HC Deb 21 February 1946 vol 419 cc1429-40

10.12 p.m.

Mr. Edelman (Coventry, West)

The subject of trade with Russia, which 1 wish to raise this evening, has no direct connection with foreign affairs. Nevertheless, such trade is closely allied to foreign affairs, because the graph of trade is followed closely by the graph of friendship. Today, the graph of friendship has reached a low point, coinciding with the graph of trade, and I, therefore, feel that it is opportune to raise this question. For that reason, I am glad to see here the President of the Board of Trade for he, perhaps more than any other person, has assisted good relations with the Soviet Union. If, today, trade with Russia is not as thriving as it might be, I am quite sure that it is not due to any lack of enthusiasm on his part.

My own limited qualification to speak on this subject is that, for a few years before the war, I was connected with a company which traded with Russia, and on several occasions I visited the Soviet Union for that purpose. At that time, I became more than ever convinced that one of the most important ways to peace with the Soviet Union was through trade. Our economies are largely complementary. We need, most urgently, timber, and the Russians need, equally urgently, machine tools and electrical equipment for their reconstruction programme. In my own constituency, which might be a typical example, we need, very badly, Russian timber in order to build houses and, equally, our factories, particularly our machine tool factories, are eager to trade with Russia. Yet despite the obvious advantages of mutual trade the fact remains that, today, trade between the two countries is dribbling to a stop. During the war years we assisted the Soviet Union greatly. We sent them large quantities of armaments under Lend-Lease and we also contracted to supply them with£100 million worth of civilian goods, 60 per cent. of which was supplied on credit. Yet today we find that despite the fact that next month the new shipping season from Russia will begin—when the rivers thaw and the port of Leningrad opens—no new agreements have been entered into and Mr. Borisenko, the head of the Soviet Trade Delegation in this country, is still absent—no doubt in Moscow. Those are not circumstances which are propitious for our future trade.

It being a quarter past Ten o'Clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, "That this House do now adjourn."—[Captain Snow.]

Mr. Edebnan

If we ask the reason for this lag in trade between the two countries we are told somewhat vaguely, that it is a question of credit which hinders trade between the Soviet Union and this country. We well know that the credit we can give is by no means inexhaustible. We can only give credit to the countries with whom we hope to trade if we can be sure that they will make payment within a reasonable time, and that our credit will not be unduly strained. I understand that we have offered the Russians a credit of£30,000,000 for five years at 2½per cent., but I understand also that they have asked for over£100 million for a period of something like 15 years. It is clear that we cannot afford to give so extended a credit and equally that it is difficult for us to strain our resources in order to give the Russians a credit of such magnitude. At the same time we must recognise that the Russians, who are willing to export because they have to sell raw materials like timber, since they urgently need machinery and machine tools for their reconstruction programme, are turning to America as an alternative source. One hears that they are negotiating for a loan or credit of£1,500 million, and it is quite likely that the Americans will want to attach political terms to that loan which the Russians will, no doubt, refuse.

At the same time, we must recognise that the American machinery and machine tool industry, built up during the war, has now an enormous amount of surplus capacity, and the individual American manufacturer is eager and anxious to sell his products. He has to export in order to keep his plant going and when the Russians, with their great capacity for purchase, go to a country and find a private manufacturer who is eager to sell, the result is that that individual manufacturer will be willing to give the Russians credit terms, as, in our own country, Metro-Vickers gave them credit terms after the last war. Secondly, the Americans are eager and willing to sell to the Soviet Union, and we are therefore faced by the unattractive possibility that the Americans, who are prepared to buy Russian raw materials, timber, magnesium and flax, will be in a position to re-export. to us Russian timber or the equivalent in American timber for which we will have to pay in dollars instead of being able to pay in machine tools, machinery, and electrical equipment, the product of our own factories. Therefore I feel that we must make a decision on this question of credit. If we are only capable of giving a restricted amount of credit, we must in a sense make what amounts to a political decision; we must decide whether it is politically desirable to strain our credit, if necessary, in order to try to meet the Russians halfway, and to obtain some kind of compromise agreement with them, by which they, having appreciated that our credit is not inexhaustible, will be willing to accept a lower scale agreement, but which is nevertheless a compromise agreement on the question of credit.

Now I want to say a word about our instruments of trading. The Russians have during the last 20 years developed a very capable system of trade delegations which represent their unified export organisation. These trade delegations are a sort of phalanx which drives itself into the country with which they wish to trade. We, for our part, trade with Russia by means of private organisations. Our exporters trade as private individuals for a private company, and, as a result, the Russians are in an advantageous position in relation to ourselves. We, it is true, have in Moscow a commercial counsellor, with a staff whose function is largely to prepare statistical information, but I feel that what we need, if we are to cope effectively with the highly efficient and well-developed Russian system of State trading, is to have ourselves some kind of collective organisation for pressing our exports, and for seeing that, when we import, the Russians do not force themselves into our markets on terms which may be acceptable to an individual buyer, but nevertheless, may be disadvantageous to the country as a whole. We should see to it that we, too, have some kind of central organisation, maybe a central organisation representing private traders, but one which will, nevertheless, be a central organisation both for imports from and exports to the Soviet Union. I feel that, as far as Russia is concerned, we, in turn, ought to have a permanent and strong trade delegation in the Soviet Union. We had during the war the United Kingdom Commercial Corporation which fulfilled a very valuable function. It was composed of a body of experts who did an extremely useful job. Now we need something which is, in a sense, more representative of trade interests as a whole in this country. I feel very strongly that we ought to have some kind of unified organisation through which we can trade.

Having referred to the complementary qualities of our trade with the Soviet Union, I wish to speak of our trade rivalries. There are certain points of contact between us and the Soviet Union in the Balkans, in Persia and in China, which are perhaps points of political rivalry, but are also points of commercial rivalry. I feel that those rivalries will best be adjusted, and those points of friction be most successfully smoothed out, if, at those places, we establish with the Russians, joint trading corporations, in which other interested Governments will be represented, and in which they will have a share, joint trading corporations similar to those Joint Supply Boards which we so successfully established during the war, and were of such great value to the United Nations. I feel that if in the Balkans we could have a trading corporation in which, instead of the traditional competition of the nations, there would be agreement both in the interests and the countries where these corporations would be located, and also of the countries which would form part of that corporation, many of our old imperial rivalries with Russia would be eliminated, and we would be able to trade with that country and with the other countries in those focalareas, in the interests of all concerned.

I began by saying that I regarded the question of trade as having more than a commercial importance. I consider that the question of trade has a most profound political importance, and I believe that by involving our affairs economically with those of the Soviet Union, by trading with them to our mutual advantage, and by promoting the trade and the interests of those countries where we have contact with the Soviet Union in foreign affairs, we can make a great contribution towards the future peace of our two countries. The Soviet Union has, politically, three policies which run in harness; first the policy of obtaining security for Communism; the second obtaining security through her own power, and an enlargement of her power; and third the policy of obtaining security through collaborating with the United Nations. I feel that if we do reach a successful economic modus vivendi with the Soviet Union then we shall be going a long way towards drawing Russia into the community of the United Nations. If, ignoring any ideological difficulties, we can do that, we shall ensure that both our trade and our friendship with Russia will be a reality.

10.26 p.m.

Mr. Willis (Edinburgh, North)

I am glad that the hon. Member for West Coventry (Mr. Edelman) has raised this question, because we in Scotland are much concerned with it. I do not wish to detain the House for long, but I wish to emphasise the fact that the promotion of trade between this country and Russia would result in very beneficial consequences, for the heavy engineering industries in Scotland which, in the years between the wars, suffered enormously. They could have been helped then, if this country had arrived at a satisfactory trade agreement with Russia. I know that Mr. Tom Johnston, the former Secretary of State for Scotland, was very keen on this proposal because it would have prevented depression not only in industrial areas, but at Leith and in some of the East coast ports. For this reason I am glad that the subject has been raised, and I ask the right hon. Gentleman the President of the Board of Trade, who has, I know, been exceedingly busy in recent times, to help Scotland by preventing a recurrence of the depression which followed the last war. I ask him to consider, in relation to Scotland, what can be done to help the engineering, fishing and other industries, and particularly to help the East coast ports.

10.28 p.m.

The President of the Board of Trade (Sir Stafford Cripps)

I am sure hon. Members will not mind if I intervene now and take the short time remaining to answer some of the points which have been raised. I need hardly say that the Government attach very great importance to trade with Soviet Russia, both from the point of view of stimulating our own exports, so as to get the necessary imports, as well as from the political point of view, to bring about that degree of friendship which all of us, I am sure, are seeking. The flow of trade, the passing of persons in the course of trade from one country to another, the many friendships that are made, and the many personal dealings that take place, are certain ways in which we can reinforce the more formal dealings which take place between Governments in time of economic as well as political difficulties.

We have, of course, to remember at the present time that both countries are suffering from very great difficulties. Difficulties in this postwar period do not affect our own country alone. They affect the Soviet Union perhaps very much more, in many ways, than our own, for they suffered a degree of devastation during the war compared with which ours might be termed slight. As a result of that tremendous devastation they require nearly all their own available resources for the purpose of their own rehabilitation. Although it might well be said that they are anxious to export timber and other commodities in order to assist us, they, like ourselves, find that these commodities have to be kept at home in order to do their own rehabilitation, because they cannot afford the luxury of providing them for others. Therefore, the trade between the two countries, which, of course, has not been very much in size, has, since the war, suffered that decline which the hon. Member detailed.

Now the question arises whether anything could be done from our point of view in order to try and build up again, first of all, a modicum of the trade that passed between the two countries between the two wars, and secondly, as I hope, a largely increased volume of that trade until it becomes of consequence both to our own export trade and to that of the Soviet Union. It is true that in normal circumstances our two countries should be complementary. Russia has a surplus of raw materials,and various kinds of foodstuffs, which normally, in the years before the war, she had been able to export to us and to other countries. Barley, butter and fish, on the foodstuffs side, timber, flax, fur skins and, of course, petroleum, on the other side—these surpluses, which at that time she was able to send to us—reached the maximum of£34,000,000 in value in the year 1930. Our exports to Russia never reached a higher point between the two wars than£9,250,000. Therefore, the trade with which we were dealing at that time took a great deal more from Russia than we were supplying to her. The House will remember that in 1934 a trade agreement was entered into, whereby it was hoped that in the four years following we should be able to adjust the balance a little nearer equality between the two countries. The achievement of that ultimate result never quite came about, for various reasons which I need not now go into, and it was interrupted by the incursion of hostilities. Actually, that agreement still remains in force, but, I am afraid, like most other trade agreements that we entered into before the war, it is not practically possible today. This means re-negotiation if we are to get a satisfactory basis for mutual trade. In the renegotiation of some suitable form of agreement, it will be necessary for us to do what we did in regard to America—find some method of winding up the agreements which existed between our country and Russia during the course of the war, and which were terminated when hostilities came to an end, the results of which have not yet been liquidated. Therefore, there are two problems, first, that of the liquidation of the wartime arrangements, and secondly, the entering, into some new form of agreement for the purpose of peacetime exchanges.

It is said that the Soviet Union are anxious that we should give them an extended credit on a large scale. I have-explained to them and to M. Vyshinsky and to others, and I think they appreciate the fact, that it is not within the bounds of practical politics at present. Just as they find it difficult to spare timber which they can export to this country, which would pay for the goods which they require, so we find it difficult to provide extended credits for them on the basis which they consider would be suitable for the goods they require to produce. It was suggested by the hon. Member for" West Coventry (Mr. Edelman) that perhaps our American friends were stealing a march on us with regard to the Russian' trade. I can only assure him, as far as any information we have that is available is concerned, that there is no evidence of any such thing at the present time. Indeed, if the Soviet Union desire to negotiate a long-term credit from the United States, they may find that that is a difficult proposition, as, I believe, our negotiators found when they were in Washington last autumn. But we certainly cannot put forward a large line of long credit in order to finance the export trade that we should like to have, and if that is a condition without which the Russians cannot enter into a trade agreement with us, we shall have to say that we are very sorry but we must wait a little bit before we can enter into a trade agreement, until either theirviews change or our position changes.

My hon. Friend said that we must make a political decision as to this credit. We must make a political decision. That is true. But that political decision must not only be made in the light of our desire to assist the Soviet Union as we desire to assist many other countries today who would also like credits of large quantities for indeterminate periods, but it must also be made in the light of our actual financial position. And in the light of that we certainly cannot afford to improve on the offer which my hon. Friend mentioned and which was made some time ago, and which was not accepted I have done my best in the last few months since I have been in my present office to contact the Soviet Union with a view to seeing whether or not they were desirous of negotiating some form of trade agreement, and I offered, when I saw Mr Serghiev the other day, if it would be of any advantage to go to Moscow myself in order to try to do it, but it is clearly of no advantage until we know, first of all, whether they desire to do it, and secondly, knowing our conditions, that they are ones which might be acceptable as far as this trade agreement is concerned. The position, therefore, is that, although we are anxious and most willing to negotiate a trade agreement as soon as ever we can, we realise that our situation and their situation may be such that they consider the moment is not a propitious one for entering upon such a negotiation, and we must accept that situation with good will and understanding, if that is truly the one that they take up. I asked Mr. Vyshinsky and Mr Serghiev when they were here the other day if they would explore the position when they returned to Moscow, and I hope before long I may hear from them the result of that exploration.

Let me turn to the second point with which my hon. Friend dealt, the question of how we should deal with Russia. The matter of whether we should adopt our normal methods of trading, as we should with any other country, or whether, with Russia, we should adopt some special method for conducting our trade with them has been very fully explored for very many years. I think the strongest argument against the adoption of special methods is that the Soviet Union would resent very strongly any such discrimination against them in our normal trading. From all we know, from all we have heard, they very much prefer to deal with traders in this country in the same way as any other country deals with us. As far as imports from Russia are concerned, certainly at the present time, the great majority of these would, in fact, be purchased by various controls through different Government Departments— timber through the Timber Control, barley through the Ministry of Food, and so on—and these negotiations, therefore, are carried on not by individual importers in this country, but by a body which represents the settled importing capacity of the country. Therefore, to that extent, the suggestion that my hon. Friend put forward has, in fact, been adopted and is being carried out at the present time.

Now, with regard to the suggestion of a joint trade corporation with the Russians, similar to the Middle East Supply Centre and bodies of that kind organised during the war for the specific purpose of maintaining exiguous imports into areas which had to be supplied by the United Nations, and which obviously it was much better to supply corporately than individually, he will have observed that, even having worked up that close association with the United States of America during the war, they now feel that after the war it is better not to carry on these organisations. The Combined Boards have ceased to exist, and it would, I think, be quite impossible to contemplate the Soviet Union entering into such an arrangement, anyway before there was some very close trading agreement with us in the first instance. It might be possible, and even desirable, later on to try to develop something of that kind in, I think my hon. Friend mentioned, Persia and other places, in the Balkans and so on, but in view of the very wide difference between the classes of goods with which the British manufacturer and the Soviet Union would be likely to be dealing in those countries. I doubt very much the practicability of such an arrangement. But I can assure him we shall not close our eyes to any possibility which may bring us closer to the Soviet Union and help to rid us of the danger of any rivalries which might otherwise impair our friendship.

Finally, the hon. Member for North Edinburgh (Mr. Willis) reminded us of the interest which Scotland has always had in Soviet trade. I am deeply conscious of that fact. I know how anxious many of the traders in Scotland are to continue that trade, and I can assure him they are no more anxious than we are; we must, therefore, possess our souls in patience until such time as world conditions right themselves after the upset of the war, and we are, both of us, the Soviet Union and ourselves, in a position in which we can see clearly enough ahead to be able to engage our resources in this mutual trade. I am sure that when that time comes, when the surpluses which Russia is now using for her own rehabilition once more become available on the market, when we have earlier dates of delivery and better opportunities of supplying her with many of the things she would like, determined efforts to reestablish a strong flow of trade between the two countries should succeed, and certainly we shall be prepared to do our utmost to make that strong effort, not only because we desire to have that outlet and inlet for our trade, but also because we attach importance, as my hon. Friend said, in the political sphere to this closer relationship with our great Ally in the East of Europe.

Question put, and agreed to.

Adjourned accordingly at Sixteen Minutes to Eleven o'Clock..