TRADE WITH CHINA (Hansard, 18 April 1957)

§ Mr. John Rankin (Glasgow, Govan)
I desire to draw attention to the need for improving our trade with China. Last autumn I had an opportunity, with some colleagues on both sides of the House, of visiting that great and expanding nation. I spent some time in Manchuria, with Shenyang as my headquarters, in Pekin, Shanghai, Hankow and Canton, visiting industries, agricultural centres and other places of importance in the neighbourhood of those great cities. Everywhere we went the keynote was that of an expanding economy. In industry, agriculture, and commerce, China progresses with rapid steps.
Other nations are not blind to this depelopment, and so, today, China has markets in 68 countries with 21 intergovernmental trade agreements, and she is also penetrating the Middle East. Internally, her petroleum, iron, coal and farm products are all on the increase. Transport improves. Wages are rising. Schools and hospitals are being built, and there are great new housing schemes. Last year, £12,000 million was set aside for capital development in all its phases.
In 1924, the total British trade with China was £35 million. If we relate that to present-day prices, it represents not less than £100 million. Yet the latest returns put our total import and export trade with China at £23 million. In a market which has expanded almost beyond belief since 1924, our total trade is now less than a quarter in value of what it was then.
It will not be disputed that until 1949 Britain played a pioneering role in commercial and economic relations with China, even after she had ceased to be a leading country in the China trade. This was due not only to private enterprise, but to Government policy. As late as 1946 Sir Stafford Cripps thought it politic to appoint a mission: To consider the best methods of developing trade between China and the United Kingdom … so as to provide a firm basis for future expansion. Nobody regarded such a move as in any way remarkable at the time. The China trade, in addition to being traditionally 2130 important for the United Kingdom, was essential to the prosperity of the Colonial Territories of Hong Kong and Malaya.
No echo of that is heard in expressions of public policy today. It would not be surprising if some of the big merchant houses which lost business and property in China after 1949 decided to write down the China trade to a fraction of its former importance. But it is not these who show indifference. It is the Government who see nothing alarming in the prospect of an 80 per cent. share in the industrialisation of the world's largest undeveloped area falling into the hands of the Eastern European bloc.
It is the Government, too, who think that it would not be helpful to issue a White Paper on the subject of the China trade. Recent Answers in Parliament make it clear that the present Administration believes that this country can afford, in this case, to let commercial policy be the handmaiden of short-term foreign policy. The Foreign Secretary, on 28th January, said: … this is not solely a question of trade… there are much wider political considerations involved."—[CIFFICIAL REPORT, 28th January. 1957; Vol. 563, c. 672.] The United Kingdom is not prepared to take the lead in dissociating itself from the rather petulant embargo policy enforced by the N.A.T.O. group since 1951, and it is thus left with no possibility of positive action save by means of exceptions in the more obviously absurd cases. In the Government's words, we permit trade "within the limitations of the exceptions procedure."
This leads to the ridiculous example which I have offered from the Floor of the House about the Bergin Company, in Glasgow. At present, diesel engines are going out in agricultural tractors to China to help in the production of food from the ground, but the same diesel engines cannot go out in China's fishing boats to help in the production of food from the sea. In one case they come under the exceptions rule, but in the other they do not. Why? No one, let alone the Government, has been able to tell me.
This is the truth, the whole truth and nothing but the truth. Britain at present has no positive policy on trade with China. Her policy is to make exceptions her policy. While the Government have 2131 been paying a lot of attention to some doubtful projects for exclusive trade areas in Europe, they have been dragging their feet over something which is much more to the point so far as our businessmen and industrialists are concerned.
China is not the only example of a large potential market in which British exporters have been placed under a handicap by the short-sighted policy of the Government and their inability to understand the need for trade promotion, but it is the largest and most rapidly developing, as well as being a part of the world in which British goods, particularly engineering goods, were traditional and enjoyed an unchallenged reputation for quality of workmanship.
For centuries, China was a most important market for British goods. Even members of the present Government cannot have forgotten the hundreds of millions of pounds worth of trade that flowed through Hong Kong in the early years of the present régime in China, before the embargo was imposed in 1951. As long ago as 1953, the Governor of Hong Kong, Sir Alexander Grantham, said publicly that he considered the potential for trade with China "immense", and likened the embargo to a knife cutting, the throat of this British Colony, a knife handed out by the hon. Gentleman opposite and his associates in the Government.
Sir Alexander also said that the United Kingdom and Hong Kong would be among the first to benefit from the lifting of the embargo, which had certainly been effective so far as Hong Kong was concerned, for it had done enormous damage to the Colony's economy, but was quite ineffective in retarding Chinese industrialisation or in reducing her war potential.
Similar opinions to this have repeatedly been voiced during the six years that the embargo has been in existence, by the chairman of the Hong Kong and Shanghai Banking Corporation, the Federation of British Industries, chambers of commerce in this country and in many parts of the Commonwealth, and representatives of industrial constituencies on both sides of the House.
The Government, however, are still treating the vital question of this trade as a part of some obscure and tawdry poli- 2132 tical bargain. It is not clear who is gaining from the bargain, but British industry is certainly losing. Britain has not only lost her place as the leading exporter to China, but is now a long way down the list, below even countries like Switzerland, which are supplying power stations while British firms are prevented from sending even a small diesel engine or a few bearings for sugar mills which this country had supplied before the war.
The Government, through the mouth of the President of the Board of Trade himself, have now revealed the reason for their inaction. The right hon. Gentleman came to the House on Tuesday determined to belittle the prospects of greater trade with China and unembarrassed by any facts about the subject. A Government supporter, the hon. Member for East Aberdeenshire (Sir R. Boothby) described the situation as "something of a scandal." It is certainly a scandal that the Board of Trade, which is in charge of the country's commercial affairs, should be utterly misinformed not only about the trade that could be done, but about that which is actually going on now.
The right hon. Gentleman said that China trade is in balance with us. It is not. I ask the Joint Under-Secretary to tell us which is correct. My assertion is that it is not in balance. The Chinese have a persistent favourable balance even in their direct trade with this country. But the Board of Trade should not need to be reminded by hon. Members that it is misleading to look at the figures for direct trade in isolation from those for British dependencies.
Hong Kong imports from China every year nearly £60 million worth of goods more than she sells to her. Malaya imports £12 million more than she sells. In addition to what she earns in the sterling area, China is adding to her surplus as a result of trade with Japan and various other countries, which is conducted in sterling. The most authoritative estimates put her surplus of sterling on current account at around £100 million per annum. This, as the Economist pointed out a few days ago, makes China the sterling area's principal short-term creditor.
When the Government talk about China needing a loan from Russia before she can do more trade with this country, 2133 they are living in cloud-cuckoo-land or, as my right hon. Friend the Member for Ipswich (Mr. Stokes), who himself is a business man, trying to carry on business with China in relation to the great scheme of irrigation now going on in the Yellow River, said in the House on Tuesday, they are speaking in a vacuum. It would not be unfair to say that that is an atmosphere, or lack of atmosphere, with which they are fairly familiar.
It is worth looking carefully at the exports and imports between China and Hong Kong. In 1950, they were £140 million; in 1951, £152 million. Then came the special China embargo and, while imports from China to Hong Kong increased to £65 million, exports sank to £8.3 million, making a total trade of £73 million, and so keeping up the great sterling balances that China holds in Hong Kong today.
What is being done with that large sterling surplus? China gave a loan of several millions to Hungary a few months ago. She bought Swiss francs and loaned them to Egypt when we had blocked Egypt's sterling balances—the hardest currency in Europe was given to Egypt for her support, far greater than the promised help of 250,000 soldiers the Chinese threatened to send during the Suez episode. Those are examples of the use to which she puts this sterling.
Japan is a potential outlet for the use of that sterling. I quote from The Times of yesterday: The Kishi Government intends to give mare positive support to Japanese trade with China than its predecessors. It is contemplating direct assistance to three organisations sponsoring greater commercial intercourse… Moreover, many facilities, short of diplomatic privileges, will be granted to the Chinese trade mission which is expected to be established in Tokyo. So Japan is conducting a big drive at the moment to extend her trade with China which is in surplus with her.
If China wants to buy more, she can use sterling, which, in the long run, comes from us, to buy Japanese machinery at our expense. That is the road along which unemployment for industrial workers in Great Britain lies. The Government are actually shaping the tools of our own destruction. If exports are to be increased, then all potential markets 2134 must be open to us and that should be made clear to the American Government.
It is far better that China should use her surplus sterling to buy our goods than that she should employ it against us. After all, in extending recognition to the Chinese Government the Labour Government took many kicks. Is it not time that the Tory Government were collecting some of the ha'pennies which are said to go with the kicks?
I want to put one or two questions to the Joint Under-Secretary and I hope that he has come here armed to answer them. Is it Government policy that we should relinquish control of large sums of sterling every year, as we have done, or are we subject in this matter, as in so many other things, to this improper liaison in Paris known as Cocom? Surely it is very unfair to the fair name of Paris that all the illicit international connections should be carried on in that beautiful city.
Cocom has two aspects. The first is that it is a device for passing the time without any action. Although it is now clear that the real decisions on Britain's trade with the East are being left to America, the Government still insist on going through an interminable rigmarole with 14 other countries in Paris every time it is their duty to come to decisions about British trade. There is a second aspect of Cocom. It is a possible leak—and this has been frequently alleged—of British business intelligence to our commercial rivals.
The Secretary of State for Foreign Affairs informed us yesterday that we have received the American verdict on our trading future in the Far East. What are its terms? Will the Joint Under-Secretary tell us something about them? Must they be referred to Paris, and months and months be spent discussing them? Are the limits placed on our trade clearly defined? If there are relaxations, what have we yielded in return?
I do not want to provoke any anti-American attitude in this. I am looking at it purely from the point of view of Britain and Britain's interests. I hope that the Joint Under-Secretary will deal with the question from that aspect and give us answers which are not only in the short-term but also in the long-term interests of the nation.

§ Mr. William Teeling (Brighton, Pavilion)
I have listened with fascination to the hon. Member for Govan (Mr. Rankin). Fortunately, I remember my history in this affair, and I must say that he has left out a good deal. He referred to Sir Stafford Cripps, in 1946, making studies about future trade with China, but he did not mention that that was the China of Chiang Kai-shek, which was at the time our ally. He had fought with us during the war and was in close touch with America, from where dollars also came.
I remember that in 1947 Lord Attlee sent out a delegation to Chiang Kai-shek, led by Lord Ammon, and I went with that delegation. I remember how anxious they were to develop trade, but later came the revolution of Red China and Chiang Kai-shek went to Formosa. In 1950, the China Association here in London put very great pressure on the Foreign Office and Mr. Bevin, I think rather unwillingly, finally agreed to recognise Red China although Australia, New Zealand, Canada and South Africa not only did not then but have not since recognised Red China.
Chiang Kai-shek moved into Formosa, where there are today about ten million people with about 300 million dollars a year from the United States, but the hon. Gentleman did not even refer to the possibility of trade with them or to the fact that in Hong Kong nobody seems to think about that. [Laughter.] The hon. Gentleman laughs; I cannot think why. There is no reason not to trade with them. They are perfectly friendly towards us in every way, and I can hardly believe that Red China really is.
I ask the Labour Party: what is their attitude on this matter? We know that Red China, like Red Russia, is not entirely a country of forced labour, but we know that the authorities can, and do, force the people to work in whatever way they want. Yet we are now being asked to make it possible to send to that country all sorts of equipment with all sorts of possibilities for them to develop industries which will be in competition with our own one day and which, one can truly say, will be operated by slave labour. What is the answer to that?

§ Mr. Rankin
The equipment is going there now.

§ Mr. Teeling
Mainly from Russia.

§ Mr. Rankin
West Germany.

§ Mr. Teeling
We should have some principles.
Only last Tuesday I asked the President of the Board of Trade to state the exact figures. We heard them given in millions by the hon. Gentleman, but in percentages they do not seem as vast, and show that in 1936 trade with China was only 1.8 per cent. of all our trade with the outside world, leaving out the Dominions. In 1946, when we were at our highest, getting more trade than before the war, with China and doing all we could—I think that even the China Association will admit that—they were only 0.9 per cent. Now the figure is down to 0.6 per cent.
The President of the Board of Trade also told us: In present circumstances. I see no advantage in attempting to make a trade agreement with China. He also said: It is a fact that Chinese trade is in balance with us, and as far as I can see, unless China sells less to Russia or gets a credit from Russia, there is very little chance of any substantial expansion."— [OFFICIAL REPORT. 16th April. 1957; Vol. 568, c 1725–6.] Therefore, I should like to ask what is the reason for so much pressure to get this tiny amount of trade? Why should we try to develop it when we know that it will alienate people in so many areas of South-East Asia who are anti-Red? Is this an effort to help the Red countries, to alienate the U.S.A., or is it a genuine effort to help British industry?

§ Mr. Douglas Jay (Battersea, North)
The hon. Member for Brighton, Pavilion (Mr. Teeling) asked what was the attitude of the Labour Party on this issue. It is exactly the same as that of the Federation of British Industries. We are in favour of doing trade wherever we profitably can, unless there is some overwhelming political argument against it. I believe that in 1951, in the conditions of the Korean War and the United Nations decision, there was a case for an embargo; but it seems to me that it has been totally indefensible ever since 1953, when the Korean armistice was signed. So far as I can see, it is four years out of date.
2137 Apart from the hon. Member for Pavilion—and even he may reconsider his view—there is almost nobody left in the country who, independently of United States opinion, would wish the embargo to continue in its present form. My hon. Friend the Member for Govan (Mr. Rankin) put the whole case. There is very little time; therefore, I will say only this. The Prime Minister, as soon as he came back from Bermuda, promised to make a statement on the matter—I think he said very shortly. I hope that we may have an assurance that it will be made at least by the end of the month.
I hope that the Minister will not today, as did the President of the Board of Trade, a few days earlier, think it necessary to play out time for this further week or two by thinking of all sorts of reasons for continuing the embargo indefinitely.

§ Mr. Stephen Swingler (Newcastle-under-Lyme)
I hope that the Minister will deal with the argument of the hon. Member for Brighton, Pavilion (Mr. Teeling) that trade policy should be governed by questions of general political discrimination. This is an extraordinary argument which, when considered on a wide background, raises many interesting questions, including that of the colour bar. How far would he wish to carry such an argument?
For good or ill, the Government recognise the existence of the People's Republic of China. We are arguing that there is no reason why our trade policy with that country should be hampered in the way it is. Twelve months ago—to be precise, on 11th April, 1956—the then Minister of State for Foreign Affairs, in answers to Questions, said: Consultations are proceeding and it is hoped that the China Committee "— that is, the China Committee of the Paris Consultative Group— will shortly be convened to discuss this subject. that is, the subject of reducing the embargo on trade with China. Later he said: I am well aware of the considerations in the mind of the right hon. Gentleman and in the mind of the House on this matter. We are consulting with our Allies on this point—they are fully aware of our point of view— 2138 and I hope that some further satisfaction and, possibly, relaxation of the list will emerge from the review to be conducted by the China Committee "—[OFFICIAL REPORT, 11th April, 1956; Vol. 551, c. 201–2.] Since 11th April of last year, when the Minister of State made that statement, there have been, we are told, 47 meetings of the Paris Consultative Group which is the machinery for co-ordinating the policies of the Western Powers in their trading relations with China. Nothing, so far, has been forthcoming despite the promise made by the then Minister of State about relaxation of the list.
This is a time for firm decision. Here is an example of vacillation. Of course, we all believe that there should be consultations with our friends and allies, but there is a limit to the process of consultation. If there are basic disagreements on policy, let those disagreements be declared and let Her Majesty's Government have the courage to make a decision. Having taken certain lunatic decisions, such as those about the hydrogen bomb, at least let them be prepared to make a sane and sensible decision about trade with other countries.
We are not at war with China. We recognise them diplomatically. There are no reasons such as there were during the Korean War for not trading. We need this trade; we need more exports; we need new exports which can provide employment for many of those who will be made redundant by the run-down in arms contracts. Let the Foreign Office take its courage in its hands and declare a decision now.

§ The Joint Under-Secretary of State for Foreign Affairs (Mr. Ian Harvey)
We have listened to a most extraordinary speech by the hon. Member for Govan (Mr. Rankin). He managed throughout the whole of it to make a speech about this situation and never once to refer to the Korean War or the results of that war upon policy.
It was fortunate that the right hon. Member for Battersea. North (Mr. Jay) came to the rescue of his hon. Friend, as I have no doubt he regularly has to on other occasions.

§ Mr. Rankin
Ours is a co-ordinating committee.

§ Mr. Harvey
The co-ordination seems to have been about as effective as it has been on other issues in recent days; but I will leave that point. The right hon. Member came to the rescue, because his hon. Friend referred to an "obscene and tawdry political bargain."

§ Mr. Rankin
"Obscure" I said.

§ Mr. Harvey
Then I misjudged the hon. Gentleman.
He referred to an obscure political bargain, which, however, was made by his right hon. and learned Friend the Member for St. Helens (Sir H. Shawcross), who was, at that time. President of the Board of Trade in the Labour Government. I congratulate the hon. Member for Govan on joining the ranks of the commercial capitalists, in that he has been advocating the extraordinary doctrine that commercial trade should take precedence over political considerations. That is a doctrine which I believe the right hon. Member for Battersea. North and his colleagues have regularly condemned.
Her Majesty's Government have to pay particular attention to the political aspect of this situation, and, in so doing, to the political aspects in which are involved the good relations which exist between this country and the United States of America. Hon. and right hon. Gentlemen opposite cannot have it both ways. At one time, when it suits their book and they think it is popular, they come out firmly for a pro-American policy.

§ Mr. Rankin
Can the hon. Gentleman tell us where China is getting her dollars?

§ Mr. Harvey
Not from the United States.

§ Mr. Rankin
Oh.

§ Mr. Harvey
Oh, no. Let us be clear about it. I shall deal in a moment with some of the allegations made about the China trade. At one moment hon. Gentlemen are accusing us of not going along with the United States and the next they are complaining because we do go along with the United States.

§ Mr. Swingler
In consultation.

§ Mr. Harvey
I am glad that the hon. Gentleman has raised the question of consultation.
2140 All this relates to the Bermuda Conference. It is quite untrue that Her Majesty's Government have been obscure in this matter. There has been very close consultation about China trade, as the Foreign Secretary stated only the other day. The position is clear. We raised this matter at Bermuda, and we clearly stated, in no uncertain terms, that we considered that the existence of two sets of controls, one for the Soviet Union and one for China, did not make sense. That was done, and everybody knows it.
Let us clearly understand that if there is mutual consultation and if we are to go along together with the United States and not to "go it alone" in the interests of commerce of all classes—which I understand to be the attitude of the former chairman of the I.L.P. in Glasgow, but that is another matter—we must take into consideration the interests, attitude and emotions of our allies. The emotions play their part in politics.

§ Mr. Swingler
Surely the Minister realises that consultation did not start at Bermuda, but has been going on for more than 12 months. The Americans are represented on the Paris Group, and for more than 12 months the Foreign Office has been declaring that consultations have been going on.

§ Mr. Harvey
There is no objection to having consultation. The important thing is to reach a conclusion. We have already said that we believe the time has come to reach that conclusion. There is no argument between us on that point. We must not condemn consultation because it is sometimes necessary to go on with it for quite a long time. No hon. Member would dispute that. It was the purpose of Bermuda to settle major points of difference between us.
We went to Bermuda and stated our case clearly to the United States of America. If we are to go along with our friends we must take their point of view into consideration just as it is necessary for them to pay attention to ours. There is give and take in these matters. The United States of America, unlike the hon. Member for Govan, have not forgotten the Korean War and the part they played in it, or the very serious world conflagration which was avoided by it. We do not forget the causes of that conflagration in the first place.
2141 The United States of America believe that the embargo on China trade should be maintained. As a result of our discussions we have told them that we think that there should be relaxation in the China controls to bring the two forms of control—with the Soviet Union and China—into line with each other. It is our intention to take that course and to reach an agreement between the United States of America and ourselves on the taking of it. We believe that to be a reasonable course of action.

§ Mr. Rankin
Is the hon. Gentleman now stating that the Government have made up their mind to follow the course of bringing the China embargo into line with that on Russia, and that they are going on with that course and hope that America will agree?

§ Mr. Harvey
We believe that the principle of bringing the two into line should be followed. We have asked the United States for their views in this matter. We clearly stated to them at Bermuda that we considered that this was a reasonable thing to do, and that, although we accepted very fully the reservations they had on this subject, we asked them to give us their views. Those views will, we expect, be conveyed to us in the near future.

§ Mr. Rankin
What if their views do not harmonise with those expressed by the hon. Gentleman?

§ Mr. Harvey
That is a matter for Her Majesty's Government to consider in detail. There is nothing secret about this. It has already been stated. We think that, in principle, an operation should be undertaken to bring the two lists as nearly into line as possible. That is our position. If we are to go along with another country in a policy of this sort it is desirable to have the fullest consultations with them, and that we have promised to do.
We have to balance, as the hon. Member for Govan does not seem prepared to do, our export trade against political considerations. He was prepared only to consider the interests of commercial trade. [Interruption.] I believe that the hon. Gentleman said "Not at all," but the whole of his speech was entirely devoted to commercial considerations, which was. 2142 no doubt, a very interesting exercise on his part. I am sure that the commercial interests concerned will be very grateful to him for what he has done. We have to balance the political aspects of this matter and we are doing it in consultation with the United States of America.
Now I want to deal with one or two points—

§ Mr. Jay
How soon does the hon. Gentleman expect a conclusion to be reached? Can we have an assurance that the Prime Minister will make a statement, at least during the present month?

§ Mr. Harvey
It is not for me to make a statement on the time factor on behalf of the Prime Minister. I am sure that when the right hon. Gentleman was in a similar position to mine, he would not have done so about his own Prime Minister.

§ Mr. Jay
It is the Minister's present hope that that will be done?

§ Mr. Harvey
Yes; there is nothing wrong with that. That is what I am saying. There will be a statement on this position before very long. That has already been stated, but I shall not give a time factor.
The hon. Member for Govan totally disregarded the fact that in our dealings with China we have made considerable use of the exceptions procedure. That should he borne in mind by those who feel that we have over-considered the political aspect.
I want to reply to the remarks that have been made about the consultative group. It is untrue that this is a sort of Star Chamber and that consultations have been useless or secretive in an adverse way. It has been a most useful advisory committee, in that a great deal has been done and many points of agreement have been reached.
There is some suggestion that United Kingdom traders have been totally disadvantaged against other nations. That is untrue. United Kingdom traders have been in exactly the same position vis-à-vis the trade with China as traders of other countries who subscribed to this agreement, and that is a very considerable number.
Let me now sum up exactly how we stand in this matter. We will do all we 2143 can to go along with the point of view of our close allies the United States. We have put to them our view in this particular respect. Frankly, we do not entirely share their intepretation of the working of these controls. We must reserve our own right to act in this matter according to the economic interests of this country.
We have to balance and consider the economic interests of our traders, who make a great contribution—and there is no question about this—in relation to our national well-being, and, at the same time, we must weigh up our political obligations to our friends and to the security of the free world, which, I think, was something which rather escaped the arguments of the hon. Member for Govan in putting forward his highly commercialised case. The decision which we shall ultimately make will be based upon a clear balance of those considerations.