HC Deb 18 December 1953 vol 522 cc785-93

3.14 p.m.

Mr. Niall Macpherson (Dumfries)

We pass now from the consideration of security in the Ministry of Supply to the subject of the American Mutual Security Act. I want to refer to the operations of Sections 541and 550 of the American Mutual Security Act under which surplus American agricultural products are made available for purchase in other countries.

I am grateful for the opportunity of raising this subject, because this matter is not perfectly understood in this country, and when something is imperfectly understood it is liable to give rise to vague fears which it is the purpose of this short debate to dispel. Incidentally, I hope that my hon. Friend will not take exception to any questions I ask him.

First, I should like to stress the gratitude which we all feel for the magnanimous attitude of the United States of America and the help that that country has given us. Anything that I shall refer to in this debate should not be taken as reflecting in any way either upon the generosity of the United States or upon our sincere appreciation of it. In dealing with the post-war economic dislocation, however, we have for so long—if I may use familiar words—moved from expedient to expedient, that it is surely now time that we were at least nearing the restoration of a more solid basis for international trade. I should like to pay tribute at once to the efforts of the present Government in that direction, and I hope that those efforts will render economic aid unnecessary and will substitute trade on an economic basis, but we have to be careful that particular expedients do not delay or even prevent the achievement of that object.

The fact of the present situation is that the United States are reported to have considerable agricultural surpluses, resulting in the main from their farm support price policy. It is certainly not for us to criticise the internal policy of the United States of America, especially as we have a farm support price policy of our own, but there is probably more to be said for such a policy in a food importing country than there is in a food exporting country. However, the fact that we and other countries have not the dollars to purchase as much as we might otherwise do certainly contributes to the surplus conditions in America.

This situation applies not to the United States of America alone, but to other dollar countries, particularly Canada. Canadian wheat exports, five years after the war, dropped by one-third, and apples and other farm products have been seriously affected.

Lieut.-Colonel Marcus Lipton (Brixton)

What about barley?

Mr. Macpherson

I do not think that barley comes into today's discussion. The United States conceived the idea of disposing of their surpluses to the benefit of other countries. Section 550 of the Mutual Security Act provides that Not less than 100 million dollars and not more than 250 million dollars of the funds authorised to be appropriated under this Act shall be used, directly or indirectly, to finance the purchase of surplus agricultural commodities or products thereof, produced in the United States. It goes on to say that the President is authorised to negotiate agreements. One rather peculiar aspect of the Act is that the President is authorised to negotiate agreements for surpluses at maximum world prices. It is a very peculiar thing to put on paper the idea of selling surpluses at maximum world prices.

The agreements that are to be negotiated must be designed to safeguard against substitution or displacement of usual marketings of the United States of America or friendly countries. They must use the normal trade channels, and there must be no resale or transhipment of the products thereby made available. It is obvious that it is very difficult not to affect other marketings. In passing, I would refer particularly to the phrase: usual marketings of the United States of America or friendly countries. I would ask my hon. Friend whether displacement of sales from non-friendly or not so friendly countries is being envisaged. Is this being done, or is it intended? Another point about the procedure is that not much time seems to be allowed. I understand that surplus products are notified every month and, in the case of tobacco, the Board of Trade gave the trade only four days to make up its mind. It sent out letters on 10th October and asked for replies on 15th October.

The particular question I should like to ask my hon. Friend is this. Before any approach is made by this country where Commonwealth products are likely to be affected or may be affected, can we have an assurance that Commonwealth countries concerned will be consulted? Can we have an assurance that the outmost action will be taken to make certain that future purchases of Commonwealth products, as is intended by the Act, shall not be affected?

In passing, I should say that the approach has to be made by the purchasing country. Notification of available products is made by the United States, and the approach has to be made by the purchasing country. I do not intend to go into detail in any particular case. It is obvious, for example, in the case of tobacco that the purpose of this particular purchase, as the Parliamentary Secretary to the Board of Trade told the House, was to replenish stocks.

After the purchase of 35 million lb. or 40 million lb. it is likely that stocks will be about 10 per cent. below the 1938 level, whereas consumption is about 10 per cent. higher. I understand the only other purchase at present is of prunes, 12,000 tons according to the latest bulletin, at a cost equivalent to about 5 million dollars.

So long as the Government control purchases such a transaction is comparatively easy, but there are other possible products that are becoming or may become available through surpluses. I have in mind, in particular, canned fruits, of which we are comparatively short in this country. Can my hon. Friend tell us whether any approach has been made or is likely to be made on that subject? Are there any other goods that are likely to be made available of which we may make purchases at the present time? Are we interested in getting, for instance, linseed oil and olive oil?

Arising out of Section 541, there is the question of purchases of cotton, which was referred to three days ago in the House. I understand that those purchases are to be mainly by private traders, and that only a small part will be by the Raw Cotton Commission. Are they also for stock? If not, what do they replace? What is to be the procedure?

Another question that arises is, what happens to the sterling paid for these products? According to the Government it was to be applied to meet defence costs. That is, as I understand, the United States pay the exporter in dollars, we keep the sterling and use it for defence costs to be agreed, no doubt, with the United States of America. Is that the case? Has the expenditure of this money to be agreed with the United States of America?

Can my hon. Friend assure the House that sterling will not be used for the purchase of defence goods for shipment to a third country, for off-shore purchases, or purchases of Commonwealth goods for United States stockpiles, or the purchase of goods in other friendly countries, all of which would be possible within the terms of the Act. It seems to me that it is most important to ensure that these gifts help us and in no way interfere with normal rade.

The Act provides that the sterling proceeds could be used for developing new markets or for loans to increase production in friendly countries. Have the Government in mind that this should be done? I think it presents certain dangers. It would mean, in effect, allowing the United States to supply us with consumption goods and using the proceeds for the development of the Colonies. In that case presumably the United States would retain the possession of the sterling and the interest on it, and I think there would be grave dangers in that.

Finally, can my hon. Friend answer a rather technical question which may lead to confusion in the future? How will these transactions be accounted for in the trade and balance of payment statistics?

3.26 p.m.

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

I am grateful to my hon. Friend the Member for Dumfries (Mr. N. Macpherson) for raising this matter, which is of very considerable importance and on which there has been a good deal of public misunderstanding. This is, in effect, another form of United States aid, and I join with my hon. Friend in expressing the appreciation of Her Majesty's Government for the aid which is involved.

I would also say a word of appreciation of Mr. Stassen, the member of the United States Administration primarily responsible for these matters. In the last few days I myself have had some discussions with him on these matters, and he is an ideal man with whom to do business. His understanding of and his sympathy with our problems in this country are quite outstanding.

Under the Act to which my hon. Friend referred, Section 550, the United States Administration is empowered to apply not fewer than 100 million dollars and not more than 250 million dollars towards financing the purchase by other countries of surplus agricultural commodities available in the United States. These surplus commodities are to be paid for in local currency. In other words, if they sell us cotton seed oil or whatever it may be, we pay for it in sterling. That is the first question—these commodities are to be available for purchase by other countries in their local currency.

Lieut.-Colonel Lipton

Because they are short of dollars.

Mr. Maudling

I shall explain that as I go along. The main condition is that these movements of commodities are not to displace the usual marketings of friendly countries. It is a very important condition, and it is an obligation on the United States Administration imposed by Congress, that it should make sure that these sales do not displace the usual marketings. It is, therefore, the responsibilty of the American Administration to see that this does not happen, and it is, of course, also very much the responsibility of Her Majesty's Government to make sure that no Commonwealth trade is displaced by these movements of commodities.

The only commodities affected so far have been tobacco and prunes. We have made apurchase for sterling of American tobacco to the value of some 20 million dollars. This tobacco will go into stock. We have the assurance of the manufacturers concerned, who are buying the tobacco, that they will apply it to stock and will not tranship it anywhere else. As my hon. Friend says, there is considerable scope for additional stocking of tobacco. At the moment, I understand, to bring tobacco stocks up to the normal pre-war level would need about another 180 million pounds of tobacco, whereas the amount concerned in this transaction is more like 27 million pounds. Quite clearly, this movement of American tobacco to this country will add to our stocks—which is a very good thing—but it will not in any way displace the normal marketing of Commonwealth tobacco. I am glad to be able to give that assurance.

The other commodity so far considered is prunes, in which the Commonwealth, apparently, has no particular interest. I am informed that there is a very large unsatisfied demand for prunes, and the American type of prune is quite different in quality from the type we obtain from other countries. This surprising information, which, in practice, I have no reason to doubt, shows that there is no danger in the case of prunes, any more than in the case of tobacco, of this movement of commodities affecting the normal marketing which would otherwise take place.

The programme we have been discussing with the United States Administration amounts to 60 million dollars and the other commodities with which we have been mainly concerned are fats and meat. My hon. Friend will readily recognise that in the case of fats and meat there is no danger whatever, in current circumstances, of purchases from the United States affecting Commonwealth markets. My hon. Friend referred particularly to the question of fruit. That has been raised but there are very considerable difficulties involved in the purchase of fruit by the United Kingdom under these provisions.

I can give my hon. Friend a definite assurance that if we should make any purchase of fruit of any kind we should do so only if the conditions to which I have already referred are fulfilled and there is no displacing of Commonwealth supplies. That is not only an obligation on us, but on the United States Administration.

Mr. N. Macpherson

That does not include apples?

Mr. Maudling

Yes, and apples.

That is the position on the question of displacing normal markets. In the case of each particular commodity any such movement will not displace normal marketing and it is a moral obligation on the Government, and equally a statutory obligation on the United States Administration, to make sure that no such displacement should take place. I am glad to have the opportunity in this debate of making that perfectly clear, because there has been a great deal of misunderstanding on the point.

The next question I was asked is what happens to the local currency. It is provided under Section 550 that the local currencies—in this case the £ sterling—whichthe American Administration acquire from the sale of these commodities can be applied for a number of different purposes. I think there are altogether six different purposes for which this sterling can be used. In our case we have agreed with the American Administration that for this 60 million dollars the whole of the sterling proceeds shall be applied to the support of the United Kingdom's defence effort. In practice, what happens is that the United States say that here is some tobacco, prunes, lard, or beef which they will sell for sterling. We say, "Thank you very much." They give it back again and say, "Spend that to help finance your defence effort."

My hon. Friend will see that it is tantamount to a gift of the United States to this country. The economic effect of the whole transaction is that there is a transfer of the surplus commodities from the United States to the United Kingdom without any additional burden upon our economy. I would have thought that hon. Members on both sides of the House would regard that as a singularly enlightened and sensible practice. There used to be criticism, before the war, of the destruction of consumable commodities in surplus supply. It is good to see this enlightened system applied to United States' surplus commodities.

My hon. Friend asked one or two questions about the alternative uses to which the American Administration can apply this sterling under the Act. It can apply it, for example, to offshore purchases and for stockpiling by the United States Government. If that were done, the situation would, I agree, be entirely different. Under the American legislation, they can, if they wish, use the sterling for that purpose, but there is the specific agreement between us and the American Administration that in the case of 60 million dollars worth of commodities the whole sum will be applied to the support of the United Kingdom defence effort.

There is one small point which, perhaps, my hon. Friend had in mind when he mentioned the Colonies. There is a small additional sum of a few million dollars in respect of further commodities that may be made available, in which case it is agreed between us that the sterling counterpart should be applied towards colonial development, but this would be colonial development by us. My hon. Friend will agree that that is just as desirable a project as the application of sterling for the maintenance of our defence expenditure.

This, therefore, is the position. These commodities are being made available to us by the U.S. Government for purchase in sterling—

Lieut.-Colonel Lipton

Thus saving dollars.

Mr. Maudling

They are being made available to us for purchase in sterling; that is the object of the United States legislation in the matter. I cannot see the slightest point in the hon. and gallant Member's intervention. These commodities are being made available to us for purchase in sterling.

The movement of these commodities I can give a certain guarantee on this—will not affect the normal marketing of Commonwealth products, and the sterling which the Americans obtain from us in exchange for these commodities is handed back to us as a contribution to the support of our defence efforts, which they recognise, and which we are all proud to recognise, is an outstanding defence effort in Western Europe. I think, therefore, it can be fairly said that this is another example of the enlightened, sensible and wise policy of the United States Administration in its dealings with Western Europe.

Lieut.-Colonel Lipton

May I put a question to the hon. Member? The whole object is to save dollars, and are not the American Government being enlightened so that we can have the benefit of these surplus products without having to pay dollars?

Mr. Maudling

The hon. and gallant Member must have failed to understand every word of my speech.