THE MOST-FAVOURED-NATION CLAUSE.

HL Deb 07 December 1938 vol 111 cc366-86

VISCOUNT ELIBANK

had given Notice that he would ask His Majesty's Government whether they will consider the desirability of abolishing the most-favoured-nation clause in all reciprocal trade agreements entered into or renewed in the future; and move for Papers. The noble Viscount said: My Lords, it is nearly three years since I had it in mind to put down a Motion in your Lordships' House on this particular question, my reason being that all the advantages which had come in the past as a result of the most-favoured-nation clause seemed to be disappearing. I believe that they have disappeared altogether to-day. This clause was originally devised in the interests of fair play and justice among the countries which subscribed to it, and it was devised under our old Free Trade system which has passed away and, if I may say so with all respect, passed away under the ægis and with the help of my noble friend who will reply to this Motion. To-day, owing to new methods of trade restrictions, the most-favoured-nation clause is more vulnerable than it ever was. Even in the past, under devices such as preferential railway rates, frontier dues, and in certain cases special interpretations, it was possible to ride a coach and four through this clause, and certainly the effect was to whittle away a good deal of its meaning and importance.

I have to go back rather far for my first instance, but I should like to refer to the Russo-German Treaty of 1894. Under that Treaty the Germans had taken the right to import coal into Russia at a reduced rate. Under the most-favoured-nation treatment Great Britain ought to have received the same right. But what happened? The Treaty was altered in order to arrange that this coal must be imported overland. Obviously no coal could be imported overland into Russia from this country to compete with the coal imported by through waterways from Germany. Then there was another case. In 1909 the Russians raised the duty on oatmeal imported into Russia. The Americans protested and threatened reprisals, and again what happened? The Russians altered the regulations and arranged that an appendix should be added to them exempting Quaker Oats as being a preparation of oats and not oatmeal. Under the most-favoured-nation treatment the same consideration ought to have been given to British oatmeal, but British oatmeal was not regarded in that light, and so the Americans rode triumphantly through the clause. Then there is the very historic example of the German concession on cattle habitually living at an altitude of one thousand metres. This admitted the Swiss cattle but excluded all cattle from Denmark.

To-day the devices for voiding the obligations in the clause are no less ingenious and we have now in various countries the quota system, the licence system and quantitative imports; in fact, the growth of economic nationalism to-day has been such that the whole economic relationship between countries has been changed and is producing an entirely new orientation of trade. This has also been helped forward by special methods of trading, such as the barter system and subsidies, which are still employed by Germany on a large scale. To-day we have most-favoured-nation-treatment arrangements with fifty other countries in the world. That is practically the whole world, and under this clause we are bound to give any concessions which we give to one of these countries to all the rest of them. For example, suppose in a trade treaty with Denmark' we get certain concessions from Denmark and give certain concessions in return to Denmark, we have to make the same concessions to every other country with which we have this most-favoured-nation arrangement.

That is the ethical interpretation of the clause, but what actually happens? Take the quota question. In practice, Switzerland, for instance, maintains that quotas and licences are outside the most-favoured-nation clause altogether. Germany, on the other hand, considers that if any quota is instituted it must apply equally to all countries. We in this country say that if quotas are instituted here, they shall apply only for a proportion of a period in ratio to the amount of imports that we have taken from the particular country for a fixed period. With such a confusion of interpretation, such a confusion of thought, such a confusion of application of this clause, surely the time has come when we should do away with it and get back to a proper trading basis. The fact that Japan is one of these most-favoured nations—Japan who, as I said yesterday in your Lordships' House, is doing everything she can to undermine our trade in China, quite irrespective of this most-favoured-nation clause—is, I submit, another reason why we should repeal it. Germany herself is a most-favoured-nation country. She is carrying on a barter trade; she is giving subsidies of a very unusual nature to her exports, and riding through the most-favoured-nation clause all the time.

I should like to give your Lordships another instance of the most recent Treaty which has been entered into by His Majesty's Government—that is, the Anglo-American Treaty which we all welcome in this country. Under that Treaty certain concessions are made by this country to American timber of coniferous species, and that concession takes the form of a reduction not only of import duty on the timber as a whole, but of certain rates upon certain classes of timber. That in itself creates difficulties for the Customs and for the importers of timber. But when I tell your Lordships that under this most-favoured-nation clause these concessions have to be applied to all other countries from whom we import timber, and who have the same most-favoured-nation treatment, I can assure you that the difficulties, trouble, and expense are trebled and quadrupled according to the countries from which we take that timber, like Finland, Russia, Sweden, and so on. Not only that, but the importers who hold stocks of this timber are going to lose considerable sums of money by the reduction of these duties, and His Majesty's Treasury will, I submit, lose revenue as well.

Then again, during the period when this clause was really operating most actively, this country was the manufacturing hub of the world, and other countries were glad to take masses of articles from us. To-day this is all changed. Most of these countries have now set up their own factories. They are manufacturing many of the articles which formerly they took from us, and proportionately, and as a consequence, our export trade has fallen off and continues to fall off. Although we are still the largest and most potential market in the world for imported foodstuffs, raw materials, and manufactured goods, our economic position under the new conditions is growing more vulnerable. This is evidenced by the statistics which I can give your Lordships from eight selected countries. I find that we imported from them in 1937 goods to a total value of £334,000,000. What did they take from us? Goods to the value of £117,000,000. Even after taking into account invisible exports, this must represent to us an enormous adverse balance. You may ask what are these countries? I am going to give you them without naming the exact figures—the Argentine, Denmark, Finland, Russia, Poland, Sweden, Germany and the United States of America; and the most glaring example of them all is Russia, from whom we buy £29,000,000 worth of goods while they take a paltry £3,000,000 worth from us.

Surely, as the greatest importing country in the world, and the most important market for so many countries, not only in respect of primary products but also of manufactured goods, we should use the power which we possess to compel those countries with heavy balances of trade in their favour to take considerably larger purchases of goods than they do. I suggest that the most feasible and most practical way of doing this is by putting on quantitative regulation of imports. But to-day, as I am advised, this would not be possible because of the most-favoured-nation clause. Therefore I suggest to His Majesty's Government that that is another important reason why the clause Should be abolished. I also venture to tell His Majesty's Government that in commercial circles—and I can speak from the point of view of the Federated Chambers of Commerce of the Empire—this is a policy for which they have long asked.

It has been suggested that the effect of doing away with the most-favoured-nation clause might be to divide the world into several large economic groups, trading principally inside their own groups, and that this would not help to extend trade, but would rather contract it than otherwise. Personally, I am not prepared to subscribe to that view. I take as an example the British Empire, which is one huge economic unit spread over one-quarter of the globe, doing certainly more than one-quarter of the trade of the world, and in which the most-favoured-nation clause does not operate; and what do we find? As the result of the preferences we have given within that group, trade has expanded, resources have been developed, and whilst there may have been to some extent an alteration in the direction of the balance of trade in the world, at the same time the members of that group have expanded their world trade as the result of this and are going on expanding it more and more.

There is another reason why I think this clause might be abolished. Already a broadside has been poured into it by His Majesty's Government themselves. In the Anglo-American Trade Agreement to which I have just referred, I find that Article 19 reads as follows: Each High Contracting Party reserves the right to withdraw or to modify any concession granted in any territory of that High Contracting Party on any article enumerated and described, or specified, in any of the Schedules annexed to this Agreement, or to impose quantitative regulations on the importation of any such article into that territory if, as the result of the extension of such concession to other foreign countries, any such country obtains the major benefit of the concession,"— I ask your Lordships to note what follows— and if in consequence imports of the article concerned increase to such an extent as to threaten serious injury to producers in the territories of that High Contracting Party … Then there is the usual proviso for consultation between the parties if they wish to take action under this article.

This article is a direct negation of the most-favoured-nation clause. It cuts right across it. It cuts right across Article 6 of the same Agreement, which is the most-favoured-nation clause in that Agreement. I venture to suggest to His Majesty's Government that if they have gone so far as to incorporate this clause in this very important Agreement they would not be doing wrong, even though they are not able to go the whole way at present, if they were to incorporate this clause in any other agreement in the future, and try to incorporate it in any agreement which already exists. I want to be perfectly fair to the Government over this. I do not for a moment think it is possible for the Government to say with a wave of the wand: "We are going to abolish this clause at once without saying anything more." I know there are difficulties. Fifty countries are involved. The clause in the agreements with those countries can be repealed under notice of a maximum period varying, I think, from three months to twelve months, but I suggest to His Majesty's Government that there is a way out, and it is this. They should advise these fifty countries that it is the intention of His Majesty's Government to do away with this most-favoured-nation clause. They should give, say, two or three months' notice that they are going to do so, with an intimation that they would be quite prepared to continue the existing agreements minus that most-favoured-nation clause, and that in any new agreements entered into and continued the clause would not be included at all.

In conclusion I would like to emphasize that the most-favoured-nation clause does not accord either with the present policy of Protection in this country or with the policy of bilateral agreements. Moreover, as I have tried to explain, it minimises and curtails the immense power which this country possesses as an importing country, and which was enhanced when we adopted Protection within the last few years. The British market is by far the largest market in the world, and there are few countries who do not value it at its proper worth, while there are few who would pay for the privilege of entering it unless they were compelled to do so. I think my noble friend Viscount Runciman, had experience of that when he was at the Board of Trade trying to negotiate agreements with countries under a Free Trade system, and he admitted to us, if I remember correctly—and it is possibly within the recollection of your Lordships—that as soon as duties were placed on various imports his difficulties vanished, so that he was able to come to satisfactory agreements during the term of his very able administration of the Board of Trade. But my view is that unless and until we take power, through the abolition of the most-favoured-nation clause, to use discrimination against all countries who make unfair use of the privilege they obtain from us, we cannot hope to restore British industry to its proper place nor maintain our trade at its economic level. I beg to move.

LORD BARNBY

My Lords, the question which has just been raised has compelled the mover of the Resolution to cover a range of subjects which go beyond the most-favoured-nation clause because, to illustrate the point under discussion, it was necessary to include references to these other questions. The subject itself, the suggested abolition of the most-favoured-nation clause, obviously is something which would have to receive very long consideration because it would involve a revision of treaties with an enormous number of countries. Therefore my noble friend has suggested a line which might in future be followed rather than expressed a hope that there should be a sudden decision. The most-favoured-nation clause itself is, however, receiving inescapably the very deep consideration of traders in this country who are experiencing progressive difficulties through the welter of increasing tariffs and quotas, exchange control and currency restrictions. And so it is opportune that this question should be debated in your Lordships' House, so important is it.

Two things occur to one. The first is the consolation that industrialists and traders as a whole will feel that when it comes to be dealt with in your Lordships' House on behalf of the Government this question is going to receive the attention of the noble Viscount, Lord Runciman. It is a matter for encouragement to everybody who wants to help the industry of the country that the noble Viscount's wide experience and ripe judgment are again at the service of the Cabinet on these very intricate matters. Then there is the somewhat curious reflection, that a matter like this, which strikes at the very basis of the economic welfare of the country at the present moment, should, when debated in your Lordships' House, attract only so thin an attendance. This is especially so when one remembers that the members of your Lordships' House include a very large number who have wide experience of, and take a deep interest in, foreign and overseas trade. But I hope that the noble Viscount, Lord Runciman, in dealing with this debate, will be under no misapprehension, thin though may be the attendance in your Lordships' House, as to the feeling of concern about this whole question.

A few weeks ago I returned from a trip to the United States and Canada, which meant that I was absent from this country during the period of extreme difficulty and concern. During that period, if I may say so, the chief measurement of the problem was the kind of advice that was going to be given to His Majesty's Government by the noble Viscount. An interesting point which must have struck most of your Lordships, as it did me when I returned to this country, was the degree to which there has been speeding up of military preparedness and expenditure of all kinds, while little discussion, attention and thought have been given to the equally important subject of economic preparedness. The spending of this money is a very easy thing for Parliament to decide upon, but the really important question is how we are going to pay. We can do so only by exports from this country—that is, by selling to the rest of the world the product of our labour. This Motion of my noble friend indicates one angle from which that question may receive the very serious consideration of the Government.

To turn for a moment to the most-favoured-nation principle, which has long been the basis of our trade treaties with foreign countries, there is no doubt that there is a strong body of industrial feeling in this country that what has served us up to now is no longer appropriate to the conditions which those engaged in foreign trade have to face to-day. To abolish it entirely is impossible, but is there not some intermediary method—indeed there is one, and there may be more—whereby this traditional principle can be modified? My noble friend suggested discriminatory treatment. We well know that in the originality of thought which motivate; the different Governments in their trading laws, there is the risk of incurring penalties which are imposed on certain countries who follow certain courses of action. We have very vividly before us the treatment by the United States of Germany in return for her new policy. I merely throw out the suggestion which has been put forward by the Federation of British Industries in a memorandum recently submitted to the Board of Trade, that we should have a three-decker tariff—the first applied against those countries which do not accord us most-favoured-nation treatment, the second modifying the treatment which they should receive under it, and the third deliberately discriminating by different duties against those countries who buy materially less from us than we buy from them.

This is an age when admittedly the policy of bilateral trade equation is getting increasing attention. It is the thought which motivates all the autarchic States. Its practical application does bring results. It may well be that His Majesty's Government might benefit the trade of this country if they applied more rigorously that principle to their trade negotiations. One well realises the difficulty of that principle when one considers the most recent Treaty to which my noble friend referred, the Anglo-American Treaty. The situation there is that we buy from the United States four times as much as they buy from us. That is the current balance of trade for the first six months of this year. One can understand, therefore, how fundamentally difficult it is to make a trade treaty which can be satisfactory to both sides in its practical results when you have such an axiomatic disadvantage as that. I should like to avoid any impression of being lukewarm about that Treaty. On the contrary, I think all traders who have a broad outlook will not only greet with pleasure its achievement but congratulate the Government on pulling off what was such an extremely difficult thing. What would have been the result had the negotiations for that Treaty broken down? It serves no purpose now to jolt backwards, but those who have been recently to the United States and have been in contact with Washington, will be able to realise the deplorable sequence of events that might have followed from the disappointment to Mr. Cordell Hull and all the negotiators had the negotiations broken down. But let us be under no illusion. A large part of the hundreds of schedules supposed to have been amended are—I scarcely know the word to use—

LORD STRABOLGI

Window dressing.

LORD BARNBY

—are at least misleading. When you read, for instance, of a duty being reduced 30 or 40 per cent.—that is from 110 per cent. to 70 per cent. specific and ad valorem combined—when it may be virtually exclusive at 40 per cent. what is the good of talking about gain? It is merely playing with words so far as practical results are concerned. Those many industries who need assistance, and had hoped for practical results in return for the immense advantages given to the United States, expected something greater; but instead of practical results all they get is a little consoling assurance of a large percentage of reduction which gives no practical advantage. This question of the conscious control of exports is not only engaging the attention of a very large number of Governments but is receiving their support. Ways in which it can be done have been exposed recently in a most helpful series of three articles in The Times newspaper, which give in some detail the technique followed by Germany. Other countries, not unmindful of what Germany has achieved, think that that is a happy line of procedure and are applying it to their own affairs. That series of articles brilliantly set out the position and will be very helpful to industrial thought.

During a helpful debate in another place there was a most courageous and clear speech by the Secretary for the Department of Overseas Trade. That speech will doubtless have been intensely resented in Germany, but it was very opportune and its delivery was very fortunate. Surely, while we in no way modify our admiration and support of the policy of the Prime Minister, of appeasement towards Germany, we do not see that that is any ground for our accepting treatment in our foreign trade which seriously encroaches upon the interests of industrialists in this country. This conscious control of industry justifies the thought of those who say, "Well, we in England might as well aim at the stimulation of our exports." After all, we come back to it: whatever we may talk about armaments, the justification of that policy, I repeat again, is that arms have got to be paid for by these exports.

There is a very natural inclination for the industrialists of this country, with the increasing difficulties everywhere, to say: "We cannot be bothered with the export trade. The Government, directly or indirectly, in order to finance their armament programme, in one way or another take a large part of the profits of production. For the balance, we are dependent upon the home market to recoup us for our share of all this expenditure which the Government are embarking upon for their programme." That is not enough. Where are we going to get the credit which is eventually going to pay for the production of arms on this vast scale? Only through exports. There are those who say: "Why not? Let us have the export bounty, and impose an internal sales tax to make a pool out of which to pay for the armament programme." The noble Viscount who moved the Motion suggested that that might involve discrimination. That is a matter for His Majesty's Government to explain and examine. Of course I merely advance that suggestion, without recommending it myself, as one line of thought along which industrialists are thinking at the present moment.

The natural sequence must be the collective purchase of raw materials. We saw yesterday, and it was announced in the newspapers this morning, one of the most impressive events: the re-imposition of exchange control in one of His Majesty's Dominions. The New Zealand Government, finding too great the outward flow of its resources, as it was delicately put, through unreasonable excess of imports—when really it was importing foreign evidences of deposit consequent on the flight of capital from the Dominion—imposes exchange control. Here is Great Britain urging on the world a remission of currency restriction and control, and we find that one of the Dominions has suddenly jumped into the arena and put itself among those who practise exchange control. Already the New Zealand Government are committing themselves to the purchase of all dairy products, butter and cheese, in that country; they take them over at a fixed price and resell them in the world's market at the best price they can obtain, at a loss of about £1 per cwt.—£14,000,000 or £15,000,000 a year. The Canadian Government impose a complete purchase of wheat, at a loss of what amount to their Exchequer?

I merely raise these points because we are being driven towards the collective purchase of raw materials. How is that going to impinge upon the economy of the Dominions within the Empire? Already some of their raw materials are at a disquietingly low price, and they are finding increasing difficulty in getting markets. As a digression, I might just say that we are all bearing vividly in mind what happens once interference with normal channels of trade occurs: the example of tobacco. Before the War South-Eastern Europe—Greece, Turkey, Bulgaria, etc.—habitually sent a large part of their tobacco to this country. The War came, and trade with those countries was immediately cut off. The whole taste of this country changed from European to Virginian tobacco, and the result is that now the whole of the imports of tobacco into this country come from the United States, a country where we already purchase very much more than we ought to. We ought not to purchase from America; we ought to purchase from South-Eastern Europe, where we can pay for it, as Germany enforces payment for it, by exporting raw materials: by sending capital goods, which include British wages, giving employment to this country. Here is a vivid example—is there not?—of the necessity for His Majesty's Government to say to the working man of this country: "You ask rightly either employment or its equivalent, but the cost is ultimately loaded on to the pods which we export. All this unemployment pay has to be paid for, and we have a right to say that you should to some extent modify your taste, accept South-Eastern tobacco instead of zoo per cent. American tobacco, and let us pay for it with something we can export to a country that will take our goods instead of buying from a country that does not take our goods to the extent that we buy from her."

To some extent this question and the result involve political considerations. May I illustrate that fact for a moment by pointing to Greece, Rumania, or Poland? Poland, for example, is a country in which the economy is entirely complementary to that of this country. There is need for something to be done whereby we assist the inflow of primary production from that country to this country in substitution of the primary products that come from countries that do not buy to the full extent from us, and pay for it by the export of capital goods which employ British labour and which are the contents of British wages. There is an example of a country of which the economy is essentially complementary to that of Great Britain. Why is it not done?

There are those who say that there is a deliberate desire on the part of His Majesty's Government to refrain from any action which would appear to give assistance to those countries which might be said to take part in political encirclement against Germany. Again, we do not want to hinder by one iota the policy of appeasement towards Germany. But we surely do not want to feel that we must sacrifice industrial interests; and we cannot afford to, because we must have this exchange, we must have this increasing volume of exports. Let us remember that many industries in this country, such as shipbuilding and textiles, are already suffering from an over-valued exchange and insufficient exports, causing further unemployment and cost to the Exchequer, and raising the cost of other products which we can export. It is not reasonable to suggest that a conscious action aimed to increase, through the time-honoured methods of treaty negotiations, trade with countries like Poland and Rumania, should be delayed because there is a doubt as to the prudence, at this moment, of interfering with the political set-up and suggesting that there is political encirclement. There is no threat towards other countries; this is purely a policy of self-preservation. But it does raise a point which very much concerns traders in this country, and one on which it has been hoped that some pronouncement might be made by His Majesty's Government.

Immediate short-term credits are the only machinery whereby we can transfer to these countries who are not able to produce exchange for cash payment, either the products of our labour or the primary products of our Dominions, which in turn are paid for by our labour and exports. The old pre-War system of banking has virtually broken down. The banks will, to-day, not take the risks which they used to take, not because there is any question of the trade-worthiness of possible buyers abroad, but because there is doubt whether the foreign Governments will permit the honest intentions of the purchasers abroad to be carried out. That directly establishes the fact that foreign trade involves considerations of the assumption by the Government in some form of a political hazard. There are those who say that Government loans, in various ways to traders, to help to establish mixed companies for the development of industries within certain other jurisdictions, would in their turn assist to develop manufactures in this country or in the Dominions. That involves some political hazard, but only in that way can we hope to establish the volume of exports which will give us the wherewithal to pay for this expenditure to which we are committed.

It can be said that already there is in existence the Export Credits Department, which was set up to help in this direction. I do not need to remind your Lordships that the Export Credits Department confines itself rigidly to exports from this country. It does not provide for the export of goods or raw materials from our Dominions, and in spite of the brilliant way in which the Export Credits Department has been conducted—by that I refer to the fact that here is a Government Department, running strictly on business lines, achieving a commercial profit in spite of its essentially hazardous business—I think we may assume that no longer in the future will it be possible for a long while on the London market to issue public loans to foreign Governments, and therefore that method for the fertilisation of foreign trade, which is the traditional method, is no longer possible.

There are two points that I would wish to make in conclusion. The Secretary for the Department of Overseas Trade, in another place last week, emphasized the work that was being done to develop internal organisation in this country in individual trades. By that I mean to say that individual trades were themselves to be put into a position to talk collectively for their industry, so that they might discuss with industries in other countries collectively, and make bilateral agreements for the sharing of other markets. That surely, is a policy by which we feel that the Secretary for Overseas Trade is doing a great service to this country.

Finally, I will just emphasize the perplexity of this question of overseas trade and the fact that our capacity to pay depends upon our exports. When we were at school and the University we all learned political economy. At that time we were brought up on the thesis that you can import as much as you like, because those imports can always be paid for by exports. That was the thesis, but we have to-day in the world a competing thesis, that of Dr. Schacht in Germany, who says: "We will import nothing until we have exported the wherewithal to pay for it." That may be heretic political economy, but it is achieving a practical result. I merely dismiss the subject with this illustration, because we must admit that whatever may have been the foundation for the orthodox political economy, the world to-day calls for at least a careful analysis of other economies, and we ourselves might review them. I would repeat that I hope that Lord Runciman, in speaking for the Government, will bear in mind that, although the attendance in this House to-day may be thin, the interest in the country on this subject is an increasing one, and that there is intense anxiety amongst serious thinkers in industry throughout the country.

THE LORD PRESIDENT OF THE COUNCIL (VISCOUNT RUNCIMAN OF DOXFORD)

My Lords, may I, in following the traditional custom of this House, ask that I may have extended to me the same indulgence which is always conferred upon maiden speakers? I hope your Lordships will listen to me for a short time with patience, for I trust that I shall not make any prolonged inroad on your time. No one can complain of my noble friend Lord Elibank having raised a subject which has been discussed so very often here and in another place throughout the last twenty years, or that he has ranged over a far wider field than is outlined in his Motion before the House; and my noble friend Lord Barnby has taken us for a world tour, full of interest, and inspired with the most recent experience of American ingenuity and competitive skill. But let me remind your Lordships that the proposal before the House to-day is that we should with one stroke of the pen wipe out the most-favoured-nation clauses which are a characteristic feature of our commercial treaties. It would be difficult to make a greater demand upon the obliterative capacity of the Government, and I have very little hesitation in saying—

VISCOUNT ELIBANK

May I interrupt my noble friend? My Motion does not read in the sense which he has just stated. What it does say is: Will the Government consider the desirability of abolishing? It is not demanding or asking the Government to abolish at once.

VISCOUNT RUNCIMAN OF DOXFORD

I do not see very much difference between what I said and the interpretation put upon the Motion by my noble friend, but I do not complain of that, because I think it is a thoroughly wise proceeding that we should, from time to time, examine our fiscal machinery and overhaul the doctrines by which we are guided. One thing that has been brought home to me is that so many of the practices of the past are based, not upon doctrinaire ideas, but upon practice which has been proved to be practical. Now with that test let us see how we stand under the most-favoured-nation treatment, which plays such a prominent part in our fiscal history. Before we undertook the making of commercial treaties on a large scale we were left with nothing but occasional agreements and a great deal of anxiety as to what the future held for our traders and merchants; and the constant chaffering and bickering and bargaining which went on in the Embassies and Legations led to a great deal of misunderstanding, and ultimately brought no permanent trade benefit to this country. Then some wise and ingenious fellow invented the most-favoured-nation clause. It is not a clause that I should care to repeat from memory, but it certainly does the trick. It provided in the commercial agreements made by this country with its customers throughout the world, numbering in all, I think, some forty-five countries, a means by which we could be assured that in competition in the great markets of the world we got fair play.

The one thing we were anxious to do was to place our merchants and exporters in the position of selling on the same terms as their competitors. To find themselves blocked out of their markets because of the tariffs on those markets, discriminating against us, was the normal experience of the day; whereas the only means by which our merchants could hold their own in those foreign markets was by getting in on the ground floor. That is really the secret of the most-favoured-nation clause: it enables our merchants and exporters to get into foreign markets on the ground floor. I am quite well aware of the fact that there have been many devices during the last few years, particularly since the War, by which the most-favoured-nation treatment to which we have been accustomed in the past was whittled down. The imposition of quotas, restrictions on imports and on exports of the character of prohibitions, exchange controls—all these alike provided obstacles in the way of our trade just as harmful as the tariffs which the most-favoured-nation clause sought to diminish. His Majesty's Government are not prepared to dispense with the most-favoured-nation clause. They have just made an Agreement with the United States of America. In that Agreement full provision is made for equal and fair treatment for our merchants and exporters in the American market. I agree with my noble friend that the number of articles which is dealt with is not a fair indication of the full range of that Agreement. One must examine the articles one by one and see whether or not they are important enough to justify our saying that the American Agreement is to make a substantial difference to our trade.

I think my noble friend went so far as to belittle the subjects which come under the new dispensation, and while he was doing that I looked up the list of some of the principal articles which are affected by the Agreement. First of all—a subject which must appeal to any Scotsman in the House—the treatment of whisky and gin; in both cases a reduction of 50 per cent. under a previous agreement is confirmed in our favour. The treatment of these two alone ought to bring satisfaction in the quarters where whisky and gin are distilled.

LORD BARNBY

It is not the custom in Yorkshire to drink them.

VISCOUNT RUNCIMAN OF DOXFORD

I leave my noble friend to speak for Yorkshire in that matter, but I point out that whisky and gin are not the only subjects which are dealt with. I look at some of the larger items, and I find china clay, imported into the United States almost entirely from the United Kingdom. The duty was reduced from 2.50 dollars to 1.75 dollars a ton. Ground mustard—almost entirely from the United Kingdom: the duty has been reduced from 10 cents a pound to 7½ cents a pound. Turning to two of our most depressed industries, cotton and wool, I find that the cotton piecegoods categories cover a very wide range and concessions are made on the finer counts—a matter of first-class importance to us. Woollen piecegoods are treated in like manner, and an ad valorem duty on the higher grade cloth is reduced from 60 per cent. to 35 per cent. I submit that these reductions are not immaterial. They have gone in the right direction, and I believe they will bring almost immediate benefit to those producers in this country who are dependent on the American market for their trade, and whose employees are dependent very largely on the good temper and harmony existing between the United States and ourselves.

I have said that in the early days it was found very difficult to make commercial agreements on a basis which brought much satisfaction to our people, but at all events we did succeed in making these commercial treaties with a very large number of countries. I believe something like a score were mentioned by my noble friend, but if my memory is right at least forty-five commercial treaties are operating still between this country and foreign countries, and in those treaties, with very few exceptions, the most-favoured-nation clause plays a part. Let us see how we stand with regard to the rest of the world. The Agreement with America is not the only one which has been reached during recent years. While I was spending my time, profitably I hope, doing what I could for other business men and traders with whom I had been associated all my early years, I succeeded in making agreements with twenty-three foreign countries. They were effective, not in every item of course, but they were effective on the whole, in producing a stability of demand which was of first-class importance to our traders. When I discussed in America with Mr. Cordell Hull the possibility of a trade agreement with this country, he told me over and over again that he had made agreements with no fewer than sixteen countries, and I had to point out to him how much more generous we had been in the obligations into which we had entered. Now I venture to say that he must be having great satisfaction from the approval that has been bestowed upon the Anglo-American Agreement in America as well as here. For let us be quite clear about these matters. Trade agreements which are purely one-sided will never be any good to anybody. There is not the least doubt about it that the long list of articles which are affected in these various agreements will not add uncertainty to the trader's outlook, but will give him an assurance of business for the future.

I hesitate to detain your Lordships over a subject which is so threadbare, but I would repeat again the chief reasons why at the present time we are prepared to examine these topics one by one, country by country, and trade by trade, but at the same time cannot give any undertaking that we are going to dispense with the most-favoured-nation clause. It brings us such distinct advantages that it would be foolish of us and improvident to abandon that clause without having something to put in its place. My noble friend has not made any suggestion excepting that of exclusive agreements within the Empire, and I sympathise very fully with his ambition to extend Imperial trade.

VISCOUNT ELIBANK

I think the noble Viscount did not follow me. I merely referred to the British Empire as an example of where units, trading together under a preferential system with us, had built up a very large trade among themselves and expanded their export trade. It was only an example. What I did try to make clear was that there should be a rearrangement of all our trade agreements over a period of time and that this most-favoured-nation clause should be excluded from those agreements, and later on from any agreements which might be entered into. That was my definite recommendation.

VISCOUNT RUNCIMAN OF DOXFORD

We are very grateful to the noble Viscount, I am sure, for having made it still more clear what his ambitions are. In the present Government we certainly have given pledges to the Empire, for we have entered into engagements there which are of mutual benefit to us and to them, but we are not going to ignore our foreign trade. It is quite true that our foreign trade is passing through a period of great difficulty, but we intend to continue in so far as we can to encourage trade and traffic not only with those countries which fly the British flag but with other countries that are capable of buying and paying for that which they buy. I would only say in conclusion that one of the things which cause us the greatest anxiety is not the tariff boundaries over which we have to leap. We are finding means of dealing with them one by one, and I do not think the situation is as bad now as it was ten years ago; but we are having to deal with exchange controls and currency questions of the greatest complexity. It is incumbent on us to examine them to the best of our ability, and to make decisions and embark on policy which may be new, but none the less useful because it is new, and to examine them as well as the old theory, with the object of providing for the sale of our goods abroad and the employment of our people at home.

VISCOUNT ELIBANK

My Lords, before I withdraw my Motion, I would just like to say one or two words. I regret that my noble friend does not seem to have followed my speech in the sense that I intended it, and I hope that to-morrow he will read my speech in the OFFICIAL REPORT and see that I did express certain things rather differently from the way in which he interpreted them to your Lordships' House. Evidently I must rest content this afternoon with accepting His Majesty's Government's decision that they do not intend to investigate this question, but are content to leave it as it is. I had no reply at all to the point with regard to the Anglo-American Trade Treaty, Article 19 of which cuts right across the most-favoured-nation clause. However, that may have consideration later on. I only wish to end these few observations by emphasizing what my noble friend Lord Barnby stated in the course of his speech, that this matter is of very great concern to all the commercial classes in this country. They are discussing it, talking about it, examining it, and will most certainly bring it up again. They are gradually and quite definitely coming to the conclusion that the only way that this subject can be met is by an amelioration of this most-favoured-nation clause and by the institution of quantitative regulation of imports, which seems to be the only way in which we can get rid of the adverse balance of trade which is assailing us to-day. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.