I beg to move, That the Bill be now read a Second time.
The Bill is concerned with increases in financial limits covering a variety of international activities, and there are a number of reasons why the increases in these limits are needed. First, there is the growth of the world economies. Second, there is the expansion of world trade that largely results from the increases in economic growth. Third, there are the increasing rates of inflation that we have seen not only here but elsewhere in the world at large. The financial limits that we see in the various parts of the Bill reflect these main changes as they have occurred throughout the world, especially in those parts of the world that are active in world trade.
The institutions concerned in this Bill and in so much of our international financial, trade and development activities are the International Monetary Fund, the Export Credits Guarantee Department in this country, and the Commonwealth Development Corporation. I should point out that since the last war we have been fortunate under a succession of Governments internationally who have accepted responsibility for a kind of development that has been almost unequalled in the history of the world.
As a result the means have been made available to feed the hungry and to help in the development of those less well-off countries and to promote suitable economic conditions. These are matters in which we in this generation should be proud to have played some part. The exceptional growth in world trade that we have seen is a reflection of the policies which have been pursued by the main countries. As a result, in post war years we have seen the trade in commodities multiply seven times and the increase in world trade in manufactured goods multiply 10 times: these are in real terms.
These are quite phenomenal increases which have been welcomed both as a cause and as a consequence of the economic growth to which I referred. They have been very much a cause of the economic growth because of the ability that they give so many of the countries concerned to increase their specialisation and to improve their standards of production and performance generally. Through the comparison which inevitably is made between the products of one country and those of another, they have led to competition in design, so that there has been this improvement in international standards not only in capital goods, which always existed previously, but more especially and more recently in the consumer goods of which shops throughout the world provide ample evidence. One further advantage that we have seen concerns the spread of international understanding as the products of certain countries become familiar in others.
The consequences of this economic growth following upon the increasing wealth that these countries have been able to acquire have led to increases in world purchases of manufactured goods steadily throughout the post-war years. Right up until 1973 it seemed that this process would continue indefinitely, with continuous expansion for the economic good of all. It was apparent that a number of countries were beginning to dovetail their contributions into the economic needs of the world as a whole, and there were signs that the changes in manufacturing output of very many countries were being geared in this way.
Then came the oil crisis and the consequential increases in the price of oil and commodity prices generally. The recession that that brought about was a profound one, and even now we see that recovery from that recession has still some way to go. This Bill is a modest but undoubtedly worthwhile contribution to the resumption in the growth of world trade which is essential to that recovery.
The Bill helps this in four main ways. First, we have the Export Credits Guarantee Department, which finances exports and the growth in exports and is crucial to our own recovery. But the financing of exports is not purely a matter for us. Though we see other countries undertaking the same arrangements, we must not think of these as purely competitive. They have a competitive aspect about which we have to be naturally concerned, but they also help to provide finance for the world exchange of goods, from which we all benefit.
This Bill provides for an increase in the financing facilities of the Export Credits Guarantee Department from the present maximum level of £18·2 billion to £25 billion. At present they are running at a rate of about £17·3 billion, and provision has to be made for the natural expansion that will come. There are other ways of financing to which I shall refer later.
The next aspect provided in the Bill for those basic requirements which I mentioned concerns the Ministry of Overseas Development and its assistance to developing countries. Under the Commonwealth Development Corporation, the increase in its limits in the Bill will be from £260 million to £500 million, or by order to £570 million.
The third aspect covers the IMF quota increase. This is designed to help the financing of the balance of payments and to take some steps to avoid some of the threatened deflationary actions which might have come about to the disadvantage of all countries. The deflationary actions could have included—and this was a threat which it was important to avoid—not only competitive deflations but increasing restrictions on international trade which could have succeeded them. The Bill increases our contribution to the IMF from 2,800 million SDRs to 2,925 million.
The fourth aspect concerns the amendment to the IMF articles. This places upon members of the obligation to make SDRs the principal reserve asset, and it requires the Fund as well, under these articles, to dispose of one-third of its gold holdings. I pick out those two main aspects of the articles.
These are important changes which have taken place in the IMF since the setting up of the Bretton Woods Agreement in 1944. It is worth remarking that this is only the second amendment to the IMF since that date. I consider this a measure of the value of the work done 33 years ago, and the fact that this is only the second amendment is a tribute to that work and a measure of the admiration and respect which I—and I am sure many others—would pay to those who set out to provide the international framework of the post-war years from which all of us have benefited.
In recent times, however, the Fund has had to contend with a number of new problems, not least of which have been the problems of the surplus funds arising from the increased price of oil. In these as in other matters the IMF has been an effective forum for international discussion, and it has been concerned with the introduction of the oil facility. Under this facility, $8 billion was borrowed and about $3 billion was obtained by the non-oil developing countries which otherwise would have suffered severely. This money has helped to prevent even heavier deflation with the consequential disadvantages to all the countries concerned.
The problem of dealing with surplus revenues acquired by the oil producers is still with us and is likely to remain with us for a long time. It will remain with us as long as those countries do not use this money, which comes from the sale of oil, for imports and their own development projects.
The counterparts of these very large surpluses of revenue which the oil producers are acquiring are balance of payments deficits of other countries of which we are one. The non-oil developing countries and the OECD countries have to bear the brunt of these deficits. It will be a long time before the oil producers import sufficient quantities of consumer and capital goods to offset these deficits, which are building up.
The big question here concerns the distribution of that deficit between the non-oil developing countries and the OECD countries. It also concerns the financing of that deficit. As long as some countries are able to ensure a balance in their balance of payments, the burden is not equally shared. This means that there is an even heavier burden for those countries which are not able to order their affairs in such a way as to produce a balance. This is still a subject of concern, and if the economic summit—about which much has been written today—takes place, this will be one of the main questions for discussion.
The decision to increase IMF quotas by one third will help considerably in financing these deficits. The quota increase will raise the Fund's resources to $45 billion and one of the problems facing the IMF is handling the difficulties arising from this. The main and newest problem is that of finding better co-ordination of floating exchange rates, which the world is learning painfully to live with. We must understand that floating exchange rates will be with us for some time and the problem, therefore, is how to get orderly variations in exchange rates and prevent the kind of competitive devaluations which were a feature of prewar Governments and which contributed markedly to slumps at certain periods.
Article 4(3) of the IMF places upon the Fund an obligation to exercise surveillance over exchange rate arrangements. This surveillance provides for the IMF to be informed of changes proposed by member countries and for consultations. Some people think that these provisions will be a long-term replacement for the Bretton Woods Agreement of 1944 concerning exchange rates. Personally, I believe that the aims are rather more modest than that and what we are seeing here is a basis for monitoring and co-ordinating exchange rates through the influence of the IMF. I would not wish to speculate on what it may lead to ultimately, and I do not think that such speculation is necessary at this stage.
Under this Bill the Commonwealth Development Corporation will acquire an increase in its borrowing limits. This is no more than a modest but valuable contribution to aid. Anyone who has taken part in our debates about the developing countries will know that there is an interdependence between developing and developed countries. This is something that we shall have to take more seriously in view of the present difficulties than we were prepared to consider in the past when the world economies were expanding continuously and were expected to continue doing so. This may lead to an extension of the Litvinov principle—that prosperity is indivisible.
At a time when our problems are great we must realise the problems of developing countries also and the dangers which a divergence rather than a convergence of living standards can cause to the relationship between different types of countries. We must continue our general aid policy of giving aid to the poorest countries and to rural development within those countries. This will help the poorest people in the rural areas to develop their natural resources. That is the best sort of help to give them.
The Commonwealth Development Corporation will continue to contribute finances as well as management of projects, and this is an area which the Parliamentary Secretary to the Ministry of Overseas Development will deal with when he winds up the debate.