Orders of the Day — Trade Policy

Part of the debate – in the House of Commons at 12:00 am on 2nd March 1948.

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Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot 12:00 am, 2nd March 1948

The Opposition have chosen this early opportunity of raising the general subject of trade, because in these times of economic crisis it is clearly a subject of vital importance. However, the field is so wide that this afternoon I propose to address myself to only three subjects which require very early ventilation. The first of the three subjects is the Russian Trade Agreement, which it is important to discuss now because, according to the White Paper, further discussions are to take place no later than next_May, with a view to a further extension of this Agreement and to embracing further materials and commodities. The second subject is the general one of bulk purchase, about which I shall have something to say of a not wholly favourable character. Thirdly, come price controls, some of the orders for which the President of the Board of Trade has signed during the week-end.

I turn first to the Russian Trade Agreement. It must be confessed that in any discussion of long-term agreement with Russia, clauses laying down, for example, the repayment of moneys over 15 years, and clauses covering regular meetings sound a little curiously in our ears today. The mere use of all the normal phraseology—and some of the phraseology is more than normally obscure, especially at page 5—gives one an almost nostalgic feeling for the world as it is not. These agreements give the sort of feeling of the passengers of a liner going to the purser's office for their disembarkation tickets and Customs declarations when the liner is sinking in mid-Atlantic—or perhaps I should say in mid-Baltic. If the agreements looked rather curious at the end of last year, they look almost bizarre today.

At the time, I found it rather hard to read the eulogies which lapped round the right hon. Gentleman when he returned from Moscow with a bad bargain and a balalaika. I do not think it is a jaundiced view to say that what the right hon. Gentleman has done, in effect, is to have sold to Russia in return for grain, a large range of manufactured goods—and those goods are about the hardest currency we have at our disposal in the whole of the sterling area. To be fair, I concede our crying need for these course grains for animal feedingstuffs. When I say that, in effect, the right hon. Gentleman has sold these goods, I am oversimplifying the transaction, for, in fact, no or very few contracts of which I am aware have been placed with the suppliers for the goods which are specified in the schedules. On page 3 of the White Paper, in paragraph A of Article III, these words are used: For this purpose"— that is for the purpose of delivering the goods— the Government of the United Kingdom will as necessary use any of the powers exercised by it in such matters, in particular with regard to the giving of permission to the supplying firms to acquire the materials necessary for the orders. I would draw particular attention to these words. They will be construed by the Soviet Government as meaning that these supplies to Soviet Russia are to enjoy priority over what is now known as the "Prime Minister's List," or if not priority over it, priority which is at least equal. As many of the goods specified in the Schedule are already in the Prime Minister's List, is it intended to instruct manufacturers to defer deliveries, either to home or foreign customers, in order that these supplies for Russia shall take a higher place in the List? The Government of the United Kingdom have under- taken to use any of the powers they have in such matters, and the Soviet Government will, I think, rightly expect, if there is any shortage of materials holding up the delivery of the goods, that these materials will be taken from other industries and made available for these orders. If there is any shortage of labour, whether skilled or unskilled, holding up the production of these orders, the Soviet Government will, I think, expect His Majesty's Government to exercise their rights in regard to the direction of labour, and to order the necessary workers into those industries which are to produce the goods.

In return for these sales we are to receive 750,000 tons of barley, maize and oats, of which we are admittedly in great need. I am not, of course, arguing against the purchase of these coarse grains, but I am expressing concern about the terms on which they have been bought. When we consider later what has been sacrificed to bring off this deal, it will be clearly seen that the congratulations to the right hon. Gentleman have at least to be tempered with some regret. Let me turn to the list of manufactured goods which we are to sell. They are set out in the schedule on page 7. The first item is for 1,100 narrow-gauge locomotives and 2,400 narrow-gauge flat-trucks. I am not suggesting that these narrow-gauge loco-matives and trucks are in themselves as difficult to manufacture and deliver as would be broad-gauge locomotives and trucks.

On this item, as on all the others, I wish to emphasise that it is broadly true that they are a call upon materials or capacity of a high priority—for example, in this case, steel, and steel wheels, and that this capacity and these materials can be used to help the production of machinery and equipment of which we stand in urgent, I might almost say desperate, need. Every locomotive means a disproportionate reduction in our own capacity, because most of our works are equipped to make 150-ton locomotives, whereas I understand that these locomotives are to weigh 15 tons. It means a general dislocation will take place, which will be very serious, in order to fit in these orders. Even those who are aware of the acute shortage of power in this country may not think that 150 50-k.w. mobile Diesel - electric generators, 24 steam-power turbine stations of 500-k.w., or 300 100-k.w. electric motors are a matter of great concern, but they are in a field where the strain on our manufacturing capacity is already very great in trying to make up the gap in our power supplies to meet our needs.

Among the goods we are selling are five dredgers. There are four under Schedule I, and one so-called electro-dredger under Schedule II. There is a dire shortage of dredger equipment in Malaya, which is the greatest dollar-earning country in the sterling area, as is well known to all hon. Members who have been in touch with that country, or who know about the tin-mining industry. The four dredgers are for dredging harbours, and the electro-dredger is a gold-mining dredger. Whether these dredgers are to win alluvial minerals or not, they are nevertheless a demand upon the capacity of our dredger-making industry, so vitally needed for the re-establishment of production in Malaya. The right hon. Gentleman need not take advice on this point, because I would not put him wrong.

In short, all the goods we are selling to Russia are the equivalent of payments in the hardest of hard currency, and the list represents the sale of vital capacity and of raw materials. It is also notable that the sales are all of essential capital equipment, and there are no consumption goods mixed up in this deal, as was the case, for instance, with the Argentine. This brings me to ask: At what price have we bought the coarse grains, that is, the barley, maize and oats? I suspect that the price for the grains has been fixed and that the price for the manufactured goods has been left open. This is the kind of thing we expect when the Government enter the trading market; what we have to pay out is fixed, and what we are to receive is left to hope. For some reason which is not apparent to me, the Government have always refused to give the actual prices at which they acquire these or similar supplies, but this time it cannot be in order to conceal the price from the Russians. I have a suspicion that I know what the reason is, but I am not going to give voice to it today.

To start with, I am going to put a number of more limited questions on which I particularly ask the President of the Board of Trade to give a reply. First of all, has the price of the grain been fixed, or is the price to fluctuate with world prices? If it is a fixed price, upon what has it been fixed? Was it by any chance fixed upon the price of grain in Chicago in that wicked capitalist country with a free market? Perhaps we shall have an answer to that later on. If so, it is a curious commentary upon the transaction which took place between two Governments, both of whom are wedded to the principle of State trading and bulk purchasing.

If the price was fixed according to Chicago prices, it is a confession that these two State trading concerns, His Majesty's Government and the Government of the Union of Soviet Socialist Republics, have to look to a free market to judge the price or value of the goods which they are buying or selling. If it was not based upon Chicago prices, then upon what was it based? If these prices were fixed according to this, how do they compare with today's market prices? If they are fluctuating prices, it is a still more curious comment on the merits of bulk buying and State trading. I assert that this House has an absolute right to know this much at least, and I personally shall require a great deal of convincing that it is against the public interest to disclose the actual prices. I can conceive of no reason why they should not be disclosed.

In order to sell these highly saleable goods, the Government have made a number of major concessions to the Soviet Government. It is impossible for the ordinary reader to glean from the White Paper exactly what these concessions have been. I should not like to say with any certainty what they are, although I have had as much experience as most of reading official language. I think that the Chancellor of the Exchequer said that no capital sum due by Russia to this country had been written off during the course of these negotiations. I wish, therefore, to ask whether any capital sum has been written off Russian indebtedness to us since 1945, and, if so, what sum?

Secondly, if I read page 5 of the White Paper correctly, what has happened is that the balance in the account established under the 1941 Agreement is to be repaid by means of advances from His Majesty's Government in sterling to Russia. This advance is to be repaid in its turn by 12 annual instalments, the first of which is to be payable at the end of the fourth year after 1st August, 1947, and the last 15 years after 1947. That would mean over 50 per cent. of the indebtedness to Russia existing in this account. The account, the House will remember, is that established in the name of the State bank of the U.S.S.R. in the books of the Bank of England. Reduced to simple terms, that means that we are lending Russia money to pay off 50 per cent of its indebtedness. The transaction is just a "washed" transaction, and we are in turn to be paid back over the 15 years.

Under Article 5 (d), it appears that on other advances, including those advances made available in connection with the future instalments of the account in the 1941 Agreement, are also to be repayable in 12 yearly instalments. I think that the President of the Board of Trade should explain in clearer language what is the particular significance of the 50 per cent. repayment under Article 5 (c), and how Article 5 (c) and Article 5 (d) are to be read; what relations they bear to one another, and to what actual sums they apply. The significance of all these arrangements will only be apparent if the Government will give to us—and I think we have every right to ask for it—the answer to these questions: What total sum has been written off the Russian indebtedness to Great Britain since 1945; to what sums do the long-term credit arrangements on page 5 of the White Paper apply? Then I come to interest on the bonus. The Chancellor of the Exchequer admitted the other day that the total loss of interest involved in all these arrangements to us would be £4 million—a very substantial sum.

These arrangements have all the appearance to me of a leisurely and liberal trade agreement made by a country which has no particular anxieties about its international balance of payments and which wishes to promote its trade by lending certain of its surpluses abroad. How painfully far from our true situation all that is. I also understand that £27 million has been written off the so-called Lend-Lease account between the two countries. That is certainly a generous gesture. I think that we can all agree about that. I hope that I may have the attention of the hon. Member for West Fife (Mr. Gallacher) at this moment. I said that the writing off of £27 million to Russia is a generous gesture, and I imagine that due tribute has been paid on the Russian radio recently when the gesture was made.

It I may sum up, the agreement appears to me to be this: We have bought some coarse grains from Russia, and we are paying for them in the hardest of hard currencies, namely, vital items of machinery and equipment. The price paid for these coarse grains is not specified, and I understand that it will not be, although I have asked questions about the prices fixed. We have made a concession in interest amounting to some £4 million. All obligations outstanding under the 1941 Agreement and others in that agreement not yet matured are to be settled by 12 annual equal instalments beginning in four years after 1st August, 1947. How fortunate would any negotiator be who went to any part of the world armed with authority to buy three-quarters of a million tons of grain, armed with authority to pay for it in the equivalent of gold bullion, armed with authority not to give the price which he paid, armed with authority to give the seller the advantage of £4 million in interest, armed with authority that all indebtedness existing under the 1941 Agreement should be liquidated over 15 years, and armed with authority not to disclose in very clear terms how much capital indebtedness had already been written off.

In all these matters, I am reminded of the story of the Irish priest who preached a sermon about the loaves and fishes, and who, by a slip of the tongue, got it wrong. He said that seven men were fed with 4,000 loaves and in the middle of the sermon one of the congregation said, "We could all do that your honour." The priest was so disconcerted that he sat down, and the sermon was unfinished. The next Sunday, he preached the sermon again, and got it right. Having described how 4,000 men were fed with five loaves, he said, "You couldn't do that, Pat." Patrick replied, "I could, your honour." The priest asked, "How?" Patrick said, "From the leavings of last Sunday." I think that there are many negotiators who could make a fairly good arrangement in almost any part of the world with the leavings that the President of the Board of Trade has given away in the deal disclosed in the White Paper.

I now turn to the subject of bulk buying. This specimen of bulk purchases is like many of the other unhappy and costly deals in which His Majesty's Government have entered of recent date. I point out again the disastrous results on the country of this system of bulk buying. I do not want to go over the arguments I have used on many occasions. I want only to draw attention to one part—one of the most vicious parts of this system. Under the normal system of buying each industry covers, and covers individually, its requirements of raw materials, and the covering, that is, the buying, goes on from day to day. It goes on in accordance with the requirements of a number of individual firms engaged in the industry. The covering on cotton on the Liverpool Cotton Exchange, when it existed, went on from 1st January to 31st December.

Let me take a less familiar example. The covering of copper by those who use it and manufacture it into finished goods took place continuously from 1st January to 31st December. The same applied to the sellers who mined and smelted the copper. This process of either selling the daily production of a mine, or, on the other hand, of covering the requirements of the works who used it, was smooth and continuous throughout the year. The seller of the metal and the buyer were only concerned to see that over the year they bought or sold at the average world price. The ordinary user of copper covered himself by some hundreds of transactions, and was very often in the market on more than a hundred days in the year.

From the very nature of things, bulk buying proceeds by a series of governmental hiccoughs—jerks; a series of bulk transactions executed by some official whom everyone sees coming with his black, shiny satchel with the Royal Arms on it.