OVERSEAS TRADE (CREDITS AND IN SURANCE) BILL. (Hansard, 3 August 1920)

THE CIVIL LORD OF THE ADMIRALTY (THE EARL OF LYTTON)

My Lords, this Bill is introduced with the object of giving statutory confirmation to the policy recently inaugurated by the Government for establishing trade between this country and certain parts of Europe which have been disorganised by the war. It will not be necessary, I think, for me to say more than a very few words in order to establish the necessity for a policy of this kind. The countries named in the Schedule of this Bill are still amongst the most disturbed parts of Europe. The trade of those countries before the war was largely in the hands of Germany, but they are at this moment in great need of manufactured articles which this country is in a position to supply. It is of vital importance both to ourselves and to the whole economic position of Europe that something approaching to normal conditions should be re-established as soon as possible in those countries. At the present moment they are utterly disorganised and economically destitute. They have large potential resources in the direction of undeveloped industries, but their difficulties, which are caused by political disturbance, by depreciated currencies, and by the shortage of all essential machinery, make it impossible for the necessary work of reconstruction to be begun.

669 This situation affords a great opportunity for British traders to establish new connections and open up new markets, but the risks of trading to-day with those communities are so abnormal that, without some kind of Government assistance, private enterprise alone cannot cope with the situation. This has been realised by other countries besides ourselves. The United States of America have set up a War Finance Corporation, with a trading capital of $1,000,000,000, and similar State assistance has been under consideration in France, Italy, and Switzerland.

My Lords, in those circumstances it was necessary for his Majesty's Government to come to the rescue. On June 21 of last year a scheme of Government insurance against abnormal risks was started; on August 18 the Prime Minister announced in the House of Commons that this would be followed by a scheme of loans to traders; and on September 8 the Export Credits Department of the Board of Trade was established. That policy is now incorportated in this Bill, and is submitted for the confirmation of Parliament. The Government scheme provides facilities whereby British exporters are able to get 80 per cent. of the price of the goods which they supply, and the foreign importer gets a period of time, up to three years, in which to find the money to pay for the goods which he obtains. It is intended to supplement and not to compete with private banking enterprise, and it is one of the conditions of all advances that application should be made to the applicant's own banker.

The conditions attaching to the advances made by this new Department have been set out in a White Paper, and I can summarise them in two or three sentences. A foreign merchant wishing to import manufactured goods from this country, for which he expects to be able to find a purchaser in his own country, but having a difficulty in obtaining the necessary cash to pay for the goods, is introduced by his bankers to the Export Credits Department of the Board of Trade. He then has to deposit securities and ask for a loan, undertaking to repay it within three years. The Department advances 80 per cent. of the total cost of the goods, which, of course, includes freight, insurance, and the commission charged to the exporter which is intended to cover the cost of the Depart 670 ment. Suppose his total comes to £1,000, the British exporter will receive £800, and the debt of the foreign importing firm will be £800 to the Government, on which interest at 1 per cent. above bank-rate will be charged. with a minimum of 6 per cent., and £200 to the British exporting firm. Repayments may be made over a period of three years in instalments, and each instalment will be divided in the proportion of 80 per cent. to the Government and 20 per cent. to the exporter until the whole of the money advanced has been repaid.

I ought, perhaps, to say a word about the financial aspect of the scheme. The staff of the Export Credits Department consists of nine persons, including two messengers, whose total salaries will amount to £7,000 a year, which is, at present, included in the Board of Trade Estimates. It is contemplated that this cost will be covered by the commissions which are being charged to the exporters, and that the Department itself will be completely self-supporting. The work on the insurance side has been carried out by the War Risks Insurance Office, and so far there have been no administrative expenses. As I have explained, business on these lines has already been transacted but the amount up to the present has not been large.

The Bill which embodies this policy—the Second Reading of which I now beg to move—is very short and simple. Clause 1 empowers the Board of Trade to grant credits and to undertake the insurance of goods where the risks are abnormal. Clause 2 fixes the periods during which the Bill operates—namely, during a period of three years from September 8, 1919, in the case of credits, and from June 21, 1919, in the case of insurance. Clause 3 gives power to the Board of Trade to add to the Schedule the name of any country the industrial and financial condition of which has been disorganised by the war. This Bill has passed the House of Commons, I believe, without a Divison at any stage, and I hope that your Lordships will also give it your favourable consideration.