HL Deb 30 November 1944 vol 134 cc53-74

2.8 p.m.

VISCOUNT ELIBANK had the following Notice on the Paper: To ask His Majesty's Government whether, in view of the proposals outlined by the Minister for Economic Warfare in the House of Lords under which the Economic Intelligence Branch of his Department will be handed over to the Foreign Office on the conclusion of the war with Germany, and of the proposals for the reform of the Foreign Service set out in White Paper Cmd. 6420/ 1943, they will make a statement regarding the post-war economic functions of the Foreign Office; and whether the arrangements will be such as will in any way curtail or affect the activities of the Overseas Trade Department; and whether their activities will be maintained on the same basis as before the war; to make certain suggestions; and to move for Papers.

The noble Viscount said: My Lords, in the gracious Speech from the Throne yesterday it was stated that the Government would try to create conditions favourable to the expansion of our export trade. The Motion which I have on the Paper is directed to that end and relates to the Government machinery which is so necessary to assist in creating those favourable conditions. I therefore venture to suggest to your Lordships that the Motion I am moving to-day is moved at a most appropriate moment. It is perfectly true to say that the revival of our export trade will very largely depend upon the initiative and enterprise of individual traders and also upon the modern efficiency of our manufacturers and industrialists. But it is just as true to say that our traders and manufacturers cannot expect to obtain the best results from those efforts unless in addition they have the assistance of Government machinery with a personnel specially trained and expert in foreign trade and assisted overseas by specially trained and expert official trade representatives located in the various foreign centres.

It is further essential that our traders, manufacturers, and industrialists when they visit foreign countries in search of trade should be able to procure on the spot from these official British trade representatives all the best advice obtainable from them with regard to local trading conditions, business firms and individuals in those centres. Of the utmost importance also is it that these official trade representatives should be on the staffs and have the full backing of our Ambassadors and Ministers and of the Foreign Office. Unless this specialized form of Government machinery, which I have briefly outlined, is perfected and made available so soon as the war is over, our traders and manufacturers will find themselves at a serious disadvantage compared with the traders and manufacturers of countries such as, for instance, the United States of America, who have already gone out with both hands—and I do not blame them—to seize all the export trade they can in every part of the world. They have, for a very long time, had a form of machinery such as I have described to assist them and this no doubt will be improved upon.

We must have a foreign trade policy and we must have an Empire trade policy. But it is with our foreign trade policy that I am particularly concerned to-day and I wish to address your Lordships upon it. I submit that a foreign trade policy can only properly be devised and revised from time to time by an ad hoc Department of the Government which has all the foreign strings in its fingers and is in constant expert touch with foreign trade matters all over the world. It is within your Lordships' recollection that in the debates on the 9th and 17th May last we were informed that the Economic Intelligence Branch of the Ministry of Economic Warfare was to be handed over to the Foreign Office after the war. As a matter of fact, there has been a public announcement quite recently telling us that this will happen on the 3Ist December. Seeing on the Front Bench my noble friend Lord Selborne, I wish to say that whilst I am sorry that De- partment is being closed down so early in view of the war in the Far East—a matter which we discussed in the former debate—at the same time I do wish to congratulate him on the way that he has administered the Department during the time it has been under his care. In addition to the Economic Intelligence Branch of the Ministry of Economic Warfare, we were told in those debates that the Foreign Office is to be made responsible—and this is a very grave and tremendous responsibility—for the planning of many economic operations in connexion with Germany after the war, including the post-war economic disarmament and economic control of Germany.

Since those debates I have carefully examined and re-examined the position both from a retrospective and from a prospective point of view, and I have come to certain conclusions which I venture to submit to your Lordships and the Government in to-day's debate. These conclusions, I admit, are not altogether along the line of thought which was indicated by me in those debates, but so far as I am concerned my only wish is to find a satisfactory solution of this very difficult problem which is so bound up with our economic future. The first result of my examination is that as the proposals for the reform of the Foreign Office have in principle received the approval and sanction of both Houses of Parliament, there is now no going back upon them. I accept that. What is also abundantly clear is that under the reform arrangements the Foreign Office are establishing a new sub-department which will contain the Enemy Branch of the Ministry of Economic Warfare, and to that sub-department apparently there will also be attached commercial, diplomatic and consular services. According to the Foreign Service Reform Paper, as I understand it, their functions will be to advise the Foreign Secretary upon all questions of foreign economic and commercial intelligence. What I am anxious to know, and what others are anxious to know, is how far the functions of this new sub-department of the Foreign Office will be executive as well as advisory, and how far they will be dovetailed with the functions of the Overseas Trade Department, and what the functions of the Overseas Trade Department will be.

These questions are questions which require very careful answering because in them is bound up the effective and efficient regulation of the future specialized form of governmental machinery for assisting our trade in foreign countries. For nearly twenty years before the war the Overseas Trade Department was a balancing Department between the Foreign Office and the Board of Trade. It was responsible to both those Departments. This form of dual control was established at the time the Overseas Trade Department was formed, and it has been maintained and continued ever since as the result of the recommendations of the Cave Committee, which reported in 1919. Previous to the setting up of the Cave Committee the unsatisfactory position arising out of dual control was recognized and as a solution it was proposed by the Board of Trade that it should absorb the Overseas Trade Department. On the other hand the Foreign Office proposed that in order to do away with this dual control the Department should be absorbed into the Foreign Office.

From the report of the Cave Committee, I quote this passage: — that in the business community of this country there is a strong body of opinion adverse to this proposal— namely, the absorption of the Overseas Trade Department by the Board of Trade— on the grounds that business men attach great importance to being able to interest directly in foreign commercial questions that Department, namely, the Foreign Office, which has power to exercise diplomatic pressure in a foreign country, and that to divorce commercial from political work will be disastrous and that traders must have direct access to the Foreign Office. The Committee went on to say that they were unable to find agreement on this point between the Board of Trade and the Foreign Office, and so finally, with one dissentient, Mr. Dudley Docker—a very great industrialist and the only business man so far as I can see who was a member of the Committee—they recommended that the system of dual control should be maintained. This system has been continued to the present day, but it is just as unsatisfactory to-day as it was when the Cave Committee was set up in order to consider it. One of the main objections recently advanced in your Lordships' House against it was that the Foreign Office has now become a mere Post Office for the Overseas Trade Department and has no direct control over what happens. Moreover, it has been submitted that the reasons given to the Cave Committee against the absorption of the Overseas Trade Department by the Board of Trade not only still hold good but are strengthened by the fact that foreign political and economic fields will after the war be even mere interconnected than they have been in the past. It is obvious therefore that the main bone of contention is still the Overseas Trade Department and its dual control. The problem is what to do with that Department in order to make it a more useful instrument for the promotion of our foreign trade interests. That is what matters, nothing else.

So far as I am concerned, and I believe I can truthfully speak for the business community, my only interest is to secure a good set of governmental machinery which will help to start our foreign trade going again, to keep it going and to extend it materially. With this object I am going to suggest to the Government that they should do away with the system of dual control and that the Department of Overseas Trade should be completely taken over by the Foreign Office. Looking at the matter from all angles, the Foreign Office seems to me the most appropriate Department to absorb it. I do not suggest that there are not certain officials in the Overseas Trade Department who might go to the Board of Trade—those who have been more closely associated with Empire trade—but I submit as a general principle that the .Foreign Office should be the Department which should take over the Overseas Trade Department. I further suggest that for this purpose a new branch of the Foreign Office should be formed, to be called, say, the Commercial and Economic Branch, and that this new branch should take over in addition to the Overseas Trade Department both the Enemy Branch from the Ministry of Economic Warfare and the Overseas Commercial, Diplomatic and Consular Services. I would also suggest that the United Kingdom Commercial Corporation—I think that is the correct name—should be finally wound up, and that such of its staff as would be helpful in this new branch of the Foreign Office should be absorbed in the Foreign Office. A branch of the Foreign Office established in that way would, I believe, have a force and unity of purpose behind it which has been sadly lacking in the past under the system of dual control, when these two Departments, the Overseas Trade Department and the Foreign Office, have individually and collectively attempted to carry out these duties in the way they have.

There is no gainsaying that so constituted—and constituted as an executive Department, not as an advisory Department—it would help to promote and expand our foreign trade everywhere. Traders and manufacturers would be dependent upon it for advice and assistance here and abroad. It would also assume the very important responsibility to which I referred earlier in my remarks—namely, the post-war economic disarmament and economic control of Germany—and presumably the same would apply in regard to other enemy countries. This new branch would further have to co-operate and work very closely in policy with the Board of Trade, which presumably would still be responsible for our internal trade and our trade with the Colonies and Dominions and for formulating our Empire trade policy. It would have to co-operate very closely also with the Dominions and Colonial Offices and the Ministry of Agriculture, because the foreign trade of the Dominions and Colonies is likely to expand very rapidly after the war. It is only through co-operation between all these Departments that a satisfactory foreign trade policy, and I may add a satisfactory Empire trade policy, can be formulated and carried out.

The activities of this new branch, therefore, would cover a very wide arena and would no doubt be subject not infrequently to public and Parliamentary criticism. This being so, I wish to make a reservation in regard to my proposals. I suggest that this new branch should not be made into just an ordinary sub-department of the Foreign Office under an Assistant Permanent Secretary. On the contrary, so as to add to it the weight it will require, it should, in my judgment, be given a very high status commensurate with its importance, and should have a Parliamentarian at the head of it of the status, at least, of a Minister of State, who should be second in command at the Foreign Office. He would be able to answer Parliamentary questions and to formulate State policy in co-operation or in consultation with, and subject to, the Foreign Secretary. I would also suggest that that Minister of State should not only be a person of high standing in Parliamentary life but, if possible, should have commercial experience as well.

These are the suggestions which I have to make for consideration of the Government, and, for the sake of convenience, as they may seem a little bit involved to some of your Lordships, I am just going to set out exactly what they are. Firstly, that in order to create satisfactory Government machinery for assisting and promoting our foreign export trade it is necessary to remove the existing unsatisfactory system of dual control by the Board of Trade and the Foreign Office over the Overseas Trade Department, and that, with that object, the Overseas Trade Department should be absorbed by the Foreign Office. Secondly, that a new branch of the Foreign Office, with executive functions, should be formed to be called the Commercial and Economic Branch of the Foreign Office. This branch should take over the Overseas Trade Department and also the Economic Intelligence Branch of the Ministry of Economic Warfare as well as the Commercial, Diplomatic and Consular Services. Thirdly, that this new branch of the Foreign Office should, subject of course to the Foreign Secretary, be directly charged with the formulation and carrying out of our foreign trade policy; that it should be assisted in all foreign countries by specially trained diplomatic, commercial trade representatives, who should be on the staffs of, and be directly responsible to, our Ambassadors and Ministers, and through them to the Foreign Office, thus ensuring local and Foreign Office expert backing in our foreign trade and its problems.

My fourth suggestion is that a Parliamentarian of weight, high reputation and practical commercial experience, answerable to Parliament, should be placed in charge of this new branch of the Foreign Office with the standing of a Minister of State, second in command to the Foreign Secretary. Fifthly, that the Board of Trade should continue to be responsible for our internal trade and our trade with the Dominions and Colonies, and for the formulation and maintenance of our Empire trade policy. Sixthly and finally, that in view of the expanding, foreign trade of the Dominions and Colonies, and to assist in formulating foreign trade policy—and I might also add Empire trade policy—there should, in future, be the closest co-operation in all trade matters between the Foreign Office, Board of Trade, Dominions and Colonial Offices and the Department of Agriculture.

These then are the suggestions which I have to make to your Lordships and to the Government for the solution of this somewhat difficult problem. It is my hope that the Government will consider them in the same spirit as that in which I have submitted them, and that the War Cabinet will not allow themselves to be influenced by any Departmental differences or antagonisms, but will be governed only by consideration of the urgent need for creating the best specialized form of machinery possible for securing such Government aid for our foreign export trade as will breathe a new spirit into it and re-create it as a really vigorous entity in our economic life. I beg to move.

2.33 p.m.


My Lords, I think we must be grateful to the noble Viscount for having raised, in a speech which showed much research, the question of the post-war economic functions of the Foreign Office, and of the position of the Department of Overseas Trade. In the debates which took place in your Lordships' House in March and July last year, about the reform of the Foreign Office and of the Diplomatic and Consular Services, the interdependence of economic and political problems was emphasized by various noble Lords who spoke with great authority and with considerable experience in these matters, and the need of a strong reinforcement of the Economic Branch of the Foreign Office was specially urged. We were, therefore, very happy to learn from the Minister of Economic Warfare, in May last, that arrangements were being made for the transfer of what was known as the Enemy Branch of his Ministry, in order to form a nucleus for the constitution of an Economic Intelligence Branch of the Foreign Office. The formation of an Economic Department of the Foreign Office with sufficient authority to advise the Secretary of State for Foreign Affairs is, to my mind, essen- tial, if he is to be adequately equipped to deal with the very numerous world problems which will confront him after the war, and, indeed, may confront him even before that time. I therefore await with great interest, tinged with a Little anxiety, the reply which will be given by the Government spokesman on this particular point of the post-war economic position of the Foreign Office. I earnestly hope that it will prove satisfactory, but if it falls short of what a number of us desire then I shall take the opportunity of reverting to the subject when I have the honour of proposing to your Lordships the Motion which stands in my name, and which is on the Order Paper for December 13.

I would like to turn for a few minutes to the second question raised by the noble Viscount—namely, the future of the Department of Overseas Trade. I fully recognize, and would wish to pay tribute to, the excellence of the work done in the past by the officers of that Department. But in doing so, I must not be held to imply that I consider that the existing arrangements are satisfactory. The Department of Overseas Trade is, as has already been pointed out, responsible both to the Foreign Office and to the Board of Trade, and everyone who has had experience of organization will realize that that is a situation which does not conduce to efficiency. It involves a duality of control and of allegiance, and though, by the oil of good will, the machine may function comparatively smoothly, yet the fact that it has two masters is likely to involve unnecessary friction in its working. I am therefore inclined to support the suggestion made by the noble Viscount that that part of the Department of Overseas Trade which deals with trade and commerce in foreign countries should be placed under the direct authority of the Secretary of State for Foreign Affairs. As regards the remainder of the Department, it seems to me that its duties might well be taken over by the Board of Trade, as the noble Viscount has also suggested.

It is true that if that happens the Department will disappear as an entity, but I see no advantage in the continuance of a Department or of a Ministry if the work which it performs can adequately and more satisfactorily be undertaken by other Departments. I realize that such a solution may disturb vested interests, and may therefore arouse very stiff opposition. Noble Lords on the Benches on my left have sometimes inveighed against vested interests, mainly of individuals and corporations, but I can assure them that if an attack is made on the vested interests of a Government Department the trouble is infinitely greater. Nevertheless, I would remind your Lordships that an admirable example has recently been given us by the Minister of Economic Warfare, and that example seems worthy of emulation. It is true that his Ministry is a war-time one, but that in no way invalidates the argument which I have tried to place before your Lordships.

Before coming to a final conclusion on this point, however, I should like to ask the noble Earl who is to reply for the Government two definite questions The first is whether the officers of the Department stationed at home and stationed abroad are interchangeable. It is quite clear that there are great advantages if they are interchangeable. I need hardly emphasize that point, because that advantage has already been recognized when the Foreign Office, the Diplomatic Service and the Consular Service all became interchangeable. I think the same advantages would be gained in this case. The second question is whether, if the officers are interchangeable, both those stationed at home and those stationed abroad are part of the Foreign Service. If they are not interchangeable, do the officers stationed abroad form part of the Foreign Service? I am inclined to suspect that the answer to the second question will be that the officers stationed in foreign countries constitute what is known as the Commercial Diplomatic Service, and that in its turn becomes part of the Foreign Service. If so, what is the position of officers stationed in countries overseas which are not foreign countries—the British possessions and so on? Are they a branch of the Foreign Service? I do not quite know what the position is.

In any event, the Commercial Diplomatic Service is composed of a comparatively small number of officials; it is in fact almost self-contained. It is only loosely attached to, even if nominally a part of, the Foreign Service. That in itself is had, and it is especially bad because so small a body of officers has very little chance of promotion to the higher ranks of the Foreign Service. Not being direct servants of the Foreign Office, they will have only a very slight opportunity of attaining the higher posts in the Diplomatic Service and in the Consular Service. I feel, therefore, that if the Department of Overseas Trade remains in its present position it is unlikely to attract men of first-class ability, and surely we need the services of such men in such a capacity after the war if we are, as was stated in the debate and in the most gracious Speech yesterday, to expand our export trade. I consider that to be essential. For these reasons I hope that the Government will give very careful consideration to the proposals put forward by the noble Viscount, because I think that they are based on two main principles—namely, the principle of sound administration and the principle of equal opportunity to the officers concerned.

2.46 p.m.


My Lords, the concluding words of the speech of my noble friend Lord Perth were that he hoped that the Government would give very careful consideration to the matters brought forward by the noble Viscount. I venture to echo ,that, but I hope that my noble friend Lord Listowel—whom I congratulate, because I think that this is the first time that he has replied for the Government to a Motion in your Lordships' House—will not give a definite decision. I do not think that a definite decision on this subject can be given now; we must wait until the war is over and see how we stand then. It must be perfectly clear to everybody, however, that in comparatively recent times the whole question of our relations with foreign countries and the importance of commercial, industrial and financial affairs in regard thereto, has very greatly altered, compared with what it was when I first joined the Department. Political considerations are still of the greatest importance, but they have become so much intertwined with commercial and industrial matters that one cannot but consider the question as a whole.

I think perhaps it may be useful to recall the various arrangements which have been made in the last forty years or more in regard to the conduct of commercial and industrial affairs where they are interlocked with our foreign policy, and how they have been dealt with by the Foreign Office and by the Government. When I entered the Service rather more than forty-three years ago, commercial matters were dealt with by the Commercial Department of the Foreign Office; and, although that Department has disappeared, I think that both my noble friend Lord Perth and my noble friend Lord Elibank have said that they wished to see the same kind of system brought back again. The Commercial Department of the Foreign Office, when I first joined it, was under the Parliamentary Under-Secretary, and I gather from the noble Viscount that that is a state of affairs which he would like to see resuscitated, or at any rate he would wish the same example to be followed.

At first sight it might seem that the supervision of the Parliamentary Under-Secretary was an attractive proposal; but, speaking only from my own very limited experience, I am a little doubtful whether there are not certain objections to having a Minister of the Crown as the superintending officer of a Department. The Parliamentary Under-Secretary, and even more the new Minister proposed by the noble Viscount, would stand on the threshold of the Cabinet, and it would be only natural that he should expect to be translated to higher office in due course; and that due course might, and probably would, be a short one. In addition to that, a change of Government would mean that the Minister in charge would be changed, so that there would be a more or less constant change in the superintending official who would look after the Department, and this, I think, would not really be an advantage. It would be much better to have a man who would be there for some years and who would have had long experience and knowledge from the point of view of an official rather than to have a Parliamentarian who may not always be available (although the noble Viscount has qualified the kind of person he wishes to sec placed there) and who at any rate would be fairly frequently changed. I believe that the superintending Under-Secretary, or whatever you like to call him, to the new Commercial Department should be somebody who has long experience and knowledge of what has gone before.

As I say, when I joined the Service many years ago the control of commercial affairs was under the Commercial Department, superintended by the Parliamentary Under-Secretary, and that went on for a considerable number of years; but about 1912, I think, the change was made and the head of the Commercial Department, who was then a senior clerk, was promoted to be Controller of Consular and Commercial Affairs and given the same pay as an Assistant Under-Secretary. I think that was a very good change indeed, because not only did it give the Commercial Department an additional status but also it put it in much closer touch with the Consular officials, who of course in those days dealt mainly from their own point of view with trade concerns. Therefore this additional rank given to the head of the Commercial Department was, I think, a useful change.

There is one other point to be noted about the control of commercial affairs. That is that we know now, as I have already mentioned, that commercial and economic policy is becoming more and more intertwined with political affairs than it was perhaps in the past. I think that in constituting such a new Department one must see that adequate provision is made for the consideration of the political importance of commercial matters. You do not want to see an intperium in imperio in the Commercial Department of the Foreign Office. The interrelation would have to be carefully considered, and I hope that that matter will be adequately dealt with. I have mentioned the arrangements that existed until the beginning of the war. Then a Very great change was made, the Directorship of Overseas Trade was started, and that is going on still. I am inclined to agree with both noble Lords who have spoken that it is not a satisfactory arrangement for the reasons which they stated—namely, that to have two authorities controlling the Department is bound to be unsatisfactory. I would reinforce that opinion by saying that, as your Lordships have admitted, and as indeed is admitted everywhere, the importance of our commercial and industrial relations in regard to foreign affairs has grown enormously. For that reason I think it is absolutely essential that the control of that Department should be in the hands of the Foreign Secretary. After all, the Foreign Secretary is, after the Prime Minister, the most important Minister in the Government, because he controls our most vital affairs. Therefore anything which concerns his office must be under his responsibility.

I entirely agree with what has been said in regard to the undesirability of dual control over the Overseas Trade Department. Perhaps I might, with great respect, offer a slight illustration of what I mean. Some years ago I had the honour of being appointed as delegate at Geneva to the Arms Traffic Conference, and I had with me various colleagues representing the Service Departments and the Board of Trade. That Conference was very largely concerned with matters appertaining to the Board of Trade, who, of course, were deeply interested. But the sole responsible official was the Foreign Office representative, and that is as it ought to be. We all worked together, but I reported to the Foreign Office, and I think that that is the right system. I do not think the Board of Trade should be responsible, and if the Foreign Office make mistakes it is they who must bear the blame. Therefore I entirely agree with my noble friend who has spoken in thinking that the Overseas Trade Department requires careful overhauling, and that the responsibility for all the matters which affect our foreign relations should be on the shoulders of the Foreign Secretary, subject of course to the Cabinet.

2.54 P.m.


My Lords, I must start by apologizing to the House for the fact that I was not here at the opening of the debate, so that I had not the advantage of hearing the beginning of the remarks of the noble Viscount, Lord Elibank. I had an official engagement, but though I made arrangements which I hoped would bring me here in time, in these matters man proposes and London traffic too often disposes. I am replying this afternoon on behalf of my noble friend the Leader of the House, who had originally, as I think the noble Viscount, Lord Elibank, knows, intended to be present himself. He has, very much to his own regret, been prevented by important public business, which he could not postpone or depute to someone else, from replying in person to the noble Viscount's Motion.

The noble Viscount has based his extremely interesting and valuable suggestions on the importance of reviving our export trade at the earliest possible moment after the war. Speaking for His Majesty's Government, I fully share his view that the maintenance and improvement of standards of life in this country will depend upon our exports. Indeed, your Lordships will have observed that our Ambassador in the United States said only a few days ago that our exports will decide whether we are able to eat and work. We also agree with the noble Viscount that the machinery of Government should be so organized and adapted as to serve this vital purpose. I think there is very general agreement nowadays, which will be shared in all quarters of this House—and there are many noble Lords who have had experience of the Foreign Office or of diplomacy—that diplomatic and commercial matters cannot be kept in watertight compartments. In the White Paper, to which the noble Viscount refers in his Motion, the Foreign Secretary has clearly stated, as one of the considerations underlying his reforms, that "economics and finance have become inextricably interwoven in politics." I do not (think that anyone would contest this statement or deny that the Foreign Service of the future should be properly equipped to deal with the economic as well as the strictly political aspects of diplomacy. One of the major tasks of our diplomacy after the war will certainly be the promotion of the export trade of the United Kingdom. And one of the principal objects of Mr. Eden's reforms has been to encourage the future diplomat to fit himself for the work of commercial diplomacy.

In the future Service the pure diplomatist, unsullied by any taint of commercial knowledge, will no longer exist. In fact, he has not existed in practice for a good long time. It is far from the case, as I think has been suggested, that the Foreign Office has become something like a Post Office for the Department of Overseas Trade. This is one good reason for the amalgamation of the Diplomatic Service in the Foreign Office with the Consular Service and the Commercial Diplomatic Service, a far reaching organizational change which since May of last year—eighteen months ago—has been an accomplished fact.

While there is no clear line of demarcation between diplomacy and events in commerce or business, there is surely a very sharp distinction between commercial intelligence, which is relevant to the work of the Department of Overseas Trade, and economic intelligence, such as was collected by the Enemy Branch of the Ministry of Economic Warfare, lately transferred to the control of the Foreign Office. Commercial Intelligence is designed to collect and disseminate information which will assist our manufacturers and exporters to find a market for their goods and to help them so far as possible to expand the volume of their exports to existing markets. The Department of Overseas Trade, in order to serve exporters, must have a first-hand knowledge of the organization of our exporting industries, of their efficiency and ability to export and of the different marketing methods which they employ. By close and regular contact, such as already has existed for a number of years with trade associations, export groups and individual business firms, the Department of Overseas Trade has in fact already acquired a vast fund of information on these subjects. This Department must also—a fact that has been emphasized this afternoon—be able to obtain regular reports from markets overseas of opportunities for export, about suitable agents to handle products of particular firms, about the competitive power of local industries—the industries on the spot—and about the import duties which, in many cases (and I fear this will be one of the obstacles after the war) have to be shouldered by United Kingdom exporters.

Now the Department collects this vital information about foreign markets through the officers of the Commercial Diplomatic and Consular Services which are now branches of the Foreign Service, and through the Trade Commissioners in the Dominions. The first duty—and your Lordships will notice this priority, which I emphasize—the first duty of the Commercial Diplomatic officers is to report direct to the Department of Overseas Trade, and they will not, as I think was stated by the noble Viscount, be attached to the Economic Intelligence Department of the Foreign Office. The Department of Overseas Trade naturally keeps in close touch with the Foreign Office and the Board of Trade, its parent Departments, as well as with such external Departments as the Dominions Office and the Colonial Office. Many problems relating to our exports can only be solved by inter-departmental discussion, and the Departments most frequently concerned in these discussions are the Foreign Office, Board of Trade, and the Treasury. The Foreign Office will continue to confer with the Department of Overseas Trade, with the Board of Trade and with any other Department involved when our exports raise questions of trade policy as well as of political relations with foreign countries. The Department of Overseas Trade, with its intimate knowledge of day-to-day trading with foreign nations and Empire countries, should be able to contribute most usefully to discussions where politico-economic questions are at issue.

But the Foreign Office has felt the need of having within its own organization—within its own four walls—a section that will concentrate its attention on the economic aspect of our relations with foreign Powers. It is hoped with the greater mobility of personnel rendered possible by the amalgamation of the Foreign Service, to secure throughout the whole Service, at home and abroad, wider experience and a more vivid interest in the domestic and overseas problems of our export trade. As one of the fields in Which such experience can be most easily acquired I rank high the two new Departments of the Foreign Office, the existing Economic Relations Department and the projected Economic Intelligence Department. I should like to give one simple illustration of the many different aspects of an ordinary economic event, similar to many others which might occur during the reconstruction period in Europe. The building of a new hydro-electric power station in Austria could affect British interests in a number of ways There is a financial interest if the undertaking is asking for British capital; if German capital is also competing for the business, politics and diplomacy immediately become involved. There is a commercial and exporting interest in supplying the power station with British machinery. There is a further political problem in the effort which Austria may at this future date be making to free herself from dependence on power which has hitherto been generated by German stations beyond the frontier. This is, of course, a purely hypothetical case, but it does show the many economic and political facets of ordinary business events.

In such a case as this, a typical case, I submit the Department of Overseas Trade has only a limited interest—to make sure that United Kingdom exporters obtain information that a specific contract is on offer and of the terms of the tender. It would naturally be anxious that a competent British firm should compete, because of the prospect of immediate sales of British machinery, of later replacements, and of the possibility of introducing simultaneously allied lines of business such as heating, cooking and lighting appliances. The Department of Overseas Trade is not interested—and this, I think, shows the dividing line between the Department of Overseas Trade and the Foreign Office—in the political issue arising between Germany and Austria or to the extent to which other countries, including Great Britain and in that case possibly also Russia, may be involved in this issue. This is a matter for the Foreign Office; and it is with such questions that the new organization of the Foreign Office is intended to deal. The Economic Relations Department will act as a liaison department inside and outside the Office—inside, to correlate economic questions arising in the different political departments of the Foreign Office, which are of course divided geographically according to the countries with which they deal; and outside it will act as a link between the Foreign Office and other Departments concerned with external economic policy, such as the Treasury, the Board of Trade or the Department of Overseas Trade.

The Economic Relations Department—and this is another, a second, function—will also be responsible for advising the Secretary of State on the probable political consequences of any action taken in the economic field, and of the probable economic consequence of any action taken in the political field. Their estimate of the political consequences of economic events will be based on a synthesis of the views they will collect from the Foreign Office, and from other Departments of State concerned with the political aspect of economic relations, such as the Dominions Office, the Colonial Office and the India Office. Their estimate of the economic consequences of political happenings will be based on a synthesis of opinions they will gather from the Treasury, the Board of Trade, the Department of Overseas Trade and from other technical, financial, or economic agencies or institutions such as the Bank of England and the Export Credits Guarantee Department. The branch of the Ministry of Economic Warfare lately under the auspices of my noble friend, which has recently been transferred to the Foreign Office, will form the nucleus of a new intelligence organization. The function of this organization will be to sift economic information received from abroad, which it will scrutinize not from a commercial but from a political and a strategic point of view. Our hypothetical power station, if I may refer to it again for a moment, has for instance considerable strategic importance and both the War Office and the Air Ministry would be keenly interested. But the Economic Intelligence Department of the Foreign Office will not collect or distribute commercial intelligence to United Kingdom exporters. This will remain after the war as it is now the responsibility of the Department of Overseas Trade.

I think your Lordships will agree that the new lay-out of the Foreign Office is a remarkable achievement in war-time. Although, like other Departments, the main preoccupation of its members has necessarily been the conduct of the war, they have nevertheless spared time and energy to put through the most important series of reforms in this Department since the end of the last war. The Foreign Office is sometimes spoken of (not in your Lordships' House but certainly outside), as a last refuge of privilege, where minds are hidebound by tradition and impervious to new ideas, a place to which only the old school tie can gain admittance. But those who make these strictures are those living in the past. For the Foreign Office has responded with that ready adaptability so typical of our British institutions to the challenge of change, and by giving due weight to the economic factor in politics, it is adjusting itself with real youthful flexibility and resilience to the pattern of the modern world.

I hope that what I have said will have removed some misapprehensions in the noble Viscount's mind about the extent to which His Majesty's Government are conscious of the vital importance of using all the available resources of Government Departments for the promotion of our export trade. I hope too that I have been able to throw further light on the way in which our machinery of Government is, in one sphere at least, keeping abreast of the times, and what I have indicated rather sketchily will show the direction in which it is likely to evolve still further. This machinery is designed primarily to secure the closest possible co-ordination and co-operation between the activities of the Foreign Office and the Board of Trade and of the other Government Departments dealing with economic affairs. Provided this close contact and constant co-operation can be secured there should be no danger from dual control of the Department of Overseas Trade. I think this danger is what was feared by two noble Lords who have taken part in the debate and I hope they may feel that a proper co-ordination between the different Departments concerned will avert the risks inherent in dual control.

Foreign economic policy is essentially the product of interaction between different and often diverging interests. What is needed is machinery for reconciling these varied claims and for co-ordinating them with other activities of the Government. To isolate the Department of Overseas Trade—and this is what I fear the suggestions we have listened to this afternoon would amount to—by putting it in a new Department under the Foreign Office would not, in my view, secure this object. It is true that the increase of our export trade is one of the principal aims of our foreign policy, but it also has an extremely close connexion with trade and industry in this county and with our commercial relations with the rest of the British Commonwealth. If the Board of Trade had foreign trade removed from their purview—and this is the consideration I would like to ask the noble Viscount if he would be kind enough to entertain—this would merely reduce by so much that effective co-ordination on which the success of our export policy after the war will largely depend. We greatly fear the consequences of isolating the Department of Overseas Trade from the Board of Trade and reducing its present contacts with business inside the country.

The noble Earl, Lord Perth, was kind enough to give me verbal notice yesterday afternoon that he intended to ask two questions in the course of the debate. The first of these is whether the personnel of the Department of Overseas Trade will serve abroad as well as at home and whether appointments in Whitehall and appointments at Legations and Embassies will be interchangeable, as they are in the case of the Foreign Office. The answer to that question is in the affirmative. That will be the case, and there is no reason why a commercial secretary should not rise to the rank of Minister or Ambassador. They have exactly the same opportunities as members of the Foreign Service and of anyone who is working at the Foreign Office. The second question is whether the personnel of the Department of Overseas Trade will form part of the Foreign Service. The answer to that question is also in the affirmative. It would extend, of course, to the lower grade. The whole of the personnel of that Department will link up with the new Foreign Service.

3.15 p.m.


My Lords, first of all I would add my congratulations to those of the noble Earl who has congratulated Lord Listowel on making his first appearance as Deputy Leader of the House answering in a debate which I regard as of some importance. I feel, however, that on this occasion he has entered into the shoes of his predecessor Lord Snell, who always said that he was put up to reply to unpopular cases and that he was one of the best counsel for the defence in the country. I felt that this afternoon, as I listened to the speech of the noble Earl. I admit that he has made, apparently, a good case in his reply. At the same time I suggest to him, from the point of view of the business man for whom I was speaking, that he made such a complicated case that I feel sure not one of your Lordships who listened to his speech would be able to say clearly and definitely what it meant. I reel that he evaded the principal issue, the question of dual control. I had sent notes of my remarks to the noble Earl and so he knew I was going to raise that question in a serious form, but all through his speech until the very last moment he evaded that issue altogether. I suggest that the question of dual control is still as important after the speech he has made as it was before he made it. Twenty years ago it was a subject of controversy and difficulty, for twenty years it has remained the same and for another twenty years it will go on causing dissatisfaction unless something is done to remove it. Twenty odd years ago a Committee was appointed to consider this question and reported. Personally I do not think it was a very satisfactory report; I think the minority opinion was the best part of it.

The machinery which has been outlined this afternoon by the noble Earl is so complicated that to whatever extent it may be understood in the Department there is no one outside who would be able to grasp all its implications. I feel that once more this subject has fallen between two stools—the differences of opinion between the Board of Trade and the Foreign Office. That is why in the concluding passages of my speech I ventured to suggest that the War Cabinet should take this question into consideration and not be influenced in any way by Departmental antagonisms or differences or by the vested interests to which my noble friend the Earl of Perth referred. It is a very curious thing that all of us who have had experience of foreign trade and its administration, both outside and inside this country, are of opinion that it should be administered and dealt with as one entity from the Foreign Office. We are only the consumers, if I may put it in that way, but as consumers we know what we like and what we believe we ought to get. I urge the Government not to continue along the lines outlined this afternoon without further investigation. I should like to see another Committee appointed to consider the whole question and see whether we cannot really get a practical solution. As the noble Earl admitted in his speech, and as we have urged, a great deal depends upon our export trade. The revival of our export trade means everything to us—our prosperity, our whole national life. If we are to be dependent on the complicated machinery outlined this afternoon for the revival and expansion of our export trade I feel very despondent about it. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.

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