§ Order of the Day for the Second Reading read.
§ LORD PONSONBY OF SHULBREDEMy Lords, this is a one-clause Bill for the prolongation of the time for which guarantees can be given under the Overseas Trade Acts, but perhaps, I should give some explanation of the Bill to your Lordships and of the scheme under which the Overseas Trade Department carries on the present arrangements. The Export Credits Department was set up in 1919, and the Overseas Trade Act, 1920, gave the Board of Trade the necessary powers. The maximum amount of credits outstanding was never to exceed £26,000,000, and that limit is still applied. The first scheme was called the "advances scheme." Advances were made to exporters for 60 per cent. of the 266 actual costs of the goods exported. The scheme was not a success and substantial losses were incurred. The first guarantee scheme was introduced in 1921. The export credits scheme was; prolonged. It was decided to guarantee payments of hills instead of making advances against them. Guarantees were given by endorsement of the bills by letters of guarantee. Under this scheme guarantees for approximately £6,500,000 were given, and the ultimate loss was estimated at about £50,000.
In 1925 Mr. A. M. Samuel appointed a Credit Insurance Committee, presided over by Major Hills, to examine the whole question of credit insurance. The powers of the Board of Trade, which had been due to expire in September, 1926, were extended up to September, 1929. The present scheme differs from the earlier scheme in being very much simpler in operation and giving a much larger measure of insurance. While previous schemes were temporary schemes to meet crises, the present scheme is intended to develop new possibilities in the way of providing financial facilities for export trade. The purpose is to enable exporters to expand their export trade by guaranteeing them against the risk of loss through selling goods on credit overseas. It has a great stabilising influence upon trade and, through its effect on trade, upon employment also. In so far as the scheme enables traders to pass on to the Department a portion of their trade risks and to obtain financial facilities through their banks without pledging additional security, it is a very valuable means of enabling them to carry an increased turnover.
The Department's guarantees are given by means of contracts or insurance policies, guaranteeing the payment at maturity of a proportion, not exceeding 75 per cent., of bills of exchange drawn upon approved importers overseas. The names of such importers are inserted in a schedule attached to the contract, which also specifies the amount of the risk which the Department is prepared to undertake on each name. Payment is made immediately on default. The contract usually covets shipment over a period of six months from the date of the contract, and, in fact, all shipments must be within six months of the date of the contract. The cover provided enables exporters greatly to increase 267 their turnover, since it relieves them of a large proportion of the risk of nonpayment of their bills. Moreover, under Contract B, which was introduced in November, 1928, the Department's guarantee is extended, if he so desires, to the exporter's bank. The bank is thus provided with a first-class security for advances in the shape of an unconditional guarantee of payment at maturity of the acceptances covered by the contract.
Perhaps I might give the results of the scheme during the last three years, since it was initiated. In the nine months ended March, 1927, the value of the contracts issued was £365,000; in the twelve months ended March, 1928, it was £2,455,000; in the twelve months ended March, 1929, it was £4,283,000; in the twelve months ended March of this year the figure reached £5,661,000; and in the last three months up to June £1,742,000: and there is every indication that as the scheme becomes more widely known there will be an increase in the volume of business. Of course, this is only the transactions under the schemes, not the general trade. The Estimates Committee of the House of Commons had the matter before them in 1928, and made certain recommendations, and the late Government duly appointed a Committee, consisting of Sir Otto Niemeyer (of the Bank of England), Chairman, Colonel Peel and Sir William Plender, to consider the question of the administration of the Department, and one of their recommendations was that the scheme should be extended to September 8, 1934. That recommendation has been adopted, with the date substituted of March 31, 1935, as being a more suitable date. They also recommended that commercial accounts on the lines which they laid down should be published, and that an Executive Committee with powers analogous to a board of directors should be appointed.
The Government have appointed an Executive Committee consisting of Colonel Peel, Mr. Caulcutt, a director of Barclay's Bank and the Deputy-Chairman of the statutory Advisory Committee, Sir E. Bain, K.B.E., a prominent insurance broker, and Mr. W. R. Blair, of the Co-operative Wholesale Society. The functions of the Executive Committee will be in the technical side of the De- 268 partment's operations. It may be said that while they are given very full discretion they will not have unfettered control. It is necessary to preserve Treasury control and the necessary statutory requirements which are involved in the composition of the Department. The recommendation with regard to the publication of accounts is being undertaken, but it has not yet been possible to publish accounts in the way recommended for the year ended March 31, 1929. The appointment of the Executive Committee does not deprive the Department of the assistance of the Advisory Committee. The Advisory Committee consists of thirteen members, of which ex officio four are members of the Executive Committee. It will continue the province of the Advisory Committee to go through all the applications submitted, and sift them, confining themselves strictly to the commercial merits of the scheme, and in the event of their not being satisfied turning down such applications as they consider advisable. I have thought it necessary to give that short survey of the evolution of the present scheme, but there are other questions that are involved in the working of this guaranteed scheme, and the question of Russia comes in.
Whatever changes I may have experienced in coming to your Lordships' House from another place, I have not escaped the obligation of participating in discussions on Russia, which are generally liable to be rather acrimonious. I do not think, however, there is any need for bringing in to-day any of the political and controversial subjects, but the noble Viscount, Lord Brentford, has been good enough to intimate that he desires to raise the question of trading with Russia. I think, therefore, that it is as well if I touch upon that subject briefly. On August 1 last the present Government lifted what may be described as the ban against extending credits to Russia, and the increase in the amount of contracts since that time has been very considerable. Every scheme, whether it referred to Russia or any other country, is submitted to the Advisory Committee, and with the exception of three members the Advisory Committee is precisely the same Committee as existed when the last Government was in office. Therefore all the schemes with regard to Russia have 269 been submitted and passed by the Advisory Committee. Gut of the total contracts issued since October 1, 1929, amounting to £5,180,000, business with Russia amounts to £2,260,000, and it seems probable that in the time to come there will be a considerable increase over 1929.
VISCOUNT ELIBANKMay I ask the noble Lord whether he can say that the Advisory Committee are satisfied that the risk in Russia is a good one?
§ LORD PONSONBY OF SHULBREDEEvery one of the applications from traders for the export of their goods to Russia is submitted to the Advisory Committee, and is investigated by them just in the same way as any other contract, and is sifted on its purely commercial merits. I do not think the Advisory Committee take political considerations into account at all. It will be seen, therefore, that the lifting of the ban is not giving any privileges to Russia, but is merely removing an obstacle which hitherto has existed, and it is interesting to note that from July, 1926, to March, 1930, £122,000 has been paid out by the Department in respect of dishonoured bills, but not one penny of that in respect of transactions with Russia. The need in Russia for material and equipment for reconstruction is increasing. The manufactured articles that we can produce are very much needed in Russia, and now that this ban has been lifted it is probable that there will be a considerable increase in our trade with that country.
May I refer to one or two arguments that have been used in another place, and on the platform, very often, against facilitating trade with the Soviet Government? It has been argued very frequently that there is a trade balance in favour of Russia in this country, and that therefore it is undesirable that that balance should be increased, or that we should come to terms with them. It is perfectly true that there is a trade balance. The imports from Russia last year were £26,500,000, and the exports to Russia £6,500,000, so that there is a balance of £20,000,000. But that is the case with several other countries. It is the case with the Argentine to a far greater extent. It is the case with Denmark to a less extent, and with Sweden 270 and Egypt. But in any case it is a misleading way of appreciating trade relations. Trade is not just an isolated set of transactions between one particular country and another, but it is multilateral and covers the whole ground; and therefore really there is no particular argument in claiming that we should not lift barriers 'between ourselves and Russia because there happens to be a trade balance in Russia's favour in this country.
Another argument that is very often brought forward in this connection is that the United States of America have a larger trade with Russia than we have, although they have never recognised the Soviet Government. It is perfectly true that they have a larger trade. The great part of it is due to the importation into Russia of raw cotton—raw material. But it is also rather interesting to note (and here one sees how politics do affect trade, especially with regard to Russia) the fluctuations which can be seen in the table of statistics of our trade with Russia, due to political differences: the original recognition by the Labour Government in 1924, which led to an increase of trade, the break of relations in 1927, which led to a decrease in trade, and the further renewal of relations recently, which has again led to an increase in trade. On each occasion the United States have benefited by that. For instance, in 1927, while the trade or the United Kingdom with Soviet Russia went down from £10,000,000 to £5,000,000, the United States trade with Russia went up from £14,500,000 to £19,000,000.
In that way one does see that the political controversies have from time to time affected trade relations; and I think that the lifting of this ban against guaranteeing trade transactions with Russia has been a step in the right direction. It has been fully justified. There have been no bad debts. I think that this last step is in keeping with the former steps which this Government have taken to draw Russia into the comity of nations, to get rid of the animosity which exists from time to time between the two countries because of a breach of amicable relations, and so to do a great deal to help trade and employment, and to ensure that there shall be no hostility or breach in international relations. I have done my best to be as mild as pos- 271 sible and not to introduce any polemics or any note of hitter controversy, but I think that this Bill, which marks another stage in bringing the two countries together in an amicable arrangement and in fostering trade, and, it is to be hoped, in helping to some extent the grave question of unemployment, is a move most decidedly in the right direction. I beg to move.
§ Moved, That the Bill be now read 2ª.—(Lord Ponsonby of Shulbrede.)
§ VISCOUNT BRENTFORDMy Lords, you will be aware that this scheme is a scheme which has received the support of all Governments, and that a little more than a year ago a Bill of a similar character was moved from the Government Benches by my noble friend Lord Lucan on behalf of the Conservative Government. I need hardly say that I am not proposing to-day to object to the proposals in this Bill. For many years past we have endeavoured when we were in office to foster our trade, and we do believe that the arrangements which were made, through the different attempts under the export credits scheme, have been entirely successful. I notice that in a debate in another place a few weeks ago two of my hon. friends were acclaimed as godfathers of this scheme. If that is so, I must personally have been the grandfather, because I was Minister for Overseas Trade in 1923 when this scheme was in its infancy, and we did our very best to promote it.
I do not, therefore, intend in any way to object to the proposals in the scheme, but I do want to say a few words in regard to the latter part of the speech of the noble Lord. I did, in fact, give him notice that I was very anxious about the new proposals of the present Government to extend the export credits scheme to Russia, and he has attempted to answer in advance the arguments which he thought, and thought quite rightly, that I should put before your Lordships. I shall endeavour to be as mild as he was in his speech, for there is no reason why we should introduce strong language into our debates. But we are entitled on this side of the House to consider whether the proposals which the Government have made, in direct contradiction of the policy of their predecessors, in opening 272 the export credits scheme to Russia, is likely to enure in the long run to the benefit of this country or not.
The noble Lord based his reasons largely upon the condition of unemployment in this country and the desirability of making every possible effort to increase our export trade and to re-open or extend the trade with Russia, which, admittedly, was, from the point of view of exports, very low indeed. That is the policy of the present Socialist Government. I remember that during the General Election they openly advocated the resumption of diplomatic relations with Russia very largely, if not entirely, on the grounds that it would increase the trade with Russia, and that unemployment would be diminished in consequence of that increased trade. In fact, according to many of their speeches, it was to be one of the principal methods of curing unemployment. May I call your Lordships' attention to the pre-War trade with Russia, when, of course, there were diplomatic relations? Either the figures have been forgotten or they cannot have been very thoroughly studied. Our pre-War trade with Russia was really a very minute portion of our international trade. If you take the year 1913, our imports from Russia were £40,250,000 representing just over 5 per cent, of our import trade. Exports were then £18,250,000, representing less than 3½ per cent. of our export trade. That was when there were the fullest possible diplomatic relations between Russia and ourselves.
Compare those figures with others I am about to give. In that same year our export trade to our own Dominions and Colonies was £209,000,000, a very different matter when dealing with unemployment from the miserable sum of £18,250,000 which was the amount of our exports to Russia before the War. After the War our trade with Russia declined rapidly, and in 1926, that is before the break with Russia, the import trade was only £24,000,000, then representing less than 2 per cent, of our total import trade. But our export trade to Russia in that year was under £6,000,000—to be exact, £5,856,000, or less than one per cent. of our export trade. So that really the scope which the noble Lord and his friends throughout the country have suggested for dealing with unemployment 273 by the increase of our trade with Russia is, to say the least of it, very small indeed.
Then came the diplomatic break with Russia. I want to explain to your Lordships—because as Home Secretary at the time I have some responsibility in the matter—that the diplomatic break with Russia made no necessary break of any kind in trade with Russia. If Russia chose not to buy from us, that was not our fault. There was no obstacle whatever, in consequence of the diplomatic break with Russia, put in the way of any trade which any of our traders carried on with Russia. It was my duty to make all the arrangements that trailers in this country needed to enable intercourse between Russia and ourselves to take place, and I can state definitely to your Lordships that never once, acting as 'Home Secretary, did I place any embargo whatever upon any Russian coming into this country for purely trade purposes. There were often embargoes made upon men who desired to come into this country for purposes of propaganda and for other than legitimate trade purposes; but for trade purposes there never was the slightest embargo of any kind put upon any Russian who desired to come here to find out what we could export or what we could deal with in the country or to communicate with our merchants, bankers or manufacturers on questions of trade.
The difficulty then was the difficulty that there is to-day—the difficulty in regard to the finance of trade between Russia, and this country. I am dealing, of course, with exports. The finance of imports was easy enough. There was the credit of Great Britain and of our merchants or manufacturers who bought Russian products. But in regard to export there is one very remarkable instance that I can give and I am sure that your Lordships will not press me for the name of the manufacturer. I had an interview towards the end of my time as Home Secretary with one of the leading manufacturers of machinery who exported to Russia. He came to see me really to get the advice of the Minister as to continuing his trade with Russia. I asked him: "What were the terms of credit when you first began your trading?" He replied, "One year's credit and very satisfied we 274 were." Then I said, "After two years what were the terms of credit?" "Two years credit," he replied. "What are the terms of credit to-day?" "Four years credit." In other words, the credit of Russia or the terms which Russia was prepared to give in regard to the purchase of English machinery were going steadily down from one year's credit to two years credit and then to four years credit. The answer which the Secretary of State was bound to make to a manufacturer asking that question was: "You are a business man, and you must decide whether you think that four years credit is good enough for you to undertake the business." As a matter of fact he did not conduct any further business in that export to Russia.
Now the trade going on is really quite as high as it was before the break or rather just before the break. But in the years 1925, 1926, and 1927 it had been going slowly hut steadily down hill. The noble Lord must not lead your Lordships to assume or to believe that there came a sudden break and that what was a valuable trade to this country was knocked on the head by the withdrawal of diplomatic relations. Our exports to Russia in the year 1925 were £6,250,000—I give round figures; in 1926, £5,750,000 and in 1927 £4,500,000. So that they were steadily on the down-grade then. It is true that after the break in 1927 they fell to £2,750,000, and that in 1929–30—I do not wish for a moment to mislead the House—after the Government came into office and diplomatic relations were resumed, there was an increase of trade, as the noble Lord said. I think it was a very natural thing that Russia should endeavour to increase her trade. But co-incident with or very soon after the resumption of diplomatic relations came the opening of this credit scheme to Russia, and I think your Lordships will find if it is very carefully examined that the increase of trade is due more to the removal of the ban and the opening of the export credit system to Russia than to any resumption of diplomatic relations.
The noble Lord chose to deal with the question of the United States of America which, he said, had consistently refused diplomatic relations with Russia. That is correct; but America does a far larger export trade with Russia than we do. The latest figures I could get show that the imports from Russia into Great 275 Britain for the six months to the end of February of this year were just over £14,750,000. The imports from Russia into the United States were under £2,250,000. It is the other way round in regard to the exports and it is there that our trade fails. The exports during the same period from Great Britain to Russia were £4,000,000 but from the United States to Russia they were £13,750,000. America had, and has, that favourable trade balance which the noble Lord does not seem to think really matters.
All through these years—and this is the point I want to put to your Lordships—Russia has had a very favourable trade balance as against our country. I do not want to trouble your Lordships with a whole mass of figures, but I think the noble Lord will agree that there has been a favourable trade balance for Russia with this country of something like £20,000,000. The noble Lord is good enough to nod assent to that and to save me from inflicting a large number of figures upon your Lordships. But the Russian Government is the importer and the exporter. The noble Lord suggested that there was a more or less similar trade experience as regards this country with, I think he said, the Argentine, Egypt, and one or two other places.
§ VISCOUNT BRENTFORDYes. That may be perfectly true; but in this case he is dealing with the Russian Government itself. It is the Russian Government which has every year in this country a favourable trade balance of something like £20,000,000. If they want to buy anything from our country there are £20,000,000 cash at their disposal. Instead of using it to promote trade here and to purchase English manufactures they have used it either for transfer by bills of exchange to some other country, for paving their debts elsewhere or possibly—I hardly like to say this in case the noble Lord should be offended with me—for propaganda. But there is a balance and the noble Lord cannot get out of it. If Russia wants to buy here, is it necessary for us to employ our export credit system, not in respect of Russian merchants because the whole of the foreign trade of Russia is done by the Government? It is the Government's 276 bills which we are backing. This is, of course, an insurance scheme. The noble Lord was good enough to explain that it means that a merchant here desiring to trade with the Russian Government and sell to the Russian Government has to take that Government's bills to the Export Credits Department and get finance to the tune of from 60 to 75 per cent. on those Bills.
It is a little difficult to understand why that is necessary. There is no other case that I know of under this export credit system where we are guaranteeing the financial stability of the Government of another nation. That is not insurance. That is a political question entirely. The noble Lord says that everyone of these schemes has gone before this Committee in which, of course, I have the utmost confidence. That Committee may be able to say, through the instrumentality of banks, through their knowledge of the credit system in the City of London, what is the financial stability of merchants. Every banker knows the credit of every individual merchant all over the world. They are all known and docketted and labelled in regard to their financial stability. But this is a question of the financial stability not of a merchant but of a Government. Therefore, that must be a question not for the pundits of the City of London but one in regard to which the Government itself must really be responsible and say: "We think" (I do not know whether they do, I suppose they do) "the credit of the Russian Government is so good that we are prepared to back their bills to the amount of 60 or 70 per cent."
That is a very great advance on anything that has yet been done in regard to Russia, and I cannot help telling the noble Lord, who spoke as though Russia had never defaulted at all and as if Russia was to be treated exactly the same as any other country or any other merchant who desired to take advantage of this export credit system, that we know in this country that Russia already owes vast sums of money to us. I wonder why they had not suggested using the export credit scheme to back those defaulting debts of Russia for the benefit of the English bondholder. One of the noble Lord's leaders, Mr. Snowden, put this matter rather clearly in writing in January of last year before the General Election. 277 I want to call your Lordships' attention, and particularly that of the Government's representatives, to the remarks of their own colleague. Mr. Snowden wrote:—
It is no use ignoring the fact that the repudiations of the pre-revolution debts and the confiscation of foreign property in Russia have created a feeling of distrust which will have to be removed before full confidence can be restored.May I ask noble Lords opposite whether that feeling of distrust which was in the mind of Mr. Snowden has been removed, and whether they have got sufficient evidence to support them in backing the bills of this Russian Government? Mr. Snowden also stated:—It is hopeless for Russia to secure foreign credits, or to float an international loan, until the debts question has been arranged.…Russia's foreign trade is now less than half of the pre-War volume. It is only 11 per cent. of the total world trade, though its population is more than 10 per cent."It is hopeless for Russia to secure foreign credits … until the debts question has been arranged"!
§ VISCOUNT BRENTFORDIt was January 6, 1929, in an article which I am sure the noble Lord must have read in Reynolds's newspaper, a very remarkable article, written with all the imprimatur of a man who had been Chancellor of the Exchequer and was, if the Election was won, again going to be Chancellor of the Exchequer of Great Britain. It gave confidence to the traders of this country and to the taxpayers of this country that we should not embark on any credits for Russia until seine arrangement had been made in regard to their international loans. That is exactly what is now being done. We are granting credit to Russia; we are guaranteeing the payment by Russia of bills for English goods.
I do not quite know how far the Government intend to go. We have got certain figures which were given in another place three days ago. It is a very remarkable fact that a great change has taken place since the Government came into office in regard to the working of this export credit scheme. In the last three months—the months of March, April and May—the face value of exports to foreign countries other than 278 Russia was £948,125, just under a million pounds sterling, and His Majesty's Government's liability under the insurance scheme for the bills they backed of foreign purchasers was something like 60 per cent. of that—£598,000. But when we come to Russia, the scheme for which has only just been opened, we find that in those same three months the contracts for exports to Russia were 30 per cent. more than to all the rest of the world—I mean the contracts under this particular scheme. The face value of the contracts with Russia was £1,502,000, and the liability of His Majesty's Government for three months only of this year is £901,000. Those are figures given in another place. It is a very serious change in the use of this otherwise excellent system of providing export credit for our merchants and manufacturers.
Now we find that Russia is taking, at all events during those three months—I suppose it is going on and will be fostered by His Majesty's Government—one and a half times the amount of credit which all the other merchants of the world are taking, and they are taking it in the form of short-term loans. There is no other word for it. If this goes on at the same rate—£1,500,000 for three months—the trade that will be guaranteed with Russia will be something like £6,000,000 a year, and the liability of His Majesty's Government will be something under £5,000,000 a year upon it. We have not got from the noble Lord opposite any statement as to what the terms of credit are in regard to these transactions with Russia. I know from my own experience in my previous office that Russia was trying to increase the length of credit, and one or two speakers on the Government side in the other House a few months ago advocated that we should give as long as five years credit to Russia on these trade transactions—five years credit, not to a merchant, but to a Government which is already in default, to a Government which already has a favourable trade balance in this country of £5,000,000 to £20,000,000 a year; and Russia, I take it, will go on exporting her raw materials to this country. It is desirable we should have them, and I do not object to that, but I do say that while we are purchasing goods from Russia, when they have that favourable trade balance, it is rather bad 279 policy on the part of the Government to finance Russia to the extent of something like £5,000,000 a year.
In conclusion I want to ask the Government what would be the position of these bills guaranteed by the Government—bills of the Russian Government guaranteed by our Government—and discounted by the holders with banks or financial houses in the City of London if (I want to be as mild as possible) diplomatic relations should be again broken off with Russia. It is by no means certain from the speeches of the Foreign Secretary in another place that he is satisfied, or that His Majesty's Government are satisfied, with the way in which the Russian Government are carrying out their pledge in regard to propaganda. I do not want to deal with that now. I am only putting it to the noble Lord as quite a possibility that it may be necessary, even for his Government, to break off diplomatic relations with Russia; in fact, they have pledged themselves to do so unless they are satisfied in regard to propaganda in this country, and the Foreign Secretary told us that an inquiry is now being made by the Government. Suppose, as a result of that inquiry, diplomatic relations with Russia have to be broken off, where are you going to get your money? How are you going to get these bills paid? The English manufacturer is all right, the merchant is all right, the banker is all right, but the British Government and the British taxpayer will be called upon to meet these bills.
Does not the noble Lord think that they will be added to the accumulating hundreds of millions of Russian debt still unpaid? Does the noble Lord think if we did come to another break with Russia—Russia who has made all these defalcations from time to time—that Russia would be likely to come down and say: "You would like us to pay this money, would you not?" I think the noble Lord himself, as a business man, and I am quite sure the Chancellor of the Exchequer (who, I am certain, will not go back upon the statement he made in 1929) must have very serious qualms as to the result which will happen if diplomatic relations are broken off. I do not in any way oppose this Bill. I believe it is a good one. I think the scheme is a good one provided only that 280 the Government would carry it out in the way it was carried out by the late Government for the purpose of increasing our export trade, by applying its benefits to merchants and purchasers in various parts of the world whom a commercial committee could reasonably guarantee, and not extend it to a Government—I am anxious not to say anything that would cause the noble Lord opposite to feel uncomfortable—a Government about which I at least cannot be expected to have confidence that, if relations are broken off, they will not do the same as they have already done and default to this country in respect of further large sums.
§ LORD DANESFORTMy Lords, the noble Lord who introduced this Bill said with a certain amount of satisfaction, and indeed with pride, that since the let of October of last year credits have been given under this export credit scheme to Russia in respect of contracts with Russia to the extent, I think he said, of £2,260,000. He said that those credits were sanctioned by the Executive Committee and he went on to make what appears to mF; a most astonishing statement. He said that in advising these credits the Executive Committee take no regard Whatsoever of political considerations. Surely the guaranteeing of the credit of a Government such as that of Soviet Russia is a case, if ever there was a case, when political considerations ought to be taken into account. That was proved, I think, by the noble Viscount, Lord Brentford. If the Executive Committee are not prepared to take political considerations—
§ LORD PONSONBY OF SHULBREDEMay I correct the noble Lord? It is the Advisory Committee.
§ LORD DANESFORTI am obliged to the noble Lord. It is my mistake. If the Advisory Committee are not prepared to take political considerations into account in sanctioning these credits, surely His Majesty's Government or the Treasury before they actually sanction the credits ought to take these considerations into account. May I ask His Majesty's Government whether, before sanctioning these credits, they made any attempt at a bargain with the Soviet Government? In cases of this sort, whatever may be the advantage or disadvantage to this country 281 of these contracts—and the advantage seems to me to be small and possibly questionable—the advantage to Soviet Russia of getting these credits is undoubtedly immense. They are most anxious to get them. It is the way in which they see that they can buy goods from this country and perhaps the only way in which they can buy goods to any large extent because they get long terms of credit. What they are we do not know but perhaps the Government will tell us.
To get those terms of credit is a very great advantage to Soviet Russia. Would it not have been wise, would it not have been reasonable before granting those credits, to make some bargain, to go to Soviet Russia and say: "See how matters stand. You have repudiated all your obligations. You have robbed the inhabitants of this country who traded with Russia or had property there of hundreds of millions of money. You have refused to pay your debts to this country. You have"—perhaps it is hardly necessary to say this—"behaved in a manner in which no civilised Government has behaved before in the matter of its obligations both to private persons and public Governments, and you have made no suggestion whatever for liquidating those debts." We are told that negotiations are going on with a view to getting Soviet Russia to acknowledge their responsibilities and to pay at any rate some portion of those debts. If a statement which I read in the newspapers—I think it was only yesterday—is true, it seems extremely improbable that those negotiations will result in any satisfactory conclusion to this country. But be that as it may, surely it would be the wise and sensible course for this Government before granting these credits to try to make some terms with Soviet Russia as to the payment of these debts.
There is another course which I think ought to be taken which might help us. As the noble Viscount, Lord Brentford, has said, there is grave reason to suspect, and more than to suspect, to believe, that the Government of Soviet Russia are indulging at this moment in what they have always up to now indulged in—namely, most dangerous propaganda against this country. His Majesty's Government are so satisfied as 282 to that that we are told that they are engaged in looking into the matter and in seeing whether propaganda by Soviet Russia is of such a nature as to justify our Government in breaking off diplomatic relations. Before making these credits, surely it would have been possible for us to say to Russia: "Unless you give us conclusive proof that you have stopped and intend to stop this propaganda, you shall have no credits." It seems to me that in this matter of credits to Soviet Russia, our Government have lost an opportunity which might have been of great value in getting concessions or guarantees from Soviet Russia which we have never been able to get yet. They have abandoned that opportunity for the sake of a very speculative advantage to our trade and in so doing I do not think they have reflected any great credit on their business capacity.
VISCOUNT ELIBANKMy Lords, I do not propose to detain the House very long, but there is one aspect of this question which has net been raised this afternoon and that is in connection with the purpose of the exports credits scheme so far as it concerns the class of goods exported under that scheme. I always understood that under that scheme it was intended that only British goods should be exported. This afternoon we have learned that 11,500,000 worth of goods have been exported to Russia under this scheme, and Mat £900,000 have been guaranteed by the Government for Russia. I have learned recently through the Press—and no doubt other noble Lords have done the same—that a transaction has taken place in which over £1,000,000 worth of sugar has been exported from this country to Russia by the refiners in this country and guaranteed to the extent of 75 per cent. by this Government. What does that sugar consist of? I am given to understand that that sugar was Cuban sugar, cane sugar imported into this country, refined in this country and now re-exported to Russia. That means that no more than 5 or 10 per cent. of the manufacture of that sugar is the result of British workmanship, but the British Government is actually guaranteeing some 60 or 70 per cent. of this sugar, not for Great Britain, not for the British Colonies but for Cuba, a dependency of the United States of America.
283 I am not asserting that this is correct. I only know what has appeared in the Press. I am told that it is correct, and I think that it is due to your Lordships' House that in this debate we should hear from the noble Lord whether it is correct, whether that is the policy of the Exports Credits Department and whether that is to be the policy of the Department in the future. If it is to be, r cannot see why the taxpayers of this country should support the Department or, indeed, why we in this House should support the Second Reading of this Bill. Possibly the noble Lord has an explanation which is satisfactory, but I do venture to suggest to His Majesty's Government that if they are going to use this exports credit scheme for Russia, they should use it in connection with goods wholly or as far as possible manufactured in this country.
§ LORD PONSONBY OF SHULBREDEMy Lords, the question raised by the noble Viscount is the subject of a Question that has been put upon the Paper by the noble Duke, the Duke of Atholl, for next Thursday, and it will be dealt with very fully on that occasion. I want to deal with some of the points raised by the noble Viscount, Lord Brentford, and the noble Lord behind him.
VISCOUNT EMBANKMay I interrupt the noble Lord for one moment? I cannot be satisfied with his answer. I am not suggesting for a moment that the particular point of Cuban sugar should be dealt with to-day, but on the question of policy I think we ought to be assured that His Majesty's Government do intend to use these export credits only for British goods and not for foreign goods.
§ LORD PONSONBY OF SHULBREDEI will come to that point in the course of my remarks. What I said referred only to the specific question of Cuban sugar, and I thought it would be discourteous to the noble Duke if we anticipated the debate which he desires to initiate next week. What surprised me most in the remarks of the noble Viscount, Lord Brentford, and the noble Lord, Lord Danesfort, was the distrust and displeasure which they evinced towards the action of the Advisory Committee. The whole of these transactions came before that Committee. His Majesty's Government have nothing 284 whatever to do with them. Every application is made to the Advisory Committee and is either turned down or approved by that Committee, and very naturally every such transaction is investigated purely from a business point of view. It is not the function of the Advisory Committee to enter into political considerations. The Committee was set up by the late Government and, with the exception of three members, it is in personnel exactly the same as it was under the late Government. It really is a matter of surprise to me that the noble Viscount and the noble Lord behind him should attack the Advisory Committee in such unmeasured language for accepting the applications of traders who desire to do business with Russia.
§ VISCOUNT BRENTFORDI am sure the noble Lord does not desire to impute to me what I did not say, and certainly did not mean. The Advisory Committee, it is true, was appointed by the late Government, but the Committee which we appointed was distinctly told that it was not to use these credits for trade with Russia. It is the noble Lord opposite and his colleagues who have given different instructions to the Advisory Committee. I did not complain of the action of the Advisory Committee; I complained of the action of the Government in giving these different instructions, and I pointed out that trade with a Government was not a proper subject for a commercial advisory committee to deal with, but must be the responsibility of noble Lords opposite.
§ LORD DANESFORTMay I add that I hope the noble Lord will not misunderstand me? I commented upon his statement that the Advisory Committee did not take political considerations into account, I presume under the authority or direction of His Majesty's Government. If that be so, I think it is most unfortunate, but, whether they do or do not take these considerations into account, what I was urging was that His Majesty's Government should take them into account.
§ LORD PONSONBY OF SHULBREDEI have no desire to misinterpret what either of the noble Lords has said, and I can appreciate the fact that their main line of attack is against the Government for having lifted the ban in August last against trade with Russia. The noble 285 Viscount said that in any case our trade with Russia was very small and that it was not worth bothering about, but I think that in these days we must take into account even trade on small lines. I think that there is every reason to expect that the development of affairs in Russia and the enormous works of reconstruction that they are undertaking are likely to bring a larger volume of trade to this country than was previously the case.
The noble Viscount said that he placed no embargo whatever for trade purposes at the time of the breaking off of relations in 1927, but I think it is obvious that trade depends on confidence between nations, and that when there is no confidence, when there is a feeling that at any moment relations can be broken off, when there is a Party in power in this country which, in season and out of season, whether members of the Government or supporters of the Government., do nothing but abuse another Government, it is very natural that traders do not feel that confidence which makes them want to go forward and undertake transactions that they would otherwise undertake. Political considerations, especially in regard to Russia, do count, and it is that want of confidence which existed largely when the late Government were in power—and justifiably so, considering that they always took the first occasion to break off relations, that has been detrimental to the increase of trade with Russia.
The noble Viscount asked what is going to happen if diplomatic relations are again broken off, and the noble Lord, Lord Danesfort, bases his idea of the lifting of the ban against Russia on the lines that it should be part of the bargain that Russia should meet the debts and outlying agreements that have been the subject of negotiations before. I think these two transactions should be kept absolutely separate. Pre-War debts and the claims of bondholders and property owners in Russia that were the subject of negotiations in the Treaties of 1924 are still the subject of negotiations between the two Governments which are now being conducted by the Foreign Secretary. We may disagree very strongly with the policy of the Soviet Government of the repudiation of debts and the nationalisation of land without compensation, but, however that may be, even in 1924 they entered into an engage- 286 meat by which they were prepared to negotiate on these questions, and those negotiations have been resumed under the present Government.
But we can detach that question completely from the narrow point of business arrangements between firms in this country and Russia, and I cannot see that there need be any mixing up of the two. I can only feel that the policy that is advocated by the noble Viscount and the noble Lord opposite would mean that you would again put down the ban against Russia, continue the embittered relations and place obstacles in the way of trade, merely because of your political detestation of the Soviet system of Government. That is not the policy of His Majesty's Government at present in power. The noble Viscount quite rightly opened his remarks by saying that our policy was in direct opposition to the policy of our predecessors.
The noble Viscount, Lord Elibank, asked a question about the extent to which our exports to Russia are purely of British origin, or are partly merchandise of a foreign or Colonial character. I could not give the figures showing the exact proportions. Imported merchandise of a foreign or Colonial origin does form part of our exports to Russia.. If they are re-exported from this country, and if they are in the shape of raw material which undergoes some process in this country before they are re-exported, they may be included in the scheme.
VISCOUNT EMBANKAre we to understand that foreign and Colonial produce is classed in the same category?
§ LORD PONSONBY OF SHULBREDENot necessarily in the same category. It depends upon what process they go through here before being re-exported.
VISCOUNT ELIBANKMy object was to try to point out that they were in different categories, and that the Government should regard them as in different categories.
§ VISCOUNT BRENTFORDThe noble Lord has not told us what is the length of credit with Russia.
§ LORD PONSONBY OF SHULBREDEIt is rather difficult to say with any precision.
§ VISCOUNT BRENTFORDYou could in regard to contracts for the last three months.
§ LORD PONSONBY OF SHULBREDEFor the most part terms of six months to a year, and in fact in few cases, in regard to any country, is that term exceeded.
§ On Question, Bill read 2ª, and committed to a Committee of the Whole House.