ANGLO-PORTUGUESE TRADE (Hansard, 15 February 1957)

§ Dr. Reginald Bennett (Gosport and Fareham)
Tomorrow, Her Majesty leaves on her State visit to Portugal. I feel that this is a useful occasion on which to draw the attention of a "crowded and expectant" House to the problems of Anglo-Portuguese trade. It is a trade which at the moment is giving grounds for some concern, and it seems, in several ways which I propose to mention, to be coming on hard times.
It is often said that Portugal is our oldest ally, but it is not generally realised how old the alliance is. In 1353 the first alliance between our countries was made, an alliance between the Government of this country and Lisbon and Oporto, a commercial alliance. On 16th June, 1373, a treaty of alliance and friendship was drawn up between King Edward III of this country and King Fernando of Portugal. That was added to thirteen years later, and the treaty of Windsor came about. So for over 600 years we have been in a state of alliance with Portugal, an alliance founded on commercial matters, and the latest addition to the treaties that bind us was the Treaty of 1703, the Methuen Treaty, in which 1688 there was an arrangement that Portugal should import British textiles and that we should import Portuguese wines preferentially as against those of France and other countries.
Nowadays, I regret to say, the picture seems somewhat less happy. Anglo-Portuguese trade has been unbalanced for a number of years. There has been a deficit. There is no great harm in a deficit, but what is alarming is that the deficit seems to be taking an unfavourable turn and increasing. I have some figures to support what I say. While our exports to Portugal are increasing, our imports from Portugal are decreasing, thus making Portugal's balance more difficult.
In 1954, the United Kingdom exported to Portugal goods worth £27.3 million. In 1955, that figure rose to £30.8 million, and in 1956 it was £32 million. As against that, the United Kingdom imported from Portugal in 1954 £16.4 million worth of goods; in 1955, £20.2 million, and in 1956 it dropped to £19.97 million. In other words, since last year the trade gap for Portugal has widened from £10.6 million to £12 million, a matter of concern to both Governments and, incidentally, a matter of some distress to a great British interest situated in Portugal.
I am therefore asking my hon. Friend to take note of this difficulty and try to do what he can to help. As my hon. Friend knows, Portugal has been a very good market for us. For instance, since the war we have provided three great hydro-electric stations and now there are such matters as railway electrification and a tube railway for Lisbon, which are of interest to us, as also to France. Germany, Switzerland, Sweden and, no doubt, others.
Recently, German competition in the export market has become tough, but, happily, our ability to compete has recovered in recent years and we have recently managed to get an order for a £2 million co-axial cable and a £250,000 mechanical handling plant for Angola in Portuguese Africa. We have recovered our competitive power largely thanks to Government action in this country.
Now there is a great iron and steel project in Portugal which has been under consideration for no less than two years. It amounts to about £10 million and Krupps of Germany are very closely 1689 interested in it, as, indeed, are we. Clearly, it will be difficult for Portugal to accept tenders from this country readily, if we are not permitting its exports to enter this country to a reasonable extent. I therefore feel that it is necessary for us now to review the imports from Portugal to see if help can be given.
How is this to be done? There is one trade which has been conspicuously damaged since the war, the one I mentioned earlier, which has no less than £12 million of British money invested in Portugal itself. I mean the port wine trade, a trade with which most hon. Members are greatly in sympathy, no doubt all those hon. Members now present. The port wine trade began after the Methuen Treaty owing to the favourable provisions of that treaty for port wine. It now amounts to about one-third of the sum of Portuguese exports to us, but that one-third, I regret to say. is in itself less than half the volume of the trade in port wine before the war.
Then we used to take four million gallons a year which has dropped year after year since the war to about 1–7 million gallons a year. This is not altogether of disinterest, in that we have British funds invested in Portugal which stand to benefit from any improvement we can make in this trade. For instance, of 80 wine shipping firms in Portugal, 26 were British, although within the last ten years ten have gone out of business, or left British ownership, and there are now only 16 firms which are British owned.
That is a particular problem which I ask my hon. Friend to consider. The reason for the collapse of this trade is by no means difficult to see. It is the simplest of all, that is that the stuff costs too much. There are many reasons for that in an inflationary period, not least the fact that 8s. 4d. a bottle is paid to the British Government. Port has to be able better to compete in our markets with other imports and the trade association, which I understand exists to further port selling in this country, will be able to do a great deal to improve the sales of port here. It does not need to do very much to encourage people to drink vintage or crusted port. Perhaps the 8s. 4d. a bottle does not act so heavily against a wine which, through its merits, 1690 is exceptionally expensive anyway, but what is suffering greatly is at the other end of the scale, what one might call the pub trade, in that the once familiar "port and lemon" has almost become a thing of the past.
There is, of course, a great deal which could be done to encourage the drinking of Portugese wine and port wine among the many millions who, since the war, have started drinking table wines for the first time. There is a much wider consumption of table wines, but port has been at a great disadvantage.
The trade association, do what it will, will have a hopelessly uphill fight if the Government are against it, and I regret to say that they are against it now. At another time I shall hope to draw attention to the fact that the duty on port is now 525 per cent. more than it was before the war—six times as much in all—whereas the duty on other wines is not more than twice as much.

§ Mr. Speaker
The hon. Member is not entitled on the Adjournment to urge any measure which would involve legislation, such as an alteration in the duty on wine.

§ Dr. Bennett
I am sorry, Mr. Speaker, but I did preface my remark by saying that on another occasion I should seek to draw attention to that matter. It was an allusion in passing, a side swipe, so to speak, at this subject.
I ask my hon. Friend to take notice of the difficulties under which the trade is labouring, to study this particular matter and do what he can to help, because, through helping this import trade to England, our export trade to Portugal can be assisted and only in this way can we make it increase. I should say that the present moment is very timely for doing that because the trade talks are to take place on 26th February and our oldest ally—an ally of 600 years standing —is not a bad country with which to try to foster good trade at a time when in other countries and mostly in other continents bad faith seems to be a primary tenet of government. Thirdly, Her Majesty's visit to Portugal at this time is a very good occasion on which to consider our problems of trade, to try to clear up the difficulties which exist and thus bring help and new prosperity to a relationship which has both history and mutual interest to recommend it.

§ The Parliamentary Secretary to the Board of Trade (Mr. F. J. Erroll)
I should like to join with my hon. Friend the Member for Gosport and Faraham (Dr. Bennett) in agreeing that this is indeed an appropriate occasion for a short discussion on the subject of Anglo-Portuguese trade, in view not only of the visit of Her Majesty to Portugal tomorrow, but also because of the forthcoming Anglo-Portuguese annual trade talks.
Before dealing with the detailed matters which my hon. Friend has raised, I should like to give the House some facts about our overall trading position with Portugal. The United Kingdom at present, as my hon. Friend pointed out, has a trading surplus, not only with what I would call Peninsula Portugal, but also with the Portuguese monetary area—which includes the Azores and Madeira—as well as with all Portuguese overseas territories. Our exports to Portugal have been increasing during the last three years.
I should like to make one or two minor corrections of figures my hon. Friend mentioned because they serve to show how well we are doing. The figures I wish to give are that over the last three years our exports have risen from £27.8 million in 1954 to £32.7 million in 1956, that is with the Portuguese monetary area. The figures for Peninsula Portugal show a rise from £18 million to £21.3 million.
Our principal exports to Portugal include coal, coke, iron and steel, general machinery, electrical machinery and road vehicles. United Kingdom imports from the Portuguese monetary area have also risen, from £16.4 million in 1954 to £20 million in 1956. Our principal imports include wolfram, pit-props, timber, which is mainly cork and cork manufactures, wine, fish and edible nuts.
My hon. Friend referred to the need to obtain permission in order to import more from Portugal into this country. I should like to correct that misapprehension on his part because practically all the trade between the United Kingdom and Portugal is liberalised in both directions, that is to say, there are practically no quantitative or other restrictions on the free movement of goods and materials in either direction between the two countries.
1692 My hon. Friend also referred to the many treaties that exist between Portugal and this country, including one old commercial treaty. As he himself pointed out, our trade arrangements with Portugal are today settled annually and are confined mainly to the negotiation of quotas for the import of the few goods which are still subject to quantitative or other restrictions and which are, of course, therefore, not fully liberalised.
Trade talks, as my hon. Friend mentioned, will start for 1957 in the course of the next few days. My hon. Friend referred particularly to the United Kingdom surplus, or, as he preferred to call it, the deficit, in our trading balance with Portugal. It is quite true that the United Kingdom enjoys a trading surplus, but one should also look at the sterling area. The fact is that the rest of the sterling area is in deficit with Portugal to a rather greater extent than the United Kingdom is in surplus, so that when one comes to look at Portugal's trade with the sterling area as a whole, one finds that we are slightly in deficit. That is the normal pattern year by year. The deficit runs at the rate of about £2 million per annum, and this is cleared through the machinery of the European Payments Union so that, in actual fact, our trade is in reasonable balance as between the sterling area and Portugal.
My hon. Friend had a good deal to say on the subject of imports of port wine and there is, of course, considerable scope for discussion as to the reasons for the decline in the consumption of port wine in this country. I should perhaps mention that very little port wine is drunk in Portugal itself, almost the whole of the output being exported to other countries. Though consumption in the United Kingdom has fallen from a figure of 4.16 million gallons in 1936 to 1.64 million gallons in 1955, the United Kingdom still remains the principal market for port, taking in 1955 no less than 37 per cent. of Portugal's total production.
It is worth pointing out, too, that no less than 46 per cent. of the decline in port exports between 1936 and 1955 was accounted for by lower sales in markets other than that of the United Kingdom. This would, I feel, in itself be sufficient to disprove the argument that it is the high rate of duty on port which is mainly 1693 responsible for the decline in consumption in this country.
There is, however, a further factor to be taken into account. The duty to which my hon. Friend referred applies to all heavy wines and not just to port. Sherry, being a heavy wine, bears the same rate of duty as port, and sherry consumption in this country in 1955 at 2.86 million gallons has almost returned to the old pre-war level of consumption of 2.88 million gallons, which was consumed in 1936.
If my hon. Friend would like a further comparison, the Australian port-type wines have a preferential rate of duty. The consumption of these port-type wines has fallen now to 10 per cent. of the pre-war consumption, whereas the consumption of the port wine from Portugal is still running at 33 per cent. of the pre-war consumption; which would seem to indicate that the principal factors are not just matters of price but may be a change in social and other habits. Indeed, I think all of us who keep our eyes open are aware of substantial changes in the drinking habits of the British people, whether of alcoholic or non-alcoholic beverages.
What my hon. Friend has said in this debate may or may not represent the whole picture, but certainly the encouragement of port wine drinking is essentially a matter for the trade to foster, and I know that the Port Wine Trade Association is taking steps to popularise the drinking of port in the changed circumstances of today. The Board of Trade is concerned simply with the general flow of trade between the two countries, and I am sure that my hon. Friend will not expect me to make any reference—particularly in view of your Ruling, Mr. Speaker—to the rates of duty on heavy wines which are a matter for my right hon. Friend the Chancellor of the Exchequer. In passing, I should say that the Port Wine Trade Association has recently submitted a memorandum to the Chancellor setting out its case, which I am sure will receive a full and careful examination by the Treasury.
It should be mentioned that we have imposed no restrictions whatever on the importation of port wines into this country. If the British public wish to drink more port, it can be freely imported. Other European countries, on the 1694 other hand, impose quantitative restrictions, and it is possible that they occasionally resort to using a port quota as a bargaining counter in arranging for the import of their own nationals' goods into Portugal.
I should like to say a word or two about growing German competition. My hon. Friend referred to the steel project where, of course, there is powerful competition, some of it I believe from Germany. Germany's share in Portuguese imports has risen rapidly during the last few years, and that country has more than regained her traditional share of the Portuguese market, while we have been no more than holding our own. It must be remembered that Germany was Portugal's most important supplier before the war, and that country's lead over the United Kingdom at present is confined to a few principal groups of commodities.
Germany's advantages at present are only in one or two fields with which I may deal. These include manufactured fertilisers, where shortages of supply in the United Kingdom make it difficult to increase our exports; ferrous and nonferrous ores, alloys and finished steel products: here again, the United Kingdom shortage is well known and prevents exports from the United Kingdom on a greater scale. In the case of electrical machinery we have to admit that there is a willingness on the part of Germany to accept a large proportion of Portuguese labour, particularly on contracts which include site work as well as the supply of machinery. There is also a willingness on the part of continental competitors to encourage the local manufacture of components and the simpler types of electrical equipment which may be required in the fulfilment of part of a large composite contract. This might apply in the case of steel projects and certain other types of projects in connection with Portugal's six-year plan.
We must remember that particularly in the field of electrical manufacture the British electrical manufacturers have very full order books and it is not always easy for them to meet Portuguese requirements as quickly as could be desired. I think the House will agree from what I have said that our exports and our re-exports to Portugal are rising fairly steadily in spite of supply shortages. Furthermore, 1695 we offer a market for Portuguese exports including especially port wine, which is virtually free from quantitative restrictions. German competition has undoubtedly made its mark in Portugal, but, in the main, it is no more than a reversion to the pre-war pattern of trade with Portugal.
Portugal has very large reserves of foreign currency—this is a point which should be remembered—and there is nothing to prevent her financing larger imports from the United Kingdom if she so desires. The fact that we have a favourable balance of trade with Portugal is therefore, no obstacle to further imports by Portugal from us.
1696 We, too, have a large stake in the Portuguese economy. The principal United Kingdom assets in Portugal total some £25 million and there is, therefore, every reason why our long and friendly relations should be still more closely cemented by increasing trade between the two countries. I am sure that what my hon. Friend has said today will play its part in increasing the commercial friendship between the two countries, and that we, can look forward to a steadily developing volume of trade between the United Kingdom and Portugal.