INTERNATIONAL TRADE.

HL Deb 21 July 1937 vol 106 cc742-97

THE MARQUESS OF CREWE had the following Notice on the Order Paper:—To call attention to the statement in the Report of the Imperial Conference, 1937, that the outstanding feature of the discussion on trade was the emphatic desire expressed by the representatives of every part of the British Commonwealth represented at the Conference that all practicable steps should be taken to secure the stimulation of international trade; it being recognised that in the last resort the prosperity of the countries of the Commonwealth depends on that of the world as a whole, and that a healthy growth of international trade, accompanied by an improvement in the general standard of living, is an essential step to political appeasement; and to ask what action is being taken by His Majesty's Government to give practical effect to that declaration, particularly in relation to the economic causes of the present tension in Europe; and to move for Papers.

THE MARQUESS OF LOTHIAN

My Lords, my first duty is to express, both on Lord Crewe's account and my own, his regret that he is not able to be in the House to-day to move the Motion which stands in his name, and which he has asked me to move in his place. He has not been very well lately. Although there is nothing serious the matter Lord Crewe has been advised by his doctor not to attempt a speech for a few days, and that is the reason why he is not moving the Motion to-day. It falls, therefore, to me to move the Motion which stands in his name. It is a long Motion, but I do not think it is necessary for me to read it, because it is before your Lordships on the Order Paper. It calls attention, of course, to a very striking phenomenon, which is the almost universal expression of public opinion by the statesmen of the world in favour of a reduction of the barriers to trade, and taking measures to increase international trade. In view of the tremendous tendency towards economic nationalism in the last fifty years that is a very remarkable fact.

I will only read one or two of the most outstanding statements recently made on that subject. The one to which special attention is called in the Motion is that made at the Imperial Conference, which is to be found on pages 21 and 22 of the Summary of Proceedings: The outstanding feature of the discussion was the emphatic desire expressed by the representatives of every part of the British Commonwealth represented at the Conference that all practical steps should be taken to secure the stimulation of international trade. It was recognised that in the last resort the prosperity of the countries of the Commonwealth depends on that of the world as a whole and that a healthy growth of international trade, accompanied by an improvement in the general standard of living, is an essential step to political appeasement. It is a curious commentary that after five years' experience of the Ottawa duties the only reference to those matters to be offered is that "in the last resort the prosperity of the countries of the Commonwealth depends on that of the world as a whole" and that "a healthy growth of international trade" is "essential … to political appeasement."

Only yesterday, or two days ago, the Foreign Secretary, speaking in another place, also made reference to this general thesis. I will only quote two sentences from his review of world conditions: The Government believe that the removal of the barriers which at present impede, and at times stop altogether, the course of international trade would be an effective step in the removal of political tension. He went on to say: The preliminary discussions now proceeding in Washington with a veiw to seeing whether there is a basis of negotiations for a trade agreement between the United States and the United Kingdom are, of course, welcomed by His Majesty's Government. It is the desire of both Governments that such agreement should be a practical contribution to the development of international trade and the movement for promoting world peace through economic agreements. That is a statement on behalf of the British Government and, while not couched in quite as enthusiastic terms as those of other Governments, nevertheless it expresses without qualification its recommendation that the improvement of international trade is a necessary condition of relieving the tension of existing international relations.

There was a very remarkable statement given in an interview in the Morning Post by Mr. Norman Davis when he was here only a month ago as representing the United States on the Sugar Conference. He said: There will be no political appeasement in Europe without an economic rehabilitation. Mr. Davis added: A political settlement, even if it were possible, would not hold water unless accompanied by a revival of international trade. Currency control, import restrictions, and all the barriers which prevent the free shipment of goods are bottling up the economic forces of countries. The result is that the military forces become more and more active. If you cannot export goods you export armies, and that means war. That is a very strong statement on the part of the man who had represented, with great success, the Government of the United States on a large number of international coneferences during the last fifteen years.

I do not think it is open to question that one of the first objects of the policy of Mr. Hull and President Roosevelt is to do anything they can to remove those economic barriers to trade which have been the greatest single cause of our international troubles since the War. The United States have at last begun to reverse a policy which they have followed without the slightest change since the Civil War in 1860, that of steadily increasing protectionist duties, except for the reducton made by the Underwood Tariff in 1912. They have now begun to move away from the policy of high protection and have done so because large sections of the people in the United States, notably the farmers, and influential financiers and professors of economics in the Universities, have recognised that the policy of high protectionist duties has been one of the major causes of the depresson which has hurt the United States more than anybody and of all those irremovable masses of unemployment which are perhaps the greatest difficulty which now confront the country.

I do not say that if you put it to the vote in the United States as to whether they wanted to abandon protection for free trade, such a motion would secure a majority of the people; but it is true to say that the policy of Mr. Hull of making trade treaties under the most-favoured-nation clause, the effect of which is that every reduction of tariff made by the United States by treaty with any other country immediately becomes operative in respect of all other countries, has had a very considerable effect already in reducing the general level of the tariff in the United States, and has been carried out with the increasing approval and consent not only of Congress but of the people of the United States at the last Election. I happened to be in the United States last October, and the Republican candidate, speaking in the campaign, expressed strong dissent from the policy of tariff treaties and his intention, if elected, of returning to the traditional Republican policy. Mr. Hull went to Minneapolis and made a most vigorous rejoinder. I have heard it stated by Americans that it was perhaps the most effective piece of debate in the campaign, and resulted in considerable support for Mr. Roosevelt. The policy of the United States is nothing like so protectionist as it was. Whilst they want reciprocal advantages in return for reductions in their own tariff, they are moving steadily to the policy that the interests of the United States and the interests of democracy and world peace are bound up with the reduction of the general level of tariffs in the world, and they themselves are prepared to play their part in bringing about such a result.

I need not quote the many statements made by eminent people like M. van Zeeland, the leaders of the Oslo Powers, and Dr. Schacht, who himself has lent the weight of his great authority to the view that the relaxation of tension in Europe depends on economic relaxation between the Powers. There is really no doubt that practically every statesman in the world now gives public assent to that view. There has been a perfect spate of utterances to that effect during the last three or four months. That, in the view of anybody who holds the views traditional in the Party to which I have the honour to belong, is not surprising. It has all the symptoms of what is sometimes called the "drunkard's repentance." But if you imbibe too freely and too long at the fountain of high protectionism, you finally get those feelings and emotions which are associated with the next morning, and the effects of universal, selfish high protectionism have now begun to come home to roost in a way that is visible and can be felt by every nation in the world.

I said just now that the descent to high protectionism has been perhaps the greatest single cause of all the troubles, both political and economic, which now beset the world. It has produced a dislocation in the traditional channels of trade, the traditional balance between world supply and world demand, the traditional system whereby foreign investment is able to obtain, through the ordinary channels of trade, the annual interest to which it was entitled. Economic nationalism dislocated that process, though the fact was hidden for a time after the War by the policy of the United States in lending vast sums of money to Europe and to South America—a policy which we also adopted, but which finally produced the world depression, a depression which, at its maximum, led to there being no fewer than 30,000,000 unemployed in the industrial countries of the world. The consequences of that are now so familiar that people almost regard them as inevitable. You had profound social discontent in every country in the world, a discontent which, in certain countries, became so acute that it made impossible the functioning of democratic institutions, and led more and more people to the belief that the only way in which law and order could be maintained in their own country was by handing dictatorial and totalitarian powers to its leaders. Economic nationalism has been the biggest single cause of the decline of democracy in the post-War world.

The second result has been that immense extension of Government inter- ference with business and Government control of economic activities with which we are all familiar and of which we have had a great deal of experience in this country. When any country suddenly finds itself confronted with millions of unemployed, with profound dislocation of economic conditions, it is inevitable that people should say that the Government must intervene. But the reason why the Government have to intervene is the prior interference with the normal channels of trade by tariffs, quotas, embargoes, and economic restrictions of every kind. You have now got another phenomenon which is causing grave disquiet in the world, and that is the reappearance, and the natural reappearance, of the demand in one country after another for a share in the Colonial territories of the world. If every country follows the policy of economic nationalism, and if that economic nationalism extends to preference and the closing of the open door of Colonial territories in favour of the country controlling them, it is quite inevitable that countries which are poorly equipped with territories or raw materials or food supplies should insist that they also have the right to share in the exclusive privileges which we have got and other nations have got for themselves. It was one of the glories of the British Imperial system before this change took place that it gave equal access to all countries in the trade of the Dependencies and the Empire. That system in the pre-War world was not a cause of jealousy or suspicion to other countries, but once you began to put barriers in the way of other countries trading with our Dependencies, you immediately got the demand that they should share in the existing privileges.

All these are the primary results of the universal surrender to economic nationalism and high protection. And the classic example of the consequences, the inevitable consequences, the foretold consequences, of this surrender was the great depression. It became utterly impossible ever to solve the internal problem or to meet that Debt obligation which was met quite easily in the days of freer trade, once you had established the various tariffs in the years after the War. That has led to tension and friction which, in turn, have led to rearmament, and to the Colonial demands, so that everybody to- day is once more talking in terms of the impending world war. I venture to say that no one fundamentally denies that. I do not think anybody is prepared to get up to-day and say that economic nationalism is not the chief among the causes which have led the world into the depression. What they do say is that it is part of the law of nature, that it is the inevitable result of national sovereignty and that you cannot do anything about it. Then, as a second line of defence, they say that in a world of high tariffs it is better to have a tariff to protect your own industries than to be open to the unprotected competition of trade all over the world. I think I am speaking for my friends on these Benches when I say that we do not now stand for unilateral free trade, we stand for equality, for co-operative methods to bring down the tariffs of all countries as rapidly as possible.

The question that I want to ask the noble Marquess who leads this House to-day is whether those eloquent statements in favour of increased international trade really mean anything or not. We had them before. We had them generally in the period just preceding a fresh wave of high tariffs, and the question I am asking, and the question which stands in Lord Crewe's name, is whether the Government can give us any information which will convince your Lordships that these declarations are not merely camouflage, that they represent not merely an intention but a faith that, from the contacts we have already established with other nations, something is going to be done in the near future to promote international trade. I am afraid that in this case, as in so many others, fine words butter no parsnips. I have met persons of great distinction not entirely removed from the Front Bench opposite who hold the view that so far from our being able to reduce tariffs, it is only a question of a few months or a year or so when the further dislocations which spring from economic nationalism will lead to a further wave of high tariffs. There are people who hold that view. All I can say is that if the statements which I have quoted, and many others which will spring to your Lordships' minds, are true, that a reduction of the barriers to trade, an increase in international trade, is necessary to the alleviation of international tension, then if, in fact, we are going to experience an aggravation of this economic nationalism—an increase of economic tension—it is going to be impossible, in my view, to avoid another very grave and considerable economic crisis in the world.

If we are going to improve conditions it will be because we are able, in practice, to do something to give effect to the policy now universally demanded by the leaders of the world. But if the Government are going to do that they must make up their mind to resist, at any rate, the cruder fallacies of the protectionist argument. I only mention two. In most countries, if they see a foreign product being sold, an emotional wave surges up that the entry of that foreign product somehow implies that your own industry is being prejudiced. That has never been the traditional view here, though I am afraid that the experience of the last five or six years may have done something to bring it into being. The truth of course is that you have foreign products corning in because you can get them better and cheaper than you can make them at home, and in the normal course you will find your own products travelling to other countries for the same reason. The very core of the protectionist vice is that if anything is coming into a country over the tariff wall the tariff must be put up higher to keep it out. That has been the traditional American view, though, I am glad to say, thanks to Mr. Cordell Hull and President Roosevelt, that view is beginning to be broken down.

I hope the Government will welcome the entry of foreign products into this country provided there is an equivalent outgoing of British products to foreign countries. The second argument is that we must protect ourselves against the products of cheap foreign labour. That is one of the most fraudulent of all the arguments. You have only got to go to one of those so-called cheap labour countries to find that the people there claim they must have Protection because, they argue, how can a nation which has to use its own hands only be able to compete with a nation in which every man has five, six, or ten horses working for him? The result of machine labour is immeasurably cheaper than the result of hand labour, and though in the case of Japan we had a period of competition with new machinery and cheap labour combined, and had a difficult situation to deal with, in the long run the nation with highly equipped machinery will always have an advantage in competition with a nation that has nothing but cheap labour to provide.

There is another reason for pressing the Government to make their declaration of faith. The last of the effects of High Protection are at last coming home to roost in the rise in the cost of living. We have had a very ominous rise in the cost of living, even by the admission of the Ministry of Labour Gazette. Between June 1, 1936, and June 1 1937, the retail prices of food have gone up no less than to per cent., and the increase in all the items that go to make up the cost-of-living figure is no less than 8 per cent. If you look at the returns for the weeks after June 1 you will find that that tendency has steadily increased. If there is going to be one cause of domestic trouble in the world it is going to be if the cost of living rises too rapidly. That is going to be far more serious in countries that do not enjoy the blessings of democracy than in countries that do enjoy them. If you are going to avoid the kind of external explosion which springs from internal tension, one of the most important things you could do is to see that the cost of living remains low for the whole world. The best way to ensure a low cost of the elementary essentials of life is to free the channels of trade so that supply and demand may adjust themselves naturally and thus ensure that as the new demand for food rises it may be met in the cheapest possible way.

I come in conclusion to suggestions as to possible practicable steps. I hope that the noble Viscount who is going to reply to this debate may be able to give us some kind of information or illumination on these points. First of all there has been a demand, especially among all the democracies of the world, that the democratic Governments of the world should take the lead in this matter. If they do not take it no one will. There have been persistent gestures from the United States, persistent demands from the Oslo countries, the Dominions have stressed it at the Imperial Conference, and Belgium has stressed it, that the great democratic countries, among them notably the United States and this country, should take the lead and try to bring about a reversal of this tragic tendency towards high tariffism and economic nationalism, the consequences of which I have endeavoured to set forth. That is the first thing. Are the Government going to co-operate with the general democratic demand that the democratic countries should take the lead in this matter?

In the second place can he give me any information as to the prospects of an Anglo-American trade agreement? There is no doubt as to the anxiety and the desire of the United States Government for that agreement. Mr. Eden said yesterday that it was also the policy of the British Government. It is quite clearly the desire of the Dominions, provided of course that that trade agreement does not diminish too much the privileges in this country which they obtained under the Ottawa Treaties. It is remarkable that at the last Imperial Conference they said nothing about perpetuating the Ottawa policy, but did express a strong view in favour of increasing international trade. I do not think there is any dispute of the strength of the view that, if possible, Great Britain should make a trade treaty with the United States. I hope that the Dominions may make it clear that they will also be willing to make their contribution towards making that treaty easy. From the practical point of view there were two major defects in the Ottawa Treaties. There was, first of all, the rigidity of the preferential system which made anything like a reduction in international trade barriers much more difficult and, secondly, the ending of the open-door policy. If the Dominions are ready to be reasonable in that matter, and if the British Government are determined, it should be possible to find a sufficient number of items—I agree it should be a simple matter—under which Great Britain and the United States can each make concessions to one another which would be of mutual advantage to both countries and which could be accepted by either country without feeling that the other was obtaining an undue advantage over the other.

A third point on which I would like to ask the Leader of the House is what is the Government's attitude to the most-favoured-nation clause. We always say that we are among the champions of lower tariffs because we adhere so rigidly to the most-favoured-nation clause. But when you examine the matter you find that other countries are not as convinced about our virtue as we are ourselves because in a number of our bilateral treaties we have used the quota system in order in fact to nullify the effect of the most-favoured-nation clause. In making agreements with Scandinavia about coal and other matters we have in fact nullified the operation of the most-favoured-nation clause. Some other countries do the same. I think we might say the same of the United States of America. I hope, therefore, it will be possible to reach an agreement by which that kind of interference with the operation of the most-favoured-nation clause will be diminished if it is not entirely dropped in the future.

Then again, is it necessary for us to insist so rigidly on the operation of the clause in arrangement between other countries who are trying to make low tariff arrangements with one another, in the name of the most-favoured-nation clause. I believe we prevented the Ouchy Agreement between Belgium and Holland from coming into effect on the ground that it was contrary to the most-favoured-nation clause. I think it is going to be very difficult for the British Commonwealth both to demand that other nations should regard the preferential arrangements which they make with one another as being outside the most-favoured-nation clause and to continue to refuse to allow other nations to make favourable arrangements lowering tariffs among themselves in the name of the most-favoured-nation clause. I venture to hope the Government will consider whether they could not follow the lead of the American Republics who agreed at the recent Conference at Buenos Aires that they would not press the most-favoured-nation clause against other countries provided their mutual tariff arrangements are in the direction of a general reduction of the level of tariffs.

Finally, may I ask whether the Government are prepared to consider the possibility of altering the Ottawa arrangements for the closing of the open door in the Colonies? Nothing does more harm to this country than the reservation for itself of exclusive privileges in our Colonies. It is not really worth while either from our point of view or from the point of view of the Dominions. I believe the larger part of the Colonial Empire is debarred from these arrangements by the Covenant of the League of Nations in the case of Mandate or by special international agreements in other cases. There is very little economic advantage in this aspect of the preferential system, but I believe that politically speaking there is a great deal of disadvantage in it. The matter ought also to be considered from the point of view of the indigenous inhabitants of the countries concerned. We constantly talk about our trusteeship for the indigenous people, but when it comes to allowing them to obtain these cheap goods necessary for their standard of living we step in and compel them to buy much more expensive goods because they are going to be made in this country. I think from that point of view the sooner we can return to our original open-door policy the better.

May I just mention one other minor point which is not perhaps strictly relevant to this Motion, but which arises out of the governmental control which inevitably follows economic nationalism? That is to the great anxiety which has been caused in India recently in the matter of the clove trade of Zanzibar. I understand that during the depression a Clove Growers' Association was formed under Government control, with Government representatives on it, and that, at any rate in the early days, the result of that Association was that the Indian merchants who had previously done practically all the trade in cloves were to a large extent ruined. There was also a moratorium which prevented them from collecting some of their earlier debts. I understand that the matter has, in some degree, been since reconsidered, but I hope the Government will look into the question because it is causing a great deal of anxiety in India. If the tradition which has been followed in this country, that if you have to interfere with vested interests as the result of creating new methods of control you must give fair treatment to all concerned, is observed, I believe they will find it possible to make a just arrangement for the Indian merchants which will allay their bitter feeling and lessen the anxiety which has been caused in India when the new Constitution is coming into being. I should like to have some assurance that the Government at any rate will look into the matter and see that fair play and justice is done to the Indian merchants in that respect.

In conclusion, I turn to my first question: Can the Government assure us that what they have said is not merely words but that they mean to do something to lessen the barriers to international trade and, as a result of their inquiries, that they believe that they will actually be able to accomplish results? Your Lordships will remember some observations which the late Prime Minister made to a deputation which went to see him to urge the importance of increased international trade. They were rigid and unaccommodating and unhelpful. The late President of the Board of Trade made a very lucid but, as I thought, not very helpful or very comforting reply to a debate in the other place in May on this subject. I feel that, difficult as the situation is, inherent as is the limitation on what can be done by the sovereignty of the State which all insist on, we can begin to reverse the tendency of the last fifteen years, and that if we do not we shall drift on until the forces of economic nationalism produce another wave of high tariffs and another set of disasters for the world. But we can only reverse that tendency if the Government really put their backs into the task. There is not a country in the world which does not at this moment look to the British Government for a lead in this matter. They feel that the National Government, which only yielded in 1931 to the disease of High Protectionism, is still more wedded to tariffs than are other Governments who are more acutely aware of the suffering that has befallen their own people—the long-distance evil results which follow from high protection as against the short-distance advantages which are recognised to follow in the early stages. I think it depends more upon the British Government than anyone else to determine whether we move towards freer trade or back towards new disasters. I therefore hope the noble Viscount will be able to give us some assurance on that point this afternoon, and I beg to move the Motion that stands in the name of the noble Marquess, Lord Crewe.

LORD ARNOLD

My Lords, the Motion upon the Paper may lead to many differences of opinion in your Lordships' House, but I think there will be agreement upon three points in regard to it. The first is that the noble Marquess, Lord Crewe, has rendered a public service in putting down this Motion so that these very important matters may be discussed in your Lordships' House before we adjourn for the Recess. The second point is that there will be universal regret that the noble Marquess, Lord Crewe, is not himself able to be present to-day to move the Motion. I know that your Lordships would have appreciated his great experience and authority in discussing this question. The third point is that we are fortunate in that the noble Marquess, Lord Lothian, is able to step into the breach. He speaks, if he will allow me to say so, on this question—as indeed on so many questions—with impressive knowledge and weight.

Despite the many important debates which have taken place in your Lordships' House during this Session, I do not think it is any exaggeration to say that none has been more momentous in its issues than the one in which we are engaged this afternoon. I do not think I am at all indulging in the language of hyperbole when I say that the peace of the world may very well depend upon what is clone by Great Britain—that means by His Majesty's Government—and done soon, in the direction of relieving the economic tension of which the Motion speaks. The declaration in the Report of the Imperial Conference which is quoted in the Motion on the Paper is, of course, to be welcomed, but I think it would have been more welcome if there had been more evidence that it is likely to lead to something. I cannot help thinking that we are at a considerable disadvantage in that we know very little indeed of what really went on at the Imperial Conference in regard to these very important matters. His Majesty's Government have told us for a long time that they are anxious to promote the flow of international trade and to deal with economic grievances. It is now nearly two years since we had that remarkable speech of Sir Samuel Hoare about raw materials. It was always rather mysterious to me why that speech was made when it was made. Of course, I welcomed it, but it has not been followed up by anything effective.

The present Prime Minister himself has in very forcible terms stressed the need for reducing trade barriers and promoting the flow of world trade. Nevertheless, practically nothing has been done by His Majesty's Government, and that is the point I want first to stress. Elsewhere in the world things have been done. The noble Marquess dealt in some detail with the attitude of the United States of America, which, of course, is of enormous importance in this matter. One example of that activity was seen in the Canadian-American Agreement—an agreement of great moment, an agreement that, so far as Canada is concerned, was really at variance with the spirit of the Ottawa Agreements. Personally I do not complain of that, but that is the fact. Then, as the noble Marquess said, arrangements have been made by the Powers at the Oslo Conference. It is very discouraging to find that in reply only yesterday in another place to questions about the Oslo Agreement, the President of the Board of Trade made a response which was really most unsatisfactory. I will not take up time by reading what was said. It was reported in the newspapers this morning, and no doubt many of your Lordships have seen it. I am trying not to be controversial tins afternoon, but it is really very difficult to reconcile what the President of the Board of Trade said yesterday with any real operative desire on the part of His Majesty's Government to do something in this matter of lowering tariff barriers.

Then, again, I would ask your Lordships to consider what has been done by the Danubian countries. They have reduced tariffs to some extent among themselves. Turkey only a week or two ago abolished quotas, and even France and Germany have made an agreement which I understand contains some tariff reductions. But Great Britain has done very little. What in fact has been done? The noble Viscount who is going to reply for the Government may quote the reduction of the steel duty. Yes, but that was not done because of the motives which the noble Marquess has been urging this afternoon. It was done because the Government were practically obliged to do it. There was no alternative. It is true that Mr. Runciman made a few trade agreements beginning with the United States, Denmark and Germany, but together they amount to very little in practice. As any substantial contribution to the problem they cannot be adduced as evidence that the Government have anything material to their credit. Yet, as the noble Marquess emphasised, in a rather different aspect although I agree with what he said, Great Britain has larger responsibilities in this matter than any other country—Great Britain and the British Empire.

The British Empire is the greatest Empire in the world. It covers about one-quarter of the world's territory and it comprises about one-quarter of the world's population. It has within its borders very much more than one-fourth of the world's wealth. Let me again recall to your Lordships that of the twenty-five minerals and commodities which are essential for modern life, it has been estimated that the British Empire has adequate supplies of no fewer than eighteen. Germany with her very large population has adequate supplies of only four; Italy has adequate supplies of only four; and Japan, with a population of 70,000,000 growing at the rate of a million a year, has adequate supplies of only three. Is it any wonder that there is economic unrest? If we were in the position of Germany, Italy and Japan, we should think just as they do. Not only has the British Empire this vast proportion of the world's resources, but under the Ottawa Agreements they are more and more hedged in by the British Empire, shut up in this quarter of the world's territory, with one-quarter of the world's population, behind tariff barriers. It is all very well to tell foreign countries that they can buy raw materials and that we shall be only too pleased to sell them, but they can only buy raw materials if they have the exchange with which to buy, and they can only get that exchange in sufficient measure if they can have a large and growing export trade. These countries, these so-called dissatisfied countries, Germany, Italy and Japan, with large and growing populations, are entitled to a large and growing export trade if they are to raise the standard of life of their people. The policy of His Majesty's Government and of Ottawa has been a blow to the trade of these dissatisfied countries.

Let me remind the House of the position to-day as compared with that of a few years ago in this matter of putting obstacles in the way of trade with foreign countries. Go back six years, go back to 1931. At that time in this country there was no protective tariff. His Majesty's Government have put on a high protective tariff. It may be said that tariff countries can have no grievance about that, because they have high protective tariffs as well. That may be so, but the fact remains that the high tariff has been a hindrance to their trade. There cannot be any dispute about that, more especially as, in the tariff, we have given a preference to the export to this country of certain manufactured goods from the Dominions. No one can possibly contend that to put up a discriminatory tariff round Great Britain for the first time is helping to remove traffic barriers.

Next, we have put increased obstacles in the way of exports of foreign countries into the Dominions, as the noble Marquess emphasised. Under Ottawa we have increased preference in our favour and to the detriment of the foreign countries; and then for the first time, under Ottawa, we put up so far as we could a tariff against foreign goods going into the Colonies, we ourselves and some of the Dominions having a preference. Now that was entirely new. It is true, as the noble Marquess said, that does not apply to anything like all the Colonies, because it cannot do so. It cannot do so owing to the fact that in the mandated territories we are not allowed to do it, and under what are known as the Congo Basin Treaties and so forth in our East African territories we are not allowed to impose these discriminatory tariffs. Under Ottawa, however, we can do it and we have done it, and it has been a source of very great grievance, particularly to Japan. To sum up the record of the Government in this matter of creating tariff barriers, it seems to me that the policy of putting a tariff round Great Britain with discrimination, combined with the total of the Ottawa Agreements, has meant the very formidable erecting of tariff barriers round this vast territory which is known as the British Empire.

The three dissatisfied nations, Germany, Italy and Japan, and other countries, have therefore found it increasingly difficult to get the expansion of their export trade which they want and which they ought to have if they are to raise the standard of life of their own people. We had a debate on these matters some sixteen months ago, and I on that occasion gave your Lordships various quotations, which I am not going to repeat to-day, showing how foreign countries felt the position, and particularly how Japan felt herself aggrieved. I say again that if we were in the position of any one of these countries we should feel exactly as they do. Nevertheless, all that debate and all the quotations did not make the slightest impression on the Government. We had a full debate on these matters and some very important Peers in your Lordships' House took part. I remember that the noble Lord, Lord Lugard, and others spoke. Despite all this the noble Earl, Lord Plymouth, speaking for the Government, said that he could see no possible reason why we should give up the benefits of Ottawa. He also said that they did not stand in the way of freer world trade.

Is that the position of the Government to-day? If it is, the outlook is dark indeed. Surely such statements are entirely opposed to the facts. Is there no possible reason why we should give up the benefits of Ottawa? Apparently all that the noble Earl could think about was what Great Britain, the Dominions and the Colonies were getting out of Ottawa. He had no regard in anything which was said, as far as I remember, on that occasion to the fact that foreign countries have well-based, strong views against this policy and against the injury which it has done to their trade. It is an extremely one-sided view to say, as is often said and as was said on that occasion, that under Ottawa Imperial trade has been increased. Of course it has been increased. If you drive trade by preferences into a certain channel, if you, to use the phrase, "canalise" trade, it is bound to increase. But the increase of Imperial trade is at the expense of foreign trade; that is the point. All that has happened is that there has been more Imperial trade and less foreign trade than there would have been. Let me emphasise that—than there would have been. This is a natural grievance with these foreign countries, because they see trade in which they might have had a share passing by them and being retained within the Empire to their disadvantage. I say again that we should feel the same in their position. Let me remind your Lordships also that the trade of the British Empire with the world as a whole is nearly three times as great as it is with countries outside its own borders. Foreign markets are of supreme importance not only to Great Britain but also to the Dominions, and I have some hope that the Dominions are coming more and more to realise it.

I do not wish to speak at great length, but I want before I sit down to put forward some practical proposals: things which I think should be done. First of all there is the general question of the revision of the Ottawa Agreements in the directions indicated by the noble Marquess who has spoken. It is not the case, as the Government seemed to think the last time this subject was discussed, that the Ottawa Agreements have been a very great success and that everybody is satisfied with them. That really is not true. That is not the view of many of the people in the Dominions. We trust that the Ottawa policy is not going to be continued by the Government without change. This is the time for change. The Agreements were made for five years. It is true that unless notice is given they will go on longer, but they were made in the first instance for live years. The noble Marquess has asked, and I should like to put the same question: Is there going to be any change in the attitude of His Majesty's Government in this matter of the revision of the Ottawa Agreements; or do we stand where Lord Plymouth stood last year and maintain that we do not see any possible reason why we should give up the benefits of Ottawa? This is a perfectly straightforward question, and I hope that if a reply is given to-day we may be told freely what is going on. But we do not want to be presented, as we were at Ottawa itself, with a fait accompli where nobody can do anything. That is not quite fair to Parliament. Are the Government going to do something?

Secondly—this also has to do with Ottawa, before I leave it—I should like very much to agree with all that the noble Marquess said about giving back what is known as the "open door" in the Colonies. I analysed these figures in your Lordships' House some time ago and I do not think it is far wrong to say that the total advantage to Great Britain through these preferences which have been put up on the Colonies under the Ottawa Agreements means an additional trade of probably about £10,000,000 a year—not profit, my Lords, trade. Last year Great Britain's exports were £444,000,000 and her imports were £844,000,000, making a total oversea trade, in and out, of no less than £1,288,000,000. I ask, is it worth while, in relation to figures like that, to have all the dissatisfaction and well-founded grievances, as I think, which these discriminatory duties into the Colonies have occasioned, for such a small material result? Is it not most unwise to antagonise foreign countries if that is all it means? It is no use, in any case; it is not a business proposition. I agree entirely with the noble Marquess that we should go back to the open door, giving other countries the same right of trade with the Colonies as we have ourselves, so that they can send their goods into the Colonies under the same terms as our own nationals. The psychological effect of that gesture would, I believe, be enormous.

I leave Ottawa and I press that the Government should resolutely set out to make this Anglo-American trade agreement. It has been talked of for a long time. I am afraid, however, that the real difficulty lies in the Ottawa Agreements. There was a very remarkable article in The Times on June 5 by the Special Correspondent in which he discussed this question. He said that the proposals for an Anglo-American trade agreement had been submitted in confidence to the Imperial delegates. These proposals, we were told, might, in some cases, have to be submitted to the Dominion Parliaments before giving a final answer to the United Kingdom Government. Next we were informed that such reservations as the Dominions might find it necessary to make might compel the United Kingdom Government to propose modifications in the American proposals in order to make the original proposals acceptable to the Dominions concerned. I think that is a very remarkable state of things and a very serious one, because it means that we have so tied ourselves up with the Ottawa Agreements that Great Britain is not free to make her own fiscal arrangements with America but, apparently, can only make a treaty agreement with America if she can get the Dominions to agree to what is finally done. If any light can be thrown upon this very important matter, that would make this debate worth while.

The noble Marquess referred to the increased costs of living, which looks like going higher, and I suggest that in view of that fact the Government should take their courage in their hands and abolish the duties which are adding to the cost of food. I mean the new duties which they have put on, particularly the duties on fruit, vegetables and meat. Fruit has been made dearer and has been driven off the tables of some of the poor, owing, again, to the Ottawa Agreements. So we come back to Ottawa again. In Ottawa a sort of vested interest has been created. Otherwise the Government would be able to abolish these food duties which would be of benefit to poorer people. We are told in connection with the fitness campaign and in the debate on the Physical Training and Recreation Bill that good nutrition is as important as physical training. And before this tariff policy came into operation this was a cheap country to live in. Before the Ottawa Conference prices were low. Now they are high and look like going higher.

Then I think the duties should be taken off building materials. The cost of houses is going up. Another set of duties which should be abolished are those which are pressing hard on the farmer in the matter of feeding stuffs. I had almost hoped that in this I might have the support of noble Lords on the other side—duties on oil seedcake, bran and pollard and poultry foods. We all know the lamentable condition of the poultry industry and that condition is in no small measure due to the enhanced cost of feeding stuffs. It is partly due to world conditions, but it is made worse by these duties. I think that agriculturists will support what I am saying, and as the Government think they are the only people who do anything for agriculture let them now come forward and have these duties removed.

I am not going to discuss free trade and tariffs although that would be in order on this Motion. It is not the case that such prosperity as we are enjoying is due to the adoption of tariffs and the Ottawa Agreements. The world as a whole is enjoying, owing to certain circumstances, great trade prosperity. Whatever their fiscal system nearly all countries are doing well, but in the scale of production since 1929 out of twenty-three countries Great Britain is tenth on the list. Therefore, to suggest, as some of the protectionists do, that owing to tariffs things never were so good in any country, is not in accordance with the facts. Nor is it true to say, as has been claimed, that owing to Ottawa we have regained our position as the greatest exporting country in the world. The United States is above us. I am not rejoicing in that, but let us have the facts. I say these things for the reason that if the Motion of the noble Marquess were implemented Great Britain would herself benefit as well as be making a great contribution to the relief of economic tension in the world, and we should be more prosperous, I submit, than we are to-day.

As the noble Marquess said, it is British initiative that is needed. The chief responsibility rests upon this country and upon His Majesty's Government. I wish the Government would make a positive effort to review these problems afresh and try to look upon them from the point of view of foreign countries. The British Empire is the largest Empire in the world, and in recent years Great Britain and her Dominions have done more than any other country or Empire to place restrictions upon overseas trade. Therefore there is a peculiar responsibility resting upon the British Empire in taking the lead. Time presses. There is not much time. We are living dangerous times, and it is Great Britain and the British Empire which can best afford to give a lead in the right direction. I trust it will be done before it is too late.

VISCOUNT HORNE OF SLAMANNAN

My Lords, I speak with a great deal of trepidation after the two eloquent speeches of noble Lords opposite. I agree with the main thesis of those speeches, although I disagree with almost every detail. The noble Marquess, I could not disguise from myself, seemed to speak with considerable complacency. He indicated, in fact he used phraseology to assert, that we were returning to free trade from an orgy of tariff drunkenness. I think the classic phrase in that matter is "appeal from Philip drunk to Philip sober." I think he proceeded noon an entirely erroneous assumption. Indeed I think the main foundation of his speech was that particular assumption—to wit, that all tariff reformers had been against international trade, and that the Liberal Party had been the custodian of the desire to increase the exports of this country. As an old tariff reformer, as a person who never was unduly prejudiced, as one who always thought it was just as silly to say that you meant to put an import duty upon everything as to say that you would never put an import duty on anything, and as one who has been through the whole of this controversy, I have never known of any tariff reformer who was not as keen on the export trade as any free trader, nor one who failed to realise that this country's prosperity, although you must have a solid foundation of internal trade, could never reach the peak which previously it had achieved unless you had a great restoration of international trade.

It is one of the things of recent years that we have been rather proud about that the export trade has been so very largely increased, although free traders so diligently informed us that you could never have an export trade if you had import duties. But the fact is, of course, that export trade, in spite of the import duties, has increased between 1932 and 1936 by £75,000,000, and that in the first six months of this year we have increased our export trade by another £31,000,000 over last year. Accordingly, nobody can either say that tariffs have been inimical to our export trade, or that tariff reformers have not been very careful of the attitude which they adopted towards international trade at large. We believe as firmly as does any free trader that the world's prosperity can never be achieved except through strong international trade, and we believe just as firmly as any free trader that the more you can judiciously and legitimately reduce the impediments which obstruct your trade in the world—keeping in mind at the same time the power that you must conserve to yourself if you are to be of any use in the world at all—the greater will your prosperity be.

But now the other assumption which the noble Marquess made was that the Dominion statesmen had retreated from what he regarded as the policy of the Ottawa Conference. He seemed to say that what they were retreating from was the arrangement made at Ottawa for preference within the Empire. But the noble Marquess will never find any word of that kind in any part of the Report. What they were striking at was the quotas, the exchange restrictions and the high tariffs which were operative in other countries, and there is not a word suggesting that they felt, so far as they were concerned, that they were obstructing the course of the world's trade. And why should they adopt any such position? Why should any of our Dominions, or the British Empire, cry "Peccavi" in connection with this matter? What is the truth? The truth is that the British Empire to-day takes more goods from foreign countries than does any other combination in the world. Instead of its being true, as the noble Lord who has just sat down says, that Ottawa put an obstructive fence round the rest of the trade of the world, it still remains true that each one of our great Dominions buys enormously from foreign countries.

And if you appeal to the figures of our own country, what are the facts? Great Britain buys more from foreign countries than any other country in the world. Last year we purchased from foreign countries £516,000,000 worth of goods. How does that compare with any other country? There is the United States of America. It has a population two-and-a-half times that of this country, and America purchased £490,000,000 worth of goods—£26,000,000 less than we purchased from the rest of the world. So far from there being any ground for saying that we should be conscious of our own iniquities in this matter, the real fact is that Great Britain and, still more, the British Empire afford to the world the greatest market for its products, and nobody else gives anything like equal facilities in their markets to those that we give in ours. If that be the fact, why should we stand here and acknowledge in a white sheet, like the noble Marquess, that we are doing something which is inimical to the peace of the world, and that we ought to do something now by which we can appease people? Can anybody say we are a bad neighbour in face of the figures which I have just cited to your Lordships?

There is one other thing which I think the noble Marquess ignores. We stand in the situation to-day which he eloquently described. He tells us that the United States has come forward, stretching out the hand of friendship and amity, and expressing eagerness to enter into a trading agreement. All that is true, and I shall say a word about that in a moment. But does the noble Marquess imagine that, if we had no tariff at all, any such proposals would ever be made? I was glad to hear for the first time from any of the Liberal free traders the acknowledgment from the noble Marquess that he does not believe in universal free trade. We have never heard that acknowledgment before. But it is true, it is patently true, that the only reason that we have to-day the offer which the United States is prepared to make to us, is that we are armed with tariffs and we have something to bargain with. I am one of those who believe ardently in negotiations with the United States for this purpose.

The state of the world at the present time is highly interesting, but very dangerous. One of the most prominent of all the factors which oppress one's mind is that the United States politically has adopted a position of complete isolation. You cannot find an American citizen to-day who would agree to take part in any of the antagonisms of the world. Their persistent, assiduous policy is to keep right outside the affairs of other countries, but in the economic sphere they are now taking up a totally different attitude. I think it arises in part from the fact that there is in the United States a greater understanding of our position at the present time than ever before, even at the time of the Great War. Vis-à-vis the dictatorships of Europe they greatly favour the British democracy, and I think there is a feeling of comprehension about our position which induces a much more friendly attitude on their part. In addition, you have got a Democratic Government in power whose policy has always been to favour lower tariffs—although they seem high compared with anything known in this country. At any rate, Mr. Cordell Hull is assiduously urging some agreement with Great Britain, and the Secretary of Agriculture, Mr. Wallace, has been preaching through his country now for several years the doctrine that if America wants to export her farm produce she must be agreeable to lower her tariffs upon manufactured goods.

We are therefore at a moment of time which is particularly propitious. The noble Marquess referred to the economic nationalism which was destroying the world. He seemed to think—and perhaps many others may think also—that a movement in favour of reciprocal trade is the method by which you will destroy economic nationalism. I am not so optimistic as the noble Marquess on that matter. The countries which most assiduously follow that policy are Germany, Italy, and Russia. Russia controls all its trade by Government. No individual element enters into its foreign trade at all. There is no possibility of destroying the economic nationalism of Russia. In the case of Italy and Germany their economic nationalism is derived from their political attitude. Why is Germany to-day, economically, so devoted to a national policy? It is because she wishes to make herself self-supporting. That is true also of Italy. In every case they wish to have all the elements which, in a war, they would have to use. Germany has been deliberately setting herself, since the experiences of the last War, to make herself independent in the matter of oil, in the matter of rubber, and in the matter of chemicals. How are you going to destroy that economic nationalism by any process of interchange of goods? You must alter first the foreign policies of these countries, the attitude of mind they have adopted, and the views they have inculcated into their own people. That is what you must alter in order to appease the condition of Europe.

I see a far more favourable situation in regard to America, not merely because of that rise in friendship—I hope I am not exaggerating—on the part of America towards us, but also because of the fact that trading arrangements with America would be very much easier than with any other country. Their standard of living is much more comparable with ours than with any country, for example, in Europe. There is a difficulty which I do not think the noble Marquess fully realised in allying yourself with a people with lower standards of life. His illustration was far too facile. He seemed to think that people with lower standards of life were only working with their hands, and he said that temporarily Japan, now that she has some machinery, would be able to compete, but that that would pass. Why does he think that it will pass?

THE MARQUESS OF LOTHIAN

It is passing.

VISCOUNT HORNE OF SLAMANNAN

I do not know whether the noble Marquess has read in the newspapers what they are doing in the matter of currency policy to meet the difficult situation they are facing. But let us leave Japan for a moment and look across the Channel at Belgium. Belgium is just as well equipped with essential machinery as we are, but the men working these machines are getting infinitely less wages than the men working similar machines in our own country. I know definite cases where the wage of the Belgian skilled man working with precisely similar machinery Ts not more than 50 per cent. of the wage paid in this country. If you wish to defend your own employment you cannot possibly allow the free inrush of goods made under these conditions into our country. I am morally certain you will never get the trade unionists of this country to agree to that. Along that line I do not think you will have any success, but, at any rate, let us begin with America. Here is a country with comparable conditions and, as I say, a comparable standard of living. It is much easier to make a reciprocal tariff arrangement with America than with any other country of which I know.

There is one more reason for making such an arrangement with America at the present time. It was partly touched upon in the speech of my noble friend who raised a question regarding the price of gold. It is eminently desirable that we should have far more definite arrangements with America on the subject of currency than we have at the present time. We have the tripartite agreement between France, America, and ourselves, but that is terminable at twenty-four hours' notice, and it has never been brought to any kind of definite terms. You have seen what happened a couple of months ago. The mere rumour that the President of the United States was going to lower the price of gold reduced the value of commodities throughout the world and upset the whole of the markets in Europe as well as in America. That was entirely due to this very artificial system under which we exist, but which is apparently necessary for carrying on our trade. You must make the measure of value stable if you are going to have any permanent prosperity in trade. Therefore I believe that at the earliest possible moment we should have far more definite arrangements with America in that regard than we have now. It would be a favourable opportunity, when we are dealing with a trade agreement, to deal also with currency, because whatever you may do in a trade agreement can be swept aside by a clause in a Currency Bill. The two matters should be dealt with at the same time.

It would be wrong if the House ceased to be conscious of the difficulties that are in the way. You must realise in the first place, so far as our own country is concerned, what has been achieved by the tariff system. It might not have been necessary if all the countries had been of the free trade persuasion, but at any rate it was necessary in our case to adopt the methods we did. The result has been that you see employment increased by 2,000,000 since 1931, and we are making for ourselves at home a vast amount of goods that we used to buy from abroad. We have seen unemployment diminished by something like 1,500,000, and we have seen production in this country go up to a record never before attained. The figures have been very remarkable. Go back to 1934, measure that by the figure of 100, and our industrial production to-day is the figure of 129. Indeed, the number of people employed in this country is greater by nearly three-quarters of a million than at any other period of our history. You may say, and no doubt the noble Viscount (Lord Samuel) will say vociferously, that that is not due to tariffs, but at any rate I will say this with confidence, that without these tariffs such a result would never have been accomplished.

Indeed, if you look at the situation in 1931, it is quite certain that if we had remained a country with open shores we should have been submerged, swamped, and overwhelmed by the glut of goods that would have poured into this country from the surplus of other nations. In the first place that stands to the credit of the policy that we adopted in 1931. I will refer for a moment to what followed in connection with the Ottawa Conference. It was only when we had reached the position of having tariffs in this country that it was possible to make preferential arrangements with our Dominions. It was only then that we could give them reciprocal advantages. I regret that there should have cropped up in the speech of the noble Marquess and the noble Lord who followed him the same suspicion against doing anything to fortify your Empire. It is in the blood of anybody who has ever been brought up on Cobden. His notable saying was that the only objection to Britain getting rid of her Colonies was that she would then be so strong she would be a menace to the rest of the world. Apparently it is upon some sort of idea of that kind that you have persistently creeping out this determination not to collaborate in any way with the Dominions except when you want their aid on the battlefield.

The noble Lord referred to the suggestion, which he regarded as anathema, that we could not, in these matters, proceed without the Dominions, that we were afraid to act upon our own initiative and entirely without consultation with them. I do not think your Lordships would give much support to that kind of view in the modern world. What would our position be in the world to-day but for the fact that we have this immense Commonwealth more solidly brought together now than ever before? I do not wish to refer to trade arrangements with the Dominions. There is something much more than that behind it. There is the strength derived from the mutual consideration for each other of the peoples of the British race all over the world. There is the building up of a great structure not merely of natural resources but of the human element, which forms our strength and our defence in any moment of crisis. Believe me, one of the things which affects the American to-day more than others is this great Commonwealth of nations that is under the Dominion of the King. I do not believe for a moment that the United States of America would wish you to do anything which would weaken that Commonwealth, because they regard it as one of the great safeguards against the dangers of the dictators in the world.

I have already talked longer than I had intended to do, but I want to say this in conclusion, that I agree that it would not be impossible to make arrangements with America, in consultation with our Dominions, which would be of advantage to us all and of great benefit to the trade of the world. I do not believe that to be impossible. I think when sometimes you cannot make direct arrangements it is possible to make triangular agreements whereby, if a market for one particular kind of goods is taken away, let us say in Great Britain, it may be compensated for by a market which America would agree to give. I am sure there are many arrangements of that kind that could be made. I am, indeed, most hopeful that they will be made, and I feel—though, of course, I cannot answer for the Government any of the questions put to the noble Viscount—that until such a task has been proved to be impossible the whole energy of the Government should be devoted to its accomplishment.

LORD NOEL-BUXTON

My Lords, may I turn your Lordships' attention for a moment from the general principles of trade which have been discussed with so much eloquence and, if I may say so, with so much charm by the noble Viscount? I should like to call attention to what appears to many of us the discrepancy between the words and the deeds of His Majesty's Government in one special particular. The noble Marquess alluded to the utterances of the Government as they affected the whole question of free trade, and he alluded to the question of the open door in the Colonies. In a debate some months ago, when I myself introduced a Motion on the Colonial question, the Government was represented by the noble Earl, Lord Plymouth, Lord Plymouth, at the end of the speech in which in the main he argued against the open door, made statements which interested us very much, to this effect.

While saying that in many points he agreed with the argument for the open door, he said: We can see that there would be considerable advantage if a joint and general declaration were made by the Colonial Powers, expressing their willingness to be guided in the adminstration of their Colonial territories by the spirit of Article 22 of the Covenant of the League. As we all know, Article 22 of the Covenant deals with the question of mandation, and uses these words: To those Colonies and territories … which are inhabited by peoples not yet able to stand by themselves … there should be applied the principle that the well-being and devolpment of such peoples form a sacred trust of civilisation … The Mandatory must be responsible for the administration of the territory under conditions which will guarantee freedom of conscience and religion. … and will also secure equal opportunities for the trade and commerce of other Members of the League. The noble Earl very definitely advocated such a declaration, referring markedly to the free trade declaration of Article 22 of the Covenant, and, in reply to the deputation to which the noble Marquess alluded, a few weeks afterwards, the late Prime Minister, in his written reply, used again the same expression in regard to the value of a declaration of the Colonial Powers.

It would be most valuable if the noble Viscount who leads the House can tell us something more about what was the meaning of that statement. What are the Government doing about it? We cannot help feeling that in some degree the Government are claiming to be what they are not. That, unhappily, is the definition given in the dictionary of a hypocrite, and I am sure that the Government, using that very definite declaration, meant something which at present is obscure to us. But it aroused hopes in many quarters, and, as I say, it was repeated not long afterwards. If such a declaration were brought about it would of course do very much to break the vicious circle in which we stand at present—tariffs leading to unrest and danger, danger leading again to tariffs. I agree with the noble Marquess that the whole of the Ottawa policy is a factor introducing risk into the international situation, but I specially want to urge the importance of the point to which the noble Earl, Lord Plymouth, was calling our attention. He was dealing particularly with the matter of access to Colonies, not to trade with Dominions, and it is the case, I think no one will deny, that exclusion of imports in regard to Colonies has an exasperating effect out of all proportion to the economic damage which may result from it.

It is very largely a matter of how it looks. In the treatment of your territorial possessions in the case of non-self-governing Colonies, which are wholly different in their nature from Dominions inhabited by whites and deciding their own tariff policy, the appearance of selfishness is much more conspicuous. If you bottle your Colonial market the economic effect is not vast but the irritation is immense, and we can see how it is taken in certain countries with whom we have to reckon. Moreover, absolutely it is very considerable. The Colonial trade of the world is about £830,000,000, more than 10 per cent. of the whole of world trade. The trade of the British Protectorates and Colonies and Mandated Territories is no less than £282,000,000. The United Kingdom sends to the Colonies £49,000,000 worth of goods, 11.2 per cent. of our exports. The population of the Colonies and Protectorates is no less than 54,000,000, and although very large parts of the Colonial Empire have no preferences—the Congo and the West African Anglo-French areas—the preferences do affect a very vast trade. An illustration of the effect of the preferences which cause so much feeling in Germany and elsewhere may be found in Kenya and Uganda as compared with Tanganyika. In the former, German imports come to 5.4 per cent., and in 'Tanganyika to over 11 per cent. I submit that if the Government would do something for their declaration—someone must give a lead if you are to have a joint declaration—it would be a serious step and an extremely valuable step, although I admit chat to extend the policy of mandation would do still more. If the Government are prepared to take the lead in proposing such a joint declaration, few things could have greater value, and I hope that the noble Viscount the Leader of the House may be able to show us that, on this particular point, the Government meant what they said.

VISCOUNT ELIBANK

My Lords, like my noble friend Viscount Home I do not quarrel with the terms of the Motion which is on the Paper, but I do differ from the way in which that Motion has been approached by my noble friends the Marquess of Lothian and Lord Arnold. They have put practically the whole of their argument upon the free trade basis, upon the Cobden basis, as was stated by the noble Viscount, Lord Home. May I venture to congratulate my noble friend Viscount Home on the speech he has delivered this afternoon, the first speech upon economic matters which he has had the opportunity of addressing to your Lordships? The clarity and the force of that speech will be remembered by those who have listened to it for many a long day. I confess that many of the arguments which he advanced were arguments which I had in my mind, and that many of the figures that he gave I had also memorised, but I was happy that they should be put before your Lordships' House in such a definite and forcible way.

The Report upon which this Motion is based is obviously one which is of a more general character than those that have been issued previously in connection with Imperial Conferences. This Imperial Conference dealt principally with questions of foreign affairs and defence, and it was not possible in such matters to make references at great length or in great detail in any report that was issued to the public. So far as economic affairs are concerned, the references were also very short indeed, but that is probably due to the fact that before the Imperial Conference met it had been decided in consultation between the Governments that the questions of trade and commerce and similar matters should be dealt with before the Conference. It is perhaps because of that that we find so little reference to the Ottawa Agreements or to the question of preference in this Report. Indeed, the only reference I could find was contained in the speech of the then Prime Minister, the noble Earl, Lord Baldwin, in which he referred to the value of the Ottawa Agreements in the development of inter-Imperial trade. That was in his opening speech, and I should like to hear from the noble Viscount the Leader of the House, when he replies, that, notwithstanding the fact that so little reference to the Ottawa Agreements or the policy of Ottawa is contained in this Report, the Government intend to stand fast upon that policy and in no way to diverge from the spirit that was inculcated at that Conference. In my belief the Ottawa Conference was a godsend to the British Empire. It came at the most opportune time, and the fruits of it will continue to be gathered so long as the family spirit of good will and co-operation governs the minds and actions of the constituent parts of the Empire.

I had the opportunity during last year to visit three of His Majesty's Dominions and certain of the Colonies, and I found that in no respect was the spirit of Ottawa depreciating in those places. I found, it is true, that there were certain new conditions and economic causes arising which seemed, to some extent, to cut across the Ottawa Agreements, but, generally speaking, I found no desire on the part of those I met— and I met men of all conditions and views—to depart from or to destroy the Ottawa spirit. But I did find that in those Dominions there was a definite movement going on for the creation and the promotion of secondary industries. I found on investigation that the reasons which were given me for that contained much substance. Having regard to the fact that these secondary industries are being created and are being promoted, this carries with it the necessity for finding foreign markets for the surplus primary produce in order to put themselves in the position of being able to purchase the raw materials which they cannot produce themselves and which are required for these secondary industries.

That applies in the same way to the United Kingdom. The United Kingdom has always lived on its surplus of exports, and if you take those two factors together it seems quite reasonable that at this Imperial Conference which assembled in London the representatives of those places should make recommendations in favour of the stimulation of foreign trade. The commercial men of the Empire realise, and have realised for a long time, that the foreign trade of the Empire is of the utmost importance to them. The total trade of the Empire to-day is £2,160,000,000. Of that amount £660,000,000 is trade within the Empire; the remaining £1,500,000,000 is trade without the Empire. Therefore we find that actually 70 per cent. of the trade of the Empire is done without the Empire. Consequently, when His Majesty's Governments at this Conference recommended the stimulation of foreign trade, they were appreciating the enormous part that foreign trade played within the Empire. They also appreciated the economic causes which have been described by the noble Marquess in his speech, and they felt that the time had come when, having set their own house in order and having an increasing supply of surplus products which they wished to export, they had to make every endeavour to increase their foreign trade.

Like other noble Lords who have spoken, I am a firm believer in the possibility of the United States of America and the British Empire countries entering into trade agreements. I believe that if we can obtain mutual trade agreements they will have their repercussions, and we may have co-operation in other directions as well. The time is now ripe for approaching this matter in an atmosphere which has never existed before. There are, however, very great difficulties in it, one of which, referred to by the noble Marquess, was the most-favoured-nation clause. Let me give you one instance of that. Last year a treaty was entered into between this country and the Argentine in regard to wheat. Under the most-favoured-nation clause, in spite of the fact that the United States were giving us no special consideration for what they were to receive, the same advantages had been extended to the United States as to the Argentine.

In any agreement that may be entered into with the United States it is perfectly obvious that points like that, which to-day come under the most-favoured-nation clause, will have to be dealt with as ordinary trading arrangements. I cannot conceive that the United States Government can take exception to that policy. America herself has paid very little regard in her trading arrangements to the most-favoured-nation clause, and I hope that when the time comes that point will be amicably settled and that trading agreements will be entered into between the Empire countries and the United States of America. There is no doubt that co-operation in trade between the United States and some of the Empire countries, especially in the Pacific Ocean, would be of the greatest advantage in many respects. I feel that one question especially which is of vital importance to all those British places in the Pacific might be approached in a tangible way—that is, defence—if the initial trading agreements were entered into. I do not propose to detain the House any longer, because I know that there are other speakers. I do, however, wish to ask the Government to do all they can to further the stimulation of foreign trade with this country and the Dominions. At the same time, when they do this, I hope that His Majesty's Government and the other Governments will cast their eyes over their shoulders and will not forget that there are Ottawa Agreements, and in no way infringe or transgress the spirit or the letter of those Agreements.

THE EARL OF ERROLL

My Lords, I do not intend to keep your Lordships for more than a very few moments, nor do I intend to weary you after this very interesting debate with my own views on the merits and demerits of free trade. Sufficient is it for me to say that I am in almost entire agreement with the two noble Viscounts who have spoken from these Benches. My reason for intervening in this debate is merely to make one point with regard to trade agreements, in particular relation to the East African Territories. As your Lordships are well aware, the point has already been mentioned by the two noble Lords opposite, Lord Arnold and Lord Noel-Buxton. The East African Territories are under what are known as the Congo Basin Treaties. These Treaties are in force at present as a result of the Treaty of Saint Germain-en-Laye, which was signed in 1919. It is unnecessary for me to go into the application of these Treaties, as they have been mentioned so often, both in this House and in another place. I might perhaps mention in passing that this Treaty provides for a revision every ten years and it can be denounced. I understand, however, that the international jurists hold that if the Treaty of Saint Germain-en-Laye is denounced, the Berlin Act of 1885 is automatically revived. Why this should be so I do not know, and I am perhaps one of those who never understand the ways of international jurists. Assuming it is not so, the same legal pundits hold that the Berlin Act cannot be denounced because the treaties contain no clause for termination. On the other hand, these treaties contain no clause for perpetuity, and I think the argument is just as sound from one point of view as from the other.

The East African territories suffer very much under these Congo Basin Treaties, and your Lordships will perhaps permit me to mention two facts. Firstly, they prevent the East African Governments from making trade agreements with any country; and secondly, they prevent those same Governments from adjusting trade imports by means of special duties, in order to preserve a proper balance of trade between themselves and any other country. They therefore deprive the East African Governments of any bargaining powers to make any agreements for themselves—the very point which Lord Horne mentioned in speaking of the trade agreement between America and this country. I would therefore ask the Leader of the House if he can give me some information on this question: Whether, if for reasons of world politics or general economics His Majesty's Government feel that it is inexpedient at this moment to try to abrogate the trade portion of these treaties, it is not absolutely necessary for the Home Government to insist when negotiating trade treaties with foreign Governments, or indeed with the Dominion Governments, that East African imports must be regarded by the foreign or Dominion Government as being part and parcel of the United Kingdom trade? I do not think that in the circumstances, and considering the harsh terms of these Treaties, this can be treated as an unreasonable demand and I hope the Government will consider it sympathetically.

THE LORD PRESIDENT OF THE COUNCIL (VISCOUNT HALIFAX)

My Lords, my first word must I think naturally be to associate myself with what fell from the noble Marquess who moved this Resolution, by way of regret at the enforced absence of the noble Marquess, Lord Crewe, in whose name the Motion stands. I, like all my friends on this side of the House who have taken part in the debate, have no quarrel with the terms of the Motion, although, if I felt so inclined, I should have considerable quarrel with some of the things which have been said in support of it. I found myself making the reflection as the debate proceeded and speeches were made on the other side of the House, that it was at least a matter for comment how many educated people, because certain things were true, came to the conclusion that it did not follow that other things were true too. I find myself in agreement with my noble friend Lord Home in the warning which he repeated.

I desire, if I can, to eschew controversy, because I do not know that it is likely greatly to assist us in a consideration of what is a matter of fundamental importance to the position of this country and of the world, and I will endeavour, so far as I may, to lay before your Lordships a plain and I hope intelligible statement of what is the view which the Government take upon the wide range of topics which have been brought into this general discussion of the economic position of the world to-day. First, I do not think it is irrelevant to remember that it was an economic crisis which was responsible for the formation of the National Government six years ago, and therefore the whole policy of that National Government and its successors has been directed to trying to restore the economic situation from the state in which it then was.

Owing to our peculiar position—a manufacturing country with a large population, dependent upon external sources for by far the greater part of its food—any step taken to restore the balance of British trade must enure to the general benefit of world trade. It was then made plain that if we were to extricate ourselves from the state of economic embarrassment in which we stood, and prevent the economic ruin of the world which would follow the total collapse of British trade, it was necessary that we should abandon the sober and strict doctrine of which we have heard from the Benches opposite, and which for eighty years has failed to win the acceptance of the world.

THE MARQUESS OF LOTHIAN

I hope the noble Viscount is not going to accept the position in which the noble Viscount opposite tried to put me in a carefully prepared speech which was almost completely irrelevant to the speech which I had made. The speech which I made in support of the Resolution was in favour of a general movement towards a reduction of tariffs everywhere, and not one in favour of free trade. I hope the noble Viscount will remember that members of this Party who were in the National Government took part in all the measures which were necessary to restore the economic position in the crisis of 1931.

VISCOUNT HALIFAX

I do not know why the noble Marquess should be at pains to contradict what I have not yet said; and I think if he will exercise some measure of the patience in listening to me which I was fortunately able to exercise in listening to him, he will find that my speech is strictly relevant to everything he has had to say. I was on the point of saying that the system of tariffs which this country has in fact adopted, and I am glad to learn with the good will of the noble Marquess opposite, has never been designed to establish a British monopoly of the home market or indeed any other market. Its avowed object has been to ensure a fair deal all round, for the home producer, and for the manufacturer and the consumer, whether British or foreign, and I hope that that statement will appeal to the noble Marquess.

With all respect to what fell from the noble Lord, Lord Arnold, I am not at all convinced (and that is an understatement) that in these days the fact that we have had these tariff powers has not been, as the noble Viscount, Lord Home, says—contrary to what was said by the noble Lord, Lord Arnold—of direct value in assisting us to get other tariffs reduced. If a free trade world were practical politics, there might be few who would for their own sake desire to see the introduction of protective tariffs. But even high tariffs do not form nearly so effective a barrier to trade as quotas and exchange controls. It is these latter devices that place a stranglehold, as it were, upon world markets, and act not so much as checks upon trade as absolute bars. I am not disposed to occupy your Lordships' time therefore in justifying our tariff policy at the present time. That is really an academic question nowadays. The figures that my noble friend Lord Home quoted are, I think, really conclusive. I do not think, however, that either my noble friend or the noble Viscount, Lord Elibank, quoted this figure: in 1932 the imports of this country (and that is a side of the question that must loom large in our consideration) were valued at £701,000,000, whereas in 1936 they stood at £849,000,000. You could hardly have a better proof that the tariff system as it is employed in this country has neither strangled nor diminished world trade. Part of the increase, I readily admit, is due to commodity prices, but part at any rate, and I think a great part, represents a real increase in the volume of trade. And the effect has been, I suggest, not only to revitalize British industry, but also to provide the British people with the wherewithal to trade with other countries.

Let me make it quite plain—and perhaps, as having sat on the Imperial Conference, I can do so with the greater assurance—that neither this country nor any one of the Dominions has ever imagined that, however high they placed the value of trade agreements with one another—and they did place them very high—they could flourish while the rest of the world suffered. That is an answer to some of the fears that the noble Lord, Lord Arnold, expressed. We know and they know, and we all fully recognise in our policy, the increasing inter-dependence of all nations in their trade relationships. I always see the layman's point of view, and I should like to present this question of world trade in the light of the simplest possible simile, which I almost apologise for suggesting to your Lordships, except that it seems to express accurately what I believe to be the truth of the matter. A traffic jam in Piccadilly might quite quickly be reflected at the Marble Arch and at Victoria, and it is just that fact of interlocking that makes the difficulty of dealing with the situation in which the world finds itself today. The simile indeed is a little more complete than that. I think it is true up to a point that reactions in these economic international relationships do have very much the same effect upon nations as does a traffic jam upon drivers of motor cars. Everybody feels slightly badly treated, everybody's temper gets slightly frayed, and, feeling himself treated with a certain lack of consideration, he is perhaps disposed to be lacking in consideration to other people with whom he is bound up. And I think that if only the people of all countries could realise this truth as well as I think the statesmen of the nations realise it, there would be a good deal less throwing of grit into the machinery, because everybody would know that on the smooth running of each part depended the smooth progress of the whole.

It is, of course, quite good to remember that man does net live by bread alone, but it is also good to remember that man cannot live without bread, and therefore, while the spiritual consolation and the encouraging exhortations to which we have listened this afternoon are all welcome, international trade requires something more substantial as well for its encouragement. The noble Marquess has asked what our contribution has been, or is to be, to the relief of the international tension that, in his view, is caused by economic strain. I hall hope to be able to say something to satisfy him. I was relieved to observe that in his speech he asked not only what it was our wish to do, but what it was going to be possible to do, and that, if I may with respect say so, imparted a pleasant tone of realism into that part of his argument. I would remind your Lordships in passing of what the actual declaration was that this country, along with the United States and France, made last September in the Currency Declaration of that date. We declared our conviction that monetary equilibrium could only be secured and maintained if international trade was allowed to develop, and we stated in particular that we attach "the greatest importance to action being taken without delay to relax progressively the system of quotas and exchange controls with a view to their abolition."

The noble Marquess asked me what this country has done. I would remind him that there is no exchange control in this country, and there are no quota restrictions on imports of industrial goods. There was nothing therefore which this country could do under either of these heads. Therefore, when the noble Lord, Lord Arnold, complains that we have not done much, part of my answer at least would be that there was not so much to do as in the case of most other foreign countries. The immediate contribution which this country made when the franc was devalued in October last was the not insignificant contribution of refraining from allowing a counter-depreciation of sterling to take place, and from imposing increased protective duties, both of which measures could well have been justified at that time by the more intensive competition to which our exporters might expect to be subjected. Our main contribution, as was made plain by the present Minister of Agriculture in his speech at Geneva last September, was that we should keep open our huge import market to the whole world on fair and equitable terms.

I might perhaps quote one figure. The total imports from all countries into the United Kingdom in the four years that have been mentioned—1932 to 1936—increased by nearly £148,000,000. Of that increase, imports from foreign countries accounted for no less than £62,000,000, and the excess of imports over total exports to all countries, British and foreign, increased during the same time from £285,0000900 to £348,000,000. Therefore I am not disposed to share the disparaging attitude of the noble Lord opposite when he, again asking the question what we have done, said that he knew that the late President of the Board of Trade had made a few trade agreements of no particular value, because I, differing from him, take the view that these trade agreements have in fact been of great value. It is a false conclusion of the argument for the noble Lord to attempt to say, what I think he cannot prove, that if we had followed a totally different system our foreign trade would have been in fact much greater than this significant and highly encouraging increase under the policy we have adopted.

The international trade policy which this nation has pursued has, as is well known, been to negotiate bilateral agreements first with Empire countries and then with foreign countries. By guaranteeing free entry to a large volume of imports from Empire countries, this country has contributed to the freeing of trade channels throughout the Empire and to that extent to the stimulation of trade throughout the world generally. The trade agreements negotiated with foreign countries, and the extension to third countries, under the most-favoured-nation clause of which I want to say a word in one moment, of the benefits thus accorded, have still further contributed to the development of international trade in these recent years. It is fair to say that the result of all these instruments working together, as measured by figures available for all who wish to consult them, has been to produce a fairer distribution of trade than was in operation before these measures were introduced. We hope, believing in the success so far achieved, steadily to continue this policy of trade agreements where they can be obtained, and the like, and it is in that connection that great importance of course attaches to the matter that was introduced by the noble Marquess who introduced this Motion and to which reference has been made by almost every speaker since. That is the matter of the discussions with the United States of America for a trade agreement with that country.

The noble Marquess opposite recognises the difficulties that are hound to arise in the course of these discussions, and just because it is the earnest hope of all your Lordships, as it is of myself and of His Majesty's Government, that it will be possible to find a secure basis for the negotiation of such a treaty as that, I excuse myself from following the noble Lord, Lord Arnold, into a detailed discussion of this matter at this time. Your Lordships will, I hope, take it from me that the end we all desire to accomplish would not be assisted by anything I could say at this time, and therefore I leave the subject with the single comment that His Majesty's Government are behind no member of your Lordships' House in desiring to see that end achieved.

The noble Marquess referred, in terms that, so far as I followed them, secured my warm approval, to the most-favoured-nation principle. In our view the mostfavoured-nation principle is, on the whole, the one best calculated to promote international trade and the stability and harmony of commercial relations. This country has probably, I suppose, more to lose than any other in a campaign of general discrimination on account of the world-wide nature of its export trade. The noble Marquess, or it may have been the noble Lord opposite, made some argument on the most-favoured-nation point which I thought was deserving of an answer. As regards imports into the United Kingdom, we are always, as far as we can be, careful to see that the most-favoured-nation rights of third countries are not infringed. As regards our exports to countries with whom we have negotiated trade agreements, the interpretation of their most-favoured-nation obligations is a matter, of course, for those countries, and it must here, as in the other fields we were looking at a moment or two ago, be remembered that exchange controls, quotas, etc., have done a great deal to undermine the virtue of the most-favoured-nation clause in many countries. On balance, it is true to say that the United Kingdom has suffered very much through this, and our policy accordingly is always to urge the abandonment of such régimes and the sweeping away of the special arrangements to which they have given rise.

Lord Noel-Buxton asked me whether I could say anything in regard to the open door, upon which he was good enough to quote a speech that had been made by my noble friend Lord Plymouth at an earlier date this year. I am not sure he had had the opportunity of refreshing his mind about the whole speech my noble friend then made. My noble friend said—and this was the part that the noble Lord quoted— We can see that there would be considerable advantage if a joint and general declaration were made by the Colonial Powers, expressing their willingness to be guided in the administration of their Colonial territories by the spirit of Article 22 of the Covenant of the League. The only point to which I wish to draw your Lordships' attention in that quotation is contained in the words "a joint and general declaration … made by the Colonial Powers … to be guided by the spirit of Article 22." My noble friend also said in the same speech—this was the point I think the noble Lord had in mind— The immediate application of mandatory provisions and of an open-door policy to all tropical Colonies, of whatever nationality, far from helping Germany or any European country with high labour standards, would only result in great advantage being given to the products of the industrialised East, and notably Japan. That is true, and it remains as true to-day as when my noble friend said it six months ago.

For the rest, the noble Lord will not forget, whatever importance he may attach to it, that it was His Majesty's Government which initiated the inquiry now being conducted at Geneva into the question of raw materials—an inquiry of great importance. It is too early, admittedly, as yet to say what may come out of it, but it is all to the good that that matter should be investigated fully by experts from all countries. And I have no doubt that as soon as that Committee reports His Majesty's Government will give the fullest consideration to it. Meanwhile there is one thing that on that topic it is worth saying. I am not going to develop it, but I think it is important it should be said. Do not let any noble Lord in this House, or any one outside, assume that the fact that certain countries cannot find a means to purchase raw materials, as at one time they could, is necessarily or primarily the fault of other countries. That, I think, is perhaps a matter that is not always borne in mind and is of importance.

I come, lastly, to the question of action on an international scale, and that brings me back to the second question that the noble Marquess asked as to what in the view of His Majesty's Government might be hoped to be possible at this time. We have, I think, to remember that we have had certain disappointing experiences of that method of approach. The examples that were furnished by the negotiations for a tariff truce in 1930, and the Monetary and Economic Conference of 1933 are not encouraging. Of course the difficulty is that the circumstances of each country differ so much, the angle of approach is so different, that negotiations on a large scale are very often in practice likely to lead nowhere. These obstacles that we have been considering all constitute restrictions quite different in kind from one another, and each of these different types of restriction is applied differently by different countries, and the problem of devising a common formula under which a number of countries could proceed together to the gradual demobilisation of the several types of trade barrier has up to now, as we all know, defied all our ingenuity. But in saying that I do not wish to rule out the possibility of multilateral negotiations at some future date, if circumstances appear more propitious.

It is, however, I think clear that before the question of summoning a large scale conference of that sort could be gone into we must await the results of the inquiry which the Prime Minister of Belgium has recently been undertaking at the joint invitation of the French and British Governments, who, as your Lordships know, agreed to make informal investigations in various countries as to the possibility of securing a joint relaxation of quotas and other obstacles to trade. At the present time M. Frere, who has undertaken the inquiry, or part of it, on behalf of the Belgian Prime Minister, is at work on some aspects of it, and it will not, therefore, be until his report is in the hands of His Majesty's Government and we have learned what has been the result of his tour of several European capitals, that we shall be in a position to decide whether the economic atmosphere is such as to permit any move on international lines. The existing difficulties at present, as we all know, are largely due to exchange restrictions, and they are largely the result of efforts to maintain the currencies of those several countries concerned.

Thus much more than purely commercial difficulties are involved. Financial and, as the noble Lord opposite said, political considerations also arise. It was quite true what the noble Marquess quoted on that point from the letter of Mr. Norman Davis, but I think that there is some comfort that we can take at this point from this point of view. Thanks to the improvement in trade that has recently taken place there is, I think, no doubt that the purely commercial difficulties are less formidable than they were a short time ago. Last year, indeed, was the first year since the commencement of the depression that there was any real increase in the value of world trade as a whole. If anything more is required of us it must, I think, be as part of a well-prepared plan to which not only the democratic countries but all the great countries are prepared to make their contribution. It is no easy or simple matter to get rid of restrictions thus imposed. Under the protection thus afforded industries tend to be built up which become important factors in their country's economy, and they cannot then sacrifice them because of the results on employment which no Government would desire to face.

Moreover, economic difficulties affect, as we have seen, political tendencies, and in many countries self-sufficiency is now proclaimed as an end in itself. If I may express my own opinion, the expenditure on armaments which has contributed to the present industrial revival throughout the world offers no real solution for economic difficulties, but perhaps creates new problems. Quotas, clearings, currency disturbance and exchange controls together constitute a network of entanglements which cannot, I think, be cleared away by any magic formula. The existence of one restriction debars the removal of some other restriction. They react on one another, they create a vicious circle from which it is not easy to break away. So far as I can see only two methods of approach are possible. One is to try to prevent any increase of restrictions and to trust to the beneficent effects of the present revival of world trade to bring about a relaxation of those restrictions. As one country after another becomes more prosperous, it should be in a position to relax its restrictions and thereby spread further the general improvement. But that may be a long and a very slow process.

The other alternative I suggest is to examine every possibility of international action and to prepare definite proposals first in one part of the field and then in another until a constructive plan for general appeasement can be devised. That is the more ambitious solution, and, as I have said, His Majesty's Government are not disposed to venture on that, with all the consequences of failure, until they can be reasonably assured of success. But it is with such a plan as that in mind that His Majesty's Government are pursuing the several inquiries referred to, and if, as a result of those inquiries, there appears a good prospect of a general solution of the problem, I am quite sure that this country will be prepared to cooperate with other countries in a concerted effort to reduce those restrictions under which we labour at present and to help the restoration of world trade to its former activity. And certainly we, in this country, have the great possible interest in the attainment of that object.

That is all that I would say upon general considerations; but I would like to add two sentences upon a special point made by the noble Marquess with regard to the clove trade in Zanzibar. I have seen the letter of which he made mention and also the answer to it, and I understand that the rights of the Indian middleman are being safeguarded so far as possible to meet the views of the Government of India. Explicit assurances have been given concerning the appointment of Indians as buying agents, two Indians have been added to the Board of the Clove Growers' Association, and statutory provision has been made for the setting up of an advisory body upon which the Indian community is adequately represented to assist the Association. I believe that the Government of India, while still regretting that it was not found possible to modify the principle of the new decree, have expressed great appreciation of the consideration which has been given to their statement of the case, and of the friendly spirit in which the whole matter has been discussed.

VISCOUNT SAMUEL

My Lords, I am sure your Lordships will all be grateful to the noble Viscount for the comprehensive survey he has given us, but I should be insincere if I were to pretend that his speech can give any satisfaction to those of us who sit on these Benches and who have put down the Motion which has been moved by the noble Marquess, Lord Lothian. The noble Viscount, the Lord President of the Council, has dwelt upon all the formidable difficulties that surround this matter, and with great cogency, but I missed any sign of a vigorous determination on the part of the Government to make head against those difficulties. He has given us many generalisations with which we can all agree, but as for any solution of the grave problems that confront us and the whole world, there is no sign of it, I regret to say, in the speech to which we have just listened. The noble Viscount, in a large part of his speech, was retrospective. He was dealing with what had been accomplished in the past and he took great satisfaction in the series of bilateral agreements which the present Government have negotiated during the last five years. But those agreements have in fact proved utterly inadequate, for everyone is saying now that there is a problem which remains to be solved.

The resolutions of the Imperial Conference, unanimously passed with the consent of His Majesty's Governments here and in all the Dominions, emphasised that there is need for a change now. To the declarations of authorities which have been quoted by my noble friend the Marquess of Lothian, I could add many to the same effect—the International Chamber of Commerce, for example, the speeches of the chairmen of our great banks, and of authorities such as Sir Josiah Stamp and Sir Frederick Leith Ross, the economic adviser of the Government. These all declare that there are obstacles to international trade which are a great cause of unrest in the world and hold back the progress of all mankind. The bilateral agreements to which the noble Marquess referred have clearly proved unsuccessful in making any real impression upon the problem.

My noble friend Viscount Horne made a speech of great vigour delivered with his accustomed facility and force, which reminded me of many speeches I have heard from him on this subject in another place, and I am glad that now, on a different field, our old battles are to be resumed. He attacked those of us on these Benches for having adopted a policy which in 1931 would have brought the country to disaster and my noble friend the Marquess of Lothian pointed out to him that in 1931, in the conditions of that time, when there was a great emergency and an economic crisis, we our- selves were members of the Government which took the necessary measures at that period to save the country from that disaster. We are by no means wedded to a rigid economic theory which cannot be modified to meet the circumstances of the time. But when the noble Viscount who has just spoken, in answer to an interruption of my noble friend, said he was very glad to learn that the tariff system then adopted had our complete approval, he put an interpretation upon the words that were spoken from this side which they certainly do not bear. The fact that we are prepared to take measures in an emergency to meet that emergency does not mean that we are in favour of a permanent system of protective tariffs. That is an entirely different matter.

The noble Viscount, Lord Horne, presented himself here, as protectionists always do, as a champion of exports. He says, "Of course we must promote exports, we regard these restrictions on trade as a great evil. We only want, or we principally want, tariffs to enable us to bargain with other countries and force their tariffs down, and by means of retaliation to secure a greater measure of trade." The noble Viscount says that as well as doing that we must have tariffs in order to prevent the flooding of our markets by imports from countries with a lower standard of living and lower rates of wages. You cannot do those two things simultaneously. If you are going to have tariffs to keep out goods, you cannot use those same duties for bargaining. Duties that are intended for bargaining cannot also be intended to be permanent. The argument upon which that theory rests is a fallacious one, if I may respectfully say so, because it assumes that low wages mean low cost of production. They do not. You may have low wages with a high cost of production.

The noble Viscount mentioned Belgium as an example, but you might take any other country. You might take for example the cotton trade and India. India has a much lower rate of wages than Lancashire, and yet Indian cotton could not compete against Lancashire on equal terms. The Indian National Movement insisted on protection against Lancashire cotton, because despite their lower wages our costs of production are lower. The notion that you must have a tariff to protect you against lower wages is fallacious. The noble Viscount would not use that argument in the case of American motor cars which are excluded from this country by a protective tariff. Although wages in America are higher than here, the costs of production are frequently lower than here. Then the noble Viscount says we must have preferences for our Colonies and Dominions. We must have a tariff in order to give a preference. But if you have a tariff for that purpose it is a permanent tariff, and it cannot be used for bargaining. Our hands are tied. We pride ourselves on having no written Constitution, but the Ottawa Agreements have given us something worse, a written economic constitution which cannot be departed from without the assent of all. Therefore tariffs put on for the purposes of preference cannot be used for bargaining, and the argument in that respect fails.

The noble Viscount asks whether we should say that this country is responsible for the present entanglement of tariffs and quotas and so forth that prevail all over the world. He asks, is it not the fault of the other man? Are we not wholly innocent in this matter? We are not, I regret to say. We bear a very large share of responsibility for the present system of tariffs in the world. In 1933 in the great depression all countries of the world sent delegates to London to a World Economic Conference with a view to dealing with these very matters, and our then Prime Minister presided over that Conference. The Conference failed utterly. It resulted in nothing, for two reasons. One was that on the currency side the President of the United States refused to make any currency agreement. The other was that the leader of the British delegation, our present Prime Minister, then Chancellor of the Exchequer, declared to the Conference that we were not prepared in any way to depart from the Ottawa Agreements, consequently we could not make any general arrangements with the Powers at large which would achieve the object in view. Those two declarations, one on the currency side and the other on the tariff side, killed that Conference dead, and this country and its present Government were largely responsible for that result.

Secondly, not very long afterwards Belgium and Holland agreed to a Convention for the gradual reduction of their tariffs by a certain percentage each year, and invited all countries to join. If that had been accepted generally over the world, these difficulties would have disappeared. Again it was this country which stopped that Convention from coming into operation by insisting upon the application of the most-favoured-nation clause and saying that we should not agree to any such arrangement between Belgium and Holland unless we could have the advantages of it without giving them any advantages in return. It was that insistence upon the most-favoured-nation clause in that form which destroyed the promising initiative then taken. I do not suggest, in answer to the noble Viscount, that the most-favoured-nation clause should be abandoned. We do not propose that. We do suggest, however, that it should be modified so that, when multilateral agreements are made for a general reduction of tariffs, they need not be regarded as an infringement of the most-favoured-nation clause. The United States have definitely agreed to that principle, and our Government have not agreed. Furthermore, when we came to make bilateral agreements with other countries, we ourselves insisted upon the adoption of quotas, the very measure which the noble Viscount now says is the chief offender in all these matters. It was the British Government which enforced quotas and compelled the Scandinavian countries to adopt quotas for our advantage. So I would emphasise the fact that it is insincere to declare that all the other countries of the world are to blame and that this country is wholly innocent of any responsibility for the state of things in which the world finds itself.

The noble Viscount, and also the Lord President of the Council, emphasised the improvement that has taken place in exports and said that this disposes of the case that is now put forward. They take as their basic year 1932, the bottom of the depression, and point to the improvement that has taken place in our trade since then. Of course, there has been an improvement, an improvement all over the world, but they ought not to compare our present position with the bottom of the depression; they ought to compare it with what our position was immediately before the depression. Have we, under tariffs, regained the ground that was lost? The facts are there. It is far better to take volume of trade if you can than values, because values are affected by prices. The noble Viscount and the Lord President have, however, taken values anti I will pursue that same argument. Before the depression, in 1929, the exports of our domestic produce to the whole world amounted to £729,000,000—a wonderful figure. At the bottom of the depression in 1932 we had lost precisely half that figure: the fall was from £729,000,000 to £365,000,000. We had been exporting £2,000,000 of goods every day. In the depression we were exporting £1,000,000 of goods every day.

How much of that has been recovered? Take this year, which is the best year. In the first six months of this year our exports are £251,000,000. If the whole of the year is taken on the same basis, our total exports will be £502,000,000. Therefore we did export £729,000,000; at the bottom of the depression we exported £365,000,000, and now we are exporting £502,000,000. And the noble Viscounts actually come here and say: "Look at the magnificent improvement! How can you show anything better? This is the result of tariffs; this Motion and this inquiry are disposed of." We lost £364,000,000, my Lords, we regained £137,000,000. We regained one-third of what we lost. That appears to me to be a very inadequate recovery. The noble Viscount, Lord Horne, said he was the champion of exports and that he would rejoice to see an increase in our exports. This year our figures for exports are actually less than they were before the War. The present figure for exports for 1937 is less than our figure for exports for 1913, a quarter of a century ago, when our population was far smaller and when, of course, the population of the world was far less.

VISCOUNT HORNE OF SLAMANNAN

If the noble Viscount had referred to the proportion of world trade and the proportion in which our exports had increased, he would have arrived at a very different conclusion.

VISCOUNT SAMUEL

No, I should not at all. It is perfectly true that certain countries like Germany have lost their trade. That is quite true, and therefore the percentage of our country may be higher. That is the fallacy of the percentage, which is always very attractive to protectionists!

VISCOUNT HORNE OF SLAMANNAN

I am not making a comparison with any individual country, but I am taking world trade as a whole.

VISCOUNT SAMUEL

Certainly.

VISCOUNT HORNE OF SLAMANNAN

The figures disclosed two days ago by the League of Nations are only now about a half of the gold value of what they were before the War. This proportion of our exports to-day has enormously increased since 1931, and enormously increased during the whole of these years, and that in spite of the tariffs which the noble Viscount thinks would be a deterrent.

VISCOUNT SAMUEL

The noble Viscount takes the year 1931, the bottom of the depression.

VISCOUNT HORNE OF SLAMANNAN

Yes, I do.

VISCOUNT SAMUEL

And again he takes gold values, which the League of Nations, I know, takes as a basis of comparison, but which are very misleading, because any country which depreciates its currency in terms of gold immediately has an apparent great jump in its trade, comparing one year with another. What I was saying was strictly relevant with regard to Germany. Of course, if German trade were to disappear altogether from the statistics of world trade, then our trade, which has not similarly disappeared, would be a larger percentage of what is left. The fact that other countries have suffered worse than we have is no reason whatever for saying that these figures are irrelevant. The noble Viscount does not deny that we had lost since 1929 one-half of our trade and that we have only recovered one-third of our loss. That is the essential factor, and the consequence of it is seen in the depressed areas, which are the exporting areas. It is they who have suffered, and suffered almost entirely from this enormous reduction in our export trade.

Furthermore, agriculturists are suffering most gravely at this moment. We hear many complaints on behalf of the farmers, and one of the main causes is the enormous rise in the cost of the raw materials they consume. The poultry industry has been mentioned. Within a year the price of feeding stuffs of the poultry industry has gone up by 3o per cent. The price of feeding stuffs of the fat cattle industry has gone up by 40 per cent. These are the causes of the agricultural depression, and while the agriculturists come to us to ask us to raise the prices of what they sell, ought they not to come here and complain of our having raised the prices of the things that they buy? Now, as my noble friend mentioned at the outset of this debate, the cost of food to the people of this country has gone up by 10 per cent., by two shillings in the pound, in a single year, and every housewife feels the loss.

Then the noble Viscount asked whether you are to do anything to fortify your Empire. That begs the question. Are you fortifying your Empire or are you weakening your Empire? As Lord Lothian said at the beginning of this discussion, years ago there was no animosity or ill will against the British Empire. We held a quarter of the earth; we held almost as much as sixty of the countries of the world put together. In the present distribution of the land surface of the earth, two-thirds are in the hands of eight Powers or Empires and the other third is left to the other sixty nations, including Germany, Italy and Japan. They acquiesced in that in earlier days because the British Empire was not regarded as a preserve for the British people but was open to the world and held on trust. Now that you have this tendency to erect a wall about the Empire and to preserve it for our own economic interest, you have a very different spirit in the world.

This Motion is put down because of the supreme importance that we attach to this question in relation to peace, and peace is the dominant issue in the politics of the world to-day. My noble friend and I, and our colleagues, resigned from the Government not because of any question of this tariff or that, or of 10 per cent. here or there, but because we felt that this great change in the spirit of British policy would arouse animosity against us in the world, and be the cause of unrest among nations, and possibly lead to the greater peril of war. The purpose of this Motion was to ask the Government what they were going to do, and we have had admirable declarations of principle both from the noble Viscount who spoke from the Back Benches opposite and from the Lord President. They were most admirable. Prince Bismarck said, in a spirit of cynicism, that to say you were in favour of any thing in principle meant that you had no intention of doing anything to put it into practice, and I am afraid that these declarations which we have had from various members of the Government for the last five years, again and again, have resulted in the position in which we are at the present time. They explore every avenue, they leave no stone unturned, they leave out of consideration no possibility—and nothing is done!

Now we have this declaration of the Imperial Conference. It is in the most specific terms and it is a declaration that it was an outstanding feature of the discussion that all practicable steps should be taken to secure the stimulation of international trade, that it was recognised that in the last resort the prosperity of the countries of the Commonwealth depended upon that of the world as a whole, and that the growth of international trade was an essential step to political appeasement. Could there be a more definite or emphatic statement? Now what has happened? The Prime Minister makes a statement of the intentions of the Government. He addresses a great meeting at the Albert Hall, and he says: I am proposing this evening to review in broad outline the main aspects of our policy and programme as it affects our people and their hopes or fears for the future. The new Prime Minister made it the occasion for a general survey, and what does he say about this issue? Not one word. He ignores it entirely.

Is that a sign of zeal and energy and enthusiasm for effecting change? The noble Viscount says we must await a report. I agree that that is so now that M. van Zeeland has been appointed to the position he has. But the whole question is: When that report is rendered in what spirit will it be received? The Leader of the House, by his speech, does not inspire one with a spirit of optimism. In our view if the Government lose this opportunity, if this statement of the Imperial Conference comes to nothing, if the American initiative fails and the initiative of the Oslo countries, and if after a year or two's time there should come, unhappily, another economic depression, increasing the strain among nations, increasing unemployment and unrest, and thereby the peril of war, if there is inaction new those who are to blame for it will not be able to escape their responsibility.

THE MARQUESS OF LOTHIAN

My Lords, we have had an extremely valuable debate, and I think your Lordships will agree that there has been introduced into it a new vigour and freshness. I beg to withdraw the Motion which stands in my name.

Motion for Papers, by leave, withdrawn.