§ 4.3 p.m.
§ Mr. R. S. Hudson (Secretary, Overseas Trade Department)
I beg to move,That the Clearing Office (Turkey) Amendment Order, 1940, dated the eleventh day of January, nineteen hundred and forty, made by the Treasury under the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which was presented to this House on the sixteenth day of January, nineteen hundred and forty, be approved.The House will wish really to apprehend the reasons for the Order for which I am requesting approval. I am afraid I must go back a few years and give a very brief account of the commercial relations between the United Kingdom and Turkey. For many years past the exports from this country to Turkey have been in excess of Turkey's exports to this country. One of the main reasons for this disparity lay in the fact that the Turkish currency had been over-valued. The Turkish Government, for reasons which seemed good to them, had been reluctant to devalue their currency, and in the pre-war years they were encouraged to maintain it by the willingness of Germany to purchase Turkish produce at prices that were well in excess of prices ruling on the world market. As the importers in this country were not prepared to pay those excessive prices, there was during all those years a large disparity between our sales in Turkey and our purchases from Turkey. As long ago as 1936 a warning to traders in this country was issued by the Board of Trade urging caution and pointing out that exporters in this country could not expect to see funds made available for payment for their goods. Indeed, I remember that one of the early steps that I took when I was appointed to my present position was to hold a meeting with representatives of chambers of commerce in this country early in 1938 to urge them to introduce a system of voluntary rationing of British exports to Turkey in order to try and establish some equilibrium between the two sides. I failed, and eventually, later in 1938, a supplementary agreement between this country and Turkey was drawn up and signed, providing for a compulsory limitation of British sales to Turkey for payment through the Clearing. Again the object that we had in view was not achieved, because although our exports to 252 Turkey were to some extent restricted, our purchases from Turkey fell even more.
To cut a long story short, in the summer of last year, just before the war broke out, debts owing from Turkey to exporters in this country amounted to some £2,000,000, and the ordinary exporter here had to anticipate waiting for anything from three to five years before he would get paid. During the same summer the commercial interests in this country discussed the matter with us and asked us whether it would not be possible to devise some means of liquidating these arrears and then placing the whole of our commerce with Turkey on what is known as a compensation basis. It did not seem possible to find any machinery which would enable us to accede to the first part of that request, namely, to liquidate the arrears at one fell swoop, but there is no doubt at all in my mind that the commercial community in this country were very anxious to see some means devised for liquidating those arrears in order that a new compensation system might start with a clear field. We were unable, however, at that time to arrive at an agreement. Then the war came, and after a certain amount of negotiation the House will be aware that we and the French signed a series of agreements with the Turkish Government, particulars of which are being published in the White Paper to-day, under which we and the French Government agreed to provide £15,000,000 in gold in Turkey and the sum of £25,000,000 for the provision of munitions and certain other materials that Turkey was anxious to purchase.
We also took the opportunity of trying to see whether we could not reach some agreement for liquidating those £2,000,000 of arrears, and after long negotiations it was finally decided that we should make a loan to Turkey of £2,000,000, the bulk of which was to be devoted to liquidating the arrears. Then, however, came the question to be decided of the basis on which those arrears should be paid off, and I am anxious that the House should realise what in effect we are doing when arrangements are made to pay manufacturers and exporters in this country debts which have been incurred by Turkey. If the House will remember, I said that even if there had been no war, it was probable that the exporters in this country would have had to wait anything from three to five years before they got 253 payment, and I hope the House will agree that it would have been quite unjustifiable to pay off to-day at their full face value debts which otherwise would only have been paid off in from three to five years. Obviously some discount had to be taken into account, and the amount had to be scaled down. The only question was the amount of that discount.
I understand that later in the Debate representations will be made on behalf of certain portions of the commercial community to the effect that we ought to have consulted them about the amount of discount, but, as I have already pointed out, we were aware that the commercial community wanted these debts to be liquidated by some financial arrangement at once. It is quite clear that they wanted to pay as small a discount as possible. We did not have to consult them to know that. It is equally clear that the Turkish Government did not want the discount to be unreasonably small, and it was our job to try and make the best arrangement that we could in all the circumstances. The final arrangement, which was the result of long, laborious, and very careful discussions on both sides, represents discounts as set forth in the agreement which I am asking the House to approve. There is no doubt that when you are dealing with 6,000 separate accounts, there are bound to be individual cases of hardship, but I would remind the House that this is not a compulsory scheme. Any exporter in this country who is owed money in Turkey does not have to be paid off. He can use his Turkish pounds to purchase in Turkey any of the 10 commodities listed in the Schedule for subsequent import into this country. I do not pretend that this year that will be of very great advantage to him, because several of the articles are subject to import licences, but, speaking personally, I think that possibly next year, if things go well—certainly well within five years—that right will be of considerable value, and in fact he will not be any worse off if he accepts that alternative than he would have been if we had not made this arrangement.
§ Mr. Hudson
The prices he will pay will be whatever he can buy for in Turkey. I do not know what the prices will be 254 but at all events if he would rather take a chance in the next few years, he can do it. Therefore, he is under no compulsion under this scheme. In future all private trade will be on a compensation basis between the two countries, and I hope, therefore, that the difficulties which we have to surmount at present or have had to surmount in the past will not recur. There is only one other point to which I wish to call attention, and that is the provision in Article 5 that certain purchases by His Majesty's Government will be exempt from the clearing. That is in order to enable us to transfer here things like tobacco which we shall buy from Turkey as part of our arrangements with them for the liquidation of the loans which we and the French have made of £15,000,000 and £25,000,000.
§ 4.11 p.m.
I think the House is indebted to the right hon. Gentleman for the clarity with which he has explained this rather complicated clearing arrangement—a clarity which we always expect from him—but I think his speech shows his incurable optimism. It is 18 months since we discussed the last Turkish clearing order, and the commercial and economic background then and the picture painted by the right hon. Gentleman then were very different from the picture now. Then we had just agreed on a £10,000,000 credit to Turkey for the purpose of the development of Turkish production and trade, and although it is true that there were £1,500,000 of blocked credits in Turkey—frozen credits—
§ Mr. Benson
How would that help, when my hon. Friend is a Scotsman? Although there were £1,500,000 frozen credits in Turkey, the picture painted by the right hon. Gentleman was one in which these frozen credits were to be thawed out in no time. Of the £10,000,000 credit, £500,000 was to be spent internally in Turkey and available for this purpose. There was £100,000 a year to come from Anglo-Turkish Commodities, Ltd. There was 10 per cent. to be set aside from compensation trade, and compensation trade was at last to be made available for the unblocking of those frozen credits; and, finally, the non-compensation imports into Turkey were 255 limited to £500,000. The actual words of the right hon. Gentleman describing the effect of all those various matters were:We anticipate that a vast reduction in arrears will be achieved in the course of the next two years.That was the anticipation of the right hon. Gentleman, but what has happened? Instead of a vast reduction, there has been a vast increase in the frozen credits—an extraordinary increase, when one takes into consideration the £500,000 limit on imports. In June of 1938 the frozen assets were £1,500,000. In September, 14 months later, they had risen to £2,000,000. That is, although our import trade had been limited to £500,000 a year, in some 14 or 15 months the frozen credits in Turkey had risen actually by £500,000. In 1938 a £500,000 quota was imposed. This year they had to prohibit entirely all imports into Turkey. Quite frankly, there has been an extraordinary deterioration in Anglo-Turkish trade. In fact, it seems almost at a standstill.
There were many complaints from traders when they saw the publication of the Schedule of this Order, but the whole of their criticism of the bargain struck for them, and the money provided for them by the Overseas Trade Department, is entirely unjustified. They have got an extraordinarily good bargain. In view of the history of the last 18 months, in view of the war, and in view of Article 5, which the right hon. Gentleman slurred over very carefully, what chance have they of getting their money in five years? The probable date when they would be able to collect their debts is the Greek Kalends. There is one point about which I want to quarrel. The right hon. Gentleman suggested that this was not a compulsory settlement, that any trader who liked could, as an alternative, unblock his credits by means of compensation trading. In theory that is perfectly true: it is allowed for under the Clearing Agreement, but to what does it actually boil down? A Lancashire cotton manufacturer who sent goods to Turkey can, if he wants to unblock his credits, and if he can get an import licence, import attar of roses, although what he is going to do when he gets it is another matter. Actually the practice of an English exporter sending goods to Turkey and bringing goods back from Turkey does not work out. The much more complex 256 system of mutual compensation trading between a number of parties on either side does not work either, and if a man wants to unblock his credits by means of compensation trade he has got to buy compensation sterling.
Compensation sterling at the present moment stands at a premium between 60 and 70 per cent., so that even at the present figure any exporter who tries to get paid by compensation sterling has to take a lower price than is offered to him by the right hon. Gentleman. The alternative is really "Hobson's choice,"and I would ask the House to mark this: Hitherto the number of articles in which compensation trading could be carried on was vastly greater than now. Only five or six months ago there was something like 40 articles, but since the war the whole of Turkish products have been thrown open to compensation trade and are available for the unblocking of credits. Yet in spite of this compensation sterling still stands at between 60 and 70 per cent. premium. What will go on when we have a limit of 10 small articles, as you find in the Schedule of this Order? We must face the fact that compensation trading has broken down once and for all.
The real sting of the Agreement lies in Article 5, which deals with Turkish pounds in the hands of the United Kingdom Government. That very small Article covers, not a multitude of sins, but a multitude of difficulties. It sounds the death knell of ordinary commercial trading between England and Turkey for a generation. It means that for many years to come the imports from Turkey to this country—and that is the only method by which we can get payment of our debts—will be imported upon the Government account for the purpose of servicing the various loans and credits granted by the Government. I am not complaining of these credits; I am merely pointing out what in actual fact will be the position of Anglo-Turkish trade. What is the present position under the credits already granted? There are three loans of which details will be found in the Treaty of Mutual Assurance. There is a £2,000,000 loan, a credit of £25,000,000, and a loan of £15,000,000. Both the £25,000,000 and £15,000,000 are joint loans from this country and France. In addition there is a £10,000,000 credit 257 which was granted in 1938 and which now becomes due for service.
§ Mr. Benson
I referred to the £10,000,000 commercial credit of 1938, not the more recent armament loan. Our share of the service without any French share will this year amount to £1,000,000. In 1945, when the right hon. Gentleman was suggesting that we might start unblocking frozen credits, the service and amortisation will amount to over £1,750,000. In 1951 it will amount to £2,200,000, and in 1952 the £6,000,000 armament loan becomes due for service. The Government loans, therefore, for many years to come will take more than double the present imports from Turkey. The method by which the loans will be serviced is laid out in the Treaty of Mutual Assurance. It is unusual and, I think, novel. The amortisation funds and interest will be paid by the Turkish Government into an English Government account in Turkey, in Turkish pounds. With these the Government will buy tobacco and any other Turkish commodities for the purpose of import into this country, with the limitation that the goods must be consumed here. In the last five years the total average imports per annum from Turkey to this country amounted to less than £1,250,000. Thus the service for loans which have been granted during the last 18 months or two years will absorb more than double the total amount of Turkish imports into this country.
What is the use of a trader or anybody else pretending that there will be anything left over for unblocking frozen credits or even for carrying on normal Turkish trade? These loans if they are to be serviced will require an immense extension of Turkish trade, the whole of which must be absorbed by the Government for servicing. I think the traders of this country have got an extremely generous bargain. Let us look at the circumstances once again. To begin with, the trade carried on has been speculative. It has been carried on in the face of continuous warnings by the Board of Trade that traders might have to wait for their money, might even, perhaps, have to whistle for it. The prices at which they exported to Turkey were heavily padded 258 in order that they should be covered not merely against the waiting period but against risk so that even a 40 per cent. discount is not really a serious discount on the normal world prices. Again, the possibility of payment as the result of the war is very greatly reduced. Taking all these things into consideration, I think the fact that English traders are going to get their money back at a discount of from 3 to 40 per cent. is an example of extreme generosity on the part of the Treasury. Whether that patient beast of burden the English Treasury will ever see its money back is a very different question. In the circumstances I think that the arrangements which have been made leave no reasonable ground for criticism on the part of the English trader.
§ 4.29 p.m.
§ Mr. Price
This Measure will regularise the position between England and Turkey with regard to our commercial exchanges, and I agree with the Minister and my hon. Friend who has just spoken that the exporters have no real grievance in the settlement along the lines of this rather heavy discount. One cannot expect the British taxpayer, in principle, to bear this very heavy burden, but, on the other hand, I am inclined to be a little critical of what has happened in the last few years between ourselves and Turkey in regard to commercial exchanges, not because of the losses which private traders have sustained but because of the situation which has been allowed to develop. In the agreement of 1938 with Turkey arrangements were made to finance trading between the two countries. In effect, however, there was no financing, because during the last 18 months there was a steady accumulation in the debts in Turkey to this country, which resulted in an almost complete stoppage of commercial exchanges between the two countries. Sterling exchange was obtainable only on certain Turkish products, and was not obtainable on a whole list of other commodities. Consequently, the debts accumulated.
It is not right to regard trade between this country and Turkey as being purely of private commercial interest, for there is a big question of high policy involved. The relationship between this country and Turkey has to be looked at from the point of view of international politics. The friendship between Turkey and this 259 country is one that has become of increasing political importance. Therefore, it is not the right way to deal with the problem to look upon Anglo-Turkish commercial exchanges as being a question of private interests and private profits. Turkey has been receiving the attention of the Power with which we are now at war. We know that the Nazi commercial policy is a totalitarian one which uses commercial exchanges for the purposes of power politics and the political domination of the country with which Germany is dealing. This has gradually dawned upon the people of Turkey, and particularly since the attitude of Russia changed and there was arranged a virtual alliance between Nazi Germany and Russia, Turkey has seen the danger. Therefore, it is a mistake to regard this agreement as a purely commercial transaction. I noticed that the Minister did not refer to this aspect of the question, but I think it is one of which we should not lose sight.
We are now making a clean sweep; we are clearing off these debts at a discount and apparently at a loss to those who have been engaged in this trade. I think it was a mistake to allow the situation to develop in this way over the last 18 months; I believe it would have been better if, earlier on, the Government had seen the economic importance of the Turkish Republic in the international sphere, and had regarded commercial operations with Turkey as being of State concern. We ought not to have allowed private interests to accumulate commercial debts in this manner. It would have been possible to set up an Anglo-Turkish commercial organisation, under Government control and with State capital, which could have developed the commercial relations between the two countries.
I am not certain how far it is possible to develop commercial exchanges with Turkey at the present time in regard to the export of tobacco and a number of articles which are not particularly needed in this country at this time. We know the difficulties of getting Turkish tobacco, and Balkan tobacco for that matter, into consumption in this country, but having, many years ago, travelled across the Continent of Anatolia, the high plateau that is now Asiatic Turkey, I am confident that it is possible to develop there, 260 as the Turks are trying to do by irrigation, more than ever before, the growing of cereals and agricultural products of all kinds, including cotton in certain districts. With the development that is going on there, I believe it will be possible to build up a commercial exchange that will enable the Turkish Republic to pay off all the credits we are now giving. Therefore, I hope that, with the acceptance of this settlement, the matter will not be allowed to remain there, but will be used as an opportunity for developing on a large scale, under State control, the economic relations between this country and Turkey.
§ 4.37 p.m.
§ Mr. Pethick-Lawrence
This Order can be looked at from a number of different aspects, some of which have already been developed in the Debate. In the first place, it can be regarded as a purely commercial transaction between the two countries, for which purpose the nationals of each country may be lumped together with the Exchequer of that country. Viewed from that angle, it amounts to feeding a dog with its own tail. When the nationals of this country sell things to Turkey, normally they would be paid by nationals of Turkey or by the Turkish Government, but in fact, of course, they are not to be paid in any such way. They are to be paid by the British Exchequer. We are liquidating the commercial debts that have been incurred, and which are owed to our own nationals, by paying them ourselves. That is what I describe as feeding a dog with its own tail.
But this is not a commercial arrangement. It is a political arrangement. It is an arrangement that is devised because it is very desirable that the political relations between this country and Turkey shall be kept on an even keel and everybody be pleased by the results. For that purpose, no doubt, the arrangement is a singularly happy one, because it deals with the existing unreality of Turkish trade by settling it ourselves instead of making any international trouble in order to bring about a settlement. In time of war, normal commercial balances tend to be obliterated or lost sight of, and it is highly important that, at any rate for the time being, political considerations should be given the prime position.
There is another aspect to which I should like to make a brief reference. This 261 agreement, and the whole of its history to which the right hon. Gentleman referred, points to the complete disorganisation of world trade. The idea which a great many people have of world trade is that somebody sells goods from one country to another country and gets paid in cash. Of course, the really substantial background is something entirely different. World trade is not really carried on in cash, but is a glorified system of barter. That barter has very rarely been bilateral, but, in the successful periods of world trade, has been multilateral. A number of people—among them, I believe, some hon. Members of this House—imagine that the great glory of a country is to sell a very large number of exports to foreign countries and not to be paid anything in exchange. If that were really the summum bonumof international trade, Turkey would provide a most perfect example for this country, for whereas some countries are so wicked as to send us a very large amount of their goods in consequence of the fact that we send them a large amount of our goods, Turkey up till now has not been able to send us very much, whereas we have sent her a very great deal.
In my view, that is of very doubtful advantage to this country, but from a narrow Protectionist point of view, it is magnificent; and if all the countries in the world were the same as Turkey, and took millions upon millions of our exports and never sent a single import in exchange, this country, according to Protectionists, would be supremely happy. The position into which we have come as a result of the facts with regard to Turkey illustrates the fallacy of that purely Protectionist theory. For some years past, we have been confronted by the fact that we were not getting rid of the Turkish debt. Owing to the complete muddle and breakdown of world economic transactions, what might have been settled by multilateral trade has not been settled, and the position between this country and Turkey, commercially, has grown worse. The result is that the right hon. Gentleman asks us to-day to pass this Order, feeding our own dog with its own tail, and thereby getting rid of the difficulty. Considering the general position in the world, that is probably the best thing to do.
I shall not enlarge upon the detailed arrangements between the Treasury and 262 the exporters. On the face of it, the exporters are having a very raw deal, because for every £100 which they expected to receive, some of them will receive only £60, and some of them even a little less. On the face of it, that appears to be a very unsatisfactory position for them, but I suspect that in all probability most of them, although not necessarily all of them, will not do so very badly, after all, because they must have foreseen that it was one thing to do a roaring export business and quite another thing to get paid for it promptly at the figure for which the bill was sent in. I suspect that most of them will regard themselves as quite fortunate if the result of this agreement is that they see ready money, even though that money is at a considerable discount on the amount at which the debts owed to them stand in their books. Therefore, I shall not weep crocodile's tears about the position of the British exporters. Some of them may be very badly hit and, of course, we are sorry for them; but taking it broadly, I imagine that, although they may not have struck a very lucrative bargain, they will be fortunate, in view of the conditions of the trade, even before the war and still more now, in that they will receive a substantial part of the money about which they were very doubtful before the agreement was framed. Therefore, although this Order is a kind of allegory of the times and may, perhaps, be looked upon in years to come as showing in what a mad world we live at the present time, I cannot say that I would wish to see the House reject it, and I shall ask my hon. Friends to give it their support.
§ 4.45 p.m
§ Major Milner
I am sorry to differ somewhat from my hon. Friends but, frankly, I am not happy about this agreement. My right hon. Friend who has just spoken suggested that British exporters might consider themselves fortunate in obtaining payment at all, and that now they are, at any rate, assured of being paid at some time, subject to a considerable discount. There are friends of mine in the city of Leeds who do a considerable amount of export business and who are going to suffer considerable loss if this agreement goes through. In that case they have never been in any real doubt about being paid at some date. Hitherto their bills, drawn on the customer in Turkey, have been regularly met on 263 maturity, although it is true that the amount in question has been paid into this clearing account. They have eventually, I understand, in respect of old accounts, month by month or year by year, received payment in full. If that be so, I do not see the justification for their having to suffer a discount of anything up to 40 per cent.
It may be, as my right hon. Friend has said, that in many cases this has been provided for in the contract or in the price arranged and that the British exporter will feel quite happy about it, but, surely, in that case the matter should be one for inquiry into each case on the merits. In the case of some exports provision may have been made for delayed payment, or in some few cases if you like little or no payment at all may have been in contemplation, though it seems unlikely. I agree that the Order provides something rather better than that, but surely, as I say, it is a matter for inquiry on the merits in each case. I understand that there is a great number of these cases. I cannot imagine that there is anything like the number which had to be settled through the clearing arrangements between ourselves and Germany after the last war, when there were hundreds of thousands. I do not know the number involved here, but it seems to me that some better arrangement might have been made when we were lending this money to another country.
I have had considerable experience in acting legally for those who lend or borrow money, and the first thing done by a man who lends money in the case of someone who already owes him money in respect of a previous loan, is to have that previous loan paid off first, and I should have thought that that was the simple, straightforward course. Out of the sum, whatever it may be, which we advanced to Turkey a certain proportion should have been used to pay off these debts. I was surprised to hear hon. Members speak as if the taxpayers of this country were really going to pay the exporters. They would appear to assume that none of this money will ever be repaid to us. If that is in the mind of the Government, we ought to be told frankly whether such is the case or not. It may be proper to lend money in such circumstances, but it seems to me that the more straightforward course would be to pay 264 the money over and to say nothing about it, rather than to enter into an arrangement which professes to be a loan, but in regard to which those in authority apparently—I hope I am wrong—do not expect to be repaid. I do not regard the agreement with satisfaction. I think a better arrangement might have been made and that exporters from this country to Turkey are entitled to more consideration than they have received. Either provision should have been made for payment in full or every case should have been considered on its merits and a proper discount allowed according to the circumstances.
§ 4.50 p.m.
§ Mr. R. S. Hudson
I am much obliged to the hon. Member for Chesterfield (Mr. Benson) and to the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) for their remarks. I agree with the right hon. Gentleman that this Order shows the evil of commercial bilateralism. Unfortunately, "The evil that men do lives after them,"and we are paying now and, indeed, will have to go on paying for the evil effects of that commercial bilateralism in the case of Turkey. While agreeing with the hon. Member for Chesterfield that it is very dangerous to make any prophecies, I would say that we must remember that Germany was Turkey's main market and if as a result of the change in the political relationship between Turkey, France and ourselves Turkey's trade with Germany is, as we hope, going to diminish, then, clearly, an alternative market and outlet for Turkish products will have to be found. In order to help the economy of Turkey in the meantime, we have, to a great extent, to go on with this bilateralism and we shall have to find in this country an alternative market for Turkey's produce, otherwise she will be unable to export.
Therefore, although in peace time I should be inclined to agree that after the arrangements which have been made for the amortisation of the interest on the Government's loan, there would be very little left for the ordinary trader, I do not think the situation will be quite as bad in the next year or two under war conditions. I should anticipate that our imports from Turkey this year and probably also next year might even amount to between £4,000,000 and £6,000,000 as against something like £1,000,000. Therefore, I hope there will be scope for the 265 ordinary private purchaser and to some extent for some of those hard cases previously mentioned. It will be open to them to invest their Turkish pounds in the purchase, not merely of attar of roses, but of carpets, hemp and other products.
§ Question put, and agreed to.
§ "That the Clearing Office (Turkey) Amendment Order, 1940, dated the eleventh day of January, nineteen hundred and forty, made by the Treasury under the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which was presented to this House on the sixteenth day of January, nineteen hundred and forty, be approved."