ANGLO-BRAZILIAN TRADE

HC Deb 18 December 1952 vol 509 cc1779-88

10.59 p.m.

Mr. Erroll

rose—

Mr. Geoffrey Bing (Hornchurch)

On a point of order. I do not think that the Question, "That this House do now adjourn," was in fact put from the Chair. I raise that matter so that no time should be lost to the hon. Member for Altrincham and Sale (Mr. Erroll).

Mr. Speaker

I understand that the Adjournment Motion has been moved.

Mr. Erroll

I started to speak a moment before and I had hoped that I was going to have a very much larger audience for my speech than is normally the case. However, you fortunately came to my rescue, Mr. Speaker, and I see that the subject of my Adjournment debate has more than satisfactorily emptied the Chamber, as is customary when I get up to speak. However, I welcome this opportunity of referring to certain matters in connection with Anglo-Brazilian trade, as they are of great importance both to this country and to Brazil.

It is no secret that Brazil's external trade is in a very parlous state. Brazil is not only in debt to this country to the extent of some £52 million, but is also in debt to Germany to the extent of nearly £30 million, and to the United States to the extent of some £125 million in sterling equivalent. This indebtedness has arisen as far as this country is concerned largely through Brazil's failure to sell her current cotton crop to Great Britain. The reason why the Raw Cotton Commission has not hitherto bought any part of the current cotton crop is because the price Brazil is asking is much higher than the prevailing world price for her type of cotton.

It is against this background that we must examine the proposed barter deal which has received such wide publicity in the Press of this country. Briefly, the deal consists of an arrangement whereby the Hawker Siddeley Group would, through the Gloster Company, sell some 50 to 70 Gloster Meteor jet aircraft to Brazil, and in return the Raw Cotton Commission would purchase correspondingly large quantities of Brazil's at present unsold cotton crop. In other words, it is a barter of aeroplanes for raw cotton.

In effect, it means that this particular exporter is getting the right to pre-empt his earnings of foreign currency in favour of a particular importer—namely, the Raw Cotton Commission; and my first question to the Economic Secretary is whether this is a satisfactory type of transaction, because I submit it represents an entirely new principle in our post-war foreign trade. It means an important change in our system of exchange control if barter deals of this character are to be permitted now and in the future.

Referring particularly to this deal, I would like to query whether it is satisfactory. To begin with, it is not, in fact, a very nice way of going on. It may be just legal. It may be that the Hawker Siddeley group have found an ingenious way round our foreign exchange control regulations, but it is surely not a transaction of which either of the English contracting parties need feel particularly proud. It is, in fact, the shabbiest type of commercial transaction, because these two have stolen a march over British traders who have been in this business for many years—some of them for more than a generation. They now find they are unable to get payment for the goods they have sent to Brazil, and they find this comparative newcomer to the Brazilian market jumping in ahead with a type of transaction which is anything but satisfactory.

It is particularly unfortunate that a commercial practice of this sort should be on the point of going through when it has been made by a semi-Government body, the Raw Cotton Commission, and an aircraft organisation which is so largely dependent on Government orders. Therefore, it has got no small part of its prosperity as a result of Government orders, which are placed with it. I put it to the House that the Treasury could surely stop this transaction from going through if they wanted to.

A number of Questions have been asked in the House in the last few weeks, and the indications given in the answers are that the Government do not intend to do anything about it, because they have no powers to interfere. I suggest that if the Government wanted to stop this transaction they could soon find a way of doing it, and it is in the interests of all concerned that this transaction should not be proceeded with. I say that deliberately, because the case may be put forward that a transaction of this sort might perhaps make a contribution towards the permanent solution of the Anglo-Brazilian trading difficulties, and I think, if that were to be the case, we might condone this particular transaction in this case, but in actual fact this transaction, if it goes through, will do nothing to help the future and would only reduce the chances of the Brazilian debt ever being cleared.

Individual traders of this country are concerned in this matter, and many of us have received details from those who have taken the trouble to write to us. I think my hon. Friend the Member for Walton (Mr. K. Thompson), if he catches Mr. Speaker's eye, will refer particularly to the difficulties in Liverpool and Manchester. I want to refer to an organisation which is hit far harder than any private trader, namely, the Export Credit Guarantees Department, because they are liable to the extent of no less than £32 million in respect of guarantees given for Brazilian exports which have not been paid off.

It is, therefore, of tremendous importance that the Treasury should seek a permanent solution of the Anglo-Brazilian trading difficulties, and not be a party to the barter transaction which is going to do nothing in making a contribution towards a permanent solution. How is the Treasury proposing to clear this liability of the Export Credit Guarantees Departments of £32 million becoming due in the course of the next 12 months? Is it, in fact, the case that the British taxpayer is going to have to foot the bill? If so, it will be almost as big as that which the British public had to pay for the ill-fated groundnut scheme.

I cannot understand why such a large figure as that should have developed. Why did the Export Credit Guarantees Department not raise its rates as the amount of risk grew? It may be that the Treasury told them not to raise their rates. It may have been part of Government policy to keep the rate the same, or to go on happily with the same rate and the amount of risk rapidly growing month by month, with the knowledge that the British taxpayer would have to foot the bill at the end if the trading indebtedness continued.

It seems to me possible that perhaps some of the Brazilian blocked sterling balances might be used in order to clear this debt. I find it very hard to ascertain the exact amount of the blocked sterling balances. I am told there is still a substantial blocked balance in some account. I shall be glad to be corrected in that matter if I am wrong, because it has received some currency in the newspapers. It would be a great advantage if we could be told that there is, in fact, no such reserve of blocked sterling. I hope that whatever is considered by the Treasury, there will be no question of some sort of loan to Brazil to try and provide a solution for this dilemma, because any spare cash we may have in this country ought to go first for Commonwealth development rather than pay off the debts of Brazil which she ought to try and do herself.

Could the Minister tell us if the Treasury will sanction this kind of barter deal, and if so, whether the Government are to permit barter deals of this kind in general? That would represent a new development in our system of exchange control, where the taxpayer is to havtto pay £32 million to the Export Credits Guarantee Department. Finally, can the Minister in his reply give us any indication about the Brussels indebtedness now and in the future, and say what the prospects are for the future of Anglo-Brazilian relations, because many people are worried about it?

11.12 p.m.

Mr. Kenneth Thompson (Liverpool, Walton)

I am grateful to the Minister for allowing me to catch your eye, Mr. Deputy-Speaker, and enjoy a little time to say a word. I do not want to prolong the discussion and so deprive the Parliamentary Secretary of the chance to say all the useful and helpful things he is to say.

My concern about the deal to which my hon. Friend has referred is that we have had for 13 months a situation developing in trade between this country and Brazil, namely from November, 1951, till today, during which the accumulated indebtedness has reached the proportions that my hon. Friend has described. So far as I can discover, there has been no dynamic approach by the Treasury or the Board of Trade to get a solution to this growing, real and urgent problem.

The Department will have to pay £30 million and private traders will have to pay a sum nearly as great unless a settlement is reached between this country and Brazil. I have been told that the difficulty is that we cannot find a medium to buy Brazil's native production—cotton, hides, and coffee—at satisfactory prices because Brazil did not devalue her currency when we devalued ours. The significance of the cotton deal is that in exchange for 70 aeroplanes we would get 32 million 1b. of raw cotton. Surely it is not beyond the bounds of the ingenuity of the Treasury to translate that cotton into terms of sterling against the price that will be put into the books for the 70 aeroplanes. Once we have established a rate of exchange of that kind we have opened the door to negotiation.

I do not suppose that all our troubles would then be over, in settling this impressive backlog of economic indebtedness. Trade between the two countries which reached more than £62 million in 1951, has withered and died in 1952 at the very time when we need trade. It is a matter of the greatest urgency for Her Majesty's Government to send the most capable representatives over to Brazil or to the Brazilian representatives in this country, and to say, "Here we are, two great and friendly nations with a common problem which is a burden and a weight upon them. Is it not possible and practicable for the two sides to get together and sort it out in the interests of both?"

In these few headline sentences I have said what I feel about this matter. I hope that the Parliamentary Secretary will take this opportunity, at this season of good will and charity, to tell us all the things we want to happen.

11.15 p.m.

The Economic Secretary to the Treasury (Mr. R. Maudling)

I would not like the House to have the impression that Her Majesty's Government do not recognise the importance and the seriousness of this matter. It would be quite untrue to suppose that no action has been taken at all to try to meet the situalion. As my right hon. Friend the President of the Board of Trade said recently, we have applied our minds to possible solutions of what is a very difficult problem; because it must be remembered that all problems of trade are two-way, and both parties must agree if there is to be a solution. Where the problem is one of accumulated debt, the liability to reach agreement is as much on the debtor as on the creditor; and it is known that there are very large commercial debts owing to this country from Brazil and, I believe, to the United States and Germany.

My hon. Friend who raised this subject confined himself, however, to the narrower point of barter trade and particularly to this agreement for the sale of jet aircraft and the purchase of cotton. So, I will confine myself mainly to the barter trade and this particular deal. The first point is that this was a transaction between a private enterprise undertaking and an independent statutory body. The Raw Cotton Commission is an independent statutory body and the aircraft company is a private enterprise concern, and the extent to which the Government can, or should, intervene in the normal commercial activities of private companies is considerably limited.

My hon. Friend says the Treasury are a party to this transaction, but the Treasury never has been, and I do not see how it ever will be, because this is not a transaction affecting the Government. I should point out that, being a private transaction, I have not a detailed knowledge of the exact terms of it, but this type of transaction does not infringe the exchange control regulations.

My hon. Friend talks of the exporters hypothecating foreign exchange earnings to a particular country, but the position is that the exporter of British goods to Brazil receives payment in Brazilian currency by transfer of Brazilian held sterling. The transfer to a United Kingdom resident account extinguishes a given amount of Brazilian held sterling, and the sum accrues, in that sense, to the British Treasury. The exporter has no control whatever over any foreign exchange. He would receive payment by transfer from a Brazilian account to his account in this country, and he is perfectly entitled to transfer that sterling to a United Kingdom resident who, in this case, is the Raw Cotton Commission.

The Commission receives sterling from the export, and obtains cruzeiros with which to purchase cotton in the normal way, because it is entitled to purchase non-sterling cotton up to a certain amount annually and it is entitled to foreign currency in order to buy it. So, infringement of foreign exchange control does not enter into the matter at all.

Then, my hon. Friend says that if the Government wanted to stop this transaction it could do so. It is all very well for him to say that, but I hope that we shall not get into the position where a Government, of whatever colour, can stop something simply because it does not like it. As the President of the Board of Trade said recently, the only question open for the Government to decide here is, first, whether export licences for these aircraft should be refused, and, secondly, whether a direction should be issued to the Raw Cotton Commission to prevent the purchase of this cotton.

So far as the export licence question is concerned, export licensing is now confined to a very small area of our trade, and I am sure that I have my hon. Friend with me in saying that it is desirable that any form of exporting licensing should he confined as narrowly as possible and should be designed solely to protect the interests of our national security by preventing the export of goods vital to our security to countries with whom our relations are not as friendly as they could be and which, if they made use of those exports, would be to the detriment of this country's security. It would be a great mistake if we should try to extend the grounds on which licences are refused in any way beyond the narrow compass to which they are at present confined.

Then there is the question of the Raw Cotton Commission. I think it very doubtful whether my right hon. Friend the President of the Board of Trade would in any case have power to issue a direction to them in this matter, but, whether or not he has this statutory power, it seems undesirable that this Government should interfere with the operation of the statutory Raw Cotton Commission, which is carrying out a commercial task and a statutory duty of providing cotton for Lancashire spinners at the lowest possible price they can obtain and which at the same time is facing competition from spinners importing on private account under the new arrangements now effective.

On both grounds, on the question of whether export licences could or should be refused, or a direction could or should be issued to the Raw Cotton Commission, my right hon. Friend came to the conclusion that there was no ground on which he should intervene in this transaction which, I would emphasise, is a transaction which is not in any shape or form a Government transaction. That is not to say that this type of barter transaction is the kind of thing Her Majesty's Government would like to see developed. We do not agree that it is in the long-term interests of British trade that transactions of this kind should occur, and if we make a barter agreement we might find ourselves forced into more and more.

We have made it perfectly clear that we believe in the widest possible agreement on multilateral trade and should not enter into bilateral agreements which in general are wholly contrary to our general policy. Of course that does not mean that in certain circumstances there are not advantages in individual dealings. In this particular case it is fair to point out that except by means of this agreement the Raw Cotton Commission would not have been able to purchase on acceptable terms the 15,000 tons of Brazilian cotton which will be available to Lancashire spinners as a result and the aircraft company would not have been able to export the aircraft which help to develop their manufacturing capacity. So there are obviously certain advantages from the national point of view in this field.

Mr. Harmar Nicholls (Peterborough)

My hon. Friend said earlier that this was not a barter agreement and then said that if we have one barter agreement it is followed by another. Does he confirm that it is not a barter agreement or the first of a series?

Mr. Maudling

This is in the nature of a barter agreement but does not involve any infraction of exchange control. There are definite quantities involved in the transaction. The Government fully appreciate the feelings of traders who have exported goods to Brazil over a long period, and have outstanding debts of a considerable size, and who feel, as hon. Members have pointed out, that the people concerned in this field have jumped the queue. I see their point of view and can sympathise with it, but, as I have said, there is nothing illegal or improper about this transaction, nor anything which could cause Her Majesty's Government to intervene.

On the wider subject of our trade with Brazil, as I have said, this is undoubtedly a serious problem. A very large debt has accrued from Brazil to traders in this country, and, indeed, to other countries as well. It is very important to all concerned that the long-established friendship and trading relations between Brazil and this country should be restarted and re-started as soon as possible.

Obviously, there are great practical difficulties in the matter, but I think it is only fair to point out that any extension of credit in the financial position of this country is a matter of some difficulty. In so far as we extend credit, we are, in fact, investing capital, if only for a short time, and, in so far as we invest capital in Brazil, we cannot invest it in the British Empire. This is one of the complexities of a situation which we are studying with great care, and which we, on our part, would very much like to see solved on a satisfactory basis.

The other point raised, which was not entirely germane to the principal matter of this debate, was the position of the Export Credits Guarantee Department in this matter. I am sure my hon. Friend would not expect me to make any statement on the position that has been reached. Obviously, we shall be hearing more about it in the House of Commons at a later stage, but it is only fair to say that the Export Credits Guarantee Department is, in fact, an insurance business, and it is a pretty poor form of insurance business that never meets a claim. That is the only comment I want to make on the matter of principle this evening. It is a complex subject which the House would like to discuss at a later stage.

May I sum up what I have said by emphasising, first, that the Government do not in any way under-estimate the importance or urgency of the difficulties that have arisen up to now in the trade between this country and Brazil, and they are studying closely any possible solution of the problem. So far as the individual barter deal which was the subject of the debate is concerned, it is not in any way an improper or illegal deal, does not in any way involve Her Majesty's Government, and is not, therefore, a deal which the Government have any power to prevent, even if they wished to do so.

Question put, and agreed to.

Adjourned accordingly at Twenty-eight Minutes past Eleven o'Clock.