§ Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Drewe.]
§ 10.59 p.m.
§ Mr. Cyril Osborne (Louth)
I apologise to you, Mr. Speaker, and to the servants of the House for keeping you here after a very late night last night, but the subject I wish to raise follows upon the debate which has just concluded.
I should like to draw attention to the Report of the International Materials Conference and to ask the Minister who is to reply to the debate to look at the Written Answer he gave to a Question I put to him recently. First, I wish to remind the House that the International Materials Conference was convened in February, 1951, because of the shortage of raw materials following the outbreak of hostilities in Korea. It was recognised that international action was needed for the co-ordination of the distribution of scarce materials, and I think that if the International Materials Conference had its functions summed up in one word. that word would be "scarcity."
On page 28 of the Report just published, it says, with regard to its remaining tasks:It has not been possible this year to give as much attention to the longer range aspects of the shortage problemsand then it states:The committees are anxious to see the supply situation improve to such an extent that it will not be necessary for them to continue in operation.It is with these words that I profoundly disagree and it is on this that I seek the support of my right hon. Friend. For it is when the supply situation has improved that the troubles will arise. The Minister will remember that on 7th April I asked him:if he will consult the United States Government to widen the terms of reference of the International Materials Conference to enable plans to be considered for the orderly marketing of strategic stockpiles no longer required, and to stabilise commodity prices, once the urgençy of re-armament is passed.I have said it privately to him, and I will repeat it publicly tonight, that I was disappointed with his reply, which was:The disposal of stockpiles is unlikely to become an issue in the near future.1587 I am sure he does not mean that he does not hope we shall have a peace in Korea soon; that he means that the cold war is going on for ever.
The debate which has just concluded has shown a great desire for understanding with the Russians, and if we can achieve that tension will be eased; and the need for the piling of stocks will be passed. This will become an issue in the near future if the efforts of the Foreign Secretary to come to an agreement with the Russians is successful. If that happened, we could be pitchforked into the greatest slump we have ever known; commodity prices would tumble unless the right steps to prevent that were taken, and we might see the one thing that none of us on either side of the House desires ever to see again—two million unemployed in this country.
It is against these fears and dangers that I ask the Government to take action. When the late Mr. Ernest Bevin was Foreign Secretary he said on many occasions that Stalin need only lift his little finger to ease the tension in the world at once. It may be possible that someone will want to do that, and if the tension were eased I can foresee that the cold war would bring with it economic problems which could almost overwhelm us. Obviously, I do not want the cold war to continue so that a false prosperity may remain. We all so earnestly want peace, but plans should be made now against the economic consequences of real peace which will come if the Foreign Secretary is successful in his efforts.
The second part of the answer given to me by the Secretary for Overseas Trade was:The primary function of the International materials Conference is the allocation of scarce materials, on which it is doing most valuable work.He said a little earlier that on all these matters we were working closely with the U.S. authorities. I hope that that work will continue, because it is obvious that it is on close co-operation between the Americans and ourselves that our own peace and security depends. But my right hon. Friend also said:I doubt whether it is desirable to vary its terms of reference as they do not exclude the discussion of prices."—[OFFICIAL REPORT, 7th April, 1952; Vol. 498, c. 187.]1588 May I remind the House what the terms of reference are which I seek to have widened? The seven commodities committees are responsible for establishing better balance between supply and demand of certain strategic materials. They may consider any aspect of existing shortage problems for the commodity under their review. They have the task of estimating not only the amount of such shortages, but also the probable duration of such shortages. The emphasis all the time in those terms of reference is on shortage. If, happily, peace comes to the world the artificial shortages which have been caused by war will cease. I want the I.M.C. terms to be widened so that they can deal with the new situation which would arise were there surplus stocks and falling prices in a dis-arming world.
It is against that economic consequence of peace that I think there ought to be international planning at once. I was fortunate enough in the Adjournment lottery to draw this Motion some three weeks ago. Unfortunately, the House sat very late, and I thought it wise to withdraw the Motion. Consequently, I wrote a letter to "The Times" embodying a great deal of what I had hoped to say in the House. I pleaded for peace, but I was sorry to see than an hon. Member who sits on the opposite side of the House, in writing to a Sunday newspaper, had twisted my words to suggest that I was anxious for the war in Korea to continue because I feared that if it did not there would be a slump in commodity prices. I think that that was unworthy, and a deliberate twist of the letter I had written, and of the point of view which I am now trying to put forward.
My right hon. Friend may say that even if there were peace in Korea stockpiles would not be thrown on to the world markets at once. I take it that that would not be done; but that, I want to remind him, would not prevent a slump in world prices. If America were simply to cease buying, for six months alone, let alone redistribute her stocks, since she has such an enormous influence in the free world markets, there would be a tremendous fall in prices. I want to remind him of how narrow is the margin between slump and boom. A movement of 5 per cent. in either direction and there is depression or shortage.
1589 I well remember that between the end of 1947 and the period of devaluation in this country there was in America a slight trade set-back. It was only slight, but the commodity index of America fell from 180 to 120—one-third in less than 12 months. That was because the American economic machine moved just that tiny bit slower. They were not throwing their stocks on to the world markets, but they were not buying quite so rapidly. There was a slump in America and there was the making of one in this country.
World prices today are higher than they were in 1947, and I ask the Minister what he thinks would be the effect on our trade in this country if there were a fall in the next three months of, say, 33 per cent. in commodity prices. We have been discussing with great anxiety in the last few weeks the tragedy of Lancashire's textile problem. The slump in the textile industry has come very suddenly. It has hit the Government, manufacturers and trade unions with unexpected severity. I am suggesting that the same sort of recession could be felt in all exporting industries and could come so suddenly that it would hit us all unawares, unless the steps that I am now pleading for are taken in time.
I have two examples, which I should like to pass on to my hon. Friend, of what is happening and of how vulneraable markets are. In "The Times" of Monday this week there were two small items that I should like to quote. The first dealt with rubber. The heading is "Fresh fall in rubber prices." This is a report from Singapore, dated 10th May:Rubber dropped eight cents here today and reached levels obtaining before the Korean war.This is one of the few world commodities that are already below pre-Korean prices.After closing at 92c. yesterday the market for first grade opened this morning at 87½c. a lb. and then fell away at the close to 84c.This is an important point.Market quarters estimated today that the sensational fall in the price of rubber during the past eight days represented a drop on an annual basis of about 290 million Straits dollars"—or about £35 million.Between 2nd May and today the price has fallen 22½c."—that is in eight days.
1590 There is no suggestion of peace at the present time. If that could happen as things are now, what could happen if there were a settlement in Korea?
The other quotation from "The Times" of the same day refers to newsprint. It reads as follows:The Ministry of Materials announced on Saturday that the Minister had made an order reducing by £2 17s. 6d. a ton from 19th May the maximum prices which may be charged for home-produced newsprint.The comment by the Chairman of the Newsprint Supply Company was this:The situation had changed almost overnight"—and it is against these sudden changes that I am asking for plans to be made—from a sellers' market to a buyers' market. Consumption in the United States had been flattening out during the past few months, while production in North America had increased. Many markets had suddenly collapsed—that of Argentina, for example—and we had been able to take some of their supplies at a lower price and to build up stocks.Those are just two examples taken from "The Times" of Monday of this week.
I say to the Minister that the risk that could come is enormous, and, therefore, I plead with him that he should seek, with the co-operation of the American Government, that the terms of reference of the I.M.C. should be widened so that instead of considering shortages and rising prices in a re-arming world, it might be in a position to consider and take steps to meet the threats of unemployment and hardship that will occur not only in America but in this country, in a disarming world, where there are surplus stocks and falling prices. I hope that he will be able to give me more assurances than I got from his answer to my Written Question
§ 11.20 p.m.
§ The Minister of State for Colonial Affairs (Mr. Henry Hopkinson)
I hope that hon. Members will forgive me for replying to this Motion, although I no longer represent my noble Friend in this House in Ministry of Materials matters. The question which my hon. Friend the Member for Louth (Mr. Osborne) has raised, however, is just as important from the point of view of the office which I now hold, dealing with our Colonies, as it is from the point of view of this country
My hon. Friend has outlined in graphic terms the form which a world slump 1591 might take as a result of a catastrophic fall in commodity prices following on the cessation of American re-armament. A year ago it was being argued by some economists that scarcities in most primary commodities would be with us for many years. So rapidly does the situation change that we are here tonight discussing, and quite rightly, the steps which might need to be taken to meet exactly the opposite situation. We have seen, in the past year, the price of wool come tumbling down. As my hon. Friend says, in the past few days we have seen what has happened to rubber. We know that in other commodities, such as pulp, lead, zinc and tin, the world supply position today is very much easier.
The fact is, of course, that with the American re-armament programme maturing about the end of 1953, the peak requirements of the United States in the matter of raw materials may have been reached in the present year. This does not mean that a world surplus in primary commodities, whether raw materials or, still less, food, is going to appear over-night. On the other hand, it does mean that we must consider with very great care the potential problems which my hon. Friend has put before us.
The history of the pre-war years, when primary commodities were superabundant, and of the post-war years when, generally speaking, the position has been one of scarcity, proves in both cases that stable prices at reasonable levels are essential to our national welfare, as well as to the welfare of our Colonies and, indeed, of the whole sterling area. This is more than ever important today, when our balance of payments is so precarious. But it is no short-term expedient. We can never really be safe if commodity prices are liable to disastrous fluctuations.
This is not simply a selfish or exclusive interest of the primary producers, whether in the Commonwealth or elsewhere. It is equally the interest of the consuming countries, of which the United Kingdom is one and a very important one. Here I would say that it must be realised that, for some purposes at any rate, all the Colonies themselves are also consuming countries.
The interest is mutual. It is a matter of securing the best possible balance which 1592 cannot, of course, incidentally, in every case be popular with all parties. We, as a large consumer, must watch our particular interest, commodity by commodity, and we must, I think, inevitably reserve the right to protect our position in regard to any particular commodity.
The desirability and the practicability of a stabilisation agreement from any commodity must be considered entirely according to the particular circumstances of the case, and the United Kingdom must approach each problem with a completely open mind as to where our real interests, as well as the interests of the Colonies for which we are responsible, lie. We must also bear in mind that when schemes are put forward they have to be acceptable to the Colonies, because local legislation is usually required.
Having said this, I feel bound to question whether the International Materials Conference, or at any rate that Conference alone, is the right body to tackle the problem of a general slump in commodity prices. As my hon. Friend said, the International Materials Conference was established to deal with quite a different set of circumstances. It was set up to handle scarcities in an emergency and it has done its work remarkably well. Among the foremost reasons for that success has been the attitude of the United States. As the greatest consumers and producers of the world's raw materials the Americans have been ready, where the common interest demanded, to share their own production fairly with other countries and to restrain demand which might, in many cases, have absorbed most of the world's supplies.
Here I should like to emphasise the fact that in a world of surplus the role of the United States will remain equally important. Rubber is perhaps an example—to which my hon. Friend alluded this evening. But our interest, both as head of the Empire and Commonwealth, as banker for the sterling area and as a leading power in Europe, must always be to work in the closest contact with the United States.
§ Mr. L. M. Lever (Manchester, Ardwick)
The right hon. Gentleman suggests that we should work in the closest contact with the United States. That is a very admirable conception; but have we taken steps to appoint our representative at the International Materials Conference 1593 or has our representative resigned? Can the right hon. Gentleman give us some information on that?
§ Mr. Hopkinson
We have Lord Knollys, our representative on the Central Group—and representatives on the other seven committees.
§ Mr. Hopkinson
There may be some who would argue that the International Materials Conference was solely intended to deal with the scarcity position and has now served its purpose. My own view is that, apart from any possible role which the International Materials Conference may be able to play in a reverse situation, it would be very unwise to be over-hasty in seeking to terminate it The fact is that while we are, this evening, discussing the question of over-supply, several raw materials are today still very scarce and likely to remain so.
In my view the right course is to keep the committees of the International Materials Conference in being to deal with such scarce commodities as exist. There is no reason why, as I see it, it should not offer advice if the reverse situation were to develop. Here, of course, it would supplement the work of other international organisations which exist for the very purposes to which my hon. Friend has referred.
As part of the general structure of postwar international economic organisation a set of rules was drafted for Inter-Governmental Commodity Agreements, dealing in particular with conditions of what is known as "burdensome surplus." These rules were incorporated in Chapter 6 of the now defunct Havana Charter, but they have since been adopted as a code of international conduct by the United Nations. The principal objective of the arrangements wasto prevent or moderate fluctuations in the price of commodities with a view to achieving a reasonable degree of stability which would be fair to consumers and would provide a reasonable return to producers.The means contemplated for achieving this result were three-fold. First, there were to be studies of any commodity in which special difficulties might arise—including a potential surplus—by means of a Study Group. Next there could be 1594 conferences for the negotiation and conclusion of Inter-Governmental Commodity Agreements, in which all interested countries could participate. Finally, there was provision for the administration of Inter-Governmental Commodity Agreements, on which producers and consumers should, through appointed councils, have an equal say. Any member of the United Nations is entitled to ask for a study of any other commodity which is or is likely to be affected by special difficulties.
At the moment four Study Groups exist, namely, Wool, Cotton, Rubber and Tin. In addition, there are certain other bodies which I have not the time to refer to tonight, such as the International Wheat Council, the International Sugar Council and the Rice Consultative Committee. All these bodies, including the Study Groups, are intended to deal with the sort of situation which my hon. Friend has in mind. If they do not exist, they can be called into existence if a threat of a dangerous world surplus should develop.
But I should give one warning to the House. Experience has proved that in these matters one has to avoid over-organising or unnecessary formalities. The organisations are merely the means by which Governments do what they are prepared to do as a matter of policy. The readiness of either consuming or producing countries to deal with these matters depends almost entirely upon the view that they take of the transactions in terms of their own interests. The successful conclusion of the 1949 Wheat Agreement, on the one hand, and the failure to secure agreements on wool and tin have made this very clear. In other words, if it is convenient to all parties to arrive at an agreement on, say, tin or rubber as a result of negotiations arising from discussions at a study group, then an agreement will be made; otherwise, it will not be made.
The House will have seen that at the recent meeting of the Rubber Study Group at Ottawa a working party was set up whose terms of reference were:to consider whether measures designed to prevent burdensome surpluses or serious shortages of rubber are necessary and practicable.The working party is to report back to the study group as soon as possible. Here, again, I must say that whether it 1595 is possible in this report to deal with the immediate problems of the rubber industry is a different matter. That question, however, is, of course, being examined here most urgently.
It is quite clear that we must never ignore the possibility of a recession, but no one country alone can take the necessary steps to deal with it. Only international action can be effective. We must examine every commodity on its merits, and while we shall, I trust, avoid any insularity or mere selfish considerations, we must be satisfied that in each case a given agreement is in the interests of the United Kingdom and its Colonies.
With that reservation, I assure my hon. Friend that no effort will be spared to ensure that whether within the International Materials Conference or in the specialised bodies which have been, or can be, set up for the purpose, the considerations to which he has referred will be fully borne in mind and such steps as may be necessary will be taken to achieve the ends which he has in view.
Mr. Horace E. Holmas (Hemsworth)
Following my hon. Friend's intervention, may I say that I read the other day in the Press that Lord Knollys' office had been terminated? Is there any truth in the statement?
§ Mr. Hopkinson
Lord Knollys may have handed over the chairmanship of 1596 the Central Group, but he is still on the Central Group.
Before I conclude, I should like to deal with a fear which my hon. Friend expressed about American strategic stock-piles. Those stocks have been created at great cost for defence purposes, and they are being added to. With world conditions as they are today, it is bound to be a very long time before it would be possible for the United States Government to disperse those stocks.
I devoutly hope that the hopes which have been expressed this evening for world peace will be realised. In any case, the dispersal of those stocks would be preceded, first, by the cessation of purchases; and the United States Government are committed, by their stockpile legislation and international obligations, to avoid disruptions of the markets. My hon. Friend fears that when American buying ceases, the situation to which he has referred would immediately occur, but having regard to the existing international arrangements, I do not believe that that situation will arise.
§ The Question having been proposed after Ten o'Clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at Twenty-nine Minutes past Eleven o'Clock.