HC Deb 24 April 1940 vol 360 cc311-38

9.0 p.m.

Mr. Shakespeare (Secretary, Overseas Trade Department)

I beg to move, That the Clearing Office (Spain) Amendment Order, 1940, dated 30th March, 1940, a copy of which was presented to this House on 2nd April, be approved. This Order gives effect to the recent Trade and Payments Agreement negotiated between the Spanish Government and ourselves, which was signed in Madrid on 18th March of this year. The House will remember that there was a previous agreement in January, 1936, but that Agreement was suspended in December, 1936, owing to the Spanish civil war. That Agreement took the line of a clearing agreement and provided a means of payment of debts. At the time of its suspension there was awaiting transfer through the clearance some £4,500,000 worth of debts owing to the United Kingdom to traders and creditors. There was also another £2,500,000 of debts payable to the United Kingdom traders and creditors, but which had not as yet found its way into the clearing. In total at that time, speaking very broadly, there was owing to creditors in this country something like £7,000,000, and at the same time as the result of various transactions there was about £2,000,000 sterling in the Bank of England awaiting transfer to settle debts owing to Spanish creditors.

After the conclusion of the Spanish war, His Majesty's Government thought it imperative that as soon as possible the trading position between this country and Spain should be regularised. Two essential conditions form the basis of good trade relations. First, the machinery of trade clearly cannot revolve if it be clogged with unpaid debts, and, secondly, the traders in this country must be able to trade with confidence that their goods will be paid for and that machinery exists for prompt payment.

Mr. J. J. Davidson (Glasgow, Maryhill)

May I ask a question?

Mr. Shakespeare

I would rather continue if the hon. Gentleman will allow me, as this is a rather complicated subject. I shall be pleased to answer any question subsequently. Let me say a word about these conditions. I will deal with the question of outstanding debts first. Before our exporters begin again to supply the Spanish market they must be assured that past commercial debts will be settled. No one can contest the wisdom of a provision in this Agreement whereby a method has been provided for this purpose. Under the Agreement we advanced to the Spanish Government a sum which, together with the £2,000,000 standing to the credit of Spanish traders in the Bank of England, will be sufficient to enable an immediate dividend of 50 per cent. to be paid in respect of outstanding debts, and the balance to be paid in five equal instalments of 10 per cent. each, starting, we hope, in the year 1942. It is noteworthy that trade with Spain in the past has not been confined to a few large firms in the United Kingdom but has covered a very large number of small traders. Consequently under this debt repayment provision, something like 25,000 British creditors will receive payment of their commercial debts, practically all of which were contracted before the outbreak of the Spanish civil war. The settlement to meet all outstanding claims is a condition precedent to the expansion of British export trade in the Spanish market. So much for the liquidation of past debts.

Secondly, as I pointed out, this Agreement provides machinery to which traders can look with confidence for the settlement of future trade transactions. The current proceeds of Spanish exports to this country will be paid into the clearing in London, and the money in this account will be hypothecated to pay for Spanish purchases of goods from this country. Without going into elaborate details, it has been agreed that 45 per cent. of the sterling arising from Spanish exports to this country shall be hypothecated for the purchase of United Kingdom goods. Another 45 per cent. shall be utilised for the purchase of goods within the sterling area, that is, mainly within the British Empire, and the balance of 10 per cent. will be devoted to various financial payments of a revenue nature such as insurance premiums, patents and royalties. This arrangement will give the trader confidence that in so far as he exports goods to Spain there is a prospect of prompt payment.

There is a third provision closely connected with the payment provision which I must shortly explain to the House. We give a long-term credit to the Spanish Government in the form of a £2,000,000 loan which will be paid by instalments into the clearing account in London for Spanish Government requirements. The question which may naturally be asked is: Why is it necessary, if we have made a good trading agreement, to give a long-term credit of this nature? It may be argued that Spanish exports will provide the sterling needed to buy for Spain her raw material requirements. The reason for this credit, which I think will be crystal clear to anyone who has followed recent events in Spain, is that that country has only recently emerged from a bitter civil war. For three years her trade has been interrupted and in some cases has been brought to a standstill. Stocks of raw material have naturally been exhausted, and during this period there has been no possibility of any replenishment of her capital resources. Indeed, her whole economy, as was to be expected, has been severely crippled, and clearly her prime need is for raw materials to enable her industries to be re-started and her people to find employment. No doubt, in course of time she could build up her economy and satisfy her needs out of the proceeds of foreign exchange derived from her exports, but this would be a slow and laborious process. So prolonged was the internal struggle and so widespread the exhaustion of Spain that something more is required. Her urgent need, if her economy is to be restored, is for an immediate supply of the necessary raw materials such as coal and coke for her transport system and her factories, and cotton, jute, wool and tin for her industries. Only so can the wheels of her industry revolve again and her prosperity be restored. I must apologise to the House for these explanatory words, but I wish to emphasise the purely trading nature of this transaction.

If our export trade can be promoted in any country which can provide a stable market and good security to our exporters, we cannot afford to neglect it, be that country where it may. The House will, I hope, take note of, and be reassured by, the fact that the loans made to Spain for the purchase of goods and all foreign exchange arising from Spanish exports to this country will pass through the clearing accounts, and must be spent in the purchase of goods either in this country or in other sterling areas—which are mainly the British Empire. Provision is made, of course, for the service of the loan of £2,000,000 and the loan for the payment of debts under this Agreement. Interest will be payable immediately, and will be the first charge on the sterling in the clearing account, and provision is made for the repayment of the capital, starting in 1942, within 10 years.

Let me, therefore, sum up the mutual benefit that will flow to us and Spain as a result of this Agreement. In the first place, our traders will secure settlement of their outstanding commercial debts, and will now resume their trade with Spain and, I hope, seek an expansion of that market. I need hardly remind the House that this Agreement is another example of the Government's intention to pursue a vigorous export policy. Before the civil war in Spain there was a good market for some £5,000,000 or £6,000,000 worth of British exports, including coal and coke and a large variety of miscellaneous manufactures. Spain also was a good market for the products of the British Empire in the form of raw materials. We have always had strong commercial ties with Spain, and our relations with that country have been good. British traders knew that Spanish traders had a high sense of commercial morality, and have honoured their obligations. It is only fair to record that all Spanish Administrations, including the present one, have shown a scrupulous regard for agreements made, and have a good record for the fulfilment of obligations. In a world where in recent years this characteristic has not been a universal feature, it is right that that should be said. From the most elementary considerations of British self-interest, we cannot afford to neglect any export market, and particularly one that lies so close to our shores. We need in return the products of Spain—fruit, vegetables, and minerals—which before the civil war were exported to the tune of £13,000,000 a year.

But something more than self-interest is involved in this question, and I wish to conclude with considerations of a broader nature. I speak primarily, of course, as one responsible for the Department associated with export trade, but there are many in this House who, like myself, love Spain and admire the Spanish people for their courage, their independence, and their warmth of heart. We shall, therefore, rejoice if the life-giving streams of trade once more refresh the parched fields of Spain. So will her economic life be re-animated and her people be restored to employment, with a steadily increasing standard of life. I believe that the friendly contacts which will be made by our traders will surely and steadily improve the relations between our two countries; and, whatever may be the convictions or the prejudices in certain quarters in respect of certain events in Spain, I do not believe there is anyone who, in the present circumstances, would willingly deny to Spain, which is now emerging from the agony of civil war, the opportunity here presented of the blessings that this Trade Agreement can alone provide, and I confidently recommend the adoption of this Order to the House.

9.16 p.m.

Mr. Shinwell (Seaham)

The hon. Member has explained this Agreement with his customary lucidity, and I offer him my cordial congratulations. I think it might serve the convenience of hon. Members if I indicate at once the intentions of the Opposition in respect of this Agreement. After the most careful consideration, we have decided not to oppose the Order. At the same time, it would be idle to pretend that no doubts exist regarding the propriety of this Trade Agreement. These doubts arise chiefly because of the civil war in Spain and what many people in this country regard as harsh, repressive measures adopted by the Spanish Government, including the detention of several persons whose profound convictions induced them to play an active part in the recent struggle. Nevertheless, I have no desire to fan the embers of that deplorable event. I prefer to consider the proposed Agreement entirely on its merits.

The test I propose to apply is that of whether this is a sound economic proposition or not. I take note of the fact that in some respects the Agreement is a revival of the Trade and Payments Agreement which was suspended in 1936, at the outbreak of the civil struggle. It may be that, owing to the difficulty experienced by traders at home in receiving payment for exports, financial assistance similar to the loan now under review would have been provided; but that is pure conjecture. At any rate, this appears to be a sound effort to tidy up the pre-war Agreement. But what is really important as regards this Order is the recognition that we are in a different situation to-day. For that matter, so is Spain. We are engaged in a fight for our existence. On the other hand, Spain's economy is gravely impaired. We require for war purposes large quantities of a particular raw material which is produced in Spain. We are not completely dependent on those supplies, but without them we should be at a disadvantage, while with them we are in a much more favourable position. That must be taken into our calculations in coming to a decision on this matter.

I therefore ask myself this question. Setting aside political considerations, what are the possible benefits which can accrue from this Agreement? Does Spain produce materials which we require for the successful prosecution of the war? If so, will this Agreement increase the flow of that material to this country? In this respect we can depart from the realm of speculation and deal with the facts of the situation. Prior to the rebellion we imported almost a half of our total iron ore supplies from that country. It is an iron ore of suitable content as far as our needs are concerned. But, in consequence of the dislocation of Spanish economy consequent on the struggle in the country, and for other reasons into which I need not now enter, the supplies of iron ore considerably diminished until we reached the point of receiving no supplies at all. But recently there has been a welcome change, and, without disclosing the actual figures—that might not be desirable—I can say that the supplies which have been received are a welcome addition to our existing supplies. Having regard to the somewhat difficult situation which has arisen in connection with supplies of that particular raw material from other spheres, we are naturally desirous of availing ourselves to the full of imports from Spain. That considerable improvement in supplies of raw material is welcome. Therefore, I come to this conclusion, that although it is not certain that supplies will increase and reach the level of the pre-civil war position, it is highly probable that they may, and the balance of the argument is on the side of proba- bility. There is a further consideration. Will this agreement lead to an increase in our exports? There cannot be the slightest doubt regarding the desperate need that exists for stimulating our export trade. We are now engaged in a strenuous export drive and we are all anxious to fortify the Government's efforts in this direction.

That brings me to the present economic position in Spain. Undoubtedly the civil war has strangled the economic life of that country. There has been considerable dislocation in industry. The machinery of production has been destroyed. There is a clamant need for material which can assist Spain to restore her economic existence. Unless that is done, she cannot facilitate her own production, and consequently, in relation to those materials that we require, there may be a distinct shortage. That is, as I see it, the crux of the whole problem. Our assistance is, therefore, not entirely altruistic but can be regarded as an act of enlightened self-interest. It is not to be deplored on that ground. In short, to make Spain a better customer than she now is, we must restore her economic position. There is a further point. Unless some means are devised for debt payments, trade between the two countries is hound to be stifled. We must at some stage, if trade relations are to be resumed, create machinery for meeting liabilities. On the other hand, traders at home must have confidence that exports will be paid for. We cannot expect them to incur losses. Consequently, in spite of some apprehension, I regard the Agreement as very satisfactory from an economic standpoint.

Although that is the conclusion that I have reached, I cannot forbear from asking this question. While this may not be a suitable moment for indulging in reflections on the outcome of the struggle in Spain, would it not enormously facilitate trade relations if we could be advised of the increasing tolerance of the present Spanish regime? I wonder whether this Agreement does not provide a convenient opportunity for making representations to the Spanish Government to abandon methods which border on repression and which cause great concern in many quarters both in this House and elsewhere. Speaking for this party, we should like to feel that this Trade Agreement was accompanied by the liberation from prison of many persons whose only crime is that they engaged in a cause in which they profoundly believed. It will be noted that I have used language of studied moderation. I make no apology for having done so, for we are all speaking under the stress of war and with due regard for national necessities. Let us have trade agreements wherever we can secure them. I am tempted to remind hon. Members of other trade agreements, some existing and some contemplated, with countries with which we have had quarrels and with which we have existing differences; yet no voice has been raised against the promotion of such agreements—I think wisely so. Therefore, let us have, I repeat, trade agreements wherever we can secure them, but let us equally have the assurance that we derive substantial advantages, not only in the material sense, but also in the moral sphere. If we can have assurances—and no doubt the right hon. Gentleman the Under-Secretary of State for Foreign Affairs can furnish such assurances—that efforts in this direction are in contemplation, it will satisfy Members of the House who are disturbed about the aftermath of the Spanish struggle.

9.31 p.m.

Commander Sir Archibald South by (Epsom)

If I might do so without presumption, I would like to congratulate the hon. Member for Seaham (Mr. Shinwell) upon the speech which he has made. We all agree that he has in the past felt very strongly on the question of internal affairs in Spain and I think myself that his moderate and statesmanlike speech on the subject of this Agreement forms a model for many of us in this House. At a time of stress such as that in which we are now living, Spanish trade, in my opinion, is of the utmost importance to us and to the Spanish people. The restoration of good conditions in Spain will help to assuage the bitterness of the Spanish civil war. Improvement in the lot of the people in Spain, irrespective of the political opinions they may hold, is something which we all desire and which this Agreement gives us an opportunity of assisting. Out of Trade Agreements comes friendship between countries. I endorse what the hon. Member said just now, that the more Trade Agreements we can get with other countries, the more likely we and they are to understand one another's difficulties. Indeed, the Trade Agreement with Spain would furnish us with an opportunity perhaps of being helpful not only with financial help but with advice generally, to Spaniards which might help them in the settlement of their difficulties.

There is at this time a greater importance to be attached to the conclusion of this Trade Agreement with Spain. As the hon. Member opposite has said, we need from Spain certain raw materials to help us in the prosecution of the war. Friendship with Spain, however, is of greater importance to us at the present moment than almost anything else. We may in the near future be faced with great difficulties in the Mediterranean. A friendly Spain working in collaboration with us will be of paramount importance to us should we be involved—and I hope we shall not be—in operations east of Gibraltar. There were those who some time ago, were rather Jeremiahs as to what might happen in Spain at the end of the civil war. We have seen a Spain which, I believe, is settling down with traditional friendship for the people of this country, a Spain which can contribute a great deal in the fight that we are making for freedom at the present time. [Laughter.] An hon. Member opposite laughs, but I would not expect him to understand any point of view but his own upon the subject of Spain. We are not debating now the question of internal policy in Spain, but whether it is desirable or not to make this Trade Agreement with the existing Spanish Government, not only in our own interests, but in the interests of the Spanish people themselves. We have had for hundreds of years friendship with the Spanish people. We have now an opportunity of holding out to the Spanish people something which will be of great advantage to them.

In making these few remarks about the Agreement I would like to add this. I believe it should be the basis of a much closer co-operation between ourselves and Spain and I would like to see it made the vehicle of an approach to the Spanish Government for an understanding between them and us. I do not believe there is sufficient British propaganda in Spain at the present time. Trade offers a vehicle to statesmen in this country, whereby we can engage in a considerable amount of propaganda in Spain. My information is that, at this time, there exists in that country very intense German propaganda. This Agreement will give us an opportunity of countering to a large extent that propaganda which is so damaging to the Allied cause and I trust that the Under-Secretary will be convinced of the necessity of something more being done even than this Agreement, to get understanding and good relationship between ourselves and the Spanish people. It seems to me that there is now an opportunity for a mission to go to Spain. Nothing is as good as advertising at the present time and in view of the efforts being made by Germany, not only in Spain but elsewhere, I think it desirable that we should have an opportunity of countering that propaganda and this Agreement may offer such an opportunity.

9.37 p.m.

Mr. Benson (Chesterfield)

I hope previous speakers will forgive me if I do not follow their general remarks about this Agreement, but I want to confine myself strictly to its technical side. When I read the Agreement I had certain doubts and hesitations about it. I thought it possible that the Government had not quite realised how powerful an instrument this Clearing Agreement could be, particularly with a country like Spain to help us in our trade drive and conservation of sterling. When I heard the speech of the Minister these doubts completely vanished, and complete certainty was put in their place. The Minister has not realised what this Agreement could do, and does not seem to realise what it implies. He suggested that because we have proposed to block 45 per cent. of sterling receipts on the clearing account for United Kingdom exports, and another 45 per cent. for sterling area exports, that was a step in a vigorous export policy. But the policy which the hon. Gentleman is pursuing is merely the stabilisation of the position exactly as it was in 1935. He has merely gone back to the pre-war position and stabilised it. Of the Spanish imports into this country for that year something like 45 per cent. were paid for by British exports to Spain and similarly 45 per cent. by colonial exports to Spain.

What is the use of telling the House about a vigorous export policy that is merely confirming the position as it was before the Spanish war? I have no doubt it was desirable that exports from sterling areas should go to Spain, but it is much more important that goods should go from the United Kingdom itself into Spain. If the arrangement as made by the Board of Trade holds, what happens is that we must find something like £5,000,000 to £7,000,000 a year of British sterling to pay for export trade from places like Canada, India, and Australia. What is much more important is that goods that come from Spain to this country should be paid for by goods going out of this country.

We are in a position to negotiate a far better Agreement than we have. Although Spanish ore may be important to this country, the British market is of vital importance to Spain. Before the Spanish war we took about 25 per cent. of the whole of Spanish exports, and these exports, of which iron was an appreciable but not a vital proportion, could find no alternative market. There are also citrous fruits, and tomatoes from the Canary Islands, for which England alone offers a large and continuous market. This bargaining power of ours has apparently not been used at all. The Board of Trade have been satisfied to stabilise pre-revolution conditions. The position in which we are à propos of Spain is that we can supply an enormous amount of the imports of Spain which she got from other countries, and we offer her an enormous market for her goods. Let me take some of the imports into Spain in 1935, the year which the Board of Trade have chosen to stabilise so far as the proportions are concerned. For example, Spain imported £4,000,000 worth of motor cars in 1935. Of that £4,000,000 of imports of motor cars, our share was £600,000. In the same year Spain imported £5,000,000 worth of chemicals, and our share was £350,000. She imported £2,000,000 worth of electrical machinery, of which our share was £120,000, and she imported £3,000,000 of general machinery, of which our share was £460,000.

Here we have a market which we can supply with British goods, a market which Germany to some extent supplied. Why should not this Trade Agreement have aimed at allowing us to force our goods upon Spain? One vital factor in fighting this war is the conservation of our sterling assets, and we shall have to use every possible device to conserve those sterling assets now and in the future. If one turns to the most recent figures of imports and exports, our adverse balance will be found to be simply staggering, and it will continue to increase. We are importing at the present moment £1,200,000,000 worth of goods a year, and these have to be paid for either by exports or by the sacrifice of our sterling assets abroad. It is essential to us that there should be a really great trade drive which will force our goods into foreign markets, and we ought not to be satisfied with stabilising the position as it was in 1935. We can do it. The whole technique of exchange clearance with this definite purpose has been worked out by Germany most effectively.

Another point which seems to be completely overlooked and which is of vital importance is the rate of exchange. We are in a position, or we ought to be, with our bargaining power to fix as high a rate of sterling exchange as is reasonable. What is the position under the Agreement? Apparently the fixing of the sterling-peseta rate is to be left to the Instituto, and we are not even to be consulted about it. According to the Agreement— Where the debt is expressed to be payable in pesetas, the relative payment shall be made in sterling at the official buying rate of exchange for sterling published by the Instituto. Further, the Instituto are to communicate each day to the Clearing Office the official buying rate of that day. On what is that official buying rate to be based? It will be based on the free sterling rate, and not even on the official dollar-sterling rate. Just as the lira, and the currency of every small nation, fluctuates in relation to the £on the free sterling rate, so apparently, under this Agreement, the peseta is to be allowed to fluctuate on the free sterling rate. That rate is 3.50 as against 4 dollars, which means an enormous loss of sterling if the free sterling rate is allowed to prevail in all our various trade relations with small countries which are in neither the sterling nor the dollar area. What we should have done was to utilise this Clearing Agreement, and the immensely strong bargaining position which results from our immense market, to insulate the sterling-peseta rate entirely from the free sterling rate and even from the official dollar-sterling rate. It could be done. Germany has done it. In her relations with the Balkans, Germany has invariably fought for a high mark exchange rate.

Mr. Holdsworth (Bradford, South)

A dishonest rate.

Mr. Benson

One does not want a dishonest rate. What I ask is that the free sterling rate shall not be allowed to prevail. I am quite prepared to make a strong case for improving on the official dollar-sterling rate, but at any rate, the free sterling rate, which in no way indicates the value of the £, should not be allowed to prevail. Why in this important matter it is left to the Instituto to decide the rate, is quite beyond my comprehension. I know that in a free market, under free exchanges, if you force up the value of your currency you tend to curtail exports. We know that from our bitter experience in 1925,when we went back to the Gold Standard. But we are not in a free market at present. Our imports and our exports are controlled. Germany has developed a technique of blocked currency and control of the exchange rate. We are in the position of offering Spainthis enormous market for her goods, far and away the most important market she has, and we are in a position to utilise our bargaining power to force up the sterling-peseta rate to a reasonable level. Not the slightest attempt has been made to improve the sterling-peseta rate. In February, the rate—taking the rate of the Bank of England Sterling Arrears Account—was 40.15 to the £, in March it dropped to 39.65, and the official clearing rate now is 39, whereas the voluntary rate under the Agreement is quoted to-day at approximately 45. I should be glad if the right hon. Gentleman, when he replies, will tell us exactly what is the voluntary rate and to what range of goods and debts it applies. It is not at all clear—at any rate if the voluntary rate can be at 45, there is no reason why the official rate should not also be at 45. The hon. Member for Bradford South (Mr. Holdsworth) suggested that to force up the sterling-peseta rate was dishonest.

Mr. Holdsworth

I did not suggest that at all. The hon. Member was referring, quite definitely, to the German methods, and they were what I was denouncing as dishonest.

Mr. Benson

I am afraid that I misunderstood the hon. Member. What I said was that the Germans had worked out a technique. You may have a technique for opening a safe and you may use it to get into your own safe or some one else's. The Germans have worked up their technique, and there is no reason why we should not use it.

What is the position of sterling at the present moment? Immediately war broke out there was a drop of 13 per cent. in value, but that did not represent the real economic position of England vis-à-vis the world. It was a natural reaction of the financial markets to the outbreak of war. What happened? The Treasury immediately stabilised that rate by fixing gold at 168s. per ounce. We shall have to use currency clearing agreements not merely in Spain but wherever we can possibly negotiate them and we shall have to use the blocking of sterling to force our exports into the markets of the world. Wherever there is an adverse balance of trade against us, and wherever the English market is of vital importance—and there is a very large number of countries where it is—we can establish a clearing agreement, and we can negotiate exchange rates, and utilise the blocking of sterling for forcing exports on the market. I suggest that there is nothing dishonest about that. We have to do it if we are to prevent this steady leakage of sterling which is our very life-blood. The effect of allowing the sterling-dollar rate to drop 13 per cent. at the outbreak of war has resulted, on our present rate of imports, in a leakage of sterling amounting to anything between £100,000,000 and £150,000,000 a year. That has to be made good. We must fight the £ back to its proper position, and we can do it. We have a negotiation and bargaining power second to none, and we ought to make this Spanish Clearing Agreement a prototype of clearing agreements with practically every country in the world. We ought to utilise those clearing agreements by the method of blocking sterling for two purposes. Firstly, the forcing of our goods on outside markets, and, secondly, in the re-establishment of a proper sterling rate.

9.54 p.m.

Mr. Wilfrid Roberts (Cumberland, North)

I want to make only one general observation on this Agreement. I would like to ask whoever is to reply to explain to us a little more clearly how the relative value of sterling is to be established under arrangements which have been come to in this Agreement. If I understood the Minister aright, all transactions between Spain and England would be paid for through the organisation set up under the agreement, and, in fact, there would be no free market for the peseta against the pound in any transactions whatever. If there is no free market in which the value of the peseta can be established, how is the value to be arrived at which will, as the hon. Member for Chesterfield (Mr. Benson) pointed out, be of vital importance in arriving at the payments that are to be made? I understand that the external value of the peseta has now been fixed for some time under the direction of experts who are not of Spanish nationality, but are experts of another country. That makes it all the more important that we should understand how the value of the peseta is to be arrived at.

The other question I would like to ask is of a more general character. There are other debts owing by the Spanish Government to this country, and I would like to know whether the damage done to owners of British shipping and to other property owners during the Spanish war has yet been met, or whether any arrangement to pay compensation has been made in connection with this trading arrangement. We were often told from the Government Front Bench that the time for the settlement for such damage was after the war in Spain. That war has now been over a year, and I would like to know whether any agreement has been arrived at with regard to that compensation. Damage was also done to a British battleship. Has any settlement been made for that? We hope that this Agreement will benefit British traders and also the Spanish people. We on these benches are very ready to agree that an increase of international trade is to the advantage of both parties concerned, but I would like an assurance that under this Agreement none of the £2,000,000 which is to be advanced to the Spanish Government can be used in ways which might be to the disadvantage of this country. Are there any means of preventing any of it being used for the rearmament of Spain which might not be used to the advantage of this country in future?

I do not believe that foreign countries necessarily admire an attitude of subservience on the part of the British Government. I have observed that other European countries find it quite possible to make agreements of a far-reaching character even though in the past they have not admired each other's political systems. I do not believe that any Spaniard would admire me the more for saying that I have changed my opinion about affairs in Spain. I have not done so, and I do not imagine that the Spaniards would expect me to change my opinion because the commercial interests of my country might be improved by any such change. But I would change my opinion on the Spanish Government if by their actions they were to show that they could exercise clemency and generosity towards their defeated opponents, and were also prepared to show in their controlled Press and on their controlled wireless that they were friendly towards our great democacy in the war in which we are engaged. If the British Government have been able to come to this commercial Agreement, the Spanish Government will, I hope, realise that it is a business arrangement, but realise also that it is by their actions, and only by their actions, that they can overcome the opposition to them which has been expressed in this country.

10.2 p.m.

Mr. Logan (Liverpool, Scotland)

This is the first time I have spoken in the House about the Spanish position. I have refrained from doing so on various occasions because the question was so delicate. To-night it affords me great pleasure to compliment one of my colleagues, the hon. Member for Seaham (Mr. Shinwell), on the magnificent manner in which he presented his case. I have been in a difficulty in regard to Spain during the last two years, having many friends on both sides, and being asked by both parties to visit Spain and express my opinion. I have always refused to do so for the simple reason that I should be considered a partisan. I have listened with amusement—I say that without any disrespect—to the discussion on the methods of exchange. It put me in mind of the time when I stood behind an exchange counter dealing with dollars and pesetas and the day-to-day rates of exchange in the money market; but I am not concerned with that aspect of the question at all. To anyone who realises from the political and diplomatic point of view the value of making friends, surely this is the occasion to make friends. Often I associate with people not because I wish to but because I have to. I look upon the world, not as a place of sanity, but a place of madness. Sanity is to be judged by actions.

To-day we must realise that a friendly Spain might be a very powerful friend, and we want all the friends we can get, and I have been pleased to note the absence of acrimony and of the spirit of vendetta in the House to-night. It is better to bury and to forgive. I feel that the Spain we recognise to-day will have a chance of resuscitating itself and bringing all Spaniards to a recognition of the possibility of living together in harmony. I am not forgetful that other parties besides those in England have been using their influence in regard to Spain, but today we should be able to recognise, in the wonderful offer of reciprocity that has come along, that we may be able to come to a better arrangement for both these countries.

I feel that a step has been made in the right direction. Many of us on this side of the House have been most anxious for more friendly relations. I believe in a fight, if the cause is just. If I can avoid the fight, I do not want it, but if I have to fight, I say, Let us have the fight out. But we must have friends in a fight, and not enemies all along the line. From this side of the House our Front Bench speaker has done justice to the Labour party in the manner in which he dealt with this most delicate question, and I can certainly say, on behalf of many people whom I know in Spain, that it will be recognised as a most friendly gesture rather than as an arrangement in regard to money. The love of the people of a country is far better than monetary value.

10.7 p.m.

Mr. McGovern (Glasgow, Shettleston)

I have listened with interest to the discussion to-night, and I also must congratulate the hon. Member for Seaham (Mr. Shinwell)—if he will permit me to do so. I recognise that he must have exercised very great restraint indeed in order to put over that case. Knowing the lan- guage he can use, I appreciate to a greater extent the restraint that he showed to-night. I realise that in this issue one has to get to the stage where the relationship which was broken off on account of war or civil war has to be renewed, and that the great healing things among the nations are trade, intercourse and the visitation by friendly people of one another. It helps to modify even the most outrageous doctrines that may have been proclaimed.

I therefore realise to-night that, behind this Trade Agreement, there are other reasons. For example, we require, and this country requires, certain goods and materials that are in Spain, and Spain requires to find a market for her goods, a limited market at the present moment, in order to get the goods and the finances which she requires. I was interested to hear that a considerable amount of money was owing to traders in this country. The Government are, of course, interested in the payment of debts owing to the traders, and naturally they say to Spain, who cannot pay, "We will give you the money from State funds to pay into our private banking accounts. That will enable you to square the debt, and, at the same time, the State will draw a certain interest on that money during the period of the loan." That is an ordinary transaction, and we see it every day, in which the State machine is used as a "go-getter" for private industry in order to settle its accounts and to get its bank balances re-established.

I was interested also in the gospel proclaimed by the hon. Member for Seaham. He is prepared to use one dictatorship against another, because dictatorship No. 2, which he does not like any more than another, has certain things that can be used against dictatorship No. 1. It is useful to know that there is, at least, a plan behind this matter, and that we are not against dictatorships as a whole so much as against a particular dictatorship. We are prepared to use a Russian, a Japanese, or a Spanish dictator in order to smash the German dictator. That is illuminating and interesting. Therefore, in this Debate to-night we are only following the lines that I have continually proposed in this House—I agree with not very much success up to the moment—that we should extend that idea—I am only introducing this as an example—to dictator No. 1and try the same policy of intercourse, association and reason and try to get out of all the difficulties in the world. In regard to the late Spanish problems, nobody could accuse me of being moderate in my language against the present Spanish dictator. I opposed him; I opposed the people also who came into the country from Russia and murdered the Spanish working class. I oppose murder wherever I find it, no matter whether it comes from a Tory, from a man propagating alleged Communist ideas or from an anarchist.

I must say I would not relish the job of ruling Spain, because no matter who rules Spain it will be a difficult job. They are a lovable people, but they are also a difficult people. Democracy and dictatorship may not suit the desires of the people; but they have a right to decide for themselves what form of government they will have, just as the people of this country have a right to form their own conclusions and opinions. I welcome the fact that we have engaged in these discussions and have developed through discussion and understanding a Trade Agreement. It is a commercial Agreement, but no person would attempt to deny that through commercial agreements with various countries you bring trade and a certain amount of prosperity and happiness to the people. In so far as that can be developed I welcome it, because I am glad to see the end, at least in the field, of this struggle where Spaniard was fighting Spaniard and brother fighting brother, and where almost a million of the best elements in that country were done to death, either on the field of battle or by being shot in the back by either side. I hope that the result of this Agreement will be not only to develop the friendly feeling between the peoples and that it will expand and develop, but that as we take Spain into the comity of nations and show that we have understanding and sympathy in our minds and hearts for them, it will enable the present dictator in Spain—I am not going to dictate to him, because it would be absurd—to modify his present attitude to the people who were taken prisoner and suffered in the late civil war. Whether they are right or wrong, men do things according to their own ideas, and in the accumulation of ideas even in this House none of us has the whole of the truth, but all of us have a part of the truth. If we approach the subject from that angle, then some progress can be made.

If a twentieth part of the disturbing reports that I receive from time to time are true, then a tremendous number of men and women are going through a Gethsemane in Spain at the present time. Some are in prison, men from Ireland, from this country and from all over Spain, many of whom I know myself. Large numbers also have been done to death. I do not wish to say anything which would enrage the people or break off any friendly relationship, but if my small voice can be heard across the Mediterranean or over the Pyrenees, I would say to those at present in authority in Spain: "Remember that it is a good thing to be merciful, even to your opponents." I hope that they can go on building up a civilisation in Spain, that they can rid their hearts of antagonism and brutality, and that they can develop that great country and that great people. If Franco and his supporters can do that in Spain, I am sure there will be an immediate response from the people of Spain and of this country that will be well for a world that is going along the road of lunacy to-day.

10.16 p.m.

Miss Rathbone (Combined English Universities)

I agree with nearly all those who have spoken, that this is not the time to stir up the hot embers of those bitter feelings that many of us felt, and still feel, about the Spanish struggle. We are discussing a business Agreement. Business is business. I am not going to discuss that Agreement in its details; I am not competent to do so. I am going to say only that the friendly feelings that we all want to cultivate with the great Spanish people would be much more easily fostered if we did not recollect how much more easily Spain itself could recover its prosperity if thousands of Spanish men and women were not still languishing in prisons and concentration camps because of their political opinions.

I want to say only one thing more. If there are to be renewed friendly feelings on both sides, they must depend not only on moderation of expression in this country. We must all agree that the speech of the hon. Member for Seaham (Mr. Shinwell) was a triumph of understatement, but those of us who follow the State-controlled Spanish Press, as I still try to do, cannot help noticing the extreme and dangerous hostility to this country of much of that Press. If there is to be a renewal of trade relations, let feeling follow those trade relations; and let this new Agreement be, on both sides, the opportunity for a better understanding and better feeling, and a kindlier attitude. That cannot be only on one side. If we show such an attitude towards Spain, Spain must show it towards us.

10.18 p.m.

Mr. J. J. Davidson (Glasgow, Maryhill)

I rather hesitate to add to the congratulations that have been showered on my hon. Friend the Member for Seaham (Mr. Shinwell), but I must say that his statement to-night will rank as one of the most statesmanlike utterances we have heard in this House for a considerable time. But as one who, like the hon. Member for Shettleston (Mr. McGovern) and other Members of this House, visited Spain during the recent troubles, I should have been much happier if, apart from raising any great controversy with regard to the past, one or two clear questions had been put from the Government side with regard to this Trade Agreement. After listening to the speeches of the hon. and gallant Member for Epsom (Sir A. South by) and my hon. Friend the Member for the Scotland Division of Liverpool (Mr. Logan), I have great hopes that if the trade negotiations with Russia come to anything, we shall hear the same benevolent kind of speeches from them. If the hon. Member for Seaham and other Members on this side have shown restraint to-night, that is nothing compared with the restraint that has been exercised by the Secretary to the Department of Overseas Trade and the restraint that, I presume will be exercised by the Under-Secretary of State for Foreign Affairs. When I remember how the British Government were consistently described for two solid years by the Government of General Franco, when I remember the statements that were made about the Under-Secretary for Foreign Affairs and the Prime Minister, when I remember how the British Government were condemned in broadcast after broadcast as the greatest hypocrites to the progress of civilisation and democracy in the world by the same Government with which we are negotiating this Agreement, I envy them their diplomacy, their statesmanship and their restraint.

The Secretary to the Overseas Trade Department referred to unpaid debts and then to past commercial debts. I wonder whether we can separate those two things and whether the unpaid debts take in the compensation which was promised time after time with regard to British sailors who were shot down, whether it refers to the sailors who have been buried in Spain with the Union Jack round their shoulders, or whether it refers to the losses of private enterprise during those troubled times. I should like to ask, further, whether the Government representatives have considered the effect that this Agreement may have on the opinions of such neutrals as are left in the world to-day. Have they considered, for instance, whether America will forget that those same speeches which were made to-night on behalf of this Agreement were made consistently on behalf of trading agreements with Germany in the past, that our trading agreements in the past were used by other Powers to organise their war machines, and that British finance and credit were used to bring into being that to which we are opposed to-day? I should like to ask for a clear and definite statement as to whether they have any information which would lead them to believe that this Agreement cannot possibly be used to assist those whom we are fighting to-day.

The hon. Member for Shettleston (Mr. McGovern), whom I consider one of the most astute politicians the House has, referred to the question of making the same approach to other nations. He must be aware that that has already been done and that we entered into an agreement with Germany and assisted them financially, we gave them the things they asked for, and the same speeches were made by many Members, and it resulted in strengthening their power in Germany, just as I am anxious lest we strengthen the same kind of thing in Fascist Spain. This is an Agreement with a Fascist nation. The hon. Gentleman opposite said this would bring better times to the people of Spain. Is he quite sure that that statement is correct? I ask because, as far as our information is concerned, the people of that country, in the conditions under which they live, under which they are oppressed and suppressed, and in which many of them are in prison for paltry crimes or for no crimes at all, will not benefit by the strengthening of that Fascist Power which is oppressing and suppressing them, unless the British Government, who claim to stand as the representatives of the democracies of the world, make some stipulation or effort, along with the Trading Agreement, to remove the oppression and suppression of the people in that particular country.

I have visited Spain, and I can say that the people of Spain have been truly described to-night as a lovable but difficult people. I know of an elderly woman, whose two sons escaped after fighting in Spain, who was executed a few weeks ago. I want to know whether the Government think that there is any chance that they may be able to establish such relations that effective representations will be made with regard to the horrors of Fascist Franco Spain to-day. The hon. Member for Shettleston, whom I described as an astute politician, knows perfectly well that his peroration with regard to this Trade Agreement will have absolutely no effect beyond the Mediterranean. As the British Government are moved by definite action, so are the Spanish Government; and therefore I trust that the hon. Member for Shettleston, in asking for moderation and restraint from Fascist Spain and that we should say no word which would bring up these terrible troubles of the past, will also accept the position that speeches in this House by back bench Members will have no effect and that pressure upon the Government, whenever opportunity occurs, by trading agreements or in any other way, to try and establish relations between the peoples of the two countries would be more effective than perorations asking that a voice may be carried beyond the Mediterranean.

It is my belief that neutral opinion will be affected in a detrimental manner by this Trade Agreement. I believe that America and other neutrals will realise that we are doing what we tried to do to Germany. We are doing what the First Lord of the Admiralty criticised the Government for doing to Italy when he stated that, if we left Italy alone without assisting her and giving her loans, the economic development of the country would have applied its own corrective. Therefore, I trust we are very sure that American and other neutral opinion is not convinced that it is other than merely a subterfuge to try and buy support from a Fascist country, of which we cannot establish any proof. If that is the case, I would consider it to be a bad Trade Agreement. But if the Government representative can provide us with definite, concrete evidence that this will be a step towards establishing relations that will have an effect upon the oppression and tyranny of the Spanish people, it will be a step forward towards that which we all desire.

10.30 p.m.

The Under-Secretary of State for Foreign Affairs (Mr. Butler)

I am sure we have all been glad to welcome the general evidence of the value of this Agreement, which has been expressed by speakers on all sides of the House. I am sure that this evidence will not go un-remarked either in this country or Spain and that it will be welcomed by all those who wish to see developed, gradually but surely, friendship between the two countries. Tributes have been paid to the hon. Member for Seaham (Mr. Shinwell), and I would certainly like to add mine. I took part during difficult months and, indeed, years, in Debates in this House upon Spain, and I have no complaint to make of the criticism that was levelled against the Government at that time. It is remarkable how, in this hour of responsibility, the British people, through their representatives in a freely-elected Parliament, rise to the importance and seriousness of the occasion and subordinate their own, in many cases, strongly-held opinions when they feel that the Government have taken a step which is in the national interest.

The attitude of His Majesty's Government towards this strong feeling and towards Governments of a certain type in certain countries is, I think, quite clear. The political regime and form of governments in other countries are no concern of ours any more than our political institutions are the concern of other countries which are governed by an authoritarian regime. But it is by the policy and not by the character of a foreign Government that we are affected. When we look at the relations which have been maintained between ourselves and Spain since the outbreak of war, I think we can safely say that they have steadily improved and that we have no cause for complaint of the attitude of the Spanish Government, which has been one of strict neutrality. We respect that attitude and shall continue to do so as long as it is respected by others. Moreover, His Majesty's Government are convinced that Spain is determined to maintain the neutrality of herself and of her possessions.

When I say that we have noticed an improvement in relations, the House may wish me to draw attention to one or two instances. Let me take, for example, the fact that, at long last, in the realm of propaganda, to which reference has been made, British newspapers are now freely circulating in Madrid and certain other cities. Their circulation is, I think, being encouraged and enlarged, and I am glad to say that, when British newspapers appear on the streets, they are rapidly snapped up by the Spanish population. Hon. Members in the course of representations to me, and in the course of their normal representation of their constituencies, have frequently called my attention to the detention of certain British prisoners of war in Spain. I am glad to say that during the last month or so the remaining British prisoners, detained by the Spanish Government after the Spanish civil war, have been released.

Mr. W. Roberts

Does that include Irish?

Mr. Butler

With one exception—Major Frank Ryan, about whom many representations have been made to me. He is a citizen of Eire and remains detained. His Majesty's Ambassador has had instructions to offer his services to the Eire Minister to see what can be done for the release of this gentleman.

The hon. Gentleman the Member for Seaham asked me whether I could assure the House that there were advantages in the moral as well as the material sphere. He said he regarded this Agreement as fairly satisfactory from the economic point of view, and he adduced certain economic arguments in relation to some important raw materials, such as iron ore, and showed that the Agreement had important economic results, particularly in view of developments in other parts of the world. That, I think, is true. He asked whether, in the moral sphere, I could give any indication of improve- ments in the regime. I must be quite honest with the House. I do not think I could satisfy the hon. Member that things are exactly as he would like them to be. But we have had an indication that there are fewer prisoners at the present time and that sentences have been commuted, and I can say that that is an example of a growing tendency which I believe the improved economic position of the country and this Agreement will encourage rather than diminish. My Noble Friend has communicated with His Majesty's Ambassador on this point and the statement which I have made to the House is based on the most recent information.

Certain points have been raised by other hon. Members. The hon. Member for Chesterfield (Mr. Benson) made a speech which illustrated the truth of the generalisation that in every Debate the House of Commons produces an expert. I do not propose to compete with the hon. Member in his knowledge of financial terms and financial facts. He raised an important question about the rate of exchange. The general statement I would make is that the Spanish authorities must realise that they must be able to market their produce at competitive rates if they are to sell, and I can assure the hon. Member that my hon. Friend, who is a greater expert in economic matters than I am, and his advisers and the Treasury, will bear in mind the points which he has made and give them the attention they deserve. I would only say that the questions which he has raised can always be brought up if we find in practice that they are preventing the Agreement working satisfactorily. He also raised a question about the rate fixed by the Institudo. The Institudo rate is a voluntary rate in respect of special payments; that is, payments of a voluntary character. It is a technical term, meant to cover insurance payments, payments to relatives, capital repatriation and payments of an allied nature. On that particular score he may not find his apprehensions are as serious as he feared; though, if they are, his speech will have that close and earnest attention which it certainly deserves.

The hon. Member for North Cumberland (Mr. W. Roberts) raised one or two points, and in particular asked whether we had remembered that compensation might have to be paid to those who lost ships in the course of the Spanish civil war. He frequently raised the same question in the course of our previous discussions, and I am authorised to say that in the course of the negotiations, which after all related to a different subject, our position in respect of compensation was reserved, and that the fact that this Agreement has been made does not jettison such claims. The hon. Member for the combined English Universities (Miss Rathbone) mentioned the Press. We cannot at present feel that in every respect the Spanish Press has been giving a fair show to our side. It is not for me to use only words of honeyed balm, but it is the hope of His Majesty's Government that, as a result of this Agreement, and as a result of the atmosphere which we believe will be created, comments in that Press will assume a tone more in consonance with the atmosphere which we all desire and with the atmosphere which has been exhibited in the House this evening.

I think the main anxiety of hon. Members has been as to whether the people of Spain will profit by this Agreement. After all, it is in the people of Spain that we in the House are particularly interested. It is difficult to overestimate the extent to which the population has been impoverished and exhausted by the civil war. Without the foreign exchange with which to buy raw materials, it can safely be said that it would have been impossible to start the necessary revival and so relieve unemployment for the masses who have had in Spain their meed of suffering. I believe one of the results of this Agreement will be that raw materials will be provided not only for Spanish agriculture, in the way of fertilisers and so forth, but for the industry, for example, of Catalonia, a district which suffered so much and in which a revival of industry could so much help the population. It was for this reason that initial help in the form of a loan was considered essential, since it was thought by our experts that the normal exchange of commodities would not provide the necessary impetus to recreate Spain and give her people an opportunity for a better life.

It is our opinion, from the diplomatic point of view, that the exchange of commodities will create a better diplomatic feeling between our two countries. By the establishment of strong commercial links, which will be created as much by the repayment of old debts as by the increase of trade, we believe that a series of commercial bridges will be built between our two countries. This should help to create a large body of opinion which will be on the side of friendship and understanding between us. That is the expert opinion which we have been able to gain by inquiry on the spot from our own representatives. We believe that such a system of commercial interchange will help to stabilise conditions and to avert uncertainties and disorder—and these are the elements which play into the hands of those who seek to profit from Spanish weakness. We hope that order and quiet will result in a resumption of industry which will be better for labour, and that the clemency to which I have referred, and for which we all hope, will follow normal conditions and reviving prosperity, and the absorption of Spanish man-power in labour for her industry. This process has, we believe, already begun. I know that some hon. Members would like His Majesty's Government to intervene directly with the Spanish Government. That is a difficult thing to do. We can indicate our feelings, but I believe that our most effective intervention is in taking a step such as we are taking to-night, and by approving this Agreement to rehabilitate the economic state of Spain, to cease our controversy, and to revert to a friendship with a neutral and a prosperous Spain.

Question put, and agreed to.

Resolved, That the Clearing Office (Spain) Amendment Order, 1940, dated 30th March, 1940, a copy of which was presented to this House on 2nd April, be approved.

The remaining Orders were read, and postponed.

  1. ADJOURNMENT. 17 words
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