ECONOMIC WARFARE.

HL Deb 09 May 1944 vol 131 cc628-70

LORD NATHAN rose to ask His Majesty's Government for a statement as to the efficiency and effect of the blockade and other activities of the Ministry of Economic Warfare, as part of the attack upon the Axis Powers; and to move for Papers. The noble Lord said: My Lords, to-day I wish to bring to your minds an almost forgotten Ministry. Back in 1939, in the early days of the war, the Ministry of Economic Warfare was always in the headlines. Then some people thought and some people said that the war could be won by blockade alone without fighting, that Germany would suddenly collapse for lack of fuel, lack of special steels, even lack of food. In a bitter school we soon learnt differently. Even to-day, though Germany is extremely short of oil, she has enough for actual military operations, and her people are still reasonably well fed. But after those early days we went to the other extreme. Blockade did not do the trick -by itself, so we put blockade on one side in our minds.

If the early hopes were exaggerated, we must not attenuate the actual achievements. The blockade almost certainly saved us from defeat. It quite certainly made it possible for us to win. The longer the war, the more powerful the blockade. Time in regard to the blockade has been on our side. It has given us the precious time to make ready for the final blow. Some years ago an economic writer put it like this: "The blockade won't make Germany crack, but it will make her brittle." Now she is brittle, now our Armies can crack her. The blockade is more important now at the climax, on the eve of invasion, when the strain is telling, than ever before. There have been of course during the past years from time to time, some relaxations of the blockade for the advantage of children, expectant mothers, and old people. A new proposal has been placed before the public recently by Dr. Howard Kershner. Surely this is not the time to relax. The famished people of Europe must now look not to a Kershner scheme; they must look to the onward sweep of our advancing Armies coming as liberators and bringing bread in their train.

Let me just remind your Lordships of what we mean nowadays when we speak of blockade. We do not simply mean, as in the last war we very much meant, stopping raw materials and goods from going to the enemy. This time, unlike the last war, he had prepared for it. He had built up stocks, rationed everything, established substitute factories. He conquered most of the stocks, resources and man-power of Europe. We do not nowadays mean just sea blockade. This time economic warfare has had to deal with the air as well. In fact we do not just mean blockade at all. We mean the whole of economic strategy, and this includes, in addition to blockade in the ordinary sense, the bombing of factories and communications, the laying of mines in enemy waters, the cutting-off of the enemy from all his financial connexions with other countries, including neutrals, both nearby and overseas.

In fact this is a particularly apt moment for bringing up the question of economic warfare. In the first place, we have just concluded a not unsatisfactory agreement with Spa in dealing with wolfram exports to Germany. We are negotiating with Portugal, which exports still more. These are important episodes in the long, crowded, dramatic story, and it may be that the Minister will be able to add something to day to what he said last week in this respect in answer to the question by the noble Lord, Lord Vansittart. Then there is the colossal air offensive against German Europe. That has recently entered a new stage. For a time economic bombing, which is part of the work of economic warfare, was mainly concentrated on large centres of Germany's production. Now, with the Second Front in sight, the targets have been shifted. Lately they have been railway centres and factories producing special key goods, fighter aircraft, electrical equipment, ball-bearings. Our targets are new and our attacks have decreased Germany's war output. We have working together in the economic war the area bombing of that great tactition, Air Chief Marshal Harris, and the wonderful, quite uncanny precision bombing of the American Air Force. These two current examples—the wolfram agreement and the bombing of the railways—are admirable illustrations of the work of economic warfare.

Let me describe our economic strategy against Germany as I see it. The work of blockade plus bombing and milling since 1940 has weakened the enemy's war effort while we and our Allies mobilized. Blockaded, the enemy could draw on his stocks and eke out his supplies by planning, but at all events after Russia was brought into the war he could not increase supplies. He could not get stronger but inevitably at some point—and the point has now been passed—he was bound to get weaker. Of course the results of the blockade came slowly, so bombing had to be used as an accelerator—an accelerator of blockade. The point when the German war effort would weaken was brought forward partly by the development of bombing, partly by dislocation in his wide-flung and intricate system of industrial power and transport. If this accelerator had not been used, if this dislocation had not been created, Germany might have built up such a strength while we were getting ready that we might not have been able to win; we might indeed have lost. Transport has, of course, been crucial. German Europe is a very big place. As one writer put it four years ago: "Delivery is almost harder than production." Here we see how blockade and bombing went together. Cut off from overseas oil, the enemy had to cut down road transport. This threw a great strain upon the railways and caused a big demand for coal which, in turn, had also to be carried by rail. We bombed the railways, we bombed the coal mines and we bombed the synthetic petrol plants as well. The result was that shortage of oil meant not so much shortage of fuel in the field as shortage of transport of supplies to the field and for domestic use in metropolitan Germany. Under this strain on German Europe, Germany is finding that German Europe is too big.

Wolfram and other rare materials are almost as good an example of the combined effects of our economic strategy as transport. With the resources of other European countries, Germany has been able to produce steel in bulk to the extent of about three times as much as we, but this, my Lords, is a war of scarce metals, of precision engineering, of alloys like nickel, chrome, cobalt and tungsten. So we bombed the molybdenum mines at Knaben; we attacked them twice and successfully. We have given nickel a pretty rough passage on its hazardous journey from Petsamo. We first pre-empted a fair amount of chrome and then we persuaded Turkey to cut off chrome altogether. Then recently, as a result of an exercise in diplomacy, we persuaded Spain to cut down wolfram. Germany, indeed, can still produce great quantities of steel but, as the grip of the blockade grows tighter, Germany is less and less able to produce armour, armour-piercing projectiles and machine cutting tools. Our economic warfare is taking the cutting edge off the German war machine on the eve of our invasion.

These are special effects of our economic warfare during the recent past. There are also general effects. To counter our blockade Germany has set herself to the making of substitutes. Nowadays almost anything can be made synthetically but such production is tremendously costly not only in materials, but also—and this is extremely relevant—in terms of labour. Thus, in order to reduce our blockade, a much larger labour force has to be kept by Germany out of the Army and put in the factories. The same is true of food, which Germany cannot import from overseas. True she has enough, perhaps barely enough, food, but a quarter of her labour forces is on the land compared with only one-twelfth of our labour force here. If we had as large a proportion of labour on the land as Germany we should hardly have any Army at all. If we had to make substitute fuels and commodities as she has to do we should not have a Navy or an Air Force either. These are stark facts too often overlooked.

And the blockade has been effective since the outset. It is true there has been some blockade running though there does not seem to have been really much. It has been mostly in relatively tiny parcels. The Germans want bulk materials from overseas but important quantities of rubber and vegetable oils destined for Germany have sought in vain to breach the blockade. They have only been able to run quite minute cargoes, little wolfram now and then from the Far East, industrial diamonds and platinum, and perhaps a few other easily carried precious metals and special glandular extracts carried in aeroplanes, and may be sometimes concealed in navicert cargoes or carried by members of the crew before crew control was established. The wants of Germany's Ally Japan are smaller in bulk. She wants, however, as much as she can get in the way of specialized goods, precision instruments and machine tools which -Germany can supply. They are vastly important to Japan if she is to increase her war potential. Therefore the outward cargoes are scarcely less important than the inward ones. But I believe, and I hope, that the Minister of Economic Warfare, when he replies to this debate, will be able to tell us that not much gets through either way.

Sea mining, as we have used it in this war, is a new method of blockade. It ties in not only with attempts to stop blockade running but also with the offensive against German transport. Petrol is scarce, railways are overstrained and bombed, and so coastal traffic is tried instead. But our ships and aircraft have laid mines in the waterways, according to the master plan of the Ministry of Economic Warfare. So Germany is losing the ships she has, and has been forced to apply labour and material to the building of new ships. Those new ships in their turn will go the same way down into the vasty deep. It probably is not an exaggeration to say that the cumulative effect of the blockade is to increase the strain tenfold.

But there is more even than economic bombing and economic mining in the pattern of combined blockade operations, for these are indeed combined blockade operations upon which we are engaged. We not only stop trade between Germany and other countries by trade agreements and search for contraband at sea. We do it also by financial blockade. The United Kingdom Commercial Corporation has competed with the enemy for materials in neutral markets, and over a large area has won the deal. Then there is the Black List drawn up by the Minister of Economic Warfare. Firms trading directly or indirectly with Germany are put on this Black List. The result is that Germany can neither buy goods nor sell goods nor acquire foreign exchange. There is one rather interesting example to which I might draw the attention of your Lordships, one which is perhaps but little known. It is the attempt to prevent Germany from getting foreign exchange in the shape of premiums on insurance policies. Steps are taken to prevent neutrals from insuring with German insurance companies. In connexion with the Black List there are one or two questions which I should like to ask of the Minister. I wonder if he can tell your Lordships whether he is entirely satisfied that the machinery of the Black List has in fact been operated without fear or favour and might not perhaps at some times and in some cases have been earlier and more firmly applied. Then I would like to ask him this further question. Can he tell us something of the relationship between our own Biz ck List and the American Proclaimed List, and something also as to the methods and machinery of co-operation in the working of the two systems?

In what little more I have to say I look not to the past but to the future. Indeed the time has come for us to look ahead. I want to ask the Minister a question or two which seem to me to be of the very greatest importance for the future. Here in the Ministry of Economic Warfare there has been built up a very remarkable economic intelligence system. The Ministry knows the industries, trade, transport, finance of Germany inside out. Has the Ministry not an obviously great function in ensuring the disarmament of Germany after the war, the economic disarmament of Germany? Should not the Ministry in some form be continued for the perpetuation of peace? They are important questions. I can scarcely expect that the Minister can answer fully to-day. It is a matter of high policy. Again, attached to the Ministry of Economic Warfare we have the United Kingdom Commercial Corporation, skilled and experienced in trading against the enemy. Has not that, too, a function to prevent the infiltration of world markets by the defeated enemy in preparation for another war? After the last war Germany built up abroad not only her trade but also a series of industrial experiments and established para-military training beyond her own frontier. She built up an interest in other countries, through interlocking directorates and shareholdings, especially in heavy industry, armaments, chemicals, explosives.

There are signs from reports that we get from Lisbon and Stockholm that she has already started in this way again. She has already started laying the economic foundations of the next war. That we must prevent and the Ministry of Economic Warfare, kept on in some form, perhaps even with a different name though with very much the same functions, can make a contribution towards preventing it. The United Kingdom Com- mercial Corporation, the Economic Intelligence branch, the Black List and all the detailed detective apparatus of the Ministry must be kept up-to-date so that we may see that all this does not happen again. To that end I venture to make two suggestions for the consideration of the Ministry. When hostilities cease the Economic Intelligence section and the detective apparatus of the Ministry might well be used to place at the disposal of the United Nations Germany's holdings outside her own confines in heavy industry, armaments, explosives and chemicals. Then if, as will doubtless be the case, there are restrictions upon certain of Germany's industries and prohibition upon certain of her imports after the war, the machinery and experience of the Black List might usefully be applied to the purpose of ensuring that Germany does not resuscitate prohibited industries and does not import prohibited goods. I believe that a real contribution—and I submit it for the consideration of the Government and your Lordships' House—can be made by the equipment of the Ministry of Economic Warfare to these special ends in the period following upon the war.

Now, my Lords, I have done. I hope I have indicated to your Lordships that there are solid grounds for paying tribute to the work of the Ministry of Economic Warfare during the past harsh four and a half years. I hope that in some form the Ministry may be kept in being so that it may help to maintain the peace as undoubtedly, in my submission to your Lordships, it will have helped to win the war. I beg to move.

LORD RENNELL

My Lords, I crave your indulgence in speaking to you for the first time, but I speak on the subject of the Ministry of Economic Warfare with particular pleasure—in fact I regard it as a privilege—since I was among the first who started that organization some months before the war broke out. Indeed, I think I was myself, with four other people, the first to inhabit their then premises.

In certain quarters the argument has been that the time had come to wind up the Ministry of Economic Warfare on the ground that there was now no more need of it, or virtually none, and that its function in continuing the blockade of Germany had practically come to an end. But anyone who has followed what the Ministry has done, and has done lately, must realize that such an argument is really entirely outside the point. The thing which strikes anyone who has followed its activities more than anything else is the vast amount of information which the Ministry must have collected for many purposes, and not merely in order to bring to a successful conclusion, through the various channels used, negotiations like those which have recently been discussed in Spain and Turkey. Anyone who has followed the comments on, and the explanations of, the bombing of Germany and other European countries, cannot fail to realize how much of the information that has gone towards the planning of that bombing is of an industrial, economic and commercial nature. If, therefore, in the course of these years the Ministry has accumulated this very large body of knowledge, knowledge not of Germany alone, is not that in itself sufficient justification for considering the continuation in existence of that organization as part of our machinery of government after the war? Lord Nathan referred, in particular, to the uses to which the Ministry might be put in dealing with Germany, but that is not the only purpose which the Ministry can, and should, serve after the war. We shall have to fight for our trade and for our economic existence—bin other words for our well-being and standing in the commercial and industrial world in the situation in which we are likely to be. We require the maximum of information and organization in order to do that, and that organization and that information are in the Ministry.

The question, therefore, does not seem to be whether the Ministry or a similar organization should continue, but rather in what form it should continue. The Service Ministries each have their own intelligence machinery which serves their own specialized purposes. The Ministry of Economic Warfare is the intelligence machine, as I see it, on the commercial, industrial and financial side. But, whereas the Service Ministries are their own executive organs, the Ministry of Economic Warfare, in the nature of things, is not, and cannot be, its own executive organ. It has to use other executive organs, and in point of fact, we have seen that it has used the Air Ministry in the selection of bombing targets, and, no doubt, the Treasury and other financial organizations in exerting financial pressure, and, of course, in its negotiations with neutral countries like Turkey and Spain, the Foreign Office. I wonder if the future place, or locus of the Ministry of Economic Warfare is not, perhaps, appropriately in the Foreign Office. That place would not only give it a home where it could remain permanently in being, but would also, at the same time, provide for that organization an executive organism which, to some extent, it now lacks.

There is another point in that connexion which I think is of great importance. The Ministry of Economic Warfare has collected a very large body of extremely competent persons with specialized knowledge, not only civil servants but men in business, industry and finance, and a highly technical personnel who deal with subjects to which Lord Nathan referred, such as the rarer metals and other products of that sort. As the war draws to a close, I have no doubt that a large number of these experts who have been collected will want to return to their own avocations, but in their association with the regular and permanent civil servants in the Ministry they will, no doubt, have been able to pass on to the latter a great deal of the knowledge which they themselves have, and, what is perhaps even more important, pass on to them the knowledge of how to get hold of the information they want. Those of us who have been, to some extent, in specialized industries and trades before the war have always suspected, in fact have really known, that somewhere or other in this country there was always required information to be obtained if only one knew where to look for it. But it was in the Ministry of Economic Warfare that all that specialized body of information and that group of experts were gathered together under one roof.

Having gathered that information together, and having, perhaps, taught the regular civil servants a little about where to gather it if they have not got it themselves, the Ministry, even if it loses the services of these experts, will still have a continuing knowledge of very practical everyday affairs, which, in the realm of foreign policy, has been the thing that the Foreign Office itself has frequently lacked. In fact, in the proposals recently made in regard to recruiting for the Foreign Service, and the future staffing of the Foreign Office, great stress has been laid on obtaining people in closer contact with the outside world than has been the case with the Foreign Office. Is not the fusion of the Ministry of Economic Warfare, if not immediately at any rate at an early date, at least a contribution to that recruiting problem which has engaged the attention of His Majesty's Government wilt regard to the Foreign Office? I venture to suggest that if the present staff of the Ministry, or even a substantial part of it, were fused regularly into the Foreign Office—not as an accretion or as an accessory, but as intrinsically a part of the Foreign Office—all the present members of the Foreign Service would have the benefit of that specialized knowledge which those regular civil servants who were drafted into the Ministry at the beginning of the war have been able to obtain h the course of the last four years.

Finally, and in that same context, the Ministry has had very practical experience of how to deal with trade, commerce, and finance. Even if it is not necessarily a spending Department within the meaning of that technical term, it has had the United Kingdom Commercial Corporation and the financial machinery of the Treasury and the banks at its disposal to put its policy into execution. That executive side, involved in close contact with commerce and finance, has been lacking in the Foreign Office for obvious reasons. More than that, by the form which the organization of the Foreign Office has taken in past years, it has suffered by losing that Commercial Department which it had before the last war. There seems to me, therefore, to be every argument for restoring to the Foreign Office, at some fairly early date in the future, by keeping the Ministry in existence, those parts of it of which it was deprived at the end of the last war and which it clearly lacks, if one may judge by the form which proposals for recruitment to the Service have taken.

If it were possible to elicit from the Minister any information in regard to future plans, I for one should be very happy, especially if that information took the line that there is no intention on the part of His Majesty's Government to bring the Ministry of Economic Warfare to an end and wind it up. It is unnecessary for me to add anything more to what the noble Lord, Lord Nathan, has said, because the Ministry has so amply justified itself, and is justifying itself now, that to praise or commend what it has done would obviously be out of place, especially coming from myself.

THE MINISTER OF ECONOMIC WARFARE (THE EARL OF SELBORNE)

My Lords, I should like to be the first to congratulate the noble Lord who has just sat down on a speech which I am sure will make your Lordships wish to hear him on many future occasions. I am fortunate in speaking after h m, because it enables me to tender our congratulations, and that is particularly pleasant to me because he was one of the founders of the Department over which I have the honour to preside.

I do not wish to go over the ground covered by the noble Lord, Lord Nathan, in the eloquent tribute which he paid to my Department, a tribute for which I should like to thank him; but I shall endeavour to touch on some of the points which he raised, and to which the noble Lord, Lord Rennell, also referred. The noble Lord, Lord Nathan, commiserated with us on being an almost forgotten Department; but the senior British Service, the Navy, is known as "the silent Service," and during the war, at any rate, the Ministry of Economic Warfare can well take a leaf out of the Navy's book in that respect. In thanking the noble Lord for what he said about my Department, I should like to make it plain from the outset that nothing could have been achieved towards enforcing the blockade had not it been for the Royal Navy and for the Navies of our Allies.

I hope that the public realize how much more difficult a task the Navy have had in this war than they had in the last. It has been much more difficult because in the first place the Navy was much smaller; secondly, Italy and Japan were always hostile, and later enemies; thirdly, in 1940 we lost the French Fleet; and lastly, there was no European bottleneck. In the last war the Dover Patrol functioned at one end of the North Sea and the Tenth Cruiser Squadron at the other, the Mediterranean was blocked at both ends, and that completely blocked the entrance to all the ports to which Germany had access; but in this war, after 1940, the whole Atlantic seaboard lay clear, and therefore the fact that the blockade has been maintained to the extent that it has been maintained is, I think, a very remarkable performance on the part of the Royal Navy.

LORD STRABOLGI

My Lords, I rise to a point of procedure. I am very loath to interrupt the eloquence of the noble Earl, but I was waiting to hear him say why he had intervened at this stage of the debate, and whether he proposed to ask your Lordships' permission to speak again, in order to cover any points with which he does not deal now.

THE EARL OF SELBORNE

My Lords, I intervened at this stage because I thought that it would be for the general convenience, as the noble Lord may realize as I proceed; but if there are points which require an answer later, and the House gives me permission, I shall be very glad to answer them at the conclusion of the debate.

There is one other point about the blockade which I should like to make, and that is that the methods of the blockade have, of course, had to be altered from what they were in the last war. In Nelson's day the blockade was enforced on the high seas. My noble relative Lord Cecil of Chelwood, when he was Minister of Blockade, introduced the navicert system, which revolutionized the application of the blockade, and in this war that has been developed still more to what we call control at source. Our weapons were the bunkering facilities on which all ships that sail the seas depend, from the coaling stations, which are nearly all British controlled throughout the world, or where British companies operate, and also the facilities of insurance. Unless a ship conforms to the requirements of the Ministry of Economic Warfare it can get neither insurance nor bunkering. That has been effected by means of what we call ship navicerts and ship warrants. None of that would have been effective, however, if the British Navy had not been in the background. To that extent the machinery of the blockade has been very much developed in the new conditions, compared with what it was when the noble Viscount was Minister of Blockade.

The methods of the Navy have also changed, of course. The close patrols of the last war have given place to long-range interception, and in that the Fleet Air Arm and Coastal Command have been playing a very big part. The other weapons with which we have enforced the blockade are the Black List, of which the noble Lord, Lord Nathan, spoke, and rationing the neutrals. That is again a device that we took over from the noble Viscount, Lord Cecil. It was he who first introduced the rationing of neutrals, and that was adopted from a much earlier date in this war than it was in the last war. By these Means Germany has been prevented from using her Atlantic seaboard to import food and raw materials. When Japan entered the war at the end of 1941 our enemies tried to break the blockade, and it was very important for them to do so, because it so happened that their economies were complementary: Japan had the tungsten, the rubber, and the oil that Germany so much needed; Germany had precision tools, blue prints, ball-bearings and the like, all of which Japan required very much. And therefore they started a system of fast blockade runners, that ran from the East to West and from West to East without showing lights or using their wireless or calling at any port. For a time they had a limited success, but before long the Royal Navy, the Navies of our Allies and the Air Forces were able to get on the job, and we have altogether sunk some fifteen blockade runners, four outward and eleven inward. Now that traffic, except for a few submarines, which can carry very little, has practically ceased. The cargoes that were destroyed included 45,000 tons of rubber, 1,500 tons of tungsten, 17,000 tons of tin, 25,000 tons of vegetable oils, and Far Eastern drugs of great importance, such as quinine. But it was not the cargoes that were sunk that were most important, it was the cargoes that never sailed on account of the way that we were able to demonstrate that the blockade could be enforced.

Thus the Royal Navy imposed deficiency on Germany from outside, and at the same time—and again this is where the blockade is very different from what it was in the last war—the Royal Air Force and the American Air Force have created deficiency inside Axis Europe. The work of the Air Forces is a most powerful addition to the work of the Navies. The Navies stop the import of rubber from Malaya, the Air Forces destroy the synthetic rubber factories in Germany. That was why in the last war it was called the Ministry of Blockade and this time it is called the Ministry of Economic Warfare, because we are really co-ordinating a vast combined operation against the enemy's fighting power by various methods outside and inside his frontiers, in his coastal waters by bombing and mining, and in men's minds by propaganda—and I should like to add fiat the peoples of occupied Europe have joined in this in their resistance movements in actions which have had such important economic results in what is called sabotage. In all this we have worked in the closest co-operation with our American colleagues, both at home and abroad. All our economic information is pooled with our American Allies.

Your Lordships will realize, as the noble Lords, Lord Nathan and Lord Rennell, have pointed out this afternoon, that this co-ordinated attack on the resources of the Axis could not be carried on without a very well manned Intelligence Department. This organization assesses the economic factors in Germany's military capabilities and her intentions, and these are embodied in inter-Service appreciations, through the medium of the Joint Intelligence Committee of the Chiefs of Staff, upon which my Department is represented. This is the organization by which the vulnerable parts in Germany's economy are discovered, neutral firms trading with the enemy are detected, enemy efforts to build up foreign exchange balances are prevented, and smugglers of diamonds, platinum, etc., are frustrated. The noble Lord, Lord Nathan, spoke truly when he said that the importance of these small materials is very great in this war; things like platinum and diamonds have a most vital importance. Modern industry depends on an adequate supply of industrial diamonds. And I need hardly say that the smaller the object, the more difficult it is to enforce the blockade in respect of it. Therefore the blockade is enforced not only by the Allied Navies and Air Forces but by every means at our disposal.

If I might give an example of the efficacy of our methods, I could quote the case of tie Spanish and Portuguese Merchant Navies plying to and from their own harbours all over the world. You would think that Germany, through what we call "cloaked transactions"—transactions which are different from what they purport to be—could have imported a tremendous amount of materials by those routes. And yet we know that if you take the whole period of the war not more than 1½ per cent. of that tonnage has operated on enemy account, and at the present moment less than half of 1 per cent. is operating on enemy account, and that is on the short voyage across the Bay of Biscay.

The noble Lord, Lord Nathan, asked some questions about the Black List. First, he asked me U it had been applied without fear or favour. I can give him that assurance without hesitation. No matter how big or how powerful any firm may be, if its activities are calculated to be prejudicial to the Allied cause we should not hesitate, in conjunction with our Allies, to act. Re also asked me what the relations were between the Statutory List, as we call it in Great Britain, and the Proclaimed List in America. For all practical purposes those two lists are identical, and steps are taken and machinery exists by which they are kept identical. The Black List is a most potent weapon. It means the destruction of a firm's whole foreign trade and frequently in a firm going into bankruptcy. The firm is from that moment onward boycotted by the world of commerce. I should like to make it clear that the end of the war may not necessarily mean the end of the Black List. Our memories are proverbially short, but they are not quite so short as all that, and we shall not readily forget what neutral firms did during this war.

Another method by which the blockade is enforced is, as the noble Lord said, what we call pre-emption. That again was practised by my noble relative, Lord Cecil of Chelwood, in the last war—buying in neutral markets accessible to Germany commodities which would be of use to the enemy. By this means, for instance, we greatly reduced the dispatch to Germany of wolfram from the Iberian Peninsula, chrome from Turkey, and ball-bearings from Sweden. In that connexion I should like to join with my noble friend Lord Nathan in the tribute he paid to the United Kingdom Commercial Corporation for the very valuable work they have done in that respect.

Finally, of course, it is by diplomacy that we have also endeavoured to enforce the blockade. We have made agreements with neutral countries. These neutral countries require certain things from us, and we require certain things from them. Therefore there are the opportunity and the means by which we can make a fair agreement. One of the things we require from them is that they shall not send commodities of military importance to the enemy. As the fortunes of war swung decisively in our favour and the danger to European neutrals of German invasion vanished, we have been able to make increasingly satisfactory agreements with European neutrals. I spoke last week of our recent agreement with Spain, and I should like to stress one point. I was sorry to see that in some quarters that that agreement was hailed as a victory over Spain. It was nothing of the sort. It was a compromise mutually satisfactory to Spain and to the Allies; but it was a victory over Germany.

LORD LATHAM

Not over Franco?

THE EARL OF SELBORNE

The noble Lord, Lord Nathan, asked some questions about the efficiency of the blockade, and in answering them I want to be careful not to overstate the facts. We must remember that after the last war the Germans publicly ascribed their defeat to the blockade. If I may say so, I think that they exaggerated partly in order to pretend that their Army was invincible; but they did publicly ascribe it to the blockade, and undoubtedly the blockade played a very important part in bringing about their defeat. That having been their theme and their experience, the Nazis laid in vast quantities of all the materials of which they anticipated shortage during the next war in the years immediately preceding 1939. More than that, long before the Nazis got into power—almost before the ink of the Treaty of Versailles was dry—the Germans started creating those great synthetic industries such as synthetic rubber, synthetic oil, cellulose textiles, and the like, which would make them to a much greater extent independent of outside supplies when the next war came. Besides that, the Nazis organized their agriculture so that far more food should be produced in Germany in this war, and they devised a system of rationing more complete, more scientific, and more efficient than they had in 1918. Therefore they started this war very much better qualified to withstand the blockade. Then in 1940 they conquered the greater part of Europe and with it, of course, immense supplies of all the raw materials which are useful to war. They then proceeded to organize all the territory they had conquered in such a way as to make it work for the Nazi machine. Nevertheless, these tremendous resources were not inexhaustible if they were not replenished from outside.

The effect of the blockade, which may have been slight at first, has been cumulative, and in my opinion is now undoubtedly very great. I am not going to suggest that Germany will collapse because she is running short of this or that commodity. The picture should be painted with a broader brush. This is how I see it. Germany's stocks, once so plentiful, are seriously depleted. Submarine blockade-runners can do little to replenish them. Neutrals are increasingly aloof. Air raids create fresh problems which every day are harder to solve. Surpluses have become deficiencies, of which the most serious is probably manpower. To those responsible for German production the prospect at this crucial moment must indeed seem sombre. This result is mainly due to three things—first, the vast expenditure of supplies and reserves and the German losses in Russia; second, the Allied victories in Africa; and third, the Allied command of the sea and the air. The part that my Department has played I have tried to explain. We are the "boys in the back-room" in this matter.

Germany has for a long time been short of many things essential to modern warfare—oil, rubber, textiles, ferro-alloys. The noble Lord said that Germany had enough oil for military operations. It all depends what military operations he means. In my opinion there is no doubt that German military operations have been for some time past severely hampered by shortage of oil. Their greatest shortage however is in men. The effect of the blockade can be seen clearly in terms of man-power. For instance, Germany has nearly a million more men and women employed in agriculture than she had in the last war. If it were not for the blockade all these men and women would either be making munitions or else using them. Again, German civilian motor traffic has practicaly entirely gone over to producer-gas. Our Ministry of War Transport has quite rightly refused to allowed producer-gas to proceed in this country beyond what may be described as a thorough experimental stage because it is grossly wasteful in man-power; but Germany has been forced on to it because her oil has been cut off. We in this country, on the other hand, are importing literally scores of millions of tons of goods every year. All the ersatz industries are very wasteful of man-power and this, combined with her colossal losses in the field, has produced Germany's acute man-power crisis which she has tried to solve with European slaves, of which some seven millions are working in Germany itself. Now we have got to the point where Germany is even enlisting unwilling foreigners into her armed Forces. That is surely very significant. The time has now come when Germany cannot maintain simultaneously the numerical strength both of her armed Forces and her civilian labour force, while the quality of both has steadily declined. Germans up to the age of sixty are called up for military service, and for fresh recruits the enemy now relies on classes under eighteen or over forty-seven.

I give one other angle from which I think it is fair to look at the picture. When Hitler attacked Russia in 1941 he hoped to conquer the Ukraine, the Donetz Basin, the Kuban and the Caucasus, and I think r he measure of his defeat and the precariousness of his economic situation can be seen in that single fact. He may well have calculated that the vast mineral and agricultural resources he would get from those territories would repay the tremendous losses of the campaign. As it is, he has had the losses of the campaign and none of the gains of conquest. Any one who supposes that the sea blockade in this war was ineffective or of minor importance must have found it difficult to explain the events in the Bay of Biscay at the end of last December when the Germans risked a large force of destroyers, of which they lost three, in order to bring in a single blockade runner. In our opinion the difficulties of Hitler's Generals are being increased every day by the growing scarcity of commodities. Therefore any neutral who now sends Germany vital war materials is simply prolonging the war and we shall certainly do our best to prevent that happening.

The noble Lords, Lord Nathan and Lord Rennell, both asked me about the future, and Lord Nathan suggested that the Ministry of Economic Warfare should continue into the post-war period. As I have pointed out, there are two parts of the Ministry of Economic Warfare. There is the administration of the blockade on the one hand and on the other hand the intelligence system that has been built up to advise me about the blockade and to advise the Services in regard to their operations. I would, however, like to make it clear that when we tender advice to the Services about military operations, all that my Ministry can do is to indicate the relative importance of certain targets; how, and when, and whether those targets should be attacked must of course depend on the decision of the Commander-in-Chief. But obtaining the information on which to advise the Services and on which to advise the Minister of Blockade involves a great organization and the compilation of most detailed information about the whole of Axis Europe. If I may say so, I think what Lord Rennell said in that respect was very true, but I see no reason why the Ministry of Economic Warfare, as such, should continue long after the Armistice with Germany.

I am not in favour of the prolongation of war-time Departments beyond their period of usefulness, and if I am Minister of Economic Warfare at that time it will be my ambition that my Department should be the first war-time Department to close its doors. I think not only the liberties of His Majesty's subjects but also the prosperity of the country will be sustained in inverse ratio to the number of Government Departments and Government officials who survive this war. But that does not mean that economic warfare against Japan would not continue, nor does it mean that the Black List, as I have already said, would necessarily come to an end. All it does mean is that it would no longer be necessary to have a separate Ministry for the purpose. I might explain to your Lordships that in the matter of enforcing the blockade we are working, as I have said, very closely with our opposite numbers in Washington and it is a natural division of labour that, whereas our American Allies are the greatest authorities on the economic situation in the Far East, we perhaps are in more intimate touch with the economic situation in Europe, and therefore., for the purpose of enforcing the blockade in the Far East, Washington requires little assistance from my Department. For these reasons I do not think that the continuance of a separate Ministry of Economic Warfare would be justified for long after the Armistice with Germany, and the remaining administrative functions of the Ministry of Economic Warfare could very well be administered by the Foreign Office or one or two other permanent Departments.

But the intelligence side of the Ministry of Economic Warfare which, by the way, is known by the name "Enemy Branch" is in my view in a different category altogether, and I very much share the views expressed by the noble Lord, Lord Rennell, in that matter. Quite apart from the manifold uses of economic intelligence for fighting the war, economic intelligence is of vital importance for the planning of many operations which will follow the defeat of Germany. In the first place, there is intelligence for the Far Eastern war, economic disarmament and economic control of Germany, reparations, the economic effects of frontier rectification, the rehabilitation of occupied territories, the development of economic sources of supply to allow Europe to recuperate. These are matters on which the Foreign Secretary and other Ministers will need expert advice in the months immediately succeeding the Armistice.

I am glad to be able to announce therefore that the Foreign Secretary has decided to create an Economic Intelligence branch of the Foreign Office and it is clear—and I am glad to know that both noble Lords who have spoken this afternoon will agree with this—that he could have no better servants for this purpose than the very efficient and experienced staff which has hitherto been working in my Department. The Foreign Office, however, already has to consider these problems and others requiring economic intelligence. Therefore there is an overlap, as it were, between the peace-time requirements of the Foreign Office and the war-time work of the Enemy Branch of my Department. For this reason the Foreign Secretary and I have recently agreed to transfer the control to the Foreign Office of all that part of my Department which is concerned with intelligence in enemy worlds. This does not mean that I have transferred to him my functions. The transferred staff will continue to be responsible to me for everything within the scope of my responsibilities and will continue to do for other Departments, particularly the Service Departments, work they had been doing in the past. In addition, however, they will be responsible to the Foreign Secretary for everything outside that work, and in consequence will be, I hope, of much use to him in dealing with the increasing number of problems relating to the period after the German collapse in which an appreciation of economic development and policy is essential.

For the time being, therefore, Enemy Branch is serving both the Foreign Secretary and myself, and its official name is now Enemy Branch, Foreign Office and Ministry of Economic Warfare. There is really less change in that than might appear at first sight, because throughout the war this section of my Department has been advising not only me as Minister of Economic Warfare, but also, as I have said, the Service Departments and the Foreign Office and other Departments. It merely means that their work as the war draws to its end, will more and more be concerned with peace-terms problems and problems of transition, and less and less with purely war-time problems. I am sure that your Lordships will rejoice with me in the decision of the Foreign Secretary that henceforth the Foreign Office is to be adequately equipped in regard to economic intelligence, which must play an increasingly important part not only in foreign policy but in all politics. I personally am very proud that it is a section of my Department that has been selected for that function—or rather let me put it in this way, I am very proud to have worked with such men during the war.

VISCOUNT CECIL OF CHELWOOD

My Lords, my first duty and pleasure is to join with my noble friend opposite in expressing congratulations to Lord Rennell for his admirable speech this afternoon and to note how he has acquired already exactly the right tone in which to address your Lordships' House. May I also express my congratulations to my noble friend who has just spoken? He has been able to give us a most interesting and encouraging picture of the operations of his Department. He has shown that they have progressed a great deal beyond what they were in the last war, and they give a very interesting example of the way in which under our system and with our particular character these things gradually grow.

When I was first in what was then called the Blockade Department it was strictly speaking a blockade department. I doubt whether it differed very much from what it had been in the Napoleonic Wars. It was different in technical methods but in substance what we did was to establish a blockade across the North Sea so that no ship could get into any of the German harbours or any of the harbours of the neutrals facing on the North Sea and therefore on the Atlantic without passing through that blockade. That was a very essential thing, and gradually to that was added a great number of other efforts by which we sought to reduce the financial and economic power of Germany. I was grateful to my noble friend for reminding the House that some of the devices which he has been so admirably putting in force were developed in the last war—the navicert system and what we used to call the bunker control. I remember that we had not only bunker but jute control. I do not know whether that has survived or has been necessary in this war. We had a complete monopoly of jute which, added to the kind of control we exercised over bunkers and insurance, made a very great part of the economic pressure put on Germany. All that is very satisfactory.

There is another thing which is satisfactory. Perhaps the noble Lord does not realize how satisfactory it is. That is the chorus of approval which has met his administration and which must be gratifying to him. I could not help remembering how very far I was from being greeted with any such chorus of approval when I had to make any explanation. That was partly due to a variety of different circumstances but mainly to the fact that we in that war had to deal with the great problem caused by the existence of neutrals, who of course had a right to trade. We had to put pressure on neutrals which added immensely to the complications and difficulties. In that respect my noble friend's problem is a simpler one, but that is the only respect. In all other respects it is a far more complicated and difficult thing than we had o carry through. At the same time I think it is satisfactory—I do not say this as any claim for myself because I am not entitled to any credit in the matter, it was done by my Department not by myself—that the steps we took then were evidently the right steps and have been developed into a much more complete system in the second war. That is a very encouraging thing because I think it does show that we still have the quality, which has been of such enormous value to us in our history, of being able to meet new difficulties without relying unnecessarily or excessively upon precedent.

My feeling is so much one of complete approval and support of my noble friend that I shall not trouble your Lordships for more than a very few minutes, but there are one or two questions I should like to put. I noticed that he did not say anything about blockade running by air. I do not know whether that has developed into a serious difficulty. Air transport is a new thing, and I imagine that at any rate articles of small bulk like industrial diamonds might be conveyed by air to some extent. That might not be a very serious matter, but I would like to know, if my noble friend can answer the question, whether that is one of the things we have to consider now.

Then I would like to say a word about the Black List. That is also a very vivid recollection in my mind. We established a Black List the principle of which, as your Lordships are perfectly aware, was that any trader wherever he lived who was found to be dealing with Germany or with German assistance should be cut off from all trade. We controlled not only trade with this country or the Empire but with other countries as well. That proved to be a very serious matter. It is rather interesting to recall that our efforts to establish that Black List met with the most violent criticism in the United States. It was about the only instance in which we came to something perceptibly near a serious diplomatic difficulty with them, and I remember the admirable Ambassador of that day, Mr. Page, pressing the Foreign Office very strongly, and through the Foreign Office, myself, to abandon the Black List. I must, say, therefore, that it is a great satisfaction to me to read in the papers to-day that it is the United States who are taking a foremost part in supporting the Black List. That shows that we were not always wrong. I should like very much to know whether the noble Earl, Lord Selborne, can tell us, in addition to the things which he has told us, something more on this head, particularly with regard to the question in relation to Ireland; about what we have read in the papers as to thirty-eight Irish firms being put on the Black List, and so on.

Another curious reversal is illustrated in the question which we have at issue with Sweden. There have been protests—made with great force, I think—to the Swedish Government to the effect that they ought not to sell their ball-bearings, or material for the manufacture of ball-bearings, to Germany. In the last war exactly the reverse was the case. We were continually pressing the Swedes to supply us with ball-bearings, and it was the Germans who were protesting vehemently. That, however, is only an accident in connexion with the development of industry.

I should like very much to know if all one hears is correct as to how far the Government have been able to get over the difficulty—with which I remember we failed in dealing—in the matter of a strictly financial blockade. We had a great idea, which we pursued unavailingly I am afraid, that somehow or other we could prevent Germany obtaining financial resources in other countries, and in that way prevent her buying articles which would be the kind of articles we wished to keep out of her country. I am bound to say that our efforts at enforcing a financial blockade were not very successful. I cannot remember details of the plans we made, and there is no record of them, because they were never put into active operation. It is evident that if the Government have found some way out of the difficulty, it must be an immense addition to their power of pressure on Germany.

I do not know that I should be doing any good by prolonging my observations, and I will just conclude by saying how heartily I agree with what fell from the lips of my noble friend Lord Nathan and from the lips of my noble friend Lord Rennell about the continuance of the Blockade Department. Again, it recurs to my recollection that we made a great struggle, at the end of the last war, to try to preserve at any rate what the noble Lord, Lord Rennell, has called the intelligence departments. There was a War Trade Department, a War Trade Intelligence Department and other Departments of that kind, and we failed simply and solely on the ground of finance. The Treasury declined altogether to sanction continuance of those Departments. I cannot help thinking that it was a very serious mistake to have made. I think that we should have been in a better position at the outset of this war, and right through the intervening period between the two wars, if the great amount of information which had been made available to the Government had been retained and kept up to date between the two wars.

I agree with my noble friend that we do not want to keep the Ministry of Economic Warfare in operation in its present form after the war has come to an end. Our business, no doubt, from every point of view, is to encourage the interchange of commerce to the greatest degree we can, subject always to the overriding considerations of safety. The old assumption that there is only a certain amount of prosperity in the world and that the more one nation gets the less there will be for others is now recognized as an entire fallacy. It is now realized that the richer one nation is the richer others must be. That must be the ground of our policy. We realize that there must be a tremendous amount of work to be done of an economic character. I should like to see a sub-department brought into existence with a name something like the Department of Economic Co-operation. That, I think, is essential, and I entirely agree that it should go into the Foreign Office Departments as soon as there is no question of fighting, to assist in co-operation with other nations. I very much hope that that will be done. I am satisfied that there will be ample work for a department of that kind to perform, and after the immense amount of thought and inquiry that has been directed to this matter during the last four and a half years it will be simply scandalous, if not criminal, for us to waste it in the coming years, which will be at least as difficult and perhaps as dangerous as any we have seen in the past few years.

LORD STRABOLGI

My Lords, I should like to join in congratulating the noble Earl, Lord Selborne, on the interesting speech which we have heard from him to-day in which he has given us an admirable review of the position with regard to his Ministry. I wish, also, to join in supporting what the noble Earl said in paying tribute to the arduous, unceasing, dangerous, and often delicate work of the Royal Navy, without whose services in exercising the sea blockade no economic warfare would be possible. Once more we are seeing the proof of the old principle demonstrated that, in a fair field, the power which controls the sea routes will defeat the power which controls the land routes. In other words, sea power must defeat land power. It is a long and difficult process, but in the end the crushing weight of a complete maritime blockade is decisive.

I hope nevertheless the noble Earl will not delude himself with the idea that there is not a certain amount of uneasiness among the public about certain other aspects of economic warfare. I was very much surprised to hear him say he regretted that in certain quarters the arrangement, I think he called it, with the Franco Government in Spain was hailed as a victory over the Franco Government. I think that the criticism has rather been the other way, especially on the ether side of the Atlantic; and the general tone of the Spanish Press has been that it is a victory for the Franca Government. That, of course, is an exaggeration. It is an arrangement; but it is rather curious that all that the Spanish Press talk about is that Spain is going to get oil and petrol again, and there is apparently no mention of the other arrangements, such as the reduction of the supply of wolfram to Germany.

What is even more significant is that I have noticed in the organ of my noble friend Lord Southwood, the Daily Herald, which I always read first thing every morning—and which no doubt the noble Earl opposite also reads with great attention, though I do not know at what time of the thy he reads it; but I am sure that he does read it, or it is read for him—that the Spanish authorities in Tangier have apparently been extremely slow in carrying out that part of the arrangement (which the noble Earl told us was a victory over Germany) which provides for the removal of the German Consul-General and his espionage staff from the Protectorate or territory of Tangier. It is also stated that all mention of this part of the arrangement has been forbidden in the Tangier newspapers. I did not give notice to the noble Earl that I was going to raise this matter, but, when he comes to reply to the other points raised by noble Lords, I respectfully suggest that it would be useful if he could say something about it. I suggest that a warning that we mean business with regard to Tangier is required.

Before I leave this question of the Spanish arrangement, I note that in the United States, and particularly in the Washington newspapers, which are presumably in the closest touch with American political circles, it has been openly stated that the State Department of the United States Government, which has sometimes been criticized for over-tenderness to certain Powers in Europe, wished to be far more severe in the terms of this arrangement with General Franco's Government in Spain, and that it was on the insistence of the British Foreign Office that they withdrew and reluctantly agreed to this present arrangement. That has been very widely stated in the American Press, but I do not expect the noble Earl to make any comment on it.

My noble friend Lord Cecil of Chelwood referred to his difficulties with neutrals in the last war—and well I remember them—and to the difficulties which the noble Earl has with neutrals in this war. The truth of the matter is that the old conception of neutrality, which we were brought up to understand, is disappearing. In wars in which we were neutral we always insisted on our right to trade, and my noble friend Lord Cecil will remember very well the case of our ships being intercepted by Russian cruisers in the Mediterranean in the Russo-Japanese war, and the tremendous tension which arose and which nearly led to a break of diplomatic relations. When we became a belligerent we insisted on the full rights, as far as we could exercise them, of maritime pressure by our Navy. Lord Cecil has reminded us of the United States protest against the Black List in the First World War, and he will remember that the moment the United States came into the war they adopted our Black List holus-bolus and proceeded to add to it.

The truth of the matter is that in these days, first of all of totalitarian war, and then of war against robber States such as Germany and Japan, the conception of neutrality has largely disappeared. You cannot have neutrals any longer in the old sense in the future, and we shall not have won this war in the political sense if we do not succeed in establishing a system after the war by which in the case of a new aggression or new outburst of lawlessness no neutrals remain. I think that I carry my noble friend Lord Cecil with me, and he is not only very experienced in these matters but very learned in International Law. I hope that this whole problem of neutrality has been closely studied from the point of view of the future. For that reason alone I should have thought there was a very strong case for preserving at any rate the nucleus of the Department over which Lord Selborne presides, even when the war is over. I understand his opposition to bureaucracy and his dislike of Government Departments and of authority generally, but for those reasons I think there is ground for preserving at any rate a nucleus of the Ministry over which he is so proud to preside.

I should like to ask the noble Earl a question with regard to the Black List. He has said that there is a possibility of the present black-listed firms being discriminated against in the future, but I notice that in the United States it is declared categorically that certain firms who are transgressing very blatantly will remain on the Black List after the war. The question which I venture to address to the noble Earl is this: What steps are we taking to let these Quisling firms in occupied territories and these neutral firms who are trading in war materials with our mortal enemies know that it will not be a case of "kiss and make friends" after the war, but that they will be discriminated against as heavily as possible afterwards? Is that being publicized and conveyed to them through all the usual and possible channels, so that they are in no doubt that, although they may gain now and become rich on this iniquitous trade with the Nazis and the Japanese, they will suffer for it for many years afterwards? If that is made known to them, it may cause a good deal of searching of heart among these scoundrelly merchants.

I should like to go a little further. I suggest not only that they should be warned, but that in certain cases in occupied countries their factories should be bombed, after due warning. The case which I particularly have in mind is that of Belgium. I took the liberty of informing the noble Earl beforehand that I intended to raise this matter. According to the information which reaches me, as we have increased our bombing of the Ruhr and of other centres of heavy industry in Germany, the enemy have relied more and more on the highly-organized Belgian steelworks to supply the deficiency. According to the Belgian underground newspaper Libération, this trade between these Belgium ironmasters and Germany has increased. If your Lordships will permit me to make a quotation from Libération, it is as follows: People talk a great deal about traitors, profiteers, and collaborators … they talk less of the big industrialists who betrayed (heir country in cold blood from the very first day of the invasion—and for more than thirty pieces of silver, too. On November 29, Radio Belgique, which is the radio station controlled by the Belgian Government in this country, alluded to this particular type of collaborators who trade on the misery of the times, work at full capacity for the enemy, and amass scandalous fortunes. The speaker on Radio Belgique went on to say: Any Belgian working of his own accord for the enemy will have to account for his action before Belgian tribunals. That is very satisfactory; the Belgian people, through their Government, will punish these guilty men. The paper Liberation goes on to say, however, that no names were given. It also says: In September of this year, Thomas (basic Bessemer) steel production alone showed a 12 per cent. increase on the average production for the second quarter of 1943. The biggest producers are Ougree-Marihaye (8.5 per cent. increase), Cockerill (14.5 per cent.), Athus-Grivegnee (17 per cent.), Thy-le-Chateau (38 per cent.), Metallurgique du Hainaut (19.5 per cent.), Clabecq (7.5 per cent.). Those, your Lordships will remember, are the largest producers, and they have modern works in Belgium producing high-grade steel. Apparently all this product is going to our enemy.

I have not seen—possibly something has been done, but I do not know about it—any accounts of these targets being bombed. I am suggesting to the noble Earl that these miscreants, the directors of these Belgian steelworks, should be warned that if this traffic continues not only will they be black-listed—they will not mind that, it they can retire to Buenos Aires with large fortunes—but their works will be bombed now. I suggest that that should be done. The reason for this increase given by Belgian editors of Libération, who presumably know the facts, that to a great extent these Belgian industrialists have taken the place of Krupps and the other concerns in the Ruhr. If that is the case I suggest that the situation requires very close attention by the Minister of Economic Warfare. It may be that this has already been given; I hope it has, and I hope that the noble Earl will give the Necessary assurance. I took the opportunity of informing him beforehand that I intended to raise this question, and I think, in the interests of the whole war effort and of the Belgian people themselves, who are suffering cruelly under the German tyranny, that we might have an answer.

The other question that I would like to ask the noble Earl, if there is no objection, is with regard to the Turkish chrome. That matter, as he stated and as my noble friend Lord Nathan reminded your Lordships, now presents a more satisfactory position. The Turkish chrome has been cut off, and the pre-emption has been successfully carried out by the body referred to, but apparently we were not very far-sighted in the early days of the war. I have here a very curious statement 'which has appeared in a newspaper of wide circulation in this country, purporting to be a quotation from a speech by the Turkish Premier at the time of the rather difficult diplomatic situation which had arisen between the United Nations and Turkey over the continued export of chrome to Germany. Apparently the Turkish Prime Minister declared en the 21st April last that at the beginning of the war in 1939 we could, have purchased the whole of the Turkish chrome output for the duration, but we would only contract for two years' supply, with an option for a third year.

According to this newspaper M. Menemenjoglu stated that in 1939 a British Delegation asked for a monopoly of Turkey's chrome, and this was agreed. But when the Turks suggested a contract lasting for the duration of the war, the British would sign for only two years, with the option of a third 'in the event of an agreement.' A third-yeas monopoly was granted, but then, with British consent"— this is the curious part of the statement— Turkey signed a chrome agreement with Germany. I am sure there is an explanation of that, and obviously His Majesty's Government, and still less the noble Earl, have no responsibility for what the Turkish Prime Minister said. But I think some explanation is needed. If the facts are as stated, the explanation may be that there was difficulty in transport. I have seen sonic excuses of that kind put forward, but surely we could have purchased it and stored it. It represents value. I do not know whether it was in the time of Lord Rennell, who made such an interesting contribution in his maiden speech to-day, and presumably it was outside the personal responsibility of the noble Earl, but if the facts are as stated then there must have been a lack of foresight and a great deal of chrome has reached Germany, to her advantage and to our disadvantage, because of this lack of foresight. But, as I say, there may be an explanation, and I should like the noble Earl to give it if he can do so.

I have mentioned these two matters not in a critical sense, especially not the one with regard to the Belgian steelworks. I know the difficulty of attacking such works without damaging the Belgian civil population, but they are important to Germany's war effort. I should like to conclude by generally echoing the view of my noble friend Lord Nathan. I think that our whole policy, viewed over the whole world, with regard to economic warfare, has been well conceived and well carried out, and will have very important results.

VISCOUNT ELIBANK

My Lords, I should like first of all to pay a tribute to the noble Earl and his Department for the operations which they have carried out during the war, and I hope will carry out in the future until the war is concluded. I should not have risen merely to say that, but I feel that I must strike a jarring note in the chorus of praise which has been given to the noble Earl for the plans which they have in view for the future. I listened with very great satisfaction to every part of the noble Earl's speech until he arrived at that part of it in which he outlined the plans for the future. There were two points, both of which gave me grave cause for anxiety. The first one was that as soon as the war with Germany is concluded the Department of Economic Warfare would be closed down, and the United States of America would take charge of all the blockade operations in the Far East.

THE EARL OF SELBORNE

If I may correct my noble friend, I did not say "take charge." I would like to repeat what I said—namely, that I did not think a separate Department in England was necessary for the purpose.

VISCOUNT ELIBANK

I do not quite know what that exactly means. It is rather a cryptic sentence, if I may say so, but I should like to urge at least that if a separate Department is not necessary such Department as may be set up for the purpose in American waters should have a very fair representation of this country upon it. Our trade with the Far East is of very great importance to this country, and measures which are taken under the blockade might affect it very seriously in the future. I hope that the interpretation which my noble friend has placed upon what they intend to do means that we shall be very fully represented on any Department of Economic Warfare that does operate in connexion with the Far East campaign. That was the first point I wanted to raise.

The second point, also raised by the noble Lord, Lord Rennell, was in connexion with the plan outlined by the Minister for the continuance of the Economic Intelligence section of his Department by attachment to the Foreign Office. I cast my mind back about fifteen or twenty years when the same issue was a very serious one—both in the House of Commons and in your Lordships' House. If I recollect aright, there was a Committee appointed by the Government, of which the Chairman was the Lord Chancellor of the day, Lord Cave, and this Committee recommended very strongly indeed that a separate Department should be set up to deal with trade matters—in other words, with economic intelligence. That Report was not immediately adopted by the Government of the day, but it was supported both in the House of Commons and in your Lordships' House. I took part in the debates, and the conclusion come to was that the Foreign Office was not the proper place in which to house that section of our overseas trade because it was felt—and there is no reflection in any way on the Foreign Office in this—that while representatives of the Foreign Office are good diplomatists, they do not pretend to know anything, or very little, about commerce or business.

Therefore I feel very anxious indeed when I hear to-day that my noble friend has made an arrangement with the Foreign Secretary by which it is definitely decided that the economic intelligence side of the Department of Economic Warfare is going to be handed over practically holus-bolus to the Foreign Office. The proper Department to assimilate that section of the Ministry of Economic Warfare is the Department of Overseas Trade. That is the Department which understands these matters. It is dealing with them all the time, and it has to prepare policy and so on. If the Department of Overseas Trade were entirely separate from the Foreign Office, that might be another matter, but the Department of Overseas Trade is responsible to the Foreign Office as well as to the Board of Trade. It is the central organization which tries to meet these particular points—first, trade, and secondly, the foreign diplomatic side which is bound up with trade.

I entirely agree that after this war there will be many trade questions which did not arise after the last war. It will be far more difficult to get out of this war from the trade or any other point of view than it was after the last war, because after the last war we had no preparations, no plans, we did not know where we were going, the whole thing was practically chaos, whereas in this case we are making our plans and trying to see where we are going and we do know something of the conditions we shall have to meet. Nevertheless it will be a great mistake if the Economic Intelligence section of the Department of Economic Warfare is handed over to the War Office, and the Department of Overseas Trade is left out of altogether. I urge with all the strength that I can that my noble friend should discuss this matter again with the Foreign Secretary and see whether it is not possible to bring within the ambit of this new arrangement the Department of Overseas Trade, which is the natural Department to look after this matter.

THE EARL OF PERTH

My Lords, I had not intended to intervene in this debate, but the very important statement made by he noble Earl regarding the arrangements which have been effected in putting at the disposal of the Foreign Secretary the Intelligence branch of his Ministry is such a cause of congratulation to some of us that I cannot refrain from saying a few words on the subject. Some of us have been trying for a long time to reinforce the economic side of the Foreign Office which had been distinctly lacking. The noble Viscount who has has just sat down seems to me to divorce completely diplomacy from economics. It is a thing you cannot do.

VISCOUNT ELIBANK

I cannot allow that statement to pass. Under the present arrangement representatives of the Department of Overseas Trade are attached to the various Legations and Embassies in foreign countries. Therefore there cannot be entire divorce. I never suggested that for a moment.

THE EARL OF PERTH

The noble Viscount said that in the Foreign Office people were brought up to have very little knowledge of economics.

VISCOUNT ELIBANK

I accept that.

THE EARL OF PERTH

Therefore it is very important that people who do know economics should be introduced as a competent Department in the Foreign Office. I would go very much further than the noble Viscount, Lord Cecil of Chelwood, who only suggested a sub-department. I should like to see a very strong Economic Department co-ordinating all this mass of knowledge that comes in and advising the Foreign Secretary. I would hope very much that the nucleus of this valuable Department should continue under the control of the Foreign Office, thus strengthening the central organization, making it more capable of dealing with world problems, and equally strengthening thereby the position of the Foreign Secretary himself.

VISCOUNT ST. DAVIDS

My Lords, we can scarcely fail to be satisfied with what we have heard to-day regarding economic warfare against Germany, but I am very disappointed with what we have not heard about economic warfare against Japan. There are a good many people in this country who talk as if we were only fighting Germany. It cannot be too heavily insisted on that we are also fighting Japan, and that we are fighting her not only with armed forces but also with all our economic power. I do hope, if the noble Viscount is going to give us a few words at the end, he will tell us a little more about Japan.

LORD LATHAM

My Lords, I suffer from the disadvantage of not having been here when the noble Earl commenced his speech, but I did arrive early enough to hear his remarks with regard to the arrangement which has recently been made with Spain. I confess I was a little disturbed when he, speaking for His Majesty's Government, appeared to be anxious that we should not regard this agreement as a victory over Franco. Why, I cannot think. Why should not we be quite satisfied that in the last resort Franco, having realized that his friends and associates cannot now win this issue, has been compelled by the logic of events and the dangers of the future to conclude this agreement with this country? It is in fact, let us be candid, what we have sought ever since the war started—a victory over Franco and a victory over those doctrines and tendencies for which Franco stands.

After all, he provided the initial playground on which the preliminary experiments for this dreadful conflict could be tried out. He co-operated as much as he could with the Axis Powers until it became dangerous to do so. He boasted about sending a Blue Division to Russia and regretted to find that in fact it did become blue from what it met with in Russia. Therefore I cannot really understand this hypersensitiveness of the Government or of the noble Earl in these days not, apparently, to offend General Franco. I think we should exult in the fact that the course of events, the courage and the fortitude of those assembled on the side of freedom and liberty have at last been able to bring Franco to realize what the result of this world conflict will be. I find the only satisfaction in the arrangement made with Spain to be in the fact that we have at last succeeded in bringing Franco to heel. I hope that the Spaniards will be able to continue the process and in the end achieve a democratic and libertarian system in Spain which will accord with what we have in mind as the object of this conflict.

I was also interested to hear that the Black List compiled in war was likely to be kept in existence after the war. After the last war we know that the Black List rapidly became a White List; that those who were on it as a result of what they did during the war became the white-headed boys for peace-time international industrial activity. I would like to suggest to the noble Earl that if the Black List during the war is to be effective after the conclusion of hostilities the Government will need to control the international cartels who were not unfriendly to many of the concerns which have been put upon the Black List during the war and might be in no sense less friendly to them immediately after the war, unless the Government are willing to take control of the activities of these international cartels. I really was interested and amused to note with what glee the noble Earl danced upon the coffin of his own Department. He seemed to be quite encouraged by the fact that he had taken part in his own demise and that the Foreign Office should take over what remained of his Department at the appropriate stage—a kind of Sidney Carton doing a "far, far better thing than I have ever done." If I may say so, this control of those on the Black List after the war cannot be satisfactorily done unless there is an organization to do it, and you cannot plan international activity after the war unless that planning be based upon some effective controls. Whilst I should be the last to suggest that all the Departments which have arisen during war should be maintained in existence after the conclusion of hostilities, I do hope that such arrangements will be made that those concerns which have been quite properly put upon the Black List during the war shall remain on a Black List, the international cartels notwithstanding.

THE EARL OF SELBORNE

My Lords, if I may, with your Lordships' permission, I will reply to one or two points on which noble Lords have asked me questions. The noble Viscount, Lord Cecil, asked me whether there has been any blockade running by air. It is the fact that in the early part of the war the Lati Airline did fly between South America and Europe and during that period a certain number of very important small articles like diamonds and platinum and the like were imported into Europe. Owing to the action of the Brazilian Government and of the United States Government that was brought to a close, about two years ago, and since then there has been, practically speaking, no air flights that would be of benefit to the enemy. There may be attempts to smuggle things like diamonds on airlines that go through territory which we control but I need hardly assure the noble Viscount that we take very elaborate steps to try to prevent that. The noble Viscount also asked me about thirty-eight Irish firms that have been put on the American Proclaimed List. Those firms have been on our Statutory List ever since the outbreak of war, but it really is a matter of little importance because they could not do any trade with Germany; they were mainly the local representatives of German firms. For some reason this small difference between the Proclaimed List and the Statutory List was never adjusted by the United States Government until yesterday, so there is very little significance attaching to that act.

The noble Viscount also asked questions about the financial blockade. I am happy to be able to tell him what we have done in that direction. I need not say that it makes a tremendous difference in this matter that America is our Ally. It would be impossible if the United States and the greater part of the South American Republics were not our Allies, but owing to that fact and in co-operation with our American Allies, we have been able to freeze the assets of all enemy firms and enemy Governments in the American banks. Then we have also black listed neutral firms that exported works of art from Europe to America which we knew to have been looted, or exported works of art or objects of value on German account. Obviously the purpose of that would be to get American exchange in America. Firms who attempted to do it have been threatened with the Black List, and we did stop that traffic. We also did the same in regard to the export of highly valuable postage stamps in which there was a certain amount of trade going on.

But I think the most significant act my Department was able to take was in connexion with a particularly horrible manifestation of Nazi brutality. About eighteen months to two years ago the German Government hit on the fiendish idea of getting American exchange, which they required for espionage purposes, by arresting wealthy Jews in Holland—and in other parts of occupied Europe, but it started in Holland—Jews who had wealthy relatives in America, and by informing those relatives that unless by such and such a date they paid £5,000 or £10,000 into the German, Embassy at Buenos Aires their relatives in Holland would be sent to a concentration camp, and not only the man but his wife and family too. Certain test cases were started by the Germans of this horrible method. The unfortunate victim of this blackmail came to us and of course the matter had to be referred to me. I consulted the Dutch Prime Minister on the subject and we agreed that no man had yet ever given way to blackmail without subsequently regretting it, and that the only way to treat the blackmailer was to tell him to do his worst. Therefore we announced at once that any bank or financial house that facilitated such a transaction or had any part in it, or any individual or firm who acted as intermediary in such transactions, would be put on the Black List. About thirty or forty cases of blackmail of this sort were tried and a corresponding number of victims massacred in Germany because the blackmail money was not paid. Then the attempt to extract American exchange by this horrible method was dropped by Germany because it failed. That is a story from which I think we can derive considerable satisfaction. That is the fullest answer I can give my noble friend in reply to his question on that matter.

The noble Lord, Lord Strabolgi, asked a question about the Tangier Consulate. I have not the slightest doubt that the Spanish Government will fulfil their undertaking in this matter. In reply to his question about the Black List I can assure him that firms on the Black List have not been left, and will not be left, in any doubt about the attitude of His Majesty's Government. He also asked me a question about Belgian steelworks. I am grateful to him for having given me notice on that point, but nevertheless I cannot discuss particular targets in public. I can say, however, that every target of economic importance has been reported on by my Department to the military or air force authorities concerned.

LORD STRABOLGI

That was not the point of my question. May I be allowed to clarify it? Have the Belgian proprietors of the firms been warned of what may happen to them?

THE EARL OF SELBORNE

All owners of factories in occupied territory know that if their factory is working for Germany in a military sense, or indeed in any sense that is important and that justifies it as an operation of war, that factory is liable to be destroyed. The noble Lord will be aware also that we have through the B.B.C. warned on a number of occasions the local inhabitants to get at least one kilometre away from all such factories.

The noble Lord also asked me a question about chrome. Again I have to thank him for giving me notice of the question. Of course the agreement that was made with Turkey in 1939 was not made by this Government. It was made by the preceding Government. That agreement provided that the entire output of Turkish chrome until the end of 1941 should be acquired by Great Britain and France with an option of one year's continuance. That option was exercised and so the entire output of chrome came to this country until the end of 1942, and indeed until January 8, 1943. It is a fact, I believe, that the British and French Governments at that time were offered a very much longer contract but the financial terms were judged to be so onerous that the offer was not accepted. In my view a very great mistake was made, but it is very easy to be wise after the event and critics must remember the fact that our financial position was in many respects much more difficult than it is to-day because Lease-lend had not been born or thought of. It was very important for us to consider in what direction we could best spend our limited resources.

The noble Viscount, Lord Elibank, and the noble Earl, Lord Perth, had a little debate on the subject of foreign affairs by themselves, and I will not venture to intervene except to say that I welcome the assistance of the noble Earl, Lord Perth.

VISCOUNT ELIBANK

Is that the answer to the question I put? Does that mean that the whole matter will not be reconsidered at all?

THE EARL OF SELBORNE

I can assure my noble friend that before I made an announcement to your Lordships the matter was very carefully considered, not only in my Department but also in the Foreign Office and by an Inter-Departmental Committee. I can assure him these changes have not been made without providing that those functions which are necessary shall be fulfilled. I really must ask my noble friend to believe me when I tell him that it is not necessary to keep a separate Ministry for purposes which can perfectly well be left to the Foreign Office and other Departments if the various duties and functions are split up as arranged.

VISCOUNT ELIBANK

I did ask whether the Department of Overseas Trade would come into this arrangement or not.

THE EARL OF SELBORNE

Of course the Department of Overseas Trade already has very close liaison with the Foreign Office, and no doubt will have with the Economic Intelligence Branch of the Foreign Office, which will advise as it does now other Departments beside the Foreign Office. That point, I can assure the noble Viscount, has not been overlooked. The noble Viscount, Lord St. Davids, asked me a question about the blockade of Japan. I must apologize if I gave a false impression. Everything I said applies equally to Japan, but of course there is this difference that Japan is an island and many of the blockade questions with regard to Germany arise from the fact that Germany has contiguous neutral countries. It is when you are bargaining with neutrals that complicated problems generally arise. In the case of Japan it is the American Fleet, now assisted by the British Fleet, that is enforcing the blockade and the complication of negotiation with neutrals really does not come in.

VISCOUNT ST. DAVIDS

In regard to the position of neutrals and Japan, I suggest that in the case of those people who are black listed for trading with Japan, of whom there must be considerable numbers in Siam and similarly situated countries, it is important that we should insist on their being treated in the same way as if they traded with Germany.

THE EARL OF SELBORNE

Oh, yes, entirely. They are on the Black List already. Anyone who has traded with Japan is on the Black List; he has been from the moment he was detected, and he will continue to be on the Black List. The noble Lord, Lord Latham, treated us to a most eloquent speech, to which, I confess, I find some difficulty in replying, because, if he will forgive my saying so, he did touch upon a number of subjects which are a little bit outside the scope, of this debate. He likes to think that we have scored a victory over Franco. I never mentioned the Caudillo's name at all. I said that there had been no victory by Britain over Spain; that Spain and England and America had made an agreement that was satisfactory to all parties. Agreements of this kind are agreements between independent countries made by the consent of all the parties. The only country that was defeated was Germany. I assure the noble Lord that that represents the fact. In conclusion I should like to thank noble Lords generally for the kind way in which they have sat in judgment on my colleagues and myself.

LORD NATHAN

My Lords, I believe your Lordships will agree that this debate has been well worth while. It is a debate to which particular distinction has been given by reason of the contribution made to it by a former Minister of Blockade and the maiden speech of Lord Rennell. I congratulate Lord Rennell on behalf of my noble friends, and I welcome him to our counsels here. I am glad that the noble Earl, the Minister, who has just sat down, has illuminated, but not illuminated too much, so many dark places. He has given us some most interesting and valuable information. He has made a most important announcement with regard to the transfer of the Information Department from his Department to the Foreign Office. I do not wish, at this stage, to enter into any controversial matter, but I would say that it seems to me that the transfer of that branch to the Foreign Office is very apt and appropriate, and useful to the public service. It cannot be believed that the Department of Overseas Trade, and the Board of Trade also, will not have access to any information which may be available to that branch although it be, actually, an organ of the Foreign Office.

I was a little taken aback by what the noble Earl said with regard to the closing down of his Department; not so much from the standpoint of the desirability, at the close of hostilities, of bringing wartime Departments to an end, but because of what seemed to me to be the practical implications of that proposal if it were to be brought into effect as promptly as the Minister seems to anticipate. I have in mind the continuation of the Black List against Japan after hostilities with Germany have ceased. As regards Japan, the list will continue, and it may well have to be extended. The necessity for the list will continue, and the necessity for some organ of Government to supervise its operation will also continue. Moreover there will be a period after the war when the list will have to be continued in operation in some respects. I have already ventured to suggest to the noble Earl that the Black List might be used for the implementation, after the cessation of hostilities, of terms for trading with countries which have been enemy countries. Certainly it appears that, for all these periods, some Government Department will be necessary to deal with matters connected with the Black List. It looked to me as if some gap might be left in the organization. That no doubt will have attention so as to ensure that no such gap is in fact left.

I am prompted by observations made by my noble friend Lord Latham to mention again in a sentence a matter which touched upon in my own speech at the opening of this debate—the propriety of trying to ensure after the war that Germany's holdings in industry, especially certain industries outside the borders of Germany, should be made available to the United Nations. It is clear that, if this is to take place, the necessary operations must be undertaken with care so as not to strengthen unduly the cartels which at present exist even without the participation of German interests. Often in another place, and less often in this House too, I have heard Ministers, replying to debates, say: "I have no complaint to make of the course that this debate has taken." I think the noble Earl, the Minister of Economic Warfare, may say—for I repre sent, I believe, the temper of your Lordships' House in suggesting this—that he has no ground for making any complaint of the course of this debate. We would say to him, "Proceed in the way in which you have thus far gone." I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.