HC Deb 02 March 1949 vol 462 cc482-504

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

9.31 p.m.

Mr. Erroll (Altrincham and Sale)

I wish to raise a very much wider subject than the one we have just been discussing, namely, the question of the re-emergence in international trade of German and Japanese competition. I take it that the Government's policy in this regard has been settled in certain broad respects. There are really two alternatives. One is to permit the ex-enemy countries of Germany and Japan to achieve a self-supporting economy, and the other policy would be to try to keep them down and to subsidise them at the taxpayers' expense. Obviously, the Government have decided on the former policy of permitting the ex-enemy countries to become self-supporting.

However, what I want to know is whether the Government have really faced the implications of that policy. We must envisage, if German and Japanese exports get going in a big way, a loss of hard currency earnings which may in a year or two's time be quite serious, and also a loss of other export markets which may adversely affect the Government's plans under E.R.P. and other forward planning of that character. Have the Government taken into account, in formulating their plans under E.R.P., the growth of German and Japanese competition, with all that that implies? I think the Government are taking an altogether too complacent attitude in this most important matter. The Chancellor of the Exchequer is reported as having said a fortnight ago to some visiting Germans that he was not alarmed by the reappearance of German competition. He certainly should be alarmed, though he need not be panic-stricken. There is plenty of cause for sober alarm at the trend of events. [An HON. MEMBER: "Free enterprise."] Of course, the enterprising nature of the ex-enemy countries will enforce a very much greater degree of enterprise in this country. We shall see in international trade a re-emergence of competitive conditions which may not altogether be to the liking of large numbers of people in this country.

I do not need to waste the time of the House in outlining the ways in which ex-enemy competition is reappearing. The Government have full details already. Deputations have already been to various Ministers, including the President of the Board of Trade, to outline what is taking place and the President has invited other deputations to come. The suggestion is being put forward that traders and industrialists are squealing before they are hurt, and that there is no need for their cries of anguish. That is less than fair because at the same time British businessmen have been accused by hon. Members opposite of lack of foresight and of just living for the day. Therefore, when they do look ahead and point to a new development in international trade which may have quite serious consequences for this country, do not accuse them of squealing before they are hurt; they are exercising reasonable foresight and showing a justifiable regard for developments which are taking place.

It is quite clear from authoritative reports in American newspapers that German exports are contemplated on a vastly increased scale. Figures have not been published authoritatively in this country, but in many earlier examples we have found that American newspapers have very accurately interpreted what will shortly be an official report. American newspapers are saying that German exports are to be planned to reach a level in 1952–53 of between 130 and 160 per cent. by volume of the pre-war level. That represents a tremendous increase on Germany's pre-war competitive power. In another American periodical it was stated that in 1953 German exports would be valued at something of the order of 3,000 million dollars, another very significant figure.

German goods are appearing in many fields. The German motor car. the Voölkswagen, is being sold in America in competition with our own cars. German scientific instruments are being manufactured in large numbers and represent a very real threat to our own scientific instruments industry which is of such vital importance in war-time and which certainly must be protected as one of our strategic assets. In machinery, shipbuilding, and—although one thinks of this primarily in connection with Japan—in cotton textiles Germany is emerging as a considerable competitor. I understand that in Brussels German textiles are available for purchase to be sold in the Belgian Congo as an alternative to British, cotton goods. Germany's textile production may well be a threat to some of Lancashire's activities.

The Government may answer—as indeed they have answered Questions—that with the reduced currency rate of 30 cents to the Deutschemark there is no longer any real threat, but that is no answer at all because already German traders are pressing for a decrease in that rate, which they claim is too high. It will be interesting to see whether the Minister is able to deny that they will be given that reduction in the near future. We have also to remember that at present Germany is producing only at about half capacity, and when she gets fully under way her costs will be far lower than they are at present, whereas British costs are constantly rising and we cannot expect much in the way of economies, as we are at present more or less on full production. I need hardly remind the House that during 1948 over 6,700,000 people received wage increases despite the formal stop on wage increases introduced by the Government a year ago.

Our costs are continually rising in regard to wages and, of course, in regard to new plant and buildings, whereas German costs are not so rising and, indeed, German industry has many advantages which are at present denied to British industry. One is that in many cases their assets have been completely written off and they have no encumbrances of that kind, and as a result of bombing many factories are being completely reorganised and re-equipped with new plant. They are not encumbered with old plant or old buildings, and so they can get away with a very good start as their production campaign gathers momentum.

Turning to Japan, our other great industrial competitor, we see there an economy somewhat similar to our own.

Mr. John Hynd (Sheffield, Attercliffe)

I noticed the hon. Member referred to shipbuilding as one of the competitive factors and I assumed he had in mind Japan, but now he is turning to Japan. Did he really mean that German shipbuilding is a competitive factor at the moment?

Mr. Erroll

I am grateful to the hon. Gentleman for raising that point. I meant Germany, and I am going to refer to shipbuilding again in the case of Japan. It is at the moment a cloud no bigger than a man's hand, but the Germans are in fact quoting prices to Scandinavia for ships. While they may be turned down and not allowed to build ships, the fact that they are allowed to quote, and to quote low rates, is a matter of consideraable significance to the shipbuilding industry of this country. I cannot think that they will for ever be denied the right to build any ships of their own. Although I do not wish to appear as an alarmist, I want to indicate the trend that is taking place.

In Japan we see an economy similar to our own, a large industrious and industrial population depending upon its industrial exports for the import of food and raw materials. We find that in Japan they are competing with us on a growing scale and in a number of ways. Cycles, watches and clocks, textiles, of course—but do not think it is confined to textiles—ceramics, pottery, shipbuilding and ship repairing. I have given these examples of where Japanese competition is reappearing. Only on Monday there was an announcement from General MacArthur's headquarters that he was permitting the Japanese to send a trade mission to South America, one of those hard currency areas which we are very anxious to hold.

It may be said that in the case of Japan the Americans will agree with us to ensure that Japanese prices are about the same as those prevailing in the rest of the world. I cannot believe that that situation is likely to arise. I feel sure, whatever agreement is reached, that General MacArthur will always ensure that Japanese prices are a little bit below our own, so that Japan will always continue to sell her goods in preference to ours. The Americans are determined that Japan shall sell her goods and sell them successfully, so I do not think that we can look with confidence to any assurance, however well-intentioned, that Japanese prices will be kept up to the level of our own.

Lancashire views Japanese textile competition very seriously, although Lancashire is well able to sell all that she produces. Lancashire hopes that Japanese competition will not be concentrated on the textile industry. She hopes that Japan will be allowed to spread her activities and to enter such fields as shipbuilding and ship repairing. While that is a very understandable point of view, it does not help the United Kingdom economy as a whole, because it merely means that we are, if I may use the phrase, exporting potential unemployment from Lancashire to Jarrow and the shipbuilding areas. We are not alleviating the economic position taking it overall. Nevertheless, it obviously would be a step in the right direction if Japanese competition was spread over a number of industries and not concentrated on Lancashire and her textile industry.

I have tried to give briefly the trend of events as I see them at the moment. I think we should look at the likely trend of events in the future. We are witnessing the creation of a vast German export capacity. Having sunk so much time, material and effort into the creation of this capacity, is it likely that the Germans will be slow to make use of it? There will be a tremendous pressure of ex-enemy manufactured exports to secure the raw materials which they require.

The situation is very serious because although the world population is growing, world food production is declining. We shall see among industrial countries—in other words former enemy countries and ourselves—an increasingly severe competition for the declining food production. We shall see the foods that are available forced up in price and the general level of prices of manufactured goods forced down and down by the competitive struggle between the countries. Not today, not next year, but over a period of, say, five years, I think that we can quite well expect to see something of that sort happen. It should be remembered that because a number of ex-enemy industries are not permitted, there will be all the more intense competition in those industries which are allowed to start again. I want to know—I hope that we shall be given a good answer by the Government tonight—what the Government are doing about this problem. I do not want to be told that they are not alarmed. I do not want to hear merely that they are prepared to receive deputations. I want something much more definite and positive than that.

I wish to continue on a constructive note and to make a few suggestions of a general character. This problem is far too serious to be disposed of in any mere party spirit. First, the Government have stressed repeatedly that competition should be fair. That is a good start. Let us be fair to our own businessmen first. Let us make sure, if there is to be a competitive fight, that British businessmen do not go into the struggle with their hands tied behind their backs. Let us make a start with a real bonfire of industrial controls. Let us really make an effort to get rid of the industrial controls—[Interruplion.] I stress the word "industrial." Many are well known to be unnecessary. Let us get rid of them. Let us create an atmosphere of freedom and enterprise—

Mr. Elwyn Jones (Plaistow)

Can the hon. Gentleman suggest any single industrial control which he considers to be unnecessary?

Mr. Erroll

I will if I get another Adjournment.

Mr. Elwyn Jones

I am sure that the Chair would allow it now.

Mr. Erroll

I will not give one just now. There are hon. Members opposite who wish to speak. In any case, I do not wish to anticipate the very satisfactory answer which I hope the Minister will give on 17th March when I have a Question on that very subject. Let us take one thing at a time. [Interruption.] If the hon. Member really wants an example, let us get rid of the Raw Cotton Commission and have free buying and selling. That would do more to help Lancashire's textile industry than anything else.

Mr. Deputy-Speaker (Mr. Bowles)

That would require legislation to repeal an Act of Parliament and, therefore, the hon. Gentleman is out of Order.

Mr. Erroll

I apologise for thus straying into the morass towards which hon. Gentlemen opposite were trying to drag me.

Second, we require speedy allocations of foreign exchange to enable a businessman to get abroad quickly to grasp at a fleeting export opportunity. That is the type of practical detail to which I hope the Government will give increasing attention.

Mr. Elwyn Jones


Mr. Erroll

No, I cannot give way. The hon. Member can make a contribution later. My third point is that manufacturers should be given a real opportunity to modernise their plant without having to do it almost entirely out of taxed profits as at present. There must be a much more generous policy towards the use of untaxed profits for plant modernisation and the re-equipment of factories on modern lines.

Fourth, we in England must know what Germany and Japan are doing. We must be given full information about the Government's plans. It is not enough for us to go jogging along hoping that all is well. It is essential that we should know what is going on and what the Government are doing if we in Britain are to be able to meet this competition effectively. Fifth, there should be an immediate inquiry into the whole question of the present competition from Germany to see if it really is fair. There is a good deal of evidence of the subsidisation of German wage rates to a certain extent out of the British taxpayers' money and out of the United States taxpayers' money. We should inquire into the amounts of these subsidies to see whether the exchange rate is really correct in order to make sure that the competition is completely fair.

Another point I want to make is about our own workpeople. The Government may know about this challenge to our industrial economy, but what is the view of the trade unions? Have they been consulted and are they behind the Government in its present attitude? I very much hope so, and that all is satisfactory, but I should like to have an assurance on that particular matter. Have the Government really thought out the implications of their own policy in this matter? Are the trade unions going to play their part in reducing working costs, and are they prepared to contemplate certain areas of possible local unemployment resulting from the Government's policy in regard to competition from ex-enemy countries? Are the unions prepared to accept that as part of the price of getting our ex-enemies on their feet again, because the competition is going to be strong, and may well result in orders for certain important commodities not coming to Britain at all—[Interruption.] If hon. Gentlemen opposite think this is a laughing matter, I certainly do not agree with them.

Next, I would draw attention to the extent to which the British Government can use their influence in this matter. After all, this competition has to be met. We cannot just go down under it; we have to sheet it and be very practical about it. I know that America really decides in Germany and also in Japan, but there is no reason why we should not use our influence to the full. It may well be that America is thinking that it would perhaps do Britain no harm to have a bit of a tough struggle in the export markets. If that is America's view, let us know the worst and prepare for the tough struggle. Let us, at least, know what the Americans' views are on this matter.

I believe that the Government can influence policy in two very important regards, though in a third I do not think the answer is at all even. How are we to meet the challenge of countries such as Germany and Japan, which are prepared to work harder and for longer hours than we are in order to get food and raw materials? In the last resort, it comes down to that, and is simply a question of who is prepared to work hardest, longest and best. The Minister shakes his head, but I should be glad to hear his reply later on.

Mr. A. Edward Davies (Burslem)

Is no account to be taken of the type of stuff we are selling, the craftsmanship and the methods of production, apart from the hours of work?

Mr. Erroll

I sincerely hope that regard will be paid to those matters, but it is the overseas customer who will do the regarding, not ourselves. Why do Germany and Japan require such a high level of exports? Of course, it is to meet a very high level of imports. Surely, the British Government can influence the policy pursued in Germany and Japan by insisting on much greater agrarian activity?

The Parliamentary Secretary to the Board of Trade (Mr. John Edwards)

The hon. Gentleman talks about a very high level of imports. I wish he would say what he means by that, because it seems to me to be a rather sweeping assertion about the present standard of living in Japan.

Mr. Erroll

It is consequential on a very high level of exports. For what are the exports going to pay, except imports?

Mr. Edwards

Surely, it all depends on whether the country concerned depends to a very large extent for raw materials and food from outside its own territory or not? If it does, it will have to bring in a good deal.

Mr. Erroll

Surely, that is exactly the case with both Germany and Japan? Germany has lost its Eastern bread basket and will export from its industrial West in order to import food. Japan, having lost her Imperial possessions on the mainland of Asia, is now unable to produce enough food, but could produce very much more if the emphasis were on home food production and not purely on the export of manufactured goods. I suggest that the Government could influence policy very considerably in that regard, and that that is one of the ways in which we might be able to reduce the threat.

This is, of course, not a full answer, but everything helps in solving a great and intractable problem of this character. Indeed, a policy of reasonable emigration might help, particularly in the case of Germany. I do not know to what extent that has been considered and worked out, but why not let some part of the German population go to other countries, not to produce more manufactured goods, but more food? If that were done, it would be a double alleviation; it would reduce the amount of exports from the German homeland for the purpose of bringing food into Germany, and the men who left Germany would themselves be helping to grow more food and thus alleviate the only too well-known world food shortage.

A similar development might possibly take place in the case of Japan. The Japanese could well go back to their old territories instead of invading markets traditionally belonging to the West. If they grew more food in Korea and Manchuria, and traded a bit more with those territories, the immense pressure which they are going to build up to export manufactured goods into our markets would be reduced. As I have said, I do not think these are complete answers, but I have tried to be constructive and to make one or two suggestions of a long-term character as to how this threat could be partially met and how we need not just sit back and "take it." We could do something about it—indeed, quite a lot. I believe that the Government must act now instead of leaving it until it is too late. Whatever the form of Government in the years to come, our trade problem will always be with us. I hope that the Government will act now in a statesmanlike way in order to prepare the way for a prosperous future.

9.57 p.m.

Mr. Albu (Edmonton)

The hon. Member for Altrincham and Sale (Mr. Erroll) has raised a very important matter, but I felt that at the end of his speech he was returning to the policy that was being pursued at the end of the war of the Morgenthau plan in Germany which I thought we had abandoned. It is necessary that we should keep a sense of proportion in this matter, and although I am not accusing the hon. Gentleman of squealing, I am not at all sure that British industry is not crying out a long time before it is hurt.

The figures for the engineering industry, an industry with which I am acquainted, show that last year the exports from the Bizone of machinery and vehicles was something between £10 million and £12 million, while British exports of similar products during the same period amounted to £55,500,000. It is true that German industrial production is rising, but it will be a very long time before it catches up with those figures. I would remind the hon. Gentleman that British industry has had three years of very great advantage. We have obtained the secret processes and prototype machines of the whole of German industry. The German steel production is restricted, and, although it has reached the level of something over 6 million tons a year, it will be a long time before it reaches the permitted level, which fact must, in itself, restrict the export of engineering products.

Finally, the conditions under which the German workers are living must restrict their output for a very considerable time to come. However, I agree that there are very serious signs that this will become an important problem in the future, though I believe it is a longer term future than some think. This will be particularly the case in certain industries. The hon. Gentleman referred to unfair competition. It is an extremely difficult thing to define unfair competition. After all, we ourselves to some extent subsidise the iron and steel industry. To some extent we subsidise the growth of the watch and clock industry. Even the United States subsidises its shipping industry. If we go on to make an examination——

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

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

Mr. Albu

If we were to go into an examination of this problem I think we should find ourselves in very great difficulties. I do not know how long the German workers will stand the conditions under which they are working at the present time—the extraordinary difference between the great luxury in which many employers are living in the great industrial towns and the very low wage rates of many German workers. Figures which I have show that in the British zone in June last year men in the engineering industry, working an average of 39 hours a week, were getting £3 4s. a week, and that women, working just over 36 hours, were getting £1 16s. Since then there has been a 15 per cent. increase, but I hope the pressure of the trade unions in the Bizone will shortly rectify this appallingly unfair situation.

The February issue of the journal of the boilermaker's union in this country shows that ship repairers' wages in Germany were 1s. 9d. an hour as against 3s. 6d. an hour in this country, and I believe that what the hon. Member for Altrincham and Sale was referring to was not so much ship-building as ship repairing, in which there is already beginning to be German competition. As a matter of fact, we have abandoned the Morgenthau plan, the plan to destroy German industry, and in those circumstances it is inevitable that competition should arise. The hon. Member for Altrincham and Sale quite rightly, I think, referred to the fact that the industries of Europe are not complementary but competitive. It really is a serious problem that in the long run in these competitive industries, the dense populations of Europe will be competing for their necessary raw material and food imports from the raw material producing countries.

Although there is absolutely no danger in the short-term I am sure the Government should be considering possible developments in the longer term. We must plan to develop the industries of Europe to avoid them competing in an effort to pay for their necessary imports. I believe that so far as Germany is concerned the quickest way to get something done is that, as soon as we can get something like a responsible governmental authority in the Western zones, we should bring the Germans into full discussion in a European co-operation organisation and make them face the facts, as we have to face the facts, of this problem of Europe's need for exports to pay for her imports. They may have to face the fact that in some industries—I mentioned the watch and clock industry and the hon. Member for Altrincham and Sale mentioned the scientific instrument industry—there are strategic reasons why those industries should be brought from their original main centres, which were in Germany. The Germans have to face that fact as a strategic fact of necessity to us. We in turn may have to see that we do not subsidise, support or protect industries which perhaps in the past have been more specialised in Germany, otherwise we shall only lead to frustration for our own workers and our own manufacturers.

I realise that this is an extremely difficult problem. I do not believe there is any solution along the lines of free for all, which the hon. Member for Altrincham and Sale seemed to suggest, and of having a competitive scramble. As a matter of fact, the only solution in the end is the solution of an expanding world economy and the industrialisation of large parts of the world at present not industrialised, so creating, not as the hon. Member seemed to think a reduction in food production but a very great increase in food production and an increase in the demand for industrial goods. I hope this is the policy which Mr. Truman had in mind when he talked about his plan for world development. I think it is the only hope in the end and I hope the British Government are taking the American Government upon this very important matter.

10.5 p.m.

Sir Patrick Hannon (Birmingham, Moseley)

I think the House is grateful to my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) for introducing this subject tonight. I agree with the hon. Member for Edmonton (Mr. Albu) that while we cannot at the moment point to any serious dislocation of labour in this country, or any new competition against us, nevertheless, the time is coming when the Board of Trade ought to give careful thought to future policy to deal with the competition that will arise.

As an old Member of this House I can recall what took place after the first world war, when we had to pass an Act to protect valuable key industries essential to our defence. Subsequently, even so, we found competition becoming more and more acute, and before the outbreak of the last war, we were face to face in many instances with most acute competition from Japan. Anybody familiar with the textile trade in Lancashire will know of the serious situation that arose because of the intensity of Japanese competition. I, in the engineering world, had to sell in Bengal and Bombay bicycles made in Birmingham against bicycles priced at £1. We found ourselves in a helpless situation. I agree with my hon. Friend that we cannot at the moment achieve any substantial, progressive, positive policy, but I think the Debate will be found to have been valuable as a means of inducing the Government to work out a policy for the future, if the Parliamentary Secretary and the President will keep a constant watch on developments as they take place. Indeed, they should above all not let the British taxpayers' money or the American taxpayers' money subsidise competition against the manufactures of this country.

Mr. Stanley Prescott (Darwen)

Why should not a policy be formulated by the Government now? Is not my hon. Friend aware that Lancashire is very concerned about this matter? It is not for the textile industry to formulate a policy, but for the Government.

Sir P. Hannon

I appreciate the point raised by my hon. Friend. I should not dream for a moment of accusing this Government of being a Ministry of all the talents, and so I would give them a little time to work out a policy. Instead of their hurrying to do things, as they have, and as a consequence of which they have rushed through a whole mass of legislation, I would give them an opportunity to work out a thoughtful, constructive policy, and constructive measures, with some essence of permanence in them, and so make the country feel they are alive to the danger to employment here, to which this country will be subjected by the development of foreign competition.

Mr. Tiffany (Peterborough)

Is the hon. Gentleman now saying that competition is bad and co-operation good?

10.9 p.m.

Mr. John Hynd (Sheffield, Attercliffe)

I realise that time is short, and I do not want to deprive the Parliamentary Secretary of an opportunity of making a full reply to the Debate, but I should like to support one or two of the points made by my hon. Friend the Member for Edmonton (Mr. Albu). I am grateful to the hon. Member for Altrincham and Sale (Mr. Erroll) for raising this matter because it is a most important subject and one to which the House may have to turn its attention more in the very near future. However, as my hon. Friend said, it is important that we should not become panicky about this.

The hon. Member for Altrincham and Sale, when he talks about Germany's having got off to a good start, and having certain advantages over us in the export field, is really talking nonsense. The export figures themselves demolish that argument at once. It is general knowledge that not only is German production very low compared with ours in export goods as well as in other goods, but that we have deliberately imposed on Germany a policy which prevents her from getting off to a good start, whereas we have investigated all the Germans' trade secrets, and abolished their patent rights and offices, and left them open to the whole world.

Moreover, we have taken Germany's most valuable machines. When the hon. Member for Altrincham says Germany is now in a position to build and use new, up-to-date machinery, do not let him forget that we have under the reparations scheme laid it down specifically that the reparations plants we take shall be the most up-to-date and effective plants, and that Germany shall be left with the least effective and least up-to-date. I do not think it is being quite fair to say that Germany has all the advantages and has got off to a good start.

Mr. Erroll

I meant that she will get off to a good start as her production increases.

Mr. Hynd

We have had three years' start, and if British trade cannot compete with Germany today, having captured the markets and with all the advantages which she has, it is hardly worthy of the name British. I have had letters from firms in my constituency who agree with me that British quality has nothing to fear from German or any other competition. I have had letters from Sheffield firms which say quite plainly that they are in no way afraid of German competition with regard to quality or even salesmanship.

Our own policy—and this is why I am glad this subject has been raised, and I hope that the President of the Board of Trade will take it further in his own Department—is in fact making it essential that Germany should use every artifice she can to try to get her exports abroad. We do not allow them shipping facilities, and Germany must use foreign bottoms for every ton she exports and every ton she imports. She has to make up for this unnecessary expenditure by other kinds of export which will be in direct competition with our trade. Similarly, in the production of roller bearings which Germany could well produce for her own purposes in Europe, we are forcing her to import them, and therefore she must export something else that is vital to our policy.

I hope that this matter will be speedily reviewed because we cannot go on preventing Germany from building ships and from having some kind of mercantile activities. It is interesting to note that the Japanese level of industry was fixed after the German level of industry, and that in the Japanese level of industry there is provision for Japan to build ships and to engage in mercantile activities because of the fact that it was realised that a mistake had been made in the case of Germany. The sooner we admit that mistake and get back to reasonable economic conditions the better. We are not afraid of Germany quality or salesmanship or afraid of any advantages that Germany may have. We are afraid of costs. The Potsdam Agreement lays down—and we are following the policy—that Germany shall not be permitted to enjoy a standard of living higher than the average for the whole of Europe including the Balkan and other countries. If we insist that the German standard of living shall be deliberately kept low, how are we to ensure that we are going to have competitive costs? I do not see how it can be done.

When the hon. Gentleman says that the only answer can be in the workers of this country lengthening their hours and working for less wages, I disagree. The answer is in the other direction, and not only should Germany be brought into the new organisation for a united Europe, but there is an organisation called the International Labour Organisation which was precisely established for ensuring stability and a common level of conditions in order to assist not only in increasing the standard of living throughout the world but in maintaining a balanced and fair level of trade. Germany should be in the I.L.O., and the quicker she is brought into this organisation the better for all concerned.

Mr. Ellis Smith (Stoke)

It had no effect on Japanese competition before the war.

Mr. Hynd

It had no effect on Japanese competition before the war because Japan did not take any notice of the Conventions, but Germany did, until she withdrew from the I.L.O. after Hitler took over. I believe that Germany today is in a mood to participate in these international organisations. If the present policy goes on very much longer of these deliberate restrictions on development in Germany, we shall be destroying the only opportunity we have or are likely to have at any time in the foreseeable future of developing a democratic Germany, because we shall have destroyed the confidence of the German people in those democratic elements which we encouraged to emerge after disarming Germany and removing the worst of the Fascist elements in control. My conclusion is quite opposite to that put up by the hon. Member for Altrincham and Sale. It is not that we should start cutting down on this side, but that we should bring Germany into line in these international organisations.

The problem of the future of international trade, in Europe in particular, as my hon. Friend the Member for Edmonton pointed out, will be solved by the co-ordination of economic and trade activities through the European organisations that are being established, for which all credit is due to the Foreign Secretary. That is the only way, and unless and until Germany is a full partner in these activities we shall have to face up to quite intensive competition which, although over a narrow field, is an intensive competition to which we ourselves are responsible for driving Germany.

10.16 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. John Edwards)

Tonight the hon. Member for Altrincham and Sale (Mr. Erroll) has drawn our attention to an extremely important matter. I must confess to a certain disappointment, though, at what he had to say, because he did beg a considerable number of questions, and matters which he ought at least to have tried to demonstrate he took for granted. Moreover—and I think this is important—there was lurking behind almost every argument he used a quite clear mercantilist fallacy. He was thinking in terms at least 200 years old, and implying throughout all he said that there was a constant volume of world trade, and that if somebody got more then inevitably somebody else got less. Such a view must be controverted whenever it is stated, because there can be no way through for the world if we behave on that assumption.

Similarly, the hon. Member also implied that the country whose workers worked longest inevitably got the market. This again is not true. In considering who, in fact, gets a market in competition one has to bring a whole lot of considerations into account: how much capital equipment the workers have for use, their standard of efficiency and traditional craft, and a whole host of other things, which quite often mean that the workers with the highest standard of living are, nevertheless, able to compete successfully with the workers with the lowest standard of living. I hope I do not misinterpret the hon. Gentleman, but he did seem to me to have both these fallacies clearly behind all he was saying, and it is important that they should not go unchallenged.

I must, however, make it plain that the Government are fully aware of the potential threat to British exports which the revival of both German and Japanese competition presents. But there is one basic fact which we must recognise, and that is that both Germany and Japan must, as soon as is practicable, earn sufficient by their overseas trade to pay their own way, and so cease to be pensioners on our own taxpayers and on those of the United States of America. I do not suggest that there should be extravagant standards. As my hon. Friend the Member for Attercliffe (Mr. J. Hynd) pointed out, that is no part of our intention. But it is part of our intention—and I hope the House accepts this—that both these countries should pay their own way. Naturally, if we accept this, as I think we must, then certain implications will flow from. it and, as the hon. Member for Altrincham and Sale himself suggested, we have to consider the effects, both present and future, on our own trade of what I believe to be this inescapable fact.

If I say more about Japan than about Germany it is for two reasons: first, because it is not very- long ago since my right hon. Friend made a very comprehensive statement about German competition; and also because some of the important issues there raised have just been presented to us by my hon. Friend the Member for Attercliffe, and I need not repeat what he said. So far, then, as Japan is concerned, I would say—in spite of what the hon. Member for Altrincham and Sale said I ought not to say—that Japanese competition is clearly a future rather than a present threat. I do not know what he meant by the phrase "sober alarm." I thought the two words rather contradictory. There is no need for alarm, and we do no service, to Lancashire of all places, if at the present time, when they have recovered their nerve and are reorganising and really putting their backs into a great export drive, we imply that around the corner there is this terrific threat.

Mr. Prescott

Is the Parliamentary Secretary aware that the Japanese textile machinery industry is practically intact, and that if iron-ore, coke and coal were available the Japanese textile industry could be rehabilitated very quickly? If that be correct, as I think it is, having been there, what is the policy of the Government in regard to making available coke, coal and iron and steel for rehabilitating the Japanese textile industry?

Mr. Edwards

Obviously, I cannot be diverted from my main argument to answer a series of questions on this point, but I do not accept the view of the hon. Member, nor do I believe that the textile machine-making industry of Japan could re-equip Japanese industry in the period I indicated when I used the phrase "just around the corner."

How much damage was inflicted on Japanese industry? If we take the period from 1930 to 1934 as being the last normal period before Japanese production was distorted by the emphasis placed on the heavy industries for war production and compare that with Japanese production in 1948, the latter still represents overall only 60 per cent. of the former, and that percentage was exaggerated because of an increased production of minerals which slightly exceeded the 1930 to 1934 figure. The production of textiles which has figured so largely in Japanese exports in the past was little more in 1948 than 25 per cent. of the figures for the base period. Before the war Japan possessed some 13 million cotton spindles, of which eight million were in operation. There remain at the present time something like 3,364,000, of which 2¼ million are actually operating. It is true that this number is slowly increasing, but the comparison is very significant. If we take the export figures, Japanese pre-war exports of cotton fabric averaged 2,126 million square yards in the base period and rose to a figure of 2,658 million square yards for the period 1935 to 1939. In 1947 they amounted to 317 million square yards, and in 1948 they fell to 285 million square yards.

And so I am of the opinion that the threat, while it is something that has to be taken into account, is not in any sense an immediate one and is no cause for any kind of despondency. Indeed, the emphasis being placed on Japan now is on other industries, such as engineering. Plans published by the Japanese Economic Stabilisation Board seem to assume a continued tendency for the light engineering and similar industries to develop more rapidly than textiles, and I hope that that will be so, because the greater diversification of Japanese industry the better

Mr. Prescott

I understand that a certain commission went out last year to negotiate an agreement and that before that agreement was negotiated the British industry was consulted. I am informed, I hope inaccurately, that other industries have gone to Japan to negotiate similar agreements. Will the Parliamentary Secretary say whether that is correct or not?

Mr. Edwards

If time permits, but time is getting on.

Mr. Prescott

The answer is either "Yes" or "No."

Mr. Edwards

I hope to say something about that agreement. What I wanted to say is, of course, that what is disturbing to British industry is the fear that we will have Japanese prices and trade practices in the future which may lead to what, rightly or wrongly, is called unfair or cut-throat competition. So far as this is concerned, it is the policy of the Occupation Authorities to fix the export prices of Japanese goods at the world price for comparable products. It is obvious that mistakes may sometimes be made, but we are always ready to take up with the Occupation Authorities cases in which the prices of Japanese exports are clearly unreasonable.

The good will of the Occupation Authorities on this point is evidenced by the fact that they have agreed to see two representatives of the British woollen industry and to discuss with them the proper pricing of Japanese woollen exports. It may be that further discussions can be arranged between other British industries and their Japanese counterparts. It may be in due course we shall get some results from the talks which Sir Raymond Streat had and about which he has made a statement on the combined action with industry in America. We have also, in every way that we could, backed the policy of the Occupation Authorities, to raise the general standard of living of the working classes in Japan, to which I attach great importance.

If I may I should like to say a word or two about the trade agreement. The agreement was signed in November and covered trade with the bulk of the sterling area and Japan. That agreement does not on either side carry with it any obligation to purchase particular goods, but it was an attempt to place trade with Japan on a sterling basis and to assess its probable volume. We shall have to review this whole matter, and before it is reviewed we shall consult as widely as possible.

I have very little time left, but I would like to say a word in regard to German exports. It is possible that when we drew up our export programme last year we may have under-estimated the speed of Western German industrial recovery because of the slow progress made until the time of currency reform. Since then there has been a remarkable increase in industrial output, but the programme which the western Germans have put in is, after all, equal in status to all the other programmes at present under discussion in Paris. There is nothing final in the form in which it has been brought forward.

In conclusion, we have tried to have regard to the possible consequences of German and Japanese competition in framing our own plans, but the best way to hold our own in international competition must be the traditional high quality of British goods and their production with ever-increasing efficiency. With the increasing needs and the increasing population of the world, there should be opportunity for all countries to achieve a great increase in the balanced flow of trade. That I believe is fundamental and we must strive in every way we can to maximise trade. If we do then the threat of competition becomes less in accordance with how far we are successful, in fact, in expanding the total volume of world trade.

Mr. Stanley Prescott (Darwen)

I have a quarter of a minute left, and I want to say that I have listened with great interest to what the hon. Gentleman has said, particularly with regard to Japanese competition. I am very disappointed in what he has said. The whole of Lancashire is considering this matter. I visited Japan recently and I know a certain amount of what is happening there. I listened to what the Parliamentary Secretary had to say with great interest, because I know we are concerned in this matter, and, speaking personally and for most of the people of Lancashire, I am very disappointed at what he had to say tonight.

Adjourned accordingly at Twenty-nine Minutes past Ten o'Clock.