ECONOMIC WARFARE. (Hansard, 18 March 1940)

§ Colonel Baldwin-Webb (The Wrekin)

The question that I wish to raise concerns our trade arrangements with neutral countries, which in my opinion are not compatible with an effective blockade. The disclosure of the existence of a number of loopholes in the blockade came as a shock to most of us, especially after the statement made by the Minister of Economic Warfare on 17th January, in which he sought to assure the House that the blockade was virtually water-tight. The existence of some of the loopholes has been admitted by the Government, while others are evident from the trade returns of neutral countries. But, even if we were to disregard all facts which have not been expressly admitted by the Government, it is evident that the statement of 17th January has been far too optimistic.

In certain circumstances it may be justifiable to withhold from the public certain facts, a knowledge of which would be useful to the enemy. This cannot possibly be the case in the present instance. Germany is, well in a position to know the leakages in the blockade and the other defects in the conduct of our economic warfare. It is to be hoped that the Government will not adopt the policy of withholding information of an 1774 unsatisfactory nature merely in order to convey the impression to the nation that all is going well, in order to keep up the morale of the nation. Such a policy always avenges itself.

In the matter of naval and air warfare, the Government's attitude towards the public is inspired by the utmost frankness, and there is no reason why the same policy shouldn't be adopted also in the matter of economic warfare. Doubtless, had Parliament and the public been informed from the very outset about the loopholes in the blockade, which are now coming to light at the rate of one tablespoonful at a time, pressure would have been brought to bear upon the Government to adopt a firmer attitude towards neutrals. In fact, since the disclosure of loopholes in February the flood of Questions on the subject in this House and the publication of a number of critical articles in the Press resulted in a perceptible stiffening of the Government's attitude. This experience shows that in this instance the absence of adequate publicity was decidedly detrimental to the efficiency of the blockade.

Presumably, if the full facts became known, the pressure on the Government would have become stronger and many more loopholes would be closed. A speech made by the First Lord of the Admiralty on 27th February left no doubt about it that he would prefer a much firmer application of the blockade. It is also an open secret that the Ministry of Economic Warfare was against some of the concessions made to neutrals, but that its point of view was overruled by that of the Foreign Office, whose policy is to appease neutrals even at the cost of sacrifices. This being 1775 so, it may be argued that criticism upon the loopholes should be directed not against the Ministry of Economic Warfare but against the Foreign Office. Since, however, the Minister of Economic Warfare in his speech of 17th January went out of his way to emphasise the perfect harmony between his Department and other Departments concerned, he has to stand the brunt of the criticism for any shortcomings in the sphere of activities of his Department.

It is a matter for grave concern that economic warfare in general, and the blockade in particular, is not applied with full vigour. After all, owing to the inactivity in the spheres of land, air and sea warfare the relative importance of economic warfare is now incomparably greater than it was during the last war. The Allies can much less afford than in the last war to be half-hearted or slack in the pursuance of economic warfare. After all, even if they did their utmost to make the blockade effective, they would be in a less favourable position than during 1914–18, owing to the fact that Germany is this time in a position to trade with her southern and eastern neighbours, and through them with the more distant countries of Europe and Asia. If in addition to this inevitable disadvantage the effects of economic warfare are further reduced by concessions to neutrals, then we shall have every reason to doubt whether economic warfare can reasonably be expected to produce the desired results.

These are unpleasant facts, but nothing can be gained by concealing them. What matters is not that the public should believe that the blockade is effective, but that it should be effective. The blockade cannot possibly be effective as long as the Government attach an excessive importance to satisfying the demands of neutrals. The choice lies between the interests of neutrals to maintain their pre-war profits, and the interests of the Allies to win the war. The Government's present policy serves the first end to the detriment of the second. The country has the right to know that this is so, and has the right to decide whether this is the policy which serves its best interests. I hope that in raising this matter I shall not be misunderstood. I desire to emphasise the need for economic blockade and to help the Minister in that regard. 1776 The facts which have come to our notice and which I hope I may have a chance of stating show that neutrals are able to purchase much more than their normal requirements, to the advantage of the enemy. Trade is going on day by day and month by month, and the blockade, so far as we know, is not as effective as it might be.

§ The Minister of Economic Warfare (Mr. Cross)

In the first place, I ought to thank my hon. and gallant Friend for the tone he has taken in this matter. I need hardly say that if he has information which he thinks should be communicated I hope he will pass it on and it will be thoroughly investigated. He complained that the House had no accurate information about war trade agreements. I must emphasise again that it is by the wish of the neutrals themselves that this information is not provided. There ought to be no doubt upon that point. If there were we may have great difficulty in any future negotiations—and there is no unwillingness on the part of myself or anyone else to be frank with the House. The hon. and gallant Member suggested that in other countries it is possible to find out something about these war agreements. In neutral countries some bits and pieces may leak out, and industries may be able to obtain information about this or that aspect of the agreements by deduction from decisions of the Government's affecting them, so that it is morally certain to be correct; but there is all the difference in the world between those bits and pieces and definite confirmation by myself at this Box as to what are the facts. The reason why neutrals attach so much importance to secrecy in this matter is fairly obvious. In the mind of the German Government any stick is good enough to beat a neutral if you want to beat a neutral. If I were to give particulars—however carefully the position of the neutrals had been safeguarded in the agreements—some ground would be found for accusing a country of having adopted an unneutral attitude. I am adding nothing to the information of the House when I say that the neutrals have been subject to pressure of a piratical nature from the enemy. My hon. and gallant Friend seems to suspect that we have been a little too easy going in some of our agreements. I will not deny that 1777 he may be able to make a marginal case on account of my being unable to give the facts that would controvert it.

But I think it will be agreed that if these agreements showed any benevolence to the enemy, the neutral Governments would not be so anxious to avoid the publication of their terms.

My hon. and gallant Friend spoke many times of loopholes in the blockade. I wish for my own part that he had been rather more specific about those loopholes. Needless to say, we are always looking for them and looking for leakages. We find little leakages here and there, and we take such action as is open to us to stop them. I would reaffirm that to the best of our knowledge and information—and one can never speak without that sort of qualification—there is no significant leakage of sea-borne imports through our blockade. I would repeat that emphatically. There is one instance which perhaps might be regarded as an exception, which received a good deal of publicity lately, and that is in regard to Vladivostok. My hon. Friend did not refer to Vladivostok. He said that he thought I had been over optimistic in the report of progress which I made to the House in the middle of January last. That was a very carefully prepared statement, and if my hon. and gallant Friend would do me the honour of having another look at it, I think that he would perhaps feel he should modify his accusation of over-optimism because I did point out on that occasion that Germany had to a great extent blockaded herself in recent years and as a result of that we had been presented with a very good start in the blockade; and that, coupled with the immediate application of the blockade measures which had been prepared before the war, had given us a very great advantage with which to begin. But, I added, the tougher and slower processes lay ahead; and I have no reason now, to the best of my knowledge, to modify anything that I said on that occasion.

My hon. and gallant Friend, in speaking of these loopholes, did not name any substantial leakages, although he hinted that he had some information of his own. I have some information which is derived from published statistics in Belgium and in Holland. I remember that my hon. and gallant Friend raised 1778 this matter, arising out of a Question on Belgium.

I will not trouble the House with the details of those statistics. They cover the first four months of the war when war trade agreements were not in operation, when we had patched-up arrangements of one kind or another, and they show the most striking decreases in the amount of re-exports of those countries to Germany. If my hon. Friend would like to have them I should be glad to let him have those figures, because as far as those two countries at least are concerned I think he would find them very convincing. I want to emphasise when I say this that I am not declaring that the blockade is 100 per cent. effective. Of course it is not. It never was in the last war, and it will not be in this war. But I declare that this is an effective blockade of sea-borne imports to-day. I believe that that is correct. I speak, as I said before, subject to the qualification that something may be going on of which we have no knowledge to-day and which we may discover next week.

Let me say a word or two about these trade agreements. Our primary object has been to obtain satisfactory guarantees, supported by adequate machinery, that contraband commodities would be imported into the neutral countries only for their domestic requirements or legitimate export trade and would not be re-exported to Germany. We consequently have the advantage that the agents of Germany have not only to evade our controls but have also to evade the controls of the neutral countries concerned. Let us remember that if we had no war trade agreements we should have no control over the export to Germany of the indigenous products of the neutral countries which are adjacent to Germany and with whom we have made these war trade agreements. It might therefore well occur that the output of some of these indigenous products, many of which are of first-rate importance in the prosecution of the war, would be increased and would be exported to Germany in increasing quantities, and would consequently nullify the effects of the blockade at some other point.

The only alternative to war trade agreements is the limitation of imports into neutral countries to such quantities as may be necessary for their own consumption. In regard to rationing, we have to remem- 1779 ber that we are subject to certain limitations of international law. We have no right to seize shipments right and left, at our own sweet will. These matters have to be taken to the prize court. We must have evidence that these consignments were destined to the enemy, and so on. We are not in a position to ration regardless of the law, because that would be blockading neutrals, and I should be earning the title, which has been gratuitously conferred upon me by the Hamburg wireless, of "Minister of Piratical Warfare." Such a policy would be liable to cause damage to the neutral countries themselves. It would cause unemployment, and stir up anti-Allied feelings; and I do not think any of us would disregard that fact. It would force the neutrals to try to expand their trade with the enemy, which would bring them more and more into the enemy's economic sphere—and when you have got into the economic sphere of Germany you have taken a step towards getting under her political influence.

I would make one last point in connection with war trade agreements. We should bear in mind that there are supplies of our own, which we are exceedingly anxious to obtain from adjacent 1780 neutral countries, and services, such as shipping which are of great importance to us at the present time. These things can be obtained only by agreement. In general, the war trade agreements are certainly not an occasion upon which you obtain something less than you would have had if you had no agreement at all.

It has not been easy to negotiate. The neutral countries concerned are determined to protect their own position of neutrality. Negotiations have consequently been protracted, and have lasted weeks and months, and I should like to add that there has been no lack of firmness on the part of the negotiators of my Department. You cannot, of course, get 100 per cent. of what you desire, or indeed anything like that, with the possibility of a threat against the neutral country at once by Germany. I may conclude by saying that we have always got—and we would not make a trade agreement unless we did get—the essential points which safeguard our blockade.