is better fitted to supply such goods than the United Kingdom? We should have been wrong if we had not made an effort to secure some of these orders to the United Kingdom. We should have been wrong if we had not used the leverage which our position as a great buyer confers upon us. The transport industry affects many trades in our country, which will have an opportunity of securing the larger orders which I believe will be placed for the purpose of improving the transport in the Soviet Union. Hon. Members of the Labour party have suggested that our handling of the Russian trade question has been at fault because the imports into Russia from this country during last year dropped. I would remind the Committee that the real reason for that was that the total imports into Russia in 1933 were very greatly curtailed. Russia recognised that her financial position was such that she would desire to curtail all imports, and, in point of fact, in 1933 her imports from all sources fell by 50.9 per cent. Hon. Members opposite must, therefore, not blame the Government for not in fact securing larger exports to Russia when their total purchasings went down to that extent. I need only add that during 1933 our share of the total Russian imports was 10 per cent., greater than it was during the time when the late Government was in office.

We make no apology for this agreement. We present it as an achievement of importance and value, which would not have been secured if we had not regained our power to bargain with foreign Powers on equal terms. We are confident that it will place our trade and shipping with Russia on a better footing than it has been at any time since the War. I go further and say that, while it is of a temporary nature, I hope that it will mark a turning point in the relationships of the two great countries, and will in time lead to a treaty of commerce and navigation, the conclusion of which must include a settlement of the outstanding questions which have been referred to, the conclusion of which I feel sure is desired by every Member of the House. Some nervousness has been shown as to the risks of embarking on this experiment and making an agreement such as this with Russia. We have been prepared to take risks in the past to extend our trade. The commercial supremacy of Great Britain—and I must point out that we are again the first exporting country in the world—was not built up by those who feared to take risks, and if there are risks we are prepared, nevertheless, to recommend the agreement to the country and are confident that trade and industry will respond to the effort that has been made to place our trade with Russia for a first time on a satisfactory basis.

Sir N. STEWART SANDEMAN

Will the hon. and gallant Member say a word on the question of Russian propaganda?

Lieut.-Colonel COLVILLE

The agreement, which is a purely commercial agreement, does not include propaganda, but we have an undertaking on the subject of propaganda which holds good, and we think that we have sufficient power to see that the undertaking is regarded.

Duchess of ATHOLL

Does it extend to propaganda by wireless?

Mr. D. GRENFELL

Is there an undertaking on the part of the Government that no propaganda shall be carried on in this country against Russia?

Question, "That Item Class VI, Vote I, (Board of Trade), be reduced by £100", put, and negatived.

Original Question put, and agreed to.

Resolution to be reported upon Monday next; Committee to sit again upon Monday next.

The remaining Orders were read, and postponed.