HC Deb 09 June 1939 vol 348 cc774-866


Motion made, and Question proposed,

"That a sum, not exceeding £228,324, 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, 1940, 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."—[Note. —£114,000 has been voted on account.]

The Deputy-Chairman

There are two Votes down for consideration to-day, and perhaps it would be for the convenience of the Committee if we take the two together. The Committee might discuss them both on the first Estimate, and the hon. and gallant Member could move his Motion for a reduction later on.

11.11 a.m.

Major Lloyd George

I am sure the whole Committee is glad that we have taken this opportunity to raise this important question to-day. I am sure also that the Committee will agree that another opportunity should be given to discuss the matter, because our time to-day is somewhat curtailed, and no one can deny the importance of this Vote. I can assure the Committee that, by the shortness of my remarks, I shall make Friday appear as near to an ordinaryday as is possible. This is a very important Vote, and very important questions to this country are involved. We have discussed foreign affairs more this Session perhaps than in any other Session I can remember. Nobody denies the importance of those discussions, but I shall also have full agreement when I say that the situation in this country is equally important, especially if we are to play our proper part in the settlement of international disputes.

The part we play in any international affair must depend in a very large measure on the strength of this country, both financial and industrial; and, while it was owing to that strength that we weathered the last storm this country had to meet, it is well to remember that we did not weather the storm without a great deal of damage, and that some of that damage has still to be repaired. That is a fact that we must acknowledge if we are to face the future with some security. I do not think anybody would call the trade situation in this country to-day a very encouraging one. The Minister of Labour told us last Monday that unemployment had on 15th May reached a figure lower than it had been since 1929. We know that it is standing to-day at 1,500,000. That is 200,000 more than in 1929. But if you compare the trade situation in 1929 with that of to-day, you will find a very much more serious position. You will find that imports for the first quarter of this year were £86,000,000 less than for the similar quarter of 1929, and that exports were £78,000,000 less. If you compare the first four months of this year with the first four months of last year, you will find a decrease of £30,000,000 in our imports and of £6.000,000 in our exports. The Board of Trade index of production figure, which is taken as 132.1 in the first quarter of 1938, shows a decrease in the first quarter of this year to 131.3.

The extraordinary thing is that unemployment was actually greater in the first quarter of this year than in the first quarter of last year in industries which one would expect to be certainly not suffering any depression with this present expenditure on armaments. It is disquieting to find that certain industries which one would expect to have benefited from the armaments expenditure have suffered a setback in employment. These facts in themselves would be very disquieting at any time, but they are even more disquieting when the factor of the abnormal expenditure on armaments which is taking place at the present time is added to them. We have been spending an increasing sum in the last few years upon armaments, reaching in this year's expenditure over £600,000,000. The increase this year over last year is something in the neighbourhood of about £5,000,000 a week. For the period from 1923 to 1935, the average amount spent in armaments was somewhere in the neighbourhood of £100,000,000 or £110,000,000 per annum, and this year that has been exceeded by £500,000,000. Yet the unemployment figure to-day is 200,000 more than it was in 1929. I cannot imagine what it would be, if we were not spending this gigantic sum upon armaments. The whole Committee will agree that, however necessary, it is unproductive expenditure. The basis has always been accepted, I believe, by Ministers on the Front Bench opposite, that £1,000,000 spent would provide employment, directly and indirectly, for 4,000 people, and it is obvious, if that figure is accepted—and I have never heard it challenged—that the increased expenditure on armaments between this year and last year should have provided more employment than actually had occurred. I suggest that if you increased your expenditure by £250,000,000 on armaments during the last 12 months, you should be having something like 1,000,000 more men in employment, but the figures show only 440,000 more people in employment this year compared with last year. It is that which makes me wonder what the position would have been had we not been spending this vast sum upon armaments.

The situation in which we are to-day gives rise to two problems which we have to face. There is the absorbing into industry of those men who are to-day engaged specially on work of armament manufacture, and the next fact to be faced is that the savings of the nation to-day are being diverted from the ordinary methods in which these savings are used to create productive industry, to armament expenditure, which, as I have said, however necessary, is entirely unproductive. I would almost call it sterile. In the Bill which we were discussing yesterday, steps are being taken which will enable the Government to take the whole of the output from industries in whatever they are engaged, whether in the way of export trade or anything else. I am not complaining, but it is possible that industries may have to have their export trade diverted to fulfil national needs, and there is the other problem of the danger of inflation. If there is a steep rise in costs and in wages, that in itself is not harmful providing you are creating consumable goods, but it would be a very serious matter if you had a steep rise in wages and costs owing to the fact that you are not producing consumable goods, but entirely unproductive goods in this country.

It is vital, therefore, that the Government should be ready to deal with the situation that must arise when disarmament comes along as we all hope it will. If it does not come along, I do not think we need worry as to what will happen. But if we are to have disarmament, as everybody in all quarters of this House hopes, the Government must be ready with plans with which to deal with the situation. These plans must take notice of one or two things. There is the necessity of re-equipping peace-time industries, all those industries which are at present engaged in this abnormal concentration upon armaments. There is the need for recovering markets lost overseas not only temporarily through what has been happening during the last few years, but markets which have been lost overseas for a very much longer period, and there is the absorbing of the men who are to-day engaged in armament production back into normal industry, which is a problem with which this country has been faced ever since the War. Everybody in this Committee is well aware that the great hard core of unemployment from which we have suffered since then has been due to the failure to absorb the men in industry, and that problem may well be much more severe after the present situation has passed away.

Perhaps the most important of the three points which I have made is the overseas trade position. I should like to know what is the Government's opinion of that Are they satisfied with the present situation, and, in particular, with the inter-imperial trade situation? Because it is a little disconcerting to find that ther is a heavy decline in inter-Empire trade in the first quarter of this year. Are they satisfied, also, that everything possible is being done to develop our Colonial Empire for trade purposes. I was very much struck in the Debate this week when in practically every quarter of the House there were complaints in regard to the state and development of our Colonial Empire. One vast country, with a population greater than that of the whole of our Dominions, had no trade representative either in its own country or outside, and that sort of thing could be multiplied practically throughout the whole Colonial Empire. We have a moral responsibility always towards people for whom we are responsible, but, looking at it from the lowest point of view, the material point of view, it would be a great advantage to us if, by development in these places, we raised the standard of life of the people, who, after all, would become our very best customers. In these days, when all kinds of peculiar methods are being used to push trade in various parts of Europe, there, at any rate, is a straight way where we could get people to absorb our goods, and we could obtain goods from them. I hope that the Government will look into that matter, as there is a vast field for development in that connection.

Can the Government also tell us their view of the American Trade Agreement? I know that it has not been in operation very long, but it is a little disappointing to find that, while there is an improvement in the first quarter of this year compared with the first quarter of last year, it certainly is not an improvement upon the quarter before that. Our exports to America are down for the quarter before the last, while there is an improvement in the first quarter of this year compared with last year.

Can the right hon. Gentleman tell us what concrete results are expected from the visit of the Secretary for the Overseas Trade Department to Poland, Russia, Latvia and the Scandinavian countries a short time ago, and what results are to be expected from our negotiations with Rumania and Turkey? One hears disquieting stories with regard to Rumania, of the very few British and French experts and business men there and the very large numbers of Germans, especially technicians. It is important, if we are to establish ourselves in the Balkan States, when every effort is being made to establish someone else there, that we should not lose sight of the fact that we ought to have our representatives there. I am told that the proportion of Germans there is something like 12 to 1 of the French and ourselves. That is a very serious matter and could be put right with an effort.

I should like to say a few words about shipping. I put this subject last, but not because it is the least important. There, again, I do not think we have a very cheerful picture. In the first quarter of last year there was under construction, or to be constructed, 175,000 tons and in the corresponding quarter of this year only 71,000 tons. The laid-up tonnage has also increased this year as compared with the corresponding quarter of last year from 339,000 tons to 418,000 tons. Freights have dropped from 131.7 to 119.5.I should like to know how the right hon. Gentleman views the prospects there. If the Mercantile Marine was important to this country in the last War, it will be much more important if we get into trouble again.

With regard to coastal shipping, there is no depression or, at any rate, no acute depression, but there has been a change in the size of the ships that are engaged in that trade. That has had a very serious effect on the smaller ports. I raised this question before with the right hon. Gentleman's predecessor, but I did not get a very satisfactory answer. I pointed out then that many years ago there were a large number of small ports around our coast which had their fair quota of ships, and there can be no doubt that they did attract the youth of those districts to go to those ships and proceed to sea. Those small ports were good nurseries for the Mercantile Marine, because these youths from the small ports, being used to the sea, went to the bigger ports and became deep-sea sailor-men. Since the War, if one looks round many of these small ports, where I have seen them well occupied with ships, one finds, perhaps, not half a dozen ships there, but only one. There can be no doubt that that has had a profound effect on boys who are deprived of the attraction to follow the sea as an occupation. I take a very serious view of this matter with regard to the future. This country will be nothing without its Mercantile Marine. The members of the Mercantile Marine are the pioneers of this great Empire, and if we take the sea sense away from the youth of the country, it will be a very serious matter for the future.

I now come to the question of shipping. I do not put it last because it is the least important. There again I do not think we have a very cheerful picture. In the first quarter of last year there was to be constructed 175,000 tons of shipping and in the first quarter of this year the figure is only 71,000 tons. In construction there has been a drop in these two corresponding quarters from 1,500,000 tons to 600,000 tons—a very serious drop.

There is another aspect of this question, and that is the diversion of shipping from the east coast to the west coast. In the event of war, if they were kept up, these small ports would be invaluable to us. It would serve two good purposes. It would not only be a direct means of defence by relieving congestion elsewhere, but we should be maintaining that reserve for our Mercantile Marine which everybody knows is so important, and the depletion of which is a very serious matter. The lack of skilled sailors in this country calls for our very earnest attention. Although the coastal trade is not in an acute depression, the effect of what has occurred is very serious, and it will be much more serious upon our outlook if we are ever engaged in a war in the future.

Mr. Fleming

With regard to the use of bigger ships in the coastal trade, can the hon. and gallant Member say whether they are owned by Britishers or foreigners?

Mr. Loftus

May I remind the hon. and gallant Member of the immense decline in the number of fishermen in our ports?

Major Lloyd George

I have not dealt with that question because it would be out of Order on this Vote. I have a fishing port in my constituency and I know the position very well, but, naturally, I was not going to put myself out of Order by referring to it. The hon. and learned Member for Withington (Mr. Fleming) had better address his question to the right hon. Gentleman. I am certain that the percentage of those ships that are foreign-owned is infinitesimal. They are almost entirely in the hands of people of this country.

I hope the right hon. Gentleman will not accuse me of being gloomy, as he did once before. All that I have done has been to try and face the facts as I see them, and I do not think I have been looking at the situation through particularly dark glasses. My intention has not been to be gloomy but to try and ascertain whether the Government have really kept in mind what they are to do in view of the position. However big this problem was in the last War, it will be greater in the next war or, if it is not greater, our experience during the last 15 years shows us that it is going to be a very big problem, and if we are to tackle it properly and see that not only is this country restored to strength but to greater strength, we must be pretty clear in our minds what we are going to do when the time comes, and we must make up our minds to do it.

11.32 a.m.

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

I have no complaint at all that an Estimate of this importance should have been put down, but I must confess that I regret that it should have been put down for a Friday. The hon. and gallant Member said that this is a subject of very great importance, and although it may well be put down on another occasion, the first cut is always the best, and the second Debate is never quite the same. This is a Friday, and I will try to follow the hon. and gallant Member's example and speak with the same commendable brevity, in order that the maximum of opportunity may be given to others to take part. We always welcome the hon. and gallant Member's intervention in Debate, particularly his contributions on trade questions, because he always shows a very balanced judgment in such Debates which must be a subject of envy to the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George). He always shows an obvious desire to put the matter in the fairest possible way. His speech to-day has been no exception to the rule. I should like, as briefly as possible, to follow the lines he has taken and to leave it to others to raise the more detailed points, to which my hon. Friend the Parliamentary Secretary will be glad to reply, and try to deal with the wider aspects which he raised in his speech. I do not recollect ever having accused the hon. and gallant Member of being gloomy. I certainly never regard him as gloomy in a social sense; it must be gloomy in a purely political sense.

The hon. and gallant Member will not deny that in the last few months there has been a marked recovery in British trade, and that recovery is, perhaps, shown most dramatically in the figures of employment and unemployment over the course of the last few months. I am not going into that matter because the figures were quoted more compendiously, and certainly more loudly than I could do, by my right hon. Friend the Minister of Labour only four days ago. I would make one criticism of the use the hon. and gallant Gentleman made of those figures. I do not think, in comparing 1929 and 1939, and trying to bring the employment figures into relation with the production figures, that it is fair to give only the figures of unemployment. It is clear that the figures you should quote are the figures of employment, because during those years we have taken in our stride an immense increase in the available population for work. When one sees the figures of the persons employed in 1929 and 1939, after allowing for agricultural workers who, of course, in those days did not come within the ambit of unemployment insurance, and you find that it is over 1,500,000 more, it does, I think, give a rather different picture.

But if the figures of employment give the most dramatic evidence of our industrial revival, the figures with which I am more particularly concerned also bear it out to the full. The Board of Trade figures of industrial production for the first quarter of this year have now practically reached the level of the first quarter for 1938, and, as the hon. and gallant Member knows, in the first quarter of last year we had not then reached the full effect of the recession which had been taking place. It is particularly noteworthy that whereas last year the figures for the first quarter were three per cent. below the last quarter of the preceding year, in this year the figures for the quarter just over are 4 per cent. above the figures for the last quarter of 1938. Not only have we practically reached the level of production of a year ago but are on an upward trend. The "Economist" index of business activity is another good test and reinforces the same story. In December, it was 101; in January, 104½; in February, 105; in March, 106; and in April, 109.

If we take the figures for individual industries we shall find the same story in most cases. Take the case of the inland consumption of coal. In the March quarter it was substantially greater than in the previous quarter, and practically recovered to the level of a year ago. As hon. Members know, we always expect a decline in domestic consumption in the second quarter of the year, but, apart from that, the inland demand has been fully maintained. The export of coal which fell very heavily in the second and third quarters of last year has now practically recovered to the high figure of the first quarter of 1938, in spite of two adverse factors, one which is obvious and the other rather obscure. One is the heavy fall in our exports to Spain, the reasons for which are clear, and the other is the heavy fall in our exports to France, which is most surprising and disappointing in view of the new agreement we entered into with France, and which we hoped would arrest the decline which had been in evidence. The Secretary for Mines, in answering a Question on this subject the other day, said he was investigating the extent and the cause of this decline, and that we should have to take the matter up with the French Government and see how far the agreement which had been entered into had been effective. Since the beginning of April the export trade has been better, and that would afford us a great measure of satisfaction if we did not have to qualify it, as we unfortunately have to qualify every trade figure used, by an examination as to how far a rise or decline is caused not by normal trade matters but by things connected with the existing tension, and we have to consider how far the very satisfactory increase in our exports since the beginning of April is caused by an increase in the international tension and the desire of foreign countries for abnormal stocks in the case of emergency.

The iron and steel industry shows in these few months an even more remarkable expansion. The production of steel and steel castings has increased from 812,000 tons in January to 1,171,000 tons in March, a figure which was within a little of the highest monthly output this country has ever reached, which was during the short peak period in 1937. In April that figure was reduced owing to the incidence of the holidays, but if you take the daily average for April as compared with March, it will show that the average output was higher.

The hon. and gallant Member referred particularly to shipbuilding. I will not deal with it at any length, because it will come more naturally for discussion on the shipping question with which my hon. Friend the Parliamentary Secretary will deal. But the hon. and gallant Member is quite right in saying that the shipbuilding statistics are among the most vital, if not the most vital, statistics, for this country at the present time. He was quite right in the figures he quoted as far as they went, which showed a most alarming position. The tonnage commenced in the first quarter of the year was only 71,200 gross compared with 173,000 gross in the first quarter of last year and 367,700 gross at the peak of the 1937 boom.

These figures are extremely disquieting. The House had given attention to them before, and they are figures the significance of which the Government cannot possibly ignore. It was because of the decline already taking place last year and which as everyone could foresee would, without some special measures, be accentuated this year, that the Government made an announcement of their proposals, an announcement which was made prior to the possibility of introducing legislation in order that any stimulating effect might be felt at the earliest possible moment. I am glad to say that that announcement did produce an immediate effect which exceeded the expectations of the Government. Compared with 71,000 tons in the first quarter of this year, 373,000 tons in the first quarter of last year, and 368,000 tons in the peak quarter of 1937, between the time when the Government's announcement was made at the end of March and 19th May, shipbuilders in Great Britain and Northern Ireland have received orders for 144 ships of 714,000 gross tons. In England and Wales the orders are for 78 ships, in Scotland 58, and in Northern Ireland 8. It is interesting to note that since the announcement was made on behalf of the Government, we have heard no reports of any orders for ships being placed abroad by British ship owners.

Although the textile industry cannot show, during the last few months, a record of improvement anything like comparable with the sort of figures I have given for these heavy industries, yet the textile industry has not been wholly outside the general recovery that has taken place. Last year, as all of us connected with Lancashire have good reason for knowing, was an exceptionally bad year for the cotton industry. The textile industry, dependent as it largely is upon the agricultural communities of the world, is particularly susceptible to any violent fall in commodity prices. It is the producer of raw material who is the first to feel the shock of a fall in commodity prices, and he is the very man who is the best consumer of the textile industry. Therefore, the recession, which to a greater or less degree was felt last year by all industries, was felt with the greatest violence by the textile industry, and particularly by the cotton industry of Lancashire.

However, since the worst period of the depression last autumn, there has been a very considerable improvement. In the first place, the too large stocks which had been accumulated in1937 during the good period, in anticipation of an upward movement, which was turned into a downward movement, have now to a large extent been liquidated. We have concluded a new trade agreement with India, an agreement which I do not pretend I regard as being in every sense satisfactory, but one at any rate which does give to the great cotton industry a fairer opportunity of competition in the Indian market than it has had for a very long time. In the first four months of this year, exports of cotton yarn were greater by 7 per cent. than they were in the first quarter of last year. Although the exports of piece goods are still lower than they were a year ago, they are running on a higher scale than, for instance, in the last quarter of last year. The woollen industry has followed the same course. The decline suffered last year was not as great or as startling as that in the cotton industry, but it was substantial enough. In the first four months of this year, exports of wool tops were up by 40 per cent. In quantity, and woollen and worsted yarn by over 22 per cent., while woollen and worsted tissues showed only a small decline. The percentage of unemployment has been considerably reduced.

Finally, let me pass to a typical individual industry. More than any other industry, motor cars illustrate, by their monthly figures, the difficulties with which British trade has had to contend over the past few months. We have only to take them as a typical example to see how closely trade in this country has followed tension abroad. Ever since the Summer, when the decline which had started in America the year before seemed to begin to flatten out, there has been an astonishing vitality in British trade which, at the least sign of a decline in international tension, has immediately resulted in increased consumption and production. After Munich, a substantial increase occurred. Then, as hon. Members will recollect, there was increased tension a month or two later as a result of the treatment of the Jews in Germany, which showed an immediate effect in this country. A relaxation of tension about Christmas allowed trade again to rise. All hon. Members will recollect the tension in January, which again caused a decline, and the better feeling in February and March, which brought real hopes of a trade revival, only to be shattered once again by the entry of the Germans into Prague. All this is shown by the figures of motor-car registration. In January, as compared with a year ago there were 2,400 more registrations of private cars; in February, when confidence was beginning to grow again, there were 4,470 more. In March, the first half of which passed in a peaceful atmosphere and the second in a feeling of much greater strain, there were 3,797 more, and in April, when the full force of the tension was felt, there were actually less than a year ago.

I think those figures show, both for industry in general and for individual trades, a very real amount of recovery during the course of the last few months; but of course, our satisfaction with that is reduced by the knowledge that a considerable amount of it is and must be due to the entirely abnormal cause of the increased expenditure on rearmament. In so far as it is due to that fact, although it is satisfactory at present, it holds out no hope of a permanent solution. While giving full weight to the effect of rearmament on this recovery, I do not think we should be inclined to exaggerate it. There are a good many signs which show that the recovery which has taken place is not so greatly due to rearmament expenditure as some people would believe. Normally, if you were having a purely unreal boom due to this unproductive expenditure, you would expect immediately to find a large increase in our imports owing to the necessity for purchasing raw materials for these armaments from abroad, and a falling off in our exports.

As a matter of fact, an examination of our trade figures for the first three months of this year does not show that tendency at all. In the first three months of this year, although it is true there was a fall in the value of our exports, the volume actually increased by some 3 per cent.; and as regards our imports, there was a fall in value of 11 per cent. and actually in volume of 3 per cent. Certainly, whatever be the present effect of armament expenditure upon our economy, we have not yet entered the phase of abnormal imports followed by a startling decline in exports. If you take those figures, which show an absence of any abnormality in imports, and take in conjunction the fact that there has been an expansion in retail trade in this country, it suggests that British industry is still engaged in supplying the usual requirements of the people, and that there is as yet no general dislocation of industry.

It is satisfactory, too, to note in this connection that in the first four months of the present year there has been a reduction in the adverse balance of our visible trade of £24,500,000 as compared with last year—again, a phenomenon which one would not expect in an economy distorted by abnormal expenditure. I do not think we ought to exaggerate the effect which the large armaments expenditure is having on the present situation, although we certainly ought not to minimise it. I agree with the hon. and gallant Gentleman that the question which must exercise the minds of all of us is what is to happen and what steps should be taken at the time—we cannot say how far ahead it may be—which we all hope to see, when it will be possible to reduce substantially the present crippling expenditure on armaments. Many hon. Members may have seen an article in the "Economist" to which the hon. Member for Aberdare (Mr. G. Hall) referred in a Debate at the beginning of the week. That article, I think, put the dangers extremely clearly under the heading "A Distorted Boom." If hon. Members read that article they will see that, in the analysis of the causes of disquiet for the present, there is disclosed what seems to me to be a great hope for the future. In analysing our present expansion, the "distorted boom," the article calls attention to the fact that there is no corresponding revival in a number of industries which depend upon confidence and where one would expect this expansionist movement to have originated, that in fact those industries are not only not leading the way in this expansion, but are not sharing in the expansion at all.

It seems to me that it is the fact that those industries which depend upon confidence are not sharing in this expansion, which points the way to the methods to be adopted when the present armament boom comes to an end, because it is upon those industries taking up the slack caused by the falling off of our rearmament expenditure, that we shall have to depend for the transit from what is almost a semi-war economy, to a full peace-time economy. Although, naturally we must all have broad ideas, such as those which the hon. and gallant Gentleman has put forward, about the line which we ought to take, exactly how it is to be done must depend to a considerable extent upon the circumstances of the moment. Under what conditions is rearmament coming to an end? I agree with the hon. and gallant Gentleman that if we are to take it that it is not coming to an end at all, perhaps none of us need worry very much about it or waste time in discussing what we ought to do. But if it is coming to an end, under what conditions will it end?

If it comes to an end as the result of a sudden dramatic stroke, something which suddenly enables all the countries of the world to feel that the necessity for rearmament is obviously and definitely decreased and that all-round reduction can be made, then it is clear that the sudden dramatic stroke which enables the countries to reduce their armaments, will, at the same time, increase confidence immensely all over the world and make possible a revival in international trade as a whole and even internally in those particular classes of goods which to-day, as we see, are not sharing in this revival. Those classes of goods are consumers' goods of what I may call a long-term character. There is no falling off in the consumption of goods which can be immediately consumed. Everybody knows when they buy those goods that there will be time to consume them before the emergency arises. The type of goods to which I refer is that which includes clothes, motor cars, furniture, paints and house decorations—consumable goods which it takes time to consume. Everybody postpones the purchase of these in view of the possibility of an emergency.

It is quite clear, then, that if the same factor which enables us to reduce our armaments expenditure, removes the fear of emergency, then there is an immense opportunity for expansion in that type of goods. Certainly—and this is a point which the hon. and gallant Gentleman also made—there will be great opportunity for expansion in our oversea trade which, of course, far more than internal market, is to-day held in check by the prevailing tension, by the lack of confidence and by the economic measures which many countries have had forced upon them, not necessarily from sound economic motives but in preparation for an emergency which they fear. The hon. and gallant Gentleman is perfectly right in pressing on the Government that not only should they be thinking of the ways in which to maintain and increase our export trade at the moment, but that they ought to have in mind ways in which they can utilise this opportunity when it comes, when conditions will be ripe for a real expansion in world trade as a whole and make certain of the share of this country in that trade.

It may be the most convenient way of dealing with the question of our export trade in the past year if I take four series of negotiations in which we have been either engaged or interested. They are typical of the different methods which we believe have to be adopted in view of the differentiations in national economies and in national trade methods which we encounter now all over the world. I am convinced that we have to recognise the reality of these differences. We have, however unfortunate it is, to adapt our methods to particular cases. Any attempt to deal with all these countries upon the footing of our old traditional economy is doomed to failure. The outstanding negotiation of the past twelve months has been the conclusion of the Trade Agreement with the United States. That is an example of what I may call the classical method of trade negotiation— negotiation designed to reduce tariff barriers between the countries, and by the use on both sides of the most-favoured-nation clause, to expand what was originally a mere bilateral arrangement, into the wider field of freer international trade.

I know that from the start of those negotiations, which were long and difficult, the House of Commons as a whole was always anxious for their conclusion and was always prepared to support the Government in their efforts to attain that end. I should like to take this oppor- tunity of expressing my deep appreciation and I think the appreciation of the whole Committee, of the efforts of those Civil servants who, through many weary months in America, dealt so skilfully with the most intricate trade negotiations which this country has ever undertaken. I am sure that the Committee will share the satisfaction which I feel on having seen in the recent Honours List that the leader of that delegation had received due recognition for his work. I, too, regard this agreement with the United States as one between two old Liberal economies, if I may steal the word, although perhaps, like others, it has fallen slightly from the old standard of Liberalism.

Mr. Macquisten

Risen, not fallen.

Mr. Stanley

To some of us, of course, a fall from the standard of Liberalism may mean a rise. There were many who said, when these negotiations started, that our two countries were so competitive in the character of their trade that any agreement between us was impossible; but I believe it was a great satisfaction to the world that that was found to be wrong. It gives some encouragement for the hope that when this terrible international tension dies down, the world as a whole may return to the saner trading methods of a few years ago. The hon. and gallant Gentleman asked me as to the actual effects of that agreement. It is too early, of course, to come to any definite conclusions, because only on 1st January last did the reductions have effect, but certainly since that date there has been a satisfactory increase in our export trade to the United States. It is quite true that that trade has not yet reached the level of 1937, but hon. Members will admit that world trade as a whole is running to-day well below the level of1937, and the fact that it shows a considerable expansion on 1938 is, I think, satisfactory. It has opened up great possibilities of increased trade between the two countries, possibilities which immediately, if you had the sort of circumstances to which I have referred, where confidence was restored and world trade naturally increased, would materialise for our mutual benefit. I have taken that as an example of what I might call the classical trade agreement.

Another example to which I should like to refer is the instance of our trade relations with Finland, one of the group of countries which my right hon. Friend visited and to which the hon. and gallant Gentleman referred. There, of course, we have had for some years a trade agreement with the effect of lowering the barriers between the two countries. It has led to increased trade on both sides, but it has led also to a far more favourable flow of imports from Finland than of our exports to Finland, with the result that in 1938 imports from Finland were worth £19,250,000 and the exports of United Kingdom goods to Finland were worth only £5,500,000, with re-exports worth £330,000, leaving a ratio in favour of Finland of more than three to one. No one, I think, is entitled to believe, or should believe, in a strict balancing of trade between any two countries. Our trade has always been built up upon something wider than bilateral trade, and to try and put our trading relations with every individual country in a sort of strait jacket so as to get an exact balance of trade with every country is, I think, a profound economic fallacy. At the same time we have to realise that in the condition of the world to-day, with everybody putting up these barriers, the effect of this circular trade is probably decreasing, and we have to pay much more attention to the figures of bilateral trade than we ever had to in the past.

We do not believe that with a country like Finland, friendly to us and anxious to do trade with us, the method of menaces adopted by some countries is a method which this country either should or could adopt, and we think that a friendly discussion with a country of that kind, a joint examination to see how they can do what we believe they want to do, which to their own advantage they should do, and that is to take more of our goods is likely to produce a much better result. My right hon. Friend visited Finland in the course of his extremely successful tour. As a result of his visit we had here a deputation of Finnish commercial delegates to discuss with commercial people here practical ways of increasing the trade between the two countries. I think everyone who took part in that visit will agree with me when I say that it went off extremely well and that the fullest desire to co-operate on both sides was shown, and I am confident that at no distant future concrete results will manifest themselves. That is another type. That is the type where, having got your trade agreement, you still find that there is a disparity and that it would appear that the amount being sold to us would justify the other country in buying more from us.

Let me take as another case the recent trade negotiations with Rumania, where the difficulties were of a different character, where the Rumanians were taking our goods in full proportion to what they were selling to us, and where the difficulty was to enable more Rumanian goods to come into this country and to enable, therefore, more purchases to be made of our goods. It is a typical case of our trade relations with South-Eastern Europe, trade relations which certainly have been rendered more difficult in the past two years as a consequence of Germany's trading methods in that area. Let me make it clear, as I have done before, that there is no desire on our part to exclude the great industrial country of Germany from the natural markets which she enjoys in the Balkan countries. It is clear that if you are to take every quarter of the world in turn and try to exclude Germany from them, you are adopting a policy which must in the end lead to disaster. We do not mean, we do not try, to thrust Germany out of these natural markets, but what we do say is that we are entitled to our fair share of the trade there and that we are determined to maintain it.

In South-Eastern Europe in 1938 some 40 per cent. of the trade was done with Germany and only eight per cent. with the United Kingdom. It is natural that there must be some disparity. The States of South-Eastern Europe and Germany are largely complementary. Germany is a great industrial nation, while these States are largely agricultural communities, and there is a natural flow between them. We, of course, are equally industrialised, but we have our complementary trading countries in other parts of the world; we have our Empire markets to supply us with the agricultural goods that we need. We do not wish to deprive Germany of those natural advantages, but we do wish to maintain our own share of the trade. During the course of the last year our imports from Rumania were falling very rapidly. They fell from £2,360,000 in the first six months of 1937 to £1,400,000 in the first six months of last year, while our exports remained almost constant. The clearing system as a result of negotiations in September was altered to some extent. This has led to increased imports from Rumania and to the clearing up of the debts which were due to us, but owing to the exchange rate for the lei it has not resulted, as it should have, in the increase of our exports. We have recently had discussions with Rumania and have signed a protocol which sets out the heads of an agreement, and we now have a trade mission over here to discuss the details of that agreement.

Then there is the credit which we are giving, a credit which it would have been impossible to give but for the expansion of our existing export credit guarantee system introduced by my right hon. Friend in the winter. There is an agreement for the purchase of certain wheat. Then there are two very important provisions. Negotiations are taking place in connection with the clearing agreement and the adjustment of the rate of the lei. A second more vague agreement, but what perhaps for the future has the greatest promise of all, is an agreement to set up some kind of permanent organisation for the fostering of trade between the two countries. The definite form that that is to take is not yet settled, but the idea is some joint trading organisation which will both improve the marketing of Rumanian goods in this country and assist in the development of production in Rumania. It seems to me that that is the best method, that through it we can best meet what I admit is the serious situation to which the hon. and gallant Gentleman referred, and that is the presence in the South Eastern countries, particularly in Rumania, of any number of German agents.

Let me refer now to the talks which were proceeding between the Federation of British Industries and the German industries. It is just as well that we should remember, when we hear talk and propaganda about this country's encirclement of Germany and our determination to push Germany down, and the impression which is being given inside Germany that we are out to defeat her at every turn and prevent all natural expansion—it is worth while remembering that I and my right, hon. Friend who represents the Department for Overseas Trade in this country were on the point of going to Berlin to discuss methods for mutual improvement of trade when the Germans themselves banged the door on the possibility of that mutual advantage by entering into Prague. I do not want to discuss the details of those negotiations now. In the present state of tension they, of course, have had to be suspended until a restoration of confidence will allow negotiations to be resumed; but I do say that we here have to remember that you have in Germany as in other countries an entirely new economy. It may not be an economy that we like; it may be an economy which we hope that the people themselves will see will lead to a reduced standard of life, and that they will abandon it. But while those economies are there, we have to recognise them and we have to try to meet the problem which they present. The lines upon which the discussions were proceeding were the lines on which it would be possible for a free economy such as ours to have dealt with a closed economy such as theirs on terms which were mutually advantageous.

I have tried to give some answer to the very important questions that the hon. and gallant Gentleman raised. There is only one further point with which I shall deal. It has been raised by many others before me but it is one which we do well to stress now. I have tried to show earlier in my speech how much trade in this country still depends on the confidence of the individual, and how grave a blow can be done to our industry, to our economic strength, and through our economic strength to our strategic security, by these alternating waves of confidence and depression in this country. All of us here would like to appeal to the ordinary man, whether acting as consumer or producer, whatever part he is taking in our complicated economic system, not to act as if an inevitable emergency were hanging over us and there was no point any longer in making the ordinary provisions and plans on which the trade of this country depends.

The slogan "Business as Usual" was perhaps not a very good one in the last War. It is certainly a bad one now. We cannot have business as usual after having spent yesterday introducing a Bill for a Ministry of Supply giving priority to Government contracts, with the disturbing effect of this immense expenditure of Government money on particular indus- tries only. We cannot have business as usual under conditions of that kind; but what we can do is to say that when everyone has given to the service of the State that which the State at present demands, then they should attempt to carry on their normal lives, whether as consumers or producers, in the belief and in the hope that this emergency will pass away. There is no good to be done, we do not help ourselves, by living always in apprehension of an emergency. The precautions we take in case it should come will have been of little avail to us if it does come; the few pounds that we save rather than buy a new suit is not going to help us if the emergency comes. Yet it is just that feeling, when it becomes widespread, which slackens down our trade, increases our unemployment and decreases our power to meet the emergency when it comes. It is folly for anyone to say that the emergency is not there and that war is not possible, but it is a crime for anyone to say that war is inevitable. It is in this spirit that I believe we should proceed. After rendering to the State those services which are demanded of us we should proceed with our normal lives, confident that we are rendering the best service we can towards strengthening the country if the emergency should arise.

12.25 p.m.

Mr. Shinwell

The right hon. Gentleman remarked that my hon. and gallant Friend, in his most interesting speech, refrained from reviving any of the old and barren fiscal controversies. The fact is that those controversies are not relevant to the existing situation. There is a new situation, recognised by the Government and by Members in all quarters of the House. That new situation calls for new conceptions. Whether the Government recognise that fact is another matter. Indeed there appears to be, as in the case of foreign policy, a conflict of thought in the Government ranks. We have had several speeches delivered by Members of the Government in the last few days. The Secretary to the Overseas Trade Department, who has taken a very prominent part in trade matters and trade negotiations, speaking at a Conservative luncheon, made reference to the German trade position. He said, as reported in the "Daily Telegraph," that he had been extremely encouraged by reports of growing complaints about German commercial methods, deliveries getting worse and worse, and the deteriorating quality of German merchandise. He added that it was encouraging to find that other countries had their difficulties, but proceeded to say that we had no desire to see German prosperity destroyed. It seems to me that, on the one hand, to take encouragement from the fact that there is deterioration in German trade, and at the same time to be anxious about German trade prosperity, certainly indicates a conflict of thought.

I notice that yesterday, in another place, the Foreign Secretary said that, so far from wishing to embarrass Germany in the economic field, a prosperous Germany would be good for all Europe and for us. For the moment I take no exception to that view, but clearly the Government must make up their minds what is their objective in relation to foreign trade. Is it to recapture our lost markets, no matter where they are, whether in the Balkan countries or in any other part of the world, or are we to allow Germany, by the employment of questionable devices, to prevent this country from re-establishing herself in foreign markets? I ask that more particularly because we have in this regard to take a long-term view. It is not a question whether production at present is satisfactory or not, or whether production and employment are assisted by the rearmament policy. The question is, are we to re-establish ourselves in the markets of the world? But that has nothing whatever to do with rearmament. We were losing our foreign markets before rearmament. As between 1929 and 1938 there has been a decline in our export trade of more than £200,000,000, several markets had been definitely lost, and there was, in addition, an appearance of deterioration in some of our best markets, and that is the situation with which we must deal. It is obvious that a situation of that kind would be accentuated by rearmament which, if it comes to a speedy and sudden termination, must create a. further collapse in the markets of the world. But it is not essentially a rearmament question. It is a question whether this country, essentially an exporting country, is to maintain its place in world markets. It is on that subject that I would offer a few observations.

We on these benches are as deeply concerned about the position of British trade, and the future of British trade, as Members in any other quarter of the House. It is a matter affecting the livelihood of millions of our people, therefore, we cannot be unconcerned about an important issue of that kind. Nor are we concerned for the moment in raising party questions. This question of foreign trade has nothing to do with party questions except as regards the steps which should be taken in future, not only for the purpose of re-establishing ourselves in foreign markets but of maintaining our position. But we can approach it without partisanship, and that is what I propose to do. Let us take the facts in clear perspective. We have had since 1930 only one year without an adverse balance of trade. That is a significant fact. Taking into account our invisible exports, our shipping services and the return from investments, only one year since 1930 has provided us with a favourable balance of trade, and there is no evidence that the situation will improve. Clearly it is not likely to improve if there is a speedy termination to the rearmament policy.

Moreover, we have to consider the British share of world trade, which has undoubtedly undergone a marked decline of recent years. It is a very disconcerting fact. On the other hand, the German share of world trade remains almost static. There have been fluctuations over a period of years, but at present the German share is about the same as it was in 1930 while ours has declined. It is true that our share of Empire trade has increased, attributable to some extent to the Ottawa Agreements, but, on the other hand, our trade in the Balkans and with Italy has sharply declined, and Italy formerly was one of our best customers. There are very valuable lessons to be learned from these facts.

There is an additional fact. It is that vis-à-vis the Scandinavian countries we have improved our export position. These are the facts of the situation. For the purpose of considering our foreign trade position I split the matter up into three parts. First of all there is our Empire trade; secondly, there is the trade with the Scandinavian countries, and countries other than Scandinavian, which still allow free imports; and thirdly, there is the trade with the Balkan countries. Although the situation as regards the Empire countries has not shown any marked deterioration there are some disquieting features. Take the decision of the New Zealand Government to restrict imports. I am far from complaining of that; the New Zealand Government were amply justified in the step they took; but it is clear that that situation was bound to arise sooner or later as a result of indebtedness. Precisely the same position will arise in relation to Australia unless we are exceedingly careful.

We had the amazing experience only yesterday of an Australian Commonwealth loan being raised and 80 per cent. of the loan being left in the hands of the underwriters. That indicates a lack of confidence in the ability of the Australian Government to meet its obligations. Why? Because there is a lack of confidence in the ability of Australian trade to meet its obligations, and that is very largely due to the growing accumulation of debt which is burdening those Dominions. But it is to some extent attributable to our somewhat peculiar industrial and agricultural policy. Australia is in this position, that she must export primary products if she is to live, export wheat and wool. Her principal customers for wool, Japan and Germany, have practically disappeared. Germany is using the synthetic product. We cannot absorb Australia's wool, nor are we in a position to purchase as much Australian wheat as the Australian Government desires us to, and we shall be less able to purchase Australian wheat and other primary products if we develop in this country a lop-sided agricultural policy based on subsidies. We have to make up our minds. Are we going to produce primary products in this country at high cost instead of purchasing them from other countries at low cost, thus enabling those countries to meet their obligations to this country? The Government must make up their mind on that head.

When we come to the Colonies I entirely agree with what the hon. and gallant Member for Pembroke (Major Lloyd George) said. There is an ample market, a great potential market, in the Colonies not being utilised. I noted that the hon. and gallant Member, though he stated the case, did not venture to propound any solution. I believe there is a solution. Our trade with the colonies has been increasing, but very slowly. In my view that is due to two causes. One is the low standard of living in the Colonies, and the other is the low consumption in this country of Colonial produce, due to high prices. We cannot attack the low standard of living in the Colonies, as it seems to me, unless we enable them to get a reasonable price for what they sell and clearly if we establish in this country quasi-Monopolies. as, for example, in cocoa or in fats and oils—I mention no particular firms engaged in those businesses, but they are familiar to everybody— which are able because of their monopoly powers to purchase from the Colonies at low prices and sell at high prices in this country, and restrict production and obviously restrict consumption while earning high profits for themselves, that must have an adverse effect upon our Colonial dependencies. That has been going on for some considerable time. It is easy enough to say that we ought to improve. the standard of living in the Colonies, as if all we had to do was to hand out £10,000,000, £20,000,000 or £30,000,000, but we have to attack the problem scientifically, and it is related to the monopolistic powers to which I have referred. It is also related to the question of efficient and scientific production in the Colonies.

Passing from those matters, let us take the case of the Scandinavian countries. Our trade with them has increased. Why? We have used our bargaining power; and quite rightly so. I say, frankly, that I believe we are entitled to exercise our bargaining power. What we are doing vis-à-vis the Scandinavian countries we ought to do throughout the world—say to them that if they buy from us we will buy from them, that is, provided we can accept the goods they produce. That policy ought to apply also in relation to shipping. I believe it can be a scientific policy. I was interested when I heard the President of the Board of Trade say recently that there was a prospect of some barter arrangement with the United States Government. I welcome a. barter arrangement provided, and it is an important proviso, that there is no intervention by middlemen, no commission payments, because if we have middlemen intervening and the arrangements are saddled with excessive costs, there is no improvement. I am certainly in favour of utilising the bargaining power of Great Britain in order to improve our export trade in the markets of the world. I was interested in what the right hon. Gentlemen said about the Rumanian position. He referred to the creation of an undertaking. I believe the name of it is Anglo-Rumanian Commodities— or there is a name of some kind, the purpose of which, as he said—

Mr. Stanley

That is another one.

Mr. Shinwell

In any event, I think we are entitled to assist in the creation of trade organisations which will not only foster trade between other countries and ourselves, but enable us to use their goods in other markets—in other words, to hawk their goods in the markets of the world as well as in our own country. That brings me to what is the crux of the whole problem, German domination in Central and South-Eastern Europe, the stranglehold which Germany is now exercising over the Balkan countries. I think we are entitled to know what the Government desire. The right hon. Gentleman says, and says it in the most solemn way as befits the occasion and the theme, "We have no intention of encircling Germany. We welcome German prosperity. She must have a place in the sun." That is economic appeasement; but obviously that policy of economic appeasement conflicts with any attempt to create arrangements with the Rumanian and Balkan countries generally which will prevent Germany establishing herself in those countries. Germany recognises that. The right hon. Gentleman says that we must take our share of these markets; the right hon. Gentleman must do more than that. He must obtain from those markets the greatest possible share, irrespective of the claims of other countries; otherwise our export trade cannot prosper. There is no half-way house. We must go forward. Indeed, that is the intention of the Government when they provide export credits for Rumania and for other countries.

The only exception I take to that policy is that it is half-hearted. Germany is easily able to counter the advantage of our export credits scheme by the devices she employs. For example, Germany offers to take the whole of the product of a particular commodity from Rumania, and at the same time she offers to finance public works in Rumania. You cannot counter a policy of that kind by giving export credits. It is quite impossible. Whether the right hon. Gentleman likes it or not, our trade in the Balkans and south-eastern countries will diminish or even vanish altogether unless something is done. It is not a question of encircling Germany; it is a question of deciding what it is we want in relation to our foreign trade. The right hon. Gentleman has to make up his mind. In the Anglo-American Treaty to which the right hon. Gentleman referred the United States Government refuse to allow Germany to avail herself of the most-favoured-nation clause, yet we permit Germany to avail herself of that clause. I cannot understand the reason for such discrimination unless it is based upon our traditional policy, which is of no value in these times. If it was good enough for the United States to refuse to allow Germany to avail herself of the most-favoured-nation clause, I cannot understand why it is not good enough for us.

Mr. Stanley

Because under a treaty with Germany we are bound to do so.

Mr. Shinwell

The situation has undergone a most remarkable change since then, as every reputable expert on this subject agrees. I challenge contradiction when I say that there ought to be a drastic modification of the most-favoured-nation clause, and particularly when Germany adopts discriminating devices in foreign trade.

Mr. Cove

Economic war with Germany. Is that the policy of the Labour party?

Mr. Shinwell

I am about to answer that.

Mr. Cove

It is sheer, naked war.

Mr. Shinwell

We shall see about that in a moment. I am just about to come to that. I am not arguing that we should encircle Germany economically or put a stranglehold on Germany. As a matter of fact, Germany has no complaint to make at all. Germany has been importing goods in vast quantities from this and other countries during the rearmament period in Germany. There is no question of encirclement of Germany. She buys wherever she is able to buy, and there has never been any attempt to impose encirclement upon Germany—at no time. She has no complaint whatever. The facts bear out the contention which I make. If Germany will persist in using devices which adversely affect our foreign trade, we must, for our own protection, employ discriminating devices, whether they are regarded as economic war or not. On the other hand, if Germany will refrain from employing questionable devices of that kind and if Germany will play the game, if she will adopt measures that we ourselves adopt, it is obviously all to the good that we should assist Germany to maintain her economic position and even to improve it. The question depends on what Germany herself is going to do. I stand by what I said. Either Germany plays the game, in which case we respond; if she refuses to play the game, then, to safeguard the livelihood of our own people, particularly the exporting industries, we are compelled to make matters difficult for that country.

In a few words I want to come to the position at home. The right hon. Gentleman the Secretary for the Overseas Trade Department speaking a few weeks ago, referred to the unification of export arrangements. We were led to belive that steps would be taken to create machinery in this country to enable manufacturers and exporters to speak with one voice but, so far as I know, nothing has been done, certainly nothing effective. If some machinery has been created and it is operating I should like to know about it; but even if such a step were taken we should have to ask ourselves, what is the object? Is it to enable manufacturers to raise prices? If it is, it defeats the object which we have in view. On the other hand, if it is intended to rationalise production towards lower prices for export, it is of great advantage. That is what Germany has done. Every step in the direction of rationalisation undertaken by Germany has been for the purpose of enabling that country to make a superior position for herself in the export market.

Now I want to say a word on the subject of prices, and particularly in regard to steel and shipping. It is clear that we cannot revive shipbuilding in this country and indeed we cannot revive general industry—I am not speaking of the present moment, because re-armament is filling the gap, but of the time when re-armament is coming to its end—unless we rationalise steel prices in a lower direction. The right hon. Gentleman asks me about coal prices, I am not prepared to say that coal prices are excessive. At any rate, I have not heard of complaints raised by manufacturers about the high price of coal. The public utilities are not making any complaint. We must bear in mind that the price of coal has always been very low, much too low. I am prepared to meet the right hon. Gentleman up to this point: if there is rationalisation in industry, whether in coal or in iron and steel, bringing some re-adjustment of the wages position to protect the interests of the men, I am all for some re-adjustment. On the other hand, as long as men's wages are determined by the price of coal in the market and certain other factors, we must certainly maintain reasonably high prices. When we have to deal with the question of steel in relation to shipbuilding it is true that the price of steel plates for shipbuilding has been reduced this year, I think about six or seven per cent., but that is much too small. The foreign shipbuilder in Denmark, Norway and elsewhere, can produce ships at a much lower rate because of low steel prices. That is what we are in competition with. I would like to know whether the Government have any proposals to make about this matter?

Finally, I want to ask the right hon. Gentleman whether he has any plans in preparation for the provision of renewed exports in future. He was not very apprehensive about the future and he talked with some vagueness, and in terms of confidence and the like. I am bound to say that that is hardly satisfactory. We are entitled to know whether the Government are in communication with manufacturers and exporters and are ready with some machinery to enable us to enter the export market at the appropriate moment. One method would be that we might, in certain industries not competing with rearmament, lay up stocks now. I think that that could be done in textiles, and it might be done in certain other industries. If we laid up stocks now, we should be in a position to plunge into the export market at an appropriate moment. I agree that it might possibly involve a subsidy, but I do not regard subsidies as unsound if they are used for an effective purpose.

Mr. Stanley

Such as agriculture.

Mr. Shinwell

If a subsidy is used for the purpose of enabling landlords to profit, I am opposed to it, but if it is used with the avowed object, and succeeds in that object, of increasing production, improving fertility, making for efficiency and raising the standard of living, I am all in favour of it. Certainly I am not opposed to the provision of financial assistance for the purpose of producing stocks which can be used in our export markets at the appropriate moment.

This is a transition period, and the right hon. Gentleman must recognise that that is the case. If we show imagination, if we are able to adapt ourselves to changing conditions, and in particular to the renunciation of private sovereignty over British trade, we can more than hold our own. The old free economy no longer exists; capitalist industry has been seriously impaired; the old conceptions are passing; the old traditions have disappeared. Manufacturers and exporters are trying to make the worst of both worlds, but obviously you cannot do that. They are trying to operate a semi-rationalised policy in a closed economy, in point of fact in what is almost a Socialist economy. More and more we have to exercise State control over industry, over production, and certainly as regards our export trade. I am not certain that private manufacturers are ready for that; I am certain that the Government are not ready for it; but sooner or later the tendencies and facts will drive them in that direction. If our exporters and manufacturers are under any illusion in that regard, there is very little hope of a revival of our export trade, there is very little hope that we can maintain our position in the export market. If, on the other hand, they set aside old-fashioned methods and are ready to subordinate their interests to those of the community, there is an excellent opportunity for British trade in the future. I certainly am not pessimistic about the future of British trade if only we are ready to use our imagination, to take the long view, to adopt a long-term policy, and at the same time to exercise a most rigid measure of control over the operations of our industries.

12.59 p.m.

Sir George Schuster

If the time were available, I should very much like to follow the hon. Member for Seaham (Mr. Shinwell) in detail as regards the figures of our trade with various countries, for I think he has given to the Committee rather too pessimistic a picture of the course of our trade, or at least of our share in world trade over the last few years. But time is limited and I want to touch on some other points. I should like, however, to say that I think it would be very unfortunate if this Debate were to develop into a wrangle as to how we can "do Germany down" in South Eastern Europe, because, although it is very important, not merely for economic reasons, that we should keep our place there, nevertheless we must remember that the total volume of our trade with those countries represents, and always has represented, but a very small percentage of our total trade. I would recommend the hon. Gentleman to read the very good survey of the whole position which appeared in the '' Economist'' of 5th November last year, where he will find some extremely interesting figures. I think I am correct in saying that the total volume of our trade with those countries to which he has been chiefly referring—namely the countries of Central and South Eastern Europe—represented something less than 3 per cent. of our total trade. That, I think, puts the matter in proper proportion.

We have to consider a particular Motion which is now before the Committee, and which takes the form of a proposal that the Vote be reduced by £100. If I were in a position to put a Vote before the House, I should like to propose that the sum spent on the establishment of the Board of Trade should be considerably increased, but that, I know, would be out of Order. In the times in which we are living, the problems with which Government Departments are confronted are daily increasing in complexity. I myself have had in the past opportunities of working in close touch with various Government Departments, and I do not believe that among all our overworked departments there is any department whose officials are more overworked than those of the Board of Trade; and when the Opposition parties are pressing the Government to follow a more ambitious policy in regard to our trade and industry, it is a little ironic that they should seek to reduce the sum spent on the Board of Trade.

Mr. Kingsley Griffith

The hon. Member will of course appreciate that to move a reduction of a Vote does not in the least imply that one desires that less money should be spent on the Department. It is, of course, the only constitutional method of criticising the Department, even though we, like the hon. Member, would desire that it should be increased.

Sir G. Schuster

I fully appreciate that, but perhaps the hon. Gentleman will allow me to point my argument in that particular way, because I want to emphasise the fact that a terrific amount of work falls upon Government Departments nowadays, and that all the policies which hon. and right hon. Gentlemen opposite are urging upon them in the way of greater planning and so on would involve an enormous amount of increased work. The work which is being done by the officials of the Board of Trade is most admirable work, and I think it is a matter for serious consideration by this Committee that they should encourage an increase rather than a reduction of the staff. I feel indeed that there is a great need for an increase at the present time, in view of the problems with which the country is now confronted.

So far as I have examined and followed the trade policy of the Board of Trade in the last few years, it seems to me to be very much on the right lines. There is no time now to go into the effects of all the various trade agreements that have been made. My right hon. Friend himself gave us some very interesting particulars with regard to certain agreements, and I would recommend all hon. Members who are interested in this subject to go through our trade with various countries, and to work out what percentages of their trade we are getting and see what differences there are in our share of that trade as between the countries with which we have trade agreements and those with which we have not. I think they will find very convincing evidence that all the trade agreements we have made have been extremely valuable in their results. One of the most notable results is seen in our trade with Denmark, of whose imports in 1929 we only supplied 14.7 per cent., but of whose imports in 1937 we supplied no less than 37.7 per cent.

When hon. Members opposite direct attention to the share which Germany is getting of the trade of South Eastern Europe, I think they sometimes make a mistake in diverting our attention from the more important countries. I think that, perhaps, the countries of South America deserve greater attention. For instance, if we look at the position in regard to Brazil we see that in 1929 we supplied 19.2 per cent, of her imports and in 1937 only 12.1 per cent. Germany in those years increased her share from 12.1 per cent to 23.9 per cent. There are a number of points of that kind which deserve attention in our trade figures. The general conclusion to be drawn is that our trade policy has been on the right lines, and I would like to say to the right hon. Gentleman "Well done; but please go on on those lines and do better."

While one is paying a tribute to the work of the Board of Trade as regards trade agreements in general, I should like to refer particularly to the Agreement with the United States and to endorse the tribute which the President of the Board of Trade has paid to the work of the officials who completed that Agreement. I do not believe the public fully appreciate how difficult their work was, and what a wonderful success they achieved. In this connection again, I would say, "Well done; but please go on—and do better." There has been some reference to the proposals emanating from the United States as regards the bulk exchange of certain commodities. I appreciate that, to certain people, it appears as though those proposals might not be very advantageous to us, and indeed, it may be difficult to devise means for working them out to mutual advantage. The suggestion is that we might take stocks of wheat and cotton, and that the United States might take stocks of rubber and tin. As to this, the point is made that they have surplus stocks of wheat and cotton but that there are no surplus stocks in existence of rubber and tin. But it is largely in our power, through the committees which the British Government influence, to increase the stocks of rubber and tin, and I should have thought that that could have been done to considerable advantage.

I want to put a broader point. I would like to say to the right hon. Gentleman who is responsible for the Department of Overseas Trade, and who has just come back from the United States, that here is a suggestion from the United States, which gives us an opportunity of sitting down at a table with them to see whether we can, by joint action, devise anything which is going to improve the general economic position of the world. That is an opportunity which ought not to be lightly thrown away, even though the original proposal is one as regards which there are obvious difficulties. If we and the United States together were to devise a policy for dealing with the production of important staple commodities, we might achieve something which would have a wide effect on the economy of the world as a whole. One starts with the assumption that the foundation of prosperity in the world must be the position of the primary producers. We must, somehow or other, increase consumption, so as to find an adequate market for the primary products, and especially the primary agricultural products. There cannot be a healthy volume of world trade unless we can produce conditions of that kind. That is something that suits us in this country, because we want large supplies, and we want them at reasonable prices. We can get them at such prices if the commodities can be disposed of in substantial volume.

It would be impossible, and inappropriate for me, in a short speech, to develop a practical programme giving effect to this general idea, but I want to suggest certain points. I would suggest that the principle of holding national reserves of suitable commodities deserves serious consideration. It is one which we have heard advocated on several grounds from several quarters recently. I have indeed, myself advocated it for a great number of years. Conditions are changing, and new methods are necessary. We have had, in the field of currency, to adopt the system of exchange equalisation funds, which we invented in this country and which has been followed in every other country. That plan might have been thought extremely unorthodox twenty years ago, but in fact it is working with excellent effect. It is quite possible that some device based on the same principle might be adopted with regard to staple commodities, and this might have great effect in stabilising the position of producers of the staple commodities. Again in connection with the same idea, I want to go back to the point that if we and the United States, who, after all, are the strongest economic forces in the world, were to work out a policy together there are things that we might do together with successful and decisive results, which it might be danger-out for either country to attempt to do singly. We have established a good precedent for co-operation and collaboration of this kind in the tripartite currency agreement, which is working so smoothly and well that it never attracts particular attention but which yet demonstrates that governments of our two countries can work together in harmony and with increasing and mutual respect.

Turning from that to our own position, there are two points that I want to make. We have been discussing mainly the position of our export trade. No one appreciates more than I do the vital importance of the export trade of this country but I want to say two things. First, we must not fall into the error of regarding the position of our export trade as the sole test of our economic well-being. Secondly, when we are considering how to benefit our export trade, do not let us concentrate attention entirely on measures which may be necessary to protect that trade from what is regarded as unfair competition. As to my first point I would commend to the attention of hon. Members who may be inclined to take a pessimistic view of the position of this country that interesting analysis of our position which was prepared by the Economic Section of the British Association, under the title of "Britain in Recovery." That review pointed out the very remarkable achievement of this country in the recovery which was effected from 1932 to 1937. Up to 1932 there had been the great depression, but even between 1929, the peak of our previous boom, and 1932 it is worth noting that the total national production of goods and services had only declined in value by something like 7 per cent. But from 1932 began a steep recovery and by 1937 we had got up again to a level which was 20 per cent. higher than in 1929.

There never has been, in the history of this country, such a remarkable move forward as took place in those five years. Economists have speculated as to what were the reasons for that recovery. They have not, so far as I know, put forward one explanation, which might appeal to many of us here, that it was largely the result of the confidence created by the National Government, though, I may say that I myself consider that that was a most important factor in the situation. One of the reasons put forward—and it is an interesting reason because it has such a bearing on our general economic position —was that the price level of the necessaries of life was low in relation to the value of our own manufactured products and the level of wages. There was left over, in 1932 and thereafter, after expenditure on food and clothing and other necessary supplies, to the wage earners of this country, a sum of £250,000,000 per annum greater than had been the position in the years from 1924 to 1927. That volume of spending power was undoubtedly a large factor in our recovery, and that is a very important thing to bear in mind when we are considering our general economic position.

I turn to my second point. As regards the export trade—and I want to emphasise this—it is not merely a question of trade agreements and of fighting artificial competition. We do indeed want trade agreements to protect ourselves against unfair competition, but we shall only go down hill if we attempt to rely on methods of that kind as a shelter to protect us if we cannot maintain our competitive efficiency. That really leads back to our own policy, and on that I want to say a few words on a topic which has not been dealt with in the Debate to-day. We often seem to forget, when we discuss our export trade, what a lot of things we are doing in other fields which are likely to hamper our manufacturers in maintaining their competitive efficiency. I would suggest that on any occasion when any Measure comes before this House, although that Measure may be extremely desirable for social reasons or very greatly needed for the protection of particular interests, nevertheless the House should also consider what its secondary effects are going to be especially on manufacturing costs generally and on our competitive efficiency in export markets. There have been many Measures of that kind introduced in the last few years which have had the effect of putting up prices.

The hon. Gentleman who has just spoken referred to the price of coal. Any manufacturer will tell you that the price of coal which he has to pay is a very great factor in his manufacturing costs, and that the high price of coal has undoubtedly greatly affected his position. These things tend to be forgotten now, partly, because manufacturers are enjoying freedom in a protected market, and, partly, because of the great volume of business resulting from the rearmament programme which makes the difficulty one of coping at any price with the present demand. But they are things which will tell in the long run. The point I want to put to the Committee is that, as the need for Government interference in every form of economic life gets greater so does the need increase for a really comprehensive survey of our position so that the secondary reactions of all the measures that are introduced may be properly considered.

I should have liked to have asked the right hon. Gentleman himself, if he were here, whether, to take one small illustration, he himself is thoroughly satisfied with the effect on our export policy of the increased horse-power tax on motor cars? I feel considerable doubts about that, and they are shared by the motor industry, for it is a measure which may interfere with manufacturing policy and may just give a set-back to the position which our motor industry was gaining in the export market. There is no time to argue that out now nor would it be the appropriate occasion, but I want to illustrate my general point by putting two questions to the Committee and to Members of the Government who are here. Where is there in the Government a Minister or an administrative organ interested in the economic position of the country as a whole? And when do we in this Committee get an opportunity of considering the economic position of the country as a whole? Some of us tried in the Budget Debate to get the general economic position considered, but the Chancellor of the Exchequer elected—wisely no doubt for tactical reasons—to treat the Budget as a purely budgetary problem. Some of us feel, particularly in times like the present, when these vast amounts of money are being spent, that it involves more than the mere Budgetary problem and that its secondary reactions deserve some consideration.

If I might continue this line of thought I would ask the Committee to consider how the changes which have occurred in the last few years give support to the point I am making. Taking public finance alone, in the last century, the total sum raised in taxation, both centrally and locally, represented about 13 per cent. of the national income, and now the money that is being raised represents nearly 35 per cent. of the national income. The Government as a borrower has become the chief factor in the capital market. The Government as the controller of the Exchange Equalisation Fund and currency policy can affect the very foundations of the country's economy. Then we have our system of protection. We have our trade agreements, clearing agreements, subsidies, marketing schemes, and cartellisation of industry under the encouragement of Government. We have in fact got right away from the old self-corrective system. The system is daily becoming more artificial, with the Government as the chief artificer, and now on top of that we have this huge armament programme, involving the establishment of a Ministry of Supply with powers of control and interference. I have no doubt that all these problems are thoroughly appreciated.

Mr. MacLaren

No, they are not.

Sir G. Schuster

The old policy and the old arguments will no longer do. Merely minimising Government interference is not an adequate objective. We need a positive and not merely a negative policy, with a wide survey and a careful diagnosis of the economic position as a whole. Whenever one talks like that it is said: "Here is one of those economic planners." I may say that I approach all ambitious economic "plans" with the greatest scepticism. I believe in individual enterprise and on principle I hate all this interference with it. But one must face realities, and when you have the Government activities inevitably and for reasons which this country cannot control, developed to a stage in which they are cutting into the very vitals of the country's economic life, then I say: "For heaven's sake let us have these activities regulated on a well-thought-out plan and on the basis of a careful factual survey of the position." But, as I have said, when one looks at the machinery of Government, one finds no organ of government, no instrument, no part of the machine which is really capable of undertaking a centralised survey or responsible for taking an interest in the economic position as a whole. I should be very glad to offer to the Committee my own suggestions of how the position might be met, but on looking at the clock I think it is high time that I gave others an opportunity of speaking. I do, however, hope that as he is sitting here, my right hon. Friend the Secretary for the Department of Overseas Trade who has such an active mind and is encouraging everybody so much just now by his physical mobility and imaginative capacity, will devote some attention to what I have said.

1.28 p.m.

Mr. Kirby

I hope the Committee will forgive me for leaving the general line of discussion in order to raise a few points on other subjects. The first subject is the proposed £10,000,000 barter scheme between this country and the United States. It is said—and we have not been told anything to the contrary in this House—that the proposal is that this country should hand over tin and rubber to the value of £10,000,000 and that the commodity to be handed over to us by the United States should consist entirely of cotton. That would mean that we should receive from America about 1,000,000 bales, to the value of £10,000,000. I have no objection in principle to the Government undertaking a big deal of this kind, because it is a thoroughly good Socialistic action, but as one who comes from Liverpool, the centre of the cotton trade, I am compelled to note the fact that we are not yet living in a Socialistic state and, therefore, we have to think twice lest, by means of a big transfer of cotton, we do anything to upset the ordinary machinery of trade, and thereby perhaps ruin those engaged in it and throw thousands of people out of work.

There can be no objection to a barter of this kind on certain lines and in certain classes of commodities, but it is a different matter when you seek to carry it out in relation to cotton, every bale of which has its own individual value. Each bale is of a different standard. It has to be graded bale by bale. it has to be sampled, bale by bale. It has to be priced separately, and every bale is sold separately. In order that that may be done, there has to be a whole host of people engaged in the cotton trade, and it seems to me that if you handle a big load of cotton to the tune of 1,000,000 bales, of the value of £10,000,000, you are going to throw out of gear the whole machinery of the cotton trade and dislocate the trade in general.

It is a well-known fact that at the present time the American producers are holding very large stocks of cotton in an effort to maintain prices at a high level, and the probability is that if this deal is carried out now by means of this barter scheme with the Government of the United States, our Government will have to accept some of that cotton which is being held, and consequently pay a higher price for it. Then there is the question of the carrying of big reserves to be stored in this country in the event of emergency, and having to store it for perhaps one or two years, during which time, I am assured by those who are experts, there would be a most serious deterioration and a most serious and heavy fall in value.

The people in the cotton trade in Liverpool, those who are employers and those who are workers, have approached me in regard to this problem, with the request that the Government should think very carefully before they throw that great cotton industry in Liverpool into a state of chaos. I would make one suggestion which the Government might consider, in order to protect the trade. I think the Board of Trade ought, in the first place, to ask the Cotton Trade Association in Liverpool to assess their normal holdings of cotton and report to the Board of Trade what those normal holdings are. Secondly, the Board of Trade ought to estimate their emergency requirements on the basis of the precentage increase over the normal; and, in the third place, the Board ought to ask the importers and others concerned in the trade to maintain their stocks at that percentage level above the normal which would meet the requirements of the country in the event of an emergency arising.

This, it seems to me, would have a five-fold advantage. (1) We should secure the additional stocks estimated to be required for emergency purposes. (2) We should prevent undue dislocation of the market when acquiring additional stock and when unloading it. (3) We should keep all the operations in the ordinary trade channels. (4) We should maintain the stability of the cotton firms; and (5) we should prevent the undue amount of unemployment which would be likely to ensue if 1,000,000 bales of cotton were handled by the Government independently of those engaged in the trade.

In order that the Committee may be made aware of the fact that these are not my simple and inexperienced views, I should like to read a quotation from a communication which I received in Liverpool during the last two or three days from a reputable firm of cotton merchants. They say: On no account can cotton be considered as a ' bulk ' commodity, such as grain or metal. Each bale has an individual value and characteristic. Cotton has to be selected bale by bale for mill use. Average grade or staple cannot be used. This is highly expert work. On no account is American cotton accepted here on United States shipping weights. Liverpool landing weights are always taken by our importers. The weight of tare, i.e., canvas wrappings and bands, varies very considerably, and the bales are always surveyed and tested on arrival, or, settled amicably. This, again, is expert work. From our experience of United States Government-stored cotton, it is in a bad condition and could not be put into store here without all faults are first remedied. Also in the United States cotton bales are liable to ' country damage ' which when bales are specially surveyed before shipment, the reconditioning never consists of more than a little external attention and much severe damage is not noticed until bands and canvas are removed for sampling here. This, for very good technical reasons, is hardly possible in the United States before shipment. We estimate, roughly, that in one million bales of such cotton there could easily be claims for condition, tare, loss in weight, etc., amounting to £350,000, which could never be recovered if the cotton went direct into store for a couple of years or so. If a large quantity of cotton comes here and not through the usual merchant channels, it would be disastrous to the raw cotton trade and cause wholesale unemployment. There are many other topics dealt with in the letter, but I will not pursue the matter any further except to express the hope that as representations have been made by the various interests concerned the Board of Trade will consider twice, in spite of the need for this national reserve, before they upset the machinery of the cotton trade, possibly causing a number of bankruptcies, and certainly causing a good deal of unemployment.

I want briefly to deal with a matter concerning the Mercantile Marine. It is the question of the safety of passengers and crews in the Mercantile Marine so far as their safety depends on the training of the crews and staff in lifeboat work and in life saving generally. The training should make them able to act with mobility, efficiency and coolness in a time of emergency. These matters affect a lerge number of men in my constituency and many thousands of people in the City of Liverpool. I want to put one or two questions to the Minister on the point. I want to ask him if he will state how far his Department are preparing the ever-changing personnel of the Mercantile Marine, by continuous, efficient and well-equipped training, for the saving of life in the event of mishap and disaster to ships at sea. I should like to know to what extent the training of crews and staffs has slackened in recent years. I understand that this has been the case from information given to me by people who are vitally interested in the matter of the saving of life.

In the third place, I should like to ask whether the lifeboat training school, which, until a short time ago, was situated in Liverpool, has been finally closed, and whether that school while it was in existence did not, in fact, perform a most useful public duty? Finally, I want to ask what has been done to replace that school in the life of the Mercantile Marine and particularly in the life of the seagoing people in the city and port of Liverpool. I have noticed in the Press of the country over a long period a considerable number of letters and articles dealing with the question of lifeboat training, and it appears for the observations of those who are experienced in seagoing work that this side of our Mercantile Marine life has been sadly neglected. They believe, without any excess of imagination, that, in the event of any mishaps occurring while at sea, many of these crews will be found unable to perform life saving under the difficulties which exist in the case of a storm or disaster at sea.

I want to quote from a letter I have received in order to substantiate some of the things which I am suggesting have been happening in the matter of lifeboat training. The letter is from a former principal of the lifeboat training school in Liverpool and is addressed to Sir Julian Foley, the Secretary of the Marine Department of the Board of Trade on 20th May this year. It is a lengthy letter and I do not propose to read the whole of it. I will read one paragraph which, I think, gets to the kernal of the question, and which draws the attention of the Committee to the fact that persons who are highly experienced in this work have grave doubts as to whether the Board of Trade are adequately carrying on this work of lifeboat training and whether, more particularly, they are carrying out the examinations in such a form that when people pass the examinations and are certificated they are really able to do the job which they are supposed to do. The letter is as follows: On the 30th June last year I had 10 men under instruction, comprising three officers, six deck hands and one steward. During the first two days under instruction the weather was bad enough to prevent any boatwork being done, but on the third day, the weather having moderated, the trainees were given a try out in the boat. Only two of the trainees showed any idea of pulling, and finding it impossible to get others going or of them learning in the prevailing weather conditions, I ordered the boat in. I informed the men that since their unfitness in the boatwork gave them not the remotest chance of passing the examination it would be postponed till the following Thursday, when in the meantime they would have ample boat practice. Against this advice they insisted on going to the Board to make their own application to be examined, joining up with some non-school candidates who were fixed for examination on the following day. To the general surprise of all, they passed. The examiner who conducted the examination did not even go into the boat to test the men. That is a letter from a man who has had many years experience in training men for this work, and it would appear that the Board of Trade examiners in this particular matter are prepared to pass men as being fit for this class of work at sea without having seen them actually at work even in the docks, let alone anywhere else. Another case was reported to me where a certificate had been granted to people who had never had oars in their hands, they had never had any boat work at all, but had simply been instructed in the theory by means of lectures. These are important matters. The question of the barter will affect many firms in Liverpool and many thousands of people engaged in the cotton trade unless the transaction is carried out in the right way, and the question of lifeboat training also affects many thousands of men in the city of Liverpool. We look upon these matters in a most serious light, and ask for the earnest consideration of the Government.

1.44 p.m.

Mr. Boothby

The hon. Member for Everton (Mr. Kirby) will not expect me to follow him in the rather specialised subjects with which he has dealt, more particularly with regard to the somewhat disheartening experiences of the lifeboat trainees with which, I am sure, my hon. Friend will deal in his reply. There are, however, one or two observations I should like to make about the speech of the hon. Member for Seaham (Mr. Shinwell). He qualified his original condemnation of subsidies by saying that he approved of certain subsidies in certain connections, but he seemed to me to be very hostile to all forms of agricultural subsidies. I should like to put this suggestion into his mind with regard to these agricultural subsidies. They may or they may not be well conceived, well devised or well administered, but these agricultural subsidies are the price which has to be paid in this country by the general body of taxpayers in order that the poorer classes may be able to purchase cheap food from all over the world. It is obvious that if we were to have a system of free trade in this country so far as agriculture is concerned no farmer would, be able to make a living, and we could not keep any people on the land. Therefore, the only alternative is to raise the prices of all forms of foodstuffs coming from abroad, or to subsidise our own farmers in order to enable them to live. That is the general argument I would make in favour of subsidies to agriculture. In this respect, I think the agricultural industry occupies a different position from that of any other industry in the country.

Another point raised by the hon. Member for Seaham with which I would like briefly to deal is the question of the struggle that undoubtedly has been going on between Germany and ourselves for the markets of South Eastern Europe. I agree with a great deal of what the hon. Member said, but I thing he ought to distinguish between what he himself described as the economic establishment of Germany in South Eastern Europe and the economic domination of Germany in South Eastern Europe. I do not think we ought to fight against the economic establishment of Germany in her natural markets in South Eastern Europe, for obviously she must have a larger part of those markets than we do. What we have to resist at all costs, in my view, is the establishment of the economic domination of Germany through an absolute stranglehold on those markets. I should consider that anything beyond 70 per cent. of the export trade would amount to economic domination. That has to be stopped, and I entirely agree with the hon. Member for Seaham in his remark that it is our business to maintain—and I would add, if possible to improve—our position in those markets. There is a difference between preventing Germany from having political and economic domination in the whole of South Eastern Europe by means of establishing a stranglehold on those markets and preventing her from having a very considerable foothold in them. I think we have to be very careful, in discussing this question, as to what exactly we mean.

There is a final point in the hon. Member's speech to which I wish to refer. He mentioned the Most-Favoured Nation Clause. I agree with him in thinking that some drastic modifications will have to be made sooner or later in the Most-Favoured Nation Clause. Even M. Van Zeeland, in what I suppose is the last really Liberal report we shall ever read in our lifetime, seemed to be disposed to agree to some modification of the Most-Favoured Nation Clause. I believe some hon. Members still cherish the belief that we shall get back to the principles of Liberalism in the economic field. I very much question that. At any rate we are a long way removed from them at the present time, as hon. Members on both sides will agree.

My immediate interest in the export trade, as far as my own constituency is concerned, is mainly confined to herrings; and I would say to my right hon. Friend that there are two markets in Europe which are still capable of immense expansion for cured herring from this country—one is Rumania, and the other Russia. Rumania is already an ally of this country, and we all most sincerely hope that Russia very soon will be an ally of this cuontry. It is, therefore, a most propitious moment for my right hon. Friend to make an unusually vigorous drive in these two markets as far as herring are concerned. There is great scope for expansion of our exports both to Russia and Rumania; indeed, I would go as far as to say that what these two countries between them, and particularly Russia, could buy as a result of a little pressure from my right hon. Friend might very easily transform the whole condition of the herring fishing industry from one of great distress into one of very considerable prosperity. I hope he will not hesitate to use all his energies in order to expand these markets.

I listened with interest, as I am sure the Committee did—and it is rather unfortunate in some ways that we should have this Debate on a Friday, when there could not be a larger attendance—to the remarkably interesting survey made by the President of the Board of Trade of the whole world situation at the present time. The impression I gathered from that survey was that this country at any rate is struggling for a revival of trade against political forces. We are probably in a sort of submerged swell of an upward swing of the trade cycle, and other things being equal, we should be coming into a period of considerable prosperity; but each time we begin to get our heads above water, we get bumped back again under the surface by tension in the international situation.

However, there is one aspect of the present world situation which I think my right hon. Friend did not sufficiently emphasise, and that is the depression in the United States of America, which is having a very bad effect and which, as long as it continues, must go on having a bad effect upon the whole economy of this country, as it must also have an effect upon world wholesale commodity prices, which are not only not too high at the present time, but in many instances still too low. Far from there being a danger of inflation in this country, we are still miles removed from it. This is partly due to the continuing and most unfortunate depression in the United States of America, which after all is the marginal consumer of world commodities. As long as that depression continues in the United States, I should not expect in any circumstances, even if there were an improvement in the international situation, to have any very sharp revival or recovery of trade in this country.

In that respect I should like to refer to a matter that was discussed by the hon. Member for Everton, namely, the proposed barter transaction in rubber and tin and cotton. We read rather mysterious references to it in the Press, but we do not know much about it. Some of my friends who are engaged in the rubber trade have suggested to me the possibility that it may be a means of providing the United States of America at a low price with commodities which they must have and cannot produce themselves, in exchange for dumping their surplus cotton into our markets, to the great disadvantage of Lancashire. I would not go as far as to say that there is any truth whatever in that assertion; I can only say that it is a point which has been made forcibly to me on more than one occasion by more than one member of the rubber trade. We should like to know a little more about what is the intention, in this barter business between rubber and tin on the one side and cotton on the other side; for there is a widespread suspicion that we are going to get the wrong end of the stick if we are not very careful. There is no doubt that the United States want our rubber and tin and want to get rid of their cotton. I would like my hon. Friend, in replying, to give some indication of what is in the mind of His Majesty's Government with regard to this matter; and what, if anything, they expect us to get out of the proposed transaction.

I come now to the general question of exports. I should like to draw attention to the fact that the countries now politically associated with us do very definitely demand, as I think they have a right to demand, more active and more vigorous trade with this country than has prevailed hitherto. I am sorry that my right hon. Friend the Secretary to the Overseas Trade Department has chosen this particular moment to leave the Committee, because I am now referring to the work of his Department, and I told him that I was going to raise this question. I would ask my right hon. Friend to bear in mind that the German methods to which reference has been made throughout the Debate, if they are allowed to continue unchecked, and if they are not countered by, I will not say similar, but Very drastic, and, if necessary, unorthodox methods on the part of His Majesty's Government, will be completely successful in driving us out of the markets of South-Eastern Europe; and may, if they are carried on to the bitter end, succeed in completely wrecking the whole of the political arrangements we have been busy making during the last few months. If we are not going to have any trade with the Balkan States, and if Germany establishes absolute economic domination and a stranglehold over them, it does not much matter how many political guarantees we may give to those countries.

They will be paralysed and they will not be able to take their place beside us. The requirements of Poland, for example, of Rumania, Turkey and Greece for capital goods, and also for equipment for war, are very great indeed. The standard of life of the populations of those countries is not uniformly high, but they are large populations, and, in combination, those countries can provide a very substantial market for our goods.

I think we consider these matters far too much in terms of the 19th century. There is a sort of 19th century "hang-over" among the merchants and traders of this country which leads them to suppose that there are no markets outside India and China and the Argentine. Their attitude seems to be that if we lose the Indian, Chinese and Argentine markets, there is no hope of getting back the export trade of this country. Of course, that is not true. There are a lot of other people in the world besides the Indians, the Chinese and the Argentinians. We have to try to develop other markets, and there is no reason why we should not do so; but, apparently, a kind of paralysis grips the merchants, traders and bankers of this country when they get outside what they regard as their own old beaten track, as far as exports are concerned. They seem to shiver at the idea of opening up a new market. There they have been in China for 70 years. Now they have been pushed out of it, no one quite knows why, and they think it a great shame, and that life has become very difficult and hard. The idea of developing fresh markets elsewhere does not seem to appeal to them. Because the old market has been lost, they believe that our export trade is done for. But that is not the case. These old markets in India and China and the Argentine had to be opened up them selves and developed at some time by somebody. We want a little more of the spirit of enterprise, not only on the part of the Government but also on the part of the merchants and traders of this country.

There is another point which I wish to raise in this connection and with which I hope the Parliamentary Secretary will deal. We have a very good piece of machinery for assisting our export trade in the Export Credits Guarantee Department. It is an extraordinarily good machine; but what I doubt, and I think my doubt is shared by other hon. Members, is whether the Government are putting enough petrol into it. I am not sure that it does not require more power, that it does not require more money, which is the essential fuel for this machinery and without an adequate supply of which we cannot expect it to achieve substantial results. I do not say that I would go as far as Lord Mancroft, who was at one time a distinguished and successful Secretary of the Department of Overseas Trade. He suggested that we should place at the disposal of the Export Credits Department a sum of, I think, £250,000,000. I think that is excessive; but I am by no means satisfied that the present sum of £75,000,000 is sufficient, and still less am I satisfied that the Department is equipped with adequate powers to enable it to fight the terrific German machine. It is only by means such as this that we can fight that German machine. I do not agree with the hon. Member for Seaham (Mr. Shinwell) that you can never beat the Germans by means of the Export Credit Guarantee Department. I say you can; but you can only do so if you give that Department adequate powers and adequate cash. Given these two requisites, it is possible to develop a machine sufficiently powerful and sufficiently flexible to beat them. But it is our only chance.

My right hon. Friend the President of the Board of Trade referred to the trading organisations to be set up in relation to individual countries, in order to facilitate trade between those countries and Great Britain. He mentioned them in connection with Rumania, and said that negotiations were in progress for setting up a trading organisation in regard to Rumania. I am glad to hear that, and I hope the same method will be applied to other countries. These trading organisations, in co-operation with Government agencies on both sides, can do a great deal to improve existing trade. They can facilitate not only sales to the countries concerned, but purchases from those countries, and sales through the London market, either to this country or abroad. But if any trade with any country is to be successful in the long run and is to be permanent it must be reciprocal and not one-sided. I believe these trading organisations or companies in connection with various foreign countries offer a solution of an important part of the export problem which confronts us at present.

I said just now that to have a successful satisfactory and sound trade with foreign countries it must be reciprocal. We should not concentrate entirely on exporting goods to those countries but see what goods we can take from them. As you get further North in Europe there is no great difficulty. My right hon. Friend pointed out that the balance is the other way so far as Finland and some of the Scandinavian States are concerned; and that we take from them much more than they take from us. Our difficulty is to persuade them to take more of our goods. But as regards South-Eastern Europe and particularly countries like Greece and Turkey, now closely associated with us from the political and military point of view, it is extremely difficult to take any goods for our markets from those countries. Much of the goods which they can supply we already get elsewhere.

There is one direction in which something should be done to remedy that position and which would make a lot of difference to our trade with those countries. That is that we should take a certain amount, even if it were only 2 or 3 per cent. of our total requirements, of tobacco from Greece and Turkey. I know that the difficulties surrounding this question are considerable, but I do not believe it is beyond the wits of the Government, or of the manufacturers, merchants and bankers of this country to devise a scheme which would enable us to take a percentage of our total consumption of tobacco from Greece and Turkey. By so doing we could put our trade with those countries on a completely different footing. This question has been raised more than once in another place and in this House. We are always told that it is being considered and that something may be done, but nothing has been done yet. I ask my hon. Friend to say whether this matter of tobacco is still under the consideration of His Majesty's Government, or whether they have given it up altogether. Have they thrown in their hand, or do they intend to continue trying to find a way by which we can import some of this tobacco? Otherwise, how do they expect to conduct a genuine trade with Greece or Turkey, for both of which countries I believe considerable credits and advances are in contemplation? How do they expect to get those advances back? They cannot have it both ways. Either we associate ourselves politically with those countries and trade with them, or we do not. If we do, there is only one long-term solution of the difficulty. We must take from them a little, at any rate, of their main product. Nobody can say that we do not smoke enough in this country. It may be argued that the tastes of the people are rigid and that they will never be weaned from the purest and straightest-cut Virginian tobacco. I do not believe that to be so. I do not believe that means cannot be found for enabling us to consume a comparatively trivial percentage of Macedonian and Turkish tobacco, the price of which corresponds favourably with that of the best Virginian tobacco. I think the Committee would be very interested to hear my hon. Friend say whether something cannot be done to meet this difficulty.

My right hon. Friend the President of the Board of Trade in his concluding observations asked rhetorically what was to happen when all this rearmament was over and peace and harmony reigned once again among the nations of the world? What then, he asked? How are we to "take up the slack" as he put it? I agree with his rhetorical answer that it is perhaps better to wait for the day. Nevertheless, there is no doubt that any substantial re-establishment of confidence in the world would immediately give rise to something like a boom in ordinary trade. That would of itself do a great deal to pick up the slack caused by any relaxation in the production of armaments. In addition, there will be a lot of public work to be done, especially, if, unfortunately, we have to go on rearming for another two or three years. Undoubtedly public work is being held up at the present time for the purposes of rearmament, and in two or three years time there will be great arrears of public works, and then will be the moment to go ahead with them.

Last, but not least, there is the development of those markets which at present are lying fallow on account of political conditions. Take the China market alone. Just think of what will have to be done in China by what I may describe as the capitalist countries of the world in the next 15 or 20 years in repairing the ravages of the past five years and rebuilding that country. The day before yesterday we had in this House a debate on the Colonial Office Vote which I thought was very remarkable. One hon. Member after another, on both sides of the House, got up and complained, in varying terms, but with almost uniform insistence, of our neglect of the economic development of our Empire. We take a lot of trouble about, and we praise ourselves a great deal for, our institutions, our arts and crafts, our culture, and all kinds of political institutions; but I do not think there is very much on the credit side so far as economic development, particularly in the Crown Colonies, is concerned, and unless we set about doing something in this field fairly soon, there will be even more envious eyes cast on those vast areas of the world than are being cast now. We have an obligation to develop much more intensely the Crown Colonies, and here again is another great field.

Therefore, I feel that there need be no very great apprehensions as to the economic consequences of any relaxation of our rearmament programme. On the contrary, I feel that there will be no difficulty what-so ever, if and when that blessed period comes, in finding plenty to do, both at home and abroad, to take up the slack. Meanwhile, new and unprecedented conditions prevail, and the important thing is that the Government should recognise that these conditions demand new and, if necessary, unorthodox methods. I hope they will not hesitate to pursue them with vigour, because I know they will be supported from all sides of the House if they should consider it necessary to do so.

1.8 p.m.

Dr. Haden Guest

Every one has asked the question, What is to happen later on, after the money that is now being spent on armaments is no longer being so spent and when the slack has to be taken up? And, of course, at some time or another, in one way or another, this period of tension in which we are living must come to an end. We have to look forward to that time, and it is to the question of what is to happen afterwards that I particularly want to devote my remarks. The hon. Member for East Aberdeen (Mr. Boothby) suggested that there was a kind of 19th century hangover in the minds of commercial men which has prevented them from seeing the possibilities of other markets than those which they find at present very difficult, but if that applies to the commercial community, it also applies, I am sure the hon. Members will agree, to the Government.

Mr. Boothby

More so.

Dr. Guest

Undoubtedly new conceptions are needed in the present day world, which is so rapidly changing, and changing in so many different ways. I was interested to hear what the President of the Board of Trade said, in his extremely interesting review, about the new economic conditions which have to be faced. He spoke of the classical example of the arrangements made with the United States, then he went on to other arrangements, such as those with Finland and Rumania, and then he spoke very interestingly of the arrangements made by the Federation of British Industries with Germany, and of how he himself and another Minister, I think, were on the point of going over to Germany for the purpose of entering into further negotiations when Germany put an end to the possibility of such negotiations by her own action in invading Czecho-Slovakia. That, of course, is an extremely interesting prospect opened up, of new arrangements being made with that country. At sometime or another, the present tension must end, and we must have normal economic arrangements both with Germany and Italy, whatever may be their position with regard to us at the present time.

I want to address myself especially to the question which has been raised by practically everyone who has spoken in this Debate, though they have only referred to it and have then passed on, and that is the possibility of the development of our Colonial trade. The President of the Board of Trade referred to it but passed on; the hon. Member for Seaham (Mr. Shinwell) spoke of the great potential markets in the Colonies, but did not further develop the idea; the hon. and gallant Member for Pembroke (Major Lloyd George), who opened this Debate, also referred to this, but did not make any definite or concrete suggestion; and every Member, I think, who has spoken in this Debate so far, although he has referred to the Colonies and the possibilities of improved trade with the Colonies, has in fact paid much more detailed attention to other markets, such as that of South-Eastern Europe, although one hon. Member reminded the Committee that this amounts to something like 3 per cent. only of British trade, important, of course, as that is. This question of the development of Colonial trade ought to be faced and ought to be faced without any 19th century hangover to hinder it. I feel always that the Colonies are regarded as something which people talk about after dinner, when they have had a nice meal and they feel excited and interested, but they do not talk about it after breakfast, when they ought to be making business arrangements about it.

We have very little to congratulate ourselves upon with regard to the development of our Colonial trade. I have lately returned from a visit to West Africa, and just as an index of the amount of interest taken in that extraordinarily important part of the world, at the centre of the British Empire, may I mention to the Committee that the party of Members of Parliament with whom I went was only the second party of Members that had been there in 10 years. That, it seems to me, does not indicate that there is any very great interest taken in that area. In West Africa one was, of course, enormously impressed by the potentialities of the country. I do not want it to be thought that I am criticising the extraordinarily valuable services of the civil servants in West Africa. I was deeply impressed by their high quality and by the spirit of service which inspires them, but I did feel that they were placed there in a false position and were not given the opportunity of developing the country and of helping to develop the trade there as they might have done. One might almost say that the administrators that we have, at any rate in the West African Colonies which I have recently visited, are only care-and-maintenance parties and that they are not parties sufficiently large to enable those Colonies to be adequately developed.

To illustrate my point, let me call attention to the vast extent of the African tropical dominion. In the review of Colonial affairs which we had the other day from the Colonial Secretary, we had presented to us at the same time a report on our Colonial Empire, and I want to emphasise what the figures in that report mean as regards the importance of the African tropical dominion. In that particular report the Colonies are divided into those of West Africa, East and Central Africa, then a number of others, and the total number of all the populations in the whole of the Colonies, Dependencies and Mandated territories of the Colonial Empire amounts to 56,000,000 persons, and the total number of people in the West African and Eastern and Central African Dependencies and Mandated territories and Colonies amounts to 40,000,000. A vast proportion of the total colonial population lives in tropical Africa, in an area comparable in extent with that of the Soviet Union in Europe, which with resources of a similar kind has made immense progress in the last 15 years.

If we took closely in hand the development of that vast tropical estate in Africa we should have at our disposal the 40,000,000 people living in it to help us in that work, and we should have the possibility of developing a new continent, with all the possibilities of trade that that would mean. The Colonial Development Fund, which is the only fund available immediately for this purpose, is limited for the whole of the Colonial area in the world to £1,000,000 a year, and the idea of trying to develop Colonial trade with an expenditure of £1,000,000 a year, to be scattered all over the world is simply and utterly ridiculous. I must be careful that I do not stray into a field which might have been entered more in order two or three days ago, but I do want, in confining myself to the trade aspects of the matter, to say how urgently important this is from the standpoint of those who are looking forward to the future, when the period of tension in Europe ends, and when we can begin again to build up a trade in which the whole of Europe and the world will participate—I want to say how essential it is that we should be building up our Colonial estate and developing it in anticipation of that day.

Of the African people who live there, the 40,000,000, the standard of life is not high, but the standard of their life is, generally speaking, secure. I want particularly to bring to the notice of the President of the Board of Trade, when he is talking about the many different conditions of which this country has to take note in making trade arrangements, that there are very special conditions in Africa itself, one special condition being the form of subsistence economy based on the communal ownership of the land, which is the basis of the life and security of the African native at the present time. It is enormously important, and the Governments in tropical Africa generally agree that it is important, that that should be preserved and that anything we do should not upset it, with the idea of obtaining better results and a quicker money turnover.

I suggest that the problem of the development of this great domain in tropical Africa is so great that we ought not to confine it entirely to our own resources, that we ought if possible to cooperate, in the development of this domain, with France, with Belgium, with Portugal (which of course has enormous tropical Colonies), and that we ought, in conjunction with those Colonies, to have a programme of co-ordinated development of the resources on a big scale. Let me say that an immediate programme of basic development in the way of roads, railways, bridges and so forth that I have recently had put before me, would involve an immediate expenditure on capital development of £30,000,000. That capital development would involve a very large amount of exports from this country, would involve a large amount of work in this country, and would be the creation of definite productive capacity in the Colonies themselves, which would be of use for the future. That, of course, cannot be said of our present armament expenditure.

I think we should get away from our present view of the Colonies and not think of them as little isolated gardens which we look after or not as it pleases us, but that, not only as a question of our trusteeship for the people in those places, we should look on the Colonies as part of the world, and that it is our duty for the sake of those parts of the world and for the rest of the world to bring them up as soon as possible to the level of the industrialised Western nations of the world. It is very difficult to get a conception of that kind agreed to by people who regard the Colonies as places where inferior types of human beings live and which are administered by superior White races of some particular dispensation not always recognised by the Africans themselves. We ought to get rid as far as possible of the old Colonial conception altogether, and invite not only the countries which have Colonies in Africa, but also any European countries which are willing to do so, to invest money in the development of those Colonies, including an invitation to Germany and Italy, in order that those Colonies may be developed in the best possible way.

It is well known to the Committee that capital development in the Colonies is largely undertaken by the Governments of the Colonies concerned, and that the large companies which operate and through whose operations we have export and import trade with the Colonies, especially in West Africa, are merchants and are not those who develop the country as such. It is essential that we get much more money invested in development in West Africa and in other parts of Africa, that in order to do that we should invite investment from investors in this country and in all European countries, and that we should create companies of a joint or mixed character, partly governmental and partly capitalist, on the lines of companies operated at one period by the Soviet Union for developing the resources there. Thus we would get the big-scale capital development of West Africa and tropical Africa which, without the investment of very large sums, is entirely impossible. That, of course, is something quite outside the scope of the Colonial Development Fund, but it might be brought within the scope of the trade organisation of the Board of Trade, which realises that if we are to get much out of our tropical Colonies we have first of all to sink a great deal in them in the way of development, and at present that is not being done. It is essential that we should safeguard the system and basis of life of the African people themselves, and not let those things be undermined, not only for moral reasons, but because it is the only possible economic basis for the prosperity of the African Colonies that the African system of life should be preserved. That is essential. If we can get rid of the old-fashioned conception of the colony, which is what the hon. Member for East Aberdeen spoke of as the 19th century "hang-over," we ought to get into our minds, if possible, the idea of developing tropical Africa, not exactly into a Dominion like Australia, Canada or South Africa, because the development of the races of tropical Africa does not permit that, but we ought to hold definitely before our eyes the objective of so developing tropical Africa economically and politically that it shall have a prospect of becoming at a not too remote stage a big black Dominion.

I remember discussing that conception years ago with the present Minister of Health and he said tome, after a visit to Nigeria, that Nigeria might become the first black Dominion in the British Empire. I believe the time has arrived when we should look forward definitely to the economic and political development of tropical Africa on a basis of raising the standard of life economically and politically, investing large sums of money, by which I mean immediately some £100,000,000, in the development of the basic needs of the colonies, with the idea of raising them up to something like economic and political equality with the nations of Europe. If we do that, undoubtedly we shall be able to get a very greatly increased trade with those countries and they will have very great benefit from their association with us. Unless we do that—if we go on as we are at present with the care and maintenance parties which we have maintained in Nigeria, the Gold Coast and elsewhere— we shall drift into a position where the conditions of Africa will deteriorate and not improve. The conditions of trade will get worse and not better, because our present methods will undermine the basis of the prosperity of the native. It is at this moment of difficulty, when it is necessary to look forward and make plans which will come into fruition not immediately but in a few years time, that we should look forward to an economic organisation and to the investment of a large amount of capital in those colonies so as to enable the standard of life to be raised and enable them to take a very much greater part in the trade exchanges of the world and inside the British Empire on which our prosperity depends.

2.29 p.m.

Colonel Ropner

The hon. Member has made some very interesting suggestions with regard to the development of the West African Colonies. I certainly agree that there is a great possibility of conducting a far greater trade with much of the Colonial Empire, but I listened to the first three speeches with care and what struck me was that not sufficient emphasis was laid on the very great difficulty of increasing our trade on account of the policy of extreme economic nationalism which is being followed by so many nations. A policy of self-sufficiency has been adopted by many countries. Others have been forced, for reasons of exchange difficulties, to make very severe restrictions on their purchases from abroad. We all know that the comparative prosperity or poverty of this country depends to a very large extent on our export trade and the President of the Board of Trade would be justified in reminding the House and the nation, not occasionally but frequently, of the difficulties put in his way because so many other nations are pursuing a policy of economic nationalism.

Questions of international trade would be a subject for debate ranging over many days, and even weeks, but I want to devote a few remarks to one particular industry, the Mercantile Marine. Circumstances have arisen which require me to do this to-day. For some years there has been a growing uneasiness because the British Mercantile Marine is shrinking, actually and as compared with the mercantile marines of many other nations. For years shipowners have been raising their voices and attempting to warn the Government and the nation how perilously small the Merchant Navy has become. Early this spring the plaintive voice of the shipowners was reinforced by a chorus of voices from many other quarters, speeches were made by many people who were in no sense connected with the industry, and numerous questions were asked in this House as to the intentions of the Government in dealing with this problem. It became realised in the country and in this House that we were faced not only with a grave shrinkage in industry, which has been and should continue to be of importance to this country, but also that there was a new and added danger in this time of tension that if war unhappily should come, the Mercantile Marine would not be sufficient to feed the nation.

It was in those circumstances that in March last the Government announced that they were going to introduce legis- lation for the assistance of the Mercantile Marine, that £2,750,000 a year for five years should be given as a running subsidy to tramp shipping, that a fighting fund of £10,000,000 should be placed at the disposal of liners and that shipbuilding was to be assisted to the extent of £500,000 a year, also for a period of five years. When that announcement was made, now nearly three months ago, the country, and I think the House, were relieved. Everyone felt that the Government at no distant date would introduce legislation to give effect to the proposals mat had been announced. To-day, nearly three months after the announcement was made, neither the country nor the industry has any precise information on how these proposals are to be administered, nor has any legislation to give effect to them been introduced. It is true that as a result of one announcement, and I am very glad that it is the case, 144 ships have been ordered from British shipyards, but I ought to warn the President of the Board of Trade that there is grave disquietude among those shipowners who have placed orders because they have not yet been told the extent of the assistance which they will receive, although the total figure has been announced, and there is a very real danger that unless a specific and exact announcement is soon made there will be a tendency for many of those orders to be cancelled. In fact, I have information already which leads me to suppose that more than one shipowner is seriously considering the necessity of having to escape from the order which has been placed. It is only a few days ago that we had a debate on the sale of ships to foreigners. Ships are only sold to foreigners because foreigners can make them pay, and the British shipowner cannot, and unless the British Mercantile Marine is assisted in the very near future we are bound to see a continuation of the tendency to sell ships abroad.

Mr. Fleming

Is it not a fact that some British shipowners have sold ships abroad for scrap?

Colonel Ropner

Certainly it is true, and that is bound to go on so long as British shipowners cannot make their ships pay. I know the pressure at which the Board of Trade is working. I know that there is no Government Department that is not simply swamped by the amount of work which it is being asked to get through. We see the lights in the windows of Government Departments in Whitehall at 10, 11 and 12 o'clock at night and even 1, 2 and 3 in the morning, and I find it very hard to complain when I know the amount of work that is being undertaken, but there is grave disquietude in the shipping industry and while the extent of the assistance has been announced the industry does not know the precise terms of that assistance. Until that is known it is impossible for the shipping industry to acquire that confidence which the President of the Board of Trade said himself was so essential for any industry. I would express the hope that the Parliamentary Secretary, when he comes to reply, will give me an assurance that there will be as little delay as possible in formulating definite proposals, in order that the shipping industry may have a chance of ascertaining its true position and providing what I think the nation wants and needs, new additions to the merchant navy of this country.

2.40 p.m.

Mr. David Adams

I am sure that the Committee feel indebted to the hon. and gallant Member for Pembroke (Major Lloyd George) for the most interesting and lucid survey in which he engaged at the opening of the Debate, and the speech of the President of the Board of Trade, with its intimate survey of our position as a great producing and exporting and importing nation, was well worthy of a great occasion. Even though the Benches are not very well filled this afternoon, happily the Official Report will place upon record the high position of this country among the great nations of the world and the high level of the speeches to which we have listened. The hon. and gallant Member for Pembroke put forward three problems for solution—the re-equipment of industry, the recovery of our lost markets at the end of the rearmament period, and the adequate absorption of labour. So far as the first is concerned, the experience after the last War was that the industrial resources of the country were never in better fettle, and that we need give little or no consideration to any question of improving the industrial machine. It will be found that we have a capacity altogether greater than that which the nation will require from that point of view.

We have heard a good deal to-day about the recovery of markets and the methods which are being adopted to achieve it. I have not observed, nor has it been demonstrated, that we have been in jeopardy so far as our foreign trade is concerned. In spite of our industrial efforts being turned largely in the direction of the production of armaments, there is little doubt that we have maintained our export trades at a remarkably high level; but it is gratifying to note that the Government, recognising the changed circumstances, have been on the alert, during the last few months at least, and have been examining in foreign countries the prospects of securing increased trade. Although the lines upon which we are working may be followed as far as possible by other countries which are seeking similar markets, I think our great financial strength will enable us to hold our own without much fear of failure.

It is interesting to notice that the financial position of this country, in spite of our colossal expenditure, is relatively no worse than it was at the end of the Napoleonic Wars; and, indeed, it has been estimated that in proportion to the increase of trade and the growth of international wealth this country still holds a pre-eminent place, and that our expenditure has been in harmony with the resources of the nation. I have no doubt that the President of the Board of Trade could amplify that aspect of the position, but certainly there is no reason for an atmosphere of pessimism over this nation's position, either now or in the future. As regards the Mercantile Marine, we must recognise that the nation will always be dependent upon that, whether it be a mercantile marine upon the Seven Seas or whether, in process of time, it evolves into a service that will use the air.

We must have, and retain and maintain a Mercantile Marine commensurate with the immense responsibilities which this nation has to its population and to its dependencies, For that reason we must take most serious cognisance of any factors which may be detrimental to either the maintenance or the expansion of our Mercantile Marine. It would almost seem, as shipowners have advised us in this House, that the position is becoming relatively past, so far as the possibility is con- cerned of the expansion of our Mercantile Marine, but there is always the remedy that the nation and the Government can turn their atention to the question of ownership, beginning with the ownership of that source of life and great source of industry, upon which the nation so greatly depends.

With regard to coastal shipping, the competition of road and rail has unquestionably diminished it in a perfectly natural way. The trade has passed into other channels in many directions. In many parts of the country there has undoubtedly been unification of services, and the facilities for shipping of a coastal character in certain ports have altered. There are now rapid methods of loading and discharging, and quick turn-round facilities for loading coal, and so forth, for very near trades and the inter-coastal trades. There is partly a reduction in the use of certain ports, which is in harmony with the spirit of the time in which we live. I am glad from personal knowledge to be able to say that the fierce competition from which we suffered up to a year or two ago from Dutch and French coasting vessels is gradually being eliminated. Our shipowners are turning their attention to the construction of more modern tonnage instead of having to rely upon that which was somewhat obsolete and economically hampering.

Our shipowners are turning to swifter, motor-driven and shallow-draught vessels which enable them to travel up our rivers and into our shallow ports, and that facilitates the competition which, I am advised, is eliminating in certain quarters both the Dutch and the French. I would say that no part of the country is more competent to build vessels for the coasting trade than is the North-East coast where, from the time of Elizabeth, shipping has been one of the dominant businesses, and seafarers have been obtainable in unlimited quantity. No one need feel uncomfortable that there will be a reduction in the numbers of those who are anxious and eager to spend their time on the high seas and in our shipping trade.

In regard to the deep-sea trades, it is true that there has been a very commendable spurt in shipbuilding of various, sorts, including passenger vessels and passenger cargo vessels. I am advised that this has been due almost exclusively to the promise of the subsidy. I have a question down for next week to ask the President of the Board of Trade when it is expected that legislation will be introduced for Government subsidies for shipping. I believe that when it is known what the amount will be and when it will be introduced and also that it will be restrospective, there will be a new spurt in certain quarters, and perhaps an attempt to introduce quite new trades into this country. Apart from the question of subsidy it is undoubtedly a fact that our prices are higher for shipbuilding than are those of the Continent, and that is due partially to a sense of loyalty to the expressed desire of Parliament that shipbuilding orders should be placed in this country, and partially to the hope of an adequate subsidy. Orders are being placed in this country, but I am credibly advised that vessels can be built considerably more cheaply on the continent of Europe, and at figures which are substantially lower than in this country. Whether they are substantially lower, as I am advised, I cannot say, but one of the main factors is that ships plates are dearer in this country than those which can be obtained abroad.

In connection with shipbuilding there is the question of export credits. Why should not export credits be used for the encouragement of shipbuilding in this country by foreigners? So far as I am aware that opportunity has not been used, and that is rather surprising. I have not been able to understand it. I know that if such facilities as have been given in certain quarters abroad were advanced and credit were sustained, which is the same thing, as in the Trade Facilities Act, the effect would have been beneficial. The result of the declaration by the President of the Board of Trade is that information may go forth that those facilities are available in this country, and that a stimulus will be given to our great shipbuilding trade.

With regard to the Colonial Empire and its development I would suggest, in view of its great ramifications, wide area, immense potentialities and responsibilities, that a committee of this House be set up to give advice to the Secretary of State for the Colonies and the Government with regard to that Empire.

The Deputy-Chairman

The hon. Member is referring to a matter which comes under the Colonial Office, and not under the Board of Trade.

Mr. Adams

I was merely indicating that the House is not sufficiently cognisant of the great possibilities of the Colonial Empire. It is singular, may I say in passing, that the general impoverishment of the West Indies especially in regard to Jamaica, which contains50 per cent. of the population of these Islands, synchronises with good or improving trade conditions. Poverty, distress and unemployment were rampart in most colonies whilst public health facilities were almost everywhere at a deplorably low level. If we have in the past, as I believe we have, neglected the possibilities of our Colonial Empire, there is a vast field for our goods there once we raise, as we ought to raise by Statute and otherwise, the general standards of that great population, amounting to something like 66,000,000, or almost 50 per cent. more than the population of these Islands. I must not pursue that subject beyond saying that great improvements can in my judgment be effected administratively without delay, and we can go forward with a feeling of confidence that this vast untapped market will be available to the goods and services, shipping and otherwise, of this country.

With regard to the competition of Germany, to which reference has been made, I happen to have served on a small committee of this party which looked into that question, and it is beyond controversy that methods far removed from those of normal trade have been adopted there; but they are being adopted under the duress of present world economic conditions. I feel confident, and I hope that the President of the Board of Trade will be equally confident, that, if Germany is approached in the right spirit, she will be prepared to meet us. We have heard that the Federation of British Industries has already been in negotiation with German industrialists, and probably could have obtained such terms and conditions as would have enabled a proper reciprocal trade with Germany and South Eastern Europe to be continued. There is no reason for believing or imagining that the purpose of Germany is to destroy the trade of this country, or, on the other hand, that we have any such intention with regard to her.

It is important that the House of Commons and the country should recognise that we are living in an entirely new age, that the old days of individual production, or the production of individual trades, have gone, probably for ever. Industry and production to-day are influenced a great deal by Government direction, Government subsidies and aids, so that in the main our wealth production has become socialised. It is an interesting reflection that the present capitalist system is being steadily encroached upon by the Socialistic system, and that wealth production in many fields has today become socialised. If that be true, many things must follow from it. It follows, for instance, that there must also be socialised distribution, and that the attention of the House must be turned in that direction if we are to have that expansion of our trade and industry which the times undoubtedly necessitate. Therefore it ought to be part and parcel of the business of the Board of Trade, and probably will be in time, perhaps at the termination of the war production period, to make a complete survey of our industries with a view to the elimination of duplication and inefficiency. While today we have been debating, very properly, the directions in which the House must turn in order to improve the conditions of capital, I think it has become increasingly evident that we must also turn similarly to the improvement of the quality of our labour. That is within the province of the Board of Trade in making an all-embracing survey of the country's position.

We are asking what will happen at the termination of the period of armament production. Just as we have had for war purposes great loans where those were necessary, so we must have great loans for peace purposes, and I am confident that, if the attention of the Government had been sufficiently directed to the conditions and the quality of our labour, we should have had loans for raising the standard of life of the masses of the people of this country in a number of directions. It is an absurdity to-day, with the wealth production which the world can show, that in any section of any nation the standards of life, of nourishment, of education, in the case of so large a proportion of the population, should be so low. Parliament has not hitherto directed its attention in this direction, but we are being driven to do so by the inevitable logic of circumstances. I am certain that, if we do so, we shall have better pensions, unemployment benefits and standards of nutrition, and these will give rise to the resources which will be available for great works of national utility, so that this country, with its 45,000,000 people just as during the War period it improved the quality and efficiency of its capital, will be able during this period of interregnum similarly to improve the quality and efficiency of the masses of the people. I commend that point of view to the President of the Board of Trade for his earnest consideration.

3.4 p.m.

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

The Debate has turned so largely on matters concerned with overseas trade, which are more within the purview of my right hon. Friend, the Secretary to the Department of Overseas Trade, that it would seem to be more convenient, and indeed more welcome to the Committee, if my right hon. Friend concluded the Debate in a comparatively short speech, while I intervene now for a few moments in order to deal with the other points which have been raised up to the present. Most of them have been concerned with the Mercantile Marine, and, before I go on to the speeches which have been made by other hon. Members, perhaps I might briefly correct a misapprehension under which I think the hon. Member for Consett (Mr. David Adams) was labouring in connection with what he had to say as to the desirability of making any assistance given to shipowners for shipbuilding purposes retrospective. In the announcement which my right hon. Friend made, something more than two months ago, he made it clear that it was the Government's intention—naturally, if such legislation were passed by this House—to make such assistance as they were giving for these purposes retrospective from the date on which the announcement was made.

My hon. and gallant Friend the Member for Barkston Ash (Colonel Ropner) also made certain references to the Government's proposed assistance to shipping, and complained that at the present time there was no precise information as to how the Government's proposals would work. As he admitted, one announcement has already been made in this connection; and those who listened to him would hardly have realised from his speech that in that announcement the Government gave the rates of annual grant which they propose in actual figures of the shillings per ton which were involved. That is, quite clearly, the most important information which can be required for a shipowner placing an order for an English ship. There must remain questions of lesser importance: conditions which require discussion, and which must be subsequently approved by this House; but I want to give the assurance that my hon. and gallant Friend asked for, that there should be no avoidable delay in doing this or in giving such information as can be given or that the industry needs.

Another of my absent hon. Friends, the Member for East Aberdeen (Mr. Boothby) asked me to say something on the barter arrangements with the United States. I think he is losing nothing by his absence, because there is, to all intents and purposes, nothing I can say except that those discussions are proceeding in accordance with the announcement made by the Prime Minister. They are not an easy matter, because there are naturally a great many technical difficulties on both sides, but I am glad to record that they are proceeding with great goodwill.

Mr. Bellenger

On the question of the subsidy for new shipping I do not think the hon. Member has made the position quite clear. Is the Committee to understand that certain shipowners have placed before the Board of Trade proposals for new shipbuilding, that those contracts have actually been placed, and that an assurance has been given by the Board of Trade that if and when the House passes legislation they will receive the subsidy back to the date of the contract being placed. Is it not somewhat irregular for a promise to be given to the shipowners before the House of Commons has voted on it?

Mr. Cross

No, that is just what my right hon. Friend did not do. He did exactly what I think the hon. Member would have desired. He said that he intended to ask the House, in due course, to empower him to make it retrospective from, I think, 28th March.

Mr. Wedgwood Benn

But suppose the House does not grant it? Who makes good the loss? Is not this policy of retrospective legislation being carried too far?

Mr. Cross

That is a risk that the shipowners have to run. They have to place these orders at their peril. That has been made quite clear to them, but they have evidently such confidence in the strength of the Government, in the support that the Government enjoy generally in this country, as to place orders firm for, I understand, something like 750,000 tons.

The hon. Member for Seaham (Mr. Shinwell) asked me a question in connection with shipbuilding costs in Scandinavia. He wanted to know whether that was to be attributed in the main to cheaper steel. I have been trying to make the necessary inquiries in the interval since he made his speech. I am sorry that I have not been able to get the precise information which was necessary in order to be able to answer his question. I hope to get it, and I will communicate with him. I take it that he was referring to Swedish steel, and it is in that connection that I have been making these inquiries.

Mr. Shinwell

It is alleged that steel costs in foreign shipbuilding yards are generally lower than the steel costs in this country, and that, therefore, there is additional competition which has to be faced by the British shipbuilder.

Mr. Cross

It is extremely difficult to generalise upon that subject. In any case, the actual proportion of the cost which is involved in steel plates is a very small proportion of the whole of the cost of a ship. The building of a ship is very much in the nature of an assembling industry. It is rather like the making of a motor car. I understand that in the case of the shipbuilder only 20 per cent. of the cost of building the ship comes under his control, and that a vast number of things come under the other 80 per cent. with which it is necessary to deal, and which it is difficult to analyse, before you can have any conception where the variation in cost is to be found as between one country and another.

The hon. and gallant Member for Pembroke (Major Lloyd George) made a particular reference to his regret at seeing the passing of the small ship and the small port, or, at all events, the great reduction there is in the number of these, and expressed his further regret that this natural nursery for seamen was ceasing to function. That is an attitude with which we must all of us very much sympathise, but I think we shall also agree that the question of obtaining recruits for the Mercantile Marine is a matter for the shipping organisation them selves. It is the practice to work, as indeed they do, in very close co-operation with the employment exchanges, and I am told that they find that this practice is extremely satisfactory.

The hon. and gallant Member for Pembroke further made considerable references to the amount of laid-up tonnage there has been in recent years, and still is, and to the fall in freight rates which reveal the deterioration which has taken place in the shipping position in recent times. The position of the Mercantile Marine apart from fluctuations in conditions and international trade, has been seriously and adversely affected by the continual development of the practice of Germany and Italy of requiring that shipment should take place in national vessels. That is one of the factors which has been weighing against us. Another factor, and one with which the hon. Members are very familiar, is the problem of State-aided competition. Here again a number of countries are continuing their activities in this direction. The United States of America maintain constructional and operating subsidies for the purpose of maintaining an effective mechant navy, and Germany, Japan, Italy, and indeed a number of other countries, are also continuing to subsidise shipping lines.

Mr. Benjamin Smith

The hon. Gentleman would not for a moment be adverse to aiding industries in this country?

Mr. Cross

I do not think that that remark is really relevant to a summary of the position. If the hon. Member will give me a little time, I might arrive at that conclusion myself. There is a further factor, which is a damaging factor as far as we are concerned in this country, and that is that the uncertain international situation has the effect of retarding the demand for shipping, while at the same time it means that a number of other countries are encouraging measures for increasing their own merchant shipping. As a consequence of the international situation the relationship between demand and supply in shipping is becoming more damaging than it would otherwise have been. Last year 1,000,000 tons more shipping were launched than in 1936, but that increase was wholly for foreign flags. As a consequence of this competition, British liner shipping has been suffering a good deal of difficulty in certain cases but, taken as a whole, I think it is, through its efficient and good management, succeeding in holding its own. The liner section has come to the conclusion that Government assistance might very well be necessary if they are to continue to withstand the pressure of foreign competition in certain parts of the world. In regard to tramp shipping, they have felt the severe competition very much more keenly, and the Government's proposals for assisting that section, so far as they have been revealed, are very well known to hon. Members. I think I can say that in recent months—although it is always a rather dangerous thing to suggest that there has been any improvement in tramp rates—the situation has been a little better, although in saying that we must remember that it means an improvement, or a rise, from a very bad state of affairs.

A large volume of shipping which for many months has been awaiting employment in the Plate has been dispersed in recent times and there is some proof that freights have been better, but we cannot be so sanguine as to anticipate that this foreshadows any general improvement in the shipping industry because, as I have already indicated, the abnormal conditions, the increase of tonnage under foreign flags and State-aided competition abroad, are bound to go far to offset any natural improvement that might otherwise have taken place. The immediate outlook for the British Merchant Navy is that they must rely in some degree upon Government assistance in order to maintain themselves in that condition which many hon. Members have already regarded as the very minimum which is necessary and desirable in the national interest.

3.18 p.m.

Mr. Macquisten

We have seen correspondence in the "Times" about a body which chooses to call itself the Oxford Group. It is a name that they got as a nickname somewhere. They are supposed to be a very worthy body, and somebody left them a legacy recently; but they could not lift it because they had not sufficient identity. I should have thought that if an institution is doing good the less it has to do with money the better. There is a passage in the Prayer Book that there is no institution of mankind, however wisely founded or sanely conducted, which in the process of time will not be corrupted. There was a court case about the legacy and I am told that it transpired that this Group pay their hotel bills by the cheques of ardent subscribers. The hon. Member for Brighton (Sir C. Rawson) and a lot of other Members of Parliament signed a memorial to the Board of Trade asking them to grant registration to this Oxford Group. My experience of Members of Parliament is that they will sign anything if you tell them that it is "on the side of the angels." They never take the trouble to inquire what kind of angels. My experience is that in nine cases out of ten the angels have bat-shaped asbestos wings, and the less you have to do with them the better.

This question has been raised by the Senior Burgess for Oxford University (Mr. A. Herbert). Then I saw that the hon. Member for Brighton challenged any other hon. Member of Parliament to say that he had been pestered to sign this document. Well, I say that I was pestered. I got a letter from a brother advocate, who I had not seen for a generation, asking me to sign the thing, and on two occasions a couple of gentlemen waited upon me outside the House and wanted somebody to come in to me and ask me to go out and see them. I refused to go, because I was satisfied that this attempt to ride on the back of Oxford University by a body of people who had nothing to do with the University at all was a dishonest and fraudulent attempt. I refused to go. On another occasion I was called out by one of the sucker M.P.s who had signed to see a nice blue-eyed boy who was an enthusiast in the cause. I saw him for a moment and left him perhaps slightly paler than he was when I first met him. I see that Lord Hugh Cecil writes with his usual wisdom on this matter when he refers to "Oxford Shoes," "Eton Collars," and "Windsor Soap." I tell him there is an offence known as "passing off."

Mr. Stanley

The hon. and learned Member knows about the "Oxford gowns"?

Mr. Macquisten

That makes it no better, but the intention of these people is to link them selves up in the public mind with this ancient and honourable university. I know nothing about the University, I am not a member of it, but I say that as I was asked to sign this document I have a right in deference of common decency to protest against the whole thing.

Mr. Mathers

Can the hon. and learned Member say where the University of Oxford got its name? Was it not borrowed from the town?

Mr. Macquisten

That was a good many hundreds of years ago and I do not remember. But what I do know is that Oxford University is a place where a good many young men go and spend a great deal of time.

Mr. Lansbury

If this movement called itself "The Poplar Movement"—and Poplar is as ancient and just as intelligent and just as useful to the community as Oxford—would the hon. Member for the Oxford University have come forward and defended Poplar from being dragged in?

Mr. Macquisten

We should expect the right hon. Member to do that. All I know about Oxford—I have been there once or twice—is that it is a place which has a world-wide reputation; and as for Poplar, well, there is such a thing as the "Popular Front." Oxford University is a place where wealthy young men go to spend a few years of their time and make friends and I think some of the mothers of England managed to get co-education introduced so that they might send their daughters there, because they wanted to give their daughters a chance to meet these young men before chorus girls got them. The "Times" tells of a steamer in which leaflets with photographs of the University buildings, long stories about the University and about the Group movement were distributed all in an attempt on the part of those running the Group to link up with the ancient University of Oxford. It is a wrong thing to do, and it is absurd to think that we should have spent days in this House considering the bogus charities Bill, while here we are getting this bogus institution registered under this name under the aegis of the Board of Trade.

3.24 p.m.

Mr. Owen Evans

We have had a very refreshing interlude, and all I can say is that I did sign the petition. Like the hon. and learned Member I also saw two blue-eyed gentlemen who called upon me 250 miles away from London. They put the petition before me, and I signed it. I am glad to know that I happen to be on the side of the angels. I am sure the Committee feels that this Debate, which was initiated by my hon. and gallant Friend the Member for Pembroke (Major Lloyd George), has been an extremely useful one. The hon. Gentleman the Parliamentary Secretary to the Board of Trade has dealt mainly with the Mercantile Marine, and I would like to make a few remarks before the right hon. Gentleman the Secretary to the Overseas Trade Department winds up the Debate for the Government. The speech of the right hon. Gentleman the President of the Board of Trade must cause us to ponder a great deal, for he clearly indicated that when we are discussing the figures of exports and imports, and unemployment and employment, it is very difficult at the present time to assess those figures at their real value. As we know that the times are not normal, we cannot place a great deal of importance on those figures, because we do not know what would happen if the rearmament programme were suddenly to finish.

It seems to me that the production of armaments and the production of consumers' goods are so interdependent as to be inextricably mixed up. Prosperity in one industry, where high wages are paid and where there is continued employment, must result to-day in an increase in the consumption of durable or consumers' goods. That is, of course, precisely the reason the figures of the retail trade are kept up in this country. The fact that labour is receiving high wages and salaries throughout the country must mean that there is apparent prosperity, and therefore, a bigger consumption' of consumers goods. Expenditure on capital goods, for armaments or anything else, must lead directly to a larger consump- tion of food, clothing and similar durable goods. We cannot have very much faith that that condition will continue, for it is clear that that sort of prosperity must be regarded as having been built on a very uncertain foundation. It is time for the House and the country to realise that, unless there is a return of that confidence of which the President of the Board of Trade spoke, we cannot have very much faith in a continuation of trade and prosperity in this country or the world. Therefore, the object of the Government and of everybody who has any connection with foreign countries should be to remove those causes of tension which have so great an effect upon production and prosperity. We must try to get back to a real condition of peace.

My hon. and gallant Friend the Member for Pembroke said that he did not want to be gloomy. Nor do I want to be gloomy. I feel that whatever we may think of the Government of Germany, or of conditions in Germany, or of the ideology of Germany, we must realise that Germany does matter to-day. We cannot ignore the fact that in Germany there are 80,000,000 highly efficiently, highly industrialised people capable of very intensive production. We cannot get away from that fact. It seems to me that while a certain number of people, some of them in this House and some so-called political leaders in the country, say that the representatives of the German people, those representatives whom the German people themselves have created, are not to be trusted, are not to be believed in any negotiations, or in any undertaking they may give, a real return to peace is hopeless. I feel that some change of mind must take place if we are to get back to real prosperity on a sound foundation.

I deplore and always have deplored the fact that trade should be mixed up with what I may call politics, and particularly international politics. The hon. Member for Seaham (Mr. Shinwell) has pointed out that this question has nothing to do with party politics, and I certainly deplore the fact that discussions in this House on questions of exports and imports, are mixed up all the time with questions of international policy. I admit that this is, sometimes, inevitable, because the trade methods of some countries involve not only economic penetration, but very often lead to attempts at political control as well. Still, it is to be deplored that these questions should enter into trade discussions. The hon. Member for Consett (Mr. D. Adams) referred to negotiations between the Federation of British Industries and the German manufacturers and traders. He said, what is known to be true, that apart from the political animosity between the two Governments, the two nations if you like, these traders would have come to a reasonable understanding in regard to trade. It is, I say again, a great pity that while those who are constantly in negotiation with foreigners on questions of trade find absolutely no difficulty in coming to reasonable understandings with regard to trade, something always happens in connection with the international situation to destroy those understandings.

The only conclusion we can come to in the present circumstances is that we must turn to and concentrate on those countries with which we have no political conflict, for improvement of trade relations. We know that, as regards our Dominions, we have no political conflict. We have there what may truly be described as a real League or Commonwealth of Nations. There we can develop our trade without hindrance or without considering any political differences. It is also for that reason that the whole House to-day welcomed the remarks which the President of the Board of Trade made regarding the major agreement between this country and the United States of America. There is another country which is well known to my right hon. Friend the Secretary to the Department of Overseas Trade, which he has visited recently, and that is Finland. I happen to know a good deal about that country, and I am quite sure that he has returned from that country with the conviction that the Finns, the Finnish people, are a very fine race, that they are good business people, that they are extremely able and keen, and that they are extremely anxious to trade with this country. The friendliness of that country to this country is beyond question, but may I again remind the Committee that there are political considerations with regard to that country which affect to some extent the trade relations between our respective countries? I know, from my own personal knowledge, that the people of Finland first of all in international questions have no interest in anything besides being neutral, completely neutral. They do not want to be involved in any international differences. They want to be left alone to develop their country, and there is a very strong feeling in that country, which I think the Committee ought to bear in mind, against any proposal at all, coming from anywhere, which they might consider as affecting their neutrality in international relations. There again is another reason for deploring the mixing up of political questions with trade questions.

I noticed a few days ago that the right hon. Gentleman the Secretary for the Department of Overseas Trade said something with regard to the German drive for trade that is going on just now. What he said appeared, I think, in the "Daily Mail." I saw it there. The only time that I read the "Daily Mail" is when I see it refers to the right hon. Gentleman the Secretary to the Department of Overseas Trade. He said: Germany's trade wax against Great Britain is collapsing, due to the poor quality of the goods that Germany supplies and to delays in delivery annoying those countries which are doing business with her. I am extremely glad to hear that, and I invite the right hon. Gentleman to say a little more about it. We know that there is a German drive for trade. Everybody engaged in manufacture or trade knows there is a definite German drive to secure a monopoly of the trade in the Near East, and there is a similar drive to secure a preference in the South American countries. Two or three days ago I had the opportunity of talking to a man who has just returned from the Near East. He is a well-known observer of affairs in those countries, who has had unique opportunities of studying the problems of trade in the Near East, and I can confirm what my hon. and gallant Friend the Member for Pembroke (Major Lloyd George) said, because the man to whom I am referring said of Rumania to-day that Bucharest is simply swarming with Germans, and the figure of about 120 was mentioned to me as being in one hotel there.

The same remark applies to Turkey. Having regard to the relations between Turkey and this country, we have a splendid opportunity to stimulate trade with Turkey. There is no doubt that Turkey in her trading relations with Germany has been disappointed because of the bad material which has been supplied to her not only for naval construction but for electrical work in Turkey. Herr Hitler said not very long ago that "Germany must export or die." That may be an excellent slogan, but that is not by any means the method that the Germans have adopted. In practice what they do is to say that they must import as much as they can at high prices, and they pay in blocked marks which are credited to the suppliers, and the suppliers have to buy goods in Germany in exchange for their primary products. We all know the methods of Germany in the Near East and the long credits which are given—credits which cannot be given by this country except in so far as they can be got out of the Export Credits Department. The Germans give long credits for machinery and other durable goods.

I ask the right hon. Gentleman the Secretary for the Overseas Trade Department to deal with these points when he replies. The President of the Board of Trade told us to-day that in the case of Germany this is a new economy, a novel system, that we must realise it is there, and that we cannot do anything about it except face it. I would very much like the right hon. Gentleman to tell the Committee in some detail how our traders are to counteract this method which the Germans are using in the Near East. The President of the Board of Trade did not give us very much guidance on that matter. It is obvious not only that traders must look to the Government to give them guidance and help, but that they must help themselves first. The methods that are adopted in this country of waiting for orders from abroad, of London merchants waiting to receive orders and then placing those orders with British manufacturers, are antiquated, entirely out of date, and the only way that I can see by which we can retain our trade and increase it in those countries where a vast opportunity presents itself to us now, is that we should send men directly to the spot and keep them there, men who understand the business, men who are not only salesmen but technical salesmen, and I venture to suggest that now is the time to do it.

3.44 p.m.

Mr. R. S. Hudson (Secretary, Overseas Trade Department)

I think the Committee as a whole will be grateful to the hon. and gallant Member for Pembroke (Major Lloyd George) for raising this debate, although personally I am not quite so grateful to him because I had no idea he was to range over my side of the Board of Trade and I expected that my colleague, the Parliamentary Secretary, would have the task of answering to-day. Therefore I am afraid that I came somewhat unprepared to deal with all the questions that have been asked, though I will do my best to answer them. The hon. Member for Seaham (Mr. Shinwell) started his speech by saying that he thought there was a certain amount of confusion of thought in the minds of the Government owing to two sentences that he was kind enough to quote from a speech of mine. I apologise for dealing with it in the short time available, but I do so in order to remove any cause for misapprehension. I was actually endeavouring to do two things. First of all, I wanted to try to answer the accusation that has been made recently in Germany that we were engaged in a policy of encirclement and that we wanted to try to reduce the Germans to misery and to destroy their trade. I said that, on the contrary, provided that we could be sure that Germany was prepared to play the game and live in decent relationship with the rest of the world, it was to our manifest advantage that Germany should be prosperous, because then she would be, as she has been, one of our most important customers.

On the other hand, I went on to say that our manufacturers have been exposed to growing difficulties in our export trade owing to the uncertainty caused by what we think the unfair trading methods of Germany. No doubt the Germans have made great inroads on some of our markets as the result of that policy, but we were, on the other hand, getting increasing complaints about deliveries and about the deterioration of the quality of German merchandise, and therefore the competition for export trade was not likely to have such results in the future as in the past. I hope the hon. Gentleman will see that there was no real confusion.

Mr. Shinwell

I accept the right hon. Gentleman's explanation, but I would point out that he said it encouraged us to know that Germany was encountering difficulties.

Mr. Hudson

It certainly encouraged me as the Minister responsible for the export trade to find the objectionable methods of trade not being successful. That does not prevent me from saying that under happier circumstances it would be to our advantage to see a prosperous Germany. I agree with the hon. Member for Cardigan (Mr. O. Evans) when he deplored that matters of exports and imports should be mixed up with matters of international politics. No one deplores that more than we do, but it is one of the facts which we cannot escape. The President and I worked extremely hard for over a year trying to see whether we could not devise some means to bring these matters of trade back into the purely commercial and economic sphere and get rid of the influence of international politics and I am sure that the House will acquit us of any responsibility for the suspension of negotiations which were started earlier this year.

The hon. Member for Cardigan asked what possible remedy we had to suggest for British traders to deal with the situation in the Near East and the problem of German methods there. The difficulty that we have to meet there is not so much a reluctance on the part of countries in the Near East to buy our goods. We hear on all sides of their anxiety to buy increased quantities. The manufacturers difficulty is to find means of getting paid for these goods. Our difficulty is to find means of increasing the exports from those countries to the United Kingdom. As I said in the speech I made last year, one of our great difficulties is that the Germans are prepared to pay higher prices for the primary produce of those countries than those countries could get in the world markets. That, I confess, is an extremely difficult problem, and it is to meet that particular problem that we are engaged at the present moment in trying to set up a special trading company to deal with and assist Rumanian exports.

Mr. Shinwell

Is it to be subsidised?

Mr. Hudson

I hope that it will not need to be subsidised by us, but obviously some means have to be found by which to get over the spread between what Germany is prepared to pay and what we are prepared to pay. I will not go into details at the moment, because the whole matter is under negotiation, but are doing our best to see whether we can devise means which will enable those countries to export an increasing amount of goods to this country in order to provide sterling for exports from here to them. I do not think I can agree with the hon. Member for Seaham when he says that we ought to go the whole hog, and endeavour to increase our share of Balkan trade to the greatest extent possible. There is no doubt, as my right hon. Friend the President of the Board of Trade said, that Germany is the normal economic market for a great deal of the produce of the Balkan countries, and all that concerns us is that we should be enabled to retain a reasonable share of these markets and that this share, together with the share of other free exchange countries, should be such as to prevent them from falling first under the economic and subsequently under the political domination of Germany. I do not think it is necessary for us to feel that we need completely displace Germany in those markets, because if that was the idea it would only serve to provide a handle for the German Government to justify its actions to its own people.

Mr. Shinwell

I am sure the right hon. Gentleman does not want to misrepresent me. I did not say that we should make an attempt to displace Germany in the Balkan countries or, indeed, anywhere. What I was pointing out was that if Germany persisted in using questionable devices—subsidised competition and the like—in order to drive us out of those markets, it would be a very serious matter for us and we must then decide whether we intended to be satisfied with half-measures or to go the whole way. And it is not merely a question of the Balkan countries, because if Germany succeeds in the Near East she may adopt the same measures elsewhere.

Mr. Hudson

I am extremely glad to have that explanation, because I confess that when listening to the hon. Member I did not quite understand what he meant. If that is what he means he and I are in accord, because I thoroughly agree that we have to adopt every method possible to prevent our being driven out of markets. The hon. Member for Cardigan referred to the great numbers of Germans who are reported now to be in these various countries. From such information as we have I feel that that is not perhaps altogether an unmixed blessing for those countries, and that they are beginning to realise this, and I am not altogether sure that in the course of time we shall not find them making an effort to rid themselves of some of the people who are being foisted on them at the moment. He talked about the necessity of British business men and British technicians going out to those countries to try to extend British trade, and I think it is a right step to take. From a number of examples which we have had brought to our notice recently I am certain that in nearly every case everyone who has done that has come home with orders. A friend of mine to whom I was talking the other day told me he has been out there himself for five or six weeks and as a result he got a very satisfactory order for what had previously been a German monopoly.

I was very glad to hear the hon. Member for Seaham say that we ought to use to the utmost our position for bargaining. When I went on my recent tour of the Baltic and Scandinavian States there was a growing opinion on all sides in this country that the adverse balance of trade between the United Kingdom and Finland and Sweden was so serious that steps would have to be taken by this country to achieve a remedy unless the countries themselves did something. I am not at all sure that everyone out there believed that there was a unanimity of opinion in this country on that matter. I am extremely glad to hear that a delegation is coming here from one of those countries and I hope that it will strengthen my hand very materially. I have only one other point with which I would like to deal, and that is the question of the balance of trade.

Mr. Boothby

I suppose that the right hon. Gentleman was out of the House at the time that I raised the question of tobacco. As all sides of the House are interested in it I suggest that he might say one or two words on that subject.

Mr. Hudson

My hon. Friend knows as well as I do that this is a matter to which we have been devoting a great deal of attention lately, but I am afraid that I cannot report that we have been able to find a solution for the difficulties that are involved. In the minute or so left to me I would like to say that I think the hon. Member for Seaham is quite right in saying that only once during the last two years has there been a point when the balance of payments was exactly square. In 1931 and 1932, the adverse balance of payments was respectively £104,000,000 and £51,000,000. In other years it has been comparatively small, and only in the last two years has it given cause for disquiet. This year, so far, the adverse balance of trade is about £24,500,000 better than in the corresponding period of last year. As my right hon. Friend the President of the Board of Trade said earlier in the Debate, the fact that the volume of our exports is up and the volume of our imports is down this year over last year must be regarded as an example of what can be done in the way of encouragement. It is dangerous to prophesy, but unless something goes really wrong in the remaining six months of this year we shall be able, I hope, to make a better showing this year than last.

3.59 p.m.

Mr. Lansbury

In this minute I want to say a word on the question which was raised by the hon. and learned Member for Argyllshire (Mr. Macquisten). I felt very keenly when he was speaking and reading the correspondence. I represent a part of London on which there have been heaps of ridicule, and a new word has been added to the dictionary "Poplarism," a sign of opprobrium. I never heard from any member of any university a word of protest against it.

Mr. Alan Herbert

The right hon. Gentleman was not mixed up with a man who was a charlatan and a crook.

Mr. Lansbury

I am not a member and have not attended any meetings of the Oxford Group, when Mr. Chamberlain—

It being Four of the Clock, the CHAIRMAN left the Chair to make his report to the House.

Committee report Progress; to sit again upon Monday next.

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