Lords Sitting of 1 May 1939

Preamble
The House met at a quarter past four of the clock, The LORD DENMAN on the Woolsack.
ADOPTION OF CHILDREN (REGULATION) BILL.
Brought from the Commons; read 1a; and to be printed.
CHARITIES (FUEL ALLOTMENTS) BILL.
Brought from the Commons; read 1a; and to be printed.
SOUTH SHIELDS CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
Brought from the Commons; read 1a; to be printed; and referred to the Examiners.

EXPORT CREDIT FACILITIES.
4.16 p.m.
LORD SEMPILL LORD SEMPILL rose to ask His Majesty's Government to indicate what arrangements they have made, or are prepared to make, to grant export credit facilities to those countries whose independence they have guaranteed, or may guarantee; and to urge that every possible measure should be taken to encourage and adequately support commercial initiative with a view to developing trade between Great Britain and those countries; and to move for Papers.
The noble Lord said: My Lords, I should like, first of all, to be allowed to express to the noble Earl, Lord Stanhope, the Leader of your Lordships' House and the First Lord of the Admiralty, my grateful thanks for the reference he made on Thursday to the Motion that stands in my name. The noble Earl informed your Lordships that His Majesty's Government attached great importance to anything that concerned the Export Credits Guarantee Department. May I be allowed to express appreciation to your Lordships for meeting specially to-day, as

795
it was not possible to take the Motion standing in my name on Thursday last because all the time was very properly given to the all-important question of compulsory military training?
I am grateful for the opportunity that your Lordships have given for considering this Motion to-day, as the question of export credits is, as I feel sure your Lordships will agree, of immediate importance in view of the fact that the Economic Mission recently sent to Rumania is on the eve of completing its investigations prior to transferring its activities to Greece. The announcement made with such clarity by the noble Viscount the Secretary of State for Foreign Affairs relative to Greece, Poland and Rumania, to whose aid His Majesty's Government would go in the event of their independence being menaced by any foreign Power, was received by your Lordships with approval. I suggest to your Lordships, if I may, that military assistance in time of war is not sufficient if during the period of peace the fullest possible economic and trade collaboration does not exist. Commercial ties are the foundation of friendship and peace, and the foreign policy of a country is bound to be influenced to an important extent by that of nations with which it has arranged commercial co-operation.
Our Empire as a whole is their largest consumer and producer, and thus we are in a better position than others to assist these countries. The supply of manufactured goods is not the only medium of assistance, as our technical services are of considerable value. In certain commodities and/or natural resources these countries are in themselves quite rich, but they require financial assistance to develop these riches, just as they want technical assistance to modernise and extend their industries. The countries under review, as your Lordships know so well, have products which we could not only absorb but which we really need: they have oil, grain, timber, tobacco, minerals and so forth. As these countries lack the foreign exchange required to satisfy their needs from countries such as ours which have not espoused the barter system, we should be prepared to accept in payment, I suggest, a certain proportion of their natural commodities sufficient to pay by degrees for goods sold and services rendered to them.
I submit to your Lordships that there exists in these countries a considerable field for the sale of our manufactured goods. No country, however, wishes to be dependent on one market only. By coming to their assistance in the manner suggested we open another trade outlet, which will help them to remain economically independent while at the same time we shall be able to extend our export trade. We must therefore offer them substantial credit facilities, and it is clear that such cannot be offered by individual traders or firms. The world at present, as your Lordships know so well, is living in a state of high nervous tension, and no single trade organisation, or even combination of traders, in this country has resources which would justify it in taking the entire risk involved in following such a policy. We still adhere to the principle of individualism, which cannot successfully compete with State-controlled machinery such as exists in other powerful countries with which we find ourselves to-day in competition. Therefore, I feel sure that your Lordships will agree with me that it is essential for His Majesty's Government to open credits and to come to the support of our industry by guaranteeing private enterprise to a very substantial extent.
I submit that we cannot ignore the signs of the times. The evidence of the last few months makes it only too clear that the object of Germany is supreme economic penetration through the Danubian States into the Balkans. If this is achieved and the Balkan States depend for, say, 70 or 75 per cent. of their trade on Germany, and thus lose their independent economic status, they will perforce become, they naturally fear, politically dependent on that Power. The credits to be opened, I suggest, should be of a political as well as of a commercial nature. These should be treated independently and be adequate for the purpose. Armaments in these days are very important, but credits for these should not be allowed to absorb the larger part of the amount available if by such an allocation ordinary commercial credits are rendered inadequate. As has been shown, if substantial assistance is not granted to enable the smaller countries to develop the arts of peace, the good done by His Majesty's Government's declaration of assistance in the case of war will be of small avail, as these countries, sooner or later, may be tempted to throw

797
in their lot entirely with those on whom they would be economically dependent. Should we fail to help these countries in this manner, we should, I suggest, thus have assisted in the creation of a large political and economic bloc stretching from the Baltic to the Black Sea and the Mediterranean, with far-reaching results, perhaps menacing the communications of our Empire.
The possible financial loss to our Empire resulting from such a development, to look at it from that aspect alone, could hardly be calculated, and therefore I ask your Lordships to support me in urging His Majesty's Government not to hesitate to open credits of, may I say, quite paltry amounts as compared with the loss which we should suffer in the event of anything occurring on the lines that I have depicted. In the light of recent events we must not look upon the credits as simply commercial transactions. Their political importance is so significant as to leave us in no doubt of their financial expediency, although, and this is my personal conviction, given peace we shall benefit from them in all respects. I am sure your Lordships will allow me to emphasize that it was never the intention of Parliament that the Export Credits Guarantee Department should be a money-making concern. Whilst I wish in no way to create the impression that I am advocating that we should combat the legitimate economic expansion of Germany or any other country—and I wish most strongly to emphasize this point—we must nevertheless strengthen our commercial collaboration to the extent needed to enable the States referred to to call a halt, without fear, to further pressure from outside. I suggest to your Lordships that, serious as a delay to carry out such a policy would be to ourselves, we have the added inducement and justification that we should be helping the countries concerned to develop their own future in their own way, which they so ardently desire to do.
In comparison with our trade turnover the sterling value of the proposed purchases from these countries which this plan involves is really infinitesimal. Taking Greece as an example, your Lordships know the huge amount which is spent annually in this country on tobacco. Only 1 per cent. of our total consumption, if purchased from Greece—and no finer Oriental tobacco could be purchased—
798
would be of vast importance to that country and would enable her to collaborate industrially in a continuous programme which for a long time she has been anxious and indeed waiting to do. The same applies to Rumania, but in relation to other commodities. If only we would purchase annually quantities of grain and oil, partly to meet the requirements of our war reserves and partly for immediate consumption, we should enable Rumania to increase her purchases from us and obtain assistance to develop her natural resources and her growing industries. My noble friend Lord Barnby, who has made a special study of Polish conditions, may feel disposed to submit his views to your Lordships and I hope many other noble Lords who have definite views on these matters will do likewise.
The Economic Mission now in Rumania under the very able leadership of Sir Frederick Leith-Ross will undoubtedly do a very great deal, and the work that this distinguished civil servant has performed, coupled with that of the Export Credits Guarantee Department, achieved with a limited authority, should be praised in very high terms. As well does this apply to the purpose behind the recent missionary tour of that very active Secretary of the Department of Overseas Trade, Mr. Hudson. It is to be hoped, in fact expected, that Sir Frederick Leith-Ross has been given very extensive powers to undertake substantial commitments of a wide nature in order to consolidate the political guarantees as now given. We have been given to understand in the Press, as your Lordships will have noticed, that His Majesty's Government propose to allocate the sum of £5,000,000 to Rumania. I submit with all deference that this sum is entirely inadequate to meet the situation, as it would no doubt be absorbed very largely in defence equipment. In making this submission to your Lordships, I may say that I have some first-hand knowledge of Rumania, having recently visited that country with colleagues with a life-long experience of Balkan conditions. The information up to the moment available with regard to the Government's intentions are of a somewhat conflicting character, and for this reason I feel sure your Lordships will agree that more definite information regarding the issue of credits could with great advantage be made clear by the

799
noble Lord who will speak to-day for His Majesty's Government.
I submit, and that with real conviction, that British industry would be only too willing to assist in these matters if encouraged by the Government. This being so, I feel sure that your Lordships will strongly support the suggestion set out in the Motion which I have the honour to propose,
"that every possible measure should be taken to encourage and adequately support commercial initiative with a view to developing trade between Great Britain and those countries,"
and, in order to assist in the carrying out of this policy, that His Majesty's Government should be asked to summon forthwith a conference of our leading industrialists and, with their help, should form a plan of active co-operation between Great Britain and those countries whose safety the Government have recently guaranteed. I beg to move for Papers.
4.33 p.m.
LORD STRABOLGI: My Lords, on behalf of my noble friends may I thank the noble Lord on the Cross Benches for having introduced this very interesting Motion, and may we also compliment him on the concise and clear way in which he dealt with a very complicated subject? Last year we had a Bill on which I had the honour of addressing your Lordships very briefly in connection with the extension of the export credits scheme.
LORD TEMPLEMORE: This year—February.
LORD STRABOLGI: Time and events move with such giant strides that I thought it was last year. This year we did pass a Bill unanimously through your Lordships' House to extend export credits where it was politically necessary, and also to permit them to be used for the subsidising of purchases of arms in certain approved markets. Perhaps the noble Lord when he replies will tell us what advantage has been taken of that Bill. It may be that events have so developed, as indeed the noble Lord, Lord Sempill, has suggested, that a great deal more than that is required, and I am sure that the Government, with all their information, will be able to tell us whether that is so. I had the great pleasure also of speaking on a Bill some little time ago to give a certain credit to Turkey. I
800
think that was unanimously approved in your Lordships' House, and perhaps the noble Lord who replies on behalf of His Majesty's Government could tell us to what extent that has been successful. I see in the newspapers that German engineering firms have obtained from Turkey the contract for the large new naval base in competition with ourselves, and I think the Dutch, and possibly other countries as well. It gives me rather a cold feeling, with our great experience of naval construction and the construction of naval bases, that we should have lost this contract, and I think some explanation should be forthcoming. For many reasons it was obviously desirable that British firms should have had that contract. However, I dare say there were several reasons for the Turkish decision, and it would be interesting to know what they were.
I think that we can generally support the Motion of the noble Lord, with certain reservations. In the first place—and I know that what I am going to say now will receive the approbation of my noble friend behind me, Lord Ponsonby: I am sure we agree in this matter—we have none of us any desire to bottle Germany in, if I may use the expression. She has to trade. She is a great trading nation, and legitimate trade by German firms and German merchants is in everyone's interest. If only that great country would settle down and collaborate with other countries, the more prosperous they become and the more contented their people are, the better for all concerned; and if only we could get that idea to the German people themselves I feel convinced it would have a very good effect.
At the same time, in the interests of our own workpeople and our own industries, I think we are bound to resist the use of the weapon of force to impose monopolies on certain markets. That is what would have been called in the old days unfair trading. But it was never anticipated in the great fiscal controversies of the past that the weapon of the bombing aeroplane would be behind those who were demanding monopoly control of the markets of small Powers. That is the new factor in the European situation which is so disturbing. I think we are bound to resist that, because if a market is monopolised under these unfair conditions it only means unemployment in our own manufacturing centres, quite apart from the political

801
effects so clearly described by the noble Lord, Lord Sempill.
That brings me to another point. I have always been a Free Trader, and I am looking to the day—and I hope it will not be so very far distant—when this fiscal madness will pass and when, perhaps as the result of Mr. Roosevelt's initiative—I am not at all hopeless about that—the artificial barriers to trade between countries can be broken down, and we can all do business with each other and all become prosperous and wealthy together. But there is another aspect of it to-day that we cannot ignore. There are certain metals and other raw materials of great importance in warfare. I do not quite make sense of a policy which allows our possible opponents to build up, not industrial reserves, but war reserves of these particular metals and raw materials out of our resources. Do not interfere with ordinary commercial transactions, but when it is obvious that certain metals are being cornered by our opponents in order to build up a war reserve, then I think it would be very much better for us to build up reserves ourselves and take the surplus off the market. I do not think any legitimate complaint could be made if we did that.
That brings me to the very well established policy of the Labour Party, for which I speak, which we have been advocating for years past—namely, that in the present state of trade of the world, the Government themselves should be prepared in certain cases to engage in bulk marketing. My noble friends will remember that Mr. Thomas Johnston, in particular, has very brilliantly propounded that policy and we have approved of it. Now the Government have often taken a leaf out of our book. They did last year engage in bulk marketing or bulk purchasing, and they bought large quantities of wheat—from Rumania incidentally—and whale oil and sugar. I hope they also bought other commodities, but I do not press them upon that. It may be desirable in the public interest not to say too much about it. I would like to see this bulk marketing applied to tobacco from Greece, as the noble Lord has suggested. I think there is a great deal to be said for purchasing the Greek tobacco crop, and from my information I believe the British tobacco companies in this country are prepared to collaborate and to use the Salonika tobacco in the
802
making of the cigarettes supplied in such millions to the women of this country.
The noble Lord has mentioned particularly Greece and Rumania. May I just put in a word also for the importance of the whole of the Balkan markets? These countries are developing and in some cases they have had a rather unfortunate credit history. I see the noble Lord, Lord Mancroft, waiting to spring on this point; but we have to take long views in these matters. In the past we have relied on great markets in the East and elsewhere. We may not be able to rely on them in the future. No one knows what is going to happen in China, for example. Again, in India economic nationalism is developing, and that market is not going to be so easy in future, perhaps, as it has been in the past. But in the Balkans you have a population of something like ninety millions with great natural resources, the people increasing in numbers, improving communications; and the Balkan market itself can be of great value to British industry. I have ventured before, in your Lordships' House, to suggest to the Government that we are not paying enough attention to the Balkan market generally, quite apart from any political considerations whatsoever.
May I now just ask Lord Templemore—I am sorry I have not given him notice of this—what is the position with regard to Russia and the Russian market? If rumour is true—and indeed not only rumour, but the statement made by the Foreign Secretary—we are negotiating, slowly perhaps, but, nevertheless, negotiating, a military agreement with Russia. To what extent do our export credits apply in the Russian market? I am not sure that they are very necessary. There has been an enormous trade done in the last year or two with Russia—a very great trade indeed—and Russia is to-day, after South Africa, the largest gold producing country in the world; I believe that is the position. I do not know if there is much need for credit in Russia, but if export credits are needed, what is the Government's policy there? We have been assured that they have no further prejudices with regard to Russia when it comes to a military agreement. I presume no further prejudices exist or survive with regard to commerce, because Russia is one of the greatest undeveloped markets in the world. Its

803
future in the next thirty or forty years may follow that of the United States in the last century. The economic resources of Russia have been hardly touched, and there is a very great market there which in future years may become of ever-increasing importance.
May I be permitted to make one final general remark? In dealing with these matters the noble Lord, Lord Sempill, is thinking, I am sure, of a temporary situation. We all know that this present situation cannot continue—it cannot last—and we all hope it will end in a satisfactory and peaceful way. If it is temporary, have the Government a long-term policy? And this is where I must say one word with regard to the Labour Party's arguments over so many years. We try to look very deeply into the causes of various disturbances and troubles in the world. What are the underlying causes of present-day wars? They are to be found in economic pressure. I set aside mere adventurousness and desire for glory and that sort of thing. I agree that it was not economic pressure which induced the Italians to overrun Albania the other day, but the Powers which are disturbing the peace of the world—Japan, Germany, Italy—have really one fear, real or imaginary, it does not matter: their people believe that there is the danger of hunger to an increasing population which cannot find itself employment and the foodstuffs it needs.
I suggest—and this is the Labour policy which has been preached in season and out of season ever since I had the honour to belong to the Party—that you must remove these underlying causes of war if you are to have peace in the world. This fear of hunger, played upon by unscrupulous leaders, is one of the causes of war. That is why we so particularly welcomed the initiative some days ago of President Roosevelt, because there was a great constructive policy behind his proposals. Once this fear of war could be removed, he suggested, steps should be taken to free the channels of trade and allow people to do business with each other once more and exchange their riches for the riches of other countries. While, therefore, one is able to support the short-term policy so clearly explained by the noble Lord, Lord Sempill, we should at the same time be working on a long-
804
term policy, and let other countries know we have this in mind, and that we are looking to a brighter future. I suggest that the political reactions to this knowledge may be quite important.
4.45 p.m.
THE EARL OF GLASGOW: My Lords, I understand that as yet none of the trade arrangements, including credits, which we hope to make with certain European countries have been completed. Delegations are coming to London in order to see whether arrangements can be come to, and I understand that the Finnish delegation is in London now. So this is the moment to express the hope that before these very necessary trade agreements are implemented it will be made a condition that our Mercantile Marine shall have a square deal. Your Lordships will remember that some years ago Italy took from this country some millions of tons of coal. It was claimed at the time that our coal industry was in a parlous condition. There was a great outcry afterwards when it was found that all this mass of coal was being sent from this country to Italy in Italian ships. Last year British ships carried less than 5 per cent. of the timber imported from Russia into this country. The remainder was brought in Russian ships and foreign ships chartered by the Soviet Government. It should, in my opinion, be made a condition that 50 per cent. of this trade, and in fact of the trade of any country doing business here, should be carried in British bottoms.
The Government have made a splendid gesture. They have injected into the failing and ailing Mercantile Marine the life-giving elixir of subsidy. But that service will not become properly healthy until some action is taken to counteract, not only foreign subsidies, but flag discrimination. It is no use building new ships if there are no freights for them to carry. In 1936—and things are no different now—British ships carried only 24 per cent. of the trade between this country and Poland, a foreign country which Lord Sempill mentioned. I realise that I am trespassing on your Lordships' patience and that this is not the time nor the debate to go into detailed arguments as to what we should do; but I would remind your Lordships that besides a building subsidy for the Mercantile Marine there is a running subsidy which could be used to do away with the discrepancy

805
between foreign ships chartered by a foreign Government and British ships which could be chartered by the same foreign Government. At any rate, what I have been talking about is, I think, perfectly relevant to Lord Sempill's Motion. Some action against flag discrimination should be taken in every agreement we make, and I hope that the noble Lord who will respond for the Government will be able to state that something on these lines is contemplated. I am sorry I have not given him notice of this, but if the noble Lord can give us an assurance we shall be much obliged.
4.49 p.m.
LORD NOEL-BUXTON: My Lords, the noble Lord who introduced the Motion has directed it mainly at the question of credits in connection with guarantees. I was very glad that he threw in a word also in the direction of the value of complete unity between the other States to which he referred in Eastern Europe and not only those in connection with which guarantees have been given. I suggest that his Motion does raise the bigger question of the united interests in particular of all Balkan States. British economic policy in the Balkans is very important to us apart from any question of war. Our interest has always been different from that of the Empires which competed for power in the Balkans, and has been on the lines of what Mr. Gladstone called the Balkans for the Balkan people. That is our true line of interest. The settlement in 1919 offered an opportunity for realising that ideal. Austria-Hungary became a series of succession States, and that would have succeeded in giving a greater opportunity to the national life of these small nations if the League had remained strong, but fear of war has hampered freedom to an extent to which it was never hampered before the War.
Although the Balkan States were then much smaller than they are now, they had greater freedom than they have to-day. Austria-Hungary exerted only occasionally a mild pressure on her neighbours, as, for instance, now and then towards Serbia by putting an embargo on Serbian pigs; but to-day the situation is quite different because Germany is a far stronger force than Austria-Hungary, backed by Germany, was before the War. As Lord Balfour foretold and explained in one of his memoranda to the Cabinet
806
in 1917, the inevitable result of the breakup of Austria-Hungary would be a stronger Germany, and that is really the occasion of the noble Lord's Motion to-day. The tearing up of Austria-Hungary involved economic nationalism in the Balkans, and therefore poverty. Poverty has meant liability to pressure, and hence we have the German plans, to which the noble Lord has alluded, of monopolies leading to political domination. A typical case was reported not long ago, in which Germany had proposed to one of the Balkan States that her entire export should be taken by Germany; in that case, the State would get a stable market (a very attractive thing) but would be tied hand and foot.
I was glad that the noble Lord and my noble friend Lord Strabolgi alluded to the fact that Germany is quite rightly, naturally and inevitably, the chief influence in the trade of the Balkans, because her trade there is vastly greater than that of others. It is only a bad factor when it leads to improper political pressure. It is by no means undesirable or repugnant to British interests that Germany should do in some cases even the bulk of the trade of those countries, but it is inevitable that German methods endanger the freedom of the States concerned. Germany seeks a monopoly by the power to reduce her purchases which are so important to a particular State, and the Balkan States must inevitably consider the best of their customers. But they get paid in goods and not in currency and so they lose their freedom to an extent which is not proper and which we ought to avoid.
German predominance is perfectly legitimate, and the Prime Minister has, to the general satisfaction, many times stated that we have no desire whatever to interfere with legitimate German trade, or to place obstacles in her way; but it is most desirable that the Balkan States should unite, not to injure Germany, but to preserve their own independence, and if unity is needed I would like to suggest that we should not ignore one State of which we have not heard to-day—namely, Bulgaria. Bulgaria is important from the point of view of the economic unity and prosperity of the Balkans, and also in regard to political security. There is a tendency, perhaps, to think less about Bulgaria because she looks very small on the map and because she was on the

807
wrong side in the War, but it became evident, as anyone who thinks of the matter knows, that Bulgaria in the War was a factor of extraordinary importance. Owing to her position next to Turkey, she enabled Germany to conquer Rumania and to help Turkey in Palestine. Some think that the War was thus prolonged by two years. Well, we are not thinking only or mainly of war conditions, but it is very well worth considering the importance of Bulgaria, not less than that of all the other States, as completing the group of Balkan States.
Bulgaria has claims because, after the settlement, she was treated with extraordinary harshness. A quarter of her country, perhaps more, was placed under alien government, and she has claims against Rumania, Yugoslavia and Greece. Consequently unity, which is of importance to us as much as to the Balkan peoples, is imperilled. We ought, in the policy which is brought forward to-day (and which commands, I hope, universal support) to use any trade benefits that we are able to give to promote unity by facilitating concessions to claims which are just, in order to remove differences between the Balkan States. Owing to these differences Bulgaria has not been able to become definitely a member of the Balkan Entente, although latterly very friendly to it. We could use those concessions also to induce Bulgaria herself to moderate the claims that she may make upon others.
That is the main point that I wish to make. British policy must be an active policy. Activity in this question of Near East trade is long overdue. The Government bought wheat from Rumania, and I think that Governmental purchases may be necessary in regard to other crops and other countries. Government purchases, though alien to our traditions, have got to be faced, and I am glad the noble Lord supports that view. Balkan prosperity certainly can be promoted individually and as a whole by the policy proposed to-day. It contributes to the independence in which each nation ought to have an opportunity to develop its characteristic life, and, more perhaps than that, it can be a great factor in the maintenance of peace.
5.0 p.m.
LORD BARNBY: My Lords, I should like to associate myself with the noble
808
Lord, Lord Strabolgi, in thanks to the noble Lord who initiated this debate for his opportuneness and also, I think one may add, for the brief way in which he covered the ground. The Motion might well have covered a wider field. It is refreshing to hear a plea that British policy in this matter should be an active policy. For that reason the Motion might well have covered exports in general with regard to a conscious special policy on the part of the Government. We are fully alive to the need for giving every encouragement to export trade to meet the tremendous imports which we shall have to make in order to meet the preparedness programme of the country. For that reason I am particularly happy that the noble Lord, Lord Strabolgi, made the opportune point in a debate of this character that there is no thought in the mind of anyone of aiming an attack against any other country. I know that my noble friend Lord Sempill has a whole-hearted, single-minded conviction, and that this Motion is brought forward simply with a view of helping this country.
Export trade is vital to this country, and therefore it would be quite wrong to suggest that there is any thought of attack on others in the mind of anyone who urges the Government to take special measures in this direction. In this connection it is not inappropriate to remind your Lordships that on the fateful Wednesday when in another place the Prime Minister had to make a statement following the elimination of Moravia and Bohemia, the Federation of British Industries had by noon on that day arrived at virtual agreement on the basis of trade collaboration with Germany. That was a very happy ending of negotiations which were industrial and commercial, not political. Those of your Lordships who have had the opportunity of speaking personally with British representatives at those negotiations, and of hearing an account of their conversations with their opposite numbers, free from any political supervision, will realise that there is a definite desire on the part of German industrialists to collaborate, so far as it is possible, compatible with the interests of both sides, to bring about happier working of industrial competition. I mention that because while it certainly is unfortunate that, because of political actions, inescapably there is some scepticism in

809
the minds of the general public, and also of industrialists, as to the degree to which arrangements entered into would be observed, at least we must pursue our trade in the hope that if industrial agreements are entered into they will be carried out. And remember, there are existing many bases of collaboration between this country and Germany. Because of that very proper caveat made by the noble Lord, Lord Strabolgi, I think that should be borne in mind in this debate.
My noble friend Lord Sempill drew particular attention to two grounds on which he felt there was need for special action. One was to conserve the exchanges of the countries concerned, and arising out of that he suggested that special consideration would give support to their particular economies. Now that we have given specific political guarantees to those countries, to whatever extent we help their economic position we develop their possibility of self support and in return help ourselves. My noble friend made it clear, I think, that he regarded the export credits machinery, which my noble friend on my left (Lord Mancroft) had under his charge with such success, was particularly suitable machinery for dealing with this matter. I support his view. In another place I was a member of the Committee which originally discussed and recommended the establishment of the Department, and from that date I have taken an active interest in its working. If I may say so, as a commercial traveller in many countries in five Continents, I have seen its working at close quarters in a practical manner, and it is not inopportune, I think, to remind your Lordships of the great success achieved.
I entirely endorse what was said by my noble friend Lord Sempill about the success and activity of our present Minister for Overseas Trade. It is well to remember that since 1937, under his active direction, the total volume of business done by the Department has doubled in two years. That is a very impressive achievement. His recent visits presumably will emphasize still further the possibilities. I would like also to add that apart from the doubling of the turnover commercial success has been achieved in that there has been no charge on public funds. My noble friend Lord Sempill emphasized that it was perhaps not intended that it should work in that
810
way, but at least it is an endorsement of its efficiency from the commercial point of view and a satisfaction to those who recommended the machinery. One should not forget the assistance given by a devoted body of very prominent businessmen who have given their time, their experience and their guidance to the Advisory Committee.
But the present Motion calls for special action. I perhaps need not remind your Lordships that in Section 4 of the Export Guarantees Act passed in February this year, new powers were given which were different from those which had hitherto been exercised by the Board of Trade. One point which has been made is that the amount of money allocated was totally inadequate. The sum permitted to be advanced was £10,000,000, and in view of the volume of trade that could be done, and our desire to increase trade in many directions, it does seem that that amount is disappointingly insufficient. For instance, it is understood that one of the first countries towards which business was directed was China. There is a strong desire in this country to avoid any evidence of partiality in the conflict in the Far East, and so it would be right to suppose that facilities available to one side would be available to the other. It requires no flight of imagination to see what very big amounts might be directed there if one can picture the sort of expansion of trade which might occur in East Asia with a population of nearly 400,000,000. The question is how to achieve what is the object of the noble Lord who raised this matter.
It would seem only common sense to give some subvention to the commercial side of the export trades machinery. Clearly it would be quite improper to suggest that this should be an assistance to countries above their financial capacity to maintain the debt service. Therefore it should be put in a separate category from that of a strictly commercial operation. It can be in the form of a subvention given by the Treasury to the Export Credits Department, which would enable them to lower their rates by the elimination of the political hazard. It is the political hazard which is hampering export trade throughout the world, and we are considering in this debate special countries. It may well be, alternatively, that the better method would be to recognise outright that it should be a credit

811
of a special character. What I have in mind in speaking of subvention is that the principle of special assumption of responsibility has already been admitted by the Government in their war risk insurance, their insurance of cargoes stored on wharves, their insurance against risk of personal accident in case of war, and so on.
So the export trade of this country seems at the present moment to be carried on in exceptional circumstances. It would therefore be right that some machinery should be instituted which would relieve the exporter from the political hazard. I might add another example of special consideration: the tramp shipping subsidy, which has been recognised by the Government as a testimony to the special circumstances. When considering the special method to be adopted one should remember that the rates, as my noble friend has pointed out, have resulted in commercial success. Therefore the actuarial calculations have been such as to include the political hazard. The point now is that the political hazard should be assumed by the Government, and for that reason they should put forward proposals whereby it would be assumed, and so relieve the Department of that part of the calculations. This would enable them to give lower rates and so permit a larger volume of business.
My noble friend the mover of the Motion and Lord Strabolgi also referred to the question of strategic subvention. That is another angle which presumably has to be considered at the present moment. I refer to the supplies of equipment of various kinds which would enable those countries to whom we have given guarantees the more effectively to defend themselves and so to lessen the strain of the guarantee which we have undertaken. I can only remind your Lordships of the policy that was followed by this country in the eighteenth century under Pitt, when a very large part of our expenditure on preparedness was directed to that purpose. You remember that in 1757, out of £10,000,000 sterling, to have received which from Parliament was considered a tremendous achievement, £1,800,000 was directed to foreign subvention. I mention that fact because the matter is doubtless receiving the consideration of the Government. I only hope that some hint of the method, without the amounts or
812
the direction, may be indicated to us by the noble Lord who is replying to-day on behalf of the Government.
The countries under consideration are naturally subject to matters which compel examination. We have, for instance, currency difficulties. Take a country like Poland: of course there they have a strictly regulated currency which, had Poland been given the same support three or four years ago as was given to France in the way of a guarantee to enable her to maintain a currency equalisation fund, we should probably not have had Poland in the same position of an over-valued currency as she is in to-day. Then, again, there is the question of this clearing arrangement. Rumania is a case in point. You have in Poland a very difficult situation, but in Rumania you have a still more difficult one: you have a whole series of pre-War outstanding external obligations, at various prices and various terms, which all mean that the credit of those countries is being quoted in the financial markets of the world on a rate-of-interest basis. This compels special consideration with regard to commercial hazard, or obligations entered into by exporters from this country.
In that particular instance it is interesting to note that even the Department, with all the advantage of Foreign Office advice, does not always make correct assumptions. Only fourteen months ago the rate of interest for comparable hazards charged by the Department on CzechoSlovakia was only half what was being charged on Poland; so obviously the calculations in that case went wrong. Poland, however, serves as a better illustration, because she has a very low standard of living and is able, therefore, to offer us a field of application of our complementary economic method. It is not a case of exporting consumer goods, but of exporting capital goods of a reproductive nature. That is one thing, in which we are particularly interested in exporting. Again in the case of Poland, the question of preparedness has been mentioned by my noble friend the Earl of Glasgow. We must bear in mind that if preparedness is to be brought into this consideration at all, the parts of Poland's Western frontier nearest to strategic positions in Germany, not excluding the German capital, are so placed as to justify support for very strong assistance. The noble Viscount, Lord Trenchard, who was

813
here in the earlier part of the debate, has reminded your Lordships that the best defence for the City of London is offence: the best offence for Poland is the half-hour flight from the Western frontier of Poland into Berlin.
The character of the credits which could be given was suggested by my noble friend, in moving the Motion, as including raw materials. It is important that, apart from consumer goods, raw materials should be subject to consideration. To that extent it saves the exchange which these countries have available, and which can be directed to other purposes. I hope that some indication may be given by the noble Lord who is replying for the Government whether there is any use in approaching the Dominions for a cooperative method of meeting this situation. With regard to many Empire raw materials the economy of our Dominions—for example, the wool trade in New Zealand—is seriously affected by low prices. Therefore if we, by giving these credits, were to raise the price, we as an Empire should be largely benefiting, and we should, conversely, naturally be hampering our industrial competitors who were least wealthy in foreign exchange. I understand that Poland is to-day herself producing about 80 per cent. of the equipment for defence. But what a vast field in a great territory like that remains for further export, and, I reiterate, of a capital nature: road-making machinery, woodworking machinery, agricultural assistance and so on, all of which would provide the increasing exports to give the value necessary to maintain the debt service on whatever credits might be afforded to her. Anyhow, that too would be of a character which would contain the best British labour content.
Emphasis has been laid on the question of South-East Europe and the Balkan States in general, and the mover of the Resolution mentioned tobacco. It will be within your Lordships' knowledge that this question has been raised often before in another place, and has received consideration by the industry concerned and by the Government. I would urge strongly that in this matter ordinary methods will not succeed. It is not likely that one company is going to impose upon itself a voluntary handicap as against its competitors, by buying tobacco which does not suit the British taste. As we know, the British taste in tobacco changed
814
during the War, and it can hardly be expected that a tobacco company should buy these Oriental tobaccos in preference to tobacco which is more easily got from the North American Continent. The only way to achieve the result mentioned by my noble friend the mover of the Resolution is to give some special treatment to all the companies concerned so that they should be on a similar basis.
Whether that should be done by special relief of taxation, or by further Excise Duties—whatever the machinery may be—I hope that the noble Lord who will speak for the Government will bear that in mind. Perhaps he may be able to give us some hopes that these special matters are already being dealt with, but it is obvious that there is no use in talking about this being a desirable method unless the Government face up to the position that, as in the case of wheat during the War, when they urged the community to accept bread which contained a measure of bran, so the community as a whole should be asked, in the exigences of the present situation, to accept an admixture of tobacco from South-Eastern Europe. Otherwise there is every likelihood of nothing being achieved. The main point is that, as recommended by my noble friend the mover of the Resolution, the circumstances call for some special action towards those countries to whom we have to assume these special guarantees. The cost of it may seem high. My noble friend suggested £5,000,000, but whether it be ten, twenty or thirty millions the cost will be small compared with what would have to be faced in other circumstances, and it is better to spend money generously in peace time than to be compelled to spend it in another manner through the lack of effective action. It is for that reason that I hope we may receive from Lord Templemore some encouragement that the plea of my noble friend Lord Sempill is going to be implemented.
5.24 p.m.
LORD MANCROFT: My Lords, the details of the Motion of my noble friend Lord Sempill have been exhaustively examined by those who have already spoken. I do not think there is much left that I can deal with of those details and therefore do not propose to waste your Lordships' time by dealing with

815
them. I will content myself with referring to two broad principles which I see underlying the Motion that my noble friend has put down with which I am in complete accord. I still think, as I said in debate in this House some weeks ago on export credits, that the amount the Government have proposed to make available for the Export Credits Committee is much too small. That of course supports in principle the Motion which Lord Sempill has put down.
For a long time past, whether the Government should have allowed it or not—and I think they are quite right in not allowing it—it has not been possible for foreign borrowers to raise loans in this country in the open market. Borrowers have said that they wished to buy goods in Britain and they have therefore raised money in Britain by flotation of loans on the undertaking to spend the money here. Investors in this country have been induced to lend money in this way. The paper which they have received on many foreign loans is now worthless. The public will not easily again lend their savings to foreign borrowers after their experiences of defaults. It would be all very well if the paper were valuable. But much paper which we have received for loans which we have made represents exports which then have become gifts, because the paper is valueless. Moreover, such overseas loans are also useless for war reserves. We should therefore abandon all idea of stimulating British trade overseas in countries which are not under His Majesty's rule by loans to foreign borrowers. You could have your export trade doubled to-morrow if you were again willing to lend money in return for paper which becomes valueless. You could put all your unemployed workmen into employment to-morrow if you were willing to lend more money and lose it. But the public has had a lesson and will not lend its savings readily again.
That brings me to this point. Lord Sempill has made a reasonable and wise proposal that we should now extend the amount available from the Treasury that can be used by the highly competent Committee which regulates the machinery of the export credits guarantee scheme. I had, as Lord Barnby has mentioned, the privilege of watching the working of that scheme for three years. I know
816
there is little likelihood, if the members of that Committee are allowed to work in their own way, of there being a loss made on balance over a long period. Indeed, I believe this scheme has been going for a good number of years without any loss to the Treasury. I think therefore we should with complete wisdom increase the amount available for the export credits guarantee scheme whether it be for commercial purposes or political purposes. It would provide good support for commerce and be a method by which we could help friendly countries in these troubled times. Let us extend our export credits fund.
Lord Barnby touched upon a point which caused me to rise and speak. He said it was necessary for us to create trade credits abroad so that we might meet, I suppose he meant, an import debit for goods we are now importing for munitions, while we are losing a little of our export trade because we cannot give the time and machinery for creating or expanding our export trade. I have just asked him, as I sat here, what was the unemployment in cotton and wool textiles. He told me 50 per cent. of the machinery in the two trades of cotton and wool textiles is out of action.
LORD BARNBY: Fifty per cent. in the cotton industry and 30 per cent. in the woollen industry.
LORD MANCROFT: Imagine the number of people that that means out of employment. It seems to me that one of the export credit methods by which we could help our foreign buyers and at the same time help ourselves not only in South-Eastern Europe but in other parts of the world—and I make this suggestion not only to the noble Lord, Lord Templemore, who is going to reply, but also to my noble friend Lord Snell, to see whether he considers it useful—is that we should put the men now unemployed in cotton and woollen textiles to the machinery which is unemployed by a scheme for which the Government shall be responsible. Let the cotton and wool trades make the coarser kinds of cotton and certain woollen textile goods, both of which types of textiles have no market now in certain parts of the world. Let them make them and sell them for whatever they will fetch in the exports markets of the world, using the credits thereby created to purchase raw

817
materials or even munition materials for the purposes for which we need them to-day. We shall then have put our own unemployed cotton and woollen trade people into work, and in effect have made them into additional munition workers. We may be short of munition workers. But if by export credits you thus put men and women who have no employment in the cotton industry and in the woollen textile industry into work, you turn that wasted time into money, save the Government unemployment pay, create credits abroad and help friendly nations by taking their raw materials as payment. You are able to compete, by the scheme of selling goods for whatever they will fetch in the overseas markets, as against foreign productions, in the counts below forty in the cotton trade, and you obtain purchasers for your cotton and other textile goods, which in turn, by the credits created, will enable us to buy raw materials that we need.
I do not know whether that scheme would apply to coal, but I see the noble Lord, Lord Gainford, and he can tell us whether it would be helpful in the coal industry. I do not venture to give an opinion about coal, but from what I have seen of the unemployment in the cotton and wool textile industries, and of the machinery consequently not in use, I think the scheme would help in meeting some of the economic difficulties we have in South-Eastern Europe. South-Eastern Europe would take our cheap textiles, and we should take their maize, oil and other products. I throw that suggestion out. Private investors will not provide loans to foreigners. Money will be needed none the less. We must urge on the Government to increase by many millions the credit facilities under the export guarantee scheme, and to consider the plan by which we could put some of the unemployed textile workers into work. Let them make the goods which we cannot now sell in the competitive markets overseas, let us sell those goods for whatever they will fetch, and let the loss or difference be corrected by Government subsidy to allies or defence accounts, and use the credit thereby created for buying food grains and raw material for our rearmament schemes.
House adjourned during pleasure, and resumed by the LORD CHANCELLOR.
5.34 p.m.
LORD TEMPLEMORE: My Lords, my noble friend has asked a Question of great importance, and in my reply I will give him all the information that I possibly can. If I cannot tell him, as I probably cannot, as much as he would like, I would remind him that, as he is perfectly well aware, the guarantees to which he refers in his Question have only lately been given to the different countries. Negotiations regarding trade agreements are now proceeding, and it would not be in the public interest to go into details or to publish prematurely what we hope to achieve by those agreements.
Before dealing with the particular point raised by my noble friend Lord Sempill, it may be useful to recall that in the Exports Credits Guarantee Department His Majesty's Government possess machinery for developing United Kingdom export trade all over the world. This machinery, which has functioned with great success, was set up many years ago in times of normal commercial activity when no possibility of political disturbance was contemplated. It was devised to work on purely commercial lines and is still doing so. For this purpose it is assisted by an Advisory Council of bankers and business men who consider all the proposals put to them purely on commercial grounds. Under this scheme substantial guarantees have been given in recent years for exports to numerous countries, including some of the countries referred to by my noble friend. In this connection I was very glad to hear the very well deserved tribute paid by my noble friend Lord Barnby to my right honourable friend the Secretary to the Department of Overseas Trade, and indeed I think what he has done there is exceedingly remarkable. I am informed that the Department's turnover during 1938–1939 was nearly £50,000,000.
The recent changes in the international situation have made it necessary for the Government to consider whether other steps might not be taken in addition to those which have worked so well for many years. It became evident last year that it might become desirable to give credit guarantees for exports from this country to other countries overseas in circumstances where the Advisory Council of business men would not feel able to recommend guarantees on purely business

819
grounds. Accordingly, in the Export Guarantees Act, 1939, which was passed the other day, and which has been mentioned freely in this debate, the Board of Trade were empowered to undertake further guarantees over and above those recommended by the Advisory Council. This Act was conducted through this House by my noble friend Lord Plymouth, who desired me to say that he was very sorry that he could not, owing to public business, be present during the debate to-day. The intention was not in any way to interfere with the normal business activities of the Export Credits Guarantee Department, which it was most desirable to continue, but to provide additional facilities amounting to £10,000,000 for other transactions which it might be in the national interest to guarantee. This of course is provided in the Act under Section 4.
The position, therefore, in regard to the countries mentioned by my noble friend who introduced the Motion is that in so far as proposals come forward which the Advisory Council can justify on purely business grounds, guarantees may be given. If it is desired to go beyond that, then the proposals for giving, in the national interest, guarantees for exports to the countries to which my noble friend refers must be dealt with under the provisions for the £10,000,000 available under Section 4, and the problem with which the Government are faced is to consider how best to allocate the available credits between the various countries concerned. I am afraid it is impossible to make any statement in advance or to give any indication of the decisions which the Government might take in considering this allocation, but my noble friend can be assured that the special situation created by the recent decision of His Majesty's Government to guarantee the independence of certain countries will naturally be given the fullest weight in considering the possibility of financial assistance.
In furtherance of that policy, definite steps have already been taken. The noble Lord referred to the British Trade Mission which is now in Bucharest for the purpose of consulting with the Rumanian authorities upon means for promoting trade between the two countries. Amongst the questions which will be examined will be that of developing
820
Rumanian natural resources and increasing the sale of her products in the United Kingdom. Then my right honourable friend the Secretary for the Department of Overseas Trade has recently visited Warsaw, and has discussed with the Polish authorities various matters affecting trade and economic relations between Poland and this country. These discussions were of a general and exploratory character, and were of a most cordial nature. It is hoped that as the result there will be a development of trade between the two countries which will be of substantial advantage to both.
I now turn to the various questions which my noble friend and other speakers asked me during the debate. My noble friend Lord Sempill was very keen on expanding the market for Greek tobacco and Balkan markets generally. I am afraid I am not able to give him any very definite answer except that such questions are considered of very great importance and are being carefully considered by the Board of Trade and the Export Credits Department. My noble friend also said we ought to accept a proportion of a country's natural commodities in payment for our exports and also offer substantial credit facilities. I can only tell him that his two suggestions, which are of great importance, will be very carefully considered by the Board of Trade. He also had a very important suggestion: he said we ought to summon a conference of leading industrialists to consider this matter. That is a point I cannot go into to-day. I do not know whether it would be possible or not, but it will be brought to the notice of my right honourable friend the President of the Board of Trade, who I am sure will receive it with the attention it deserves.
I turn to the questions asked by the noble Lord, Lord Strabolgi, who was kind enough to inform me he had to go away and could not therefore hear my reply. He asked what advantage has been taken of the Act passed earlier this year. All I can tell him is that negotiations are proceeding. I cannot give him any details, but returns will be published giving information as provided in Section 5 of that Act. He also asked what was the result of the Agreement of 1938 with Turkey. Orders are being placed in the United Kingdom for machinery and plant, and in some cases the specifications and surveys have involved a considerable time. He

821
also asked what was the position with regard to Russia. Under the Agreement signed in 1936 orders up to £10,000,000 were placed here, and the goods are now being delivered—mainly plant and machinery. Payment to United Kingdom exporters is made on delivery, and in order to pay for them the Soviet Government issues promissory notes which are guaranteed by the Export Credits Guarantee Department.
I turn to the questions asked me by my noble friend Lord Glasgow. He was kind enough to apologise for the shortness of notice, and said he was afraid I could not answer his questions. As a matter of fact I can. The noble Earl said that British ships ought to have a square deal in these matters. Wherever possible this is done, and I can tell him that in the Anglo-Turkish Guarantee Agreement of 1938 it was made a condition that the goods exported from the United Kingdom must be carried in British ships. That provision is to be found in Article 10 of the Agreement with Turkey made on May 27 last year. He also asked about the carriage of goods in British ships. That is a matter which will certainly be borne in mind in connection with the Russian and other negotiations which are going on. His Majesty's Government, I can assure him, attach the greatest importance to flag discrimination, and will take vigorous action whenever it appears.
I next come to the speech of the noble Lord, Lord Noel-Buxton. The main point he made was that His Majesty's Government ought not to ignore the very important country of Bulgaria. He suggested we were rather inclined to ignore that country because it looked very small on the map. I cannot speak, of course, for my noble friend the Foreign Secretary, but I am quite sure that he and all members of His Majesty's Government have very much in their minds the importance of Bulgaria and indeed, at this time, of all the Balkan countries.
Then I come to the very interesting speech we had from my noble friend Lord Barnby. I was very glad to hear him say that it was very important to keep the industrial agreements we had with Germany, many of which were working very well. Incidentally I was very glad to hear Lord Strabolgi say that this country does not seek the encircle-
822
ment of Germany. Of course we do not, but the Germans are ready to believe that, and the more it is contradicted in public in this House and elsewhere the better for this country and for Germany and for international relations. Lord Barnby made several very important and interesting suggestions, and I will ask him to excuse me if I do not go into most of them to-day at short notice. I can assure him his speech will be studied in the Board of Trade and his suggestions will be given due weight. One great point he made, and so did my noble friend on the Cross Benches, Lord Sempill. He said that the amount provided under Section 4 of the Act of February this year—£10,000,000—was too small. It has always been in the mind of His Majesty's Government that the amount might not be enough, and I can assure him that if the amount is really found not to be enough the Government will not hesitate to come to Parliament again with another Bill, which of course it will require, to ask for more. My noble friend Lord Mancroft had some very interesting suggestions to make not only by way of dealing with the question raised by my noble friend Lord Sempill, but also for curing unemployment in this country, and I can assure him they will be studied very carefully.
I have answered as well as I can the various points that have been raised, and I should like to add in conclusion that while the Government recognise the paramount importance of maintaining and increasing our export trade with all parts of the world, they are not unmindful of the fact that special considerations apply to the countries referred to in the Motion of my noble friend. They intend to utilise to the fullest extent the powers conferred on them by Parliament to assist United Kingdom export trade to these countries. I have, as I say, answered as well as I can the questions put to me by my noble friend who introduced the Motion. We are exceedingly grateful to him for introducing such an important matter, on which we have had a very interesting debate, and I only wish more members of the House had been present to hear it. I hope he will excuse me if I have not told him quite as much as he had possibly hoped.
5.50 p.m.
LORD SEMPILL: My Lords, may I be allowed to express real appreciation of the

823
statement that has just been made by my noble friend Lord Templemore, replying for His Majesty's Government? I would like to suggest, if I may, and in this I feel sure I shall have the support of your Lordships, that he, and those in the Department for which he speaks in particular, should carefully study the details that have been submitted by various speakers to your Lordships to-day, as he said in his reply that he had not been able to give full and weighty consideration to the many points that were suggested to him. I would like again to thank your Lordships very much for the privilege you have accorded me in moving this Motion, especially to-day, when your Lordships kindly arranged a special sitting, and to thank my noble friends who have taken part in this debate, which has aroused, as the noble Lord, Lord Templemore, suggested, a considerable amount of interest.
I would like to emphasize the point that was mentioned by my noble friends Lord Strabolgi and others relative to Germany or any other Power. There is no suggestion whatever in this Motion or in any matters discussed in your Lordships' House, as has been so clearly stated, of restricting, or endeavouring to restrict, the economic expansion of Germany or any other country. That was made perfectly and amply clear when I submitted the Motion to your Lordships and it has been made equally clear by other speakers. If my noble friend Lord Templemore accepts the suggestion, as I
824
think he does, that the matter should be given very careful consideration by those specially concerned, might I suggest in this connection that it would be advantageous if the right honourable gentleman Mr. Hudson could be given an opportunity for submitting details of his recent tour to the noble Viscount the Secretary of State for Foreign Affairs in view of the general expressions given vent to in your Lordships' House to-day? I would like to urge particularly this point, that His Majesty's Government should summon a council of the leading industrialists to debate these matters, and I hope my noble friend Lord Templemore will give special consideration to that. I would like again to express appreciation and my thanks to your Lordships who have attended and to all those who have participated in this debate. I beg leave to withdraw the Motion.
Motions for Papers, by leave, withdrawn.

BUSINESS OF THE HOUSE.
THE EARL OF LUCAN: My Lords, before we adjourn I should like to remind your Lordships that it is proposed to meet at three o'clock on Wednesday when Motions will be considered in regard to the Report of the Select Committee on the Prevention of Road Accidents on which many of your Lordships have expressed a desire to speak.
House adjourned at seven minutes before six o'clock.