BOARD OF TRADE.

HC Deb 15 June 1938 vol 337 cc231-362

Motion made, and Question proposed,

"That a sum, not exceeding £211,444, be granted to His Majesty, to complete the sum necessary to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1939, for the salaries and expenses of the office of the Committee of Privy Council for Trade, and subordinate Departments, including certain services arising out of the War."

3.35 P.m.

Sir Percy Harris

I should like your Ruling, Captain Bourne, upon a point of Order. There is a desire on the part of a number of Members to raise the question of trade as a whole, but at the same time to raise such questions as shipping and manning, which all come under the two Votes which are on the Order Paper. May I suggest that if, after discussion, it is decided to move a reduction of this Vote such action should be postponed till the end of the Debate. I think that would be for the convenience of the Committee as a whole, and would allow discussion on a rather larger range of subjects than would be possible if only one Vote were taken, or the discussion were limited to the first Vote.

The Deputy-Chairman

I am, of course, in the hands of the Committee in this matter. We have already had one discussion upon the Board of Trade Vote, and I think it would probably be the wish of hon. Members in all parts of the Committee that on this second occasion we should deal with subjects which were not in order upon the first occasion, and if the Committee wishes that course to be taken, it will be necessary to postpone moving a reduction of the Vote until the end of the Debate. If a reduction is moved earlier we shall be limited to a discussion upon the particular Vote upon which the reduction is moved

3.37 P.m.

Mr. Graham White

When we discussed the trade situation a little over 12 months ago while the economic and general position of the country was not too promising or reassuring, it was certainly more hopeful than it is to-day. That being the case, I hope the Committee may think it suitable that to-day we should dwell not so much upon what has been done, or what it has been sought to do, in the last year—because the results have certainly not been all that we should desire —but rather that we should concentrate upon a consideration of what steps we can now take to improve a situation which undoubtedly shows signs of active deterioration. Twelve months ago, although there were some doubts as to the strength of the upward movement of trade, nevertheless the pause in that upward movement had not become a definite decline. To-day, judged by any test which I am able to apply to the situation, the reverse is the case. The upward movement has ceased and the decline has set in and has been steadily proceeding, and there is yet no sign that I can discover that the process of deterioration has been arrested. The evidence to which we turn first in regard to the economic health of the country, the tragic roll of men and women who are without work, is unfortunately steadily rising, and has reached the tragic figure of no less than 1,800,000 individuals. Our international trade seems to have lost its velocity of improvement and is tending to decline. In fact, all the general indices to which one turns for enlightenment on this point seem to indicate that the recession is a serious one.

Last year the Government in the discussion on the Vote mentioned two steps which had been initiated, with the general approval of the House. The first step was the beginning of negotiations with America for a trade agreement which it was hoped would open up the way to wider co-operation in trade between ourselves and America, and might in time embrace the Empire as a whole. There was also the invitation, again widely supported and commended, of the Government, in association with tire French Government, to M. van Zeeland to undertake a diplomatic mission in order to find out whether, outside of Geneva—where certain Powers found themselves prevented from taking action —there were any means by which the economic grievances of the dissatisfied countries could be brought into the light of day and discussed in the light of common sense and sanity. Those two movements, which were hopes last year, are still hopes. We hope that they will not disappear and that the Government will be able to tell us something of the progress which has been made. If there are difficulties in the way, perhaps the Government will be able to indicate to us what they are, in order that those difficulties may be overcome.

Since the beginning of this year those whose business it is to review our financial position—economists, bank chairmen and others—have been unanimous in telling us that we must get rid of the restrictions on trade if we are to advance in our economic structure, and if we are to avoid the development of the present decline into positive disaster. Everyone feels that we cannot go on as at present and that a courageous movement is eminently called for. Something must be done to arrest the rot which is eating into the economic structure of this country and of the world. Different opinions are held by different people as to the cause of our present economic distresses, and some people incline to attach the major responsibility to the economic state of America. It is true that America's prosperity or otherwise is, if not a determining factor, then a very important factor, in the standard of life of people throughout the rest of the world. Other people are still attached to the fatalistic doctrine of the trade cycle and its inevitability, but that doctrine dominates men's minds far too much as the main cause of the present decline.

In my judgment, however, the main cause of the setback in activity, the decline in enterprise and the general withdrawal from advance in various directions, is, without any question, the fear and anxiety about the general political situation which override and dominate every other consideration at the present time. It makes it all the more essential that we should do something which would put into men's minds something to compete with the constant obsession with questions of force and preparations for defence, and the fear of war. Before I ask the Committee to consider the matter in this aspect, I would like to direct their minds for a few moments to certain questions relating to the shipping industry.

In the consideration of the general economic structure of this country, we realise that many industries are of great importance and others of less importance, but the problem as a whole cannot be considered intelligently without taking into review the position of shipping. Whatever may be the position and relative importance of any industry, it is fundamental that we should be able to maintain our share of the carrying trade of the world either in peace or in war. It cannot be said that the present situation in that respect is free from anxiety. In 1913 our share of that trade was, I think, 48 per cent. of the whole; to-day it is 32½ per cent. approximately. Considering the figures of our international trade we find that we are interested in 31 per cent. of the world's trade at the present time, and that the British Empire controls 32 per cent. of the world's shipping. If we take the figures of our inter-Imperial trade and the whole of our foreign trade in addition, we are concerned with about 47.5 per cent. of the whole. The question which immediately rises in one's mind is whether our share of the carrying trade of the world does give us an adequate margin either in peace or in war. It is clear that we might have to rely in time of emergency increasingly upon our own resources and our own shipping, and that we might find ourselves in real difficulties.

I want to ask the Government whether they are satisfied with our existing proportion, whether they think that the proportion of shipping that we have, provides a sufficient margin and whether they think that, in existing conditions, the shipping trade will be able, of its own resources, to provide for the maintenance and the expansion of our merchant fleet. The difficulties of the industry have been put before this House on many occasions. There is the competition of highly subsidised fleets of other nations, including countries where the wage-level is much lower than our own. There is, in addition, the startling fact that shipbuilding can be done very much more cheaply on the continent of Europe than in our own country at the present time. We have to be clear in our minds whether there is a sufficient incentive to the shipbuilding industry in this country to go on building and replacing tonnage. I want to know whether the shipbuilding resources of this country are adequate in themselves to replace the casualties and losses which might occur if, unfortunately, we were in danger of war. On some of these matters we require decision and guidance at the present time, so that we shall not have to wait until we find ourselves in an emergency. They fall to be dealt with in what I might call a period of apprehension, and I would ask the Government what action they propose. Can the Government give some assurance to the shipbuilders and shipowners of the country, who have these anxieties at this time, that there will be adequate insurance facilities not only for hulls but also for cargoes, in that event?

I do not intend to pursue that aspect of the subject very far, but we know that the matter has been under active consideration for the last 10 years, that a Committee has been considering it and that it would be a very great reassurance if it could be dealt with to-day, so that those concerned might know what protection will be available for them. I hope we may be told to-day that action of some kind is contemplated in the near future which will enable these anxieties, which have an inevitable effect in retarding the shipbuilding industry at the present time, to be set at rest.

With regard to the van Zeeland report, on 1st February the Prime Minister told us that the time was not ripe to enter into a discussion of these very important proposals. Naturally, they would have to be considered departmentally and by the Government, and consultation would have to take place, particularly with the French Government, who were the joint partner with ourselves in issuing the invitation to M. van Zeeland. Five months have passed, and we hope that to-day we may be given some reassuring account of the progress of these deliberations and of the consultations which doubtless have taken place. There is no question, and, indeed, I think the Prime Minister himself stated, that the main responsibility for action in this matter lies with our Government and the French Government, and we hope we may have some more positive assurance than the Under-Secretary of State for Foreign Affairs was able to give us during the Debate initiated by the right hon. Gentleman the Member for Bow and Bromley (Mr. Lansbury) that this matter is not being allowed to rest. I hope there is no foundation for a somewhat sinister paragraph in the "Times" of 3rd June, which, referring to this matter, said: Politically speaking, the dust appears to be gathering on the van Zeeland report, and those who look towards long-term appeasement would be unwise to pin any hopes on this Debate. The subject has been selected by the Opposition party, not by the Government, and, although the latter may have the best intentions regarding it, they remain tied to more immediate issues. If there are any more important immediate issues than taking some steps to bring about some economic détente and political appeasement, I shall be very much surprised to learn what they are. The van Zeeland report is not remarkable for any fresh point of view on the general economic position of the world. Indeed, I very much doubt whether these have not been brought to light already by the Economic Committee of the League of Nations or by some of the other bodies whose business it has been to consider the subject. The great value of the report is due to the personality of its author, and the extraordinary combination of qualifications which he possessed when he set about his task. He was a trained economist, a practical banker, and, above all, a statesman who had had some responsibility for the successful solution of some extraordinarily trying economic difficulties in his own country. The report is entirely free from the suspicion which might have been attached to it if it had been introduced by anyone who holds my political faith, and it is free from anything in the nature of theoretical considerations and from any doctrinaire views. The 'proposals put forward pay full regard to all the difficulties of the time, and are supported by eminently practical arguments.

The van Zeeland report discloses how intimately the whole working of our trade and the whole economic conditions of the world to-day are bound up with strictly political issues. In fact, to quote its own words: It is impossible to ignore the fact that we are really working in their shadow. No one can doubt that that is a true verdict on the position. If the world were reasonably sane and stable, these questions of tariffs, quotas and the like would be comparatively easy to settle, but if we are to hold our hands now because we think we should be running risks if we ventured into this field, I would point out that we should be running no risk which could compare with the risk we are running every moment of our lives at the present time. The underlying fact which we must all realise if we are to make any progress at all towards economic appeasement is that the overriding task of statesmen to-day the world over is to make the world resources of raw materials, markets and territories available for the use of the common peoples of the world. I agree with the statement of the right hon. Gentleman the Member for Bow and Bromley in the recent Debate on this subject, that: Ultimate peace can be maintained only when nations are willing to co-operate in sharing the raw materials, the territories and the markets of the world."—[OFFICIAL REPORT, 3rd June, 1938; col. 2477, Vol. 336.] To put it in another way, we can only expect abiding peace in the world when all the nations have the same reason and the same common incentive for keeping the peace and, if that condition is to be attained, all positions of special privilege and preference must be done away with. That is the fundamental consideration in this matter. It is only when the subject is approached from that angle, with a full realisation of all the difficulties, that we shall be able to make any impression upon the gigantic task which lies before us. The report does not shirk these difficulties; it states them faithfully, bluntly and without offence. It refers deliberately to the difficulty caused by the attitude of Germany with regard to the colonial question. It does not fail to remind the nations of the world that it is of vital importance at this time to bring to light the sanctity of plighted engagements and the rule of international law, and it has a word or two for us and for other countries which have adopted positions of special privilege and control in regard to territories such as we have within our sphere of economic influence.

M. van Zeeland was given a very difficult task, and, at the time he completed it, he said that the difficulties had increased rather than diminished. That, unfortunately, is the case to-day. But if our difficulties to-day are no less than they were at that time, if the political and economic situation has deteriorated further, that is no reason why we should not act; indeed, it makes action more rather than less necessary. It is of the greatest importance to bring into the news of the world the science of peace, to bring it home to people that the only way to check the armaments race and get real security is to get rid of the economic causes of war. Failure to check the present tendency of the world can only lead to the formation of groups and empires each trying to control and secure economic domination of more and more territory, that control resting ultimately upon force. This process is going on rapidly from day to day before our eyes, and the urgent need for action on the lines of the van Zeeland report is much more important in the light of the events which have taken place in Central and South Eastern Europe since the report was completed.

The process of consolidating Europe into exclusive self-contained groups is proceeding rapidly. We already know that Germany proposes to build a big port on the Danube and to put an armed flotilla on the Danube, and that her economic penetration in central and south-eastern Europe is in effect the building up of a closed Empire in which country after country finds itself economically entirely linked with Germany, without any alternative choice in the matter. It is of very great importance to those countries that there should be some alternative, something which will give them some freedom of manoeuvre in the disposal of their products and the exchange of their services. No one in his senses would wish to place restrictions upon the German Empire further than the restrictions which their own rigid policy of self-sufficiency places upon them already; but we have to remember that this process of economic penetration is carried on by means which are entirely unorthodox, and that as part of that process of economic penetration we shall see the gradual elimination of the remaining trade of France, ourselves and the western countries of Europe, with a corresponding diminution in the resources and an increase in the distress of the industrial population.

If there was no other reason for action on the lines sketched out in the van Zeeland Report there is a reason in the situation which is rapidly developing and which will continue to develop rapidly under the impetus and the energy of this new Imperial movement, unless some alternative can be brought to those who have no wish to find themselves entirely tied to any one country or system. What is to be the ultimate outcome if Europe is to be divided into these systems of close empires, each one working for self-sufficiency and resting upon force for the sanction and stability of its arrangements? It is evident, from a study of the figures, that this process has already gone a very long way. The trade of greater Germany with the Balkans and central European countries is already one-fifth of the whole of her trade. What is more striking, and more important even from a strategic and peace point of view, is that the position in Italy is far more dependent upon the trade and influence of Germany than it has been in the past. We can use no means, except a resolute and courageous proposal which will offer some alternative to these negative proposals, resting upon military force—we can use no means except some kind of action based upon the proposals of M. van Zeeland.

It would not fail to be of the greatest assistance, and it would give an impetus to any move which may be in contemplation, if we could say to the world that in future our commercial policy in relation to all other countries shall be that, in spite of our great possessions, no country shall be the poorer because of them. As we know, England and France have a special responsibility in the matter. The proposition that we have ventured to put before the Committee as the basis of appeasement is the only one which will enable us to answer the statement which is made to us when we venture to query the wisdom and advisability of a movement made by naked force, by economic force, to bring other countries within a system of tutelage and servitude. If we raise any doubt as to the wisdom of that we are immediately confronted with the statement, "Well, you have made special arrangements of privilege and preference with large Dominions and large proportions of the earth's surface. You have done that, and you may be within your rights, but if so you cannot question our right to do the same thing with our neighbours and those who we can bring within the ambit of our control." I leave the matter there. I hope the Government will give a more satisfactory reply than that which they gave to the right hon. Member for Bow and Bromley in the Debate on this subject the other day.

I turn now to ask for some reassurance with regard to the negotiations which are proceeding between ourselves and the United States of America. I hope that there are no foundations for the rumours which have appeared in the Press and elsewhere that the negotiations are not proceeding satisfactorily. I can think of nothing more disastrous than that these negotiations, which would mean so much economically and politically to the whole world, should not succeed. It is true that they are not merely a question of economics. The economic advantages to be derived from such an agreement could not be exaggerated, but there are also the political consequences, and it would be a first-class result in the present state of a mad world if it could be shown that the two great democracies were capable of coming to an agreement to co-operate on any subject whatsoever. Conversely, it would be a lamentable thing if the United States and ourselves were not able to come to an agreement on this subject.

It is well known that in the political conditions at present prevailing in America, and in any conditions which are likely to prevail in the near future, it is only in the economic field that America is free and able to co-operate with us and the rest of the world. We know that Mr. Cordell Hull has in his period of office negotiated a very large number of bilateral agreements containing the most-favoured-nation clause. He has now reached a point at which he feels he can go no further without an agreement which will give him entry to and co-operation with this country and, he hopes, with the British Empire. The political consequences to democracy and the whole future of our civilised world would be very serious indeed if these negotiations failed and if America were driven back, as she would be driven back, into a state of complete isolation. That would be a disaster of the first order. These are the matters which we have ventured to bring before the Committee. They are matters of great consequence and difficulty, but what will determine them is the amount of courage put behind them and the spirit and the heart with which they are begun.

4.10 p.m.

Mr. Lees-Smith

The hon. Member for Birkenhead East (Mr. White) has opened the Debate with a speech with no word of which I find myself in disagreement. In the greater part of his speech he has alluded to issues raised in the van Zeeland Report, and the general problem of quotas, tariffs, and international exchanges which that report discusses. Before I come to the main remarks which the hon. Member made, it may be worth while if I indicate broadly the attitude which I and my hon. Friends adopt towards the whole problem of tariffs on the one hand and that of free trade on the other. I begin with the tariff. In all these Debates for some years I have noticed that hon. Members taking part on the opposite side have always argued that the revival of trade in this country from about five years ago has been mainly due to the tariff policy which has been adopted. I myself never believe that up to the present you can, by the test of any results, come to any verdict as to what the effect of the tariff policy has been one way or the other, and you will not come to a verdict until you have seen its effect in a period of slump and not in a period of boom. As a matter of fact the tariff policy of this country was introduced simultaneously with our abandonment of the Gold Standard and with the beginning of the world revival of trade. Either of those two causes by itself was more potent than the moderate tariff which was introduced.

There has been a good deal of discussion lately about our export trade and about the effect of the tariff on that. I should say that, so far as we can judge by results, it is evident that the tariff has had a very serious effect upon our export trade, on which we depend, as has been said, to fill the gap if we are on the verge of depression. After all, when we abandoned the Gold Standard we gave a stimulus of at least 30 per cent. to our exports. I would imagine that a stimulus of that kind would have a spectacular effect upon the increase of the export trade. As a matter of fact the increase was never very substantial, and in the last few months we are actually faced with a decline. It appears to me that the reasons for the rather disappointing effect on exports is that at the same time by our tariff we put a duty, broadly, of 15 per cent. on the raw materials and semi-manufactured goods which we work up for export, and so very largely detracted from and took away the advantage which the abandonment of the Gold Standard had given to us.

Apart from the increase in the price of raw materials, the chief barrier to our export trade, as the report points out, undoubtedly has not been so much foreign tariffs as foreign exchange controls and prohibitions. These foreign exchange controls and prohibitions have been very largely the direct result of our tariff, to which they have been a reply. I do not mean a reply, so to speak, in a spirit of retaliation. If that were so nobody could have any sympathy, because countries which have been protectionist for generations have not the right to retaliate on a country which has been protectionist only for years. But the increase in our tariffs has undoubtedly led to an increase in exchange controls and prohibitions in foreign countries, because the countries which have adopted these exchange controls obtained part of their exchange from their exports to this country, and, so far as our tariffs cut those imports off, those countries find part of their exchange cut off; so, without any ill will at all, but automatically, they impose controls and prohibitions, in order to diminish correspondingly their need for foreign exchange. So our tariff has led both to an increase in the price of our exports and to an increase in barriers to foreign countries; and it is ridiculous to suggest that foreign trade can be benefited by such a policy.

May I, in the same way, summarise the attitude which I and my hon. Friends adopt to the pure doctrine of Free Trade? I should say, with a great many qualifications, but using the phrase "other things being equal," that, on the whole, the nearer this country can approximate to Free Trade the higher will be the standard of life for its people. If we were living under a Socialist State, I should certainly argue that a Socialist State should not produce, at great expense, commodities which it could import at less expense by selling and exchanging goods in respect of which we have a comparative advantage. Therefore, the deduction, to my mind, is that, other things being equal, the more free trade we have the better it will be for the standard of life in this country. But there is a qualification, on which M. van Zeeland dwells, that is, that we must secure greater stability and security in our economic life. If you increase your imports, even to obtain cheaper imports, at the expense of security and stability, you may very well lose more than you win. M. van Zeeland points out that, especially in Europe, a number of foreign countries regard their import and export policy not as a commercial matter but as governmental strategy. In these circumstances, we have to have some means of protecting ourselves. I do not think tariffs are the best thing: they are not sufficiently elastic either up or down; you want to have complete prohibition.

The President of the Board of Trade (Mr. Oliver Stanley)

For industrial purposes?

Mr. Lees-Smith

Let me develop my argument. I consider that the tariff is not the best instrument for this particular problem. The attitude which I and my hon. Friends take is that you must introduce into your international trade that general idea of national planning which in our internal industry is now being accepted by schools and parties far outside the ranks of Socialism itself. Therefore, the general line we should follow should be through some authority—it might be the Department of Overseas Trade, it might be a commodity board, but by some authority we should, by methods far wider than a tariff—by prohibition if necessary—try to protect ourselves against these abnormal and irregular dislocations of our economy on account of imports coming in for illegitimate commercial reasons or semi-political motives.

There is a passage in M. van Zeeland's Report which deals with an argument which I have very seldom heard brought out with this authority. It always seems of such importance to me that I have been surprised not to have heard it mentioned more often. It is one of the reasons why my belief in a tariff is still further diminished. It is mentioned on page 32 of the report, which deals with the economic sphere. It is a very interesting doctrinal argument, and always has seemed to me to explain a number of features otherwise difficult to understand. M. van Zeeland points out that after a few years a tariff defeats itself because of its effect on internal prices. Goods are coming in from abroad at prices so low that they undercut our British goods; therefore a tariff is imposed, in the hope that prices of foreign goods will rise and British goods be able to compete. But he points out that after a few years your domestic prices rise as a result of the tariff. I myself have pointed out the simple fact that you have a 15 per cent. tariff on raw materials for industry, and that must mean a rise in internal prices, and then again there is a gap between internal prices and the prices of goods coming in from abroad, and they begin to come in in greater quantities again. That has seemed to me to be the explanation of the fact that this country, in spite of foreign tariffs, was able to increase its exports; it is also, to me, the explanation of a number of speeches I have heard in the last five or six months in this House. The zealots for a tariff inevitably are disappointed four or five years after it is introduced, because it defeats itself. In this House I have heard speech after speech from a certain section of hon. Members opposite pointing out that after five years of a tariff the imports into this country are higher than when the tariff was introduced, and demanding that the tariff should be raised. It makes me reflect that it is not only among Free Traders that doctrinaires are to be found.

The hon. Member for Birkenhead East made some remarks about negotiations for a trade agreement with the United States, remarks which I thought were very appropriate at this moment, and to which I will call the attention of the President of the Board of Trade. I understand that there are inevitable difficulties arising in this very complicated transaction. One thing becomes clear to me, that if we do not make this trade agreement now we shall not get another opportunity, because if the depression in trade increases and deepens into a slump, all ideas of reducing tariffs, in the United States alone, would be abandoned. The opportunity is unique. We were told for years that the difficulty in the way of these agreements was that other countries were not willing. Now the greatest manufacturing country in the world is coming forward with the initiative. We were told that the Dominions were not willing. Now they are realising that if they rigidly adhere to the letter of the Ottawa Agreement they will lose more than they gain. The main difficulties, I quite realise, are among the manufacturers in the United States, but they are being dealt with at the moment by Mr. Cordell Hull, who is the greatest Free Trader in the world, and who has set his heart on this agreement as the culmination of his years of office.

I emphasise this because I notice that the Federation of British Industries, which is a body with which some Members opposite are familiar, has issued a manifesto very unfavourable to the idea of a trade agreement with the United States. I can imagine nothing more inappropriate to the present hour than such a manifesto. The hon. Member for East Birkenhead pointed out that all our discussions now are being held under the shadow of imminent danger, and in recent Defence Debates one fact has emerged as, I should say, the main conclusion to which after a year or two of discussions on Defence hon. Members have come: that is, that if we have to take part in a great struggle, the economic factor is likely to be eventually the determining factor. No nation would be able, in a struggle to-day to maintain millions of men in the field, and at the same time within its own borders to produce the measureless accumulation of equipment and munitions and raw material and metals which would be exhausted every day. Therefore, the main conclusion which has been reached in Defence Debates undoubtedly is that that nation is most likely to endure to the end which has at its disposal the greatest command of the economic resources of the world, and at the same time has command of the sea, which will enable it to bring its resources to its shores.

Under those conditions the nation which is pursuing the wisest policy is the nation which is building up now the trade connections, the credits and the trade goodwill which will enable it to command the resources if the time of need arises. Under those conditions the attitude of the United States, the greatest storehouse of manufactures in the world, in a European struggle, might very well turn the balance in favour of the State with whom its sympathies lay. In the times in which we live, and in view of the subjects which we discuss, and the shadow under which we are working, when these issues are at stake, for a body like the Federation of British Industries to be willing really to imperil the whole existence of the nation for its own self-centred sectional interests is really horrifying and disgusting at this stage of our national danger.

I want to say something about the latter part of the speech of the hon. Member for Birkenhead, East. He referred to the attitude of the European countries to the van Zeeland Report, and especially to the dictatorship countries and the countries which are now under their menace. I am bound to say that at this moment—I do not know that he, perhaps, emphasised this—the van Zeeland Report, is applied to the whole of Europe, appears to be rather hypothetical, because it assumes the desire for economic co-operation among countries which up to the present moment regard their import and export policy as merely a preparation for war. 'While that lasts, some of the proposals of the van Zeeland Report would be dangerous. For example, to give credits to countries in order to be used for the purpose of piling up armaments, in respect of which we would have to pile up armaments in return, would obviously not be a policy that anyone would accept. M. van Zeeland may be, nevertheless, building better than he knows. I doubt whether the present tension in Europe can last at its present stage in perpetuity. Something is going to happen one way or the other. It appears to me that generally the conclusion which the mass of the people of this country is reaching now is, that the dictatorship countries have about reached the limit of what they can secure by methods of brutal aggression, and that, if they wish to obtain further advantages without resistance, they can only do so by negotiation and mutual confidence.

If and when they recognise those facts then, as the hon. Member for Birkenhead, East, pointed out, the report of M. van Zeeland will be a masterly summary—not anything new—of all the proposals which can be gathered together for the purpose of appeasement in the economic sphere which dominates most of us. I would also agree with what I take to be his last suggestion, namely, why should we wait for the dictatorship countries to come in at all? If an Anglo-American agreement were to be signed, I believe that we would regard all its possibilities with an entirely new vision. We should have new ideas of the possibility of trade agreements. There is no reason why that should not be followed up by similar agreements along the line of economic collaboration with those countries of South-Eastern Europe which want an alternative—with Holland, Belgium, countries in South America, with Scandinavia and with the other free nations of the world.

4.36 p.m.

Mr. Boothby

The right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) has made, as always, a very interesting and instructive speech, and so has the hon. Gentleman the Member for Birkenhead, East (Mr. White). They both covered pretty nearly the whole field of trade, with particular reference to the van Zeeland Report. I hope to say a few words with regard to the van Zeeland Report, but, before doing so, I would point out to the Committee that, whatever else we can expect to do in the immediate future, one thing is sure, we cannot expect to re-establish pre-war conditions in the international economic system for a very long time to come, if ever. My hon. Friend the Member for Lowestoft (Mr. Loftus) pointed that out the other day in a very interesting speech, and I think that he was perfectly right. We are in new fields and new methods are being adopted, and we ought to study some of these new methods, not with the idea, necessarily, of copying them in every respect, but at least with the idea of learning how certain foreign countries appear to achieve such remarkable results by methods, which, according to the old standards are, to say the least of it, absolutely unorthodox.

The most remarkable example at the present moment is Germany, as, I think, the Committee will agree. Whatever we may think about the Nazi system there is no doubt that, in the economic field, their achievement is very remarkable indeed. Their wages are low and controlled, but they have no unemployment, and for several years now they have succeeded in financing, with apparent success, a gigantic programme of public investment both in armaments and in ordinary constructive public works. In effect, the German Government has borrowed all the capital accumulations which are not being actively used and, itself investing them in one form or another, has maintained activity throughout the whole economic system by a continuous upward movement of internal prices, accompanied by an elaborate system of export subsidies; and so far they have got away with it. Until quite recently every orthodox or semi-orthodox economist in the world would have regarded this economic achievement, which is largely, I think, the work of Dr. Schacht, as being absolutely beyond the bounds of practical possibility.

While we may not wish to copy the German methods, it is well worth studying them, and if the Committee will not be very bored I should like to outline the two main expedients which they have used in order to achieve these somewhat startling results. These two main expedients, which the German Government have gone in for during the last four or five years, have been, first, the manipulation of currency, and, secondly, an elaborate system of subsidising exports. The whole system is immensely complicated and is being continually adapted to meet new conditions as they arise. It is known in Germany under the comprehensive title of Z.A.V., which stands for "Zusatz Ausfuhr Verfahren." Z.A.V. is not a single organisation. It includes all the instruments of German economic policy which are applied to the conduct of international trade. The two principal methods which they have used with such success have been the manipulation of currency and an elaborate and extremely clever system of subsidising exports. That is what we are up against. I may say, in parenthesis, that it is no good talking about tariffs when dealing with this sort of thing, because they do not touch the fringe of the problem. The currency manipulation is the cleverest method of all. It is based on the system of free marks and blocked marks. There are various different denominations of blocked marks—I believe 19 in all—the value of which is determined in accordance with the uses to which the German Government wish to put them. It all boils down to this, that marks owned by the Government are valued as high as possible, and marks owned by anybody else, and above all by emigrants, are valued as low as possible. Thus the German Government combines all the advantages of a highly valued currency for the purpose of purchasing goods abroad and for prestige at home, with all the advantages for the purposes of export of a depreciated currency, and in certain cases a currency which has been virtually repudiated. Blocked marks can be bought in a free market, but practically no one can use them except the German Government, and in practice they are bought by the Golddiscont Bank. The German Government subsequently re-issues them at the full nominal value, thus making enormous profits at the expense of all the holders of blocked marks, whoever they may be; and a good many are British subjects, and some of them are in the City of London. It is a very ingenious system.

The second main expedient is that of deliberate export subsidies. If I am a German exporter, and want to export to any particular country, and want to take advantage of Z.A.V. to under-sell my competitors, I send a copy of my order to that section of Z.A.V. which deals with the particular class of merchandise in which I am interested, and which is usually a board consisting of representatives of industry and of the Government. A rate of subsidy is then fixed by the board, in collaboration with the Government, with reference to the immediate trade conditions that apply in the case of that industry and that country, and the extent of the desire of the German Govern-men to secure supplies of the currency of the country in question. Take, for exan4le, the case of motor cars and Sweden. The German Government recently have had occasion to buy a substantial amount of iron ore from Sweden chiefly for rearmament purposes. In order to do this they have had to acquire Swedish currency. One of the ways in which they have done it is by heavily subsidising the export of cars to Sweden. The export figure has actually risen from 767 in 1934 to 7,545 in 1937, entirely by means of subsidy. They are doing it on a minor scale in connection with the Opel cars coming to this country at the present moment. The exporter deposits the foreign currency he receives with the Reichsbank, receiving free marks in exchange; and, in addition, subsequently receives from the Golddiscont Bank the amount of subsidy which may have been decided upon. The guiding principle of the whole thing is that no orders shall ever be lost on the ground of price alone, and that is what we are up against in this country. In a modest way this is what I find myself confronted with when I have to consider the problem of the herring industry in my own constituency. Our markets are European, and we have to compete with these formidable economic methods on the part of European Governments, and at the present moment it is almost impossible to do so.

It should be observed that the subsidies vary sharply as between different industries. So it is not merely a method of bringing their currency into line with the currencies of other countries. For instance, there is a 48 per cent. subsidy on leather goods, a 43 per cent. subsidy on cars, and still higher rates are paid for goods which have to meet keener competition. Lastly, the German Government enjoys the immense advantage derived from maintaining its exchange at a nominal rate of 12 marks to the pound sterling, and thus buying its imports from abroad very cheaply. The whole system is ultimately directed and dominated by the Reich Minister for Economic Affairs, Field-Marshal Goering; and when Field-Marshal Goering says that something has to be done, it is done very quickly by whoever he tells to do it. We are also up against the sheer efficiency of their administration which, with the best will in the world, I do not think my right hon. Friend will ever be able to emulate in this country without a most appalling row from those people whom he tries to order about. But, it is certainly worth while studying their methods.

With regard to the van Zeeland Report, it is a document of absorbing interest and great utility, but at the moment it does not go to the root of the problem. Take the stabilisation of currency. Nobody suggests that that can be achieved over a wide field at the present time. Take the question of credits. The right hon. Gentleman opposite pointed out that it is impossible to grant credits under existing conditions to certain countries, particularly the totalitarian States. We must have political appeasement on a very big scale before we can contemplate doing that. If the world is to derive real benefit from the van Zeeland Report, I agree with him that we shall have to begin to apply its recommendations over a limited field; and I think that it should be extended in the first instance to those countries which are to-day not threatening aggression, but which are threatened with becoming the victims of aggression through economic penetration by such methods as I have endeavoured to outline, on the part of Germany. From this point of view, however, the report contains some very valuable recommendations.

I should like to draw attention, in the first place, to the Most-Favoured-Nation Clause. I am convinced that the Most-Favoured-Nation Clause is obsolete under existing conditions, and that it will have to be either removed altogether or very substantially modified, because, as M. van Zeeland points out, it makes it almost impossible to conclude any group or regional economic agreements. The same thing applies in the political field, and here also the best way is to start off with regional pacts. In other words, to bite off what you can chew.

Mr. Stanley

The hon. Member is not suggesting that M. van Zeeland is opposed to the Most-Favoured-Nation Clause?

Mr. Boothby

I was pointing out that I think M. van Zeeland is too optimistic and too ambitious in his recommendations. What I was saying was, that I think the principles which he recommends should be applied in the first instance in a much more limited field, and that if we are to confine it to that field some modification of the Most-Favoured-Nation Clause will be inevitable. He does not recommend that, because he wants at once to bite off the whole thing and to cover the widest possible field, which I suggest is impracticable under existing conditions.

Sir Arthur Salter

M. van Zeeland does recommend a very substantial modification on page 34 of his report.

Mr. Boothby

I have not the reference by me, and I hesitate to contradict my hon. Friend.

Mr. Stanley

Perhaps I had better read the recommendation: The Clause should remain, in principle, general and unconditional. It provides for one exception: allowing its application to be suspended in the case of countries which employ inadmissible discrimination or which refuse to participate in a general effort aiming at the reduction of obstacles to international trade.

Sir A. Salter

The following paragraph says: Finally, it ought to be drawn in such a way as not to obstruct the conclusion of group agreements or regional pacts.

Mr. Boothby

In any case, it does not affect the general trend of my argument. I do not think that we can go as far as M. van Zeeland suggests. There is another suggestion, namely, the removal as far as possible of the existing embargoes on foreign lendings. There, I think, we ought to modify our present policy as far as we can. But in the existing political conditions in Europe it is absolutely essential that the Government should take the initiative, because the ordinary private trader is far too frightened to take the initiative, unaided, at the moment. The ordinary manufacturer and banker is simply not going to risk his money in Europe at the present time; and, unless he gets the support and assistance of the Government I do not see how he can be expected to do so. In these circumstances I suggest that the Anglo-Turkish Agreement is on the right lines, and that it might be followed by similar operations being carried out in respect of other States in Central and Eastern Europe. Lastly, the report recommends that assistance should be given to certain countries in order to assist them to liquidate some of their clearing arrears and start trading again on a profitable and sound basis. I do not think that anyone would dispute the value of that recommendation.

When it comes to the steps that we can take to meet the menace of the economic methods of the totalitarian States—and I think they are a menace—there are certain practical steps that can be taken. In the first place, we have to bear in mind that in the modern world the objective of trade policy is the profitable exchange of goods with other countries and not merely, as used to be the idea in the nineteenth century, the piling up of an enormous favourable balance of trade. We ought to abandon the idea of building up a favourable balance, but if we can get a balance of trade it would be of the utmost value. I imagine that this is what is holding up the negotiations with the United States of America. The balance of trade with the United States is so overwhelmingly against this country, that it is difficult to get a trade agreement.

If we want to revive our trade with Europe—and I submit that that is an essential, although perhaps not the dominant, factor in a sound British economy—we have to meet policy with policy, and we must remember that in competition with Germany the determining factor is no longer price. Can we save the countries of Central and Eastern Europe from becoming part of a Reich-mark empire? We have to try to do it, because if Germany gets an absolute economic stranglehold over these countries then, perhaps in a few years' time, it will have a complete political and military control over those countries, and will dominate the whole of Europe. Despite the formidable apparatus of the totalitarian States, and their absolute control over exports and imports I think we can certainly do something to mitigate the situation. But not by signing further commercial treaties. I do not think that commercial treaties have proved very satisfactory in practice, because they have tended to stabilise both tariffs and quotas, which is undesirable.

The absence of unified buying and selling in this country has hitherto been the main obstacle to the formulation of an effective and practical international trade policy. There are, however, two factors which tend to offset this to-day so far as we are concerned—first, the requirements of Defence, and the necessity for the purchase of munitions and raw materials by the Government; and, secondly, the growth of the technique of medium-term credits. By these two methods the Government can, for the first time, exercise considerable control over the type and flow of imports and exports. Commodities purchased by the Government, or by agents acting on behalf of the Government, could be regarded as collateral security for the due payment of credit bills. I suggest that in this respect Rumania and Poland both occupy key positions. There is a frozen clearing in Rumania, which could be cleared up by the extension of credits; while as far as Poland is concerned her sterling commitments are already so great that at the moment she is unable to make purchases of capital goods in this country, of which she stands in great need.

I do not think that anyone would want this country to make any attempt to check legitimate German economic expansion in Central and Eastern Europe. But we should certainly make a definite attempt to prevent German political and military domination of Europe by means of the economic penetration which I have described, through the use of highly un- orthodox methods with which it is difficult to compete. That that is taking place cannot be denied. To fight against the modern economic weapons, which are being so brilliantly used by Germany to-day, by the methods of laisser faire, which, I think, still dominate the thoughts of the British Treasury, is like fighting tanks with bows and arrows. You will not get anywhere.

We must face up to being a little bit unorthodox, and I think this Committee would not object to that. We must also have rapidity of action, for speed is one of the things we are up against. Decisions of the greatest magnitude can be taken in Germany within 24 hours. We must, therefore, evolve a system of administration which ensures not only flexibility but great speed; and I submit that what is required is not State trading but the deliberate encouragement by the Government of private initiative and enterprise in these clays of great difficulty, particularly political difficulty. Credits, which might well be secured by the purchase of commodities, amounting to not more than £20,000,000, would be sufficient to save Central and Eastern Europe from German domination, and would at the same time greatly expand the overseas trade of this country.

The Government have started on good lines. They have the Turkish Agreement to their credit, although they seemed almost apprehensive as to whether this House would approve of that Agreement. At any rate, certain organs of the Press which normally support the Government were apprehensive that the Agreement would be unpopular, because it was a deviation from the pure Empire policy and the economics of isolation. But all sides of the House have welcomed the Agreement, and I believe they would welcome other agreements on similar lines with other countries.

I have left out, because it is a different theme, although of fundamental importance, the question of co-operation between this country and the United States of America; but I should like to say to the right hon. Gentleman who spoke last that in my opinion it is even more important to get financial and monetary co-operation at the present time than to get a trade agreement, because at the moment the world is in the grip of a paralysing deflation. This deflation must be checked, otherwise we cannot hope to finance our rearmament programme, and the United States of America cannot hope to finance their public works programme. I should like to plead once again for the sending from this country to the United States of a powerful mission, headed by my right hon. Friend, to discuss with the Federal Government of the United States the ways and means of breaking the deflation which is not only paralysing economic activity all over the world, but is greatly weakening the democratic countries at a time when they ought to be strong.

4.59 P.m.

Sir A. Salter

It has been a great advantage to the Committee that on the second occasion that we have discussed this Vote we have concentrated upon the international aspect of our economic problems and largely upon their political aspects. Even with those limitations the subject is a very wide one. I wish I could follow the hon. Member for East Aberdeen (Mr. Boothby) into his discussion of the problem created by the economic and financial and currency devices of Germany, but I am afraid that I shall have to put that off to another time. It is a very intricate and extremely difficult question and one of great importance.

The whole of our economic policy is, of course, dominated at the present moment by the political situation. We and other countries have to consider what will be our position if war should break out, and measures which might be desirable and appropriate in other circumstances are impossible in regard to certain countries at a moment when we are engaged in an active arms competition with them. Of course, this dominance of the political factor may be given as a reason for waiting and really doing nothing about our economic policy. I suggest, on the contrary, that while the political situation creates special difficulties, it also certainly creates a special urgency for tackling the problem. I would suggest two principles to the Government. The first is that desirable reforms in our economic policy which are of general application, and which are appropriate alike to the present position and to more normal and stable conditions, should be undertaken at once, and should not be retarded because of the political situation. Secondly, taking the whole of the policy of economic appeasement such as the right hon. Member for Bow and Bromley (Mr. Lansbury) is so anxious to see adopted, but which for special reasons we cannot now put into force, I suggest that the Government should at once pre-part it in the greatest detail and work it out in full; and that they should then announce it as a policy they would accept as part of a general political settlement, of which one essential factor would be the putting an end to the armament competition. The fact that we cannot put it into operation now is not a reason for waiting. It is a reason for getting it ready for application as soon as the political situation allows it as part of a general policy of appeasement.

With that preface may I make one or two suggestions to the Government, and one or two comments on the speeches which have been made? In the first place, I sincerely hope that the difficulties which appear to have arisen in regard to the Anglo-American Trade Agreement will be overcome. The moment was bound to arise when difficulties would be experienced. When you start trade negotiations of this kind the statesmen on both sides in the first instance have in mind the political advantages which will result from such an agreement, and the whole matter is discussed in an environment in which those who are interested more in the general political advantages than in the specific economic consequences play their full part. Then the negotiations get into the hands of specialists, and the environment tends to be one in which those who are more interested in the immediate economic consequences than in the political advantages play the main part. I think we have reached that position, and I appeal to the President of the Board of Trade to see that at this moment the full advantages from the political point of view are taken into full account, and have their effect in the negotiations.

I am not in any way suggesting that the difficulties are arising particularly on our side; I have no idea where precisely these difficulties are emerging chiefly at the moment. I would like, however, to suggest with reference to what the hon. Member for East Aberdeen has said, that the argument as to the adverse trade balance between this country and the United States is rather misleading. It is quite true that if you take the visible trade between the United States and this Island there is a serious adverse visible trade balance, but that balance is considerably diminished if you take into account the invisible trade between the two countries; and if you take into account, as we really should, the balance of trade between the United States and the Empire as a whole, the adverse trade balance disappears.

Mr. Stanley

Can the hon. Member say whether that is true of the first four months of this year?

Sir A. Salter

There has been a slight change in the first four months of this year, but I have not the precise figures at the moment. If, however, you take anything but a short period and also take into account the exports of gold from South Africa you will find that the trade balance position as a whole is not such as to cause us any hesitation on that ground alone.

Mr. Boothby

But is it not to some extent due to the action of the United States in forcing down world commodity prices that the adverse balance of trade arises?

Mr. Loftus

In his Empire figures, does the hon. Member include the exports from the United States to Canada?

Sir A. Salter

Yes. I am not quite sure whether the hon. Member for Lowestoft (Mr. Loftus) has in mind any particular classes of exports. But apart from the changes in the last few months, I think it is generally true—and it came out in the long discussions I had with the right hon. Member for Sparkbrook (Mr. Amery) on this subject—that if you take the Empire as a whole and do not look only at the experience of one or two months we have no reason to be dissatisfied with the character of the trade balance between the Empire and the United States.

Sir Alan Anderson

The hon. Member has mentioned the export of gold from South Africa as if it were goods imported into the United States. Surely it is one of the great difficulties that whoever has to pay, the United States has to pay in gold. As far as I remember, the United States has in each of several recent years imported well over the world production in gold. An enormous mass of gold has been concentrated there, which shows that the United States is not buying enough goods from us.

Sir A. Salter

I should like to follow the hon. Member into the gold problem, but I cannot do so at the moment. I would only remark that from the point of view of those who are producing and earning money in South Africa, gold, whatever it may be from our point of view or from the United States point of view, is an exported commodity, not perhaps in every aspect, but certainly in some important aspects. Broadly speaking, I say that the great economic and political advantages which would accrue from the conclusion of the Anglo-American Trade Agreement, if it is of a really substantial character—and not a mere token agreement—are such that no argument based on a momentary and partial adverse balance of trade is sufficiently serious to prevent us from making every possible effort to bring these long-drawn-out negotiations to a successful conclusion. We have often discussed this question before and there has been general agreement as to the enormous effect which a successful and dramatic conclusion to these negotiations would have on the whole world. I will say no more on that particular problem.

I would like to make one or two other suggestions to the Government. I hope that if this country finds itself in a period of declining trade, as the United States are already to a very serious extent, we shall not restart the policy of beggar-my-neighbour through a competitive increase in tariffs. In saying that I am not making any criticism on the policy which was adopted by this country in 1931–32, though I am not saying that I agree with that policy. I would suggest that the experience since the last crisis has shown that while some countries get certain advantages from new and increased tariffs, there are also very serious ill-effects from the same process. While we were able the first time to get certain advantages from the imposition of new tariffs as well as certain disadvantages, we must expect that if we attempt the same process again we shall have the disadvantages but shall not enjoy the same advantages. When a country which has been Free Trade adjusts its policy to the rest of the world, it starts with an initial advantage greater than any other country, but it cannot repeat that process to the same extent. If there should be another trade depression I hope we shall not start the disastrous game again of beggar-my-neighbour in which every country wins in the sense that it beggars its neighbours and every country loses in the sense that as a neighbour of others it is beggared.

I want now to discuss the economic policy of this country as it is related to the general world problems and to make one or two comments on Imperial Preference. I have very little to say on the Imperial Preference of Ottawa so far as it concerns the self-governing Dominions and ourselves. As regards that part of Ottawa, I would only say that I think the fact that self-governing countries like Canada, Australia and ourselves, have negotiated tariffs which are preferential as between ourselves and other countries very strongly reinforces the argument, which is sound on other grounds as well, that a modification is due, and indeed overdue, in the conditions under which we apply the Most-Favoured-Nation clause. I agree with the hon. Member for East Aberdeen on that point, and we have a great deal of support also from M. van Zeeland's Report. Let me read a quotation from that report: Finally, it ought to be drawn in such a way as not to obstruct the conclusion of group agreements or regional pacts so long as these do not tend to constitute a discriminatory regime, but to lower tariff barriers and so long as they are open to the accession of all those who are willing to accept the combined obligations and advantages. That is approximately in accordance with resolutions which were passed by a rather remarkable conference at Montevideo in December, 1933, at which a number of countries which had the most-favoured-nation clause in their commercial agreement passed a resolution in favour of undertaking not to invoke the obligations of the most-favoured-nation clause for the purpose of obtaining advantages enjoyed by the parties to multilateral economic conventions of general applicability, which include a trade area of substantial size, have as their objective the liberalisation and promotion of international trade or other international economic intercourse, and are open to adoption by all countries. That is the kind of modification I should like to see made. I will not elaborate the point. I will merely repeat that I think the fact that we have Imperial Preference arrangements between ourselves and the self-governing Dominions makes it really quite untenable that we should effectually bar such countries as Holland and Belgium from attempting to make preferential agreements between themselves when they do so, not by way of increasing tariffs against others, but by means of reducing tariffs inter se, with a free and open invitation to other countries to come in under similar conditions. This is a rather tiresome and technical subject, and I will not weary the Committee with it further, especially as it has often been discussed before; but I would like to say that I very strongly support what the hon. Member for East Aberdeen said on this point.

I will turn now to what is really the quite different question of Imperial Preference as applied to the Colonies in the most limited sense, namely, those parts of the British Commonwealth of Nations on which we from Whitehall impose economic policy. I venture to suggest that the advantages, if any, which we get by imposing Imperial Preference on those Colonies are infinitesimal in comparison with the political dangers which that quite new policy involves. I would remind the Committee of the very remarkable statement made by the Prime Minister's father, when he was Colonial Secretary, in which he gave it as one of the principal justifications of the British Empire that, wherever it was responsible for the economic policy of its dependent Empire, it adopted a policy which gave a free and equal chance to all countries in the world in those Colonies.

I do not know whether the Committee realises how small, for good or ill, is the economic effect of the preference which we impose in these cases. The Committee may have read two very remarkable articles by Sir George Schuster which appeared in the "Times" a week or two ago. He there pointed out that this problem does not, of course, concern the Dominions, it does not really concern India, on whom we do not now impose an economic policy, it does not affect the very considerable area either of the Mandated Territories or of our own British Colonies to which the Congo Basin Treaties relate; it applies only to the remaining Dependencies, and therefore the economic effect is very limited indeed. First of all, those Dependencies account for only about 10 per cent. of British exports altogether. Secondly, if one looks at the difference immediately before the Ottawa Agreements and afterwards, one finds that the percentage of imports of those Dependencies from this country in relation to the world as a whole varies only from 27 per cent. to 29.9 per cent. —3 per cent. or one-thirtieth. If one looks at the result, although, of course, other factors are in operation, it suggests that the effect of Imperial Preference has been only of the order of magnitude of about £1,250,000 as the gross increase in British exports to those other Dependencies. Of course, that is not profit on the trade, and the gross figure does not allow for the adverse repercussions in other respects. The effect of Imperial Preference in this case is really almost negligible in character.

Brigadier-General Sir Henry Croft

How could we have beggared our neighbours, in view of the fact that, in spite of the Preference, we have imported more into the British Colonial Empire from foreign countries than before the Ottawa Agreements?

Sir A. Salter

I did not suggest for a moment that this policy was beggaring our neighbours. When I used that term, I was dealing with a quite different matter.

Mr. Stanley

When the hon. Member talks about preferences, I am not sure -whether he refers to tariffs or preferential treatment of any kind. Does he include, for instance, the arrangements we have in regard to quotas for textile goods?

Sir A. Salter

I was taking the actual difference in the trade figures immediately before the Ottawa Agreements and immediately afterwards as applied to these Dependencies, so that in that would be included the effect of quotas as well as tariffs. In his first article, Sir George Schuster gave the total figure as going up 'from 27 per cent., being the average for the years 1930 to 1932, to 29.9 per cent. for 1936. Sir George Schuster used those fignures to suggest that there was nothing in our policy which should justify the envy and resentment of the external world. I agree, if envy and resentment were capable of being measured by statistical facts of this kind. Statistical facts of this kind are, however, a very good measure of economic consequences, but a very poor measure indeed of the resentment which may be felt.

I would suggest the general proposition that if there is a dispute as to the justness or legality of the possession of a particular article or the adoption of a particular policy, it is a very poor argument for the country or person against whom that complaint is made to say, "Really, for good or ill, it is worth hardly anything." If I have an article of doubtful title, which I insist is worth only a sovereign and which you think is worth £10, it is a very poor argument from me to you to say that is is worth so little that it is really not worth while for you to get it back. On the contrary, the fact that you think it worth more than I do is in itself a good reason for me to yield it to you. The real fact is that this political principle, although having an extraordinarily small economic effect, is the basis of a very great deal of political resentment. I seriously suggest that the Government should consider whether, having regard to the extent to which our Empire has become more vulnerable at the same period in which it is now encountering this further complaint and criticism, from which it was exempt during the nineteenth century, it would not really be worth while for us to attempt to retrace our steps. Let us beware lest in the long perspective of history we shall not be found to have endangered an almost illimitable birthright for an almost infinitesimal mess of pottage.

I have only one or two further remarks to make. One is that I very strongly agree with the hon. Member for East Aberdeen as to the great advantage we should get by attempting to increase our trade and economic relations with the countries of Central Europe. The hon. Member suggested credits, and mentioned the instance of Turkey. I would go further along that line. Apart from that, I think that we could do something by deliberately arranging that some part of the goods which we need, and which must in any case be obtained, should be obtained from that part of the world. I will give one example of what might be extended a good deal more widely. It is proposed to buy oil under the Essential Commodities Bill. Already, apart from that Bill, the Service Departments are buying and storing oil. Why could we not deliberately arrange to buy. a substantial part of that oil from Rumania?

I do not wish to delay the Committee any further, and I will finish by saying that I do not think I over rate the extent to which economic causes underlie the dangers of war. In 1913–14 the economic factors were relatively small by comparison with the political factors which ultimately resulted in war at that time. At that time, there was, in effect, a world currency, there was a world either of low tariffs or stable tariffs, a world almost exempt from the major causes of economic and financial conflict at this moment. Nevertheless, war came. I do not think that, whatever we may do, we shall be able to make the world as exempt from causes of friction of that kind as the world of 1913 was. Nevertheless, there is certainly no way of salvation in the mere competition of power in which we are now engaged, nor shall we find, even in political concessions and ways of appeasement, a sufficient solution unless we can combine with them economic appeasement as well. I suggest that we should have our plan worked out, broadly conceived, prepared fully in detail, and in due time proclaim it as a plan of appeasement in which we are willing to collaborate as part of a general political settlement, as soon as political conditions may be ripe for that purpose. And now is the time to start working, and working hard, upon such a broad policy of economic appeasement, although it is now too early, unhappily, to put the greater part of that policy into effect.

5.26 p.m.

Sir A. Anderson

In a debate of this kind on commerce and our relations with the world, there is such an abundance of topics that it is hard to restrict oneself to the narrow compass one wants. I shall confine myself to considering the report of M. van Zeeland, and in particular whether we should urge the Government to press on with M. van Zeeland's recommendations or blame it in any way for not having pressed on with them. Turning to that report, it appears to me that we must all agree with M. van Zeeland. What he has told the world is our story, and what we have been telling the world. M. van Zeeland assumes what we have assumed. In the first place, he asks a question which everyone has to settle— Is it a useful thing to develop international trade? and on page 2, he answers that question— We must assume that these views are, in the long run, shared practically unanimously by all statesmen of the present day. He proceeds to give a more complete answer on page 44, where he says that it is futile to make arbitrary distinctions based on views or arguments of an over-simplified nature, in the light of which attempts are made to divide the nations into distinct groups. In fact, we do not find on one side States devoted to a policy of complete autarky, and, on the other, States faithful to a strict observance of international free trade. He then says that he is debarred from touching on the political aspects, but being a wise man, he is not very strictly debarred from that, and he notices that political aspects must impinge upon the economic necessities. Then, no doubt having the political aspect in mind, he turns to the question which we are discussing to-day—whether, seeing the obstacles that are piling up, it is preferable to give up any major attempt, and to wait for a more serene atmosphere. Taking it all in all, it seems to him that that attitude would be sterile, and even dangerous. He says: The moment is perhaps favourable, in spite of appearances, for a new attempt based on reason and common interest. What new attempt? We have heard some discussion this afternoon about whether we ought to press forward for an agreement with the United States of America. In my view that would be far the biggest thing that we could get and would tend to appease the whole world. I share the views of hon. Members who have said that it is very difficult to reach such an agreement and that we must not be too urgent about it; we must not only make a good bargain for ourselves but we have to remember that there are 130,000,000 people on the other side of the Atlantic whom we must convince of the advantage of such an agreement to them. An agreement between us and the United States would be worth so much to us and to the United States and to the world that it would outweigh any petty losses which a small section here or there might suffer.

Adverting to our Debate the other day on Air-raid Precautions it appears to me that the best precaution against air raids is to make friends and that the best way of making friends is to start with the United States—with 130,000,000 of the best buyers in the world. If we could get them to buy freely from the world and by their purchases to set the exchanges moving, the debtor nations would be able to relieve some of their existing obstacles to trade and would be able to allow their people to live more happily. We heard one or two remarks about the balance of trade. Far be it from me to enter into an economic argument with my hon. Friend the Member for Oxford University (Sir A. Salter), but I believe that one of the great difficulties in the world to-day is to convince a great nation which is very protectionist that what is known as a debit balance of exchange is a proper and indeed an essential corollary to its creditor position. The United States have never fully grasped that fact. They have in some quarters established an adverse balance of trade with the world by bringing into account as merchandise the gold in which the world pays. Incidentally, the Committee will remember that we were knocked off the Gold Standard because the gold was being drawn away in other directions. The United States also helped to establish an adverse balance by enormous investments from Europe. In the ordinary circumstances of trade I submit that one of the great difficulties which we have to solve and which the United States have to solve, is how a creditor nation can take payment from the world for its goods and services so that other countries may sell their goods to the world and so that the exchanges shall be kept moving. If we can contribute to the solution of that problem we shall have done a great service for the peace and security of the whole world.

Sir A. Salter

The hon. Member said that in a few recent quarters the United States had established an adverse balance of trade by counting in their gold imports, but is it not the case that apart from the gold imports there was during that period a real adverse balance of trade between the United States and the rest of the world?

Sir A. Anderson

I have not the figures here but I should not have thought so. I know that the balance did move rapidly in that direction. I agree that there were other causes besides gold. There was a crop failure in the United States and the price of imports rose. I agree that the United States are moving in a direction which seems inevitable, and I am merely pleading the extreme urgency of helping them to move forward on that salutary line. We have heard arguments to the effect that whatever we do about commerce and trade, we cannot secure peace, or we cannot avert war. I agree that we cannot achieve zoo per cent. safety in this life, but we can move in a right or in a wrong direction and the right direction for us at the moment is to assist all the peoples of the world to buy and to consume. The only difference which I have with my hon. Friends opposite, who advocate exactly the same aim, is that they seem to think that that aim would be achieved more quickly if we kicked out the present Government and put in another Government.

I do not agree with that view. I believe our present Government have moved forward more rapidly in that direction than any other Government could have done, and therefore I support them. But as to the aim, I have no doubt at all. I submit that that is also M. van Zeeland's aim, and his method, as he says on page 49 of his report, is to bring together representatives of the principal economic Powers. An hon. Member has said, "Do not let us go to the great Powers named by M. van Zeeland; let us go to the Powers whose markets are likely to be penetrated by this artificial trade of Germany." That is not the point which M. van Zeeland is making. It may be a good point but it is a different one. His point is that the initiative for progress in the world rests with a comparatively few Powers. The great creditor nations represent world economic force; we are leaders among them and it is our business and our function and our duty to get them together as soon as we can. But we must bear in mind that M. van Zeeland himself recognises that political considerations have to be taken into account. I have not consulted him on this point, but if he were here I doubt very much whether he would urge the Government to move forward more rapidly in any direction except perhaps that of getting on with the United States, and that they are doing at the moment.

5.38 p.m.

Mr. Richards

The question of the balance of trade is of fundamental importance to this country. Everyone recognises that the greatness of this country has been built up almost entirely upon international trade. We exploited to the full such natural resources as we had during the nineteenth century, with the result that we became at one period the richest nation in the world, and to-day, as the last speaker has pointed out, we are one of the leaders in the financial control of the world. The question which we have to face to-day is this: Is international trade going to be as important in the future as it has been in the past? I do not think there can be any two opinions about this proposition, that we shall not continue to enjoy that leadership which we enjoyed in the nineteenth century. There are one or two reasons for that conclusion. First, we had certain advantages in the nineteenth century which we could not hope to retain for all time. We were first in the field with industrial machine production. Other nations have copied us and in a number of cases are now excelling us in industrial production by machinery.

When a comparatively backward country starts upon its industrial career it generally comes to this country or to some of the other Western countries and buys the very latest machinery. The result is that if we consider certain industries, say, in Japan and China to-day, we find that they are better equipped, on the average, than the industries in this country because of the fact that they have bought from us the latest machinery to equip those industries. They start therefore with certain comparative advantages, and we find to-day that they are formidable competitors. That is a factor of fundamental importance and it is a factor which has come to stay. The difference between us and other nations in the industrial field is likely to become less and less, and, as I have indicated, nations which were considered backward in the nineteenth century are taking a lead in some of these matters.

Another interesting development of recent years has been the remarkable progress in agricultural production in other countries besides our own. It was generally argued during the nineteenth century that industrially we would continue to lead for some time and that the countries which were producing agricultural commodities and raw materials for' us would find it increasingly difficult to continue to pro- duce as they were producing at that time. We were constantly referred to our old friend the low of diminishing returns, and to the fact that America was finding it difficult to increase the fertility of the soil and increase agricultural productivity. That is no longer the case. Agricultural science has made great advances, particularly in America and in countries where prairie farming, to use a convenient term, is practised on a large scale. We are faced at present with a tremendous increase in agricultural production in those countries. We find agricultural products of all kinds, particularly wheat, from those countries flooding the markets of the world and making it uneconomic for us to compete with them. It is difficult to assess the relative strengths of these two forces, namely, the progress made by backward countries in industrialisation and the equally remarkable progress made by agricultural countries in production.

I think this Committee is well versed in the facts of our economic situation. In the nineteenth century, as I say, our supremacy was based on the exploitation of such natural resources as we had, and they were not many. The outstanding one was coal, and we have to admit, I fear, that it has been used up in a very extravagant fashion. It was from the beginning a wasting asset, and we got rid of this valuable commodity in a thoroughly wasteful fashion. Now we find, as has been made clear to us by successive Debates on the plight of the coal industry, that we are no longer in the position of supremacy which we occupied during the nineteenth century with regard to coal, and I doubt whether we shall ever again be in that position. We have in electricity a formidable competitor as a source of power, to what was, at one time, largely a monopoly of this country. Not only have we exploited this important part of our natural resources to the full extent during the past century. We have also exploited the natural abilities of our people. We were predominant in the cotton industry. That industry is rather an anomaly, as far this country is concerned. There seems to be no reason why the cotton industry should have established itself as it did in Lancashire. I know that there are certain advantages, such as coal and climate, but the existence of the cotton industry really depends on the particular ability of the people of Lancashire. As I have pointed out already, we are beginning to feel that other countries, backward countries, like Indian and China, can produce at any rate inferior kinds and are formidable competitors of Lancashire.

Another element in our industrial and commercial supremacy during the nineteenth century was the coal and iron industry, and there again we had very considerable advantages to start with, because we happened to have iron mines alongside the coal, but everybody knows that that is ancient history by this time, and we are very largely dependent upon foreign supplies of the raw material in this case. It is a fact that even before the War we were left far behind by certain countries, by the United States and by Germany, in the matter of iron and steel production, and despite the recent fillip in the production of iron and steel in this country as a result of re-armament, the relative position of this country as compared with those countries has certainly not improved since the end of the War.

This afternoon we heard reference to another element in which we were predominant over a period, and that was the element of shipping. It was pointed out by the hon. Member for East Birkenhead (Mr. White) that we do not hold the position in that field that we formerly held, I would like to point out, however, one remarkable fact with regard to international trade. We sometimes argue as if international trade were on the decline, speaking generally, but the fact is that international trade has very considerably increased since the end of the War. I believe it has increased by about 25 per cent., so that there is a very considerable opportunity still for this country to recover some of the ground that it has lost in the matter of the shipping industry.

There is one other element to which I would like to call attention. Our foreign trade depended upon our exporting all of the commodities to which I have already referred, but there was one other element which I do not think is as important now as it was during the nineteenth century, and that was the very considerable exportation of capital. After all, our foreign trade was built up very largely by the exportation of capital to new countries that were developing their own resources and that looked to this country to finance them. In return for that finance, we obtained, in the way of interest, the raw materials that we required in order to produce the commodities which we wanted to re-export. Some very striking articles have appeared in the "Economic Journal" lately by Sir Robert Kindersley, pointing out that foreign investments, in common with most others, are very seriously on the decline in this country, and that is a very important matter indeed for us, because, as I pointed out, hitherto the capital was exported; it was not brought home for a great number of years, and we were content merely to bring home the interest in the form of raw materials, and the decline of that element is, I think, one of the most serious of the whole of them.

There is the other question to which reference has frequently been made this afternoon, that we are living in an entirely different world, in a world, that is to say, where economic nationalism, for the time being at any rate, is dominant. It is obvious that we cannot compete with these other countries in that field. I do not suppose that anyone here believes that Great Britain, for example, can be made self-sufficing, and consequently we cannot find ourselves in real competition with Germany, which has an ambition of that character, I believe. The point that I would like the Committee to realise is that our concern is not so much with economic nationalism as with a revival of international trade. We are a small country and a very populous country. In the past we have exploited the resources of our country, and particularly of our people, and that is why we have been able to establish such a standard of living as we have been able to establish in this country; and unless we can to some extent restore the fundamental elements of the position, so as to make international trade possible again, it will really be a very dark prospect that is facing this country in the immediate future.

5.55 p.m.

Sir H. Croft

I am constrained to intervene after listening to one or two of the speeches that we have heard. The hon. Member for East Birkenhead (Mr. White), when he mentioned the position of our Mercantile Marine, certainly had my sympathy and, I expect, that of many other hon. Members of this Committee. I am not at all certain that, as part of our general defence, we have not got to consider taking measures to assist the Mercantile Marine which we might never have considered perhaps 10 years ago, and I hope that subject may be developed later this evening. The Debate opened on the question of the van Zeeland Report, and when that most eminent Free Trader was asked to explore the world in order to try to find some method of economic appeasement, he went out with the good will, I am sure, of everyone in this country, but on reading his report I agree with my hon. Friend the Member for the City of London (Sir A. Anderson) that one cannot find any indication that he would wish or suggest that His Majesty's Government should press these views upon the world at the present moment. I should have thought perhaps it was the most unhappy moment possible at which to enter into a discussion, or in any event to try and force that issue upon those countries which the hon. Member for Wrexham (Mr. Richards), in his interesting speech, has pointed out are definitely committed to this policy of economic nationalism.

I am sure that the van Zeeland Report gives no justification for the idea, which comes from the benches behind me, that because we would like to see a freer interchange of commodities in the world, therefore we in this country should go right back on our policy of preferences for the Empire. Apparently the hon. Member for Oxford University (Sir A. Salter) was prepared to allow a preference with limitations, to go on between the self-governing Dominions and ourselves. That was not a criminal action entirely, but he seemed to think that it was utterly wicked that we should give some small preferential advantages to our own workers in the Crown Colonies, or such few of them as are within the preferential system, and he suggested that we should immediately go back on that policy. I think that view was shared by the hon. Member for East Birkenhead. The hon. Member for Oxford University, in his most interesting speech, pointed out that it was really a very small matter, and that is true, because it only affects probably between a third and a quarter of the whole of the system of countries which come within the British sphere of influence. The whole of the countries which come under the operation of the Treaty of St. Germain are eliminated—a very large part of Africa, that is—and the Mandated Territories are eliminated. The consequence is that there are only very few territories, as he rightly said, which benefit by the preference. But he pointed out, I think, that the figure only went up by a very small percentage; that is, the increase in trade with those Colonies. I think that it is probably 6 or 7 per cent. since the policy was started, but if we could get an increase of 6 or 7 per cent, in all the markets of the world in a similar period of time, would that not be a step in the right direction of promoting trade?

I want to point out that this country has committed no sin, even against the old economists, in that we have endeavoured to establish sane fiscal arrangements between ourselves and those countries which are within our sphere of influence. We have in fact endeavoured to establish, and have succeeded to a certain extent in establishing, a freer field of trade in practically one quarter of the world. I quite agree that if the Scandinavian countries wished to do the same, we should endeavour not to prevent them by any too rigid adherence to the Most-Favoured-Nation Clause. I think we should consider whether we could ever have any real agreement which would be beneficial to this country, or to the United States, or to any other country, until we were prepared to abandon that rigid system, because it does deprive us of giving advantages to any country which we do not have to give to every other country in the world at the same time.

Sir A. Salter

What does the hon. and gallant Member mean by saying that we have, in a quarter of the world, established freer trade? Does he mean freer trade than before, or only that there is now freer trade in that quarter than with the rest of the world because we have put up new impediments against the rest of the world?

Sir H. Croft

We were driven—and I understood the hon. Member does not really complain of it—to defend ourselves against the rest of the world, but we have in fact, under our policy, continued absolute Free Trade with the whole of the rest of the British Empire; and the whole tendency of the Ottawa Agreement has been for the Dominions to reduce their tariffs against us. If that Freer Trade can go on in one quarter of the world, and if it is successful, should we immediately abandon our friends and tell Jamaica that we are going to take away the preference on sugar, cocoa, bananas, and whatever other products there may be in that country, and should we tell the other countries, which have had terrible difficulties in getting through this time of economic depression, that we were going to stop giving the small quota advantage that we are giving, which gives Lancashire the opportunity of getting her cotton goods into some parts of the Empire—that is really a policy which this country could not tolerate, and I am sure my right hon. Friend will realise that, although we have been listening with great interest to the professorial utterances from the benches behind me, members of the Conservative party could not tolerate such a betrayal of our whole election policy with regard to preferential trade within the Empire.

Sir A. Salter

The hon. and gallant Gentleman asked whether I would take away the preferences which we give to imports from the Colonies to this country But that was not what I was discussing. I was criticising the economic policy under which not United Kingdom but Colonial tariffs are imposed by our decision, tariffs which give a preference to exports from this country as compared with exports from other countries to those Colonies.

Sir H. Croft

I cannot consider that it would be regarded as tolerable that we should deny one half of the preferential scheme, continue it as to one party and deny it to the other. It must surely be reciprocal if it is to be carried on at all, and as far as reciprocity is concerned, undoubtedly it has been of immense advantage to those territories within the British Empire which are the producers of those primary products for which they can find a market in this country alone.

5.59 P.m.

Sir P. Harris

I think the whole Committee will agree that we have had a very interesting Debate, and I think there is a general feeling, from whatever angle the discussion has been approached, that the economic position of the world is so serious that mere partisan approaches on the lines of our old controversies do not meet the situation. We are now faced with world problems which I think the right hon. Gentleman the President of the Board of Trade would not think I exaggerated if I described as presaging a very near approach to a possible future catastrophe in a very short period of years if a better spirit is not forthcoming in the world. The hon. and gallant Member for Bournemouth (Sir H. Croft) was stirred to eloquence because of an attack on the principle of Imperial Preference, but my hon. Friend behind me did not venture—and I shall not—on the larger problem of the relations between ourselves and the Dominions. The Dominions approach this question as free self-governing democracies. They gave us a preference of their own free will many years before we attempted to reciprocate the principle, and at this stage of our discussions I certainly will not tackle that very thorny question, although I still have my views.

The other issue raised by my hon. Friend is on a different plane. Whatever economic advantage may accrue to us and to our Crown Colonies is, I suggest, largely discounted by the political irritation that that causes at the present time. I had the honour to attend the Conference of Inter-Parliamentary Unions last summer, and on every side, from almost every country, there was the underlying feeling that certain countries had a great economic pull over other countries because of the fact that they had these undeveloped countries to exploit. They had the suspicion that this country had some economic pull over them for that reason. It was no use for us to argue, as we could with some reason, that Continental countries could buy raw materials in the great South African countries on the same terms as we could. The fact remains that they were under the British flag and that there was this preference, and that caused great suspicion and unrest. A gesture at this time, even at the sacrifice of principle, on that one narrow issue of the Crown Colonies, would do much to remove the real cause of economic suspicion.

The world is faced with the serious danger of something like a breakdown. It has been postponed because the great countries of the world have embarked on a policy of extensive borrowing. The United States for five years were borrowing at the rate of £800,000,000 a year.. They were priming the pump. That reacted all over the world, and the artificial prosperity and the planning policy of President Roosevelt brought about its repercussions in a stimulus to trade. The cumulating effect was not merely the expenditure on public works, but a stimulus to trade throughout the United States, and the increased purchasing powers of the people brought them more and more into the world markets. understand that another attempt to bring about artificial prosperity in the States is to be made and that there is to be in the next 12 months an expenditure of £1,000,000,000. The same kind of thing is going on in France. In the last few years they have been borrowing at the rate of £300,000,000 per annum, largely to create employment. On top there has been an extensive rearmament programme, which is to be increased in the next two or three years.

A question which we have to ask ourselves and which the French people are asking themselves is, what is to happen when the source of borrowing dries up? We see the same problem at work in Germany. Although the financial policy of Germany is shrouded in mystery and we do not get the same publicity for it that we get in democratic countries, I am informed that she is borrowing very much on the same scale as France, largely to create employment artificially. The hon. Member for East Aberdeen (Mr. Boothby) marvelled at the economic prosperity and the decrease in unemployment in Germany, but I think it is largely to be explained by the artificial stimulus of borrowing not merely for rearmament, but for great schemes of road making and national improvement and development. The question we have to face is, what will happen when the nations exhaust their borrowing power? Whether it be in Germany, in Italy or in any other country, when nations exhaust their borrowing power and the power artificially to create prosperity, there is the danger of their resorting to covering up their economic failures by war, rumours of war, or attempts at the freedom and independence of other States. The hon. Member for East Aberdeen told us that the currency policy of Germany was a great success. Before 1931 this country was buying from Germany something like £60,000,000 of goods. Last year it was reduced to £36,000,000. If it is written down to our real currency in relation to German money, it has been reduced to something like £22,000,000,

One of the controversies at the present moment is whether Germany will keep her engagement for the debts of Austria, which she has absorbed. It is a vital problem. Will she fail to implement the liabilities of Austria as guaranteed by half-a-dozen great Powers? Is the Chancellor of the Exchequer or the Foreign Secretary or the President of the Board of Trade or Sir Frederick Leith-Ross using his diplomatic skill and ability to persuade Germany that it would be a world disaster if she defaulted on her liabilities? Germany has her case. She can pay only by creating credits. The right hon. Gentleman seems to doubt that. I hope he will explain how Germany is to do it otherwise. Everywhere in the world she sees markets closed to her by preferences, quotas, tariffs and all sorts of ingenious methods. There has been a controversy about the great influx of German cars. I have a real prejudice against anything German. I hate everything that Germany stands for. I hate her system of government, her Nazi philosophy, and her whole policy, especially the policy that seems as if it will inevitably plunge Europe into war. We have, however, to be realists.

If Germany is to meet her liabilities, whether the liability for Austria or her own liabilities, she can in the long run do it only by trade. This importation of cars has no doubt been selected for her own purpose. It may be, as the hon. Member for East Aberdeen said, in order to create credit, not to pay her liabilities, but to purchase raw materials for munitions. The fact remains that she cannot meet her liabilities except by trade. The case of these motor cars is significant because it shows that tariffs alone will not provide a sound basis for any industry.

Sir A. Salter

Would not the hon. Baronet agree to separate his general case from the particular question of Austria's default, because in regard to Austria there is the short answer that Germany might get the money from precisely the same source as that from which Austria got it and met her obligations?

Sir P. Harris

I think my hon. Friend is right. I was perhaps on rather dangerous ground. There was gold stand- ing in the Bank of Austria which Germany diverted for her own purposes, and she should have earmarked it to meet her liabilities. The fact remains that her excuse is the difficulty of creating credits in the ordinary way in order to meet her liabilities.

To go back to my fundamental point, if we are to get good will in the world and a different spirit, we have to restore the channels of trade, to get nations trading with each other freely, and to carry out the policy which is embodied in the van Zeeland Report. I would put to the President of the Board of Trade the significant fact that this report was made at the request of the Governments of Great Britain and France. In the ordinary way the usual excuse is, "Why should Great Britain give a lead?" Great Britain in this particular case has a special obligation. This distinguished ex-Prime Minister, economist and banker spent something like six months of his valuable time running round various countries calling at foreign offices, interviewing prime ministers and trying to find out the causes of the economic breakdown. After his long and laboured efforts came a carefully considered report, and every time we ask a question about it we have the usual stereotyped reply that the Government are considering the matter. Has not the time come, especially as we are approaching the Adjournment, for the Government to outline their policy, not only in reference to tariffs and quotas and all the various barriers to trade that are so severely criticised in the report, but also to the serious questions of currency, exchange and other barriers to the free movement of goods?

This is probably the last time we shall have a discussion on the Board of Trade and no doubt the right hon. Gentleman would be glad to see the last of his Vote. We do not think he is overpaid for his great responsibilities in his big and important job, but in order to stop us moving a reduction cannot he to-day—not next week, some time or never, but to-day—tell the Committee what his policy on the van Zeeland Report is? Has he got a policy? Has it been discussed in the Cabinet? What are the Government waiting for? Are they waiting for France? Have the French Government made up their minds? We have a right to know why the Government cannot make up their minds on their attitude to this report. If they are opposed to the recommendations, let them say so. If they have no policy, let them say so, but we have a right to demand, on this second occasion of discussing the Board of Trade Vote, a clear statement of the Government's attitude to the report.

The same remark applies to the United States discussions. Mr. Cordell Hull over a year ago appealed to the world to break down tariff barriers. He made clear that he is convinced that there will never be a revival of prosperity in the world until there is some change in the attitude towards trade and the great countries on the Continent of Europe. One of the most significant remarks of M. van Zeeland in his report is on that very subject. He blesses the negotiations for an Anglo-American agreement as beneficial for the two countries concerned, but especially indirectly in its repercussions on the whole world.

I am glad there has been some reference to the Most-Favoured-Nation Clause. My attitude, and I think that of my party, has never been narrow on this subject. Before the War, in a period of comparatively low tariffs, and with Free Trade in Great Britain, I think we were justified in being meticulous about the strict interpretation of the Most-Favoured-Nation Clause, but, as M. van Zeeland points out, more respect should be paid to the spirit which originally inspired it, and it should not be applied as a supplementary element of rigidity in the maintenance and increase of trade barriers. He says that it must not be used to obstruct the conclusion of group agreements, so long as they are open to all who are willing to accept the combined obligations and advantages of the Most-Favoured-Nation Clause. My friends and I did find fault with the attitude of our Government to the attempt of Belgium and Holland to come to a trade agreement. It was rather a mean thing to use this Most-Favoured-Nation Clause to break down that attempt in the direction of freer trade. Our attitude is that when the Most-Favoured-Nation Clause is the barrier to freer trade it should not be taken advantage of to stop the lowering of tariffs, and if the right hon. Gentleman can, by a more liberal interpretation of that Clause, get a lowering of tariffs on the Continent, it will be an advantage to world trade, and my friends and I will be very willing to co-operate with him in every way.

Another matter to which I wish to refer, which has already been dealt with by several speakers, is the position of our shipping industry, which has become of urgent importance. It is symbolic of the general contraction of world trade that our shipowners are feeling the difficulty of maintaining the supremacy of our mercantile marine. It is common knowledge that since the War the percentage of tonnage owned by Great Britain has receded. As was pointed out by my hon. Friend the Member for East Birkenhead (Mr. White), it has gone down from 48 per cent. of the total tonnage of 1913 to 32i per cent. That is a serious matter. It does not concern merely our economic prosperity, but is of significance from the point of view of National Defence. In time of war we have to look to our mercantile marine to man our ships; in the Great War it was our merchant seamen who provided the personnel to make up the wastage inevitable in war.

I think we have a right to ask the Government to give a lead on this subject. It is not easy, I agree. There are all sorts of subsidies and various other methods are adopted to stimulate Continental shipping; but there are directions where I think we can use our influence. I am the last person to criticise trade with Russia, because I believe there are great potential markets in that country for our traders, and the extension of credits to Russia and the stimulus of trade with Russia must be to the advantage of our manufacturers. But there is one thing of which we are justified in complaining and that is that they are precluding British ships from a great part of the trade in carrying timber from Russia to this country. The Soviet Union control the whole of their foreign trade, and are able to say what goods may go out and what ships shall carry them, and I think our Government would be justified in saying, "If we are to give you credits, if we are to be a large market for your timber and other goods, you should give our ships a reasonable percentage of the carrying trade between your country and our own." There is no economic fallacy in that; it is a reasonable condition of bargaining, and at a time when our shipowners are faced with serious problems we should be justified in putting that point to the Russian Government.

There are other problems which are also becoming of great importance to the shipping industry. There is the question of our ships in the Pacific—a very important question, because of the danger of the trade between the Continent of America and Australia and New Zealand going out of British hands, and I would suggest to my right hon. Friend that while he is negotiating with the United States of America it would not be unreasonable to try to come to a friendly agreement about the dropping of subsidies on a large scale such as are destroying British shipping in the Pacific.

That brings me again to the subject of the proposed American agreement. Up to 1934 the American Executive had no power to make special agreements with foreign countries. Under the Act of 1934 no fewer than 16 agreements have been made, including, significantly, an agreement with the Dominion of Canada, one which has been to the mutual advantage of Canada and the United States. We have always been told by hon. Members opposite that it is difficult to reach an agreement with the United States without sacrificing the interests of our Dominions, of Australia, Canada, New Zealand and South Africa. I think the answer to that argument is to be found in this agreement between Canada and the United States. Australia and New Zealand, with their additional production of wool, meat and butter, feel that they must have a larger field than the United Kingdom for the disposal of their products. I think I could quote statements from Mr. Menzies, who is now in this country, and other Australian statesmen, that they are anxious to find new fields to exploit, and I suggest to the right hon. Gentleman that our representatives at present in the United States trying to negotiate a trade agreement with America, should not be restricted too much by the feeling that they might infringe upon the interests of our Dominions.

I hope that he will give us an assurance that the Dominions have been taken into partnership in this matter, that their cooperation is being asked, and that they will be allowed to assist in reaching a satisfactory agreement. As the United States must desire markets for her wheat and other products, we do hope that the principle of Ottawa will not provide an excuse for the breakdown of the efforts to reach an agreement, because I believe that the Dominions are as willing and as anxious as ourselves to come to an understanding with the United States. An understanding with the United States would, in the words of M. van Zeeland, have repercussions throughout the whole industrial world. If in a few weeks' time the right hon. Gentleman could come to this House with an agreement which showed that some substantial arrangements had been arrived at between this country, the United States and the Dominions, it would have a world-wide effect in restoring confidence. It would be a message to the world that the great British-speaking peoples of America, the Dominions and Great Britain had found a way of co-operation in industrial matters, and that might be a symbol of peace and prosperity in the world in the future.

6.27 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. Cross)

I think it may be for the convenience of the Committee if I intervene now, in order to reply to some of the points which have been made and in particular to deal with shipping questions, while leaving the main reply on economic matters to my right hon. Friend when he comes to wind up the Debate. The hon. Member for East Birkenhead (Mr. G. White) expressed his desire to see some effort made in the direction of implementing the recommendations of the van Zeeland Report. He expressed his recognition of the political obstacles which stand in the way of exploratory action of the kind which M. van Zeeland recommended, and admitted that the difficulties had increased since that report was drawn up. His object, and, indeed, the object of us all, is to facilitate the international exchange of goods and of services, and whilst political obstacles stand in the way of efforts to attain international co-operation at the present time I do want to make the point that we are fully playing our part, as far as any one country can do so unilaterally, in providing markets for the rest of the world.

Here, also, lies the answer to the right hon. Member for Keighley (Mr. Lees-Smith) who, if I understood him rightly, said that the imposition of duties in this country, by reducing imports from foreign countries, reduced our own opportunities to export in our turn to them, and said further in connection with exchange control that the loss of free sterling exchange consequent upon the imposition of duties was one of the important causes of exchange control being set up in other parts of the world. It seemed to me that in saying that he was ignoring the fact that our retained imports in 1937 were greater by volume than in 1929, the last prosperous year that we had before the time of the Ottawa Agreements. I suggest that that is a proof that our protective system has not been pressed to excessive lengths. Our share of world imports in terms of value —which is relevant to his point concerning exchange control—was 15.9 per cent. in 1929; in 1936 it had risen to 18.2. Last year the figure was about the same. In the meantime, our share of the world's exports had not correspondingly increased; indeed, it had diminished. In 1929 our share was 11.2 per cent., and last year it had fallen to 10.4 per cent. I suggest that this is a proof that we are at the very least doing our full share and that we are providing free exchange to the maximum of our ability. Indeed, when our balance of payments is considered, which is a matter requiring and receiving unremitting attention, some anxiety is caused among some of my hon. Friends on this side of the House—but that is another subject.

The hon. Member for East Birkenhead was not too pleased with the Ottawa Agreements and he had a word to say about the arrangements we have made with the Dominions. He suggested that the trade of the rest of the world was being injured as a consequence. I have here official figures that set out the imports and exports between Canada, Australia, New Zealand, and South Africa and foreign countries in the years 1932 and 1937. So far as I can generalise from them the figures are in most instances nearly double. It seems to me that you cannot reconcile figures of that kind with the suggestion that the Ottawa Agreements have been injurious to the trade of the rest of the world.

As regards shipping matters, I should like to call the attention of the Committee to the fact that the tramp shipping industry is considering the provision of a scheme for the laying up of unwanted tonnage, as a corollary to the minimum freights scheme which is already in opera- tion in agreement with foreign tramp shipping. The Tramp Shipping Administrative Committee is preparing a scheme to provide for payments to a pool from which compensation will be paid to owners who are laying up tonnage. An investigation of the possible effects upon British tramp shipping is being made and I am told that the Tramp Shipping Administrative Committee have in mind also the possible effect of such a scheme upon the employment of officers and men of the Mercantile Marine. It is obvious that the Government cannot determine their attitude towards such a scheme until the details are forthcoming, but in the meantime, on general grounds I think I may say that a scheme of that kind would appear to be in line with general Government policy.

Mr. Kirkwood

Does that statement mean that the Government are going to introduce rationalising for the tramp shipping industry by the laying up of ships, on the same lines as they rationalised shipbuilding by scrapping shipbuilding yards that we could do with now? Are they going to introduce the same idea?

Mr. White

Are the Ministry of Labour collaborating with the committee and advising with a view to putting forward a scheme for the men?

Mr. Cross

I do not think the latter point has yet been reached or that the Tramp Shipping Administrative Committee have got to that point in their deliberations. In answer to the hon. Member for Dumbarton Burghs (Mr. Kirkwood) the scheme proposed is not on the same lines at all as the acquisition of the shipyards, which were subsequently put out of action and cannot be brought into action again. This is a scheme for the payment of compensation from the pool to ships which are temporarily laid up. In that connection I may say that the policy of co-operation was a condition of the tramp shipping subsidy and that policy had and has the full approval and encouragement of His Majesty's Government. Moreover, as the Government have now terminated the subsidy period it is for the industry to endeavour to ensure, by the continuance on a voluntary basis of measures of co-operation, that there is no recurrence of the unrestricted competition, which, in the years before co-operation was successfully introduced, provided a disastrous experience for the tramp shipping industry.

I was asked by the hon. Member for East Birkenhead to say something on the subject of a Government emergency war risks insurance scheme. Arrangements were made a few years ago, whereby in the event of emergency, schemes for insurance covering both ships and cargo against war risks could be brought into operation immediately, and, indeed, that was announced by my right hon. Friend's predecessor. Those arrangements are at present under review on account of the changes which appear to have taken place in the methods of warfare. A decision as to legislation must obviously await the findings of the committee which is now considering the changes in the proposed system of insurance.

Mr. Kirkwood

Are we to understand that the Government were going to cooperate, so far as ships and cargo were concerned? Are the Government going to co-operate also to see that on the loss of the life of the breadwinners, those who depended upon them will also be compensated?

Mr. Cross

Yes, I understand that is so. That will be covered by this scheme.

Mr. Maclay

What so many people in the industry wish to know is that there will definitely be some scheme of war risk insurance for both cargo and hull which we know definitely will come into force immediately war breaks out, but we have had no assurance of that.

Mr. Shinwell

Perhaps I might widen that point slightly by asking whether the Government intend to introduce legislation on war risk insurance or whether they propose, as in the last War, to come forward as a Government with an Order in Council; and if they intend legislation, would they put their cards on the table so that this House and the shipping industry can examine what the Government's proposals are?

The Chairman (Sir Dennis Herbert)

May I remind hon. Members of the Committee that they may not discuss legislation?

Mr. Shinwell

On a point of Order. The hon. Gentleman himself mentioned that the Government were considering the matter and that legislation might be necessary.

Mr. Cross

Perhaps I might be allowed to say quite briefly that that is not a point which the Government would be prepared to consider until they had had the further recommendations in front of them resulting from the consideration which is now going on regarding some altered scheme which would be more up to date and more consonant with the war risks of to-day as compared with the war risks of yesterday.

Mr. Shinwell

May I put the point to the hon. Gentleman or to the right hon. Gentleman whether they can give the Committee an assurance in relation to war risk insurance that if there is a scheme of any kind it will be brought before the House of Commons?

Mr. Cross

No, I do not think that my right hon. Friend can give that assurance, but an assurance that I can give is that there is a scheme ready which can be introduced at a moment's notice in the event of emergency and which would be introduced if that were necessary.

Sir Alan Anderson

Before the hon. Gentleman leaves that point may I suggest that it is not merely after war begins that this scheme is wanted, and that apprehension of war requires a scheme. We have already felt that difficulty. A good deal of business is being diverted from the British flag because of the apprehension of a war in which Great Britain might be engaged.

Mr. Cross

Yes, and that is why I used the expression "state of emergency," which is a wider term than "war." A state of emergency might clearly exist in advance of an outbreak of war when there is the possibility of war.

The hon. Members for East Birkenhead and South-West Bethnal Green (Sir P. Harris) asked me to say something on the subject of the state of the industry. As everyone in this Committee must be aware last year was a good year and freights were available which enabled owners to put aside normal depreciation and to make some contribution towards the arrears of depreciation in respect of previous years, and thereby to contribute something to the restoration of the normal and necessary strength of the industry. In recent months the industry has been directly affected by the contraction in international trade consequent upon crop conditions, political considerations and other matters with which hon. Members are familiar. As a consequence freights have fallen, and taking 1929 as a basis of l00, the index was 95.5 in March. The volume of tonnage laid up was 400,000 on 1st April, which figure compares with 3,500,000 tons gross in the depth of the depression in 1932 and 100,000 tons at the best time last autumn. As to foreign competition, British shipping in most sections, in face very often of subsidised foreign competition has, I believe, through good management and efficiency, been able to hold its own well, despite the fact that Japan, Italy and Germany are very active in fostering merchant ship building.

As to tramp shipping the British position in the principal trades seems to be strong. In the three years 1935–37, British tramp shipping secured a very substantial percentage of three important trades—the Plate trade, the Australian trade and the North American St. Lawrence trade. At present the Plate trade has fallen to insignificant proportions, owing to crop conditions in the Argentime, but tramp shipping activity is, I am informed, showing some signs of improvement. Conditions in the industry as a whole are in some respects more healthy than they have been for years past.

Colonel Ropner

Is not the hon. Gentleman aware that the tramp shipping industry will tell him that decline has been extraordinarily rapid in the last few weeks, that ships are being tied up literally by the dozen every week and that the British proportion of tonnage chartered in the trades which he mentioned is lower than in previous years? The hon. Gentleman is altogether wrong in saying that the trade is showing signs of improvement.

Mr. Cross

My hon. and gallant Friend knows, I suppose, better than anybody else in this Committee, and I must accept his correction if my information appears to be out-of-date or in any way incorrect. I hope that he will agree that the position is altogether better in one respect, which is that the volume of world tonnage available and the extent of world` seaborne trade are at the present time. in more stable relations than they have been for a good many years past and that, as a consequence, the general prospects of the shipping industry may be 'regarded as more hopeful than one would have gathered from my hon. and gallant Friend's observations.

I was asked by the hon. Member for East Birkenhead to say something also about the adequacy of the. British Mercantile Marine in the event of an emergency. If we make a comparison of the British Mercantile Marine, including Dominion tonnage, with what it was in 1914, it is a fact, that, having regard to the improved speed of our cargo vessels and the larger carrying capacity per gross registered ton, the cargo-carrying capacity of the Mercantile Marine is at least as great as it was in 1914. The number of ships is less, but that is not necessarily a disadvantage, because, although the sinking of one ship involves a greater individual loss, a smaller number of larger ships represents, I am informed, an easier convoy problem for the Admiralty. In the last War, the demands on the tonnage available to us and our Allies were for the military requirements of our defence services, for the civil requirements of the United Kingdom, the Colonies and the Dominions, and for the military and civil requirements of our Allies. To meet those requirements it was necessary to depend to an important extent on neutral tonnage as well as upon British and Allied tonnage. In any future war, the demands for tonnage of the kinds I have indicated must inevitably differ both in amount and in kind. For instance, there would be a reduction in the number of ships to carry coal for the Fleet, but, on the other hand, there would be an increase in the number of tanker vessels required. Therefore, an examination of the question whether our existing tonnage would be adequate for a situation such as obtained in 1914–18 would be quite useless. The possible war demands for shipping are largely a matter of guesswork, but there are certain considerations which I would offer to the Committee. In the last War, our military shipping needs were worldwide, extending not only to the Continent, but also to the Mediterranean, East Africa, West Africa and the Persian Gulf. It hardly seems likely, if I may make the suggestion, that in another war we should find ourselves engaged in quite so many theatres of war.

Mr. Shinwell

On the other hand, is it not true to say that in the last War we had the assistance of Japanese shipping? Are we likely to have the assistance of Japanese shipping in the next war?

Mr. Cross

I do not think it rests with me to suggest who our possible allies or enemies may be, or who may be the neutrals in the event of another war. In the last War, at one time nearly a quarter of the British tonnage was engaged on services for our Allies. We cannot foretell who our allies would be in another war, any more than we can foretell, or, at any rate, than I am prepared to foretell at this moment, who our enemies might be in such circumstances. But one might perhaps make some guesses without naming countries, and, in so far as I can estimate who our potential allies might be, it would be true to say that they have more tonnage than they had in 1914–18, and that their demands upon us should consequently pro tanto be reduced. Again, in the last War we engaged a large volume of neutral shipping, and, if one might also guess what the neutral countries might be, it would appear that the available tonnage of neutral countries has very largely increased. Assuming, therefore, that we maintain the command of the sea, as we have always assumed in such discussions, the exclusion of enemy countries from sea-borne trade would mean that neutral tonnage would either have to lay up or trade with us, and it is therefore probable that we should have much more neutral tonnage available to us than was the case between 1914 and 1918.

There are, of course, many other factors which it is impossible to weigh up. We cannot foresee whether the balance of those factors is going to be favourable or unfavourable, but I would like to add in conclusion that the Board of Trade has under constant review plans for ensuring that all necessary steps could be taken in an emergency to regulate the employment of the British Mercantile Marine, plans for securing the services of neutral ships, and plans for ensuring the highest output of new ships from our own yards. We cannot foretell with precision what our shipping needs might be in another war, nor the losses and hindrances which we might have to encounter, but my submission, in the light of the review which I have given, is that the House can feel assured that our position in regard to the available supply of merchant shipping is not unsatisfactory.

6.49 p.m.

Mr. Ellis Smith

Listening to the speeches of the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith), the hon. Member for East Birkenhead (Mr. White), and the hon. Member for East Aberdeen (Mr. Boothby), I have found myself in almost complete agreement with them all. The hon. Member for East Birkenhead and the right hon. Gentleman the Member for Keighley dealt more in a theoretical manner with the issues we are considering this afternoon, and I want to apply their theories to the concrete situation with which we find ourselves faced at the present time. Before doing that, I should like to say a word about the remark of the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris) that Germany had eliminated unemployment. I have often wanted an opportunity of denying that in this Chamber. It is true that Germany has abolished the unemployed, but it is not true to say that Germany has abolished unemployment. When it is in order and an opportunity of dealing with that issue presents itself, I hope to produce concrete evidence so that the House and the country can judge the matter on its merits.

From 1830 to 1930, there was in this country an ever-expanding industry and an ever-expanding market, but since 1934, in particular, there has been a completely new alignment of forces in Europe, which is having its effect on our trade in Europe, and will have its effect on our trade throughout the world. I am very concerned about this because, whenever I speak in this Chamber, I have in mind all the time the people I belong to. When we consider those dense populations in Lancashire, in North Staffordshire, and in the North generally, no matter how we may differ in our political outlook, no matter how we may differ in our philosophy of life, we must agree that, until there is a change in the social system, those populations have got to be maintained. In addition, we have built up in this country, as a result very largely of a hard struggle on the part of the common people, a relatively high standard of social services, and it is upon the trade of this country, and the maintenance of the economic equilibrium of this country, that those social services have to be maintained. Therefore, no matter what may be our political differences in the House of Commons, we are all involved in this issue, and it is on that subject that I want to speak.

First of all, I want to say to the President of the Board of Trade that, if it is right to apply to the cotton industry the principle that he proposes to apply to it, surely it is right to apply the same principle to other industries. Why should other industries be left to engage in a struggle for the available markets of the world until they reach the same position as has been reached by the cotton industry and the coal industry? Why should there not be an enabling Bill for all sections of industry engaged in the export trade? On condition that the workpeople's standard of life is safeguarded, and that the profits of the manufacturers are limited, this principle, if it is to be applied to the Lancashire cotton industry, ought also to be applied to every other industry in this country. If I had time, I could produce evidence to show the need for that.

We have suffered in this country, particularly in those industries which are concerned with the export trade—I am speaking more from the point of view of the workpeople than of any other section of the community—we have suffered too long from the price-cutting that has been taking place for years. Individual units in this country have been struggling one against another, and we are now struggling against highly organised competitors throughout the world who have State subsidies. I will give one example of what I mean. Some time ago, a friend of mine was in touch with people who were responsible for negotiating contracts with certain of our Dominions, and one of those Dominions has always given Britain a preference on the particular commodity concerned. This representative of the trade was negotiating a contract, and the price of the commodity was fixed at that time at 15s. The representative with whom he was negotiating said, "We have been offered this same commodity at 14s."The British representative said that, if they had been offered it for 14s., he was prepared to come down to 14s., and then along came the German representative, and he went down to 13s. 6d. This is the kind of thing that is going on. It is due to the pooling system which is operating in trade in Germany, and which is having an unfair effect upon the industries of this country, even from an orthodox point of view. I suggest that the time has arrived when the Government should deal with this matter. In the countries where we are thus affected, we find that long hours and relatively low wages prevail. The countries to which I am referring in particular are Japan, Italy and Germany.

I want to make it quite clear that I as an individual, and most of my hon. Friends with whom I am associated, want to co-operate with mankind throughout the world and to bring about a social order of things that will provide the world with a basis for economic co-operation; but as realists we are bound to face the situation as it is in the world, and not as we would like it to be, and therefore, when we talk about political appeasement and about negotiation, we have to remember that it is not possible to negotiate with wild tigers, that it is not possible to negotiate with poisonous reptiles. Until a situation has been created in the world where you can negotiate in a spirit of mutual confidence, where you can negotiate round a table with people who are going to play the game with you, and not stab you in the back, we have to look throughout the world for people who are prepared to meet us on the same footing, who are prepared to play the game with those with whom they are negotiating, remembering the other people who are carrying on in a different way altogether.

We in this country have been affected by increasing trade restrictions, and certain of our industries are also being affected by internal subsidies which are constantly being put on the cost of production. Every pound that is voted by the House of Commons has in some way an effect upon the cost of production, and, therefore, when we are constantly voting subsidies, it is not fair to fix those subsidies on one particular section of industry and leave other industries, which have to struggle to gain their share of the world's markets, to bear, in their cost of production, the effect of the subsidies in other trades. Whether these subsidies are direct or indirect, I say it is unfair to export trades which are struggling to hold their own in the world's markets. I want to make it quite clear—because I do not take the orthodox view on these questions—that I am not criticising subsidies in general. I know that subsidies, especially in the present state of the development of our world interests, are essential. But what I do say is that every industry catering for the export market should be placed upon the same footing, and should have the right to similar subsidies where it needs them. A more scientific method of intervening in the export trade should be adopted by the Board of Trade in order that justice may be done to the whole of the export trade, and not only to one particular section.

I want now to deal with one section of industry which it is my duty to represent, and whose interests are not referred to in this House often enough, and in order to provide the basis for the remarks I have to make I want to give a few extracts from a book recently published entitled "Japan over Asia." I find on page 54 of this book, which is the result of an investigation conducted by an authority on political questions, it is stated: Japan's advance in Manchuquo has left little room for the commercial activities of other Powers. Agencies which were formerly held by foreigners have been more and more taken over by the Japanese. On page 147 this writer says: The sales appeal of Japan's low-priced textiles, bicycles and crockery wares has been irresistible. Then he goes on to show on page 178 that a weaver starts work in Japan at 6.3o in the morning and works until 8 in the evening with only two hours for meals, and this man has only two holidays a month. He continues: The Japanese are guarding their trade secrets, and while Japanese firms show profitable balance sheets the competitive victories in the field of foreign trade has been purchased by long hours and small wages of millions of people. That is the basis from which I want to consider the conditions in the special industry with which I am concerned.

A letter appeared in the "Manchester Guardian" on 16th April of last year from which I want to quote, and it is right that the whole House should have its attention drawn to this, particularly certain Members who are always appealing for tariffs and protection. The letter is written by a professor of the textile industry. He states: In my daily newspaper I have just read three paragraphs. The first refers to a 4o per cent. dividend paid by Woolworths, the second to the prospective increase in the exportation of Japanese cloths to Australia and the third to the decline in population of Great Britain Anyone passing down the coast of Japan on a cargo steamer cannot help but be impressed with the goods that Woolworths are shipping to Great Britain from Japan. These goods are purchased at one-half to one-fifth the price of the corresponding British goods and represent the displacement of so much British labour. and eventually contribute to the reduction in the population of the British Isles. What applies to Woolworths equally applies to a large number of the departmental stores of this country. Therefore, I want the Board of Trade to examine this question, arising out of the new alignment of forces in the world. On 26th April of this year I was responsible for raising for the first time the serious issue of the importation of the Opel automobile into this country, and I find that the Financial Editor of the "Manchester Guardian" on 11th June of this year explained to the readers of that paper how this importation has been brought about and how the makers of the Opel automobile are able to undercut the motor industry of this country. Just as they have adopted the pooling system in one trade that I have already referred to, so they have in other industries, and the income which is received from the pool in one particular industry is being used for the purpose of giving a subsidy to that particular industry in order to increase its export trade and thus undermine the trade of countries like ours. I see that the "Financial Times" on 8th December last year, writing on the economic conditions in Germany stated that they would mean the re-entry of Germany as a formidable competitor in the world markets.

Now the industry with which I am mostly concerned is the pottery industry. There are employed in the pottery industry in this country approximately 75,000 workpeople, of whom 67,000 are employed in the industrial area which it is my duty to represent in this House. Seventy-five per cent. of the total output of pottery in this country is produced in North Staffordshire. The condition of this industry is therefore of great importance to that area, and in a lesser degree to the whole of the country. The pottery industry has too often been seriously affected by the manipulations of departmental stores in this country. The manufacturers, after pooling their accumulated experiences in the industry, can only earn upon capital invested approximately 6 per cent., while the workpeople get a bare living out of the industry. The trade unions negotiate reform. They have recently, much to their credit, negotiated holidays with pay. The Home Office is more and more taking an interest in the industry with a view to the elimination of silicosis and other industrial diseases, and I want to impress upon the Board of Trade that it is not fair to the industry or to the working people, it is not fair to the Home Office or to the country as a whole, for us all to be pooling our ideas, for the Home Office to be doing what it is doing, for the workpeople and for the employers to co-operate in order to produce the maximum results, though only receiving a relatively small return on the capital invested, while departmental stores can make anything from 20 to 4o per cent. on the products of this industry.

I want to ask the Board of Trade to give their attention to that question, because it is like a cancer in the human frame. It will have to be dealt with, and the sooner the better for the future of this country. I do not want the industry for which I am speaking to get into the same condition as the coal industry and the cotton industry. There are great possibilities of expansion, and if the Board of Trade are going to play their part in modern conditions as their predecessors have done in the past Too years, the time has arrived when they should take the initiative and should get the manufacturers together, should get other interests together, in order that they may formulate a common trade policy acceptable to all interests, in the same way as they are proposing to do under the enabling Bill for the cotton industry which they are now considering.

I do not believe that the suggestion I am making will bring about the millennium. I hold definite political and economic ideas which I consider are based upon scientific theories that in the end are the only hope of humanity, but the situation in the world is so serious that we cannot afford to wait until those hopes are realised. Our lives are in- volved, and we have to prepare to deal with immediate issues in such a way as to safeguard the people to whom we belong. Years and years of research and invention have been devoted to improving this industry. Very highly skilled people have been trained in it. Factories have been modernised, the products are the delight of all who see them. The Stoke-on-Trent municipality and the Pottery Committee of the Council for Art in Industry have played their part in improving the products, and are providing educational facilities for art and research. Yet this is what I find in the latest publication of the Board of Trade, the Trade and Navigation Accounts for April, 1938, which on page 65 show the large percentage of imports in quantities into this country. On page 67 they show the large percentage of values, and pages 141, 142, and 143 should be studied by all Members of this House who are interested in the question that we are now considering, because on these pages is shown the present trend of our trade, and anyone who makes an analysis of the figures published in these Accounts is bound to be concerned for the future of the trade of this country.

I will give one or two examples. I find that in the first four months of 1936 we exported to Japan £19,000 worth of pottery; in the same period in 1937 £22,000 and the same period in 1938, £5,000. And yet we imported from Japan goods to the value of £59,000 in the first four months of 1936, of £59,000 in the same period of 1937, and of£56,000 in the same period of 1938, as against the £5,000 of our products exported to Japan. If I had time I could give many illustrations of the same character. We find more and more that our Labour majorities, our Labour groups and relatively progressive Conservatives on municipalities are insisting that the Fair Wages Clause should be adhered to by anyone who submits an estimate or contract for municipal work. If it is right to apply the principle of the Fair Wages Clause to internal trade, it ought to be right to apply it to the goods imported into this country. Why not a Fair Wages Clause for imported sanitary ware, for electrical porcelain, and for other products of the pottery industry when municipalities are considering giving orders. If you examine the reports of the Overseas Trade Depart- ment—very fine reports, which ought to be studied by all who are interested—for Australia, New Zealand, and a number of other Colonies and Dominions you are bound to come to the conclusion which I have come as the result of an examination of these reports. Just as the Board of Trade has its department for examining specific issues, so it should set up departments now and give them instructions to examine all sections of industry, particularly those catering for the export trade, in order that they can take the initiative in hammering out schemes in this country. Instead of leaving it in small units, industry should be able to speak as a whole, just as the cotton trade will through its own Enabling Bill.

Although we know the great difficulties, although we know that the Board of Trade is having more and more responsibilities thrust upon it, if we are to hold our own in future with these countries which are prepared to stop at nothing in order to undermine our trade, we have to meet them on the same level. You can do that by establishing economic cooperation and confidence among nations and building up our forces so as to take the lead in the world. In that way, particularly through the League of Nations, we should see that the forces that stand for peace and economic co-operation may be so strong that any potential aggressor, whether in the military field or the trade field, will be forced to consider these pooled resources.

7.17 p.m.

Mr. Amery

I should like, if the hon. Member for Stoke (Mr. E. Smith) will allow me, to congratulate him on making the first speech I have heard this afternoon, whether in criticism or in defence of the Government, which has in any sense touched on the grave realities of the world in which we live. The other day I listened to my right hon. Friend the Minister of Agriculture when he was entrusted with the unusual task of making a speech on foreign affairs. His comment was, "How easy foreign affairs would be if it were not for the foreigners." It is the same with regard to trade. What has struck me about the speeches this afternoon, with the exception of the hon. Member's speech, is that they were all concerned with what we should like to do with world trade, and not with what other people are determined to do with world trade.

The state of world trade has been referred to in one speech after another as if it were the result of certain unfortunate natural phenomena, and not the result of the purpose and determination of great nations, a purpose which is not going to be deflected by anything we say or do in this House, a purpose of which we have got to take account. More than that, it is a purpose which is not the mere accidental result of the character or temperament of certain individuals; it is not because certain policies please Herr Hitler, Signor Mussolini, or Mr. Stalin; it is because those policies lie in the very nature of the economic, social, and political development of the world. We are, after all, in every sphere, for good or ill, moving from a phase of low national organisation and greater individual liberty to a phase of much more intensive national organisation and restricted or controlled individual liberty. Social reform involves an immense amount of national legislation and a certain amount —a very desirable amount—of limitation of individual liberty, whether that of capitalists or of other sections. We are faced to-day with the fact that nations like Germany and Italy are settled in their determination to pursue a strictly controlled, autarkic economic policy, and the very policy of sanctions advocated earnestly by the believers in Free Trade has enormously confirmed them in that. Nothing is going to induce those nations to go back on the policy on which they have embarked for the defence of their own markets and for the most determined and constant aggression on other markets.

It is a mistake to consider that these countries are actuated by military reasons alone. They are also actuated, from their point of view, by the desire to secure the well-being of their own citizens. Their method of bringing about that may be right or wrong, but the autarkic policy of great nations like Italy and Germany is influenced by a blend of military and social considerations. They believe they are doing their best to raise the standard of living of their own subjects as well as their military strength. Let me take another instance. I think I shall have the entire agreement of hon. Members opposite if I say that the even more strictly controlled economic system of Russia was not primarily devised for military purposes, but for raising the standard of living of the Russian people from the disastrously low level in which it was. How far that method has been a success I am not prepared to judge: hon. Members opposite may take a more optimistic view than I do on that point; but we can agree as to the intention and the belief that 170,000,000 people believe that a policy which involves not only complete control of internal industry but an absolute denial of the policy of free trade in external relations, is for the benefit of their people.

We are dealing, also, with a problem which is raised to an entirely different plane from that which it occupied in prewar days. The world's economic policy then was based on a discriminating use of tariffs, but apart from that you had a Free Trade system, a free monetary system, free investment and, in a certain measure, free emigration. It was on the whole a Free Trade world, with some slight restriction in certain countries. Today you are dealing not merely with tariffs; they are a small part of the problem; you are dealing with countries in which the financial system is an instrument for promoting their own national interests, regardless of those of any other country. Systems of quotas are all employed for that purpose, and, as the hon. Member pointed out very truly, for purposes of offence as well as defence. The hon. Member quoted a case where a German competitor in a certain market was prepared to undercut the British price whatever it was. That was because the policy of his Government allowed him to do that, as that Government wanted credits outside for one purpose or another, and in order to obtain them was prepared to maintain exports by subvention to a point at which it could get those credits.

I ventured to raise, in a letter to the "Times" the other day, the question of the importation of Opel cars. There again, there can be no doubt either as to the fact of payment, in some form or another, of subsidy, or the fact that that is done by Germany for the perfectly definite purpose of securing credits. Whether they are required for raw materials for armaments, or in order to pay back at low price German indebtedness outside Germany, all these things have nothing to do with individual industrial competition as we knew it, and everything to do with high policy of State as Germany conceives it to-day. That is going on more and more ruthlessly in the whole field of trade.

The hon. Member opposite asked, why should we not say to Russia that we must have our fair share of the shipping that carries our imports? What is the good of saying that? If we want to secure our fair share it is easy to do so, by saying we will not take the imports unless they come in British ships. It is that kind of answer, as the hon. Member truly suggested, to which the Board of Trade has got to wake up, because they have not begun to wake up yet. The speech of my hon. Friend just now has not got far from the stage of somnolence to which we have got accustomed in recent years. We are dealing with a new world, in which the competition in trade is just as formidable as competition in armaments, and it requires methods just as drastic and effective. You have to deal with Governments like those of Mr. Stalin, Herr Hitler and Signor Mussolini by methods of the same character as they employ. You have to meet them with their own kind of weapon, or you will certainly be defeated. These nations mean to have shipping, and they mean to get it at the expense of British shipping. As sure as can be, if our attitude is to continue to be the soothing-syrup attitude of my hon. Friend just now, so we may be certain that the British mercantile flag will be cleared off the seas, just as we cleared the Dutch mercantile flag off by our Navigation Acts.

Somebody referred to the British flag in the Pacific. For three years negotiations have been going on which ought not to have lasted three months, as to whether we shall give help to maintain the British flag on the Pacific. The shipping situation is not to be met by a little compensation arrangement for ships stood off. It may be that we shall need to have, after consultation with the Dominions, an Empire Navigation Act, restricting shipping between Empire ports to British ships, or that we shall have to introduce an effective system of preference under which we add a charge to any goods carried to this country in foreign ships, and a still heavier charge on goods carried between any two ports in the Empire in foreign ships. In one way or another, it is measures of that sort and not the mere puny, trifling things we have had in the last few years which are going to save that Mercantile Marine upon which our whole existence as an oceanic nation depends. The hon. Member seems to suggest that in another war, if it came, the call upon our merchant shipping and our Navy would be less than it was in the past. I venture to say that it would be infinitely greater than in a war in which we had Germany bottled up in the North Sea. The steady diminution in the proportion of our share in the shipping of the world seems to me to be disastrous.

The tariff, again, was introduced with the definite intention of putting a stop to the excessive importations into this country by foreign competitors to the detriment of British industry, which is carried on, as the hon. Member opposite pointed out, under much more effective safeguards for the welfare of the workers than are in force in other countries. This obtains throughout the whole of industry—we are just bringing a new Factory Act into force—and all these things add to the costs of production. Since the tariff was introduced the case for strengthening it in the interests of our country has enormously increased. The protection afforded to our industries has enormously diminished because we applied that tariff at the moment that we went off the Gold Standard, which gave us for the time being a protection of 20 or 25 per cent. against the outside world. Since then other countries have gone off the Gold Standard, and every other country has adjusted itself to the new scale of prices.

The tariff having been initiated the Government seem to have washed their hands entirely of the fiscal policy of this country. It is perfectly right and proper that the Import Duties Advisory Committee should be, as they are, a thoroughly impartial and independent body, and that we should be free of any idea that Members of this House should be continually lobbying their particular individual interests. I think that all industries concerned pay their tribute to the impartiality and fair-mindedness of the Import Duties Advisory Committee in dealing with their particular industry. Yes, but it is no part of the duty of the Import Duties Advisory Committee, but of the Government, to consider the whole state of the nation, its relation to the tariffs and the economic policy of other countries. The state of our balance of trade has become as grave as it was in 1931. It was far more the state of our balance of trade than the temporary unbalancing of the Government's Budget which was responsible for the crisis of that year. Yet, apparently, nothing is being done. We are fast approaching a situation in which we are entitled to ask the Board of Trade to wake up, to forget the Nineteenth Century and to realise the hard century in which we live, and to be prepared, forgetful of the past, to take effective measures, whatever they may be, to deal with those who do not deal fairly by us.

The present situation of the world is least intolerable to those who have large areas and large resources. I do not think that the depression in the United States, due to causes internal to the policy of that country, is in any sense permanent. The United States enjoys an enormous advantage in the range of its resources, and so does Russia, and so, to a very considerable extent, does Germany, especially when the pressure is the embargo which is applied to countries in South-Eastern Europe. And so, in a measure, does Italy. The countries which suffer most and are most seriously affected are small countries dependent largely upon the external market and external competition. We have had our attention drawn in the last few days to the pitiable plight of the West Indies and of the West Indian natives. How are you going to meet that plight unless you are prepared to pay the West Indian more for what he produces than you pay to the Javan and the Cuban? I hope that when the Commission goes out it will inquire into conditions in Porto Rico, where labour is protected in sugar growing by the full strength of the American tariff.

The hon. Baronet opposite, and, I gather, the hon. Member for Oxford University (Sir A. Salter) spoke as if we had imposed a preference upon the Colonial Empire. There is a very large part of the Colonial Empire upon which we are not entitled to impose a preference, and do not impose a preference. There is another part, of which the greater portion enjoys in some measure or other a considerable discretion in the administration of its own affairs, and upon which the Colonial Office only exercises a very modest amount of pressure, if it exercises pressure at all. I would remind hon. Members opposite that the preferential system in certain of those Colonies, notably the West Indian Colonies, was initiated by them of their own free will and without any interference on the part of the Colonial Office, as part of the negotiations for a mutual preference with Canada. It was done in their own interests and very generously they extended preferences to ourselves. The basis of the preference in the West Indies, through negotiation between the Colonies concerned and other parts of the Empire, has been extended to Fiji, Mauritius and other Colonies subsequently. The hon. Member opposite made it clear from his point of view that one or two measures taken with regard to quota in certain Colonies did not meet with popular approval, but I should like him to associate himself with the view that wherever a colony desires to extend the preference, the only way in the world as it is to-day is to secure a sheltered market—

Sir A. Salter

I do not think that the right hon. Gentleman was present at the time, but I very carefully distinguished, by eliminating one category after another, all cases in which we did not impose our policy, and I limited my particular appeal to the remainder which, I said, was a very small remainder—to cases where we did impose a policy.

Mr. Amery

The hon. Member agrees with me in accepting inter-Imperial preference where it is sought, and limits his objection only to some instances where undue pressure may be put by the Colonial Office on the local legislature. That brings me to a wider point upon which again, I think, I am in a considerable measure of agreement with the hon. Member opposite and also with the report of M. van Zeeland, which for most other purposes, must, I fear, be regarded as a dead letter. In that report M. van Zeeland pointed out that the Most-Favoured-Nation Clause in its rigid form is to-day probably an obstacle instead of a help to freer trade. Let me remind the Committee of the circumstances in which that Clause was first introduced and disseminated. It was at a time when governments as a whole were convinced of the desirability of Free Trade and had to deal with objections of vested interests and so on in their own countries, and when they believed that after you have got the tariff reduced, you not only peg it down as between countries A and countries B, but secure its pegging down to a much larger group of countries. In that way the area of Free Trade was gradually spreading, and at any rate you had lower tariffs. I think that that is probably true of the '6o's and '70's of the last century. But in recent years the Most-Favoured-Nation Clause obviously has had the opposite effect. It means that when you make a concession you do not know how much of your own interests you have given away. You have given that concession not only to the person with whom you negotiate, but to a very much larger number of other persons who in subsequent years may be in a much more favourable position to compete with your industries than you ever realised.

Let me take in that connection the possibility of danger inherent in the present negotiations with the United States of America. I can see that it would be possible that, apart from any reduction which we might be induced to give to the American industries, we might promise stabilisation of duties on certain goods, such as motor cars. That means that we stabilise them not only against American competition whose general character we know, but against the competition of countries, which the hon. Member for Stoke (Mr. E. Smith) and I have pointed out previously, not dependent at all on costs of production or labour or industrial skill, but upon national policy. We may be confronted with dumping on an immense scale in many industries in the near future from those countries. Are we then to have our hands tied behind our backs by an agreement with one specific country? Or again, on the other hand, if you secure a concession, there is no guarantee that you secure it for yourselves. It is just as likely that any concession from the United States will, in the present condition of world competition, benefit Japan, Germany, Italy or Russia. We do not know.

Therefore, the whole field of legitimate bargaining is reduced by the fact that you have to give everybody what you are giving to one, and you have to share with everybody what you have secured. The natural temptation is not to run the risk but to lie back and hope that other people will make an agreement from which you will get benefits for nothing. The whole effect of the Most-Favoured-Nation Clause to-day is to hinder trade negotiations. What has the world done in order to get round the Most-Favoured-Nation Clause? It has introduced quotas and other exchange arrangements, exchange preferences and so on, which are a much greater obstacle to world trade than any tariff. M. van Zeeland himself points out that all nations are doing it to-day. Every trade agreement to-day is based not on mutual tariffs. That part of it is generally eyewash. The real part of a trade agreement is the private arrangement in defiance of the spirit of the Most-Favoured-Nation Clause in which A says to B, "I will take so much of your produce regardless of the rights of international competition." In our own trade agreements with Scandinavian countries and the Argentine the only features of real value to either side are precisely the ones in which we have stipulated the specific quantities of our goods to be taken and in which we have guaranteed to those countries either specific quantities or specific proportions of our total imports.

If only we could get away from the Most-Favoured-Nation Clause in its present form, we should for the first time create a position under which some of these quotas and exchange restrictions could be reduced or abolished. Above all, it would give an opportunity to the smaller nations to find their place in groups, either among themselves or with larger nations, and it would give them that independence which circumstances deny to them at the present time. I agree with the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris) in regretting that our Government took so stiff-necked and unfriendly an attitude towards the Dutch and Belgian negotiations; but I part company with my hon. Friend and with M. van Zeeland on one point. M. van Zeeland suggests that the Most-Favoured-Nation Clause: ought to be drawn in such a way as not to obstruct the conclusion of group agreements or regional pacts, so long as these do not tend to constitute a discriminatory regime, but to lower tariff barriers, and so long as they are open to the accession of all those who are willing to accept the combined obligations and advantages. The moment you make these agreements open to any nation that likes to claim them, you destroy their value to those who take part in them. Is it conceivable that we should ever have arrived at an inter-Imperial agreement at Ottawa if the British Government had held out for the point that any foreign country that gave us the same preference should be entitled to the same conditions that we granted to the Dominions? Of course, not. The whole essence of these agreements was that we gave each other a relatively sheltered market against the inclemency of the world situation to-day. Only by that are you likely to make progress in the direction you desire. If you want Europe to be freer economically than she is to-day, you must say to the European nations "We have no objection to you giving each other the kind of preferences that we in the British Empire give each other, and we should not be surprised or indignant if we are excluded from them." In that way you are likely to get a much wider area of relative freedom of trade.

If I might follow up a point made by my hon. and gallant Friend the Member for Bournemouth (Sir H. Croft), the Ottawa Agreement did in fact embody a very wide measure of relative freedom of trade. I am not speaking only of the actual freedom of importation from the Dominions and the Colonies which is still in force in this country, nor of such reduction as the Dominions make in their tariffs for us. Had it not been for the Ottawa Agreement in the world situation as it was in the year 1932 and in subsequent years, the Dominions and ourselves would have been forced into a more highly protective policy. It is by the policy of group agreements that you can secure relatively low tariff arrangements within the group, without necessarily making the tariffs too high as against the world outside. The smaller the area the more intense is the necessity for its local protection and the greater very often are the difficulties which are involved. The larger the area the easier it is for the group as a whole to conduct a very large measure of trade with the outside world.

With regard to the plea made by the hon. Member for Stoke (Mr. E. Smith) for our facing facts as they are in the world to-day and trying to find a scientific solution for the problems, I would make the plea, first and foremost, that we should face the facts of world competi- tion as it is to-day and meet them in the spirit in which we are being dealt with, but not to stop at that. We should go on building and strengthening that great complementary and largely Free Trade area of the British Commonwealth, making arrangements with other countries that are willing to come in on a second preferential basis, like the Scandinavian countries, in adherence to our general system, and placing no obstacle in the way—whether based on our treaty rights under the Most-Favoured-Nation Clause or otherwise—of other nations which may wish to get together and to find some co-operative system for themselves. When we have made a further advance to that stage it may well be that the larger world groups can also arrive at reasonable arrangements among themselves and that we may get not only a maximum of effective production and employment but the highest possible standard of living within each group—which is the real thing to aim at—and also, in so far as it may contribute to that end, the most unimpeded flow of trade not only within the group but as between one group and another.

7.52 p.m.

Mr. G. Strauss

The speech to which we have just listened has been extremely interesting. I do not want to follow all the points made by the right hon. Gentleman, but I know that for a long time he has advocated that in these groups of countries there should be some system of low tariffs or free trade. While any movement for the reduction of tariffs is desirable, I cannot see, in the long run and looking at the world as a whole, that that would really present any solution for the world troubles of to-day. I agreed with the right hon. Gentleman when, in the earlier part of his speech, he suggested very strongly that in view of the difficulties which we are up against at the moment and the new weapons which are being used by our competitors in world trade, it is essential that the Board of Trade should use more effective, determined and progressive action in countering the harmful effects of those weapons. We are in a new world situation, and the weapons which are being used—it is ridiculous to call them unfair, because there is perhaps nothing unfair in world trade—are contrary to our concepts of international trade. They are based not on the value of exchanging goods but very largely on the desire of becoming a strong military Power, thereby threatening the peace of the world. When nations which have that as their national outlook use new and effective weapons against us, we must look round to see what new and effective weapons we can use in order to counter their actions.

I should like to underline the plea that has been made by a number of hon. Members in regard to one part of Europe where it is possible for the Government to take effective action immediately. I refer to the Danubian States. M. van Zeeland's Report is, we are all agreed, admirable in most of the measures which he advocates, although I do not agree with everything it contains; but I think we are all agreed that in the world as it is to-day most of the recommendations of the report are impossible of application, because many of the countries involved, perhaps most of the important countries involved, either will not or cannot play the game. It is very much more important to try to concentrate our attention on those immediate problems where effective action can be taken, and I suggest that effective action can be taken by this Government to bring economic appeasement to the Danubian countries in the spirit of the van Zeeland Report, not only economic appeasement but political appeasement also. No one wishes to interfere with the legitimate trade of Germany in the Danubian Basin, but what is the position to-day? What is happening to-day is that Germany by a process of currency manipulation and open blackmail is trying to bring all the Danubian countries into the German hegemony and to destroy the economic independence of those Danubian countries.

That is contrary to the interests of international trade, contrary to the proper interests of this country, and contrary to the proper interests of peace. We are all agreed that this process, and particularly the methods which have been used to carry it out, are undesirable and should not continue. I hope that that is the view of the Government. They have taken some steps already in regard to Turkey by negotiating a loan of £16,000,000 to show that they are interested in the economic affairs of the Danubian countries, and anxious to cooperate with those countries. What I should like to emphasise is the urgency of Government action in this respect and even more so the urgent necessity of the Government of this country making some declaration as to the interest it has in Danubian trade and the maintenance of the economic independence of the Danubian countries. What is happening in those countries is that most of them are suffering from bad crops. They are-frightened of world depression. Many of, them are suffering already from world depression. In many of those countries the currency reserves are locked up in the clearing agreements with Germany, and Germany is daily bringing all possible pressure to bear on those countries in order to bring them completely, zoo per cent., within her sphere of influence.

Mr. Boothby

Is the hon. Member talking solely of the Danubian States, or does he apply his argument also to Poland and the Baltic States?

Mr. Strauss

It applies also to Poland and the Baltic States. I mentioned the Danubian countries because the pressure on those countries is much more intense than the pressure on Poland or the Baltic countries. The Danubian countries, Poland and the Baltic States, which are subject to this pressure and are confronted with these unfortunate economic difficulties, do not want to be made completely dependent on Germany economically, because they know that when that economic dependence occurs their political dependence will have gone too. Every one of those countries is desperately anxious that that should not happen and that the other countries of the world should co-operate with them or come to their help in some way to prevent their disappearance as economic units and independent nationalities.

Without the Government in the slightest bit damaging our interests but rather helping our interests they could bring very considerable economic appeasement to Europe, because these particular countries want the closest co-operation with this country in all matters appertaining to trade. Many of them are very anxious to negotiate on terms which are as favourable to this country as to any other country, loans which will carry them over their present difficulties. In fact many of these countries are relying on getting short-term loans from this country as their one hope of not coming completely under German control.

To-day there is constant propaganda from Germany in these countries to the effect that this country has abandoned all interest in trade with these Danubian States. There is a stream of propaganda going on in this direction with the object of demoralising the forces for independence which exist in these countries and of facilitating the policy of Germany in bringing them under her domination. Indeed, some English newspapers which are looked upon, perhaps wrongly, as the mouthpiece of the Government, have been stating in leading articles and elsewhere that the Government would not consider favourably any further extension of the Danubian trade. There was an article in the "Sunday Times," which has been reprinted by the newspapers in the Danubian countries, and has had considerable influence there, in which it was suggested that in the negotiations resulting from the Austrian loan situation Germany might agree to pay her interest on the loan if we would give Germany a free hand in the Danube Basin, and it was suggested in the newspaper that the Government would very likely agree to such a course and would put no obstacle in the way of Germany expanding in that direction.

That sort of propaganda, emanating from German sources, and to some extent from usually well-informed English newspapers, is having a very harmful effect in these Danubian countries, and I suggest that it is very necessary for the President of the Board of Trade to take the first opportunity—I hope he will seek it tonight—to say that this is not our policy and that so far from abandoning our trade interests in the Danubian countries the Government intend to foster those interests, and that wherever an appropriate opportunity occurs and British interests are not in any way sacrificed they will consider granting loans on proper trade terms to countries in South-East Europe or in other parts of Europe where mutual trade advantages may be obtained.

I ask the President of the Board of Trade to make a clear statement on this matter in order to counteract the pernicious propaganda which is going on daily in the countries in South-East Europe to the effect that England has no more interest in that part of Europe and that the only thing which these countries can do is to come within the German sphere of economic influence more and more. If the President of the Board of Trade made such an announcement of policy, so far from it being harmful it would be beneficial to British trade, as this country can well do with the new export markets which would be opened up by the granting of such credits. It would also bring economic security to this vital part of Europe, and with this economic security a good deal of political appeasement as well. Looking at it from the broader point of view of national policy and strategy, I submit that every £ loaned to these countries in some trade agreement would be more beneficial for preserving the peace of Europe than very £100 spent by this country in building up armaments.

8.5 p.m.

Admiral of the Fleet Sir Roger Keyes

There can be no question that through the operation of the navigation laws and heavy subsidies foreign shipping is securing a larger proportion of the trade which hitherto has been carried in British ships. We are spending a vast sum of money on national defence, but no scheme of national defence can be complete unless the British Mercantile Marine is in a condition to operate against the unfair and hostile competition of other nations. Surely we, the largest commercial importers in the world, should be able to do something to aid our merchant shipping. Surely a way can be found by which our own ships shall carry a fair portion of the trade which comes to this country. My right hon. Friend the Member for Sparkbrook (Mr. Amery) referred to our Navigation Laws in this connection. I think we ought to revert to the principle of the Navigation Laws. The Parliamentary Secretary to the Board of Trade gave some statistics to prove that our shipping is in a better state. Undoubtedly there-has been some recovery during the last year or so, and tramp shipping has been greatly assisted by the subsidy. Nevertheless, while our shipping has benefited to the extent of about £4,000,000 other nations in the last few years have spent no less than £200,000,000 on subsiding their mercantile marine.

The hon. Member for South-West Bethnal Green (Sir P. Harris) has referred to the competition by America in the Pacific and by Russia. Everybody knows that, aided by a subsidy, the Japanese mercantile marine has taken 80 per cent. of the carrying trade in the Indian Ocean and the Persian Gulf which only a few years ago was entirely British. As Lord Lloyd remarked in the House of Lords two years ago, Japan is as remote from this field of activity as Great Britain. The American coastal shipping laws prevent us, as the hon. Member for South-West Bethnal Green remarked, from trading on the coast at all, and yet they have freedom to trade all over the Pacific, in New Zealand, Australia and Fiji. Last June the President of the United States asked for an appropriation of £32,000,000 to build new ships, and a few days ago we were told that the Italians are going to build 6o new ships by subsidy. The hon. Member for South-West Bethnal Green referred to the competition of Russia. It was hoped that when the Russian Trade Agreement came into operation our shipping would be on a better footing, but that hope has not been realised. Russia has practically driven us out of the Baltic; practically all Russian timber is carried in Russian ships. The hon. Member said that we should come to some arrangement. It is no good trying to come to an arrangement. We should refuse to take their trade unless they are prepared to give us a fair deal.

Our coastal shipping trade is in a pretty bad plight. A good deal has been said about foreign competition. I believe it does not amount to very much at the moment, but it is very galling. I think that the difficulties of our coastal shipping mainly lie in the cutting of freights by our own shipowners. They are cut so low and competition is so severe that officers and men have to serve under very bad conditions and there is a great deal of unrest and discontent in the coastal shipping trade. I know that in some small coastal ships in order to compete and keep the ships going officers have had to work 120 hours a week. That is all wrong, and in my opinion the coastal trade should be put on a sound basis so that officers and men can be employed under fair conditions and the people who invest their money in the industry enabled to make a reasonable profit. The Parliamentary Secretary seemed to consider that since the size of the ships and their speed have increased we are better off than in the last War. I have heard the Minister for the Co-ordination of Defence say much the same thing, and I heard what the representative of 300 master mariners thought about it a few days later at Southampton. It does not represent the views of the Mercantile Marine.

The Parliamentary Secretary also spoke of the great advantage we had from neutral shipping in the last War and hoped that we should get even more help in the next war. The people who helped us most in the last War were the Scandinavian nations and they used to ply their trade mainly to our Eastern Ports. It is not possible to say whether Norway, Sweden and Denmark will help us in the next war, but if they did and they were within aerial striking distance of our enemy it might be that the enemy would make them pay for their assistance by bombing their towns in order to get this shipping assistance stopped. I hold no brief for the owners, but I do want to see every merchant officer and man employed. The right hon. Member for Sparkbrook referred to the pool for putting merchant ships out of commission as a puny move—it is a puny move—and one which will hit the officers and men of the Mercantile Marine very hard. I think that every ship we have should be put into commission. We cannot expect the owners to carry on and lose money. Surely there must be ways of finding out whether they are losing money, and if they find it necessary to lay up their ships, I think they ought to be helped by the nation. We shall want all the ships in the next war. Altogether 2,479 mercantile ships were sunk in the last War and 14,288 men were lost. We cannot afford to drift on; we cannot afford to allow the Mercantile Marine to die in this way. Other nations mean to drive us off the sea; and they are doing it. Every British ship should be kept in commission, and if it is not a commercial proposition, the Government should make it so. We have to meet this challenge which will threaten the very life of the country in war time, and which is threatening our prosperity and trade in peace time.

8.15 p.m.

Commander Sir Archibald Southby

I regret that an engagement elsewhere in the House prevented me from hearing the speech of my hon. Friend the Parliamentary Secretary. I understand that he discussed the question of the adequacy of the merchant marine, and expressed himself as satisfied that we have at the present time an adequate merchant marine, suitable to our needs. I want in the few minutes which I shall detain the Committee to touch upon a much more human side. I listened with interest and pleasure to the speeches which were made on the subject of world trade and the methods which might be employed to bring about a better state of economic affairs throughout the world. I have no desire to follow hon. Members who have spoken on that line, but I wish to take this opportunity, an opportunity which occurs but seldom, to discuss the conditions of life of merchant seamen, and to say a few words about the conditions in the forecastles of our merchant ships.

I want to plead for better conditions of life for the men in the merchant navy. Their work is taken far too much for granted. It is work which vitally affects every person in the community throughout this country. The merchant navy inherits great traditions, but it also inherits vile conditions of service. Perhaps only a sailor can understand the lot of the men who live in the forecastles of merchant ships to-day. Hon. Members would be horrified if they were to go on board some of the ships which fly the British flag and see how hard are the conditions of life of those who man those ships. It is true that it is difficult to alter old ships, but I think that the Board of Trade have a duty, not only to the country, but to the men who man the merchant ships in particular, to see to it that when new ships are constructed, there shall be a vast improvement in the accommodation which is provided for the men in the forecastle.

Foul forecastles, no baths, stark steel work, unshaded lights, no locker accommodation, no bunks—all these things are going on at the present time. One wonders that the men are able to continue to do their duty as they do in ships so ill-found. I pay a tribute to many of the shipowners who are enlightened and who, in the main, desire to improve the lot of the men who serve in their ships. But there are others. Bad food and bad living quarters are things to which the merchant navy has been accustomed for many years. But to-day we take a pride in the regulations which govern the construction of houses ashore; we insist that people shall be properly housed in adequately ventilated houses with decent accommodation. We take pride in the fact that we are providing proper washing accommodation in houses ashore. As regards merchant seamen, I think it is a case of "out of sight, out of mind."

Mr. Maclay

Although my hon. and gallant Friend has said that he does not apply the things he is saying to the whole of the merchant marine, as he is making a comparison between housing conditions ashore and the living conditions afloat, I think it is only fair to point out that the great majority of the improvements in housing conditions ashore have been carried out with the aid of State money.

Sir A. Southby

] do not want hon. Members to think that I am making any accusations against particular persons, and I appreciate that the subsidies that have been given for housing ashore have been one of the contributory causes to the great improvement; but the fact remains that in the merchant navy there are conditions of life which call for a long overdue improvement. Even in the case of those great liners in which many of us have enjoyed happy days cruising, I think people are apt to forget that very often the good accommodation, the comfort and convenience which the passengers enjoy are obtained at the expense of curtailed accommodation for the men who serve them. Very inadequate space for recreation, very inadequate space for living, poor mess rooms—those are things which it is the duty of the Board of Trade to set right. It should not be possible for modern ships to go into hot climates, when the men live in steel forecastles—and only those who have lived in a steel ship in a hot climate know how hot it can be between decks—where there is no provision for ventilating fans. During the War, some merchant ships were taken over for service in the Royal Navy, and I think I am right in saying that in many cases the forecastle accommodation had to be considerably altered and improved before it was possible to put bluejackets from the Royal Navy into the crew spaces, so bad was the accommodation.

No sailor expects his life afloat to be a bed of roses. The sailor's life is one which entails a considerable amount of personal discomfort. I do not think that sailors as a body are people who cry out for the moon or who desire a standard of luxury afloat. They are only too anxious to do their duty, but they want to do it in decent comfort. When one realises that the ships taken over by the Navy during the War were large liners, and that the conditions of life in the forecastles of those liners were so bad that alterations had to be made before Royal Naval service ratings could be put on board, I think it will be agreed that there was something to put right. Comparatively speaking there has been very little advance in merchant ship accommodation since that day. I know that many shipowners who are building new ships are doing their level best to improve the forecastle accommodation, and, as I have said, it is exceedingly difficult to alter present ships. There are, of course, ships flying the British flag at the present time which are manned almost entirely by foreign crews, and the forecastles of which are completely revolting. Those are ships which are not really and truly British ships, but where ships for the merchant service are being constructed at the present time, it should not be beyond the wit of the constructors—and indeed it is not—or beyond the resources of the shipowners to put some portion of the profits which they make into constructing for the men who earn those profits accommodation of which this nation may well be proud.

Mr. Cross

May I observe that my hon. and gallant Friend made no reference to the new instructions which were issued last year, which I understand not only the shipowners but the National Union of Seamen regard as most satisfactory?

Sir A. Southby

I did not make a specific reference to them, as I took it for granted that hon. Members would realise what I had in mind when I said that ships now being constructed were much better constructed than the old ones; but even so, I do not agree that it is not possible to improve the regulations which at present exist, because I believe that even they do not set up the sort of standard to which the men in the merchant service are entitled.

8.24 p.m.

Mr. Price

I am sure that the Committee listened with sympathy to the remarks of the hon. and gallant Member for Epsom (Sir A. Southby) in his plea for better conditions for the men in the merchant service. I am not an expert in this matter, and I shall not attempt to follow the hon. and gallant Member, except to say that many years ago, coming back to this country from-the North coast of Norway in a Norwegian tramp steamer, I had some experience of the conditions under which some seamen are expected to live on that kind of ship. I am sure the Committee are glad that the matter has been raised to-day.

I think this Debate has shown that, in regard to foreign trade policy, the old controversy about Free Trade or Protection which vexed the last generation is dead to-day. What we are arguing about now is, in what way we are to regulate our foreign trade. The idea of returning to unrestricted competition between the individual trader in one country and the individual trader in another, is dead as the dodo. For the last 3o years or more hon. Members opposite have favoured the instrument of the tariff as a means for the regulation of our foreign trade. I and my hon. Friends on these benches are more inclined to advocate the increased regulation of trade by State control. It seems to me that to-day the pace is being forced by the Fascist States in Europe. Attention has been drawn to-day to the danger to our own economic system of the German policy of aggressive economic nationalism whereby they have organised what is practically a system of commercial swindling. That is really what it has been. Dr. Schacht in Germany has pursued a policy of purchasing raw materials from Germany's neighbours and then saying, "We cannot pay you and you will have to take whatever goods we choose to send you." If Hungary or Bulgaria has exported pig or cereal products to Germany, they have to take a million mouth organs in exchange, whether they want them or not. That is the method of Dr. Schacht and that, I understand, did actually happen in the case of one country, the name of which I have forgotten. That is a kind of commercial Bolshevism which has not been attempted even by the Russians. They certainly have followed totalitarian method in their foreign trade relations but in a much more respectable way.

Now, the question is, how are we to meet the authoritarian economic policies of these totalitarian States? We can only do so by a certain measure of self-discipline. Democratic capitalism will have to discipline itself or be disciplined by the State. In this respect it is not the working-class in this country which needs disciplining. The trade unions played their part when they organised the workers in industry, and they are prepared still to play their part. But the owners of capital, industrial, commercial and financial need disciplining by the State in this respect if we are to meet the competition of the totalitarian States. The City has to realise, and owners of capital in the big industrial centres have to realise that the interests of the State must be considered first, last and all the time. In this respect I do not think we can meet the situation entirely by such methods as those proposed by the hon. Member for East Aberdeen (Mr. Boothby). He said we ought to meet the totalitarian States of Eastern Europe by an extension of medium-term credits. That is probably one method, but I think we have to aim at a greater measure of stability in regard to the prices of primary commodities than has been achieved in recent years.

The hon. Member for East Aberdeen argues that the danger facing the democratic States to-day is the danger of the world deflationary trend, which started in the United States last year and is now spreading throughout the world. The totalitarian States have to some extent insulated themselves from it, though probably they have not insulated themselves completely. It is true, however, that the democratic States, where private capitalism has much more liberty than it enjoys elsewhere, are more liable to the dangers of a world deflationary movement than the totalitarian States. But it seems to me that what we are facing to-day is one of the normal crises of the capitalist system. Over-speculation in commodities has brought about high prices and overproduction and, finally, under-consumption and a fall in prices. The "Economist" the other day published some interesting figures showing the general trend in certain commodity prices during recent years. Taking the figure for 1929 as 100, it showed that from 1932 to 1936 these prices crept up from the low point of 55, which obtained during the depression, to 70. Then, from 1936 to the middle of 1937, in a period of about seven months they shot up from 70 to 90 and in the following six months collapsed again from 90 to 70. That shows the kind of thing from which world trade has suffered, and will continue to suffer if we cannot more effectively regulate the prices of primary commodities.

It is the business of our Government and the Board of Trade to see what can be done in that respect. M. van Zeeland's Report has something to say on this subject. In regard to some primary commodities it recognises the fact that steps should be taken to regulate and control output, production and price. It is true that we have, to-day, restriction schemes for rubber and tin, but they are very unsatisfactory. They control output only and not price and they do not attempt to deal with surpluses which may accumulate and become a drag on the market. The van Zeeland Report suggests the desirability of creating international public utility companies which would control output, and price and also have control over surpluses as they arose. Something of the kind is necessary also, because it might have important political consequences and that I think was at the back of the mind of M. van Zeeland when he suggested that it might have a pacifying effect on those countries which are complaining of being shut out from full participation in supplies of raw material.

On the restriction scheme to-day only the producer countries are represented; the consuming States are not represented. If we had something like an international public utility company, with nominees of the States which not only produce but also consume, we should have the beginnings of a real, practical attempt to control the distribution of raw materials. I suggest that that is one of the aspects of the van Zeeland Report which ought to be considered. I do not suggest that Germany in her present mood would be prepared to consider it—I am certain she would not—but it would at least have a very important propaganda value. Germany to-day wants a grievance in order that she can exploit it, and it would surely be wise tactics on our part to see what can be done to give her no excuse and, while resisting economic aggression on the one hand, to offer economic appeasement on the other, even though it is not accepted; and I do not think it would be in her present mood. But who knows? As my right hon. Friend the Member for Keighley (Mr. Lees-Smith) suggested in his speech, that mood may change. Indeed, we have come at the moment to one of those crises in world affairs in which things may get better or may get worse.

There is another aspect of the van Zeeland report about which I would like to say a word or two, and that is the argument that there should be an extension of low tariff areas, areas of greater freedom of trade. I am not speaking of Free Trade in the old sense of the term, but of less restriction than exists at the present time. It is suggested that we might extend the area of the Congo Basin Convention. I think the hon. Member for Oxford University (Sir A. Salter) was very sound in his argument that the advantage that we get to-day from the application of the Ottawa tariffs to those Colonial dependencies outside the Congo Basin Convention is very small indeed. It covers, I believe, the Malay States, the West Indies, and some parts of the West Coast of Africa—the Gold Coast, Sierra Leone, and, I think, Nigeria—and I really think the propaganda value of extending the Congo Basin Convention conditions to those Colonial dependencies infinitely outweighs any little economic advantage which we may still get from them. Of course, this would involve a modification of the Ottawa Treaties.

The right hon. Member for Sparkbrook (Mr. Amery) made an interesting speech this afternoon, in which he argued for, as it seemed to me, low tariff areas. He said, "Let other areas be created outside the Ottawa Treaties." But why cannot we join up with any other low tariff areas? Why not extend the Ottawa Treaties to include any other countries or groups of countries which may be inclined to join us? Why not create as large an island of sanity as possible in the world of economic stupidity? Looking at the figures of our export and import trade in the first quarter of 1938, as compared with the first quarter of 1937, I find that our exports to Europe during that time declined 2.9 per cent. and to the foreign countries outside Europe as much as 18 per cent.; they had increased to the Empire, however, by 6.3 per cent. That indicates to me that, although we have improved our export trade with the Empire, it is very much at the expense of trade with other countries. What we ought to aim at is not to improve one line of trade at the expense of another, but to improve the general level, to raise the whole volume of our trade, whether it be within or outside the Empire. Sir George Schuster, writing in the "Times" the other day, almost admitted that when he said: The outstanding feature is the increasing share of our trade taken by the Dominions and to a lesser extent by the Colonies, both as suppliers of our imports and as exporters of our exports. But, as I say, it is not satisfactory that it should remain like that, and that is why I consider that the success of the Anglo-American commercial negotiations is of the utmost importance, because it would show that if we can extend the area of our low tariff group to bring in the United States, the way will lie open to other areas as well. I think there is a general feeling throughout many other countries outside the totalitarian States—in France, Holland, Scandinavia and Belgium, as well as the United States—that the remaining free economic systems of the world ought to draw together as much as possible. I am certain too that the Dominions are not by any means concerned only with their trade with this country. The general tendency is for Canada to realise how closely bound up she is with the United States, on the same continent, next door to her. If things go wrong in the United States, things will not go right with her, no matter how much she may develop her trade with us. Australia is concerned with the development of her export trade in wool and livestock products to the Far East, particularly with China and Japan, and she has been very badly hit by the war in China. The Union of South Africa is concerned with her general trade with the United States and with Europe.

Everything, therefore, points to the un-wisdom of confining the Ottawa Treaties simply to the Dominions and Crown Colonies, and steps ought to be taken to extend them widely. It is hopeless to expect to bring in the Fascist and totalitarian States, which at the moment are bound to the policy of increasing their own economic self-sufficiency, but I would like to say a word in support of what has been said from all benches in this Committee on the importance of our trying to see what can be done to maintain and if possible improve our commercial relations with Eastern Europe, with the South-East of Europe, particularly too with Czechoslovakia, surrounded as she now is by totalitarian economies. If we can do anything by the extension of export credits to those countries to enable them to take more of our goods, if we can take something of theirs in return, from Czechoslovakia, Hungary, Rumania, Poland, and the Baltic States, I am certain that it would be a good thing. It would not hinder Germany's legitimate expansion. Naturally a great industrial nation like Germany, with her 80,000,000 population, must be a tremendous economic draw to all of her neighbouring States on her Eastern frontier, which are not industrially so well placed as she is. While one can wish for legitimate trade between Germany and those States, we can draw the line, and must draw the line at this kind of economic Imperialism based on the methods I described at the beginning of my remarks being allowed to expand without our doing something to save the countries of Eastern Europe from that kind of economic policy.

With regard to our trade with Russia, I am not altogether satisfied with the position. Can the President of the Board of Trade tell us what is our balance of trade with Russia to-day? I know that we are importing more than we are exporting, but we have to consider invisible exports in the form of all kinds of services. Can the President give us some indication of what they are? The Board of Trade experts must have means of estimating what they are. If there is an adverse balance in Russia what can we do? Can we do something by the extension to Russia of export credits to improve that position, or, as several hon. Members have suggested, can we do something to insist that our shipping is used more in the Anglo-Russian trade. There is no doubt that the Russians have been trying it on and insisting on the use of Russian ships to a large extent to carry goods to this country. It only requires a little firmness on our part to make Russia see reason in this matter and to get it established that we, too, have rights with regard to our shipping.

With regard to our commercial trade balance with the United States, it has been argued that it will be difficult to bring about an Anglo-American commercial treaty because our trade balance with the United States is adverse. We are importing so much more and our exports have gone down. Our exports have gone clown and our imports have increased owing probably to our rearmament pro- gramme. I would like again to emphasise, however, that we must not look upon our trade with the United States bilaterally. It is probably triangular, if not multilateral. While we are importing more from the United States, there are certain Colonial Dependencies with whom our exports are greater than our imports, and who in their turn export more to the United States than they import. Consequently, the balance of trade may go round in that multilateral way. I hope there is not any weakness on the part of the Government, or that they may think that owing to the adverse trade balance with the United States we can for the moment drop the idea of an Anglo-American treaty and postpone it to a more favourable time. If the adverse trade balance has grown, it is due to the special conditions of the rearmament programme, and it should not be made the excuse for not pushing forward this most desirable measure. If part of the world is economically insane let us at least try and get an area of sanity, and do not let us confine it to the Empire alone.

8.50 p.m.

Mr. Maclay

I should like to congratulate hon. Members on the Liberal benches for raising this subject and the hon. Member for East Birkenhead (Mr. White) on his wise and moderate speech. I did not intend raising the question of the Mercantile Marine, but the hon. and gallant Member for Epsom (Sir A. Southby) made some very hard criticisms about the conditions in British ships. An industry such as shipping should welcome criticism, but I suggest that criticism such as we heard to-night was overdone. Any industry may have a part of it of which it is not proud, but it is wrong to point to certain black spots and then refer to the whole British Mercantile Marine in relation to them. A certain amount of criticism is certainly due, but it does not apply so much to the new ships, because, as the Parliamentary Secretary mentioned, and the hon. and gallant Member for Epsom did not, the Board of Trade issued new regulations last year which brought the regulations up to as high a standard as that of any other nation in the world. It now remains for the industry to put them into force. The criticism comes from the old ships. It is in regard to them that the port sanitary authorities have made their criticisms. It is a difficult problem.

The average British old ship is as good as the average foreign ones of same age, but it has to be admitted that in some of them conditions are bad. Some of the conditions can be remedied, but a lot of them present a great deal of difficulty because it is a question of structure and space. It is only fair to say that, as far as one can gather, the industry and owners are as anxious as anyone to solve the problem of how to improve old British tonnage. What has not been mentioned to-night is that on the initiative of the industry a committee is to be set up, along with the Seamen's Union, to see whether some of the problems such as structure, and problems in connection with cleanliness and comfort of the crew in the old ships can be solved. It will be done, I trust, in conjunction with the Board of Trade, the port sanitary authorities and the shipbuilding industry. Mention has rightly been made of the great improvement in housing people ashore as against accommodation at sea, and there is no doubt that the standard of housing ashore has leapt ahead of accommodation at sea. That has only been done by the very large application of State funds. Although some of those owners who are fortunate enough to have resources and to have made profits may be pressed into improving their ships, there will still remain a large number of old ships which cannot be improved because the owners have not the financial means with which to do it. It may be well for the Government to remember that point of view. Unless the assistance comes from somewhere it will be impossible to substantially improve those ships because it is a question of lack of space and that means alteration of the structure and that means heavy expenditure. I think again that it is a fair criticism of the industry to say that feeding at sea has in some sections not been properly tackled. The industry admit it, are trying to put it right, and there is sitting a joint committee of the Seamen's Union and the officers and owners to try and put the victualling on a sounder basis. It is not so much a question of the food which is supplied as of the cooking of it and the suitability of it in different climates.

I will pass next to the general position of our Mercantile Marine and its relation, as regards amount of tonnage, relative to foreign mercantile marines. It is ad- mitted that during the past number of years the British Mercantile Marine has remained stationary and in some cases has been declining, while foreign tonnage as a whole has been consistently rising, and the gap continues to increase each year. Why? The reasons are dimly known. We know what is happening in some directions, but there has been no thorough investigation to find out why the great British Mercantile Marine should be stationary while the tonnage of the rest of the world moves forward, and there is no designed national policy to meet this menace from foreign mercantile marines. I am not criticising the Parliamentary Secretary for what he said, but I think he gave a wrong impression when he told us that all was more or less well. If he will come with me to any of the exchanges concerned with shipping, in this or any other country, he will find a most acute depression and a fear of the future. The outlook is a serious one, especially for British shipping. The impression which I thought he gave to-night was that the industry itself was organising laying-up schemes which may tide it through. If the only thing which Great Britain can do to help shipping is to depend upon the laying-up of ships, then Heaven help us because what we require is not some temporary palliative but a definite aggressive policy, though not one such as will cause undue retaliation, in order to keep British ships at sea, to keep British seamen employed and to direct British trade into British ships.

I said that there are various reasons why foreign tonnage is growing while British tonnage remains stationary, and those reasons need the most careful investigation and ought to be connected and analysed. There are many foreign nations which are determined to have a mercantile marine, whether it prove economic or not, for national defence purposes, and we have to face that as a fact. There are many foreign nations, especially the totalitarian States, which are determined at the moment to keep their ships running for purposes of securing foreign exchange, and I do not think we can manage to put them off doing so. There are foreign nations which are subsidising their ships, and other foreign nations which carry their own cargoes and refuse to let British shipping carry even per cent. of them. That sort of thing I think we can meet, and ought to chal- lenge. There are nations, such as Turkey, which are wondering whether shipping is a good proposition or not, and whether it ought to be subsidised. Now is the time when our Government and the shipping industry ought to make the world realise that Great Britain is determined to hold on to her carrying trade, and not only to hold on to the present trade but to try to get a greater share of the trade of the world. Another reason why foreign tonnage is increasing is that the British Mercantile Marine bears heavy burdens as compared with foreign shipping in regard to regulations, manning scales, pension allowances, wages and high taxation.

Yet another reason is to be found in the high shipbuilding costs, and I want particularly to draw the attention of the Parliamentary Secretary to the figures of shipbuilding. Britain has always regarded herself as the greatest shipbuilding nation in the world, but to-day we have only 1,000,000 tons of shipping under construction as compared with nearly 2,000,000 tons being built abroad. That is a strange reversal of the old position, and I think it is high time there was a careful investigation to ascertain why the cost of building ships here is so high and why ships can be built abroad at 15 and in some particular cases 20 per cent. less than in Britain. One knows that at the moment it is the Admiralty work which is keeping up prices, but it is a dangerous thing for the merchant service if the price of ships is kept up owing to Admiralty work replacement will stop. These are some of the reasons, and I could give a dozen more, why there is a growing gap between the tonnage of British shipping and of foreign shipping. During the last few years America has been worried over the question of what her shipping policy ought to be. She set up a Maritime Commission, with Mr. Kennedy, the present Ambassador to this country, at the head of it, to investigate the position. That commission carried through its inquiries very quickly. In under six months it had made a complete investigation of the American shipping position and the question of future policy, and produced a report, and America now knows what her policy is going to be and the reasons for it.

I suggest that at the moment Britain has no definite policy, no designed plan, for her shipping, and although the situation may be difficult we should get to know, and connect, the facts, and not wait until the trouble is too deep for the position to be remedied. There ought to be a full investigation. I do not mind whether it is undertaken by a Royal Commission or whether the Government ask the industry itself to conduct the investigation. It should inquire into such matters as the share of trade coming to British ships, the inter-Imperial routes of trade, questions of National Defence, foreign subsidies and relative costs. It will be found that there is not one cure for the position, but a dozen cures, and I would say incidentally that the one cure that cannot be adopted is Nationalisation. [HON. MEMBERS "Why? "] For the simple reason that over a period of years there is a debit and not a credit balance in the shipping industry. If hon. Members like to take the trouble to look over the records of the past 25 years, although there may be outstanding cases in which a lot of money has been made, it will be found, as everybody knows who has ventured into shipping, that there has been a debit and not a credit balance if all the money invested is accounted for. All I ask is that this great maritime country should know what it is doing and should follow a policy based upon a considered plan, not giving a subsidy here and a laying up there, but following a reasoned plan drawn up to meet a known position. It may be that the cure may be by way of trade treaties or subsidies, or the provision of better ships and conditions, or by better trading facilities—as I say it will not be one cure but a combination of many. The spirit is there, the enterprise is there, and I think the brains are there, and all we ask is that the industry should be properly concentrated upon a concerted plan of action and Government policy.

9.5 P.m.

Mr. Dodd

The Debate has ranged over a very wide field during the past few hours. We opened with the van Zeeland Report and we have touched on many different aspects of trade. I feel that there is a general measure of support on both sides of the Committee for the findings of the van Zeeland Report and for the recommendations that are contained therein, but that there is a feeling at the same time that international cir- cumstances make it impossible at present to put some of those recommendations into operation. Nevertheless, I feel that a start should be made and that there are countries within the British Commonwealth, or associated very closely with us by trade agreements already made, who would support a proposed pact of economic collaboration as propounded in the van Zeeland Report. An American agreement has been mentioned this afternoon. It would be a tragedy for this country and the world generally if that agreement did not become operative. Sacrifices will probably be required, but I think British industry is prepared to recognise the necessity for them if called upon to make them. Whether on the part of the ordinary man in the street or industry in general, there is a desire on this side of the Atlantic for a pact and an agreement between this country and the United States.

It has been suggested from the Opposition side that only by a complete revision of our social system can economic appeasement be attained, but I cannot agree with that. The right hon Gentleman the Member for Sparkbrook (Mr. Amery) has said that some scientific system should be adopted, but I have a feeling that a scientific system would be an extremely dangerous thing to experiment with in contending with the competition of dictatorially governed countries, and that the wiser course is to widen the orbit of our agreements, covering as much as possible the nations with whom we are already in agreement so that they may act on similar lines to ourselves. A great deal has been said about Germany, but the general situation of German trade is a problem difficult to face. Germany is apparently free to send in what she wishes to us, but we cannot export into Germany except under licence, and that is an entirely unsatisfactory position. There is no need to revolutionise the whole system of export trade. Great progress can be made with the machinery which we have already.

I have considerable associations with the Chambers of Commerce representing British industry, and they are determined that the time has come to make a stand against Germany on the Austrian debt and international trade. We are prepared to go so far as to say that the Government, whether through the Exchequer or the Board of Trade, should take a strong line with Germany and indicate that we are not prepared to continue as things are at present. The Austrian debt must be cleared or settled at an early date, and if that is not agreed to they must be prepared for any measures that we are prepared to take on this side, even to the extent of closing down a big proportion of our German trade and the opening of a unilateral clearing-house in this country for German debts. The time has come to take a strong line on this matter. It is no use attempting to negotiate with weakness; we should do so with absolute determination, prepared to see the matter to its ultimate conclusion. I am convinced that Germany would be compelled by economic circumstances to give consideration to the matter.

Another factor would be the psychological effect which such action would have upon the whole German nation when they saw that we, as the British nation, were prepared to take a stand at last from an economic point of view and were not going to tolerate any more of this economic wangling—which is really what it amounts to, in a sense. There is no difference between a trading concern going into liquidation for the purpose of securing its assets to the disadvantage of its creditors, and a nation going into voluntary bankruptcy for the purpose of defaulting upon its international bonds. That is happening in certain European countries at the present time and in certain countries in South America. Debts have been piled up over a period of years, and before we know where we are the British industrialist, whether through exports which he has made or money which he has invested in the country, finds himself with blocked credits, and bonds which he cannot use. Capital which should have been used for British industry has been locked up abroad. Such a situation has arisen in recent years, but provided that it is grasped quickly it may still be brought to an end before it has been allowed to go too far. I am not suggesting that any scheme such as the German export scheme should be operated here, as I consider it would be fatal to British interests, but many Government Departments are affected.

When all is said and done, the initiative in these matters must rest with the Government. It is no good individual industries or concerns making attempts to reach a settlement with foreign debtors and traders. The Government should give a lead in the matter to British industry. It is not only the Board of Trade which comes into the matter but the Colonial Office, the Dominions Office, and the Exchequer. We have heard from the other side of the House about economic appeasement; I have come to the conclusion that a little economic appeasement for this country might be quite a good thing. The number of our unemployed reaches approximately 2,000,000 and that is good ground for the claim of economic appeasement in reference to some of the things with which we are contending. I should like to know better grounds.

This afternoon we have discussed ships and shipping, but I am interested in them only because of what I can put in them. I have been associated with the export trade, and I represent a division which is the major cotton town in the country, depending almost entirely at the present time upon exports. What do they see? A declining trade to the right and to the left. We have been faced with exchange restrictions and with quotas of every kind and yet we have made some agreements which have proved satisfactory to industry in general and to the cotton trade in particular. Much more can be done and should be done. If other countries imagine that British industry and the British Government are prepared to climb down when faced with awkward circumstances, they will carry along on the same lines. I say that British industry is not prepared to climb down and that the Government must back industry and support it in its plan.

Mr. Thurtle

The hon. Member will never get this Government to do that.

Mr. Dodd

The Government have introduced a considerable number of agreements and they have other agreements under consideration at the present time. One factor relating to our declining export trade is well worth consideration because it is affecting the Exchequer very considerably, and it is that during the present year much of the very heavy burden of taxation being borne for Defence purposes is raised upon large assessments which were made when trade was good during the past year. In the state of decline which exists in the export industry it will be difficult to raise funds next year on this year's assessment to see us through our Defence proposals. Our defence expenditure benefits, not only ourselves, but almost 50 other nations, and many of them, I feel sure, appreciate it. As regards the Scandinavian countries in particular, I have talked with many people from Norway, Sweden and Denmark who appreciate our expenditure and work for Defence, because they feel that they also have some interest in it. Surely that fact can be used to a greater extent than it is. The world is living in a state of craziness, with every type of madcap economics. If we were to change our present economic policy we should be following in the same path as others. We may have to be slightly unorthodox in some ways, but an orthodox policy pays in the long run.

I should like, if I may, to make a few short references to one particular industry, because it is our major exporting industry, and because what I am going to say about the cotton industry as a particular case applies to dozens of other industries in this country at the present time. Before the War, the cotton trade employed 712,000 people. Last year, when things were reasonably good compared with recent years, it employed 445,000. Now there are 100,000 unemployed, or more than double the number who were unemployed this time last year. Foreign goods are coming almost free into this country, and, after being finished in this country, are stamped "British" and re-exported, although only a fraction of the work upon them has been done in this country. But if we send British piece-goods say to France, Belgium or Germany, for special finishes to be put upon them there, they have to be stamped as foreign even when they are sent to our own Dominions and Colonies. That is a position which cannot give any satisfaction to us.

If I may mention one particular case, I have had brought to my notice in my own division some shirts manufactured in Japan and bought at 6d. each at a chain store in the town. They were Japanese shirts which were being sold in a town in the centre of the cotton industry. They were quite well made and satisfactory for the requirements for which they were wanted. They might not have very long tails, but at any rate they were sufficiently effective for general requirements. The Japanese are particularly interested in shirt tails at the present time, because they are not only sending these particular shirts to Great Britain and selling them in our own market, but they are sending other shirts to the West Indies with tails several yards long, which can be lopped off and used as table-cloths or bed-spreads. That may sound very ludicrous, but nevertheless it is a fact, because the tariff arrangements are different for piece goods and for wearing apparel. Cases like this have created in Lancashire a feeling that here in London there is not the interest in this huge exporting industry that there should be. Little enough is known about the industry here. It has been abused in recent years, and accused of being ill-equipped and unable to compete, of having obsolete plant and ineffective sales methods. From close knowledge of and contact with the industry, I can tell the Committee that to-day there is a large number of concerns in it thoroughly well equipped and capable of competing with anyone in the world provided that they are given fair and reasonable conditions. But it is not possible to compete in an open market with nations whose level of livelihood and labour costs are very low.

At the present time negotiations are going on with the Indian Government for a new trade agreement. I am given to understand that that agreement is almost completed, with the exception of the most vital question, namely, the question of the entry of piece goods into India and the import of raw cotton from India. I wonder how many Members of the Committee know that for years past the Lancashire cotton industry has levied itself specially for the purpose of developing the growth of Empire and Indian cotton. It has spent money on development, on research, on establishing a native cotton growing industry. What is India's response to that? It is to place a high tariff on British piece goods going into India. We have assumed for India vast responsibilities, and we are continuing to carry them. We have built up a raw cotton industry in India which is of very high value to that country, and we consume as much of its cotton as we can in Lancashire. The response is a closed door to our goods. India has now reached a position in which she is not only supplying to a very great extent her own requirements, but is entering into competition with this country in markets abroad. This year she has reached the position of the second largest exporter of cotton yarns in the world, while our exports to India which last year were 356,000,000 yards, have fallen by 50,000,000 and 87,000,000 yards respectively in the last two years. Is it not time that, in making any agreement with India, we took all these facts into earnest consideration?

India is competing with us in West Africa and in various other markets at the present time. I think the President of the Board of Trade has already had brought to his notice the Indian competition that is taking place in Mauritius. This country is granting to Mauritius a rebate on its sugar at the rate of 3s. 5d. per cwt., amounting last year to a net revenue to Mauritius of £1,513,000; yet India, while exporting to Mauritius, is at the same time placing a 20 per cent. duty on British goods going into India. Do we need to worry so much about the Balkan States, or about individual Baltic countries or smaller nations up and down the world, when within our own Commonwealth we are faced with conditions such as that in the biggest market which our cotton industry has? Again, Egypt has advised this country that she is going to apply increased duties on cotton piece goods entering Egypt, in some cases to the tune of 100 per cent. ad valorem. In my opinion that is a very poor response to an agreement between Great Britain and Egypt which was welcomed in all quarters of the House, and under which we assumed responsibilities for the defence of Egypt and gave Egyptians certain rights and privileges within their own country. Their response, in a grand spirit of good will, is: "You British people must pay an increased duty of 100 per cent. on what you send to us." Lancashire still rankles over the Ceylon quotas, which were discussed in this House less than 12 months ago, when our quotas to Ceylon were reduced.

In West Africa, within our own Empire, we cannot compete with Japan and India. As long as the Congo Basin Treaties stand as they are, we are faced with competition even from within our own Commonwealth. On the Gold Coast conditions have been such that, due to the boycott which has taken place following the disagreement over the price of cocoa, the whole of the Gold Coast was shut down to Lancashire. In Nigeria imports have fallen off, due to cocoa prices. Colombia, which is the second greatest market for the cotton trade, has told us that she is going to abrogate an agreement which has existed with this country since 1866. There is a possibility of being cut out of that huge market, and yet it does not appear as if anybody takes a great interest as to whether we lose it or not. With cases like these I could go on for a long time, but it is getting late.

I make no reflection on the President of the Board of Trade; he is alive to many of these difficulties. But I feel conscious that if he felt that he had the people of this country behind him in these negotiations it would make a very great difference to the way in which he would approach each individual country. Opinion has to be aroused to a point where it can appreciate that there is something left which is worth fighting for. Are we going to see a great export trade which has been built up over a century or more frittered away merely because the German nation wishes to send Opel cars to Britain? Are we to admit that, because we have given free government to one nation after another, there is to be no quid pro quo to the great British race which has done its utmost for generations past to make them what they are? The time has come when we must make a stand.

Mr. R. J. Taylor

Leave the National Government.

Mr. Dodd

It is no use asking the Government to make a stand—[HON. MEMBERS "Hear, hear"]—it is no use asking any Goverment to make a stand unless that Government is convinced that it has behind it the solid backbone of public opinion in the country. This public opinion must be roused, it must be brought to a point where we can speak as one nation, where we can enter into negotiations for trade agreements, whether with European countries, with Colonies, or with Dominions, when we can say to them, "We have gone so far and we go no farther." If we can take such a line, surely there would be a hope for the exporting industries of this country.

Mr. Charles Brown

Does the hon. Member suggest that we liquidate the Empire?

Mr. Dodd

I do not suggest that. I say there is no reason why the British Commonwealth should not reach a far stronger position in world affairs than it has at the present time. British industry has for a very long time been in the Slough of Despond. It has lost a little through internal circumstances and much through external conditions. I say we have to take such a line as will clear this international situation. Do we as a great nation know our strength? We are contemplating entering into an agreement with the United States. Surely the British Commonwealth and the United States must count for something in world affairs. I hope that when the Minister comes to, respond he will be able to give some indication of what he is going to do in some of those countries to which I haves made reference to-night.

9.30 p.m.

Mr. McLean Watson

The time has come when we have got to make a stand —so we are told by the hon. Gentleman the Member for Oldham (Mr. Dodd). After that speech, does he expect this party to be a tariffist party? Does he expect this party to be enamoured of a system for which his Government stands? His speech is not singular. Such speeches are becoming very frequent on that side of the House. Hon. Members opposite are becoming very dissatisfied with a system that was going to relieve us of unemployment and poverty and destitution. All those things were to disappear if we accepted tariffs. Now we have got tariffs, we have got restrictions and quotas and everything that they want. At any rate, we have got all that they asked for, and they are not satisfied yet. If this Debate has done nothing else, it has shown very clearly that what was regarded as the panacea of all our industrial and commercial ills has proved a failure. But still the hon. Member has faith. He rather resents the suggestions made during the Debate that there should be certain changes in our tariff system. He prefers that we should go on with the system. How the hon. Member proposes to improve the position in Lancashire, as he has described it, under the tariff system is more than I can understand. I should have thought he would welcome the suggestions for the amend- ment of our present tariff system, which we have had for about six years, so as to bring some ray of hope to the cotton workers of Lancashire.

Not only have we had very significant speeches from the opposite side of the House in recent Debates on trade, but if hon. Members have been watching they will have noticed a growing number of questions, addressed principally to the President of the Board of Trade, with regard to certain industries and with regard to the quantities of imports coming into this country which we were assured would be kept out if we accepted a tariff system. When this system was introduced we were told that as a result we would have British work for British hands; the foreigner would not be asked to do work that could be done by British workers. What has gone wrong with your tariff system that it is not providing work for British hands? These were your promises when you got the people of this country to approve of a system of tariffs—and I agree that you got a mandate to undertake a tariff system, but the people of Great Britain gave that mandate on the understanding that they were to be provided with work and wages, that they were not to be continually on the dole, that we were not to have a huge army of unemployed. As. a result of the change in the fiscal system they expected unemployment to be reduced to a very insignificant figure, and here it is nearly as bad as it has been in previous years, and growing at the moment. At a time when unemployment should have been reduced we find unemployment figures going up, our export figures going down, and our import figures going up.

That is a very serious position, and the President of the Board of Trade has his work cut out not only at the moment but for some time to come before he can get a readjustment of that position and win for the people of this country what we were promised when tariffs were introduced.

I want to draw attention to one or two points that have not been touched upon in the Debate. We had a Debate some time ago on the question of imports of jute goods into this country from India. During our last Debate on the Board of Trade Vote we had a speech, similar to that to which we have just listened, by the senior Member for Dundee (Miss Horsbrugh) in which she painted as doleful a picture of the position in Dundee as the hon. Member has just painted of the position in Lancashire. The hon. Lady pointed out that it was impossible for the Dundee workers to compete with the workers in India in the production of jute goods, and that unless something was done the position in Dundee would be absolutely desperate. It is fortunate indeed for the workers in Dundee that the Government have been providing them with very large orders for sandbags, which have helped to tide them over a very bad period; but the time will come when the Government orders will fade away, and then in that city we are bound to have a very serious situation. It is impossible for the Dundee manufacturers to compete against the conditions that prevail in India, and the hon. Member for Dundee addressed to the President of the Board of Trade a very earnest appeal for something to be done to readjust the position there.

I want to refer to one or two other industries. Yesterday the President of the Board of Trade answered a question with regard to the importation of rubber footwear into this country. We were assured that negotiations were going on with other parts of the Empire in regard to this importation. Some time ago I drew the attention of the President of the Board of Trade to the enormous increase in the quantity of rubber footwear coming from Hong Kong, and I asked whether he was satisfied that that was being produced by Empire labour. His answer was that the authorities in Hong Kong were convinced that it was all being produced by Empire workers. I want to put this to the President of the Board of Trade: If there are factories in Hong Kong owned by Japanese and worked by Chinese labour, does he consider that that is fair competition with the workers in our own country? I am certain that during recent months he has had representations from rubber manufacturers in this country, complaining about the competition they are having to face from that quarter of the globe. They do not complain so much of the competition from Canada; but here we have in the East an industry built up and, as I say, in some cases owned by Japanese, where almost all the labour employed is Asiatic, and we find the rubber manufacturers in this country in a very desperate position. I know that in the east of Scotland rubber manufacturers have been dispensing with workers. They have carried on as long as they possibly could against that competition, but they have found it impossible to continue. I hope the President will give further consideration to this, and see whether something cannot be done to make sure that manufacturers in this country get a fair chance.

I want to refer to another industry that is suffering very badly. After the tariff system was introduced in this country a number of foreign manufacturers set up factories here, to get behind the tariff walls. In my area we had a new industry introduced. The linen industry, which was a great industry in that area at one time, had almost vanished from there when the tariff system was started. Behind our tariff walls silk manufacturers from Switzerland set up their factories, and they have been carrying on for a number of years. The first handicap that these manufacturers have to face is the fact that they have an import duty on the raw material to pay before they can start to work up the silk itself. Is that a method by which the President of the Board of Trade expects to help an industry here? That duty was put on at a time when, we were told, silk was a luxury; but silk is no longer regarded as a luxury: it is an article of every day wear for womenfolk; and so far as I know there is no reason why that duty of is. 6d. per lb. on raw silk coming into this country should have to be paid. Will the President of the Board of Trade consider either the reduction or the complete abolition of that tax?

I have the same complaint to make about competition from the Far East with regard to silk as I had with regard to rubber footwear. The quantity of silk coming into this country from Japan is going up by leaps and bounds. Almost every month we find increased imports of manufactured silk from Japan. The Government introduced tariffs for the purpose of giving work to British hands. While they are maintaining their tariffs, the foreigners are able to get round those tariffs and get their goods into this country. Apparently as long as the Government can rake in something between £80,000,000 and £100,000,000 a year in duties, they consider they are doing their duty by the electors, who elected them to carry out a successful tariff policy. You should either demonstrate that you believe in your tariff policy or abandon it; either make it effective or depart from it entirely. These are points which I wish to bring to the attention of the President of the Board of Trade before the final reply is given from the Government Front Bench. [Interruption.] I have never said that I believe in tariffs. I have always said that I am against the tariff system, which only pretends to protect. The Government say that they have a protectionist policy and are going to protect British industry, yet here we are listening to speeches like the speech which preceded mine. We have listened to the the voice of Lancashire, and there are many other hon. Members opposite who could get up and repeat what was said by the hon. Member who preceded me and say that the tariff system has been a complete failure. The sooner the Government review the system the better it will be, not only for them but for the country as a whole.

9.47 P.m.

Colonel Ropner

I hope that the last two speakers will forgive me if I do not follow them into the intricacies of manufacturing rubber, linen or cotton. I do not think I could do so were I tempted to try. I hope the Committee will allow me to endeavour to answer a question which was asked by the right hon. Gentleman who opened the Debate early in the afternoon. He asked this question, "Can the Mercantile Marine under existing conditions and through its own unaided resources enlarge, or at least maintain, its present position "? At the same time he reminded the Committee that the proportion of British tonnage in the world has already been considerably reduced in the last few years. I was not quite clear —I cannot say that I am now—whether the Parliamentary Secretary, when he replied, meant to give an affirmative answer to that question. If he did, I am afraid that he was mistaken. The true answer is an emphatic and definite "No."

I hope that the Committee will bear with me for a few minutes while I try to narrate the causes of the present depression in the shipping industry. Anyone who knows the facts cannot possibly deny that shipping passed through a period of prolonged and acute depression prior to 1937. For the capitalists, those who had invested capital in shipping, there were no profits; rather were enormous losses sustained. For crews there were low or no wages, doles were paid instead, and for the reward of management was constant worry. Ships had to be tied up. Shipyards were empty and no orders were received. I am not altogether sure whether it is generally realised that, while the merchant fleets of all nations were at that time running at a loss the merchant shipping of the United Kingdom suffered worse than that of almost any other nation.

We were, during the whole period of that depression, subject to the most intense form of unfair foreign competition, the ruthless nature of which my right hon. Friend the Member for Sparkbrook (Mr. Amery) reminded us this afternoon. It is fairly widely known in what ways the competition was of an unfair nature. The running costs of British vessels were considerably higher than in the case of some nations. Many nations heavily subsidised their mercantile marine. Trade reservation and flag discrimination in favour of their own nationals was rife throughout the world, and the merchant navy, which had lost no less than 7,000,000 tons during the War, was still further reduced, both actually, and proportionately to the shipping of the rest of the world. I think that it was the late President of the Board of Trade himself who, in 1935, stated that British shipping was being swept from the seas.

Mr. Kirkwood

And he was the biggest shipowner.

The Deputy - Chairman (Captain Bourne)

Order.

Colonel Ropner

The failure to maintain our merchant fleet and keep ships running was not because of any failure or weakness of private enterprise or the Capitalist system. Given fair trading conditions, the British Mercantile Marine was then, and still is, quite able to look after itself. If the whole merchant navy had been owned by the State, precisely the same difficulties would have arisen as arose under private enterprise.[Interruption.] I am ready to give way to the hon. Gentleman the Member for Dum- barton Burghs (Mr. Kirkwood) if he wishes to ask a question, but I do not think it helps the Debate to have these constant interruptions. The same difficulties would have arisen under State ownership, and the only difference would have been that millions of pounds of the taxpayers' money would have been necessary to support the industry instead of that loss falling upon the shareholders in the companies. It will be recalled by the Committee that towards the end of the depression, the Government, convinced that the competition which shipowners had to face was of an unfair nature, gave a small subsidy on conditions which may or may not prove to have been ill-considered. At the end of 1936 there was a miraculous improvement in the condition of the shipping industry. There was a sudden and an enormous increase in the demand for shipping throughout the world, and in a very short time 'co per cent of British shipping was employed at very high rates of freight.

But I would ask the President of the Board of Trade to note that both in good times and in bad, under present conditions, foreign shipowners have an advantage over their British competitors. When the British owner is sustaining losses, the foreign owner is making ends meet, and when the British owner is making high profits the foreign owner, in nine cases out of ten, is making still higher profits. After years of depression the good times, when they came, unhappily, only lasted for a few months. During the last few weeks the rates of freight have fallen even quicker than they rose a few months ago. Cargoes even at cut rates of freight are unobtainable, ships are going back to the buoys, the rivers and estuaries of these Islands are once again becoming cluttered up with idle tonnage, officers are being dismissed, seamen are going back on the dole, shipyards are becoming empty, and shipyard workers have little hope for the future. I have no hesitation in saying that the present state of shipping is almost as bad as it was in the depth of the recent depression. I warn the Committee that while this fact may not be evident for the moment, because voyages are still running out and ships cannot be tied up until they get home, there are scores of ships that will go to the buoys and be tied up unless matters improve in the next few weeks. The outlook is black, indeed, for the British Mercantile Marine.

Mr. C. Brown

The hon. and gallant Member cannot expect us to believe that all this is happening under a National Government.

Colonel Ropner

The hon. Member can believe it or not. I am telling exactly what is happening. Under these conditions, we are forced to ask, as has been' asked in the case of other industries during this afternoon, what is going to be the general policy not only of this Government but of future Governments in regard to shipping? It would be a most unhappy suggestion to propose that the recent increases in wages, the provision of better accommodation, the increased manning scale and the various other improvements which have been made in the conditions of labour in the industry in the last few months, should be abrogated. It would be a tragic state of affairs if the condition of British shipping necessitated a retrograde step in that direction, but we are forced to ask whether already these additional burdens are not placing a new handicap on British shipping in the losing battle which it is fighting. I sincerely hope that a solution other than the one which I have indicated may be found, and that it will take the form of very definite action on the part of the Government to save the industry, so that the threat to the standards of existence in the industry shall not be fulfilled. Something must be done if the shipping industry is to maintain the conditions which have been so much improved during the last few months.

Not only are the running costs of British ships higher than those of foreign ships, but millions of pounds of public money are being spent by other nations on their mercantile marines. Subsidies are given for running their ships, and for building their ships, open subsidies and hidden subsidies are given. Scores of millions of dollars, francs, marks and so on are being spent by other countries on their merchant fleets. Not only have we to meet the competition of heavily subsidised fleets, but trade reservations and flag discriminations are still rife throughout the world. The subsidies which are maintaining the large and increasing fleets of foreign nations are at the same time destroying the merchant navy of this country.

The continued fall in the volume of United Kingdom shipping is disastrous. Between 1922 and 1937 this country lost through unreplaced wastage 1,600 ships. The Parliamentary Secretary mentioned this afternoon the efforts that are being made by the industry itself to find some new method which may give shipping a temporary respite, but I thought how true was the description of those temporary measures when more than one hon. Member described them as pettifogging. To suggest that the British Mercantile Marine can be saved by tying up our ships, by making provision for idleness, by dismissing the crews, is a defeatist policy, and I beg the President of the Board of Trade to turn his attention not to methods of keeping ships idle, but to try to find some plan whereby increased employment may be given to the shipping of this country.

Mr. Kirkwood

rose—

The Deputy-Chairman

Order. I would point out that it is getting late and that other speeches have to be made.

Colonel Ropner

I have nearly concluded my remarks. In good times and bad, unfair foreign competition is the chronic cause of the failure of this country to maintain her position in the shipping world. Even if we were able to count on To or 20 years of world peace, the problem of maintaining our Mercantile Marine would have to be faced by the Government. We cannot afford to see our ships swept from the seas and our shipyards becoming derelict. But what Member of the Committee dare count for a certainty on To or 20 years of peace? However important it may be in times of peace to maintain a large Mercantile Marine, it is infinitely more important in times when war is a possibility, and when so much time and money are being spent on providing for that dreadful emergency.

British shipowners, officers and seamen, all engaged in the Mercantile Marine, if they are given a fair fight will emerge victorious, and maybe they will be all the better for having gone through the conflict. The industry will do the fighting. The shipping industry will fight, but it is the Board of Trade, the Government itself, which must give it fair conditions. I warn the President of the Board of Trade that the Government must do more than it is doing. Pettifogging schemes of co-operation, either national or international, only touch the fringe of the problem. The industry as a whole is open to the ruthless competition of foreign nations which are determined to increase their mercantile marines irrespective of the welfare of the shipping industry of this country. It is the action of foreign Governments which is tending to destroy the British Mercantile Marine, and it is the responsibility of the Government to defend it. I have complete confidence in the President of the Board of Trade and in the Parliamentary Secretary.[HON. MEMBERS: "Oh."] Yes, I have complete confidence in them, and I believe the President of the Board of Trade and the Parliamentary Secretary are fully alive to the position. The industry will therefore anxiously await, because it is a matter of life and death to it, the proposals which in due course I know the President of the Board of Trade will make to save shipping from unfair and ruthless foreign competition.

10.5 p.m.

Sir Archibald Sinclair

We have had a very interesting discussion which has never fallen below the high level of argument upon which it was launched by my hon. Friend the Member for East Birkenhead (Mr. White). I listened with particular interest to the speech of the right hon. Member who spoke for the Opposition at the beginning of the Debate. He said that we could express no final judgment on tariffs until we had had experience of a Protectionist slump. None of the speeches this afternoon have succeeded in erasing from my mind the impression that we may not have to wait very long. But the right hon. Member, nevertheless, gave powerful and indeed unanswerable arguments for condemning the experiment even on our present experience—the disaster to our export trade of which we recovered at the height of the boom only a fraction of what we had in 1929, and which has already started once again to decline; the inevitable retaliation in other countries, exchange controls and prohibitions, and increased hostility and suspicion. So far I find myself in complete agreement with the right hon. Gentleman. Yet he seemed to hanker after other methods of protection rather than tariffs. He would not even exclude industrial quotas when he was challenged by the President of the Board of Trade, or prohibitions, although they fall under M. van Zeeland's special ban in his report which the right hon. Gentleman so warmly supported.

He said that he wanted more security, more stability, for industry. I want more security and stability for those employed in industry. [Interruption.] It is not the same thing, as I will point out to hon. Members if they will listen. There is a real danger in importing too much stability, and therefore rigidity, into the 'economic and industrial structure of the country and the world. If the masses of the people are to enjoy reasonable standards of living and the fruits of scientific research and invention, new and vigorous industrial and economic growths must be encouraged, even although older industries may be displaced in the process and traditional methods abandoned. Surely our goal should be security for those employed in industry rather than the protection of industries which cannot survive in conditions of fair competition. Of course, there is a great deal of competition which is not fair, and markets are, in the present condition of the world, quite abnormally dislocated. I can assure the right hon. Gentleman on the Front Opposition Bench, although he knows it without any assurance, that he made no new discovery in suggesting that any Free Trader must in these abnormal circumstances, be prepared to adopt unorthodox methods. A generation ago Mr. Asquith said in this House that Free Trade is not a doctrine of economic Quakerism or quietism, and certainly the economic policy of the totalitarian States means that in dealing with them we shall have to adopt unorthodox methods.

But, so far, the economic policy of the Government has failed to revive our international trade, failed to revive our exports and maritime industries or to break down foreign barriers to our export trade. On the contrary, their policy has provoked economic retaliation and hostility against Great Britain on an unprecedented scale. Already we seem to be floundering back into the slump from which we so recently emerged. Economic difficulties are intensifying political difficulties and increasing the risks of war. So we put down this Vote in order to ask the Government how they are dealing with the situation, and I must say quite frankly to the Committee that I got no comfort from the speech of the Parliamentary Secretary. He spoke with that cool deliberation which the House always admires especially in a Minister speaking from that Box, not indeed in a vein of self- satisfaction, indeed rather of modest courtesy, but, shall I say, in a vein of Departmental complacency. Did we object that the Ottawa Agreements had torpedoed the World Economic Conference? Did we quote M. van Zeeland on world protests against Imperial Preference—he said: Particularly numerous are those who protest loudly against systems of preference which distort the normal channels of trade. Did we remind him that fresh duties were being imposed week after week? He replied, that the object of us all was to facilitate the exchange of international goods. Did we ask how the shipping industry was to be helped to survive protection? We were told that its prospects were never better. When the hon. and gallant Member for Barkston Ash (Colonel Ropner) protested that ships were being laid up every week, it was pointed out that there was less trade and that with less trade the fewer ships that sailed the seas to compete for it the better. Did we express concern at the shrinkage in British tonnage as compared with 1914, and the hon. Member for East Birkenhead suggest that if we found ourselves in another emergency we should not have sufficient tonnage for our wartime requirements? The reply was, how shortsighted! Had it never occurred to us that the fewer ships there were the easier it would be for the Navy to guard them?

The hon. Member's complacency was not convincing. Least of all was it convincing in regard to the insurance of ships and cargoes in the event of war. The position is that we are losing trade now. I have received information, as no doubt have other hon. Members, from men actually engaged in the shipping industry that cargoes are not being sent in ships under the British flag for fear that these ships might be involved in war. Perhaps the lack of protection afforded to British shipping around the coasts of Spain may have something to do with that attitude, but we are told that one main reason is that there is no certainty that ships, and, above all, cargoes will be covered by insurance in the event of war. When the Parliamentary Secretary made his statement the hon. Member for the City of London (Sir A. Anderson) intervened and put the same point as I am trying to put to the Committee now. The hon. Member for the City of London said it was necessary that the Govern- ment should state its policy, and that it should state quite clearly and definitely the terms under which this insurance would be available. To that the Parliamentary Secretary yielded only one point. He said that these schemes will be ready not only for war but for an emergency. What is the emergency? Can you imagine a difficult foreign situation arising between ourselves and some foreign country and the Foreign Office carefully handling it and up to the last moment hoping that peace may be saved, and then the President of the Board of Trade coming along and saying," I want to bring in my insurance: this is a state of emergency." The Foreign Secretary will say, "You must do nothing of the kind. We must not admit up to the last moment that there is an emergency; we must do everything we can to save the situation; and we cannot have the President of the Board of Trade saying that there is an emergency, and that he is going to introduce his war-time plans for British shipping." That would be a good gesture to the world at a time of crisis! The fact is that the emergency is now; it is now that these cargoes are being refused to British ships, and it is now that the President of the Board of Trade ought to state clearly what is his policy and to give us an assurance that a scheme of insurance certainly will be available and will be tabled in the House as soon as possible, so that the House can form its judgment on it.

But on this Vote for the Board of Trade, let our main preoccupation be, when we discuss the problems of British trade, not of war, but of peace. Of all the Ministers in the Cabinet, the President of the Board of Trade, not less than the Foreign Secretary, should he the Minister of peace. No man could do more than he could, if he were properly supported by his colleagues, to strengthen the forces of peace, law and freedom in the world against those of aggression and militarism. The idea of uniting in resistance to aggression those nations which love peace and freedom and repudiate war as an instrument of policy, needs to be supplemented by the idea of economic and financial co-operation which will enable them to escape the stranglehold of what the hon. Member for East Aberdeen (Mr. Boothby) graphically described as the Reichsmark empire.

We made a good agreement with Turkey. Let us continue, if possible, on broader lines with other countries of Central and Eastern Europe. Do not let us, of course, try to exclude Germany from her rightful interest in those areas. Let her extend her trade there by all legitimate means, and not only with the Danubian countries, but with Britain and other countries too; but do not let us abandon those Danubian countries to the ruthless pressure of present German economic methods. Let us afford them alternative markets and financial facilities for expanding trade between their countries and our own. If one takes the trade of Bulgaria, Yugoslavia, Rumania and Hungary, one finds that, whereas it increased by 64 per cent. between 1933 and 1937, Germany's share of that. trade increased by no less than 16o per cent. Let hon. Members contrast that with Empire trade. The volume of trade of all the countries of the Empire, including the Protectorates and the dependent Empire, has increased by 40 per cent. since 1932, at the bottom of the slump, but the United Kingdom's share of that is only 35 per cent. Looked at in the cruel, cold light of German economic imperialism, the Ottawa Agreements are just shamefaced little experiments, shoddy little structures.

No country needs such economic support more than Czechoslovakia. The United States of America are giving it; they have signed a commercial agreement giving tariff reductions to Czechoslovakia of from 3o per cent. to 50 per cent. of the former rates, and they have agreed not to regard preferential duties agreed upon between Czechoslovakia and Hungary, Rumania and Yugoslavia as an infringement of the Most-Favoured-Nation Clause, provided that they are open to other countries. That is a very practical example of the working of what is commonly known as the Montevideo Resolution, passed by the Pan-American Congress at Montevideo four or five years ago, and which my hon. Friend the Member for Oxford University (Sir A. Salter) supported in his speech this evening. We ought to follow the example of the United States of America, and give these little Danubian countries a means of escape from the economic prison of German autarchy.

Equally should be hold out, not only to these little countries but also to Germany and Italy, an alternative to autarchy. That is why I so strongly support the plea of my hon. Friend the Member for Oxford University that the Government should be preparing, on lines which are broadly conceived and in details which are carefully worked out and proclaimed, a policy of world economic co-operation which would form part of a general settlement, not only with our fellow-members of the League but with Germany and Italy. That is why we do not want the dust to settle on the van Zeeland Report. That is why we ask the President of the Board of Trade to tell us what steps the Government are taking to carry out the recommendations of M. van Zeeland and that, too, is why we are so anxious about the American treaty.

Let me say this about the American treaty. Sometimes I think too much stress is laid upon the political aspects of these negotiations with the United States about a commercial treaty. Do not let us cherish for one moment the illusion that they are going to lead to any form or kind of political alliance between the United States and this Our Government ought not country, even to be aiming at such a thing, and I do not suppose that they are, because it is unattainable and the effort to attain it would only ruin the chances of success in the economic field. Success in the economic field would be of enormous importance. It would clear, to some extent, the channels of trade between the two countries, between the United States and the Empire countries and between all parties to the agreement and foreign countries. The immediate effect would depend, of course, upon the terms of the agreement and upon how good an agreement the Government could get, but it would start us in the right direction, and its effects would grow. Its example would be infectious and then, as trade was liberated, we should begin to feel its political benefits, not only on the relations between the United States and Great Britain, but on the relations between all the nations which benefited from it by the increased trade and prosperity which it produced. Democracy would be justified by an effort at economic reconstruction, and the forces of freedom and the foundations of peace would be strengthened. But we are profoundly anxious. It is getting on for three years since the first steps were taken to prepare for the negotiations. We ask the President of the Board of Trade to express determination that the negotiations shall succeed.

In my concluding passage I wish to refer briefly to the importance of trade with Russia. I have always advocated the closest possible commercial relations with Russia, and one of the aspects of the Ottawa Agreements which my hon. Friends and I most strongly criticised at the time was the breaking of the 1930 agreement with the Russian Government. In 1934 the Government negotiated a new agreement, the results of which have been most disappointing. The justification given for breaking the old treaty of 1930 was that the trade was so unbalanced, that we were buying all the Russian imports and that they were taking none of our exports.

Let me briefly call the attention of the Committee to the facts about Russian trade with us. If you take the four years during which the 1934 Agreement has been in operation, you will find that the imports from Russia have been £87,000,000 an average of £21,000,000 a year—and the imports last year were £29,000,000, so that they are going up—while the British exports to Russia have been under £14,000,000 for the four years, an average of £3,500,000, and for the year 1937 they were only £3,000,000, so that the exports are going down. If you contrast the results of the 1934 Agreement with those of the 1930 Agreement, which the Government, against our advice, tore up, you will find that the exports for the four years 1931–34 were £25,000,000, as against £13,750,000 for the last four years. Under the 1934 Agreement we have only had half the exports to Russia that we had in the four years previous to 1934 under the old Agreement which the Government denounced. Is this because the Russians have not fulfilled their obligation? Not at all. They have fulfilled them to the letter. The Government can bring no indictment against the Russians in that regard.

There are a great many British goods which they could buy. There are wool textiles, textile machinery, machine tools, and, I would remind the President of the Board of Trade, there are herring. There is the extremely important Scottish herring fishing industry, for which Russia used to be a most valuable market, which is so distressed that to-morrow the House of Commons will be discussing a Bill for the rescue of that industry. It is here that the Government should take a strong line with the Russian Government. Do not let them run into their old mistake in 1930 and 1934 of brusquely terminating the treaty, but let them say, what I have said in this House before, hoping it would reach the ears of the representative of the Government of Russia, that if the Government of Russia attach importance, as I believe they do, to the friendship of this country and to trade with this country, they would do well, not merely to obey the letter of the commercial agreements that they make with us, but the spirit too, to use a little more of British shipping where it is available, and to buy a few more British herring and British manufactured goods.

The truth is that it is time we had the permanent treaty that successive Governments have talked about, the permanent treaty of trade and navigation which is eventually going to take the place of these temporary treaties. It is time we had that treaty. The Russians need friendship, and the Government, if they would show friendship with Russia, if they would give them the additional prestige and security which such friendship would give to them and would approach them with a view to the conclusion of a treaty on more favourable terms. I have little doubt, for my own part, that they would succeed.

10.30 p.m.

Mr. Stanley

We have had an extremely interesting and varied Debate in which have joined most of the economists and political economists in the Committee. We have covered so many subjects and there is not much time left that hon. Members, I am sure, will not expect me to answer every detailed question that has been asked. I will devote myself rather to the main lines of the arguments which have been developed. May I say how much I have enjoyed, as I always do, the eloquence of my right hon. Friend the Member for Caithness (Sir A. Sinclair)? He has the gift of tongues; he can raise an academic subject to Olympian heights, and even the most prosaic subject he can detach completely from reality. He was in exceptionally good form to-night. I expect he has a reason for it. There used to be a practice in the Church of England and, I believe, in Nonconformist circles, known as the test sermon. Candidates for a living were invited down to the local church to preach a sermon, and naturally, knowing that their selection depended upon it, they put into it all their power and energy.

To some extent the right hon. Gentleman is to-day on trial. He has been trying to persuade hon. Members above the Gangway that in certain sections of the country he is a better vote-catcher than they are, and that they would be well advised to stand aside and make sacrifices in order to leave it to him to convince the electorate. I hope that they will be as satisfied as I have been with his eloquence to-night. I must confess that if I had been one of them I should have liked perhaps a little more definitness, a little more definition, of where exactly he stood upon the important questions we have been discussing. The right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) was very practical. He told us plainly what the Socialist view of the old controversy of Free Trade and Protection was. He told us that, although it might be that the party opposite did not believe that the way of tariffs was the best way of protection, yet he and his party did not see how in this world it was possible to abandon Protection in one form or another. The right hon. Gentleman and the hon. Gentleman who opened the Debate avoided giving any clue to where their party stands in this matter. But hon. Members opposite may well feel that if they are being sold a pup they might as well know what breed it is.

The right hon. Gentleman who has just spoken made one or two specific points which I should like to answer. With reference to trade with Russia, may I welcome his support I, too, am disappointed at the course of our trade with Russia. It is true, as he said, that the letter of the agreement is being observed, but it is being carried out with a proportion of re-exports to exports of the manufactures of this country which none of us think represents the spirit in which we believed the agreement was to be carried out. The right hon. Gentleman urges me to take a strong line—his little essay in economic appeasement, I suppose. I am at the moment discussing this very im- portant question with some of those interests which are most affected by the course of trade with Russia, and I shall remember that I have the support of him and his party—not only in words, because it is sheer humbug if, when you talk about taking a strong line, you mean only making a loud noise—I shall have his support not only for any words that I may think fit to utter but for any action which we may find it necessary to take to secure the results that we desire.

Sir A. Sinclair

Necessary and well judged.

Mr. Stanley

I can always trust the right hon. Gentleman to leave behind some little tag on any statement he makes which will enable him and his party to say next day that really they had meant exactly the opposite.

The other specific point which the right hon. Gentleman raised, and it was one of great importance, concerns marine insurance in time of war. To amplify a little what my hon. Friend the Parliamentary Secretary to the Board of Trade said, the position is that there is in existence to-day a scheme of insurance which would be put into operation on the outbreak of hostilities, and which I believe would prove effective, but we realise that this temporary emergency scheme is neither as complete nor as effective as it could be made, and we are, therefore, in the process of discussing with the industry, and of considering ourselves, a more elaborate, more complete, and more finished permanent scheme. When that permanent scheme is drawn up, and we are satisfied that we have reached agreement with the industry upon the points involved, we shall then have to consider whether it would be wise to introduce it by way of legislation passed in peace time and before hostilities or whether it would be better to retain it as a plan to be introduced immediately hostilities break out, and certainly when we come to consider that question full weight will be given to the opinion of the shipping interests as to which is the better and more advisable course.

Mr. Maclay

Can the industry be assured that the deliberations will be completed within a reasonably short time?

Mr. Stanley

On the definition of what is "reasonable" opinions are apt to differ, but I can assure the hon. Gentleman that my Department is working at full pressure upon this scheme, and with the co-operation of the industry which he represents we shall no doubt be able to make progress at a rapid rate.

Mr. Kirkwood

Will the scheme include the men as well as the hull and the cargo of the ship? Will the men be safeguarded and insured?

Mr. Stanley

A scheme is being worked out to deal with the men as well. Passing from that to the speech made by my hon. and gallant Friend the Member for Barkston Ash (Colonel Ropner), I am afraid the subject of merchant shipping is one to which I can devote only a short time in view of the very few minutes which are left to me, but I would say that I fully agree with his analysis of the history of the shipping industry. It is true that the extremely prosperous times which it encountered last year have to a large extent passed away, although I think he will agree that the picture which he painted was more applicable to the tramp than to the liner section of the industry. As far as the tramp industry is concerned, there is a considerable amount of depression, and that is, of course, the inevitable result of the world fall in commodity prices and the check to the world buying of commodities.

Mr. Quibell

The right hon. Gentleman said that before.

Mr. Stanley

I do not want to say anything in reply to the hon. Gentleman at the moment except that I am glad he had heard it before, that he got it from me and that he did not refute it.

Mr. Quibell

Yes, I did.

Mr. Stanley

My hon. Friend did not himself offer those suggestions for the rehabilitation of the Mercantile Marine, but I can assure him that the policy of the Government remains as it was stated to be in July, 1934. It was fully stated at that time and I do not want to do more than to summarise it. Its two main features were that the Government were prepared to assist any section of the industry which was in difficulties in any way open to them, not excluding temporary financial help where no other course was available, and, further, to promote measures for co-operation with a view to avoiding, or at any rate mitigat- ing, the effects of any sudden decline in demand for tonnage.

A very interesting speech was made by my hon. Friend the Member for East Aberdeen (Mr. Boothby) with regard to the position in south-eastern Europe, German expansion and the methods which Germany uses to expand; the problem was dealt with also by the hon. Member for North Lambeth (Mr. G. Strauss). I agree with my hon. Friend that we see in this respect, as we do in other parts of the world, a completely new method of trading being employed and that no one seeing those new methods employed can feel satisfied in relying solely upon old principles and old methods to which one used to be attached. I agree also that much as we may disagree with the actual system which is employed, and impossible as may be for us many of the methods which other countries can use, we have a good deal to learn. We have to absorb many lessons from the trading methods of some of these countries today. My right hon. Friend the Member for Sparkbrook (Mr. Amery), in a very interesting speech, advised me to wake up. Quite evidently he was prepared to act as Prince Charming to my Sleeping Beauty. I wonder whether he is more than half awake and I wonder whether, in learning the lesson which he learnt, which was that those new methods must be met with the old method of the higher tariff, he has really learnt all the lessons that are to be learnt from this situation.

A reference was made by my hon. Friend the Member for East Aberdeen to the great power given to those countries by their unified buying and selling. I believe it to be true that in the motor industry there is no Government subsidy and no juggling with the exchange, but that it is simply a case of an industrial subsidy from a pool provided by the industry as a whole and devoted to the fostering of the exports of one particular product of that industry.

Sir H. Croft

With the Government behind it.

Mr. Stanley

The Government behind in the sense that they approve of it and not that they add money into the pool, and, in this case—I do not know about other cases—without any exchange manipulation. We have a lesson to learn from that. Is it possible any longer for, in many cases, one particular firm or one particular shop to compete in the markets of the world against a whole industry, or, indeed, in some cases, against a whole country? Will there not have to be a great deal more co-operation between sections of particular industries in this country for the purpose of fostering export trade and fostering the sale of particular products than there has been hitherto, thus approximating the enormous strength of the industries of this country to the strength which is now being used only against an individual firm?

The hon. Member for North Lambeth asked me to make some specific declaration with regard to South-East Europe. The House will have an opportunity of discussing that subject—I cannot discuss it now—in a few days' time on a Bill in connection with credits for Turkey, which, I should have thought, was in itself the answer to his question, for it makes it quite clear that any rumours to the effect that the Government of this country is no longer interested in British trade in the south-eastern part of Europe are completely unfounded. The Government are, of course, anxious to develop in every possible and practicable way trade in that quarter of the world, and they will be glad to use any practical methods to develop it. It is not possible to restrict one's methods of dealing with individual countries and individual industries merely to those methods which in the old days we used to think alone came within the canons of financial and economic rectitude.

The hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris), in the course of a very interesting speech, made one reference which, if I may say so, I think was extremely unfortunate. He gave the impression to the Committee, and he may have given it to the public outside, though it is an impression which I am sure he does not himself share, that the refusal of the German Government to pay the interest due on the Austrian loan was forced upon them by the fact that they could not sell goods in this market.

Sir P. Harris

I should like to make it clear that I did not wish that to be implied, although I quite see that, in the way in which I put it, it might be interpreted in that way.

Mr. Stanley

I am glad the hon. Baronet has made that quite clear, because I would not like it to go out from any hon. Member that that was the view held by any section of the House. The reason which he appeared to give, is not the reason why the loan interest has not been paid. As the Committee know, negotiations with the Germans are proceeding. It is impossible at present t6 forecast their outcome. As was stated only the other day by the Chancellor of the Exchequer, the Government are in a position to terminate the Anglo-German Payments Agreement on 3oth June without notice, and will, therefore, be free to take any necessary action as from that date. It is, of course, impossible at this stage to make any announcement as to the nature of the action which is likely to be taken. Clearly it must depend on the circumstances at the time. We still hope that the negotiations will reach a successful conclusion, but, in the meantime, traders must recognise that in the present circumstances there may be difficulties in obtaining payment after the end of this month, and they must, therefore, use their discretion in accepting any new commitments which may result in the accumulation of debts in Germany.

I am afraid that without any discourtesy I am obliged to pass over a large number of very interesting topics raised by various Members, but I must say something with regard to the American agreement. I know that the negotiations for this agreement have been long and slow, but the matters to be discussed have been difficult and intricate. There is of course one easy way to shorten negotiations of this magnitude: It is for one side or the other not to press claims which it thinks fair, or not to resist the claims of the other side which it thinks unfair. I certainly should not be prepared from the side of His Majesty's Government to adopt these means of shortening the negotiations, and nobody in this House would have any right to expect the Government of the United States to abandon the legitimate defence of their claims either.

It is vitally essential that this agreement, if it is to be arrived at, should be an agreement which is not only fair to both sides, but which is recognised by both sides to be fair. The right hon. Gentleman said he attached little, in fact, no importance to the political side. I think he is quite right. This is an economic bargain, and not a political one. But it may be that the greater part of the value in such an agreement will not lie in its actual details, in the actual commodities which are dealt with, but that it will lie in the general impetus it will give to a renewed feeling of confidence in world trade as a whole. But we can only get that impetus if the agreement which is arrived at in the end is one that is accepted in the two countries which negotiate it as being an agreement which is fair and reasonable to both. I can assure the right hon. Gentleman and the Committee that no one is more anxious than I am to achieve an agreement if it is an agreement upon those lines and no one more anxious than I am to press the negotiations if possible to a successful conclusion.

May I say one final word about the main topic of the Debate, the question of appeasement? That has been a sort of theme song of to-day's Debate. But I must own that if I had brought a stranger into the Gallery at most times during the seven hours and let him listen to the speeches, and then told him that the theme was economic appeasement, he would have been extremely surprised, because not an inconsiderable portion of speeches of hon. Members, not only on one side of the House, has been devoted to the discussions of means—interesting and valuable discussion of means—of putting more pressure upon one or other foreign country. With regard to this question of appeasement, it seems to me that one must first of all make it quite plain that the protective system which this country adopted in 1932 has come to stay. I am not arguing about details, am not even arguing about methods, but I do not believe, nor does the right hon. Gentleman, that our generation is ever likely to see conditions which made the nineteenth century possible, and therefore the conditions which will make possible again a reversion to the economics of that day. The second point I would make is that the Ottawa system also will remain. The hon. Gentleman the Member for Oxford University (Sir A. Salter) said he had nothing to say against it. The right hon. Gentleman the Member for Caithness apparently had a lot to say against it, but he did not say it. After all, we must remember the difference to him between the tariff system and the Ottawa system was that on one he only agreed to differ, while on the other he agreed to resign.

Sir A. Sinclair

When I resigned I thought of nothing else but a complete and final break and it was only afterwards at the request of my colleagues that my friends who resigned with me and I continued in office on the basis of differing from and opposing the Government's tariff policy.

Mr. Stanley

I apologise to the right hon. Gentleman. I am very sorry, I was wrong. He resigned, but after the passage of the Act which introduced the tariff system he was still sitting on the Front Bench here.

Those two points have to be borne in mind by anyone who considers the possibility of economic appeasement on the lines of the van Zeeland Report. I am not so impressed by the need for this economic appeasement from the point of view of peace and war. I do not believe it when I am told that the causes of war are usually economic. I think they are much more often ideas—religious ideas, or the sort of ideas we see now in various parts of the Continent. But I believe that economic appeasement is of immense importance for prosperity. I have not time to deal in any detail with the van Zeeland Report, but I would beg the Committee to remember that this talk of M. van Zeeland and appeasement is becoming rather a symbol and a slogan. I get letters sometimes from constituents which make me think they have never read the report, and do not know what is the action they want us to support. But those who have read it know that not only does M. van Zeeland make an admirable critique, but that he sets out clearly the goal we should aim at and the methods we should use. The methods are those of diplomatic approach to the Governments and to individuals of certain named countries.

I would ask the Committee to consider whether, at this particular moment, when with one of these named countries we are in these very difficult negotiations over this Austrian debt to which I have referred, and when in the last few months, since the preparation of the report, we have seen events in Europe which have created political tension far overshadowing these economic questions, that method is desirable. The danger of trying that method and failing in it is that you can never try it again. I share the desires and hopes of hon. Gentlemen in all parts of the House that we might see some relaxation of this tension. I believe, although I do not agree with every bit of it, that there is in M. van Zeeland's scheme and methods a good deal which we could all accept and share, but I do not believe that the moment is one in which we could press it forward. I should have liked, having expressed my views, just to try to elucidate from the right

hon. Gentleman what he and his party really think, but I can only hope that he will give me another opportunity in the future, because I am sure that we shall to-night prevent him from unkindly and mercilessly reducing this Vote.

Sir Hugh Seely

I beg to move to reduce the Vote by £100.

Question put, "That a sum, not exceeding £211,344, be granted for the said Service."

The Committee divided: Ayes 136; Noes, 192.

Division No. 233.]	AYES.	[11.0 p.m.
Acland, R. T. D. (Barnstaple)	Henderson, J. (Ardwick)	Pathick-Lawrence, Rt. Hon. F. W.
Adams, D. (Consett)	Henderson, T. (Tradeston)	Poole, C. C.
Adams, D. M. (Poplar, S.)	Hicks, E. G.	Price, M. P.
Adamson, W. M.	Hills, A. (Pontefract)	Quibell, D. J. K.
Alexander, Rt. Hon. A. V. (H'Isbr.)	Hopkin, D.	Rathbone, Eleanor (English Univ's.)
Ammon, C. G.	Jagger, J.	Richards, R. (Wrexham)
Anderson, F. (Whitehaven)	Jenkins, A. (Pontypool)	Riley, B.
Barnes, A. J.	Jenkins, Sir W. (Neath)	Ritson, J.
Barr, J.	John, W.	Roberts, W. (Cumberland, N.)
Batey, J.	Johnston, Rt. Hon. T.	Rothschild, J. A. de
Ballenger, F. J.	Jones, A. C. (Shipley)	Salter, Sir J. Arthur (Oxford U.)
Benson, G.	Jones, Sir H. Haydn (Merioneth)	Sexton, T. M.
Bromfield, W.	Jones, Morgan (Caerphilly)	Shinwell, E
Brown, C. (Mansfield)	Kelly, W. T.	Silkin, L.
Brown, Rt. Hon. J. (S. Ayrshire)	Kirby, B. V.	Sinclair, Rt. Hon. Sir A. (C'thn's)
Buchanan, G.	Kirkwood, D.	Smith, Ben (Rotherhithe)
Burke, W. A.	Lansbury, Rt. Hon. G.	Smith, E. (Stoke)
Cape, T.	Lawson, J. J.	Smith, Rt. Hon. H. B. Lees[...] (K'ly)
Charleton, H. C.	Leach, W.	Smith, T. (Normanton)
Cove, W. G.	Lee, F.	Sorensen, R. W.
Cripps, Hon. Sir Stafford	Leonard, W.	Stephen, C.
Daggar, G.	Logan, D. G.	Stewart, W. J. (H'ght'n-le-Sp'ng)
Dalton, H.	Macdonald, G. (Ince)	Strauss, G. R. (Lambeth, N.)
Davidson, J. J. (Maryhill)	McEntee, V. La T.	Summerskitl, Dr. Edith
Davies, R. J. (Westhoughton)	McGhee, H. G.	Taylor, R. J. (Morpeth)
Davies, S. O. (Merthyr)	McGovern, J.	Thurtle, E.
Day, H.	MacLaren, A.	Tinker, J. J.
Dunn, E. (Rather Valley)	Maclean, N.	Viant, S. P.
Ede, J. C.	MacMillan, M. (Western Isles)	Walkden, A. G.
Edwards, Sir C. (Bedwellty)	Mander, G. l[...] M.	Walker, J.
Fletcher, Lt.-Comdr. R. T. H.	Mathers, G.	Watkins, F. C.
Foot, D. M.	Maxton, J.	Watson, W. MaL.
Gardner, B. W.	Messer, F.	Welsh, J. C.
George, Megan Lloyd (Anglesey)	Milner, Major J.	Westwood, J.
Graham, D. M. (Hamilton)	Montague, F.	White, H. Graham
Green, W. H. (Deptford)	Morrison, Rt. Hon. H. (Hackney, S.)	Whiteley, W. (Blaydon)
Greenwood, Rt. Hon. A.	Morrison, R. C. (Tottenham, N.)	Wilkinson, Ellen
Grenlell, D. R.	Muff, G.	Williams, E. J. (Ogmore)
Griffith, F. Kingsley (M'ddl'sbro, W.)	Nathan, Colonel H. L.	Wilson, C. H. (Atterciffe)
Groves, T. E.	Naylor, T. E.	Windsor, W. (Hull, C.)
Guest, Dr. L. H. (Islington, N.)	Noel-Baker, P. J.	Woods, G. S. (Finsbury)
Hall, G. H. (Aberdare)	Oliver, G. H.	Young, Sir R. (Newton)
Hall, J. H. (Whitechapel)	Owen, Major G.
Hardie, Agnes	Paling, W.	TELLERS FOR THE AYES.—
Harvey, T. E. (Eng. Univ's.)	Parker, J	Sir Percy Harr[...]s and Sir
Hayday, A.	Parkinson,.J. A.	Hugh Seely.
Henderson, A. (Kingswinford)	Pearson, A.
NOES
Acland-Troyte, Lt..Col. G. J.	Astor, Major Hon. J. J. (Dover)	Brown, Brig.-Gen. H. C. (Newbury)
Adams, S. V. T. (Leeds, W.)	Atholl, Duchess of	Bull, B. B.
Agnew, Lieut.-Comdr. P. G.	Balfour, G. (Hampstead)	Burghley, Lord
Albery, Sir Irving	Barclay-Harvey, Sir C. M.	Campbell, Sir E. T.
Amery, Rt. Hon. L. C. M. S.	Beamish, Rear-Admiral T. P. H.	Cartland, J. R. H.
Anderson, Sir A. Garrett (C. of Ldn.)	Beaumont, Hon. R. E. B. (Portsm'h)	Carver, Major W. H.
Anstruther-Gray, W. J.	Birchall, Sir J. D.	Cary, F. A.
Apsley, Lord	Boothby, R. J. G.	Cazalet, Thelma (Islington, E.)
Asks, Sir R. W.	Bower, Comdr. F. T.	Cazalet, Capt. V. A. (Chippenham)
Assheton, R.	Brown, Col. D. C. (Hexham)	Chapman, A. (Rutherglen)
Clarke, Colonel R. S. (E. Grinstead)	Harbord, A.	Ramsay, Captain A. H. M.
Clarry, Sir Reginald	Haslam, Henry (Horncastle)	Ramsbotham, H.
Clydesdale, Marquess of	Haslam, Sir J. (Bolton)	Ramsden, Sir E.
Cobb, Captain E. C. (Preston)	Holy-Hut[...]hinson, M. R.	Rathbone, J. R. (Bodmin)
Colfax, Major W. P.	Heneage, Lieut.-Colonel A. P.	Reed, A. C. (Exeter)
Colman, N. C. D.	Hepburn, P. G. T. Buchan-	Reed, Sir H. S. (Aylesbury)
Conant, Captain R. J. E.	Herbert, Major J. A. (Monmouth)	Reid, J. S. C. (Hillhead)
Cook, Sir T. R. A. M. (Norfolk N.)	Higgs, W. F.	Reid, W. Allan (Derby)
Cooke, J. D. (Hammersmith, S.)	Holmes, J. S.	Remer, J. R.
Cooper, Rt. Hn. T. M. (E'nburgh, W.)	Howitt, Dr. A. B.	Rickards, G. W. (Skipton)
Courtauld, Major J. S.	Hudson, Capt. A. U. M. (H[...]k., N.)	Ropner, Colonel L.
Courthops, Col. Rt. Hon. Sir G. L.	Hume, Sir G. H.	Ross, Major Sir R. D. (Londonderry)
Cox, H. B. Trevor	Hunloke, H. P.	Ross Taylor, W. (Woodbridge)
Craven-Ellis, W.	Hunter, T.	Royds, Admiral Sir P. M. R.
Croft, Brig.-Gen. Sir H. Page	James, Wing-Commander A. W. H.	Ruggles-Brise, Colonel Sir E. A.
Crooke, Sir J. S.	Jones, L. (Swansea W.)	Russell, Sir Alexander
Crookshank, Capt. H. F. C.	Keeling, E. H.	Russell, S. H. M. (Darwen)
Groom-Johnson, R. P.	Kerr, H. W. (Oldham)	Salmon, Sir I.
Cross, R. H.	Kerr, J. Graham (Scottish Univs.)	Salt, E. W.
Cruddas, Col. B.	Keyes, Admiral of this Fleet Sir R.	Samuel, M. R. A.
Davidson, Viscountess	Law, R. K. (Hull, S.W.)	Scott, Lord William
Davies, Major Sir G. F. (Yeovil)	Leech, Sir J. W.	Shaw, Captain W. T. (Forfar)
Denman, Hon. R. D.	Lees-Jones, J	Shute, Colonel Sir J. J.
Denville, Alfred	Leighton, Major B. E. P.	Smith, Sir Louis (Hallam)
Dodd, J. S.	Levy, T.	Somervell, Rt. Hon. Sir Donald
Dorman-Smith, Major Sir R. H.	Llmellin, Colonel J. J.	Southby, Commander Sir A. R. J.
Drew., C.	Loftus, P. C.	Spears, Brigadier-General E. L.
Dugdale, Captain T. L.	Lyons, A. M.	Stanley, Rt. Hon. Oliver (W'm'ld)
Duggan, H. J.	McCorquodale, M. S.	Strauss, H. G. (Norwich)
Dunglass, Lord	Macdonald, Capt. P. (Isle of Wight)	Stuart, Lord C. Crichton- (N'thw'h)
Eastwood, J. F.	McEwen, Capt. J. H. F.	Stuart, Hon. J. (Moray and Nairn)
Eckerstey, P. T.	McKie, J. H.	Sueter, Rear-Admiral Sir M. F.
Edmondson, Major Sir J.	Hooray, Hon. J. P.	Talker, Sir R. I.
Ellis, Sir G.	Macmillan, H. (Stockton-on-Tees)	Taylor, C. S. (Eastbourne)
Elliston, Capt. G. S.	Macnamara, Major J. R. J.	Thomas, J. P. L.
Emery, J. F.	Manningham-Buller, Sir M.	Thomson, Sir J. D. W.
Emrys-Evans, P. V.	Markham, S. F.	Touche, G. C.
Erskine-Hill, A. G.	Mayhew, Lt.-Col. J.	Tufnell, Lieut.Commander R. L.
Everard, W. L.	Mellor, Sir J. S. P. (Tamworlh)	Turton, R. H.
Fleming, E. L.	Mills, Major J. D. (New Forest)	Walker-Smith, Sir J.
Fremantle, Sir F. E.	Morgan, R. H.	Wallace, Capt. Rt. Hon. Euan
Furness, S. N.	Morrison, G. A. (Scottish Univ's.)	Ward, Lieut.-Col. Sir A. L. (Hull)
Fyfe, D. P. M.	Muirhead, Lt.-Col. A. J.	Ward, Irene M. B. (Wallsend)
Gibson, Sir C. G. (Pudsey and Otley)	Nall, Sir J.	Waterhouse, Captain G.
Gluckstein, L. H.	Nicholson, G. (Farnham)	Watt, Major C. S. Harvie
Goldie, N. B.	Nicolson, Hon. H. G.	Whiteley, Major J. P. (Buckingham)
Grant-Ferris, R.	O'Connor, Sir Terence J.	Windsor-Clive, Lieut.-Colonel G.
Greene, W. P. C. (Worcester)	Palmer, G. E. H.	Wise, A. R.
Gretton, Col. Rt. Hon. J.	Patrick, C. M.	Womersley, Sir W. J.
Grimston, R. V.	Pickthorn, K. W. M.	Wood, Hon. C. I. C.
Gritten, W. G. Howard	Pilkington, R.	Wright, Wing-Commander J. A. C.
Gunston, Capt. Sir D. W.	Power, Sir J. C.	Young, A. S. L. (Partl[...]k)
Hambro, A. V.	Procter, Major H. A.
Hannah, I. G.	Radford, E. A.	TELLERS FOR THE NOES.—
Hannon, Sir P. J. H.	Ra[...]kes, H. V. A. M.	Captain Hope and Lieut.-Colonel
		Kerr

Original Question again proposed.

Mr. R. Acland

rose—

It being after Eleven of the Clock and objection being taken to further Proceeding, The CHAIRMAN left the Chair to make his Report to the House.

Committee report Progress; to sit again To-morrow.

The remaining Orders were read and postponed.