Orders of the Day — Import Duties Bill.

Part of the debate – in the House of Commons at on 16 February 1932.

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Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

Those of us who have fought successful and unsuccessful campaigns in favour of fiscal reform in this country are much gratified to-day that at last we are about to see a definite Measure for the defence of British trade and employment placed upon the Statute Book. I should like to pay my tribute of gratitude to the Chancellor of the Exchequer and the President of the Board of Trade for the assiduous work which they have done in preparing this plan and for the eloquence with which they have expounded it to the House of Commons, Might I also be allowed to add a meed of admiration to the President of the Board of Trade for his speech last week, and the exhibition he gave us of his skill in riposte. I do not say that the Bill in its present form meets all our views or satisfies all our desires. There are many Amendments which we might have chosen to make, but it does one thing quite definitely; it gets rid for ever of the illusion that a free market in this country with restricted markets in all other countries constitutes a system of Free Trade. It also unequivocally establishes the principle that we should retaliate upon any country which discriminates against us. In fact, from the evidence which we have had even to-day we may conclude that it will compel freer trade than this country has enjoyed at any time during the last two generations.

We accept this Measure as a beginning. The Home Secretary said that it was really Protection. I do not shrink at the word. We should not have been content with this Measure if it had given us nothing but a general undiscriminating 13 per cent. duty. Like the Home Secretary I do not consider that this duty will greatly affect the balance of trade, but I accept the Measure as the basis upon which there will be built up a scientific system which is going to be evolved by the Import Duties Advisory Committee. If the Home Secretary had also accepted it, he might have realised the aspirations of the poet by rising on stepping stones of his dead self to higher things. I am sorry that he did not do so. I hoped until the last moment that the dissentient section of the Cabinet would have been content, in the emergency with which we were faced, to subordinate their views to those of the majority, but I fear that there are shadows behind the Home Secretary's throne.

I read an account of a meeting in Lancashire where the Chairman asked the innocent question whether Samuel was to anoint David or David was to anoint Samuel. I dare say that is a matter which concerns both those distinguished people. I appreciate his position, and I feel no resentment in any form as to the attitude which he took in the House. I am glad to think that he is a philosopher. When the Home Secretary takes to writing essays to philosophical journals he writes on philosophy with a verve and clarity which is very unusual in such periodicals. I read not long ago a disquisition by him which greatly rejoiced me. It began with the intriguing sentence "I was led by politics to philosophy," and the subject of the article was the "Relativity of Free Will." It was an interesting essay upon the amount of free will an individual might suppose himself to have, surrounded as he inevitably is with great and predetermining forces. That was subsequently followed by one on the "Dual Standard of Conduct." The House will realise that by study at least the Home Secretary had put himself in a position to play the difficult and ambiguous part which his insistent colleagues have forced upon him.

4.0 p.m.

With regard to this Advisory Committee, which is the centre of the Government scheme, one must ask how they are to perform the functions which have been entrusted to them? Are they going to be snowed under and suffocated from birth by innumerable petitions from all the industries of the country concerned as they will be about the fate which is to be meted out to them? There is first to be placed upon them the duty of considering whether the abnormal imposts recently established are to be retained or modified or reduced to the level of the 10 per cent. duty under this Bill. I do not know how long it will take the Committee to deal with these matters, but it is apparent that it will take some time to reach decisions. Then there lurks behind a very formidable question in relation to the iron and steel trade. Here is an industry in regard to which there have been four Committees or Commissions during as many years. Committees have sat and occupied interminable tracts of time, heard innumerable witnesses and presented reports. I am not at all sure that we have seen any of those reports. No Government has had the courage up to now to tell us what decisions the Committees have arrived at.

Is this new Imports Committee to go through all this question afresh, and, if so, how long is it going to take to do it? Is it going to take as long as these various Committees to arrive at a conclusion? I confess I could have hoped, after all that has been done, that the Government would have had the courage to deal with this question themselves, rather than to pass it on to another Committee. But as they have not done that, there is this formidable industry for the consideration of this new body. And not only this one, but the great variety of other trades which will require to be dealt with by the Committee. I ask, Are we to have a separate investigation by this Committee into each of these trades? If that is to be the procedure, it is obvious that no time will be enough for the purpose but that only eternity will suffice, and that in the meantime you will have the trade of the country kept in a perpetual state of suspense. Uncertainty kills industry worse than any other thing, and I would beg of the Government to take means whereby rapid conclusions can be arrived at.

I venture, with great humility, to make a suggestion. I am in favour of this Committee, and it is not because I think that it will be unfruitful that am putting forward these criticisms, but I do venture to suggest to the Government that the Committee should be in a position to take a wide sweep of British trade, and to arrive at some general test. I very humbly put forward the test of the amount of work which has been contributed to any particular commodity that is imported; that duty should be graded upon a principle of that kind; and that on such a system as that, without all the elaborate investigation which would otherwise be required, the Committee should frame a tariff. They will have ready to their hands the fruits of the labours of many enthusiastic and expert people who have been investigating this topic over a period of years, and whose schemes, I suppose, would be of immense value to such a Committee. No doubt they may make, under the plan I am suggesting, some errors, and such errors may do some injury, but of one thing I am perfectly certain. and that is that the errors they may make will never do so much injury as perpetual delay and hopeless attempts to arrive at preliminary perfection.

There are many other items in this Bill which deserve notice. There is the matter of the Dominions, which is a point of principle. Most of the other points are of the nature of Committee points. Somebody will want to know, I am sure, why it is that the farmer should have to pay an import duty on his maize when he has no protection for his meat, and I must say, for myself, I have deep sympathy with the difficulties in which the farmer is placed in that respect. I am also sure, in my own mind, from such inquiries as I have been able to make, that there is a very large margin for the importing meat trade to work upon which might easily take the form of an import duty on the commodity, without in any way justifying a rise in the price of meat. Other people, I have no doubt, will desire to take notice of the system of drawbacks which the Bill provides. I am not sure that the Financial Secretary to the Treasury entirely convinced me yesterday that it was quite fair to give no drawback upon the initial duties, but to confine it to the additional duties which may be imposed.

Then others will want to know, I am sure, why drawbacks should be confined to those imports which go out from this country in the same shape or form. That is a matter with which, I think, other countries have succeeded in dealing on a plan more suited to the needs of the manufacturers. Then some will want -to know, I should think, whether it is practicable to impose your duty upon the value of the commodity when it arrives here. I am not sure that in every case it will be found that that is a suitable method to apply. Some, too, will ask why it is that Dutch-grown rubber is to escape an import duty when there is far more produced than we require by British planters in the East. Others will raise questions, no doubt, with regard to the number of items in the list of exemptions. I should like, with great respect, to suggest that in dealing with the exemption list a not unfair criterion to apply would be this: If our country does not produce a commodity and the Empire also produces none of it, or if the Empire and the home country together do not produce enough of a commodity to supply the needs of the British manufacturer, then prima facie in such a ease the commodity should be exempt from duty. I should deprecate in this great matter our getting off on the wrong foot.

We can apply, even in the short space at our disposal, a certain number of scientific ideas, and I would remind the House of this fact, that while Free Traders have commonly argued the fiscal case upon the basis that everything in tariff countries is subject to duty, even so rabid a tariff country as the United States allows two-thirds of its importations to arrive in their territory free of duty. We wish to devise some plan by which we can get our raw materials as cheaply as possible, and defend the manufacturers of our goods to the extent which is reasonable. I can give an illustration of what I mean by contrast. My illustration is meant to show what ought not to be done in this country and yet has been done. I take the case of raw real silk—the silk as it comes from the silk worm, with no manufacturing process upon it. We in this country at present are taxing that commodity at a rate which is 28 per cent. of the value. See what that does. It immediately puts us, as far as our manufactured products are concerned, at a disadvantage compared with every other country, because, as far as I know, there is no other country in the world which taxes raw real silk. Ought we not in such a case to let in the raw silk free from duty, and if we are losing revenue by that, cannot we regain it, as I am sure we can, by putting an extra duty upon the manufactured article which comes into this country? I give that as an illustration of the kind of thing I mean. I think that from the beginning the House should try to shape this Measure so that it can give us the greatest amount of benefit, and put us to the least possible disadvantage.

I turn from these details of this particular Measure to the principles that lie behind it, and I would assure the House, at the very outset, that I do not propose to occupy much time upon that branch of the case. We have had not merely arguments over a period of at least 30 years, with which everybody now is familiar, but, in addition, we have had a general argument in this House last week. I would, however, for a moment like to refer to the Liberal Amendment on the Order Paper. It is true, that we cannot. discuss it, but it forms the basis of the arguments which are put forward by some Liberals, and I would like the House to remember the form which that Amendment takes. I am not going to read the actual Amendment in all the fine flavour of its fruity phraseology, but I will give, if I may, syncopated headlines of this Amendment. The tariffs, we are told, which are to be set up by this Bill will cripple our export trade, and consequently create unemployment. They will affect adversely British credit, raise the cost of living to wage-earners, destroy the traditional control of the House of Commons in finance and taxation, and threaten the welfare of the Empire and the peace and security of the world. I am sorry that the gentlemen who composed this lyric did not carry it a little further. They might have said, with equal truth, that these tariffs would produce eruptions in Vesuvius, earthquakes in Japan and tornadoes in the West Indian islands.

Let me deal with the first item of this criticism of the Import Duties Bill. It says that the tariffs will [...]ripple our export trade, and consequently create unemployment. I am going to direct attention, for a moment or two, to that particular count in the indictment, because I find, even in the minds of those who are supporting this Bill, a hesitancy in regard to the effect which the Government's proposals will have upon exports, and some puzzlement as to whether the export trade, even if it does not suffer and disadvantage from these Measures, may yet obtain no advantage. That is a proposition which I entirely controvert. I think it is founded upon a complete fallacy. It is based upon the old glib argument that imports pay for exports. Of course, there is a very real sense in which that is true, but it is not true at all in the superficial and ignorant way in which it is used by those who put forward Amendments like this.

I am not going to deal to-day with the theoretical part of this argument. I want rather to direct the House's attention to the facts. The kind of assertion in this Amendment is entirely out of consonance with reality. If you look at the theory you find that it is founded upon the idea that you always have some sort of stable ratio between imports and exports. What has happened? In the year 1913 our visible exports paid for 82 per cent. of our imports. In the year 1929 our visible exports paid for only 71 per cent. of our imports. In the year 1931 our visible exports paid for only 52 per cent. of our imports. I have no doubt someone will say that I have taken no account of invisible exports. But if they are taken into account they make the Free Traders' case still worse, because in the year 1913 not only was 82 per cent. of our imports paid for by our visible exports, but we had a margin of £250,000,000 to invest, and we did invest it abroad. In the year 1931, after taking the two categories of exports together, according to the Board of Trade figures, we were £120,000,000 to the bad. It is absurd to say that we cannot readjust that ratio of exports and imports without doing damage to our trade. We can indeed. The only way in which we can not only benefit our trade but save ourselves from the trouble which an unbalanced trade will bring, is by making just such a readjustment.

Let us get back to something like the ratio of 1913, when our visible exports paid for 82 per cent. of our imports and when we had such a large margin for investment. Surely the rule that exports and imports pay for each other was just as applicable in 1913 as in 1931. Let us design our policy so as to get back to the ratio of prosperous years, when we were building up our finance and were able to make savings.

But there is another element to which we have to pay attention, and that is the character of our imports. The most disquieting feature of all our trade returns in recent years has been the extent to which we have been combining an increase in the purchase of manufactured articles and a decline in the purchase of raw materials. For a manufacturing country, dependent upon its export of manufactures for its survival, it is suicide to allow a continuance of the process that went on between 1924 and 1931. We purchased, in 1931, £70,000,000 more of manufactured goods than in 1924, but we purchased £12,000,000 less of raw material and we exported £187,000,000 less of manufactured goods. There is the core of the trouble from which this country has been suffering. It is there that we have to make the readjustment that will put us in a better shape as a manufacturing country.

So far from a tariff destroying or doing injury to our export trade, it forms the most excellent basis for the export trade. It is upon the security of a home market that you can build your best exports. Why? Sometimes when I see in the newspapers the reports of speeches by people who argue upon these matters I come to the conclusion that while they do lip service to the theories of business they know very little about the application of them. Is it not obvious that your best method of obtaining an export trade is by having cheap prices? Cheap prices depend upon cheap costs. The greatest factor to-day in reducing costs, in a period when such a vast amount of machinery is employed, is to be able to spread your overhead costs over the largest amount of material that you produce. But in order to have that large production you must have a large market. It is the certainty of the home market that enables you to sell at prices which compete with those of your rivals in other countries. It was only by such a method that America, with all its vitality, was able to build up an export trade which began to threaten our own, and it was by that method that Germany has been enabled not merely to approach figures which we thought were very high but has outdistanced us in the export market.