HC Deb 06 June 1951 vol 488 cc1046-58

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Lennox-Boyd (Mid-Bedfordshire)

This Clause deals with the new trade agreement with Pakistan, and in the Fourth Schedule of the Bill the terms of that trade agreement are set out. As this Clause deals with a matter of the greatest importance to a Dominion in the British Commonwealth, we feel that some observation should be made upon it this evening.

It deals with Pakistan, whose loyal association within the British Commonwealth is deeply valued in this House and country, and whose brave people are held in the highest regard and affection throughout the British Empire. We cannot pretend that the Clause does not make startling changes in the Imperial Preference system. I recognise that the Secretary for Overseas Trade deserves the congratulations of the Committee for the zeal with which he has addressed himself to the preservation of Imperial trade between the United Kingdom and Pakistan, and he will, I know, agree that the Clause does represent very significant changes in the pattern of Anglo-Pakistan trade.

We appreciate that some alteration was inevitable and very desirable in the tariff arrangements between the two parts of the British Empire, because the Anglo-Indian Agreement of 1939 had, obviously, to be amended. The Committee will realise that with the separation of the Indian Continent into the two Dominions of India and Pakistan, the trade agreement arrived at with India when India was a single country needs wide modifications. One consequence of the division of the Indian Continent into two Dominions has been that in the last few years Pakistan has given the United Kingdom a preference of some £16 million on our exports to Pakistan and has, I believe, in return received only some £4 million on her exports to us. Such a disparity of trade cannot indefinitely continue.

The agreement which, no doubt, the Secretary of Overseas Trade will commend to the Committee—I must apologise if I appear to be doing it for him—results in certain very considerable changes. I think that I am right in saying—perhaps he will confirm this—that on some 30 articles the preference hitherto held by the United Kingdom in the Pakistan market will disappear altogether and, in a considerable number of other cases, the margin of preference, by the raising of the general level of duty, will be reduced. Perhaps he will confirm that I am right in believing that in future, after this agreement, grey cloth for example, from the United Kingdom, which has hitherto enjoyed in Pakistan a preference margin of 45 per cent., will now have only a margin of 5 per cent. On rayon fabrics the preference margin will drop from 30 to 10 per cent. and on printed cloth the margin will drop from 42 to 6 per cent. These are very significant changes.

A new agreement was necessary. It seems to us that it would have been better if, when we saw this growing disequilibrium between Britain's trade with Pakistan and the advantages that we were getting compared with the advantages that Pakistan were getting in return, the United Kingdom-Pakistan had been allowed to get together and work out their own solution for improving trade, either by creating new preferences or raising existing preferences and giving Pakistan greater concessions in the United Kingdom market.

I hope that the Committee will realise this fact: we were not able to do that, not, I believe, through any lack of good will on the part of the Government, but because of our international obligations under the general agreement on tariffs and trade. I can understand the attitude of many people in Pakistan. They are able to sell wherever they like all their products—cotton, jute and tea. There is a great demand for all they produce. The time may come when competitive sources may be found for these commodities. Then the preferences which Pakistan has hitherto enjoyed and still, in a measure, continues to enjoy will once more become very important. We shall not be able to restore the preferences which are being altered today without very difficult international negotiations with some 30 other countries who will feel that their interests are also affected and prevent us from restoring these preferences which we are now abandoning.

5.15 p.m.

We, in the United Kingdom, I think it says in the agreement, will consult together with our friends and fellow citizens in Pakistan if there is a mutual change, in future, in the pattern of our preferential trade. Once more we may consult together, but we cannot do anything about it, because preferences abandoned or reduced cannot be restored or raised without international agreement, and agreement from those other countries whose competitive position would be jeopardised if they granted that agreement to us.

We do not believe that this is the way in which Empire trade may be developed. The Clause deals with an agreement made with a Dominion and made, I recognise, largely at the request of that Dominion, and it would be inconceivable for the Opposition to vote against the Clause. All the arguments that I have advanced are arguments not against the Clause but against those provisions in international agreements which will prevent us, if we want to in future, from restoring the preferences that we are altering tonight. There is a very strong case indeed for the earliest possible opportunity being taken to recover for the British people in this country and our associated Dominions throughout the Empire that freedom of decision in this field of preferential trade which, we believe, we are entitled to claim and which we feel should never have been given up.

Mr. Harold Wilson (Huyton)

I apologise for detaining the Committee, but I cannot allow this Clause to go through without adding my support to what has been said by the hon. Member for Mid-Bedfordshire (Mr. Lennox-Boyd) in the tribute which he paid to the Secretary for Overseas Trade in the negotiation of this agreement with Pakistan.

The hon. Gentleman himself, I think, would be the first to agree that in the past year or two we have been experiencing great difficulty with regard to the Imperial Preference system. A special difficulty arises in the case of Pakistan following the partition. It is, I am sure, no secret to the Committee that following partition the Pakistan Government felt that some of the advantages granted to undivided India did not apply equally to post-partition Pakistan. They did not feel the same about continuing with the pre-war trade agreement. In those circumstances, the desire of the Pakistan Government to revise or even completely to remove the pre-war agreement presented the Government with a very great problem indeed.

I should want to be the first to say that had it not been for the way in which my hon. Friend handled these negotiations the whole future of Anglo-Pakistan trade might have been very different indeed. As I think the Committee know, my hon. Friend has undertaken in the last three or four years a very large number of missions and tasks of this kind which have redounded to the benefit not only of British trade but also of Commonwealth trade as a whole—missions and tasks which seldom hit the headlines but which are of very great value.

As a result of his conducting these tremendously difficult negotiations, we have this Clause in front of us today. It is not ideal and not all that we should have liked. We have lost preferences in Pakistan which are of great value to a number of British industries. But on balance, I think British industry and those with whom my hon. Friend were in close consultation would feel that, out of a very difficult situation, his negotiations and his knowledge of the subject have obtained a very reasonable settlement which makes it possible for us to look forward to a long term and permanent development of trade between our two countries.

Sir Patrick Spens (Kensington, South)

I should not like this Clause to be passed without a few words on two subjects. First, I want most heartily to congratulate the Secretary for Overseas Trade on his success in obtaining the agreement for us at the present time. Some time ago I had the pleasure of entertaining him when he was on another mission in India. I realised full well how Pakistan felt shortly after she became a Dominion and how difficult it would be to get the resumption of a trading connection with Pakistan which would be satisfactory to them and reasonably fair to our own people.

This agreement is not perfect and there is no doubt that some of our traders will suffer to some extent as a result of it. I am extremely pleased that the right hon. Member for Huyton (Mr. H. Wilson) has made the speech which we have just heard, because I think it will explain to many people in Pakistan some of the difficulties which are inherent in what was attempted and in what we should like to do. On the other hand, this means that there is a resumption of trade between the Dominion and ourselves with a hope that in time to come it will develop for the mutual benefit of both the Dominion and ourselves.

I regret that the term of the agreement is so short but, on the other hand, if it is a success, there is no reason why it should not continue indefinitely beyond the autumn of next year. I hope very much that the agreement will be continued in this or some altered form because I think it is essential for the prosperity of that part of the world that there should be the closest trading connection between Pakistan and ourselves, as well as between India and ourselves.

As a lawyer, I am bound to say that there is one point I wish to put to the Secretary for Overseas Trade. I realise that it was not possible to put into the agreement, as such, everything which Pakistan desired to have put into it. In the Schedule we find two letters of great importance; they are simply put into the Schedule and no reference is made to them either in the Clause or in the agreement. Both letters contain important assurances, and I apprehend that Pakistan was desirous that the contents of those letters should be put on record in one form or another.

But I am not at all sure what this Committee will be doing, or what the House will be doing, if we merely put into a Schedule two letters which are left apparently completely in the air. They can have no legislative validity at all; I should have thought they could have no additional legal validity. I raise this matter because I think the assurances given in these letters are of the greatest importance and I wonder whether, between now and the Report stage, it may not be possible to put those assurances into some other form which would give them some ordinary legal validity of one sort or another.

Subject to that one main criticism, I should like to end by congratulating the Secretary for Overseas Trade again and also by congratulating His Majesty's Government in Pakistan that they came to this agreement with His Majesty's Government in the United Kingdom.

Mr. C. Williams

I do not wish to raise any further controversial matter on this subject. I welcome the Clause and I welcome the fact that we have reached this agreement, but I must say—and probably there are others who agree with me—that there are many factors connected with British trade which have not advanced as much as we might have hoped under agreement with Pakistan.

I will not pursue that point, for I want to ask whoever is to reply on behalf of the Government whether this is not a rather unusual Clause to find in a Finance Bill. Perhaps I may have the attention of the Law Officers here. The Clause itself seems normal, but when we come to this amazing Schedule, which is of great length with the letters at the end, I am bound to ask whether there are any precedents for putting that kind of letter and this kind of agreement between ourselves and the Dominion in a Finance Bill. Or are the precedents that this should come under a separate Act?

This is a subject which should be investigated, because a Finance Bill is liable to become congested if we begin slipping into it other material. The duty is an obvious subject which must go into the Bill, but when we have an agreement it is an entirely different matter. If we are to have many of these agreements, and if they are all to go into the Finance Bill, we shall undoubtedly lengthen our Finance Bill and, as I see it, we may create a very difficult position. It may be that such a matter as this could be tabled at the same time as the Finance Bill, but I suggest that it might be better to have the agreement as a separate matter rather than have it in the Finance Bill. If a considerable number of these agreements are made we might clog up the Finance Bill.

Mr. Gammans (Hornsey)

I agree with what the right hon. Gentleman the former President of the Board of Trade had to say about the difficulties under which the Minister carried out these negotiations, but I think he should have gone a little deeper into this and explained to some of his hon. Friends behind him exactly what is implied in the provisions of this Clause. I wonder how many Government Members would care to go to their constituencies this week-end and explain to their supporters exactly what this agreement may mean to the standards of living of the British people.

I am sorry that the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), is not here, because earlier today he raised the question of Japanese competition and the effect it might have upon our standard of living. As my hon. Friend the Member for Mid-Bedfordshire (Mr. Lennox-Boyd) pointed out, the main reason for this agreement is that India is no longer one entity and that since Pakistan has come into being some sort of separate agreement is necessary. We do not quarrel with that at all.

But I wonder how many hon. Members realise how much we have lost in preferences. My hon. Friend pointed out the reductions we have suffered on British piece goods and rayon, but we have lost some preferences altogether. For instance, we have lost all preference on cement, motor tyres, motor cycles, bicycles and many types of iron and steel goods. That may not matter very much now in a sellers' market, when we can sell almost anything anywhere at any price; but before long we will be in a buyers' market and we must expect in Pakistan, which is a great and growing market, to meet some fierce competition from Germany and Japan.

5.30 p.m.

What the hon. Member for Stoke-on-Trent, South, feared when he raised this subject earlier today is almost certain to occur in Pakistan, especially over textiles and bicycles. As my hon. Friend pointed out, the other reason for this new agreement is that we have been selling to Pakistan about four times as much of goods which are subject to preference as they have been selling to us. It is no good our blaming or thinking of blaming Pakistan. They are quite right to want to redress the balance. The normal way would be to try to make up the difference by giving them increased preferences, or perhaps by starting to give them new ones.

Here we see one of the evils of the agreement we entered into on tariffs and trade. We cannot give a preference to Pakistan unless we give it to the whole world. We are forbidden to help our friends in Pakistan unless we help our not-so-good friends in Argentina and our enemies in China and those countries behind the Iron Curtain who are out to destroy us. Here we have the chickens coming home to roost for having accepted the American Loan. It was a fell day's work when, for a mess of American pottage, we sold the birthright of the British Empire.

It was the right hon. Gentleman who is now the Minister of Local Government and Planning who did it. He is the Esau of the Labour Party. I hope that the British people will realise that this was done by the present Government when we once more have to face the fiercest competition in markets where we hitherto enjoyed preference. No attempt was made to explain to our American friends that Imperial Preference, far from hindering world trade, had increased it and had led to a stable area in the world such as we and they so much desire. I do not know whether any Member of the Government finds time to go to the movies. If they do so, they will see from time to time a gangster film. I believe that the gangster refers to his gun as "Gat." This particular G.A.T.T., the General Agreement on Tariffs and Trade, is certainly a gun, directed not only at the British Empire but at the standard of living of the British worker.

We do not blame Pakistan for this agreement, but I wonder whether hon. Gentlemen on the other side of the Committee realise how deep may be the repercussions of what their Government have done in the past. Now we see an example of it. We are not going through any evil effects immediately, because of the sellers' market which now exists. The fundamental fault is that we have surrendered a vital principle for cold cash. In other words we have committed the unpardonable error of eating the seed corn. I hope what we have done in that direction will not result in what normally happens to people who eat the seed corn, which is that before long they wonder where their next meal is coming from.

Mr. David Eccles (Chippenham)

All hon. Gentlemen who have taken part in the debate on this Clause have referred to the difficulty of making a commercial agreement. Considering the handicap under which the Secretary for Overseas Trade was working, in that he could not bargain with Imperial Preferences, I would add my congratulations to those of other hon. Members. What has made this agreement hard to conclude is that many of our friends in Pakistan have felt for some time that they had not been getting a fair share of goods which were in short supply. I refer especially to capital goods. That feeling, if it exists widely, which I am told it does, may have added to the difficulties of making the agreement.

The problem of Pakistan's imports has become very much more acute because they are getting higher prices for the raw materials which they export and which we need very badly. That additional income is not being balanced by an increased volume of imports. The Pakistan Government have done their best to stop inflation, but inflation is now growing in Pakistan. One realises that our re-armament programme will make this difficulty more acute. The demands of defence are for the products of the heavy engineering industries which Pakistan hopes to get as a result of this agreement in order to develop her resources and raise her low standard of life. In the consideration of our defence programme the requirements of Pakistan may easily be overlooked.

I rose to say that I think that would be a very great mistake. Pakistan people are very tough. They live upon the confines of the Communist bloc. I do not know whether it would be right to describe Pakistan as "the Canada of South Asia," but it is of the highest importance politically and economically to Pakistan and to this country, and indeed to the whole free world, that that part of the Colombo Plan which relates to Pakistan should be swiftly and efficiently carried out. That will take a great deal of encouragement, good will and deliberate prodding on the part of His Majesty's Government, so far as our capital goods are required for that great purpose.

I do not think that we should part with this Clause, especially when we know how difficult the agreement has been and how difficult the situation is in Pakistan today, without a very clear assurance from the Ministers concerned that they intend to do everything possible to make the agreement a success and that they are not going to lie back and say: "We have got out of this very awkward tangle of preferences. We have come pretty well out of it." That is not good enough. We must try to help this strategic area of the free world, and these people who have been such stalwart friends of ours for so long. I ask the Secretary for Overseas Trade for that assurance in the very clearest terms.

The Secretary for Overseas Trade (Mr. Bottomley)

My first duty is to acknowledge all the kind comments, which have come from both sides of the Committee, upon the securing of this Anglo-Pakistan Agreement. I have been asked to say a word or two on how it came about.

Circumstances developed in such a way that it became necessary for me to fly to Pakistan in order to get this matter settled. My right hon. Friend the ex-President of the Board of Trade and I met the Pakistan Minister of Commerce in June, 1949. The Minister explained to us the difficulties in carrying on trade under the Anglo-Indian Trade Agreement of 1939. We discussed this with him and suggested that it might be good if departmental officials from Pakistan and from the United Kingdom got together to see what could be done. After long deliberation nothing was settled, and it was only when we began to see the Pakistan Press that we understood some of the influences which were at work.

I will quote one comment as an illustration of the atmosphere which was built up. One of the Pakistan newspapers said: Three years have passed since Pakistan came into being but we continue to give preferential treatment to British goods to the great detriment of our trading relations with the world outside the British Commonwealth. The sentiments of the people in this country on the question of Imperial preferences are well known. As a matter of fact, the struggle to abolish preferential treatment to British goods has been one of the most important aspects of the struggle for freedom waged for years in this sub-continent. It went on to say: The operation of the Imperial preferences has been inflicting great injury to our economy. It has turned our country into a preserved market for British manufacturers to the great detriment of our own industries. We all know that that was not true, but that this atmosphere existed has now been confirmed by the hon. Member for Chippenham (Mr. Eccles) today. He said that Pakistan was not getting its fair share of industrial goods. I assure the hon. Gentleman that if we look at the Commonwealth as a whole we see that Pakistan has been getting a very liberal share of the capital and other goods that we have been able to export in recent years. That atmosphere had to be changed.

I am glad to say that from the very moment that I got to Pakistan I found the Minister of Commerce most friendly and co-operative. The whole Government said that they wanted Anglo-Pakistan trade relations to proceed smoothly and sweetly. After such an introduction it was not at all difficult finally to reach some settlement. It is true that in reaching this settlement we had to give away a good deal. We have enjoyed great advantages for a considerable time. The figures of £16 million worth of preference trade on our side against £4 million on the Pakistan side are correct.

I have one or two minor disagreements on the rates to which the hon. Member for Mid-Bedfordshire (Mr. Lennox-Boyd) referred, but I will not go into them now. We must recognise that, when it comes to preferences, the British Commonwealth in itself is not self-sufficient and therefore we must trade with the rest of the world. It would be wrong to get rid of preferences; it would be equally wrong to insulate ourselves against the rest of the world. The Pakistanis take that view very strongly, too. We must remember that they are parties to the General Agreement on Tariffs and Trade. Whatever our initial position may have been, we have to meet the Pakistan Government on these terms which we have also rightly imposed on ourselves in our general trade relationships.

The hon. and learned Member for Kensington, South (Sir P. Spens), asked me a question about the letters. As far as the agreement itself is concerned, there is nothing new in the present procedure. Agreements have been presented in the past in this way in the Finance Bill. There are precedents for it, although I cannot at the moment recollect them. If the letters are read carefully, it will be seen that they contain no legal obligation. His Majesty's Government have given assurances of helping the Pakistan Government, through the aid of our commercial agents, in supplying and buying goods which are required. It is not a legal document. It was at the wish of my colleagues in Pakistan that they were incorporated in this way.

The real reason for the Clause is that there is a need for legislation arising out of the provisions of the Ottawa Agreement of 1932. That Agreement provides for the free entry of some Commonwealth goods and gives guaranteed margins of preference to certain others. The Ottawa (Agreements) Act, 1932, gives effect to the individual agreements then reached with Canada, Australia, New Zealand, South Africa, Newfoundland, India and Southern Rhodesia. If any one of those agreements is revised in any way or a new one is desired, fresh legislation is required so that they can be attached as scheduled agreements to the Ottawa (Agreements) Act, 1932. It is because of this that we present this Clause to the Committee. We hope it will be accepted.

Mr. C. Williams

I asked the Government to give any precedent for incorporating these letters in this way—the hon. Gentleman said that he thought there was some precedent—and for the way the Clause is framed.

Mr. Bottomley

I think there is a precedent in the Ottawa (Agreements) Act and also in the India Act, 1939.

Mr. Williams

For the Clause, but not for the letters. I do not believe there is any precedent for having letters of this kind in a Finance Bill, letters such as the one which talks about tea rationing and all sorts of things like that. I have no point of hostility to press, but I think it will be very inconvenient to the House of Commons if we are to have attached to ordinary agreements of this kind—they may be quite ordinary in the future—very long Schedules of this kind which could form a separate Bill, especially if we are to have correspondence of this kind added as well. It is not a good precedent.

Mr. Godfrey Nicholson (Farnham)

Does not the hon. Gentleman think that it would be wise to be a little more categorical in his assurance to Pakistan that we shall pay particular attention to that amount of capital goods? He knows that that has been a stumbling block in Anglo-Pakistan relations. I wish he would strengthen his assurance.

Mr. Bottomley

Not only have we given an assurance but we have specially sent out an industrial mission to see what is wanted and what can be done by British industry to provide the capital goods that Pakistan requires.

Question put, and agreed to.

Clause ordered to stand part of the Bill.