INTER-COMMON WEALTH TRADE

HL Deb 30 July 1958 vol 211 cc513-66

3.53 p.m.

Debate resumed.

LORD BARNBY had given Notice of his intention to call attention to statements of availability of sterling resources for investment in the Commonwealth; and to move for Papers. The noble Lord said: My Lords, my noble friend, who speaks with such knowledge on these subjects, has made a powerful and convincing speech, and I have little doubt that it will result in the affirmation and approval of all sides of the House. Fortunately, this is not a partisan matter, and therefore it can be debated without any contention. I regret that we are not to hear the noble Lord, Lord Ogmore, to-day, but I am glad that the noble Lord, Lord Macdonald of Gwaenysgor, who speaks with such knowledge on these subjects, is to take his place.

Lord Balfour of Inchrye has dealt in great detail with the possibilities of trade. I propose to try to confine my remarks in the main to the suggestion that expansion of the Commonwealth will contribute to expansion of trade; and to achieve that, resources greater than are now available must be found from some directions. I speak on this matter with a passionate belief in the power of an expanding and powerful Commonwealth to contribute to world peace. With immense wealth and some 600 million of population it has great power to-day. It is going to have greater power in the future. I suddenly recall to mind that, as an enthusiastic boy, I was fortunate enough to attend four of the seven great rallies at which Joseph Chamberlain unfolded his great dream of the future of this Empire. I certainly was inspired, and I have never let go of that inspiration.

The forthcoming Conference at Montreal is important, as has been admitted by all; and we have high hopes. The noble Lord, Lord Balfour of Inchrye, has emphasised many of the requirements that it is hoped will be fulfilled, but on the question of resources we admit that the Commonwealth in its development needs resources greater than have hitherto been attainable. The subject has been much discussed recently in the financial Press and in an important debate which took place recently in another place. That was followed by a statement by the Parliamentary Under-Secretary of State for Commonwealth Relations. It was perhaps inescapable that at that stage it should be reserved in character. I expect that the noble Earl, Lord Perth, who is to speak first in this debate for the Government, will address himself in the main to the trade matters which my noble friend has raised; but we hope that the noble Earl the Leader of the House, who we assume with enthusiasm will be attending the Montreal Conference, will be able to go rather further along the road of telling us what he hopes to achieve at Montreal.

In the pursuit of getting these additional resources it is thought that some new agency, happily conceived, might secure additional funds, perhaps also from outside the Commonwealth, which presently are not being attracted. Like my noble friend, I feel that over the past two years perhaps more than enough of Government attention, thought and action has been directed towards Europe. By that, I mean that all the Government agencies, all the great Government financial and industrial organisations, have been exploring what are going to be the results of the European Free Trade Area. Had attention been applied in the same degree to thoughts of increasing the Commonwealth trade we should perhaps have been further along the road.

While I do not belittle the hopes that may come of the European Free Trade Area, I remember what my noble friend said about the General Agreement on Tariffs and Trade. I was not altogether unhappy to hear the misgivings to which he referred. One thing that G.A.T.T. certainly has not been able to do is to help the weaker countries from the effects of the American recession or to prevent all sorts of circumventions of its rules about dumping and other matters. In fact, my noble friend Lord Dundee recently gave your Lordships' House a very clear example. Surely our Government are frankly, just fooling G.A.T.T. by the way they manipulate the Dundee jute trade. He brought that out and there is no need to expand on it.

But, my Lords, for myself, with a long life in European trade, circulating as salesman for forty years, I have grave misgivings about the results a European Free Trade Area may have for certain industries. I believe that it may create great dangers; though perhaps, over all, on balance, it is unavoidable. Free exchange in merchandise, free movements of capital and of people, will do nothing to ensure the parities of wage rates or standards of living, and so establish equitable competition for industries of equivalent efficiency. True, the disparities between European countries are not so great as the disparities between the Asiatic countries and Britain, or, again, between the wage rates in Britain and Canada. These facts of life are too often overlooked in the political discussions. However, perhaps the European Free Trade Area, in its operation, will stimulate (the movement of both industries and workers from this country to the Com monwealth, in which case they will be the gainers and we shall be the losers.

An expanding Commonwealth, apart from more trade, means more wealth formation and more population. But over it all hangs the problem of the strength of sterling. Why, bluntly, should the Swiss or the Dutch or the German investors be tumbling over themselves to invest in sterling when there remains the hazard of devaluation? I do not seek to be contentious but to encourage sober reflection. With the permission of your Lordships I am going to read from the Swiss correspondent to The Times as recently as last Saturday: But the Exchange dealers have quickly taken note of the change in the political climate in Britain. Whereas the return of a Socialist Government at the next election in the United Kingdom was regarded as almost inevitable two months ago (and thus an unfavourable factor for sterling) that assumption is no longer being made quite so readily.

I am not among those who dream that an expanding Commonwealth can be entirely independent of United States assistance. On the contrary, I frankly welcome the highest likely degree of United States investment in the Commonwealth, and even in the United Kingdom itself. We need the dollars. Lord Balfour of Inchrye has reminded us that statistics indicate that the Commonwealth share of world trade is falling. This in itself is disquieting; but, alas! we see that within the Commonwealth itself widespread restrictions are imposed on the freedom of trade. Recently the United Kingdom has been congratulating itself on the swing in our favour of the balance of trade. Lord Pethick-Lawrence laid proper emphasis on this in his speech yesterday. This factor should make greater resources available momentarily for sterling investment in the Commonwealth—that is good—provided we do not eat up too much of that sterling our-selves at home in unreasonable consumption.

We come now to another point: the catastrophic fall in the prices of primary products, with the resulting disturbance to the economies of the producing countries. This must surely presage misfortune for our exporting industries, because those countries which produce primary products will not have the resources with which to buy our engineering products. World illiquidity has been highlighted in the Press, and also that 45 per cent. of the world trade, to which our noble friend has drawn our attention, has been done in sterling, and has been done against reserves of under 10 per cent. This is a grim picture for the assembly at Montreal. But surely it should be possible to work out some new means to add to the strength of sterling and so permit it to do its great job in the world.

With the indulgence of your Lordships I should like to quote Mr. Thorold, the Executive Director of the International Monetary Fund, speaking to a New York audience at the end of last year. He said: If further advantage were taken of all the facilities available, sterling could be used to settle nearly 70 per cent. of world trade.

He went on to say: It is difficult to see how post-war expansion of trade could have been so great if sterling had not been available for making day-to-day payments required for settlement.

My Lords, I have emphasised the need for additional resources. These can come only from capital formation or external borrowings; but with the shrinking commodity prices and falling industrial profits capital formation in most of the Dominions must surely be filling. It may be assumed, therefore, that our task must be to induce external capital to invest more freely in the Commonwealth. Here it is only right that a tribute should be paid to the results of the policy of Her Majesty's Government at home and the plans they have made to strengthen sterling.

On the question of resources, the White Paper (Cmnd. 237) recorded the belief that available resources from the United Kingdom for capital investment in the Commonwealth are of the order of £200 million a year. The noble Earl the Leader of the House, the Secretary of State for Commonwealth Relations, on two occasions in 1957 gave this House the then best available information. Surely some way must be found of convincing the U.S.A. that to support and aid sterling is in their own interests. But U.S.A. aid, however generous, and also their external investment in the rest of the world, will not alone suffice when nearly half the world's trade is done in sterling. Any repeated crisis which would rock confidence in sterling would recoil heavily on the United States. Then why should not the U.S.A. in some way respond to the appeals of this Government that they should in some way underwrite sterling?

Sir Oliver Franks, who used to be our Ambassador td the United States, has suggested a method through revised or expanded practice of the International Monetary Fund. He said: Countries should be prepared to deposit exchange reserves with the Fund and treat the Fund's certificates of indebtedness as exchange reserves.

Others have suggested some central institution with membership of all the Dominions and in some way the Colonies. Call it, perhaps, the Fund for Commonwealth Endeavour—something imaginative and new. This might well attract additional support for sterling and make better the World Bank collaboration. Probably this is what the Press meant when they referred to those meetings that the Prime Minister had in Washington, which seemed to follow the interview be gave in this country to Mr. John Bassett of the Toronto Telegram. At any rate, various suggestions have been put forward for supplementary agencies. Of course all these suggestions can be countered with powerful arguments, but surely some machinery should be found.

Again, there are many who think that wider use should be made of the Colonial Development Corporation. It has great accumulated experience. I am glad to see Lord Reith here, who beaded it with such effect and brought it forward latterly to such better condition. I regret that tradition prevents him from assisting us with a contribution to-clay. The Colonial Development Corporation have great accumulated experience. Again, there are suggestions for widening the Commonwealth membership of the Directorate of the Bank of England. Others suggest still greater facilities than those promised so generously recently by the Government, to extend export facilities.

Reference has been made to the Commonwealth Economic Committee, which I think should have a higher status. I understand that a report has been called for by Her Majesty's Government, as the result of which we are promised some further development. I would suggest the creation of an Overseas Investment Board, with appropriate membership and terms of reference somewhat similar to those of the Overseas Settlement Board, to advise the Secretary of State continuously. There is some idea that in connection with the preparatory conference which is taking place in London there is lukewarmness about many of these suggestions, and obviously my noble leader at Montreal will face difficulties in getting agreement from other directions. But there is a widespread belief in the need for something more than exists at the present moment.

May I turn for a moment to population? It is obvious that the expansion of the Commonwealth from increase of its own population will be slow. There must be immigration, and this should be on a substantial scale. Your Lordships will recall that in a debate in your Lordships' House the Secretary of State said: I am anxious that there should be no doubt whatever about Government policy. It is to encourage the regular outflow of United Kingdom citizens. It is gratifying to read the recent bold creed of the Australian Government that temporary reverses of the trade cycle should not impede the receptiveness to inflow. Undoubtedly we want more emigration from this country, and I urge the Government to take a still more active attitude on this problem than they do. I would remind your Lordships that Parliament votes £1½ million a year for this purpose and in recent years has not spent more than £200,000.

All this adds up to the need for more finance to fulfil the aspirations of wider power for the Commonwealth. These additional resources mean more liquidity in the world trade position. I believe that more resources can be gathered into the Commonwealth investment net, and that some additional agency ought to be found. I hope that my noble Leader can give the House the assurance that Her Majesty's Government intend to make the most powerful attempts to secure agreement on these lines at this Montreal Conference. Why not set our aspirations high? Why should not the slogan for the Conference be, "Commonwealth expansion to cure world recession"? I have great pleasure in supporting the Resolution.

4.15 p.m.

LORD MACDONALD OF OF GWAENYSGOR

My Lords, may I in the first place congratulate both noble Lords on timing their Motions so well, from the point of view of the Montreal Conference? I think that it would be unwise for your Lordships to disperse without seizing the opportunity of trying to ascertain from the Government what policy, what plan, they have in mind, what they intend to try to do when they get to Montreal. Your Lordships' House is entitled to know.

I would remind the noble Earl the Leader of the House of another Conference that was held in Canada some twenty-six years ago. I am not sure whether he was in another place at that time, but I happened to be, and I shall not forget the long discussions we had on this very issue before a delegation went to Ottawa. We were given an outline of the agenda to be placed before that Conference. But on this occasion, for some reason or another, we have been treated with silence. Not a word is being said, and if one asks a question, it is not always kindly received. The noble Lord, Lord Barnby, referred to a debate in another place. During that debate I was amazed to find that the Government had put down an Amendment to the Motion before another place in order to bring Montreal into the Resolution. That was a surprise to my colleagues in another place.

Another reason why I think that these Motions are well timed is because of the two other debates we have just had in your Lordships' House, one on foreign affairs and the other, on the Finance Bill. I submit that it would be impossible to adumbrate a sound foreign policy if it was not accompanied by a sound Commonwealth policy. What happens inside the Commonwealth is of interest to countries outside, and what happens in any country outside the Commonwealth is of interest to the countries inside the Commonwealth. I submit that today's debate can well link up with the debate on foreign affairs.

I agree that we in this country ought to try to make the Commonwealth as big a factor as possible in international affairs. I agree, too, that economic prosperity is a factor in that. I have always felt that there is a danger of the Commonwealth being used sometimes as a pretext and sometimes as an argument, when dealing with affairs outside this country. The noble Lord, Lord Barnby, said he had "grave misgivings" about a European Free Trade Area. I have not these misgivings; neither has my Party. We are inclined to welcome the idea of a European Free Trade Area. We think that it would be a good thing, not only for Europe but also for this country and for the Commonwealth.

It has been argued from time to time that Her Majesty's Government are not proceeding at a more rapid rate because some of the Commonwealth countries are rather uneasy about this. The other day I went to the Commons Library and asked for a book I had heard of, written by a Canadian, Professor Frank H. Underbill, described as a Canadian scholar, historian and political critic. In this book I was surprised to find these words: British spokesmen always give as one of their main reasons for refusing integration with the European Continent that their Commonwealth partners object to such a policy, and it would undermine their Commonwealth connections. But they have never quoted a leader from the rest of the Commonwealth to this effect. He goes on to say, and these are rather unkind words from any author in any country writing of this country: It is they who invite the Commonwealth to press them to stay out of European commitments, not the other Commonwealth nations who are doing the pressing spontaneously because of their concern for Commonwealth unity. The idea that Her Majesty's Government are making representations to the other members of the Commonwealth that they should do this, that and the other in order to assist us does not go down too well. I can hardly believe that that is true, but it is what is said by a Canadian author in a book on the British Commonwealth.

I would make one other reference to this book. The noble Lord, Lord Barnby, was rather concerned and asked the question: "Why should the U.S.A. not respond to the financial requirements of the Commonwealth?" This author is a little concerned about that happening. Here, to me, is a pregnant matter which needs to be thought over. In a footnote in this -book this says: The ultimate, though not the intended, effect of United States diplomacy may be to promote the security of the individual members of the Commonwealth at the expense of the unity of the Commonwealth as a whole. I take it that what he means is that they may help some country to such an extent that that country may be attracted in the direction of the U.S.A. I am not too sure that there is not such a country, if not a Continent, in the Antarctic which does not show reason for that statement. The danger is that the U.S.A. is in a position to help more Chan we can, and that those countries wanting financial and economic help may be attracted to them. To put it bluntly, I am not sure that Australia to-day is not more interested in the United States of America, just because they are in a position to help more 'than we can. There is the indication from this Canadian author (do not forget that Montreal is in Canada), and this book is being circulated in Canada.

There is another matter to which I want to refer, one on which I tried to get satisfaction by asking a Question, but I failed. I am much concerned about this matter. On Monday, July 21, I asked this Question [OFFICIAL REPORT, Vol. 211 (No. 96) col. 1]: To ask Her Majesty's Government if they can give a definite undertaking that at the forthcoming Commonwealth Economic Conference in Montreal1 the underlying problem of duty-free imports from Commonwealth, countries into the United1 Kingdom, at present affecting in particular the (Lancashire cotton industry, will be fully discussed. No one is better informed as regards this thorny question than I am. Here is the reply that I received from the Minister Without Portfolio, Lord Mancroft: My Lords, I am afraid that I cannot give any undertaking that we will, at the forthcoming Montreal Conference, discuss our general policy of according duly-free entry to goods from other Commonwealth countries. This is provided for in our trade agreements With these countries and is inherent am the whole structure of Imperial Preference, which brings very important advantages to our export trade. Her Majesty's Government have no intention of varying this policy. As regards the effect of duty-free imports from Commonwealth countries on the Lancashire cotton industry, this is a problem for settlement between the countries concerned and Her Majesty's Government doubt whether there will be much advantage in discussing it at Montreal. I was amazed at that reply. I was amazed at the refusal to give a definite undertaking, but even more amazed at the reason, that: This is provided for in our trade agreements … Therefore, anything that is now provided for in our trade agreements cannot be brought up for discussion at Montreal. Surely that is monstrous. That would shut out from the Montreal Conference many questions. Yet there is the statement. The Minister's Answer goes on to refer to … the whole structure of Imperial Preference, which brings very important advantages to our export trade. If it brings advantages, we cannot discuss it; and therefore we cannot discuss it if it brings disadvantages.

My Lords, the Lancashire cotton trade is in a grim position. In the last four years over 50,000 have been put out of work, and the way things are going, that total will increase. What is it that we ask? We ask that at the Montreal Conference, where delegates from all over the Commonwealth are assembled, this question should be discussed. I realise that the difficulty may be that we should disturb something that is being attempted now, and I approve of attempts to get voluntary agreement between India, Pakistan and Hong Kong. I understand that the present position is that India and Pakistan have indicated their willingness to make an agreement, but have made it contingent upon Hong Kong doing the same. I realise that to have a discussion in Montreal on this may sway the balance the wrong way, so that we shall not get voluntary agreement. I do not know whether the noble Earl, Lord Perth, or the noble Earl the Leader of the House will reply to this point, but if they feel that they must repeat that they cannot put this item on the agenda for discussion, I hope they will at the same time make a statement which will be reassuring to these cotton operatives in Lancashire.

The Lancashire cotton industry today is haunted with fear and a sense of uncertainty. I realise that there need not be an agenda, but this is a formal conference and at formal conferences there usually are agendas. The Prime Minister is fond of informal conferences, and I must say that I have found them beneficial many times; but this is a formal Conference and I imagine that there will be an agenda, and maybe the Canadian Government, as the hosts, will be responsible for drafting that agenda. All I am asking is that, if this matter cannot go on the agenda, some opportunity should be provided outside the Conference—and many things, sometimes the best things, are done outside conferences. I ask this because of what is happening industrially in the Far East.

With regard to the two Motions, I do not intend to refer much to the Motion of the noble Lord, Lord Barnby, because I think he has covered it well. I would only say this. He referred to the attracting of external capital. How does a project attract external capital? The investor must have a sense of confidence and feel that he is putting his money in a concern run by the right men. That is the only way to attract external capital. The noble Lord talks about switching over. How do you switch over? You cannot order your customers about. That is a strange suggestion from people who are great supporters of private enterprise. How can you give instructions to shift about here, there and everywhere?

LORD BALFOUR OF INCHRYE

Surely the method would be by a preferential tariff.

LORD MACDONALD OF GWAENYSGOR

Yes; so long as we know the method. But I do not like the idea of this putting responsibility on Governments to switch over from here to there. To me the position of the Commonwealth is a serious one; and it was bound to be so. Things have changed substantially. Reference has been made to Russia and China. The Russia and China of to-day are not the Russia and China of twenty-five, thirty or fifty years ago. And because there has been this change, the Commonwealth must of necessity have a different outlook on this question of strengthening the Commonwealth as a factor in international relations.

The noble Lord, Lord Balfour of Inchrye, referred to the Colombo Plan, and perhaps your Lordships will forgive a personal reference. In 1950 I was asked by the Prime Minister of the day to head the delegation to this Conference. At that time we had no plan whatever. Let us see how we got a plan, because in my view the same method must be followed in order to get a plan for the Commonwealth as a whole. We were there to try to find out how we could formulate some plan to assist South and South East Asia. The first question I put on behalf of the Government was: "Have you any idea of your natural resources?" I put that question to every delegate from every one of those countries. He had some idea, but not as clear an idea as I should have liked. I asked: "Have you any idea how you are going to develop them?" I put the responsibility on the delegate from the country which needed the help. Quite frankly, they had ideas. On behalf of the Government of the day I submitted what we thought should happen. We ought to get an idea of the resources of each of the territories. We needed a plan that would develop the resources and also the monetary contribution they would make towards the cost. That was done m every case, and the result was that in the following October here in London we finalised and got the Colombo Plan.

Suggestions have been made about setting up boards. I should think we have enough boards already. A secretariat is the form of board which was suggested by the noble Lord, Lord Balfour of Inchrye. The noble Lord, Lord I3amby, suggested a kind of Commonwealth investment body. Do you know the type of body I should like to see brought into existence?—one which would help us to formulate some policy as to what are the natural resources of the Commonwealth. One sees figures here, there and everywhere, many of them inaccurate.

LORD BARNBY

A Paley Report for the Commonwealth.

LORD MACDONALD OF GWAENYSGOR

That would be a good idea. First of all, let us get to know the economic resources of the Commonwealth. Having got to know them, we can consider which is the best way to develop them. The same body, I would suggest, should do that for us, too. Now with regard to the cost. What can each individual member of the Commonwealth contribute? The result would be this: at the end of all the investigations you will find that you need more money from outside the Commonwealth than you can get inside it. Where have you to go? The U.S.A. does not always attach strings, but there is a sense of fear, especially amongst some people in this country, that if the U.S.A. provide the finance they will have a determining voice in the affairs of those countries.

I agree that to attract capital is not easy. Three things are needed: men, materials and money. I think we have the men. I am not too sure of the quality sometimes. One of the difficulties we have had is with regard to technical assistants. The Colombo Conference tried to get over that difficulty. I think we have got over it, except that we are short of men of technical skill to go out there. With regard to materials, as I have suggested, I think there is a good supply but not sufficient to meet the requirements of the Commonwealth, never mind the countries outside. The money is difficult. The noble Lord, Lord Barnby, referred to the fact that my noble friend Lord Reith was present but could not intervene. I am prevented for the same reason from intervening on the Colonial side, and I respect that reason; I think it is good. I am dealing only with the Commonwealth as a whole.

I would say that we have agencies in existence to-day which are working effectively. I wonder whether we are satisfied that the agencies that are in existence are doing all they can. Are they doing all they can for the Commonwealth? I am not too certain. I am riot blaming the agencies all the time. After all, terms of reference limit what you can do and when you can do it. But I think we ought to try to find some Commonwealth agency, possibly with members of the Commonwealth on the board, although there is a difficulty about that. If you get the recipients on the same board with those who make the grants, it is not too easy; therefore, we may find difficulties there.

I should like to see some attempt made, if at all possible, to create an organisation that will help us throughout the Commonwealth and help every country to get the best out of its own resources. That is very necessary. The Ottawa Conference was in 1932, and it has been given far more credit than I think it is entitled to. I will tell you why. We were down at the bottom of a depression when the Ottawa Conference was formed. The only change there could be was upwards, and if there had been no Ottawa Conference there would still have been an upward change. I do not want to make any suggestion that the Ottawa Conference was not worth while—it was. But the difference is that to-day we are not at the bottom of a depression, and I do not think we can expect too much from the Montreal Conference. There is a danger in that.

What should we expect? What should we call a successful conference? I expect that in the first few days of October the noble Earl, Lord Home, will be returning. I shall be looking at the television, and he will be there. He will be interviewed by somebody—the B.B.C. I hope—and he will be telling the B.B.C. what a "grand conference we have had; a wonderful conference, with a fine spirit; the Commonwealth is knit together better than ever, and we can face the future hopefully and joyously." I expect that will be it. I hope it is, and I hope the noble Earl will be able to say so because he really believes that that Conference has rendered a great service.

I spent this morning reading the debate in the Commons in 1932, and it was a very enjoyable morning. I read one passage which I am going to use, but before doing so I would emphasise what the Prime Minister himself said in April. He was speaking to a correspondent in Canada—and I was rather pleased he was, because this Conference is in Canada—and here is what he is reported to have said last April to an interviewer, Mr. John Bassett of the Toronto Telegram. He said that the British Government's objective at the Commonwealth Economic Conference next September will be the establishment of a workable Commonwealth organisation similar to the World Bank or the International Monetary Fund. I am pleased that the Prime Minister has gone so far as to commit himself to that extent. That should serve some good purpose. I would also emphasise that it is important that we get the finance organisation that will attract external capital.

I want to conclude with the words used by the then Mr. Clement Attlee in the debate on June 16, 1932 [OFFICIAL REPORT, Commons, Vol. 267, col. 644], and the only alteration I shall make will be that I shall delete "Ottawa" and insert "Montreal". He said: We shall judge what is done in [Montreal] by whether or not it will raise the standard of life of the people of the world. If [Montreal] enables us to do that and enables us to get a higher material civilisation for all the peoples in the world, good luck to it; but if, on the other hand, it is a mere device to try and save the people who have invested their money in the Dominions overseas, and who fear that they will never get their capital back, or any interest, and if this is done at the cost of reducing the standard of life of the British workers we will have none of it. I do not think anyone could conclude on a better note than that. That would, I know, be voicing the opinion of my colleagues, both in this House and in another place.

I know that the noble Earl, the Leader of the House, has had a very difficult time over the past weeks, and he is not likely to have an easy time between now and the Montreal Conference. What I should like to do on behalf of my colleagues is to wish him well at that Conference. There is nobody who would wish him better than we do. He has a difficult task, and we hope he will succeed in it. We know that he will do it well.

4.40 p.m.

LORD MILVERTON

My Lords, in rising to make a brief contribution to this debate, it is perhaps unnecessary for me to say that I am in support of the Motion of the noble Lord. Lord Balfour of Inchrye. There is, I imagine, no one who in general terms would be willing to say that he was not in support of it. Nevertheless, I think that differences of opinion must arise in relation to the way in which this policy should be implemented. I agree with the noble Lord, Lord Macdonald of Gwaenysgor, that we all want certain things, but we have very strong differences of opinion as to what would be the effect of certain means used and suggested to get them.

I know that it is very tempting to suggest all kinds of machinery, from a central secretariat to a Commonwealth Bank, or even a sterling area bank. Personally, that is where I should diverge from the noble Lord, Lord Balfour of Inchrye. I should view with horror and apprehension the idea of a central secretariat; and to the best of my knowledge that sentiment would be largely shared in colonial areas, even if it were not, as it might easily be, shared in Commonwealth areas as well. No doubt, however, suggestions of that major kind will receive attention at the Montreal Conference, where there will be people eminently qualified to deal with their implications. If it is felt that something like a Commonwealth Bank would be likely to increase the resources available or to ensure that a better use was made of resources available, no doubt that would be a justification.

There are certain hard facts which no amount of sentimental feeling about the Commonwealth can override. The first of them all, surely, is this love of freedom, the love of independence. One notices it acutely developed in the nations now rising from colonial status to be independent members of the Commonwealth; they are passionately anxious to manage their own affairs. I am not saying that is entirely good or entirely in their own interests, but I think there is no doubt of the extent of that feeling, and I believe that they would shrink from any machinery savouring too much of control or, indeed, of the constitution of a sort of Commonwealth bureaucracy to run the affairs, and especially the business affairs, of the Commonwealth. In my view, the Commonwealth is kept together fundamentally by enlightened self-interest which finds expression in voluntary co-operation. The network of economic and trading relationships within which the Commonwealth has risen has grown up in just such a way as that. The difference of resources and needs in the various countries, large and small, which comprise the Commonwealth, and the wide variations in their economic progress and their problems surely preclude any rigid system and demand the utmost possible flexibility of approach. There is such a world of difference in the conditions and the resources and the stages of development in the various members.

The second fact is, surely, that the resources immediately available are emphatically not adequate for all of the immediate needs of the Commonwealth. Many members of the Commonwealth to-clay are committed to massive schemes of development which are really beyond their resources, and they are politically extremely reluctant either to slow up or to abandon any of those developments. But overspending of that kind must be a source of weakness to the whole Commonwealth, and I have no doubt that that matter also will receive its due consideration in Montreal. Potentially, no doubt, the resources of the Commonwealth are so vast and its potential capacity for trade so immense that it is tempting to dream of it as an economic entity, whilst none the less appreciating that in the present state of national feeling this is not a possibility. I can see no reason why the future of the Commonwealth should be fettered by the restrictions of G.A.T.T. It seems to me that that is the first thing which should be reconsidered if we want to be able to do something to set the people free, to set the members of the Commonwealth free to manage their own affairs in their own interest—not, of course, overlooking the fact that that has to be co-ordinated with their world interests as well. After all, G.A.T.T. in itself was meant only as a prelude to another dream, and that was of an increasingly free world trade. But it has undoubtedly acted as a severe handicap in the development of internal Commonwealth trade.

I do not think that any idea of making the Commonwealth self-supporting or exclusive is either desirable or possible, but I do suggest that a close relationship in economic matters is worthy of maintenance and enhancement. To do this, may I say once more—and one cannot say it too often—that we need to be free from these appalling restrictions of G.A.T.T. There does not seem to be, either, any overwhelming reason, so far as I can see, why the European Free Trade Area should not be fitted into such a Commonwealth policy. But I stress that it ought to be that way round; it ought not to be that the Commonwealth policy is fitted into the European Free Trade arrangements. The fact is that all Commonwealth countries, great and small, are in need of capital for their development; and they need to attract it from outside the Commonwealth as well as from within.

I do not propose, nor am I qualified, to deal with the problems which beset this country as banker for the sterling area. I mention that aspect only because it must be mentioned in connection with Commonwealth policy. Our inadequate reserves; the ever-urgent need to export more goods than we import; the danger of inflation, which would encourage our depositors to keep their money where it will not depreciate in value—all these things really lie at the root of our difficulties. New machinery per se will not avail any-thing; what is needed, surely, is the creation of new funds from real assets.

I have here a list, with which I will not weary your Lordships, of the various committees and councils and the rest which are the machinery for dealing with the Commonwealth. Surely to goodness, there are enough of those. The noble Lord, Lord Macdonald of Gwaenysgor, asked whether they were doing all that they could. My own view is that they are not—not from their own fault but because, like the Colonial Development Corporation, it does not seem good to the Government to reconstitute them and to increase their scope so that they can fulfil the needs of the modern day. They are still living in the shadow of misconceptions of what they could or should do at the time when they were originally initiated.

It is, I gather, quite true that 40 per cent. of world trade is done in sterling and that we hold only 4 or 5 per cent. of the world's reserves. The question one has to ask is: is there a Commonwealth policy, and is it desirable to have one? It is a delicate subject, since no fixed control would, as I have urged, be generally acceptable. We have organisations to promote trade but not to direct its flow. I suggest that that is a very important difference and one which I, personally, should like to see preserved. I gather that the noble Lord, Lord Balfour of Inchrye, would have liked—I do not know how it would work—powers to be taken to direct the flow of trade. In my view, directing trade into channels which seem good to one is an extremely dangerous operation.

LORD BALFOUR OF INCHRYE

My Lords, I really could not let that pass. I certainly should not wish for any legislation to direct trade. I should like to make opportunities so attractive that trade itself went along the channels which I indicated.

LORD MILVERTON

In that case, I beg the noble Lord's pardon, because that is precisely what I myself was going to advocate. As it seems to me, that is one of the functions of government: to create the conditions in which business is possible on the lines which Government believes is highly desirable. One thing I think we should also remember is that relations with the Colonies are getting increasingly less complementary—which they used to be—and more competitive. I suggest that we do not want to substitute Government control in any way for private enterprise. Surely, if it is a question of making advances against crops and operations of that kind, it is much better done by individual banks and business organisations than by Governments.

The question of the stabilisation of commodity prices is obviously one which has to be seriously considered, although it is not one which I am competent to go into, nor perhaps is this a debate in which to try to do so—I just mention it in passing. Imperial Preference has also been mentioned, and the West Indies have been rightly quoted as an area which has suffered severely from the failure of Government (because nowadays they are tied by G.A.T.T.) once more to bring the preferential margin up to what, in modern terms of money, it used to be. For instance, originally, tobacco had a preferential margin of 25 per cent. but now, owing to the change in the value of money and the increase in taxation, that preference is worth only 3 per cent.

There are various things which could and should be done. Attention had to be drawn in this House some two or three years ago to the measures taken in some of the Colonies to encourage new industries, and a tax-free holiday was given. But the British Treasury, in its infinite wisdom, proceeded to take the whole of that advantage to itself in taxation imposed in this country, with the net result that the Colonies were not subsidising a new industry they were subsidising the British Treasury.

My Lords, there are different points of view which I think ought to be remembered. It is not one chorus of approval of Imperial Preference and of preferential things. Take Malaya. The Minister of Commerce, Mr. Tan Siew Sin, said only a few days ago, at a Press conference in Kuala Lumpur, that the Federation would raise the question of Imperial Preference at the Commonwealth Trade and Economic Conference at Montreal in September. He added that, provided the present volume of imports was maintained, the Federation stood to gain 25 million dollars a year if the Imperial Preference tariff were removed. One has to remember that there are those narrow views being taken—I say "narrow" because they are obviously limited to the small consideration of their immediate interests in that particular country.

Again, with reference to what the noble Lord, Lord Macdonald of Gwaenysgor, said about Lancashire and about possibilities of agreement with Pakistan and India, here is another Malayan note about Johore. A 2 million dollar mill, operated by Malayan Weaving Mills Limited, has begun production in Scudai, Johore, It is producing woven fabrics and carrying out dyeing and bleaching work with the object of combating Japanese, Indian and Hong Kong competition. The mill, financed by Malayan and Hong Kong capital, is equipped with modern machinery, employs 250 workers, and has an estimated output of 600,000 yards of cloth a month. Those are the initial indications of some of the difficulties which face anyone who tries to arrange a kind of Commonwealth policy. It is net going to be at all easy and it will, unquestionably, require the most careful consideration.

Another thing which I suggest should be considered in this connection with Commonwealth policy is taxation—not only taxation in other members of the Commonwealth, but taxation in this country. The only way of getting more funds for investment in the Commonwealth is to encourage savings, and the only way to encourage savings is for your taxation system to make it possible for people and for businesses to save money—whether to plough it back into business or to invest abroad, as was done in Victorian days. Other difficulties have been mentioned, such as the immense penetration of Canadian business by American capital and the subsequent power to dictate where purchases shall be made. There are also those things which will have to be considered. One must remember that Ghana, one of the new members of the Commonwealth, has set up a commission to examine and consider where, and in what way, they could best invest their balances. All of these things are now being reconsidered by the emergent new Powers.

In conclusion, I would emphasise once more the aspect of Government creating the conditions and the atmosphere in which private enterprise can operate. As I know full well, Colonies prefer this kind of help, with guarantees for credit facilities, cheaper loans and so on. I must admit that, like Lord Macdonald of Gwaenysgor, I am old fashioned enough to believe that Government should work closely with business and with Commonwealth Governments; one should not try to control the operations of either of them. Finally, it seems to me that the remark recently made by the Prime Minister himself is a fitting conclusion: It is futile to plan for interdependence in defence and to ignore the economic foundations upon which that defence, if it is to be effective, must rest. If that is the spirit in which our representatives are going to Montreal, then I believe that the noble Lord, Lord Balfour of Inchrye, need have no fear of the results.

5.1 p.m.

THE MINISTER OF STATE FOR COLONIAL AFFAIRS (THE EARL OF PERTH)

My Lords, I know that we are all very grateful to the noble Lords, Lord Balfour of Inchrye and Lord Barnby, for their Motions, and as the noble Lord, Lord Macdonald of Gwaenysgor, has said, their timing is most fortunate. Broadly, I feel certain that all of your Lordships will agree with the terms of the Motion of the noble Lord, Lord Balfour of Inchrye. I know that there may lie a difference over the steps by which to reach that objective. Indeed, we have already heard from the noble Lords, Lord Milverton and Lord Macdonald of Gwaenysgor, points on which they differ. The Motion of the noble Lord, Lord Barnby, is not only most appropriate but is also a most necessary part of our whole problem, that of dealing with the finance needed for Commonwealth development and the strength of sterling. The speech of the noble Lord, Lord Macdonald of Gwaenysgor, was not only most constructive but, in its references to such items as the European Free Trade Area, gave me considerable comfort; and generally I believe that your Lordships will agree that his remarks show that the Commonwealth is not a Party matter but one on which we are all working for the same end.

Lord Balfour of Inchrye and Lord Milverton both made a considerable attack on G.A.T.T., the General Agreement on Tariffs and Trade, to give it its full name. In particular, they attacked the inability to have new increased preferences—indeed. I believe that the noble Lord, Lord Milverton, used the term "appalling, restrictions" which I think is pretty strong language. Whilst it is true that at times we find this restriction a bore, we must remember that this is part of a general agreement; that we are the greatest trading nation of the world, and that for us expansion in trade and rules which ensure a large liberty of trade are of tremendous importance. For example, there is a rule which limits other countries on their quota restrictions. Again, there is a rule which controls duties on a wide range of imports all over the world. And believe me, my Lords, for us those are tremendously important. The noble Lord, Lord Balfour of Inchrye, suggested (and whilst I understand the point of view, I am very afraid of it) that we should quite consciously and deliberately try to negotiate for a change on the one aspect which undoubtedly at times does hurt us, in the sense that the shoe pinches. But I fear greatly what might come out of that: the floodgates would be opened; there would be struggles, bilateral agreements, arguments and fights, and no one could say what the end of it might be.

It has been said that G.A.T.T. is one of the causes of the fall in Commonwealth trade. I believe that a much more likely reason is that Commonwealth trade all over the world is very largely in commodities, and it is commodity prices which have come down; or, again, that the main increase in trade during the past years has been among those countries which are themselves highly industrialised. Part of the Commonwealth is already highly industrialised and we want to see that happen more widely. But, of course, that takes time. It is quite true that the specific Ottawa duties to-day are relatively lower in value than when they were first made, but I do not think the figures which I am going to quote (I will not quote many) will bear out the contention that that is a bad thing.

The noble Lord, Lord Milverton, mentioned the example of tobacco. I have not the figures for that, but I know, as I believe your Lordships do, that the amount of tobacco we take from the Commonwealth, and particularly from Southern Rhodesia, at present is enormously greater than it was ten, twenty or thirty years ago. Our Commonwealth imports at the outbreak of the war represented 36 per cent. of our total imports. Today they represent 42 per cent. Our exports to the Commonwealth were 40 per cent. of our total exports and are today 46 per cent. We see that in both cases our trade with the Commonwealth is up. I am afraid that I find the figures given by the noble Lord, Lord Balfour of Inchrye, in direct contradiction to those which I have. I am told that last year our imports were £1,700 million and our exports £1,500 million. Those figures show that our trade with the Commonwealth is going up and not down—and this despite G.A.T.T. Surely it would be unwise to make the change and upset what is a good trend.

LORD BALFOUR OF INCHRYE

My Lords, I gave the comparative imports into the United Kingdom. I was not giving figures of imports and exports but the comparative imports for 1957 and 1958, and I believe the drop there is £147 million.

THE EARL OF PERTH

My Lords, it may be that from one year to another there is a drop because commodity prices, prices of things like copper, for example, have dropped. What is much more important is the general trend, from before the war up to the present. Furthermore, we must remember that since Ottawa there has been a considerable development of the Commonwealth. Think of the industrialisation of Canada, Australia and South Africa. There has been, too, a considerable change in the United Kingdom. Look at the agricultural position. Our agricultural output today is 50 per cent. higher than it was before the war. Is it suggested that we should try in some way to put back the clock? What would be said by countries which have lately developed so well in industrialisation? What would the farmers in this country say?

LORD BALFOUR OF INCHRYE

My Lords, the farmer here would say what he says about the pig industry now, with its depressing picture of foreign competition.

THE EARL OF PERTH

My Lords, it is all very well to take a single example; the important thing is the general trend. It is true that the nature of our trade with the Commonwealth is changing, but that is a good thing, because it shows that the Commonwealth is growing up. Before the war, for example, the volume of capital goods exported to the Commonwealth was under 29 per cent. of the whole of our trade. To-day it is over 42 per cent. All this shows that the Commonwealth is growing up and that we are playing our part in that development; and that is going in the right direction. It is true that at times this direction causes pain. The noble Lord, Lord Macdonald of Gwaenysgor, referred to the textile industry. But on the other hand Lancashire, like many other parts of the country, is greatly increasing its exports of machinery.

Although these figures are good we are not sitting back complacently. Rather are we seeking new ways of doing what we all want—namely, to increase inter-Commonwealth trade. When Mr. Diefenbaker, a short while ago, made the suggestion about increased trade with Canada, and subsequently Mr. Gordon Churchill came over here with his delegation, we were only too ready to try to play our part. The sequel has been helpful support from the Dollar Exports Council, who have just issued an excellent and helpful report. Changes of this sort are not easy to make; they cannot be done by Government direction. A 15 per cent. switch has to be done by hard work, by working to produce the sort of things the Canadians want: salesmanship, servicing what we send over, getting the right goods. I am sure that our industry will not fail. I know, too, that the Canadian importers want to have, if they can, other things being equal, British goods; and with the same spirit ruling here we shall go a long way towards achieving the target that has been set. But it is done by hard work and not by some particular restrictive measures.

Again. I might example how much we pay attention to developing Commonwealth trade when I tell your Lordships that we have at this moment seventy Commissioners and sixty Assistant Commissioners in the Commonwealth and the Colonies whose sole purpose is to help on that development of trade. Last year in South Africa the Federation of British Industries had a campaign on what was known as "Two-way trade", in order to encourage the business between the two countries. The Minister of State for the Board of Trade was there to get things launched. There will be at times special difficulties that will arise between one Commonwealth country and the United Kingdom. We have seen examples with meat, in the case of Australia, or butter, in the case of New Zealand. And then what do we do? We talk it over with them and do all we can to help mutually to overcome these difficulties. But those special problems will always arise, and they are not things which I think should be dealt with otherwise than when they do arise.

On commodity schemes, it was mentioned that we could perhaps do more on sugar. The Commonwealth Sugar Agreement has had a remarkable result. To-day we import 1½ million tons annually from the Commonwealth, and it has been of particular value to such areas of the Colonies as the West Indies, which we have had mentioned. As for other commodity schemes, we are always very ready to look at them. There was a cocoa study group in which Commonwealth countries are very much interested, but they have said they do not want any scheme at the present time—and far be it from us to force them; we are anxious only to help. There has been a Tin Agreement in which we play our part. Indeed, I would say that we do not exclude any study, but in those studies there are not only Commonwealth problems: they are essentially world problems. I think that too often, when we see a difficulty, a very real difficulty, on some commodity—for instance, copper at the present time—we are apt to say, "Let us do some special deal with the Commonwealth." But the sequel to that, my Lords, would be harmful not only to the Commonwealth but also to ourselves, because these are world problems.

I have instanced one or two ways in which we are trying to help, and that brings me inevitably to the questions of our financial help and the help we give in technical aid. Turning to the financial question, we have had a most helpful and valuable speech from the noble Lord, Lord Barnby; and, of course, it must never be lost sight of that no less than 70 per cent. of the capital which has been used for the development of the Commonwealth since the end of the war from outside sources has come from the United Kingdom. That is a pretty good figure. How has it come? Some of it has come from Government sources. We have, for example, the outright grants from Commonwealth Development and Welfare funds—some £200 million since we first started the schemes in 1945; and it was announced only the other day that we are going on with this when the date expires for the present grants, which is in 1960.

Then we have the Colonial Development Corporation, to which several noble Lords have paid tribute to-day, with the noble Lord, Lord Reith, as Chairman, and the noble Lord, Lord Macdonald of Gwaenysgor, also on the board. Your Lordships will have seen the Report for the year and how satisfactory it has been. I take this opportunity myself to pay them tribute and to wish them good luck for the coming year as well as to congratulate them on the last. This year we have announced the increase in their capital from £100 million to £150 million. Her Majesty's Government have said that of that increase they will find £30 million.

The Government, too, give help by grants to certain of the Colonies, in particular for their budgetary problems. Then, most important for the Commonwealth as a whole, we have the export credits guarantees; and only the other day the Chancellor of the Exchequer said that he was looking at the problem and finding out whether there was something more that should be done. The Government give further assistance through the International Bank, because we make important subscriptions to it; and these in their turn, and probably in good measure, find their way back to the Commonwealth. I have instanced some of the ways in which the Government help.

While on finance, we must never lose sight of all that the private sector does—it amounts to at least one-half of the whole. The figure is calculated to be about £100 million a year since 1953. That may come in many ways, such as by loans from the City, Commonwealth countries which are wanting to develop raising money over here directly from the market; and, most important of all, through the numberless companies here which have subsidiaries in the Commonwealth by which they take a leading part in Commonwealth development. But, my Lords, we have to be careful that we do not overdo it. If we lend too much long-term and accumulate short-term balances in the sterling area, that is the way to bankruptcy, so we have to be careful.

There is another word of warning which I feel I should issue, and it is this. It is extremely important, if the Commonwealth is to develop, that the Commonwealth countries take particular care to encourage overseas capital. Overseas capital is a very nervous thing. When it hears threats of nationalisation or speeches of too large advantages being taken, then it is apt not to "go"; and that, my Lords, is bad from the point of view not only of capital coming from this country, but, more importantly, of capital coming from overseas. As the noble Lord, Lord Milverton, said, "We cannot 'go it alone'." We do not want to "go it alone". It is good for the Commonwealth to get as much money as it can from other sources, whether it is from America, Switzerland or Germany. Let them all come, or let them come perhaps in partnership with us. But the great thing is greater Commonwealth development. So much for the money side.

On the subject of technical aid, which is often rather forgotten, let me say that it takes many forms. But, my Lords, this is of tremendous importance particularly in those Commonwealth countries or the Colonies in their early stages of development. I need not go into any detail. The Colonial Office (although I do not know whether it is proper for me to say this, I shall say it) have an excellent system by which they are able to provide technical help for the Colonies when they ask for it. Last year, when Ghana achieved independence, a mutual pact was immediately made for the exchange of technical aid between Ghana and ourselves—and I should like to emphasise the word "mutual". Let us not forget, also, the immense number of students who come to this country. The figure for 1950 was 10,000 students from overseas. To-day it is 35,000, of which 24,000 come from the Commonwealth and the Colonies. Those are tremendous increases; tremendously important and of immense value in development. Of those, about one-third go to universities, one-third go to the technical colleges, and the rest go to law, nursing, and so forth.

My Lords, I have outlined what we are doing at the moment, and we are determined to try to do more in the future, but I would stress again that we cannot "go it alone". We cannot do it in a restrictionist block. And I believe that even if we wanted to, the Commonwealth would not follow us. That brings me to the Free Trade Area. Some noble Lords have praised it; others have attacked it. I have no doubt that the Free Trade Area is wholly good for the Commonwealth. It has been much misunderstood, but if we in Europe can establish this Free Trade Area it will be of immense value to the Commonwealth as a whole. Remember that in the Free Trade Area we have made it very clear that the things which are of particular importance to the Commonwealth—foodstuffs, drink and tobacco—will be outside the scope of the talks, and all the European countries understand this.

I believe that the Free Trade Area and the Commonwealth are not opposite or antagonistic one to the other; I believe they are complementary. There are some figures which I can give which show the truth of that in the field of the expansion of Commonwealth trade with Europe over the last years. In talking of Europe, I mean Europe less the United Kingdom, because in the Free Trade Area there might be sonic confusion. In 1948, trade between the Commonwealth and Europe was £330 million—13 per cent. of the total trade that they did. By 1957 it was £860 million—16 per cent. of their total trade. So you see, my Lords, their trade with us is increasing and their trade with Europe is increasing, and it seems to me undoubted that if Europe prospers and if the Free Trade Area achieves all that we hope over the next 25 years, that may be of tremendous help to the Commonwealth concept and to Commonwealth development.

Again, if that all succeeds, then it means that our balances will go well and that sterling will be strengthened. That, as Lord Barnby and other noble Lords have said, is a key point. Everything must be subordinate to the strength of sterling, because we have an obligation there not only to ourselves but to the Commonwealth as a whole, and if we overstrain ourselves at this stage and bring it into any danger we should be damaging them every bit as much as, if not more than, ourselves. So we must always bear in mind that the strength of sterling is an essential feature of the Commonwealth, and at the conferences and various financial meetings that have taken place in the last years Ministers have again and again reiterated this point.

My Lords, generally our policy or our philosophy is an expansionist philosophy. We believe that that is the only possible philosophy at a time when we want full employment. It is a much better way of ensuring good prices for commodities and a good demand for commodities than trying restrictive schemes. Montreal's timing is curiously opportune. Remember it was decided before we knew what was going to be the state of the world at this time. We have ahead of us the problems of commodity prices; we have the problems of the recession in America (which happily now looks a little better), and we have the problems of the falling trade in Europe and elsewhere; and this is a good time for coming together. I cannot say that I expect that there will come anything very spectacular from the Conference. I do not believe anything very spectacular is needed. But no one can doubt our determination. No one who knows how much importance the Prime Minister attaches to the Commonwealth (as witnessed by his tour) can doubt that we are going to make Montreal a success.

The task of developing the Commonwealth is never finished. Indeed, I think we owe a special word of thanks to the noble Lord, Lord Balfour of Inchrye, and even to the Press—the noble Lord, Lord Beaverbrook—for keeping us on our toes and for constantly spurring us to try to do better. But we must not move, or expect to move, by fits and starts. Nor is there some magic which can overnight, as it were, find a key to great further increases; it is something which has to be done slowly but steadily and deliberately. The Commonwealth is a family, and is a growing family. It is a family we are determined should prosper; but for that we must look not only inwards but outwards. We must look to trade with the rest of the world, and we must get help from old and trusted friends in the rest of the world. All the same, I would agree that the family is our special loyalty. We are determined that it should develop and be happy. But happy families or happy marriages do not just happen. They have to be worked for steadily, and that is what we are going to continue to do.

5.28 p.m.

VISCOUNT BRIDGEMAN

My Lords, so many words of wisdom have fallen from the noble Lords in all quarters of the House who have spoken up to now that I feel it is just as well that I did not plan to cover the same ground as they have done; otherwise, I should have torn up my speech long ago. However, I shall try and look at this problem from the other end of the telescope, so to speak —namely, from the viewpoint of our own exports. If I do that for a minute or two, I think it may tie up with the general tone of the debate, because, after all, the imports from Commonwealth and Dominion sources into this country provide those countries with the sterling exchange which we hope they will use either directly or indirectly, to buy goods from us. It is absolutely vital that they should do so; and so I think that it is worth while looking for a moment at how our export trade and the problems of that trade are affected by the discussion we are having this afternoon.

I will take the engineering sector, because it is the one about which I know a little more than the rest, and here I have to declare an interest, as one does on these occasions. If one looked at the official figures one would probably find that shipments so far are keeping up reasonably well. That means that our figures of production for export are keeping up reasonably well, and those figures were no doubt in the mind of my noble friend Lord Perth. So far, so good. But I beg noble Lords at the present time not to base their opinions entirely on shipment figures but to have a glance at the order book. If my noble friend Lord Perth were in the Chamber, I should make that appeal to him very strongly, because in the engineering trade at least it is certainly not the case that the order books match with what they were three or four years ago. I do not want to quote a lot of figures, but I have no doubt that the advisers of my noble friends in front of me would confirm that statement from sources in the trade.

If that is so, and I am certain that it is, then we have to be careful about the export problem with which we are faced. There was a certain amount about this subject in one of the financial papers to-day, but actually I wrote what I am going to say now last night, so I am not particularly influenced by it. I doubt very much whether all the firms in the engineering trade are fully booked for 1959. If they are not by now, then they will have to look out, because time is passing, and if orders come in during the last quarter of the year it will not be possible to order steel and have it delivered in time to produce the manufactured goods. So we may easily find a situation which will cause a good deal more concern than perhaps it is causing at the moment. One of the reasons why I say what I do now is that this is the time, and not next year, to take whatever measures are necessary to correct this. None of this is surprising, because if we think of what has happened in the last ten years we shall see that this is a natural consequence from causes which arose before then.

In Africa, Australia and New Zealand there has been a tendency to balance the economy by increasing industrial production so as not to rely entirely on agricultural goods and primary products. Germany and Japan, which were down and out ten years ago because of the Second World War, have come back into production, and come back in a big way. Very soon we shall have the Iron Curtain countries competing with us, and no doubt we shall be competing with them, as soon as "Cocom" restrictions begin to be reduced, as I am sure they ought to be and no doubt will be in time. And we shall have the greater independence of places like Nigeria and Ghana, which were mentioned by my noble friend Lord Milverton, the effect of which will be that instead of their being tied to the Crown Agents as their suppliers, they will place their orders wherever they think fit in the world market.

Do not think for a moment that I am complaining about this state of affairs. It is merely a challenge to British industry to meet this competition, which I am sure we can do; but if, by any chance, we fail to meet that challenge, it is certain that we shall be faced with unemployment and that that will begin next year. I do not want to be a pessimist or to cry stinking fish, but I want to put the position as I see it and as I think many other people would see it if they happened to work in these industries.

I come to a point which affects the heavier industries, as opposed to the lighter ones. With the lighter industries we can get a position where the annual export of, say, wheat and wool from Australia, produced within the year, can be balanced by the export of, say, textiles from this country which are also produced within the twelvemonth—my noble friend Lord Barnby will correct me if I am wrong about textiles. But the engineering trade is not supplying consumer demand; it is supplying the demand for capital goods for the construction of harbours, railways, electricity plants and all those things which my noble friend Lord Milverton mentioned. These are all long-term projects covering periods of years. If they are soundly conceived, undoubtedly they will be good investments for countries going in for them, but if we are to compete for orders for these goods, then they have to know at the time of giving an order that they can count on finance for seeing it through, not for one year but for at least five years, and very likely more. So while we may have no difficulty in financing consumer goods in return for primary products like wheat and butter, it is by no means the same picture when we try to finance capital goods for countries overseas.

Whatever my noble friend Lord Perth or any other noble Lord may have said, I do not think that we can be certain that our financial arrangements are such as to put our exporters right in the face of two things: first of all, the long-term nature of potential contracts; and secondly, the constructive support which is being given to exporters in countries like Germany. I know that when we discuss this matter we are told that, of course, no instance has yet occurred where this support has been given in such a way as to break international agreements or put British exporters out of court. That may well be true, but it does not follow that things are not tending that way. It might be possible to "shoot a little in front of the bird," as I hope my noble friends in front of me will do in August next.

May I give two examples? The Germans have now set up two funds to provide credits for exporting goods overseas. One is a fund of 250 million Deutschmark, which is over £20 million, set up by the Credit Bank for Development, I think in conjunction with the German export credit organisation, but I am not fully informed about that. The second is a credit of 35 million Deutschmark for the United Arab Republic, apparently to finance goods for periods up to ten years. Although I do not want to do a "White Queen act" and call out before we are hit, I want to make it plain that this sort of Continental credit arrangement needs watching carefully. I could give more examples of these, but I do not want to waste your Lordships' time.

As my noble friend Lord Milverton said, certain Commonwealth countries, like Australia, are beginning to turn their eyes towards the dollar world. I would agree with him that it would be much better that they should turn their eyes towards the sterling world; but unless their requirements can be financed by sterling we should be acting foolishly if we raised any objection to their going to the dollar world. If they went to the Export-Import Bank, undoubtedly the order would go to American goods. If we do not want the order to go to American goods, then transversely we must do everything we possibly can to see that finance is available. We may find that a "new look" is needed for the Export Credits Guarantee Department. We may find that a "new look" is wanted for the City of London. Whatever "new look" we have, I doubt very much whether it could be effective unless it is given under Government leadership, and we do not want to wait too long. So if our trade with the Commonwealth, or indeed our trade with anyone else, is to expand, and we want it to do that, then we must see to it that those countries are ready to buy what we have to sell to them.

That, I think, presupposes two things: first, that British industry is properly competitive on quality and on price; and secondly that British manufacturers, having secured the orders, are in a position to finance them—because if they are not, irrespective of quality or price the orders will go to the countries which can finance them. What are the answers to those two questions? First of all, I have no doubt, and I do not suppose any noble Lord has, that we can compete on quality and on price, provided that, as regards price, we are not threatened with a further dose of inflation, in which case we are likely to be priced out of the markets. I am sure that the advice which my noble friend Lord Perth gave in the course of what he said just now will not fall on stony ground in the industries concerned.

But what is the answer to the second question? Can we be certain that all the worthwhile orders we get in this country, which, as I have said, industry can secure on its own feet on quality and on price, are going to be sure of finance? At the moment, I would say that I doubt it. Of course we all know that a lot of evidence has been given on this very point to the Radcliffe Committee, and we have no doubt that the Radcliffe Committee's assessment of the position when they come to report will be absolutely correct. But we still have to deal with the time factor and, in view of what I have said about order books, I am not sure whether we can afford to wait patiently for the report of the Radcliffe Committee or to allow time for that Report to be thoroughly considered and examined: the problem may come a little before that.

5.44 p.m.

THE EARL OF DUNDEE

My Lords, it is a good thing that my noble friend Lord Balfour of Inchrye should give us the opportunity of debating Commonwealth trade so soon before the Conference at Montreal, and we are grateful to him for the powerful way in which he has introduced the subject. I am not going to discuss Commonwealth trade policy in general, but only want to spend a few minutes in mentioning one or two practical considerations about our trade with one particular part of the Commonwealth—namely Canada. I think that Anglo-Canadian trade may need some special consideration, partly because Canada is the only part of the Commonwealth which is not in the sterling area, and partly because Canada is growing so quickly, and has such immense resources of natural wealth—possibly even greater than those of the United States—that any new trade contacts which we can establish now will become immeasurably more valuable in the course of the next generation.

The Board of Trade valued our exports to Canada in 1955 at £140 million; in 1956, they went up to £177 million, and in 1957, they went up again to £195 million. That is an increase of nearly 40 per cent. in two years, and as it took place at a time when the whole North American continent was going through a small but distinct economic recession, I think these figures are not at all unsatisfactory. That our imports from Canada in the same period should have substantially declined is, of course, due to the fact that the danger of British insolvency made it necessary for us to take severe measures to correct the adverse balance of our trade, particularly with dollar countries, and our trade with Canada was until recently very unevenly balanced.

As soon as Anglo-Canadian trade can be established on a rather more even balance, we ought then to aim at a large increase of imports from Canada, as well as an increase of exports to Canada. In the meantime we should, in my submission, take particular trouble, however difficult it may be from an exchange point of view, to maintain our purchases of Canadian wheat, which used to be (and I hope they still are) at a figure of 100 million bushels, because we are much the biggest customer for Canadian wheat, and the disposal of the Canadian wheat surplus is by far the biggest economic "headache" which Canada has. If one goes through the wheat growing Provinces of Canada and sees farm after farm with hundreds of tons of unsold wheat piled up outside the farms which the Wheat Board cannot buy up, and the farmers living on credit because they cannot sell their wheat, some of our agricultural problems begin to seem a little smaller than they did before.

As for our exports to Canada, we have of course some disadvantages. One is the greater proximity of the United States of America, which is our chief competitor. America also has the advantage of possessing an industry organised on a much larger scale, on the whole, than ours, so that they have a greater surplus of capital goods for export; and capital goods are what Canada chiefly wants. Incidentally, that is one reason why a European Free Trade area would not be inconsistent with greater Commonwealth trade: because one of the objects of the European Free Trade area is to create much larger-scale industry in Western Europe, and if that were done it would then be easier for us to have the surplus capital goods for export to Canada, where they are wanted.

Another disadvantage, and perhaps the greatest—though I hope it is now becoming less than it was—is the dreadful un- punctuality in the delivery of British goods, and also ignorance of Canadian needs. Canadian customers of ours have been so often vexed and exasperated by failure to deliver goods on time and have been obliged to turn elsewhere. I hope that this may have been a temporary feature of the sellers' market which prevailed for so long after the war and which did, to some extent, encourage slackness and laziness in our own methods. Coupled with that, there is the great ignorance about the precise kind of goods which Canada requires and which we can so easily make if only we take a little trouble to find out what they are.

We have, on the other hand, some advantages. One is that British goods, if they are delivered on time and are of the right variety, are usually both better in quality and cheaper than American goods. As for distance, our disadvantage in that respect will be partly corrected net year with the opening of the great St. Lawrence Seaway, which I understand is to be opened by Her Majesty the Queen in 1959. When that is done, large British vessels will be able to take goods, not only to the Eastern seaboard and the Gulf of St. Lawrence but right into the heart of the Canadian Continent, at freight rates which will probably be less than the rates by rail or road over much shorter distances by land. We should not underrate the advantage of Commonwealth sentiment. Sometimes it is expressed in the Press and in politics, and sometimes it is not; but all through Canada there is a strong feeling among a great number of people that they want to buy more British and less American goods.

What should we do now to exploit these advantages on the Canadian market which we have? I am not talking about high trade policy which will be discussed at Montreal: I mean, what can we do now, in the circumstances which exist at present? Of course the main responsibility is upon individual private traders in Great Britain to take more trouble. But what can the Government do to help them? Ignorance of Canadian needs—lack of contact—is one of our great handicaps because it is difficult to go often to Canada. The Bank of England gives currency allowances to business men who have some good reason for going there. But trade does not entirely depend upon visits of business men and traders themselves. The development of trade depends to a great extent on greater contacts between larger numbers of ordinary people who are not directly engaged in trade, and I wonder whether, if the Government were to take the bold step of allowing any British subject who wanted to travel in Canada to take as much of his money as he liked without any currency restrictions, that would wreck our national solvency. I do not think it would; and it would do an immense amount to prevent Canada and Britain from drifting apart politically as well as commercially.

In transport also, I hope that the Government, who now have so much to do with air transport, will facilitate travel. Not long ago I took the liberty of suggesting to your Lordships that we should make larger runways for the new larger-size Canadian passenger transport machines, not only at London Airport, where they often do not wait to go, but at Prestwick in Scotland, where they want to go more often.

I gave notice to the Government this morning that I would ask for information (I do not know whether or not my noble friend will be able to give me any) about recent progress in our information and trade services in Canada. We have two kinds of public service there: there are the information officers, who are under the Commonwealth Relations Office, and the Trade Commissioners who are under the Board of Trade. I think that all these men are doing their work exceedingly well, and I believe that they ought to receive most of the credit for the satisfactory increase in our export figures to Canada I have just quoted to your Lordships. I would suggest to the Government that this is a branch of the public service on which we ought not to think of making economies, but on which we ought to spend more money. I always feel a little diffident about saying that because the late Chancellor of the Exchequer, Mr. Thorneycroft, told me just before he left office that the House of Lords was far more of a nuisance than the House of Commons in suggesting new ways in which public money should be spent. But I think if we relate what we are spending to the importance of the subject here in Canada, we shall find that it is extremely little.

To give one example, eighteen months ago (it may be different now) in the City of Winnipeg we had one extremely good Trade Commissioner, with one assistant and one typist, in a little office in which I found it rather difficult to move about and stretch myself without knocking something over. He had the job of looking after British commercial interests, not only in the enormous Province of Manitoba—which is about the size of France, Spain, Germany and Italy put together—but also in the Province of Saskatchewan, which is about the same size. That is not good enough. We ought to have a large set-up for helping the promotion of our exports in Canada. The same thing is to be found in Alberta, British Columbia and the Eastern Provinces. They could not be more efficient individually, but we should give them a larger set-up.

May I also refer, as I did last year, to the question of salaries? I do not apologise for referring to it again, because I think it is a little difficult for us here to realise what a tremendous amount of good can be done to British trade by Trade Commissioners in a country whose economy is so young and unsophisticated as that of Canada, and how much benefit will be derived by British trade—I am putting it on the strictly practical ground—if our Trade Commissioners are able to meet and sometimes entertain Canadian business men on more or less equal terms, which they cannot do now because they cannot afford it.

I would suggest to the Government that if these Commissioners were given much more generous entertainment allowances, and a larger set-up altogether, the money it would cost the Treasury would be earned back over and over again in additional export trade for Great Britain. Now that the St. Lawrence Seaway is being opened, and when we have, perhaps, a Government in Canada which is looking for new orientation in its trade policy, I think this is the time when we should not hesitate to spend a good deal more money in order to promote a much stronger export drive into this country whose new economy is being almost built up from the beginning by industrialists and traders who are not yet finally committed to any fixed established channels of export trade, and who are often strongly disposed to integrate their own economy more closely with that of Great Britain.

6.0 p.m.

THE EARL OF CROMER

My Lords, the White Paper on Commonwealth Development of last July (Cmnd. 237) contains a statement in the introduction which says that the United Kingdom is the only country in the Commonwealth which is a net long-term investor abroad. In the debate on the Finance Bill yester-day, I ventured to suggest to your Lord-ships that our level of savings and investments was totally inadequate for our internal needs. I have had no cause to change my opinion since yesterday. That, of course, does not mean that we look for any excuse to evade our responsibilities towards investment in the Empire.

I ventured to make one or two suggestions as to what action the Government might take to mobilise more effectively the immense potential savings of this country, but it is bound to take some time before their effect is shown in tangible form. If we are to face up to our responsibilities at home, it may well be some considerable time before the United Kingdom can afford to play the role of a large-scale investor overseas. The suggestion which has been discussed by several noble Lords this afternoon as to the creation of a Commonwealth Bank will not, in my opinion, create one new penny of savings; it is only going to divert savings from one place to another. It is really lack of financial resources, not of machinery for channelling investments into the Empire, that is our problem. There is plenty of machinery existing to-day; some of it I fear is growing rusty through lack of use.

The Dominions, as we know, are all heavy borrowers on capital account and certainly have no surplus to lend outside their own boundaries. The White Paper gives the figure of private investment at about £150 million as being the annual contribution of the United Kingdom towards investment in the sterling area overseas. The White Paper itself states that this figure should be treated with great reserve, as I believe it is in point of fact the balancing figure in the statistical pattern, so that very little reliance can be placed upon it. If we accept this figure with due reserve, it is probably more than we in the United Kingdom can afford, but it is certainly less than the overseas countries of the Commonwealth require. It seems to me unrealistic that we in this island, with a population of some 50 million people, should attempt to accept the whole financial burden of Empire development without aid from our friends. In the days when we were regarded as being the richest country in the world we certainly did not do it. We were not too proud then to accept the foreign investors' money. Why should we adopt such a high and mighty attitude to-day?

We have paid a lot of lip service this afternoon to the desirability of attracting foreign capital, but it takes more than that; it takes some constructive action. After all, any businessman who wants to develop some new project for which he has insufficient capital himself goes outside and borrows the money. The same applies on the national level, and there is certainly no finer business than the Commonwealth. It so happens that the City of London has traditionally been the channel recognised and respected on the Continent through which Continental capital has in years gone by been invested in all corners of the globe. With the exception of the United States, whose contribution to world development since the war has really been magnificent, the only really substantial reservoir of capital available for investment lies in Continental Europe. Is it not very foolish to continue pandering to the rigidity of our own administrative machine, to create a situation whereby portfolio investment through London is made as unattractive as it can be to foreign capital?

In the course of my business I have had occasion in recent months to discuss with investment bankers in France, Belgium and Switzerland their views on foreign portfolio investment. On my travels I do not happen to have met the gentlemen of Zurich who are always accused of being at the bottom of our troubles every time we overstep the mark ourselves. Since the war the bulk of private Continental investment overseas has been in dollars. The background and the reasons for this are so well known that I do not need to explain them further to your Lordships. But I have found that recently there is a certain disenchantment in this direction. Whilst I should think that there has been little selling by Continental investors of dollar securities, there is not the same magic in buying them.

I asked my friends whether there had been any inclination to buy sterling securities, and I found that amongst them there was considerable interest but very little action. The explanation given as to why nothing happens is always the same: it is lack of confidence, curiously enough not in the pound, but mistrust of our Exchange Control. If you say, as I do, that the British Exchange Control is hardly very onerous on the foreign investor to-day, the invariable reply is, "No, that may be true now, but it can always be changed by a stroke of the administrative pen." There is, of course, no answer to that. As I have said before, confidence is a very tender flower which bureaucratic control cannot cultivate.

The noble Viscount, Lord Bridgeman, suggested that perhaps in the City and in other circles we need a "new look." I Agree with him entirely. I should like to look forward to what perhaps we might christen the "Liberty line." Economic nationalism was imposed upon us by the last war, and up to now we have not been strong enough to attempt to shake off our fetters. The courageous and sound policy of Her Majesty's Government is, I think, bringing about a situation when we can seriously contemplate such a move. What does not seem to be sufficiently realised is that if we create a situation in this country to attract foreign capital, the fear of too much British capital going abroad ceases to exist. After all, it surely follows that if the foreigner finds London the most attractive place to invest his money, the British investor will find exactly the same thing. Rationing showed that people took up their entitlement whether they wanted it or not, simply because they were entitled to it. Likewise, the existence of monetary controls makes people want to get outside the control. If you eliminate the control, this desire evaporates. The greater freedom there is in the movement of capital the greater the development. It may sound a paradox, but I think that is how human nature works.

The noble Earl, Lord Dundee, spoke at length with great interest about Canada. Quite a large proportion of the new investment which has taken place in Canada by the private investor, as opposed to direct investment, arose through the "Kuwait Gap." If I may, I should like to lay the bogy of the "Kuwait Gap," which comes into our discussions on investment both at home and abroad. I have heard noble Lords on the Benches opposite, including Lord Pethick-Lawrence, I think yesterday, describe it as the loophole through which the implied the wicked capitalist sent his money in order to avoid its investment under the wise direction of the would-be planners. Whilst it is true that dollars which became available through the Kuwait gap were not added to our gold and dollar reserves, they were, of course, in no way lost to the country, because all dollar securities held by residents in this country are held by authorised depositories and are as such ultimately at the disposal of the Bank of England. In point of fact, the dollars in question have been put to a more profitable and productive use than they would have been if they were sterilised in our gold and dollar reserves.

It is a great mistake to belittle our resources in the eyes of the world. Our gold and dollar reserves are merely the cash in the till. There is a great deal more behind which, for some reason which I have never discovered, we are always inclined to belittle. We have a heavy responsibility to take in giving a lead in developing the overseas countries of the Empire. I maintain—I think it has been fairly widely agreed this afternoon in your Lordships' House—that the burden is too great for us to accept unaided. Surely the time is coming when we should remove those barriers of our own creation which prevent those, where-ever they may live, who want to participate in the development of the Empire from doing so.

6.12 p.m.

THE EARL OF HOME

My Lords, my two noble friends Lord Barnby and Lord Balfour of Inchrye have done a service, both to the Government and to the House, this afternoon by raising this question of the economic situation as it will be seen by the United Kingdom delegation and the other Commonwealth delegations who will assemble shortly at Montreal. Noble Lords have contributed ideas which will go into the pool and will be sifted and studied between now and Montreal—and many of them, of course, will come on to the Conference table itself.

I do not think this is the occasion—I have done it often in this House—when we need enlarge on the virtues of the Commonwealth association; we take that for granted. It is a great and inspiring political conception. I would only add that the more political co-operation that can be sustained by common action in the field of finance and development the greater will be the influence and the authority which the Commonwealth as a whole will exercise in world affairs. So I welcome the Motion of my noble friend Lord Balfour of Inchrye, because its whole object is to contribute to the economic strength of the Commonwealth.

Secondly, I should like to assure your Lordships that we in the United Kingdom take this Conference seriously. I doubt whether there has ever been a conference in the economic field, or indeed in any other, for which the preparation has been more careful. We have now had two meetings of officials of the Commonwealth countries. These countries sent their top economic officials to these conferences, and the last one lasted for a fortnight of continuous discussion. I am glad to say that from these conferences of officials a degree of common thinking has emerged which is most encouraging. Of course all the way along those conferences of officials have been paralleled by the meetings of Ministers who will be present and will represent the United Kingdom at Montreal. Perhaps the House might like to know who is going on the delegation. It will be led by the Chancellor of the Exchequer, and will include the President of the Board of Trade, the Paymaster General, the Minister of State at the Colonial Office, and the Commonwealth Secretary, who will give it, I hope, a little amateur status.

If this afternoon I cannot put before the House any of the proposals which the United Kingdom Government will make, it is not because we have no ideas but because if this is to be a Commonwealth Conference the results must emerge as findings agreed by the Commonwealth countries. While the United Kingdom accepts, as the leading partner in the Commonwealth, that we should give a lead, nevertheless we do not want to "jump the gun" and to take up rigid attitudes in advance; we want to have a conference which is a discussion between the independent Commonwealth countries and from which joint decisions will emerge.

There are, however, one or two things which I feel I might usefully say this evening. The Canadian initiative (for it was Mr. Diefenbaker's initiative) is, as many noble Lords have said, well timed. I think that we were, anyhow, due for a wide economic review. The results of the Ottawa Conference, as I shall show in a moment, were extremely advantageous to the various Commonwealth countries. But that is some time ago now, and I think the time is ripe for another wide review. But we are also holding this discussion against the back-ground of the American recession, with its impact on primary producers who have suffered a pretty severe fall in their prices; and we are, therefore, facing balance of payments problems. As my noble friend Lord Bridgeman reminded us, we are now in a situation rather different from what we were even six months ago, and when the order books are not nearly so full as they were. That is one factor, one part of the backcloth, against which the Commonwealth economic conference will be held.

Then, again, there is the difficulty which some countries are finding, particularly the under-developed countries in Asia and the newer members of the Commonwealth, in earning enough foreign exchange to finance their development plans. They face the problem, to which Lord Balfour of Inchrye drew attention, of the run-down of their sterling balances. Of course sterling balances are accumulated in order to be used in this sort of circumstance, but there may be a point at which they may be faced with running them down dangerously fast Then, again, there is the difficulty of attracting capital to those areas where the prospects, both political and economic, are not so certain as others. Lastly, there is the fact that whereas over the last few years there has been a large boom in Europe, there are signs that that boom is now levelling off.

That, my Lords, is part of the backcloth. Against these more difficult factors there are the basic buoyancy of the United States economy, the better balance of the United Kingdom's economic position, and the more favourable trade balance, the proved resources and undeniable prospects, as Lord Balfour of

Inchrye reminded us, of a good many Commonwealth countries. One has only to take the case of minerals to realise that within the Commonwealth there are all the minerals that would supply the greater part of the world's demands.

In this country, too, there is a situation which has to be faced, that certain Commonwealth countries overseas are now increasing their own industrial production. The situation in the Commonwealth is not the clear-cut one that it was at one time, when we had primary producers in Commonwealth countries supplying a highly industrialised United Kingdom. It is not as simple as that, for a great many Commonwealth countries are creating their own industry and facing the exporters in this country with what one noble Lord has called "a challenge"—which means that British industry has to be flexible and to study the needs of each individual Commonwealth market.

It is clear from all those factors, I believe, that there is room at this point for good, solid, joint inter-Commonwealth planning, in order that we shall not drift into the future but rather shall be in a position to control and direct events. As I have said, the last great Commonwealth Conference was at Ottawa and the arrangements made then undoubtedly have been an advantage to all Commonwealth partners. My noble friend Lord Perth gave some figures which seemed to differ from those given by the noble Lord, Lord Balfour of Inchrye; but mathematicians are always leading politicians into trouble in that way. It is a fact, however, that half the trade of the Commonwealth is conducted between the various Commonwealth countries: That is to say, 50 per cent. of their trade is with each other and 50 per cent. with the rest of the world.

My noble friend Lord Perth gave figures which I have had checked since he spoke. The percentage of United Kingdom imports from the Commonwealth has risen from 36½ in 1939 to 42 in 1958; and exports to the Commonwealth from the United Kingdom have risen from 40 per cent. in 1939 to 46 per cent. in 1958. Clearly, one year may show variations as against another. For instance, as my noble friend said, there has lately been a steep fall in the price of copper; and, as my noble friend Lord Balfour of Inchrye will know, the price of wool has also suffered a fairly severe decline. But, taking one year with another, the preference system which resulted from the Ottawa Conference has produced a large expansion of Commonwealth trade.

We must not be content—I am not arguing that at all. We must strive to do better; and to do better must be the purpose of the Montreal Conference. In what way? That is where, as we have seen in this debate, we may have genuinely differing opinions. The remedy offered by the noble Lord, Lord Balfour of Inchrye, was to abolish the G.A.T.T. or, if not to abolish it, at least to abolish the "no new preference" rule; and he has described our present operations within the G.A.T.T. as the policy of Her Majesty's Government. Well, I would not deny that. But the noble Lord may remember that the communiqué issued after the Mont Tremblant Conference of all Commonwealth Finance Ministers contained a recommendation that the Commonwealth should proceed towards the common objective of freer trade and payments. And whilst I have no doubt at all that if, when we get to Montreal it is found that, on balance, G.A.T.T. in its operations is harmful to the Commonwealth, the Commonwealth could take action, equally I think I am safe in saying that at the moment no Commonwealth Government wishes to see or would propose that the Commonwealth should be formed into a discriminatory bloc. In other words, they see the future expansion of Commonwealth trade in the context of expanded world trade.

There are certain considerations which probably have led every Commonwealth Government to that conclusion. It is a little difficult to particularise them, because there are a great many; but it is true that although it can be anticipated that the United Kingdom market for food and raw materials will continue to expand, we are a very highly populated island and we can expand only within limits. As certain Commonwealth countries, too, are becoming increasingly industrialised they will want to export their manufactured goods, and to do so they must find world markets. I think, therefore, that it is true to say that while, of course, we shall pay the closest attention to the effect of G.A.T.T. on the Commonwealth trading system, at the moment the Commonwealth countries feel that the best way to expand, as was said in the Mont Tremblant communiqué, is to work towards the common objective of freer trade and payments; that is, lower tariffs the world over.

The noble Lord, Lord Macdonald of Gwaenysgor, said he remembered that before the Ottawa Conference was held an agenda was put out. If the noble Lord will look at the communiqué issued after the Mont Tremblant Conference he will see in it really the framework of the agenda which will be the working agenda for Montreal. I have previously mentioned, in this and other debates, the effect of the United States upon the trading fortunes of Commonwealth countries and the influence of the American market. One or two noble Lords have mentioned that aspect to-day, and also the part which they would like America to play in assisting investment within the sterling area. I think it is inevitable that at Montreal we shall talk about commodity prices. Probably the noble Lord, Lord Balfour of Inchrye, would like to see certain plans for stabilising commodity prices—for which there is a great deal to be said.

This evening I should like to make only this point: taking three commodities which are very important in the Commonwealth, namely wheat, copper and wool, I do not think there is to-day any arrangement in the Commonwealth which could efficiently stabilise prices without the full co-operation of the United States. The surpluses of the United States wheat output are, of course, one of the great problems which face wheat producers. But if it is generally true that it would be very difficult to stabilise commodity prices, or even the price of any particular commodity, without United States' co-operation, that does not mean that in particular cases we cannot do a lot to help ourselves within the Commonwealth. The noble Lord, Lord Balfour of Inchrye, will recall that there are a great many arrangements which are at present working successfully: meat, sugar, and tobacco—where the manufacturers have an arrangement to put a certain proportion of Rhodesian tobacco into cigarettes, for example.

The noble Lord actually gave us his own example—meat—and suggested that we should buy more meat from Australia. Under the Australian Meat Agreement, which runs until 1967, the United Kingdom has undertaken to import all Australia's exportable surplus of beef, veal, mutton and lamb at agreed minimum prices. That, again, is an example of how we in the United Kingdom and Commonwealth countries can make arrangements to help each other. Incidentally, in this field of meat, that agreement cost the United Kingdom Exchequer in 1956–57 something like £4½ million; but we are willing to make that kind of arrangement in order to help the primary producers in one of our most important Commonwealth countries.

Another way in which we can help Commonwealth countries—and here I come to the question of development, particularly raised by the noble Lord, Lord Barnby—is to look at methods by which we finance, or make finance available, for development schemes involving the purchase of capital goods and to do so against the background of a possibly diminishing volume of world trade. That point was particularly urged by the noble Viscount, Lord Bridgeman, and I think he will have seen what the Chancellor of the Exchequer said in his Budget speech. The Chancellor of the Exchequer, I know, has this very much in mind about extended use of the Export Credit Guarantees. I think in this section of trade, which the noble Lord, Lord Balfour of Inchrye, made the subject of the main part of his speech, I would not quarrel with his Resolution. We may not at this moment, before consultation, take his advice as to methods; but, nevertheless, our aims are identical.

The noble Lords, Lord Barnby and Lord Cromer, both made one point which I think we all ought to remember: that when we are financing development—indeed, in all these matters—basically what we must consider, first and always, is the strength of sterling and the position of the United Kingdom. If the United Kingdom's position is weak, as the bariker of the sterling area, there is nothing we can do to help the Commonwealth. Therefore, the strength of the United Kingdom's economy must be our first consideration. Accordingly, we have to consider a factor of which the noble Earl, Lord Cromer, reminded us, because we have to do two things if we are going to fulfil our aims. We have to find enough money to finance development in this country, so as to keep this country, which is the centre of the sterling area, fully equipped to meet the industrial challenges of the twentieth century; and over and above that, we have to find—and we can find it only out of savings, as he reminded us—enough money to finance essential development in the Commonwealth for which there are so many demands.

Basically, this is a problem, as the noble Lords, Lord Barnby and Lord Cromer, reminded us, of hove to mobilise fresh capital from within the Commonwealth or from outside. This is a prodigious task, because the United Kingdom must really bear the brunt of it. Of course, we all welcome United States investment in the sterling area; we hope they will do more and more. But when the United Kingdom goes to Montreal, it will be the United Kingdom and the Commonwealth countries which must accept the responsibility for providing money for development. As my noble friend Lord Perth in his review said, we are increasing the flow of Commonwealth development. Seventy per cent. of the external capital investment in the Commonwealth has come from the United Kingdom; that is the figure at present. In Australia, the United Kingdom capital investment is holding its own at something like 67 per cent. (I must not be held to be quite accurate, because I am quoting these figures from memory) whereas investment from the United States amounts to 18 per cent.; and the capital which we are investing at the present time in the Commonwealth amounts to some 1¼per cent. of the United Kingdom's national income.

As I say, we can do more only if we can save more and as our trading surplus rises. This year, as I believe the noble Lord, Lord Barnby, reminded us, we have had a favourable year, and we shall hope to be able to do more and to use largely the Export Credit Guarantees Department to do it. So I believe there are three things that we shall have to do at Montreal. The first is to find out how we can expand the flow of private investment in the Commonwealth and to interest the private investors in the prospects, particularly perhaps in the newer and under-developed parts of the Commonwealth; and in order to provide them with that better knowledge the Commonwealth Economic Committee have been working.

Noble Lords may not have read the volume which the Commonwealth Economic Committee produced in April of this year, and, if not, I would advise them to get it and to look at it, because it is a most comprehensive review of Commonwealth raw materials. I think it has almost everything in it about Commonwealth raw materials, and it has been compiled, with the High Commissioner for the Federation of Rhodesia and Nyasaland in the chair, with great care, and I believe it contains all the information that could be required. The Committee are now preparing another volume of the review, and this will set out the raw material resources of each Commonwealth country individually, and so we shall have a picture not only for each individual country but for the whole Commonwealth together. So we must do three things: expand the flow of private investment; and try to discover how we can further help those countries, the new Commonwealth countries, which have some difficulty in raising capital, and find the best machinery for channelling the capital to obtain the best results.

I mentioned the Commonwealth Economic Committee because it brings me on, having spoken of trade and development, to the third part of the speech of the noble Lord, Lord Balfour of Inchrye, which dealt with economic consultation within the Commonwealth framework. As he knows, and as noble Lords know, there is an immense amount of activity going on. There is the Commonwealth Economic Committee which does the research I have mentioned and which will provide us with the statistics and information on raw materials: there is the Commonwealth Liaison Committee where officials meet very often to review the whole Commonwealth field and finance and economics; there are meetings of the finance officials of all the Commonwealth countries, which now take place in the spring; and in the autumn, there are regular meetings of the Commonwealth Finance Ministers. A pattern is evolving in which I should like to interest your Lordships. These bodies meet throughout the year and they are beginning to meet at regular intervals.

The noble Lord, Lord Barnby, has suggested that there might be added to this machinery an investment advisory board. Well, it is an interesting suggestion which one would consider, but the only point I would make now in reply to the noble Lord, Lord Balfour of Inchrye, and I think this is as far as I can go to-day, is this. There is a strong case for the co-ordination of these various bodies, all operating in this financial and economic field. What form that might take or whether there might be Commonwealth agreement on any form, I cannot say, but it will clearly be part of our discussions.

There are only one or two more words I have to say in answer to one or two individual points which were made. The noble Lord, Lord Macdonald of Gwaenysgor, asked me in particular about cotton. I think that as the present position is, as noble Lords know, the Cotton Board has reached an agreement with the Indians and the Pakistanis, and it is hoped that that may be able to be supplemented by an agreement with Hong Kong; and we hope those problems, very acute problems in Lancashire, which the Government appreciate very well, may be eased in that way, because it ought to be settled by the parties directly concerned. Although you will be disappointed in what I say, and althouh, of course, problems can be raised of any kind at any time between the Commonwealth countries or at Montreal, I do not think it would be practical to ask the Commonwealth countries at Montreal to discuss this particular United Kingdom problem, because it would raise the whole question of low-cost production and its impact not only here but for the rest of the Commonwealth, and indeed the whole question of Commonwealth free entry in the United Kingdom. But I can assure you that the Government fully understand this question and will follow it, and hope to be able to reach a situation in which a voluntary agreement may be made.

The noble Earl, Lord Dundee, has given us from practical experience (because he did a tour of Canada last year) some very good advice. I think he illustrated how in one part of the Commonwealth at least there is a great expansion of trade. United Kingdom exports to Canada have increased at a time when, as he said, we might not have expected them to do so because there has been a recession in the North American Continent. He will have noticed—because he asked us to pay particular attention not only to our exports to Canada but also to our need to buy more from Canada—that the dollar restrictions in respect of chemicals have been removed to-day. If he has not already seen it, I know he will be glad to hear that.

He also stressed the importance of trade commissioners and information officers. I agree. I went to Canada a year or eighteen months ago, and I was very much impressed by the need for more information officers to tell the Canadians about the United Kingdom and its prospects. Quite recently we have opened new posts in Edmonton, in Winnipeg, in Vancouver and in Quebec; and both the President of the Board of Trade and myself will be in Canada this autumn. I shall be going to the West, and I shall have a look at the situation then. If any further strengthening is needed, then we can do it. What he says about unpunctual delivery is very true, and I hope that industrialists will note it: quality, too—because so high has been the United Kingdom's reputation for quality in the past that any individaul failure now has widespread repercussions.

So, my Lords, if I may conclude in this way, this debate has for the Government been well worth while. We have listened to it, and we will re-read the suggestions that have been made. I certainly accept the Motion of the noble Lord, Lord Balfour of Inchrye. I know that he and Lord Barnby will not expect me to accept all their methods, but I can say that our aims are identical, and our task at Montreal will be to translate them into facts.

6.43 p.m.

LORD BALFOUR OF INCHRYE

My Lords, it only remains for me to thank most sincerely the Secretary of State for Commonwealth Affairs and the Minister of State for their wide review, and also to thank the other noble Lords in all parts of your Lordships' House who have taken part in this debate. I am well content with the words of the Secretary of State, that all ideas will be studied and sifted. No one can ask more of any Government than that. I feel that that statement alone, apart from his wide and wise review, has made our debate worth while.

I rejoice that the clear, positive and (some would say) provocative declaration contained in this Resolution—namely, that the greatest possible expansion of inter-Commonwealth trade should be the first objective of Britain's overseas economic policy and welcomes all steps necessary to attain this end—should be accepted by Her Majesty's Government, and I hope that it will be endorsed by your Lordships in all parts of the House. In doing that, I am sure that we wish success and good fortune to those who represent Her Majesty's Government, and, wider than that, Parliament, and, wider than that, the nation, in their work at the forthcoming Montreal Conference to attain the ends which are embodied in the Resolution before your Lordships.

On Question, Resolution agreed to.