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Anglo-Soviet Trade Talks Moscow

Volume 441: debated on Monday 28 July 1947

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I am glad to be able to take advantage of this first opportunity of informing the House upon the course of the recent trade negotiations in Moscow The House will be aware that following the talk between my right hon. Friend the Secretary of State for Foreign Affairs and Generalissimo Stalin, my hon. Friend the Secretary for Overseas Trade visited Moscow at the end of April for talks with Mr. Mikoyan, Soviet Minister of Foreign Trade, in the hope of removing the many obstacles which remained before trade between our two countries could be opened up on a substantial scale. At that time the Soviet Government made clear their willingness to supply substantial quantities of grain and as much timber as could be spared for export, having regard to the low production resulting from the war and to their great internal needs for housing and reconstruction. At the same time they indicated to us the goods, chiefly equipment for the timber industry and for the transport of timber, which they would like to import from us. They stated, however, that they regarded it as an essential preliminary to the resumption of trading relations, that we should so adjust the terms of repayment of the credit advanced to them under the Civil Supplies Agreement of 1941 as to lighten the load of immediate repayment. In particular, they asked for a reduction of the rate of interest to a half of one per cent. for a waiving of the obligation to pay 40 per cent. of advances still falling due in cash, and for an adjustment in the terms of repayment of the credit so as to spread the payments over 12 annual instalments instead of five.

Before my hon. Friend returned to Moscow in June, the Soviet Government were informed that we were prepared to make some concession on the terms of the 1941 Credit Agreement, provided that it was done as part of a comprehensive trade agreement which was of real, substantial and immediate advantage to us. In particular we stressed the need for substantial quantities of cereals out of the 1947 harvest, which the Soviet Government confirmed was a very good crop. The trade talks, which lasted five weeks, were intensive and extremely detailed. They were carried through in a friendly and co-operative spirit, and with complete frankness on both sides. This is true of the meetings between the technical and trade experts on both sides, no less than of the meetings between my hon. Friend and Mr. Mikoyan. The Soviet Government stated their willingness to supply really substantial quantities of cereals over the next four years, beginning with a large shipment out of the 1947 harvest. In addition they were prepared to ship to Britain practically the whole of the timber available for export this year, though, for the reasons I have stated, this is not a very large figure. Canned salmon and crab and certain other items, were also to be supplied to us.

After several difficulties, we had succeeded in reaching agreement on all matters within the trade field, including quantities, prices and terms and conditions of shipment. Contracts for building timber and pitwood were signed, and that for cereals was drawn up and practically ready for signature. Agreement was reached also on the quantities of equipment to be bought by Soviet importing organisations from British firms and arrangements discussed for a purchasing mission to visit Britain for the purpose of signing the necessary contracts with the firms concerned. In addition, agreement was reached on shipping, providing for the participation of the shipping of both countries on an equitable basis in the Anglo-Soviet carrying trade. Provision was made also for representatives of the two Governments to meet at frequent intervals to review the progress of trade between the two countries, and to consider all possible means of developing it and widening its basis.

But, unfortunately, with so wide an agreement on trade matters, we were unable to reach agreement on the terms of repayment of the 1941 Credit. While we were prepared to meet the whole of their requests for reducing the rate of interest to half per cent., to waive the 40 per cent. cash payment in respect of all contracts not yet signed, and to go some way, at a heavy cost, towards meeting the Soviet request for lengthening the period of repayment of all advances, we could not go the whole way the Soviet Government demanded as a condition of an agreement. In fact in addition to the concession on the rate of interest, and on the waiving of the cash payment, we offered to meet the remaining Soviet demand on the period of repayment as to over 60 per cent. of all the advances old and new. The concessions we were prepared to make involved us in a heavy loss in the next three or four years, and in view of our serious overseas financial position, we could not meet what the Soviet Government, after moving some way to meet us, stated were their minimum terms. The talks, therefore, came to an end and my hon. Friend returned home to report to the Government.

In view of our failure to agree, the position is, of course, that the trade agreement which was practically complete in draft, was not signed, and for our part, the financial concessions we were prepared to offer were withdrawn, leaving the original terms of the 1941 Agreement in full force. I can tell the House that it was not through any want of trying or any lack of effort or reasonable concession on our part that we failed to reach agreement. In addition to the signature of the timber contracts, I think it has been useful to go so fully into all the trading matters and so prepare the way for future trade. In spite of this, we hope, temporary disappointment, it remains the wish of His Majesty's Government that there should be a large expansion of trade between the two countries. My hon. Friend the Secretary for Overseas Trade was given every assurance during the talks that this was also the wish of the Soviet Government.

May I be allowed to say that we on this side of the House, at any rate, feel that the Government could not have gone further, particularly in respect of the 1941 arrangements, than they appear to have done, so far as we can follow from the statement. There were reports that there had been difficulties in respect of the price-fixing for wheat and that that was one of the obstacles. Are we to understand from the statement that those reports were unfounded?

These difficulties were overcome in the last stages of the negotiations.

I did not quite gather from the statement whether the timber agreement which was, I understand, signed is now effective or not?

It had been signed as a contract but it was, I think, on the understanding that it was part of the total deal.

After listening to this statement I should like to ask the President of the Board of Trade whether, in view of the very great importance to this country and to the Soviet Union of such an agreement, and in view of the small difference that seems to exist, another special effort could not be made to get agreement?

We are most anxious that another special effort should be made and we hope will be made by the Soviet Union.

On what grounds did the Soviet Government suggest that there should be this drastic alteration in their favour of the 1941 Agreement?

On the ground that it was an agreement signed during the course of the war and in special circumstances, and that now that peace has been in operation for some years it was time to review it.

Could my right hon. and learned Friend give the House an approximate idea of the actual loss that would have occurred to this country if we had conceded the Soviet demand?

Will my right hon. and learned Friend give the House an assurance that no political considerations whatever were allowed to enter during the whole course of the negotiations?

Assuming the agreement had been successful, what quantity of grain would Russia have supplied to this country and when?

From the 1947 harvest, one million tons, and from subsequent harvests rather larger figures, as to which details have not yet been fixed.

Are we to take it that although a timber contract has been signed, no timber will be exported to this country?