THE SHIPPING INDUSTRY

HL Deb 26 October 1955 vol 194 cc19-45

2.58 p.m.

LORD WINSTER rose to call attention to matters connected with the shipping industry; and to move for Papers. The noble Lord said: My Lords, in rising to move the Motion standing in my name, I think I should mention briefly that perhaps my chief interest in the matters to be discussed arises from the fact that I have the honour to be the President of the Association which endeavours to look after the interests of the officers of the Merchant Navy. I am happy to say, in that connection, that the relations which exist between the Council of the Association and the shipowners on the National Maritime Board are of a very happy nature. I think the days have gone by when those two parties, the officers and the shipowners, regarded each other as natural enemies. I know that the Council deeply appreciate the sympathetic good will of the shipowners in regard to the matters that we feel must be put forward on behalf of the officers. I might add that the relations between the Council and the Admiralty are of a similarly happy nature. The individual relations which exist between the officers of the two Services are first-rate, and in the Association we greatly appreciate what the Admiralty are doing to see that in future the Merchant Navy is adequately protected in time of war—perhaps more adequately than has always been the case in the past.

In calling attention to certain matters connected with the shipping industry I am, of course, dealing with one of the classic industries of this country—an industry, moreover, which is of primary importance to the Chancellor of the Exchequer. I have the figures for 1952 (I am sorry to say that I have not later ones), which show that in that year the industry contributed £221 million to invisible exports; and I have been told that the figures for 1953 and 1954 were considerably higher. That figure of £221 million is not all, because another £218 million was earned by the shipping industry in carrying United Kingdom imports—which, of course, represents a great saving of foreign exchange. In the light of figures like that one might fairly expect that the industry would be in good standing with the Chancellor of the Exchequer and the Government, and would be encouraged and assisted by them in every way. But I cannot find that this is always the case, and I propose, with your Lordships' permission, to give several instances of what I think are handicaps which afflict the industry today. These handicaps ought to be considered against the background that we need an increase in production and an added impetus to our export drive. We can thrive only upon international trade; and that, of course, means shipping. I would mention, too, as the background to what I am going to say, that United Kingdom tonnage, which was once half the world's tonnage, is now only one-fifth. In particular, the fall in tramp tonnage is very significant and unwelcome, because we can carry the share of the world freights which might be offered to us only if we have the bottoms to carry them in. But the decrease in intermediate tramp tonnage continues. One instance I may give is that British ships have practically entirely disappeared from the Baltic softwood trade.

Now let me come to some of the handicaps against which this drop in our tonnage to one-fifth of the world's total must be considered. The first thing I would mention is what is known generically as the Panamanian fleet. By that I refer to the registration of shipping in countries which have little natural interest in the sea. These registrations are becoming a menace to bona fide maritime countries. I quote the words of Sir Donald Anderson who will be known to all of your Lordships as a foremost authority on matters affecting our shipping. He said this: The fleets of Liberia and Panama are artificial creations, born largely of the dreadful fact that modern taxation turns as much thought and ingenuity into avoiding it as into doing a job. That a country can have a large merchant fleet without owning, manning, operating or having any native interest in it causes confusion in the realm of international agreements and conventions. If a shipowner wants to undercut his competitors, all he need do is put up his brass plate in the right country, save his taxes and at once he is way out ahead of the rest of us. That is the situation with which these registrations confront us.

In 1924, Panama had only 15 ships on her register in 1954 the figure was 565. Those 565 ships totalled nearly 4 million gross tons, and 224 of them were oil tankers, totalling over 2 million gross tons. In 1954, Liberia, a country which I confess I have never associated with the sea or maritime traditions, had 176 ships, of a total of 1,600,000 tons, registered under her flag. The total number of ships registered in Panama, Liberia, Honduras and Costa Rica was 845, totalling 6 million gross tons—7 per cent. of world tonnage. The Greeks, naturally, have not been backward in "putting up their brass plate" in other countries. Greek registrations in those four countries which I have mentioned continue to grow. Last year Greece had 497 ships, totalling over 3½ million tons, registered in those four countries, while on her own register—and we agree that Greece is a maritime country—she had only 301 ships, totalling a little over 1 million gross tons.

The object of these exceptional registrations is to avoid the obligations which legislation enforces in the recognised maritime countries. By registering as they do, these countries evade national taxation—which, of course, is the affair of the countries concerned—but they also evade regulations about survey and load-line. Very little legislative control is exercised in those matters. These ships are often manned by cosmopolitan crews and displaced persons, and conditions are frequently sub-standard. Panamanian ships are often prosecuted for overloading, and many of them are involved in casualties. But the serious thing for us is that, if a decline in shipping activity materialises, the owners of ships on these furtive registers will be able to undercut ships on the registers of countries which do impose adequate regulations and adequate supervision of the ships registered under their flags. I have not many questions to ask, but I would ask what the Government view is on this matter, and whether they feel that any action is open to them to check what is clearly a growing evil of some considerable size.

Next, I want to speak about flag discrimination. That is a practice which arbitrarily determines that freights shall be carried by ships flying a particular national flag, without regard to whether they are suitable for the purpose in hand or whether they offer the cheapest freight rates. Flag discrimination, I am sorry to say, is on the increase in trade treaties. Recently, twenty international agreements have shown this system, and the evil it brings in its train, at work. It is an evil system, because it diverts trade from normal economic channels into channels which are determined by nationalist passions. Inevitably it increases transportation costs, and it hampers the development and growth of trade between countries. In that respect, I must point out that this flag discrimination has a boomerang effect. If bona fide maritime nations cannot act as carriers, if they cannot sell their shipping services on a competitive basis to customers offering, their ability to buy abroad is diminished. So that those who prevent them from carrying freights in fair competition must themselves suffer in the long run. If Great Britain does not give a lead, in standing up to flag discrimination, to those countries who realise that it is a bad thing, then it will be very unfortunate indeed. But if those other countries get a lead from us, then I believe that, by standing together, we could compel the abolition of this system.

The question is far more than a complaint from the shipping industry of this country. The Chamber of Shipping recorded its "consternation" (that was the word the Chamber used) when finding that we had purchased goods from America on terms laying down that 50 per cent. of the purchases should be carried in American bottoms. That condition, of course, completely conflicted with the ordinary rules of commerce and of competition. It was far more expensive to carry that 50 per cent. under the American flag, but that was how, under the agreement, it had to be carried; and so it was carried. Such a bad example is likely to be followed by countries unable to support a mercantile marine run on normal commercial lines. I should like to ask what the Government are doing to protect our shipping from this totally unfair practice. The Council of Shipping is the policy organisation which represents the Chamber of Shipping and the Liverpool Steamship Owners' Association—in other words, it is the body which is supremely competent to speak for the shipping industry. It sent a deputation on this subject to the Minister—a deputation which could not possibly have been stronger. May I ask: what was the answer given to that deputation? Will the Government, in future, decline to enter into transactions in which flag discrimination is made a condition? Have they ever made any successful representations on the point when negotiating trade agreements and commercial treaties?

The shipping industry has fought flag discrimination for centuries, but to-day nationalism is in the air. Each country regards a mercantile marine as a prestige affair, and so the flag discrimination struggle is brought to a peak. I must express some surprise that America should give a lead in this matter to countries of doubtful commercial morality. I entirely agree that a merchant fleet is a strategic necessity for America, but surely such a great country might be expected to pay for her own strategic requirements. It is not very dignified for America to try to make good her shipping deficits by levying on world trade by means of flag discrimination. I do not think that squares with American declarations on liberalisation of trade. We had no grounds for protest when aid and gift cargoes were involved, but those are things of the past; and I feel that now we are fully entitled to protest against what seem to me illiberal terms.

I felt that our Government acted rather tamely about that coal deal with America—a matter which aroused a great deal of attention and criticism at the time. We bought a quarter of a million tons of American coal and flag discrimination added to the price that we had to pay. In contrast to our behaviour, Norway boldly refused the American terms; she would not accept them. I most warmly support the demand of the Chamber of Shipping that the Government should refrain from entering into transactions where purchase of commodities would be subject to the 50 per cent. discriminatory shipping requirement. It is a most damaging requirement, and Sir Colin Anderson was quite right when he said: It would he folly not to say plainly that we have accepted the situation long enough. Indeed, we have. And, of course, other countries are moving in the same direction: we have seen that in connection with the oil from Saudi Arabia and the terms which they are insisting upon for the carriage of that oil.

To revert to the American coal, similar purchases have been effected by normal commercial arrangements. America was not saying she would sell on no other terms. Who proposed these terms in regard to this purchase of coal? Was it Britain or was it America? Which Government Department was responsible for concluding that agreement? I wonder whether the Ministry of Transport were consulted about it. I have mentioned America, and I will just add two words on how I think this affair of the 50–50 rule cropped up in America. At the present moment the American Government are urging operators to get their replacements under way, and American shipyards are desperately short of orders. The American Government want to see the country's fleet of 1,300 merchant ships increased to 1,700 to meet the demands of the military. I think the 50–50 rule aims, in part, at enabling such an expansion of the American merchant fleet. That may be all very well from their point of view, but I do not see why British shipping should assist them in that matter.

If I may now pass on to shipbuilding, replacements to-day cost four times what they did pre-war. The Chancellor of the Exchequer did something last year with his investment allowance. He told the shipping industry, amongst other industries, to "Invest in success." That slogan seems a little fly-blown today, and has been replaced by something else. For the shipping industry, "Invest in success" means laying down replacements, and the industry will certainly not be reluctant to do just that, provided that it is given reasonable conditions in which to do so. There never was a time when it was so important for our merchant fleet to be kept up to date. Technical changes press in upon the shipowner at this moment, and if he does not keep abreast of them he must fall hopelessly astern of his competitors. Therefore he deserves assistance and encouragement in that task. Amongst his competitors are the German and Japanese shipping lines, competing with their most modern ships built in the most modern shipyards. Our shipowners and shipbuilders should be encouraged and assisted to stand up to that competition. Since the war, our shipowners, with great tenacity of purpose, have spent about £700 million on building 7½ million tons of shipping. That is a fine effort. Our shipping is now back at about 18 million gross tons, but in order to keep it at that figure we need to build some 700,000 tons annually, and at the present moment we are about¾million tons in arrears on replacements. Prices are steadily rising. Future replacements will cost more.

How are the necessary replacements to be financed? It is a difficult thing to do out of earnings while taxation remains at its present level. Replacements have been possible so far because the shipping companies had made it their financial policy in the past to accumulate the necessary resources for financing replacements. But for some time they had to contend with a situation in which compensation for ships sunk during the war was based on the pre-war cost of shipbuilding. That did not help them very much in their task. Depreciation allowances have been based on the pre-war costs of ships, taking no account whatever of the post-war cost of replacement. I do not feel that the investment allowance, welcome though no doubt it has been, bridges this gap. It is the cost of replacement which ought to determine the size of the compensation. The Government war losses insurance scheme fell far short of what was required to replace war losses. I mention these things because shipowners must have the tools of their trade. As the chairman of the P. & O. Line said when launching his latest ship, it is a bit of a gamble building at this cost, but if shipowners do not build ships they go out of business. They are the tools of their trade.

Then, of course, on the question of shipbuilding, certainly the shipowners have great trouble, because I am afraid that only rarely can they obtain either a fixed delivery date or a fixed contract price. The delivery date is left uncertain and the price is to be cost at the date of delivery. That is a difficult way to have to go to market. What is the result, from the point of view of our shipbuilding trade? The President of the Norwegian Chamber of Commerce was over here the other Clay, and he made a public speech in which he said that, in the course of six or seven months, out of seventy-three contracts for new ships not one had gone to Britain. Then he used these words: Norwegian shipowners know that nowhere could they have better ships built than in the United Kingdom, and it is with great regret that they are hound to go where prices are not so high and delivery is much shorter. My Lords, the figures of our competitors are most startling. The German shipbuilding industry now runs second in the shipbuilding race, and the latest figures I have seen for Japan show that, with some £180 million worth of contracts, she now runs third. This progress is attributed, among other things, to fixed prices and better delivery dates than can be obtained in other yards.

There are still some other figures which I feel I must quote to show what shipbuilding and the shipping industry are up against from America. At the present moment America has in hand a £1,000 million merchant shipbuilding programme, and of that great programme about 40 per cent. of the cost will be borne by the American Government. I feel that not everybody realises on what a huge scale America subsidises her shipping industry. For example, to one small item, the construction of two passenger cargo ships, five cargo ships and conversions, Congress voted over £15 million. Not only that: the American Government grant to their shipping twenty-year operating subsidies and insure 90 per cent. of privately financed mortgage. The construction and operating subsidies are granted to foreign trading ships and ships intended for foreign trade: they are granted essentially to subsidise trade which is in competition with foreign trade. Since American shipping lines can neither build nor operate their ships competitively the Government grant these subsidies. For 1955 the operating subsidies alone were estimated at £60 million. For instance, a 10,000 ton tramp will get an operating subsidy of £500 a day. As I say, few people realise on what a tremendous scale these subsidies are granted to the American shipping industry.

Next, I should like to say a word about territorial waters. Here again, this question has a direct bearing upon one most important section of our shipping industry, the whaling industry. We stand for a 3-mile territorial limit. I think that the whaling industry in this country would probably settle for 12 miles, which seems to me a reasonable figure. But Peru, Ecuador, Colombia, Costa Rica and Chile claim a 200-mile limit for territorial waters. Peru seized a whaling fleet fishing from 80 to 100 miles off her coast. The owner was fined £1 million and Peru claims that the fact that he paid up is an acknowledgment of her claim to a 200-mile territorial limit. I hope that our Government will be adamant in resisting extravagant claims to extend these limits beyond what is sanctioned by custom and usage. I call attention to these matters because they are of immense importance to the whaling section of the shipping industry, which is menaced by the action of these South American countries in claiming extended territorial waters, not only off their own shores but off the shores of those territories over which they are at present claiming sovereign rights.

The Argentine, Chile, Ecuador and Peru are not members of the international convention which governs the whaling industry, so they are not bound by the rules which restrict the operations of those who are members. Of course, to some extent that makes the convention inoperative. For instance, the Chilean land stations whale for twelve months in the year, whereas the members of the convention fish for blue whale for six months of the year, and for sperm whale for eight months, in order to give the whales a close season for breeding. But if a country which is not a member of the convention sends a whaling expedition to the Antarctic, and it fishes according to its own independent rules, clearly the convention is likely to break down. The primary purpose of these "splinter" groups of countries is to establish a whaling and fishing monopoly within 200 miles of their shores, instead of within the internationally accepted 3-mile limit. They are out to establish a whaling monopoly off their own coasts. There are particularly large concentrations of whales within 200 miles of the coasts of Chile and Peru. For many years a British expedition used to fish there. The great firm of Christian Salvesen, of Leith, sent expeditions there in 1936 and 1937. I am told that that firm will send no more expeditions to those waters so long as the present conditions prevail.

The last Government said that aid would be given in such circumstances. What sort of aid? What sort of time would elapse before such aid was forthcoming? A British expedition goes there and finds itself attacked, as was the Greek expedition. What period of time would elapse before aid was forthcoming, and what would be the financial loss, meanwhile, that such a British whaling expedition might suffer, supposing it were seized, as was the other fleet, by the Peruvian Government? What loss would be inflicted before aid could arrive? The fact is that this very important whaling area is now out of bounds for our expeditions. The whaling industry has on three separate occasions called the attention of the Government to these facts, but the attacks and seizures continue. And I therefore ask; what is now the view of Her Majesty's Government on what they can do to assist the British whaling industry in this very unfair attack upon it by these South American countries?

My Lords, I had intended to say something about another great handicap to the shipping industry—that is, what goes on in the docks; bat I propose to curtail my remarks upon that mattter, though very reluctantly, because a Committee is now sitting to inquire into the working of the Dock Labour Scheme. I recollect having raised this matter about two years ago when the noble Lord, Lord Leathers, was Minister of Transport; but since then, far from anything being done, matters have got distinctly worse. However, I welcome the setting up of this Committee. Whilst I will say little upon the subject, it is common knowledge that the Dock Labour Scheme has not been working satisfactorily. My noble friend would have some interesting things to tell your Lordships, but, of course, his lips are sealed, as were the lips of the noble Lord, Lord Ammon, who I thought received rather brusque and shabby treatment when he was Chairman of the Board. While it is fair to say that one cannot draw an indictment against a whole nation, many of the dockers seem to have very hide sense of responsibility, and the trouble is that the steady men do not seem either willing or able to make their influence felt.

We have heard a great deal about the dockers' rights, but those who use the docks—the nation, the community—also have some rights which I feel have been severely disregarded for some little time. In the past, whenever I have tried to talk about these matters, I have always been told that the dockers are a grand lot of men because they have the great virtue of what is called "solidity" among themselves. What this "solidity" means is that if a man runs alongside the docks shouting "All out," all the men stop work and come out on strike, without taking the trouble to ask what it is all about. If that is "solidity," and if that sort of solidity is said to be a virtue, then I cannot agree. I am reluctant to say more, in view of the fact that the Committee is now at work, but in the recent disputes, which were internecine disputes between two trade unions and were not an affair between workers and employers at all, the shipping industry suffered irreparable loss. The loss of shipping earnings in London during those strikes was estimated at about £400,000 a week. Things have become so bad at the docks that although shipowners, at great expense, have been building more speed into their ships, and although those who administer our docks have been introducing improved labour-saving equipment into them, the turn-round time in the docks is to-day slower than it was pre-war. That fact alone is enough to establish what a very shocking state of affairs has grown up in our docks.

I am sorry if I am taking up too much of your Lordships' time, but the last thing I wish to mention is something which I know is felt by the shipping industry to be of importance, and certainly a matter where, again, they feel that they have suffered under a severe handicap; that is, in relation to the air. In recent years, several companies hive decided to take part in the expansion of air freight services, which I think is an admirable and far-sighted move. Sea and air are equally complementary and competitive, so that each will gin by collaboration with the other. In my opinion, Government air policy has wisely been modified, and shipowners now see more opportunities opened out for them in the field of air transport. But they are still restricted to such operations as will not attract traffic from the State corporations: there is no freedom to fly the air as there is to sail the seas. The State airlines, however, are heavily subsidised, while our shipping is not. Airports are subsidised, as is a great deal of aircraft and aeroengine research. Air transport claims to be indispensable to the modern State. Maybe it is, but shipping is every bit as indispensable to this country. Although that is so, those who use ocean transport services must themselves pay for doing so, whereas, air users get a great deal of the cost paid for them.

The only advantage that the "indispensable" aircraft offers is speed. It is beaten on cost and carrying capacity. Yet although sea transport must charge rates covering all its costs, air transport need not do so; it has a great deal of its costs paid for it. Air transport is subject to the same economic laws as shipping, but users of a form of transport regarded as indispensable in the modern world decline to pay in full for it and expect the State to pay some part. The shipping industry may well feel that it has something of a grievance in that respect. We need air transport no more and no less than we need sea and land transport, and each ought to be used in accordance with the economic advantages of doing so in preference to using one of the other two forms.

The Director-General of the International Air Transport Association, the great governing body of civil aviation, has said: Scheduled air transport will go on functioning regardless of whether it is soundly financed, for this simple reason: that society cannot get on without it. I do not want to use such an ugly word as "blackmail" but I feel I am entitled to say that that is a rather arrogant statement. I prefer what has been said by the International Chamber of Shipping, which represents no fewer than sixteen countries. It has passed a resolution saying: In the true interests of world trade the competitive balance between sea and air transport, both of which are essential services, should be determined by commercial considerations, taking into account the intrinsic and different merits of each. The resolution went on to urge that if State aid is given to the air, the nature and extent of such aid should be made known and the aid should be kept under review with an eye to its elimination. That would not suit the chairman of I.A.T.A., Sir William Hildred, for it is a source of complaint with him that the Government should make inquiries before giving a subsidy. He also complains that the subsidy can be stopped if the Government consider that the airline can manage without it. What an extraordinary position to take up, to contest the right of the Government to withdraw a subsidy if the Government are satisfied that the airline in question can manage without any subsidy! On top of that, he said that he did not ask for special treatment for air transport. If asking for a subsidy without inquiry, and that withdrawal of such a subsidy is not to be allowed, is not asking for special treatment, then I should like to know what is.

There is one last matter—a very brief one indeed—to which I wish to refer. I think that in previous shipping debates one section of our shipping industry has escaped notice, and that is the trawler section. I do not recollect very much having been said in our debates about the trawler section of the industry, which does such wonderful service and which is manned by some of the most remark- able seamen we have in this country. We hear plenty about the hardships of the miners' life, and I do not wish to minimise them at all; but we hear little about the hardships endured by the trawler men, especially when they are fishing within the Arctic Circle. The point I want to make is simply this. I do not think that enough has been done by those concerned in the trawler industry to bring in new methods and new equipment in order to relieve the trawler men of some of the heavy manual labour which they still have to perform. I believe it is not beyond the wit of man—of clever engineers and good seamen—to devise ways of doing by machinery much that at present has to be done by such fearfully hard labour, often under conditions of great hardship. The modern trawler is lavishly equipped with fish-finding devices. Progress has been made in the taking of fish, and in the handling of the trawl, but in the cleaning and packing of fish generally there has not been comparable progress.

I have spoken about several recent disasters to trawlers. These disasters have attracted a great deal of public attention, and considerable public feeling has been aroused by them. I have noticed that at the inquiries into the disasters failure to ensure that lifeboats could be quickly lifted and launched has been mentioned. At the inquiry into the loss of one of these trawlers, the "Dorothy Lambert," these words were used by the court in giving its findings: The Court is very much concerned to find that grave difficulties were experienced in launching the boat.…This is another of the now too frequent cases in which the Court has been compelled to comment unfavourably upon the arrangements made in trawlers for saving life by means of a small boat. The Court feels that the time has come for a convincing and publicised effort to find a solution to these problems. That is a very grave indictment of those who are responsible for sending trawlers to sea without adequate and proper lifesaving equipment. It was because of reading this that I felt that I must mention that matter.

Here, again, I know that the matter is not impossible of solution, because the firm of Christian Salvesen, whom I have already mentioned, and who are one of the outstanding firms in the business, as a private venture have been carrying out, in a fishing vessel called the "Fairtry," fishing on the Newfoundland Banks, novel methods which are designed to effect improvements in many of the matters of which I have spoken. Roughly, they aim at applying factory ship methods used in whaling to fishing carried out by trawlers. I hope that as a result of what I have said the Government will have a look at that matter and see whether they can use their influence—I am not speaking about anything stronger than that—to see that the trawling industry begins to pay attention to relieving the trawler men of some of the hard manual labour which they now have to do and to see that the life-saving equipment of trawlers is adequate. I apologise for detaining your Lordships for so long, but we do not discuss the shipping industry much more frequently than once a year, and I felt that it would be only fair to the industry to bring to the attention of your Lordships some of the handicaps from which it is suffering to-day.

3.45 p.m.

LORD TEYNHAM

My Lords, I do not propose to follow the noble Lord who has just spoken on all the points which he has raised to-day. He has certainly covered a very large field. He called attention to the fact that our shipbuilders were being priced out of the market by foreigners. That is, of course, true. I am afraid the fact is that trade union restrictive practices and pressure for increased wages are having their effect. Perhaps the Party to which the noble Lord, I think, belongs may be able to help in that direction. In view of the debate now going on in another place I do not propose to deal with the question of taxation which, of course, affects shipping very seriously, but I should like to emphasise once again the difficulties of re-equipment of our Merchant Fleet. Shipowners are certainly quite unable to set aside adequate reserves to meet the cost of replacement at the present time. This is a matter of grave concern and I again draw the attention of Her Majesty's Government to it. It may be that this matter is already being dealt with in another place, but I am afraid I am not very optimistic about it. Perhaps the noble Earl who is to reply on behalf of Her Majesty's Government may be able to give us some encouragement in that direction.

Before going further, I should perhaps declare my interest in the shipping industry. I am a director of shipowning companies and I certainly have a material interest in the welfare and efficiency of our Merchant Fleet. There are two specific matters with which I should like to deal today, both of which have already been mentioned by Lord Winister. One is the slow turn-round of ships and the other is the claim for expansion of territorial waters. There is no doubt that delays in the docks are having a grave effect on our export trade. Complaints come not only from shipowners, merchants and their customers, but also from haulage concerns who are unable, owing to the condition of the approach roads, to get goods to the docks in time for shipment. That is having a serious effect on our export trade. I should like to ask Her Majesty's Government whether they have any plans for improving the approach roads and for providing better facilities in the various dock areas. Anything that can be done in this direction would certainly be of the greatest benefit to export and shipping generally and would help to keep down time lost in the turn-round of shipping.

It is, of course, true that there are many contributory factors to the slow turn-round, and labour is clearly one of them, but I think we had better leave that question alone at the moment. I understand that at the present time an inquiry is going on into the National Dock Labour Scheme. I wonder how many of your Lordships realise that delays in the turn-round of shipping have a material effect on our standards of living. We build more efficient ships year by year, but so often we see their gains in efficiency almost completely whittled away by the slow turn-round in our ports; I should like to ask Her Majesty's Government whether the Government's Ports Efficiency Committee, which I think was set up in 1952, has yet made a comprehensive report on the question of improved port facilities. It is a truism that if port facilities are not adequate to meet increased trade, the increase in trade cannot take place. We are now endeavouring to do all that is possible to export more goods, but all these exertions may be useless unless proper and adequate port facilities are, in fact, provided.

I should like for a moment to refer to the question of territorial waters. I feel sure that most of your Lordships are aware of the gradual encroachment on the principle of the freedom of the high seas which has been occurring all too frequently in recent years. A number of countries have made claims for an increase in territorial waters over the usual three-mile limit, in some cases to as much as 200 miles. I think it is true to say that Colombia and Costa Rica have now joined Chile, Peru and Ecuador in claiming sovereignty over 200 miles of sea. Israel, I believe, at the end of September announced that their territorial waters would be extended to six miles. Egypt, in their attempts to blockade Israel, have now issued regulations controlling the movement of ships through the Gulf of Akaba. The Gulf of Akaba has for long been recognised as an international waterway, and surely this is an unwarranted interference with the right of freedom of passage through these waters.

With regard to the claim by Ecuador for an extension of territorial waters up to 200 miles, there is a still more serious development arising in that they are also making provision for the regulation of fishing and whaling in this very large zone. I think this was mentioned by the noble Lord, Lord Winster. I understand that Ecuador are now taking the view that fishing vessels and whaling ships should be prohibited from passing through the territorial zone, even though no whales or fish may be on board. I suggest that this is an intolerable interference with the free navigation of the oceans. It would mean that there would be a grave risk of interference with any British whaling fleet that wished to proceed to the Antarctic grounds by way of the Panama Canal and steamed within 200 miles of the Ecuadorian coast.

I suggest to your Lordships that it is high time we pressed strongly for an international agreement on these matters before they get completely out of hand and we have another incident like that which occurred off the Peruvian coast only recently. I believe that the International Law Commission, which was set up by the United Nations to deal with these matters, reported by majority decision as recently as May this year that any claim for territorial waters above twelve miles was completely unjustifiable. I presume that the next step will be for the findings of this Commission to be reported to the United Nations for ratifi- cation. I hope that Her Majesty's Government will do all they can to exert their influence to obtain international agreement at the earliest possible moment. What do we mean by "the freedom of the seas"? I would submit that it means the right of ships of every nation to pursue their peaceful callings on the oceans of the world without let or hindrance. Perhaps on the 150th anniversary of Trafalgar it is fitting to recall that this freedom grew out of and has been maintained by the activity of the Royal Navy.

3.53 p.m.

LORD GEDDES

My Lords, may I first ask the indulgence which it is your Lordships' custom to give to one addressing your Lordships' House for the first time. Much has been said about the shipping industry, but it is not so much to what is there as to what is no longer there that I should like to draw your Lordships' attention. We have seen, in 1914 and again in 1939, that though help comes in time, it takes time to come. Apart, therefore, from its importance as an invisible export—a matter to which the noble Lord, Lord Winster, has already referred a strong shipping industry is strategically essential to us if we are to be able to survive the first impact of any war.

Yet what is happening to the shipping industry? In 1914 we had 19 million tons of shipping, or approximately 40 per cent. of world tonnage. Between the wars world tonnage grew from 50 million tons to approximately 65 million tons, yet during that time not only did our percentage fall to about one-quarter of world tonnage, but our actual total tonnage fell. Broadly speaking, our loss appeared as a gain in Scandinavia and, to a lesser extent, in the Mediterranean countries; yet many of these foreign ships were built and financed in this country to carry British cargoes. Then came 1940, and the sharp realisation that we were dependent on these ships, though we had no control of them; and we had no alternative but to pay heavily for them. At that time we had the advantage of being able to negotiate with Governments with requisitioning powers, and so, at a price, we got the ships, although we paid for neutral and, indeed, for some Allied tonnage over twice the rate which had been paid for identical British ships. Moreover, in many cases we paid even to our Allies the cost of their ships lost in the joint struggle.

Since the war, however, a far more serious trend has developed, a trend to which the noble Lord, Lord Winster, has alluded—I refer to the fleets registered under "flags of convenience": under the flags of Panama, Honduras and Liberia, countries which have no mercantile marine, in the strict sense, of their own. In the past nine years, tonnage under these three flags has grown from 1 million to 8 million tons; and of the 8 million tons over 4½ million represent tankers. Meanwhile the percentage of world tonnage flying the Red Ensign has again fallen, until now it is barely one-fifth. It is not as though this growth were something outside this country: again a large part of this tonnage was built in Great Britain for the express purpose of carrying British cargoes on long-term charters to British companies. Look at the result. If war should come again, this vast fleet —and I emphasise that it is measured in millions of tons—on which we have become dependent will, in its own self-interest, seek safety. We cannot requisition it, nor is it reasonable to assume that the Governments of Panama, Honduras or Liberia would, or even could, effectively requisition it. At best, the services of some of these ships might be bought, at exorbitant prices. A few might become available through commercial arrangements made in the United States, but it is almost certain that most of them would he lost, at least during the first impact of the war.

What is the answer? It may lie in the lack of enterprise of British shipowners, though I do not think so. It may lie in excess patriotism among British shipowners, who would disdain to register their ships outside their country. It may lie, in part, in the restrictive practices that have developed all over the world; and, of course, among these I include such an arrangement as the recent Saudi Arabia-Onassis transaction. But surely it lies chiefly in our own taxation policy. These relatively new countries of registration impose taxation which is negligible compared with that which must be borne in respect of a British ship. As a result, the owrers, who are frequently gentlemen of obscure nationality, are able to accumulate reserves far faster than British shipowners can; and they can afford to, and do, place further orders for some of the finest ships in the world and thus continue to prosper. Here I would take exception to the point made by the noble Lord, Lord Winster, that these are "coffin ships." I have been in some of them and the conditions in them are quite first-class. They are first-class ships. Competition with inferior tonnage might be something that we could face, but we are competing with vessels which are as good as anything we can put on the seas, and because of that the situation is much more serious.

It is often said that British shipping cannot be treated differently from other industries, so far as taxation is concerned, but I submit that this attitude is unsound. No other industry can fade away from us in the way, which I have tried to describe, in which shipping is fading away. Either shipping must be treated as an exception, and the British owner allowed to compete internationally, or we starve.

3.59 p.m.

VISCOUNT RUNCIMAN OF DOXFORD

My Lords, it is my good fortune to be the first to congratulate my noble friend Lord Geddes on a maiden speech which, for conciseness, clarity and compression of thought and vocabulary, ranks very high. I very much hope, as I am sure 0.11 noble Lords do, that we may have the pleasure of hearing him again, not only on the subject of this afternoon's debate, on which he ii, so well qualified to speak, but on other occasions, too.

It would be difficult to contribute anything this afternoon without going over some of the ground which has been covered in so comprehensive and masterly a fashion by the noble Lord, Lord Winster, in introducing his Motion. If as a somewhat interested party in this discussion may say so with respect, I think there was practically nothing in it with which I did not wholeheartedly agree, and I feel that there is a certain supererogation in even trying to speak further on any of the points he has raised. However, I should like to detain your Lordships for a few moments on one point which has already been raised in every speech and I have no doubt will be raised for some time to come in any speech that may be made on the shipping industry, and that is the question which goes by the name of flag discrimination. If I declare, as I do, a personal interest in the shipping trade, I think I may also declare an interest which I am quite sure all your Lordships must necessarily share with me, and that is in international trade as a whole, without which it is a simple platitude to say that this country would not long survive. It is from that point of view, rather than from the primary interest of British shipping, that I should like to talk for a few moments this afternoon.

It may, indeed, seem slightly odd that at a time when obviously the shipping industry is doing so well, and when the shipbuilding industry is extremely full of orders, it should be thought necessary to bother our heads a great deal about practices which at their present level, though irritating, harmful and damaging, can certainly not be said yet to have arrived at the stage of a major menace to British shipping, or, indeed, to the shipping of any of the maritime countries. But I think it is fair to make this comment on that observation, if anyone should be tempted to put it forward: big things have small beginnings. The rate at which these practices have spread during the last few years leads one to suppose that if they are not checked within the next fifteen or twenty years they may become very formidable indeed. And fifteen or twenty years is not a long time in shipping industry terms. After all, twenty years or so is the generally accepted lifetime of a ship, and anyone who is thinking of ordering a ship to-day must consider what sort of world she will be trading in fifteen or twenty years hence—not, indeed, an exercise in which one is invariably successful, but in which I think the British shipowner, through fairly long practice and a certain rather cheerful habit of accepting unwarrantable risks, has somehow or other managed to survive. But it is an exercise in which, if he is going to have to enter it with everything weighted against him in the future, even his optimism will at some stage wilt, and he will have to consider whether, under many of the handicaps to which the noble Lord, Lord Winster, has already referred, it is in the vulgar phrase even "on" to continue to attempt to expand his fleet, or even to maintain it at its present strength, or whether he had not better take his money and go out into some other trade.

The noble Lord, Lord Winster, gave a good working definition of "flag discrimination," but I should like to give another from slightly the other way round, and to say that flag discrimination can fairly be described as action by Governments aimed at restricting the freedom of traders to choose the ships in which their cargoes may be carried. I think, in a way, that is the more important aspect of it. It is true that the reason for the action is to promote what those Governments believe to be the interests of the mercantile shipping flying their flags, and to ensure, if they can, that their fleets are maintained and, if possible, increased; but the primary effect, and the primary method of doing it, is to place impediments in the path of the free flow of international trade. That, I believe, is the really mischievous and important aspect of the matter.

It is done, as your Lordships may know, in three main ways. It is done by giving better port facilities or cheaper port facilities and other concessions of that kind in your own ports to ships flying your own flag, and that sometimes reaches considerable dimensions. By way of example, the country of Ecuador, to which reference has already been made, levies considerable consular dues which in the case of foreign tonnage may, I understand, be as much as 8 per cent. of the f.o.b. value of the cargo. They give a discrimination in favour of their own country of 2½ per cent. on that; and 2½ per cent. on the f.o.b. value of a cargo is a much higher percentage on the value of a freight. I have, as a shipowner, kicked hard enough at shipbrokers to try and get ⅛ per cent. off their commissions, to know that 2½ per cent. on your freight is something which can be very formidable.

Then there is the method to which the noble Lord, Lord Winster, referred, particularly in connection with the United States, of financial inducement, or plain subsidy, whether for construction or for operation. Frankly, I think that is the least harmful way of the lot, because under those conditions the taxpayers of the country concerned at least know what they have to meet, and the world at large is not affected by an attempt to distort the pattern of trade. It may well be that British shipping would thrive much better than it does if the American subsidy, the purpose of which is to bring their effective operating costs to the same level as ours, were not there; but, seeing that we know it is there, we know what we are up against; and if a country feels bound, as the United States clearly does, to pay for keeping a mercantile fleet in existence, then that, I am bound to say, is the least harmful way in which it can be done.

The most harmful way is, as I have already suggested, by diverting cargo from the channels through which it would naturally flow, or from the ships in which it would naturally be carried, into other tonnage which must be less efficient or it would not he necessary to make the diversion artificially. That is done in a great many ways. It is done in some cases actually by legislation; it is done often by administrative action; it is done by the use of exchange controls, by the use of import permits and licences, or by bringing pressure on the insurance of cargo and the like. It has also become an open feature of trade agreements between certain countries. There are, to my knowledge, some seventeen countries which have made agreements of that character, and if your Lordships will forgive me I will read the list to you, because it shows how widespread this sort of thing has become, even though many of the countries will not occur to your Lordships as being substantial maritime nations. Argentina, Brazil, Chile, Colombia, Portugal, Spain, Rumania, Russia, Czechoslovakia, Turkey, Uruguay, Egypt. Ceylon, India, Hungary, Poland and Yugoslavia have all within recent years entered into trade agreements which contain restrictive clauses in respect of shipping.

One of the unfortunate things is that when protests are made against such clauses they increasingly begin to quote as the justification for their action the "fifty-fifty" rule of the United States to which the noble Lord, Lord Winster, has referred. We all know that the United States feel that they need a merchant fleet for defensive purposes, and I do not suppose any of us after the experience of two wars would seek to maintain that they should not have one. It is perhaps difficult for us to criticise too much the way in which they propose to set about achieving that object. But what is extremely unfortunate is that a country which professedly and, I think, sincerely stands for the liberalisation of trade throughout the world, should find itself in the position of having its name invoked as the justification of people, who have no such liberal intentions, for indulging in practices of a kind which can only he harmful to international trade. That the United States do not like those practices, at any rate in other people, they have shown clearly on several occasions. They have protested most manfully against the restrictive clauses of agreements in South America and elsewhere, and I believe that what they had to say about the recent Chilean proposal to restrict 50 per cent. of the imports into and exports front that country to Chilean ships would have done great credit to one of Her Majesty's Ministers had he been disposed to denounce it—as perhaps we hope he will denounce it—in so forthright a manner.

The prosperity of the world and the standard of life of us all largely depends, as we know, upon the maintenance of an efficient and, I would say, a competitive, and a fairly competitive, international trade. When one Aristoteles Onassis made an agreement with Saudi Arabia which is manifestly of a monopolistic character, the whole world got a shock and all sorts of people who were not generally supposed to be free-trade minded felt moved to express their indignation. But 50 per cent. is, after all, half way to 100 per cent., and although the arithmetic is, I think, a little spurious, nevertheless if two people share 50 per cent. each you get 100 per cent. in the end, and I do not think monopoly is any the less dangerous if it is done by a combination of persons associated for that purpose than if it is done by a single man.

If, therefore, various countries seek to associate themselves together in order to restrict the carriage of goods between them to ships of their own flags, they are establishing a monopoly, and the real sufferers are not only, or even possibly mainly, the shipping competitors of those countries but the merchants, the manufacturers, the importers and the exporters of those countries and of the world at large. It is for that reason that Ii think these practices ought to be nipped in the bud, if they possibly can he—I cannot say "strangled at birth," because they have been horn too long. But they have not yet sprouted forth into the full green bay tree like which the wicked flourish. The basis of international trade is that countries should engage in those activities in which they are best qualified and which they do to the best advantage. Anything which disturbs that basis—and I hope your Lordships will not accuse me of talking outmoded free-trade economics—must to a greater or lesser extent be not for the betterment of the world at large. The state of affairs at which we are arriving in respect of some of these agreements, or at any rate the desires which lie behind them, is really about as absurd as if the manufacturers of greenhouses in this country were to combine with the makers of coke to promote legislation to ensure that half the bananas consumed by the United Kingdom were grown under glass at home. That is, of course, pushing it to absurdity, but it is an absurdity not far removed from what appears to be in the minds of some of the people who practise this sort of thing. Might I at this stage invite your Lordships' consideration of whether some of the remarks of the noble Lord, Lord Winster, about air transport may not be related in some little degree to that kind of observation? I do no more than make the invitation and leave it at that.

What do we, as shipowners or as traders, ask Her Majesty's Government to do about this matter? What can Her Majesty's Government do about it? I think we must be fair and say that the powers of any Government in a matter of this sort are in one respect limited. The shipping trade of this country or, indeed, of any country which is a substantial exporter of shipping services—perhaps the supreme case one might quote would be Norway—is necessarily extremely vulnerable to retaliation against any protective measures which it may take. I would remind your Lordships that something like two-fifths of the cargoes carried by British ships are carried between places neither of which is in the United Kingdom. That is one of the reasons for the remarkable figures of exports which are contributed by the British shipping industry and which the noble Lord quoted. But it means that the more direct forms of protection are in many ways ineffective, and in the second place if they provoke retaliation can do a great deal more harm than good. I believe that Her Majesty's Government have already introduced into at least two trade treaties, with Argentina and Bulgaria, a clause requiring that neither country shall discriminate against the shipping of the other. It may well be that by the extension of the influence of this country as a major trading power something quite effective will in course of time be done.

I should like to ask Her Majesty's Government to look extremely carefully at any trading arrangements they may make with countries, on whatever tempting terms, if those should appear to be, even indirectly, of a restrictive or discriminatory character such as arrangements already made with the United States have appeared to be. As I said before, I do not think that there is a great deal more that can be done in that case. If British shipowners were in a position in which it was easier for them to find money to build new ships it would be an advantage. You will notice that the bulk of the new orders for ships which have been placed in recent months have been for tankers. The reason for that is not far to seek and has already been mentioned by noble Lords who have spoken this afternoon: it is that a tanker can be assured of employment at a not unremunerative rate, because a tanker will inevitably, or almost inevitably, be hired over a period by one of the great oil companies. Obviously, if you have an assured employment you feel you can take a greater financial risk. It is for the general traders, the dry cargo ships and the passenger ships, that the difficulties are greatest, and it is in respect of them that the orders for new tonnage are fewer. But they are no less necessary in a world where international trade has been broadened and expanded by the great increase in the use of oil which has called into being these new large tanker fleets. One can only hope and expect that there will be a greater call, too, for the carriage of manufactured goods and raw materials between the several countries. It is no use saying that tankers in that respect take the place of dry cargo ships. They may, indeed, be carrying oil instead of coal, because oil is being used instead of coal. Some of the decrease in the British tramp fleet is due to that cause, but that is a very small proportion of the main overall picture.

It has been said before, but I think it can well be said again, that, given a fair field and no favour, British shipping is prepared to take almost any risk which commerce requires of it. But if a man does not get a fair field and if he receives disfavour, then even though he be the most obstinate of men he comes to a point where he cannot go much further. It is not necessary to repeat what the noble Lord, Lord Teynham, implied in his mention of Trafalgar, and say that, if that day came, neither your Lordships sitting here nor I standing here would be in nearly so well fed a condition as we are this afternoon.