EXPORTS (STATISTICAL RESEARCH) (Hansard, 12 July 1961)

§ Mr. John Woollam (Liverpool, West Derby)

I wish to discuss the subject of more statistical research into our export trade, but first I should like to apologise to my hon. Friend for the short notice that he and his Department have had of the subject matter of this debate. I have explained the reasons which led to the change of subject, and I think that my hon. Friend understands them.

I think that anyone would agree that more information on a difficult subject such as exports would obviously be welcome. There are some aspects of our export trade about which too little is known. If more information were available, it might help both the Government and private industry in formulating fresh policies.

By way of example, I suggest three possible lines of research. First—and I put this first because I think that it would probably be the most significant and rewarding line of research—it would help 543 if we could ascertain the proportion of our exports which takes place on credit terms. I am aware that a rough guide is afforded by the returns which come from the Export Credits Guarantee Department, but that is only part of the story. A large volume of short-term credit is afforded through confirming houses, merchanting firms, and manufacturers themselves in the normal course of the trade credit which they extend to clients.

All those forms of credit are not necessarily reflected in the E.C.G.D. figures. If we could commence some research into that aspect of our export trade, we should begin to understand how dependent our exports may be on credit. We should have a clearer understanding of the effect their interest rates have on our exports, and on the competitiveness of our exports. For example, if the Bank Rate goes up I per cent., the finance charge element on our export prices goes up by at least 1 per cent. We do not know, at the moment, over what extent of our export trade that rise happens. Does 50 per cent., 60 per cent. or 70 per cent. of our export trade immediately and directly suffer from this finance charge?

Thus, if we could have more thorough research into this problem of exports on credit, we might have a clearer understanding of the relationship of monetary policy and export prices. That is, if not an unknown, a major controversy in our major export affairs today.

A possible second line of research would be to try to find out what proportion of our exports are being handled by confirming houses and merchanting firms, as distinct from that proportion of our exports which are handled direct by the manufacturers who make the goods in question. It would be necessary, if the results are to be meaningful, for comparative figures for our competitors, particularly Germany, to be produced. I am only guessing, but I suspect that we should find in the case of Germany that a higher proportion of their exports—or, perhaps, a higher proportion in certain categories of their exports—are handled by merchants, often trading on their own account as principals, than in the case of this country.

In any case, such facts and such a contrast would provide a clue to the 544 superior export achievements of, for example, Germany. The question is really whether it will pay us better to put more of our exports into the hands of merchants, whose job it is to specialise in overseas selling, or whether it is a better theory that those who make the goods, the manufacturers, should have that responsibility through their own sales departments of trying to sell their wares overseas.

These two views exist, and experience in this country has changed considerably since Victorian days. It is my impression that Germany does more of its exporting through merchants than does Britain. It may be easier, if the statistics are made available, or amplified, to examine further our invisible export earnings, particularly with regard to shipping and investment overseas.

I have two points in mind. First, in the case of shipping, we have the global totals for the overseas earnings of our shipping but what would be more significant, I think, would be for us to find out what proportion of those earnings represent cross-trades—earnings of our shipping industry which result from their bearing on two foreign countries without them touching this country. It would be a guide to the formation of taxation policy, for it would give a better understanding of our overseas earnings that are truly earned overseas without any United Kingdom element entering into it.

Many European countries exempt, or partially exempt, earnings from cross-trades, and such a view is mot dissimilar to that which inspired the overseas trade corporation concept in 1957. We should also 'have a more informed picture of our shipping earnings which would help us in deciding policy in regard to cargo discrimination, because the main argument against this country retaliating, and the Board of Trade commencing any policy to take powers to retaliate, is whether or not we are more vulnerable than any country to retaliatory methods, and whether those retaliatory methods would really hurt us in hitting cross-trades between two foreign countries. Statistics may be available, but they do not seem to be generally understood or known. If made publicly available, they would help many of us in forming our views about those two aspects of shipping policy.

545 Also, there is the need for more information about invisible earnings coming from our overseas investments. I need do no more than refer briefly here to certain articles which have appeared in recent months in bank reviews which have expressed disappointment at the yield or reward in terms of invisible earnings flowing to this country from the considerable post-war investments overseas. The disappointment ends on a note of puzzlement because there does not seem to be an analysis available of quite why that should be so and why we are not receiving the dividends, yields and rewards which we expected.

I well understand that my hon. Friend, in replying to those three points, may not be able to carry the discussion very much further tonight—they are technical points—and he may wish to correspond with me later. I hope that, at least, he will not present the argument that what I suggest will simply mean more paperwork for industry. Industry will always co-operate—this has been my experience in business—for the purpose of research if the research has as its objective helping the Government to increase their understanding and formulate a better informed and more effective policy.

§ The Parliamentary Secretary to the Board of Trade (Mr. Niall Macpherson)

I congratulate my hon. Friend the Member for Liverpool, West Derby (Mr. Woollam) on his second choice of subject tonight and on speaking on it so lucidly. I shall do my best to deal with the points he has raised. He was kind enough to say that I was under certain limitations in dealing with them now; nevertheless, I hope to be able to give some response to his arguments and suggestions.

My hon. Friend said that more information is welcomed. That, of course, is well recognised by the Government. He will probably recall that my right hon. Friend the Prime Minister on 1st August, 1956, when he was Chancellor of the Exchequer, gave six or seven matters on which he intended to obtain further information. One rather interesting thing he said in answer to a supplementary question, which has a bearing on our debate tonight, was this: I think that the part of our statistics which is already almost complete is that which deals with exports and imports. That is very com- 546 plete and up-to-date, and I do not think that very much more needs to be done to improve it. However, he went on to say: With regard to invisibles and the balance of payments—and especially the movement of capital—we are consulting the Bank of England to see whether we can make this information more up to date, more complete and more accurate."—[OFFICIAL REPORT, 1st August, 1956; Vol. 557, c. 1403–4.] The results of that consultation came when Lord Amory made a further statement in a Written Answer on 28th April, 1959, in which he dealt with balance of payments statistics. He said that he intended to invite industry to co-operate in the supply of statistics on this very point of invisibles and the balance of payments. He said: The first is interest, profits, dividends and capital transactions connected with investment by British companies abroad and the similar investment by overseas companies in this country."—[OFFICIAL REPORT, 28th April, 1959; Vol. 604, c. 114.] I am happy to say that we have had excellent co-operation from industry in this respect. Naturally, it has put an extra burden on industry, and, in certain cases, companies have occasionally demurred at supplying the extra information; but when it was pointed out to them how very valuable the extra information was, in every case, I think, they have been willing to supply it. I acknowledge the ready cooperation of industry and the great value of it. We do not pretend that we have reached perfection by any manner of means. There is a good deal more to be done on this side of the "invisibles" and particularly on the side of overseas investment from this country and the returns on that.

My hon. Friend has raised three specific points, the third being divided into two parts, and perhaps I might deal with those points in the order in which he raised them. He asked, first, about what proportion of our exports were made on credit terms and on that he referred to export credit guarantees. I can tell him that the evidence of the guaranteeing of export credits is a most useful pointer. About 18 per cent. of export trade is guaranteed by the Export Credits Guarantee Department, and about three-quarters of these credits relate to goods supplied on six months' credit or less.

In highly competitive fields, even 1 per cent. of price matters, and it would be 547 completely wrong to give the impression that a small percentage was insignificant in these calculations. For example, if we were borrowing at, say, 8 per cent. and our competitors were borrowing at 4 per cent. and the credit was for three months, our credit would be adding 1 per cent. to the bill over that of our competitors. It must also be remembered that credit rates represent only one factor, but they tend to affect the whole economic field. A reduction of interest rates in general might have an adverse effect on our export trade. It might well result in higher imports, less personal saving, and more expenditure on consumer goods.

What my hon. Friend suggests is that it might be possible to establish the overall extent to which our exports are handicapped by high borrowing rates. The difficulty here is to get exact information. For example, some exports are specifically financed by borrowing, such as the more expensive capital goods, but in other cases manufacturers finance them from internal reserves or by borrowing. There is a variation between manufacturer and manufacturer, between market and market, and even between customer and customer. Nor, if we had the information, would it be very much use unless we also at the same time had information from other countries, and that, so far as I know, is not available.

We shall, however, certainly have a look again at this point. I am not certain as to how far we can meet my hon. Friend on that point. It would be a valuable pointer if we could get it, but I must say that I am not certain at first sight whether it would not involve a disproportionate amount of information being sought from industry, and a disproportionate burden being placed upon it. In the last resort, this matter is dictated by the economic situation of the country in which our export drive must work.

My hon. Friend suggests that we ought to know the proportion of our exports handled by manufacturers, as compared with those handled by merchants and confirming houses. My hon. Friend asked how the proportion compares with the German figure. All I can say is that the information collected in the 1950 Censuses of Distribu- 548 tion and Production suggested that merchants, including agents, handle over one-third of our total exports. I do not know whether comparable information is available for Germany. I was extremely interested in the suspicion expressed by my hon. Friend that there may be a higher proportion of trading through merchants in Germany and that that might place German exporters at an advantage over our own. I should like to argue with my hon. Friend privately on that subject. We cannot very well go into it at great length tonight, because we are concerned particularly with statistics. I am inclined to think that even if we knew the figure, and even if we knew the German figure, it would be extremely difficult to make any valid deductions from those two figures.

The next point raised by my hon. Friend concerned invisible export earnings on shipping. I do not know whether he is aware that the Chamber of Shipping annual report shows the receipts for freight on cross-voyages; the figure is shown as £332.6 million for the year 1959 as compared with £338.6 million for 1958. I need not pursue that matter further. It is an item of statistics that is well known. I should say also about it that part of the improvement in statistics that has taken place has been due to the cooperation that we have had from the Chamber of Shipping. That co-operation is reflected in the much more ample balance of payments statistics that we are able to show this year.

My hon. Friend then turned to the invisible earnings from overseas investments, which is a matter of great importance and is, admittedly, one of the matters on which we have a long way to go before we reach any sort of perfection, or even satisfaction, in our statistics. Due to the co-operation of industry, we have had great improvements of late concerning British overseas investment and the returns on it. As my hon. Friend said, that has given rise to a good deal of public discussion and a certain amount of invidious comparison. There is no harm in such discussion. It is one thing to get the statistics, but it is quite different to be happy about them when one gets them.

My hon. Friend said that disappointment had been expressed at the yield 549 on overseas investment compared with the yield obtained by overseas investment in this country. It is a fact that overseas investment in this country has been shown to be very profitable and there are, no doubt, reasons why our overseas investments are not so readily apparently profitable. For one thing, our industry often has to invest defensively overseas; that is to say, where it sees that it will lose its trade unless it builds a factory or makes certain investment in another country, it invests in another country for that reason. Therefore, for that reason, the returns may not be as great.

It is also, perhaps, possible that we have invested more in public enterprise abroad and in other forms of enterprise which are bound, in the earlier years at least, to show a lower return. But at any rate, I think, to look at the other side of the picture, that it is really a direct compliment to the underlying soundness and stability of the United Kingdom economy that foreign investors are willing to bring their capital here and are able to invest with such good results. The fact that they do bring it here shows that they are confident of being able to remit earnings and repatriate capital if need be.

There are no figures of the value of our direct investments overseas as a whole and they would indeed be extremely difficult to get. As the Committee on the working of the Monetary System under the chairmanship of Lord Radcliffe recognised, a census of overseas assets would be 550 an extremely formidable undertaking, much more so than in other countries. No other country has so long a history of overseas investment, and in no other are external and domestic finance so interwoven. I would add that if such a census were taken it is doubtful whether anything other than book values could be obtained and it would be difficult to interpret those on assets widespread over long periods of time.

Nevertheless, it is possible to look on the increment of investment in 1958, 1959 and 1960, the last three years, and compare this with the corresponding increment of income. For United Kingdom investment overseas, the latter has been about £20 million, compared with a value for the former of £180 million; for overseas investment in the United Kingdom about £30 million compared with £125 million. All these figures, I should add, exclude oil and insurance.

I hope that I have been able to deal with some of the points my hon. Friend raised. We are improving our statistical methods all the time. We recognise the need for improvement. We are grateful for suggestions how our statistics can be improved and I shall be happy to discus with my hon. Friend these matters at greater length on another occasion. It is important, I would say, that we should not ask industry to provide further information unless we are certain that we can put it to really effective use.