§ 53. Colonel Crosthwaite-Eyre
asked the Chancellor of the Exchequer if he will now make a statement on the European Payments Agreement.
§ Sir S. Cripps
The Council of the Organisation for European Economic Co-operation reached unanimous agreement in Paris on 7th July on proposals for establishing a European Payments Union as from the 1st of this month. The documents incorporating these proposals were approved by, and have been made public by, the Council. A few copies only are so far available in this country, but I have arranged for some to be placed in the Library.
The Organisation will now proceed to draft a Convention for signature by the participating Governments. This will take some weeks. So far as the United Kingdom is concerned, Parliamentary authority will be required for the provision of credit and for the discharge of our other obligations under the scheme, and legislation to this end will be introduced in the autumn. I propose, however, to make such arrangements through the Civil Contingencies Fund as may be necessary to carry out our obligations in advance of legislation, and I am sure that the House will agree that this is the right course to take in view of the importance of this scheme to the economic progress of Europe.
This agreement to establish a European Payments Union is a very great achievement of international co-operation. The objective was the complete transferability of European currencies earned on current account, so that each member country should, in future, be concerned solely with its balance of payments with all the other member countries taken as a group. This objective has been secured by the new scheme, which, by providing an adequate volume of credit and limiting the extent to which settlements have to be made in gold, establishes a basis on which further progress can be made with the liberalisation from import restrictions of European trade.
1142 The scheme embraces the whole monetary areas of the member States. In particular, the multilateral system of trade and payments, which already exists in the stealing area and through the arrangements for sterling transferability, is brought into effective association with this new multilateral system in Europe. through the membership of the United Kingdom.
The new payments scheme is associated with certain principles of commercial policy which are an essential and most important part of the whole arrangement. Subject to certain exceptions for specially difficult cases, each member country will be required as from the 1st January next to avoid any discrimination in its licensing of imports as between one member country and another; and, in particular, a member country which has been discriminating hitherto by reason solely of bilateral payments difficulties must remove forthwith any such discrimination so far as concerns the open general licences that it has issued under the O.E.E.C. programme for liberalisation of trade, unless it is itself being discriminated against by the other country.
We are currently discriminating against certain O.E.E.C. countries on balance of payments grounds, and these rules have therefore an important bearing on our own import policy. There is no discrimination against our trade in Belgium, Luxembourg and the Belgian Congo, and we shall on 17th July extend our open general licences to imports from these countries of commodities already imported under open general licences from other O.E.E.C. countries. The same consideration applies to invisible payments with the result, among other things, that, as from 17th July, there will no longer be a restriction on the number of tourists who may visit Belgium. Switzerland, similarly, does not discriminate against us and we shall do the same in her case as soon as the Swiss Government confirm their intention of becoming effective members of the Union as from 1st July. The only other participating country excluded from the benefit of our open general licences is Western Germany. Western Germany, however, unlike the other countries I have mentioned, is treating the trade of certain other countries more favourably than ours and we are at 1143 present negotiating on this matter with a delegation from Frankfurt. If, as I hope, these negotiations result in an agreement for a sufficient extension to us of the facilities that Western Germany accords to some of our competitors in her market, we shall extend our open general licences to imports from Western Germany.
The new scheme is a measure of the economic recovery which has taken place in Europe since the war to which the generous aid given by the United States through the European Recovery Programme has so largely contributed. The European Payments Union itself is based on a Working Capital Fund contributed by the United States, and the final agreement owes much to the advice and help of the Economic Co-operation Administration, and especially of the Office of the Special Representative, under Mr. Harriman and his successor, Mr. Katz.
The United Kingdom has the largest quota in the Union—1,060 million units equivalent to one dollar each out of a total of nearly 4,000 million, or approximately 27 per cent. According to the rules of the Union, this means that if we are a net creditor in Europe we undertake to provide goods and services up to a value of 210 million units against credit. and thereafter against 50 per cent. credit and 50 per cent. gold payments, until we reach the total limit of 1.060 million units. On the other hand, if we are a net debtor in Europe, we are entitled to draw on credit up to 210 million units and thereafter to cover our deficits partly by drawing on credit and partly by gold payments, on an increasing scale. till we reach 1,060 million units.
A country may reimpose restrictions if it finds itself running into deficit with the Union at a rate and in circumstances which it deems serious in view of the state of its reserves. But if it finds it necessary to do this, it must be prepared to justify the action it has taken before the Organisation; and in applying any such restrictions it must avoid any discrimination.
The arrangements for relating our dollar aid to the European Payments Union are as follows. We undertake to make sterling available to the Union. if we have a surplus with Europe, up to an amount of 150 million units against the 1144 receipt of an equivalent amount of conditional dollar aid. This arrangement will apply to the first slice of any surplus we have, and thus it will only be if we have a surplus in excess of 150 million units that the arrangements which I have just described for dealing with a creditor position would begin to operate.
Under the general rules of the Union we are required to make arrangements with the other members concerned for the disposition of sterling balances held by them at the inception of the scheme, that is at 30th June, 1950. The necessary negotiations are in progress. In some cases, it may be appropriate for these balances to continue to be held, in other cases for some part to be paid off during the next two years. Any member, however, who runs into deficit with the Union will be able to draw freely on his sterling balances to meet all or part of his deficit. In this special case, the Economic Co-operation Administration have undertaken to guarantee us against any loss of gold which might result from such a use of sterling balances.
The Government have been naturally concerned, throughout the discussions leading up to the present agreement, to ensure that an improved payments scheme for Europe should not be secured at the expense of weakening the position of sterling as an international currency. We are satisfied that the position of sterling is adequately safeguarded in the proposals that have now been adopted and that we need not fear any detriment to our wider interests. The other Commonwealth Governments have, of course, been kept closely informed of developments throughout.
I am sure that the House will welcome this great achievement by the Organisation for European Economic Co-operation, and the contribution towards it which the United Kingdom has made.
§ Colonel Crosthwaite-Eyre
I am certain the Chancellor will appreciate the difficulties of the announcement which he has just made and I personally feel that it is a very important statement. May I ask him one question at the moment? As I understand it, His Majesty's Government are now committed to a further 1,000 million dollars' worth of unrequited exports, which, in the eventuality, can be paid for from sterling balances. May I ask him whether that is so, and further if. 1145 should that happen, the United States have guaranteed to us a similar gold payment to offset the sacrifice we have made?
§ Sir S. Cripps
No, I am afraid that is not accurate. I appreciate that this is a very complicated matter, and that it is difficult to understand it in this way, but in effect the amount of credit we shall have to grant in the extreme case will be 600 million dollars. The other 400 million will be paid to us in gold.
§ Mr. Oliver Lyttelton
We on this side of the House always welcome any sensible step directed towards European cooperation and solidarity. [Laughter.] I do not see anything funny in that. At the same time, these arrangements are not free of complexities, and, as there is no official document which is available to us, except that which has been placed in the Library today, we must refrain from any detailed comment. At the same time, the statement is a very long one, and I must express some apprehension that we are undertaking obligations when this House has not had full opportunity of discussing them. I would seek an assurance from the right hon. and learned Gentleman that, before we are bound and all these things are ratified, there will be given an opportunity for a full debate in the House. The Chancellor mentioned in his statement that these arrangements will require legislation, but we may feel that we may be too far down the road before that takes place, and I ask him whether he will issue a White Paper and also give us an opportunity of discussing the matter in full before the Recess.
§ Sir S. Cripps
So far as a White Paper is concerned, I would certainly get reprinted the document now in the Library if hon. Members feel that it would be of some assistance to them in the matter, but I thought it was quickest to place that document in the Library at once. So far as the question of time for a discussion is concerned, that is a matter for my right hon. Friend the Leader of the House.
§ Mr. Lyttelton
Will not the right hon. and learned Gentleman agree that these very long statements on matters of such great importance definitely place the House in an awkward position, when, without the House discussing them, obligations are later entered into from which we cannot recede and on which there has been no discussion by the House?
§ Mr. Walter Fletcher
The Chancellor has said something about the granting of open licences for manufacturers in Western Germany, which will affect manufacturers in Lancashire very much indeed. Will the House have an opportunity of discussing this matter before the licences are granted?
§ Sir S. Cripps
If we get an agreement with the Western German Government as regards the liberalisation of their markets, we should be under an obligation immediately, under the agreement entered into in Paris on 7th July, to make arrangements for extending open general licences to Western Germany.
§ Viscount Hinchingbrooke
I understood the Chancellor to say that there was a difference between capital and current transactions. Since many people hold that it is impossible to differentiate between capital and current transactions, how does the Chancellor propose to define what are current transactions?
§ Mr. Godfrey Nicholson
Does the Chancellor mean that 600 million dollars is the amount of the sterling balances to be jeopardised?
§ Sir S. Cripps
No. It is the maximum amount of credit under the scheme that we might have to advance in sterling.
§ Mr. Maclay
May I ask the Chancellor whether, in addition to the document which has been placed in the Library, he will also issue a simple summary of what it means?
§ Sir S. Cripps
A summary has been put out by O.E.E.C., and I will certainly consider printing that in addition to the document.