EASTERN EUROPE (TRADE) (Hansard, 14 December 1948)

§ Mr. Solley (Thurrock)
I desire to call the attention of the House to the problems of trade between Eastern and Western Europe and the part this country can play in a speedy and happy solution of that problem, especially in the light of our serious economic situation and the difficulties of getting ample supplies of food for our people. A report was submitted on 14th August, 1948, by the executive secretary of the Economic Commission for Europe on the potentialities for increasing trade and accelerating industrial development in Europe. This document may be of historic importance. The report spoke of the central immediate problem of what might be conveniently termed the Western group, as being one of overcoming large deficits of the balance of payments, especially with dollar areas, and that of what might be conveniently described as the Eastern European countries as being the most rapidly developing industrialisation of that group. The report stated that the excess of expenditure over receipts on current account in the non-European countries in 1947 was 7,500 million dollars and that the deficit was unlikely to be substantially reduced this year.
1169 If Europe is not to experience a sharp fall in the standard of living—and for this purpose England is part of Europe—there must be a tremendous increase in heavy industrial exports, and Europe must seek to develop imports from non-dollar countries and, for this purpose, the mobilisation and increasing of exportable surpluses in manufactured goods. It would appear from this report that the minimum amount that would be needed to come from Eastern Europe would be of the order of 3,000 million dollars, and that is on the minimum basis of supposition that Western Europe's import needs would not exceed the pre-war level, or, alternatively, that Western Europe would be enabled to earn dollars directly or indirectly in the amounts assumed in the Marshall Aid calculations. Putting it bluntly, unless trade between Eastern and Western Europe increases five-fold by the time that Marshall Aid is planned to expire, Europe will be faced with a most substantial drop in its standard of living.
The report indicated that imports of cereals before the war amounted to 20 per cent. from Eastern Europe to Western Europe; and that today the figure is 2 per cent.; also, that in the case of raw materials, for example timber, the figure was 77 per cent., but now is 44 per cent. The report made clear that the problems of the Eastern European countries and the Western European countries are complementary in this sense, that the Western European countries need the raw materials and food which Eastern Europe can supply; and Eastern Europe needs the machinery necessary for increasing the productivity of its land and increasing the standard of living of its people. In other words, unless Western Europe and Great Britain are prepared to assist Eastern Europe in increasing the productivity of Eastern Europe, then the increase of trade between Eastern and Western Europe which is envisaged in this report will not be achieved and we shall all be faced with a substantial and serious drop in our standard of living.
I ask this question: what are the Government doing to assist in this expansion of trade? This is not the occasion to talk of foreign policy, although it is impossible to exclude considerations of foreign policy from this matter. It seems to me that the attitude taken by the Government 1170 in demanding as a condition precedent to achieving comprehensive trade agreements between this country and Central and Eastern European countries, a settlement by way of compensation for nationalisation in those countries of British industrial interests, is making it extremely difficult to reach a satisfactory solution of this problem. Take Roumania as an example. I submit that His Majesty's Government are, in fact, putting the interests of Shell, Unilever, and similar combines before the interests of the people of this country. The Government are acting as the financial agent of these monopolies.
It is all very well for the Government to say that they must protect the interests of British property. If this property were national property, and the Government were in a sense trustees for the British people of that property, there would be no challenging the authenticity of that argument. But, in fact, the British people are being blackmailed by Shell and Unilever, in this sense: they are saying to the people in my constituency, "You cannot have petrol from Roumania, or beef, or fats, or timber, because before we can get a trade agreement with them we, the shareholders of Shell and Unilever, must be satisfied in full with shekels for our pre-war holdings in Roumania."
Whatever may be said about the ethics of that sort of thing from the capitalist point of view, it is wrong that that sort of demand should be sustained by His Majesty's Government in the light of our international trade difficulties. Be it observed that these countries do not desire to escape the demand for payment of compensation. They have made statutory provision for it. All I ask the Government to say is that they will not make it a condition precedent to the achievement of comprehensive trade agreements with these countries that there shall be agreement on the compensation for nationalised properties.
Another difficulty to which the Government ought to pay attention is the result of the refusal to guarantee deliveries under trade agreements—for example, the agreement with the Soviet Union. According to my information, the Soviet Government have only been able to make firm contracts in respect of some 40 per cent. of the amounts envisaged by the contracts, whereas they have delivered slightly more than they had contracted to 1171 deliver. I understand that of the group of 28 headings of goods which the Soviet Government were to place contracts for in this country, there are some 18 headings still uncontracted for. That is most unsatisfactory, and is not the way to achieve better trading relations with the Soviet Union.
A further difficulty is the operation of Section 117 (d) of the Foreign Assistance Act, 1948, of the United States. That affects us here by way of the Marshall Aid Agreement. It says: The Administrator is directed to refuse delivery in so far as practicable to participating countries of commodities which go into the production of any commodity for delivery to any non-participating European country which would be refused export licences to those countries by the United States in the interests of national security. A Committee has been set up, and is sitting in London, under the pressure of the United States, with English and American representatives, and I understand with the Minister of Defence as chairman, which seeks to control British exports to the Soviet Union and Eastern Europe. This committee has black-listed items which, it is suggested, must not go to the Soviet Union or Eastern Europe, and this is being done under American pressure under the Act I have quoted, and allegedly because of security reasons. The representative of Poland at the General Assembly of the United Nations this year made clear what was the American conception of security, and therefore one that is, no doubt, operating in the committee I have referred to. He said that the United States had prevented Poland from purchasing the following commodities on security grounds: cotton linctus and synthetic resin, tubes for condensers, radio lamps, apparatus for measurement, gramophone disks for recording, needles for the textile industry, ball bearings and other articles.
I would say it is infamous that a foreign country should seek to dictate to this country what sort of trade we are to do with Eastern Europe and the Soviet Union and say that such-and-such an article is on the security list—as I have no doubt they have said, though this House apparently is not to be given the information. We have to seek information from Poland that articles like gramophone discs and needles for the textile industry are on the list. That, in my submission, is not the way to further 1172 trade between this country and Eastern Europe and the Soviet Union.
I cannot at this stage go into the details of every country. I have already mentioned Roumania and perhaps I may say a word or two about that country, since I have been there. It would interest hon. Members to know that wheat which Roumania had for disposal, has been sold, not to this country, but to Italy, to Egypt, to Syria and certain other countries. It would be very interesting to know how it is that those apparently impoverished countries are able to make bids for and secure Roumanian wheat, while we are prepared to allow ourselves to be blackmailed by supplies from dollar sources. It may well be that our inability to buy Roumanian wheat is not unconnected with the actions of the assistant commercial secretary at our Embassy in Bucharest.
As regards another country, Czechoslovakia, I would commend to the Government the statement made in the December issue of the "Monthly Bulletin" issued by the Czechoslovak-British Chamber of Commerce in London. The statement is made by the Deputy Minister of Foreign Trade, and it arises directly from the position which Czechoslovakia occupied before the war. It will be remembered that in those days Czechoslovakia exported large quantities of surplus industrial products to nearly all the world markets, and in so doing used German ships and German commercial houses, and that it was through Germany, that Czechoslovakia regularly bought supplies of raw materials and met her industrial requirements.
The suggestion made by the Deputy Minister of Foreign Trade that Czechoslovakia should allocate to this country their entire export surplus, which she would reserve for Western Europe, and that Czechoslovakia would make use of existing British export and sales facilities for selling these goods on the world markets, is an extremely interesting one. It comes to this, that British shippers and confirming houses would gain from the additional business possibilities thus supplied by Czechoslovakia, British export industry would lose what we must confess can be a very dangerous possible, and even actual, competitor on the world markets, Czechoslovak products would be welcomed in our own country and would release similar British products for export to hard currency countries, and 1173 with the proceeds of this trade, Czechoslovakia would be able to make sterling purchases in this country.
I ask my hon. Friend to give most serious consideration to this suggestion, coming, as it does, from an official source. I put it to him that in doing so he would take a step towards improving the trade relations between this country and Czechoslovakia. In view of the shortage of time, I cannot proceed further with my suggestions. I hope I have made it clear to my hon. Friend that there is a very serious situation arising as a result of lack of improvement in trade relations between this country and Eastern Europe and in the light of the necessity for a tremendous increase in that trade to five times more than we are doing now and far more than we were doing before the war.

§ Mr. Rankin (Glasgow, Tradeston)
I would add one point before my hon. Friend replies. Before I put that point I should like to say that I think the House is indebted to the hon. Member for Thurrock (Mr. Solley) for raising this subject tonight, because we all realise that the functional approach is a most important and necessary one as a contribution towards peace.
The point I want to put to my hon. Friend concerns our trading relations with Russia. About six weeks ago, I think, there appeared in the Press an intimation that it was proposed to send a trading mission to Russia. Those of us who read that announcement were delighted with the prospect. Six weeks at least have passed and, so far as I am aware, nothing has materialised from that announcement. If it is convenient for my hon. Friend to do so, I think it would be useful and helpful tonight if he let us know whether any difficulties have been created or have cropped up which prevent the carrying out of that mission, and if difficulties exist, are they serious and on what side do they lie?

§ Mr. Bottomley (Secretary for Overseas Trade)
I am grateful to my hon. Friend for raising this matter, because I can assure him and other hon. Members that it is the wish of the Government that trade between Eastern European countries and ourselves should be expanded. Unless that does happen, it will put not 1174 only this country but the whole of Europe into difficulties when the generous help from the United States comes to an end.
It is true that there are two things which perhaps do seem to limit trade—the two mentioned by the hon. Member for Thurrock (Mr. Solley). He referred to Section 117 (d) in the E.R.P. Act. In that connection, the things which have been mentioned are still being discussed. There is no settlement, so it cannot be said at this stage that it does hamper trade. As far as our own security measures are concerned, we have to take them because no one can dispute that the present international situation is not as sweet as it should be. Therefore we on our side have to prevent certain goods going to those countries which at the moment are not as anxious as we would be to do trade in the things with which we can push ahead.
Let me also say that we cannot, despite the plea which my hon. Friend has made, ignore the matter of compensation for nationalised property. It is not just a question of meeting the selfish aspirations of stockholders or of concerns in this country. It is absolutely necessary in our own economic interest that we should get some compensation for property which at one time was earning dollars. So if one looks at it purely from the economic point of view, it does mean that we ought to get for the kind of development we put into those countries earlier, goods which offer some kind of return to this country. In matters of compensation we have never been difficult. We have been reasonable and have given many concessions.
We have done that so that trade should be expanded to benefit the economies both of Eastern and Western Europe and allow us to overcome our present economic ills. Nobody can dispute that the economic position of Europe was considerably damaged by the war, but even taking that into account, we have expanded trade between Eastern European countries and ourselves. If one takes countries such as Poland, Finland the Soviet Union, Czechoslovakia, Hungary, Roumania, Bulgaria and Yugoslavia, trade is higher today than before the war. In the first nine months of 1948, £32 million of exported goods were sent to these countries compared with £20 million in the comparable period of 1938. Considering the great upheaval of the 1175 war, that is something which cannot be turned lightly aside.
My hon. Friend the Member for Thurrock referred to trade with Russia, and said that trading developments had suffered a hitch; but that is not true. The talks are still going on and I hope they are going to be successful. My hon. Friend implied that while the Soviet Union had met its obligations in full we have failed to do so. If one put it in the way he demonstrated, it would appear that that was so but, in fact, it is not. The Russians, within the trade agreement, sent us grain for which they got sterling and with that sterling they have had the opportunity of buying goods within the schedule of the agreement; but if they chose to spend that sterling on things outside the agreement and to go into the sterling area outside the United Kingdom to buy coffee, cocoa, and wool, that is their responsibility.
As regards the actual trade in capital equipment in this country, tenders for 95 per cent. have been offered and we are anxious that this kind of trade should be developed. It is in the interest of the Soviet Union and the Eastern European countries not to spend in this country all the sterling which they earn because there are valuable goods outside and if they have no sterling balances trade is limited. In the case of the Russians, we shall still push on with our trade talks so that, in due course, they will be able to see that we carry out our obligation to see that the goods are available. It is for them to settle with the manufacturers in this country so far as terms of contract are concerned. I think the Russians know that. They are very good business men and no doubt in due course they will see that this awkward position in which we find ourselves today is something which can be improved if our economies become complementary as, I think, they should be.
One must recognize—and the Russians do appreciate it, although all other Eastern European countries do not—that we cannot give capital equipment immediately for the grain which they provide. They can sow the seed and get the grain in a year, but we cannot, in as short a time, get all the capital equipment we should like. There has to be confidence in each other. We ourselves 1176 have to expand our capital equipment industries. We hear many demands for steel; other countries want it, but we also must build up our capital industries for the long, as well as the short, term. We want trade with Eastern Europe to be of a long-term nature because our economies are complementary.
My hon. Friend said there was very valuable timber and oil and other goods we could have if it were not for the stand we make on compensation which he said prevented trade expansion. In the case of all these countries where they have essential goods which we require we are prepared to meet them. We want to trade with them. Take the case of Czechoslovakia, which has been mentioned. They want to send to us what are less essential goods, what one might call fripperies, and we just cannot afford to exchange for those goods valuable capital equipment. Because our economic position is desperate, we have to say that we can only trade essential goods for essential goods. We hope we shall also be able to build up our trade in such a way that they will take our consumer goods and we will take their less essential goods.
In the case of Finland and some Scandinavian countries, we have been able to build up that method satisfactorily. I regret that in the Eastern European countries, in what I might call the Soviet area, they have not responded. Our essential equipment is in short supply and we cannot justifiably trade it in return for goods which we cannot, because of our own economic position, afford to take. Until we can build up trade in such a way that we trade essential goods for essential goods; until the industries in Eastern Europe see the pattern of trade working in a different way; until they are prepared to take out traditional exports of less essential goods to balance theirs, and to take our sterling which is valuable—