HC Deb 19 March 1940 vol 358 cc1813-5
Mr. Shinwell (by Private Notice)

asked the President of the Board of Trade whether he is now in a position to make a statement on the progress of the negotiations for a trade and payments agreement with Spain?

Sir A. Duncan

Yes, Sir. I am glad to be able to state that a Loan Agreement and a Payments Agreement between the United Kingdom and Spain were signedyesterday in Madrid. The texts of these agreements are not yet available, but will, I hope, be published within a week. In the meantime, with the hon. Member's permission, I am circulating details of the main provisions of the agreements in the OFFICIAL REPORT.

Mr. Shinwell

Has the right hon. Gentleman any reason for assuming that this is likely to lead to a speedy resumption of trade between the two countries?

Sir A. Duncan

Yes, Sir. I hope so.

Following are the details:

A United Kingdom Delegation arrived in Madrid in the middle of November for negotiations with the Spanish Government on questions relating to trade and payments between the two countries. These negotiations were concluded on 18th March by the signature of a Loan Agreement and a Payments Agreement.

Under the Loan Agreement the United Kingdom Government agrees to advance a sum of £2,000,000 to the Spanish Government for the purchase of goods and a sum sufficient, together with the amount of nearly £2,000,000 standing in the Reserve Fund at the Bank of England under the 1936 Payments Agreement, to enable an immediate dividend of 50 per cent. to be paid on outstanding debts. While payment of interest on these loans will be made from the outset there will be no repayment of capital by Spain until 1942; repayments will then be made in ten equal annual instalments, the funds for this purpose to come out of the sterling receipts paid into the Sterling Account established under the Clearing Agreement.

The Payments Agreement re-establishes a Clearing. It provides for all sums due in respect of Spanish goods imported into the United Kingdom to be paid into a Sterling Current Account in the name of the Controller of the Anglo-Spanish Clearing Office at the Bank of England. After provision has been made for the service of the loans the amounts paid into this account will then be allocated; 45 per cent. for purchases by Spain of United Kingdom goods and payments of freight on British ships between the two countries; 45 per cent. for purchases by Spain through United Kingdom firms of goods coming from certain parts of the Empire and other countries within the "sterling area" and payments of freight on British ships between Spain and any of the countries concerned; 10 per cent. for payment of insurance and reinsurance premiums, royalties, patent fees, interest and other financial payments of a revenue nature due from Spain to the United Kingdom except that for the year 1940 it has been agreed that the amount reserved for these financial payments shall not exceed £400,000.

The whole of the £2,000,000 loan for goods may be spent on goods (including raw materials) of "sterling area" origin.

As regards outstanding debts, the Payments Agreement provides machinery for a dividend of 50 per cent. to be paid on outstanding debts due from Spain to the United Kingdom. This dividend will be paid as soon as possible after the agreement comes into force.

After the initial 50 per cent. dividend there will be no further dividends payable until 1942. From January of that year the agreement provides for a monthly amount of £50,000 to be made available from the current receipts of the Clearing towards final liquidation of the outstanding debts. It is estimated that this should enable a further 10 per cent. dividend to be paid in 1942 and in each succeeding year until 1946, when liquidation should be completed.

The debts covered by this arrangement are:

  1. (1) All debts which were already awaiting transfer under the 1936 Payments Agreement; (2) All other debts in respect of United Kingdom exports and re-exports to Spain and in respect of insurances, royalties and other financial payments from Spain to the United Kingdom which fell due before the 1st April, 1939; (3) The sums due to London accepting houses in respect of acceptances outside the 1936 Payments Agreement covered by the terms of the Spanish Centro's guarantees of February, 1936.

The full texts of the agreements will be published as White Papers on the 27th March. The Payments Agreement will come into force on 1st April, and will remain in force until 30th September, 1940, and thereafter unless denounced by either country on one month's notice.

At the same time, a separate agreement has been signed containing special provisions regarding war trade, including an undertaking by the Spanish Government not to allow the re-export of certain imported goods.