ECONOMIC CO-OPERATION AGREEMENT.

HL Deb 06 July 1948 vol 157 cc381-434

2.37 p.m.

THE LORD PRIVY SEAL AND PAYMASTER-GENERAL (VISCOUNT ADDISON) rose to move to resolve, That this House affirms its support of the objectives of the Convention for European Economic Co-operation signed in Paris on April 16, 1948, and having regard to the need for the achievement and maintenance of a satisfactory level of economic activity without extraordinary outside assistance, approves the Economic Co-operation Agreement between the Governments of the United Kingdom and the United States of America initialled ad referendum in Washington on June 26, 1948, and the draft exchange of notes between the Governments of the United Kingdom and the United States of America on most favoured nation treatment for Western Germany and Trieste.

The noble Viscount said: My Lords, I am well aware that in moving the Motion that stands on the Order Paper in my name I am asking your Lordships to take a very important decision. More than once during the recent months the economic situation has been under discussion in this House. I need not go back over the details of those discussions, or do more than remind your Lordships of the governing facts of the situation—namely, that the deficit on our accounts is continuing; that there has been, hitherto at all events, no substantial check to the progressive rise in prices; that the adverse balance of trade is continuing; that, as your Lordships are well aware, we ourselves, by the loss of overseas assets, have lost a large part of our income which previously reinforced our purchasing power; that we have lost a considerable section of our invisible earnings; that, although our surplus of overseas expenditure has happily diminished, there is still a continuing adverse balance; and that the situation is not confined to this country but is becoming increasingly critical in the whole of Western Europe.

Hence it came about that Mr. Marshall made his great proposal, the generosity of which I am sure is recognised by every one of us, and should receive our tribute at the beginning. I think we may also be glad that our Foreign. Secretary took advantage of this offer to do his best to increase the co-operation amongst Western European countries, and that the co-operation and machinery for dealing with affairs of common interest have made remarkable progress in a very short time. The European Economic Organisation is how in existence and in active session. The purpose of this European. Economic Organisation was defined in the Convention in Paris on April 16, in the light of Secretary of State Marshall's offer to enable the participating countries as soon as possible to achieve and maintain a satisfactory level of economic activity without extraordinary outside assistance. The necessity that that should be achieved, and achieved as soon as possible, is evident to every one of us. The importance of it in world affairs cannot be exaggerated.

The Economic Co-operation Act of Congress required that as a condition of aid there should be bilateral agreements with the participating European countries. For the first quarter grants or loans, as the case may be, were made available on receipt by the U.S. Government of a letter of intent to co-operate on the terms that I have read out. It is evident that a common form of bilateral agreement applying to a large number of nations with different economic circumstances necessarily presented considerable problems of adjustment, but the attitude of the United States has been throughout that each country's freedom o' action, should not be unreasonably prejudiced.

The outcome so far as we are concerned is the Agreement which is how before your Lordships, as set out in Command paper 7446, which also contains certain interpretative notes of great importance. I will refer to these before I sit down. Accompanying it, is another Paper which relates to the most-favoured-nation treatment for Western Germany, and also including Trieste. Your Lordships will not Expect me to go in detail through the different Articles of the Agreement, but I think it right—and I am sure you would expect—that I should call attention to those which are of outstanding importance. Your Lordships will notice that in the beginning of Article II which sets out the general purposes, it says: In order to achieve the maximum recovery through the employment of assistance received from the Government of the United States, the Government of the United Kingdom will use its best endeavours (a) To adopt and maintain the measures necessary to ensure efficient and practical use of all the resources available to it… Your Lordships will note that the United Kingdom is required to "use its best endeavours." Those words denote that the sovereignty of the United Kingdom is fully recognised, but we shall be expected to do, and of course shall do, our best faithfully and loyally to give effect to this Agreement.

In the same Article there is another paragraph of great importance to which I will call your Lordships' attention. It is paragraph I (a) (iii) at the top of page 5, which says: To the extent practicable,"— we shall take measures to locate, identify and put into appropriate use…assets, and earnings therefrom, which belong to nationals of the United Kingdom and which are situated within the United States…. In regard to this your Lordships will be aware that we have certain assets still within the United States; that we have realised our foreign assets to our own severe disadvantage in purchasing power. The Chancellor of the Exchequer, with full authority, said on June 29, and repeated yesterday, in respect of this question of the treatment of assets in the United States, that the United States Government took the view that the measures already in effect in the United Kingdom adequately fulfilled the obligation of the United Kingdom relating to the mobilisation of the United States assets of United Kingdom nationals. That statement of course, of first-class importance with regard to the treatment of assets which belong to this country and which are in the United States.

There is another observation that I should make with regard to this important Article. If your Lordships will refer to the second interpretative note which is on page 12, you will see that the requirement that we should balance our budget is interpreted not strictly as applying annually. The note says: It is understood that the obligation under paragraph 1 (c)…to balance the budget would not preclude deficits over a short period but would mean a budgetary policy involving the balancing of the budget in the long run. That again, as your Lordships will apprehend, is an exceedingly important interpretation of the Article.

Article IV contains provisions in which I am sure your Lordships will be interested, and I ask you to refer to it. It refers to the creation of a special account in the Bank of England in the name of the Government of the United Kingdom in which will be made deposits in sterling, corresponding to the dollar value of the aid afforded by way of grant. If your Lordships look further you will see that it is provided in paragraph 4 that Five per cent. of each deposit made pursuant to this Article…shall be allocated to the use of the Government of the United States for its expenditures in the United Kingdom.… That, I think, explains itself. But it is fair to say that in substance, of course, that 5 per cent. is, to that extent, a subtraction from the total amount freely available. Apart from this provision I think we may confidently assume that the local-currency proceeds so accumulated will be used, to a great extent, at all events, in the reduction of debt. But it is right that I should point out that in that particular Article, 5 per cent. is taken from the total amount available.

I should also draw your Lordships' attention to the most important provisions in Article V relating to the provision of materials for stockpiling or other purposes. It is clearly in our interest to have, so far as we can, in the United Kingdom and elsewhere materials which will give rise to dollar earnings. That is what is involved in that Article. If your Lordships will look at paragraph (3) of the Article you will see that it is pointed out that: The Government of the United Kingdom, when so requested by the Government of the United States, will co-operate wherever appropriate to further the objectives of paragraphs 1 and 2 of this Article in respect of materials"— That is stockpiling materials"— originating outside the United Kingdom. The main provision of the Article relates to materials produced inside the United Kingdom, but this provision applies to the provision within the conditions of the Agreement of stockpiling materials outside. In that connection, if your Lordships will refer to Article XII, you will see that it says: This Agreement shall, on the part of the Government of the United Kingdom, extend to the United Kingdom of Great Britain and Northern Ireland, to the territories specified in the Schedule attached hereto…and to any other territories (being territories for whose international relations the Government of the United Kingdom is responsible).…"— That means, of course, the Colonial territories. As we are all well aware, many of these important raw materials may be, and in fact are, available in Colonial territories and not in the United Kingdom, and this Article is therefore of great importance.

VISCOUNT SWINTON

May I ask the noble Viscount to clarify one matter? He referred us to a paragraph of Article V relating to the co-operation of the Government of the United Kingdom, when so requested by the Government of the United States, for obtaining materials originating outside the United Kingdom. As the noble Viscount has just told us, Article XII defines the United Kingdom as including all Colonies and dependencies which adhere. Am I right, therefore, in assuming that paragraph 3 of Article V does not refer to goods produced in the Colonial Empire but to something wider—to goods produced outside the Colonial Empire?

VISCOUNT ADDISON

I should say no. It refers to goods produced inside the Colonial Empire or any territories—to use the words of the Article—"for whose international relations the Government of the United Kingdom is responsible." Certainly the Colonial Governments are being consulted, and up to the present the great majority of them have agreed to participate in this scheme. I have no reason to expect that the remainder will not also do so.

Now there is another important provision to which I should draw your Lordships' attention. It is in Article VII, and it relates to the provision of information. It is quite reasonable and right, of course, that so far as we are able to provide information which will facilitate the working of this Agreement for the purpose of promoting the restoration which we all have in mind we should supply whatever information we can that is necessary for that purpose. It is provided in Article VII that The Government of the United Kingdom will communicate to the Government of the United States in a form and at intervals to be indicated by the latter after consultation with the Government of the United Kingdom.… and then the nature of the information is set out. So it is for us to do all what we can to assist in that way. There is another important provision in paragraph 3 of that Article, which appears at the top of page 9, to which I must also draw the attention of your Lordships' House. I am sure that it is a necessary provision. The paragraph states: The Government of the United Kingdom will assist the Government of the United States to obtain information relating to the materials originating in the United Kingdom referred to in Article V which is necessary to the formulation and execution of the arrangement.… Your Lordships will also see that at the top of page 13 it is stated that It is understood that the Government of the United Kingdom will not be requested, under paragraph 2(a) of Article VII, to furnish detailed information about minor projects or confidential commercial or technical information the disclosure of which would injure legitimate commercial interests. I am sure your Lordships will agree that that is a necessary safeguard, and that it is of great importance. In Article XIII there are certain provisions relating to the termination of the Agreement in the event of fundamental changes occurring in the circumstances, but I do not think I need detain your Lordships in order to deal with them.

I would like now t a say a word on the Notes on the most-favoured-nation treatment for Germany and Trieste. It is provided under paragraph 5 that the undertakings will remain in operation for two and a half years, and it is also provided elsewhere that the most-favoured-nation treatment will be in accordance with the Agreement on Tariffs and Trade dated October 30, 1947—in other words the Geneva Agreement. I can quite understand that many of your Lordships will be interested to know whether or not this affects our preferential arrangements with the Dominions and ties us in any way with regard to them. It does not go any further than the Geneva Agreement. I can say explicitly that neither this exchange of notes nor any provision in the Agreement itself involves any new limitation of Imperial Preference. That is, I think, a matter of first-rate importance. I refer to this Paper in order that I may make that statement.

As to the amount of aid that will be forthcoming, I may say that discussions are now proceeding with the other European countries and with the United States; but at the moment I am not authorised to give a specific figure. I think, however, that I should draw attention to the necessities of the case. The drain on the sterling area and reserves during the first quarter was £147,000,000 and in the second quarter, £107,000,000, but we received reimbursements of £22,000,000 under the aid programme in the second quarter. Our holding of gold and dollars at the beginning of 1948 was £512,000,000. At the end of June that figure had fallen to £473,000,000, taking account of amounts received as well as of outgoings. As against the £473,000,000, there was an amount of £53,000,000 due for reimbursement under the first quarter of the Aid Agreement. So that, if you allow for that, the holding is still somewhat over the £500,000,000.

None the less, it is clear that up to the present, despite all the economies we have exercised and all the things we have gone without, largely due to the increase of prices and the fact that the increase of prices has affected imports more than exports the adverse balance of outflow from the Fund at the present moment cannot be stated to be less than £25,000,000 a quarter. Therefore, it is evident that economies must be exercised and either reductions must be made in expenditure or increases must be made in our receipts from exports to make good that amount in the immediate future. As the benefits derived from the Aid Agreement will diminish during the four years, it is necessary that we should do much more than that. It is evident that, even with the amount of assistance that will be available under this Agreement, it will not be possible to expect any augmentation in our dollar purchases over the present scale, and we have to aim at increasing our production to compensate for this big drain. But, as I have already said, much depends on the level of prices.

Unfortunately, there is no material indication at the moment that the level of prices is falling. But with all this, every one of us knows in his heart that a country like ours that has made these enormous sacrifices—and it is because of these enormous sacrifices that we are in the position we are—has not entered lightly into an Agreement of this kind. We have done it because, in our view, it is necessary that we take advantage of this great and generous suggestion that has been made to us. It is right, of course, that before doing so, we should consider the alternative. The alternative, in view of what I have said, must be obvious—namely, that in the absence of some Agreement of this kind, made in co-operation with the other European nations, there would necessarily have had to be in the immediate future substantial reductions in the imports of food and raw materials, of oil and other products, some of which would certainly cripple our agricultural and industrial expansion. And that, of necessity, would be accompanied by large-scale unemployment. Apart from all these questions, which affect us alone, we have to take account of what would be the result on the world outside of refusing to enter into this Agreement. The effect on Western Europe and the rest of the world would have been disastrous. We have had to take all these things into consideration, and after prolonged and amicable negotiation, we have formulated, in concert with the other European nations and the United States authorities, the Agreement which is now before your Lordships.

I have not sought to paint a bright picture of what will be the results even of this Agreement. It still leaves hardship and struggle, which are inescapable. What this Agreement does give us, and the other European countries, is time. It gives us time in which we and the other European countries can increase our productivity and that of our overseas territories. It gives us time to work out, with the other participating countries, a programme for increasing trade between them and the sterling area as a whole. It gives us time to build up a more efficient industry, producing more cheaply the goods which other countries need. I may say, parenthetically, that I am sure all the evidence shows that there are still possibilities of a great increase in food production and other forms of production in this country, provided that the most efficient and up-to-date methods are adopted. The Agreement gives us time to expand our markets in hard currency areas. It gives us time to expand our agricultural production even beyond the present target we have set ourselves. And it will also give us time to develop new sources of supply—a question which we have discussed more than once in your Lordships' House—in different parts of the Commonwealth, in Africa and other parts of the world. That is what this Agreement really provides for us. The task which this country and Western Europe must achieve before 1952 is formidable, but this Agreement, which I now commend to your Lordships, provides us with the opportunity of fulfilling that task.

Moved to Resolve, That this House affirms its support of the objectives of the Convention for European Economic Cooperation signed in Paris on April 16, 1948, and having regard to the need for the achievement and maintenance of a satisfactory level of economic activity without extraordinary outside assistance, approves the Economic Co-operation Agreement between the Governments of the United Kingdom and the United States of America initialled ad referendum in Washington on June 26, 1948, and the draft exchange of notes between the Governments of the United Kingdom and the United States of America on most favoured nation treatment for Western Germany and Trieste.—(Viscount Addison.

3.8 p.m.

VISCOUNT SWINTON

My Lords, the Motion which the noble Viscount has submitted to your Lordships House is indeed of the utmost importance. The enterprise which we are invited to approve is of vital consequence, not only to the United Kingdom, but also to the whole free world. Although the problem and the solutions proposed are so vast and the Agreement submitted to us necessarily so comprehensive and complicated, I think the issues are relatively simple and clear. Nor do I think there is any assembly in the world where those issues could be debated with more understanding and more experience than in your Lordships' House. We have had an opportunity of studying the Agreement, we have heard the exposition of the Leader of the House, and probably most of us have read the more detailed exposition of the Chancellor of the Exchequer in another place yesterday. I do not propose, therefore, to follow either of them in a consecutive review of the clauses of the Agreement. I think I can serve your Lordships' convenience better if I concentrate on certain aspects and topics which I am sure have been present to the minds of all of us, and which I suspect have occasioned some, indeed many, noble Lords, a certain amount of heart searching and anxiety. I say at once (and I know that in this I express the view of my noble leader, who will speak later in the debate) that this is an Agreement which, in all the circumstances in which we find ourselves to-day, we feel we ought to accept and support.

Let me begin as is indeed fitting, with a tribute to the man who is primarily responsible for this plan, and with whose name it will always be associated. I suppose that of all the great commanders in the war the man who saw total was in every theatre most dearly was General Marshall. To that strategic conception he added an acute appreciation of ways and means—what our American Allies call logistics—and of the co-operation which was necessary both in strategy and in ways and means. He was, indeed, a great strategist and a grand co-operator. It is a remarkable achievement that the same man has been in a position to apply, and has applied, the same practical vision to world recovery, as he applied to world war.

While we may, and indeed must, regret that we need this help to play our full part, that does not in any way diminish our appreciation of the great economic conception of the United States statesmen, or of the generous and understanding response of the American people; for no more in America than in this country is aid provided by some remote unit called "the State." When we talk of the provision of billions of dollars—whether it be by loan or by grant; and the bulk of this is going to be by grant—that is not the creation of a credit by some financial manipulation. Every dollar of it is money voted by the Parliament of the United States, and their action has been unanimously endorsed (it is most remarkable that in an election year it should be unanimously endorsed) by the generous understanding of the American people. It must be a sobering reflection for the more exuberant and less responsible members of the Socialist Party (I am sure that I do not include Lord Pakenham in that section of the Party, and I hope I do not include Lord Ammon) that to-day we in this country are living on two things: we are living on the past accumulations of a century of free enterprise, and on the generosity of the United States of America, the greatest capitalist country in the world. On those two sources to-day depend in a very large measure our employment, our food, the raw material for our industries and the social services which we enjoy.

It is a sombre and humiliating reflection for all of us that this aid would to-day not be necessary or would be needed in much smaller measure if the former Chancellor of the Exchequer had not so recklessly dissipated its predecessor, the first American Loan. I may add that I think our troubles have been added to. The noble Viscount, Lord Addison, spoke of the difficulties of rising prices for what we buy. I do not think I would be unduly controversial if I said that those troubles have not been diminished and our resources have, in fact, been more depleted by an insistence on a policy of bulk purchase, and also by excessive Government expenditure. The noble Viscount the Leader of the House said that even when this aid was forthcoming great economies would be needed and great sacrifices would have to be made. Is the economy to be made everywhere, and the sacrifices to be called for everywhere, except in the expenditure of His Majesty's Government? That economy might well be added, if, indeed, it is not explicit or implicit in the principles of sound finance and recovery which are laid down in the Agreement. It is in those circumstances—concealed so far as they could be by the former Chancellor of the Exchequer and disclosed quite frankly by the present Chancellor of the Exchequer—that I think there is a general appreciation of the situation in which the country would be if this generous offer were rejected. As the Chancellor of the Exchequer has said and the Leader of the House has repeated to-day, our reserves would soon be exhausted. We could not pay for our food or raw materials; unemployment on a vast scale would be rife; and we should be unable to maintain even our present meagre rations.

This aid is offered as part of a wide plan for European recovery, for which our own recovery and our own co-operation are vital. I think most of us are convinced that security and economic recovery are interdependent. If economic warfare is a necessary element of war, economic prosperity is an essential element of peace. There are few to-day who would deny that the security of Western Europe, and its economic recovery, are intertwined with our own. But even more strongly do we feel that, real as are our ties with Western Europe, much closer are our ties with our own Commonwealth and Empire. In that unity has lain our strength in two world wars. In that unity lies our abiding economic strength, and anything that weakened that unity or fettered its free development would weaken not only the economic life of the Commonwealth and Empire but world recovery as well. It is from that point of view that some of us scanned this Agreement most anxiously.

I note with relief what has been said by the Leader of the House to-day, that the Agreement has no such weakening effect. Article II, paragraph 1 (d), of the Agreement, which reproduces a part, I think, of Section 115 of the Economic Co-operation Act, speaks of the need for co-operation in an increasing interchange of goods and services and a reduction of the barriers to trade among the parties and with other countries. I have always held, and have frequently expressed in this House, the firm conviction that there is no conflict between economic co-operation within the Commonwealth and Empire and co-operation of the Commonwealth and Empire with the countries of Western Europe. I am quite sure that that is true. So far from being mutually hostile or exclusive, they are essentially complementary. All resources and all possible co-operation will be needed.

But we can play our part in world recovery, just as we can only play our part in world security, only if there is the maximum of economic development and trade co-operation within the British Commonwealth and Empire. I believe that to be axiomatic of all the great trade blocs or associations, whether they be rigid customs unions or looser associations like our own. It is indeed obvious that international trade—which is not something devised by some mysterious multilateral body of economists—is the aggregate amount of business which all the world does. If two countries can trade together, that is a good thing; and if those two countries become more prosperous by that trade they will be able to do more trade with the rest of the world.

I do not profess to be a political economist. I had some difficulty with the subject in my schools, and though in later years I have always employed an accountant to do my accountancy work for me, I have not always employed an economist, because I am not sure that they all know the facts of life. But I am quite sure that the elementary truth I mentioned earlier is just as true in the life and intercourse of nations, as it is in the life and intercourse of individuals. That axiom is equally true of the United States of America or of the British Commonwealth, and it is not a matter of theory. We have seen it happen over and over again in practice, in times of depression and in times of expansion. When internal trade within the customs union of the United States is prosperous, at that moment the United States' trade with the rest of the world increases. It is just so in the looser-knit unity of the Commonwealth: the more its countries trade with each other the more prosperous they become and the more they are able to buy and sell to the rest of the world.

We must be sure that this power to help ourselves, and thereby to help others, is not impaired. We are assured by the Leader of the House that that is so and, of course, I accept the assurance. If I may summarise the position as I see it and as I understand the noble Viscount to have re-stated it to-day, I would put it like this. We are bound by the Geneva Agreement upon certain tariffs. That was an ad hoc Tariff Agreement under which a number of countries agreed to make certain tariff adjustments—never mind whether they were by reduction of tariffs or by agreements to stabilise them. That was an ad hoc tariff bargain—be it a good or bad business deal—into which all countries entered willingly and which lasts, as I understand it, for three years. Then there is the Havana Agreement. We have been repeatedly told that the Havana Agreement—which I will not discuss at all—will have no force; and that it will be ratified (if the Government at some future time desire to ratify it) only when it has been brought before both Houses of Parliament and approved. That is in no way affected by the Agreement into which we have entered.

The third position is one which has been stated frequently in our debates and assented to by spokesmen of the Government. We have been told that we are the judges of whether any Tariff Agreement we are asked to make is reasonable, and that neither we nor our Commonwealth partners can be forced into any agreement which we do not think to our mutual advantage. Those propositions are assented. If those propositions are firmly established, then I do not think that this Agreement in any way fetters us in the development of Imperial Preference, or makes any difference at all. I am sure that there are many who wanted to have that assurance.

I will refer to only one other Article of the Agreement, because I think it has been the subject of some misunderstanding. I hope that I understand it myself, but I shall be corrected if I put a wrong interpretation upon it. It is Article V, which provides for stockpiling, and the general provision is this: The Government of the United Kingdom will facilitate the transfer to the United States, for stockpiling or other purposes, of materials originating in the United Kingdom which are required by the United States as a result of deficiencies or potential deficiencies in its own resources, upon such reasonable terms of sale, exchange, barter or otherwise, and in such quantities, and for such period of time, as may be agreed to between the Governments of the United States and the United Kingdom after due regard for the reasonable requirements of the United Kingdom for domestic use and commercial export of such materials. I am bound to say that I do not think that any exception can be taken to that Article. In the British Empire we have always given the world free access to our raw materials. We have sometimes been charged by ignorant, uninformed or misinformed persons with having kept the Colonial Empire as an enclave which we exploited for our own benefit. We never did anything of the kind; indeed, anybody who has been Colonial Secretary will bear me out that our anxiety was to sell as much as we could. We did that not merely because it was a good neighbour policy but because it was good business for our Colonies; it is in the interests of the Colonies themselves, of course, to have as wide a market as they possibly can. In the war, we had Reciprocal Aid and Lease-Lend. Obviously it is good neighbour policy and good business that we should sell as much as we can and it seems to me to be sensible in every way that if there are things which the United States require, they should be able to collect stocks of those articles. I would add only this proviso—and although I am not sure whether it is in the Agreement itself, I am sure that it is present in the minds of both of us—that one thing that users in the United States will not want is a constantly fluctuating market. They are perfectly happy with a steady economic price. But that point has to be safeguarded. If you have large stocks piled up in the world—very necessary reserves though they may be—you do not want those stocks, or a large part of them, suddenly to be thrown on the market and so upsetting it.

Then there is the proposal, under Article IV, that 5 per cent of the purchase price of the stockpile shall be paid for by the United Kingdom out of the sterling value of the free grants which this country receives; therefore the stockpile can be paid for in sterling only to the extent of 5 per cent. of the free grants. As to the balance, it would be paid for in dollars. I am bound to say that I do not think that is an unreasonable provision. We might have been asked to do more on the lines of Reciprocal Aid in the war. In the war, the United States of America gave us everything they could for the war effort under Lease-Lend; and we provided free of charge everything that they wanted and that we could provide either in this country or in the Colonial Empire. That was a reasonable agreement between Allies and friends. It might have been suggested that a little more should be done out of this account; but I think it was very wise that that was not required, because our common object, after all, is to bridge the dollar gap, and it would not be reasonable to draw a large part of the stockpiling from the sterling balance.

In this connection it is important to know as soon as we can how much of this aid is to come in grant and how much in loan. I appreciate that that cannot be said to-day with certainty, although I understand that——

VISCOUNT ADDISON

It is a proportion of twenty-five to seventy-five.

VISCOUNT SWINTON

That is, twenty-five in loan and seventy-five in grant. Now the recovery plan is essentially realistic. It would be unrealistic and inconsistent with the objective of bridging the dollar gap and restoring and increasing normal trade with the United States of America if we assumed debts which we could not pay, or if we were paying interest of the debt on one account, while we had to restrict future dollar purchases on the other hand. That would not be meeting our common purpose.

If I may sum up the points I have tried to make to-day, I would say this. We do not like being dependent on the charity of our best friend. But it is right, in our own interest as we find ourselves to-day and in the interest of Europe and the world, that this Agreement should go through. It is a great and generous offer so far as the United States are concerned. The Agreement appears to me to be widely and therefore wisely drawn. We are at one on the common objective of European recovery, and there is general agreement as to the way we should travel to reach it; but the course is not plotted with too much particularity. Within the general conditions which we have agreed are the right road to recovery, whether we receive this aid or not, the responsibility, as I understand it, is ours. We are, as I think the Chancellor of the Exchequer phrased it, "Masters of the means." That puts a grave responsibility on the Government. It is a responsibility by precept, by example and by action to unite the nation as they were united in the war with the single-minded purpose to win the war. I cannot help saying—and I have nothing to say against the spirit of the noble Viscount's speech in introducing this Motion—that that spirit is singularly at variance with that of some of the speeches which have been delivered during the week-end and in recent days. United action is the only sure way, as it is the quickest way, to our goal, the goal of recovery and independence: independence not in order that self-sufficiency may induce isolation, but so that we can more effectively play our part in the world where, whether we like it or not, we are all members of one another.

3.39 p.m.

LORD RENNELL

My Lords, I am a little surprised that the two noble Lords who have addressed you have referred particularly to the Agreement which is the subject of this Motion as, I think, outside the framework in which it has happened. The noble Viscount the Leader of the House rightly spoke of the part that we had to play. He spoke of the effects upon us of the Agreement which it is now proposed to sign. The noble Viscount who has just sat down spoke of the effects of the Agreement on the Commonwealth and the part which the Commonwealth might play. It seems to me, however, that this Agreement is part of an even bigger thing than that. As I see it, this Agreement is the third stage of what is perhaps the most remarkable international development that has ever been seen.

The first of these great achievements in the international world was the Lease-Lend Reciprocal Aid Agreement of the Second World War. The second was the American Loan Agreement of 1946. And this Agreement is part of the general conception of the responsibility of the American people to the world as a whole. To me, the reception of these three different international Agreements, which form part of a whole, is interesting; and I think it is significant of our own attitude of mind. It is our own attitude of mind in this that seems to me to concern us. When the Reciprocal Aid Agreement was framed and signed, we entered into that Agreement with no misgivings whatsoever. We were satisfied in our own minds that the obligations imposed upon us had been fulfilled, were being fulfilled, and would be fulfilled. We were satisfied that, provided that we received aid from the United States under the Reciprocal Aid Agreement, we were in a position, and had been in a position, to play our part. It is always said that it is more blessed to give than to receive. Certainly, it is more difficult to receive than it is to give. It is because of that difficulty that many in this country had misgivings about the Loan Agreement, and have misgivings—because it is idle to deny it—about the present Economic Co-operation Agreement. And yet we had no misgivings about Reciprocal Aid during the Second World War, because I believe that we were then satisfied, as perhaps we are not quite so satisfied to-day, that we were in a position to fulfill the obligations which had been imposed upon us, and that we had played, and were playing, our part in as full a measure as the United States were playing their part under Reciprocal Aid.

The rôle of the recipient is never easy unless the recipient realises to the full that to receive contains an obligation which goes far beyond what can ever be conveyed by, or incorporated in, any written agreement. It is for that reason, if only for that reason, that I perhaps underrate the importance of this Agreement in the form in which it has been written. Much can be said about this Agreement; much controversy can be made about many of the clauses, and a great deal can be said on both sides of the argument which it would not be fitting on this occasion to say. I am very glad that the opening remarks of the noble Viscount the Leader of the House, and of the noble Viscount, Lord Swinton, have given a lead which I am sure is right, that the debate in your Lordships' House to-day should not take the form of an economic debate or a debate upon the economic affairs of this country. If, for the reasons that I have stated, the Agreement is controversial and if, at some later date, we come to examine the economic situation, I think that we shall still see that, in spite of what is written and in spite of the obligations which are imposed upon us, there are yet beyond those written clauses greater obligations now than there ever have been before. If we, in our minds and in our consciences, are satisfied that we can fulfill those obligations, and that we shall fulfill those obligations., then the rôle of the receiver will be less difficult. Otherwise, it will remain very hard.

To translate what I have said into simpler language: what is obnoxious to us is not to receive but to feel that we are receiving without having ourselves to give, without having to fulfill the obligations. It was that sneaking thought, I am sure, which was at the back of people's minds when in this, country, two years ago, they did not give that full support to the American Loan Agreement which I for one felt it merited. Many people thought—and perhaps still think—that we were embarked upon a road which would not allow us to fulfill the obligations which we had assumed and which we owed to America under the Loan Agreement. It is that same feeling, perhaps, which leads people to-clay to wonder whether this Economic Co-operation Agreement is right for us—I repeat: "is right for us." It is right only if we realise and accept all the obligations which are contained, not only in the text of the Agreement but, above all, in the Preamble. I thank it is more important for us to realise the intention which lies behind this Agreement than it is to study the wording of particular clauses or the interpretations which are put upon them. In the Preamble is laid upon us—as it is also laid upon the United States—the obligation to restore, in European countries and in countries that are like-minded, "the principle of individual liberty, free institutions and genuine independence." We are not to do that only for ourselves; we are to seek to do that for others as well. This is not a bilateral Agreement. It takes the form of a bilateral Agreement, but it is very much a multilateral Agreement, in which we have imposed upon us—and have freely adopted—obligations to do unto others we would they should do unto us. In that context, I can see little merit in discussing whether this clause or that clause is burdensome, difficult or dangerous.

In the Reciprocal Aid Agreement of the Second World War, there were many clauses which were equally controversial, but over which, as your Lordships know as well as I do, no controversy arose. Many of those clauses could have led to very great difficulties. They did not lead to any difficulties. They did not lead to any difficulties because we were satisfied of the intentions of the United States and they were equally satisfied of our purpose. I believe that the same lack of controversy can carry to a successful outcome this culmination of the American plan for the rehabilitation of the world, because the intentions of both sides, freely accepted and freely adopted, have been recognised by people who believe that those obligations can and will be fulfilled. There is one further and perhaps nearer reason why, in my submission, the actual wording of this Agreement is a matter of perhaps secondary importance. As your Lordships know, the whole plan is a four-year plan, but a plan which may in certain circumstances be terminated at six months' notice by either side. To those who do not agree with the policy which has been adopted by His Majesty's Government of going into this plan and of playing our part I say: Will you move to terminate this Agreement and to give the six months' notice? I should be surprised if anyone from our side of the House did that in the course of the Agreement.

But there is another and perhaps more important reason why this Agreement is in fact a terminable Agreement. Every year the appropriations under this plan have to be voted by the Congress of the United States; every year the grants or loans will have to be approved; every year what we have done in this country will fall to be judged by the American people, freely assembled to give their opinion about whether we have played our part and whether we have lived up to the obligation we have assumed. If the American people do not believe that we have done so, the material which alone makes this Agreement possible will cease to be available and the Agreement will be terminated. My Lords, the opinion of the American people, the verdict of Congress on those occasions, will be given not by considering whether we have or have not precisely fulfilled the wording of any particular clause or sub-clause of this Agreement; the American people will give their verdict when in their common sense they have come to the conclusion that we have done our best under the leadership of our Government at the time, and when they are satisfied that our Government have given the right leadership and that the people of this country have responded.

That is what is really important at the back of this Agreement; that is what is at the back of our minds. Those of us who have the faith that the people of this country can and will play their part will support this Agreement; those who have not that belief will go against it. For my part, I have an entirely clear conscience about it. Two years ago I believed that the Loan Agreement was a second great manifestation of American thought and generosity. I believe that it was right to accept the aid which then came to us. I still believe that there was no other course possible, and that no other course should have been taken. I am equally confident that it is right for this country to enter into this obligation; to learn the other road of receiving instead of giving; to do what we are engaged to do; and I have no doubt that the people of this country, with whatever Government they have chosen, will succeed in fulfilling their part.

3.54 p.m.

LORD STRABOLGI

My Lords, I hope my noble friend the Leader of the House will allow me to congratulate him on the very precise and clear explanation he gave of this rather complicated matter, and, as nobody else has done so, perhaps he will allow me also to congratulate him on his promotion to Paymaster-General. The noble Lord who has just addressed us from the Liberal Benches gave, I thought, a badly needed warning that this arrangement is, by its very nature, temporary. The United States Congress of next year may be of an entirely different composition; many things may happen, and it is within the discretion of Congress to terminate this Agreement. That being the case—and I hope my noble friend, the Leader of the House, will allow me to make this point—what I miss in all these discussions, both inside and outside Parliament, is what is the alternative plan if such a thing should happen. The noble Lord, Lord Rennell, has told us quite clearly what may happen. I presume—in fact, I take it for granted—that an alternative plan does exist. But I venture to suggest that that fact should be made known to the British people, and that they should be prepared for the certain sacrifices and even privations which will be necessary if we have to put it into operation. My understanding is that up to a little time ago it was still doubtful whether this arrangement could be come to with the United States and, therefore, the Government had their alternative ready. I hope I am right and that this could have been carried through. I make the suggestion with great seriousness that the people should be warned of what it may mean if the worst comes to the worst next year or the year after. That is only common prudence.

There is one alternative which was suggested in the speech of my noble friend the Leader of the House, and one which has been discussed frequently in your Lordships' House and in another place—namely, that, whatever happens, we must make the most vigorous drive possible to develop our agriculture. I am not in any way criticising the Ministry of Agriculture and Fisheries, and certainly not the Government, in this matter, but my noble friend suggested that more could be done. It must be done, whatever happens. It is part of our duty to make sure in the next five years—because then, in any case, the whole arrangement comes to an end, and also in the light of the contingency referred to by the noble Lord, Lord Rennell—that we make the utmost use of our soil. I do not think Lord Addison and the other great experts or agriculture in your Lordships' House would agree that that is at present the case. Our sheet anchor is the use of our own soil to the fullest extent. The sort of thing I have in mind is not only the present use of good soil, middling soil and poor soil, but the use of soil or land that has been looked upon in the past as uncultivatable soil. With modern methods and implements and modern science we can bring into use vast areas of soil which are at present almost unused. I suggest that as an economic proposition, even though it may not show paper profits. There was a certain department in one of the Defence Services in the recent war which displayed over its portals an amusing caption: We solve difficulties here. The impossible takes a little longer. I suggest that that might go over the doors of the Ministry of Agriculture and Fisheries and should be emblazoned in every room in that Department. Certainly that spirit is needed.

I have another suggestion to make, with great humility, to the leaders of the two great political Parties which sir on the other side of the House. A great deal of harm is being done all the time by a certain type of British subject who goes abroad, for whatever purpose, and proceeds then to belittle everything that is being done in this country. It is not so much a question of abusing the Government—every Englishman always does that. That is not the point. But the deliberate crying down in countries abroad by this type of person of the efforts of every section of our Community is undoubtedly doing much harm. In the last six months, I have met this sort of thing in South America, in south Africa and in Canada, and our diplomatic representatives there have complained very strongly indeed of its evil effects. In many cases the people concerned are apparently prominent people; certainly they are in many cases people in a certain social position in this country. I am told that the same sort of thing happens in the United States. People in that country deplore it as does our Ambassador in Washington.

VISCOUNT SWINTON

Could not the people of whom the noble Lord is speaking pair with the fellow-travellers, and then we could get rid of both?

LORD STRABOLGI

I am sure that a good deal could be done in this respect by the leaders of the Liberal Party and the Conservative Party—particularly by the leaders of the Conservative Party—for I do not think that the people who are guilty of this mischief are members of the Labour Party. I have never heard of any who are, at any rate. I think that anyone who has the means of doing something to stop that sort of thing should regard it as a public duty to do so. No effort should be spared to bring all possible influence to bear to put an end to this mischievous behaviour. After all, whatever our shortcomings and whatever our mistakes have been, our exports are up, 134 per cent. compared with 1938. In the circumstances, that is a remarkable achievement. I think it is a fact that should be driven home on all possible occasions, and that overseas peoples should be informed of it.

The next suggestion which I have to make is that, whatever happens and however we go through the next five years, we should not relax for a moment our efforts to push our trade and commerce in every possible direction. I hope that we really mean it when we say that we are prepared to divorce commerce from politics. Let me cite two examples to illustrate what I mean. First of all with regard to trade with Spain. I am very glad indeed that a trade Agreement has now been reached with the Spanish Republic. I have said so before in this House and I say again, that there have been certain lunatics in my own Party who would not agree to trading with Spain, simply because they do not like the complexion of the Spanish Government. There have been certain lunatics in the Parties opposite who have opposed trading with the countries of Eastern Europe—and with Russia in particular—because they do not like the Governments there. That sort of thing is sheer madness—in fact, in the present circumstances it means suicide for this country. In the past we have traded wherever we could, and we must do so in the future.

In this connection I must ask my noble friend the Minister for Civil Aviation if, when he comes to reply on behalf of the Government he can give some further elucidation upon something which is not in White Paper No. 7446 but which, I understand, is in the United States Act.

That is the proposal, or the condition, that goods which are on the United States black list and which cannot be sent to certain countries in Eastern Europe must not be supplied by the recipients of the aid. That, of course, is reasonable enough when we are speaking of war materials and munitions. But I understand that it can also apply to goods made here from our own as well as from E.R.P. materials, if those goods happen to be on the United States black list and are not allowed by the United States to be exported to certain countries in Eastern Europe. If they are not actual munitions of war—and, apart from those, almost everything can be said to have a war potential—that is a most serious matter. It might mean interfering with our normal commerce with Eastern Europe and the Balkans.

I would particularly draw the attention of my noble friend Lord Pakenham to a letter in The Times to-day over the signature of Mr. M. I. Lipman, in which some consideration is given to this proviso, which it appears is in the American Act, with regard to goods on the American black list. I think that is a matter which might well be cleared up especially as in the Agreement before us—it is in Article II (1) (d)—it is laid down that (I am paraphrasing) we are to co-operate with other participating countries in facilitating and stimulating the interchange of goods and services among participating countries and with other countries. That would seem to show that the ordinary interchange of goods and services with countries other than the sixteen who are participating in this very generous American assistance and the British Dominions is encouraged. I hope that my noble friend Lord Pakenham can give us some further enlightenment on that matter, as this is the last opportunity we shall have before the Agreement is signed. I am sure that any information he can give will be extremely valuable.

The noble Lord, Lord Rennell, said that this was no occasion for a general economic debate, and I am rather inclined to agree with him. We have to decide whether, in all the circumstances, we can support this arrangement with the United States or not. Of course, we really have no option in the matter. I do not see that any Government which might have been in power at the present time could have refused this offer, not only because a refusal would lead to greater austerity in this country, to the cutting down of rations and, still worse, to the reduction of supplies of raw materials, and therefore to unemployment (which are serious enough matters in themselves), but because the rejection of the arrangement would be a blow at a great scheme for co-operation between the countries of Western Europe, the United States of America, and, I believe also, the British Commonwealth. It would loosen the ties in the economic sphere which ought to be tightened at the present time. The only real hope for the recovery of the world is international cooperation on the economic level among all nations. To reject this most generous offer—and that undoubtedly is how it is regarded among the American people themselves; they think they are treating us most generously and I certainly agree—would be a blow to that close integration of world economy which is, in the long run, the basis of our hope for the salvation of mankind.

4.7 p.m.

LORD BRAND

My Lords, like other speakers, may I say at once that I support this Motion, because I regard the external aid that is offered to us as essential. It is extremely regrettable that we have to ask for aid to such a great extent, but the fact that we have to do so is not due to any misdeeds on our part. It is due to our deeds. It is the result of the enormous part which we had to play in the war. In the circumstances, I regard the Agreement—as the Chancellor of the Exchequer said in another place yesterday—as "sensible and fair." However I have never yet seen an agreement between a lender and a borrower which reads well to the borrower. The borrower never likes the terms of the agreement which he has to enter into; and that is the case, I think, when one reads even this Agreement. Nevertheless, it is at least as generous as we could have expected. In fact, in all the circumstances, the United States Government, Congress and the American people have shown not only great generosity but great reasonableness and considerable restraint. I think also, from my knowledge of the Washington scene, that our new Ambassador and his colleagues are to be congratulated on the part which they have taken in the negotiations.

The Agreement and the Act—the Economic Co-operation Act—together present a voluminous document. It was natural that Congress should want to "spell out," as they say, all the terms under which aid was to be given. We have to remember, as has already been pointed out in this House, that the American people have already lent and given huge sums, since the end of the war, not only in the form of our Loan, but also in the form of U.N.R.R.A. The results hitherto have been disappointing to them. Nothing very much seems to have been accomplished. Europe is still in a very bad state; though it is fair to remember that Europe would have been in a far more desperate state, as we ourselves would have been, if those huge sums had not been lent and given. We have also to remember the character of the American constitution. We have in Congress a legislative body, far more independent of the Executive Government than our Parliament here is of our executive. In addition, in both parts of Congress, in the House of Representatives and in the Senate, there are Republican majorities; while the Marshall Plan originates from the Democratic side. To my mind the picture is just as if in this country a Socialist House of Commons, as independent as Congress is, were asked to give huge sums to foster capitalistic private enterprise in other countries. That is what Congress has been asked to do, and that is what Congress has done. The passing of this Plan through Congress by the United States Administration has indeed been possible only because of what is known as the bi-partisan foreign policy of both the great Parties in the United States.

In all these circumstances, Congress not unnaturally has demanded very full information from all the sixteen countries aided; and, not unnaturally, too, Congress has set up a very elaborate organisation to follow the expenditure of these great sums in all these countries. The organisation is, indeed, extremely elaborate. There are the Administrator and his staff; the National Advisory Council—a Board in Washington of independent business men which meets once a month to advise the Administrator; Mr. Hoffman, representing the Administrator abroad. Then there are the special missions in each country, and, lastly, a Congressional Committee, which is to follow, on behalf of Congress, all the proceedings in all countries. I welcome all this for the very reason—which has already been pointed out—that this is not a one-year Agreement, it is intended to be a four-year Agreement, and the best chance of its continuing for four years is that the American public should be fully educated on what is happening, will accept what each of us is doing and that we are doing our best, and, therefore, will be prepared year after year to vote the further very large sums to aid us in getting straight. I welcome all this for another reason. I am glad that pressure should be put on the Government in this country to toe the line and keep them up to the mark. I believe the fact that we are being forced to say exactly where we are going, forced to take all the steps necessary to secure American concurrence in future, will be helpful to our Government and helpful, particularly, to the Chancellor of the Exchequer in the great work which he has undertaken and which we hope he will bring to a successful issue.

I do not intend to enter into all the details of the Agreement. The Chancellor of the Exchequer gave a full account of them yesterday and the Leader of the House has added to that to-day. No doubt many difficulties will arise. I think the Chancellor's explanation with regard to the sterling which will accumulate in a special account in the Bank of England in forming the counterpart of dollars that we receive was a satisfactory one. I regard his account of the conditions with respect to the provision of raw materials for stockpiling as satisfactory. I hope we shall take as few loans as possible. We have entered already into vast loan obligations, which we may find extremely difficult to fulfil. While I think it would be very valuable to have loans for constructive purposes in this country, I am always against either a Government or an individual accepting obligations that they or he see little chance of meeting.

There may be some difficulties about the use of dollars for the sterling area. The United States Government, for instance, do not wish their dollars to be spent in wiping out our indebtedness to other sterling countries. On the other hand, when we are given dollars, it is difficult to earmark those dollars so that they are kept distinct from any other dollars that we have. They all form part of one reserve, and how can we tell whether the dollars we are giving to India or Argentina, or any other country, are the dollars provided by the United States Government or other dollars? Nevertheless, I feel sure that all those difficulties will be ironed out. Like the noble Lord, Lord Strabolgi, I think some difficulty may arise in connection with the Russian and Eastern European trade. I favour trade with that part of the world, provided that it is not in the form of armaments. It is highly desirable to continue to trade with the countries of Eastern Europe, such as Poland and Czechoslovakia. We have to keep them as near us as we can, and one way of doing that, and of helping them and ourselves, is to trade with them. In all I have said I have been assuming that we must accept American aid. That seems to me, as I think it does to other noble Lords, self-evident. Those who think differently, if they, are prepared to vote against the Agreement, must be prepared to face very serious results on our standard of living—indeed, worse than that; serious unemployment; worse still, the disappearance of our national reserves and the unhappy consequences to the sterling area which would follow; and perhaps still worse, the fatal effect on European recovery as a whole.

Notwithstanding what my noble friend Lord Rennell has said, I think it is worth while to say a few words on our present financial and economic situation as affected by, and as affecting, this Agreement. I shall therefore follow the Chancellor of the Exchequer in some remarks he made in another place yesterday. He made an important and interesting statement about our reserves. He pointed out how rapidly they had been falling; but he came to the conclusion that, if we obtained the aid under this Agreement, we might expect, unless there were further rises in the price of our imports, that our reserves would remain at a figure of about £475,000,000 or £500,000,000. This is very satisfactory in itself. In my view, that is about the minimum figure which the country which is the responsible banking centre for the whole of the sterling area should have.

If I am right, however, this means that apart from American aid we should still have a real adverse dollar balance of about £350,000,000 to £4,000,000 a year.

VISCOUNT ADDISON

Apart from American aid?

LORD BRAND

I mean without bringing into account American aid. That throws a light on our true and very difficult problem. Let me give your Lordships a calculation—I think it is correct—which I have made, taking as a basis the imports and exports for the first five months of this year. Importsf.o.b.have been running, I think, at the rate of about £1,780,000,000 a year, and exports at the rate of £1,470,000,000 a year. That is our visible trade, altogether apart from invisibles and Government expenditure, and shows a deficit at the rate of something over £300,000,000 per annum. If one calculates that amount of imports and exports at 1938 prices, the adverse balance would be not £310,000,000 but £55,000,000. This, I think, indicates that the country has made a tremendous effort, in bringing up our exports to 132 per cent. of 1938 and accepting imports of only 80 per cent.

LORD STRABOLGI

May I interrupt the noble Lord? When he speaks of our total exports, has he included our invisible exports as well?

LORD BRAND

No, I am excluding invisible exports. It is, however, clear that our effort is not nearly enough. Higher prices, on the basis of our present trade, cause us, say, a loss of £250,000,000 a year, compared with 1938; and we have to add, also, the loss of our invisible exports, which I put—I do not know whether I am quite correct in this—at about £150,000,000. If you add those two together, the increase of prices plus our losses of invisible assets, the result is an adverse figure of £400,000,000. It is these two causes that are mainly responsible for the rate at which the present adverse balance is running. The important thing we have to consider is: What can we hope to be able to do, whether about prices or about our invisible exports? As to our invisible exports, we must, of course, make every conceivable effort to increase them. But that is a long-period operation. As to prices, who can say? I myself think there may be some reduction in prices; but it is possible that the terms of trade have permanently turned against us, and that we cannot expect to return to the relatively favourable prices of 1938. Therefore, we have both of these difficulties, caused by prices and by the loss of invisible exports, still to overcome, if at the end of four years we are to get square, and are not to have to look after that time for any further external help. We have also a problem in the future of the sellers' market; and we have a further problem in the competition which must arise from such countries as Germany and Japan.

Therefore, we must conclude that we have a very difficult, though not impossible, task to fulfil, if we are to get straight by the time this Agreement comes to the end—always on the assumption that it continues for four years. If it does not continue, but suddenly comes to an end, perhaps it would have been better that it should never have been started. I remember vividly the result after the last war, of this country, and particularly the United States, lending large sums of money to the rest of the world in the years 1924 to 1930. I remember the effect of the United States collapse in 1929, when all this lending stopped, with the resultant crisis of 1931–33, the greatest economic crisis the world has ever seen. For Europe and for this country to accommodate ourselves to living on American aid, and then for something to happen to cause disagreement between us or the rest of Europe and the United States, so that that aid stops, much too soon, would, in my view, produce an extremely serious state of affairs.

We in this country are dependent in my opinion, on two things for our getting straight. One is a large growth in international trade, which in itself requires peace and security. The other, which is something we can do for ourselves, is the greatest possible development in industry and agriculture of enterprise, initiative, salesmanship abroad and co-operation of all the partners in production, so that the goods not produced by ether countries in sufficient quantities may be produced by us and exported to them, and may be of such a quality and price that we can compete with all others. I believe we have to face a future in which it will be high- class materials, in the main, that we shall have to sell to the world—namely, high-class machinery, high-class textiles, high-class chemicals, high-class steel products and so on. We shall need not only the power of production, but also the power of salesmanship all over the world. We shall have to live on our wits.

What we want, first, is a clear determination in principle of function as between the sphere of the Government and the sphere of private industry and commerce. My own view is that the sphere of the Government should stop short at the competitive and exporting industries. It is highly important that industry should know this, because then it can go ahead with its plans. If that is settled and known, all encouragement should then be given by the Government to industry and commerce in the great monetary and economic sphere which will remain to the Government. We want also the greatest co-operation between all partners in industry, whether shareholders, managers or workers, to achieve that success which is equally vital to all of them.

These should be our objectives and not, in my opinion, plans for nationalising this or that industry, and particularly perhaps the steel industry—plans which I regard as obsolete. Such plans should not be pursued when the Government is faced with the great problem of how we are to live. We should not spend our energies on plans which will not go any way towards helping us to produce or sell more to other countries. Moreover, apart from the intrinsic demerits of such schemes, they are clearly hardly helpful in making this Agreement a success and in making the American public anxious to lend to us and to other countries great sums over the next four years. If we can only get near equilibrium within these four years, then we shall reach the point where the credit of sterling will be more easily re-established. Everything would then be easier. We are not likely to get straight purely by imports and exports. We are now a debtor country. If we become once again a country in whose currency the world has confidence, we shall be able to obtain the assistance of other countries through private channels and other countries will wish to hold sterling. Everything will then be much easier.

We have a strange paradox at the moment between our external and our internal position. We have just seen brought into force a great scheme of social welfare, which is to give security from the cradle to the grave, and yet our people have never been so insecure in their history. The lesson to be drawn from that is not to give up social security, but to make everyone understand that it can in effect only be earned by the utmost efforts of all of us. If, however, this Agreement fails, I cannot foresee what the future holds for us. It is therefore the duty of the Government above all to concentrate on making it a success. The British and American Governments must concentrate on the same objective and assist one another to the utmost. Of course, His Majesty's Government face certain political difficulties. But we have to remember that the United States Government also face very critical political difficulties. It is not going to be at all easy for them, for the Marshall Plan still has many enemies. I should like to repeat my view, therefore, that it is the duty of His Majesty's Government above all else to devote their whole strength, in cooperation with the United States Government and the American people, to bring to fruition this great plan. This is indeed I think what the Chancellor of the Exchequer urged on his Party and his colleagues yesterday in another place.

4.36 p.m.

LORD LAYTON

My Lords, it would be very tempting to carry this debate forward into the general economic position of this country and of Europe. After all, this is "M" Day—that is to say, it is the "D" day of the Marshall Plan and the launching of perhaps the greatest international recovery plan that the world has ever seen. But that would take us very far afield. Nor will I follow my noble friend Lord Rennell on to the high plane to which he lifted this debate, except to say that I think we should all agree with him that if the rôles of the United States and Great Britain were reversed, we should all be proud to have stipulated so little and promised so much.

I propose for a short while to make some remarks about the commitment—although perhaps that is not the right word—the obligation, the sense of duty, or even of privilege, which is laid upon us to act in a certain way in consequence of the granting of Marshall Aid. There is nothing new in that. There is nothing new, indeed, in the present document itself. The obligation for the countries of Europe to assist each other has been recognised from the beginning. It was first mentioned in the Harvard speech itself. The Paris Report of last year contains a series of obligations, enumerated and agreed to by the signatories—the Convention was signed in April—and these Agreements are strictly in keeping with what has already been undertaken. It is not an imposed series of obligations; it is a statement of principles and of our intentions. There is no question at all of our being able to keep within the letter of the law of the document which we shall pass in a few minutes.

If that were all, there would be nothing more to be said. Experience has, however, taught us the danger of formulas which mean one thing to one party and something else to another. The unprecedented investment which America is making to restore the economy of Europe will not succeed in its purpose unless there is not only a common intent but a common expectation. If that deeper understanding is lacking, then we may well have friction; and the plan itself may even be in danger. It is inevitable, as has already been mentioned in the course of this debate, that appropriations will be voted for the Marshall Plan year by year. This will be done only if Congress is satisfied that the purpose of the expenditure is being achieved. As I said, on the common purpose there is no difference of opinion; but it is much less certain that there is a common expectation as to the effect of Marshall Aid and the way in which it will work out.

One of the most important danger signals—perhaps I should say a "yellow light" rather than "red light"—is a difference of outlook about the time factor in the operation of the scheme. One distinguished American, for example, has expressed concern about the large scale of capital developments which are contemplated in Europe and fear that this may delay progress in making the best use of existing equipment and resources. If this happens, he says: It will prevent Europe achieving results in time—and results, tangible results of real magnitude there must be in January. If results are not forthcoming when the President and Congress review the situation, certainly the scale, and possibly the actual continuation, of the Plan might be in jeopardy. What are the results that can be achieved by January, and what are the results which Congress can properly expect? This particular commentator considers that too little attention is being paid by the Marshall Aid countries to the problem of removing the internal barriers to trade in Europe. Indeed, to many Americans this means a customs union—the sign and symbol of European co-operation. On the other hand, those Americans who are closer to the facts lock to the removal of quota restrictions, licences and other obstacles. This relaxation is of the utmost importance if there is to be European recovery. I should be the last to underestimate it; but it is, of course, linked with currency, credit, budgetary and other economic policies; and to bring these into line and into order will take time.

In the hope, therefore, that it may contribute slightly to the anticipation of misunderstandings I should like to make a few remarks on the time-table as seen from this side of the Atlantic. First, a customs union is a long-range proposition. It took Mr. Cordell Hull five years to make a substantial dent in the American tariff by his reciprocity treaties. Today, the Benelux countries are discussing a customs union and have discovered that two or three years will be required for the preparatory work needed to achieve a common tariff. The Economic Commission of the recent Congress at the Hague recognised that customs unions would be the final and not the first step in the process of economic union. By contrast, suggestions for reducing quotas, licences and other administrative obstructions which prevent the development of trade in Europe today can and should be tackled at once. But even these cannot he removed by a stroke of the pen. They must be accompanied by Agreements, as I have said, concerning credit, budgetary and ether economic policies.

The first practical step that must be taken to achieve the evolution which we expect under the Marshall Plan is definitely to co-ordinate the economic policies of the countries of Europe in these various matters. The Chancellor of the Exchequer said in another place yesterday that the Organisation in Paris will get to work on this problem in the autumn. A definite scheme bringing the economic and financial policies of Western European countries into line would be a very fine result to present to Congress in January; but it will be of the character of creating machinery and getting consultation going. The actual material result of increasing and developing trade will, of course, take much longer. There is an even more direct approach to the problem of European recovery. Coal allocation, a steel programme, production and distribution programmes for agricultural machinery and other commodities are the obvious devices for making the best of the shortages in Europe; they are also the preliminary to the long-range planning that would prevent overlapping and a wasteful use of capital in the development period ahead. This forward planning is vital if the integration of Europe is to proceed quickly.

There are, however, two points in connection with that integration which our American associates should bear in mind. One is that the international programming involved in the Marshall Plan is an innovation in times of peace. The new technique for carrying it out has developed rapidly in the last twelve months, but the number of persons qualified to handle it in the Civil Services of various countries is limited. This small corps of experts have recently had to produce figures very hastily for the three months, April, May and June of this year; then they had to turn to the third quarter. They will shortly tackle the period ending July of next year. Merely to keep pace with this constant work is a tour de force. But this series of short-range estimates have put a very great strain on the limited personnel available for this kind of work—personnel, your Lordships will appreciate, who have also to staff the delegations to Lake Success, Geneva and many other Conferences. Yet the Organisation in Paris will, if it has to make one programme after another, not have time to get down to the major task of preparing a picture of European economic development over the next four or five years. It is not to be expected that the evolution of joint mutual aid and of mutual assistance can develop until that picture has been worked out by the new organisations; and, indeed, from the point of view of what Europe can do, the creation of that picture is the major task. It is important that our American friends should realise that an unending series of questions about the programme is in danger of delaying the preparation of the general Plan that is really needed if the Marshall Plan is to reach full fruition in Europe.

This brings me to my second comment on this question. Up to date the public know extremely little of what this small inter-governmental group of civil servants from the various countries are doing. Yet on their work so much depends. If the economies of Europe are to be increasingly integrated, the willing co-operation of associations of industrialists, of trade unions and of other organisations, will be required. A Western Union cannot be created except with the active backing and support of the people on the political side and of such organisations on the economic side. In the present state of Europe, this will undoubtedly involve arrangements between the industries which, in the terms of Article II of the Agreement which we are discussing, may restrain competition, limit access to markets or foster monopolistic controls. Those words smack of cartels and trusts, but the condemnation of such practices is limited by the words which immediately follow to cases where they have the effect of interfering with the achievement of the joint programme of European recovery. It is important that there should be no difference of view on an issue of that kind. We know quite well that in the United States there is a strong feeling against anything which savours of cartel organisation. Equally, we know that, if there is to be co-operation of industries and mutual assistance in Europe, it will almost inevitably take on the appearance, at all events, of a trust or cartel. It will be the task of Mr. Harriman and his colleagues not to veto those arrangements but to try to satisfy Congress that they will contribute, in the words of this text, to European recovery.

Therefore, while it is reasonable that Congress should look for quick results, the task upon which we have been launched is one in which the Americans must expect development to be slow. It is a case for patience. The members of Congress are quite properly concerned to watch the dollars and cents, but time will be required to work out the scheme in which they have so important a share. The best proof that the project is going forward will be evidence, such as I have suggested, that the countries of Europe are taking steps to put their own house in order.

Finally, there is one other assurance which I suggest to your Lordships we might give to America. Basically, the United States want to know that we are serious about the policy of Western Union. This is not merely a matter of economics. For reasons which I have more than once submitted to this House, a close economic association implies agreement about Defence and a common political background. A number of most important steps have been taken in these directions by His Majesty's Government; but there still persists in the United States a fear that we have hesitations and reservations. It is also true that in Britain itself much uncertainty continues about what Western Union implies. It is for this reason that the recent Congress at The Hague recommended that a European Assembly, representative of the Parliaments, should be called together, whose first task would be, not to produce a ready-made European constitution, but to consider what form of association is suited to the many-sided, complex structure of Western Europe. This scheme would bring to bear upon the common purpose and upon the common task many aspects of public opinion and interested groups who have as yet played no part whatever in this movement. By so doing, it would powerfully reinforce the hands of His Majesty's Government in carrying out their policy. The proposal was recently submitted to the Prime Minister and Foreign Secretary by representatives of the delegation which went to The Hague. If the Government would give it their approval and support, such an Assembly would go far to allay any suspicion lingering in the minds of people in America that Great Britain is half hearted in this ambitious but most promising adventure.

4.55 p.m.

THE MARQUESS OF SALISBURY

My Lords, I propose to speak only briefly this afternoon and to try, if I may, to draw together some of the main threads of the debate. If the noble Lord, Lord Layton, will forgive me, I shall not follow him in the extremely interesting and authoritative account which he has given of the prospects of European Continental recovery. We shall all wish to study what the noble Lord has said. I feel that it is a matter upon which it would be unwise to embark without that study. Nor do I propose now to go in great detail into the actual provisions of the Agreement. I think that these have already been well covered in the speech of my noble friend Lord Swinton, and in the speeches of other noble Lords. Certainly I need stress no further what they have said.

I think that one can, however, say broadly—and it is clear from what everybody has said in this debate—that the Agreement which we are asked to approve is not in itself a bad one from the point of view of this country. As we all know, it is the result of long and complicated negotiation. No doubt, the terms which were originally proposed by those who were to provide this money were more stringent than those which we are now asked to accept. As anyone who has taken part in such negotiations realises, that is natural in any discussions of this character. The fact that a final agreement has been reached which is acceptable to all parties concerned is, I think, concrete evidence of the fairmindedness and common sense of those on all sides who have taken part. In particular, I would like to associate myself with the tribute which the noble Lord, Lord Brand, paid to Sir Oliver Franks, our new Ambassador at Washington, who has clearly, by the skill which he has shown, amply justified his appointment to that very arduous and important post.

The Imperial aspect of this Agreement must, of course, bulk very large in the minds of all of us. There is no doubt that anything that might have involved an essential weakening of our Empire ties would have been utterly repugnant to those who sit on this side of the House, and no doubt equally so to noble Lords who sit opposite. Whatever our present needs, we should have felt great difficulty in accepting the Agreement. As I understand it, that aspect is adequately safeguarded in this Agreement. There may be some who are still anxious about the real meaning of Article V. I must confess that found considerable difficulty in understanding it at all. But, so far as I have understood it, I take it to mean that we are committed to sell to the Americans only a reasonable proportion of the current output of our Colonial raw materials, and to let them have in return for Marshall Aid an agreed proportion of any production which has been achieved as a result of the aid which we are receiving, our own reasonable needs having a priority. I understand that to be the position and I hope that that reading of it is correct.

I also understand—and I was very glad to hear what the noble Viscount the Leader of the House said in his opening speech—that under this Agreement there will be no interference with Imperial Preference. If I am correct in that understanding—and perhaps the noble Lord, Lord Pakenham, will confirm it in his final speech—the terms which the American Government have asked of us are not unduly onerous, taking into consideration the vast scale of the assistance which they are offering us. I think the same is true of the whole of this Agreement. Indeed, if I may, I would very much like to associate myself with everything that has been said about the United States this afternoon. I believe that no tribute that we can pay is too great for the wise and far-sighted statesmanship which has been shown by the United States Administration and by Mr. Marshall in carrying through the European recovery programme.

Consider what they are doing. They are providing from their own resources the vast sum of £1,250,000,000 in a single year, partly in grants and partly in loans, to assist in the recovery of the stricken Continent of Europe. I do not suppose anything on that scale in times of peace has ever been known in the world before. That is not mere relief; indeed, if it were spent as relief the whole intention, as I understand it, would be stultified. It is definitely intended to put the countries of Western Europe on their feet again. It is a contribution to their permanent recovery. That fact I feel imposes an immense moral obligation (and I think Lord Layton said this in his speech) on the nations who receive the money. Unless they do their utmost to re-establish their economies on a stable basis they will be guilty of a definite breach of faith with those who are providing this help—help which is lent only on that condition. I emphasise that everything in this country and in the other countries concerned must be subordinated to this overriding aim. I hope that consideration is very much in the minds of His Majesty's Government. As I have said, it is not only that we who have supported this Agreement are morally bound in that respect but, as I think Lord Brand said, the further instalments of assistance which we may hope to receive in the next four years may depend upon our success.

No one, if he has a fairly objective mind, as we all try to have in politics, would seek to place the whole responsibility for the present position on the Government, or to blame them for everything that has happened. It is true to a very great extent that, as the Leader of the House said, it is the result of the war and what has followed from the war. Perhaps I may be allowed to say that I have noticed on the part of Ministers, and especially during recent months, if they will forgive my saying so, a tendency to view the present situation with rather undue complacency in their public utterances. Instead of telling the British people how desperate is our economic situation—and indeed without this Agreement it would have been very desperate—and stimulating them to supreme efforts, they have shown a tendency to regale them with some extremely rose-coloured comparisons, backed by carefully selected statistics, between the situation now and the situation at the end of the last war. I regret to say that even the Leader of the House, who has the respect and admiration of us all, in a recent broadcast fell into that error. To-day he has spoken frankly to your Lordships. He has not for one moment glozed over the hard facts of our position and the dangers that are assailing us. But in his broadcast he adopted quite a different tone. Charming and admirably worded, extremely persuasive as that discourse was, with a bedside manner which, with respect, is more attractive than that of the other doctor who enjoys a prominent position in another place, he painted a glowing picture of the present from which any uninstructed listener—and I am afraid most listeners are not completely instructed in this affair—could only draw the conclusion that there was nothing very much to worry about; indeed things are infinitely better now, with more employment, higher wages, shorter hours and so on, than in the days of Mr. Lloyd George's Coalition Government after the last war—a Government of which, if I remember rightly, the noble Viscount himself was at one time so distinguished a member.

Yet during the whole twenty minutes of that talk, to which I listened with the greatest enjoyment, he never mentioned and never even hinted that this happy result had been achieved, not by our own efforts, nor entirely by the miracles of Socialism, but only because of the provision on a vast scale of assistance from the people of the United States. He said he preferred the Labour way. He did not say exactly what the Labour way is, but I gained the uncomfortable impression (I hope I am wrong) that the Labour way, as it is working out, is to live in comfort at somebody else's expense. There is nothing very new about that, either for Governments or for individuals. There is, if I may remind your Lordships, an admirable example in a famous series of pictures painted by Hogarth entitled "The Rake's Progress." There you can see the individual applying exactly this principle to his private life with, at the start, an apparent extreme advantage to himself. And indeed, for a certain type of man, that life, no doubt, has considerable charms. He does not cut down his expenditure; He does not pay his debts; he borrows as freely and as often as he can and, on that basis, he gets on pretty well while the money lasts. But noble Lords will remember how the Rake ended up. He ended up in bankruptcy; and that is (and I think we all recognise it) the prospect that faces us and other Governments if we do not succeed in making both ends meet.

His Majesty's Government have already had one chance to put their house in order. I do not say it is an easy thing to do, but they have had one chance to do it with the American Loan of two years ago. On that occasion, if I remember rightly, they borrowed £1,100,000,000. I wish that we could see more sign that advantage had been taken of that chance. But what in fact has happened? Wages have continued to rise—which is an excellent thing in itself, provided there is a comparable increase in production. Government expenditure has not been reduced, or has been reduced to only a very small extent, and the consequent heavy taxation has continued at a crippling level. Where has all this led us? At the end of two years the £1,100,000,000 has been spent, and even now there is no sign that some of the more important members of the Government—I do not by any means say all—are facing up to the facts, or are ready to cut our coat to suit our cloth. Indeed, as your Lordships know; the Chancellor of the Exchequer has made a number of powerful, realistic and courageous speeches, for which we all greatly admire him. He made another yesterday, absolutely facing up to the hard facts of the position. But there is very little evidence that he is receiving the support of all his colleagues. Indeed, some of the less responsible seem to spend a good proportion of their week-ends in undoing the good which he does during the week. This wilful ignoring of facts by a certain section of men to whom the uninformed electorate must look for advice cannot go on for ever without disaster.

By all means let the Government take this money which is so generously offered us, but I beg of them to use it as it was intended to be used—to enable us to turn over a new leaf. As I understand from Lord Brand's speech, in any case it will not bridge the dollar gap. That gap last year amounted, I think, to £1,000,000,000 and I understand that the estimate for the first half of this year was £222,000,000 and that that is almost certain to be exceeded. If that is true, the new loan of £300,000,000 for the whole of this year quite obviously will not cover the gap and, as Lord Brand has said, there will be a heavy adverse dollar balance apart altogether, as I understand it, from Marshall Aid. Even with this new assistance, which is being given by the Agreement, clearly within this year, we must either increase production or reduce imports on a large scale, if anything like a balance is to be struck. I do beg the Government, therefore—and I hope they will believe that I do not say this in the least offensively—that, instead of continuing to pat themselves on the back for the glories of Socialism, they will lace up to these hard realities—and having faced the facts themselves, let them put them bleakly and honestly before the British people. And let them do it, if they can, with a united voice.

To-day—and I am afraid there is no doubt of this—a large proportion of the British people are living in a fool's paradise. They are rejoicing in high wages and short hours. Who shall blame them? We should all of us rejoice in the same way. But they have no conception that they are drifting nearer and nearer to the rapids, and they are only encouraged in their illusions by the type of speech to which I have referred. Above all, I repeat: let the Government speak with a united voice. Two voices or three voices in the Government are utterly confusing to the people of this country, as, equally, they must be to the American people on whom so much depends. If the Government will only, at long last, tell us the truth, as the Chancellor himself does, if only they will produce a policy which gives some hope of our imports and exports being balanced, if they will do that frankly and courageously, I am quite certain that the British people, as always, will support them. They always have supported the Government in a great emergency and they will do it again.

As my noble friend Lord Swinton has told your Lordships, we do not intend to oppose this Agreement. On the contrary, were it to be pressed to a Division—which it certainly will not be in this sensible House—we should support it. We wish to give the Government every chance to put the country on its feet. But if they fail, Nemesis awaits them—Nemesis certain and terrible. Frankly, I am not enough of a Party man to desire that, because with them would go down the country. Let them eschew the line at present being taken by the Minister of Health to whom I would say that a burning, and what appears to be an almost pathological, hatred of half his fellow countrymen is not a good basis for a united national effort in a time of great crisis. Let the Government—as I was bold enough to say two years ago—produce a national policy, making it as acceptable as they can to all sections of opinion in the country, a policy that is realistic and courageous; then they will gain the good will and, I believe, the support of every section of opinion in the country. What is more, they will earn the respect of that American opinion on which so much depends. I can only pray the Government this afternoon that they should be wise enough and brave enough to do that. As I think Lord Brand would tell your Lordships—and Lord Layton would say the same—this may well be our last chance. I urge the Government, most sincerely, not to throw it away.

LORD BRAND

My Lords, I should like to say one word in explanation of figures which I gave, because I would not like an incorrect version of them to be extant. The Chancellor of the Exchequer said that he hoped to keep the reserves at about the present level of £500,000,000. I take that to mean that he thought the deficit, the adverse balance, which, without American aid, would exist, would be about covered by American aid. Otherwise, clearly, our reserves could not remain as they are now. I have no figures to show exactly at what figure that adverse balance is estimated, but I assume that it is something between £300,000,000 and £400,000,000. By that, I mean the adverse balance which the Chancellor thought would be covered by American aid. I did not mean that there would be, in addition to American aid, a still further considerable deficit.

THE MARQUESS OF SALISBURY

I quite understood the noble Lord, and I am sorry if I have inadvertently misrepresented the figures which he used.

5.15 p.m.

THE MINISTER OF CIVIL AVIATION (LORD PAKENHAM)

My Lords, I should like, on behalf of the Government, to express gratitude to the House for the way in which this Agreement has been received. There has been solid support for it from all quarters, and, if I may say so, the speeches have been on a very high level. I hope that the noble Marquess who spoke last will not confuse me with one of those sinister wild men whom he is always discovering in our Party, if I pass one or two fairly frank comments on some of the observations which he has himself just let slip. The noble Marquess is so highly esteemed in all parts of your Lordships' House that he could get away with murder, provided that he did it on the floor of the House, and that at the same time he assured your Lordships that he was doing it in no Party spirit!

But few of us on these Benches, and I think few outside his own immediate circle, will accept his account of the policy of the Government as one of living in comfort at other people's expense. It is most unjust that that should be regarded as our aspiration. I am surprised that the noble Marquess should allege that at the present time any substantial portion of the British people are living in comfort, either at their own or anyone else's expense.

THE MARQUESS OF SALISBURY

I did not say that that was the aim of the Government; I said that that was how it worked out. I do not think the noble Lord can deny that.

LORD PAKENHAM

I am surprised that the noble Marquess takes the view that we are living in comfort. It is the first time I have heard him allege that about any substantial part of the British public. I doubt whether he considered that phrase very carefully before he used it.

LORD CHERWELL

I always thought it was part of the argument of the Government that we are better fed now than we were before.

LORD PAKENHAM

The noble Lord knows perfectly well that that has never been part of the argument of the Government. He knows perfectly well (and here again I am led to wonder whether he has considered his words with his usual selectiveness) that it is admitted that during one period at the end of the war we were slightly better fed than we are at the present time. The noble Lord has taken part in discussions on this so often that I am sure he must know that that is admitted as a result of forces over which the Government have no control. There was a year close to the end of the war when the level of the feeding of the nation was slightly higher than it is now. The noble Lord seems to wish to keep a sotto voce commentary going. I shall be delighted to be accompanied.

LORD CHERWELL

The Government have compared the food situation at present with that in 1938, and have said that the country as a whole is better fed now that it was in 1938.

LORD PAKENHAM

Now it is sought to open a new argument, the subject being whether or not we are better fed than in 1938. Perhaps the noble Lord will allow me to proceed with what I have to say with regard to the subject of today's discussion, which seems to bear little or no relation to the level of the feeding of the nation in 1938.

The noble Viscount, Lord Swinton, has performed a signal service to the country by his speech this afternoon. I hope that he does not mind accepting bouquets, and that they do not embarrass him if they come from these quarters. I can assure him that they come from our hearts. But that does not mean that I accept by any means every statement that fell from the lips of the noble Viscount. It seemed to me as though the speech composed for this occasion was well nigh perfect, but that he had allowed one or two glosses to creep into it from earlier utterances—I have in mind his attack on the level of public expenditure, his reference to the way in which the late Chancellor of the Exchequer, Mr. Dalton, is alleged to have squandered the Loan, and other matters of that kind. He knows that such things have been said here before and that they have been answered.

We are not aware that noble Lords opposite have ever recommended a higher degree of austerity than that which we have proposed. In fact, it has always been the other way. So far as the level of public expenditure is concerned, we have had three years in which to make every sort of investigation. I am not aware of any sort of proposals coming forward from the Benches opposite for the reduction of the public expenditure of this country, and in the absence of such proposals, I cannot attach quite so much weight to the noble Viscount's comment on that point as to some others.

THE MARQUESS OF SALISBURY

Would the noble Lord accept our proposals if we put them forward?

LORD PAKENHAM

I should certainly welcome them if put forward, but I am not so sanguine as to expect to see them to-night. I will touch on one or two of the wider issues that have come up this afternoon when I draw my remarks to a close, but before reaching that stage, perhaps I may deal with one or two particular points. The noble Lord, Lord Strabolgi, was rather concerned about the restriction that might be placed on exports to Eastern Europe, and particularly to Russia, as a result of this Agreement. With the permission of the House, I will read the section which deals with that and which, as he himself pointed out does not come into any Agreement by which we are bound. Section 117 (b) of the American Act says: The administrator"— that is, the American administrator— is directed to refuse delivery insofar as is practicable to participating countries of commodities which go into the production of any commodity for delivery to any non-participating European country, which commodities would be refused export licences to those countries by the United States in the interests of national security. That means simply this, as most noble Lords are perhaps aware: Where the United States decided on security grounds that a particular raw material or finished article should not be exported to a country, such as Russia, it would not permit the Administrator to export commodities under this scheme, in such a fashion as to enable us to re-export the raw materials or export the finished article. There is no restriction on our freedom. It is simply an American rule, but if the Americans have these rules—and they must be the best judges as to what can be exported to these countries—then it is natural that they should restrict any possible flow of prohibited articles through this indirect channel. It is simply an American direction, and one of which they themselves must be the best judges. It is not in any way a part of the Agreement, and it is not something to which we commit ourselves.

LORD STRABOLGI

Everything here would depend on the interpretation of that; on the wideness of the American list. Does that apply merely to munitions of war or to anything which could possibly strengthen the economy of a country the Americans happen to dislike at the moment?

LORD PAKENHAM

That is clearly a matter which the Americans must decide. They are the best judges of their own national security. Personally, I have every confidence in their wisdom in their own national interests.

I would like to come to the points that the noble Viscount, Lord Swinton, raised during his speech. My noble friend the Leader of the House had already given such a wide measure of assurance that I shall do nothing more than make assurance doubly sure. Lord Swinton has, very naturally, asked how far, if at all, the proposed Agreement interferes with our existing freedom to make trade agreements, to raise or lower tariffs, and to grant Imperial Preferences. He referred to the general Agreement on Trade and Tariffs signed at Geneva, and to the Havana Charter, and asked whether our commitments are at all affected. This is one case where, to a very complicated question, an answer can be given that is simple and, I hope, completely satisfying. It has already been given in essentials by my noble friend the Leader of the House, but perhaps I may repeat it.

The main Agreement—excluding for the moment the agreement with regard to Germany—in no way affects our existing freedom of action in relation to any of these matters. As the House is aware, the general Agreement reached at Geneva has been approved by Parliament for provisional application; that is to say, it is subject to two months' notice and runs, as I think the noble Viscount himself pointed out, to the beginning of 1951. On the other hand, the Havana Charter is still awaiting Parliamentary approval. There is no intention whatever of modifying our pledge, given here, that it must receive the assent of Parliament before we become committed to it. The House will also remember that more than twenty nations in all have to ratify the Charter before it comes into operation.

I would like to be completely frank with the noble Viscount—he always is with us, even when he casts his frankness in a painful form. The supplementary note representing the Agreement between the United States and ourselves regarding most-favoured-nation treatment in Western Germany does commit us to a course of action in regard to Western Germany which has the effect of extending to Western Germany the terms of the general Geneva Agreement, on condition that Western Germany and those responsible for her reciprocate. But I imagine that few noble Lords, and certainly not the noble Viscount who has always taken a most sympathetic interest in the recovery of German trade, question the wisdom of this step. Therefore, so far as the Empire is concerned, I endorse all that has fallen from the Leader of the House, from the noble Viscount, the noble Marquess and other speakers, that here we have a plan which is intended to promote co-operation in Western Europe, but in such a fashion as to strengthen trade within the Empire, and in that way to strengthen trade with the whole world. Further, as the noble Viscount has said, there is no conflict whatever between trade within the Empire and trade between the Empire and the rest of the world. They should in every way supplement one another.

Let us ask ourselves where we stand after this impressive debate. We are all agreed—certainly everyone who has spoken agreed, and probably everybody in the House will agree—that aid of this character, and on something like this scale, is not only a welcome boon, not only an act of great generosity on the part of our America friends, but in fact is essential to this country if we are to recover in any reasonable period of time. Like others who have spoken, I appreciate that, first from the point of view of our own country, but also bearing in mind that Europe and the world cannot recover unless Britain herself recovers. There seems to be, as there should be, no dispute about the wisdom of accepting aid of this kind. Nor has any noble Lord to-day seriously suggested that the terms on which the aid is offered are unreasonable. I certainly join with noble Lords who have paid tribute to the work done by the negotiators, perhaps most of all by our Ambassador in the United States.

In Article II we are required to set ourselves a number of objectives which all of us, whatever our Party, regard in themselves as being entirely laudable. Some of us may feel a pang of regret that these objectives have had to be put down on paper, but of course one must remember that this Agreement is not drawn up with reference solely to ourselves. It is based on a form applicable to sixteen countries; and it may be, without my striking a jingoist note, that some of these other sixteen countries are more in need of these useful reminders than we are. Be that as it may, these are objectives which, in any case, we would be pursuing, and which we have been pursuing and, therefore, I do not think any of us feel the slightest hardship—indeed, we may feel positive pleasure—at embracing them in the Agreement.

The two Articles which—as was natural—appear to have received the closest scrutiny of your Lordships are Articles IV and V. The more one goes into those Articles the more innocuous they become. It is impossible to take positive pleasure in Clause 4 of Article IV, because it does reduce by up to 5 per cent. the amount of the aid which we should otherwise receive. I suppose all of us, if we felt it necessary to obtain assistance, would rather receive 100 per cent. of the assistance hoped for than 95 per cent. Therefore, I do not offer Clause 4 of Article IV to the House as containing positive attractions. At the same time, it would be clearly most ungrateful to cavil over 5 per cent., as we are obtaining so much. I prefer to dwell on the splendour and nobility of the general offer. Having said that about Clause 4 of Article IV, I would urge that the Article as a whole is entirely sensible and proper. It says, in effect, that if we are given large supplies of commodities without having to pay for them, it will be most undesirable for us to sell those commodities in our own country, and for the Government to use the proceeds for unproductive or inflationary purposes. I feel, therefore, that there is little reason to quarrel with the principle of a special account into which the proceeds obtained in this way should be paid. That argument, again, appears to have won acceptance in the House.

Article V has, at first sight, a rather formidable appearance. I entirely agree with the noble Marquess, Lord Salisbury. I have no doubt that he has access to excellent advice. Where I should have been without my tutors—if I may speak in that way of those who hold our hands in these highly technical matters—I tremble to think. If one goes into it with that highly intellectual guidance, I think one sees that it contains no menace, but is, indeed, constructive and helpful. Perhaps I might just amplify one word that fell from my noble Leader in reply to an intervention by the noble Viscount who raised the issue of Clause 3 of Article V. With the permission of the House, I will simply read what the right honourable gentleman the Chancellor of the Exchequer said yesterday. He said: Under section 3 we agree where the materials originate outside the United Kingdom, and that means outside the acceding Colonies as well, to co-operate to implement the purposes of the Article. That would mean that if for instance a British Company was developing certain rights in South America we would the best of our ability sec that the United States as well as ourselves had access to those raw materials. The Leader of the House has asked me to amplify in that respect what fell from him.

I may now, perhaps, say one or two words about the Article generally. It originates, of course, in the natural anxiety of the Americans about their reserves of raw materials, which now show signs of depletion in certain directions, owing to the immense war consumption and to their great post-war exports. It seems natural that the Americans should wish to secure access on equal terms to the raw materials in the territories of the beneficiary countries. I would emphasise that there is nothing in this in any way detrimental to Commonwealth or Colonial interests. I give the noble Marquess, Lord Salisbury, that further assurance. Apart from the expenditure under Article IV, to which I have just referred—namely, the expenditure of up to 5 per cent. of the total of the local currency fund—we expect all these supplies of materials to be paid for. The requirements of the United Kingdom and Colonies for domestic use and export are fully safeguarded. We undertake only to facilitate the transfer to the United States of such quantities as may be agreed after due regard to those requirements. I feel that that will meet what was in the mind of the noble Marquess, Lord Salisbury.

I will not go further into particular points arising from the Agreement unless any noble Lord wishes me to do so. I would say a few words, in conclusion, about the general attitude which all those who have spoken have adopted towards this Agreement. If there is one word which has been brought forward again and again—I think it is absolutely the right word in this connection—it is the word "responsibility." Everybody has stressed that from different quarters of the House: speakers from the Front Bench opposite, the noble Lord, Lord Rennell (who started a train of thought in my mind which I have not yet been able to finish, it runs so far, but which I think will keep me and perhaps others thinking for a very long time) and also, among others, the noble Lord, Lord Brand, who spoke with his usual immense authority. Undoubtedly, we do here accept very great responsibilities. It is not just the responsibility that a debtor assumes to a creditor. From that point of view, of course, we are getting off very lightly. It is the responsibility for using this assistance in a way to rescue, not only ourselves, but many other countries, and, indeed, a large part of the world. I feel, as do other speakers, that once we recognise the responsibilities we, as a people, are capable of shouldering them. It is undoubtedly a duty that rests on the Government in the first place, but also on all of us, to make those responsibilities clear to the people.

I would not go along with speakers who have suggested—as some have to-day suggested—that we as a people are simply living on the accumulations of the past, or on the generosity of another country. We are benefiting from the generosity of the United States; we are, to some small extent—but only to a very small extent now—living on the accumulations of the past. We are not living on the accumulations of the past to anything like the degree we were before the war, because they have, to a large extent, disappeared. Surely the noble Viscount, Lord Swinton—whose speech, I repeat, made such a deep impression on me—would not wish it to go out that we as a people are doing anything else but making a great effort at the present time. Whatever noble Lords opposite think of the Government, surely they will agree with Lord Brand that we, as the British people, have made a tremendous effort.

Take the question of exports. Our exports in May paid for 86 per cent. of our imports, as compared with 64 per cent. in 1938. That represents, on the one hand, a great measure of self-sacrifice—a giving up of things that we enjoyed before in order to try and get straight—and, on the other hand, a readjustment towards the export market which has naturally been painful. I will not weary the House with many figures, but I must just allude to this point, in view of what may go out to the world. If we take the total production in April of this year, as compared with last year, we find that the index, of production shows an increase of 18 per cent. over the year. If noble Lords would like me to compare our production with that of other countries, before I close I will give the House a few figures taken from the Report on the economic position for Europe. If we compare the figures with 1937, the latest percentages available are as follows. This year (sometimes for January, sometimes for February, sometimes for March and sometimes for April) the figures are: Austria 84 per cent.; Belgium 91 per cent.; Denmark 124 per cent.; France 110 per cent.; Germany 44 per cent.; Netherlands 104 per cent.; Norway 129 per cent.; Sweden 112 per cent.; United Kingdom—admittedly for April, which is a month or two later than most of the others—somewhere between 125 per cent. and 130 per cent. So that it would be true to say that we have done as well as any other country of which we have the records, if you compare our performance to-day with our performance before the war.

LORD STRABOLGI

Is that total production?

LORD PAKENHAM

That is the index of production compared with pre-war. There is no country which has done better, unless you say that Norway, with 129 per cent. is better. Putting it broadly, I think it is fair to say that we have done as well as any and better than the vast majority of those countries. Against that background, I do not think it is fair or right—and I know no noble Lord wishes to say anything that is not fair or right—to suggest that we have not been trying; to suggest that we have been putting our feet on the mantelpiece. We are producing more than ever before; and we are cutting down our consumption more than has ever been called for in peace time. While I agree that we have to bring home to all our people that there can be no possible moment—not a single second—of complacency, yet we must encourage them by telling them that they are doing well, but have to do better still. Surely that is how we all look upon it, and all wish to look upon it. I do not want to end on a controversial note. We are at one in wishing to use this great opportunity in the most constructive fashion possible. I would like it to go out to the world from these Benches that we appreciate that, in taking this step, we have the solid support of noble Lords in all quarters of the House; and that support means more to us than I can easily express.

On Question, Motion agreed to.