§ 2.42 p.m.
§ LORD BALFOUR OF INCHRYE rose to call attention to the results of the recent Torquay Conference of the Contracting Parties to the General Agreement on Tariffs and Trade; and to move for Papers. The noble Lord said: My Lords, I rise to move the Motion which stands in my name on the Order Paper. The Torquay Conference represents one more milestone on the rather tortuous road of international commercial relationships which we have been following for the past five or six years. The aim of this Conference was to free world trade from shackles and restrictions, but I very much doubt whether the Government's eventual aim of restoration of world multilateral trade will be found along the road on which the Government have been taking this country for the past five or six years. The general assessment, according to Press reports, of the Torquay Conference, is that it has been a failure, except, perhaps, from the point of view of the landladies and shopkeepers of Torquay, who I understand have enjoyed an unexpected winter season. The general assessment of failure is because of the small number and the small value of the tariff bargains that have been made.
§ I do not wish to weary your Lordships with many figures, but in deploying this case I must try to give a picture showing how small are the results in relation to our total trade. Out of a total import and export trade to the broad value of £4,900,000,000 a year, we have, as a result of the Torquay Conference, undertaken to reduce rates on imports valued at just over £4,000,000, and we have undertaken not to increase rates on imports valued at approximately £3,500,000 199 On the other hand, this country has obtained concessions on imports into Europe, South America, the Philippines and Turkey, which are valued at just over £18,000,000. I give your Lordships these figures to show the small results in relation to the total of this country's trade. As regards inter-Commonwealth Preference, United Kingdom preference on imports has been reduced in one case only that of dried figs. It is true that Commonwealth countries have agreed to this reduction of Imperial Preference, because it so happens that they do not send any dried figs into this country. Preference reductions on imports to Commonwealth countries from this country affect some £7,000.000 worth of trade. It is satisfactory that in the Torquay Conference the Government have shown their assessment of the high value which they place on Imperial Preference by refusing, during the negotiations, to go more than a very limited distance towards reduction and elimination. This view of the value of Imperial Preference has been confirmed by the right honourable gentleman, Sir Hartley Shawcross, the President of the Board of Trade, in a speech which he made recently at the function of the Federation of Empire Chambers of Commerce over which my noble friend Lord Llewellin presided.
§ I submit that the most outstanding feature of the Torquay Conference is the failure of this country and the United States to reach any agreement whereby substantial reductions in, or the elimination of, Commonwealth preferences were to be bargained against United States tariff concessions. The reasons for such limited bargains are not difficult to deduce. They are threefold. First, there is a limit to the extent to which any country is prepared to sacrifice the protective value of a tariff imposed for the maintenance of its own standard of life, and there is a limit to the extent to which any country will sacrifice the revenue which it gains by a tariff. Secondly, during the past few years we have seen a genuine effort by all countries to get rid of the system of import licences, embargoes, quantitative restrictions and quotas. As these practices are progressively got rid of, the importance of tariffs becomes increasingly enhanced. Except in the minds of a few dreamers of a free trade world, and in the minds, perhaps, 200 of some members of the Liberal Party who still cling to the doctrine of pure Free Trade, I believe that tariffs are now accepted in a trading area containing, on the one hand, a highly industrialised United States and, on the other, the rising competition in world trade from a revived Orient. While the wide inequalities in industrial capacity and the wide variations in the standard of living of the workers producing the same articles under widely different conditions continue to exist in various communities, the nations of the world are justified in taking such steps as they consider necessary to put themselves on an equal level of opportunity. That is what this country has been doing, and what other countries have been doing. It would be foolish not to admit that tariffs can be, and at times are, abused but the fact that one man gets drunk is not sufficient justification for the abolition of alcohol.
The third and most cogent reason for the small results at Torquay is the illogical working of what is termed the most-favoured-nation clause—the principle of non-discrimination. The General Agreement on Tariffs and Trade lays down in these rather ponderous words:
Any advantage, favour, preference or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.
The principle of non-discrimination has been accepted in this country, in the idealistic belief that it will assist in the revival of world multilateral trade. In fact, it has had quite the contrary result. Noble Lords will excuse my going back to those gentlemen, A and B, whom we all knew in our school days, when we were familiar with the number of times A ran much faster than B, or lifted a weight heavier than B, or performed some other athletic feat to the disadvantage of B. If countries A and B find it profitable to exchange concessions of approximately equal value, the most-favoured-nation clause insists that at the same time both A and B shall be compelled to extend these concessions to all other countries who are signatories to the General Agreement on Tariffs and Trade. Nations, like humans, have their failings, and one of the failings of the
individual is a dislike of giving something for nothing. The result is that country A hesitates to give a concession to country 13, because at the same time it must give it to other countries who are offering nothing in return. It is only natural that A and B should sit back and wait, calculating that if they wait long enough C and D will come to some arrangement advantageous to themselves, and that the concessions which they have tried to achieve will fall into the laps of A and B without their having to give anything is return. The Economist summed up the Conference very well on April 21, it these words:
Torquay will have shown, not for the first time, that the most-favoured-nation clause can in certain circumstances be an impediment to tariff reductions.
That is the third reason why Torquay has failed to come to any comprehensive agreement.
§ The Havana Charter is dead, unratified and unmourned, but its mantle has fallen on this organisation, the G.A.T.T., whose signatories have been persuaded to put into effect all its main principles, including the objectionable provisions for non-discrimination. I must be fair in debate, and it is true to say that the protocol of G.A.T.T. provides that it shall continue for three years and can be renounced by any party on sixty days' notice. Meanwhile, these non-discriminatory provisions are having serious effects in throttling the prospect of valuable developments in inter-Commonwealth and Colonial Empire trade. I cannot reconcile the acceptance by His Majesty's Government of the principle of non-discrimination involved by the signing of G.A.T.T. and the tributes paid to the principle of Imperial Preference by the President of the Board of Trade and other Ministers. They seem to me to contradict each other.
The Government deny that the principle of Imperial Preference has been compromised. On looking up the debate on the American Loan in your Lordships' House, I saw that the noble and learned Viscount on the Woolsack said to my noble friend Lord Swinton:
! I confess I asked about tariffs and preferences, and I was told what Mr. Winston Churchill said, I think, in another place, that so far as he could see on that matter we were completely free.
I am sure the noble and learned Viscount will be glad to hear those words repeated, because they support the contention of the Government that the principle of Imperial Preference has not been compromised. Nevertheless, sometimes the Government seem to be riding two horses, because the aim of the eventual elimination of Imperial Preference has been accepted by His Majesty's Government as the goal for their economic policy. Here I quote the words of the Prime Minister in another place, in the same debate—the same debate, the same subject but different expressions. He said:
The elimination of all preferences would he such a step as would require a most substantial and widespread reduction of the tariffs and other trade barriers by a large number of countries. Thus it is recognised that the degree to which the final objectives can be reached at the initial stage can only appear at the negotiations themselves and as the result of a mutually advantageous settlement.
Therefore, I would submit that the eventual goal of this Government, if they can obtain concessions which they consider worth while, is the elimination of Imperial Preference.
§ I speak for myself, but on Imperial Preference I can think of no trading advantage or concessions which would compensate in value for the loss of this expression in terms of trade of a brother-hood of spirit and a community of interest which has carried the united British Commonwealth and Empire through the force of two world conflagrations. If you are illumined by the broad conception of the utter need to preserve the British Commonwealth and Empire, you will feel as I do. But if, as I fear, followers of Socialist beliefs feel no such urge in the international world they dream of and hope for, then they cart make out a case for the eventual elimination of Imperial Preference. That is where many of us on this side of the House part company with the Government, in our evaluation of the principles as being a symbol of something far greater than a mere expression of trade.
I should like to give your Lordships one example of the ill-effects of this principle of non-discrimination, in relation to the recent Pakistan Agreement. I must make it clear that I do not criticise the Pakistan Agreement; I believe that the Minister who conducted the negotiation
did extremely well, and made the best bargain possible within the boundaries which His Majesty's Government have set up by the principle of non-discrimination. A new Agreement with Pakistan was necessary, now that India is divided into two, and we and Pakistan conferred. Investigations showed that the United Kingdom were receiving preference on exports from us into Pakistan to the value of £16,000.000; on the other hand. Pakistan was receiving preference on her goods entering United Kingdom to the value only of about £4,000,000. Naturally, Pakistan felt that there should be some redress of balance. Normally, the two parties would have got together and hammered out a successful bilateral agreement. But not so in the case of the principle of non-discrimination and the G.A.T.T., which forbids any party giving a preference unless it is given to all and sundry. The value, therefore, evaporated, because we could not give a new preference, or increase an existing preference, to Pakistan, or she to us, without giving it to Germany, Italy and Nicaragua. The Manchester Guardian, not a paper usually favourable to a tariff policy, summarised this position on April 3 as follows:
The preference margin enjoyed by British cotton piece goods is reduced in the case of grey cloth from 45 per cent. to 5 per cent.; for printed cloth from 42 per cent. to 6 per cent. The margin for rayon fabrics drops from 30 to 10 per cent—Preferences for cotton, rayon, or mixed household textiles are wiped out.
At the moment, no great hardship is felt in this country because of these reductions: there is a sellers' market, and the manufacturers can sell all they can produce. But one day competition will again be acute, and we shall not be able to negotiate an Agreement with Pakistan for a readjustment of the surrendered preferences. What we shall have to do will be to go cap in hand to the contracting parties of the G.A.T.T. and ask for permission to increase preferences. As the other nations are all our creditors, it is not likely that we shall very readily be given permission to do so. One can envisage future Japanese competition in the Pakistan market, and its effect upon those industries in this country where the preference has been wiped out.
§ I should like in this connection to ask the noble Lord who is to reply one question, of which I have given him private 204 notice. Have we the right under G.A.T.T. to increase or create preferences in respect of trade passing between Great Britain and the Colonies, including Southern Rhodesia and Tanganyika, without asking permission of the contracting parties? And, if we have that right, is it the Government's intention to make use of it should circumstances warrant? I believe that the need for freedom to increase inter-Commonwealth trade and multilateral trade within the sterling area is becoming increasingly important, because I feel convinced that our future dollar difficulties are far from solved. As your Lordships know, at the moment there is a great demand for raw materials and an intense industrial activity, due to world rearmament on both sides of the Atlantic. The dollar deficiency picture of 1947–48 has been drastically altered to our advantage by that demand for raw materials and rearmament activity. But at some time in the future rearmament has got to slow down; the outcome must be either war or a peaceful world settlement, because national incomes cannot indefinitely carry the present load of armament production. I believe that when this situation comes about the present industrial disequilibrium will be intensified, and once again we shall face the dollar shortage of 1946-47 in our trading accounts with the United States, if we are then still dependent on dollar imports for food and essential raw materials. And when that occurs, I believe that the threat to the standard of living of the British working man will be just as great as it was in 1946–47 and 1947–48.
§ In support of that argument I should like to refer to what Mr. Paul Hoffman said some time ago. He gave the warning not to celebrate too soon the closing of the dollar gap, because it was due to abnormal circumstances; and, further, that permanently to balance our account we needed to double the value of our 1949 manufactured exports to the dollar area. I beg leave to doubt the wisdom of this, or the ability to achieve this end by a policy based on the export by 50,000,000 people to a country of 150,000,000 people of permanently manufactured goods, most of which the 150,000,000 people can make just as well themselves. Surely, it is better to concentrate everything on a policy of 205 obtaining all the dollars we can by the encouragement of dollar trade, while aiming primarily at developing the raw material resources needed by us and the rest of the sterling area. We should develop inter-Imperial trade, protected by a system of Imperial Preference and, secondly, a multilateral sterling trading area within Western Europe. I submit that those two primary objectives—the development of the raw materials and the development of the multilateral sterling trade area—are wiser aims than a policy based on a belief that the revival of world multilateral trade is just round the corner.
§ The President of the Board of Trade said recently that the British Commonwealth could not be a self-supporting economic unit, but that we could at any rate go a long way towards that by developing the sterling area unit, having regard to our advantageous world position in raw material resources. The Commonwealth and Colonial Empire has a commanding position, as shown by the following percentages of the world's supply which are produced from the British Commonwealth: nickel, 70 per cent,; gold, 61 per cent,; jute, 94 per cent.; rubber, 63 per cent.; ground-nuts, 62 per cent. and tea, 83 per cent. I give your Lordships some of the main world raw material requirements and the percentages of the production within the Commonwealth in relation to total world production. The Torquay Conference seems to try to guard the principle of Imperial Preference, yet it still accepts the limiting restrictions on Empire development, apparently in the mistaken belief that it is possible to achieve this restoration of world multilateral trade. The President of the Board of Trade said proudly that the percentage, of Commonwealth trade vis-á-vis foreign trade was higher than before the war. That is true, but he forgot to say that the war drove the trade upwards, and that ever since the war there has been a steady decline in the amount of that trade.
I should like to make one thing clear. I am not advocating isolation, or detracting from the need for the greatest amount of world trade; but I believe that past experience proves that the development of inter-Imperial trade of itself brings about a higher degree of activity in world international trade. The United States of America have every right to conduct their fiscal policy in any way which suits them
best. We would no more deny them the use of tariffs than they should deny us the use of preference to the Commonwealth and Colonial Empire. If the Government's policy seems—as it does to me—hesitant and contradictory, the policy of the Party of which I am a member is firm and positive. For the record I should like to reiterate one section of the Declaration of Imperial Policy, which was published recently. It says:
The Conservative Party has never supported any decision taken at Geneva, Havana or elsewhere, inimical to the general system of Imperial Preference, and we shall take all steps in our power to ensure that in the future our liberty in this direction is not impaired.
We reserve the right to restore that conception of ourselves that always prevailed before—the right to regard the British Commonwealth and Empire as an entity, however loosely knit together. This means that we pledge ourselves to re-examine from the start the working of the most-favoured-nation clause, and to see where it is harmful to inter-Imperial trade. While we shall keep all our Treaty obligations, as any successor Government are bound to do, we shall renounce any part of the Agreements which have been reached successively at Geneva, Havana, Annecy and now at Torquay, which may be prejudicial to Empire trade. There is no hesitation on our side where we stand in this matter of Empire Trade. We are for it. In conclusion, I would ask the Government where they stand on proposals for denouncing non-discriminatory provisions which hamper both Commonwealth and sterling area cohesion and expansion.
§ 3.5 p.m.
My Lords, I cannot let this opportunity go by without saying a few words in support of my noble friend's Motion, because I feel, as do many others, that these international conferences on tariffs have been most inopportune. When one considers the systems of world trade, one can divide them into four. There is, first of all, the barter system, about which I will not worry. There is also the old free trade, which most people regard as being as dead as the dodo. Then there is the system we had before the war, which was tariffs with or without preference. Next there is this fourth system which sprang up during the war and which may be called, briefly, licensing. To-day, over the 207 whole world the rule seems to be licensing, and the exception the ordinary tariff, outside the British Empire, which, so far as I know, is the largest area of free-ish trade in the world.
Why is this state of affairs continuing? There are several factors at work. First of all, there are the primary producing countries, who as a result of two world wars have greater urge than ever to be industrially self-sufficient. They have seen their imports cut off in two separate wars. The idea seems to be spreading in the primary-producing newer countries that the machine-minder is a more noble human animal than the man who tills the soil. Curiously enough, this is at a time when, in the older countries, precisely the reverse idea is beginning to prevail. Another factor is the new doctrine which has sprung up of essential and nonessential goods. This doctrine has sprung up all over the world, and the man who decides what is essential and what is not essential is the man who corresponds to our "gentleman in Whitehall." In these countries everything connected with industry is called essential, but the alarm clock which wakes up the worker in the morning, the garments he puts on to go to work, and the bottle with which he seeks oblivion from his toil in the evening, are all regarded as non-essential, and probably are completely barred as imports. It is a world-wide disease. The planners are rampant everywhere.
There is another factor, and that is the factor of fear. I do not think I exaggerate when I say that, outside these islands, the majority of the human race believes that we are on the brink of a Third World War; and those who have any money want to achieve safety for that money. It is well known that wherever goods can flow, it is not impossible for money to flow also, and only too often licensing systems are kept in being in order to prevent the flow of money by preventing the flow of goods. Lord Keynes pointed out that no trade balance can ever be relied upon to withstand the impact of heavy movements of money. Now there is abroad in the world a still further new idea, which is definitely post-war, so far as I am aware, and it has been bred by the sellers' market for raw materials. The old game in international trade used to be competitive devaluation of exchanges. To-day the 208 position is almost the reverse: the primary producers able to exploit the shortage of the few essential goods are tending to keep their exchanges at a much higher level than their price level would justify. In order to do this, they have to prohibit or restrict enormously the import of consumer goods which otherwise would bring down drastically their price level. At the same time, by these artificial exchange rates they are able to buy cheaply the capital that they require for further industrialisation. It is the old story: they will take our tinplate and our machinery and stop our cloth and our whisky; meanwhile, we have to pay the price on our food and raw materials.
Now, my Lords, the trade world is in a most extraordinary mess. Instead of world trade being left to the merchants of the world to handle, it is in the hands of bands of Government experts, who travel about all over the world and meet together and play their little games of loaded statistics. Will this situation persist? Some people clearly think it will not—otherwise these conferences would never have been permitted. Moreover, I see that fairly recently the International Monetary Fund has issued a warning to its members that by March, 1952, they must eliminate or substantially modify any such restrictions and other forms of discrimination against trade. The majority of the members of that international body will, I suspect, take no notice of the warning at all; and that leads me to believe that the International Monetary Fund will probably pick on us. It is rather like the situation arising when a young and timid policeman, or a prefect in a school, not too sure of himself, finds himself called upon to quell some disturbance. Instead of plunging into the midst, he tends to skirt about on the outside, and to pick on one of the more inoffensive bystanders. I am sorry to say that, so far as His Majesty's Government are concerned, we have now descended into the category of the more inoffensive bystanders in the world to-day. Nevertheless, I hope that His Majesty's Government will give a pretty stiff reply when they get this intimation.
The United States have, I understand, drafted a Resolution to lay before the United Nations Latin-American Committee, which I believe is now sitting, asking them to study fiscal methods of stimulating investment in the under-developed 209 areas. While it may be necessary for the New World to study this question, we in the Old World have studied it already—and Imperial Preference is our method. And it is working very well. The British Empire is the largest area with the freest trade that I know in the world to-day. I do not believe there is any hope of reverting to the pre-war system of worldwide trade, controlled merely by tariffs, until the basic causes of the prohibitions and licences which I have enumerated have been removed. In many countries there is no hope of arresting a heavy and persistent inflation. In that case, fixed exchanges and the removal of licensing are quite incompatible as yet. The International Monetary Fund stands for both those two objects: which is it going to go for?
Then again, what of Japan? Anybody who was engaged in world trade before the war knows that the impact of their rice-eating industrialisation upon the meat-eating and solid house-dwelling industrialisation of Europe was then an unsolved problem. If there had been no war I do not know what would have happened. In my humble view, it is quite impossible to admit Japan into any system whereby goods are exchanged freely subject only to tariffs. Before we talk of going back to any system ruled only by tariffs, we must certainly enlarge the area of trade where total prohibition does not exist to-day, and abolish the factors leading to that total prohibition. Let the International Monetary Fund plunge into the mêleée and pluck out the real culprits by the collar, even if they are rather rough people, instead of looking for inoffensive parties round the edge. We must go on ever widening the area over which Empire trade becomes greater and freer, and increasing rather than decreasing Imperial Preferences. That is the principal method by which we have chosen to develop what are at present the under-developed parts of the world for which we have a responsibility. Other people may choose other methods for the parts of the world for which they have responsibility; but our method has served us well in the past, and we do not think it has served the world badly. I beg to support the Motion.
§ 3.19 p.m.
LORD FAIRFAX OF CAMERON
My Lords, the Torquay Conference went on for six months, and in that time the 210 results achieved were very small indeed. It is not specifically to those results that I wish to refer, but rather to the principle behind those discussions for the reduction of tariffs and the continuation of the freeze on preferential rates. His Majesty's Government have said on more than one occasion that they are in favour of Commonwealth trade—and I am sure they are sincere in those statements. After six years of power, they have now learnt the value of Empire trade, and of the many valuable raw materials and other things with which it can supply us. But I cannot reconcile their expressed views in favour of Empire trade with their action in continuing those discussions to reduce the rates of tariffs and also of Imperial priorities. Both these tariffs and Imperial priorities intimately concern Empire trade, and any reduction in, them can only have an adverse effect upon it. As the noble Lord who moved this Motion has already said, the artificial obstacles to trade, such as licences and quotas, are steadily being brought down—and a great many of them have already been removed—so that tariffs and preferences will inevitably come more and more into their own, and will be far more effective. They are no longer the academic thing that they were immediately after the war, and any reduction in them must have a serious effect upon trade, and particularly for the smaller countries of the Commonwealth.
I realise that it is not easy for His Majesty's Government to reverse the position they are in, so far as the General Agreement on Tariffs and Trade is concerned, because their position there is somewhat heavily compromised. We all know how it is that we have come to be so compromised through the conditions attached to the American Loan. But, in spite of the fact that it would be difficult to reverse that position, we cannot get away from the fact that we have surrendered a great part of the rights of control over our foreign arid Commonwealth trade; and, like convertibility, that is something that we just cannot afford. It is something which, so far as we are concerned, cannot go on for ever; and it will not. We had to give up convertibility pretty quickly, and we shall probably have to give up this Agreement as well. Both those things have sprung from the same cause. But this is of real detriment to the trade and the cohesion of the 211 Empire, and I believe that, knowing that fact, it is thoroughly unrealistic to continue with it.
In my view, this country will have to make a very big decision in the near future. By going on as we are going now, and have done since the war and at Torquay—in effect throwing away a large part of our Empire trade, and separating ourselves from the Commonwealth because we are in effect, so far as trade is concerned, treating Commonwealth countries just like any foreign country—we are becoming more and more like any small European Power, and more and more dependent upon the United States of America. Just because, as another Lord has already said this afternoon, we happen to have favourable dollar balances at the moment, we do not perhaps feel the pinch quite so hard in that respect. But that state of affairs will not continue for ever. We shall find out our weakness. We are certainly no longer in a position where we can attract the confidence that is due to us as leaders of the great Commonwealth and Empire. If we go on as now, as at Torquay and Geneva and other Conferences, it means that we are taking the easy way out, throwing up our responsibility as a great Imperial Power, with responsibilities beyond the seas to all sorts of countries and peoples. We are throwing away that responsibility, and we shall be taking the course that it would be all right for some small countries to take, countries with no responsibilities outside their own territories. But that is not the course for us, because we did not start off in the position in which they started. We have an Empire for which we are responsible, and at the moment we are not taking up those responsibilities in the way we should.
The other course which I believe is open to us is to regain our right to have an Empire trade policy, which at the moment, in point of fact, we have not got. We must have a policy which we can control ourselves, in consultation with other countries of the Empire, and not something that is at the discretion of about thirty or forty completely foreign countries, who do not in any way share the responsibilities that we have. Without such a unifying force as an Imperial policy—an Empire trade policy one might call it—of this sort, the Commonwealth countries must surely drift more and more 212 apart. Either the countries of the Commonwealth will look for foreign aid, and to leadership from foreign countries, instead of from us, or else, as some of them are already doing, they will turn to Communism.
I believe now that I can give a case which will in some way illustrate this point. One of the biggest disappointments of Torquay was the way in which Canada gave up a good many preferences, though I have not been able to get hold of the details, as I do not think they are yet available. Canada moves further and further into the orbit of the United States. That, of course, is not entirely a result of this Torquay Conference, or of the Geneva Conference. I believe—and this view, I know, is shared by a good many other people—that her action is a result of the treatment which she has received from the United Kingdom since the war. We have treated her with considerable indifference, and with little regard for the great help she gave us during the war. We have not treated her in any way as an Empire country. I should like to give a few figures to illustrate our indifference to trading with Canada—something which is quite inexcusable—and so allowing her to drift away from us. I would assure the noble Lord, Lord Hawke, that these statistics are not "loaded." Between 1945 and 1950, the United Kingdom imports from Canada dropped by £20,600,000, whereas in that same period Canada took from us £106,000,000 more in goods than she had taken before. Her imports from us went up something like five times. If that points to one thing, surely it is to a reluctance on our part to trade with Canada and certainly not to any reluctance on her part to trade with us.
It would be interesting to compare those figures with the trade between Canada and the United States. Since 1947, Canadian exports to the United States have gone up by 900,000,000 dollars—that is to say, they have doubled. Her exports to us, as I say, have gone down by £20,000,000. That is a rather striking comparison. I know that His Majesty's Government say that a great part of the responsibility for the falling off to such an extent of trade with Canada has been due to our own shortage of dollars. But the Canadians did not want only dollars in return for goods they could send us: they wanted other things—things that we can provide, 213 most particularly iron and steel goods. It is interesting to see that since the war we have not sent to Canada all the iron and steel goods that we could have done. I have some figures here which will reveal clearly that we did not. Before the war, in 1938, we sent to Canada 88,000 tons of steel goods. In 1947, we sent only 23,000 tons and in 1948 we sent only 41,000 tons—that is, half the amount of steel goods that we had sent in 1938.
That was not the case with other countries, European countries, to whom we exported steel goods. The figures we sent to them did not drop after the war, they rose. To Finland in 1938 we sent 17,000 tons of steel goods, and in 1948 we sent 78,D00 tons—that is to say, the amount went up by four and a half times. To Sweden in 1938 we sent 12,000 tons of steel goods, and in 1948 we sent 89,000 tons that is, an increase of seven times—and Sweden was a neutral country during the war. But, worst of all, in 1938 we sent 4,000 tons of steel goods to Russia and in 1948 we sent 21,000 tons—or an increase of five times. Yet to Canada our exports of steel goods dropped by half. We cannot say that the dollar situation caused a drop in trade between Canada and the United States, and if Canada is moving away from this country we have only ourselves to blame.
Now, my Lords, His Majesty's Government have undoubtedly become more converted to the value of Commonwealth trade. Unfortunately, the damage is already done, and it will take many years to restore confidence in this country, and also to restore the flow of trade between the various parts of the Commonwealth most seriously affected—notably Canada. I believe that if the Commonwealth is to stay together we must have a wholehearted Empire policy, and not be led away from that aim by any such outside influences as the various promoters of the General Agreement on Tariffs and Trade, because without that policy our Commonwealth is just going to split apart. A policy of Empire priorities is, to my mind, in no way exclusive, and will not cut off us or any part of the Empire from the rest of the world.
Such a policy is not anti-American, as it is so often thought to be. In fact, the worst blow the Americans could 214 receive from us would be the splitting up of the Empire, so that they would have to take care of the pieces. They already have enough burdens on their shoulders, without any more. We are in a position to understand the mechanics of our Commonwealth in a way that no other foreign country, and certainly not the Americans, can do, because, after all, we have always been much more closely concerned with it than anyone else. We know that it can exist only on a basis of preferential trade in some directions. But there are different kinds of preferences, and it is only well-meaning ignorance which makes people try to persuade us to throw over our tariffs in what they believe to be the interests of free world trade. But it does not free world trade as far as we are concerned it makes it much more difficult.
I do not believe that words are enough. It is not enough for His Majesty's Government to say that they believe in Empire trade, and think that no further action is required. There must be a policy for the promotion of Empire trade, and no policy to that end can possibly work so long as there still exists the "freeze" of preferential rates. I do not suggest that His Majesty's Government should contract out of the General Agreement on Tariffs and Trade. That would indeed be a very invidious situation for them. But as the Torquay results show, most of the nations which are now party to the General Agreement seem to be just about at the end of the concessions they can make. They do not seem to have many more up their sleeve. Surely now is the time to make a change in the terms of the General Agreement. I believe that there is to be another meeting of the parties to this Agreement fairly soon, and instead of His Majesty's Government going there with one or two more concessions to make, let them take that opportunity of altering things a bit so as to restore to us the freedom of trade that we have lost.
§ 3.35 p.m.
§ VISCOUNT SWINTON
My Lords, think this debate has been a very useful one—particularly useful in that in his opening speech my noble friend Lord Balfour managed to see the wood through the trees, and tried to put the details in their true perspective and against the real background. I expect I express the 215 view of many of your Lordships in saying that I find it extraordinarily difficult to follow the results of these various conferences. They go on for a very long time, they produce voluminous reports, and they do not seem to lead to any great results. I am not sure that that is always a bad thing: it is much better to have no result at all than to have a bad result. I do not think it is very profitable to discuss these conferences piecemeal. What we should really like to know today from the noble Lord, who can always be very clear when he has something to be clear about, is: Have the Government got a policy; what is that policy; and does their action conform to it?
In trade policy, as in foreign policy or defence, it is necessary to have a long term plan. I should have thought that was the one thing which the planners ought to have. It is very important that short-term action should not compromise the plan. We should all agree that we have a great interest—I suppose a greater interest than any country—in promoting world trade, but practical realities do not always conform to academic theory. Countries increase their mutual trade when they are individually prosperous. If they are not individually prosperous, they do not increase their mutual trade. That applies equally to great and small countries. When the slump came in the United States in 1929 its external trade was cut as by a knife. Not only does the willingness of countries to do mutual trade depend upon their internal prosperity, but they will always do what they think necessary in their economic defence.
I must say that I think it is unwise today to try to make countries accept treaties or obligations which they may not be able to carry out. It is much better to have obligations which countries can carry out, and where they will go a little further than the bond because there is good will behind it, than to have a bond from which they will always be trying to escape. If you try to make the obligations too strict, you will find that the treaties will be denounced or that use will he made of "escape" clauses; that people will insist on "escape" clauses being put into the treaties; and then, quite unevenly as between one country and another, use will be made of those "escape" clauses which, when they are used, and, above all, when 216 they are used unevenly, may make a treaty almost valueless. That leads me to say that I believe—and I am not talking theory now—that it is profoundly unwise to try to prevent two or three countries from making mutual arrangements, beneficial to them all, unless they extend them to the whole world.
I am very glad my noble friend raised the question of the most-favoured-nation clause. That is perhaps the supreme example where theory and practice conflict. I was four times President of the Board of Trade and I had a good deal of experience of it. I came into a tradition where the most-favoured-nation clause was almost the Ark of the Covenant. Well, it is an ark in which I have progressively lost faith, and a covenant which I find more honoured in the breach than in the observance. One must use decent language in dealing with these international obligations, but I was going to say that a country "works a racket"; at any rate it performs a successful manoeuvre. Your Lordships may be familiar with the classical instance of a treaty made by Switzerland, I think, with Germany. The object of that treaty was, as between the two countries, to reduce the tariff on canned milk. Both countries had a most-favoured-nation treaty with the rest of the world, so that if the duty on canned milk was reduced by Germany for Switzerland, it had to extend all round the world. But they found a very ingenious way out of this, for it was arranged that the reduction in the duty was to be granted on canned milk the product of cows pastured at an altitude of more than 1,000 metres. The "M.F.N. "clause was, technically, left untouched, but the benefit extended to no one except the cows on the Alpine pastures.
The noble Lord, Lord Balfour of Inchrye, was quite right in what he said in this connection; I have seen it happen over and over again that the "M.F.N." clause has prevented deals which would have benefited two or more countries, and by making both countries more prosperous would have enabled them to do more trade with the rest of the world. In the past we very wisely excluded Imperial Preference from the most-favoured-nation clause. I want to ask the noble Lord. Lord Lucas, this specific question. In my time, in all our commercial treaties when we put in a most-favoured-nation 217 clause, it was provided that it should apply only to foreign countries. The word "foreign" was the governing word. This, while obliging us not to give a concession to one foreign country which we did not give to another, left us free to do what we pleased with preference, and grant preference within the Empire. I want to know whether that practice and that formula is still maintained.
Let me take an example from the past, which I think will not be contentious, to show how valueless "M.F.N." may be when looked at from another aspect. Before the First World War, there was in existence the old Austrian Empire of which I think Mr. Gladstone said that if it had not existed it would have had to be created. In those days there was a tariff running round the whole of the Austrian Empire. They could put up their tariff as high as they pleased against the rest of the world, and they did put it up pretty high. But we did a great deal of business with the Austrian Empire. Then came the First World War. After that war was over, the Austrian Empire was split up and whatever value the Peace Treaty may have had ethnologically, economically it was disastrous. Vienna, the capital, which with its expertise, its knowledge of banking and merchandise was capable of conducting the trade of a continent, was left without a country.
There was a desire in the countries concerned to draw closer together, and I believe that would have been the best thing which could have happened in the world economically. If it had happened it might well have saved some territorial disasters which afterwards occurred. Some of those disasters might never have happened if the old countries of the Austrian Empire had been allowed to draw together in a customs union, I pleaded for it at the time; I am not being wise after the event. But after the Empire was split up, each of those countries—there were five or six of them—had, as part of the Peace Treaty, a mostfavoured-nation agreement with the rest of the world. So, without the consent of all the world they could not make their customs union. It was a great pity. Certainly we did far less trade with those individual countries who could not put tariffs against us than we had done before with the Austrian Empire. Therefore I say that I do hope we shall stop making 218 a fetish of "M.F.N." For my part I will support anybody who on good occasion "gives it the go by." It has ceased to be useful; it has almost ceased to be respectable.
I find this General Agreement on Tariffs and Trade a strange and illogical document. It brings in a large part of the Havana Charter which no one will ratify. The Government have been loyal to their word that they would not commit us to this awful thing without the approval of both Houses of Parliament, and I do not think it has their own approval now. A lot of the Havana Charter has been incorporated into our economic organisation by this General Agreement on Tariffs and Trade and by Annecy and the rest of the Agreements. I must say that while we are bound by whatever treaty has been entered into, there is a time limit and there are also powers to get out of these things. Without committing us to what we should do, I say that we must hold ourselves free to get out of any entanglement which, on careful consideration, it is seen would be an impediment to us. One of the first things it would be wise to do would be to have an Imperial Economic Conference.
But is it not a very illogical document? If you read it, you find that customs unions are blessed, and groups of countries, large or small, are encouraged to make customs unions. I do not quarrel with that. I think you do more world trade as between large units. I have always thought so. But in customs unions, those within a union can increase or lower their tariffs against the whole world outside it. While blessing and encouraging customs unions, this odd document or collection of documents frowns upon the less rigid and less exclusive system of Imperial Preference. Exactly the same arguments which are used in favour of a customs union, which is a strict and comprehensive fence, can be used, and rightly used, in support of Imperial Preference. Therefore both customs unions and Imperial Preference ought to be equally commended.
This is not a case of theory. In fact, Imperial Preference has increased the trade of the Commonwealth and Empire with the rest of the world. If somebody says I put that too high, no one can challenge the statement that after we extended widely the whole range and scope and 219 mutuality of Imperial Preference at Ottawa, not only did the internal trade within the Empire increase but the trade of the Empire with the world outside increased to an even greater extent. We must reserve our full freedom to grant and receive preferences. If we have lost it, we must be free to recover it. That is not only a vital Commonwealth interest; I believe I do not put it too high if I say it is a world interest as well, because I am sure it is only if the British Commonwealth and Empire is economically strong that it can play its full part in the economic and strategic defence of a free world.