HC Deb 13 December 1949 vol 470 cc2621-32

8.35 p.m.

Mr. Stokes (Ipswich)

It is of the nature of things that in an Adjournment Debate of this kind we travel the world somewhat. I wish to take the House away from Japan right across the Atlantic and to discuss, not at some length but in some detail, the whole problem of trade with the dollar countries, particularly with Canada. I may say to my Canadian friends that I do this with some delight as an old friend of Canada. I fought with the Canadian Corps of 1916 and 1917 and was at Vimy with them. Now I am pleased to know that as a result of the efforts which some of us are making here, Canada is willing to bat with us to promote and stimulate trade from this country to Canada with the aim of keeping our balance of payments in order.

I do not think I shall be out of Order, and I am sure that the House will welcome it, if I make some reference to our general export effort with which my hon. Friend the Secretary for Overseas Trade has been so intimately connected. I suggest that the tremendous achievement of our export trade since the termination of hostilities is not sufficiently appreciated either in this country or in the world as a whole.

In 1948 we had in fact an overall balance of trade. I agree that we were out of balance in respect of the dollar countries, but having virtually abandoned our export trade during the war on account of conditions attaching to Lend-Lease and for the purpose of bringing the war to a satisfactory conclusion. I suggest that it is a matter for tremendous congratulation to everyone concerned in the export trade of the country that we achieved an overall balance in 1948, more especially when it is considered that, as a result of the year in which we stood alone, we sold up our overseas investments to an amount which corresponded to about the value of £150 million a year of free imports, in terms of pre-war monetary values. That meant in fact that in 1948 we had to export to the value of £300 million in order to balance that, on top of which we had in 1948 also to deal with at least £200 million of unrequited exports.

Those two items add up to £500 million, which means that we had to achieve exports of £500 milion before we started to pay for anything which we paid for by goods before the outbreak of war. When it is considered that our total exports prior to 1949 were £470 million a year, I submit that it is a tremendous achievement on the part of everyone concerned that we achieved an overall balance in 1948. Now, on top of that, we have a situation arising out of devaluation which means that in order to compensate for the depreciated value of the £ we have to export about £48 million a year of goods more to the dollar countries before we start paying for any goods which we imported from those countries prior to devaluation.

I am raising this point particularly tonight because I wish to emphasise the importance of trade with Canada. Without casting any severe criticism on the comments that have been made in the Press and elsewhere and in public speeches by responsible people about the possibility of closing the gap in trade with the United States, I suggest that it is most unlikely that we shall make any substantial inroad into the dollar gap by increasing trade with the United States. Our trade with the U.S. amounted to about £52 milion in 1948. If we double that we shall have done very well, but when we have doubled it about half of that increase will be accounted for in compensation for devaluation.

I wish to make one or two general observations. It seems to me that there is a fundamental difficulty of which sufficient note is not taken. It is that the United States has a population of about 140 million and produces food for over 300 million, whereas we in this country have a population of 50 million and produce food for about 30 million. Somehow the whole price system has got out of gear, and it is to this point that I particularly wish to draw the attention of my hon. Friend. In 1938–39 we used to pay 4s. a bushel for wheat imported from across the Atlantic. Today the price of wheat is about 2.25 dollars a bushel from U.S. We are paying in effect about 16s. a bushel and we are constantly being told to get our prices down. The cost of production depends very much on the cost of labour all through the productive machine, and if the price of the food which goes into the bellies of the people who do the work increases by four times, it is extremely unlikely that we shall get prices down. The fact is that we are at the present moment suffering from what might be called American inflation—and that is all there is to it.

I wish the Board of Trade would do something—which the Chancellor of the Exchequer will not do—in the case of our best dollar producer, which is whisky. I do not believe that people realise that America pays only about 10 per cent. more for the whisky she imports from this country than she did before the war. She pays only twice as much for capital goods if she ever wishes to buy any—which she does not. J suggest for my hon. Friends' information that it would be a good thing if we doubled the price of whisky, even if the sales fell by half, because we should get just as many dollars and we should have more whisky for ourselves. That would please everybody, except my hon. Friend the Member for Ealing, West, (Mr. J. Hudson), who does not take that same point of view. I do not believe our whisky sales in. America would fall; they are only 2 per cent. of the whole whisky consumption in America. I believe that is a bit of nonsense to argue that sales will fall off. I should like to find out what the facts are between the distillers of this country and the distributive trade in America which are keeping the price down. I believe they find it more profitable to make profits over there than over here.

That is only one side of it. There is, of course, the gold issue, on which I am not going to speak tonight, because I made a speech about it a fortnight ago. I will emphasise to my hon. Friend, as I endeavoured to do to the Economic Secretary—and incidentally got him so cornered that he had no reply—that it is fantastic that we are tied to gold through Bretton Woods with the dollar at a fixed price. While we have to pay four times as much for wheat from America, America pays only 70 per cent. more for the gold which she takes from the British Commonwealth. If we are to have a fixed currency, for heaven's sake let it be a proper one and not one fixed on the fictitious price of gold.

Now I come to the main point of my discussion tonight and that is our trade with Canada. I do not propose to castigate the Canadians that, per head of population, they buy about 11 times as much dollar goods as we do in this country per head of population. That is a mathematical fact which anybody can work out. Canada is next door to the United States, and it is only natural and economic that they should buy most of their manufactured goods in that direc- tion. On the other hand, the fact is that Canada depends for her prosperity largely on her farmers and the food which she produces and sells to us. We have this astonishing position, that whereas in 1948 Canada purchased 1,806 million dollars worth of goods from the United States, she sent only 1,500 million dollars worth of goods to the United States, and there was an out-of-balance of 306 million dollars which had to be made good, presumably out of the sterling-dollar pool.

That is only a bit of it. If we look at it the other way, we are the best consumer of Canada's crops. The Canadians do not sell wheat to America. In 1948 Canada sold to us £217 million worth of goods and we sent to Canada in exchange only £76 million, and there was an out-of-balance of about £141 million which, at the ruling price of the dollar, was 560 million dollars. I have been at some pains to look into this matter of trade with Canada and really to find out what are the possibilities. I urge my hon. Friend, if he needs any urging—and he has had a bit from me from behind the scenes—not to be misled into believing that we shall close the dollar gap by any other means than by intensified trade with Canada.

When I say that, I mean an intensified trade in two particular classes of goods, namely, coal and capital goods—iron and steel products. Anybody who takes the trouble to check the statistics which have been produced, both by our Government and the Canadian Government, can prove these figures for himself. We can ignore the rest of the trade. We may do a bit of tiddling about with a few motor cars and the rest of it, for just so long as the Americans allow us to do it and for no longer, because the Americans will make smaller cars just when it suits them and the export of motor cars will then go phut. The two trades in which we can make a substantial step forward towards closing the dollar gap are in shipping coal to Canada and and in iron and steel products.

In 1948 Canada bought from the United States 6 million tons of coal at an average price of 32 dollars a ton. At the same time she purchased from us only something of the order of 50,000 tons as compared with her average pre-war amount of 1 million tons a year. I do not know anything about coalmining, but quite clearly here is an opportunity. We know that freights across the Atlantic are cheaper than freights from north to south of the American continent by rail, and there is no reason why, if we can get the coal, we should not ship at least 3 million tons of coal to Canada, which would close the gap by approximately 100 million dollars. But coalmining is not my trade, and I do not want to spend the time of the House in discussing how it might be done.

My trade is the heavy engineering industry, or iron and steel production as we may call it. It will be found that in 1948 the totals purchased by Canada from the United States and ourselves were in the order of £196 million. I think the House will be astonished to learn that of that £196 million only £13 million came from this country. In other words, Canada purchased from the United States £183 million worth of iron and steel products—including raw materials, I grant that, but probably the manufactured capital goods were £100 million to £120 million—and she purchased only £13 million from us. Here is a tremendous market. How exactly it is to be entered by this country is another matter, and a point which I do not propose to discuss now.

I wish to emphasise that Canada is what we might call, for want of a better term, "on the up and up." Canada has a vast development programme. I worked out today, when discussing the matter with somebody in the office of the Canadian High Commissioner, that in the next few years Canada proposes to spend not less than £7,600 million on capital expenditure. In 1949—the year just ending—they have already estimated to spend 800 million dollars. Having done that, in the first seven months of this year they have a budget surplus of 337 million dollars. They are in a marvellous position and if we are to balance our trade at all we must continue to help Canada to become more and more prosperous.

This analysis shows what I have stated—that the two great possible inroads which will really make a substantial contribution to closing the dollar gap are the export of coal and the export of capital goods. It is very difficult to calculate just what that increase in the export of capital goods means in the way of increased production in this country. Anyone who studies the figures will find that it is very difficult, but I put it at a rough estimate—and my guess is probably - just as bad as anybody else's—that if we are to close this gap by selling, say, another £100 million of capital goods to Canada, then it means increasing our output of capital goods in this country by something of the order of 20 per cent.—something of that order in the machinery trade.

It is a big job. Again, I will not divert my hon. Friend from the subject matter on which he is going to reply to discuss ways and means of how that should be done. What I particularly appeal to him to do is to impress upon those companies and concerns which are capable of making this contribution that now is the time to take action. It is hopeless to diddle-daddle about and, because we are full of orders which we have got as a result of a big demand, apparently arising out of the release of sterling balances, merely to say that this Canadian trade must stand by until such time as we have worked off our backlog. That just will not do.

I should like to hear the Government, or if not the Government then some responsible body in the trade, declare to the manufacturers of heavy machinery and capital goods, that they should, regardless of what their obligations may be to their customers, set aside at least five, if not ten per cent. of their production in 1950 for shipment across the water to Canada. The Canadians are willing to play. The Canadian Government have taken steps which will ensure a fair measure of opportunity to British manufacturers and, of course, we all know that as a result of devaluation there is a tremendous price advantage to the Canadians which gives us a very big pull.

There are one or two other matters which I hope the hon. Gentleman will emphasise. First, delivery must be prompt. Secondly, when we do get there we must bear in mind that both the Canadian distributor and the Canadian consumer have been utterly spoiled by American efficiency—much more so than anybody realises. We must ensure that proper service is provided from the word "go" and that full and adequate spare parts are available for all the machinery which is transported across the Atlantic. I know that arrangements have been made for facilities through the Export Credits Guarantees Department so that this can be financed and both machinery and stock can be ready for quick sale. Facilities have also been arranged for spare parts on the same footing.

It is necessary, of course, to emphasise that the period that matters in Canada is immediately after the freeze breaks down, namely, about the end of March. It is urgent that steps should be taken now by manufacturers so that the goods are there when the break takes place. Before I close I wish to emphasise to my hon. Friend that he will be doing this country a very good turn if he will bring the point home quite specifically to the manufacturers of heavy machinery that here is a really great opportunity. As I said earlier, the Canadians are willing to play. The price situation is favourable and the prospects in the country are tremendous. The duty of the manufacturers to the whole country is to see that this opportunity is not lost. It is their duty to see that a really serious contribution of not less, in my opinion, than £100 million a year—or 300 million in Canadian dollars—from the heavy industries alone is made towards the closing of the dollar gap.

8.55 p.m.

The Secretary for Overseas Trade (Mr. Bottomley)

The subject of trade with the dollar countries—and particularly with Canada—cannot be ventilated too often. It is a matter of vital importance in order that this country of ours can again recover its position in world trade. I am quite sure that my hon. Friend would not wish me to reiterate a good deal of what has already been said in the Press and in the Debate, by my right hon. and learned Friend the Chancellor of the Exchequer or my right hon. Friend the President of the Board of Trade, so I will endeavour to reply to the points which my hon. Friend made and hope that that will suffice.

It is true that, in 1948, we had an overall balance of trade, but we did not have as much trade with the dollar countries as was necessary to enable us to get economic viability. It is comforting to know that, until October -of this year, our average export above the 1938 figure was 49 per cent., as compared with 34 per cent. for the similar period in 1948. My hon. Friend made reference, quite rightly I think, to the suggestion that, if the prices of food and raw materials are going to be kept high, it will be very difficult for us, as consumers of those goods, to be able to reflect in our production cheaper capital goods or cheaper manufacturing goods which other countries require. But, having said that, one has to take note of the fact that the laws of supply and demand inevitably operate. Because of the devastation caused by the war, there are shortages of foodstuffs and raw materials, and the demand is so great that it is inevitable that prices will remain high. But with better harvests, with the recovery in the Far East, in Europe and elsewhere from the ravages of war, it is to be hoped that the prices of both food and raw materials will show a drop from what is, I agree, a very high price.

I am quite sure that my hon. Friend did not intend to say that, in the case of the Canadians, they were after the highest possible prices. It is only fair to say that, in the case of wheat, they have quoted us at below the world prices.

Mr. Stokes

I was talking about United States wheat.

Mr. Bottomley

My hon. Friend also went on to show why we should get the maximum possible prices for some of the goods, in particular whisky. Knowing who are the main producers of that commodity, I should have thought that Scotsmen would have been keen to get the highest possible price and would not need encouraging to do so, but it is not a Government matter or one in which we can in any way interfere. I am quite sure that the trade as a whole does what it can to obtain that, while retaining the maximum goodwill. No doubt they will take note of the point which my hon. Friend has made, but, so far as the Government are concerned, there is nothing we can do. I have no doubt that the people concerned will look after their business in the best way they can with a view to getting the best possible prices for their goods.

I am sure that my hon. Friend does not expect me to fall into the trap which he apparently laid for another of my colleagues. I am not half as competent to deal with the subject, and I shall therefore pass on to the other item which was much more the concern of my Department. That is the export of a number of goods, and particularly coal and capital goods, to Canada. In the case of Canada, we are exporting all the coal that we can, but they want a specialised type of coal. They want anthracite from South Wales. I think the figure is something like 70 per cent. of our availability of the type they need, which is exported to Canada. In the case of other coal, the extent to which we can supply them depends on the needs of home industry for the production of goods that Canada must have and our obligations to other countries with whom we have connections, but we shall be prepared to consider any opportunity that will enable us to earn more dollars.

Mr. Stokes

Can my hon. Friend tell us the tonnage of coal?

Mr. Bottomley

I really could not give an answer offhand, but I shall see that my hon. Friend receives one.

With regard to capital goods, that is another point which is emphasised time and again. We want to send as many as we can to Canada, and I like the suggestion that manufacturers should set themselves a target. I hesitate to suggest that it should be made public, because we have had some experience of setting a target for the cotton industry, and, in that case, we found that, when it was known that a particular quantity was coming, they said "We know that that amount is coming; we can more or less choose our prices." I think, as my hon. Friend agrees, that that is a thing we have to watch. But it is a useful suggestion, and I hope that ideas of this kind will be circulated among men actively engaged in the industry. I know from my hon. Friend's association: with our Department that his undertaking is really doing a good job. If all would follow that standard we might get that, percentage without any suggestion from a ministerial authority.

I do not want to deal with the Export Credit Guarantees Department. I think industry is aware of all that has been done, but I would re-emphasise what has been said already, that it is necessary that there should be a prompt delivery of our goods. I ought to say that we have the fullest co-operation of our friends in Canada and in the United States. May I quote a word or two uttered by the Canadian Prime Minister? He said: It is very strongly in our national interest to encourage imports of British goods into. Canada. I could also quote from what was said by the Finance Minister who uttered similar sentiments. May I conclude by saying that in the case of the United States, the Secretary of State, Mr. Acheson, has also indicated in similar words how necessary it is that the United States should import goods from this country. If trade is to flow and the world is to be free from these constant economic troubles it is necessary for those two countries to import our goods as it is necessary for us to import theirs in order to live.

Mr. Stokes

I should like to ask my hon. Friend one question on a point with which he did not deal. Will he cause some instructions to be given that notices which go out to the Press are not so misleading? I think he will agree with me that on reading the Press for the past few days, one gets the impression that we made an inroad into the dollar gap in November. Actually, we earned one million dollars less in exports to the United States and Canada in November this year compared with the same period last year. In other words, the total was 44 million last year and 43 million this year. That sort of thing does us no good. Will my hon. Friend see that his Department puts over the propaganda in such a way that people realise that what we want is double that figure a month?

Mr. Bottomley

I think that the figures we have given show that, if read carefully.

Adjourned accordingly at Three Minutes past Nine o'Clock.