EUROPEAN ECONOMIC CO-OPERATION

HC Deb 05 July 1948 vol 453 cc41-166

3.40 p.m.

The Chancellor of the Exchequer (Sir Stafford Cripps)

I beg to move, That this House re-affirms its support of the objectives of the Convention for European Economic Co-operation signed in Paris on 16th April, 1948, and having regard to the need for the achievement and maintenance of a satisfactory level of economic activity without extraordinary outside assistance, approves the Economic Co-operation Agreement between the Governments of the United Kingdom and the United States of America initialled ad referendum in Washington on 26th June, 1948, and the draft exchange of notes between the Governments of the United Kingdom and the United States of America on most favoured nation treatment for Western Germany and Trieste. The House will observe that this Motion has been drawn in rather wide terms in order to enable the House to discuss the large implications of the proposed Agreement with the United States of America. The House will no doubt need an assurance from His Majesty's Government that the Agreement is not only suitable in form to the circumstances with which it is designed to deal, but also that there is a need for the aid which can only be available upon the signature of the Agreement.

It will, therefore, I hope, be convenient if I start with a short review of our economic circumstances today, and then pass on to an examination of the situation so far as economic co-operation in Western Europe is concerned and the essential part that U.S. aid must play in that co-operation. Finally, I will deal with the actual terms of the proposed Agreement and of the Note on Western Germany, giving such explanation of the various articles as seems to be necessary in order to make quite clear what their implication is.

In our economic circumstances today our basic need is to maintain and increase our national productivity so as to enable us to balance our current overseas payments while yet importing sufficient foodstuffs, raw materials and machinery to enable us not only to maintain our existing production but to increase its volume. That we must do with the very minimum of reduction of our existing reserves, for we must still have those reserves in hand when we reach the end of the E.R.P. period both for ourselves and to maintain the integrity of the sterling area. Without a considerable volume of reserves we should soon find ourselves unable to support the international position of sterling, and so slipping into the position where we could no longer function as the centre of what is today the only large multilateral trading group in the world. Such an event it is unnecessary to add would be disastrous both to ourselves and to the world as well.

We must then accept as the basis for our economic planning the need to preserve our reserves in gold and in dollars. It is the fact that these reserves have been slipping away over the last few months, and are still doing so, and that makes it essential for us to join in some plan whereby that drain, which would, if continued, so gravely damage our chances of recuperation, can be stopped. This drawing on our reserves arises from two main causes; our own unbalance with the dollar area—the U.S.A., Canada and certain other western hemisphere countries—and the demands from other countries of the sterling area arising from their net unbalance with the dollar area. We also finance the whole sterling area's deficit with what we call hard currency countries—that is countries to whom we have to pay balances in gold—and this adds somewhat though not very markedly to our gold drain.

I should like to take this opportunity to thank our fellow members of the sterling area for the understanding and co-operative way in which they have done their best, some of them under very difficult circumstances, to diminish their drawings upon the central reserves, and I may say to increase their contributions of gold and dollars to those reserves. This restraint by the sterling area countries has meant a considerable reduction in the rate of their drawings since last year. For our part, as the House knows, we also have cut dollar expenditure drastically—in a heavy and often painful manner. Altogether, therefore, we have reduced the problem of the drain upon the sterling area to more manageable proportions.

In the Economic Survey we estimated that if we received no E.R.P. assistance there would be a drain on the reserves of £222 million in the first six months of this year. I should here tell the House that we have already received—just before the end of June—the first very welcome payment of dollars under E.R.P. arrangements. This receipt was the equivalent of about £22 million, and forms part of the reimbursement for purchases in the second quarter of this year. The total amounts of grants in respect of the second quarter will be £75 million. That refers to grants as distinct from loans; the maximum amount offered for loan during this period is equivalent to £25 million.

The actual result of the six months' operation is that the net drain on our reserves, disregarding E.R.P. aid, which I have mentioned was £254 million. In the first quarter the drain, as I told the House in April, was £147 million. So in the second quarter it was £107 million or more than 25 per cent. less than in the first quarter of the year. If we take into account the E.R.P. payment so far received the second quarter's drain was £85 million, and that for the whole of the half year £232 million. That is dealing with the question of the amount of the drain or drawings.

I now come to the actual level of our reserves. Hon. Members will remember that our reserves of gold, U.S. and Canadian dollars stood at 31st March last at £552 million. During the second quarter we drew nearly £2 million on the Canadian credits. Apart from an amount of £4 million, which India drew from the International Monetary Fund, there was no further reinforcement of our reserves. In the result, including the actual E.R.P. receipts, our reserves stand at the moment at £473 million. There will, of course, throughout the E.R.P. period, be some lag in reimbursement, but we hope that even so we may be able to retain our reserves at about the £500 million mark. The reimbursement for the second quarter's dollar expenditure has not all been received as I have stated; there is still to come an amount of £53 million of aid in the way of grants, together with such amount of loan as is arranged.

It is, of course, impossible to forecast the exact movement of our reserves over the next few months. Obviously a great deal depends upon the amount and the timing of E.R.P. receipts. In addition, however, there is the complication resulting from movements of world prices. If prices in the dollar area continue to go up and are followed as they probably will be, by prices in other parts of the world too, we shall find our reserve position more difficult, and we have to take this into account in framing our dollar import programmes. We also have to avoid getting into a severe unbalance with the non-dollar world. It is possible that, with good harvests and an absence of the adverse conditions of last year in the way of drought and flood, we may see some reduction in world prices, and also in the exceptionally high prices we have had lately to pay for some raw materials. Hon. Members will appreciate how these heavy increases in prices have affected the cost of our imports over the first few months of this year. Indeed, an excess over the estimated drawing on our reserves is largely due to that fact.

In other words, these facts prove that we could not hope to maintain either our present standard of living or our present level of production unless we were able to get some share of that outside aid which has been so generously offered by the U.S.A. to Europe. It is in order to assure ourselves of that help that we are asking the House to approve the agreement which is now before it. Despite this aid however, there can be no relaxation in our own efforts to attain a balance. We hope and expect to increase the volume of our exports still further, provided we get no unexpected setbacks, as unfortunately we have during the month of June, and we hope that a greater volume of our exports will go to the hard currency countries, particularly to the Western Hemisphere, and most particularly to Canada whence, of course, much of our dollar foodstuffs are drawn.

We are reviewing our import programme to see how far, if at all, that can be further pruned down without damage to our production. By one means or another, we must see that we do not draw further upon our reserves. We shall not be able to arrive at final decisions upon exactly how we are to achieve that end until we know what it is we can expect to get by way of grant-aid and loan from E.R.P. for the next year, and those figures have not yet been settled.

What I have said is, I think, sufficient to show two things, first, that we must continue all out to produce and export all we can, especially to hard currency areas; and, second, that without E.R.P. we should have to face such an immediate cut in our imports as would make it impossible for us to maintain our living standards or our production, and so would set us right back in our attempt to balance our overseas trade. E.R.P. is in fact an essential pre-requisite to our own speedy recovery.

I should here, perhaps, say a word about the division of E.R.P. between grant and loan. Of the total amount of assistance approved by Congress for the first year, an amount not exceeding, in the aggregate, one billion dollars has been approved as loan, and, roughly speaking, four billion dollars as grant. All we know definitely at the present is that, so far as the first three months are concerned—which have now passed, of course—we have been offered 300 million dollars in grant and 100 million dollars in loan. It has not yet been finally decided upon what terms, either as to interest rate or date of repayment, the loan will be made. These matters, are now under urgent consideration in Washington.

So far as we know at present, the amount of the loan for each country will have finally to be settled bilaterally between that country and the E.C.A.—the administrator of the economic aid. I hope that this will be a negotiation on the amount and terms of the loan only, and will not affect the amount of the grant, but that matter is still undecided. Our aim is to restrict the use of loans to items of capital equipment or goods capable of quick conversion into capital items which will earn their keep and help us to repay the loan in due time. I shall inform the House as soon as these loan negotiations are concluded, and let hon. Members know what has been arranged.

I should perhaps here mention one or two internal economic matters that have an indirect bearing upon this question of E.R.P. aid. As the House will see when we come to the Agreement, there are a number of things which we state we will use our best endeavours to accomplish, particularly in Article II. These relate to our internal economy, and are in fact the main elements of the policy that we have been carrying out over the last three years, and which we are most anxious to see carried out in other European countries. They are, indeed, the necessary conditions for a stable and visible economy in Europe. I might perhaps state how we stand as regards some of these matters.

We have, of course, an over-balanced Budget with a large surplus, which was, as the House knows, designed to help in the process of disinflation. I was asked the other day by some hon. Members what was the difference between disinflation and deflation. As I understand it, disinflation is the reduction of an undesirable degree of inflation to whatever point is considered necessary or desirable in the circumstances of the time. Deflation is not merely the removal of undesirable inflation but is the creation of a positive degree of deflation below the normal, in order to accomplish some particular end. If I may take the simple analogy of a motor tyre, if it is pumped up too hard you disinflate it to the right level, but when you get a puncture you deflate it altogether. We want to disinflate our economy and not to puncture or deflate it.

This process of disinflation has hardly started as yet and it is extremely difficult to bring it about while world prices are still rising. We have, however, largely held the position, and there are signs here and there of some slight measure of disinflation. This is an essential factor, as the House knows, in our ability to export our goods and we must go through with the process, as I said on the Third Reading of the Finance Bill, even if it has some unpleasant consequences for us.

The same degree of restraint on all hands is required as was necessary when the White Paper on prices, profits and personal incomes was published in the Spring. The response to that paper has been, I think, remarkable considering we were asking for voluntary restraint and not trying to impose restraint by law. It is a signal proof, I think, of the intelligence of our democracy. But we must continue intelligent and reasonable if we are to be able to get through with the level of E.R.P. aid that is likely to be available and, what is even more important, if we are to bring about a balance in our overseas trade within the next few years, as we must do. This is certainly no time for letting up in our efforts.

Now let me say a word about co-operation with Western Europe. Our co-operation with Western Europe is fundamental to the conception of E.R.P. We have undertaken in the Convention which was signed last April in Paris to do our utmost to help in this co-operative effort to rehabilitate European economy so that it can carry on without exceptional aid from outside—that is the expression which is used to signify the objective of the co-operation—just, indeed, as it used to carry on before the war, and also with the objective of strengthening and reinvigorating Western European democracy. That was not a lightly given promise made just to enable us and others to enjoy E.R.P. aid. It was and is our genuine belief that without such co-operation Western Europe, including our own country, would be long delayed in its economic recovery and would gravely suffer in its political and moral strength in world affairs.

We have played and are playing today our full part in the O.E.E.C., the committee which is guiding this co-operation, which is faced with many new and difficult problems. Co-operation is easy to talk of but much more difficult to carry into practice. We are now beginning to get down to the practical application of this economic co-operation and we hope that by the time we have got the most complicated matters relating to E.R.P. settled, in the form of programmes and so on, some time this Autumn, we shall also have reached some agreement as to practical plans for co-operation in the economic sphere. These matters cannot be rushed; there are so many considerations affecting the economy of each individual country, including our own, that it would be folly to try to embark upon any considerable co-operative effort without first giving full consideration to all the factors and then working out schemes for implementing the conclusions which had been arrived at. We have a picked staff in Paris working on these problems, and we hope that in a few months' time practical and valuable results will start to flow from that work. I want to make it quite clear to the House and, indeed, to the whole world that we are in this co-operative work with Western Europe in order to make it a success, not on paper, but in actual economic results.

I now turn to the Economic Co-operation Agreement which is in Cmd. 7446 and the second White Paper, Cmd. 7447, which deals with Western Germany. Taking first the Agreement, I would emphasise once again what I said in my statement to the House last Tuesday. It was agreed that the most practical way of arriving at this Agreement quickly, as was necessary, was to have a small negotiating committee in Washington, made up of representatives of the participating European nations, to work out with the U.S. Administration a common form of agreement, which could then be applied—with slight variations if necessary—to all the participating countries. This left it free, of course, for any particular country to put forward its own special case or special considerations, and that we have freely done so far as this country is concerned.

The result of this procedure is necessarily that some of the clauses of the Agreement are more applicable to some countries than they are to others. It may be that some people will think that it was unnecessary to include some of the articles so far as we are concerned, doing things, for instance, that we are already doing. That may be true, though the same considerations do not necessarily apply as regards the circumstances of other participating countries. The provisions of all these articles will reinforce the undertakings already given under the European Co-operation Convention which, as I have already said, was signed in Paris.

There is one other remark of a general character which I should like to make as regards our approach to this Agreement. The Congress of the U.S.A. has laid down in the European Co-operation Act certain requirements as to the content of the bilateral agreements, of which, of course, this is one. Those, agreements have to be entered into as a condition of any country continuing to receive E.R.P. aid after the 3rd—now in effect it is the 6th—of July.

Some people have suggested that those requirements are unreasonable. I ask them for a moment to put themselves in the place of the members of Congress or of the ordinary United States citizen. The citizens of the United States are taking a step, unexampled in world history, to give away vast quantities of goods for which they will have to pay. Whatever view we may take as to whether this will in the long run be of help to them or how necessary it is for their own economy at the present time, we must recognise that it is an action of great immediate generosity and enlightenment to offer to undertake such a programme, and they are fully entitled, as we should feel ourselves entitled in like circumstances, to take steps to ensure that their aid achieves the aim it is designed to accomplish. That is not only reasonable but prudent, and no participating country can have the slightest objection to such a wise precaution, indeed they should all welcome it, provided the provisions insisted upon do not in any way infringe the sovereignty of the participating nations.

Upon this last point the United States negotiators have shown themselves most understanding and His Majesty's Government are satisfied that, as the result of the negotiations, a form of agreement has emerged to which no valid objection can be taken. I should in this respect like to express our appreciation of the very skilled and effective part that our Ambassador in Washington and his team of negotiators have played.

I now come to the details of the Agreement and I will run through the various articles with such comment as I hope may assist the House in their understanding of the document. It would perhaps be convenient to hon. Members if they were to have the document in their hands. The Preamble sets out the joint desires of the two Governments as regards the carrying out of the E.R.P. Programme, and stresses the need for Western European co-operation to make it effective. I emphasise once again that E.R.P. is essentially a scheme designed to help Europe as a whole and not merely to assist participating countries individually.

Article I consists of three paragraphs. In the first the Government of the U.S.A. undertakes to assist us by making available aid either to the Government or any trader designated by them, where goods are bought by private contract and not through Government buying organisations, in accordance with requests submitted by us and as approved by the Government of the United States of America. That will, in effect, be approval by the Administrator to whom that task has been delegated by the Government. The assistance is to be in accordance with the Economic Co-operation Act, or any amendment to it, and is to be limited as set out in the Act.

In section 2 we state our reciprocal obligations that, individually and in co-operation with O.E.E.C., in accordance with the Paris Convention, we will exert sustained efforts—and those are the operative words—to enable ourselves and Europe to become independent of extraordinary outside assistance within the term of the Agreement, that is, before 30th June, 1953. We also re-affirm our intention to carry out the general obligations of the Paris Convention, and to continue to adhere to the purposes and policies of the Economic Co-operation Act. Those are the general obligations, and they make it clear that we are determined to make the O.E.E.C. successful and effective, which is, of course, our wish and our intention.

Section 3 deals with what have come to be called off-shore purchases, that is, purchases made by us with E.R.P. dollars from third countries. We undertake to make such purchases on reasonable terms and at reasonable prices—a provision that I am very glad to see in this Agreement—and so to arrange that any dollars we thus spend are spent in accordance with any arrangement made between the United States and the third country. If, for instance, the United States agree with such a country, maybe Canada or the Argentine, a price level at which a certain class of goods are to be sold or above which they are not to be sold, then we will not pay more than that price; that is the agreement stated in this section. This, too, is, I think, a valuable provision to prevent international profiteering out of E.R.P. aid.

Article II is in many ways the most important article in the Agreement, as it lays down our obligations—and those, of course, of other participating countries—as regards the requirements of Congress contained in Section 115 (b) of the Economic Co-operation Act, which deals with the provisions that are, where applicable, to be inserted in the bilateral agreements. The opening words of Section 1 of Article II are most important because they define our obligation as regards all the various matters dealt with in all the paragraphs (a), (b), (c) and (d). I would, therefore, like to read them: In order to achieve the maximum recovery through the employment of assistance received from the Government of the U.S.A., the Government of the U.K. will use its best endeavours. … It is to be remarked that this does not bind us to any specific act at all; it states that we will do our best to achieve certain objectives, but we are complete masters in our own house as to how we can best achieve those ends.

Section 1 sets out that we will use our best endeavours—to repeat the introductory words—to adopt or maintain the measures necessary to ensure use of all our resources, and then specifies certain of those measures in paragraphs (a), (b), (c) and (d) which follow. I here draw attention to the word "maintain," because so far as we are concerned, but not necessarily in the case of other countries, it is rather a question of continuing our present policies than adopting any new ones.

Sub-paragraph (i) includes measures to see that commodities and services furnished under E.R.P. are used for the purpose for which they were obtained—not misused, that is to say—and for the general purposes outlined in the schedules which we furnish with our requests for aid. It will be necessary, therefore, for us to see that those schedules cover the uses to which we desire to put the goods, including, in the case of some raw materials, our desire and need to export the goods made from them. An interpretative note on this sub-paragraph which appears on page 12 of the document makes it clear that amongst other things the purpose of this sub-paragraph is to keep goods off the black market.

Sub-paragraph (ii) deals with follow-up procedure, and is in conformity with the Convention of O.E.E.C., and I think I need say no more on it. Sub-paragraph (iii) deals with our assets in the United States of America, and stipulates, first, their identification, which we have, of course, done long ago, though some other countries have not, we believe; second, that having identified them, we should put them into appropriate use to assist the European recovery; but, third, that nothing imposes any obligation upon us to dispose of such assets.

Now if this stood alone, it might require us to mortgage those assets or deal with them in some similar way, but we have already, of course, as the House knows, done a great deal long ago in that direction, more I think than any other country. We therefore sought an explanation of the views of the United States Government upon our obligations under this sub-paragraph. The U.S.A. Government stated, and agreed that I could so report to this House, that it is their view that the measures now in effect in the United Kingdom adequately fulfil the obligations of His Majesty's Government under this paragraph, which is therefore directed to the maintenance of existing measures rather than the adoption of any new ones.

Paragraph (b) states generally that we will use our best endeavours to promote our industrial and agricultural production on a sound economic basis, and to carry out any production targets fixed by O.E.E.C., on which body of course we shall have already agreed any such targets, because all decisions there must be unanimous. These, again, are our avowed objectives and add nothing to our existing policies. The paragraph further provides that in the case of projects contemplated to be undertaken by the Government of the United Kingdom in substantial part with E.R.P. assistance, we will communicate to the Government of the U.S.A. detailed proposals for those specific projects. That seems to me a perfectly reasonable undertaking if those projects are substantially to be financed by E.R.P. aid.

By paragraph (c) we undertake to use our best endeavours to stabilise our currency, establish or maintain—in our case it is, of course, maintain—a valid rate of exchange—

Mr. Boothby (Aberdeen and Kincardine, Eastern)

What is that?

Sir S. Cripps

—balance our budget, maintain internal financial stability and generally maintain confidence in our monetary system. These are all objectives that this Government has emphasised over and over again, and that are accepted, I think, generally by the whole House and the country; and, as I have said, we are of course the masters as to how we should maintain these most desirable principles. I hope that other participating countries will adopt the measures necessary to attain the same ends. If they do it will greatly help European co-operation.

Mr. Boothby

Who decides what is to be "a valid rate of exchange"?

Sir S. Cripps

We decide. We say that we will maintain "a valid rate of exchange." The important word as far as we are concerned is "a," especially when one looks at what is happening in some other countries. Interpretative note number 2 explains that the objective of balancing the Budget does not preclude short period deficits if it means a policy involving a balance in the long run. That also is obviously consistent with our policy.

Paragraph (d) again sets out an objective enshrined in the convention of Paris and, indeed, generally accepted as desirable, that is co-operation to bring about a freer exchange of goods, the objective being to get as much multilateral trade in Europe as possible.

Section 2 of Article II relates to the effective use of European manpower, particularly as dealt with under Article 8 of the Paris Convention. Here we state that we will accord sympathetic consideration to proposals made for the largest practicable use of manpower available in any participating country so as to make the most of European resources. We have probably done as much as, or more than, anyone else along these lines by way of introducing E.V.Ws., employing Poles and so forth, and we shall, of course, be glad to continue to look at this problem with sympathy and with a desire to help.

Section 3 binds us, in the matter of the prevention of restrictive practices which might interfere with European recovery, and it binds us to take such measures as we deem appropriate to prevent, in co-operation with other participating countries, such practices. This fits in with the provisions of the Havana Charter on this subject and with our own Bill which is now passing through Parliament and leaves us to decide what we shall do in the event of any such case occurring. Interpretative note number 3 elaborates what is meant by business practices and arrangements in this paragraph. Note 4 makes it clear that we shall only take any action after such examination or investigation as we regard as appropriate to that case.

I now turn to Article III. This deals with the case where, under Section III (b) (3) of the Economic Co-operation Act, the Administrator may guarantee up to a total of 300 million dollars over the whole period of the aid, investments made by Americans in projects in the participating countries the objects of which is to further the objects of E.R.P. We agree to consultation as to such projects in the United Kingdom—that, of course, covers the acceding Colonies as well—which are subject to the approval of His Majesty's Government, under Section III (b) (3), and in the event of any such guarantees being given and the Government of the U.S.A. making payments of dollars under them to any American citizen and having assigned to them sterling in return, we say we shall recognise such sterling as the property of the U.S.A. Government, which seems to me to be a natural consequence of such a series of events.

Mr. Oliver Lyttelton (Aldershot)

Does it mean it is remittable?

Sir S. Cripps

No, it is not remittable. It is sterling belonging to the United States. The United States will themselves have done the remitting operation by paying the guarantee of dollars to the American investor.

Now we come to Article IV. This provides the machinery whereby the sterling equivalent of any grant aid is to be dealt with, and only grant aid—our Loan aid, in this case. The commodities or services granted will, of course, be sold in this country for sterling. The sterling equivalent of the dollar price paid for the goods will be paid into a special account at the Bank of England in the name of His Majesty's Government. The balance standing to the credit of the account will be published as a separate item each week in the Bank return. The sums paid into the account will consist, as I have said, of the sterling equivalent at the par value agreed with the International Monetary Fund—at present 4.03 dollars to £1. The sterling equivalent, on that basis, of the dollar cost to E.C.A. in the U.S.A. of the goods and services provided on a grant basis. The amount will, therefore, not necessarily be the same as the proceeds of sale received in this country where the goods will be sold in accordance with the ordinary price structure of the country. It will be the equivalent of the dollar amount paid for the goods.

Under the Article up to 5 per cent. of this fund will be allocated for expenditure by the Government of U.S.A. upon the local administrative services of the U.S.A. in connection with E.R.P. and for expenditure by the U.S.A. under Article V upon strategic materials. The effect of this latter provision is in effect to decrease the amount of grant by 5 per cent. because, up to that amount we shall probably be providing for sterling those goods for which otherwise we should have received dollars in the normal course of trade. In addition further sums will be made available out of the special account if necessary in connection with the costs of transport in the U.K. of relief supplies and packages under Article VI.

That leaves a balance of roughly 95 per cent. in the account to be drawn on under proposals made by His Majesty's Government and agreed by the U.S. Government as provided under Section 6 of Article IV. We plan to establish a close link between the machinery for depositing sterling in the special account and the arrangements for drawing out of that account. The particular avenues of disposal are indicated in paragraphs (a), (b) and (c) of Section 6.

Though purpose (c), "the effective retirement of the National Debt," comes third in the list, as I indicated when I spoke in the House about the matter earlier, we give it first place. The Economic Co-operation Act lays down "internal monetary and financial stabilization" as the first of the approved purposes to which the special account shall be put, and these words are reproduced in this paragraph of Article IV. This purpose can be most easily and effectively carried out by the extinction of Government Debt, either short-term or long-term, according as the internal monetary situation may require. The total amount of sterling to be paid into the special account will be very large and the bulk is bound to be applied in debt redemption, for which of course we already have the necessary Parliamentary authority.

I am glad to say that it has already been indicated to us that the United States Government share the view that first place should be given to debt extinction, and that the special account should be managed from the start so as to give continuous and continuing effect to this policy. We have in fact discussed with the United States the general principles of the use of these funds. In the course of these discussions the United States recognised our strong budgetary situation and our present desire to combat inflationary tendencies in our economy. I am sure therefore that the United States will promptly agree to any proposal for the release of funds in the special account for the purpose of cancelling in present circumstances, the floating debt. This will obviate an undue accumulation of funds in the Bank of England, and any undesirable repercussion on the credit structure of our economy. I may point out that this special account cannot be opened until after the Agreement has been signed. In the meanwhile, the funds which have accumulated are being held by the Paymaster General on suspense.

Section 7 deals with the disposal of the balance remaining after 30th June, 1952. This final disposal will require ratification by the U.S. Congress. We see no reason, however, why the principles governing drawings before 30th June, 1952, should not apply equally to the balance when the time comes. In these ways the sterling equivalent of the grant will be dealt with in such a way as to assist the objects of the Agreement and of European co-operation.

I now come to Article V, which is again a very important Article. It deals with materials originating in the United Kingdom for which purposes the acceding colonies are also included, which materials the Government of the U.S.A. desire to have for stock piling or other purposes, as a result of deficiencies, or potential deficiencies, of its own resources. It is right that in view of the large amount of materials to be supplied to us and other participating countries we should help to make available to the U.S.A. commodities of which they are or expect to be short.

These materials will be paid for in dollars, or their equivalent, except in so far as they can be bought with the 5 per cent. of the special sterling account which I have already dealt with under Article IV. We agree to facilitate the transfer upon such reasonable terms and in such reasonable quantities as we subsequently agree with the Government of the U.S.A. such materials as they require, due regard being had to our own reasonable requirements for domestic use and commercial export.

The interpretative note number 5 makes is clear that such reasonable use includes the maintenance of reasonable stocks and that commercial export may also include barter transactions. That note states that actual agreements negotiated under this article might appropriately include provisions for consultation—on the pattern of the Havana Charter—in the event of those stockpiles being liquidated, which might otherwise obviously cause trouble to world markets. We agree also to promote increased production of specific materials if this should prove necessary. Under section 2 of the article we agree, if so requested, to negotiate a plan of minimum availabilities to the U.S.A. of such materials at world market prices so that the U.S.A. may get a fair share of such materials.

We also agree to negotiate, where necessary, arrangements providing their nationals with equal treatment as compared with out own in access to such materials. That would of course apply almost exclusively to the colonial territories. It has long been our normal practice to extend such equality of treatment to the United States and, indeed, to other foreign firms, and under such arrangements we should need to do no more than undertake to continue this normal practice for a suitable future period. Finally, we agree to negotiate an agreed schedule of increased production of such materials if necessary on the basis of the United States taking a fair share of them. Any such arrangement, however, is to be on a long-term, and not on a short-term basis for the obvious reason that we might get landed with a largely expanded production for a short period which it would then be difficult to dispose of.

Mr. Oliver Stanley (Bristol, West)

This share of the increased production, I gather, will be transferred free to the United States of America, and not paid for in dollars?

Sir S. Cripps

No, it will all be paid for.

Mr. Stanley

What is the meaning then of "in consideration of assistance furnished" by this Agreement?

Sir S. Cripps

We are undertaking various obligations as regards access to raw materials and that is the reason for that particular phrase "in consideration of assistance" they have given us. That is a mere general phrase. It does not mean that they do not pay for them. The only provision as regards not paying for them in dollars is the one under Article IV not Article V. Otherwise they pay in the ordinary commercial way for the goods.

Under section 3 we agree where the materials originate outside the United Kingdom, and that means outside the acceding Colonies as well, to co-operate to implement the purposes of the Article. That would mean that if for instance a British company was developing certain rights in South America we would to the best of our ability see that the United States as well as ourselves had access to those raw materials. To this Article the United States Government attaches, understandably I think, considerable importance, and we feel it is reasonable that there should be provision for their continued access to raw materials as a small return for all the help they are giving to us and to other European countries.

Now I pass to Article VI—

Viscount Hinchingbrooke (Dorset, Southern)

In regard to Article V, will the Chancellor explain how the stock-piling programme of the United States is limited to 5 per cent.? He indicated a tie-up between the stock-piling programme and the 5 per cent. mentioned in Article IV. There is no mention of a percentage in Article V.

Sir S. Cripps

It is not a tie-up at all in a direct sense. What Article IV says is that 5 per cent. of the special account in sterling can be used for two purposes—paying their current expenses for their representation, etc., under E.R.P., and also for acquiring strategic materials under Article V. Strategic materials are the goods which they will require for stockpiling purposes, or they may want them because they have no stocks at all and want to use them. There is no limit to the amount they can ask for or which we agree to let them have under Article V, which is not related at all to Article IV. It is only a question of how much of what they get they can pay for in sterling. The rest they will pay for in dollars.

I can deal with Article VI very shortly. Section I is to encourage visits by United States citizens to Europe, which we all desire and welcome as a means of getting dollars. Section 2 deals with facilitating relief supplies from non-profit relief agencies and relief packages coming into this country from the United States of America. Interpretative note 6 points out that Article VI raises no assumption that existing methods of dealing with these packages are not adequate. We naturally desire to do all that is practicable to facilitate the generous impulses of American citizens towards people in this country. Therefore, we have no objection to doing what we can to help them.

I now turn to Article. VII. The first section is a general arrangement for consultation upon any matter relating to the application or carrying out of the Agreement at the request of either party. That is a common form in an agreement of this kind. All that it means is that if either side is disgruntled or thinks that the other side is not doing what it should do there can be consultation about it. By section 2 we undertake to provide the Government of the United States with all necessary information in a form and at times indicated by them after consultation with us covering those matters arising out of aid and set out in paragraphs (a), (b) and (c) of the article.

It is made clear in the interpretative note that this does not cover minor projects or, which is more important, confidential commercial or technical information the disclosure of which would injure legitimate commercial interests in this country. We think that with this safeguard there should be no difficulties under this section. If there are we can of course ask for consultation about them under the first section of the article. Under section 3 we agree to assist the United States Government to get information as to the materials they may wish to obtain under the provisions of Article V. That is only providing that we will help them to find out the goods available which they might require for stock piling and other purposes.

Article VIII deals with publicity for the E.R.P. scheme and recognises that the whole subject matter of European recovery requires constant explanation and publicity to help in its success. Otherwise, I think the article speaks for itself. Article IX which goes with interpretative note 8, provides for the recap- tion here of the special E.C.A. Mission of the United States of America. We are very delighted to welcome it here under so able and experienced an administrator as Mr. Finletter, as it will be of the greatest help to us in discharging our part in all the programming and other arrangements that have to be made. May I also add how fortunate we are to have so distinguished and statesmanlike a figure as Mr. Averell Harriman as the European head of the E.C. Administration? Under section 2, the members of the Mission, on nomination by the United States Ambassador, will be given appropriate diplomatic privileges. We also agree to extend the appropriate courtesies to the members and staff of the Joint Committee of Congress on Foreign Economic Co-operation and with them give them necessary facilities. We shall be only too happy to do that, and I hope that we have always done the same in the past.

Article X is a mutual provision for the term of the Agreement, whereby both Governments agree to submit to the decision of the International Court of Justice claims espoused by either Government on behalf of any national for damage arising as a consequence of Governmental measures taken after 3rd April, 1948. In both cases this is limited by the terms of the declarations accepting the compulsory jurisdiction of the International Court under Article 36. All domestic remedies must of course first be exhausted. The declarations under Article 36 referred to are the following: First, that of the United States, dated 14th August, 1946. Among the classes of disputes reserved from the scope of this declaration are: disputes with regard to matters which are essentially within the domestic jurisdiction of the United States of America as determined by the United States of America. The reservation of the United Kingdom is that dated 28th February, 1940, which was, as a matter of fact, a renewal of the original declaration of 1930. This declaration reserves disputes with regard to questions which by International Law fall exclusively within the jurisdiction of the United Kingdom. These are the two reservations as regards this reference to the International Court, section 2 states that in lieu of going to the court such claims can by agreement of both Governments go to an arbitrator. That cannot of course happen without the agreement of both Governments, and in the case of the United States of America also ratification by the Senate, as is made clear in interpretative note 9.

I come to Article XI. This is the interpretation article and is only of importance in so far as it brings into the definition of the United Kingdom those territories dealt with in Article XII. This latter article must be read with the text of the note appearing on page 13 of the White Paper and they both deal with Colonial accession.

There is a reference in the article to a schedule which is not printed as it could not be finished until the last minute, obviously. However, all Colonial Governments have signified their willingness to accede, with the exception of Barbados, Bermuda, British Guiana, British Honduras, the Federation of Malaya, Gold Coast, Jamaica, Leeward Islands, North Borneo, Northern Rhodesia, and Trinidad, all of which require more time for local consideration by their local legislature, and so on. We have no reason whatever to suppose that any of these Colonies not be willing to accede—indeed, it is possible that some of them will have given their assent before the end of this Debate.

Sir Arthur Salter (Oxford University)

Will these provisions as to stock piles originating in the United Kingdom technically apply to similar quantities originating in the Colonies as those Colonies accede?

Sir S. Cripps

Certainly. As I have already stated the "United Kingdom" in Article V covers all acceding Colonies. Apart from this list, which we shall attach when it is ready as a schedule to the Agreement, we can subsequently notify adherence of any other territories for whose international relations we are responsible. The note on page 13 points out that we cannot give a complete list at date of signature and stresses the special case of Southern Rhodesia. We state that we expect most Colonial Governments to accede, but recognise that if some of the more important territories do not agree to participate within a reasonable period then the United States would be entitled to regard that as a matter of major importance entitling them to reconsider the form and continuance of aid to the United Kingdom. That provision, of course, largely arises from the desire of the United States Government to protect itself against the consequences of the non-adherence of those territories which are the principal producers of strategic raw materials, which the United States may wish to acquire.

Finally, I come to Article XIII which sets the term for the Agreement. It comes into operation on the day of signature, which we hope will be tomorrow night, in order to avoid any hiatus in the aid. That, of course, is subject to Parliament approving the Motion I am moving. It will remain in force until 30th June, 1953—provided six month's notice is given to terminate on that date, otherwise it runs on till six months after the notice is given. The choice of this date, a year after the termination of aid, is so as to give an adequate time to work that aid out and to clear up the various matters that will be outstanding after 30th June, 1952, which is the end of the period covered by the Economic Co-operation Act. That seems to us to be a reasonable provision. But as aid is decided upon annually it might, of course, so happen that, say, next year we got no allocation at all. In that event obviously there will be a fundamental change in the basic assumptions underlying the Agreement, for those assumptions include one that we are receiving aid.

In any such event either side may notify the other and consultations are thereupon to take place as to what is to happen. If agreement is arrived at, well and good; but if the parties do not agree within three months, then either party can give the other six months' notice to terminate the Agreement. At the end of six months the Agreement will be terminated. There is, however, this exception that Article V, and the related provision, Section 3 of Article VII as regards information and materials in Article V, shall continue in operation for two years after the notice, that is 18 months after the rest of the Agreement has ended, but not later than 30th June, 1953, in any event. Article IV also remains in effect until all the monies in the special account have been disposed of. Similarly Section 2 of Article III dealing with guarantee payments remains in force until all those payments are liquidated.

Mr. Scollan (Renfrew, Western)

Would the Chancellor tell us if that applies to paragraph (b) of Article IV?

Sir S. Cripps

It applies to the whole of Article IV. The whole of the article remains until such time as the monies in the special account are liquidated.

Mr. Scollan

The Chancellor did say that the obligations of Article V would last two years after the Agreement had been rescinded by one or other parties. Obviously (b) of Article IV is part of that. I should like also to know about those two years.

Sir S. Cripps

I am not certain what my hon. Friend is referring to as (b).

Mr. Scollan

I refer to page 7: Expenditures upon the exploration for and development of additional production of materials …

Sir S. Cripps

By section 6 of Article IV—there is a "(b)" higher up—yes. The whole of Article IV will remain in operation until the funds are liquidated. But of course the 5 per cent. will not grow any bigger if no aid is being given, because no further sums will be paid into the account. We believe that these provisions are reasonable since the benefits under Article V to the Government of the United States cannot accrue until after aid has been given to us and will therefore take a longer period for their completion. In these cases there are to be special agreements as regards Article V, though none has yet been embarked upon and it may be some time before they are. It may be argued that two years is an excessive period, but I do not think we need boggle at that period in view of the benefits that we are receiving.

Having now dealt, I am afraid rather lengthily, with all the articles of the Agreement, I sum up, so far as the Agreement is concerned, by recommending it to the House as a fair and sensible document in no way interfering with our rights to regulate our own affairs, and as designed to assist the United Kingdom, as one of the participating countries, to the maximum of effort in bringing about that recovery which we all desire and which we are engaged in this co-operative effort with our American friends and with the participating countries to achieve as rapidly as possible.

I now come quite shortly to the second White Paper on Western Germany. This note records an arrangement which is designed to extend most-favoured-nation arrangements to Bizonia and thus to assist her to rehabilitate herself as rapidly as possible. Under the terms of the note we and the United States of America agree to give Bizonia most-favoured-nation treatment for her imports, provided that reciprocal treatment is extended to our trade with Bizonia, for a term of two-and-a-half years, by which time we shall be able to see how the scheme works out and what, if any, difficulties it raises. There are at present no effective or significant tariff barriers in Bizonia. But if such were introduced during the two-and-a-half years the undertaking to give most-favoured-nation treatment would be governed by the principles in the Havana Charter relating to the reduction of tariffs on a mutually advantageous basis. Provision is made in paragraph 4 of the note for the levying by this country of countervailing duties on imports from Bizonia so long as the lack of any uniform rate of exchange for Bizonal currency has the effect of indirectly subsidising Bizonal exports. This whole arrangement is, I am sure, a wise and good one, and His Majesty's Government hope that it will assist in making Western Germany independent of further assistance from us or from the U.S.A.

I have now completed my review of this further step in the great European experiment of co-operation and recovery which has been made possible by the farsighted generosity of the American people. It is for us and the other participating countries to see to it that we make the fullest and best use of the opportunity with which we have been provided. We can, I am convinced, if we will devote ourselves actively and continuously to this cause, re-establish the strength and influence of Western European democracy, and there is I believe no greater contribution that we could make to the future peace of the world and the happiness of mankind. This Agreement to which I ask the House to give their unanimous approval is an essential step in the process, and one without which the immediate prospects of recovery would indeed look grim.

Europe and the world have too long lived in an atmosphere of destructive antagonism, and it is high time that we got down to the practical ways of economic co-operation which could do so much to ease all our tasks and which can so greatly benefit all our people. The United States of America have come forward with their great economic and productive strength to help in this new and hopeful plan which sets the eyes of the Western European peoples upon an objective that is economically sound, politically wise and morally right. Let us in this country, therefore, play our full part by contributing of our best to the plan and by exerting sustained efforts—to use the words of Article I of the Agreement—to bring about the fullest degree of co-operation that is practicable in the shortest possible time.

5.5 p.m.

Mr. Oliver Lyttelton (Aldershot)

We have listened with great attention to a painstaking speech by the right hon. and learned Gentleman. He addressed himself, as I think I must, to the two main questions which are before the House this afternoon. The first is, "Can we look for recovery and re-establishment of our economic life in this country within a reasonable time without American aid?" If the answer to that question is "Yes," then, of course, we must refuse the aid. But if the answer is "No," if we consider that the rapid recovery of our country cannot be brought about without this aid, then we must ask ourselves the second question, which is whether the terms upon which it is offered are too onerous or too hampering for us to accept.

I do not think that any hon. Member in any part of the House, whether he is in favour of this Agreement or not, could help feeling a certain sense of humiliation at the straits to which our country is reduced after three years of peace. [HON. MEMBERS: "And after six years of war."] I hope that the right hon. Gentleman the Chancellor of the Duchy of Lancaster, the former Chancellor of the Exchequer, feels a greater sense of humiliation than anyone else, because he it was who permitted the lush Government expenditure to continue. He it was who pursued a policy of inflation at home, and thus succeeded in dissipating the first American Loan, I think two years before the predictions of the present Economic Secretary to the Treasury. He it was who pursued an expansionist policy in times of scarcity boom. In fact, he said on 15th April, 1947: We are entitled to say that the new Britain, represented by this House of Commons, has taken the cost of social security proudly in its stride: the money has been found. …"—[OFFICIAL REPORT, 15th April, 1947; Vol. 436, c. 38.] —and so forth. It may be that Great Britain has taken the cost in her stride, but that she could stride at all is due to the large loans which she has had from the United States of America. Yet Socialist speakers usually refer with pride to the last three years and acclaim the achievements of the Socialist Government. What they omit to say is that, for example, full employment—which it would have taken the grossest mismanagement not to secure, so great were the needs and so large the shortages in the world—the social services, and the very standard of life itself have only been sustained by huge loans from a capitalist country, the United States of America. [Interruption.] I see that hon. Members opposite are inclined to compare these three years with the three years after the Kaiser war. It is quite true that we had great trials, difficulties and sufferings after 1918: but what they forget is that during the 1914–18 war we had no Lend-Lease, and after that war we had no loans from abroad. We did not depend upon outside aid. If we suffered, at least we suffered unaided and stood upon our own feet.

The first American Loan has gone, and with it a great block of our reserves of gold and hard currency. I was glad that the right hon. and learned Gentleman went so fully into the latest figures of the balance of payments. I think I am right in saying that the Government have now suspended the statement of the quarterly shipments of gold. Consequently, what he has said this afternoon will be of great use.

Sir S. Cripps

The statement is not suspended. It has not come out.

Mr. Lyttelton

I am glad to hear that. At least, the right hon. and learned Gentleman has given us very full figures. We must now face the question squarely: what would happen if we refused the aid now proffered to us? The Government have not enlightened the House or the country in detail upon this matter, although the right hon. and learned Gentleman has not shirked the truth in a general way. He said, I think at a Press conference a month or two ago, that, without American aid, Britain would soon be hungry and many factories, lacking materials, would have to close. I would like to be rather more specific. I would like to ask the Government whether it is not true that, if we had no American aid, or if we refused the aid now offered, there would very soon be an 8d. meat ration, there would be at least a one-third cut in sugar and fats, serious cuts in bacon, eggs and cheese, and about 1,500,000 unemployed, to say nothing of no basic petrol and very little tobacco?

I want to make it quite clear that I challenge the Government to deny the general correctness of these figures. I admit that they can be varied one way or another, but I challenge the Government to deny their general correctness, and I hope that the President of the Board of Trade, who is to reply, will refer to them specifically and either confirm or deny them. These facts drive home the lesson of the past three years. They show that, from now on, without American aid—and the right hon. and learned Gentleman said so himself—we should not have enough to eat and should not have the vitality or energy sufficient to maintain our production or to increase, or even maintain, our exports. Lastly, I think these facts answer, without any shadow of doubt, the question: can we look for recovery in a reasonable time without this aid? I think the answer to this question must be "No."

This seems to me to be a fitting place in my remarks in which to acknowledge in the warmest terms American statesmanship, generosity and broad-mindedness in this very distracted and divided world. I must say that, when I see the figures in black and white—that 20 billion dollars of aid is offered by the American people to the rest of the world in the next few years—I cannot help feeling that one might look in vain at the pages of history for another example of magnanimity on this scale. I scorn the arguments, to which the right hon. and learned Gentleman did not lend himself, which are advanced by many. That America is acting in this matter chiefly out of self-interest. She could, if she had wished, have given great benefits to her own people, but all that she stands to gain by this action is something above a selfish interest—it is the peace of the world. I see in Marshall Aid one of the most far-sighted and enlightened pieces of statesmanship ever given to the world by a victorious nation, especially when one remembers that she is separated by 3,000 or 4,000 miles of ocean from the convulsions which she is now seeking to cure.

Lastly, I think how lucky it is for us that the United States does not adopt the same attitude towards the rest of the world with regard to capitalism that our own Government adopts towards the rest of the world in regard to Socialism. No longer ago than last Wednesday, the Foreign Secretary was touching upon this favourite Socialist theme. He seemed to imply that sound relations could only exist with foreign countries provided those foreign Governments were of the Socialist brand. How lucky it is that the capitalist United States does not think that way about Socialist Britain, or, perhaps, they think this is only a passing and transient phase.

I should like to put it another way, so as not to rouse hon. Members opposite, but in order to bring out the generosity and disinterestedness of the United States. I would like to pose for His Majesty's Government an imaginary question and an imaginary set of circumstances. Let us suppose there were a capitalist country, a free enterprise country, a Right-wing country, which had just removed its transport system from public control back to private enterprise, which had removed electricity and gas in the same way and was contemplating the de-nationalisation of its steel industry, and was muzzling the Senate in order to bring it about; let us suppose that country had a deficit of £500 million a year with Socialist Great Britain, ruled as she is now. Does anybody think that a Socialist Government, if it had the means—and I would like to say, in passing, that no Socialist Government is likely to have the means—would make one and a quarter billion pounds available for a period of four years, chiefly by grant, to that Government? Before any Socialist casts a stone at American intentions, let him answer that question which I have just put.

I now turn to the second part of the main question: are the terms too onerous or too hampering? If they are, then perhaps even these consequences which I have already described might be preferable. I suppose that at least every Conservative Member of this House, in asking himself this question whether the terms are too onerous, looked first to see whether Imperial Preference had been thrown overboard. I cannot see myself that it has, or that any new obligations have been laid upon this country in this respect since we discussed the Geneva documents a few months ago. So far, so good; but I confess that I am not without misgivings. I still find in this document some obeisance to the doctrine that Europe can cure itself of its shortage of dollars—a sort of economic Vitamin C shortage, so to speak—by a policy of non-discrimination in trade. It is quite true, as the right hon. and learned Gentleman expressed, that the master words in Article II are: the Government of the United Kingdom will use its best endeavours but, if it is clear that those best endeavours must fail in these respects, I would have preferred words showing a greater sense of realism, or at least showing a knowledge that world trade is more and more becoming a mosaic of bilateral pattern. So Imperial Preference is not further assailed, but a genuflexion is made to the possibilities of immediate multilateral trade. No country would benefit more than our own if general mulilateral trade was developed, but such hopes are entirely visionary in the near future. I still fear some charge of a breach of faith by us if these principles are not attainable in the immediate future, and are contained in this document which is going to be read, perhaps, by others very soon.

On the general subject of the relations between the Empire economy and the rest of the world, I have even greater misgivings. As I understand it, the needs of Great Britain under the Aid Agreement have to pass through the Paris Committee of the Organisation for European Economic Co-operation—O.E.E.C. In the working of the Agreement, there is theoretically no direct contact between the Government of the United Kingdom and that of the United States in Washington, and therefore all British requests will, so to speak, be under fire by all the other 15 nations in this Paris Committee, and, in that case, can we be sure that Empire interests are to be properly safeguarded? I have misgivings on that, and that they are substantial is proved by the statement by the Chancellor of the Exchequer himself only a short time ago in this House. This was on 6th May, when the right hon. and learned Gentleman said: But this means that we have to contemplate some quite considerable readjustment in our economy as that co-operation develops. We may have to deal with certain industries; we may have to agree that we should not manufacture certain things; but that they will manufacture them, as they may agree that they will not manufacture some things which we will manufacture for them."—[OFFICIAL REPORT, 6th May, 1948; Vol. 450, c. 1587.] I think we require considerably more explanation than we have yet been given on this subject from the Government. It is generally held in the House, I believe—and I remember the hon. Lady the Member for Epping (Mrs. Manning) saying this in the course of a Debate—that the principles of Western Union need not conflict at all with the maintenance of the present trade relations within the British Empire. This statement has seldom been subjected to analysis. I believe it to be true. The statement made by the Chancellor of the Exchequer would seem at least to erode the integrity of this idea and give cause for some further explanation from the Government.

The right hon. and learned Gentleman has been very fully into the document, and I do not intend to go over it all myself, but to pick out some of what I regard as the main points. To begin with, I should like to welcome Article III. It seems to foreshadow the investment by the Americans of dollars in the United Kingdom or in the Colonial Empire, and it gives them the facilities for withdrawing not only the profits and interest on those investments but also the principal if they so desire it, which is one of the great bars now to any form of investment in Great Britain and the Empire. In fact, I was sorry to hear that the sum was limited to 300 million dollars; but when that has been invested, no doubt, consultations can take place.

I believe that one of the commonest errors into which we are apt to fall is to think that this immense disparity between the Western and the Eastern hemispheres can be cured in terms of current trading or by any interchange of current commodities. I believe that there must be private capital movements from the Western to the Eastern hemisphere. There must be private capital moving to seek profit in this hemisphere if we are ever to get back to an equilibrium or a balance.

I want to turn to those points upon which I still have anxieties, in spite of all that the right hon. and learned Gentleman has said to try to allay them. I still think that the greatest blot on the Agreement which we are discussing is that we do not know—I am sure it is not the fault of the right hon. and learned Gentleman—what proportions of the 1,320 million dollars are to be by way of loan and which are to be by grant, but I think from what he said that it would be a reasonable assumption, looking at the proportions which we have already received, that about 25 per cent. will be by loan and 75 per cent. by grant. I think that was the tenor of the right hon. and learned Gentleman's remarks.

But that is not quite all. It is one thing to incur more indebtedness to the United States and to put that with the debts which we already owe; it is one thing to do that, and put the future strain upon sterling if the dollars are at our disposal and are spendable entirely under our own control. But in addition to our not knowing what proportion is to be by loan and what proportion is to be by grant—and I am not blaming the right hon. and learned Gentleman—we do not know yet what proportion is to be given us in spendable dollars and what is to be sent to us in kind or commodities. I think that is a serious blot on our understanding of the Agreement, and I hope the Government will address themselves to that question.

I turn to Article V. Some of our greatest anxieties and preoccupations on this side of the House are concerned with this article, especially as it applies to the acceding Colonies. In the first paragraph it is clear that only a sale of our raw materials upon reasonable terms is contemplated. The proviso which permits the reasonable requirements of the United Kingdom for stockpiling for strategical purposes—I think the phrase "for domestic use" clearly includes stockpiling for strategical purposes—and commercial export of such materials, which includes barter, is a wise provision. The right hon. and learned Gentleman has made it clear that five per cent. of the deposits mentioned in Article IV can be used for the purchase of raw materials for stockpiling. But the amounts concerned are fairly large. It means that £13 million worth will be available to the United States for the purchase of these raw materials—raw materials which, I would remind the House, would otherwise have earned us that amount of dollars. The right hon. and learned Gentleman has said so this afternoon.

I must say that parts of Section 2 of Article V are still a little obscure to me, notably Section 2 (c). I am relieved to hear, what I did not understand when I read it, that there is no question of the dollars standing to the credit of the United States being subsequently remittable from this country. I hope that in carrying out this article we shall not get back into some of the complications of Lend-Lease which bedevilled us during part of the last war, and with which difficulties I am only too familiar. Of course, the Lend-Lease principle, that we would not compete in exports with materials which we had received free from the United States, is unexceptionable, and nothing would appear to be fairer; but, in fact, the opportunities for misunderstanding were almost limitless. I hope that any raw materials which we have to transfer to the United States under this provision will be subject to a very—

Sir S. Cripps

Did the right hon. Gentleman say that this came under Article V, 2 (c)?

Mr. Lyttelton

Yes.

Sir S. Cripps

I am afraid I do not understand.

Mr. Lyttelton

I may have misread the words, in which case the right hon. and learned Gentleman can put me right, but I understood that there was to be an agreed schedule of increased production of such materials where practicable … and for delivery of an agreed percentage of such increased production to be transferred to the United States on a long-term basis in consideration of assistance. … To me that means that there is to be some relation in the transfer of these raw materials to the United States—some percentage, for example, representing the proportion of aid given by the United States to secure this increased production. If it does not mean that, the drafting is very bad, but that is how I read it. At any rate the right hon. and learned Gentleman can clear it up. If we read those words in the terms which I think they mean, they mean that we should get into a sort of Lend-Lease discussion as to what proportion of American aid is contained in the materials to be transferred. I think the right hon. and learned Gentleman is seized of my point, and perhaps he can allay my anxieties about it.

I would also like to express the hope that arrangements concerning exports of warlike material—we used to call them munitions—will be the subject of a separate agreement, and that the present Agreement will not be used as a means of controlling what I might call the defence aspects of international trade. I share Mr. Hoffman's view that the export of jet engines to Russia was a folly. Nor is it in the least a defence to say that those engines were out of date or obsolete when they were exported. Everyone knows that one of the great difficulties which had to be overcome in the manufacturing of gas turbines was the metallurgical problem, and 10 years of research had certainly gone into finding the right alloys which will stand up to these very high temperatures. Therefore, it is really 10 years of research and not obsolete engines which we are exporting when we sell them to Russia. I think it would be a mistake if the export of contraband of this kind—munitions of war—were going to be regulated under this Agreement, but what Mr. Hoffman said did seem to show that was the present intention. I do not think it should come under this Agreement and I think a specific Schedule, which will cover this matter, should be separately negotiated.

To sum up, I think it would be fair to say that although many obligations are imposed upon us, wherever they are clearly stated—or after the explanation of the right hon. and learned Gentleman—they appear to us to be natural and understandable. I think the United States has shown very great restraint in this Agreement, and if their restraint is in any way due to the persuasion by our representatives in the United States and our new Ambassador, in particular, or to the efforts of the American Ambassador in London, I think they have earned our gratitude and our congratulations. But, in the main, our thanks must be due to a country which is in a position to impose onerous and restrictive terms but which has not sought to take advantage of her position.

That we should be reduced, largely by the ineptitude and mismanagement of our own Government, to a position where we are almost entirely dependent on the good will of the United States is a matter which grieves and humiliates every British subject who thinks straight about these matters. I am not saying at all that the Socialist Government succeeded to an easy heritage in 1945, but what I am saying is that almost every action which they have taken since has aggravated our position and has damaged our national fortunes. Today, we should be not discussing this; we should be emerging from some of our postwar difficulties; actually we are in a far worse case than we were when the last shot was fired. I shall vote for this Agreement, but I shall vote for it reluctantly—

Major Bruce (Portsmouth, North)

The right hon. Gentleman has made a very serious statement—

Mr. Lyttelton

I shall not give way. In a moment the hon. and gallant Member for North Portsmouth (Major Bruce) will be making his own speech. I am just finishing.

Major Bruce

The right hon. Gentleman has made a very serious statement that this country is now in a far worse case than it was immediately after the war. Is he prepared to substantiate that most serious statement?

Mr. Lyttelton

I am prepared to substantiate it. I have already substantiated it, in the words which the Chancellor himself used, but which I am not going to read again, when he said Britain would starve and our factories would close, without more American aid.

I shall vote for this Agreement—[Interruption.]—Hon. Members will have their opportunity soon—but I shall vote for it reluctantly and with some sense of humiliation. It is not without significance that yesterday, on 4th July, the United States celebrated her Independence Day, and that we are discussing this Agreement on 5th July. May I express the hope that at a not too-far-distant date we may also, on a 5th July, celebrate our own independence.

5.32 p.m.

Mr. Norman Smith (Nottingham, South)

The deplorable conclusion of the speech we have just heard proves that the right hon. Member for Aldershot (Mr. Lyttelton) has no contribution whatever to make to the solution of the difficulties in which we find ourselves. I rejoice that his right hon. and gallant Friend the junior Member for the Scottish Universities (Lieut.-Colonel Elliot) is on the Front Bench with him because, in proving the right hon. Gentleman the Member for Aldershot wrong, I propose to call his right hon. and gallant Friend the Member for the Scottish Universities as a very material witness.

The only constructive suggestion made by the right hon. Member for Aldershot was that Americans should be given every opportunity to invest their capital in this country and in its Colonies.—[An HON. MEMBER: "To exploit us."] What he does not understand is that the facts of geography, which have made America so independent of the rest of the world, prevent America from carrying out a policy of overseas investment on a scale sufficient to overcome the dollar shortage in the rest of the world. In the 19th century, when this country occupied the position of economic primacy, there was no sterling shortage in the world because this country was able to undertake a very large and comprehensive policy of overseas investment, and we were able to do so because the facts of geography rendered us dependent on the rest of the world for a supply of raw materials and foodstuffs, for which reason we were able to take interest payments from other countries.

We were able to do more than that. We were able to stand very substantial losses on our overseas investments, whereby our overseas investments became, in fact, not loans but gifts. That puts the right hon. Gentleman the Member for Aldershot wrong when he says there is no precedent whatever for what America has done by way of making substantial gifts to the rest of the world. There is such precedent. Before 1914, Great Britain gave away at least £2,000 million of capital goods to the rest of the world. That, on comparable prices and values might fairly be compared with Marshall Aid today.

Great Britain did that. I have used the figure of £2,000 million, which was the figure given by the late Lord Mancroft when he was Mr. Arthur Michael Samuel, a Conservative Financial Secretary to the Treasury. I believe the right hon. and gallant Gentleman the junior Member for the Scottish Universities has put the figure at twice that amount since he was returned to this Parliament in a by-election. Whether that is right or wrong, certainly I can call the right hon. and gallant Member as witness for the case I am about to make in opposition to the case made by the right hon. Member for Aldershot. I can call the right hon. and gallant Gentleman as a substantial witness for my case that America must, in the circumstances of the world, indulge in a programme of "give-away," Marshall Aid is "give-away." I do not object to Marshall Aid; we want it, because we shall do very badly if we do not get it. I object very strongly to the conditions which are imposed, but I will come to that in a minute.

I will deal with the right hon. and gallant Member for the Scottish Universities. He agrees that America, in the world in which we find ourselves, must, in fact, indulge in a tremendous policy of "give-away" economics. This is what the right hon. and gallant Gentleman wrote in the London "Evening Standard" of 30th September, 1943. With your permission, Sir, I will read the quotation, which is very short: After the war the output of the U.S.A. will be one-third higher than it was at the tip-top of the boom levels of the last year in peace. All that new output as well as the old will have to be set running along the channels of peace. A new United States, one-third the size of the present, all market, will be needed to soak up this great output—and that in a year and a half or less. You will never handle that vast problem by foreign trade. Give it away—yes! Leaselend—yes, if neither lease nor lend means what it says. Long-term credit—yes, again, if the word does not mean what it says, for this is to be a credit which must bring neither debit nor audit. Free Trade is no remedy. It is only the internal market that will be able to engulf goods and services at the rate which post-war machines can deliver.

Lieut.-Colonel Elliot (Scottish Universities)

Does not the hon. Member realise that is saying that, if the United States uses that material at home, it can all be absorbed? Everybody knows that, and that is what the United States are voluntarily renouncing at the present time.

Mr. Smith

Everybody knows no such thing.

Lieut.-Colonel Elliot

The hon. Member must not call me as a witness, because I deny the interpretation which he puts upon my words.

Mr. Smith

I am calling the right hon. and gallant Gentleman as a witness in support of my case, that in the conditions in the world today, we have to think in terms of the economics of "give-away" and not in terms of the economics of buying and selling or of investing.

Lieut.-Colonel Elliot

Once for all, does not the hon. Member, with whom I have often discussed this matter, admit that we have to agree that giving it away at home is the simplest way to deal with it, and that if the United States had liked to do that, none of this surplus would have arisen?

Mr. Smith

For the United States it would be neither simple nor easy to give away at home the surplus involved, and for this reason. Mr. Hoffman said the other day, "We in the United States believe our economic system to be the best the world has ever known." That is the economic system of capitalism. The industrial potential of the United States is so tremendous that if the United States were to contemplate giving away to her own population anything like the production of which that country is capable, the standard of living of the American people would be raised to such a tremendous degree that capitalism would break down for the excellent reason that the workmen would no longer have any incentive to toil for any employer.

Lieut.-Colonel Elliot

Does the hon. Gentleman really ask the House to agree to the theory that the United States could not raise their wages and could not thereby absorb the sums of which he has been talking, and that the raising of wages would make American workmen stop work? What utter rubbish.

Mr. Smith

The level of technological achievement in the United States is such that if that country decided to share out all its production, the standard of living of the working class would be raised to such an extent that the capitalist system could no longer function. In any case capitalism could not give away to workers its output in that way without violating the rules of capitalism. The right hon. Member for Aldershot displayed a glimmer of the right sort of intelligence when he said that, in the circumstances in which we are, it is quite impossible to have a balance of current trade between the Eastern and Western hemispheres.

I submit that the whole idea behind this Marshall arrangement is this. The Americans appear to believe that by 1952 or thereabouts Europe will have got back to what the Americans deem to be a normal condition of things, namely, that Europe will be able by her own efforts to earn all the dollars she wants. I submit that, owing to the facts of geography, that is not true. Britain in the 19th century could take imports because geography denied to us the things which we needed.

I submit that by 1952, no matter how successful Marshall Aid will be, the countries of Europe, including our own, will be able to balance their overseas trade accounts, if at all, only by exercising the utmost economy and the most superlative parsimony in spending such dollars as they may be able to earn. When the aid programme is completed, there will still be a dollar shortage. Indeed, according to geography, the dollar shortage must of necessity last for ever. That being the case, it is surely the duty of this country to plan its economy in such a way as to arrange that, so soon as may be, Great Britain, the Dominions and the Colonies shall be independent of dollar supplies. If we are to do that, we cannot at one and the same time observe the conditions which are imposed upon us by this Marshall Aid.

All the more true is it because, as my right hon. and learned Friend disclosed to the House today, roughly a quarter of the entire aid available to Europe is to be by way of loan. If we are going to incur a Marshall loan over the next four or five years to about 1952, we shall have to find £40 million or £50 million worth of dollars per annum for Keynes and Marshall interest, over and above what is necessary to find by way of dollars for current trading. There is not an hon. Member of this House who honestly believes in his heart that it can be done. It cannot be done. The dollar shortage is perpetual, for which reason a multilateral economy based on convertible currencies is necessarily chimerical.

This penetration of the British Colonial Empire by the United States is the key to the entire Agreement. The letter on page 13 proves that. That letter—as, indeed, my right hon. and learned Friend was most scrupulous to inform the House—means in effect that if, for any reason, some important British Colonies do not come in, the entire deal is off. The whole idea of our long-term colonial development should be to render us independent of the dollar economy. Instead of that, we are subordinating our colonial development to America's need instead of giving primacy to our own. It is all very well to say that our reasonable requirements will be allowed for. But who will define reasonable requirements? The definition will be done in Washington and not in London—in all probability, by a Republican administration backed by a Republican Congress.

Then again, as, indeed, my right hon. and learned Friend hinted, it may well be that if we do not watch it, this colonial development for stockpiling for the Americans may leave us in some Colonies with a distorted capital equipment, a capital equipment having no reason for existence once American requirements have been satisfied. Lastly, what is to be the effect on the Dominions on this business of colonial stockpiling and American penetration into our Colonies? Once we subordinate our own economy and that of our Colonial Empire to the economy of the United States—as we must under this Agreement—we leave the Dominions, economically speaking, up in the air. They will have no option but to subordinate their own, with the result that it is no longer practical for us to think in terms of the policy we ought to be thinking in terms of—creating a viable economy to comprise not only this country, the Dominions, and the nations of Western Europe, but also their respective colonies. Under this business of Marshall Aid, the terms and conditions are harsh and unconscionable and would have the effect of diverting the whole of our economy.

I am alarmed at the financial strings attached to this. Who could be anything but alarmed? Articles II and IV set out the financial conditions by which we have to abide. We have to stabilise our economy, maintain a valid rate of exchange. What is a valid rate of exchange? Who is to define a valid rate of exchange? As I see it, two factors enter into the computation of a rate of exchange. The first and obvious factor is and ought to be the comparative purchasing power—purchasing power parity: "What is my currency worth in my country, and what is his currency worth in his country?" That is what it ought to be. That is one important factor.

At a time like this, when this country is deflating very drastically with a Crippsian Budget, thereby sending up the purchasing power of its currency, while America, on the other hand—although the capitalist economy of which the right hon. Gentleman boasted—is giving free rein to business acquisitiveness, and inflating, sending up prices, one would have thought that the effect of those divergent tendencies would be to send up the pound in term of dollars. Unfortunately, along comes the other influence which is the instrument of power on the part of the American financiers. Whereas the economy of the Eastern hemisphere is in decline, while that of the Western hemisphere—not because of capitalism, but because of immunity from war and because of the bounty of nature and the facts of geography—is in the ascendant, obviously there is a general demand for Western currency—which, indeed, was why we had the breakdown of convertibility last summer. That sends up the dollar and when the dollar goes up, because of the law of supply and demand, it falsifies the rate of exchange, prejudices the economy of this country, and makes it impossible to predict how long a time a loan will last.

The Economic Secretary in February, 1947, made a statement, which was widely quoted, that the American Loan would last until the middle of 1949. I had that thrown up at me at a village by-election meeting in Brigg the other day by a Conservative heckler, who did not belong to the village but who probably went round working for headquarters. I am an ingenious person and I had an answer ready for him. I turned it back on him, particularly to the delight of the farm labourers present at the meeting. But the Economic Secretary fell down because applying the law of supply and demand to the valid rate of exchange makes it work the wrong way. So long as the Americans give rein to business acquisitiveness, we are going to have prices rising over there, and the rate of exchange becomes invalid.

We are asked to balance our Budget, though there is an interpretative note, according to which we may have an occasional deficit if we want to, though we must balance over a period of years. This, of course, interferes with our internal affairs and the power to control our own finances. There is in this country a large and growing opinion that the Budget ought not to be balanced, and for this reason. In any country where the population continues to rise while productivity, due to technological reasons, continues to increase, there must be a constant increase in the monetary supply. That periodic increment of the monetary supply comes into existence as a debt owing to the bankers, because they provide the necessary additional money by augmenting total deposits through loans. Such increases average over a very long period some 3 per cent. per annum of the total deposits.

Suppose that an Englishman, desiring to free his country from the power of the bankers, desires, instead of the increment being found in that way, that it should be found by an annual Budget deficit, which is a perfectly fair thing to ask for, and which tends to undermine the power and influence of the bankers—an object which my hon. Friends on this side would applaud, if they understood it, which they do not—America can come along and say, "No, you are bound by the terms of Marshall aid to balance your Budget." That is why I object to a condition like this. It is foreign interference with our internal financial matters.

Under Article IV we are required to do something else to which my right hon. and learned Friend referred. This is gross interference with our financial independence. Article IV says that there shall be a special account in the Bank of England, into which there shall be paid the sterling equivalent of all the proceeds of Marshall Aid goods. I do not object to that. Nor do I object to the fund being used for the amortisation of debt; but I object to foreigners dictating what kind of debt shall be amortised. They do that, when they say: Effective retirement of the national debt, especially debt held by the Central Bank or other banking institutions. That is floating debt, and they single it out for two reasons. First, if we amortise that sort of debt, there is no benefit to the taxpayer. The interest on it is so small as to be negligible, but there is a direct deflationary effect; and American bankers, true to form, believe that that which is deflationary is praiseworthy. Too many right hon. Members on these benches believe that, and the entire party opposite believe it; they believe it, because deflation is the mother of unemployment, and unemployment is the mother of servility in the minds of the working-class. I am against anything deflationary, and this sort of debt retirement is deflationary. My right hon. and learned Friend said that in certain circumstances it would be long-term debt that would be amortised. But what of the stipulation debt held by the Central Bank, or other banking institutions"? We would not be allowed to amortise long-term debt carrying interest at a rate of 2½ or 3 per cent. We could not do that, because that would be to convert bonds which are frozen, into cash which is liquid, and that would be inflationary and against all the rules.

I find that these financial conditions are harsh and unconscionable. I think, however, that I understand why they exist. There is something else about the floating debt which the American bankers know and the British bankers know. Whether the House of Commons know it or not, I do not know. There is really no moral obligation on any Government to repay its floating debt. Any Government may rightly and properly, without violating any ethical canon, simply cancel its floating debt out of existence for the reason that, in the case of bank-held floating debt, the lender does not part with what he lends—he merely creates it. The American bankers know that, and they want to protect the British bankers against the sort of attack which may come from people who think as I do. The American bankers have Alberta just across their frontiers, and in the light of that they are anxious to impose on us harsh and unconscionable financial conditions. I have an objection to Colonial penetration and to financial strings.

There are many sections in this Agreement to which my right hon. and learned Friend referred, not always so frankly as he might have done. There is, for example, section 3 of Article I about offshore purchases. We are required, as he said, to take steps to ensure that the purchase of certain things from areas outside the United States shall be effected at reasonable prices. But there is nothing about reasonable prices in respect of purchases in the land where Marshall aid originates. They do not apply to their own country the criteria which they apply to Canada or the Argentine. Article II, section (1, a) says that we are to have the use of Marshall Aid for purposes consistent with this Agreement. That rules out using Marshall Aid dollars for current Dominion deficits, and that is, therefore, a direct slap at the sterling area. That is a very mischievous Clause.

Article II, section 1 (iii), deals with British capital assets in the United States. As my right hon. and learned Friend insisted, we are not required to sell these. I suspect, and I should like some guarantee on this, that if we are not required to sell them, we shall have to use them as collateral for dubious loans which the ordinary American commercial bankers or the World Bank would refuse to underwrite. I suspect that that is the reason for this section, and I think it a mischievous section. I regret that we should fall for it.

But the thing goes much further than this. We are required under paragraph (b) to submit to the American Government detailed proposals for specific projects in connection with our own basic industries. If we propose to expand basic industries with goods delivered under Marshall Aid, how can we disentangle what we do with Marshall Aid goods from what we do with other goods. The quantity of steel available from Marshall Aid resources may bring the total quantity to X plus A. We may use A somewhere else, but if we use X we shall be indirectly concerned with Marshall Aid. We have nationalised coal and transportation, and we are proposing to nationalise steel. As for food, we have taken that off a business basis and put it on a basis of service. Under this Section, we are required to submit to the Americans any project whatever for expanding these basic industries. Now, that means saying goodbye to all hopes of raising the standard of life of our people through expanding our basic industries sufficiently to make possible a much higher all-round output. Otherwise, why are these basic industries mentioned in this Article?

I will refer only very briefly to section 2 of Article II, which refers to displaced persons. "The Times" this morning had a leading article contrasting our own record in that respect very favourably with that of the Americans. Who are they, that they should impose that sort of condition upon us? Let them do their share with displaced persons before they ask us to do any more.

Mr. Walter Fletcher (Bury)

Is the hon. Member not aware that they have just agreed to take over 200,000?

Mr. Smith

I am also aware that President Truman chided Congress for behaving in so niggardly a fashion over those 200,000.

Section 3 of Article II prevents us from fostering monopolistic control. Now, hon. and right hon. Members opposite have often argued—and I, as an objective, genuine, reasonable man, am prepared to admit that their arguments have been cogent—that nationalisation involves monopolistic control. That does not frighten me off nationalisation; but I think hon. Members opposite have some cogency in their argument when they make that case against nationalisation. Monopolistic control? Well, why are we inhibited from fostering monopolistic control? That might mean that we are inhibited from expanding our steel industry. Under this section it would be possible for the Americans to say, "If you nationalise steel, you make it monopolistic; and if you propose to expand it, what you are doing is upsetting the joint programme of European recovery." They might argue because Western Germany is included in this scheme, that Western Germany's contribution should be by way of expanding her steel output, so that if we expand our productive capacity in Great Britain we are going to upset the whole balance of European economy. If they did that, it would mean that we should be saying goodbye to the great hopes that we have of presently raising the standard of life in our country, which we can do only by expanding first the production of our basic industries.

There are other objectionable conditions which I find very frightening. I cannot help looking at section 3 of Article VIII, which provides for the most elaborate publicity on all this. All this elaborate publicity which we are required, in the days ahead, to give to Marshall Aid contrasts ill with the hush and the rush that have characterised the handling of this business ever since 3rd April. I am glad to see my right hon. and learned Friend return to the Chamber; I have waited for him to come in before making what is in the nature of a quite objective personal charge against him. I say that this business has been subject to hush and rush. The terms of this Agreement are substantially identical with those laid down in section 115 (b) of the European Recovery Act of Congress. I think any reasonable- minded Member will agree that is so. Now, last Tuesday my right hon. and learned Friend came to this House and gave the House eight days' notice to approve this Agreement: just eight days' notice. He then said: For the convenience of the House, I am having that Section reproduced in the OFFICIAL REPORT."—[OFFICIAL REPORT, 29th June, 1948; Vol. 452, c. 2022.] That is what he said; it is on record in the OFFICIAL REPORT for last Tuesday. And he did have section 115 (b) reproduced. Why did not he cause it to appear before? It was printed 12 weeks ago. Was it because His Majesty's Government did not want any discussion on this?

But it is not only my right hon. and learned Friend who has offended: the British newspaper Press kept it dark for 11 weeks. Not until 18th June did the "Financial Times" come out with section 115 (b) in full; it had not appeared until then. I have ascertained that before 18th June Lobby correspondents discussed section 115 (b) with officials in Government offices: but their papers printed nothing. When I used to earn my living in Fleet Street, it sometimes happened that the Government of the day would send a request round to editors, advising them to ring down on certain news. The classical example was in 1936, when Fleet Street printed none of the news, which was appearing day by day in France and America, about the events leading up to the Abdication. Did anything like that happen this time?

Sir S. Cripps

indicated assent.^*

Mr. Smith

You know, some of my right hon. and learned Friend's answers appear to be rather pragmatical than related directly to absolute truth. On 7th April I asked my right hon. and learned Friend in very plain English: "Are there any strings to Marshall Aid?" Not only did he reply that there were no strings, but he used the word "fantastic" as applied to my suggestion that there were strings. The thing had been in existence four days; there is a cable under the Atlantic; we have got a diplomatic set-up in Washington; but I went about, on the strength of the authority of my right hon. and learned Friend, telling audiences that there were no strings attached to Marshall Aid. Little Simpleton believed it, because Little Simpleton had great confidence in the integrity of his right hon. and learned Friend. I must confess, that confidence has been a little shaken, and in future I shall feel tempted to examine very closely every perceptible facet of any answer which my right hon. and learned Friend may give at any time to any Member of this House.

Never before have I asked the House to listen to me for more than 20 minutes, and I must now ring down. [HON. MEMBERS: "Go on."] Well, I know that other hon. Members want to speak. But I must say this in conclusion. The right hon. Member for Aldershot (Mr. Lyttelton) referred to the fact that yesterday, Sunday, was Independence Day. Geography has, in very truth, made the United States independent of the rest of the world. Geography and what has happened in the last two or three decades have made us very dependent, for the time being, upon the rest of the world. We are not independent; we are not suppliant; but we are indigent.

We have got to have this aid, and I know it. If we do not have this aid, we cannot maintain full production. Everything the right hon. Gentleman said ^* See Col. 226, lines 3–24. in that respect was true, without any qualification; there was no pragmatism about that; it is true. There are hon. Members of this House who think we should look to Russia. We cannot do it. Russia has nothing to give away, for the very reason that we have nothing to give away. I want all the trade we can have with Russia; but that trade must necessarily be of the nature of an exchange of goods and services for goods and services. Russia is not in a position to give us anything. That is her misfortune, and ours.

We want something over and above what we can get by exchange. We want gifts, commensurate with the great gifts this country gave to the rest of the world in the 19th century under the operation of our overseas investment policy, which involved losses on the tremendous scale indicated by the right hon. and gallant Member for the Scottish Universities (Lieut.-Colonel Elliot). We want gifts now, commensurate with the inestimable gift of liberty which the rest of the world, including America, enjoys very largely because of sacrifices of British blood and British treasure—our disproportionate sacrifices in the late war. We want those things. The common people of America, I know, do not grudge us those things. The common people of America wish us well. I know that that is so. But if one looks a gift horse in the mouth, one sometimes sees that it is a Trojan horse; and the generosity of the common people of America contrasts very greatly with the calculating statecraft by which the rulers and financiers of that country are imposing conditions on to this aid, which they know we must have.

I believe very sincerely, and with all the intellect I have, that the hope of the world lies in this country's teaching the rest of the world how to combine individual liberty with economic abundance. I believe that. Russia cannot do it, because in Russia the individual human being is subordinated to the one-party State. America cannot do it, because they worship this inhuman law of supply and demand. Only Great Britain can do it, in conjunction with her Colonies, the Dominions and the other nations of Western Europe. Because of that, and because I think the conditions attached to this Agreement fatally impair any hope of building up Western Union, I ask the House to join with me in opposing those conditions and in asking His Majesty's Government to re-open negotiations for the reconsideration of conditions which are obnoxious and burdensome.

6.10 p.m.

Mr. Hollis (Devizes)

This is not a very joyous occasion; it is a highly actual occasion. I think it best that Members should keep their attention very closely to the particular propositions we are invited to consider. There are three major respects in which the situation today differs from the situation at the time when we were discussing the American Loan. The first, which has not so far been referred to, is that today we are debating this matter in a very much more immediately critical international situation, and, legitimate as it may be to argue that one country may without unfriendliness refuse the economic assistance of another, I do not think anyone can seriously doubt that if we rejected this Agreement it would be taken by other Powers as a sign of an Anglo-American rift, and might have most serious international consequences. It is no good arguing whether they have a right to make that interpretation; and I do not think anyone would seriously doubt that they would not do so.

The second factor is one which the hon. Member for South Nottingham (Mr. N. Smith), whose speeches I always so greatly enjoy, a little overlooked. The hon. Member said that he wanted to have Marshall aid, but that he did not want to have Marshall aid on these conditions. He overlooked the fact that the situation today is different from the situation at the time of the loan in this respect, that the American administration is only negotiating under authority given to it by an Act of a Congress which has already passed away, and therefore there is no scope for modification of the aid beyond the terms of that Act, and that, therefore, rightly or wrongly, we must take it or leave it. That is the way these negotiations have been carried on.

The third strand of the hon. Member's argument, in his criticism of fixing the rate of exchange and of the threats to our Imperial position, was to suppose that were we to reject this Agreement we should then be entirely free people. That is not the situation at all. Both the hon. Member and I were opposed to the loan, but rightly or wrongly this House accepted it, and rightly or wrongly we accepted Bretton Woods, Geneva and Havana, and all the obligations which this country undertook under those Agreements are obligations which still stand, whether this Agreement is rejected or not. Therefore, the only serious matter to which to give our minds is not whether there are things in this paper which are inconvenient, or whether this country is tied by certain obligations that are inconvenient, but whether there are additional obligations undertaken in this Agreement which justify us rejecting it.

When we consider the desperate economic condition of the country, I entirely agree with my right hon. Friend the Member for Aldershot (Mr. Lyttelton) that we cannot take the responsibility of rejecting this Agreement. But I entirely agree with him also, that though we must accept the fact of being in this pass, that does not mean that we must not vigorously condemn the Government which has brought us into this pass. We need not go into the whole argument whether the Loan should have been accepted or not, but I would point out that among the many voices which would not counsel rejection of that Loan there was none more responsible than that of my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson), but he gave the country a warning that unless all help and encouragement is given to those industries on which we have to depend for the development of our export trade, and unless everything possible is done to maintain the prestige of sterling and to create conditions of confidence throughout the world … I think that a breakdown is inevitable."—[OFFICIAL REPORT, 12th December, 1945; Vol. 417, c. 454.] Our complaint is not so much that the Government accepted the loan, but that having accepted it they pursued a policy which made it mathematically certain that the loan policy would fail, and there-for this Government are to a very large extent responsible for the position in which the country finds itself today. The hon. Member for South Nottingham has tabled a Motion in which he says we have a right to expect assistance from America "unconditionally and as of right." He failed to note throughout his speech a matter which is surely of no small importance; that it is America which is giving the money and we who are receiving it. That makes a certain difference in making a bargan.

I have expressed at times in this House some concern about certain aspects of American policy, but let us try and see what is the American point of view on this question. First, the hon. Member quarrelled with the contention of my right hon. Friend the Member for Aldershot that this was an unparalleled act of generosity on behalf of the American people because they were giving away very large sums of money. The hon. Member's repartee to my right hon. Friend was that British overseas investors throughout the course of the Nineteenth Century had also lost a large sum of money, and that therefore there was no unparalleled generosity here. Surely, there is a very great deal of difference between the person who deliberately and with his eyes open gives away money and the person who makes a bad investment. If the hon. Member cannot see any distinction then it is very difficult to see on what he bases his argument.

Mr. N. Smith

I learned these facts a good number of years ago from a book called "The Breakdown of Money," written by the hon. Member for Devizes (Mr. Hollis). It is all in his own book.

Mr. Hollis

It is in my book, a very admirable book, and I thank the hon. Member for giving it publicity, but it does not alter the fact that the investments were aimed at making money but were foolishly made and therefore money was lost. I do not see the parallel between a person who makes a bad investment and loses his money, and a person who makes a gift with no intention of getting his money back.

Secondly, the Americans—and the people of this country—were told that they were making a loan to this country which would be used as a spring-board and would keep it going for some two or three years. Instead, it was exhaused in little more than one year, and far from being used as a spring-board it was used as a penny-in-the-slot to start up the "Song in the Heart" of the Chancellor—the Chancellor of the Duchy of Lancaster, of course. His worst enemy would not accuse the present Chancellor of the Exchequer of having a song in his heart. Instead, it was expended after little more than a year, and then Oliver Twist goes back and asks for more; but it is not recorded of Dickens' Oliver Twist that he took that particular moment to criticise the workhouse system, or to cast aspersions on the personal appearance of Mr. Bumble. I cannot see that we can seriously object to the Americans having some say in what is to be done with their money when they are not going to ask for their money to be given back. The only serious question is whether that say is inordinate and against our honour to such an extent that we should refuse.

This Agreement has been attacked on one or two grounds. Writers in the newspapers of Lord Beaverbrook have attacked it very vigorously as a sell-out of the Empire, and we should most carefully study it to see whether our Imperial interests are in any way fatally compromised. I quite agree with my right hon. Friend the Member for Aldershot. I cannot see that in point of fact they are compromised by this Agreement. There are relevant articles such as section 3 of Article 2 which talk about arrangements affecting international trade and which restrain competition, but, as the Chancellor of the Exchequer said, all that the Government are under an obligation to do under that article is to take the measures they deem appropriate. Naturally enough, we on this side of the House think it highly probable that the measures which the Government deem appropriate will turn out to be extremely foolish measures. But that is a reason for getting rid of the Government, and not a reason for getting rid of the Agreement.

Again, by article V (2, b) the Government accept the obligation, when so requested by the Government of the United States, to negotiate, where applicable, the arrangements for the entry of American capital into the colonies. The hon. Member for South Nottingham was very concerned about the possibility of American capital coming into the Colonial Empire. I found it rather difficult to follow his argument, the first stage of which was that when people exported capital they practically always lost it and, therefore, it was a gift. The second stage was that it was absolutely essential that the Americans should make gifts to the rest of the world, and the third stage should then surely have been that it would be admirable that they should invest in the British Colonial Empire because that would be a way of making gifts to the rest of the world.

Mr. N. Smith

Has the hon. Member forgotten the fourth stage of my contention, which was that American economic penetration of our Colonial Empire was to be financed on the strength of collateral, as represented by our investments in the United States, which we should proceed to lose?

Mr. Hollis

That does not seem to me an argument of the hon. Member. It seems to me an assertion which he would find it very difficult to substantiate.

We come now to this other matter, which we should view with great concern—whether our exchange policy is vitally compromised by this Agreement. I was no supporter of Bretton Woods; it seemed to me to be an agreement between two runaway horses to run away at exactly the same pace. I do not believe that a more stupid Agreement was ever made. I agree with the hon. Member, however, in not knowing what the words "valid rate of exchange" mean. If that is not clear it is, at any rate, an advantage, because we have at least undertaken a meaningless obligation instead of a very harmful one, such as we previously undertook. I cannot see that we have undertaken any new obligation by this Agreement.

The hon. Member for South Nottingham made great play with the obligation which the Government had accepted to balance the Budget. But the Government only accepted the obligation to "use their best endeavours to balance the Budget." And the Chancellor pointed cut that there was an annex by which when they said balance it now they did not really mean it, that they were only going to balance it "in the long run." That phrase seems to me entirely meaningless. I do not necessarily defend this traffic in meaningless phrases, but it is better than nothing. To say that the Budget should be balanced every year has some meaning. To say that it should be balanced over, say, seven years, has some meaning, whereas to say that that something must be balanced in the long run without defining how long, is, as a legal obligation, entirely meaningless. It is like telling us that if a coin is spun often enough it will come down an equal number of times heads and tails; we spin it three times and it does not. "Oh," they say, "go on long enough and you will find it does." But this really means: "If you stop when heads and tails are equal, you stop when heads and tails are equal" and means nothing else whatsoever. So, balancing the Budget in the long run has no meaning whatever.

It seems to me that far from undertaking new obligations by this document, we are, on the contrary, rather less closely bound than we were by obligations already undertaken. That being so, and seeing the country's enormous need of the money, I could not give my vote in favour of rejection of this Agreement. I agree that there is plenty of general reasons for anxiety about the commercial relations between the Western and Eastern hemispheres, because of the vast surplus of American exports over imports which has existed ever since the 1914 war. I agree that this Agreement does not solve that problem, and I entirely agree in condemning the folly of the Treasury Bench and others, elsewhere, who sometimes talk as though surplus of exports over imports were a temporary phenomenon likely to be cured by 1951 or 1952. And I have, too, spoken in criticism several times of a certain slowness on the part of the Americans in realising that if they want to sell goods abroad and expect to be paid, they must be prepared to take goods in payment. But, gracious Heavens, this surely is hardly a generous moment to make that criticism. We may have been right to make it in the past. We may have to make it in the future, but when we are being given hundreds of millions of dollars it is hardly generous at this time to make it in the present. Without any sort of pride in the position to which His Majesty's Government have brought this country, and without any sort of illusion that this document contains a magic formula for the solution of all the economic troubles of the world, I shall, without hesitation, support it.

6.27 p.m.

Mr. Jenkins (Southwark, Central)

So far in this Debate there has been, with the possible exception of my hon. Friend the Member for South Nottingham (Mr. N. Smith), a certain amount of unanimity in acknowledging the generosity of the American nation in putting forward this European Recovery Programme. I am glad that that has been so. Whatever the possible argument that the Americans may be actuated by self-interest in doing this, they are, at least, actuated by farsighted self-interest. That is a great deal more rare and more welcome than shortsighted self-interest. The unanimity of approach, however, was rather abruptly broken by the right hon. Member for Aldershot (Mr. Lyttelton), who is not here at the moment. He took the opportunity to upbraid the record of the Government during the last three years, and to point out, almost with amazement, that the Americans were so tolerant as not to interfere in the internal political and economic systems of our country.

This sort of attitude on the part of Members opposite leads us to think that some of them are a little disappointed that the Americans have been so forbearing on this point, and have shown such reluctance to pull Conservative chestnuts out of the fire. The point was also made that without this aid we should be facing substantial unemployment in this country. We are not surprised that Members opposite should make that point, because it is a good debating point and prominent Government spokesmen have admitted that this would be so.

But it is unreasonable that Members opposite should go on from there to say that the achievement of the Government in maintaining full employment during these three post-war years is therefore negligible, or that the only difference on this point between the Government and prewar Conservative Governments is that we have had the American Loan, or will have Marshall Aid, and that they did not. These forms of external aid are deflationary in their effect and in themselves, apart from the special circumstances of the time, they tend to diminish rather than decrease the volume of employment. In 1935, if we had had some such aid as Marshall Aid coming from overseas, under the system by which our economy was then ordered, the effect would have been not to do away with two million unemployed but probably to create four million unemployed.

I and a great number of hon. Members on this side of the House welcome the European Recovery Programme not only because of the very necessary material help it will give to this country, but also because we think it will greatly facilitate the establishment of Western Union. But it is clear, and it was made clear to a large extent by the Chancellor of the Exchequer, that the sort of Western Union that this programme will facilitate, whatever hon. Members opposite will think and whatever sort of internal regime which the United States may have, is not a union based on free economies or laissez faire systems of Government. If we look at the draft Economic Co-operation Agreement, which our representatives have initialled and which we have before us in the form of a White Paper, we are able to see the form of agreement which is being applied to other countries. We find that Socialist Britain with its planned economy is required to do comparatively little, but it is other countries in Europe with their free or semi-free economies, which are required to make alterations in their economic programme and generally to pull up their socks economically.

Article II, which it is agreed is one of the most important Articles in the Agreement begins by saying that the United Kingdom is to adopt or maintain the measures necessary to ensure the efficient and practical use of all the resources available to it. That motif of "adopt or maintain" is repeated several times throughout the Agreement. Sometimes it is "Restore or maintain" and sometimes "establish or maintain." There is no doubt that this dichotomy of phrase is explained by the fact that to a large extent, curious though it may seem, the United States is satisfied with the general framework adopted by Britain under a Labour Government, but not satisfied with the general framework adopted by other European countries the Governments of which are of different shades of opinion. In section 1 (a) (i) we have to insure that the supplies are not diverted into the black market. I do not suppose it was primarily of the United Kingdom which the United States was thinking when this Article was negotiated.

In section 1 (a) (iii) of this same article we have the proviso that the dollar resources of the citizens of participating countries must be fully mobilised. Here again I do not suppose for one moment it was of this country that America was thinking when this was put in. In section 1 (c) we have the point about the valid rates of exchange and balanced Governmental budgets. Again it is not Great Britain with its Labour Government which will have to change its ways.

Article V might almost be interpreted as encouraging the Governments of the 16 nations to take part in bulk marketing arrangements, slowness in the practice of which hon. Members opposite would not be likely to say was a fault of this Government. Therefore it may seem paradoxical, but the outcome of this Agreement is likely to be that, so far from restricting the freedom of this country to work out its economic destiny, it is more likely to ensure that other countries will come up to our standards, and thus create a sort of economic basis for Western Europe which we on this side of the House regard as tolerable. For that reason I welcome it very much.

It may be true, as hon. Members on the other side of the House are very fond of telling us, that we cannot build up Western Union on the foundation of those political parties which subscribe to the Second International. I agree that that is far too narrow a basis. It is equally true, however, that we cannot build up Western Union on a system of chaotic regimes with free economies, and that seems to be recognised in practice if not in theory by the Government of the United States.

I should like for my last point to turn to the internal economic position of the country with which the Chancellor himself dealt to a certain extent. I take it that the European Recovery Programme is in itself no more disinflationary than is the system under which we have been living, that of having a deficit on one's balance of payments and financing it out of one's gold and dollar reserves. I hope that the drain on our gold and dollar reserves will stop and will be replaced by Marshall Aid. But from the point of view of the inflationary situation at home this will not make any difference one way or the other. We will still be just as much in need of the Chancellor's deflationary Budget as we would be without the European Recovery Programme.

I should like to add a little to the divergent views that have been expressed on how far we need to go in this direction of deflation. I remember on the Third Reading of the Finance Bill several hon. Members on this side of the House expressed the view that the Chancellor had already gone far enough and should now call a halt. They seemed to be taking up the point of view that as soon as any hardship arose it should be immediately corrected even though it meant the Government abandoning its general economic policy. The Chancellor himself went rather far in the other direction, and in his speech on that day said: There is still a very great amount of under-manning in some of our most essential industries, and until that state of affairs is cured we cannot say that we have disinflated our economy."—[OFFICIAL REPORT, 25th June, 1948; Vol. 452, c. 1729.] I would say to my right hon. and learned Friend that the present immobility of labour and more so of female labour than of male labour, caused very largely by the housing shortage, means that he will have to go a very long way in the direction of deflation before completely overcoming the difficulty of under-manning in our basic industries. He will indeed have to go so far that he will cause widespread unemployment and widespread hardship before that is achieved. But on the other hand I believe that one has to be prepared for a certain amount of ruthlessness in this direction. I hope the Chancellor will resist the pressure that will be put upon him every time a third-rate company in a luxury goods trade becomes bankrupt and has to close down. We have to be prepared for a certain amount of that, and, indeed, that sort of thing has to happen if we are going to bring down the general level of profits which I and my hon. Friends regard as necessary and desirable.

I hope that two notes will stand out in this Debate, and will, therefore, impress themselves on the minds of the general public. First, I hope that they will realise that hon. Members on all sides of the House are grateful to the American nation for this offer which I believe should be most readily accepted. I hope, too, that nothing that is said today will in any way give the impression that E.R.P. will, even temporarily, solve all our difficulties. Certainly there can be no increase in our imports. It should also be said quite clearly that unless things go extraordinarily well for us, in regard both to our export programme and to world prices, there may well have to be further cuts in the comparatively near future. I believe that it would be churlish not to stress the first point, and that it would be unbelievably foolish not to stress the second.

6.41 p.m.

Mr. Walter Fletcher (Bury)

I hope that the hon. Member for Central Southwark (Mr. Jenkins) will excuse me if I do not follow him in the last part of his speech on domestic matters. I hesitate to shatter the delightful oasis of self-deception and unreality in the matter of what America thinks of the present Government in which he lives. I suggest that the first use of the dollars that the Chancellor will get might be to pay for a trip for the hon. Member to go to America and learn the real, naked truth of what the American people, and a good deal of American labour, think of the hon. Gentleman's Government.

I am one of a fairly large band of neo-Columbi who recently discovered, or have re-discovered, America by making a trip there—my fifteenth. I think it would be wise if I tried to show the background under which this Agreement came to birth. The hon. Member for South Nottingham (Mr. N. Smith) talked about fuss and rush. There was a good deal of rush, first of all as the Act went through Congress embodying this bilateral Agreement, and then to get the bilateral Agreement through. What was the cause of the rush? It was simply the running out of the loan far earlier than anybody there thought would happen, or at any rate that the present Government thought would happen. There is no doubt that, in the minds of a good many people in America in many walks of life, as well as in this country, the villain of the piece is the right hon. Gentleman who is now the Chancellor of the Duchy of Lancaster.

If one wants the truth, it is very easy to find. When Mr. Snyder of the American Treasury came over here in September of last year, the right hon. Gentleman to whom I have referred went down to Southampton to meet him. He gave an interview in which he said, despite what everybody knew to be the position at that time, that "we were marching along 'singing as we go'." That gives the measure of the quite unjustifiable ebullience and optimism, the complete belief in unreality and the refusal to look at the real facts of the convertibility clauses, which led us to the brink of disaster where we found ourselves at that time. There is no doubt that the right hon. Gentleman was warned from both sides of the House and from America about where we were going and of the actual conditions under which we should not get anything like the full benefit of the loan. That being so, it is obvious that the rush under which this Agreement has to be got through the Congress and Senate was understandable. The Americans were by no means pleased to see what they considered to be the considerable waste of the resources which had been put at our disposal. Hence what the Chancellor calls their "prudence" about the new loan.

If hon. Members will take the trouble to go and find out for themselves, will take the opinion of American Labour leaders, as I did, they will undoubtedly find that that was the main difficulty. What surprises me, what strikes me as extraordinary, is that even in the six weeks while I was in America there have been remarkable changes brought about in the form of the bilateral Agreement, considering that the Act of Congress which governs it, permits, and indeed almost lays down, an agreement less favourable to this country than that which is now facing us.

Mr. Scollan

I am rather interested to hear from the hon. Member that Congress were surprised at the effect of the convertibility clauses, considering that they inserted them.

Mr. Fletcher

That point is very easily dealt with. The loan arrangement was put through originally nearly three years ago, and a great deal that was in it was experimental. How those clauses were going to work at length began to be recognised both across the Atlantic and here, and many attempts were made to get the Chancellor and the Government to see how things were going and the new turn that things had taken. [An Hon. Member: "It is not true."] It is entirely true. I challenge anyone in this House to disprove that warnings were given to the right hon. Gentleman of what would take place. Now we face a more beneficial bilateral agreement than we might have expected.

There is a certain danger in that situation because it is a manifestation of change of mood that has taken place in America. In my view, the dangers we face are not so much in the actual clauses of this Agreement, which have been put in such a form that they can hardly, any of them, be fully effective, qualified as they are, but in the possibility that when the circumstances of today and the mutual danger that we face begin to pass away, there may again be a change of mind and mood which will make some of the things to which we subscribe willingly today capable of being worked by less enlightened statesmen than those with whom we now have to deal in America. That moment may well be a danger moment, and I would like to sound a note of warning about it.

I must refer to what was said by the hon. Member for South Nottingham. I am sorry that he is not in his place at the moment. He appears to have been sitting at the feet of the wrong Douglas. The little essay on Douglas Credit which he gave had very little to do with the present circumstances. He gave one note of warning which had a certain amount of weight in it, which was the long-term effect upon Colonial development which may arise under Article V. I consider that, as they stand, Articles IV and V, and V particularly, the stock-piling article, were undoubtedly drawn up in order to be well drawn legally and fairly watertight provisions. But they took as their model a common domestic utensil. Article V is a colander clause. It is so full of holes that it cannot be made to hold water.

What is the danger of stock-piling, and of the 5 per cent. purchase of strategic material? We can all see what has happened in stock-piling up to date. The 5 per cent. itself is not a very large loss of dollars, and may amount to about £10 millions of dollars or possibly less. It may be that the 5 per cent, is provided for reasons and uses outside strategic raw material. That was not in itself undesirable but it means that the normal way by which we should provide dollars has been diminished by that amount. It seems to me that it is rather a token amount. It might possibly be used rather differently in future years.

Let us try to understand why stockpiling on this enormous scale is being undertaken in America. I believe that it is not entirely on strategic grounds that the enormous amounts of material are being piled up in America. It is not to be considered purely on strategic grounds. I think it arises from the fact that America says to herself: "I am going to lend a very large amount of money, partly from generosity, partly from a very wise recognition of interests mutual with ourselves, and partly from enlightened self-interest. What am I going to get back?" That is a perfectly reasonable question. American export trade is going to be considerably restricted, owing to the dearth of dollars, or the impossibility of obtaining them in a great many countries. What she can take from us in the normal way of trade is being considerably reduced, largely because of the great increase in quality of many goods which are made in America and with which we compete. That is particularly true of textiles.

A change in taste in America is diminishing the amount of high quality goods that we can sell to her. It is a curious commentary and one worth making, that one effect of Article V may be that the total that we export direct from this country, is not equal in dollar value to the total that is exported in one raw material from one colony, namely rubber. America has said: "I shall not be able to take very much manufactured goods because my markets are changing in taste and my goods are improving in quality. The best I can get will be raw materials in large quantities." One of the great dangers of that is that the unseen weight of goods held off the market, is very much greater than those which are visible and bring prices down; and the effect of stockpiling may well be to accentuate the dangerous tendency which exists in the disparity between the price of what we buy from America and the price of what we sell to America. One of the greatest difficulties and dangers is that an economy of two-dollar wheat and 20-cent rubber is not viable and cannot last very long without eating to a considerable extent into the reserves which the Chancellor has told us exists.

One of the things that should be undertaken by His Majesty's Government in the future negotiations which will go on through the various committees that have been set up is an attempt to equate in value the prices of what we deliver in the way of raw materials for stock-piling and what we take from America. That is a difficult question but it is worth while studying. It will make this Agreement, which depends not so much on the Articles as on the spirit behind them, to an infinitely greater extent a much more effective instrument.

Now let us look at what has happened in practice. That was the dream; now we must get down to business. Take rubber, where stock-piling is going on in a very large way owing to the mistake which was made at Geneva. I am sorry that the President of the Board of Trade is not here because he appeared in a white sheet about this on one occasion. It was a mistake started at Geneva and continued at Havana. Rubber was never brought into this Agreement in a proper way. What was the result? There is now in America a stock-pile of a certain magnitude, and under the agreements which we have made with America that stock-pile is supposed to be kept entirely separate from civilian needs, as it is called. However, that does not happen. It flows over. A certificate is given that, say, 25,000 tons can be let out because it requires to be turned over and replaced. Behind that America has a weapon in the way of synthetic rubber which is being abused. One of the greatest men in the industry stated that it is chiefly a means of keeping down the price of the raw material which is our main dollar provider.

If that continues, and continues in other articles, the whole programme towards European recovery may well come to nothing. It is no use talking about European recovery and in the next breath of our colonial inheritance, as if it did not really matter, or was not an integral part of it. The vast bulk of what America is to take from us comes from the colonial territories, and unless we have a degree of prosperity in Africa, the West Indies, Malaya and the Far East as an integral part of this apparently pure European scheme, Western European recovery on its own cannot and will not take place, and this programme will be entirely vitiated.

One of the first tasks of His Majesty's Government—let them thank their lucky stars that they have had such a good deal of this bilateral Agreement—is to see that the machinery for equating what we have to deliver against what we have to take is balanced. Let them strike while the iron is hot—while there is a generous mood in America, and a great increase of knowledge and sense of world responsibility, which I found in everybody, including labour leaders who are by no means against private enterprise and would far rather have their form of economy than ours. They are more enlightened to that extent than our labour leaders are. Everyone in America has a greater degree of responsibility than ever before. However, when the change comes, when the present dark clouds roll away, I do not know whether that will continue.

On the question of stock-piling, there is one other very important thing to be said. There are others in the world who wish to stock-pile too. Do not let His Majesty's Government be tardy in their arrangements for seeing that stock-piling is carried out as soon as possible. It can be done in a number of ways but one way in which it cannot be done because it gives the greatest disadvantage is, I believe, though I do not intend to go too far on this matter, by unlightened bulk purchases. America is not really wedded to that form of state trading. I believe other methods are well available. In all of them, I would utter one note of warning about the so-called "acceding Clause." It is taken for granted that all territories will accede and that it will naturally be in their interests in the long run to do so. Malaya, however, for example, may point out that she produces a mass of dollars but does not get equivalent advantages. It may be a little more difficult to get a territory to accede in such circumstances.

When a territory does accede, let it be quite certain that the dollars which are produced are sufficient in volume. Let us be quite certain that the error which crept in at Geneva and which was perpetuated at Havana is not repeated. In this instance I offer a direct criticism of American methods. I believe that to use the existence of synthetic rubber in order to keep down unduly and unfairly the price of raw rubber is an example that may well be followed unless steps are taken to see that it is not followed. I strongly urge that we should be quite frank and open about this. One of the luxuries one can allow oneself when dealing with countries with which is on such a friendly basis is to say what one thinks and bring some of these difficulties into the open.

The hon. Member for South Nottingham (Mr. N. Smithy) said that this Agreement was a slap in the eye for this country. It would be impossible to think of any phrase giving a greater measure of foolishness. It is quite likely that in due course we may have to offer the other eye for a second slap. If the terms of trade run heavily against us and if the gap between what we have to sell America and what we have to take from America remains so great, this slap may not be sufficient. It was said by a man in America of considerable eminence, "Do not look upon European aid as being a slice of a cake which you can cut again whenever it suits you. It is nothing of the sort. It is one opportunity being given to you and the rest of Europe to put yourselves on your feet again. It must be regarded not as an opiate but as an opportunity."

Taking that into consideration, I end on this note of warning. Let there be no complacency and no thought that the Government have brought off a coup through the brilliant work done by the Ambassador in Washington and his team, that they have a much better Agreement than they thought, that it is a blessing for Socialism and all its works, and that they can continue to think that the export drive on its present scale and the amount of reserves we have leaves us in a state where we can relax. None of that is true. This may be generosity or self-interest or any of the things we label it, but looking at it on the figures alone, it is the narrowest possible gap through which by our own exertions through the next few years, taking into account our colonial responsibilities as well as those in Europe, we may just get to safety and no more.

6.57 p.m.

Mr. Platts-Mills (Finsbury)

I beg to move the Amendment standing in the name of the hon. and learned Member for North Hammersmith (Mr. Pritt) and myself, to reject Marshall Aid, in line 1, to leave out from "That," to end, and add: in the opinion of this House, acceptance of the terms set out in the White Paper relating to the grant of Marshall Aid will not solve our present economic difficulties but, on the contrary, will lead to the further political and economic subordination of the country to the changing requirements of U.S. industry, and will make unemployment inevitable; this House accordingly calls upon His Majesty's Government not to ratify the Economic Co-operation Agreement with the Government of U.S.A., but instead, to initiate trade negotiations of a far reaching character with the U.S.S.R. and the countries of Eastern Europe so as to avoid the threatened isolation of Great Britain, lessen dependence on the U.S.A., minimise the effect on Britain of an economic slump in America, and improve British bargaining power in relation to the U.S.A.; and is of the opinion that such an alternative policy would lead the American Government in its own interest to make credits, capital goods and raw materials available to all countries equally, without imposing onerous conditions such as are at present proposed.

Mr. Speaker

As I have not selected that Amendment, the hon. Member cannot move it.

Mr. Platts-Mills

In view of your Ruling, Mr. Speaker, I will not move my Amendment. Perhaps I may address to the Motion such observations as I would have liked to do if I had moved the Amendment. I was a little confused when I heard the hon. Member for Bury (Mr. W. Fletcher) disclose to the House such a picture of the ruthlessness of the attitude of American businessmen towards our country in dealings in rubber and yet heard him anxiously urging that we should accept the terms of Marshall Aid.

Mr. W. Fletcher

May I correct a slight inaccuracy? I suppose it is the natural trend of thought with the hon. Gentleman. I did not say "businessmen." The hon. Member has added the word "businessmen."

Mr. Platts-Mills

If the hon. Gentleman meant the Government, I understand that, too, but I thought from the way he was speaking that those who controlled synthetic rubber were the American businessmen.

Mr. Fletcher

That is controlled by the Shaeffer Act passed by the United States Government.

Mr. Platts-Mills

This is not an Economic Co-operation Agreement but, as was shown by my hon. Friend the Member for South Nottingham (Mr. Norman Smith), it is an agreement for the economic strangulation of Britain and nothing less. If we accept these terms, we shall be yielding up our commercial independence, we shall be abandoning the last vestige of political freedom, and we shall finally be submitting this country to a colonial status on a level with that of the most humble of the 16 nations.

No one would reject external aid if it were genuine. There are few points on which any one of us would challenge the unhappy picture given on both sides of the House of our need, but if we look at the political realities behind it, on which one or two hon. Members have only barely touched, we find that Marshall Aid is not genuine. It offers no cure for our economic ills. It will inflame and worsen them. I commend by contrast the honesty of the draftsman of the original Act upon which all this is based, the American Foreign Assistance Act—and I ask in passing how many right hon. Gentlemen have looked at the Act and have been in contact with its terms?—where, in the Preamble, among other things he describes the Act as: An Act to promote the general welfare of the United States. Superficially, of course, that is an accurate description of it, but it is only superficial.

Mr. Fletcher

Excuse me, that is inaccurate, if I may interrupt the hon. Gentleman. I have in my hand Public Law 472 of the 80th Congress. It says: "To promote world peace"—

Mr. Platts-Mills

I would rather the hon. Member did not interrupt me—

Hon. Members

Give way.

Mr. Speaker

If the hon. Gentleman does not give way, I am afraid the hon. Member for Bury (Mr. Fletcher) cannot persist.

Mr. Platts-Mills

I have the Act and I propose to refer to the other terms of the Preamble. The hon. Member is quite right. I should have said that part of the Preamble describes it in that way. What the draftsman should have said was that it was an act for the general welfare of United States businessmen. May we look at the Agreement which the Government have put before the House tonight? Any student looking at an agreement expects at least two qualities of it: that its terms are certain and that it has the quality of mutuality, that each side has a fair chance in the agreement. I invite any hon. Member to take this to the greenest law student he can find, the merest tyro round the courts; he will reject it with contempt as being totally uncertain and totally lacking in mutuality—entirely one-sided.

To begin with Article I. If hon. Gentlemen opposite will give attention to the document, they will find something of value to them in it. Article I provides for assistance and line 4 of section 1 says that the assistance is to be such as is approved by the United States. Suppose they do not approve? They alone decide. Then let us turn to the principal question that arises on any contract to buy anything—the question of the price. At the moment I am not speaking of the political price; we will learn something of that as this Debate goes on; I mean the cash price. That is the most elementary requirement. There is no provision in this Agreement, or in any of the documents accompanying it, as to how the price will be fixed—I mean the price for the main purchases that we make. I agree that under section 3 the offshore purchases are to be at a reasonable price, but there is no provision for a fixing of the price, not even by the test of reasonableness, of the goods which we get from the United States.

Let us assume that they will be the world prices. But world prices in our experience in these days are defined by American prices and by no others, even for the goods we produce exclusively in the Empire, such as cocoa. This House has found to its astonishment that in Britain we pay American prices for the cocoa we produce in the Empire, though none is produced in America. What was our experience with the American loan? It was that the prices of the goods provided to us by the Americans, when we last had this kind of dealing with them—remember what the Prime Minister told us—rose 40 per cent. in the course of carrying out the Agreement, and so robbed us of a proportionate amount. Can that happen again? Hon. Members will have noticed that the "Observer" reporter in New York yesterday estimated that already, before the Agreement comes into effect, so great has been the rise in American prices since July of last year—the date at which our needs are said to have been assessed—we have lost £100 million worth of the goods that we are supposed to get under American aid.

Mr. W. Fletcher

The hon. Gentleman mentioned cocoa. Is he aware that the facts in that case are that the price at which we sell these goods, produced in the sterling area, is the New York terminal cocoa price, and that as a result we have made £50 million profit between the price we pay the producer and the price we sell on the market?

Mr. Platts-Mills

If the hon. Gentleman is trying to emphasise my point, I accept what he has said; it is perfectly correct; otherwise his intervention was meaningless.

May I turn to Article II? As the hon. Member for Central Southwark (Mr. Jenkins) said, this is an important article. It provides the machinery. The most striking part of it, as the Chancellor pointed out, is that which requires that Great Britain shall comply with the production targets fixed by the O.E.E.C. That means production targets designated by the United States of America. I will tell the House why I say that. Everybody has observed that from the very first day in July, 1947, when the Foreign Secretary raced headlong to Paris, to try to capture the leadership in the task of shepherding Western Europe into the Marshall fold—from that day the 16 nations, first in C.E.E.C. and then in O.E.E.C., have been distinguished by one quality—they have acceded to the slightest whim of the American adviser.

The Foreign Secretary has led in this field. I first encountered this sort of leadership as a youth in New Zealand, in the meat works at Ngauranga. In that place the task was to get the sheep to be slaughtered. They climb up a slope to the top of the building where the slaughterer takes the first step in converting them into prime Canterbury lamb. The device adopted is to get the oldest wether, the longest in tooth, to go in front. He is trained to do this; day after day he leads the run up to the top of the building, and the first blow strikes the second sheep, so that the leader is saved each time. In the Marshall slaughterhouse there is no saving of the leader, there is no remission of sentence, there is no postponement—although I fear that the Foreign Secretary has deluded himself into believing that is the case.

If we look at Article II, section 1 (c), we find the provision that has most interested the House, that is the requirement to maintain a valid rate of exchange. I ventured to draw attention to this in the House some weeks ago. The Chancellor had denied in May that the Americans were insisting on such a clause. On 14th June the Under-Secretary of State for Foreign Affairs said, when I asked him, that it was undesirable from a public point of view to disclose this matter. It was only when public interest was aroused that we were told, in the course of the negotiations, that the Americans were insisting, and that our representative, the Ambassador, was fighting back gallantly and was rejecting the idea. In spite of what the Chancellor says, in spite of what we have heard in interventions from the President of the Board of Trade, it is not we who will decide the validity of the rate of exchange, but the Americans.

I say that for this reason: If it were an ordinary question of construction of a private bargain, it would be decided by a court. In this bargain, however, with its international setting, we notice that in Article VII—the provision which the Chancellor said was a common form of agreement but which I suggest is not habitual, because we do not habitually have agreements about these matters—there is a provision for consultation about any part of the Agreement. Every part of this Agreement depends upon future negotiations and consultation. Let us glance through the articles. In Article III: The Government will … consult. In Article IV, section 6, we have the main provision explaining how we will spend our great reserve of dollars in the Bank of England, in the special account; it will be: for such purposes as may be agreed. … We then come to Article V, section 1 of which states that we will, when so requested … enter into negotiations. These negotiations, agreements or discussions will be between unequal parties; between those, on the one hand, who claim and possess the power to insist and those, on the other hand—the leaders of the Government of today in this country—who say they are powerless to reject the demands of the Americans and have shown that they are determined to submit. Therefore, when the Americans ask for consultation, as they will, on the validity of our rate of exchange, they will decide what is the correct rate. Not only is that so, but the very terms of the article provide that we will maintain confidence in our monetary system. That means to maintain confidence in the mind of the American Administrator—not in my mind or in your mind, Sir, but in the mind of the other party to the bargain; and when the American Administrator says that he no longer has any confidence, we will have to change our rate of exchange.

I beg the President of the Board of Trade, if he is to reply, to express his view about this skeleton of Hitler's "New Order" prescribed for Europe. The essence of that arrangement was not that Germany confiscated the great industrial concerns of the subject countries. It was that German big business men bought those concerns, and said they did so at a fair price; that was how it appeared in the native currency. But the Nazis decided the rate of exchange and of course only "after consultation."

Article II (1, d) is the one about which also some weeks ago I ventured to ask questions and was told that it was not right that we should consider or discuss this in public. This is the provision that we will reduce our tariff barriers. I venture to warn the House that there is no security for British industry, once our Government is required by obligation to discuss the reduction of barriers when the other party to the discussion has the threat of the right to withdraw aid.

So far as I remember, Article III contains the first express provisions by a British Government for the incursion of large-scale American investments into the United Kingdom. Hon. Members may think that that cannot harm us, for British capitalists have long since given up trying to invest in the United Kingdom. It is some time since the British capitalist has been prepared to invest in the basic industries of Britain—[Laughter.] It is so. That is why we have nationalised the bankrupt industries, coal and the railways. Indeed, that is the basis of our approach to the problem. It is not enough to say that the United Kingdom is safe, unless we observe that in this Agreement a novel definition of the United Kingdom is introduced. As the Chancellor today pointed out to the right hon. Member the senior Burgess for Oxford University (Sir A. Salter), the United Kingdom in this definition includes every colony in the Empire. A letter accompanying the Agreement, and intended to be signed by the Foreign Secretary, says that for the moment: it is impossible … to give a complete list of those Colonial territories which will participate in the Agreement. What is this humbug? To whom are we suggesting that the Colonies have a right of free choice in this issue? The Foreign Secretary goes on— It is my understanding that most Colonial Governments may be expected to participate in the Agreement within a very short time. Within the time that it takes the Colonial Secretary to give instructions to the Governors? As the Chancellor said, it may be by the time this Debate is over. If any of the Colonial people should object, is there any doubt that the Prime Minister will declare a state of emergency in the Colony to dispose of the matter promptly?

Article IV provides for what we have called up to now the gift or grant—the gift that we pay for in full. Here we have a most interesting description of the price of the goods and services which we get. It is not to be agreed; it is not to be a world price or a reasonable price; it is the price indicated by the United States—"the indicated dollar cost" which every now and again they will notify to us. It is a price fixed exclusively by the U.S.A. We are then allowed to use the money we accumulate in the Bank of England and Article IV (6) tell us how. We are to spend the money, for such purposes as may be agreed… by the United States. They, then, particularise certain of the purposes which we all have in mind. The outstanding purpose is the contruction of works and the building-up of enterprise to increase our production of raw materials, which then will go to the United States. This is the lot of every Colonial and subject country—to provide raw materials for the industry of the superior. Article V, dealing with strategic materials, goes on to tell us what we are to do with this great reserve of raw materials which we are expected to build up. We are to give it to the United States—or, rather, we are to ship it to them. As the Chancellor pointed out, there is no limitation to 5 per cent., as some hon. Members have thought; nor is it limited to strategic purposes. The article states, precisely, for stockpiling or other purposes —for any purposes that the United States may think right. I will tell the House what the first purpose will be. It will be not for strategic purposes, but to enable the new Germany to build up her industries. From the point of view of lawyers, and, perhaps, of politicians, Article V (2) is probably as jolly as anything which we have ever read in this House. The parties recognise the principle of equity. On hearing that, we think at once of someone coming with open, clean hands; of the equality that flows from equity, and its fairness. But what is the "equity" between two great capitalist Powers, battling for world supplies of raw material and for the markets necessary to their bare survival? The principle of equity applied here is that the weakest goes to the wall.

On the outside of this document the Foreign Secretary tells us that we may get it for 4d. It is not worth 2d., and mainly for this reason: Article I—over which the Chancellor skipped with great skill and, perhaps, even with some relish because he was not interrupted—provides that the terms of this Agreement are the terms prescribed by the Act on which it is based—the American Foreign Assistance Act. If right hon. Gentlemen opposite will look at their copies, they will find that Section in 111 (a) prescribes the duty of the Administrator and says, the Administrator may … furnish assistance … upon the terms and conditions set forth in this title"— which are hideous enough— and such additional terms … as he may determine. If the right hon. Gentleman would like more read out, he can have it. [An HON. MEMBER: "He has had it."] We cannot blame these terms upon the right hon. Gentleman, nor upon the Administrator or the American people. We must blame the terms on the American rulers. Our rôle is reduced to that of a suppliant who will have to beg for mercy when it comes to consultation. The duties of the Administrator are further prescribed—as being to maximise the use of private channels of trade. Would the Foreign Secretary care to explain why that passage was omitted from the terms of the Agreement which the British people were allowed to see? Was it because they voted for Socialism and the Government did not wish them to know that we are committed to an Agreement the whole basis of which is to prevent any move towards Socialism? Under Section III (a) (2) it is stipulated that a minimum of 50 per cent. of the goods moving from America shall if possible move in American bottoms. What happens to the British shipping industry if the Administrator cares to decree that the whole shall move under the American flag, as indeed he may? The only certain requirement is that he must decree 50 per cent., and the rest is at his whim. He must further, by Section 112 (b) take note of the undesirability of permitting any expansion in petroleum-consuming equipment. In ordinary words, that means that the American Government says to him, "Strip these paupers of their petroleum. We will use it here at home where we need it."

Finally, I mention the famous Mundt Amendment, Section 117 (d), about which I have asked questions over the last three months and have got the answer that the Government are seeking clarification. I suspect that the Government are still doing that. If they bothered to read the newspapers, they would see what it really means. What the Mundt Agreement decrees is that the Administrator, if he finds we are selling any goods to Eastern Europe containing raw materials coming from America, must cut off those raw materials. That is the express requirement. He is free to make other terms, and in the last three days Mr. Hoffman has made a ruling that if we supply any goods at all which the Administrator does not want us to supply, the whole of Marshall Aid will be cut off instantly. It is not a question of the next shipment—the whole would be cut off. No wonder that the preamble to the Act says further: This Act is to promote the foreign policy of the United States of America. That is precisely what it does.

Mr. W. Fletcher

The hon. Member has an early copy of the Act; this is a final copy that I hold in my hand.

Mr. Platts-Mills

If the hon. Member looks at the one which I received from the United States Embassy in Great Britain two days ago, he will see that that is what it says. It is an American Act of Parliament and we expect the copy supplied by the Embassy to be correct. For six months past the American people have known the truth about the Administrator's position. On 27th February in "The United States News and World Report" it was stated: The Administrator of the Program is to become a director of world business. He will be in a position to tell France, for instance, whether to rebuild railways or to improve highways. He can decide whether farms are to be mechanised. He will determine whether Britain or the Ruhr gets first call on coal-mining machinery. He can stop the dollar flow altogether if countries do not abide by his terms. As though that were not enough, there is a great deal worse in this bargain than we have seen, and the worst is in the rôle to be assigned to Germany. If we examine that rôle we see the scheme which American businessmen have for the whole world. United States metropolitan industry is to supply the American home market, South American and a great part of the British Empire; Japanese industry, under American control, is to supply Asia, and German industry, under American control, is to supply the whole of Europe and a great part of the Empire.

Under the Act itself, in Section 115 (f), we see that the Administrator is required by American law to demand—indeed, this was pointed out by my hon. Friend the Member for Attercliffe (Mr. J. Hynd) in the Debate on Germany last week—that we should agree to keep in Germany all the capital goods the Americans want to have kept there. It is the end of reparations. Is this why, for the last six months, the Foreign Secretary has been unable to explain, for example, in answer to my questions, why there has been a total stoppage of allocations of reparations from the Western zone, and why on Wednesday last he could only give the lamest and most halting explanation and could not refrain from his usual abuse of the Soviet Union? We saw an exhibition of the same sorry spectacle presented by the Minister of State this afternoon when I questioned him on the same issue.

The Agreement which we have before us now for the provision of most-favoured-nation treatment for Germany is the most disastrous step we have yet taken, or propose to take. The Chancellor made it sound most respectable by referring to the Havana Charter; but the interesting thing about the Havana Charter is that, except for our relations with Germany, it has not come into effect and will not come into effect. We see the reason when we see how many have to adhere to it before it can come into effect. But we have adopted it for this purpose and propose to apply it to Germany, with the result that it will sweep Great Britain from the European market.

The President of the Board of Trade (Mr. Wilson)

We have not adopted it.

Mr. Platts-Mills

The President of the Board of Trade says that we have not adopted it, but if he looks at the terms of the application of the most-favoured-nation treatment to the 16 nations in paragraph 1 of Mr. Marshall's letter (Cmd. 7447) he will see that we set up these terms only for Germany, and between ourselves and the 16 nations. We preserve in the Agreement the minimum of protection for ourselves and the home market. But whereas in the first Agreement—the Marshall Aid Agreement—"the United Kingdom" meant the whole Empire, in this Agreement "the United Kingdom" means only the home and domestic market. Only that market is protected from German invasion. This means the return of German goods and the invasion we all knew years ago. I knew it in 1913 under the "D.R.G.M." mark and after that in the "Made in Japan" mark; and that German mark will dominate European trade again. Lest there be any doubt about that, hon. Members should bear in mind what was disclosed in an answer this afternoon by the Minister of State, when he confirmed that Bizonia has asked as its share of Marshall Aid for the first year one and a quarter billion dollars and, as the Chancellor showed this afternoon, it is in the first year more than one quarter of the whole amount which the 16 nations are to get. This at least is my understanding of the figures given by the Chancellor.

Mr. Nigel Birch (Flint)

Did I gather that the hon. Member is in favour of no kind of revival for Western Germany?

Mr. Platts-Mills

The hon. Member would be quite mistaken if he thought I said anything of the kind, or if he thought that the people in Britain, who honestly want the wellbeing of their country, want first of all to see the recreation of a mighty industrial power in Germany uncontrolled. What emerges is that America is determined to rebuild the Western zone of Germany, and to that purpose is to be devoted the great flood of raw materials which will become available to America under Article V. That is why the hon. Member for Bury was right in saying that it was not for stock-piling and strategic purposes alone but also for other purposes. That other purpose will, I suggest, be the equipping of Germany with raw materials with which she will flood the markets of Europe. When the American capitalist slump comes, as it will, what will be the position of Britain?

The alternative is set out in some detail in the Amendment in the name of myself and my hon. and learned Friend, which I ask hon. Members to read. If the House thinks that we are not in a position in which we can argue with the Americans, that we cannot fight back against them, that we cannot resist their terms, will they bear in mind what has happened in the last few days? When it became obvious that the Americans could not get our adherence to the agreement within the time limit demanded in their own Act, they found a simple legal fiction to extend the time—there was a weekend, and we could make it the 6th. Why not the 16th, the 26th, or the next six months? The Americans are desperate to obtain our adherence to the plan for Marshall aid Without it, they cannot obtain the markets on which they are dependent for the survival of their business. If anyone cares to make a stand against the Americans on these issues, they can come back not only with steel, of which there will be virtually nothing under the plan, not only with mining machines, which will now go to the Ruhr; they can come back with fair terms, our terms, with no political strings attached. They can come back with provisions which will ensure that the Americans fix fair prices for the goods for which we have bargained.

What we are seeing in Britain in peace time is what the occupied countries saw in wartime—the surrender by the leading capitalist forces of our country to the most powerful capitalist State in the world. I can understand that the capitalist forces and classes can do this with a quiet mind. When the ruling class loses confidence in itself, it loses all sense of loyalty to its own country. But that the Labour Party should hope to build Socialism on the basis of surrender to the most ruthless, most powerful, violent predatory capitalist forces that have ever existed in the world, this is the most bitter commentary on the betrayal of their promises which has been made by the party's leaders. It was a crime to negotiate this Agreement, and the greatest crime has been to conceal its true meaning from the people of this country. If the people knew its true meaning today, they would reject it. When they learn it, as they will, in the suffering it will inflict on their own flesh and blood, and in the burden on their own bodies, they will reject it with anger. And let not hon. Gentlemen go whining and saying, "We did not know." I ask the House to reject the ignominious surrender which has been negotiated by His Majesty's Government.

7.33 p.m.

Mr. Maclay (Montrose Burghs)

Article VIII of the Agreement which we are discussing reads as follows, and having listened to the speech by the hon. Member for Finsbury (Mr. Platts-Mills) I sincerely hope that Article VIII will be amply fulfilled by everyone concerned; because obviously there is real need of it. The Governments of the United States and the United Kingdom recognise that it is in their mutual interest that full publicity be given to the objectives and progress of the joint programme for European recovery and of the actions taken in furtherance of that programme. If ever there was a speech full of the most dangerous and vicious distortions, the one to which we have just listened is it.

Mr. Platts-Mills

If the hon. Member will disclose one distortion and one vicious one, I will accept his opinion.

Mr. Maclay

I propose in my speech to controvert practically everything which the hon. Member has said. In following up one part of the hon. Member's remarks I shall have to take a piece out of what would have been the middle of my remarks and deal with it now. We should get clear what is the Preamble to the Act. If I understood his statement aright, the hon. Member for Finsbury was quoting from an earlier version of the Preamble but so that we can get this matter clear let me read both versions. The hon. Member for Finsbury makes some play of the fact that hon. Members did not appear to have looked at this Act.

Mr. Platts-Mills

I did not say anything of the sort. I said that the Front Bench had not done so.

Mr. Maclay

Then let us get this point straight. If I understood the hon. Member aright the earlier version of the Bill read as follows: To promote the general welfare, national interest and foreign policy of the United States through the necessary economic financial and other assistance to foreign countries which undertake to co-operate with each other in the establishment and maintenance of economic conditions essential to a peaceful and prosperous world. I think that is what the hon. Member began to quote.

Mr. Platts-Mills

No.

Mr. Maclay

Then the hon. Member quoted from the final version and missed out pieces of it. It reads: To promote world peace and the general welfare, national interest and foreign policy of the United States through economic, financial and other measures necessary to the maintenance of conditions abroad in which free institutions may survive and consistent with the maintenance of the strength and stability of the United States. That is the whole, parts of which—I assume deliberately—the hon. Member gave.

Mr. Platts-Mills

The hon. Member is entitled to assume that. I said so. I said I was giving an extract and I repeated that when the hon. Member for Bury (Mr. W. Fletcher) challenged me.

Mr. Maclay

I only hope that we have at last got the record straight as to what the Preamble states. Taking pieces out of it is pretty dangerous. But even if the Preamble contained only what the hon. Member quoted I still think that there is nothing wrong or dishonourable from any point of view if this action was taken by the United States in its own interest. We have for years been longing for the United States to realise, once and for all, that it is an integral part of the whole world and that actions in this country and Western Europe will vitally affect the United States. But that is a point which I hope to develop as I go along. Other things which the hon. Member said were so numerous that one cannot deal with them all. I was most intrigued when he suggested that the Front Bench were capitalists who had given way to another capitalist nation. It was puzzling and difficult to follow but I accept that as the hon. Member's charge against his own Front Bench.

I wish to return again to Article VIII because I intended that to be the theme of the remarks which I wish to make—the necessity for definite and clear publicity about the whole of the working of this Agreement once it is signed, if it is signed. I have most vivid memories of a most unfortunate situation arising in 1940 before the United States had entered the war. It arose from lack of proper publicity as to the aims, objects and methods of working of Lend-Lease. One evening in Washington an evening paper came out with what I think are technically called banner headlines, "British run up bill for 10 million dollars in Occidental Restaurant." We then read on and found a vivid description of what was alleged to have happened. The report said that one could go into the Occidental Restaurant any evening, say between five and six o'clock, and find red-faced British pukka sahibs calling out "Waiter bring me another whisky soda and charge it up to Lend-Lease." That was a fantastic piece of nonsense but it took several weeks of hard work to remove from people's minds a lot of the doubts which it started. It is a good illustration of the need for Article VIII to be fully implemented by both Governments and at all stages, and of the best possible publicity being given to the objectives, procedure and means of achieving the objectives.

It is clear from what we have already heard in this Debate and outside that there are two schools of thought about the Agreement. Some look on it, as does the hon. Member for Finsbury, as Britain's surrendering her whole economic sovereignty. There were other suggestions of that earlier in the Debate. There are others who think, as I do, that it is a piece of magnificent, far-sighted and generous statesmanship on the part of a nation upon whom events have almost thrust world leadership. I agree with everything the right hon. Member for Aldershot (Mr. Lyttelton) said in connection with what we should feel towards America about this. But between these two extremes there are a very large number of views, and I think it is extremely important that people should rightly understand what is happening, not only in this country but in the United States, and should see that we are working towards the end and objective which everyone wants to reach.

A short time ago I happened to follow the hon. Member for Gateshead (Mr. Zilliacus) in a Debate, and now I follow the hon. Member for Finsbury. I do not know whether that makes me in any way a fellow-traveller in any particular direction, but what has puzzled me about the arguments both of the hon. Member for Gateshead and the hon. Member for Finsbury is what they really mean by what they say and by what they write down. The hon. Member for Finsbury referred to a very clear statement in his own Amendment which we cannot now discuss in detail. But he is merely saying in that that we should turn to Russia and make an agreement with them instead of with the United States.

What signs have there been of Russia being prepared to make any agreement? I am told that the hon. Member for Finsbury is a man of great intellectual honesty. I would dearly like, even at the risk of another speech from him, to know what he really thinks and if he believes genuinely that we should not turn to the United States but that if we want an agreement, we can make one with Russia. That surely would be infinitely worse even than the horrible picture which the hon. Member for Finsbury has painted of this Agreement, but I would come from the far corners of the House if I heard that he was speaking and if I thought he would explain exactly what he means about that.

To return to the United States. When we are trying to decide the real merits of the Agreement, we should remember what has happened in recent years. We have had Lend-Lease, that tremendous outpouring of resources in the common effort. Then it is well to remember, that in the last four years, before this particular Agreement came up for discussion, before the Foreign Assistance Act, the United States had already extended in grants and loans to the nations of Western Europe no less than 12 million dollars— 8 million in loans and 4 million in grants. That is a very big figure. Under this Economic Co-operation Act the figure I have worked out is about 17 million dollars over the next four years. The right hon. Member for Aldershot said about 20 million dollars. Either of those are very large figures.

Let us remember, as the Chancellor of the Exchequer pointed out, that these things have to be paid for by the American taxpayer in two ways, not only in a sustained high level of taxation but also in the inflationary pressure which through the European Recovery Programme, is bearing heavily on the whole United States domestic economy. The hon. Member for South Nottingham (Mr. N. Smith) talked about inflationary pressure and implied it was the result of allowing the wicked capitalists to push the prices up. If he were present I would ask him to remember that the biggest factor over these years since the war to keep inflationary pressure on their domestic economy is the outpouring of American resources in aid to other nations.

If that is so and if the United States is putting out all this money and effort, it is not unreasonable to ask why they are doing it. I repudiate violently the suggestion that it is charity. I do not think that is in the mind of any good American and I do not think it should be in our minds. It is really insulting, both to the United States and to ourselves. During the war every one of the United Nations, according to its circumstances, expended its energy and resources in the common effort. Equally, today I believe that the best thinking in America is convinced that a similar effort has to be made if we are to achieve anything like the stable world, the economic stability, and therefore the political sanity, without which none of us can survive.

It is clear that in trying to make a united effort towards this peace, the conditions we are up against are unfortunately more difficult than they were during the war. In war time the threat of the enemy does make united action relatively easy, even between a large number of nations. But in peace, even the kind we have now, national considerations, national institutions and susceptibilities are involved in almost everything we do in the way of negotiation and agreement. Between 1940 and 1945 we worked out with the United States a quite remarkable system of combined Chiefs of Staff and Combined Boards which achieved under war conditions, a most astonishingly effective concentration of man power and resources on the one objective, which was the defeat of the enemy. But we cannot use these methods today and that undoubtedly is one of the difficulties with which we are faced.

What has taken their place? I get puzzled when I try to fathom it myself. We have the United Nations, the proposed International Trade Organisation, sections of which are vaguely working now, the International Monetary Fund, the International Bank for Reconstruction and Development and now we have the Organisation for European Economic Co-operation which is the Western European counterpart of the American decision to lend her full weight and resources to the united effort to achieve economic recovery. Each one of these highly complex organisations, and the linking up of each to each, is extremely difficult to fathom. Each one of them has to work in relation to the peculiar circumstances of the various partner nations in the different forms of combined effort. They will obviously call for the greatest forbearance and understanding between the nations concerned, particularly because there is not even agreement among the experts about the real diseases from which the world is suffering and there is not a remote agreement as to the real cures.

In these circumstances it is not very remarkable that each nation should be taking careful thought as to what their contribution is to be to the common effort and what is to happen to their contribution if it is made. I will not bore the House by quoting again the Preamble to the American Act, but in those words which I read out earlier we have a most refreshingly frank statement by the United States that she recognises that the only hope for world recovery is a united effort, and that she must take her part in it, and that she herself cannot survive unless there is this effort in which she is taking her full part. I would suggest that that is not charity. Nor is it looking for a dumping ground for surplus production. It is a frank recognition that isolation is now dead. The hon. Member for Finsbury smiles. If any one wants a dumping ground for surplus production do they deliberately try to build up the economy and productive power of the nations which may be their competitors?

Mr. Platts-Mills

Since I am asked, may I say that their only course is to smash into the market of every other country in the world, and that is precisely what the United States is doing. It is what we did in our turn half a century ago.

Mr. Maclay

I am puzzled to understand how that particular charge can be levelled against this Agreement when exactly the opposite is the case. There has been great difficulty in persuading a considerable section of American business opinion that this Act is not deliberately building up their competitors in all the receiving nations. It is quite wrong that that kind of argument should go out to the public. I appeal again to Article VIII—

Mr. Platts-Mills

May this go out to the public? Germany is being built for this very purpose. The United States is eschewing the European market for manufactured goods and leaving it to her new satellite, Western Germany.

Mr. Maclay

That is not a point which I propose to follow up. It is in the same class of distortion about which I complained earlier on. I have been drawn aside into some very interesting diversions but we have to look at this Agreement, as an earlier speaker has said, from the point of view of whether there is anything in it which is inconsistent with our own interests, whether there is anything dishonourable, and whether there is anything we cannot fulfil.

One asks what is really in the Agreement. One must concentrate on the question of objectives. As far as I can make out, there are four objectives. There must be united effort among the 16 participating nations. That, surely, is an objective with which everyone of us agrees. We cannot do this thing on our own, and neither can any of the 16 nations. There must be a united effort in every country. That runs all through all the arguments leading up to the Agreement, and it is in the Agreement itself. Also, each nation must accept some measure of supervision of the use to which American resources are to be put. It simply would not be a reasonable document if it did not contain a provision something like that. There is nothing remotely dishonourable in accepting that provision.

Another provision in Article V is that we shall all attempt to make available resources in which America is deficient. I should have thought that that was a very reasonable suggestion in return for a contribution to the common effort of the size which is being made. The horrible dangers which the hon. Member for Finsbury held up for our attention of our being forced to do things which we did not want to do are, of course, there. The whole Agreement is full of dangers. But if one agrees on the objectives, the dangers disappear, because in the process we are bound to have continual negotiation, discussion and, I expect, argument with our American friends. A great deal of cross-learning must go on. At the moment I believe it is correct to say that internationalists in America have become relatively sudden converts to multilateralism and free trade. That is a relatively recent process. I think that some Americans are exaggerating this and that some of us, on the other hand, having been advocates of multilateralism and free trade for a good many years—even some of us former enthusiasts—are changing our minds slightly. We cannot jump straight into these things, as the right hon. Member for Aldershot said. Out of this Agreement, and the discussions and negotiations which will follow, I sincerely hope that there will be a steady process of mutual education. I, for one, would not argue that the present British Government could not benefit by a bit of education from some of our American friends. That is what I hope will come from this Agreement.

One could go through endless dangers and one could say that terrible things could happen. I believe that in the working out of this Agreement we shall find exactly the same tolerant approach that those of us who had anything to do with the working of Lend-Lease found in the working of that arrangement. There were difficulties, and some rather absurd things happened. The real test is the frankness of the exchange of opinion between the Governments concerned. I urge most strongly on the Government that they should see that the exchange of opinion is full and frank on both sides. There is no need for this to be a one-way traffic. It must be a two-way traffic. When we have men like Mr. Harriman and Mr. Finletter in the United Kingdom who have tremendous experience in these matters I believe that we have no cause to fear.

7.54 p.m.

Mr. Ronald Mackay (Hull, North-West)

We have had a very wide discussion in the course of this Debate, but I do not think that anything we have heard has quite exceeded the extreme extent to which the hon. Member for Finsbury (Mr. Platts-Mills) completely distorted the whole of the Agreement and the Act on which it is based. I raise this matter because I do not want to let it go unchallenged from this side of the House. While one has not sufficient time to go through the whole speech, I propose to take one or two points from it.

The hon. Member made a point of the fact that the Act, which was passed before the Agreement, was something about which we over here knew very little. The Act has been passed since 3rd April. I have had my copy for over two months and I believe that other hon. Members have had copies for some time. The hon. Member for Finsbury made the point with regard to Germany, particularly Western Germany, that it is a satellite of the United States, and that reparations were being given up for the purpose of the benefit of the United States. He read a part of the Section just as he read a part of the Preamble—not the whole of it, but just a small portion—so as to make the distortion all the more complete. I want to read the whole Section, because there is not the slightest justification for the allegation which he made. This is one example of the distortion with which the whole speech was filled line by line. The Section says: The Administrator will request … not "demand"— The Administrator will request the Secretary of State to obtain the agreement of those countries concerned … It does not say "demand" or "tell" those countries. It says: … will request the Secretary of State to obtain the agreement of those countries concerned … all those words were not quoted when the Section was read before: … that such capital equipment as is scheduled for removal as reparations from the three western zones of Germany be retained in Germany … These are the material words which, again, were not read out— … if such retention will most effectively serve the purposes of the European Recovery Programme. I suggest to the House that it is rather sad that, in discussing a serious matter like this, one's mind can be so inflamed by a desire to oppose it on any ground whatever, that one goes to the extent of the distortions which that one reference indicates.

Mr. Platts-Mills

Bearing in mind that the hon. Member has asserted that I read something and omitted certain words. I invite him to remember that I merely paraphrased without even picking up my copy of the Act when I was referring to that Section. The hon. Member has been at pains to read through the Section and to suggest that I omitted part of it, when I did not even refer to the Act but merely paraphrased. He will find in the OFFICIAL REPORT that I paraphrased correctly.

Mr. Mackay

I leave it to other hon. Members. When one paraphrases one tries as near as possible to give the correct words. One does not go out of one's way to distort when paraphrasing. Often paraphrasing is done to make a Section more clear than the drafters have made it. Whether the hon. Gentleman read from the Act or from his own notes, I do not know. Perhaps one is as distorted as the other. The essential words are: … if such retention will most effectively serve the purpose of European recovery.

Mr. Platts-Mills

The correct words are, "European Recovery Programme."

Mr. Mackay

The Agreement is a document prepared by a number of countries for the purpose of putting Europe on its feet again. I will come back to the German question, because I was most amazed at the attitude disclosed by the hon. Member and by the way in which he dealt with the subject. One of my main points is that the whole problem which we must face is that European industry and the whole of European production and trade are completely upset primarily because of the position in which Germany finds itself. I want to go on to another point. I had taken the trouble to read the Amendment in the name of the hon. Member for Finsbury. I had seriously looked at it, because I seriously look at the things which hon. Members put on the Order Paper and because there are a lot of hon. Members in this House who have always felt that we should turn away from America at present and look to Russia in order to be able to secure recovery both here and in Europe.

I am one of those who have always supported trade agreements with Russia. I ask these people—and I am not now so much directing myself to the hon. Member for Finsbury and the Amendment he has put down—to look at Russia and to consider her position. We must face the fact that what we are getting and what we need is relief, not aid. To a certain extent we are getting a gap filled for two or three years. We have had to go to the place from which that could be done. Cotton is one of the things we want. It is no use suggesting that we should go to Russia for cotton. Wheat is another thing we need. We cannot get it all from Russia. When we look at the whole problem of Russian production today in relation to United States production, would any sensible person looking for aid turn to a country so badly mauled about by war whose productivity is so much down compared with that of other countries in the Western hemisphere? Let the House look at the facts. During the war Russia lost 58 per cent. of her rolling stock. We want rolling stock. We need 20,000 carriages for Europe immediately. It is not likely that we will get them from Russia. Russia lost 45 per cent. of her steel production. She lost 46 per cent. of her electric power capacity, 56 per cent. of her coal. All these figures I am quoting are from Marshal Stalin, and I assume that they will not be challenged.

At the end of the war, her industrial production dropped to 42 per cent.—this next figure is not from Marshal Stalin—while United States production rose by 52 per cent. In Russia in 1941, industrial production was equal to that of the United States in 1904, and, by 1960, it will have reached a figure which was passed by the United States in 1915. If we take individual figures, such as those of some of the things we want and which we are to get under Marshall Aid, we get a better picture of the position. Oil is one of the things we require. Russia hopes, according to Stalin, to produce 60 million tons in 1951, but America passed that figure in 1921, and last year America produced 270 million tons, which is more than four times the amount which Russia hopes to produce in 1951. In coal the same sort of problem arises. Over 30 per cent. of Russia's coal is burned in locomotives; 30 per cent, is burned in electric plants, leaving only 40 per cent. for industry. When we come to steel, which is one of the major factors in the European Recovery Programme, we find that Russia in 1951 hopes to produce 60 million tons a year, whereas the United States, before the end of the last war, was already producing 90 million tons annually and was getting on towards producing much more.

Obviously, it is right and proper that we should make trade agreements where-ever we can, in order to get the flow of international trade going in the whole world again. But when we are looking for a mutual arrangement that is going to secure a whole lot of relief, without which we cannot hope to continue—and this is one of the points of which hon. Gentlemen opposite took insufficient notice—we ought not to take up any particular position because the Government of any country is a Socialist Government. The Scandinavian countries have not always had Socialist Governments: the Dutch, French, and Belgians are all in that position. Why blame the present position in Britain on the Socialist Government, when the same position occurs in non-Socialist countries? In other words, we should not be looking at this matter from that point of view, but from the point of view of European recovery under the conditions operating in Europe today.

One of my regrets about this agreement is that it is not a joint agreement. The obligations of co-operation would have been ten times stronger if it had been a joint agreement and if the 16 nations concerned in these undertakings had jointly agreed to them. That is one of the worst features of the whole situation. This agreement could have been of much greater value, because the benefit of it can be destroyed if one of the other 16 countries does not carry out the whole of its obligations. At the same time, I do not think anyone on the Treasury Bench believes that all the 16 countries are going to carry out their obligations under their respective Agreements.

I should not have thought that there would be much argument over the terms of the Agreement. I have listened to what has been said, but I would remind hon. Members that this matter goes back to the Convention which was signed in April last, and all the obligations which we are undertaking now were in that Convention. All these things which have been regarded as objectionable, this business of inflation and the steps necessary to maintain the stability of the country, are nothing new. We are not undertaking any new obligations in this Agreement that are not already in the Convention which has already been ratified. It is all part of the Recovery Programme, so that it is ridiculous to argue that point. We have only to look at the first eight Articles of the Convention and we shall see that all we are undertaking in this Agreement was undertaken and agreed to before. The Act of 3rd April went through before the Convention, the phrases in that Act are reproduced in the Convention, and they are now reproduced again in this Agreement.

There are some questions, however, to which I think we ought to direct our minds. I want to raise three questions which seem to me of fundamental importance. No one denies that, without the European Recovery Programme, we cannot get our country going again or enable other countries in Europe to maintain their present standard of living; but there is a great divergence of view between the European people and the people of the United States, and the amazing thing here, I think, is that many of us are on the same side as the Americans in these discussions.

The whole point is this: Is this programme something which has been conceived to give Europe relief? If that is so, it will be all right; but is there not something fundamentally wrong with the world monetary system? I want to suggest that a condition responsible for our present position is the dollar shortage, which I suggest is not a new condition, but one which existed before the war. I suggest that the European position which we are facing now is a position which did exist before the war. We know that it can be put in a number of ways. We have only to look at the balance of payments figures of different European countries before the war, and we know that we in Europe only balanced our position because we sent out large quantities of gold to the United States.

We knew all about it, and we knew that, before the war, about 90 per cent. of the world's gold was there, because that was the only way in which our trade could be paid for. Of course, we used also the income from our investments to pay for goods, but after the war we lost the income from them, which left us still further short of dollars. We had dollars from the goods we sold to Netherlands and Malaya, but I do not think that anyone who has been to Texas in the U.S.A. and has seen the big plants which are being built there for rubber and tin smelting can think that we will ever get from the Netherlands and Malaya the same amount of dollars which we had in circulation before the war. Thus, the whole basis and foundation of the world monetary system has gone, and it had gone before the war began. I do not deny that Hitler and all his devastation made it worse, but he was not the real cause of our present position. It would have come about, even if we had not had the war.

It is clear, too, when we look at this situation, that we are not right in thinking that America, being a great country in production and manufacture, can now take the place which Britain took in the 19th century. I would suggest that, for purely geographical and industrial reasons, she cannot succeed in taking that place, and I will give one example which always seems to me to be important but of which nobody takes any notice, and perhaps the Economic Secretary will consider it. If we compare the United States in 1947 or 1948 with Great Britain in 1914, which are comparable periods, we shall find that Britain's external trade in 1914 was greater than her savings and that the external trade of the United States has never been greater than her savings and was not in 1947. Moreover, the savings of Britain were invested overseas and those of the U.S.A. invested at home.

This makes it impossible for the U.S.A. today to take Britain's place in the 19th century. Because of her large population and her enormous productivity, America cannot afford to send her savings abroad. Britain, a small island, has to import all her food and almost all her raw materials. America is now decreasing the quantity of her imports. American imports last year were greater than the year before, but in relation to her increased production, not as great as they ought to be if we consider the quantities of raw materials required to provide for her greatly increased production. In other words, the increased production has been provided either out of raw materials which she is getting at home or out of synthetic materials, but the fact remains that there is no comparison between the positions which these two countries held.

I look at the problem with a view to discovering the answer. I do not see any answer to the problem of the dollar shortage. I do not see that America can play the part that Britain played in the past. I do not think she can lend to the extent that we lent. She is not an importer of raw materials. The Survey of the Economic Situation and the Prospects of Europe says that Europe can solve her problems, first by increasing her exports to those countries who are able to buy from her and give her dollars, and secondly by exporting direct to the United States.

The hon. Member for Bury (Mr. W. Fletcher) knocked the second of those solutions fairly on the head. Except in a few items, we cannot increase our exports to the United States in the next five or six years, and, unfortunately, we cannot sell to those countries who will be selling raw materials to the United States. Let it be remembered that the curve was going down between the wars; the world was getting less and less dollars, so that we were spending gold and getting less and less dollars all the time, and now we are in a position which is infinitely worse than the prewar days because of the enormous productivity of the United States. We must face the fact that there is a change; there is a dollar shortage. From my reading of American newspapers, it appears to me that the Americans think that if only they could tide over these poor people in Europe for three or four years, they could get back on to their feet again—which is very laudable, and we should be very grateful. I only wish it were true. It is not true, and the economic facts between the two wars show that the dollar shortage is more acute than it was in those prewar days. We cannot do anything about the dollar shortage. We cannot balance the dis-equilibrium between Europe and the West.

This brings me to the second point which I wish to make. Just as the world has got upset, so has Europe got upset. Europe has got upset not only because her trade and production were upset as a result of the war, but, again, the pivots of it were broken before the war began. That is the point which hon. Members and people generally in the country do not sufficiently realise.

The Survey of the Economic Situation and the Prospects of Europe, which is a document all of us should read because it gives so much interesting information, points out one of the most important factors in the post-war period; that is, that whereas the imports of Europe—when I say "Europe" I mean Western Europe, including the Western zones of Germany, and Great Britain, of course—have increased 7 per cent. in 1947–48, the inter-State trade between the European States is 56 per cent. of what it was. Of course, the two fundamental things that are wrong are that Germany, which was the biggest exporter and the biggest producer in Europe, has not recovered anything like her position, and Britain which used to be a big importer from Europe, does not import from Europe but from the Western hemisphere. In other words, the two factors which were the basis of European economy before the war, were a prosperous Germany plus large exports.

Of the trade of the world, in manufactures amounting to 10 million dollars, Europe provided seven million and Germany provided two million—one-fifth of the whole trade of the world. Today it is so small as not to be worth thinking of. The other basis was the imports to Britain from Europe. Today we are not taking those imports from Europe because we have not any confidence in the currencies of Europe. Therefore, the whole basis of European trade has gone. The Recovery Programme, even if we have it for four years, will not make the position any better. It will help to bridge the existing gap, but it will not necessarily increase any of those things to which I have referred.

May I give some figures which seem to me to be important? They can be seen in the Report on page 46. They give the pre-war and post-war trade, divided into foodstuffs, raw materials and manufactures. The years 1935 and 1947 are taken as comparable years, 1935 being a better year than 1948. It gives inter-European trade, excluding the U.S.S.R. and bringing in Western Germany. For foodstuffs, imports were 715 million dollars in 1935, and in 1947, 175 million dollars. Europe can recover that food herself. This is the inter-State trade between the European countries. Before the war they could provide for 715 million dollars of imports of foodstuffs, and 665 million dollars of exports of foodstuffs, whereas in 1947 the figures are 175 million dollars in both cases. Those factors show the bad position in Europe today. Until we get the position right, if we go on looking to the United States instead of realising that we have got to increase the productivity of Europe, we are not doing Europe a good service.

For raw materials the figures are 1,205 million dollars worth of imports in 1935 and 550 million in 1947; exports were 1,040 million in 1935 as against 475 million dollars in 1947. In the case of manufactures the figures are higher, but still the divergency is the same. Europe should not be looking to America to get manufactured imports. She should be getting those for herself, but because of Germany being in the position she is this is not being done. The figure is 2,000 million dollars in 1935 for imports and exports, whereas in 1947 it was only about 1,000 million.

The other day I read in a statement of Mr. Harriman's that there are problems in Europe arising out of what he called potential surpluses of goods in Europe. He said that there were goods in different countries in Europe which could not be brought into trade, because the other countries in Europe have not the wherewithal to pay for them. In Belgium today there is steel which could be exported to other countries, but the other countries have not got the wherewithal in Belgian francs to buy that steel. Belgium has lent some 13 billion Belgian francs to other European countries—an amount which is equivalent to Marshall Aid for one year for Europe, if one compares the countries on a population or a national income basis. It is an enormous amount for Belgium, but she is now "fed up" with paper currency. She does not want to lend any more, and she does not want to take the paper currencies of the other European countries. Therefore, Europe is going short of steel. We shall either get it under European Recovery or we shall not get it at all, whereas if only we could get currency stability in Europe or one currency in Europe we would be able to buy it quite easily.

Another example is that of textiles, wanted in the Scandinavian countries. The warehouses in this country are full of textiles which the Swedes would willingly buy but they cannot buy them because they cannot get sterling or import licences. Vegetables have been rotting for some months in Italy partly because of currency difficulties in other European countries, and partly because of shortage of transport—a difficulty which would be avoided if only the barges on the Rhine and the tugs in the Belgian and Dutch ports were made available to other countries. There are many other examples. The fact remains that in Europe today there are whole quantities of material which could be entered into trade—tobacco from Turkey and Greece, which again would come off the quantities coming into Europe. Only a revival of inter-European trade can solve this problem.

I cannot deal with the German question except to say one short word. If Germany is the centre of European economic recovery, as she is, then the proposals of the Committee for European Economic Co-operation for German production in the next four years are quite inadequate. The rest of the countries will be increasing production of steel, other manufactured goods and other things, while, in the main, Germany is to be kept largely at a position 50 per cent. to 60 per cent. of her 1938 level. If we take account of the land which has gone to Poland, and the raw materials which has gone to Poland, and take into account the different articles which Germans are not allowed to make by the Potsdam Agreement, we see we are laying up for ourselves a whole lot of trouble in the future because we are not permitting the biggest and most important part of Europe to recover.

I do not want to delay the House too long, but there are two specific considerations which we must look at. First, this dollar problem is something which has lasted a long time—at any rate, it was growing before the war—and it is a condition of the world which leaves Europe to find its own salvation. What we are getting in Marshall Aid is relief for the next four years, for which we should be eternally grateful, but it is only going to bridge a temporary gap, and the problem is to get European production and trade to a figure even higher than it had reached in the days before the war.

If we look at that position, what is standing in the way? The obvious thing—and this is a point I want to make and a point which many of us have been making for a long time—is that European integration was in tatters before the war because of its tariffs, import restrictions and so on. The co-ordinating machinery which has been set up in Paris is a Co-ordinating Committee whereby the nations are going to get together to discuss these common problems. What are these common problems? They are movement of populations, stability of currency. We undertake to keep our currency stable, but we know that French currency is not stable. We know of their double system of foreign exchange, which works well sometimes and badly sometimes. Paris newspapers report that 67 billion francs of goods under European Recovery have been received. They have banked that amount and sold the goods, which realised 37 billion francs, and that means already they are 50 per cent. down on the first quarter. That must be borne by the Budget, because they have put the money into one account and sold the goods and have got only half of it back.

If that goes on, it is going to burst the European Recovery Programme. We have, in the co-ordinating Committee in Paris, a Committee to deal with that problem—that of the stabilisation of currency—but they have no power to do it. They are only a committee co-operating to try to work out schemes. In order to put European recovery right there has to be, in the first place, complete freedom of the movement of population, and the planning of it, and complete control over currencies. If the Chancellor of the Exchequer in this House were the Minister for Finance in a European Parliament, he could control the currencies of the 16 countries—he could control the stability of the currencies of those countries. But so long as there are 16 different currencies, 16 different countries, 16 different authorities, 16 different demands being made of all sorts and kinds, there will be no stability whatever and no real solution to this problem.

What one says about currency also applies to transport. This problem will not be solved without the planning of the transport of Europe, which is an essential element in recovery; it will not be solved so long as the Co-ordinating Committee remains, as at present, without the power it would have if it were a Minister of Transport in a British Government and a British Parliament. That is a fundamental point. I plead with the Front Bench and with the Government to realise that it is relief we are going to get as a result of Marshall Aid, and to realise that the economic problems of the world are such that a return to multilateral trade and the free trade system we knew in our day will not come in this century and that Europe has to direct herself to an entirely different form of political and economic organisation if she is to survive.

Mr. Alfred Edwards (Middlesbrough, East)

Would my hon. Friend explain one point he made in his most interesting argument? He used the argument that America could not take the place we took in the last century in investing abroad because it would cause unemployment at home if she did so. In exporting her surplus under a long-term foreign investment plan, I would expect the opposite effect—fuller employment.

Mr. Mackay

If she were to export her capital she could not develop her own industries to the extent she has been able to do, and from that unemployment would arise. To put the point in another way, she would not be able to develop her production to the enormous extent to which she has been able to develop it. The position is that Marshall Aid in Europe is five per cent. of the national income of Western Europe. American national income has increased by 75 per cent. in the last few years. Why has America been able to increase her national income to that enormous extent—leaving aside the question of war, which was obviously a contributing factor—whereas in Europe we have to get somebody to give us five per cent. to make up our national income to what it was before the war? In America one has free trade, a big market and a large number of people. The point is to be found in the Act itself—the American Act, to a sentence of which I hope everybody will refer. In the preamble to the Act, or the findings and declarations of policy, we find: Mindful of the advantages that the United States has enjoyed through the existence of a large domestic market with no internal trade barriers and believing that similar advantages can accrue to the countries of Europe, it is declared to be the policy of the people of the United States to encourage these countries through a joint organisation to exert sustained common efforts as set forth in the report of the Committee of European Economic Co-operation. … What steps are being taken to achieve that? I was one who voted for the American Loan some years ago, hoping that, in the meantime, we would take steps to organise the European market. We took no steps. The plea I want to make tonight is that, while we accept Marshall Aid, let us accept it knowing that it gives a few more years of life, and that is all. In the meantime, if we only get to work and convert the Co-ordinating Committee in Paris into a European Parliament, a European Government, with a European Finance Minister, a European Customs Minister to get rid of European Customs, and a European Transport Minister, we would be laying the foundations for something that is sound and real. For Europe is an area of the world with greater resources than almost any other and with a greater number of people—and people of very great skill—than any other. We shall not solve this problem until we realise that in future we must get together, not in a committee co-operation but in a really effective union or federation of Western Europe.

8.28 p.m.

Mr. Marlowe (Brighton)

The hon. Member for North-West Hull (Mr. R. Mackay) has devoted a considerable part of his speech to dealing with the question of the integration of Europe and he certainly showed that he is an expert on that subject, because he most skilfully integrated his economic theories in his speech on Western Union. He did not, however, have a great deal to say about the subject under discussion tonight—the question of Marshall Aid.

I should like to say on this subject—for I intend to oppose Marshall Aid for this country—that I would agree entirely that Marshall Aid should be available for the other 15 nations who are so very much in need of it, but I take the view that we in this country should not be in the position in which we now are, and the fact that we find ourselves there is, I think, entirely the fault of the Government. I do not think we should be accepting this assistance. There have been many expressions of opinion and much criticism during this Debate, but one thing about which there is complete unanimity is our gratitude to the United States for the offer which they have made to us. I do not think anyone in any quarter would have anything but great thankfulness to express to America for that gesture.

So far as criticisms have been made from this side of the House I fully endorse them. The only difference between my hon. Friends who have made those criticisms and myself is, that the criticisms lead me to a different conclusion. They lead me to the conclusion that so far as this country is concerned, Marshall Aid ought to be opposed. I base my conclusion on two grounds. First, I think it will operate only as a cover for the failure of Socialism—and only a temporary one at that. The hon. Member for North-West Hull really said the same thing himself. He warned the Government it was but a temporary tide-over to another crisis. My second ground of opposition is I believe that it will be a damaging blow to our Imperial interests.

We have sought American help now because we have arrived at a crisis. But under Socialism, so far as I can see—and so far as all experience has shown—there is always a crisis. If we are to accept Marshall Aid merely in order to tide over from one crisis to another then, quite clearly, this vast sum of money will get us nowhere. I know that hon. Gentlemen opposite attribute our present situation to the aftermath of the war. I do not accept that as being the sole reason for our present position. I believe that our present position is due to a mixture of the aftermath of the war and a Socialist Government. It is, as it were, like mixing chemicals. One can put in a number of chemicals which remain quite harmless until one adds the final acid which causes the explosion. I believe that in the conditions in which we were after the war Socialism was the acid which brought about our present position.

Dr. Morgan (Rochdale)

Which acid?

Mr. Marlowe

In any event I wish to be consistent about this. I have expounded this theory from many platforms in the country, and I feel I can be consistent only by repeating it here. [Interruption.] I have no doubt that hon. Gentlemen opposite advance their theories on political platforms from time to time. Anyhow, that is my belief; and it is because I believe that the real turning point which led us to our present situation was the advent of Socialism, that I believe it is only logical to oppose the subsidising of further Socialism. I know, of course, that it is said that to Marshall Aid there is no alternative. I find it difficult to believe that if a doctor is poisoning his patient, the only alternative is another dose of poison.

Dr. Morgan

That is a queer argument.

Mr. Marlowe

I next ask myself, Where shall we be at the end of Marshall Aid? Shall we be one step forward from where we are now? I see no evidence that we shall be. Where is the plan to use the time which is being gained? I have not heard that expounded on the benches opposite. Even if there is a plan it must be a Socialist plan, and, therefore, I can have no faith in it. I believe that all that this aid is going to do is to bring us, probably in a not very long time, back to where we are now. In the meantime, however, the people of this country will have been lulled into a false sense of security, so that, far from there being increased production, we shall find production falling off.

Government spokesmen, of course, have really admitted themselves that this is something in the nature of a windfall. Many Government spokesmen have agreed that but for Marshall Aid there would be mass unemployment. I must remind hon. and right hon. Gentlemen opposite of their Election pledges about employment. They promised at election time that there would be full employment. If they did not know that they were going to get Marshall Aid, then that fact makes nonsense of their promises; because they are now saying that without Marshall Aid there would be mass unemployment. Therefore, they must realise that their promises at the Election meant nothing—unless Marshall Aid came to their assistance.

I cannot find out how under this Agreement we are to know how the thing is to be worked. We do not know what is going to be sent us. I have no doubt that the Americans will do their best to co-operate with us in our present position, but there is certainly nothing in the Agreement from which we can get any enlightenment. Although hon. Friends of mine on this side have criticised the Agreement, their criticism leads them finally to support the Marshall Aid Agreement—only, I think, on account of our desperate situation. My deductions lead me the other way. I certainly feel that if this thing does not work out properly I, for one, must feel myself free to criticise it.

I turn now to my second point, and that is the question of our Imperial interests. I have from time to time, by Questions in this House, sought to find out whether there was any real attempt being made to convene an Empire Conference. In such attempts I have been always put off by the shambling excuse that there are difficulties in the way of finding a convenient date. I do not believe those difficulties are insuperable, as the Prime Minister and other Ministers responsible have indicated. I believe that if they had really put their hearts into calling together an Empire Conference they would have found that there are other solutions to our present problems; and if those solutions had been found in the Empire, that would have been an infinitely preferable thing.

It is true—it has been said in this Debate—that there is no specific mention of Imperial Preference in the Agreement; but, of course, no one can deny that there are provisions which enable the Americans to get into—and well into—our Empire trade. Of course, I am only too pleased that the Americans should help the Empire prosper with all other parts of the world, but I must make quite sure that inter-Imperial trade is not ruined beyond repair; and that may happen under this Agreement. I should a thousand times prefer that we get the Empire together to get ourselves out of our present difficulties by our own exertions, rather than that we should have to go to seek aid from any foreign Power, however friendly. Moreover, I believe that the people of this country would also prefer that, if the matter were honestly put to them.

The whole of the postwar finance of this Government has been tending away from the Empire and Imperial Preference. I fully admit that in this present Agreement there are the minimum of strings, but I see in it a great danger to Empire trade. Naturally, the Americans, in cultivating their trade within our Empire, will wish to see all obstacles such as Imperial Preference taken out of the way. If that blow is struck at the Empire, and if Imperial Preference is ultimately eliminated, as does appear to be the object of this Government in the end, I believe that that will be a blow which will be fatal to our prosperity, and which will be damaging one of the most stabilising factors for peace in the world. In these circumstances, I feel that I must say that I cannot give my blessing to this Agreement, and I am not prepared to support a Measure which, I believe, gives a renewed lease to Socialism and does grave injury to the British Commonwealth of Nations.

8.41 p.m.

Mr. Swingler (Stafford)

The hon. and learned Member for Brighton (Mr. Marlowe) has run the usual line from the Benches opposite, that the Government are to blame for the situation in which we find ourselves and for the necessity for this Agreement. He might never have heard the speech of the hon. Member for North-West Hull (Mr. Mackay), who explained the causes of the dollar shortage. Apparently, he is prepared to oppose this Agreement in order to bring the country to ruin, so as to prove that Socialism is no good. That is what I understood to be part of his argument. I feel that the argument of almost every hon. Member who has spoken from the benches opposite in this Debate, in which they have suggested that it is the Labour Government in Britain who are responsible for the dollar shortage, responsible for the squandering of the American loan, and now responsible for the appearance of Marshall Aid and this Agreement is a fantastic argument. After all, it was the right hon. Member for Woodford (Mr. Churchill), who, in 1944, said to an American business man that the day the war ended, this country would be bankrupt, and there would be very little for the returning soldiers to come back to. That opinion of the right hon. Member for Woodford was recently quoted in an American magazine.

Mr. Marlowe

I think that has already been quoted in this House, but does the hon. Gentleman recall that the right hon. Member for Woodford was at pains to point out that although, in an American book he was alleged to have said that, he did not endorse that he had said it.

Mr. Swingler

I have no knowledge that the right hon. Member for Woodford ever denied making that statement, which has been quoted recently on a number of occasions in American magazines and in newspapers in this country. It may be that the right hon. Gentleman has not confirmed the fact that he made a statement quoted by Mr. Henry Morganthau, but he has certainly never denied it.

The statement of the right hon. Member for Aldershot (Mr. Lyttelton), in opening this Debate for the Opposition, that we in this country and that hon. Members in this House ought to feel humiliated when confronted with this Agreement and ashamed of the fact that we had to discuss the question of accepting Marshall Aid was also, I thought, a fantastic statement. When I contemplate the effects of the sacrifices that were made by this country during the war, the fact that £1,000 million worth of foreign assets were sold in order to fight the war, and the damage sustained to our economy, estimated to—1,500 million, I find no reason to be surprised at the difficulties with which this country has been faced in the past few years, or humiliated that we are in this position in relation to the United States which, after all, began not in 1945 but in the period of the war, as the result of the sale of those foreign assets and our need to draw supplies from the United States in order to be able to fight the war.

If the hon. and learned Member for Brighton had read the report on the Economic Prospects for Europe, he might feel pride at the extent of the recovery of this country during the past three years. One of the things which the United Nations Economic Committee's report brings out is, that despite the enormous damage sustained during the war to the economy of Britain, and the aid given by Britain during the war and since to many other countries of Europe, this country has made a remarkable recovery in developing agricultural and industrial production. That is the conclusion of the United Nations Economic Commission's Report about the development in Britain during the past three years as the result of the policy we have pursued.

I feel that in our approach to this Agreement there are two questions to which we should address ourselves. The first question about which we are concerned is whether this Agreement and Marshall Aid as a whole is a means towards making ourselves within a period of time independent of extraordinary outside assistance. That is a point to which a number of hon. Members have addressed themselves. The second question about which Members have been concerned is whether this Agreement in any way curtails our freedom to work out our destiny in this country in our own way or in collaboration with European countries.

We listened not long ago to the brilliant analysis, developed previously to some extent in this House, by the hon. Member for North-West Hull, about the way in which the dollar problem has developed from before the war, during the war, and during the last three years. One point which he brought out in agreement with the hon. Member for South Nottingham (Mr. N. Smith) was that we could not make this Agreement the means of making ourselves independent of outside assistance, by continuing to pursue a policy of trying by an extraordinary export drive to solve the balance of payments with the United States, as we have attempted to do during the past few years. The attempt by vastly increased exports from the United Kingdom or from Western Europe to solve this problem of the unbalance of payments with the United States, is something which simply cannot be achieved.

Already there are signs of a crisis looming in the export markets in the Western hemisphere owing to the heavy competition from the more powerful manufacturing industry of the Western hemisphere. Although we have made in the last 12 months tremendous efforts to develop our export drive, if we look at the figures of the balance of payments of the last few months and compare them with the Autumn of 1947 and previously, we see that the gap opens a little one month, closes a little the next month, but is still running now at the same level as in September and October of last year. Although we may be exporting far more and the value of our exports to the Western hemisphere may have been increased, at the same time, owing to the rise in the cost of primary products, we pay more for necessary imports of food-stuffs and raw materials from the United States and we do not close the gap.

Therefore, I suggest, and I agree with the hon. Member for North-West Hull, that we must pursue a solution of our dollar problem by concentrating on both buying and selling in the non-dollar countries and in tackling the problem of general European recovery, rather than throwing our whole effort into pursuing the mirage of hope that by some particular date we shall balance our payments in the Western hemisphere. As he said, the greatest drag during the past few years and today in the problem of the dollar shortage is the slowness of general European recovery and that is what appears in the report of the European Economic Commission on Europe. Europe's share of world trade has fallen very considerably. It is very much lower than the level prewar—I believe 17 per cent. compared with the prewar 30 per cent.—and trade between European countries is at a low level.

Therefore, every country in Europe is looking for materials and foodstuffs which can be bought from the United States of America and is faced with this dollar problem. The greatest danger in relation to that is that we shall be unable so to direct our trade and to increase it with non-dollar countries and to assist the general recovery and increased production of other European countries, as to make ourselves continuously during the next few years more and more independent of the need to buy so many goods in the Western hemisphere. I do not want to repeat what was much more ably said by my hon. Friend the Member for North-West Hull about the European position, but I agree with him that unless there is a European plan to raise production generally as a part of this system of Marshall Aid and unless all the efforts of all countries concerned, including Britain, are concentrated more on the development of trade between European countries than of trying to solve Europe's adverse balance of payments with the Western hemisphere by exports, Marshall Aid can be simply a self-perpetuating process and the need for more aid and more relief from the Western hemisphere will continue.

That point was well brought out in a leading article printed in "The Times" on 6th April commenting on the United Nations Economic Commission's Report for Europe. It said: This should be the first and essential purpose of the European Recovery Programme—to enable the countries of Europe to help themselves by trading freely together and furnishing again each other's needs. Later on it said: Nothing comes out more clearly from this survey, with its emphasis on European trade, than the heavy price which Europe will pay for the blocking of its commercial arteries by the 'iron curtain.' It was stressed throughout this analysis of the United Nations that only by the increase of agricultural production, in particular, in Europe and by the supply of the necessary capital goods in exchange for the many other products of Western Europe, could the European countries as a whole, work towards becoming independent of dollar aid.

This Agreement, and the points made about the efforts of Governments in order to pursue the aim of making themselves independent of outside extraordinary assistance, emphasise the need for the policy that has been pursued during the past few years by the Labour Government of this country and the need for not relaxing, as the Chancellor said this afternoon, in the pursuit of that policy. In connection with that I should like to quote an extract from the White Paper on full employment published by the Coalition Government and presented to Parliament by the then Minister of Reconstruction, Lord Woolton, in 1944. It expresses so clearly the policy which has to be pursued, or rather, to be continued, so far as hon. Members on these benches are concerned. There are a number of paragraphs dealing with the situation likely to occur in this country in the aftermath of the war. On page 9, the White Paper says: The third danger is that production of unessential goods may interfere with the production of essentials. In order to direct the efforts of industry towards the right tasks in the right order, it will be necessary to establish certain broad priorities and to enforce them for a time by means of the issue of licences, the allocation of raw materials and some measure of control over the labour and staff required for industry. There are three main reasons why this must be done: (a) During the war we have obtained a large proportion of our imports first by the sale of our foreign assets and later by lend-lease or on credit. This process cannot continue indefinitely; and if we are to be able to buy the imported food and raw materials which we need to maintain our standard of life, we must expand our export trade. An export drive is thus of paramount importance, and home demands must not be allowed to divert the resources needed for exports. I believe that extract from a White Paper, to which the right hon. Member for Woodford recently directed our attention in a speech which he made outside the House, is a thorough justification of the home policy which has been pursued by the Labour Government during the past few years, and has brought down upon the Government so much criticism from the benches opposite. I quote it to reemphasise in relation to this Agreement what the Chancellor said about the need to continue the policy of priorities, the allocation of raw materials, and the measure of control over the labour and staff required for industry that were advocated in that White Paper.

In that connection I should like to sound one note of warning. I believe that this Agreement is an opportunity to reaffirm the necessity for achieving the objectives set in the Government's Economic Survey for 1948; and not merely for achieving the standards set there, but, if at all possible for surpassing those production standards, which in many cases were set as minima, if we are to move along the road of general European recovery. I believe that still the signs are that during the first few months of this year, and at present, the vital industries of the country are lagging behind in the productive effort. In particular, we are lagging behind in the recruitment of labour for productive industry.

This is a subject to which I have frequently come back when I have spoken in this House, because I believe it is of vital importance. It was emphasised in the Government's Economic Survey that if this country this year is to continue without relaxing the policy of making ourselves independent of extraordinary outside assistance, we must achieve the standards set by the Government in regard to recruitment and production in the basic industries. One of the most urgent needs there is a considerable degree of manning up. Minimum standards were set for the most important basic industries on which the whole of our export trade depends, such as coal, textiles and agriculture, and while in the first six months of this year in general we have nearly achieved those standards, it is only because of the extraordinary efforts to recruit European voluntary workers or Polish soldiers from the Reconstruction Corps into those industries. I would like to give the actual figures, but I do not want to detain the House any longer. If, however, hon. Members will analyse the amount of the manning up in those industries which is due to the exceptional efforts of the Minister of Labour in recruiting immigrants, they will see how dependent we are becoming on displaced persons entering this country. I believe that is a hazardous situation and that further efforts by the Government are required as regards incentives in those industries, to make these productive jobs more attractive, otherwise we shall live in an illusory situation as a result of getting Marshall Aid.

9.0 p.m.

Brigadier Peto (Barnstaple)

It is customary nowadays for hon. Gentlemen on the back benches of the Government to do all they can to discredit my right hon. Friend the Member for Woodford (Mr. Churchill). They quote things said about him, whether true or untrue, and they try to prove that what he said was that this country would be bankrupt after the war. There is no doubt whatever that, had the right hon. Gentleman been the head of the Government which had to negotiate a loan, as was done by the present Government in 1945 not only would he have got considerably better terms, but he would have made that loan last considerably longer and would have spent it a great more deal wisely.

There is no shadow of doubt, for instance, that, at this time of tension between us and the U.S.S.R., he would not have approved of the sending of 50 or 60 jet fighters, with our most modern engines, to Russia; anything more absolutely insane could hardly be imagined. Nor would he have sent them to other countries behind the Iron Curtain. He would have spent the loan, when he had it, very much more wisely than on schemes of nationalisation or in allowing it to be filtered away into other countries. I would ask hon. Gentlemen, therefore, when speaking about my right hon. Friend, to treat him as the country as a whole treats him.

The hon. and learned Gentleman the junior Member for Brighton (Mr. Marlowe) said that he voted for the loan but was about to oppose the present E.R.P. measure. I voted against the loan for various reasons which I gave at the time. They were that I did not feel that 48 hours was a sufficient time for a person of my intellect to consider it; secondly, that I did not feel any confidence that the Government would spend it wisely; thirdly, that I had no confidence that the Government ever intended to repay it; fourthly, that I had grave doubts about its effect upon Imperial trade. Many of those same feelings are in my mind today about E.R.P. under the Economic Cooperation Agreement. It is prolonging the fool's paradise in which we are now living instead of facing the issue, which sooner or later we must. In addition, under Article V of the Economic Agreement, there is bound to be some effect on our trade with our Commonwealth and Empire. That effect cannot be for the good. To some extent it impairs the sovereign rights of this country and of our Commonwealth to trade as freely as we should like with the countries therein.

After due consideration, and having given the matter considerable thought during the past weekend, I have come to the conclusion that I must support this loan for the following reasons: firstly, out of sheer gratitude to the United States for their extraordinary generosity in spite of provocations and the way in which their large loan was spent; secondly, because, as is laid down in Article I (2), it tends to encourage sustained efforts towards recovery and lasting peace. In my opinion anything that will help towards recovery and for lasting peace should not be opposed. Article IV (6) says that it will ensure: productive activity and international trade and … the development of new sources of wealth within the United Kingdom. Those are principles which I hold very dear. I am, also, delighted to see that under Article II (1) (ii), the use of the loan is very carefully guarded. The way in which it will be used is under careful observation. It will not be spent on nationalisation, but "on industrial and agricultural production on sound economic lines." It is worth while reading the last three or four lines of that paragraph: when desired by the Government of the United States, to communicate to that Government detailed proposals for specific projects contemplated by the Government of the United Kingdom … including, whenever practicable, projects for increased production of coal, steel, transportation facilities and food. So the United States will have the last word as to whether the loan under this Agreement can be used for the nationalisation of steel, land and so on—

Sir S. Cripps

I do not understand what the hon. and gallant Member is arguing. How can a loan in dollars be used for nationalisation?

Brigadier Peto

In the same way that the previous loan from the United States was used to assist this country in nationalising the industries which have already been nationalised.

Mr. H. D. Hughes (Wolverhampton, West)

Will the hon. and gallant Member give examples?

Brigadier Peto

Did they not help us to balance our Budget? Did they not help to keep up our currencies?

Mr. John E. Haire (Wycombe)

What has that to do with it?

Brigadier Peto

Lastly, one of the minor reasons why I would not oppose this loan is that the hon. Member for Finsbury (Mr. Platts-Mills) is prepared to oppose it. The Chancellor of the Exchequer dealt with Article VI "very speedily." He said that this is an Article we welcome and desire to encourage. It says: The Government of the United Kingdom will co-operate with the Government of the United States in facilitating and encouraging the promotion and development of travel by citizens of the United States to and within the participating countries. Living as I do in a constituency in which there are hundreds of hotels dependent very largely on foreign travel and on the tourist trade, I welcome that paragraph, if it means that the Government are to assist seaside resorts to some measure of prosperity. They have had no encouragement from the Government since the end of the war. There has been needless delay in derequisitioning, needless delay in settling claims, increased wages for hotel staffs and increased prices of furniture usually bought in foreign countries, increased taxation which prevents people taking their holidays far away and just as they were at last getting started, the petrol ban came on. No petrol at all is better from the point of view of North Devon than a little petrol, because a little petrol only enables people to take their cars to localities around the East Coast. There is the fact of no visitors from abroad, and in many cases—

Mrs. Leah Manning (Epping)

If they lived in Somerset could they not then go to North Devon?

Brigadier Peto

If they lived in Somerset they would not necessarily take their holidays in North Devon. [Laughter.]

Mr. Carmichael (Glasgow, Bridgeton)

What have the Government to do with that?

Brigadier Peto

May I tell hon. Members that in many cases hotels in my constituency are facing ruin? If they consider that to be a matter for laughter I cannot say that I agree with them. The hotels have had no encouragement of any sort, financial or otherwise. They have had promises made, particularly in the case of ex-Service men—

Mr. Deputy-Speaker (Major Milner)

I do not think that matters to which the hon. and gallant Member is now referring have anything to do with the Motion before the House.

Brigadier Peto

I was referring to that matter in connection with the promise or hope of assistance which is given under Article VI to those catering for the tourist traffic. If you rule that out of Order, Mr. Deputy-Speaker, I will naturally bow to your Ruling. I shall support this measure with grave doubts as to the efficiency and skill with which the Government will spend the money they get.

9.12 p.m.

Dr. Barnett Stross (Hanley)

I was interested to find that the hon. and gallant Gentleman the Member for Barnstaple (Brigadier Peto) agreed with me in supporting this Agreement, although his reasons seem to be very different from mine, and some of them seem rather quaint. I hope he will forgive me if I do not follow him in his line of argument. Earlier today the Chancellor pointed out that the co-operation of the countries of Western Europe is fundamental to our conception of E.R.P. That cannot be stressed too strongly. If assistance were given from any source whatever to any countries, and if there were no increase in the trade between those particular countries as compared with today, all possibility of success would vanish. That is obviously in the minds of those who conceived this measure.

If we are to judge by the Agreement as we have it before us, there is a good deal of altruism expressed in the words. What has disturbed some of us, perhaps not only on this side of the House, has been that the Agreement has been rather like a baby at whose birth two or three midwives have attended. The ultimate result of the delivery has been beyond the expectation of the midwives themselves in beauty, general appearance and health; and the only complication has come from the relatives who from time to time have made pronouncements before the delivery and these have differed very materially from one another. For example, according to some observers Marshall Aid has divided Europe into two camps. The reasons for this are to be seen in my cumbersome analogy. For instance, we first had a pronouncement from the President of the United States on 12th March, 1947, when he spoke of the assistance which must be, and was, given to Europe for the "containing of Communism and Russian influence" and in order to give military aid to Greece and Turkey. That was one type of pronouncement.

Later, a good deal later, we had the speech of Mr. Marshall. This was considered by other observers to contradict the essence of the first speech because the words were finer, more exalted and seemed more liberal. Those of us who have listened today to the Chancellor would be in agreement that there has been a great change in the attitude of the American people and Administration from those early days. At least, that is my view. But in between these two pronouncements there was another. That was by Mr. Dean Acheson on 8th May, 1947, speaking at Cleveland, Mississippi. If I quote a few sentences from it, we can get some understanding why countries in Mid-Europe and the Soviet Union took a certain attitude towards this matter as the result of that speech. He said: These measures of relief and reconstruction have been only in part suggested by humanitarianism. Your Congress has authorised, and your Government is carrying out, a policy of relief and reconstruction today chiefly as a matter of national self-interest. I think the House will agree that it would be easy for the Soviet Union to seize upon sentences of this type, and perhaps translate them out of their context, and not realise how far the American Administration has to bring its people along to agree to this type of action. Most of us believe that the American people have found it somewhat novel and new. Hon. and right hon. Gentlemen have already expressed far better than I can, that this was a new divergence for our American friends and that they have come in with this great scheme in a way which is strange and unaccustomed to them. Further on in his speech, Mr. Dean Acheson said: Since world demand exceeds our ability to supply, we are going to have to concentrate our emergency assistance in areas where it will be most effective in building world political and economic stability, in promoting human freedom and democratic institutions, in fostering liberal trading policies and in strengthening the authority of the United Nations. This is merely common sense and sound practice. It is in keeping with the policy announced by President Truman in his special message to Congress on 12th March on aid to Greece and Turkey. Free people who are seeking to preserve their independence and democratic institutions and human freedoms against totalitarian pressures, either external or internal, will receive top priority for American aid. I think the House will agree that it would be possible to construe that as meaning that American influence aimed at preserving and expanding its own markets and foresaw the possibility of influencing the internal regimes of other countries who are receiving American aid. If that be accepted as a premise and hypothesis, one can quite understand why it was that the Soviet Union used all its influence to prevent countries on its borders from entering into this Agreement. The arguments that we can imagine coming from that side were bolstered up by evidence at that time. One factor was that the Export-Import Bank refused at that time a loan to Czechoslovakia for the buying of cotton. Secondly, they pointed to the refusal to make use of the Economic Commission for Europe which is a United Nations committee and the establishment of a new piece of machinery.

It is part of my thesis to show, if I can, that this type of misunderstanding can be fatal to the good prospects of Europe, fatal to ultimate peace and fatal to the ultimate outcome of any help that may come from any great country to any other country. We have heard from the hon. Member for Finsbury (Mr. Platts-Mills) a very zealous, one-pointed exposition of what he considered to be the worst possible aspects of this Agreement. Allowing for what I think were the grossest exaggerations on his part, it must be admitted that countries in Europe, and not only in Mid-Europe and the Soviet Union, have felt sceptical at times, and have certainly felt worried as to what strings would be attached to the Loan and the Agreement. If they had been more patient, their realisation of it as it exists today would have given them a greater feeling of security.

But in any event, whatever they may feel, some good has already come. It is a strange way of putting it, but I think it is true that two great Powers have tended to bid against each other. One bid comes from the West, to the countries of Western Europe. The Soviet Union, realising that Marshall Aid was offered, has bid to the countries on its own borders and has had to offer a quid pro quo. This shows itself in the possibility of increased prosperity in those countries that lie on the borders of the Soviet Union. I think it was the hon. Member for Montrose Burghs (Mr. Maclay) who asked for a possible example of anything which the Soviet Union might ever have done for another country which was not selfish. I am not sure of the exact word—

Mr. Maclay

Those were very nearly the words.

Dr. Stross

I wonder if the hon. Gentleman will allow me to give him some examples? If he will look at the Agreements which Russia has made, since Marshall Aid was offered, with Roumania, Czechoslovakia, Bulgaria and other countries, I think that he will find that they are as humane and as good as could possibly be effected. Obviously the Soviet Union today is not a great and wealthy country like the United States of America. She has not in any way attempted to do to countries on her borders what was done by Nazi Germany. I was also amazed to hear the hon. Member for Finsbury suggest that this Agreement had any semblance to the method which Nazi Germany used for Central Europe, because, in my view, nothing could be further from the truth.

Again, on the other hand, the Soviet Union exports raw materials to countries like Poland and Czechoslovakia and receives from them a proportion of manufactured goods made out of those raw materials, only to such a percentage as will guarantee leaving those countries with a steadily higher standard of life for themselves.

Major Tufton Beamish (Lewes)

Absolutely untrue.

Mr. Maclay

The Soviet Government are undoubtedly humane and have certain very clear objectives in everything they are doing.

Dr. Stross

That remark does not take us very much further. There was an interjection from the opposite benches in which the word "untrue" was used. Therefore, I will quote some figures.

Czechoslovakia has just made a five-year agreement with the Soviet Union without any interchange of cash but with a transfer of goods from Czechoslovakia to the Soviet Union, and vice versa, estimated in value at 500 million American dollars. When one realises that before the war the total export and import trade of Czechoslovakia with Russia was less than 1 per cent., one sees that it has been stepped up to roughly 10 per cent. and that the increase between the countries of Middle Europe in the intra-zonal area, plus the trade with the Soviet Union, reaches about 40 per cent. import and export, leaving up to 60 per cent. for trade with the rest of Europe and ourselvesr— when one realises that, and also the fact that the Soviet Union exports cotton to Czechoslovakia and takes back only 13 per cent. of the manufactured output in cotton goods, leaving that country raw materials for her export trade to us or to any other country which wishes to have them, I think that the hon. Gentleman who says that what I am saying is untrue is probably grossly mistaken.

Mr. Molson (The High Peak)

Are we to deduce from this sudden increase in trade that it is greatly to the advantage of Czechoslovakia and, if so, could not that agreement have been negotiated without the coup d'etat in that country?

Dr. Stross

These agreements have been going on for quite a long time and preceded the coup d' etat. As for the first part of the question, the answer is that their economic advisers pointed out, as I am sure the hon. Gentleman knows, that the terms which they are receiving are distinctly favourable as compared with what they got from other countries in other parts of the world. I have to accept that, and I think the hon. Gentleman must accept it, unless he can prove the contrary.

Mr. David Eccles (Chippenham)

How does the hon. Gentleman explain the fact that there are no consumer goods in the shops in Prague, and that everyone in Prague at Whitsun said that the goods had gone to Russia, and that that was the common and usual explanation?

Dr. Stross

One possible explanation seems to me to be that, in view of the present situation and of the sudden, and I hope temporary, decrease of trade with the West, it might be that the hon. Gentleman is correct in what he says, and that they have exported all they could lay their hands on to the Soviet Union to pay for the corn which, as the hon. Gentleman will remember, they had to have as the result of the drought.

Major Beamish

May I ask the hon. Gentleman how he explains the fact that there are also no consumer goods in Roumania, Bulgaria, Hungary and Poland, in all four of which countries I have recently been?

Mrs. Leah Manning

Absolutely wrong; quite untrue.

Dr. Stross

I think the short answer to that, which I hope will satisfy the hon. and gallant Gentleman—although I hear expressions of opinion that he is not correct in what he says—is that we have also in our own country been short of consumer goods. If I might be allowed to resume, I have already stated that the treatment which the Soviet Union offers to the countries on her borders, partly, I think, as a result of having to bid against the results of Marshall Aid, is to the benefit of countries on her borders. In the same way, we have a right to expect that the assistance we are to receive as a result of this Agreement will be greatly to the benefit of ourselves and Western Europe, and that, as a result of these two regional areas of Europe facing each other, each with a right to expect an increase in total production and a right to expect an increase in trade between the two areas, I think it might well be that, as a result, the Agreement will become, not a weapon for dividing Europe into two parts but a method of building a bridge between the two parts of Europe for the ultimate good of all of us.

When Nazi Germany made trade agreements before the war—and an example was the one she made with Roumania in 1939—she expressly prohibited any increase in heavy manufacture. If I remember rightly, she demanded that some factories should be dismantled, that on no account were they to import from any country anything which Germany could supply, and that they were not to import at all without German permission. When, in the Autumn of 1939, Roumania attempted to buy silos from us in quantity, she was expressly forbidden to carry out this transaction. That is the last sort of thing that we ourselves can afford from anyone who offers assistance to us, and the last sort of thing that mid-Europeans could possibly afford from the Soviet Union.

There is a tremendous similarity—although it seems to meet with some criticism from hon. Members opposite—between what is happening between the Soviet Union and the countries on her borders, and what is happening between America and the countries in Western Europe—namely, that the basis of each plan is similar. For example, there must be increased production and a raised standard of life; secondly, that there should be suitable division of labour to stabilise markets and prevent or reduce unwholesome competition between country and country, and excessive duplication of manufacture; thirdly, that there should be encouragement of trade between the countries of each zone, between the two zones and throughout the whole of the world. If that be the essence of the Marshall Plan, it is my view that it can do nothing but good. It should be accepted in this way, and it may well help to give stability and world peace.

9.32 p.m.

Mr. Dodds-Parker (Banbury)

Perhaps the hon. Member for Hanley (Dr. Stross) will forgive me if I do not follow him in what he has been saying, because, like my hon. Friends who have spoken before me, I came here to talk about the Economic Co-operation Agreement between this country and the United States, and not about the lack of economic co-operation between Western Europe and Russia. I might just say that all the facts which the hon. Member has just adduced are completely contrary to any information which I have received in the last few years.

I welcome the chance of joining in the general praise for the great generosity of the American people in making this Agreement. I was glad to hear the words, albeit somewhat frigid in which the Chancellor of the Exchequer acknowledged that generosity, although he got but small support from his side of the House. That, however, I think is understandable because one of the things that is getting home to the people of this country is that the whole system of Socialism is being maintained, as has been so well pointed out by my right hon. Friend the Member for Aldershot (Mr. Lyttelton), by these American grants. We have the former Chancellor of the Exchequer, the right hon. Member for Bishop Auckland (Mr. Dalton) going about and saying that the country is proudly taking the new social services in its stride, omitting all reference to this tremendous outpouring of generosity from the great free enterprise systems on the other side of the North Atlantic—not only from the United States, but also from Canada.

I think I am right in saying that of every three meals we eat in this country one is given to us free, without effort on our part, by people from across the seas, our Dominions as well as the U.S.A. It is coming home to hon. Members opposite that the people in this country are beginning to understand this. Therefore, the applause of hon. Members was as frigid as I expected when the Chancellor uttered those words, in recognition of this great generosity of the people of America.

There may well be a certain amount of self-enlightenment about the American attitude. I am very glad that this should be so. It shows that the phase of isolationism, which has been abroad in the United States for so many years, is passing, but it would be a very great mistake for hon. Members opposite, as I have heard them, trying to maintain that without Marshall Aid the whole of American economy would collapse. That is complete and utter nonsense. I do not make myself out to be an economist, but those who talk to people on the other side of the North Atlantic will know that there are many who would only too willingly see exports of everything stopped for say two years in order to knock the top off their own inflation. My hon. Friend the Member for Montrose Burghs (Mr. Maclay) well pointed out that it is this policy—the manufacturing of these goods, receiving payment for them, and yet handing them out overseas with no equivalent return—which is causing this very great inflationary pressure in the United States, and I hope hon. Members will study that fact and not go round making themselves and the Government look even more stupid than they are, by saying that the whole American economy would collapse without the giving away of this material free.

One hon. Member was talking about full employment. It was like the Prime Minister in his broadcast the other day saying: "I have decided on full employment; my Government have decided on full employment." Even the Minister of Health said that without American aid there would be 1,500,000 unemployed. How then can the Prime Minister get up and say, "I have decided on full employment"? The real facts are that full employment in this country is being sustained by the generosity of this great free-enterprise, capitalist system which hon. Members opposite decry at every possible opportunity.

There are two points I want to put to the President of the Board of Trade who, I believe, is to reply. The first refers to Article 3. As I understand it, in the original Economic Co-operation Act in the United States there were very rigid conditions laid down. It is not for the Administration there to negotiate with the Administration here on these terms. They were laid down very rigidly by Congress in the original Act and one of the Articles—I am afraid I cannot remember at the moment which it is—laid down that private enterprise in general and not only Government monopoly corporations in this country should receive financial help and capital goods.

How are we to ensure that this aim is achieved? How are we to ensure that a private company which wants to develop some capital project has access to this assistance? I make no secret of this fact to the House—I have on several occasions said I have the privilege to be a director of a primary producer company overseas. If we cannot get capital goods for a particular project—we cannot do so at the moment except by going through some Government agency—how are we to ensure that these private companies, on whom I, personally, believe the whole future of Britain depends, can acquire capital goods without the risk of being turned down by some Government agency?

How is the United States Government to ensure that private companies are able to have a fair say and to put their case before an impartial arbitrator, and not through some Government Department which will, as I see it, in many cases—I do not say all cases—attempt to divert goods for its own use? I think this is a most important point because I am quite convinced, as I have always been, that it is only through the endeavours of private enterprise that we shall get this country straight again. If they are to be denied the capital goods which it was the intention of the original Act to give them, I think we may as well kiss goodbye to any hope we may have of getting under weigh the economy of Britain and the area still under her economic control.

The second point I want to put to the President of the Board of Trade arises from Article V (2). What are the terms and conditions of United States participation in Colonial development? Personally, I have always welcomed it. I am quite certain when we see the tremendous task of capital reconstruction which has to be done in this country and in Europe, it is beyond the capacity of industry in Britain and Western Europe to produce the capital goods for the development and reconstruction not only of Western Europe and Britain, but also of the territories overseas. I, therefore, welcome very much this participation of American capital in these tremendous undertakings, but can the President of the Board of Trade or the Economic Secretary to the Treasury, when the moment comes, give us some indication about this, because I believe it to be one of the most important practical tasks to which we must turn our minds in the near future.

As I said, in the company in which I am personally interested, we have been trying to get a heavy tractor and bulldozer for some time. We cannot get it because all are being picked up and taken off for Government monopoly schemes. Not only are American aid dollars being used for that, but dollars earned by the production of this particular company. Therefore, we are not only denied access to materials, but deprived of our earnings that we could use to buy tools with which to get on with the job. Then hon. Members opposite say that private enterprise cannot do the job, and so we are not only injured but insulted. If the United States could be brought into partnership with this country in this development work, as we helped Argentina in the nineteenth century, it would be productive of government; but I hope we shall not treat the United States afterwards as Argentina has treated us.

Incidentally the Chancellor of the Exchequer mentioned the magic words "over-production." I have been taunted on many platforms by Socialists and told that there is no such thing as overproduction but only under-consumption. So I am highly delighted to hear the Chancellor of the Exchequer talk of the danger of over-production. I am not quite clear what he means by this. Does he mean that under Socialism alone we shall never have sufficient production, and that he is frightened that, with American capitalism that free enterprise inside our economy, the Americans will produce a great deal so that there will be over-production? If this is so, then he will have to deal with that problem which plagued so many administrations in the past. I am highly delighted that it should be on record that these words should have fallen from the lips of a Socialist Chancellor, that this is one of the things which we have to face in the future. Socialism creaks along in an era of restriction. It will be interesting to see how it works in an era of competitive surpluses.

It is, I believe, vital that there should, be an early effort to get an overall agreement. It seems to me the Government intend to give development rights to American firms in certain areas in our oversea territories, while at the present moment to my knowledge, certain British firms are being deprived of existing land and rights. That does not seem a very good thing to do. I shall watch that. I make no secret of the fact that I have an interest in this. If I had not, I should not know that these things were going on. It is only by being involved in day to day management that one finds out what this Administration is up to behind the scenes.

Finally, I would utter a word of warning on the text of the "Note on the most-favoured-nation treatment of Western Germany." It has been said that if Germany had not made "war with weapons" on us but had waited till 1917 or 1943, she would have had us beaten economically. I think some of us involved, as I am myself, in commerce with Western Germany would warn the Government that if we open our gates to a flood of German produced goods, there may be a very deleterious long-term effect on the trade and industry of this country as time goes on.

There is more than sufficient to be done by every productive machine in this country and in Western Europe in the next 10 or 20 years to repair the devastation caused by the war and to undertake overseas developments; but that work must be done in a practical manner, otherwise instead of working with German industry in a complementary manner, as I believe we can and should, we shall find ourselves struggling with German industry in a form of cut-throat competition and destructive struggle, the blame for which will be chargeable to this Government.

9.40 p.m.

Mr. H. D. Hughes (Wolverhampton, West)

The right hon. Member for Aldershot (Mr. Lyttelton) started the Debate by saying he felt humiliated. Having heard the contributions from his hon. Friends of the Conservative Party, I hope he feels more humiliated. The Tories are in the same despicable and divided state as they were when we debated the American Loan. One half are following the "Daily Express—Daily Worker Axis" in opposing the policy outright, and the other half, for various curious reasons, such as that they want more petrol, or more American tourists in their hotels, are unwilling to support the Government's Motion and yet not willing to vote against it. The only thing upon which His Majesty's Opposition have been united so far this evening is in the endeavour to carry on a smear campaign and to try to prove that the fact that this country has a dollar deficiency is due to the present Government. Can any hon. Member opposite put his hand on his heart and say that if we had had a Conservative Government in this country during the last three years, we should not now be facing a dollar deficiency? They know perfectly well that the situation would have been no better.

The other attempt which hon. Members opposite have been making is to show that the Americans have no faith in the present Government of this country, and that if the right hon. Member for Woodford (Mr. Churchill) had been Prime Minister we should have got very much better terms. I ask them to look at the American evidence on this point and the evidence of the American commercial counsellor in London who, when speaking before the Senate on American aid, said that Great Britain had made an outstanding effort in increasing production. I ask them to look at the evidence on the United Kingdom presented in the general E.R.P. reports on the 16 nations to America. The independent American technical experts said: The reconversion of British economy after July, 1945, was smooth and rapid. The post-war record of industrial relations in Great Britain has been very good. The United Kingdom plans for the period covered by the Recovery Programme contemplate a steady progress towards a balance in international payments. These are the independent testimonies of American experts to the American Government on which the decision to grant Marshall Aid to this country has been based. If hon. Members opposite will be honest with themselves they will drop this smear campaign and recognise that in the face of tremendous difficulties since the end of the war this country has made a magnificent production effort, that our production today is higher than it was in 1938—

Major Beamish

What about coal?

Mr. Hughes

Our general production is higher than it was in 1938. Our volume of exports today is far higher than it was in 1938. The Government and people of this country accepted a high degree of abstention at a time when the Tory Party opposite were sneering at the Government for its austerity campaign and pleading for more luxury goods, an increased petrol ration and things of that kind which, if they had been carried out, would have made our economic international position far worse than it is today. It is time that they dropped this hypocrisy and faced the economic fact that this country had a dollar deficit in 1938 before the war, and that the war inevitably made it far worse.

May I come to the immediate terms of the Agreement? I believe that the Agreement shows enlightened self-interest on the part of the Americans in granting, and on the part of this country in accepting, it. It is in the interests of America, as it is in the interest of this nation and Western Europe, that we should co-operate to get Western Europe and this country, as the Agreement says, in a position where they can become independent of extraordinary outside economic assistance within the period of the Agreement. There are no illusions on this side of the House that that will be an easy task. As an article in this week's "Economist" points out, it is a matter of considerable doubt whether the European nations will be able to balance their dollar accounts by 1952. But it gives a chance at least to this country to strike a balance. It gives us a chance, if trade is able to recover, if, above all, it is possible to get reasonable price levels established in the dollar area as well as in the sterling area, if it is possible to get some healthy restoration of trade between the East and West of Europe, and further, if this Marshall Aid Agreement is not so implemented that the Americans drain too deeply the resources of the receiving countries.

The hon. Member for Finsbury (Mr. Platts-Mills) made one point with which I agree. It is right that someone who is in favour of this Agreement should make this point. Marshall Aid will fail unless the rising prices in America as well as in the offshore countries can be brought under control. The general level of prices in America today is 15 per cent. higher that it was a year ago and the index of the prices of industrial goods has risen over 145 per cent. since 1939. At the present time a new increase in the price of American steel is taken for granted and it is anticipated by the Federal Bureau of Labour Statistics that there will be a steady rise in food prices between now and November in America. If that kind of thing goes on, it will make nonsense of the dollar figures of Marshall Aid. In fact since July last year there has been a cut in the value of Marshall Aid, owing to rising prices in America, equivalent to the cut Congress made in the total allocation. If that goes on the value of Marshall Aid will diminish very seriously. It is a weakness of that Agreement that although in Article I (3) it provides that offshore purchases will be effected "at reasonable prices and on reasonable terms," there is no similar provision for the goods which are to be supplied from America.

The second point on which I feel considerable reservations is Article V. It provides for a schedule of minimum availabilities of materials, originating in the United Kingdom, required by the United States, either in absolute quantities or in percentages of production. It provides equal right of access for American and British nationals, and provides that we shall draw up a schedule of increased production where practicable in the United Kingdom and that an agreed percentage of this shall be transferred to America on a long-term basis. This article has to go on for two years even if the general agreement is terminated before it has run its full course. It is true that this is all to be done after all due regard to the reasonable requirements of the United Kingdom for domestic use and commercial exports, including stocks and barter.

It may be that there are considerable advantages to the Colonial territories in this Article. It is quite clear that at the present time we are failing to carry out our development and welfare plans and the economic development of the colonial territories because of our desperate shortage of capital goods and skilled technicians. It may be that supplies of capital goods and technicians from America, from dollar sources, will be a valuable help in that respect. Under the Loan Agreement it will be possible to get finance for colonial development at cheaper rates than would have been possible through the International Bank for Reconstruction. I understand that some of the blocked sterling accounts may also be available for colonial development. It will probably tend to strengthen and maintain the prices for colonial raw materials, and so benefit the colonial revenues and producers.

That is the credit side of the case, but there are also serious dangers, and I would like to ask the President of the Board of Trade a few questions to which I hope he will reply at the end of the Debate. We have set out on a colonial policy by which we want to develop our colonial territories towards economic as well as political independence. If we are to carry that out, it is important that there should be an increase of capital development from within the Colonies themselves rather than by extra-territorial firms. It is important that there should be an increase in the amount of production in the Colonies from inside and not from outside exploitation. It is important that we should get an increasing percentage of colonial technicians and managers as opposed to foreign technicians and managers. I do not want to see those important aspects of Colonial policy weakened by anything which happens under this Agreement.

Therefore, I ask, are there any indications so far as to what materials are involved under Article V, and what quantities or percentages are likely to be considered as equitable or fair within the terms of the Agreement? I also want to ask what consultations have taken place with the colonial Governments on the effect this Agreement will have on their trade and on their economy; how much increased production will be demanded, and what will be the effects on the recurrent costs which have to be borne by the revenue of those territories; what safeguard will there be to see that there is not an undue drain on the scarce raw materials which are to be extracted? I think it was the right hon. Member for Aldershot who said that he believed in profits being made in colonial territories and being taken out of those territories. I want to see an increasing proportion of the profits made under colonial development put back into the Colonies and not taken out of them. I fear the political repercussions that may be involved if large numbers of American technicians, with different views from our own people on the colour question, flood, for example, into West Africa.

These are some of the difficulties that I foresee. Another point on which I would like assurance is that there will be rather greater safeguards for the colonial economies in the event of America at some future date wanting to unload or liquidate her stock piles than are provided for in the Havana Agreement. As I read it, Article 32 of the Havana Agreement simply says there will be four months' notice if such unloading should take place. That would not be much consolation to a colonial Government, which has vastly developed its economy and which needs some safeguard on prices for the future. I saw in the "New York Herald Tribune" that the French had asked for, and secured, some modification of Article V. I have not been able to get a copy of the French Agreement, but I would like to know if, in fact, any modification has been secured by the French, and if so, whether it would apply to this country as well.

We on this side of the House enter into this Agreement with no illusions. We realise that we are undertaking serious responsibilities; that, as the Chancellor of the Exchequer has pointed out, under the Marshall Plan there will be less dollars available for expenditure by this country in the years ahead than there were in the years which lie behind; and that we can only make a success of this agreement if we carry on our productive effort on the lines which this Government has initiated with such success during the last few years.

Debate adjourned.—[Mr. Snow.]

Debate to be resumed Tomorrow.