RAW MATERIALS AND FISCAL POLICY.

HL Deb 25 March 1936 vol 100 cc233-82

LORD ARNOLD

had given Notice that he would call attention to the problem of Dominion and Colonial raw materials and also to the need, in view of the effects of the Ottawa Conference Agreements, for a return to freer trade in the fiscal arrangements of the British Empire, particularly having regard to the claims for economic expansion of Germany, Japan and Italy; and move for Papers.

The noble Lord said: My Lords, the Motion which I am submitting to your Lordships' consideration this afternoon deals with several questions of public policy, but they are all closely connected, and I think it would be difficult to discuss one of them without discussing them all. In the first place my Motion calls attention to the problem of Dominion and Colonial raw materials. This is a matter of which much has been heard lately; in fact ever since it was brought into great public prominence by a very notable speech made by Sir Samuel Hoare last September at the meeting of the League of Nations at Geneva. Subsequently Sir Samuel Hoare came to explain how it was that he made this declaration about raw materials. I will quote your Lordships his precise words. He said:

"I tried to look behind the range of our immediate political difficulties and to consider how we could remove the cause of bitterness and strife. Looking into the future, I selected the question of the control and distribution of Colonial raw materials as one of these causes, and I suggested that it would be well to anticipate possible controversy by examining it without unnecessary delay."

In my Motion I refer not only to Colonial raw materials but also to Dominion raw materials, because obviously both should be taken into account when considering the resources of the British Empire.

It is those resources which provoke a certain amount of jealousy in the peoples of some foreign countries. It would appear probable that Sir Samuel Hoare, who in his speeches has more than once exhibited a capacity for clear thinking which, if I may say so without offence, is somewhat unusual in a member of the Conservative Party, has come to the conclusion that something must be done to meet the legitimate grievances of the three Powers in the world which to-day are dissatisfied. They are, of course, Germany, Japan and Italy. These powerful and growing nations, with not much territory in proportion to their populations, look abroad and see the British Empire owning one-quarter of the world's surface with about one-quarter of the world's population. They see that the British Empire possesses about one-quarter of the world's wheat, about one-half of the world's wool, more than half of the world's rubber, about one-quarter of the world's coal, nearly one-third of the world's copper, and no less than about 94 per cent. of the world's nickel, and so on. It is not difficult to understand that foreigners look with jealous eyes upon this vast holding of the world's wealth.

It has been estimated that there are twenty-five minerals and commodities which are essential for modern life. They include coal, cotton, wool, oil, rubber, iron and steel ores, aluminium, zinc, nickel, silver, tin and so on. It has also been estimated that out of those twenty-five essentials the British Empire has adequate supplies of no fewer than eighteen, some supplies of two and none at all of the remaining five. Germany has adequate supplies of only four, some supplies of two, and no supplies at all of nineteen. Japan has adequate supplies of three, some supplies of five, and no supplies of seventeen. Italy has adequate supplies of four, and no supplies of the remaining twenty-one. In these circumstances it is not surprising that there is unrest in Germany, Japan and Italy.

It is vitally important for us to understand their point of view and to visualise the world to-day as they visualise it. It may well be that on equitable recognition and treatment of the just claims of these dissatisfied nations and of all nations the very future of civilisation depends. In Great Britain we pride ourselves that we are peace-loving people. We say that we do not want any more territory, and some people seem calmly to assume that other nations should accept the present division of the territory of the world. It is quite true that Great Britain is probably the most peace-loving country in the world. That is because we have all we want. What have we got I As I have already stated, and as your Lordships know, this small island with a population of about 45,000,000 people owns an area covering about one-quarter of the world's surface, with about one-quarter of the world's population, and, as your Lordships will realise from the figures I have just given, possesses distinctly more than one-quarter of the wealth of the world.

Let me consider next the position of the three dissatisfied Powers and see where they stand. I will take them in order and begin with Germany. The population of Germany now is about 67,000,000. Germany has an industrial capacity equal to that of any other nation and greater than that of most. The population of Germany is not at present growing so rapidly as that of Japan and Italy, but Germany's territory has been reduced. Germany lost the War and she had taken from her every Colony which she possessed, Alsace-Lorraine, the great port of Danzig, part of Silesia, part of Schleswig. Not only so, but the German people—and this applies also to Italy and other countries—cannot emigrate as in pre-War days. Germany also finds increased difficulty in selling goods abroad because markets overseas are more and more protected and restricted.

Next consider Japan. Japan has a population now of about 70,000,000, and that population has increased by somewhere about 10,000,000 in the last ten years. The growth of population is at the rate of about 1,000,000 a year and that seems likely to continue. This big population has to be fed and clothed with an improving standard of living. Practically the whole of the land in Japan which can be cultivated is cultivated to the greatest possible extent. Japan is such a mountainous country that only about 20 per cent. of the area is habitable. That means that the real density of population is 916 to the square kilometre in Japan, compared to 180 to the square kilometre in Great Britain, which is regarded generally as an overcrowded country. Obviously then, Japan is compelled to depend more and more on imports from abroad, certainly for clothing and the general purposes of life. These must be mainly financed by the export of manufactured goods. As I have already said, Japan, like Germany, cannot alleviate her problem to any extent by emigration, and Japan also finds herself faced abroad with an ever-increasing network of tariffs, quotas and trade restrictions.

Finally I come to Italy. Italy now has a population of 44,000,000, which is growing rapidly. These 44,000,000 Italians are confined in a territory half the size of France, but in fact the cultivable land of Italy is only one-fifth as large as the cultivable land of France. That is the problem of Italy so far as land is concerned. And Italy is faced with the same problems as Germany and Japan—emigration now merely a trickle, difficulties facing her export trade in all directions, as she has to surmount a growing ring of tariffs and quotas. So, my Lords, the central problem, the central difficulty of the three dissatisfied nations is the same. They want freer access to markets abroad for the sale of their manufactured goods, so that they can have and finance bigger imports, because these are essential for large and growing populations.

Before I pass on, I would say that Japan's exports are, despite the statements I have been making, still increasing. That is partly due to the great advantage which Japan has in the depreciation of her currency, an advantage which will not continue indefinitely, at any rate to anything like the present extent. But a further point of primary importance is that Japan, with her rapidly growing population and bigger industrial output and efficiency, must have bigger exports in order to improve the standard of life of the people. Great nations of proved capacity and value are entitled to expect, as a reward for their labours, an improved standard of life. Japan, Germany and Italy cannot possibly have that improved standard of life to the degree which they are entitled to expect except by bigger exports and bigger overseas trade. We here in Great Britain could not enjoy anything like the high standard of life which we do—nothing approaching it—without a great export trade. It may be taken that Japan and Germany will never be satisfied until they have vastly greater exports than their present ones, and that in one way or another they will achieve those exports. It is far better that we should face the situation and further the legitimate aspirations of these three dissatisfied nations. It seems to me that it was the recognition of these difficulties which caused Sir Samuel Hoare to make the speech he did, stating that the time had come when attention should be given to the problem of Dominion and Colonial raw materials and of the world's raw materials generally.

But the question arises whether the problem of raw materials, vitally important though it is, is at the root of the trouble. Looking into the matter at the present time it is only fair to say that the three dissatisfied nations, or any other nations, have no difficulty in obtaining what they want of the British Empire's raw materials, if they can pay for them. It has been frequently pointed out in the last two months that British Empire producers, or any other producers, are only too anxious to sell all they can. There is no withholding of supplies. That is not the urgent problem at the present moment. I say again: Germany, Japan and Italy could get all the raw materials they want from our Dominions and Colonies, or from anywhere else in the world, if they could pay for them; that means, if they could have bigger exports. They want bigger exports in order to provide the exchange with which to buy goods abroad.

Sir Samuel Hoare said:

"The view of His Majesty's Government is that the problem of the discontented Powers is economic rather than political and territorial."

There is a good deal of truth in that. The Economist last October said much the same thing in an article:

"Markets are more important than resources to the dissatisfied Powers."

As I have shown, the problem is that with tariffs and so forth it is increasingly difficult for the three dissatisfied nations to sell sufficient goods abroad. The Times, in a telegram from Tokyo last month, said that the Japanese Foreign Office spokesman referred appreciatively to the fact that the Western statesmen are beginning seriously to discuss a more equitable distribution of the world's resources. He admitted that Japan had found no difficulty in obtaining raw materials, but complained that access to certain markets was obstructed. Then let me give your Lordships one more quotation: it is from the Report for 1933–34 on Economic Conditions in Japan, of Sir George Sansom, the Commercial Counsellor of the British Embassy in Tokyo:

"Obstacles in various forms have been placed in the way of imports from Japan in a number of countries throughout the world, and although Japanese exporters continue to make strong efforts to surmount those obstacles by such means as are open to them, and the Japanese Government endeavours to assist those efforts by official action, it does not seem likely that exporters can do much more than maintain their present position."

Let me say at this juncture that I do not propose to-day to discuss schemes which have been put forward for changing Colonial Mandates or internationalising Colonial Mandates or territories, or, again, for bringing Colonial raw materials in some way under the control of the League of Nations. These schemes, or some of them, may have much to commend them, though whether overseas territories are as advantageous to great nations as is commonly supposed may be a matter for argument. However, the world being what it is, all great nations want the prestige which overseas possessions give, and that aspect of the claims of Germany, Japan and Italy merits attention. It is important. If I were to discuss these matters, it would obviously be in order on my Motion, but I cannot deal with everything in one speech, and perhaps some other noble Lord or Lords will deal with this aspect of these problems.

The proposal which I am putting forward to-day for the alleviation of the present situation may seem less ambitious than the schemes of which I have just been speaking. Nevertheless, I believe it would do much to alleviate the present situation. Moreover, I would say, before I put it to your Lordships, that it is a proposal which seems to be fully in accord with the admirable sentiments recently expressed both by Sir Samuel Hoare and the Chancellor of the Exchequer. Sir Samuel Hoare said not very long ago, shortly before he left office, that there should be a lowering of the barriers for international trade. I think he said it was one of the most fundamental problems of this time. The Chancellor of the Exchequer spoke not very long ago about not relaxing our efforts to promote the flow of goods and services throughout the world, the blocking of which has so long retarded world recovery. I wish, my Lords, to urge that the system of Preferences within the British Empire should be done away with and that the British Empire should go back to throwing the door of its markets open, on equal terms with its own nationals, to all the countries of the world. That is the fiscal policy upon which the British Empire was built up, a policy which did not excite ill-feeling or jealousy amongst other nations.

I do not think I can do better than quote to your Lordships a passage from a speech by Mr. Joseph Chamberlain. Needless to say this was a speech made before what I may call his tariff days. In this speech—it was made in the nineties—Mr. Joseph Chamberlain said:

"We English, in our Colonial policy, as fast as we acquire new territory and develop it develop it as trustees of civilisation for the commerce of the world. We offer, in all these markets over which our flag floats, the same opportunities, the same open field to foreigners that we offer to our own subjects, and upon the same terms. In that policy we stand alone, because all other nations, as fast as they acquire new territory—acting, I fear, most mistakenly in their own interests, and above all in the interests of the countries they administer—all other nations seek at once to secure the monopoly for their own products by preferential and artificial methods."

I will not myself attempt to improve upon that great pronouncement. Your Lordships will observe that what I am, to-day, urging does not mean the abolition of a policy of Protection either on the part of our Dominions and Colonies, or even Great Britain, although personally I should like that to happen. That is not the proposal now. The proposition is that there should be no Preferences of any kind in the British Empire, and that all countries should be able to trade with any part of the British Empire on the same terms as its own nationals. Such a policy would do a great deal to remove from the minds of Germany, Japan and Italy a sense of exclusion and grievance.

I must at this stage refer to the change made from Free Trade to Protection by Great Britain in 1931, because the closing to some extent of the greatest free market in the world naturally greatly aggravated the difficulties of Germany, Japan and Italy in their export trade. No doubt it may be said that as other countries have tariffs there should be no ground for grievance when we in Great Britain also impose tariffs, but that does not alter the fact that the adoption of Protection by Great Britain was a serious matter for world trade, to say nothing of our own trade. I will not pursue the latter theme, although to me it is a tempting one.

I now turn to the British Empire as a whole and the Ottawa Agreements. These Agreements, as your Lordships know, greatly increased the system of Preference for British goods entering our Dominions and Colonies; but they did more than that. I have just been stressing the fact that the general tariff that we put on in 1931 was an obstacle to the exports of Germany, Japan and Italy, but in addition those countries were faced, as part of the Ottawa policy, with a further difficulty in the entry of their goods into Great Britain, because the Ottawa policy established a Preference in Great Britain for many Empire products, to the disadvantage of non-Empire countries. As your Lordships know, before Ottawa there were Preferences given to British goods entering the Dominions. Ottawa increased those Preferences, or many of them, largely by raising the duties against the foreigner. But Ottawa also gave Preferences in the Colonies, and in addition, almost for the first time, Preferences to the Dominions and Colonies in the markets of Great Britain itself. I say almost for the first time because there were Preferences on commodities like tea and sugar, but not manufactured goods nor on butter, cheese, fruit, and so on.

What did all this mean? Quite clearly it meant that the Ottawa policy and Great Britain's protective policy imposed a double hardship from the point of view of Germany, Japan and Italy. In addition to the general tariff those countries were faced with increased Preference rates against them in Great Britain as well as increased Preference-rates against them in the British Dominions and Colonies. So it all came to this, that the policy of erecting tariff walls round the British Empire against foreign goods was being greatly extended. I think it is difficult to over-estimate the effect of all these happenings upon the dissatisfied countries, Germany, Japan and Italy. These nations have small territories and large and growing populations. On the other hand the British Empire has vast territories but, so far as our overseas Dominions are concerned, a very small white population. The population of Great Britain is now about 45,000,000 and the white population of the Dominions and Colonies is only about 25,000,000. Therefore the total white population of the whole of the British Empire is only about 70,000,000, and the white population is growing with extreme slowness. So far as Great Britain is concerned our growth in population is very near the peak point, and inevitably before long there will be a decline. In fact, if the tendencies in births and deaths of the last decade are continued the population of Great Britain will fall to below 30,000,000 in fifty years. I do not say that that is going to happen, but it may happen.

Then look at the white population of the Empire abroad. The growth there is most disappointing. The total population of Canada now is somewhere about 11,000,000, and the population has grown by about 1,500,000 in ten years. The population of Australia is now about 6,750,000, and it has grown by somewhere about one million in ten years. With such small populations in such vast territories it is quite impossible for the Dominions adequately to develop the land which they hold. As The Times has put it:

"The emptiness of the Dominions is a problem of the first importance."

Indeed, when the population figures which I have given are taken in conjunction with the fact that Germany, Japan and Italy have large and growing populations, it seems impossible for the present partition of the world's territory to continue indefinitely. I would like to read a quotation from the Spectator of January 10 of this year:

"There is a clear enough connection between Japan's activities in China and the closing of markets, especially in the British Empire, to Japanese goods; indeed, Japan's decisive step in Manchuria was only taken after the policy of commercial expansion had been made impossible."

I also give your Lordships two brief quotations from the Oriental Economist:

"That England blundered badly in implementing the Ottawa Agreements at the expense of Japan, there can be no shadow of doubt. There was no justification for the action of introducing anti-Japanese quotas ill the Crown Colonies."

Again:

"England departed from her traditional policy in encouraging the Crown Colonies to restrict Japanese sales in their markets to the advantage of English cotton manufactures, and Mr. H. Vere-Redman, author of Japan in Crisis, just published by Allen and Unwin, expresses the view that this action was responsible for driving the Japanese industrialists or some of them into alliance with the extreme militarists."

I would also like to give a quotation from a very high religious official in Japan, who said that Great Britain was not entitled in the world as it is to-day to adopt her present exclusionist policy. It cannot be too strongly stressed that this acute dissatisfaction of Japan, Germany and Italy has come into being since the Ottawa policy; and indeed it is difficult to see how the British Empire, with its vast territory and its small white population can long retain its present position. It seems certain that that can only be done by some reversal of the fiscal policy of the last few years, that is, this policy of attempting to hedge in behind preferential trade walls one-quarter of the world's surface.

Moreover, I can demonstrate to your Lordships that this Ottawa policy has not been a success for the British Empire itself. A return to freer trade is indeed in the interests of the Empire. I know it will be said by supporters of the Ottawa policy that since Ottawa the trade between Great Britain and the Dominions and Colonies has increased. Of course it has increased. So far as I know, it has never been denied by anybody that by these artificial preferential arrangements you could, at any rate for a time, divert trade and increase trade in certain directions. It would be astonishing if that were not so, having regard to the high Preferences given. But this increased Imperial trade is not a net addition to the trade of the country or of the Empire; it is all achieved at the cost of foreign trade. It does not add to the total trade of Great Britain or of the Empire, it merely means that there is more Imperial trade and less foreign trade than there otherwise would have been; and that is one of the grievances. These three dissatisfied Powers see trade in which they might have had a share diverted from them by this policy. And if we were in their position we should feel exactly as they do.

I do not propose to inflict a large number of figures regarding trade results since Ottawa upon your Lordships, although, as I have indicated, certain figures can be adduced to show that there have been increases in many directions. Yet it is noteworthy that in certain respects that has not happened to any extent, in one or two cases not at all. In fact, since the Ottawa Agreements the exports of Great Britain to South Africa have gone down and the effect on Great Britain's exports to Canada has been disappointing, as has the effect on Great Britain's exports to India. It is essential to recognise that the Ottawa Agreements were come to in 1932, that is, when trade was at a low point everywhere. Since then the trade of nearly all countries, with all countries, has shown some increase. That should be borne in mind when figures about the results of Ottawa are brought forward.

In drawing my remarks to a close, I repeat that the Ottawa policy has not been a success, and in particular that it has made for discord rather than for harmony in the Empire itself. It has always been urged by the opponents of Preference that any attempt to bind the Empire together by a system of preferential tariffs and differential rates was bound to fail, and to be harmful. It is blindness to facts not to recognise that, because of the widely varying character of the products and trade of the different countries making up the Empire, it is impossible to devise a reasonably symmetrical and equitable scheme as between the different countries of the Empire. It soon became evident after the Ottawa Agreements that the result was to make for discord rather than harmony in the Empire, and I will quote two or three examples to illustrate that. Some time ago, because Australia was deemed to be treating Lancashire cotton goods unfairly, there was actually a boycott in Lancashire of Australian butter. It is difficult to conceive from the point of view of Imperial unity of anything more unfortunate, to use no stronger word than that. Then again, the relations between Lancashire and India have been severely strained owing to tariffs, and this state of things was accentuated because of Lancashire's disappointment in her expectations of what Ottawa was going to do for her.

Coming to our own country, let me read two quotations from the National Union of Manufacturers' Report. They say:

"It is quite intolerable that articles for which the United Kingdom has long been famous should be subjected to a substantial protective duty on importation into a British Dominion, and that competitive articles manufactured in the said Dominions should have free entry into the United Kingdom."

At a meeting of protest the National Union of Manufacturers protested against the maintenance by the Dominions of unfairly high duties on British exports as inconsistent with an equitable interpretation of the Ottawa Agreements. Then I come to the Federation of British Industries. They have said that:

"Since the Agreements wore concluded in 1932 the trade figures show that other Empire countries have obtained greater benefits than has Great Britain."

One further quotation I give—that from Mr. P. J. Harmon, M. P., who, I think, is a considerable figure in the tariff world. He has said:

"The Government will have to decide in the interests of the United Kingdom production that we cannot afford to give free entry to Empire secondary produce."

And so the sorry business goes on, making for discord rather than for harmony in the Empire!

Many of your Lordships will remember the acute difficulties which arose in Ceylon in implementing the Ottawa Agreements, leading to a really serious crisis. Actually, the Secretary of State here at home had to intimidate the State Council in Ceylon, who had refused to pass certain provisions in the Ottawa Agreements. They were informed on the 6th February, 1933, that if they did not do what they were told to do and implement the Ottawa Agreements, His Majesty's Government in Great Britain would reconsider the Preferences accorded to Ceylon in this country. It is difficult to imagine anything worse than happenings of that kind. And let us always remember that there is no quarrel like a family quarrel. Another source of trouble has been that the Ottawa Agreements, by putting duties on foreign fruit, cheese, butter and other foodstuffs coming into Great Britain, have made food in this country cost more than it otherwise would have done. That, again, is not the way to bind the Empire more closely together.

Turning to the Dominions, the most important condemnation of the Ottawa Agreements comes from Canada. Not only was the Bennett Government, which strongly supported Ottawa, defeated at the succeeding General Election last year, but the, Conservative Party was reduced to pitiable proportions, mainly because of its responsibility for, and its support of, the Ottawa policy. Mr. Mackenzie King was returned by an overwhelming majority on a policy of reversal of the Ottawa Agreements. All this was largely due to the Canadian agriculturists, the largest section of the Canadian people. They are sick and tired of this policy of High Protection for all manufactured articles; but unless you have Protection, and High Protection, the Ottawa policy cannot be carried out. It is abundantly evident that these Ottawa Agreements cannot continue in their present form. One of Mr. Mackenzie King's first acts after being returned to power was to negotiate a very important reciprocal trade agreement with the United States, and the statements made both by Mr. King and by Mr. Roosevelt about this Agreement show that they hoped to give a lead to the world by this reversal of the policy of economic nationalism. This Agreement between Canada and the United States is in effect a violation of the Ottawa Agreements, so that there are further problems arising hereafter out of this ill-fated Ottawa policy, and it is clear that this policy will in any case have to be modified when the Agreements come to an end next year.

Finally, I refer to a very important factor when considering a change in the fiscal arrangements of the British Empire. The Dominions have complete control of their own fiscal policy, and that is now true to a large extent, or will be, of India. The Dominions at any rate are as independent of us in their fiscal policy as any foreign country. It is also true that owing to the adoption by Great Britain of Protection, and by her partnership in the Ottawa Agreements, we in Great Britain are in a worse position to press for a policy of freer trade than we were a few years ago. Nevertheless, my submission is that we should do our best, and that as far as possible we should not only urge that the Ottawa policy should be reversed, but we should take steps to reverse it. So far as the Colonies are concerned, we can next year inaugurate a change in the present policy, which is a great offence, particularly, to Japan. Moreover, at the next Imperial Conference Great Britain, in urging that the Ottawa policy should be reversed, would have the help of the Canadian Government, that is, of the largest oversea Dominion. Thus the way is opening out for a policy of freer trade.

In urging the adoption of that policy I again remind your Lordships that it is the policy upon which the Empire was built up, and it is only in my view on a policy based on those principles that the British Empire can continue to hold such a vast proportion of the world's territory and resources. It is my firm belief that the adoption of this policy by Great Britain and the British Empire would be a real contribution towards alleviating a serious, not to say menacing, situation. I beg to move.

LORD LUGARD

My Lords, the noble Lord in moving his Motion has referred very freely to the memorable speech made by the late Foreign Secretary at Geneva in September last. Sir Samuel Hoare did not disguise or minimise the difficulty of the problem. He said that the fact that some countries do possess advantages in regard to raw materials not unnaturally gives rise to fears of exclusive monopolies, and the wise course is to investigate this cause of discontent, and if it is substantial to endeavour to remove it. He announced the willingness of His Majesty's Government to take their share in any collective attempt to provide a guarantee that the distribution of raw materials will not be unfairly impeded. Having taken the initiative in proposing such an international inquiry, it is clearly desirable that this country should consider what is the share it is willing to take in the collective attempt, and what guarantee should be provided.

Your Lordships are doubtless aware that the subject of study for a Conference to meet in 1936–37 (in which I am privileged to assist) is the "peaceful solution of certain international problems," and includes the subject of the present Motion—namely, the distribution of raw materials, markets, population and migration. No doubt the views expressed by your Lordships to-day will be carefully noted by the British Co-ordinating Committee. The Conference, your Lordships will re-collect, is one of a series convened by the International Institute of Intellectual Co-operation, which is a Standing Committee of the League of Nations, for the study of collective security, and annual meetings have been held since 1928 in the various capitals of Europe and attended by important international groups of seventeen different nations. It is not the first time that the noble Lord, Lord Arnold, has expounded the doctrine of Free Trade in your Lordships' House. In view of the obstacles with which international trade is confronted at the present time, I do not share his views as far as the policy of Great Britain and of the Dominions in their own home markets is concerned, but I do strongly support his appeal for reversion to the traditional policy of the Open Door in the non-self-governing Colonies and Protectorates, at any rate in Africa, since wider principles are involved than any question of trade profits.

The policy of quotas, special duties, differential tariffs, and reciprocal preferences in those markets deprives us of what was once our boast and the unanswerable justification of our world-wide Colonial Empire—namely, that while we assumed the obligations of trusteeship towards the native peoples, we asked for no exclusive privilege for ourselves, and we admitted the foreigner on equal terms to those enjoyed by our own nationals. By the imposition of differential duties and tariffs we not only give colour to the charge that we thereby create, in the words of Sir Samuel Hoare, "exclusive monopolies at the expense of those countries which do not possess Colonial Empires," but we also deprive the native peoples, whose purchasing power has already been reduced very greatly by the fall in the prices obtainable for primary products, of the opportunity of purchasing the cheap goods which alone they can afford to buy. The result is to paralyse native production.

It may be that it will be found that there is little or no substance in the complaint of deprivation of raw materials and foodstuffs, for they can be bought by any nation from produce brokers at the world prices which both Colonial and non-Colonial Powers alike have to pay without distinction. There is not, and never has been, any local obstacle to the purchase and export of produce of all kinds in the Colonies themselves. The complaint, therefore, appears to lie in the alleged difficulty of selling in the local markets owing to currency difficulties. This, said a correspondent representing the Empire Industries Association, in Monday's Financial Times, is an entire myth; and he gave figures showing that the value of foreign imports into British Dependencies and Colonies compared very favourably with those from the United Kingdom between the years 1931 and 1934. The bulk of our own imports of raw materials is, of course, paid for by us in foreign exchange. Germany, however, has dissipated her credits in the foreign exchange markets by unprecedented expenditure on armaments amounting, directly and indirectly, as Mr. Churchill said in another place recently, to £800,000,000 sterling last year and £1,500,000,000 sterling in the last three years. I hear, too, on high authority that she spent last year not less than 2,000,000,000 marks, which is about £163,000,000 sterling, on popular entertainments. If these figures are in any way approximately correct, it is small wonder that there is little left for ordinary commerce. Italy and Japan have similarly been engaged in very heavy war expenditure.

Your Lordships will recollect that it was the considered opinion of the Allied and Associated Powers at Versailles that Germany's economic development in no way depended on the possession of Colonies, and they pointed out that in 1913 only 3 per cent. of her total imports of the principal raw materials and foodstuffs were derived from her Colonies, while the small number of German colonists in them went to prove that they afforded no outlet for emigration. This appeal for new lands for the settlement of surplus population is less effective in view of the artificial means resorted to by both Germany and Italy for increasing the population in order to add to their man-power. But however that may be, the non-self-governing Colonies and Dependencies which alone are controlled by Great Britain lie almost entirely in the Tropics, and they are all already populated by dense populations which are rapidly increasing. Though here and there there may perhaps be room for a few hundreds or even thousands, there is no room for bulk immigration, even assuming that tropical climates permit of white colonisation. If then there is no real substance in these claims, why, it may be asked, should we go out of our way to meet them? I recur again to the wise words used by Sir Samuel Hoare. The fact remains, he said, that some countries do view the situation with anxiety. It may be that it is exaggerated, but none the less it is causing anxiety which it would be foolish to ignore. And personally I should be the last to deny that the control of Dependencies does confer advantages, though chiefly in other ways than the possession of raw materials. The problem before us, therefore, as I see it, is how can we share these advantages without compromising our pledges to the inhabitants, white and black.

As a signatory of what are known as the Congo Treaties—namely, the Berlin Act of 1885, the Brussels Act of 1890, and the Convention of St. Germain of 1919—Great Britain is precluded from imposing quotas in such of her African territories as fall within the "Conventional Basin" of the Congo, including practically all her East African Colonies and Protectorates, but in British West Africa and Somaliland practically prohibitive quotas have been imposed against certain Japanese imports. Reference was made quite recently in another place to the German law of last June authorising a levy for the purpose of subsidising exports. It may, therefore, be necessary any day if this policy is pursued to impose quotas against bounty-fed goods from Germany. Her present contention is that she cannot obtain the raw materials and foodstuffs she requires, because she cannot sell her goods in the local markets, and so obtain the local currency. She may well argue that her only alternative is to reduce the cost of her goods by bounties, and if she is met by prohibitive tariffs in favour of British imports, new causes of friction will be created.

On the other hand it seems to me reasonable to demand that the vendor of imported goods should in the interest of the local producers purchase a reasonable amount of the produce of the country in which he sells. If the local producer cannot sell his produce, he has no money wherewith to buy, and it does him no good if British merchants, for instance, import cheap Japanese goods and, with the credits thus obtained, Japan buys machinery in Belgium. I have heard quite recently that her purchases of machinery in Belgium have doubled. It has been said that the import of cheap goods from Russia into West Africa was checked by a stipulation on these lines, but I have not been able to obtain any very precise information on that point and the noble Earl who replies for the Government will perhaps correct me if I am wrong. It would seem probable that the application of a proviso of this nature, which since it would be of universal application would not contravene the principle of equal opportunity, might in the case of Japanese goods imported into Nigeria have been just as effective as quotas. Japan does not require to purchase the main staples of export from West Africa on account of transport costs and other reasons.

In order effectively to remove any suspicions of monopoly, and to share as far as possible the economic advantages of control of Colonies the policy adopted should, I suggest, be that understood by the equal commercial opportunity conditions imposed by the African Mandates with a somewhat wider meaning than has been attached to the Free Trade policy of the Congo Treaties, so as to include for instance international tenders for large public works, or for loans under conditions fully safeguarding the sovereign rights and administrative functions of the Colonial Power concerned. To provide the guarantee for the due execution of the pledge, the Permanent Mandates Commission might be charged with the investigation of any alleged infringement—a task for which I think it has shown itself fully competent. The African Mandates purport to effect a double purpose. While the majority of the clauses are concerned with the interests and welfare of the natives, there are two Articles which are specially designed to protect the interests of the non-Mandatory and other Powers. The first is the Equal Commercial Opportunity Clause to which I have referred, and the second prohibits the creation of naval bases and the raising of troops other than those required for the police and defence of the territory. I should desire to see the second no less than the first included in the proposed undertaking which the Colonial Powers would make.

I will not attempt to discuss other aspects of this question such as the claim of the non-Colonial Powers to a voice in any international scheme for restriction of output of certain raw materials such as rubber, tin and tea and other products which are produced largely on European estates or in European-controlled mines. They will no doubt be investigated fully by the proposed Commission of Inquiry. The Motion before your Lordships is concerned primarily with the question of fiscal arrangements in regard to the subject of raw materials and the claims for economic expansion of Germany, Japan and Italy, but I hope I shall not exceed the latitude which your Lordships are wont to permit if I add a few sentences which appear to me to be relevant to the question, though they perhaps go rather beyond the strict interpretation of the Motion. Sir Samuel Hoare in his memorable speech, to which I have referred, said that in the view of His Majesty's Government the problem of the claims of these Powers was primarily economic rather than political and territorial. In a brochure, however, by Professor Dr. Freiherr von Freytagh-Loringhoven, who is a member of The Hague Court, and therefore may be credited with an authoritative voice, he states that the questions of raw materials, foodstuffs, markets and even of accommodation for surplus population, though important, are really secondary, and the decisive question is that of equality of status, including the possession of Colonies, which he regards as a question of German right and German honour.

The Allied and Associated Powers expressly denied the premises upon which the claim of right is based, while as regards the surrender of Mandates or Colonies, British honour, in view of specific pledges given, is as deeply involved as German honour, the more so since Herr Hitler in a recent speech derided the principle of tutelage of backward races with a view to enable them to stand alone, which is the basis of Article 22 of the Covenant and the Mandates founded upon it. But your Lordships will not have failed to observe that in the proposals put forward in the German memorandum what is called "Colonial equality of rights" is expressly reserved. If these proposals should ever eventually form the basis of negotiation, I earnestly hope that the Colonial question will be included and not left over to become the basis of a new crisis.

I have ventured to suggest the form which the British share in a collective effort for appeasement might take—and I would go further in order to implement the promise of equality. I would suggest that the Colonial Powers should undertake to include in their Colonial staffs a given proportion of Germans, especially but not exclusively in the scientific and technical departments such as health, agriculture, forestry, veterinary, research and engineering, and thus afford to German youth the opportunity of careers overseas now denied to them. Such a gesture would go far to remove the colonial grievance dwelt on by Professor von Freytagh-Loringhoven. Great Britain might select a few German Rhodes scholars or other suitable English-speaking young scientists. If other Colonial Powers preferred that their share of the collective effort to remove the causes of discontent and anxiety should take some other form, they could make their own proposals. We should at least have done our best to meet the demand for unfettered access to Colonial markets and to satisfy the amour propre of a great nation.

LORD REDESDALE

My Lords, I desire to say a very few words at least in partial support of what was said by the noble Lord, Lord Arnold, and also by the noble Lord who spoke last. I find myself in agreement with much that has been said, but I propose to confine my remarks to the case of Germany. It is not my intention to make any effort to disguise the fact that I am one of those who consider it is high time that some arrangement should be made whereby Germany should have some of her Colonial territory restored to her. This, of course, is not an appropriate moment to enter into details as to how such arrangement should be carried into effect, and still less to ask His Majesty's Government to give any undertaking; but surely some arrangement such as the compensation by Germany of settlers subsequently to 1918 who had no desire to remain under another flag would not be unreasonable.

I agree whole-heartedly with a great personage who said the other day that the time had surely come to let bygones be bygones and to extend the hand of friendship to Germany. We have no quarrel with Germany. We have no quarrel with any nation. We harbour no hatred for Germany. Why should we? Where such hatred exists it is bred of fear. Why should we take any part in the apparent European desire at the present time for the encirclement of Germany? I find it quite impossible to comprehend the mentality of people who imagine for a single moment that you can take a great nation and, as it were, stamp on it and bottle it up indefinitely. Any effort to do so is foredoomed to failure and will in the end—and that end is not very remote—only cause the very explosion which every human must wish to avoid. You cannot expect a great and powerful nation such as Germany to submit indefinitely to the indignities to which she has for so long been subjected. You have already had an example in Germany-leaving the League of Nations. The turning point came when five years was changed to eight as the term at the end of which Germany was to be given something in the nature of equality. Upon that she walked out of the League of Nations, and who could expect a great nation which had been subjected, as I have said, to every form of indignity for a long period to do otherwise? She considered that she had a right to equality and in her proper pride was not prepared to receive it as a favour and in homeopathic doses at that.

There is no doubt in ray mind that Germany would have been given the equality she actually desires long before if it had rested with England, but for some reason which I have never been able to understand we appear to have taken our instructions in these matters from abroad. The general treatment of Germany in these matters does not appear to me to bear the stamp "British" Why cannot we say to the other European powers: "If you want to go on nagging at Germany do it alone?" There can be no offence in that. It may come naturally to them, but it is most certainly not British. Has the world so changed that we can no longer treat an ex-enemy in the way we always have in the past? Of course, I know there are difficulties. There has been a tremendous amount of anti-Nazi propaganda going on in this country, some of it of a very doubtful character, and all of it bearing the appearance of importation. There has been, for instance, the grossest exaggeration in such matters as the Nazi treatment of the Jews. After reading what appears in the Press in this country the very last thing when you go to Munich or Berlin that you would expect to see is a Jew. In fact, the place is full of them. They are in restaurants and shops and places of entertainment. In fact, they are everywhere, and no one interferes with them so long as they behave themselves and adhere to the regulations laid down for Jews.

So far as I have been able to ascertain, there is no interference with any creed so long as it is confined to worship and not used for political purposes and propaganda against the régime. It is perfectly true that the Jews are not allowed certain privileges in the matter of citizenship, but surely that is a domestic matter and no affair of ours. No doubt we in this country have not so far experienced the same difficulties and troubles of various sorts as have been caused by the Jews in Germany—or at least, not to the same extent. Surely, however, if the Germans are satisfied that there is a certain sect of people who for some reason or another constitute a national danger, they must be allowed to deal with that danger as they think fit. In any case, Germany's internal arrangements in this matter or in any other cannot be any affair of ours.

I only say all this because these are matters which seem to prejudice people against giving Germany what many people in this country consider to be her rights. Whatever may be said about certain details of his administration, it is at least certain that Herr Hitler saved Germany from going "Red," and for this if for nothing else he deserves the deepest gratitude, not only of Germany and not only of Europe, but of the whole of the civilised world. In three years Herr Hitler has raised the German people from the lowest depths of absolute, black despair and restored to them their pride and self-respect. Can anyone doubt Herr Hitler's absolute sincerity, or his desire, as expressed over and over again, to live in peace with his neighbours? The very last thing the German people want is war, and everybody should do his best to help to avert war. For my part I should like to see this country take some step in the direction I have indicated, on its own account and independently of any other country: I mean, with reference to the restoration of Colonial territory. I do not like the idea of international conferences. A conference of that sort is too much like an auction; at such a conference Germany would quite certainly have to ask for more and take less than she deserves. Why can we not do something generous and big, and do it on our own account, and so create the sort of understanding which should exist between two great nations? In view of the possible contribution at a later stage in this debate from the Episcopal Benches, I should like in conclusion to ask one question: Is it the considered opinion of the Church in this country that the treatment of Germany since the War has any relation whatever to the true teachings of Christianity?

LORD ADDINGTON

My Lords, I propose to base the few remarks I have to make to-night on the claims of Japan, as I am particularly interested in the problems of the Far East, where I spent five years not long ago. As the noble Lord, Lord Arnold, has already been telling us, Japan is one of these growing countries whose territory is strictly limited and whose opportunities for expansion in agriculture are therefore very small. So it is essential, if she is to keep her growing population employed, that she should extend and develop her industries. Japan also is peculiarly dependent on sources outside her own control for raw materials, which comprised over 60 per cent. of her imports for the year 1934, according to the latest statistics that I have been able to obtain. She has not produced in her own territories nearly enough iron ore, coking coal, lead, zinc or aluminium. She has practically no oil; she has absolutely no cotton, no wool and no tin. For all these therefore, she is dependent on imports from elsewhere. Again, in order to be able to pay for those imports and keep her population fully employed, she has to extend her export trade.

It may be said, and it is perfectly true, that in the last two years the trade and exports of Japan have been growing, but all the same she is beginning to find difficulty in her exports, that they are being shut out and that special steps are being taken against them in over thirty countries. Economic expansion is therefore an absolute necessity for the growth and development of Japan as a nation and for her civilisation. I have heard it said on high authority that there have been three different attitudes taken by Japan towards this country. There was the earliest phase, when we were allied together, of admiration and of friendship. The friendship continued, but it was crossed by misgiving. The present phase is one of suspicion that we, above all nations, are opposed to the spread of her civilisation. I feel that is incorrect, and that there are many in this country besides myself who are anxious to understand her requirements and meet her just needs for expansion. Her suspicions are to some extent justified by the change in our fiscal policy. The noble Lord, Lord Arnold, has already quoted what Mr. Joseph Chamberlain said in that respect, emphasising the need for the spirit of trusteeship and of the open field, which was the traditional policy. The Motion of the noble Lord does not call for absolute Free Trade but for freer trade, although perhaps in his speech he has gone rather beyond the terms of this Motion. That is the spirit which we should adopt.

The noble Marquess, Lord Salisbury, suggested last week that the causes of all these difficulties were not economic but moral, and he went on to say:

"What you want are God-guided personalities, which make God-guided nationalities, to make a new world, and all the other ideas of economic adjustments are too small really to touch the centre of the evil."

May I very humbly commend that statement to the serious consideration of your Lordships? I should like with great respect to suggest to the noble Lord, Lord Ponsonby, in view of what he said last night, that that does not mean—at any rate, as I interpret it—that our present difficulties are due to our being less moral or more immoral than our fathers and our grandfathers, but that they are due to such causes as fear, hate, greed, jealousy, revenge, and personal and national selfishness and self-sufficiency. Those are moral causes; and our difficulties are due far more to stupidity than to any particular proposal or to any particular economic policy or economic difficulty.

I would suggest further that, in regard to this question which we are discussing this afternoon, we should consider ourselves as stewards, entrusted by the Father of the family of nations to administer the resources of the territories concerned for the benefit of every member of that family according to the needs of each and according to His principles and His will. I think we must approach that problem in that spirit, in the willingness to consider sympathetically the needs of these nations and to understand what is behind their demands, and in the determination to seek for the means whereby it can best be solved. That will require some real co-operation and a readiness to sacrifice some of our own advantages, some of the advantages of our own individual nation, for the benefit of the whole; but I believe that in the welfare and prosperity of the whole we should be amply compensated.

I should be grateful to the noble Earl if, in his reply, he would tell us what investigations, if any, have been made preliminary to the inquiry suggested by Sir Samuel Hoare at Geneva in that speech which has been referred to by several of the noble Lords who have spoken to-night—inquiry into the question of raw materials from Colonial areas. Although the calm and dispassionate consideration which he laid down as necessary for such an inquiry may be impossible at the moment, it does not seem to me too soon that such preliminary investigations should be begun. It may well be necessary that such investigations should take place in several countries and by various bodies, rather on the lines of some preparatory inquiries and committees for the Pan-Pacific Conference—on the lines of those inquiries referred to by Lord Lugard earlier in the evening. At a recent meeting of the Council of the League of Nations the Secretary of State for Foreign Affairs used these words:

"If we want to win peace, it can only be through the winning of fuller understanding on the part of us all of the things that are foremost in the thought of each."

This question of economic security and economic expansion is certainly foremost in the thought of Japan, and probably in the thought of Germany and Italy as well. I believe that by facing it in the spirit I have ventured to suggest we will remove a potential cause of war and lay the foundation of a just and lasting peace.

LORD NOEL-BUXTON

My Lords, Lord Arnold has stated a strong case, but he has not exaggerated it in any degree. Indeed I think he has under-stated the urgency of it. I think that the significance of Sir Samuel Hoare's utterance at Geneva in September of last year has not been fully grasped by the public. We forget what a surprise it furnished to the world that he should raise such a subject at such a moment. None of us would have foretold that the Colonial question would then be raised, and anyone not in the highest authority who had raised it would have aroused strong resentment by doing so. Sir Samuel has forced the question into the front rank, and since he did so he has repeated his case in a broadcast to America. It has led to a flood of debate on the subject, and consequently to quite a revolution in public thought. We have The Times saying that a new survey of the Colonial field offers the right and reasonable substitute for unreasoning demands. Who could have imagined The Times saying such a thing two years or even one year ago?

Why did Sir Samuel Hoare spring this surprise on the world? It can hardly have been his mere sense of the degree of injustice, which Lord Arnold has described. Some more urgent cause, it seems to me, must be sought for this surprising fact. There was every ground for avoiding the topic. It is an extremely thorny subject, and he is a good Party man and would have avoided it if possible. Had it been raised from the Benches of the Labour Party I am sure the denunciation would have been keen. Such a question also rouses claims which otherwise might have remained dormant. It might be said that he raised it in addressing Italy in order to give Signor Mussolini some inducement to avoid going to war, but Italy afterwards went to war, and since then Sir Samuel has returned to the case. It seems to me that he must have seen, as many must have seen, in the Colonial situation elements of great danger, and an apparent necessity not to defer these discussions any longer. I do not know whether the Colonial situation may be one of the grounds for the rearmament policy which has been adopted by the Government, but some explanation is needed. Presumably it lies in new facts which are before us. Colonial ambitions are rising, and they are undoubtedly, if not dealt with, a danger to peace. Germany has begun to make her demands for the return of her Colonies more definite. Italy has proved, by going to war, the urgency that is felt in Italy; and I agree with the last speaker that the Japanese case may be one of the greatest possible urgency. Japan has been very hard-hit by the policy of recent years, and those who have been to that country lately tell us of the menacing propaganda which is to be heard there. It is not now mainly a Chinese policy, but increasingly an anti-British propaganda, which we regret to learn of.

Have those in the highest authority seen in the Colonial question a very great obstacle to peace unless it is dealt with, and is that why the question has been raised? The partial monopoly that our own Empire possesses no longer looks as tolerable in the eyes of the dispossessed as it did a few years ago, when we could boast, as Mr. Chamberlain boasted, that the door was open. It is now greatly resented as an exclusive institution, and that makes it a very precarious foundation for peace. Moreover, the League of Nations is in many quarters suspected as in some degree and organ of the satiated Powers. The urgency of the question raised by my noble friend is reinforced by the Rhineland crisis. The Locarno States propose a Conference to deal with security, the limitation of armaments, and the economic difficulty, and especially with the German proposal, which uses the words "Colonial equality of rights." In connection with that Conference I would like to ask the noble Earl who will reply whether inquiries are being set on foot into the details of the questions which presumably will come before the Conference before many months are past.

The noble Lord, Lord Lugard, has shown how in some respects the grievance which the unsatiated Powers feel is exaggerated, but I think he will agree with me that we should not in any way belittle the grievance which exists. The economic grievance is of course exaggerated, especially in regard to the possibility of finding lands for settling new populations, but the noble Lord would agree that it is dangerous to let the question drift as if no grievance existed. My noble friend Lord Arnold has shown how real a certain grievance is, and we all know how keenly it is felt. The Ottawa policy has vastly enforced the case of the dissatisfied Powers. They cannot buy because they cannot sell; they cannot sell because of tariffs. It is a striking fact that Germany in 1930 could import into this country 89 per cent. of her imports free, and now it sounds almost incredible that only 4½ per cent. of Germany's goods can come into this country free of duty.

Lord Arnold gave some figures of the partial monopoly of certain essential products which we possess. He did not mention one or two other very striking ones. I do not think he mentioned jute, of which we have 99 per cent. of the world's supply. He did mention nickel, but he did not mention that we had 64 per cent. of the gold and 40 per cent. of the lead and the tin of the world. What is important in that connection is the fact, not universally known, that there have been in regard to some of these products export taxes which violently differentiate against the freedom of purchase by foreign countries. There has been in the case of tin a duty which diverted tin from Nigeria and Malaya to this country by Governmental action.

With such a situation and such a preponderance of possession by our own Empire—and of course very much the same applies to the French Empire, which has never been able to boast of a Free Trade policy—if it is not treated on the basis of the Open Door it is impossible to imagine the continuance of the situation that exists to-day in twenty or thirty years' time. It will either be solved by the wisdom of statesmen or solved by regrettable means. The Empire trade policy of Lord Beaver-brook would make war quite certain within not too distant a date.

Lord Arnold might have added several points to the statement of the grievance of the dissatisfied Powers, on which he did not exaggerate at all. He might have dwelt on the exclusive advantage of investment which belongs to the governing State, an illustration of which has occurred quite lately in the case of the Kenya gold fields. Between July, 1934, and February, 1936, the Kenya gold mining companies issued in the City of London no less capital than £4,800,000. These advantages belong to States holding Colonies in sovereign possession in a way which does not apply to Colonies held under Mandate such as Tanganyika. Other advantages that my noble friend did not mention were the advantages of the governing State in regard to contracts, in regard to concessions, in regard to posts in the Civil Service which, though not amounting to more than, I think, about 20,000 in the Colonial Empire and India, are, after all, a very natural object of jealousy on the part of the dissatisfied Powers.

He mentioned the question of prestige. Sir Samuel Hoare wisely, no doubt, limited his subject to the economic side, but we all know what a powerful motive prestige can be. Even before the War, in more favourable days, it exerted a powerful influence in Germany, and the desire for Colonies on grounds of prestige was undoubtedly one of the causes of unrest which led to the War. I hope that my noble friend Lord Lothian is right when he says that a solution of the economic difficulties would be almost adequate. Let us hope that that is so, but we must not close our minds against solutions that may carry us beyond the economic sphere, because we may find that the economic solution is not entirely adequate. Many proposals for dealing with the case will come up at the forthcoming Conference, and they will include some which are not purely economic. The return of the German Colonies has already been mentioned. My noble friend who introduced the Motion has suggested that we should return to freer trade, and we should give an undertaking to abide by it. But will not something more than that be required? Part of the case of the dissatisfied Powers is that though at times, and until lately, they have had access to our markets, they have not had security for the continuance of that situation. Some means to assure to them continuity of freedom will be required.

The best means of security for that purpose exists in the Mandate system. I was very glad to hear the suggestions that the noble Lord, Lord Lugard, made in that connection. The mandation of tropical Colonies now sovereign possessions would be the very greatest step Still greater changes may be needed. One advantage of the Conference will be that the dissatisfied Powers will be compelled to state their case, and that will inevitably lead to the dispelling of many exaggerations. The chief proposal that must be in our minds is that of the extension of the Mandate system to tropical Colonies now in our possession. That would secure the Open Door, which is the main genuine need of the dissatisfied Powers. It would give them also participation in the development of those territories which they now fail to reach in regard to contracts, concessions, and investments. It seems to me that the acceptance of a wide extension of the Mandate system to British Colonies in Africa need never be regarded as a derogation of dignity to ourselves. We have always boasted that we are trustees of those lands, both for the natives and for the rest of the world. In any case we must be ready to revise many ideas that we have long held, and not even our most cherished traditions must prevent a solution of what is a very dangerous question.

VISCOUNT SCARSDALE

My Lords, I have listened with great interest to noble Lords talking of a freer exchange of goods and raw materials between the Empire and the rest of the world. If I have not misunderstood the noble Lord's main thesis it is that a return to a system whereby the products of the Empire could be more freely exchanged with those of the other nations is to be desired, and indeed would considerably assist the Empire as well as the rest of the world to release the dam which stops the easy flow of international trade. If such a state of affairs could be achieved, our Dominions and Colonies would profit greatly by the vastness of their productive capacity of raw materials, and the Mother Country would reach an unexampled prosperity through the increased trade and commerce resulting from large-scale production and an unrivalled experience of industrial problems. Alas, I think this is only a Utopian dream.

The post-War era has been significant by reason of the efforts made by almost every nation to become self-sufficient and to escape the benefits which the scientific development of large-scale production and specialisation has made possible. Governments appear—and indeed industry too—to take narrow, short-sighted views of their interests. Restrictions, regulations, high tariffs, subsidies—all these are used to bolster up industries and enterprises irrespective of the interests of the consumer or of their ultimate effect on the economy of the country. Stress is laid, and rightly so, on the importance of reducing unemployment, maintaining key industries and increasing home food supplies. The weakness revealed by the Great War has compelled all nations to survey their own sources of all these products and commodities, the supply of which during the critical period of a war might be endangered unless sufficient were produced at home. In other words, whether it be in the growing of raw materials or the manufacture of goods, each nation is impelled by a war fear towards an economic nationalism which almost closes the door to international trade. This fear, which demands the conservation of gold supply, is one of the main causes of exchange restriction and of a financial contraction which strengthens the vicious circle in which international trade attempts to move.

In a few brief sentences I have tried to sketch the principal difficulties which beset the flow of trade between one country and another. I contend that the special position of the Empire in relation to world trade makes the need for an examination of the restrictions and their modification an urgent necessity. The prosperity of Great Britain cannot be fully realised except by an increase of its export trade in manufactures. Our Dominions and Colonies will again look to an encouraging future only when their products such as wool, coffee, wheat and corn find a ready sale in the world markets. It has been aptly said that the irony of the present world situation lies in the fact that in a world of overflowing plenty millions of people are literally starving for want of those very commodities of which large surpluses are being destroyed. It is against this background that we have to consider the Motion of the noble Lord, Lord Arnold.

Whilst the Ottawa Conference helped to define the principles of inter-Empire trade, it did not in my opinion deal with the question in a radical manner. Empire trade must not be considered in isolation. It has to be connected with world trade as a whole, by which I mean that no proper solution, let us say, of New Zealand's dairy output as a whole, can be found unless markets outside the British Empire are discovered. The competition between our home dairy products and those of our Dominions and Colonies prevents the proper development of our own industry, nevertheless there is no one so bold as to say that the best interests of our farmers would be served by placing such restrictions on the importation of Colonial dairy produce as to give a premium to an expanding dairy industry in this country. And I may add that I am a dairy farmer myself! I would venture the suggestion that a more fruitful policy would be to examine by what means Colonial produce could be marketed in those countries in Central Europe and in Asia where the purchasing power of the people is exceedingly low, and where even now whole groups and communities live below the subsistence level. I believe that a survey of the needs of those countries from the point of view of the utilisation of Dominion produce would not be as hopeless as would appear at first sight.

Another point which appears not to have been sufficiently stressed in the noble Lord's observations is the factor of the balance in the economy of this country as between industry and agriculture. Prior to the War the system then operating enabled this balance to be automatically achieved. We lived then in what appeared to be a perfect state of laissez-faire. We now move and work in quite other conditions when national and strategic considerations compel a new direction, both in the development of industry and in quantitative and qualitative production in agriculture. To encourage the latter we have to place quantitative restrictions, through tariffs and quotas, on the agricultural imports from countries hitherto accustomed to export freely. In return we formerly were able in most cases to pay for those imports in manufactured goods. Hence it has been found necessary to make special agreements with countries like Denmark whereby a certain reciprocal trade has been maintained.

After all, it could be easily demonstrated that the political problem of Central Europe and Asia was principally a hunger problem. Is not the time opportune for Great Britain and the Empire to act courageously, as it has recently acted in the sphere of international politics, by initiating steps to ameliorate the economic conditions of those nations on which the future peace and stability of Europe must depend? It has been rightly argued, I think, that it ought to be possible to relieve international tension through the more intelligent use of the United Kingdom's immense resources as a trading nation. The problem should not be tackled narrowly, purely from the standpoint of British commercial interests, but broadly on the assumption that in the long run the most vital British interest is to secure by any means in our power a peacefully developing international situation. I venture to suggest that our foreign trade must be fostered and expanded. To achieve this purpose, a necessary machinery must be set up by industry to survey and discover the needs of those far markets for our goods, such as South America and China, and in fact the greater part of Asia and Africa as well as our own Dominions. These investigations having been made, it will then be necessary to arrange for the essential finance, either through loans for public works and industrial expansion in those countries, or through long-term credits to increase their purchasing power. I believe that this method of approach to the problem of international trade will accelerate its flow, and if the industrial and financial interests in this country will take the initiative we will reap the rewards.

LORD STONEHAVEN

My Lords, the noble Lord, Lord Noel-Buxton, used a phrase in the course of his speech to which I would like to refer. He said that it would be necessary for us to revise many ideas that we had long held. It seems to me that is what we have been very busily doing since the War. Some have been revised advantageously, and in other cases the advantage has not been so noticeable. But in discussing this question to-day surely we have omitted two points which in the past would certainly not have been omitted. We have been talking about the fate of great stretches of country inhabited by races who look to us for their improvement and development and who hitherto have not looked in vain. We rightly have been looked upon and have considered ourselves as the trustees for these races and nations who are in a lower stage of development than we are ourselves, and surely it is impossible for us to divest ourselves of that responsibility. That is one side of the question.

The other side—and I am surprised that it should have been ignored by noble Lords sitting on the Benches opposite—is the interests of working men here. Although undoubtedly our trade with the Colonies has increased, and nobody can deny it, since the Ottawa Agreements were reached, that increase has only been at the expense of general world trade. But what guarantee is there that our world trade would not have diminished to the extent that it undoubtedly has diminished if we had not entered upon the Agreements at Ottawa? It seems to me that we now run a grave risk of depriving the working men in this country of the advantages which they undoubtedly have enjoyed from those arrangements without any guarantee whatever that we can find them corresponding work in another direction. I seems to me that those are two very serious points which have to be taken into consideration. Any one who has lived, as many of your Lordships have done, in our Colonies, cannot have failed to recognise how proud the great majority of the natives are at being under the British flag, and I must say I should shudder to think what the fate would be of an Englishman who had been one of the Governors, or one of the many admirable fellow-countrymen of ours who carry the great burden of Colonial governorship through the length and breadth of Africa, if he went back to the country he had governed after it had been handed over against the will of the natives to some other nation.

What guarantee is there, again, that this new idea—this is one of the new ideas of the noble Lord opposite—would relieve the situation which undoubtedly is serious so far as Germany, Italy and Japan are concerned? My noble friend Lord Lugard, who speaks with unrivalled authority on this matter, referred to the fact that before the War the number of colonists which the German territories in Africa were able to accommodate was infinitesimal. I think he also referred to the fact that the reason why these countries are unable to obtain raw material is not that there is any lack of raw material—indeed raw material is, I believe, cheaper in general than it has ever been in the world—but that they cannot pay for it, and they cannot pay for it because they have chosen of their own free will to devote to rearmament the immense resources which otherwise might have been available for buying this raw material.

An expression, I think from a translation, used by the noble Lord opposite was "Colonial equality of rights." What is that? Has any nation a right to Colonies I We have not heard of it in the past, and, indeed, why should these so-called rights be gratified at our expense? Yesterday the noble Lord opposite suggested that it was right that we should occupy the position of the policeman of Europe. To my mind that involves responsibilities on us which we must think about very carefully before we are prepared to accept them. To-day we are being invited to divide up the Empire in order to satisfy "Colonial equality of rights." Many investigations would undoubtedly be fruitful into the question that was raised by my noble friend Lord Lugard, but I think we should not talk glibly, as I think noble Lords have done, about distribution of areas of the Empire for which we have a grave responsibility, and a responsibility which we are discharging in a way that is not merely satisfactory to the natives but ought to be a source of pride to everyone of us who has visited those countries and who knows how very beneficial the rule of our country has been. To divest ourselves of those regions requires a far stronger argument than any which has been brought forward to-day.

I come back to the position of the working man of this country. We are only now emerging, and emerging with the greatest possible difficulty, from a position where our most appalling problem was to provide employment. Is it to be suggested that in order to supply, I will not say the needs but the claims of other nations, we are to do that at the expense of the British working man who gradually is emerging from that position which resulted from the War? I venture to suggest that our primary consideration must be ourselves, and the British Empire, and first of all this country, and that before we are called upon to make further sacrifices we ought to be much more sure than anything that has been said can enable us to be that that sacrifice is justified and that, indeed, it is going to remedy the disease to which it is to be applied.

THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE COLONIES (THE EARL OF PLYMOUTH)

My Lords, may I first of all thank the noble Lord who initiated this debate and one or two other noble Lords for having given me certain information about the line of argument they were going to adopt. The debate has ranged over a very wide field. I am afraid it will be impossible for me to cover it all, but I shall attempt to cover as much as possible. In the beginning of his speech the noble Lord, Lord Arnold, referred to a speech made by the former Foreign Secretary, Sir Samuel Hoare—and it was reverted to by a number of other speakers—in which Sir Samuel Hoare gave an assurance that we should be prepared to discuss the question of raw materials generally, their availability and so on. That is an assurance which the Government are prepared to honour, but I would like to go further than that and to say that it is definitely the policy of the present Government to do what they can to lower the barriers which are hindering world trade at the present moment, and to do anything within reason to try to increase the flow of international trade throughout the world.

We fully realise the benefits that would arise from anything that could be achieved in that direction. But the policy of His Majesty's Government must take into account the realities of the situation. The Government must take into account the fact that the conditions in which the theory of Free Trade can be converted into practice do not exist at the present moment. It is unthinkable that we should now adopt a policy of Free Trade unilaterally or even take any steps which would to any considerable extent lower the protective duties which we have had to adopt as a result of the policy of other countries. Every other important commercial country throughout the world is highly pro tectionist at the present time, and indeed it was this fact and a certain number of other facts which drove the Government to adopt the policy which we are now pursuing. The economic position at that time was deteriorating so quickly that I feel sure there is hardly one of your Lordships who would not agree that some steps had to be taken to protect British trade. The Ottawa Conference Agreements were really complementary to the system of protective tariffs which was then adopted. I should like, however, to take the opportunity of disabusing your Lordships of a misconception which seems to be prevalent and to point out that these duties do not represent an intensification of Protection, but are rather a modification in the direction of freer trade over a very wide area. I would like to revert to that particular question later.

What in effect the noble Lord, Lord Arnold, asked the House to do is this. He asked your Lordships to endorse the view that the claims of Germany, Japan and Italy for economic expansion could be met, and should be met, at any rate in part, by a return to freer trade, which would result from the abrogation of the Ottawa Agreements. I think I am justified in saying that he has made three separate assumptions—firstly, that abrogation of the Ottawa Agreements would result in freer trade; secondly, that Germany, Japan and Italy would be in some way satisfied by the establishment of freer trade; and lastly, that the United Kingdom and the other members of the British Commonwealth of Nations could afford to give up the trading advantages derived from the Ottawa Agreements.

I personally do not agree that the abrogation of the Ottawa. Agreements would result in freer trade. May I first of all take our Colonies and territories in Africa, which were specially mentioned by the noble Lord, Lord Lugard? In the great majority the position is controlled by certain agreements by which we are bound. Nigeria, the Gold Coast, Kenya, Uganda, Tanganyika, Zanzibar and Nyasaland are all affected by those treaties. Those territories comprise far the greater portion of our Colonial Empire in Africa. In all those territories Germany and Italy enjoy exactly the same economic opportunities as the British Commonwealth of Nations. There is no discrimination whatsoever against them by means of tariffs or quotas. The noble Lord, Lord Lugard, said that it might be necessary for us in time to impose quotas on bounty-fed goods imported into those Colonies from Germany. I am afraid I am not in a position to discuss that question to-day, but I want to point out that the treaty position which obtains to-day would not permit us taking that action.

At the present time there is no discrimination against Germany or Italy so far as tariffs or quotas are concerned. Japan has the same privileges that Germany, Italy and members of the British Commonwealth of Nations have in the five East African territories, though I agree that in her case the treaty position does allow the Governments of Nigeria and the Gold Coast to discriminate against her. But the point I want to emphasise is that modification of the. Ottawa Agreements is not really going to make any difference, in so far as tropical Africa is concerned, in the direction of bringing about freer world trade. There really are, to all intents and purposes, no restrictions of any kind on trade in Africa.

I must say a word with regard to Japan, as her position has been specially referred to by a number of noble Lords. The Government's policy has been explained on many occasions. It aims, firstly, at the maintenance of a fair balance of trade between Japan and the Colonies; and secondly, at the preservation of certain vital industries in this country, notably the Lancashire cotton industry; and incidentally, as the noble Lord, Lord Stonehaven, pointed out, at safeguarding the standard of living of the workers engaged in those industries here at home. But I want to emphasise that the decision to discriminate against. Japan was not taken until it became perfectly clear that settlement by negotiation was out of the question.

The noble Lord, Lord Lugard, made some kind of suggestion with regard to an agreement in respect of the balance of trade. I want to repeat that every effort was made to settle this matter by means of negotiation. It was only when that failed that it became clearly necessary for the Government to take some action. I venture to say that, in the circumstances that then existed, the Government had to take some action to check the process that was then going on. I feel compelled to deal with this particular question at some length, and I hope your Lordships will forgive me, because, as I said, a number of noble Lords, including the noble Lord, Lord Arnold, the noble Lord, Lord Lugard, the noble Lord, Lord Addington, and the noble Lord, Lord Noel-Buxton, I think, have referred to this matter, in spite of the fact that it really has nothing to do with the Ottawa Agreements.

The position was this. Japan flooded our Colonial markets with cheap manufactured goods, with a suddenness and a thoroughness which naturally gave rise to great alarm among those people who were most chiefly concerned. We were faced with an unprecedented situation; I do not think a situation of that kind had ever occurred before. At the same time, she was buying practically nothing from our Colonies in return. I will quote one example as being typical of the process which was going on. The average quantity of grey, unbleached and white-bleached cotton piece goods exported by Japan to Malaya in the years 1927 to 1931 was 4,000,000 square yards per annum. In 1932 this shot up to 22,000,000 yards, in 1933 to 26,000,000 yards, and in 1934 to nearly 29,000,000 yards. This was typical of what was going on all over the Colonial Empire. Your Lordships can imagine the depressing effect that this had upon the Lancashire cotton trade.

I agree that in an ideal state of complete free trade an adverse balance of trade with one country should be automatically rectified by a favourable balance with another. The experience of the United Kingdom in the years prior to 1931 proved, however, quite conclusively that this was not so in present conditions. It is now quite definitely necessary for a country to maintain some sort of balance in its trading relations with individual foreign countries. Otherwise it will almost certainly become a dumping ground for surplus and cheap goods. It was in these circumstances that the quota system in respect of certain specified classes of goods was established in the Colonial Empire, but even so no quotas have been imposed upon Japanese goods other than cotton and artificial silk, and no discriminatory duties on any other classes of Japanese goods except in Nigeria and the Gold Coast—that is, within the whole Colonial Empire. The principle upon which the quota is based is to allow Japan to export a quantity of cloth equal to the average quantity exported by Japan to the dependencies for the years 1927–31. After the explanation I have given, I think your Lordships will agree that it was perfectly clear that action had to be taken, and that the action which we did take was not unreasonable.

I should like for a moment to revert to the question of the Ottawa Agreements, as affecting particularly the Dominions and India. Your Lordships do not need me to remind you that the question of the economic policy of the Dominions is, of course, a matter for the Dominion Governments. This, of course, is obvious, but I am in a position to say that abrogation of the Ottawa Agreements would affect the right to preferential tariffs of Empire goods in those countries. The noble Lord, Lord Arnold, I noticed, during the course of his speech stated that the Empire was built up on a system of Free Trade. I am afraid I disagree with him as far as that is concerned.

LORD ARNOLD

I am sorry to interrupt the noble Earl, but that was not what I said. I quoted the statement of Mr. Joseph Chamberlain. It was part of a system of no preferences—I thought I had made that quite clear—not a system of Free Trade.

THE EARL OF PLYMOUTH

I am sorry that I misunderstood the noble Lord, and I therefore will not pursue that particular point. Personally, I can see no reason why, if the Ottawa Agreements are abrogated, those Empire countries that would lose their Preferences would be likely to reduce their general tariffs to non-Empire countries. In spite of what the noble Lord has said, I cannot see why action of this kind should lead us any farther in the direction of international Free Trade. The view of His Majesty's Government definitely is, as I have stated, that the Ottawa Agreements were not a step away from Free Trade but a distinct step towards it over a very large field—freer trade within the Empire. That, as your Lordships have reason to know, covers a very considerable field indeed. It is interesting to note in this connection that a well-known newspaper in Canada greeted the Agreements on the grounds that "the crumbling of the tariff wall in Canada has begun."

What were just one or two of the effects of the Ottawa Agreements? So far as Canada was concerned, 40 per cent. of our trade with that country benefited immediately by the removal or lowering of Customs Duties. Duties were entirely removed from $8,000,000 worth of goods a year, and duties were reduced on $37,000,000 worth of goods a year. Incidentally, I think I am perfectly justified in saying that it is not true, as the noble Lord said, that the present Government in Canada was returned on a pledge to reverse the policy of the Ottawa Agreements in Canada. That, I feel certain, is an inaccuracy, to say the least of it. So far as Canada, Australia and New Zealand were concerned, machinery was provided for reviewing protective duties. In India most of the new Preferences accorded to the United Kingdom were made effective by reducing duties on United Kingdom goods. In the United Kingdom free entry was guaranteed for the great bulk of goods from oversea Dominions, and thus I venture to say that a big step was taken in promoting freer inter-Imperial trade and increasing the volume of that trade.

But, my Lords, as I fully expected, the noble Lord has argued that the Ottawa Agreements did in fact add barriers to international trade by increasing duties on foreign goods. It is true that certain of the duties on foreign goods were increased, but only over a very limited field. This was inevitable in order to make Preferences to Empire countries effective and to protect certain classes of Empire production. I should like to point out that the Ottawa Agreements fixed, not the rates of duty to be imposed by the Dominions on foreign goods, but the margins of Preference on Empire goods. Every effort was made to bring about the reduction of duties on Empire goods, and I think I can therefore claim that, except in a limited number of cases, Ottawa did nothing to erect barriers against the trade of outside countries, while at the same time it made inter-Imperial trade considerably freer than it was before. In addition to this, I want to point out that, since Ottawa, the United Kingdom has made trade agreements with a number of foreign countries under which very great benefits have been obtained for the trade of this country. Bilateral negotiations have succeeded where multilateral negotiations would have shown no possibility whatsoever of success. Definitely, then, Ottawa was a step in the direction of freer inter-Imperial trade, as I have said, over a very big field.

It was hoped by the Government that a further step in that direction would be taken at the World Economic Conference in 1933. Unfortunately, our hopes were not fulfilled on that occasion, but His Majesty's Government are still anxious that this next step should be taken as soon as there is a reasonable prospect of success. It seems to me some what doubtful whether at the present time there is a reasonable prospect of success in dealing with this particular matter. I think perhaps it is pertinent that I should draw your Lordships' attention to the fact that one of the points in the document which was yesterday presented by Herr von Ribbentrop to the Foreign Secretary, was to the effect that Germany desired to make an important contribution to peace, but that an economic conference will be in vain until nations have been given the feeling of unconditional and lasting security.

I would remind your Lordships of what the Foreign Secretary said in another place last Friday, in the course of his statement already referred to to-day. He made mention of a proposal that a World Conference should be held to consider, amongst other questions, the economic relations between the different nations, but clearly that cannot be brought about with any prospect of success unless other Powers are ready and willing to come in and discuss these questions. It is perfectly clear that His Majesty's Government are themselves only too willing to co-operate with other nations to see what is possible to bring about a more satisfactory economic state of affairs throughout the world, but I do maintain that it is not possible for them in the present circumstances to take any unilateral action in regard to the matter which will have any useful result. I think that I was asked during the course of the debate what further steps were being taken to implement Sir Samuel Hoare's statement, which has already been referred to, with regard to raw materials, and I think my reference to what was said by my right honourable friend the Secretary of State for Foreign Affairs in another place is really the answer to that question—that the Government are prepared to examine this matter in conjunction with other nations when there is any reasonable prospect of a successful result emanating.

I now pass to the noble Lord's second assumption—namely, that Germany, Italy and Japan will be satisfied by a return to freer trade. I myself am afraid this is a very optimistic view of the situation. I do not think the "hungry countries" could be satisfied in this way. What they want is not equal opportunities but, to all intents and purposes, exclusive opportunities over certain defined areas. Germany and Italy in particular are countries where the idea of Free Trade throughout the world has not, I imagine, been given a single moment's thought during recent years. They are essentially highly protected countries. This is clearly the essence of the situation in which they find themselves at the present time. The strength and position of the Government are what count, and very little else does. Of the restrictions which have been placed upon the trade of Germany and Italy it is fair to say that the majority are the result of their own deliberate policy. It really has nothing to do with the Ottawa Agreements, nor, indeed, with anything else which this country has done or can do in the future.

Recently the whole of their foreign trade has been very largely subordinated, as has already been pointed out, to the single object of building up strength in armaments, and achieving a state of economic self-sufficiency. Clearly there is very little money left for anything else, as has been pointed out. Clearly the main difficulties facing these countries is the difficulty of obtaining foreign currency in sufficient quantities to cover their requirements in raw materials. Germany and Japan, and Italy when sanctions cease, can all have, as is generally acknowledged, all the raw materials they want from our Colonies on the same terms as ourselves—namely, that they should be prepared to pay for them. The difficulty which Germany and Italy experience in buying foreign primary products does not arise through any action of ours, but through the policy of their own Governments, as I have attempted to explain. The fundamental necessity is to solve the difficulties of exchange and currencies throughout the world, and that really cannot be done either by the abrogation of the Ottawa Agreements, or by any action that we ourselves, by ourselves, can take at the present moment. It is really a much larger problem than that.

I pass to the third assumption which the noble Lord made, and that was that the British Commonwealth of Nations could not only afford to give up, but would benefit by giving up, trading advantages resulting from the Ottawa Agreements. Quite frankly, it is unthinkable that we should withdraw those Agreements at the present moment and in the present situation. His Majesty's Government contend that the maintenance of these Agreements is essential to the maintenance of the position of Empire countries in the state of comparative prosperity which they have achieved during the last year or two. The noble Lord, Lord Arnold, during the course of his speech suggested that we would benefit, or the world generally would benefit, ultimately, if we were prepared—at least that is the impression his argument left with me—to hand over a certain amount of our trade with the Dominions to other countries. Frankly, I confess I find it difficult to follow an argument of that kind. I should like to remind the House of the deplorable condition of our trade in 1931, before the Ottawa Agreements were brought into operation. Our exports were decreasing by leaps and bounds. I do not want to quote many figures, but the fact is perfectly well known. In 1920 our exports reached a total of £1,557,000,000. That figure fell in 1925 to £927,000,000, in 1930 to £657,000,000, and in 1932 to £416,000,000. These are terrible figures, and it is suggested by the noble Lord that in spite of that we should revert to the policy that very largely obtained at that time. At the same time, the adverse balance of trade was increasing very seriously indeed. It increased in 1930 to £386,000,000, and in 1931 to £406,000,000.

At that time the whole world's economic position was artificial. As my noble friend Lord Scarsdale has pointed out, tariffs, quotas, subsidies, hidden and otherwise, were being applied throughout the world and interfering with the natural and normal flow of international trade. Whilst that was going on our position was deteriorating continuously and rapidly and some steps had to be taken to stop that process. It was quite obvious that so long as so many of the world's markets were closed to our goods we could not afford to leave our door wide open. We had to take steps to protect our own home markets, and secure a reasonable amount of it for our home producers and, at the same time, expand our trade within the Empire.

The advantages derived by the United Kingdom from the Ottawa Agreements really speak for themselves. The value of United Kingdom exports to the over-seas Dominions and India rose from £100,000,000 in 1932 to £128,000,000 in 1935, and, as the noble Lord, Lord Stonehaven, has pointed out, there is absolutely nothing to show that if we had not benefited by that rise in our trade, we should have been likely to benefit in some other way in so far as our trade with foreign countries is concerned. Indeed, the whole trend of events has been to show that that was unlikely. In the same period the proportion of our exports which went to the oversea Dominions and India rose from 27.6 per cent. to 30.2 per cent. The value of United Kingdom imports from the oversea Dominions and India rose from £169,000,000 in 1931 to £207,000,000 in 1935, and the proportion of our imports from those countries rose in the same period from 19.6 per cent. to 27.4 per cent. The improvement in inter-Imperial trade finds reflection in the steady recovery in our overseas and foreign trade as a whole. Since 1932 our exports have increased steadily year by year, the total increase in value from 1932 to 1935 being about £65,000,000—that is, about 15 per cent. of the total. Our adverse balance of trade has declined from £406,000,000 in 1931 to £275,000,000 in 1935. It is really perfectly clear, I should have thought, to anyone from these figures that the advantages that have been derived from these Agreements are mutual advantages, and that the economic position of the overseas Dominions has improved accordingly.

So far as the Colonies are concerned, I want to say that they, too, have derived enormous advantages from the Ottawa Agreements. If it had not been for the preferences granted as the result of Ottawa, many of our Colonies would have been practically ruined. I would like your Lordships to think for a moment of what the position of the sugar Colonies would have been, for instance, but for Imperial Preference. They would literally, most of them, have been absolutely ruined, and in others the economic position would have been infinitely worse than it is at the present moment. Preference has meant everything to a large number of our Colonies, and I would only ask any of your Lordships who doubt my contention to go and talk to people who come from the Colonies, or are interested in the Colonies, and ask them whether that is not so. Palestine is constantly complaining of the disadvantages which she suffers, as the result of being a mandated territory, through not being able to discriminate and not being in a position to be granted Preferences by this country and by other parts of the Empire. I venture to say that, without the right to discriminate, the Colonies would quite admittedly be in a hopeless position.

I just want to say a word or two about certain other matters which have been referred to in the course of the debate. The noble Lord, Lord Lugard, made a suggestion in the course of his speech that a certain number of Germans might be included in the staffs of our Colonies. Anything that the noble Lord says will certainly command attention, but I do not think he would expect me to make any comment on his suggestion at the present moment; nor do I think that the noble Lord, Lord Redesdale, on the Cross Benches, will expect me, at this juncture, to discuss the various problems to which he referred, and some of which, I must admit, were not very germane to the subject we are discussing. The noble Lord, Lord Noel-Buxton, made reference to the Colonies, and to the possibility of handing back to Germany certain of her former Colonies. He raised certain very delicate questions, and I think he, too, will not expect me to comment on what he said. I am not in a position to add anything to what has been said on that subject in another place. I have attempted to deal with some of the aspects of this very large question. I hope I have said enough at any rate to convince your Lordships, if that is at all necessary, that His Majesty's Government have pursued a sound and effective policy in these matters.

I am left with the impression that the noble Lord, Lord Arnold, has been trying to prove the soundness of a theory without any real thought of the actual realities of the situation. After all, the proof of the pudding is in the eating of it, and nobody can deny that the Ottawa Agreements have been of immediate benefit to the countries concerned. I can see no possible reason why we should forego these benefits. These agreements do not, in my view, stand in the way of freer world trade. I repeat that we are ready to discuss ways and means to that end when other countries show any disposition to do so. We are prepared, at the same time, to discuss the question of the availability of raw materials, but at the present time I can see no sign that any number of countries are desirous of doing so. In the circumstances obtaining at the time, His Majesty's Government adopted a policy dictated by considerations of reason, material benefit and—I am not in the slightest degree ashamed to say—of sentiment as well. This policy has been eminently successful in our view, and if there is no fundamental change in the attitude of other countries towards this problem, I for one hope to see it maintained and extended in the future.

LORD ARNOLD

My Lords, I desire to thank the noble Earl for his very full reply. He has covered a great deal of ground and has dealt with many of the aspects of this problem very comprehensively. I cannot honestly say that I think he has shaken the thesis which I put forward, more particularly as in certain vital respects he seems rather to have misunderstood what that thesis was. He said that I proceeded on three assumptions. The first one was that my policy would make for freer trade within the Empire. That, as a matter of fact, was not one of my assumptions, although in a sense I think that if it had been I could maintain it. My argument was that by the abolition of Preferences a condition would be established of freer trade in the fiscal arrangements of the Empire for the benefit of the world as a whole. It really is rather playing with words to say that the Ottawa Agreements make for freer trade within the Empire, because before Ottawa and before 1931, apart from Protection with certain Preferences which were given to our goods in the Dominions, there was absolute Free Trade in the Empire. If I may say so, with all respect to the noble Earl, to use words like that is part of the general tendency in these days to indulge in what I call make-believe. Take one point. The Ottawa Agreements have not, I believe, in a single instance helped our manufacturers by the lowering of protective tariffs in the Dominions, which were an obstacle to our own manufacturers in their exports to those Dominions.

The noble Earl—and I would like to couple with him the noble Lord, Lord Stonehaven—appeared to be under the impression, first, that a great recovery had taken place in this country, as compared with other countries, and, secondly, that that is due to Ottawa. I have to tell the noble Earl in reply to the figures which he gave—and I mentioned this in my speech—that as a matter of fact since 1931 and 1932, which was the low point in the greatest trade depression in history, the trade of practically every country has shown an increase, and therefore the figures he gave have really no relevance to the general world position. In the world recovery table given by the League of Nations, and referred to by Mr. Lloyd George in his broadcast during the General Election, Great Britain is placed tenth on the list. There are nine nations which have done better, yet which have not had the advantage of Ottawa and of these other preferential arrangements which the noble Earl commends. That is my reply also to the noble Lord, Lord Stonehaven. He says, "Let us think of the working man." I am thinking of the working man, and my general contention is that this policy is not helping the working man. It has certainly made his food dearer than it otherwise would have been, and it has not really helped. Take exports. Several other countries have done much better than we have in their export trade.

LORD STONEHAVEN

Are they Free Trade countries?

LORD ARNOLD

That is not the point. The point is that we were told that because of Ottawa we got great advantages. Nearly every country which has gone off the gold standard and has had the advantage of a depreciated currency has advanced greatly in its export trade. I do not remember the latest figures, but I remember a certain reply given in the House of Commons in the earlier part of last year. It showed that in 1934, whereas exports of merchandise from the United Kingdom had increased by 7.7 per cent. compared with the previous year, the exports of the United States had increased by 32.6 per cent., of the Argentine Republic by 31.5 per cent., and of Sweden by 30 per cent. I say that if you go into the figures and compare our position with that of other countries, there is really nothing to be proud of, in spite of the fact that a good many members of the present Government stated at the General Election that this is the only country which has improved its position since 1931 and that this was due to Protection and to Ottawa. I think I have said quite sufficient to destroy that illusion.

The noble Earl gave certain figures about Canada and spoke about the days before this policy was inaugurated. Very well. In 1929, before this policy was inaugurated, we exported to Canada goods to the value of $194,000,000 and in 1932 the amount was $106,000,000 and in 1934, despite the two years of Ottawa, it was $105,000,000—actually lower than in 1932. If I were to continue with these matters I should take more time than I think it right to do at this hour, but I hope I have said sufficient to show that there is really a very full reply to the contention that the noble Earl has put forward. And I would say this in reply to the noble Lord, Lord Stonehaven. He wants us to think of the working man. In 1913, long before Ottawa, unemployment in this country was down to 2 per cent., and that was in the old days to which I am wishing to return. That was a good time for the working man so far as unemployment was concerned. The noble Earl in the second place suggested that I had assumed that Germany, Japan and Italy would be satisfied if the abolition of Preferences were brought about. I did not say that. I was most careful of my words. I said that it would help to alleviate the situation.

THE EARL OF PLYMOUTH

I said "in some ways satisfied."

LORD ARNOLD

Well, if that is so, that qualifies it. I am not saying that this is the be-all and end-all of our trade policy, but if the policy I indicated were carried out and the exports of those countries thereby considerably increased, I think it would help to remove from them the inferiority complex from which they suffer at the present time. A large overseas trade quite apart from the advantage that it would have in enabling them to finance imports and raise their standard of life, would help considerably, psychologically and in other ways, to improve their position. The noble Earl asked whether I actually propose that we should give up these exclusive trading advantages which we have through trying to hedge round a quarter of the world's surface with preferential tariffs. That is exactly what I do propose. I say that the present policy is too greedy, that it cannot last. It might be very nice from some points of view for some people if it could last, but it is too greedy, and if we go on being too greedy we shall have to pay the penalty one day, and it may be a very serious penalty indeed. That is precisely what I have put before the House, and nothing that the noble Earl has said has shaken my conviction in the least.

One word about Canada. I think I am speaking correctly when I say that the Canadian Elections were fought largely on the Ottawa Agreements. That has been stated categorically in paper after paper, and the result was regarded in Canada as a condemnation of the Ottawa Agreements. I do not think there is any dispute about it. I wish in conclusion to thank the noble Lords who have taken part in the debate, apart from the noble Earl. Until he rose and Lord Stonehaven rose, there really was nothing very controversial in the discussion. I had a note from the noble Viscount, Lord Elibank, saying that he was detained and unable to come to-day. I regret that very much, because on these occasions he always puts his case, with which I personally do not agree, with ability and vigour. However, towards the end these more controversial points have been brought into the discussion, and through your Lordships' kindness I have had the opportunity of making some reply. I now beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.