EXPORT AND IMPORT TRADE

HC Deb 24 March 1947 vol 435 cc865-999

3.52 p.m.

Lieut.-Colonel Elliot (Scottish Universities)

When we are discussing, as we are today, the Consolidated Fund Bill, under which vast sums are now required for the service of Supply, it is fitting we should take an early opportunity of considering how these vast sums may be secured. We are discussing today the supply of 1200 million for the service of the Fund in 1946–47 and £1,253 million for the service of the Fund in 1948. The President of the Board of Trade in his review of the economic position on 10th March indicated that we should require for imports £1,450 million, and from exports £1,200 million, and that the long-term target would need to be 175 per cent. above the 1938 figure which, as he said at the time, would require a third of the world's trade. It is an impossible target unless the world trade has substantially increased. He, therefore, laid down as his objective that there should first be an adequate expansion of existing trade; and, secondly, an attempt to increase the trade as rapidly as might be. He indicated that he was taking steps to carry out these objects. He said that he had urged industry to give its immediate attention to these problems.

Therefore, our first question would be: How far has the right hon. and learned Gentleman succeeded in those steps, which he himself said he was taking? He said: Detailed discussions with particular exporters and groups of exporters are now being started by the Board of Trade and by the Ministry of Supply. … We shall have no hesitation in relying upon exporters … to work out, in consultation with the Board of Trade the precise steps that can best be taken for its solution."—[OFFICIAL REPORT, 10th March, 1947; Vol. 434, c. 978.] Can he tell us, first of all, how these negotiations are proceeding, and whether the groups of exporters which he has mentioned are now in close touch with his Department; and what steps he has taken to find some way of dealing with the two problems, the solution of which he put down as the main objectives—that is to say, the increase of our exports towards the hard currency countries, and the development of goods and supplies for the soft currency countries from which he hoped to draw a larger supply of goods in the future? Those, obviously, are tasks of great difficulty. The groups of exports on which he can rely upon for this task are circumscribed. They come down, I think, to vehicles, chemicals and electrical goods of the main group, and possibly rubber manufacture, as the subsidiary group.

Mr. Scollan (Renfrew, Western)

What about whisky?

Lieut.-Colonel Elliot

The President of the Board of Trade will be able to tell us whether he has succeeded in prevailing upon his right hon. F lend the Minister of Food to give an adequate supply of raw material for the process which is inevitable and indeed desirable in that industry. The great groups which are mentioned, vehicles, chemicals and electrical goods, will have a heavy task laid upon them if an increase is to be made in any way corresponding to the hopes of the President of the Board of Trade for a very great expansion of our export trade. I think he will agree that if it is to be concentrated upon these groups—and I am sure the House will be glad to know If there is any chance of expanding other groups—it is not an expansion of 40 per cent. or even 70 per cent. that will be required; it will need to be more than double those exports. That is a formidable task. The carrying of coals to Newcastle was proverbially regarded as an example of what one might call superfluity, until, of course, the advent of the Minister of Fuel and Power made it a practical question of world trade. But the task of carrying coals to Newcastle is simple and easy compared with that of selling vehicles to General Motors, or, let us say, electrical goods to General Electric. That is a task that will be fraught with very great difficulty.

The President of the Board of Trade indicated that the increase of exports to the hard currency countries was going up by about 1 per cent. per quarter, or some such figure as that, which showed that the trend was in the right direction. He admitted, however, that it is still slow. We should like very much to know what are the right hon. and gallant Gentleman's hopes. Is it his hope, first of all, that every group of exports can be brought in; and, secondly, does he think there is any chance whatever of doubling our exports of these commodities to the hard currency countries? Countries such as Sweden or Argentina may easily take a certain increased amount of goods, but it is very difficult to believe that countries such as Canada or the United States will be able to absorb an increase of anything like the extent suggested.

Let us take the second hope which the President of the Board of Trade put down—purchases in the soft currency or sterling markets as soon as ever the goods are available. That, of course, is a very important proviso, because there is a certain amount of export to the soft currency markets which is merely a diminution of our adverse balance. We must be sure that we are drawing real goods for those which we are sending there. Incidentally, the House would like to know to what extent any negotiations on the sterling balances in the Eastern currencies have been successful, and to what extent Sir Wilfred Eady has prospered in his negotiations with the Governments of India or of Egypt. Obviously, in a general survey of our trade position these great overhanging weights upon our export trade—from which we should not receive any corresponding advantage unless the negotiations were successful—would be of the very greatest importance.

The proviso or fundamental assumption—the purchase in soft currency or sterling markets as soon as ever the goods are available—seems to us on this side to indicate that the problem there is really one of production rather than of trade. It seems to me that it is a question of making sure that the goods are being produced for us to enjoy. Here, as elsewhere, markets are surely the mother of goods, but stability is the mother of markets and arrangements which will produce stability and, still more, encouragement of production, are vital if the flow of goods from soft currency countries into sterling countries and to this country is to be promoted to the extent which the right hon. and learned Gentleman desires. It cer- tainly seems to us odd that in the White Paper so very little reference was made to markets within the Empire, and that the President of the Board of Trade, in his speech, referred to Imperial production twice only, saying in one case that it was undesirable that we should abandon a good market in the Dominions for a temporary advantage in a hard currency country, and secondly that we must not burke our obligation to continue the supply of goods to the Colonial Empire. We hope very much that it will be a two-way process and that a supply of goods from the Colonial Empire to this country can also take place.

In all that, we think that the organisation of the Empire markets and the trade arrangements within the Empire which have been built up over a number of years, are of the very greatest importance, and that it is very worth while that they should be maintained and encouraged. The policy of Imperial Preference should not only not be slighted; it should be fostered, because half our manufactures go to the Empire. This country, the greatest commercial community that there has ever been in the world, has built a great part of its trade upon the wide base of Empire and Commonwealth, as against the narrow base simply of this island, and we find it difficult to believe that our own prosperity would persist if these arrangements were damaged or even seriously cut into. But there is far more in it than that. There is the history of 300 or 400 years, and there is affection. "Preference" is a word which does not apply only to trade. If I say that I prefer those who fought beside us on many a stricken field, to those who stood on the sidelines and applauded or even barracked, as the case may be, I am expressing an ordinary impulse of humanity. If I say that between the two—with every respect to the second—I prefer General Smuts to Colonel Peron, I am only saying something which, in the ordinary walk of, life, I have every reason to say, and I do not think the world has suffered because of the encouragement Field-Marshal Smuts and other Empire statesmen have received from us in trade and in preference, taking that in the widest sense.

We therefore look with apprehension on the suggestion that this is in some way an immoral and undesirable act, and one which should be apologised for and brought to an end as soon as possible. I should not have said that if it had not been that we are now going to a Conference at Geneva upon which the President of the Board of Trade rests great hopes. As he said himself the expansion of trade is necessary if we are to secure this great expansion of imports and imports which we desire, and he added: That is why the Government attach so much importance to the plan for an international trade organisation, with its declared objective of providing full employment and increasing the total volume of world trade."—[OFFICIAL REPORT, 10th March. 1947; Vol. 434, c 978–9.] On that we should all be agreed, but the steps which are laid down in the draft charter are steps which beg the question and which, without any proof so far as we can see, bring forward the contention that I have just cited—that it is in some way, an immoral thing that mutual arrangements should be made between the countries of the British Commonwealth or beween Great Britain and parts of the Colonial Empire, and that step, should be taken to eliminate these. This is the first time that the words "eliminate preferences" have arisen in an official document. They arose in the Atlantic Charter, but all that the Atlantic Charter said was, quite rightly, that restrictive practices should go, that there should be access to raw materials on equal conditions, and that the volume of world trade should be increased. Even the Bretton Woods Agreement merely spoke of the elimination of restrictive practices and the master agreement, the Lease Lend Mutual Aid Agreement, uses the same expression—"elimination of restrictive practices."

Mr. Douglas Jay (Battersea, North)

May I point out to the right hon. and gallant Gentleman that the Mutual Aid Agreement did not say "elimination of restrictive practices" but "elimination of all forms of discriminatory treatment"?

Lieut.-Colonel Elliot

But surely the general overriding purpose was the increase of world trade. It was not that discriminatory practices were to be eliminated as such, but because they interfered with the flow and expansion of world trade. The overriding purpose in the Atlantic Charter, the Mutual Aid Agreement, the Bretton Woods Agreement and the Food and Agriculture Agreement is always an expansion of trade and, indeed, the promotion of full employment. These other things are merely argued against in that they tend to diminish or injure that flow of trade. It is not being done in order that prophecies may be fulfilled, but because they militate against the fuller life we all desire. But surely the onus is on those desiring a change in the law to prove the case for it, and I do not think it can be said that the case has been proved, or even seriously argued. But judgment has been delivered. Article 24 of the Charter, drawn up by the first Session of the Preparatory Committee of the United Nations Conference, has as its heading "Reduction of Tariffs and Elimination of Preferences"—and it says: Each member shall, upon the request of any other member, enter into negotiations with other members directed to the substantial reduction of tariffs and to the elimination of import tariffs and preferences provided that proper international commitments shall not be permitted to stand in the way of negotiations with regard to tariff preferences, it being understood that they shall not require the modification of existing international obligations except by agreement. Then there is a very odd provision—provision (c), which says: The binding or consolidation of low tariffs shall in principle be recognised as equivalent to the elimination of tariff preferences. These are very far-reaching proposals, and although it may be said that they are merely draft proposals and the President of the Board of Trade has stated as recently as November last in this House that we are not committed—he said that it is only a question of so much preference as against so much tariffs, and that we are all perfectly free negotiators—I think it is beginning to go a little further, and that a certain commitment is undoubtedly beginning to take place.

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

indicated dissent.

Lieut.-Colonel Elliot

The right hon. and learned Gentleman shakes his head, but I am sure the House will be anxious to learn what is the status of this Conference and the extent to which we are committed by its conclusions. It is said that we are perfectly free and that these conclusions have to come back to this House to be discussed and voted upon, but we have seen these Conferences before and the mere fact that it has gone as far as this from the agreements already reached at any rate indicates that a very strong trend exists. That should be challenged now and this House should have from the responsible Minister a clear statement of how free the hands of the House will be after the Government's negotiators, in solemn conference with other nations of the world under the auspices of the United Nations, have drawn up and initialled some agreement of which these articles form part.

I think we can say that those who claim that preferences are in restriction of trade are not justified by the facts. They are not justified by the facts as far as the Empire is concerned or as far as world trade is concerned, and that is a point upon which I wish to address a short argument to the House this afternoon. I think it is admitted by everyone that preferential arrangements have been of great benefit to the Empire. Then people say, "But this is grabbing and selfish; it is taking a larger slice of cake for ourselves and withdrawing it from the general resources of the world." That is not so. On the facts it is not expected to be true that a stable area of trade is an injury to world trade, but that argument is brought forward. We are prepared to accept the challenge and prove that, on facts, a stable area of world trade has been of great advantage to world trade and, specifically, to the United States of America. On that, I think we can claim fairly that it is not just that this whole line of thought should be prejudged in the way in which it is being prejudged in international discussion and even in the draft Agreements drawn up by representatives of the Government themselves.

It is scarcely necessary to run over even briefly the facts as to the expansion of inter-Imperial trade which took place after the Import Duties Act and the Ottawa Agreements. Imports from Canada rose from £43 million in 1932, to £90 million in 1937; exports to Canada rose from £16.4 million in 1932, to £27.6 million in 1936. Imports from Australia rose from £46 million to £71 million, and exports to Australia from £20 million to £37.5 million Imports from New Zealand rose from £37 million to £50 million and exports to New Zealand from £10.4 million to £20.2 million—a doubling of our trade. To any other country in the world the proof of these great advantages to the citi- zens of that country would, I think, be a sufficient defence, but of this country, and of this country only, is proof also demanded that it was, in addition, an advantage to the world as a whole.

Very well, we accept that. Let us take United States trade. The total imports of the United States in 1932 were 1,323 million dollars, of which 27.6 per cent. came from the Empire. What was sold to the Empire? In 1932, still before the working of the preferences, exports totalled 1,611 million dollars, of which 40.2 per cent. went to the Empire. Then the Import Duties Act was passed, the Ottawa Agreements were come to, and the arrangements of which complaint has been made were put into operation. In 1935, the latest year for which I have been able to obtain figures, the total imports of the States from all sources were 2,047 million dollars, of which 35 per cent. came from the Empire. Their total exports to all countries were 2,283 million dollars, of which 42.6 per cent. had gone to the Empire. That is to say, instead of a diminution in the proportion of the United States exports to the Empire after the preferences were put on, there was a rise to the highest proportion reached since 1925.

I think it is clear that these were not operations in restriction of world trade. Between 1931 and 1937, when our preferences were in force, our imports rose as soon as we put on a protective duty, not for the purpose of shutting out trade, but for the purpose of organising and canalising trade, and carrying out in the world of international trade the same beneficent operation as the right hon. Gentleman the Minister of Agriculture has just indicated he is busy trying to do in the Fen country. An uncontrolled flood drowning out productive areas is of no more advantage in trade than it is in agriculture, and the fact that our imports of food, drink, and tobacco went up by £16 million, our imports of manufactures by £14 million, and our imports of raw materials by £142 million during that time shows that the object which we had in view, of increasing production in this country by stabilised and organised trade, was being achieved. In a word, after five years of preference we in this island were still taking one-fifth in value of the whole exports of the world.

I think we can claim that the organisation of trade which went on in this country under the Import Duties Act and under the Ottawa Agreements was not action in restriction of trade, but was action which resulted in an expansion of trade. It is said that these arrangements are to be negotiated on and can be swept away, but that if necessary they can also be restored again. Indeed, the United States negotiators have taken very vigorous and active measures to be sure that they can be restored again, and restored at very short notice, because in their trade agreements, as the President of the Board of Trade will know, they have insisted in including in every one an escape clause which says that if the domestic producer is affected or threatened by imports from another country the United States Government have the power to withdraw, in whole or in part, for a time or for ever, the concessions which have been made.

Mr. Norman Smith (Nottingham, South)

The whole thing makes nonsense.

Lieut.-Colonel Elliot

It certainly seems to me to impart a great air of unreality to any suggestion that stability will be brought about under these arrangements. The arrangements which we are defending, the inter-Imperial relations and preferences, cannot be modified in that sudden way overnight. These multilateral arrangements of ours are the results of long and careful negotiations, as we know well. I have played a certain part in those negotiations. For four years, as Minister of Agriculture, it was one of my chief tasks, in conjunction with the then President of the Board of Trade, to discuss and put through these arrangements. They were matters of long and arduous argument, but in which good faith was preserved on either side. They are matters on which, when a bargain is struck, it is intended to be maintained, and anybody pleading an escape clause as a justification for withdrawing from such a bargain in two or three months time would be regarded as no gentleman. That is the only basis upon which any form of gentleman's agreement can be drawn up. I happened to be at the time Financial Secretary to the Treasury and moved the Second Reading of the Import Duties Bill, and I remember the discussions which took place before the import duties were put on. They were the subject of the long and careful inter-governmental consideration which is inevitable in the case of multilateral bargains of the type I was discussing. I say that multilateral negotiations between friendly peoples, preferring to trade with one another, are not only in themselves an extension of an area of stability, but are more permanent in their effects than the results of mere unilateral declarations as to tariffs with the possibility of invoking at any moment an escape clause which may make nonsense of the whole thing.

We are told that tariff reductions are to be made in the case of the United States, and I understand that the President of the Board of Trade has been in negotiation or consultation with the manufacturers of this country and also with the Dominions. We were told here, and it was also mentioned in another place, that the conferences had been held. What can the President of the Board of Trade tell us with regard to these discussions and negotiations? Can he tell us, for instance, what articles he has in mind as being the subject of a possible reduction of tariffs? The right hon. Gentleman indicates dissent, or perhaps the impossibility of doing so. Will he tell us what amount of reduction would seem to him to be reasonable? The President of the Board of Trade denies us information upon that also. He says he cannot start making his bargains here, but shall we in this House be able to consider the bargain when he brings it back?

That is what we fear, that is what industry fears—that these bargains are made without their being brought fully into the picture. They are then brought back here and, although it is true that we are free to accept or reject them, the Whips are on—a three-line Whip goes on that night, and everybody is perfectly free to bring down the Government and destroy a thousand things which hon. Members supporting any Government hold very dear. The bargain comes back, the Government Whips are put on, and that bargain is as good as signed, sealed and delivered. I think the President of the Board of Trade will need to go a little further, at least in indicating what he will have in mind, and what expansion of trade he will look for as a result of the very substantial reduction in tariffs in the United States. I fear that no expansion of trade could be expected; the reason why we took off all our tariffs was not because we desired a vast expansion of our trade but because we were such a powerful producing country that we were perfectly unafraid of any competition from wherever it might come. Frankly, to sell cars to Ford or films to Hollywood, or to sell electrical equipment to General Electric, is not the sort of task which is either helped or hindered by a tariff. It is a task which, as the President of the Board of Trade may remember from another incarnation, amounts to delivering a dinosaur's egg—which I understand in the law courts is regarded as the type of bargain which it is impossible to fulfil and which, therefore, is null and void.

This conference, it is true, is out to eliminate preferences, but there is a type of preference of which it makes an exception, and it is a very odd type of preference indeed. In Article 27 it is said that there shall be no discriminatory administration of quantitive restriction. That is to say: Subject to the provisions of Article 28 no prohibition or restriction shall be applied by any member on the importation of any productive of any other member unless the importation of the like product of all third countries is similarly prohibited or restricted. That means that we cannot in any way limit the importation of, let us say, Virginian tobacco unless we limit the importation of tobacco from the Union of South Africa. There is, however, a very odd article which provides for exceptions from the rule of non-discrimination. It says that restrictions could be applied against imports from other countries by a group of territories with a common quota in the International Monetary Fund. In a word, that means that we are legally prohabited from giving any advantage to Australia, South Africa, Canada or New Zealand which we do not immediately give to everyone else, and if we reduce imports from the United States we must reduce pari passu imports from these other countries, but it does not affect the Colonial Empire. We can give an advantage to the Masai but not to the New Zealanders. We can give an advantage to the Tanganyikans, but not to the Canadians. We can prohibit altogether American Virginian tobacco and bring in Rhodesian or Cypriot tobacco without a word being said, but I do not believe that that is what the United States would undersand; I believe that a charge of bad faith would instantly lie in such a case.

Sir S. Cripps

indicated dissent.

Lieut.-Colonel Elliot

But the President of the Board of Trade must agree, remembering his previous incarnation, that not only must justice be done but that justice must seem to be done, and I assure him as one who has read a good deal of the American Press that in those conditions justice would certainly not seem to be done, and we should be accused of making a large breach in the provisions which they thought they had secured from this country. In any case, what a name, what a description of a great Empire—the Empire is abolished, and in place of A group of territories with a common quota in the International Monetary Fund. It is not a very enlivening slogan, it is not a very enlivening replacement of the work of the great Empire builders, pioneers and missionaries; every other nexus has been swept away but the cash nexus, which has been erected into a deity. We are no longer an Empire, but we have "a common quota in the international monetary fund." I would like to see the banner of that new organisation, I would like to see the motto which is to be planted under its strange device. I think the President of the Board of Trade, himself an austere man, will find difficulty in popularising a slogan of such singular austerity as A group of territories with a common quota in the International Monetary Fund. The difficulty about all this is the unreality of the whole thing. Trade is not being done at present, as we all know, by a five per cent., 10 per cent., 30 per cent., or even 50 per cent. movement up or down in tariffs; it is being done by import licences and by control. The combination of exchange control and import licences of an airtight character is so strong that the reversion to a mere tariff would seem like happy liberty to any trader in this country. The Chancellor of the Exchequer had some revealing things to say about this when discussing the Exchange Control Bill. He said that he could not foresee any date which could be named in the future when it would be possible to restore anything approaching the uncontrolled export of capital which was permitted in prewar days; he could not see any date when that could be done; and that was why the Bill was permanent and not temporary in character. The Opposition tried to limit the duration of the Measure, but their Amendment was rejected by the Chancellor, on the grounds that the conditions under which he was working were permanent and not temporary. Although the Chancellor said that it applied only to capital transactions, he would be the first to agree that the line between capital and current transactions is very difficult to draw, and it is very doubtful where it could be drawn.

The Conference to which we are proceeding is a conference about totally unreal issues, and issues which are so far-distant that the Chancellor of the Exchequer can estimate no date—nor, indeed, can any practical trading man—as to when such conditions are liable to be restored again, either as regards this country or as regards other countries engaged in international trade. Surely, we have had enough experience of unreal arrangements come to long in advance. The President of the Board of Trade has been quoted in a newspaper as saying: The nations are favourably disposed towards us now; if we miss this chance, it may not come again. I think that is an unwise approach to a problem of this kind. To tackle the immediate hard problem by coming to arrangements which will not be valid, if at all, for years to come is, it seems to me, erecting unreality into a fetish.

This Charter which we are to negotiate is supposed to run for only three years, the mutual trade agreement lapses next year, and the import licence control, under the Act passed by the Government as soon as they came into power, is to run for five years—the import licence control on which the whole of the trade of this country is at present conducted, and, as far as I can see, likely to be conducted. Therefore, for all these reasons the danger of our finding ourselves involved in commitments, and particularly implied commitments—gentlemen's commitments—to an attempt honestly to abolish Imperial Preference is a very real one. We should be giving that up in return for nothing, because the practices which we are now engaged in—the practices of import licence and exchange control—are far tighter than would be any alleviation which the Charter could give us.

The objective is expansion of trade and production. We have had experience of that in the past. The way to do it is to get to grips, with a few people, on specific problems rather than to enter into a wide international conference from which everybody can find ways of escape. The Ottawa Agreements, and before Ottawa, the Import Duties Act, and before the Import Duties Act, the Abnormal Importations Act, were not the fruit of some abstract philosophy. They came about as a result of exactly the same thing as the present crisis comes from—the cessation of dollar lending. It was that which produced the crisis out of which came the Abnormal Importations Act, the Import Duties Act, and the Ottawa Agreements.

As everybody knows, we are running straight forward into a cessation of dollar lending now. Any cessation of overseas lending by the great lending Powers will create inevitably a crisis. This country would have created a crisis at any time during the too years of the industrial revolution if it had ceased relending the surpluses as soon as they accumulated, if it had ever tried to bring them home. This island sent £8,000 million out during the century of the industrial revolution, and £4,000 million were lost—given away. Four times this country raised at home and sent abroad, and sacrificed, sums equal in currency to the great American Loan, and in value far, far greater. It was in virtue of these great transactions that the crisis which inevitably would otherwise have come was averted. I have an uneasy feeling, and so must have anyone who was in Parliament during the period just before the 1930–31 crash, that this is where we see the beginning being run through again. The argument that it can be averted by a conference of this nature on the minor problems of 20 per cent. or 30 per cent. up or down in tariffs seems to me to be utterly ridiculous.

I think that the President of the Board of Trade should use his great powers to increase production; and so must the Colonial Secretary. I am sorry the Colonial Secretary is not here, but I am glad to see that he is represented by the Under-Secretary of State on the Government Front Bench. Let me put it to the hon. Gentleman that the process of development of the Colonial Empire would be a far more fruitful source of improvement in our trade affairs than a conference of this kind. We need good will, research, money, encouragement for those things, and the production from which trade derives. Let me give a simple example of an Imperial nature—beef exports from Australia. It was impossible to bring chilled beef from Australia, and it had to be frozen because of the long haul through the tropical areas. We set to work on that problem, and the Low Temperature Research Station at Cambridge worked out the necessary conditions for chilled beef to be transported in an atmosphere of carbon-dioxide, so that it became possible to bring chilled beef from Australia through the long tropical haul without having it frozen, and thereby greatly reduced in value and palatability.

To do that we had to say that it we worked this out, we would have to make arrangements to sell the beef. We had to say that we would, if necessary, make room for a certain import of this kind in the midst of enormous imports of chilled beef from South America—which we did—and as a result, the export of chilled beef from Australia went up from 10 tons in 1932 to 26,000 tons in 1938. We obtained this from a soft currency country as against a hard currency country—and the hard currency country which drives, as we have had reason to know in recent months, a hard bargain. That is an example of expansion and not restriction of trade; but it required strong and positive action, and indeed preferential action.

The development of the West African Colonies has been a matter for great assistance, care and work from this House. The assistance given in the building of Takoradi harbour was of great help in developing the mineral trade in that area; the assistance at present being given by the Government in the development of the groundnuts scheme in East Africa is another case. I am sure that all of us greatly welcome those schemes, although I am not so sure—and I think some other hon Members on this side are not sure—that the development of large-scale capital schemes and experiments of that kind is as valuable as developments carried out by the peasant African, who is a very intelligent man and in most cases is perfectly capable, given a remunerative price and some secured market, of greatly expanding his energy, as in the case of West African cocoa, which is one of the romances of tropical agriculture. That was done entirely by the West Africans themselves.

These things are a thousand times more worth doing than going to a conference of this kind. That is not the end. There is the industrialisation of the Colonial Empire, the market for machinery, markets which are available there in cash, and at no very great distance of time; because what the Soviet Union were able to do in the way of industrialisation of their Republics must be paralleled by this country in. the development of its, relatively speaking, new territories. In Nigeria, for instance, there is coal—five-feet seams in formations extending for 500 miles In all these areas, if development were to be undertaken, I am sure it would be far more to the advantage of this country and the world than would be spending our time for weeks and months—for that is the timetable—in going through the motions of this international conference. I think it would be better worth the honour and the dignity of this country. When other great groups come forward. when the Soviet Union come forward, and say, "We represent Marx, Lenin, the rising hope of a Socialist world," when the United States say, We represent Lincoln, Jefferson, the land of the brave and the hope of the future," and all we can do is to come forward and say, "We represent a group of territories with a common quota in the international monetary fund," I do not think we shall have raised a banner which will inspire either ourselves or the Empire, or the world, and will not have done anything to develop trade and production and the higher standard of living, which, after all, is what all these things are applied to. For these reasons, we on this side felt it desirable to raise this subject this afternoon

4.45 p.m.

Mr. Hopkin Morris (Carmarthen)

I have listened with very great attention, as I always do, to the right hon. and gallant Member for the Scottish Universities (Lieut.-Colonel Elliot), but I could not help feeling that history was repeating itself. After the first world war, his party did precisely the same thing. When the first Labour Government took office in this country, with Mr. Snowden as Chancellor of the Exchequer, the party above the Gangway put down 10 resolutions in favour of Imperial Preference. These were moved by Mr. Baldwin and the arguments which have been produced today by the right hon. and gallant Gentleman were really the same arguments as were used 23 years ago. They began with precisely the same assertion of a great love for the Empire. I was quite interested to hear that, but the one thing I object to is the implication that the Conservative Party are the only people who love the Empire. We are as anxious as they are to see the Empire prosper, but we are equally emphatic in saying that the one way to prevent the Empire prospering is by fostering Imperial Preference. That is not a disagreement about the Empire.

The right hon. and gallant Gentleman provided a very interesting illustration. Later in his speech he said that we had lent £8,000 million and £4,000 million of that had been lost—[HON. MEMBERS: "Lent to the world, not the Empire."] I want to point out the fact that we lent that amount. It was not a preference or a tariff; it was lent as a mark of the generosity of this country and this country's feelings for the development of the Colonies. It was lent freely by this country and was the result of anxiety for the welfare of the Dominions and the Colonies.

There is a good deal of very ill-considered talk about these preferences. We are dealing with separate and independent Governments in the Dominions. They are even more independent today than they were when the Conservative Party put down those resolutions in 1924. The Statute of Westminster has since been passed, and the Dominions are masters in their own house and can do as they please. They have a tariff system, not only for revenue but for prohibitive purposes. A very good description of how the Australians view preference was written in the "Australian Manufacturer," a Sydney newspaper, as follows: It should be borne in mind that the preference we gave Great' Britain was quite a different thing from the preference we asked Great Britain to give us. All we lose when we give Great Britain a preference is a small amount of revenue, but if Great Britain gave us a preference many of their industries, already sorely tried, would be crushed out of existence. It should also be remembered that the preferences we give to Great Britain are largely nominal. We first of all put on a duty high enough to protect local industry from British competition and from every other competition. We then make a duty a percentage higher for foreign governments. We therefore do not give Britain a real preference. That is given, and rightly so, to our own manufacturers. Quite rightly, preference is given to their own manufactureres and not to this country. The welfare and the development of the Dominions is a totally different matter to what it would be in this country. The whole population of Australia does not amount to the population of London, and the balance of that economy, due to tariffs and this preference system, has operated adversely in Australia itself. It has not been for the welfare of Australia. Urban population has developed at the expense of the vast agricultural country behind it. That great continent has not been developed as it should have been developed. With such vast amount of territory undeveloped between the two wars, there have been large numbers of unemployed in the urban populations. That is an absurd development. It is not in the interests of Australia, of this country or of the world—

Lieut.-Colonel Elliot

Would the hon. and learned Gentleman not admit that it is precisely the same development which has taken place in Uruguay, where there are 2,000,000 people in a country the size of England and Wales, with 1,000,000 in Montevideo on the coast?

Mr. Hopkin Morris

The same development because these countries adopt tariffs. That is precisely what I am saying—

Lieut.-Colonel Elliot

But in the case of Uruguay?

Mr. Hopkin Morris

I am not certain of the position there, but, broadly speaking, that is what happens. If one examines development between the two wars in close detail, it is difficult to find out the incidence of tariffs and preferences between country and country. It is not only an impossibility for Labour Ministers but it is virtually an impossibility for the professional economists. The League of Nations appointed an expert committee about 1927 which provided a report completely condemning all the restrictive practices which have grown up between country and country as a result of the war. Every country was aiming at self-sufficiency and was afraid of the others. Nothing was more responsible for the decline in Empire trade between the years 1930 and 1935 than the Empire direction of trade. If one looks at the volume of trade in Europe during the corresponding period, what strikes one is that there has been a de-Europeanisation of trade in Europe itself. The volume of trade in Europe has gradually and progressively been dwindling and the unemployment figures have been progressively increasing, What I am anxious about is that so far as the Government have promised to eliminate Imperial Preference whenever a particular case—

Sir S. Cripps

indicated dissent.

Mr. Hopkin Morris

The right hon. and learned Gentleman shakes his head. Very good. If he is not prepared to go so far in the matter of Imperial Preference, is he prepared to use the existing preference system—whatever view we take of it—as a ruthless bargaining weapon to extend the area where tariffs can be eliminated and to extend free trade between countries?

The report of the Preparatory Commission of the United Nations is open to a gfreat deal of criticism in many parts, and in some parts to serious criticism. Article 26 speaks about the removal of restrictions on trade and enlarging the area of freedom of trade with a right to impose quantitative restrictions in so far as it is necessary to safeguard the balance of payment and the monetary reserves. No country in the world is satisfied that it has at any time adequate monetary reserves. The result is that whatever steps are taken to free trade, the reservation in that Article enables any country to impose any restrictions they think fit.

It is not the tariff restrictions which are the danger today; it is the devices that every country has framed to control imports. These devices are a serious barrier to the development of the future. It would present the Government with a problem which it has never hitherto been called upon to face. If a world slump came and these devices existed, how would the country face the situation? Who knows? What is the answer to that? I should like to know from the right hon. Gentleman what steps the Government are taking to meet these restrictive practices.

One hope here is co-operation with America. The fact that America increases her tariffs or not is of some importance, if only incidental. The important point is so far as restrictive practices are concerned that every country reserves, from fear of war or from seeking to maintain its self-sufficiency, the right to impose restrictions. America has avowed her readiness to take steps to remove tariff barriers and to put aside all these restrictive practices. What steps are His Majesty's Government going to take to co-ordinate the activities of this country with those of America? The hope of the future lies in that. We are a small island carrying a heavy population, and we depend upon imports. Even in 1944 we were only able to restrict our imports to about 80 per cent. of the prewar figure, and we could only do that because we were living on accumulated stocks. We cannot restrict them any further. We must import, and therefore we are dependent as probably no other country is upon a free system for the maintenance of our standard of living.

The right hon. and gallant Gentleman said that what trade needs above everything else is a stable atmosphere. I fully agree that stability of conditions is essential, but we should not seek to link trade with Government control in some form or another. I know nothing more unstable than politics itself or the political colour of the Government in any country, and to seek to peg the trade conditions of the world to the political complexion of the Government of the day in any country is to link it with the most unstable thing in that country. There is no hope in that direction. The one hope is that trust shall be restored among nations. As to the development of the Dominions and the Colonies, they are so placed in the world that their prosperity depends on trading with the continents of which they are a part. Canada is part of America with the United States. South Africa has a whole undeveloped continent. Australia is linked with the trade of the Far East—

Mr. Beverley Baxter (Wood Green)

Canada is not part of the United State, but part of the Continent of North America.

Mr. Hopkin Morris

I am sorry. It is geographically part of the Continent of North America. This island is geographically in or near Europe. The strength of the Empire depends on the prosperity of its parts, and the prosperity of those parts depends on developing the trade which is near those parts and not on the artificial direction of channels of trade. That is not the way to build up a strong Empire, nor to cement it. A strong Empire, cemented by free trade, with a free access of goods, raw materials and food, and with a free flow of them, can only occur because it has for its foundation a trust between nations.

Colonel Ponsonby (Sevenoaks)

May I ask the hon. and learned Member how Australia, for instance, can dispose of its wool only in countries adjacent to it?

Mr. Hopkin Morris

I am not advocating restricting the trade of Australia to countries adjacent to it. Such trading depends upon future developments.

5.1 p.m.

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

I am sure the two speeches to which we have just listened, from the right hon. and gallant Member for the Scottish Universities (Lieut.-Colonel Elliot) and the hon. and learned Member for Carmarthen (Mr. Hopkin Morris), give us a view of two rather extreme outlooks on this situation—almost the old traditional extremes, which must have been argued in this House, or its predecessors, almost over the centuries, certainly over the decades. Rather than trying to deal with specific points as they have been raised, I think it would probably be more convenient to the House if I were to put forward the view that we as a Government take as regards these forthcoming negotiations. If I were to try to travel over the separate points I should become discursive and not informative, and I want to be informative. My hon. Friend who is to reply to the Debate will be able to deal with the various points that have been raised.

The point from which we must start our consideration is one which is very familiar to every hon. Member of this House, namely, that it is absolutely essential to build up our export trade, in a very short period of time, to something much bigger than it has ever been before. That, of course, makes us peculiarly sensitive to the habits of nations as regards their import trade. Indeed, anyone who knows the diversity of our export trade—which is one of its great characteristics—must realise that there is hardly a single country in the world that does not materially affect it as regards the volume of our exports. We are not like some other countries, where the large volume of our export trade is in a particular type of article, or indeed goes to a particular area of the world. Our export trade is marked by the great diversity of articles, and the great diversity of markets. During the war, of course, we had to shed a great many of our foreign investments; and we have, in addition, accumulated a great volume of overseas indebtedness, both in hard currencies and in sterling. And that makes it all the more essential that we should not only be able to sell a large volume of goods abroad, but be able to enter those markets where, particularly, we must sell in order to balance hard currency as well as to balance our total trade.

We have, indeed, two problems. We have a hard currency problem and a general problem. The general problem can be affected by a general rise in the volume of our exports. The hard currency problem, as the right hon. and gallant Member for the Scottish Universities pointed out, must be dealt with by a canalisation of our exports, as far as possible, into those hard currency markets. Therefore, it does become, as the hon. and learned Member for Carmarthen just remarked, a matter of the very greatest importance as to whether we can get some mutual and satisfactory arrangements with, amongst other countries, but most important, the United States of America. In our approach to this general problem, which arises from these changed conditions in which we find ourselves, there are two matters particularly that we have to appreciate. First, we must not any longer regard the Commonwealth and Empire as being simply divided into two parts: one a manufacturing area, the centre, consisting of this country; and the rest a vast agrarian, raw materials area, with which we can carry out an exclusive policy of exchange of manufactured goods for foodstuffs and raw materials. That, of course, was the original conception upon which the Commonwealth and Empire grew up. But today, many other parts of the British Commonwealth have become, to a greater or lesser extent, manufacturing countries themselves, and they desire, not unnaturally, to protect their infant industries just as much against our goods as against the goods which come from other countries. Indeed, that perfectly natural sense of protection is found not only in the Commonwealth countries, but in all countries where industrialisation is developing today.

There is still, of course, a large field in which the old conception of the exchange of manufactured goods for primary commodities rules, particularly so far as the Colonies are concerned. But the picture as a whole is changing, and the change must affect the outlook both of this country and of the Dominions upon their mutual trading relations. We all, within the Commonwealth and Empire, need and must have wider markets than even that with which the Commonwealth and Empire can provide us. The family grouping is still of great importance to us, not as an exclusive or isolationist group, but rather as a factor within the wider conception of world trade. This means that any idea that it is possible or helpful to try to prevent industrial development in other parts of the Commonwealth and Empire has become replaced by the conception that the general development of industry throughout the world—in other words, a policy of full employment and high standards in every country—has to be the objective of all countries. That expansion, the industrialisation of the world, is, of course, going forward, as we know, at a great pace. Our right attitude towards it is, I believe, that we should take our full share in assisting in that expansion, and, I hope. keep our own industries actively employed, and help to pay for those imports which we must, of necessity, have in this country.

The second point I want to stress is, that we cannot get the advantage of freer trade into those markets—particularly, let me say, the hard currency markets—unless we are prepared ourselves to make some contribution to the general freeing of world markets. We cannot expect others to make a unilateral grant to us. We, as very great exporters of manufactured goods—with, as I have said, probably wider markets than any other country—stand to gain in a special way by any general measure of the removal of trade barriers—and I am not dealing only with tariffs when I speak of trade barriers. In other words, our export trade has always been, and is now, peculiarly sensitive to the erection of barriers by other countries, as we experienced, only too unfortunately, in the period between the two wars. It has become a commonplace that in order to regain and maintain prewar standards we must have this very large increase of exports, at least 75 per cent. over prewar. There can be no doubt that if we were to proceed on a restricted view—that is to say, a view that world trade is likely to remain substantially static, as it was prewar—our hopes of attaining that necessary increase, even with Germany and Japan substantially eliminated as competitors—and also, of course, eliminated as customers—would be, to say the most optimistic thing one could say, a very slender thing indeed; particularly if we have regard to the composition of our export trade, which is now practically entirely manufactured goods.

Our prewar share of the total world trade in manufactured goods was 20 per cent. To reach 175 per cent. of our prewar export trade, with a static world trade, would mean that we should have to secure 35 per cent. of the total world trade in manufactured goods. And that, of course, is an obviously ridiculous impossibility. So, it is only if there is an expanding international trade generally that we can possibly hope to attain our export target. That is the vital importance of the consideration: How can we bring about a general expansion of world markets? We cannot, as I have said, preserve all the particular incidents which favour our own internal production, or even our own family production within the British Commonwealth and Empire, and at the same time expect others to meet our desire for freeing their markets. We have to make tip our minds, indeed, whether we are advantaged by a general removal of restrictions to which we have to make our contribution, or by reverting to the restrictive policies which greatly diminished, and indeed nearly destroyed, international trade between the two wars. I could not, from the right hon. and learned Member's speech, quite discover which of those two alternatives he would choose. The Government have no hesitation whatever in choosing the first of the two alternatives.

It, therefore, becomes a cardinal point in our policy for our external trade that we should try to reach a measure of agreement with all the principal trading countries of the world, including particularly the other countries of the British Commonwealth and Empire, whereby we can be assured of a general expansionist policy throughout world trade. That is the objective with which we have now been working since we came into power, and which is now reaching an important stage in the talks that are about to take place at Geneva. No major industrial country today will, or indeed can, afford to throw open its own markets if it is to find other markets in other countries entirely closed to its goods. Though that is the general line of policy which we must adopt, the world economic situation at the moment is far too complex and difficult, in these postwar years, to allow us to imagine that there is any simple method of removing those restrictions rapidly and in a wholesale way.

We are all of us, in all countries, feeling very uncertain about the future. We are anxious as to what other countries will do. These uncertainties mean that we must proceed by stages, and with due safeguards, to protect ourselves from exceptional and unseen developments. Nor, indeed, can we—as I think the right hon. and gallant Gentleman very justly said—talk of a sudden breakdown of the economic systems and customary channels of trade that have been built up over the centuries. Indeed, if we proceed upon the basis of a static volume of world trade, then the existing canalisation of trade, and the customs and habits of commerce, must limit very severely the possibility of any changes in the direction of the flow of trade.

To think in terms of static, or prewar, conditions of world trade, means we have to think in terms of a very bitter struggle in world markets, with each country trying to carve out a larger share of a whole which is not sufficient to satisfy all. That is all the more so, of course, since we have had such a rapid growth of industrialisation in new countries and, therefore, an ever-growing number of countries who are anxious to share in the world export market. Unless this sort of background of facts and tendencies which I have attempted to picture is fully appreciated, it is not possible to arrive at a sound conclusion as to the proposals of the International Trade Organisation. Our approach to the question of postwar trade is based on the principles I have outlined, upon the Atlantic Charter, and Article 7 of the Mutual Aid Agreement. This approach was given a firm shape in the discussions which we had with the Government of the United States in 1945, from which there emerged the American pro- posals for the world Conference on Trade and Employment—proposals to which, the House will remember, we gave our support at the time they were made. A preparatory conference, under the auspices of the United Nations, was held in London at the end of last year, in which some 16 of the major trading countries participated. It was at that conference that the draft document, to which the right hon. Gentleman has referred, came into being. That conference was fully aware and conscious of the disastrous results of the failure of the international trade mechanism in the 1930's, and the restrictive measures and devices to which that failure led.

That breakdown was followed by the even worse devices of the totalitarian countries in their struggle to make their economic preparations for war. The conference was faced with the choice, either of going back to some similar restrictive framework of international trade, or attempting to establish a more favourable and promising framework, such as is envisaged by the Charter of the International Trade Organisation, which has been published. That Charter does not contain any sort of magic formula which will assure prosperity to everybody, but it does attempt to establish a set of rules—not rigid but with proper latitudes—to be decided by the Organisation in each case, and in accordance with the economic facts and circumstances of the various countries. It does enable us, as our own economy and the economies of other countries, dislocated by the war, gradually regain their strength, to see, and, I hope, enjoy, all the possibilities inherent in an expanding world trade.

The International Trade Organisation has two objects, to promote full employment on an international scale, and to reduce barriers to international trade. It is to accomplish those two objectives that our delegation will be going to Geneva. The discussion will have two aspects, first, the establishment of an international trade organisation with rules and regulations, and, secondly, a very great complex of tariff negotiations. If I may deal first with the tariff negotiations—

Sir Arthur Salter (Oxford University)

May I put a point about the trade proposals of the American Government put forward at the time of the Loan Agreement? The British Government accepted these as a basis of discussion but the draft defining them was an American not a joint one. As such it naturally set out what is required, in order to give effect to a general policy of freer trade, by a country with an adverse balance of payments like our own. There has never, so far as I have seen, been a corresponding statement of what is needed for the same purpose from a country with a favourable balance of payments, such as America herself. But that is at least equally important. As I read the agreement there is nothing to preclude the British Government from now putting forward proposals of this kind as a compliment to the American draft, and I hope they will do so.

Sir S. Cripps

Of course, there had been a great deal of discussion with us before the American proposals were put forward, and they incorporated a great many of our ideas. But, although we give them our general support, there is nothing to prevent us from suggesting improvement and amendment, provided they do not go contrary to the general tenor which we have accepted.

I was about to deal first with the tariff negotiations. I feel certain that all countries, including the United States of America, realise that at the present stage no finality can be sought, much less can it be found, in the Matter of tariff negotiations. Trade at the present time is in a disturbed and dislocated condition, and that is likely to go on for a time. The trade agreement we made with the United States of America in 1938 had no chance of proving itself one way or the other because of the war. Those factors would alone make it unjustifiable to adopt a doctrinaire approach to this subject. It was for that, amongst other reasons, that an earlier idea put forward as to the reduction of tariffs and preferences by formula has been discarded in favour of the selective basis of reduction, that is to say, dealing case by case with each commodity. Therefore, the negotiations will be carried out item by item, and the criterion for which the right hon. Gentleman asks me will be the balance of the advantages resulting to the various participating countries from the bargains they conclude.

We have pledged ourselves to include Imperial Preference in the bargaining process, although that is only, of course, one aspect of the negotiations. We shall be ready, after consultation with the Commonwealth countries concerned, which is now proceeding in London, to consider reductions in margins of preference, both those which we grant, and those which we enjoy, in return for concessions which we regard as of comparable value made by other negotiating countries. We are under no one-sided obligation to eliminate or reduce Imperial Preference. Our obligation is to consider reduction of preferences in return for reductions of tariffs within the scope of our negotiations. We, together with the Commonwealth countries, remain the judges as to whether the counter concessions offered to us are sufficient to induce us to modify preference margins in return, just as, of course, other countries will judge whether the advantages they get are sufficient to justify the concessions that they will be making.

Although I suppose it fair to say that there is no one school of thought amongst economists as to the value of preferences—indeed, that has been demonstrated already in the House today—His Majesty's Government are fully aware of the importance of Imperial Preference, both in practice and in sentiment, and they fully appreciate the value attached to the system by other Commonwealth countries.

Mr. Baxter

I am sure we on this side of the House are particularly glad to hear the right hon. and learned Gentleman combine sentiment with commercial advantages. If, in the opinion of the Government, the advantages offered in world trade are great enough, will the Government then consider the absolute elimination of Imperial Preference with all that elimination will mean? Will they go as far as elimination if, in their opinion, they are getting a bargain which is worth it?

Sir S. Cripps

If the hon. Member is speaking of the elimination of all preferences, we do not see any prospect of anything of that sort or kind happening. But, if he is speaking of the elimination of any particular preference, that might happen.

Mr. Scholefield Allen (Crewe)

The Dominions would have to agree?

Sir S. Cripps

Of course, but one gets a little confused—I do anyway—in considering this matter, as the preferences we control do not benefit us. The preferences we want to get altered or which we want to get stabilised are those which others control in the Dominions. The preferences we give benefit the Dominions and in the negotiations on the question of the removal of these preferences it is for the Dominions to say how it is going to benefit them, rather than us.

Mr. Henderson Stewart (Fife, East)

There has been a very important exchange on this question. Do I understand that the right hon. and learned Gentleman to agree that no preference will be eliminated unless the Dominion or Colony agrees?

Sir S. Cripps

We certainly shall not unilaterally agree to elimination without the Commonwealth Governments' agreement. There will be bargains as between the Commonwealth and us, and the Commonwealth countries and America, and other countries. The question of whether we remove a particular preference is a matter for bargaining between us and the Dominions, just as the question of our tariffs which involve preference to a Dominion will be a question of bargaining between the Dominion and America.

Mr. Stewart

The right hon. and learned Gentleman will remember the rather unfortunate giving away of bases during the war. It was no doubt necessary, but it was done without consultation. One wants to be sure that that will not be done again.

Sir S. Cripps

It was not a question of giving away. During the war the emergency of war led to a great many things being done which would not have been done under other circumstances. I do not think we can deal with that here. I was just saying that we shall certainly not give away interests of other Commonwealth countries in reducing preferences enjoyed by them in the United Kingdom markets, and we are equally sure that we can count on them to treat us in the same way, and not to give away preferences which we value in their markets Whatever is given up, will have to be part of a mutually satisfactory bargain. That is the whole basic idea of the negotiation on the tariff side on which we are going to proceed at Geneva. That is also the basis of these preparatory conversations which are now going for- ward amongst the countries of the Commonwealth and Empire in London. We, of course, recognise very well in this relation that some industries, including agriculture particularly, perhaps have been developed in Empire countries on the basis of markets assured by preferential arrangement. We do not want suddenly to modify these preferences to an extent that is going to cause real disruption and distress in the overseas countries concerned. In the long term, we can, I think, avoid any such results by the successful implementation of the whole of the terms of the proposed trade charter. In the short term, the consultations that are now going on between representatives of the Commonwealth countries should make all parties, including ourselves, fully aware of the dangers of sudden action of that kind and should, therefore, enable us to avoid them.

The United Kingdom is, on the whole, a country with a low tariff. Some of the other countries participating at Geneva will have much higher tariff systems. It has been recognised as a principle for the negotiations—and I was rather surprised that the right hon. Gentleman the Member for Scottish Universities (Lieut.-Colonel Elliot) emphasised this adversely, because this is a principle of great value to us particularly—that the binding or guarantee of low rates of duty is to be considered as equivalent to the reduction in a high rate of duty. For a low tariff country, that is a very important consideration.

Lieut.-Colonel Elliot

I agree that that is a very important consideration. It was rather to the second part of the sentence—that the binding of a low tariff was to be regarded as the equivalent of the elimination of a preference—to which I referred.

Sir S. Cripps

I appreciate that but I think it is in regard to both things: The binding or consolidation of low tariffs or of tariff free treatment shall in principle be recognised as a concession equivalent in value to the substantial reduction of high tariffs or the elimination of tariff preferences. So far as we are concerned, the important element is that it is considered as equivalent to the reduction of high tariffs.

Lieut.-Colonel Elliot

It goes a little further. This is rather important. The President of the Board of Trade has said that we are a low tariff country. That being so, we cannot have substantial reduction of high tariffs in our case. There- fore, the only thing we could do is to eliminate a tariff preference. I should think it hard if our own bargaining factor was the elimination of a preference. we not being a high tariff country.

Sir S. Cripps

What we can do is that we can bind the low tariff. That is as good as reducing. That is of great value. If we say that we bind our tariff—that is to say, we undertake not to increase it in the future—we are entitled as against that to get someone else to reduce their tariff to a lower rate. That is a very important factor.

Mr. Charles Williams (Torquay)

For an equal time?

Sir S. Cripps

For whatever time may be agreed upon; whatever the bargain is. But in bargaining, the binding of the low tariff is to be taken as the equivalent of the reducing of a high tariff That is an important factor.

Mr. Walter Fletcher (Bury)

Any country could come into the bargaining area and say, "I now announce I am going to increase my tariff to a higher tariff." That gives a bargaining factor which they did not have before and they will want something for it.

Sir S. Cripps

It is not a question of whether they say they are going to increase or not. The mere fact of preventing themselves from increasing is the bargain.

Mr. Fletcher

It has no bargaining value unless they were going to increase.

Sir S. Cripps

The binding of a low tariff is accepted as a concession in this transaction. That is a matter of great importance. Of course, we realise the limitations under which some countries, such as the United States of America, will enter the Geneva Conference. Under the powers given to their administration by the Reciprocal Trade Agreement Act, they cannot reduce their existing duties by more than 50 per cent., and it is necessary to limit the period of the agreement to three years. There is also provision for emergency action in certain circumstances. Those are definite limitations and one must accept them if one is to have a bargain with America. It is no good our regretting that they are there. They are there, and we believe that even despite these limitations there is room wherein we can work out a satisfactory bargain on the tariff side.

Mr. Gammans (Hornsey)

Can the right hon. and learned Gentleman say whether or not the recent agreement between the United States and the Philippines comes under this limitation because, as he is aware, the Americans have just made a treaty with the Philippines which gives them preference for the next 25 years? Is that outside any discussions at Geneva or elsewhere?

Sir S. Cripps

No, it is not outside any discussions. Anybody can ask that this preference be removed as part of a bargain. They may or may not be removed. I think it would be a great mistake to attach importance only to this question of tariff negotiations, though, of course, they are extremely important. The result of these negotiations will have to be judged not in themselves alone but in relation to the general framework which is arrived at for the International Trade Organisation. We hope in that to secure undertakings by member countries, or countries who become members, that they will each in their own way take steps to ensure the maintenance of effective demands within their own countries which, if we can get the reduction of trade barriers, would benefit not merely themselves but every other country in the world as well.

There is one thing which is a great advance, anyway in thought, and that Is that inter-dependence in the matter of full employment has now been recognised as of world interest. In the field of commercial policy we hope to secure the gradual giving up of a number of practices which we regard as harmful to world trade, and which we so regard because of our own experience—such as, for instance, export subsidies, arbitrary Customs administration, which has been used very much in the past, and the use of quantitative regulations for protective purposes other than in the most exceptional circumstances which the right hon. and gallant Gentleman mentioned. All those are things of which we had a very unhappy experience between the two wars. They are matters of great importance for the future of our trade.

Vice-Admiral Taylor (Paddington South)

In regard to the agreement between America and the Philippines, there are quotas which America is grant- ing to the Philippine Islands. The right hon. and learned Gentleman now says they are one of the restrictions to which he has great objection, but in that agreement the quota, in addition to preference, will come into being.

Sir S. Cripps

I am quite aware of that. The International Trade Organisation is not yet operative. I was thinking of the things we are trying to obtain by an International Trade Organisation.

Vice-Admiral Taylor

This has only just been introduced by America.

Sir S. Cripps

Quite recently. We hope that if we can develop an international understanding on these matters it will make it less likely—indeed, very unlikely—that further bilateral arrangements of that sort will be arrived at. If world trade were to be maintained in its existing channels, then obviously we would have very great difficulty in reaching the increased volume of exports that we require, and in supporting the standard of living that we wish to achieve.

In the same way, we have to secure our freedom to engage in bulk buying operated under commercial and not political considerations, and we must retain the necessary freedom to plan our imports so as to use our limited exchange resources to the best national advantage. All those things are open to us under the terms of the International Trade Organisation Charter as it is proposed. In the same way, of course, other countries, too, have to secure, as far as they can, the points which they regard as of importance to them. For instance, the countries I have already mentioned which are in a less advanced state of economic development, want to use exceptional measures to protect their "infant" industries. That exception, if used in moderation, need not cause us any anxiety at all, indeed, I think we should welcome it as part of a general expansionist development in the world, a development of resources which will give us new markets, though perhaps not the same markets that we used to have before.

All these points, and a great many others, together with the results of the tariff negotiations will have to be looked at as a whole, and a reasonable balance will have to be struck between our wishes and desires and the desires and ambitions of various other trading nations with whom we are negotiating. We hope it may be possible as soon as the Geneva meeting is over to bring a good deal of this bargain into operation between those countries who will have been participating at Geneva. The next step will then be to bring the results before all the United Nations at a world conference to see whether we can get their co-operation in the completion of the world-wide trade organisation. Our delegation will be going to Geneva with the firm intention that the negotiations shall be a success.

We are, of course, aware that economic conditions throughout the world are still difficult but we believe that in three years—if this agreement were to be for three years—we can hope to see a progressive reduction of barriers and defensive mechanisms which, in themselves, are of course inevitable in some degree during a transitional period. I believe that it is absolutely essential that we should not delay in taking the necessary steps which will enable us to make full use of the better economic prospects which lie ahead and which, we hope, will unfold themselves within the next three or four years. We must also—and this is a matter of great importance—make sure in time that the pernicious trade barriers and policies that wrecked international trade in the prewar years are not built up or followed once again. The International Trade Organisation is the logical and necessary complement to the International Monetary Fund and the International Bank. It is a vital part in the postwar scheme of finance and economic co-operation on the international plane. To fail to go forward would be to tip the scales heavily in favour of a descent to restrictionism and uncontrolled economic conflict in the world. That would be equally dangerous to our standards of living and to international friendship and goodwill.

5.45 p.m.

Mr. Hollis (Devizes)

A critic might be perhaps inclined to think that on the matter of Imperial Preference, at any rate, this afternoon's Debate can hardly get us very much further, because whatever our theoretical preferences may be about tariffs, the fact seems fairly clear to most of us that we have really undertaken an obligation to eliminate preferences upon conditions which, with the political developments in the United States, are extremely unlikely to come into existence. That is to say, no one can really seriously think that, after their domestic political developments of the last 18 months, the United States will go to Geneva in a mood to make concessions of comparable value, to use the right hon. and learned Gentleman's phrase, such as would put us under an obligation to indulge in any general elimination of preferences. Particularly as long as the escape clause is an integral part of all American tariff reductions, it is impossible to take those reductions seriously.

Indeed, the position of His Majesty's Government would have been a great deal more difficult if American developments had been other than they had been, and the elections there had returned to power statesmen in the United States who were in favour of drastic American tariff reductions or free trade. In those circumstances, it would have been extremely difficult for the British Government to have resisted an obligation of honour to eliminate preferences, and, if they had done so, it would also have been extremely difficult for us to have got any large increase in our exports even into an American free trade market. That is not a possibility with which we are likely to be faced.

I only wish to intervene in this discussion to make one important point, that is, to rescue this argument from any suspicion that a moderate and sensible policy of Imperial Preference is one which is antagonistic or hostile to the United States. It would be disastrous if that impression went out. I believe myself that it is directly contrary to the facts. The hon. and learned Member for Carmarthen (Mr. Hopkin Morris) gave us a characteristically lucid exposition of the Cobdenite point of view. That argument, as far as it goes an attractive and logical one, is that if there are no tariff interferences, every article will be made or grown in the part of the world where it is made or grown most cheaply, and that will be for the general benefit. That would be perfectly true if all the world were at the same stage of economic development. That is a state of affairs which has never existed and is never likely to exist.

Therefore, in the last century, Cobden imagined that the rest of the world would follow this country into Free Trade. It did not do so. On the contrary, the countries of Europe and the United States, knowing that if they did so they would never be able to build up their own industries, preserved their tariffs, and in doing so took action which was, in the long run, for the advantage of the world, and, indeed, for the advantage of this country so far as we gained from a general increase in the productivity of the world. The answer to Cobden was given, not by disreputable American adventurers—or merchants maybe—but by the greatest of all American statesmen, Abraham Lincoln, who, in his last words before the Civil War, said: What, open Charleston as a port of entry? What then becomes of my tariff? The result of the American tariff against British goods was to build up that American production which in the twentieth century was to be our salvation. As it has been to our interest that America should prosper behind a tariff wall in the nineteenth century, equally it is to the American interest that we should prosper behind a moderate scheme of Imperial Preference in the twentieth century.

I entirely agree with the President if the Board of Trade when he says that more world trade is in itself desirable, but we are also entitled to remember the figures and cogent arguments of my right hon. and gallant Friend the Member for the Scottish Universities (Lieut.-Colonel Elliot), when he clearly demonstrated that this moderate Ottawa system of preferences was not an enemy of world trade but a creator of greater world trade. So tariffs on this system—not all tariffs, but a scientific moderate system of tariffs—are a friend of world trade. In the same way they are particularly to the interests of the United States.

We have now to face the fact, whether we like it or not, that it is highly unlikely that the gap between our exports and imports will be bridged before the American loan runs out. It is highly probable that we shall have to go for some further accommodation to the people of the United States. We may not like it, but there it is. We shall have to go back next time to receive that accommodation according to the conditions of the International Monetary Fund, accommodation which, under Clause 2 of its articles of incorporation, exist in order to encourage private international investment. Hon. Members opposite may not like that, but they voted for it. I did not. The Socialist Government voted for it in setting up the International Monetary Fund. Therefore, the next accommodation will come from private American capital.

There is an extremely interesting document, the Balaam Report submitted to the American Department of Commerce, which analyses the fate of American money which went abroad between the two wars, and which reaches, with ample statistics, the conclusion that far the least unprofitable of that money was that which went in investments in industries of other countries, and particularly in the industries of other countries which were protected against American consumer goods by tariffs and preferences. They lost far less of that money than they lost in lending to Governments, and the relevant passage in the report closes: Tariffs, especially the British Imperial Preference scheme, have been particularly important in this development. I would submit to our American friends that far from advocating something which is against their interest, we are advocating something which is greatly to their interest. Nothing could be less to their interests than to turn us into a bankrupt nation, to serve as a mercenary army for their purposes. I cannot believe that any serious American opinion really wants to pursue such a disastrous policy. If it be to American interests from the purely fiscal point of view to support the British Empire, it is still more clearly so from a larger cultural point of view.

We are continually being told that in these days we must transcend narrow nationalisms, that we must look on the world as a unit. That is indeed true, but between the wars there were many people who made speeches about standing up to aggression and many people who passed resolutions about collective security, but when the actual day of crisis came, the only countries which came to our assistance voluntarily were the four great free Dominions of Canada, Australia, South Africa and New Zealand. The only countries that declared war voluntarily in the last war were the countries of the British Empire. The others fought when they were attacked—[An HON. MEMBER: "And France."]—I beg your pardon, France. I make no criticism of other nations. They had their own problems and their reasons for behaving in such a way, but the fact should be faced in this country, with pride, and it should be faced in the United States and in every other country. We need this sense of supranational loyalty—I am not disputing that—but it is a fact that that sense is much more highly developed in the countries of the British Empire than it is elsewhere. For that reason, it is in the interests of the United States and the world not merely to say that the British Empire should be preserved but that it should be preserved in all its strength. The British Empire can only be a menace to the world, not if it is too strong but if it is too weak. If it is too weak it will be a desperate menace to the world. It is from that menace which it is our duty in this House to save the world, if we possibly can.

Therefore, the preservation of the strength of the British Empire is of interest to the United States and of all the world. To my mind the most important thing which has emerged out of this Debate so far, and the most comforting thing, if I understood him correctly, has been the assurance of the right hon. and learned Gentleman the President of the Board of Trade that the Empire will approach all the negotiations about reductions of preferences as a unit, and that we shall make no unilateral reductions, that we shall only make reductions in agreement with the Commonwealth. I hope that there can be no doubt about that. I understood the right hon. and learned Gentleman to say, at the end of some cross questioning, that there was no doubt about it. A most disastrous mistake was made by His Majesty's Government in not asking the Empire to accept or reject Bretton Woods as a unit. The whole of the negotiations about Bretton Woods should have been carried out by the Empire, and the Empire should have accepted or rejected it together. We put the Australians and the New Zealanders in a most intolerable position by accepting it in this huddled-up way, without consultation with them. I am delighted to receive the assurance of the right hon. and learned Gentleman that the question of preferences will not be treated in that fashion, and that we shall make no reduction of the benefits, which he said are benefits which we are giving to them rather than taking for ourselves, without consultation with those who showed themselves to be our first friends in our day of trouble, and who should be our first friends still.

5.58 p.m.

Mr. S. N. Evans (Wednesbury)

Let me say at once that I accept wholeheartedly what the hon. Member for Devizes (Mr. Hollis) has just said in relation to the maintenance of the strength of the British Commonwealth and Empire. I can think of nothing worse for the world than that it should be split into two blocs, one based on the finance capitalism of the Western hemisphere, backed by clerical reaction, and the other based on the totalitarian single-party police State of the East. I can think of nothing worse. Therefore, I subscribe whole-heartedly to the view that we should do all in our power to keep this British Empire and Commonwealth an influence second to none in matters of social and economic import throughout the world.

This problem at Geneva agitates the minds of those persons who voted against the Bretton Woods Agreement. I am one of them. Multilateral trade is something to be aspired to as good. There is, however, one fundamental factor which the Americans seem unable or unwilling to understand. It is that in the days of British financial hegemony, when the City of London was the dominant financial force in the world, Britain practised free trade, and anyone could bring goods to these islands and sell them, provided those goods were of the right quality and the right price. The obstacle to multilateral trade is that America seems determined to sell to everyone, to buy from no one, and to act as world banker at one and the same time. That seems to me to be quite impractical, and I hope that our people, when they go to Geneva, will be very, very careful. I was worried when I recently heard of what I call the "orthodoxy" of the economists advising the Government in this connection. Whether we like it or not, we have a social and economic revolution going on in this country, and the fact that it is a revolution by consent, does not make any difference. It is very important that the economists, the twentieth century witch-doctors advising the Government, should be alive to the altered circumstances, not only in this country but in the world.

The world today is in a tremendously fascinating condition. This is one of the most fascinating periods in which anyone could live, but anyone who wants a nice quiet time has chosen the wrong time to be born. We British are marching towards a Socialist economy; on the other hand, the United States is the stronghold of laissez faire, finance capital. It is ironical that at this moment Socialist Britain should depend so very largely on the United States for the means of life. I confess it is a matter which gives me no satisfaction, but I am one of those persons who, when convalescent, never falls out with the man who provides the beef tea. We must have a long-term strategy; we must also adopt short-term tactics, and I hope our people at Geneva will have full regard to that view. When we have the markets and have opened them up, it will still be necessary for us to provide goods of an adequate standard and at a competitive price, and that is something to which we have not yet given sufficient attention. I am very worried about the prospects of this country over the next two or three years. It may be, in 18 months to two years' time, we shall look back to this somewhat austere standard of life we now enjoy or endure, not as a floor from which we have risen, but as a highly desirable ceiling out of our reach.

We are not going to get out of our difficulties by importing foreigners although I am in favour of importing them, if they can be put to use in accordance with agreements with the representatives of organised labour. However, to get in 100,000 foreigners will not save us. It is only the British people who can save us, the same people who saved us during the war. There is too much complacency in regard to the situation that will arise when the American and Canadian loans run out. At that time, the position will be that our external expenditure on food, raw materials and incidentals will be about £1,800 million, and our total income from all external sources will be £1,550 million, leaving us with a deficit of £250 million. We shall then be faced with the problem of funding some of the sterling balances, about £44 million, and paying interest of £40, million on the Canadian and U.S. loans, in 1951, making a total deficit of £334, million per annum, unless we are able to speed up production considerably above its present level. There is one other disturbing feature which does not receive sufficient attention, and that is the extent to which our stocks have run down during 1946. No one says anything about this, but it is a very important matter. I find that cotton stocks are down by 36 per cent.; zinc by 75 per cent.; lead by 67 per cent.; tin by 40 per cent.; jute, 18 per cent.; hemp, 35 per cent. and raw hides and skins, 23 per cent. This is a serious depletion of our capital assets, and it is estimated it will cost £60 million of hard currency to make them good.

We have to put the position very clearly before the people of this country and I am not at all certain that we are doing so at the moment. The economists—God bless them—prepare these White Papers. They are great people, and have no doubt that they understand these documents thoroughly. Sometimes, after a month's study, even I can understand them, but to expect the men in the factories, fields and mines to understand these documents in the way they are written, is to expect the impossible, and yet it is precisely among these people that there has to be a psychological change if this country is to maintain its standard of living, never mind increasing it. As I have said, this matter does not receive sufficient attention. Take the question of invisible exports. If you talk to a man in the factory about invisible exports, he simply does not know what you are talking about. I remember, in the years between the wars, in the Queen's Hotel in Birmingham, hearing a £4,000 a year man say, when asked what invisible exports were, that he thought they were washers contained within an article like a pump or a valve. If that is what a £4,000 a year man with a very liberal expense account thinks of invisible exports, how can you expect men in the factories, fields and mines to know what they are? It is very important that it should be brought home to them in language they understand. It should be pointed out what a very important part invisible exports have played in building up and maintaining our standard of life, and that today they have been sorely depleted.

Looking through the White Paper, I find that yearly we are now £115 million worse off in investment income than before the war. It has to be pointed out that this money was previously placed at our disposal without any British workers growing a potato, threading a nut or bolt, or hewing a hundredweight of coal. The workers do not understand these facts, but opportunities present themselves of getting the facts home to the people. It will not be done by lecturing them. You do not want to talk down to them, because they are quite intelligent. It can be done by giving them simple illustrations which they can understand, because they are reasonable men. We can tell them, as I did in my constituency the other day, that in the case of the Argentine we have now sold to pay our war debts the British-owned Argentine railways for the sum of £150 million, which as an investment, yielding, say, 5 per cent., brought us £7,500,000 per annum.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

These investments yielded us £4,000,000, but under the consortium agreed last summer they would now give us £5,000,000. It was this sum, not £2,500,000, that was thrown away by this agreement.

Mr. Evans

I cannot go into the mechanics of the agreement now. I am trying to show how this question of invisible exports is a complete mystery to the workers, and that it has to be explained to them if we are to gain their full co-operation in the matter of increasing production. We can point out that this yield of 5 per cent. on £150 million brought in £7,500,000, without their having to grow a potato, thread a nut or bolt, or hew a hundredweight of coal, and that that money was spent on Argentine beef, maize and hides, which contributed to our means of life, and that now it has come to an end we have to build 375 locomotives at £20,000 each and send them to Buenos Aires to provide the equivalent value of beef, hides and maize. When you talk to them in this way, they can understand. They do not need a university education to understand what 375 locomotives means in terms of manhours. It is necessary to speak in language they understand because it is precisely at this moment that 20,000 railway shopmen at Crewe, Derby, Wolverton and Glasgow are threatening direct action to achieve a 40-hour week. If they understood these things about which I have spoken, I do not think that that would be their attitude. I am bound to say it is the duty of leaders, and here I refer particularly to Smith Square, to explain these things to their people. It could be that what our comrades are asking for is greater leisure to eat less food, more time to wear fewer clothes, greater leisure in which to see fewer of the more bedworthy denizens of Hollywood, more time in which to drink less ale and to smoke fewer cigarettes. That is what they may well be asking for. I apologise for detaining the House—[HON. MEMBERS: "Go on."]—and I will now come to a conclusion.

The situation in which we now find ourselves is somewhat akin to that which faced Napoleon and his armies during their Italian campaign. Napoleon marched his tattered, ill-fed, weary army to the summit of the Alpine passes, and there, spread out before them, were the plains of Lombardy. Napoleon turned to his men and said, "There, my soldiers, is a land flowing with milk and honey, but there is one more battle to be fought." He explained it to them, and the battle was fought and won. I believe that this second battle of Britain, this battle of production, can be won in the same way, always provided that we are not afraid to court temporary unpopularity, by explaining to our people these great economic facts in plain and simple language which the people can understand. Economic reality is a very tough customer. You can pitch him out of the window with an idealistic pitchfork, but he returns with devastating regularity.

6.17 p.m.

Mr. Godfrey Nicholson (Farnham)

The House has just listened to a speech of profound commonsense and great sincerity. The hon. Member for Wednesbury (Mr. S. N. Evans) struck the note that should be struck and, I hope, will be struck on both sides of the House in the months to come. I cannot hope to rival him in interest, but in what I have to say, I will try to emulate him in brevity. I was not able to hear all the speech of the President of the Board of Trade, but from what I did hear, and from what I have been told, there was no mention of the great problem of the sterling balances. I therefore rise in order to try to induce the Minister who is to reply to the Debate to give us some information.

While the sterling balances have a great bearing on the future of our economic position, we are singularly deficient of any information thereon, or of any knowledge of the intentions that the Government have about this matter. There are sterling balances outstanding against us to the tune of about £2,400 million. About £1,200 million of these are in India, about £450 million in Egypt, well over £300 million are, or were, in the Argentine, a certain amount is in Iraq, and the balance is elsewhere. It must be clear that it makes nonsense of any future big trade agreement, or any new international commercial policy, that we might venture into in the future, if we have this £2,400 million around our necks. It would be a millstone. I also understand that little was said by the right hon. and learned Gentleman about invisible exports. If we are to pay off these sterling debts from our exports they will be a serious invisible import, heavy in themselves, and of long duration, and I do not feel that the House, or the people in the country, can believe that they have anything like a fair picture of the situation unless a Government spokesman says something about this problem in this Debate. I repeat, we want information. We want to know whether the figure by which we are expected to increase the volume of our export includes any allowance for paying off these sterling balances? We want to know the exact figures, how much, in the past year, of our exports to those countries have gone to the writing down of these balances? My information is that there has not been much of this sort of writing down so far, but what about the future? And I think we should like to know something about the recent Treasury Mission to India. These questions cannot be burked, and it is foolish to shut our eyes to them. We have the right to ask the Government what their view on them is, and they have a duty to tell us.

May I say, in conclusion, that in regard to India and Egypt these balances were accumulated on account of value received in defence during the war? I do not want it to be thought—and I am sure that the Government would not wish it to be thought—that we are disregarding the political effect of these sterling balances in India. We are not using, and do not wish to use, our position with regard to them as a political bargaining counter, at a time of political crisis and negotiation. I hope the Government will make it clear that we do not look upon these balances from that point of view, but, nevertheless, it is folly to shut our eyes to their existence. If it is not dealt with, it makes nonsense of any future negotiations we may enter into. These balances are a great millstone around our neck, and I ask the Minister to tell us something about the position. In fact, I go so far as to say that he will be failing in his duty if he does not say something about it tonight.

6.22 p.m.

Mr. Ellis Smith (Stoke)

I have sat here through the whole of this Debate so far, and I feel very concerned at our approach to these problems. Before I proceed, let me assure my hon. Friend the Member for Wednesbury (Mr. S. N. Evans) that the workers of this country understand the problems all right, that they know what is facing them, and are prepared to face up to them again as they did in the past, especially in the war. They have been treated in such a way for so many generations that they know what is at stake, what they are about, and are determined to save their country while, at the same time, improving their own conditions.

Between the two world wars some countries were nearly choked with abundance, while millions of people throughout the world were starving. At the same time, productive capacity was rusting. As my right hon. and learned Friend the President of the Board of Trade reminded us today, we are pledged to avoid that in future, and to adopt the policy that will provide full employment, not only in this country, but throughout the world. The recent war has completely upset the economic equilibrium of the world. It is now 18 months since the termination of hostilities, and the world is drifting towards a catastrophe that very few realise. In that catastrophe, Britain, owing to her geographical position, has more to lose than any other country. But, in my view, Britain can still be saved. To work just to restore trade is not enough. We must have an enormous increase in the volume of world trade. By our present method we are simply tinkering with the problems which will face the world. This method is out of date; we are now stepping into the scientific age, and we must all face up to that fact.

The Government are approaching the question of national and international planning in the same way that a great lawyer, formerly Minister for the Co-ordination of Defence in this House, approached rearmament before the war. You cannot plan successfully in a piecemeal fashion, by trying to maintain the status quo. That is what the appointment of an alleged super-planner means. This method will fail as surely as the former Minister for the Co-ordination of Defence failed in his task in prewar times. If planning is required internally—and it is now admitted by most Governments that it is required—then international planning is the logical development from that internal planning. I understood that it was the policy of the trade unions, the co-operative movement and the Labour Party to support this policy. Most of the world is eager to work with Britain. Them is now more good will towards Britain than ever we had in our history, but we are not capitalising that goodwill. Many countries are eager to adopt a policy of international co-operation, but, as I have said, we are not approaching this problem in the way that will best bring that about.

I would like to refer to a document that was prepared on 28th September, 1945, in which I stated that the time had arrived when Britain should organise a public trading corporation, that there should be State supervision of imports and exports, to be controlled in the general interest, that we should have State stimulation of trade. I pointed out the very serious position in the country due to the relatively high cost of raw materials, that we were constantly taking steps to reduce the cost of production, and that our prices, in any future trading, would have an important bearing on the amount of trade we did. I pointed out that in that situation the policy which had proved so valuable during the war ought to be adopted for the future. The Governments of Australia and New Zealand would have co-operated gladly in a policy of this kind. The Soviet Union, which covers one-sixth of the territory of the globe, and now by direct or indirect influence covers much more, would have welcomed it, because this would have been a concrete basis for world co-operation.

I have with me two Command Papers, Nos. 16287 and 16288. During the war, my right hon. Friend the Lord Privy Seal was responsible for negotiating the agreements outlined in these White Papers. It is on that basis that the Commonwealth should be working now. The Commonwealth should work within the Commonwealth for the highest level of trade, should make it clear that it is its policy to work for the highest level of international trade on the basis of co-operation, that all should be prepared to work with us towards freer trade. During the war, in spite of our difficulties, we successfully adopted a policy of this kind. As a result, New Zealand sent us butter, cheese, mutton and wool; Australia sent us bulk supplies of wheat, metal, and sugar; Canada sent us metal, wheat, timber, and meat; South Africa sent us fruit, maize, sugar, and wool.

This policy could be applied to world trade if there was proper organisation. I am not advocating that it should be confined merely to the Commonwealth. I am saying that this is the concrete approach to world problems, instead of tinkering with the problem as we are doing this afternoon. If the United States is prepared to work with us on this basis, we can build world trade co-operation. If they are not prepared to work on this basis, the world should build in accordance with its own needs. We want tons of cotton in this country. Stacks of timber will be required for our housing and for other building. We shall need tons of food and raw materials, and in return we should organise the exchange of manufactured products of the finest quality in the world.

I understood that this was British Labour's policy. It is, but we do not seem to be applying it. The people responsible prefer to take their advice from alleged super-planners. If any hon. Member in the Labour movement disagrees with me, I ask him to read our literature or to read the Foreign Secretary's speech made at Blackpool in 1945. The Foreign Secretary at Blackpool and for 20 years prior to that advocated what I am pleading for this afternoon. If any Conservative Member of the House disagrees, I ask him to consider this: The "Financial News" of 26th March, 1941, advocated this policy. They realised the serious economic situation into which we were drifting, and put forward constructive proposals for dealing with it instead of tinkering with it. The "Financial News" said: What is to be the future role of British trade …? The 'Financial News', on the assumption that now is the time to plan, has recently endeavoured to formulate some of the main principles on which our post-war policy should be based. Broadly, it seems incontestable that the key to foreign trade is a solution of the problem of maintaining employment internally and raising the standard of living … If expediency rules out any return to the free trade conditions we knew before 1931, it is equally clear"— and I wish the Liberal Members were here— —that we ought not to go back to the semi-autarky of 1939. A middle course must be found—foreign trade in great volume, without the fluctuations and speculative uncertainties of the pre-1931 era. They go on to advocate: There seems to be no reason why long-term and large-scale contracts should not be negotiated; so that everyone knows well in advance what the main imports will be. It is upon that basis that that article continues to make a number of constructive proposals. In the "Financial News" of 26th July, 1944, we find these words: What is required is an international development authority to act as an economic general staff on a world scale; to help to time and direct equipment orders and to initiate inducements. It is upon that basis that I think the Government should have approached this question of international trade. We are all pledged to full employment, to an expanding economy, to raising standards, to developing world economy towards an avoidance of world economic friction, and all this requires international co-operation and a regulation of trade by international agreements.

Not a word has been said about the American proposal with regard to disposing of the manufactured goods in Japan. The trade union movement are very concerned about this aspect of trade, and they state in one of their documents: Intense competition from Japanese products, which were manufactured for low wages and at low standards, contributed to low wages and low standards and poor quality manufactured goods. I would like to know what is to be our attitude with regard to the American proposal to dispose of those goods. Are we again going to risk the menace to our own standards and our own internal economy from Japanese exports of the character with which we had to contend prior to the war? If it is the American policy to dispose of those articles throughout the world, what will be the effect of that com- petition on our own manufactured goods? I hope a statement will be made as to our attitude in these negotiations, in view of the fact that America seems to be pursuing a policy of that kind. We have already linked our economy too closely to the United States. If we continue to drift as we are, we in particular and the world in general are in for the greatest slump that has ever faced mankind. We would still have been Feeling the effects of the 1930 slump had it not been for the world embarking upon preparations for war.

With the war and postwar needs, our problems were eased for the time being, but, as a result of wartime development, the United States has taken unfair advantage of the position in which the world has been placed as the result of the war, and they now have a gigantic production organisation of a kind of which the world has no idea. If they are going to be able to flood the world with their manufactured goods, it will have a very serious effect upon industrial countries like Britain. Therefore, a far better method would have been to say to the world, "We fought in order to save democracy. Now let us organise trade upon a democratic basis instead of bargaining in the way which is proposed, with little things which are very small compared with the big issues with which the world is faced."

As evidence of this, the value of Wall Street securities tends to increase. In 1946 the prices of consumer goods increased 14 per cent., while consumer incomes increased by only 7 per cent. Concurrently with increased production in the United States, there is a relative reduction in the purchasing power while prices tend to rise. That means we are moving towards a situation which means either that the world will be flooded with goods or that there will be a slump which will have a serious effect. Everything in the world has been speeded up, and the result will be that once the movement towards a slump starts it will gather momentum with catastrophic velocity.

Therefore, I appeal to the Labour Party to approach the problems in a more constructive and bigger way than we have done up to now, to approach the world problems in the same way in which this country was forced to face its problems after the Norwegian fiasco. We must take the initiative and adopt a constructive policy of this kind. India is now conscious of her political greatness. Nobody knows better than my right hon. Friend the President of the Board of Trade that she is preparing plans for an enormous economic development. Are we going to work with her? Why have we not obtained a trading agreement before now? Why have we not obtained a trading agreement with Soviet Russia? There is a natural basis for trade between Britain and the Soviet Union. Those mighty countries, Russia, China and India, have hardly yet been scratched economically, and yet we are going to Geneva to play about with things instead of appealing to the world to call a world trade conference in order to deal with this matter in a much bigger way.

It was a very near thing for Britain on the military field. Have we learned the lessons from the position in which we were in 1940? Just as we learned the lessons on the military field, we have got to learn our economic lessons. Prior to 1940 this country was approaching its problems in a narrow way. When we found we were faced with a mighty military machine, we adapted our policy to deal with that mighty machine. We are now in a similar position with regard to our economic affairs, and I appeal to the Government not to approach our problems in the way in which we approached them internally on the economic field a fortnight ago. Let us deal with our problems in a big way, in a scientific way, which the world will be forced to do sooner or later.

6.42 p.m.

Colonel Ponsonby (Sevenoaks)

Except to say that I cannot agree with the hon. Member for Stoke (Mr. Ellis Smith) that the discussions at Geneva would be a very small matter, I will not follow him in his speech. I wish to make a few remarks as representing my constituency, and in this case my constituents are the primary producers of the Empire. For many years I have been chairman of the British Empire Producers' Organisation and the Tobacco Federation of the Empire. There is a particular reason why I am glad I caught your eye today, Sir, and that is because I have recently returned from Australia and New Zealand, where I have had an opportunity of discussing these matters on the spot with the growers, all over Australia and New Zealand. I would say at once that they have been very apprehensive, because in the White Paper which brought in the words "elimination or modification of the preference," they thought their doom was likely to be sealed.

Before I go into details in connection with one or two of these primary products, I should like to ask the President of the Board of Trade one question. From what he said—and I am sure his words will make the Empire producers much happier—it would appear that nothing definite will be settled at this conference at Geneva. He said there would be no finality and that negotiations would take place item by item. He also said that the Dominions and this Government were working side by side. The question I would like to put to him is this: Will the Government say that they will not come to any conclusions at Geneva on this subject of tariffs without coming to this House? I say this advisedly, because in 1938 the American trade agreement was made. In that there were one or two items which certainly could have come before this House, but nothing of the sort was done, and the agreement was made and presented as a fait accompli. I hope, however, that what the right hon. Gentleman has said, that nothing of the sort will happen this time—

Sir S. Cripps

I do not want the hon. and gallant Gentleman or anyone else to be under any illusions about this. If a large series of bargains are to be entered into at Geneva, then it is quite impossible obviously to discuss each one of those in the setting of this House. If we have negotiators we must give them, as other people will give their negotiators, power to come to conclusions. Otherwise it is a waste of time.

Mr. Scollan

Does that mean that the negotiators are going there with a free hand and that whatever they agree to, will be presented to us as a fait accompli?

Sir S. Cripps

They will not go with a free hand, but the Government will be responsible for whatever they do.

Colonel Ponsonby

Of course, that enables me to say what I am going to say, which is rather in the form of a warning to those negotiators. I now wish to deal with one or two particular items, and thereby to present the point of view of the growers, though compared with the great issues we are discussing, these may appear small. A few weeks ago I visited the town of Mildura, 350 miles from Adelaide and about the same distance from Melbourne. Sixty years ago this was a desert, a sheep run with many rabbits and worth nothing. Owing to a great irrigation scheme controlling the waters of the Murray River, there are today 30,000 acres of wonderful vineyards and orange groves. There are 26,000 people there and including the town of Renmark further down the river there are about 40,000 people practically all of British stock, and the whole of their prosperity has been built up because they were able to send their exportable surplus of dried fruits free of duty to this country. In other words, Empire preference has made them. When I was there they told me that they wanted to expand and make more soldier-settlements as they had done after the first world war but they added, "If there is any reduction in the preference we shall stop."

The same applies to canned fruits. I had meetings in Sydney and Melbourne and discussed the matter there. As in the case of dried fruits, the producers are frightened by the development of California. Quite frankly, in all cases these people were apprehensive of the competition of the United States and they were terrified that the preference might be altered, because 60 per cent. of their products come here. Incidentally, 33 per cent. of the canned fruits from South Africa come here also and 90 per cent. from Malaya. Owing to the preference, which was introduced in 1933, the imports of canned fruits such as peaches, apricots, pears and so on rose from 22¾ per cent. to 35 per cent.—again entirely due to Empire preference.

In regard to sugar, I went on to Brisbane and had discussions with the people there. As the House is aware, sugar is grown not only in Australia but in South Africa, the West Indies, Fiji, and Mauritius, whose economy depends on its production. In the last 20 years, entirely through the operation of Empire preference, sugar imports from the British Empire have risen from 23 per cent. to 49 per cent. Here again, as far as one can see, there is no satisfactory substitute for preference. One word about the Colonies in this connection. It must be remembered that places like the West Indies, Mauritius, British Guiana and Fiji depend almost entirely on sugar and if by any chance they are prevented from producing and selling their export surplus at payable prices it will mean that the economy of these countries will go down and they will need to have grants from the Imperial Exchequer. I would add that the preference which sugar from the Dominions and Colonies gets, is far less than that given by the United States of America to what one might call the American Colonies.

I now want to say a word about tobacco. I have had a meeting with the tobacco growers from Rhodesia and from Nyasaland. These countries depend largely on their tobacco and as a result of our preference, since 1920, imports of Empire tobacco retained for consumption have risen from 4,250,000 lb. to 52,750,000 lb. in 1938. We realise at once what that means in the development of these young countries. It is essential and it is our duty, looking at the Empire as a whole, to accelerate the development especially of these central African countries for our own good and for theirs. This I must point out—that it is impossible to say suddenly that we will take more Empire tobacco. The ground has to be prepared, curing barns and houses have to be built, so that we must announce a steady policy over a period of years. The duty has been whittled down very much. It used to be 25 per cent. on the full duty of 8s. 2d.; now it is only 4½ per cent. on a full duty of 35s. 6d. As a result of the trade agreement with America in 1938, 6d. of the preference was taken away actually in 1943 which Parliament did not know anything about until it was presented. I should like to remind the right hon. and learned Gentleman of that in view of what I said before on this subject.

I should now like to say a word or two about the position of our chief competitors or whatever we might like to call the United States. We cannot conceal the fact that they are the chief people with whom we have to negotiate, and before saying what I am going to say I reiterate what was said by the hon. Member for Devizes (Mr. Hollis) that we are not in the least antagonistic. But we must remember that we are a nation of shopkeepers talking to a nation of traders. I am perfectly convinced that if we talk quite frankly, they will not object at all. As appeared from the original White Paper, the United States would like to break down our system of Empire prefer- ence, but if we go to this conference, both sides must put their cards on the table. Here are one or two instances. The United States admit free of duty sugar from Porto Rico and Hawaii. With the Philippines they have made an agreement for 28 years, and under it 850,000 tons are being admitted free of duty to the United States until 1954. As far as Cuba is concerned it was granted very much of a preferential agreement, but I am told that owing to protests made the matter has for the moment been suspended. All I can say in this connection is that the United States cannot ask the British Empire to come and discuss the elimination or modification of preferences if they do not take similar steps themselves. Are they going to modify their preferences? Are they going to lower their trade tariffs? These are matters which will come out during the discussions in Geneva.

Leaving the United States now, I should like to say a word as to Portugal and France. Their Colonial trade barriers are even higher than those in the United States. One other point. One or two hon. Members have talked about preference as a bargaining counter. I remember that in Australia one of the producers said to me that Empire preference should be regarded as part of our regular trade arrangements and should not be bandied about as a matter for bargaining from time to time between the nations. I do hope that the right hon. Gentleman will be able to carry this through and that the whole question will be settled once and for all to our advantage. It will be not only to our advantage, but to the advantage of the other parts of the family, because we must all agree, as has been admitted tonight in the House, that owing to the preference not only have our brothers overseas prospered but it has increased world trade as my right hon. and gallant Friend the Member for the Scottish Universities (Lieut.-Colonel Elliot) pointed out.

It is perfectly true that the picture is changing. The present conditions and atmosphere are abnormal but what producers are afraid of is that their long-term interests might be thrust aside or prejudiced in pursuit of perhaps illusionary aims. Let us hope that that will not be the case. We certainly do not want to give up the substance for the shadow. The substance is the real and tangible benefits which have been received from Empire preference, and the shadow might be the securing of a free entry for our manufactures into the United States or other hard currency countries. This shadow may be dancing alluringly before the eyes of economists but it may be as difficult to grasp as the end of a rainbow. All I would say in conclusion is this: With all good will, let us ask the negotiators not to throw away our Empire birthright for a mess of appeasement pottage.

6.59 p.m.

Mr. Richard Adams (Balham and Tooting)

So far in this Debate we have had a series of interesting speeches from both sides of the House which have not generated a great deal of controversy. I hope that I may maintain that spirit, although I must begin by referring to the speech made by the right hon. and gallant Gentleman the Member for the Scottish Universities (Lieut.-Colonel Elliot) who opened the discussion for the Opposition this afternoon. As I listened to his speech I was irressistibly reminded of the story of Don Quixote attacking the windmills of his own imagination, because it seemed to me that the right hon. and gallant Gentleman spent most of his time setting up arguments of his own creation which he then proceeded to demolish. He was creating a monster of his own imagination. The circumstances of these discussions which are to take place were brought about by his own party leader, that great free trader the right hon. Gentleman the Member for Woodford (Mr. Churchill), who has not turned up here this afternoon to take part in this Debate—presumably for some reason of his own.

These discussions were first defined in the Atlantic Charter which was signed by the right hon. Gentleman the Member for Woodford on 14th August, 1941, and in which we find that the fourth principle, which was agreed by Great Britain and the United States, says: They will endeavour, with due respect to existing obligations, to further the acknowledgement by all States, great or small, victor or vanquished, of access on equal terms to the trade and raw materials of the world which are needed for their economic prosperity. That was a principle laid down by that great man Franklin Roosevelt and our own wartime leader, the right hon. Member for Woodford. It is true that the right hon. Gentleman found it necessary as late as 21st April, 1944, to make it clear that the obligations referred to had due regard to Imperial Preference. The next reference is in 1942 when the Mutual Aid Agreement was signed. That laid down that the final settlement should aim … at the elimination of all forms of discriminatory treatment in international commerce and to the reduction of tariffs and other trade barriers. That principle was accepted and agreed to by the leader of the party opposite. Again, it is true that on 1st April, 1944, the right hon. Gentleman once more found it necessary to make it clear in this House that, following private correspondence with President Roosevelt, we were no more committed to the abolition of Imperial Preference than the American Government were to the abolition of their high protective tariffs. So I could go on at some length, were it not for the fact that I do not wish to weary the House, showing that the whole of these deliberations which are to take place have been arranged against a background created by the leader of the party opposite.

I should like to leave that and to return to one or two other fallacious points made by the right hon. and gallant Gentleman the Member for the Scottish Universities. The first is that we are running into a crisis which will develop because of the cessation of dollar lending. I do want to make it quite clear, both to hon. Members of this House and to the country, that we are not running into a crisis. The right hon. and gallant Gentleman has failed completely to understand the difference between the circumstances which prevail now and those of 1931. He has forgotten that the Exchange Control Act which was put on the Statute Book by this Government will prevent the financial panic which occurred in 1931.

Lieut.-Colonel Elliot

I do not wish to interrupt the hon. Member in his very interesting argument, but I was not referring to the financial panic of 1931. I was referring to the freeze-up of trade which occurred before the crash of 1931 and which, if I may say so, was certainly due to the cessation of dollar lending.

Mr. Adams

To the extent that difficulties increase in the coming two or three years, they will consist of a material shortage. If, when the American and Canadian loans come to an end, we find ourselves unable through our exports to bridge the gap between imports and exports, then it will have to be bridged by cutting down our imports, but that is in no sense a crisis.

Viscount Hinchingbrooke (Dorset, Southern)

Does not the hon. Member view that in terms of the most severe and grave crisis?

Mr. Adams

Certainly not. By a crisis I understand a situation which is so acute and so overwhelming that something has to be done immediately to overcome it as occurred in 1931 when, in my opinion, the wrong set of steps was taken. You cannot apply the word "crisis" to a continuing situation.

Mr. W. Fletcher

Not even if the country is starving?

Mr. Adams

The country certainly will not be starving. If and when the loans are exhausted we may—I say "may"—have to face a reduced standard of living.

Vice-Admiral Taylor

Surely the hon. Member must realise that it would be an economic crisis if we had to cut down our imports and still further reduce our standard of living as it exists today? Surely that would be an economic crisis of the first water, with enormous unemployment and less food?

Mr. Adams

I do not consider for one moment that that is in any sense a crisis. It would be a difficult and awkward situation and would call for the utmost effort on the part of all the people in this country, but there is quite a difference between a situation like that and the kind of economic crisis which occurred in 1931. In my view the right hon. and gallant Gentleman has completely failed to understand the significance of the Exchange Control Act. He made reference to the fact that in his opinion it would never operate, but I would ask him to re-read the Measure because he will find that it places no restriction at all on genuine current trading. In other words, there is an obligation placed upon this country, through the Chancellor, to meet its dollar and other commitments where they result from genuine current trading operations, and the right hon. and gallant Gentleman ought to be aware that, as things stand at present, starting in July of this year, we undertake to honour the free convertibility of current transactions in connection with sterling balances which have accrued in this country during the war.

Mr. William Shepherd (Bucklow)

Surely the hon. Gentleman is not correct in that assertion. All we have done is to undertake to make a certain proportion of them convertible, and I think the hon. Gentleman would be very naive if he imagined that this would be carried out. I cannot see how it could be.

Mr. Adams

As I understand the position, negotiations are going on regarding the funding of the outstanding sterling balances, but the moment they are funded certain current payments will become due and we undertake that those current payments will be freely convertible. I am prepared to give way if any hon. Member disagrees with what I say.

If I may continue and leave the right hon. and gallant Gentleman, I should like to make it quite clear that in my view the discussions into which we are entering, and those which have already taken place, in no way commit us to giving away Empire preference. I agree with the Liberal point of view that in theory world Free Trade is desirable, but we have reached the stage over a number of years where tariffs have been created and Imperial Preferences formed, and it would be quite unthinkable at the present time to do away with all of them at one moment. In my view it is a question of knocking down a series of unequal brick walls. It is not a question of flattening all those walls by blowing another trumpet, as it were, to lay flat the walls of Jericho; it is a question of cutting down the height of the walls by mutual agreement. Any bargains we make with the United States or any other country must be fair in terms of Empire trade, and full employment in this country and the other countries of the Empire. All that this country is committed to is to enter into negotiations on these matters, and I would not for one moment suspect the Government of intending to give away at one fell swoop the whole of Imperial Preference in return for some diminution of tariff walls on the part of the United States. It is a matter for bargaining and negotiation.

I would like to make a few points in connection with our export trade. While I agree with a good deal of what was said by my hon. Friend the Member for Wednesbury (Mr. S. N. Evans), I do not think it is entirely a matter of increasing the physical output of the workers of this country. There are other matters which must be borne carefully in mind, and I hope that they are being kept in mind by the Board of Trade. Mere volume of exports will not achieve the target we have set ourselves. You cannot call upon the workers of this country, by their physical exertions, to step up our export trade to 175 per cent., and in my view before very long it will have to be 200 per cent., of what it was before the war. We must pay great attention to quality in our export trade. It must surely be apparent to hon. Members that if we can send abroad goods which are of high quality and are at the top of the price ranges we can increase the monetary value of our exports, thereby helping us to increase our imports.

Again, I suggest that we must have great regard to the manpower content of our exports. To use a technical term, we must have regard to their conversion values. It is true that at the present time coal as an export would be very acceptable to many countries in Europe, but in the long run I put it to the House in this way: If we had to choose between exporting a ton of coal at a value of £5 or £10 or so, and a ton of wireless sets whose value would run into several thousands of pounds, obviously we should choose the wireless sets. In that connection, to those hon. Members who criticise the policy of the Board of Trade in concentrating upon the export of motorcars, for instance, I would point out that the conversion value of motorcars and motorcycles is as high as 60 per cent. Mechanical engineering equipment runs at 57.5 per cent., and electrical engineering equipment 53.2 per cent., whereas textiles run at only 35 per cent., and tinplate also at 35.7 per cent. In other words, if we are to succeed in achieving our export targets we must concentrate upon those products which have the highest manpower content, because they are what will provide full employment in this country with the minimum amount of effort.

Similarly, we must have regard to the coefficient of imports. This small island, if it is to increase its exports, must necessarily increase the amount of its imports, because we have to import the raw materials from which we manufacture the finished products to export. Here again there are differences between the different industries. Pottery, I am told, has the lowest coefficient of imports, running at 5 per cent., and all engineering products are relatively low at between 9 and 11 per cent. Such things as textiles, however, need a relatively high proportion of imports in order to step up our exports.

There are one or two other points which I am sure the Board of Trade are bearing in mind in considering our export drive. It is not a simple question of increasing our physical production; there is plenty of room for planning and scientific management if we are to achieve our target. What is likely to be the position in a few years' time? I estimate that by 1951 or thereabouts our imports, provided there is a satisfactory situation, will be running at somewhere between £1,700 million and £2,000 million per annum. That means that our exports, less any services, or interest we get from abroad, which I would not put at more than £100 million, will have to cover those imports plus £104 million a year which represents payments on the loans we have already received. Calculations have been made regarding the American and Canadian loans and the outstanding sterling balances, and if we succeed in funding those balances satisfactorily it will still mean that, starting in 1951, we shall have to pay away some £104 million a year for which we shall get nothing back in return. Provided that things go all right, I would not regard that as unsatisfactory because it would mean that our earlier loans would be costing us some 5 or 6 per cent. of our exports, which is not a heavy burden.

We have, however, the gap of the next two or three years to cover, and that is why I was pleased to note that an hon. Member raised the question of the convertibility of the sterling balances outstanding in this country. I would like to ask whether the Government have considered the possibility of applying to the United States for permission to defer the time when we undertake that free convertibility which, as hon. Members know, is at present fixed for July of this year. There are provisions for doing so under Article 7 of the Loan Agreement, while Article 14 of the Bretton Woods Agreement also makes it possible for us to break the arrangement whereby we undertook to make them freely convertible starting in July of this year. If we were able to defer that, say to 1951, when we start repayment of the American loan, that would give us another breathing space of some three or four years in which to get to work on our export drive without being saddled with the added responsibility for paying away valuable dollars on account of the sterling balances which accumulated during the war.

Finally, whatever the situation may prove to be in the next few years, whatever may be the financial and trading difficulties, I am quite sure that despite what the hon. Member for Oxford (Mr. Hogg) had to say in the recent economic Debate, and despite what the right hon. Member for Woodford had to say, to the effect that we were not entitled to appeal for the Dunkirk spirit, I know sufficient of the ordinary working-class people of this country to know that they will face the future with calmness and fortitude, and I know that they will accept the challenge to their economic security in the same spirit as they accepted the earlier challenge to their spiritual and political freedom.

7.20 p.m.

Mr. Lennox-Boyd (Mid-Bedford)

My intervention is not an attempt by the Conservative Opposition to bring this most interesting Debate to a premature close. The Debate will be wound up from this side by my hon. Friend the Member for Edgbaston (Sir P. Bennett), who knows a great deal about business and industry, and who has this qualification, not always common among Members of Parliament, that he is also engaged in a trading activity which, if he mismanaged it, would bring him some personal discomfort. I intervene to make a few further observations about one particular aspect of the Debate, that is, Imperial Preference; but before doing so, I hope I may be allowed to make one or two more general comments, particularly upon some of the rather remarkable observations of the hon. Member for Balham and Tooting (Mr. R. Adams). We are always interested in the creation of Socialist alibis, and it is something to be in on one right at the birth. When it is necessary, we were told by the hon. Member for Balham and Tooting, drastically to cut down still further the imports of the nation's food, the raw materials that go to our clothing, the raw materials that are necessary for our industry, that will not be a crisis. The hon. Gentleman said that, and he will be able to read it in the OFFICIAL REPORT tomorrow.

Mr. R. Adams

I do not deny it. I was shaking my head in order once more to reinforce what I said.

Mr. Lennox-Boyd

I do not think that defence will get either the hon. Gentleman or his colleagues very far when the inevitable day of retribution very rapidly dawns. Certainly, one of his Cabinet leaders is in no such doubt. "For Heaven's sake," said the Minister of Health, "keep the wheels of industry turning, or else this Government's plans will fail." It may be that the hon. Member for Balham and Tooting does not regard the failure of Socialism as a crisis, but as a return to sanity on the part of the British people. The hon. Gentleman's speech was so full of casually, and rather agreeably, thrown out inaccuracies that it would be almost impossible to concentrate on all of them, but I would like to remind him of what was said, with full Government authority, recently in regard to sterling balances—and contrary remarks by him have produced, as, no doubt, he has noticed, admonitory looks from his own leaders: Only current payments are to be converted and not capital payments. That statement was made officially in another place in regard to sterling balances.

Mr. R. Adams

May I make it clear that once those balances in London at the present time have been funded and agreements have been made for their repayment, the repayment will start on a given date, and they will become current transactions which will be freely convertible.

Mr. Lennox-Boyd

That, of course, is a different matter. I am glad to have that further explanation from the hon. Member, because his remarks on this subject, as he made them, seemed to be inexplicable. The hon. Member also dealt with exports of coal. We have always been confused as to what the Government's policy is in regard to coal experts. From time to time inspired statements appear in the public Press attributing to the Foreign Secretary observations such as: If only I had coal to send to the world, how much stronger my bargaining position would be. We then hear that we are not exporting coal, and then we hear that more coal was exported quite recently than caused the entire fuel crisis in this country—some 5,000,000 tons, because of which all the wheels of industry stopped for a prolonged period, and we are confronted with dangers the full extent of which have not yet been realised. If I try to go in detail into all that the hon. Member for Balham and Tooting said, I should not be able to deal with the point I am anxious to tackle.

We on this side of the House join with the right hon. and learned Gentleman the President of the Board of Trade—this is the first occasion since I was the right hon. and learned Gentleman's Parliamentary Secretary that I have been engaged in Parliamentary controversy in the House with him—in the desire to promote by every possible means the export drive. We sympathise very much with him in the embarrassment he must feel in daily Cabinet meetings in sitting alongside, for example, the Minister of Health, who, at the last Election, said: Exports—they are a Tory will-o'-the-wisp"; or in sitting alongside the Minister of Food, who said, only two or three years ago, that after the last war, the workers were asked to work harder, and they did so, but only the bosses profited. No doubt, after this war, they would try to tell you the same story. The right hon. and learned Gentleman must have some awkward companions. The right hon. and learned Gentleman, in addition to that less desirable company, has one or two intelligent people on his own back benches, and I would like, in particular, to single out the speech of the hon. Member for Wednesbury (Mr. S. N. Evans). It must be very rare in this House that any hon. Member on either side hears those magic words, "Go on" when he shows a sign of sitting down towards the close of his speech. The hon. Gentleman made such a sensible speech that I hope he will be one of the delegates to the Geneva Conference. I have looked him up in Dod, and I see that he is a late road transport officer of the Ministry of Transport. We may assume, I suppose, that the decision of the Government to take "C" licences out of the absurd Transport Bill was, in part, due to the advice of the hon. Member for Wednesbury. Only in one thing do I quarrel with what the hon. Member said. He spoke of a possible deficit in the coming years of some £230 million. I am sure that the right hon. and learned Gentleman the President of the Board of Trade and the Government wish that that were the whole danger. We have been told that, even assuming in this year we increase our exports by 140 per cent.—which means, since there will be no coal exports, I suppose, something like 165 per cent. in manufactured goods—we shall still have an adverse trade balance this year of £350 million, equal to £20 per head for every man and woman engaged in productive industry today.

As I said at the beginning of my remarks, I want particularly to deal with the question of Imperial Preference. It seems to hon. Members on this side that it is a pity that the White Paper treated the United Kingdom in isolation and made no reference to the fact that we are the centre of a great Empire. We also could have wished, when first the question of Imperial Preference was discussed—I must point out that in this document, for the first time, the word "preference" is used in a setting where hitherto the words "discriminatory treatment" have always been used before, showing that the Government have apparently accepted the American contention that preference is discriminatory treatment—we could have wished, when this was first discussed, that the right hon. Gentleman had said, in friendly but firm fashion to the United States, "Imperial Preference is a domestic matter. Ours is an Empire united by sea; the Americans have an Empire united by land. Just as we would not dream of questioning your right to have completely Free Trade throughout the whole of your land Empire, so we claim an equal right to put Imperial domestic arrangements outside discussion at international conferences."

Sir S. Cripps

The hon. Gentleman referred to "the right hon. Gentleman." I presume he means the right hon. Gentleman the Member for Woodford (Mr. Churchill).

Mr. Lennox-Boyd

No. The right hon. and learned Gentleman cannot get over the question as easily as that. I will come to the actions attributable to my right hon. Friend the Member for Woodford (Mr. Churchill) under whom the right hon. and learned Gentleman was glad to serve during the war. We could have wished it had been possible to say that to the United States, but we accept the fact now that the situation has so far deteriorated that it is inevitable that at Geneva, in a few weeks' time, the question of Imperial Preference will be discussed; but that being so, we are anxious to see that the British delegation go there with the knowledge that behind them this country as a whole is determined that, as far as possible, the whole fabric of Imperial Preference shall be maintained inviolate. If there must be any inroads into that fabric, they should be only for the most obvious and permanent advantages, because we might disrupt the economy of a whole Colony and then find that the "escape" clause on the American side deprived us of any quid pro quo, or very little, while the whole of the Colony's economic life would have been completely disrupted. Secondly, we would also like to have an assurance that there will be no concession of any kind by either the Dominions or the Mother Country without the other partner to that preference having fully agreed.

I would like to refer once more to Article 24 (c), which cropped up earlier in the Debate. The right hon. and learned Gentleman said that, in return for a reduction in the high tariff, say, in the United States, all we might have to do would be to bind ourselves to continue the present low tariff level. We are interested in his reading of that Clause, and we accept it, as we accept all he has said, as representing what he generally feels this agreement purports to represent. This is what we are afraid about. Say the United States reduced—most improbably—a particular tariff by 50 per cent., a very big reduction. They would then say, "We have made that reduction. What are you going to do in return?" Does the right hon. Gentleman believe that a promise by us to stabilise our existing low tariff on some commodity would be an adequate quid pro quo? The United States would say, "That was always with you, very foolishly, a low tariff. Now under Clause 24 (c) you also have to consider in return for reducing our tariff by 50 per cent."—which, we may note, may still leave it prohibitive—" the elimination of tariff preference."

These are facts which ought to be ventilated, not least in order that this House should come to a sensible decision, but also because this concerns fellow countrymen from various parts of the Dominions and Colonies, many of whom are here in London today. We are delighted to welcome them. They should know that there is a substantial body of opinion in this House—certainly on this side, and I believe there is a certain element of support on the other—which is quite determined that Imperial Preference, which has stood the test of time, shall as far as possible be preserved inviolate.

There is another matter, to which attention was drawn by the hon. Member for Devizes (Mr. Hollis). America is now no longer critical of our influence. She is only alarmed at the decline in our influence. It ought not to be difficult at Geneva to convince the United States that if Great Britain and the British Empire make this strong contribution by the only means open to us in the economic sphere, by planning trade into Imperial channels, that is itself a further form of defence for the American way of life in the world. My right hon. and gallant Friend quoted certain figures to show that after the Ottawa Agreement, though Imperial trade jumped enormously, world trade jumped as well. Those figures are indisputable. It was bound to improve after a slump. The right hon. and learned Gentleman the President of the Board of Trade is sniggering. Perhaps he thinks I expected that world trade would remain static in a world recovering from crisis? The important thing is how nearly the world trade increase approximated to the general increase in British Empire trade. In the five years after 1932 the exports to the Empire from this country jumped by 52 per cent. but our exports to the rest of the world jumped by 35 per cent. Our imports from the whole world increased by 37 per cent. This is not an illustration to quote the right hon. and learned Gentleman, of those pernicious tariffs that wrecked the trade of the world between the wars. We are very much afraid that the right hon. Gentleman includes among "pernicious tariffs" the efforts made by the British Commonwealth at Ottawa to make some mutually advantageous arrangements. It would be useful to hear if he regards it—

Sir S. Cripps

I did not use the phrase "pernicious tariffs." If the hon. Gentleman will look at my speech he will see that I used the phrase "barriers to trade."

Mr. Lennox-Boyd

I beg the right hon. Gentleman's pardon. It was "pernicious barriers to trade," but we would be reassured if we felt that at Geneva the delegates did not regard Imperial Preference and the Ottawa Agreement as coming under that title of "pernicious barriers to trade"—

Sir S. Cripps

I do not.

Mr. Lennox-Boyd

The right hon. Gentleman says that he does not. That is—

Sir S. Cripps

I certainly do not regard them as such, but it may be that somebody else does.

Mr. Lennox-Boyd

All we can do is to look after our own Ministers. Probably the Prime Minister wishes he could do it half as well as the Opposition are doing it now. So much for the result of the Ottawa Agreement after the 1931–1932 crisis. The reason we are really anxious about the forthcoming Geneva Conference is that the United States has never left us in any doubt as to how they regard Imperial Preference. They regard it with the utmost hostility. It is always desirable to realise that full co-operation between this country and the United States is an absolute need for the political and economic future of the world, but the United States likes plain talking. They certainly indulge in it in their own country—and there is no reason why this country should refrain from doing it too. For years between the wars, by the operation of the Most-Favoured-Nation Clause the United States prevented the European nations making mutually advantageous agreements. Behind the shelter of a high tariff wall, without any fear of retaliatory action which would be effective, they were able to export their goods taking to themselves, because of the Most-Favoured-Nation Clause, any concessions any nation gave any other nation. Only one thing stood in the way and that was British Empire Imperial Preference. They have made it perfectly plain since they first became the predominant economic power that they are anxious to bring the system to an end.

The Atlantic Charter was quoted by the hon. Member for Balham and Tooting. He suggested that the origin of all these Measures was the signature of the right hon. Gentleman the Member for Woodford to the Atlantic Charter, but in read- ing from that Charter he was obliged to quote the words "with due regard to existing obligations," which the Leader of the Opposition included in the Atlantic Charter. An existing obligation is the obligation among the British people in the British Empire to preserve Imperial Preference. Consider how far we have moved and are today moving from that position. There followed in February, 1944, the Mutual Aid Agreement, and I agree that in Article 7 of that Agreement we undertook jointly to consider with the United States the reduction of tariffs and the elimination of discriminatory practices, but we did not at that point intend, nor have we ever intended, to concede that Imperial Preference was a discriminatory practice. It is left to this document which has just been issued, "The Report of the First Session of the Preparatory Committee of the United Nations Conference on Trade and Employment," to substitute the word "preference" for the words "discriminatory practices."

We have to read this new phrasing in the light of certain observations made in the United States, not least the remark of President Roosevelt towards the close of his life that he intended to find jobs for 60 million Americans by trebling American exports. This was said at the same time that Mr. Sumner Welles said in Washington that the whole history of British Imperial Preference was a history of economic aggression. We are naturally alarmed when we have these phrases still ringing in our ears.

I will briefly capitulate what our fears are. We fear firstly that the right hon. Gentleman may be giving advice to the Dominion and Colonial representatives over here that in the interests of the world-wide problems that face us, with which the United Kingdom is probably more closely faced than many other parts of the Empire, they should agree against their better judgment to whittle away Imperial Preference. If we feel that statements of the kind made by the Prime Minister of New Zealand yesterday represent the view that he will still hold after he has had long contacts with the right hon. Gentleman, then we are not so much disturbed; but we are very much afraid that the natural leadership of the Mother Country, which in the present problems of the world today is an inescapable obligation, should lead the right hon. Gentleman to try to convince the Dominion and Colonial statesmen against their better judgment that they could make a contribution to the peace of the world by allowing Imperial Preference to be whittled away.

Secondly, we are afraid that any reductions in American tariffs against which we are prepared to bargain Imperial Preference may be on such a comparatively small scale as to leave the American tariff walls still unscalable. Thirdly, we are afraid that the inclusion in all trade agreements by the decision of Congress of an Escape Clause may rob any agreements we may have with the United States of all their value as we may be left having perhaps disrupted the economy of a part of the Empire in the belief that we were getting a permanent advantage in return. Many people feel that the enormous needs of this country for increased exports cannot possibly be met, in substantial part, by a big drive in Imperial and Empire markets. None of us have ever pretended that the British Empire could absorb that vast quantity of manufactured goods which we have to add to our existing total of exports in order to survive as a trading power. Yet we believe that a great deal more can be done than is being done now, if the emphasis is put where it ought to be put.

We recall, in our decline as a great exporting Power over the last 70 years, that our exports to our Empire have never declined. In the 'seventies, two-thirds of the world's manufactured exports were in British hands, in the United Kingdom; in 1913, one-third; in 1938, less than one-fifth. But that last figure of one-fifth included our exports to the sheltered markets of our Empire, which took 32 per cent., about one-third, of all their imports from us. Our share of the manufactured markets of the rest of the world was only 8 per cent. It seems to some of us that this is the true index of our competitive efficiency in terms of price in the open markets of the world. On the other hand, we have the sheltered markets of our Empire, and they have the same over here.

We believe further that there is an immensely increased possibility of exports to the Dominions and the Colonies. We are not frightened of Australian or Canadian industrial development. I agree with the right hon. Gentleman, that it would be a monstrous thing for the Mother Country, the United Kingdom, to attempt to stop it, even if we could. We believe that trade breeds trade, and that the creation of industry in the Dominions leads to an increase in their demand for goods, even though they may be, as the right hon. Gentleman said, different goods from the goods they needed before. Obviously, the Dominions will get more and more selective in what they buy, because of the growth of their secondary industries. But we read with pleasure what was lately said by the Prime Minister of Australia, that he expected Australia to take twice as much in terms of value of imports into Australia as she did in 1938; and Australia has been stressing particularly the big market for British heavy machinery, cotton and motor cars, which is open to them in future.

As for Canada, I hope hon. Members of this House have read the extremely valuable survey by the Canadian Daily Newspaper Association, a summary of which was published lately in the "Sunday Express," giving the result of an inquiry into hundreds of thousands of Canadian homes, showing the great demand for British goods, over and above what they take already, provided—and this is a real danger in the get-rich-quick period through which we are now passing—these exports are of the same high quality that British exports used to be. As for the Colonies, it is common knowledge, on all sides of the House, that the Colonies are, in many cases, woefully underdeveloped; and with the proper development of the Colonial Empire there is no saying what the results may be. So much for the mother country side.

Briefly, what is the position of the Dominions and the Colonies? I will not attempt to deal in detail with the Dominions, except to say that the sellers' market will not last for ever. This applies to the Dominions as well as to the United Kingdom. How do the Colonies stand? The right hon. Gentleman suggested earlier on in the Debate that we are in a position to make preferential agreements or to maintain existing agreements with the Colonies because this comes under the paragraph, "Exceptions from the rule of Non-Discrimination" in Article 28. They are actually the territories sharing the same rights in the economic pool. Well, I hope he is right, and that the United States view it in the same way. It means, I take it, that we can give a sugar preference to the West Indies, but the Dutch would not be able to do it in Java. If that is so, then it might be all right. But it seems to me an extremely unlikely event when the international conference actually assembles. If I am wrong, I stand subject to correction, because we are only anxious to get at the truth of this matter. What we are concerned about is, as long as they can sell anywhere to competing Governments at high prices, naturally, it does not matter very much to some of the Colonies whether Imperial Preference is maintained or not, except on the great moral issue, on which they are wholly united.

But it will matter very much indeed when the sellers' market comes to an end, when obsolete machinery is replaced in the sugar producing countries, when Java starts exporting again, when the Philippines and Formosa export again, and when the ravaged sugar beet fields of Europe are brought once more into production. Unless the West Indies have a sheltered market for sugar here by preference, probably above the world price for sugar, then gone will be all our hopes for social improvement in the West Indies, to which hon. Members opposite and we ourselves attach very great importance.

In conclusion, I think we should say to the United States two plain truths. First, that we have no wish to use a tariff or Imperial Preference to bolster up inefficiency in Great Britain or anywhere in the Empire. We recognise that our goods must sell in foreign markets by their value alone, and that we cannot allow a tariff to shelter inefficiency, or laziness, or the half-hearted production of people robbed of any incentive to work harder or to make more money. But we do not regard the British Empire as a foreign market, and we think we are entitled to claim that some part of the great efficiency of certain American industries is due to the fact that they have a home market of 180 million people in which they can sell their goods, and we claim equal rights in the home markets of the British Empire. Now, this is not only a material matter. To many of us it is something more, though the first considerations of this House today must be directed towards material things, and the exports and imports of this country. We also believe that Imperial Preference has an immense moral significance at a time of changing values and of the destruction of so many things that were of high value in the world.

I should like to conclude by reminding the House of something said a few days ago by a noble Lord, who has had a lifetime of experience of men and affairs: There is no price in gold or dollars that ought to lead us to give up this precious possession of Empire. Changes there must be in changing crcumstances, but I am certain it will be a very bad day for this country when it abandons its right to trade with its own Empire, among its own people, and to trade under conditions that it determines itself. It would be a bad day when it allows any other country, however friendly that country may be, to dictate the terms of its economic policy.

7.49 p.m.

Mr. Younger (Grimsby)

It is with some diffidence that I intervene in this Debate, because the subject is one of such astonishing technical complexity. If my research has not misled me, it is one on which no two economists can agree. Nevertheless, it is of such importance, not only to the welfare of people of this country but also to the wider aspect of organising and preserving world peace, that the layman must make an attempt to understand what are the main implications, to see something of the wood even if he cannot identify and label all the trees. It is clear from what we have heard today that the discussions on this International Trade Organisation are overshadowed in the minds of almost everybody by the fear of the impact upon the postwar world of this gigantic unplanned and very largely unpredictable United States economy.

The fears and the criticisms of the draft Charter seem to me to divide themselves into three different kinds. The first, which is the one about which we have heard most this afternoon, is the criticism that they will tend to break down our system of Imperial Preference, and so leave us, and even more obviously still, leave our Colonies and some of the Dominions, at the mercy of the United States. Fortunately, I do not believe there is very much between us, anywhere in this House, upon this subject, because assurances have been given from this side of the House that there is no intention of selling out Imperial Preference altogether, while most hon. Members who have spoken on the other side have shown themselves aware that it might be reasonable to accept certain modifications in the Imperial Preference system. I would take it as axiomatic that the social and political implications of dropping rapidly any large proportion of our Imperial Preference arrangements, would be catastrophic and could not be accepted by any Government. But, I think we have to guard against elevating this idea of Imperial Preference into an article of faith, something which is in no circumstances to be tampered with. It is, after all, a variegated patchwork of economic devices which has proved very useful to us and many parts of the Commonwealth over the last 20 years or so. It had many advantages in the prewar world, and, although they have not been stressed very much today, except by the hon. and learned Member for Carmarthen (Mr. Hopkin Morris) certain rather less obvious, and perhaps more indirect, disadvantages for world trade.

The thing we should emphasise about it in this postwar world is that it is not a big enough idea to be elevated into a sort of panacea for all the problems of international trade. By itself, it is not enough. What it amounts to is a very powerful bargaining counter, which we can take with us to any international conference. I hope that when we go to Geneva we will use it very firmly. The right hon. and gallant Member for Scottish Universities (Lieut.-Colonel Elliot) told us of many advantages which had accrued, not only to the Commonwealth but also to the outside world, including the United States, from the Ottawa Agreements. I am not necessarily accepting everything he said—I have not checked up—but those are arguments which could well be at the disposal of our negotiators when they are facing the question of whether or not they should give up particular items of the Imperial Preference system at this world conference.

The second main line of criticism, of which we have heard surprisingly little this afternoon, is the fear that a system based on the draft Charter would frustrate planning, not only in the international sphere, but within the economies of member States, and particularly Socialist planning, and would endanger longterm commodity agreements, State trading, and other devices, which are aimed at a measure of stabilisation. I must confess that I am to some extent nervous on this score. In particular we will have to keep our eye on short-term problems. We are in an abnormal period—at least one hopes it is abnormal—from the point of view of world trade, when we cannot afford to give up our rights to make particular arrangements to meet particular emergency situations. Although it is true that almost every article of the Charter is accompanied by an escape clause, or some kind of exception, that is one of the things our negotiators must watch with the greatest care in order to ensure that we do not find ourselves obliged in the near future to infringe the spirit, if not the letter, of some of the articles to which we shall have given our signatures.

I have no doubt myself that one of the main objectives of the United States when they put forward their initial proposals was to reduce to a minimum the planning of international trade. There seemed to me to be laissez faire ideas written all over the original draft Charter. I was rather surprised that the President of the Board of Trade indicated today that even that initial draft, although emanating from the United States Government, has been the subject of long consultations with us. However, we do not need to give way in all respects to the laissez faire theoreticians of the United States. We have, in fact, very strong backing for the opposite school of thought in the international conference in Geneva. Many nations in Europe, and many of the Dominion Governments, are basing their whole economies on planning. They will back us up in seeing to it that we are not simply driven back into a kind of 19th century Free Trade system. Indeed, so great are the advantages of ensuring, by planning methods, a degree of stability, that we may well find even the United States coming slowly along our path in this matter. There is perhaps a good omen in the reception which has been given by the farming community in the United States to the stabilisation proposals of the Food and Agriculture Organisation. I understand that they have welcomed those proposals, even though they are contrary to what most of us would conceive to be the American farming tradition.

The third objection is that the machinery set up in this Charter, though possibly adequate to deal with minor dis- locations and fluctuations in a period of settled world trade, will prove inadequate to deal with the emergency situations we may have in the immediate future. I think that was what the right hon. and gallant Member for Scottish Universities had in mind when he said that there seemed to be an air of unreality about the whole document. There is a certain amount of validity in that view. There are provisions whereby members may be let out of a particular obligation, and they are very cumbersome. One might find that one could not obtain agreement with the necessary parties in time to take effective action.

Whether this machinery works satisfactorily or not depends to a large extent on the United States, as do so many things in the international economic world; it depends on their being prepared to support with their very great influence reasonable policies, and reasonable compromises. I think as I consider these criticisms to which I have referred, that they are really complaints not so much against a world system of international trade, as against the crude fact of the United States economic power. It is a fact that the United States is economically far and away the most powerful single economic unit in the world. We have to remember that that economic power will be exercised on world trade whether we like it or not, and whether we pursue these proposals or not. The question is whether it would be better for that power to be exercised within a rational framework of more or less agreed principles, or in an old-fashioned "free for all" trade war. I have no doubt which is the better of those two alternatives.

Moreover, although the risks of a system of this kind and an attempt to organise world trade in this way are considerable, there is no doubt that there are positive advantages for us. I think that no one has attempted to deny that if the conference were to be successful and the Organisation were set up, there would be reason to hope that it might lead to an increase in world trade. That is vital to us, not only for reasons already given, namely that we cannot hope to reach the target of 175 per cent. of our prewar exports without a great increase in world trade, but also because in the event of an American recession—as they like to call it—it will be vital for us that trade outside the United States should be very rapidly increased, and should be able to pick up some of the slack left by a recession of that kind. It seems to me that Imperial Preference, by itself, offers no alternative to an increase of this kind. The most one can say about it is that it is one part of a larger whole. Moreover, development in world trade, particularly in devastated or backward areas, needs capital. We must bring the United States into this, if we are not to be forced to accept a great retardation of the development of these backward areas. If we had such an organisation as the International Trade Organisation, it could ensure that capital investment in backward areas was given upon terms which favoured world trade and which favoured the inhabitants.

I found it a little amusing that the hon. Member for Mid-Bedford (Mr. Lennox-Boyd) should have thought so selfrighteously—perhaps that is an unfair phrase—should have talked about the urgent need for the development of the Colonial territories, which he described as being so lamentably under-developed at the moment. He was using that as an argument for Imperial Preference. So it is, up to a point, but it is not merely a party point to remind him that the lamentable state of under-development in which these Colonies find themselves, comes at the end of a pretty long period when his party was in power, and was applying the principles of Imperial Preference, very largely at the expense of the general development of world trade.

Mr. Lennox-Boyd

I am sure that the hon. Member will realise that there were only seven years of Conservative Government—1932–1939—during which we were in a position to give preference, after the Ottawa Agreement, before the war came.

Mr. Younger

I will not pursue that point, but I think that the argument for the urgent need for the development of backward territories, whether in the Colonial Empire or elsewhere, is not one which supports Imperial Preference as an exclusive system.

I believe that every country which is attempting to apply some kind of national plan requires some degree of international planning as a background. I understand that the majority of hon. Members oppo- site are now of the opinion that some kind of plan is necessary in this country, and, therefore, we should not be in disagreement about that. We certainly want an orderly development of world trade. We, therefore, have a great interest in the success of the forthcoming conference. It should not escape our notice that the United States also has a great interest in its success. It was largely the United States which promoted the idea of this Organisation. She wants agreement because she is afraid of the alternative. She is afraid of barriers being raised against her in many parts of the world. I say this to emphasise that not all the bargaining counters will lie with the United States. She is as keen as we are to get some kind of reasonable compromise agreement. I do not think that she is coming to this conference to lay down her terms and say, "Take it or leave it." It is true that the omens in the United States are not too favourable at the moment, with the Republican Party in power, but once again, I repeat that it is better to have the United States, dominated as it is by those ideas, inside a world system, than to have it acting as the most powerful of all freebooters in an entirely lawless world.

It is a matter of great regret to me, and to others, that the Soviet Union is not, at the moment, taking part in these discussions. So far as one may permit oneself speculations as to the motives of the Soviet Union, it would be reasonable to suggest that their reason for abstention may be the fear that a United States-dominated organisation, which is what it might well appear to them to be, would introduce an uncontrollable element of what the hon. Member for East Aberdeen (Mr. Boothby) calls "knockabout capitalism" into the carefully controlled Soviet economy. One has some sympathy with that. No doubt, the Soviet Union can afford to be guided by such a consideration, though at the cost of trying to organise herself in semi-isolation. We cannot afford to do any such thing. World trade is, to us, the very breath of our being, and we have to attempt an increase of trade not merely on an Empire-wide scale, but on a world-wide scale. Moreover, from an even broader viewpoint, I believe that some kind of rationalisation of world trade is an essential part of the prevention of war, and we cannot have an organisation of that kind unless it includes in it the greatest component of world trade, the United States of America. I think it is even possible that if some successes in this sphere were to be registered in a year or two by the world International Trade Organisation, we might be able to persuade the Soviet Union to participate. If that were to happen, I believe that the United Nations would have taken a considerable step along the path to success.

I believe that the success, both of this Organisation, if it comes into existence, and also of the Food and Agriculture Organisation, is among the most vital long-term objectives of world policy. Even failure to agree upon the future of Germany in Moscow would not be more alarming than a breakdown of the schemes for the Food and Agriculture Organisation and for the organisation of world trade. I rather deplored the tone in which the right hon. and gallant Member for the Scottish Universities referred to this Conference, towards the end of his speech. I noted down one phrase in which he talked about us "going through the motions of this Conference." Hon. Gentlemen opposite tell us they believe, as we do, in the United Nations as an instrument of policy. I cannot help wondering whether the right hon. and gallant Gentleman might be, after all, still in the frame of mind which distinguished his predecessors some 20 or 30 years ago in regard to the League of Nations. They were quite prepared to pay lip service, so long as it was only discussing vague subjects such as human rights, in which right hon. and hon. Gentlemen on the Tory side in those days did not believe, but as soon as the Organisation dared to touch the pocket, they began to back out.

It was only the right hon. and gallant Member for the Scottish Universities who was positively opposed, as it seemed to me, to our taking part in a conference of this kind. No one else from the other side of the House has gone so far. They have expressed misgivings, some of which I share. The right hon. Gentleman went so far as to suggest that it was a waste of time and a dangerous one at that. I hope that our representatives will go to Geneva convinced of the paramount importance of their task. I hope that they will go there not feeling too modest about the demands they must make and the bargains that they should strike. Above all, I hope they will be fully conscious of the strength of the cards which, despite all the appearances, I believe they hold in their hands.

8.8 p.m.

Mr. Dodds-Parker (Banbury)

I will not follow the hon. Member for Grimsby (Mr. Younger) in his argument, and start discussing his party's failure to put teeth into collective security before the war. Like him, I tread somewhat delicately on the subject of this international trade conference, especially as I have not had, as he has, considerable experience in the last 15 months or so, of the United Nations.

Before coming to Imperial Preference and the trade conference, however, I should like to follow one or two of the remarks by the hon. Members for Balham (Mr. Adams) and Wednesbury (Mr. S. N. Evans) about practical aspects of the export trade. The hon. Member for Balham spoke too about raising quality. I would like to put to the Parliamentary Secretary one or two questions about actively increasing the export trade. The hon. Member for King's Norton (Mr. Blackburn) said in a speech during the week end that we must realise that whatever the Government do on the top level, whatever planning is done by the Government, the overseas trade of this country depends very largely on private enterprise, and on encouraging the individual who is involved in that private enterprise to get on with the job and sell our manufactured goods. In one of the London newspapers, I think it was the "Daily Express" or the "Sunday Express," about two weeks ago, some interesting figures were given of a poll taken in Canada.

That poll showed that some 80 per cent. of Canadians wish to continue to buy British. In the last few days again I have had inquiries from Canadian friends asking why it is that in the last two or three months, in view of this very strong sentiment for an increase of British goods in Canada, there has been, in fact, a falling off of the export of British goods to Canada, whereas there has been an increase to such places as Panama and Brazil which are also, presumably, in the hard currency areas. I do not know whether the Secretary for Overseas Trade can give some information why this has happened. I think it would reassure people in Canada and other Dominions if he could indicate why it is that trade is increasing with other hard currency areas and not with the Dominions.

On the question of increasing the export trade, I wish to put two points to him as practical suggestions. I think it is generally agreed that today the import and export trade is more closely linked than before the war. People endeavouring to export goods to a foreign country wish to buy a certain amount of goodwill, possibly by taking imports in exchange. I think it is generally agreed that many people involved in imports are prewar established firms who get a certain allocation from the Government on a fixed percentage as a commission and the trade goes on accordingly. I put it to the Parliamentary Secretary that it is most important that new blood should be brought into these industries and should be given an opportunity of developing new markets. We should not rely almost entirely on people who were established in 1939 or earlier. Another practical suggestion on the subject of the export trade is that there is no practical incentive given to an exporter in any way to build up for himself any sort of reward for exports to hard currency as opposed to soft currency countries. Would it be possible to allow an exporter to a hard currency country to have, say, 5 per cent. of the value of the goods allocated that he might buy therewith raw materials or something he needs in exchange? I put that as a practical suggestion. I believe it would have considerable results in giving an incentive to exporting firms to build up their trade.

To come nearer to the question of Imperial Preference and what is being done by the Government in a practical way to build up our trade with the Empire, I take as an example tobacco, which has already been mentioned by the hon. and gallant Member for Seven-oaks (Colonel Ponsonby). It is difficult at the moment to find out the exact facts in regard to tobacco, but as far as I can make out, for 1947 the estimate is that some £40 million of hard currency will be spent on tobacco, at 1946 prices, to give us what we want in this country. If that figure is accurate, it represents some 10 per cent. of the first year's drawing on the loan and not 32 per cent.—a figure which has been quoted already elsewhere. It is very important that this should be made clear by the Government. There is considerable misunderstanding in this country upon why we are spending so much money on tobacco, particularly from hard currency areas.

One point which has never been made clear to me—I do not think it has been explained to the House—concerns how far the Treasury is interested in this particular affair. It has been said that for every dollar spent on tobacco, between £1 and £3 is earned in revenue by the Treasury. Obviously, if that is so, it must remain a very important point for the Government to consider, that they are not only trying to keep up the morale of this country by continuing to import tobacco but also they are trying to keep up the revenue which is tending to fall in many other respects. As my hon. Friend the Member for Bury (Mr. W. Fletcher) explained in a letter to "The Times" some weeks ago, we do not wish to export unemployment from this country to the United States; but if the Government could give some indication of what they are doing from the long-term point of view of the next three or four years to ensure the tobacco supply of this country, it would show what their practical steps are towards building up Empire and general trade overseas. What is to happen when the present American loan comes to an end? Are we to have a further loan to enable us to continue to purchase American tobacco, or are the Government to build up even more than is being done at the moment the supply of tobacco from Empire sources? I put these points as briefly as I can. If the Secretary for Overseas Trade can give a reply, it would enable us to see the real position in regard to the import into this country of tobacco, particularly from Empire countries.

My next point is one which has been made more clear by the speech of the right hon. and learned Gentleman the President of the Board of Trade. I refer to the convertibility, after July, 1947, of currency transactions between the Colonial Empire and hard currency areas. As I read it, before the right hon. Gentleman spoke, I understood that the Colonial Empire was in some doubt whether they might after July convert their currency without restriction. From what the President of the Board of Trade has said, I think that the Colonial Empire is regarded all as one part—as the hon. Member for Mid-Bedford (Mr. Lennox-Boyd) said, "the sea Empire as opposed to the land Empire of the United States." That is, we are all in together, and transactions between the Colonial Empire, including presumably mandated territories, and hard currency areas will not be affected. If this is so—and I personally believe that it should be so at the moment—I put it to the Minister that there are certain points which need careful, weighty consideration from the point of view of the Colonial Secretary. The Colonial Empire, including the mandated territories, had come before the war to rely very largely on American motor vehicles, and textiles from places other than the British Isles. I believe that, particularly if we can readjust motor taxation in this country, we may be able to find sufficient motor vehicles and tractors, and textiles, to send to these countries. If in the meantime we cannot do so, it may lead to a considerable amount of discontent in the Colonial Empire if they cannot get sufficient of these goods. While on the point of the Colonial Empire, I would enquire what action if any, is being taken before or during the Conference to revise the Congo Basin Treaties? Are they to come under consideration? They have been very loyally observed by the British for the last 40 or 50 years, but they have not been so loyally observed by certain foreign Powers. In fact, we have lost and they have gained.

To return to the question of Imperial Preference, after what has been said by my hon. Friend the Member for Mid-Bedford and the hon. Member for Devizes (Mr. Hollis), I do not think I have very much to add on the general terms. They have put very well what I feel about our Colonial Empire. I am one of those who believe that we should take more positive action to weave together the Colonial Empire and the Dominions, always allowing for the usual pitfalls. I believe the Statute of Westminster was unfortunate in the way it decentralised the Commonwealth without leaving any central federal authority. We should aim at a constitution on the lines of Northern Ireland between ourselves and our overseas territory. While on this point, I would ask that the Colonial Secretary, if he has not already done so, should go even further in studying the attitude of the United States towards what they call their noncontiguous territories. They affect certain overseas territories which have already been mentioned here, and their attitude is that they are "home" territories, as much one of the sovereign United States as is California or Vermont. I think it would be very appropriate for the representatives of the Government at Geneva to have at their fingertips knowledge of the American attitude towards this problem. The United States regard these areas, which produce primary products not produced in the United States, as home areas. Similarly I believe we have a right to regard our overseas territories and what goes on between them and us as being our affair primarily, and that of other countries outside secondarily.

Mr. Frank Byers (Dorset, Northern)

May I take it that the hon. Member is pleading for the retention of Imperial Preference?

Mr. Dodds-Parker

Most certainly. I believe that we should go further, that we should knit the Colonial Empire closer together and get on the same sort of footing with them as with Northern Ireland and have complete Colonial free trade.

I believe that the study of the question of the escape clause and what has led up to it has in one respect completely altered the approach to the Geneva conference. On the other hand we should be prepared to welcome the United States at the conference with the escape clause, rather than not to have them there at all. That brings me to my last point. We have in the United States an immense fund of good will towards this country. I believe from what has happened in the last six or seven months when I was over there there has been a considerable development. I see in the last copy of "Life" which has reached me there were three suggestions put forward, the third of which states: bring about closer economic and military co-operation between the United States and Britain than has existed before, even during the war. Besides all this we must take action to restore health to Britain's economy. This means giving British industry as much technical help and leadership as the Englishman can be persuaded to accept. I am not putting forward this extract in a controversial way but to show that in an influential journal such as "Life," whose editor, Mr. Jackson, incidentally, formed with the hon. Member for East Coventry (Mr. Crossman) one of the brilliant and little recognised partnerships in co-operation during the war in North Africa and at S.H.A.E.F. There is an attitude of mind in the United States towards co-operation with us. An olive branch is being held out at the moment and I believe they are prepared to co-operate as never before and that we should do everything we can to co-operate with them. As my hon. Friend the Member for Devizes said there is no need for a moderate, or even a strong policy of Imperial Preference to conflict with the long term interest of the United States. But as in 1939, 1940 and 1941 when we stood alone and all these Dominion and Empire countries rallied to us and gave us the greatest military and economic support, so we can now give them back the economic and military support at the present time.

8.22 p.m.

Mr. Gordon-Walker (Smethwick)

I agree very much with one thing that the hon. Member for Banbury (Mr. Dodds-Parker) has said, namely, that we have a great fund of sympathy in the United States. I was there fairly recently—a few weeks ago—and there is undoubtedly a growing fund of sympathy for us as a country, and also a great deal of sympathy for the Labour Britain of today. I agree also that our negotiators at the Geneva Conference should pay a great deal of attention in their bargaining to this American attitude to what they call noncontiguous territories. The Americans have a cockeyed conception of Free Trade. What they are introducing into the Philippines is really Imperial Preference but they call it Free Trade in their Act of Congress. This sort of bargaining point should be used very strongly.

I should like to say a word or two on what the President of the Board of Trade said about the balance of payments. He said, quite rightly, that there were two problems, namely, the general problem and the hard currency problem. It is very important that we have made that distinction. But it seems to me that the Govern-men have not driven this distinction at all firmly enough in our overseas trade. We have put a great emphasis—too much emphasis—on an overall increase of exports, but it seems to me that an overall increase of exports is not much help in our present position. It is not a very great solution, and in some respects it makes some of our problems even worse. As the White Paper states, it creates a dollar deficit within our general trade balance. But even more important, it means that in effect we are giving away for nothing a good deal of the goods we are exporting. The extent to which we export to soft currency countries in return for soft currency or to reduce our sterling debts is really giving goods away. The White Paper very clearly states this problem, but it does not seem to suggest anything in the form of a proper solution. It says that we must sell more to the hard currency areas and buy more from the soft currency areas, but that is merely stating the problem in other terms. It is not a solution. It is important that we should do these two things, but we cannot do them to any great extent for we would be flying in the face of the facts of world trade, because world trade depends on the triangular trade between the Eastern hemisphere, the Western hemisphere and Britain. We cannot much alter that unless we have a complete revolution, which would involve restrictions and a reversal of the policy the Government want and rightly want.

There are two things we have to do. We cannot just leave things to adjust themselves. The first thing we have to do is based on, I think, the last article written by Lord Keynes just before his death, in which he showed that a great many of the soft currency countries have very considerable holdings of dollars and gold. These countries are very reluctant to produce these dollars and gold in exchange for our goods. It is essential that we should be much tougher than we have been in our agreements with these countries. They need our goods very badly. It is a hard world in which we have to do hard bargaining, and we have to say to them that we will take goods for goods, or goods for dollars or gold. We must tell them quite frankly that it is physically and logically impossible to repay debts when we have an adverse balance of trade. We can look as if we are doing it by borrowing dollars, but it does not in fact reduce debt by repaying in borrowed dollars. And it is creating a bad situation in the world if we do that—rather like the one in 1931 when private capitalism borrowed money from America and relent it to the Continent. We are, to some extent, today by loans between Governments using borrowed dollars to repay accumulated sterling debts. If we are not careful we shall create a situation in which an American slump would be really serious because it would hit an economically unbalanced world. We have to tell these soft currency countries it is in their own interest that we get our balance of trade as quickly as possible, because only then can we repay them properly.

The second thing is to be much more frank and open with the United States, especially at Geneva. We have to tell them that we both believe in multilateral trade, but that we cannot get it unless the necessary preconditions are present—that is, they finance their exports. We can tell them that they can finance their exports in two ways. They can either import as much as they export, or make dollars available to the world by various devices. I do not agree with the hon. Member for Devizes (Mr. Hollis) that it is we who necessarily need the dollars. I think it is the other countries of the world that need the dollars. We can pick up dollars in the ordinary course of trade. Unless America does finance exports in one of these two ways, the conditions of multilateral trade will disappear, and however much we may want multilateral trade, we shall have to tell the Americans that the conditions are not there, and that we have to use the Escape Clause and create a closed economy. It is not for us to decide, but the Americans.

I do not think the long-term position of the balance of payments is as gloomy as some would have us think. The short run problem is serious, but as we get through it the long run problem will become easier. Even in the short run there are some favourable factors; there will very probably be a price recession, as they call it in America, this year. Every American I met, a few weeks ago, from the worker to the big business man, thought that there would be a price recession this year. That will lenthen the life of the loan, because it will reduce the price in dollars of the things which we have to buy. It will have some bad effects, but it will be good for us in that respect.

A favourable long-term factor is the changing attitude in America, towards imports. Many views have been expressed today about America going wholly against more multilateral free trade. When I was recently in America I noticed that more and more emphasis was laid in America on something that we should not ignore. The Gallup polls there were moving more and more in favour of increased imports in order to balance exports. There were great advertisements in the American newspapers inserted by American magazines, like "Time" and "Life," telling Americans that they ought to cheer when a ship arrived at one of their ports to land foreign goods. Of course, "Time" has an interest in this. It wants to be the vehicle and organ for advertising outside America American goods. But it is significant that it is doing that in a way that is particularly well designed to affect American opinion. We must not exaggerate the chances of a change of opinion. A large number of America's important trades are wholly artificial, and are maintained only by tariffs and high protection.

Finally, in negotiations now, and in the future, Britain will have one great weapon which no other country has, namely, the weapon of her market. A country that has a great market which wants to import is in a strong position. This market will become, under the present Government, when their long-term programme comes into full force and with full employment, an ever increasing asset, and an ever more powerful weapon.

8.32 p.m.

Mr. Henderson Stewart (Fife, East)

I think the House will agree that the Opposition are to be congratulated on having introduced this subject today. It has brought forth a series of interesting speeches, some rather astonishing from the Government benches, but, on the whole, I think that there has been a wide measure of general agreement on this vital problem. For me, it is a subject of special interest, in that it happened to be the one on which I made a maiden speech, and it has remained throughout all the years, something of first-class importance to this country.

I think that I have never spoken in this Parliament without finding myself in opposition to the other side of the House, but I am bound to say that the speech of the President of the Board of Trade today seemed to represent, very fairly, my own views on this matter. There were, of course, some points with which he did not deal. First of these was the short-term problem of exports. I am prepared to be told that the right hon. and learned Gentleman had not time to deal with that, but before the Debate ends I hope that the hon. Gentleman who is to reply will say something about the Government's short-term export trade policy. I see that the City Editor of "The Times" estimates that we have, at the moment, something like the equivalent of 2 million men idle in this country, who might be working upon exports. Now, the tragedy about that is that we are losing, on that account, the rapidly diminishing sellers' market abroad. That is a thing of great seriousness, and I am not at all satisfied that the Government are doing everything they can in that direction.

We are faced with all manner of problems, but I would like to speak, for a few moments, about one section of trade I happen to know something about, namely, agricultural machinery. There is a lot of complaint, some of it from this side of the House, against the Government's action in exporting certain types of agricultural machinery. It has been said that this is wrong, that all agricultural machinery ought to be kept at home. With great respect, I think that that is a wrong view to take. The problem is not nearly so simple as that solution would seem to be. First, the home demand for all kinds of agricultural machinery is by no means unlimited. For certain specialised types of agricultural machines the demand is quite limited, moreover where it exists at home it is, in a great many cases, on a seasonal basis. I agree that tractors are probably wanted all through the year, but tractors are not the only agricultural machinery that we make. We make many other kinds. The demand comes in the autumn and winter for use in the spring. While factories are very busy in winter and early spring, they often find themselves rather slack during late spring and in the summer, and that is the time when they are ready to export agricultural machinery, and can do it without any harm to this country.

Further, the demand from abroad for all kinds of agricultural machinery is itself limited, mainly by a shortage of currency. In the case of the particular machines my firm makes, there has been a considerable demand from, and export to, France for the past two years. For the winter just past the demand was as great, but no money was provided by the French Treasury. Therefore we made no exports. The same is practically true of Belgium and Holland, although it is perhaps not quite so bad. In the case of Belgium, I think that the currency allowed for those who want our kind of machines amounts to only 10 per cent. of the effective demand. I believe the same is true of Holland, and that only in Scandinavia, Sweden and Denmark is the currency provision up to the standard of the effective demand.

A large part of the machines that go out from this country go out in driblets to many different parts of the world. My firm is exporting one, two, three or half a dozen machines to a long list of countries. It cannot be against the interest of this country that we are making these contacts now, because, ultimately, we and other firms hope to expand these contacts and so establish a permanent and profitable trade for British manufactures. I therefore suggest to my hon. Friends that it is not right to condemn the Government for exporting agricultural machines. On the contrary, I think that it will be proved to be in the national interest to do so now.

On the long-term policy I, speaking as a Liberal, and my hon. Friends on these Benches, take the view that whatever may have been the case in 1906 or 1914 circumstances have now changed. Whereas free trade was justified at that time, free trade, in the old accepted sense, does not make sense today. Theoretically, it is most attractive. I am still bound to it theoretically, and in loyalty, but I know that it is no longer practical politics. What is practical politics is the biggest effort to get freer trade. The President of the Board of Trade was right in explaining that our export trade was more diverse than that of any other country, that our kinds of goods are more numerous, that we penetrate more markets than any other nation.

World trade is, therefore, of prime importance for us. We are concerned with the lowering of tariffs and trade barriers all over the world, and that is why, in my view, it is right to make this effort at Geneva. I am sensible of the difficulties to which some hon. Members have referred. I am aware of America's peculiar position, of her arrangements with her Colonial Empire, of the laws of her country and of the possible dangers of the escape clause. There are other possible snags. The President of the Board of Trade is aware of the peculiar problems facing us in the Far East. I will not develop them, because other hon. Members know much more about that problem, but someone has got to face it before this Debate ends. But even if all these things were true, I would still think it is right to make this international approach to the problem.

I must avow my faith in Imperial Preference. I was in the West Indies with a Parliamentary delegation two or three years ago, and I saw as plainly as possible that without some measure of Imperial Preference the West Indian sugar industry would collapse. That is true of the principal industries in a great many other parts of the Colonial Empire. But because that is true, we cannot say that under no circumstances will we consider any change in Colonial Preference. In the case of the West Indian sugar industry, we cannot take the view that under no circumstances can the present figure or system be altered in return for an adequate quid pro quo. I understood that the pledge which the President of the Board of Trade gave was that we are going to the conference ready to "consider" a possible move or change in Imperial Preference, provided we get an effective quid pro quo which would advantage the Empire.

Vice-Admiral Taylor

So far as the West Indian sugar industry is concerned, if the preference is done away with, does the hon. Gentleman consider that America will take the sugar which we do not take? If not, what is to happen to the West Indian sugar industry?

Dr. Morgan (Rochdale)

May I point out that in the case of sugar, there are definite one island crops, and if they do not get Imperial Preference at a certain rate, it will mean the ruin of those particular islands?

Mr. Stewart

I am aware of that, and I also agree with the hon. and gallant Member for South Paddington (Vice-Admiral Taylor). Without an adequate Imperial Preference, the West Indian sugar industry would collapse; that is indisputable. But, despite that—and remember that Imperial Preference covers the whole of the British Empire and Commonwealth—it would seem to be asking the impossible to suppose that any British Government would go to the international conference unwilling even to consider any adjustment of Imperial Preference if that in itself would make for larger world trade; more particularly when the President of the Board of Trade, in response to my question, said that it was understood that agreement or negotiation would take place between this country and the various Empire countries concerned.

I saw in the West Indies the calamitous results of the leasing of bases during the war. Something was done there without consultation with the Colonies. They were suddenly presented with a fait accompli, which caused the greatest consternation, and in certain sections it affected the loyalty of those fine people to this country. I ask the right hon. Gentleman to give an assurance that that kind of thing will not happen in this case.

In this matter of Imperial Preference we ought to be given more information than we have had. We have sitting in this country now a miniature Imperial conference on trade, I understand, to discuss this very matter. Surely, the Government can tell us something about it? I was going to ask what progress has been made in formulating a common approach by the Empire countries to this problem of Imperial Preference. No one has told us what has been happening at the conference. I do not expect the Government to give us any conclusions, but they ought to give some indication of how the talks are proceeding. Are we to assume that the statement made by the President of the Board of Trade was the result of those talks, or is it only his view? We are considering a vital matter affecting ourselves and the British Commonwealth and Empire.

Air-Commodore Harvey (Macclesfield)

Does the hon. Gentleman suggest that the Government should disclose their hand now, and tell the Americans how we are going to bargain with them?

Mr. Stewart

I did not say that. The words I used were carefully chosen. What progress has been made in formulating a common approach to this general problem? I think it is the duty of the Government to offer us some general indication today. In doing so, it is not necessary to reveal to the Americans what is to be our approach.

I find myself rather in general agreement with the view expressed by the official spokesmen of the Government, and I can only hope that the delegates to this vital conference will, in the course of their deliberations, achieve what I understand they are out to achieve, namely, a lowering of trade barriers in all parts of the world with the aim of improving the prosperity not only of our people but of all peoples, because this country more than any depends upon world prosperity. To that extent I am an internationalist. I believe, having been brought up in free trade circles, that world prosperity is good for us. If this conference is seeking such prosperity, I wish it luck.

8.49 p.m.

Mr. Edelman (Coventry, West)

The hon. Member for East Fife (Mr. Henderson Stewart) has pointed out our need to be present at this conference because the sellers' market is now coming to an end. If the delegation to the Geneva Conference visit the motor show there, they will see one of the reasons why the sellers' market is coming to an end. They will see a British low powered car selling for £800, while not far away an American 28 horsepower car is selling equally for £800. That represents American entry of them into the European and into the world market. Up to the present the United States has been saturating her own home market with her production, but now at last when that saturation is complete America is beginning to take advantage of the particular good will in Europe which she built up not only since but during the war, when many of her industrial representatives went in with the Army as camp followers. Today, in places like Geneva, where the international motor show is being held, we see the spectacle of the prestige through advertising of the magnificent chromium plated cars in new designs not only for 1948 but for 1949. These are suddenly presented on the stands at the motor show, and are in competition with British cars.

America has an enormous motor car production. Even last year the production of General Motors alone was three times more than the whole of the British motor industry, and next year, if their production plans are realised, Americans will produce ten times as much as the whole of the British motor industry. I emphasise these points in order to indicate the sort of background against which this international conference is to be held. We are going to a conference in which America is our greatest friend and also our greatest industrial competitor, and what we have to achieve is a modus vivendi with the United States. We have to achieve that at a time when we are being faced with the competition of our other friends in the markets of the world. France under the Monnet plan proposes to increase her exports by 200 per cent., and proposes to increase those exports almost exactly in the products which we ourselves wish to export.

At the same time, we and the Americans in our fused zones of Germany are trying to boost the exports of these zones—with the desirable intention of relieving the British taxpayer—to a figure of £300 million worth of goods which will be directed for the most part into the hard currency areas in competition with our own products. So we find ourselves in the position in which we are trying to increase our exports of manufactured goods to 165 per cent. this year, while at the same time we are met with the onrush of American exports and we find that our former enemies are also trying to raise their exports in order to be self-sufficient through obtaining dollars.

In addition to that, we have from one point of view the very desirable fact that America, in order to try to stimulate trade in Europe, is financing many of the countries with whom she wishes to trade. There has been a very grave danger, as has been said in another context, that the dollar loans by America will support those countries whom they are designed to help precisely in the same way as a rope supports a man whom it is designed to hang. In other words, while removing the burden of the feet of those it helps, it adds to the strain on the neck. Consequently we have the spectacle today of Europe, with ourselves predominant in Europe, engaged in a most savage competition in order to try to obtain American dollars to pay our way. Therefore, the question which I should like to ask is, How are we at the conference table going to present our case? What support are we going to obtain before going to that conference table and before engaging in bargaining with America?

I feel that one of the first things which we must do, and I think we must do it because the Americans expect it from us, is to put in the forefront of all our plans the modernisation and re-equipment of our industry. I was amazed that in the recent economic Debate so little stress was laid upon that obvious point. We are rapidly reaching the state in which in any selling market we may find ourselves in a position in which we will have to trade three or four hours of British work for one hour of American work, and the reason is that American industry is very much better equipped than is British industry. I believe it is relevant in this Debate to insist on the point that we need most rapid re-equipment and modernisation of British industry if we are to meet the Americans as potential competitors.

I should also like to support the demand which has been made from both sides of the House that Imperial Preference should be retained at least until such time as there can be substituted an alternative system from which we derive equal benefit. It is obviously a bargaining counter, but, in addition to that, it is a most solid protection for imports from this country as well as a protection for the producers of those other countries in our Dominions and Colonies with whom we have made these agreements. I hope that nothing will be suggested which will indicate that in going to the Geneva Conference we are going to abdicate from any of the positions we have taken up in connection with Imperial Preference.

I come now to a point which I feel has not been mentioned today, but which I think is of paramount importance to Great Britain. That is the question of our economic integration with Western Europe. There is today an official committee—the Anglo-French Economic Committee—discussing ways and means of co-ordinating our two economies so as to avoid conflict. It has been suggested that one of the ways in which conflict can be avoided is by a particular French and British industry getting together, assessing their capacity, determining their production and fixing the joint needs in both countries, after which they should fix a ceiling of production and arrange quotas between them. One of the industries in which it is proposed to do this is the agricultural machinery industry, in which we have a start and which France proposes to develop under the Monnet plan. I strongly support that and consider it highly desirable, but what I should like to know from the President of the Board of Trade, assuming we do work our plan in the agricultural machinery industry, is what we shall say if the Americans come along and say, "We object to you having a plan to establish a level of production in a particular industry, because we want to sell Fordson tractors, combine harvesters and other such machinery which we wish to dump into Europe." Are we going to say to the Americans, "We are extremely sorry we are making this plan and we apologise. Please go ahead and do what you can in order to dump your machinery into Europe."? Or are we going to say, "This is the plan which has been made and which suits us, and we should be very glad to talk to you in order to see if we can meet you half way or part of the way in order that you may integrate your plans with ours, which are already integrated"? That, I feel, is the approach which we should try to make to the problem of the integration of Western European industry, but here I would add one point as to the method by which that integration should be achieved.

I do not believe for one moment that an Anglo-French economic committee, sitting either in London or in Paris, can, of their own accord, simply determine what the level of production is to be. However willing and able officials may be in fixing the limits of industry or the amount of its production, at a certain point one obviously comes up against the perfectly proper interests of industrialists and workers in France and in this country who may not be willing to accept levels fixed by a group of administrators. If I may respectfully make a suggestion to the President of the Board of Trade, I would propose that we should try to have that kind of joint industrial consultation between our two countries which we sometimes have in Britain. I feel that it would be better if representatives of both industries were to meet under the chairmanship of a Member of the Government in order to see if this plan can be achieved.

There is one further point I should like to make concerning the question of our trade with soft currency countries. I believe that if our exports were properly directed, and if the imports which we required from the soft currency countries were properly demanded, we could do far more productive work and carry on more beneficial trade with these soft currency countries than we are doing at the present time. I noticed today that one country—which happens not to be in the soft currency area—is sending us azaleas in pots as one of its major exports. The country is anxious to encourage its own horticultural industry and, consequently, if one walks through the West End one finds shop windows filled with azaleas in pots. I mention that because the country in question is capable of sending us steel and it seems to me highly undesirable that we should weakly acquiesce in receiving horticultural products from some of these countries when we are in a position to ask steel from them.

One final point. I have asked the President of the Board of Trade from time to time what progress he has made in his trade negotiations with the Soviet Union, and from time to time he has replied. I do hope that today he will give us some indication whether or not it will be possible to trade with Russia and with Eastern Europe. Does this conference mean that we have now completely written off Russia and Eastern Europe as a region in which we have trade interests, to which we want to export, and from which we want to receive imports? One of the most alarming facts of the postwar world is that Russia has control of practically the whole of the European timber belt. In the White Paper emphasis is given to the fact that our housing programme cannot be achieved unless we obtain the timber which is necessary, and most of timber is due to come from the Soviet Union. I feel that we should have more success if a correct approach were made to Russia—I do not mean a political approach but a simple economic and commercial approach—and if we offered the Russians precisely those tools and that equipment which they need in order to obtain the timber, and for lack of which, they complain, they cannot cut it. If we were to offer them the necessary portable saws and other equipment which they need to develop the areas where they are now cutting new forests, we might make much more progress in obtaining timber from them than we have in the past.

I believe the Russians are a strictly practical people, whatever we may think of their politics, and I am quite certain that our failure so far to achieve a proper trade agreement, and in particular agreements concerned with those essential things which are needed from Russia, is to a great extent, though not entirely, due to the fact that we have not made a proper commercial approach. I would say finally that, if we go to the Geneva Conference with the support of an expanded and more efficient trade with the soft currency areas, if, in addition to that, we cling resolutely to our Imperial Preference agreements, and if at the same time we show a determination to modernise and re-equip our industry, we shall be able to talk to the Americans on a basis of equality. If we do that, we shall obtain far better results from them.

9.6 p.m.

Viscount Hinchingbrooke (Dorset, Southern)

According to the weekend Press, today was to have been the fourth day of the great Debate on the economic state of the nation. It has been a very quiet Debate, in my view almost too quiet, considering the present distress which exists throughout our country, and I hope the House will forgive me if I strike a note of urgency and alarm and perhaps also of controversy, and urge upon the Government a course of action which so far has not been discussed. The right hon. and learned Gentleman the President of the Board of Trade gave the Conservative Party the emotional theme of Imperial Preference today, and that has no doubt been the reason for the lowered temper and tone of the Debate since his speech, but the fact still remains that this country is in a desperate condition, and nothing that the President of the Board of Trade said today was applicable to the immediate needs of the times.

In a Debate of this kind, like a foreign affairs Debate, one is apt to travel through many countries and to cover many subjects. The subjects I want to cover are those which have already been raised, Imperial Preference, the overseas trade balance, and our import and export position, but the country I wish to start with is one which has not so far been mentioned. It is the little country of Belgium. I would like to read a brief extract from the "Manchester Guardian" dated 10th March, which I think will interest the House, and I hope it will whet the appetites of hon. Gentlemen. It is entitled "Belgium, the Land of Plenty": To the casual visitor the success of Belgium's reconstruction must seem dazzling. To the student of economic affairs the experiment is highly instructive. Almost alone amongst the nations of the world Belgium has listened to the advice of her sturdy traders and bankers. Keynes and austerity have been thrown to the four winds. The supply of money has been ruthlessly cut down and firmly stabilised. Government expenditure has been limited. Imports have been encouraged and the world has been scoured for goods. Wages have been allowed to rise only against strong resistance, and the delay has been sufficient to bring prices down nearly to within the reach of all. Belgium today is the storehouse of Western Europe. The shopping streets of Brussels are crowded with gaping foreign visitors. There are stocks to last for many months, including the finest English worsted and Scottish tweeds, French silks, and Italian rayon. A year of re-stocking has restored to Belgium something like the prewar standard of life. A 10 per cent. cut"— a thing which I have been advocating we should do here for the past month or so— in free prices has just been imposed for the second time. But the main cause of declining prices in the free market is competition. Apart from almost free imports, Belgian production has recovered to nearly 90 per cent. of the 1936–38 volume, and in the case of textiles to 130 per cent. Confidence in the Belgian franc is firmly established. Interest rates are high and rising. The balance of payments has yielded a surplus of foreign exchange in 1946, and the National Bank is confident that in 1947 it will end with more foreign exchange than it began. That is an authentic and, as far as I know, completely undisputed account of a country—

Dr. Morgan

It does not mention the black market.

Viscount Hinchingbrooke

—where even one-third of Communist representation in the Government does not deter the community from re-establishing its economic life on traditional and free lines.

What a sorry picture this country presents by comparison, the very country which rescued Belgium from Nazi enslavement—no light, no colour, no warmth, no supplies; queues, short-time labour, depleted stocks, to which the hon. Member for Wednesbury (Mr. S. N. Evans) referred in a constructive speech; worn-out factories and machinery; a new puritanical priesthood of bureaucrats installed in every town and sizable village, and instructed to say, "No," and worst of all, an archpriest at the Board of Trade who soars above the highest ambitions of a prewar Protectionist to contract and reduce our imports and to maintain a high exportable surplus. The right hon. and learned Gentleman even repudiates his own colleagues. The Minister of Fuel and Power, in the last Parliament and again at the time of the General Election—I wish he were present now—said that he thought the prime object of manufacture in these times was home consumption, and that we should not for the present bother ourselves unduly about exports. The Minister of Health used words to much the same effect. The President of the Board of Trade said in the House, on 10th March, that exports must be a prior charge on our resources, and that we should have to content ourselves with what was left over, and nothing that he said today in any way detracted from that. Is that the best thing that statesmanship can do at this time? Do we have to work our fingers to the bone—[Interruption.]—we should be working, but for the fuel crisis engendered by this Government which has thrown people out of employment—do we have to work our fingers to the bone and raise up to the full tide of prosperity country after country, Belgium, Holland, France—where our soldiers met their deaths—Spain, Portugal, Sweden—whose assistance in the late war was so very, very material to our success—

Mr. Skeffington-Lodge (Bedford)

The hon. Member has talked a great deal about Belgium, and has just mentioned France. Is he aware of the fact that it is the exception rather than the rule for the ration cards of the normal workers in those countries to be fully honoured?

Viscount Hinchingbrooke

I believe that may have been the case during the past year or two, but the position is very rapidly improving today. It is becoming apparent now that in our efforts to avoid the charge of war loot and pillage, we have rushed quixotically to the opposite extreme. We have carved out of our economic resources one quarter of all the good and useful things of life—after the recent fuel crisis and after what the right hon. Gentleman has said today it may amount to one-third—and sent those good things overseas. To satisfy what? To satisfy an entirely new Socialist craving for traditional financial orthodoxy and rectitude. We despatch overseas agricultural machinery and wreck our farming programme. We send overseas machine tools and interfere with industrial recovery. We send overseas locomotives and delay the travelling public. We send overseas cars and vans, and harass the professional man and the distributive trades. We send overseas household goods and clothes, and keep the housewives in a permanently exhausted state.

We despatch those things overseas in the interests of a strict overseas trade balance and against all the natural laws of war and victory. We heard a lot before the war about the economics of the jungle, but what we are suffering from today in international trade and in the mentality of the right hon. Gentleman is the economics of Mr. Gandhi. Since his last interview with that extraordinary fanatic, the instructions from the President of the Board of Trade to the British people have been, "Lie down and take it." So we have sent goods to India and Egypt to pay them for having allowed us to save them in 1942; we have sent goods and services to Germany to fill the vacuum caused by the blowing up of plant; and we have sent goods to France and Holland to pay for the wine, the mimosa, and the tulips, which one would have thought the Governments of those two countries would have sent us gratis in recognition of their five years' sojourn over here.

I remember making a speech in this House about six months before V-Day in which I expressed the fear that the economic organisation behind the Armies would prove inadequate to keep Britain's head above water after the war. I was reproved by hon. Gentlemen opposite for not speaking in the correct accents of liberation. Well, we have liberated and all the world except our late enemies enjoys a higher standard of living than our own.

I would like to say a few words about Imperial Preference, the other main theme of this Debate. My hon. Friends are believers in Empire trade and Imperial Preference. So am I. I regard it as a step to freer trade. As such it falls within the terms of the Bretton Woods provisions and the Conference which is about to be held. Wherever a group of friendly democratic countries can be got together, whether in the Empire or whether in the West of Europe, it seems to me that that should be done, and tariffs lowered between them. But we ought to avoid two mistakes about Empire Preference. The first mistake is that the Dominions will play on the idea that tariffs can be lowered between us and them, and maintained or raised against the United States. The Empire free trade idea exclusive to other countries is unworkable. For example, we could never get Australia and Canada to accept our cars under an Imperial Preference scheme and to deny the right of the United States exporters of cars to send them at equivalent prices. The second mistake is in thinking that Empire Preference makes any substantial contribution now or in the foreseeable future. To my mind the thing has been completely transcended by the new trading techniques—export subsidies, bulk purchase of entire crops and markets, import and currency controls, and the whole rigmarole of regulations dictated by war and carried on by postwar Socialism. To base a policy now upon Imperial Preference is to do something which is ideologically right but practically ineffective. As the hon. Member for Grimsby (Mr. Younger) said, in what I thought was a most pointed speech, by itself it is not enough. We are temporarily through the period when Imperial Preference can save us. It is good stuff for the future, but it is luckless now.

Let me say by way of illustration that it is redolent of an interview which might have taken place in 1936 between Mr. Baldwin and Dr. Schacht: they would never have understood each other's economic language. Imperial Preference is not the right economic language today. If Lord Baldwin was still active in politics I believe he would not be advocating a policy of Imperial Preference. I feel sure he would be advocating a policy which would get us back to a situation where Imperial Preference was real and workable. What might that policy be? I believe it should be a temporary policy of stopping the exports of goods urgently required here; a policy of importation of food, raw materials and machinery on a large scale; and of course a consequential policy of a deliberately unbalanced overseas budget. The arguments in favour are, as I see them, five, and I will give them very concisely. First, the prospective exportable surplus of America, Canada, the Argentine, New Zealand, Denmark and perhaps some other countries; and the fears of unemployment to which the hon. Member for Smethwick (Mr. Gordon-Walker) referred, that might arise—and I think soon will arise—in those countries if the markets here are suppressed or curtailed—

Mr. Zilliacus (Gateshead)

With what does the noble Lord propose to buy these very extensive imports, if we are to stop a lot of our exports?

Viscount Hinchingbrooke

I am coming to that in a moment.

Dr. Morgan

Why not answer now?

Viscount Hinchingbrooke

Secondly, there is the lack of spirit of our own people at the moment, and of their will to work for home consumption, much less for exports, due to under-nourishment, insufficient housing, bad working conditions, and general drabness. Thirdly, the stifling of initiative due to the apparatus of controls, which extends from the small trader right up to the great strategic raw material controls. Much of this apparatus, and hundreds of civil servants who now administer it, would disappear if the policy I advocate were adopted. Fourthly, the stimulation of industry from its present two-thirds time basis to a full-time basis, and the absorption of many of those who are now unemployed. Fifthly, the anti-inflationary effect which the presence of foreign goods and equipment here would have on the £1,000 million excess purchasing power. Exporting is supposed to be a virtue, but it is sometimes forgotten that every car or locomotive 01 item of any sort sent overseas increases internal inflation to the extent of its value provided it is wholly manufactured in this country.

The only argument I can see against a policy of deliberate importing is the desire of a great nation to recover rapidly and to pay off its debts; natural, justifiable pride. But shall we ever pay off our debts if we do not recover, and shall we ever recover if we do not retain the essential standard on which to rebuild? I admit that is the age-old dilemma that faces every debtor, "Can I make good without borrowing any more?" I am firmly convinced that the answer in our case is "No." The people's needs are too great, the industrial wreckage is too great, and on the other side the productivity of the untouched part of the world is potentially too large. There are forces making for a flow of trade towards us too powerful to be resisted by pride or the niceties of party faith in restrictions or tariffs in the customs houses.

The logical steps towards our salvation are three—gifts, loans and investments in that order. Lend-Lease was a gift, we are now in a stage of Government to Government loans, and, as my hon. Friend the Member for Devizes (Mr. Hollis) said, the final stage is commercial investments on a private or semi-private level. I would open the doors of this country to such investments forthwith. I believe that if we did that, if we allowed the great blitzed cities of this country to float rehabilitation loans in the United States of America and with the proceeds to import raw materials to rebuild those cities, if we allowed industrial enterprises, great and small, to issue stock to like concerns in the United States or Canada or South Africa in return for new plant and new equipment, and if we allowed the great trading concerns of the Argentine, of South Africa and Australia to finance their selling enterprises over here, we should get into this country the goods and services which we need to recreate our industrial life.

9.29 p.m.

Mr. Christopher Shawcross (Widnes)

Strange as it may sound to some of my hon. Friends on this side of the House there is a very great deal in the speech of the noble Lord the Member for Southern Dorset (Viscount Hinchingbrooke) with which I agree, and with which I think hon. Members on this side of the House will on reflection also agree. I cannot follow him in every point he has made, but I take in the first place certain rather smaller points. He referred to the lack of spirit of our people, and stated that that was due to under-nourishment and bad housing. I entirely agree that that is so. In so far as there is any lack of spirit in the middle-aged workers in this country, it is largely attributable to the under-nourishment from which they suffered during the long years between the wars under the rule of the party opposite. As for the point about housing conditions, that is so obvious that I need hardly mention it. Again, of course, if there is any lack of spirit, housing is a factor, and obviously that is entirely due to the rule of the party opposite in the years between the wars.

Lieut.-Colonel Elliot

I suppose that the blitz had nothing to do with it?

Mr. Shawcross

I do not want to go too far on what appear to be controversial topics, so I will go on to deal with what has been said by the noble Lord. He said that all the world, except the ex-enemy countries, enjoyed a higher standard of living than our own. From his point of view, I entirely agree. I hope he will not think this is meant to be in the least offensive, but his world, in practically every other country, probably has a much higher standard of living. That is to say, the wealthy and the moderately wealthy people in all countries from America to Belgium and France, probably Sweden and certainly Spain, do enjoy a much higher standard of living at the moment, because they are able to deal either in a black market or a market in which there is no rationing. So there, again, I think we can agree with the noble Lord.

Mr. Walter Fletcher

Does the hon. Member wish to imply that in Belgium, for example, the average working man does not also enjoy a much higher standard of living than is the case here?

Mr. Shawcross

A very much lower one. There is indeed a considerable body of opinion in America that a large section of even the American working class population has a much lower standard of living than our own.

To come to some of the points which have been touched upon by the noble Lord as less controversial, I agree with him as to the imports of wine mimosa and tulips from France. That strikes me and a great many people on this side of the House as slightly unnecessary. One notes a good many imports from the hard currency countries, particularly from America, which are equally unnecessary. For example—and this is only one example—during the last three months we imported fresh fruit and vegetables from the United States of America to a total value of £2,503,325. That apparently is at about double the rate at which we were importing fresh fruit and vegetables in 1938. What they are is difficult to ascertain from the trade returns, but one finds that what bulks most largely in them are such things as pears, grapefruit, grapes and other somewhat luxurious articles, having regard to the price at which they sell—for instance, cranberries at 15s. a pound, or 7s. a pound, as I think they have come down slightly. There are other examples of a similar kind, such as the patent medicines imported from America.

I have previously mentioned one which claims to be a remedy for over-indulgence in alcohol or food. These imports amount to a considerable sum. A lot has been said about tobacco and films. Chewing gum was mentioned, only to be denied. If one looks at the trade returns, one sees that, apart from the large sums spent on fresh fruit and vegetables, there are many small items imported from America and other hard currency countries, which really do not seem necessary to the ordinary working people of this country. The noble Lord also referred to the state of this country in comparison with Belgium. One of the things which he mentioned as, I suppose, an important factor, was the worn out condition of factories and machinery. Whose fault is that? [HON. MEMBERS: "Adolf Hitler's."] I am not aware that Hitler had anything to do with the wearing out of factories or machinery. The amount of damage to factories was comparatively small. [Interruption.] I am sorry that that arouses such a lot of annoyance from hon. Members opposite.

Mr. William Shepherd

Does the hon. Gentleman not realise that there is more than one way of wearing out industrial equipment? It can be done by dropping bombs on it and also by working it for 24 hours a day.

Mr. Shawcross

I understand that, but I cannot understand why, when I was agreeing with the noble Lord, hon. Members opposite seemed to be so angry. I did not say it was their fault.

Lieut.-Colonel Elliot

That is what the hon. Gentleman did say.

Mr. Shawcross

I did not say it was their fault. Hon. Members will be able to read what I said tomorrow. If I did say that, I should like to withdraw it because I do not want to argue the point now. I was simply saying that I agree with the noble Lord and, though probably it is not within the scope of this Debate, I would agree with him that the amount proposed to be spent on the re-equipment of factories and machinery this year is inadequate. I was about to say when hon. Members interrupted that I would like to see a great deal more plant and machinery imported from the United States if that is possible—and I believe it is—rather than some of the imports I have mentioned. I do not want to make any further suggestions which hon. Members opposite are or are not to blame. It seems to me that at present that question has become largely irrelevant.

The question is: Where do we go from here? I am sure nobody opposite will object when I say that I entirely agree with the noble Lord that the dangerous and urgent state of the country at present either is not fully appreciated or, at any rate, does not seem to have due attention in the speeches from the Government Front Bench. I would refer to a leading article which appeared in "The Times" on Saturday. I doubt whether many of my hon. Friends read it because probably they were too busy in their constituencies. That article contained a most admirable summary of the present situation and of the very dark and dangerous course into which we seem to be drifting—or, at any rate, the situation in which we may find ourselves in the very near future, if we are not properly navigated. I regard the present situation just as seriously as any hon. or right hon. Gentleman opposite. I know also that a great many of my colleagues on this side of the House regard the matter equally seriously.

I wish to deal with another important matter which, as far as I know, has not been raised so far in this Debate. I refer to the export trade in motor vehicles. I think this has, to some extent, been over-estimated. It has been thought that we have been doing very well indeed and that there is not much to worry about at the moment. As far as I can ascertain the figures from the trade returns—and I think they are correct—they are that during the 12 months ending 31st December we exported 86,000 new motor cars. That includes chassis—cars and vehicles without bodies—but it does not include spare parts. The sum that we received, whether in hard or soft currency, was £20 million. I know that in addition there were a large number of trucks, as the Americans call them, and spare parts. The total amounted on paper to a sum in sterling of about £50 million or £52 million.

The healthy state of the car export trade is often looked at from these figures, but if we examine the figures in regard to ordinary private cars, it is not quite so good. It seems not unlikely, during the next 12 months, that it will not be even as good as it was in the last 12 months. That arises largely through the probability of foreign competition. The American export trade is bound to increase rapidly. It amounted to 116,000 during the last 12 months, and that represented a very small percentage of their total production, although their total production was smaller than in peacetime. The Americans estimate that next year they will produce 3,600,000 private motor cars, and of that quantity about 10 per cent., and perhaps much more, will be exported. If that is so, the figure of 10 per cent. would represent more than the total estimated production of private cars in this country. It is said in the White Paper, and it has been stated again today by several hon. Members, that we have to compete in future by the quality and design of our products. Our motor cars will, therefore, have to compete with the exports of America and other foreign countries.

A year ago I had the opportunity of calling attention on the Adjournment to some deficiencies in the organisation and output of the British motor car industry, and I was able to quote a large number of figures. It called forth a great deal of vulgar abuse from certain leaders of the motor industry, and even from right hon. Gentlemen opposite, but none of the facts or figures I gave—

Air-Commodore Harvey

Who were the right hon. Gentlemen who objected, because I agreed with much of what was said, and so did some of my hon. Friends?

Mr. Shawcross

I do not want to indulge in any controversy. It is a fact that certain right hon. Gentlemen took exception in public to what I said, although I am very glad to hear that some Members opposite agreed with me. The leaders of the motor car industry, or many of them, certainly did not agree, but apparently some of them have recently visited America and have thought again. It appears that not only were the figures and statistics, I then gave correct but many of the prognostigations I ventured to utter are rapidly being proved true. It was said that the motor car industry could not be expected to produce new models but that it was better to go on with the manufacture of old types as it took at least two years to produce a model from the drawing board to the production line. That has been proved wrong, because several new models were then being advertised, and since then others have appeared, although whether they really were new models or not is a different matter.

One model has recently appeared. I believe it is the convention not to refer to names of particular manufacturers or vehicles, but this model which has appeared from one of the largest, if not the largest, manufacturers seems to be just the type which might be expected, on paper, to compete with the products of American factories. I say "on paper" because one cannot get all the information one would like from the specifications. Although the horse power is stated, we do not know the weight, and have no possible means therefore of judging the probable performance. We find, on the other hand, that it sells at a price which, on an average, is double that of similar products from American factories, and if you require an extra carburettor to give about five per cent. more horse power and a rather different and better looking body, it costs 50 per cent. more.

In other words, you pay a total price without any Purchase Tax of £1,500. I understand that that vehicle has been shown at the Geneva motor show, and that although it called forth admiration from the point of view of the lines of its new body its price, in comparison with similar American models, put it completely out of any possibility of being a competitive product for our export trade. That, so far, is the only model of the type and design which are likely to compete with American cars. I think that we are apt to forget that there is also competition approaching—if it does not already exist—from the products of French factories which seem, under national ownership and Government control, to be concentrating on one very good model, which they soon will be turning out in large quantities—to say nothing of the Italians.

There has been a good deal of talk lately about the desirability of altering the taxation system for motor vehicles at home. I cannot go into that in this Debate, but I would suggest that my right hon. and learned Friend the President of the Board of Trade must not expect that if that system of taxation is altered, we shall get, either now or within a measurably short time, an enormous output of Mass-produced cheap vehicles of a type that will compete with those of America, or other countries. It will, no doubt, in the long run assist manufacturers, who will be able to plan ahead, who will be able to say, "Even if we no longer have a sellers' market abroad we shall still be able to sell our products on the home market." But that cannot be done unless somehow or other, by force, fear or assistance, manufacturers are persuaded to amalgamate, or co-operate in some way, among themselves, so as to be able to produce the right type and design of model in sufficiently large numbers to compete with American, French or Italian competitors. I do not know how that is to be done. I believe that my right hon. and learned Friend, after a stormy encounter with the motor industry, if he did not retire hurt, at any rate retired, and transferred his burden to the Minister of Supply. He promptly set up an advisory council, a kind of working party which makes reports which have not been, and will not be, published.

But what is going on in the meantime? The only thing we have seen is a rise in prices, paralleled by a rise or at least a steady level of profits. The motor car to which I have referred was produced at two or three times the price at which the cars of other countries were produced. If that industry is to be regarded seriously, as something on which we can rely in future for our exports, something must be done about it. If the industry will not do it, then some form of compulsion should be exercised by the Government. The Government should not be fobbed off, by the industry, with the theory that they cannot build up the export trade unless they have, first, a large home market. Some of the arguments which were put forward on other occasions have been demonstrably false. It is said, for instance, that the Americans can always have an advantage over us, because they have a large home market. A Member opposite said tonight that he regarded the Empire as being the home market. If that were so, it would mean that the home market for British industry would be as big as the American market. But even if we had to rely on the United Kingdom market alone it would provide a quarter or a third the possible number of car owners in the American market.

Whether that is the case or not, is it not obvious that an industry need not neces- sarily depend upon a large home market? I cannot refer to what was said in another place, but I can refer to what was said elsewhere on numerous occasions by one of the greatest living authorities on the motor industry, Lord Lucas, who has had experience not only in the manufacturing side but, more important still, in the sales of motor cars. It has been pointed out by him that that is unnecessary and that other industries—for example, the watch industry in Switzerland and many others—have been built up with practically no home market at all. If the motor car industry is to be taken seriously, that principle should be accepted and everything should be done to build up that industry for the primary purpose of exporting cars in large numbers at prices which will compete abroad.

A matter which is often overlooked is that it will not be enough merely to produce the right type of model at the right price, but the industry must also organise a sales and maintenance service for the supply of spare parts and repairs in foreign countries which is, at least, equal to what the Americans do in that respect. I believe that to be just as important as producing the right type of car at the right price. That can only be done by the industry itself, and I hope it will receive the attention of my right hon. Friends who may have overlooked it if they have been concentrating only on this question of taxation or on the possibility of producing cars in large numbers at cheap prices.

I ask my right hon. Friend the President of the Board of Trade, and those who will consult with him upon this problem of the motor car industry in relation to exports, to consider whether it is not too late now to place any reliance at all upon the motor industry from a long-term point of view, but whether in the next year or two, or three, it may not be that in allotting steel for the manufacture of cars we will be putting too many eggs in the wrong basket—that is, unless the industry shows more signs than it has shown so far of putting its own house in order. I would urge him, in considering that, also to consider this fact which was brought to my attention the other day by a gentleman who, I understand, has been sent out by my right hon. Friend to make a tour of our Colonies and Dominions, the chairman of the Import and Export Board of the London Chamber of Commerce, who pointed out that before the war if not now, something like 50 per cent. or 60 per cent. of our export trade consisted not in these large exports like motor cars, but in the small things which were sold and dealt with through small merchants and agents. He pointed out a fact which is often overlooked—that, for example, it is much better to export razor blades which sell at £500, £600 or £1,000 per ton of steel, than it may be to export a motor car which represents only £400 or £500 for a ton of steel. I suggest these small matters are being neglected by us, whereas they are just the things upon which the Americans are now rapidly regaining their former export trade and building it up for the future.

The immensity of this problem which we have to face, of this competition or trade from America, which is flooding into all the markets of the world, will only be realised if we go to shops abroad—we can do it in Europe, and certainly in the Colonies and the Dominions—and see what is coming from America and how much is coming in comparison with our own exports. There are all sorts and conditions of small things of that kind. I should like to mention two of these which have reference to the electrical industry, about which we are often told there are great possibilities in the future. One of the two things is an electric toaster which was designed in America to sell 10 years ago. I have one, and it is still working without any trouble, and it is used two or three times a day. It makes toast, turns itself off and no one needs to attend to it. Such a machine has never been produced by the British industry, and it is the sort of thing that sells like hot cakes—or hot toast. The other thing to which I wish to refer is an electric razor. Right hon. and hon. Members opposite may not need an electric razor or they may not like one, but electric razors produced in America, and before the war in Germany, sold very well abroad and in this country. So far, our electrical industry has not been able to produce one. It is things of that kind which, I believe, are overlooked, but which constitute a large proportion of the total American export trade which in this coming year, is estimated to be no less than 11,000 million dollars.

I conclude by repeating my agreement with the noble Lord the Member for South Dorset when he stressed the danger and the urgency of the situation in which we now are. I ask hon. Members opposite not to make these controversial speeches, such as the noble Lord himself made on some of the points which he mentioned, though on others I entirely agreed with him. Let us concentrate on constructive suggestions which those in industry will appreciate and understand. Hon. Members opposite should not only make constructive proposals here, as many of them do, but should go outside to their friends in industry, to the leaders of the motor industry, for example, and tell them that this House is agreed on both sides as to what should be done, and let them see that they do it.

9.59 P.m.

Sir Peter Bennett (Birmingham, Edgbaston)

It would be interesting if there were time to follow up the scheme which the hon. Member for Widnes (Mr. Shawcross) and others in the wider aspects of this subject haw touched upon since the President of the Board of Trade made his speech. I have no doubt that the good advice from the hon. Member for Widnes will be studied by the motor industry, who will take full note of it and act in accordance with a judgment of its worth. I have no doubt also that the Minister of Supply will refer it to the Advisory Council if he needs advice upon it. I cannot speak tonight on it because my time is limited, but there are points in regard to it to which I shall be able to refer at a later stage.

My reason for speaking is that in a fortnight from tomorrow the conference at Geneva opens, and in my view that is very important. It has been suggested that it is a preparatory conference. Let us understand clearly that already there has been one meeting of this preparatory conference. It has referred part of its work to a drafting committee in New York, and when it reassembles in a fortnight's time the delegates will have instructions to get down to the draft which will be the final document. As far as I can gather, when it goes in front of the final conference not much more will be required than to confirm it. We must remember that the preparation of this document for this conference is now being carried out. I have a little experience of attending these conferences in connection with business matters. I was at Ottawa where, although not instructed by His Majesty's Government to represent them, I was invited to attend as one of the independent industrialists to give advice if needed. We were known as "the hungry forty," and we gave our advice and, I think, were able to overcome one or two difficulties. I saw the others at their work and I appreciated how difficult it was.

In November, 1944, I attended a preliminary canter in America for the conference which is now taking place. Under the sponsorship of the American authorities business organisations were asked to get together the representatives of 21 nations, and I saw what it was like trying to reach agreement between a large number of people of different nationalities. I think that perhaps the experience I had may help the House to understand what the difficulties are and how these matters have to be undertaken. We found over there that the Americans had advanced very considerably since the days of the Hawley Smoot tariff. The Administration over there understands and is very anxious to meet world needs. Expansion of trade is the slogan. They realise how much they need it. Some of the manufacturers there are very broad minded men. There is an article by Mr. Philip Reed in the journal which is sent to me—and no doubt to many other hon. Members—entitled "Freedom and Union" in which he appeals that business should be kept free and shows the breadth of view of many American businessmen.

There are others, of course, who are narrow in their outlook, and that is not peculiar to America. We have them in all parts of the world, including this country. But the position in the United States is quite different from the position here. During the war they expanded their facilities, they were not subject as we were to concentration, and there was no rationing of resources, so that their domestic consumption increased during the war while ours decreased. The result was that at the end of the war American consumption was 50 per cent. more per head than ours. Therefore, their problem at the present time, as it was when we discussed it with them there, is how to keep all these expanded plants working and how to provide full employment.

I heard Mr. Roosevelt say in an election speech that his policy was to find 70 million jobs for the people in order that the war-time employment should be kept at full strength, and the American businessmen at that conference, and Americans generally, decided that the way to do it was to have a great increase of exports. When we discussed the matter at that conference they first of all decided that they would lift their exports from five billion to 12 billion, and, finally, to 15 billion. When I use the word "billion" I mean the American one, which is 1,000 million dollars, although it is not figures but the proportion which counts. We said, "Yes, that is very good," and we discussed it with them. We asked them, "Do you realise that you are talking all the while about export policy? In that you differ from us in England because our export policy follows behind an import policy. We have to import food and raw materials in order to live and then we export to pay for them. You are talking all the while of exports."

Their history has been one of expanding frontiers, and they have been developing the country on a market which could take care of all that they could produce. Now they begin to realise that that moving frontier has come to a standstill, and they are looking round for an outlet for the excess production of their factories which they cannot absorb at home. We asked, "Have you any idea what your imports are?" At a meeting, of a large number of business men, there was only one who knew anything about the volume of their imports. They were staggered when we told them that the average for the years 1933–38 was around two and a half billion. They had been exporting five billion, and now they were talking of going up to 15 billion. We said, "How are you going to balance the account? Is your policy permanent Lend-Lease?" They admitted it was not. We then asked how long their people would stand taxation to pay for the excess products they were going to send overseas.

It was November, 1944, when we were there. In an article which was published early in January of this year, Mr. Arthur Paul, the director of the Office of International Trade, says that in 1946 their exports were ten billion, of which eight billion were commercial and the balance for U.N.R.R.A. and the winding-up of Lend-Lease, while imports were five billion. Some hon. Members have probably seen the publication called "The Round Table." In its March issue, an American writes that the present rate of American exports is 14 billion and of imports 7 billion, so it is still two to one. He goes on to say: If we do not balance our exports with our imports there is no alternative to a loan policy as reckless and uneconomic as that of the 1920's. There are people there who realise this position, but what are their difficulties? They are political difficulties, because as the House knows America is a high tariff country. The industrial expansion there was built up behind a high tariff wall, and there is always opposition to a modification which will hurt somebody when it takes place. Now the Republican majority is asserting itself. Some of them are opposed to the whole idea of these negotiations, but a bargain has been struck. The article I referred to in the "Round Table" goes on: … The Administration has long been committed to a freer trade program for the whole world. It is the keystone of official American economic policy. As an essential step, the Administration not only wishes continuation of its authority to negotiate generalized reciprocal agreements, but it also seeks further international tariff reductions on a bargaining basis. The State Department has announced items which will come up for negotiation at Geneva, and has invited interested parties to make general statements, either for or against. Republican groups in House and Senate were opposed to extension of the reciprocal agreement program last year, but Democratic votes put through the extension. Now that the Republicans are in a majority, they have the chance to halt the tendency toward lower tariffs which has been an essential of Democratic policy since 1933. Already, various Republican stalwarts in Congress have issued statements of objection to lower tariffs. Although Senator Vandenberg recognized, in a speech coincident with the opening of trade agreement hearings, that 'peace and economics are inseparably akin', and although he indorsed continuation of reciprocal agreements 'in one form or another', he gave only qualified approval. He intimated that generalized lower tariffs from specific reciprocal agreements might not continue. That was the position, and, as I say, a bargain has been struck as a result of which an executive order has gone out which says that Congress can continue to support negotiations provided that, under any trade agreement in future, if as a result of unforeseen developments and of the concession granted by the United States on any article in the trade agreement, such article is being imported in such increased quantities and under such conditions as to cause or threaten serious injury to domestic production of like or similar articles, then the United States shall be free to withdraw the concession in whole or in part, or to modify it to the extent and for such time as may be necessary to prevent such injury. The argument is that that proviso was put in only to cover extreme cases, and is never likely to be invoked. It was not, however, put in to meet an emergency, but was put in deliberately to buy off the opposition, and it is only because it was inserted that they were allowed to proceed to Geneva. There is, also, an overriding "escape" clause under which the Americans have to admit that any agreement they make at Geneva is subject to three years' run and can be altered by Congress after three years. I mention this simply to give some idea of the background and the conditions in which our people will have to negotiate when they go to Geneva.

Vice-Admiral Taylor

When my hon. Friend had these consultations in America with regard to tariffs and the future trade of the world, did he discuss with them the agreement between America and Cuba whereby preference would be given and which would be exempt from this question of preference; and also the agreement between America and the Philippines, whereby also there would be considerable preference, both these policies cutting right across the principle which they lay down for the elimination of Imperial Preference?

Sir P. Bennett

I could hardly have discussed the Philippine agreement, seeing that it was put through only this year, but the principle of the agreement was mentioned. The President of the Board of Trade has said that he knows about these agreements and that our people are being instructed in them, and will argue the question. It has always seemed strange to me that Imperial Preference should be anathema to the Americans, but that nevertheless they should still have something very similar in Porto Rico, in Cuba and in the Philippines. I have never been able to understand why we were committing almost a mortal sin, and they were perfectly entitled to make their own arrangements. I do not question for one moment the desire of the United States Administration and many of its supporters and businessmen to expand world trade on the widest possible basis. I believe they are as anxious as we are to do so, because they realise how much the future of the world depends upon that being accomplished, and how essential it is also to their own good. What concerns me is that they can guarantee to deliver the goods all right, but can they guarantee to take the goods back in payment? I feel that the United States can afford to experiment, because if things go wrong they can change direction. They have made arrangements to do it, and their economy would not be seriously upset; but failure for us would mean disaster from which it might take generations for us to recover, if we ever did.

I have sketched out the American position. What is our position? The joint statement which was made when Command Paper 6709 was introduced is a general acceptation of the American proposals as a basis for discussion. It was accepted by the House of Commons after the Prime Minister's statement, and that statement was confirmed by the President of the Board of Trade. We are obliged to go to a conference and to endeavour to obtain a satisfactory arrangement. Beyond that we are not obliged to go. A preparatory conference was held in London and the Charter which has been prepared has been discussed and redrafted and will now be agreed at Geneva. Our position is that we are all agreed on the necessity for the expansion of world trade. That is common ground.

The "Economic Survey" proves that the target at which we are aiming for our export trade will be equivalent to one-third of the world rate. It is, therefore, quite clear that if we are to have our full share it must be a larger cake. But our steps to real multilateral trading must be guarded or we may find ourselves without what we have and waiting for something to come. I do not think our economy can stand a gap in it at the present time. World conditions are unpredictable. We have difficulties here. There is uncertainty in America. Hon. Members have spoken today—I get it in almost every letter I receive from America—of the fear of a recession on the part of American business men who are quite certain that there will be a slump though they do not know when it will come. From New York to California they think there will be a slump, and there is uncertainty. When we look at the rest of the world the conditions are chaotic, and there are difficulties in many of our old markets.

There is plenty of good will, to which reference has been made during the Debate, but there is a great deal of guesswork when it comes to the implementation of these arrangements. Somebody said it is very much like commercial crystal-gazing at the moment to forecast future business developments. At Geneva there will not only be ourselves and the United States and also our Dominions and Colonies, but we must bear in mind that there will be these 18 nations of all races and languages, and with all sorts of problems. The non-industrial people there will all wish to add to their industries. Previously we supplied food and raw materials to those markets, and we and the United States are anxious to supply them with equipment. We have to bear in mind that if we supply equipment to markets to which we previously supplied consumer goods, there has to be a readjustment, and we shall have troubles and difficulties as we did when the cotton industry provided large amounts of cotton machinery which later affected the production of Lancashire. These things take time to adjust, and there will be gaps, troubles and difficulties, and therefore the other nations are asking for escape clauses when it comes to the rigid rules which are suggested in the Charter.

On the other hand, those who are anxious to see this Charter through are very anxious that excess protection shall not be put on by the new countries. The new countries say, "We agree in theory, but we must be allowed to escape," and at Geneva they are trying to find compromises. The Charter proposes a code of conduct which is excellent and will be perfect in smooth waters, but it seems to me that it is quite contrary to the Government's policy at the present time. It is difficult for us to reconcile complete freedom internationally with domestic controls, which are necessary at the present stage according to the Government. It is a little difficult to reconcile those two lines of approach at the moment.

At Geneva tariff changes are to be negotiated. We should like to know what plan of consultation there is with those who are to be affected. I can imagine that there will be some sort of committee organisation in London, but I hope a sufficient time will be given to them when a problem is sent over. I have sometimes heard right hon. Gentlemen on the Front Bench, when asked the question, "Was industry consulted?" say, "Oh, yes, we consulted both sides of Industry." But they do not tell us what advice they received, and whether they acted on it or not. True, they certainly asked; but whether, having asked and consulted industry, they went their own way or not, they do not tell us. I am rather frightened that something of that sort may occur, that industry may be consulted very much on these lines: "That is what has been arranged. You agree with it, don't you?" I hope steps will be taken—because the conference at Geneva will not be for only a few weeks, but will take a long time—to give those people whose businesses depend on the way trade is working out, and who will have to find the employment necessary to keep the country going in spite of whatever changes are made, a full opportunity of expressing their views, and that notice will be taken of those views by those who negotiate.

Remember, we are in a much more difficult position, as it seems to me, than any other nation. In return for the loan we have agreed to remove some of our defences. We have agreed, as has been pointed out during the Debate, to the non-convertibility of sterling; we have agreed to remove discrimination in regard to imports. Well, that has been the price we have paid for the loan, but it is a weakness in the rest of our defences, and when it comes to giving up or scaling down Imperial Preference for some tariff concession in the hope that it will increase world trade, some of us are very alarmed. The case has been admirably put by my hon. Friend the Member for Mid-Bedford (Mr. Lennox-Boyd), and I have not the time, nor would the House desire me, to go over that ground again. I would, however, emphasise that many of us feel that to ask us at the present time to take the risk which is involved in upsetting that arrangement is one which cannot be justified in our present state.

We have had the promise from the President of the Board of Trade that there will be no unilateral disarmament; that there will be a quid pro quo. He said so in December, and he has repeated it today. As I gather it, he says there is to be a satisfactory bargain which suits both sides—which I hope means our side as well—and if there is not, then there is nothing doing. Well, he was very hopeful. But, of course, I can understand that, because if ever I have to enter negotiations I always do so hopefully; it would not be much use entering the negotiations at all unless one does so with some sort of confidence that one has a good case and can hold one's own. I hope we are not going to be over hopeful, and enter the negotiations in the spirit of, "Well, we must come to an agreement of some sort at any price." That is what we are frightened of; and there is always that danger in negotiations.

In the past British industries—I admit with one or two exceptions, but at any rate the great majority of them—have said unanimously that they would not surrender Imperial Preference if America gave them the whole of the 50 per cent. reduction which the Administration can give. And remember, too, when their tariff adjustments are added—and this applies not only to America but to other parts—it is quite possible, by administrative action, to remove a great deal of what has been given. There is a whole section of the negotiations which have been going on which deals with non-tariff matters. I can assure hon. Members that there are hidden away all sorts of things which can nullify any tariff concessions which are given—such things as the difference between home consumption value and the way they are asked for in different countries and different customs houses. I hope to have the assurance of the Secretary for Overseas Trade that that will be watched very closely and that what we give with one hand we do not lose in another direction.

What are the Americans importing at the present time? Mr. Paul, the Director of the Office of International Trade, says that they are importing rubber, crude petroleum, newsprint, cotton, sugar, fruits and whisky. That is all very well, but they are not things in which our industry is particularly interested. The "Round Table" article to which I have referred pointed out that there has been a change in the American position. America, as a big manufacturing nation, feels more secure in manufacturing goods and they have a big tariff of 42 cents on wheat, four cents on copper, 21 cents on petroleum and nearly two cents on sugar. The American imports which they are asking the world to send them and which they say they can take in much larger quantities are largely raw materials which we do not supply. No wonder our people are worried. We can easily see what we can lose, but it is very difficult to see what we can gain.

I know the argument for multilateral trade is that we only have to push it out, and it will come back in due course. I had an example of that the other day when discussing the question with the Secretary for Overseas Trade, and talking about exporting to the hard currency countries. I put forward the view that if we can supply some of these other markets they will be enabled to send goods to America and other countries and we shall get the benefits at second hand, but they seemed very doubtful. In addition, there is no certainty about the matter. The Reciprocal Trading Act will only run until June, 1948. There is no certainty that it will be renewed with the Republicans in control and in their present mood, and if there is any set back in America. If it is not renewed, the United States would be forced out of the International Trade Organisation. Where would we be if in circumstances over which they had no control the Americans had to drop out, and we had been persuaded to some agreement to give up Imperial Preference which has been so valuable to us? We should be back again in the days of the high tariffs without the Ottawa Agreements, and would have to start again. I would not like to think what would happen with our economy in its present position.

The Dominions are equally interested in this matter, and we know that they hold strong views. But the Statute of Westminster has been passed, and they are sovereign States. I would not presume to discuss their affairs. They are quite capable and, I am sure, alive to the position. But where do the Colonies come in? Are they to be treated as part of our system, or are we to negotiate on their behalf? It is a matter of life and death to them. That was pointed out by the hon. Member for Rochdale (Dr. Morgan) when he intervened. Surely there can be no question of our sacrificing them at a time when we are spending millions to rehabilitate them? Where do they come in when it comes to this hard bargaining basis? I had an example the other day which I now pass on to the Secretary for Overseas Trade. We may run short of dollars and, if so, we may not be able to buy United States tobacco. Certain countries in the Empire are supplying tobacco, but it is riot enough. They say they can lay out their lands, but they cannot do that on a short contract. No businessman would. We ask for a guaranteed market. Can we guarantee a market? Suppose we do that and America comes back and wants to sell us tobacco? We shall be accused of discrimination and yet we should never have got the cultivation of Empire tobacco, unless we had given some such encouragement.

The last point to which I would refer is this. I have not considered the effect of tariff reductions on our domestic position, because it is clear from the White Paper that we shall have to restrict our imports rigidly for many years to come. Are we to be accused of breach of faith because we start to do certain things, knowing that we shall not be able to carry them out because of overriding conditions at home? The whole matter, as I have tried to show, is one in which our interests are vital. We dare not make a mistake, and I hope that when the Secretary for Overseas Trade replies, he will reassure us on some of the points that have been raised since the President of the Board of Trade made his statement. Our negotiators at Geneva will carry our best wishes with them. They have a difficult and thankless task. Those who have been at such meetings know what takes place. You go to a reception; a man takes you into a corner and insists upon discussing some intricate point amid the buzz of conversation and clinking of glasses. Our negotiators will be going through all that for many months. We wish them all success. We hope that His Majesty's Government will stand behind them and give them all support, and let the House of Commons know as much as possible of what is going on.

10.32 p.m.

Mr. Harold Wilson (SECRETARY FOR OVERSEAS TRADE)

This Debate has covered a very wide range in the field of overseas trade, and I think, if I may say so, it has proceeded at a very high and serious level, with the possible exception of the very charming intervention of the noble Lord the Member for Southern Dorset (Viscount Hinchingbrooke), who gave us some little insight into that dream world in which he is still living. With this exception, I think the importance of our export trade has been fully recognised and fully expressed, both in the short-term and in the long-term aspects. I should like to deal with many of the points that have been raised both on the short-term and on the long-term problems, but in doing so, I am afraid it will be necessary for me to hop from subject to subject rather than attempt a connected picture.

The short-term problem of export is, of course, fundamentally a problem of production and a problem of the allocation of supplies between home consumption and export. The short-term import problem in many fields is a question of actually getting hold of the materials, machinery, food, or whatever it is that we need to import into this country. When the, noble Lord suggested that we should not only cut off our export trade for a short time, but also increase our imports, I do not think he realised that many of the things he was calling upon us to import are not easily procurable. A large number of hon. Members have referred to the necessity for importing more machinery for the re-equipment of our factories, and have contrasted the dollars and other currency spent on what they describe as non-essential imports, with the relatively small amount spent on machinery for the rehabilitation of industries. The reason is not that machinery has not been getting an adequate proportion, but simply the difficulty of competing with the vast reconversion needs of the American industry. With regard to increasing importation of food, I do not want to go too much into that subject to which the noble Lord referred. One of the biggest difficulties, as he well knows, has been, not only in procuring it but in getting it moved to the seaboard for shipment to this country. On many of the points raised on the short-term question I agree with the hon. Member for Banbury (Mr. Dodds-Parker), particularly that we should try to encourage new exports and, where possible, new suppliers. Of course, he will realise the difficulty of bringing new suppliers into industries where the raw materials are already very short and where it is necessary to give fair supplies to those who are already in the industry.

The question of the direction of exports was raised by a very large number of hon. Members and I think that most of what I can say on that has already been said by the President of the Board of Trade in his speech a fortnight ago today. What we are doing, without introducing a system of rigid licensing of exports, which would be necessary to get such a physical redirection, is to encourage and persuade industrialists in as many industries as possible to try to send their exports to the hard currency countries, and, as the hon. Member for Edgbaston (Sir P. Bennett) has just said, particularly in cases where it is possible to increase the total amount of exports. In those cases we are asking that, so far as possible, the additional exports should go to the hard currency areas, but, of course, there are great difficulties about doing that on a really rigorous scale and on the scale which some members have suggested, particularly, of course, in view of the necessity for maintaining contacts with the markets which we shall certainly need when we come to deal with the long term aspect, especially some of those Empire markets the importance of which hon. Members opposite have stressed in their speeches today.

Then the question has been raised by one or two of my hon. Friends on this side of the House of trade with Russia. I do want to assure them that we are anxious to get the fullest possible trading relations with Russia, and there is no lack of good will or energy on our side in trying to make that effective. My hon. Friend, now the Paymaster General, who preceded me as Secretary for Overseas Trade, was very energetic in this respect and only a few days before he left the Board of Trade, he sent a message to Moscow stating his willingness to go immediately, at short notice, with a view to having trade talks with the Russian Government. Since I followed him at the Board of Trade, another message has already been sent repeating, on my behalf, the assurances he has given that we are anxious and ready to go and have talks with the Russian Government to see what mutually advantageous arrangement can be made for trading between Russia and Britain.

The question was raised by four or five hon. Members about the importation of azaleas, tulips, mimosa and other flowers in recent weeks. There is a reason for these imports. I think hon. Members who have had experience of negotiating with some other countries on a bilateral basis know that when asking them to increase their exports to us of the things we want often we can get the increase required only at the cost of bringing in certain other things which, quite frankly, we are not so keen to have. It is a fact that the country to which the hon. Member for West Coventry (Mr. Edelman) referred was willing to increase exports to us of steel which we need, only on condition that we would take imports of certain flowers and fruits to which exception has been taken in certain parts of the House.

Turning from the short-term to the long-term problem that, of course, is very much more complicated and in some ways more difficult. The long-term problem of British exports is partly one of getting production but much more it is a problem of cost, of efficiency, of being able to compete with other countries under conditions of a buyers' market. It is partly that, but fundamentally, it is a problem of increasing world trade above the level of the nineteen-thirties. As my right hon. Friend said earlier this afternoon, we require a 75 per cent. increase above prewar volume. In our own interests, and in view of the necessity to maintain the flow of raw materials for full employment, it is also absolutely vital that we get such an increase in world trade as to make it possible for us to reach our export target. That is one reason why we have joined in the elaboration of this International Trade Organisation, and one reason why we are going to send a delegation to Geneva is to attempt to raise the volume of world trade.

Mr. William Shepherd

As our export trade is almost confined to manufactured goods, and as the tendency in the world today is an increase in industrialisation, to what direction does the hon. Gentleman look for our manufactured goods market?

Mr. Wilson

I am afraid that question would take a long time to answer, but an increase in industrialisation leading to a rising standard of living in those countries, would demand more goods. And one thing which is going to affect the pattern of trade in the future will be the demand for capital goods already playing a large part in Britain's export trade. What we are seeking at Geneva as a means of increasing world trade is a reduction not only of tariffs, but of other trade barriers, including quantitative regulation of trade. This reduction in tariff barriers is being sought, not only in an effort to increase world trade, but also as a means of solving the problem mentioned in the speech of the hon. Member for Edgbaston just now. While speaking of that, I should like to thank the hon. Gentleman for the good wishes he expressed for the delegation which we are sending to Geneva. The problem to which he referred was that of increasing the imports into America, in order that there could be something corresponding with their capacity to export, and the problem of maintaining the right balance of payments for the creditors, especially those in the western hemisphere, quite apart from the problem of increasing British exports. Anyone who considered the problem of world trade for one moment, would agree that it is impossible to solve the world monetary problem, unless we can solve this problem of imports into the United States and similar countries.

The right hon. Gentleman the senior Burgess for Oxford University (Sir A. Salter) said he could not find in the Charter any proposals for dealing with this problem in a country which had a consistently favourable balance of payments. I see that he is not here at the moment, but if he were I would refer him to Article 7 of the Charter and to page 5, Section E, paragraph 3, of the accompanying Report Charter, which sets out in the fullest terms, the kind of proposal which he was wanting to see.

Turning to the question of Imperial Preference, this matter was first raised—I thought in the least constructive form—by the right hon. and gallant Gentleman the Member for the Scottish Universities (Lieut.-Colonel Elliot). He quoted some very impressive sounding figures of trade in the period following Ottawa and the Import Duties Act, and showed that during the period between 1932 and 1937, trade with the Dominions increased quite remarkably—and so did trade outside the Empire. It is very easy to prove a thing, of that kind, if you are going to compare, as the hon. Member for Mid-Bedford (Mr. Lennox-Boyd) was quick to see, one of the worst slump years of all time with a year of peak activity for prewar days, particularly when using value figures, and comparing the figures of a low price year of 1932 with the figures of a high price year of 1937. I suppose that figures of that kind were used before the war by hon. Members opposite to persuade themselves that they had solved the problem of world depression.

Lieut.-Colonel Elliot

I do not wish to interfere with the rather complacent arguments which the hon. Member is addressing to us. Surely he will see that the purpose was to get out of the depression; and we did get out of the depression. He admits that by his arguments.

Mr. Wilson

I think a lot of other countries without Imperial Preference got out of the depression, and have equally remarkable figures. I do not think anyone in 1937, this so-called boom year—the people in my constituency and in other parts of the country, and for that matter, the millions of unemployed in the export industries—really felt that the right hon. and gallant Gentleman and his colleagues had solved the problem.

Lieut.-Colonel Elliot

They certainly made a better effort to solve it than was made in the two free trade years when the hon. Member and his friends put men out of Work at the rate of one per minute.

Mr. Wilson

If we are going back into the question of the depression, it hit the whole world and began before our party came into office. There are a lot of other figures which we might quote.

Lieut.-Colonel Elliot

We have all night.

Mr. Wilson

The right hon. and gallant Gentleman apparently wishes me to quote some figures. Unlike him I will compare like with like, taking not 1932, but another so-called boom year, 1929. For those Empire countries to which he referred, taking 1929, the exports to Canada were £35 million, and in 1937 they were. £27½ million; for Australia they were £54 million in 1929, and £37½ million in 1937; for New Zealand they were £21 million in 1929, and £20 million in 1937. He did not refer to South Africa, where there was an increase. I will give him that one.

Lieut.-Colonel Elliot

The very country I want.

Mr. Wilson

If the right hon. and gallant Gentleman had not compared 1937, but the year of incipient slump, 1938, when the export trade was falling very fast indeed, and when, if it had not been for the oncoming of war and rearmament, we should have entered a slump at least as great as that of 1931–32, the picture would have been very different. I remember reading in the "Manchester Guardian" at the time, that in the second quarter of 1938 cotton exports had reached the lowest figure since 1852. Statistics can be used to prove either the case for Imperial Preference or the case against it. I am sure we are happy to leave the statistics which the right hon. and gallant Gentleman was quoting, and come to the real argument about Imperial Preference, and the part which it is to play in this conference at Geneva. I think that the right hon. and gallant Gentleman opposite really over-dramatised the situation when he used the phrase about "the Empire being abolished." Not only can this be answered by the assurance given by my right hon. and learned Friend, but also by the fact that the British Empire was not born in 1932, and does not derive solely from Ottawa, the Import Duties Act, or the various other economic bonds to which he referred. I wish the right hon. and gallant Gentleman had been present at some of the discussions we have had during the past few weeks between the Commonwealth countries, so that he could have realised the "ideological" relationship—I hate the word "ideological"—between certain of the Commonwealth countries and this Government. We have been having the closest consultations with Commonwealth countries on the line to be taken at Geneva, and we are consulting with the representatives of a considerable number of Colonies. Representatives of the Colonies will be at Geneva, as well as representatives of the Dominions. In these talks, which began on 11th March, we hope to have three and a half weeks' of very intensive work on the problems we have been debating today. I can certainly say that the talks have been extremely friendly and co-operative, and that there is a hopeful spirit about the outcome of the Geneva conference. We are, at present, going through every item of common interest to ourselves and the Dominions. We are going through every item that might appear on any tariff or preference list that might he called into question at Geneva.

I think that my right hon. and learned Friend gave Members opposite the assurance which they were seeking—and I think they were satisfied with it about Imperial Preference. Article 24 provides for negotiations to begin the participant foreign nations for reciprocally mutually advantageous negotiations, directed to a substantial reduction of tariffs and other charges on imports and exports, and to the elimination of import tariff preferences. It is not a question of trading the whole of the Imperial Preference system for minor concessions in the tariffs of other countries. We are undertaking a whole and laborious series of individual negotiations at Geneva. There is no question of trying to apply an automatic common rule to the Imperial Preference list, or overseas tariff list. We judge every item on its merits. A given reduction in a foreign tariff would call for an appropriate reduction in preference, if it were mutually advantageous. In the phrase, "mutually advantageous," we have in mind advantageous to the third party to every preference negotiation. The elimination of preference on any item, or series of items, can only be in return for a substantial reduction in the tariffs of the country with whom we are negotiating. Article 24 (1) (c) states that the principle is accepted, in negotiations, that the binding of a low tariff is recognised as a concession equivalent to a substantial reduction of a high tariff. This point seemed to be troubling the right hon. and gallant Gentleman opposite—

Lieut.-Colonel Elliot

And the next point?

Mr. Wilson

I am sorry that the right hon. and gallant Gentleman still seems to be in trouble.

Lieut.-Colonel Elliot

I think it is the hon. Gentleman who is in trouble, if I may say so.

Mr. Wilson

The next point referred to the reduction or elimination of preference. The point of the Article is that if we were negotiating with, for instance, the United States, an offer to bind one of our existing low tariffs would be equivalent to an offer on their part to reduce a high tariff. As far as the preference is con- cerned, if, for instance, Canada were negotiating with the United States, a reduction in the preference would be equivalent to a reduction in the high tariff, or, alternatively, if a country with low tariff rates were negotiating with Canada on a particular high tariff item, a binding of that low tariff would be taken as equivalent to Canada's reduction in the preference.

Lieut.-Colonel Elliot

The hon. Gentleman does not seem to realise the difference between the words "reduction" and "elimination." There is a difference, I assure him.

Mr. Wilson

That has been fully realised in these discussions. These words have not been put in without the most careful thought.

Lieut.-Colonel Elliot

I am sure of that, but why does the hon. Gentleman skate round them when it comes to explaining them to the House?

Mr. Wilson

I think it has been explained several times that only a substantial reduction in a tariff would be exchanged for the elimination of a preference.

Lieut.-Colonel Elliot

The hon. Gentleman has not grasped the point at all. A tariff can be reduced and put back again, especially under the escape clause. It can be done at any moment. A preference takes a long time to negotiate. Once swept away, it cannot be restored.

Mr. Wilson

I will deal with the right hon. and gallant Gentleman's question about the escape clause in a moment in its relation to preference as well as to tariffs, but I would not accept his suggestion that if any other country makes use of the escape clause it is not possible to reimpose a preference which has been lost. I want to repeat what is more important, and that is the fact that we shall not lightly reduce, much less eliminate, any preference except in return for a really valuable concession from those with whom we are negotiating. In many ways, the negotiations which we are having at Geneva, and any subsequent ones which follow, can be regarded as a continuation of the trade negotiation of 1938 with America, carried out under the guidance and direction of the right hon. Gentleman the Member for West Bristol (Mr. Stanley)—a negotiation in which we reduced tariffs and preferences in return for a reduction in United States' tariffs. It is owing to the war that we have not felt the real effects of that agreement.

I come briefly to the point raised by a number of hon. Members concerning the effect of these proposals on agriculture. I wish to assure hon. Members briefly, though I could go into it more fully, that nothing that is done under these proposals ties our hands or prevents us carrying out the agricultural policy which has already been announced to the House and which the House has approved. We can continue the use of tariff protection in agriculture to the extent that it can be introduced on any item as a result of the Geneva discussions. To the extent that State trading continues, we can use State trading in the same way, giving more advantageous prices to home agriculture than to overseas buyers, the margin corresponding to the tariff which would rule if private trading were in operation. We are perfectly free to assist home agriculture to any extent. The restrictions in the use of subsidies under the Charter deals with export subsidies rather than subsidies for general production. Of course, subsidies can also be followed equally in private or State trading. I should like to assure hon. Members on this side of the House that nothing in this Charter in any way affects the right or ability of this country or any other country to manage or operate internal economy, whether agricultural or industrial, and cannot affect the development of the welfare services which this Government in recent months have been intensifying.

I think the proposals will really help the British farmer. Not only do they not tie our hands with regard to an internal agricultural policy, but they assist the farmer in the positive help which is given in protecting him against the worst effects of international agricultural depression. One of the worst things which hit the farmers between the wars was the quantitative regulations in other countries and the fact that many exporting countries found a market in this country, because they had been driven out of other markets owing to quantitative restrictions overseas. I know the Government then found it necessary, in defence, to introduce and operate quotas in this country, which possibly at that time was the only means of defence against the influx of food from abroad. The proposals in commodity planning and stabilisation of prices will help to protect the British farmer, and as well, will balance the international development of a full employment policy.

I have been asked a number of questions about quantitative restrictions, the quota restrictions and the banning of such restrictions under this scheme. As I have said they can be used in agriculture. They can also be used in dealing with short supplies, in the regulation of war surpluses and, very important to this country, in times of acute balance of payment difficulties. As long as we are in balance of payment difficulties we can operate quantitative restrictions on imports. There are careful safeguards so that no country will abuse that provision. Apart from that, quantitative restrictions go altogether, and I think that will be of great value to this country. It was a familiar weapon in use between the wars, but like so many primitive weapons, it often recoiled on the heads of those who used it. Take the figures of the years between 1929 and 1937, exports to 11 selected countries fell by nearly 40 per cent, in spite of the fact that by 1937 we had concluded bilateral agreements to relax the severity of quantitative regulations with nine of the 11.

Before I conclude I should like to deal with one or two points which were raised by the hon. Member for Edgbaston. He asked about the consultations with industry. The Lord President of the Council on 15th April, 1946, announced the Government's desire to get into touch with trade organisations, and on the same day a letter was sent out to the British Chambers of Commerce, the Federation of British Industries, the Trades Union Congress and other bodies asking for expressions of view from industry. We have had those expressions of view from industry on the general question of international trade policy and details of trade organisations and also individual tariff negotiations. We have had a series of meetings in the Board of Trade with possibly hundreds of individual trade organisations and also with representatives of the trade unions on many of these questions. My predecessor, now the Pay- Master-General, met the Federation of British Industries and the National Union of Manufacturers. I have met the Association of British Chambers of Commerce and a meeting has been arranged with the T.U.C. which, unfortunately, had to be postponed owing to travelling difficulties. We have also arranged to establish, while the Geneva talks are going on, a standing consultative committee representative of the bodies I have mentioned and also of the National Farmers' Union, and this is to meet constantly and regularly under my chairmanship to consider progress at Geneva and to discuss any points that arise. I shall, myself, travel between Geneva and London, and representatives from Geneva will come across as occasion arises, to meet this consultative committee. We shall certainly bear in mind what the hon. Gentleman said about the desirability of giving as much notice as possible of the questions on which we want to consult the committee.

Another point that was raised concerned the escape clause. I have already mentioned that this escape clause, which has alarmed a number of hon. Members, applies equally to ourselves as to the United States. We have the fullest right to invoke the escape clause if we are adversely affected, and the mere fact that the American Government have said that this escape clause will be included in all future American trade agreements is not, perhaps, quite so serious as it looks at first sight. That clause has been included in very many American agreements in the past and, so far as I know, it has been invoked only on one or two occasions. Furthermore, as I have said, we ourselves can invoke it, and the fact that there is an escape clause may make some other ccountries more courageous in the kind of trade agreement which they are willing to come to at Geneva, and subsequently.

Finally, a question was raised about the Philippines which was exciting the hon. and gallant Member for South Paddington—who has gone out. The point is that the Philippine products used to enjoy a reciprocally free entry with the United States. There was, in fact, a customs union, which is fully allowed for in these trade negotiations. When the Philippines became independent this was changed, but to avoid too rude a shock on the Philippine economy it was arranged that transition from the customs union to the final state of things should be spread over a period of about 20 years, at the end of which time preference would be completely extinguished as between the two countries.

The last general question with which I should like to deal was raised by my hon. Friend the Member for Stoke (Mr. Ellis Smith) and my hon. Friend the Member for Grimsby (Mr. Younger). They were a little afraid that these proposals would make international planning impossible. I want to reassure them completely on that point. In the first place, international commodity planning, which is very vital, is possible only under this kind of proposal—unless we are going back to the kind of commodity planning we had between the wars, which was mostly of a restrictive character imposed by the producers themselves.

Viscount Hinchingbrooke

At least there was some wealth and food then.

Mr. Wilson

Secondly, in so far as international planning means anything, one of the most important things of all is the development of underdeveloped areas, and we are all grateful to the hon. Member for Mid-Bedford (Mr. Lennox-Boyd) for his very frank admission that the Colonies, over the very long period when hon. Members opposite were in the Government, still remained very severely underdeveloped. This Government has plans, and intends to go on with the development of the Colonies, on a very big scale. The scheme to which the right hon. Gentleman the Member for Scottish Universities referred for groundnuts production in Africa is only the first of many schemes of development. The proposals in Chapter IV of the Charter and Chapter II of the covering Report, as well as the proposals in the Report of the Food and Agriculture Organisation, provide for a much more rapidly increasing development of the so-called backward areas, and I fail to see how that could be done except on the basis of an international organisation of the kind which it is proposed to set up under this Charter.

We have heard certain criticisms of these proposals; we have heard certain worries expressed as to what might happen; we have heard a certain amount of cynicism that this might not come off; but what we have not heard is a constructive alternative to the proposals which are at present before the world. We have to increase our exports. That is absolutely vital to this country. The hon. Member for Mid-Bedford pointed out that, as President Roosevelt said before he died, it is equally vital, if the Americans are going to provide full employment for themselves, that they must treble their exports. Except on the basis of an increased world trade, the only result of that would be an extremely vicious, vigorous, intensive trade war between that country and ourselves, and probably most other countries as well, which have just the same ideas. It is not a question of opening up the Empire markets to American competition. It is a question of opening up all the world's markets to all the export trade of the world.

I would like to conclude where I began, by saying that these International Trade Organisation proposals are not of themselves a solution to Britain's export problems, either short-term or long-term, but they do provide the conditions in which a solution can be found. That solution in the long-term can come only by the development of efficiency in British industry, and of lower costs of production, and, as the hon. Member for Banbury said, by new blood and new ideas in British industry and in British exports. That can be achieved only under this kind of proposal. If we are to look at the alternative, an alternative based purely on trade wars with a restricted volume of world trade, of British industry sheltering behind high tariffs and, therefore, only able to go on from year to year as it was before the war, without modernising itself, re-equipping itself, sheltering all the time its inefficiency behind the trade barriers erected—if that is to be the alternative which some hon. Members opposite are suggesting—there is truly no hope whatsoever for British export trade in the modern world. That is not the spirit in which we go to Geneva. We go to Geneva hopeful that something will come out of this, hopeful that we are going to establish an organisation which will make possible a great increase in world trade, and while we are quite prepared to discuss with all countries any item they want to discuss, we certainly shall not give up any item of Imperial Preference without getting something really worth while in exchange.