§ 6.35 p.m.
§ Mr. R. S. Hudson
I beg to move,That the Clearing Office (Turkey) Amendment Order, 1938, dated the fifteenth day of June, nineteen hundred and thirty-eight, made by the Treasury under the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which was presented to this House on the sixteenth day of June, nineteen hundred and thirty-eight, be approved.In order to make the position clear I shall have to go back a short time. In 1935 an Anglo-Turkish Payments Agreement was negotiated. Under that agreement, we found, owing to a vast amount of goods being shipped from this country into Turkey against the goods shipped from Turkey to this country, arrears of payment amounting to £1,000,000. Therefore, we superseded that by the Anglo-Turkish Clearing Agreement in 1936, and that, in turn, proved unsatisfactory in that the arrears continued to mount at the rate of £300,000 a year. In March of this year I had a meeting with representative Chambers of Commerce in this country and pointed out to them that the situation was becoming extremely unsatisfactory, that already a man who shipped his goods to Turkey had to wait 19 months for his money, and that the only feasible way of getting back to a reasonable condition of affairs seemed to be to devise a scheme for limiting our exports approximately to the amount which the Turks could pay for them, and that the best way to do this would be a voluntary rationing agreement run by the various Chambers of Commerce, to whom the bulk of exporters in this country belong.
The scheme did not meet with approval and in the meantime the Turkish delegation arrived here to try to negotiate a wider agreement for the development of their minerals, harbours and railways which we know as the Anglo-Turkish Credit Agreement. I pointed out to the Turks that we could not possibly begin to negotiate about further credits unless they would, as a preliminary and necessary part of the negotiations, do something to improve the clearing and stop accumulations of debt. A great number of different methods were explored, and finally, after long negotiations, we reached this rather complicated document which the House now has before it. Briefly, 106 the basis is the restriction by the Turkish Government of imports from this country on a non-compensation basis to a figure of £500,000 a year, which is the amount we estimate they can at present export to this country. I emphasise the word "non-compensation," because compensation trade is not to be restricted in this way. The basis of restriction is to be in proportion to the amount of British exports to Turkey in 1935, so that, if the scheme works as we anticipate, from now onwards no further arrears ought to accumulate. But there was left the point which was raised by my hon. and gallant Friend the Member for Abingdon (Sir R. Glyn), namely, as to what we were going to do with the arrears which already amount to £1,500,000.
The Turks have agreed to three main ways of providing funds to clear off or reduce those arrears. In the first place, under the contracts which are to be carried out with Turkey under the £10,000,000 scheme, a certain amount of money will be paid to Turkish workmen and will be spent in Turkey. The Turks have agreed that the equivalent in sterling of that sum will be paid over to the credit of the Clearing Office, and we anticipate that on a total of £10,000,000, that sum will amount to about £500,000. That will be the first item towards clearing off the debt. Secondly, they have promised an annual sum of £100,000 which they anticipate will be available as surplus from the Anglo-Turkish Commodities Company; and, thirdly, they have agreed that 10 per cent. of the moneys derived from compensation trade should also be paid into the Clearing Office for this purpose. From these three ways we anticipate that a vast reduction of arrears will be achieved in the course of the next two years, and we hope that the whole of the arrears will be paid off in the following years. There is also provision under which money lying blocked in Turkey will be able to be transferred by means of compensation trade, a right which up to now has been withheld.
§ Mr. Pethick-Lawrence
Will the right hon. Gentleman say exactly what he means by compensation payments?
§ Mr. Hudson
What happens at present is that if an exporter in this country wants to send some goods to Turkey outside the clearing on a compensation basis, 107 he writes to his importer in Turkey and says, "Will you find someone in Turkey who is willing to send some goods to this country on what amounts to a barter basis?" One difference between the clearing and compensation is that the exporter in this country has to pay a premium of approximately 30 per cent. to get the necessary goods. He either recoups himself out of his profits, or, as I understand in the majority of cases, he adds that price to the amount which the Turkish importer has to pay. The effect of this Clearing Order will be to increase from 30 to 40 per cent. the premiums which the British exporter has to pay.
That is as simple an explanation as I can give of a rather complicated clearing. The main justification lies in the fact that there was no possible sense in allowing British traders to go on accumulating these arrears of payments. As I have already said, a man sending his goods to Turkey had to wait for 19 months for his money, and if the whole system had been allowed to go on, in a very short time he would have had to wait three years. It was in order to put an end to that deplorable state of affairs that, with the assistance of the Turkish Government, we have reached—and I hope the House will so regard it—a reasonable and satisfactory arrangement.
§ 6.44 p.m.
§ Mr. Benson
The right hon. Gentleman has presented a very clear statement of the Clearing Order we are now discussing, but to some extent he has achieved clarity by carefully leaving out all the difficult parts. This Clearing Order is a very great break with traditional clearing orders. There are three points which require to be stressed. The first has already been mentioned by the right hon. Gentleman, and that is, that this Clearing Agreement puts a definite limit on the amount of our exports to Turkey. In the future, or so long as this Clearing Order remains unmodified, we shall be limited to the exportation to Turkey of goods to the value of approximately £500,000. That means that we have cut our normal exports to Turkey by half. I realise that the £500,000 does not include any exports under the credits guarantee arrangement.
§ Mr. Hudson
This does not limit our total exports to Turkey to £500,000. The 108 British exporter will be at liberty, as in the past, to export whatever he can, on a compensation basis, and it is a fact that compensation trade has been growing. There is the limitation to £500,000, on the conditions that I have explained, but the whole of our total exports to Turkey are not limited to £500,000 a year.
§ Mr. Benson
The amount of compensation trade is extraordinarily small. From the most recent report from the right hon. Gentleman's Department, the trade returns show that in 1935 the total amount of trade with Turkey on the compensation schedule, that is, under Schedule 4 of the Principal Agreement, amounted to only £140,000. Only a certain amount of the imported goods contained in the compensation schedule are compensation trade, so that when we come to examine the figures, there is not very much trade that can have been carried on under the compensation provisions according to the figures for 1935. What is happening now I do not know, but we do know that of the £140,000 mentioned a certain proportion is not carried on a compensation basis.
§ Mr. Boothby
Is it not a fact that the bulk of this trade will be carried on under the medium-term credits under the Exports Credits Guarantee arrangement which is not limited in the way the hon. Member is trying to suggest?
§ Mr. Benson
If I read the Guarantee Agreement and this clearing Order correctly, the whole purpose of the £10,000,000 guarantee has nothing whatever to do with our normal trade. It is for the purpose of facilitating capital exports to Turkey, in order that Turkey may develop her mineral wealth. I am dealing now not with those extraordinary capital exports from this country but with normal trade. When we were discussing the last Order, the Chancellor of the Exchequer said that this Clearing Order would be a facilitation of our normal trade and that it would facilitate the repayment of frozen credits. I am very sceptical about that. Obviously, compensation trading can have no effect upon our frozen credits. The form of compensation trade which has been mentioned will leave the frozen credits as they were. There is another form of compensation trade by which if a man has blocked credits in Turkey he can import into this country certain goods, but if he does that 109 he has to pay a premium of something like 30 per cent. The result has been that the amount of credits that have been liquidated in the past by means of compensation trade has been extraordinarily small.
§ Mr. Hudson
I do not think the hon. Member has got hold of the right end of the stick. For the first time, under this new Agreement, people with block credits will be allowed to export goods. Up till now they have not been allowed to export. The hon. Member seems to think that they have. The reason why block credits have not been released is not due to any falling off of compensation trade, but to the fact that the owners were not allowed to bring them out. The hon. Member is relying on our annual report for 1935 when the compensation trade was very small but, as I have already said, compensation trade has developed very largely in recent years, and now it stands at a considerable figure.
§ Mr. Benson
Is that for the purpose of unblocking credits or is it compensation trade carried on a mutual basis, where the exporter from this country sends goods into Turkey and receives in payment goods from Turkey?
§ Mr. Hudson
I have explained that there has never been any compensation trade for unblocking credits. It has been on the mutual basis.
§ Mr. Benson
Then from now onwards we shall be entitled to use this compensation trade for that purpose. I have fallen into error, but I make no apologies, for anyone who has read the agreement and the Order and can understand them completely has certainly far better brains than I have. In the future, any advantage that we are likely to get under this Order for the unblocking of credits will not for some time come from the normal payment arrangements set out in Article 5. As far as I can read this Order it is much more likely to make normal clearing arrangements for our blocked credits much more difficult. References have been made to the list of articles which are to be exported through Anglo-Turkish Commodities, Limited, which are to include metals, mineral ores and concentrates, coal, wheat, cotton, timber, fresh fruit and vegetables and canned 110 goods, and also about £120,000 from figs and raisins. The amount in respect of these commodities is not to be paid into sub-Account A of the clearing account but into the special account in the Ottoman Bank of Anglo-Turkish Commodities, Limited. These receipts are not to be used for unblocking our frozen credits normal trade payments. The purpose for which they are to be used is set out very carefully on page 4—for bills owing Brassert and Company; for liabilities accruing under the Guarantee Agreement; for liabilities under the Armaments Credit; for certain amounts to be set aside for the future purchase of ships, and to meet the liabilities on certain bonds. Moreover, the Guarantee Agreement liabilities are going to be fairly heavy. By 1945 the amount will be something like £1,000,000 a year—strictly speaking, £900,000. There will be very little left out of this balance to unblock our credits or to pay for the £500,000 worth of trade that is allowed.
I do not think that we can look for a very rapid return on the £10,000,000 that are to be invested in Turkey in the development of her mineral resources. You cannot develop the mineral resources of a country very rapidly. It will be three or four years before the Turks are in a position to develop their concentrates and mineral wealth to any considerable extent, and the result will be that for several years to come it is highly probable that we shall find that the £1,500,000 of frozen credits will be fixed where they are.
I shall be glad if the right hon. Gentleman will give us more information as to Anglo-Turkish Commodities, Limited. Are they to have a monopoly of the export of these commodities from Turkey that are scheduled? There is no specific statement that they are to have a monopoly either in the Guarantee Agreement or in the Clearing Order, but are they virtually to have a monopoly? Furthermore, why are Brasserts, a private limited company, to be put in a specially favourable position? Other companies in this country have to take their chance. With regard to the annuities payable to the Aidin Railway Company and the Istanbul Telephone Company, the right hon. Gentleman said in reply to the right hon. Member for West Stirling (Mr. Johnston) that the points at issue with 111 regard to those companies were being carefully looked after. I believe that at the present time, of the majority of Turkish bonds 50 per cent. are paid in foreign currency and 50 per cent. in Turkish currency. Can the right hon. Gentleman give us any idea of the amount of Turkish bonds held in this country which are under this fifty-fifty arrangement? If he cannot do so, will he tell us why the Aidin Company and the Istanbul Telephone Company are put in a relatively favourably position? There is one thing in this agreement that I do welcome and that is the establishment of the Anglo-Turkish Commodities Company. Here the Government are in effect setting up an Import Board and also a world sales organisation. We on this side of the House for many years advocated an Import Board, but we never went so far as to suggest a world sales organisation. We welcome the acceptance of a policy of import boards, and congratulate the Government on going one step further and making a joint arrangement with Turkey for the sale by the two Governments of Turkish commodities throughout the world.
§ 7.1 p.m.
§ Mr. Silverman
I do not desire to enter into the complicated discussion on highly technical matters which is quite safe in the hands of my hon. Friend the Member for Chesterfield (Mr. Benson), who has just spoken. But I think, perhaps, the occasion ought not to pass without calling attention to a general question of principle lying behind this agreement. I hope the right hon. Gentleman will correct me if I misquote what he said, but I think the effect of it was that there would be very little purpose in entering into negotiations for a new financial arrangement with the Turkish negotiators unless some provision were to be made for honouring to some extent past obligations. That is an admirable principle, and I congratulate the Government upon their return to the acceptance of a sound principle of that kind. But my mind goes back to the discussion in this House about international affairs—not on that occasion international financial affairs, but international political affairs—when the House was very greatly divided as to whether it was possible in negotiating with other States about the removal of difficulties and doubts and misunderstandings 112 and suspicions, to have any regard to the past; whether it was not much better to say, "Let us sweep away all these doubts and misunderstandings and suspicions and start with a perfectly clean sheet on a fresh basis, without calling upon people with whom we are negotiating for any evidence of good faith, even though they are negotiating a new agreement, without their having first carried out the old agreements of the same kind."
I am glad to see that the Government now accept the much sounder principle of saying to people who are in default on their international agreements, "Before we enter into a new agreement with you, give us some evidence that you propose to honour the old one." I cannot help wondering how much better the state of Europe and the world would have been if the Government had applied that principle to Anglo-Italian negotiations a month or two ago. What a difference it might have made to Austria, what a difference it might have made to Spain, what a difference it might have made to Czechoslovakia, what a difference it might have made to the peace of the world. I hope that now that they have by accident, in a matter of mere money, international debts, tumbled across the true principle, they will not be afraid to apply it, with results beneficial to the future of mankind in these very dangerous and difficult times.
§ 7.6 p.m.
§ Mr. Pethick-Lawrence
I do not propose to follow my hon. Friend the Member for Chesterfield (Mr. Benson) in his detailed analysis of the proposals of this Order. Though he has, perhaps, not understood the whole of this arrangement, I venture to think he got nearer to understanding it than almost any other hon. Member of the House, and, therefore, he is to be congratulated on his analysis of the proposals. It is a well-known saying that error is the first approach to truth, and when he substituted concrete realities for the general fog which permeated most of the House, I think he enabled the House as a whole, by the enlightenment he brought to bear, and the corrections which the right hon. Gentleman was able to make when he went slightly into error, to understand what we otherwise should have failed to do. I do not propose to criticise the main provisions of the agreement. Granted all the premises of the Govern- 113 ment, and granted the facts of the Turkish situation, I think that probably it was essential to do a deal of this kind in order to enable us to get the whole matter put on a more satisfactory basis.
The few remarks I propose to make will be directed to the subject of the light that this clearing agreement and the need for it bring to bear on the fiscal policy of the Government and of some of their most enthusiastic supporters. There must have been brought home to those who listened to the right hon. Gentleman expounding this agreement—and I could only wish that a larger number of Members who are very strong advocates of a tariff policy had been here to listen to him—a, truth which many of them for many years have refused to admit, that you cannot effectively sell unless at the same time you are prepared to buy. He told us that Turkey, which from many points of view has been a most exemplary country, had done everything that a tariff reformer in his most exalted frame of mind wanted to have done: it had gone on buying and buying and buying British goods, and it had sold us next to nothing in return. Now that is an ideal country from the point of view of a large number of hon. Gentlemen who are supporters of the present Government. And yet this country, which has done everything that it should have done, has been convicted of getting more and more into arrears of debt, and something has to be done about it. Hence this agreement. Because it is perfectly clear to the right hon. Gentleman that Turkey cannot usefully to this country go on receiving our exports unless in some way or another it is prepared to send us imports with which they are to be paid for.
It is interesting to observe that the right hon. Gentleman was, I will not say critical, but doubtful, about the position with regard to other countries. They have committed the other unfortunate error of selling us a great many of their commodities without being prepared to purchase an equal quantity in return. There, again, he showed us the necessity of equalising the buying and the selling. But, of course, what the supporters of the present Government have never recognised is that there is such a thing as triangular trade, and that under a properly regulated system it may perfectly well be that one country needs more of our exports than it is able to import into 114 our country, but it makes up for it by means of a third, and a fourth and a fifth country; and it is only when you take all those countries into account that you get the equal balance of trade which enables the economic system of the world to go on. At last, by means of these clearing arrangements and the necessity for them, some hon. Gentlemen who support the Government, and some members of the Government themselves, are beginning to realise that international trade can be made to be profitable to this country and that the way to effect that is not by attempting to cut off all our imports in order to stimulate our exports, because that result certainly will not happen.
I am not saying for one moment that we can go back to unregulated private enterprise in imports and exports, owing to a number of causes. For one thing, we are getting a large number of monopolies in commodities all over the world, held by a very small number of companies and firms, and the position we used to be in in days gone by cannot be repeated. Again, different Governments, for political or semi-political reasons, practise a number of financial arrangements which interfere with the normal flow of trade, and, therefore, I am quite prepared to admit—and I think all the hon. Gentlemen who sit with me are quite prepared to admit—that regulation of trade in some shape or form must be part of the necessary policy of this country as well as of other countries. We do not agree with the precise form of regulation adopted by His Majesty's Government. We do not think that the effect of these things should be to enrich private individuals and companies by making private profit out of international or national trade, but regulation there has to be, and it has to be done in the interest of the country and of the community as a whole. Something will have been gained by the Debate this afternoon, and something further will be gained as the clearing arrangements get more and more understood, if they succeed in banishing from the minds of a few of the right hon. Gentleman's supporters the idea that trade is a matter of encouraging your exports and cutting down imports.
§ Question put, and agreed to.
That the Clearing Office (Turkey) Amendment Order, 1938, dated the fifteenth day of
June, nineteen hundred and thirty-eight, made by the Treasury under the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which was presented to this House on the sixteenth day of June, nineteen hundred and thirty-eight, be approved.