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Commonwealth Economic Conference

Volume 523: debated on Tuesday 2 February 1954

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The following Questions stood upon the Order Paper:

73.

To ask the Chancellor of the Exchequer if he will make a statement giving the details of the plan agreed to at the recent Commonwealth Conference to combat the effects of any recession in the United States of America in 1954.

74.

To ask the Chancellor of the Exchequer whether he will make a statement on the recent Common wealth Conference in Sydney.

80.

:To ask the Chancellor of the Exchequer if he will make a statement on the discussions which took place and the results which were achieved at the Commonwealth Conference in Sydney.

At the end of Questions

Mr. Speaker, I will with permission answer Questions Nos. 73, 74 and 80 together.

It is clear that neither a short statement, which is all I can make to the House today, nor an official communiqué issued on behalf of the Governments concerned, can, of their nature, reveal the full value of the Sydney meeting at which the Commonwealth discussed freely and frankly the problems facing them.

We met a year after we had set out together on a new course of policy. The success of such a meeting should be judged rather by the maintenance of agreement and the effective sharing of experience than by the test of whether new and startling decisions were reached. The first notable feature of our discussion was that all the Ministers involved, including the Canadian Finance Minister, whose country is outside the sterling area, registered absolute identity of view and purpose on the line to be followed by the sterling area countries in our external financial and economic policy.

We confirmed the wisdom of our decision taken a year ago to work towards a freer system of trade and payments between the dollar and non-dollar world. Indeed, I know of no other approach which would keep the policies of the old and new Commonwealth countries and of Canada in step. The statement of the President of the U.S.A. to Congress and the Report of the Randall Commission since published, give us considerable encouragement. But the results we hope for, including the eventual convertibility of sterling,will be achieved only if all those concerned contribute. Apart from what we ourselves must do, we look for good creditor policies by the United States. Over the last year or so they have been paying out gold to the rest of the world. This has been largely due to heavy military expenditure. We want to see some more permanent pattern emerging. We shall also look to international institutions to play a more active and intimate part in enabling the problems of trade and finance to be tackled together.

We welcomed the prospect of LM.F. credits being more readily available whether to help the world to ride out the effects of an adjustment in the American economy or to augment the reserves as a step towards freeing trade and payments. Our series of conferences have established facilities for close consultation and we shall use these in order to compare notes before a review of the G.A.T.T. which is at present to take place in October of this year.

Our second major decision was to concentrate on the immediate necessity of increasing our own strength and sense of self-reliance as the most powerful unit of our type in the world. We were not ready to sit back and await what success might attend our long-term policies.

We reaffirmed in the light of experience, sinceour last meeting, our determination so to conduct our internal policies that we hold inflation in check and concentrate our energies and inventiveness on increasing our overseas earnings. This not only strengthens our own economy but is our contribution to the advance to freer trade and payments. Second, we repeated our intention to ease, as opportunity allows, restrictions on intra-sterling area trade. Third, we considered how best to provide the means of developing the huge latent resources of the Commonwealth and Colonial Territories. Thus we propose to maintain the health of the Commonwealth's balance of payments.

Hon. Members will no doubt wish me to sum up the effect of these decisions on the economy of the United Kingdom. I am convinced that whether world trade goes up or down, whether we have to face a recession in trade or not, the development of overseas resources helps United Kingdom exports. I made it clear to my colleagues at the Conference that we shall regard investment in producing and manufacturing enterprises in the United Kingdom as a high priority just as they realise that capital available for development must be spread over a large area and that the projects must be remunerative.

We can take pride in the fact that, in the last year, United Kingdom visible and invisible exports accounted for 60 per cent. of the gross earnings of the sterling area. Hon. Members may also have seen that the United Kingdom Government authorised in 1953 loans and grants totalling some £120 million for investment in the sterling Commonwealth. I am satisfied that we can, in the coming year, continue to give the Commonwealth and Empire the lead it so much needs provided that we proceed with the task of making our own economy stronger, more flexible and expansive. In conclusion, I look forward, Mr. Speaker, to a proper opportunity of expanding these themes and of imparting to the House some of the sense of strength and unity of the meeting which we have just held as the guests of the Australian Governmentand under the wise chairmanship of the Australian Prime Minister.

:May I be permitted to congratulate the Chancellor of the Exchequer on the honour which Her Majesty recently conferred upon him? [Hon. Members: "Hear, hear."] As regards his statement, is he aware that it falls in no way behind the standard set by the communiqué" issued in Sydney as regards clichés and platitudes?

May I also ask him whether, in view of his claim that there was absolute identity of view and purpose, the question of surplus Australian wheat was discussed at the Conference, and if so, what decisions were taken about it; and particularly whether the United Kingdom proposes to purchase more Australian and less dollar wheat? May I ask him whether the question of G.A.T.T. was discussed, and whether there is also identity of view in the Commonwealth on that subject?

On development, would the Chancellor agree that, if we are to play our part in developing the Commonwealth it must involve a very substantial export surplus? Would he be prepared to say what understandings were arrived at in Sydney which affect the size of that surplus? Finally, in view of the last few words of his statement, may we take it that the Chancellor has already arranged with the Leader of the House for an early debate on this important subject?

:I feel honoured that my language compares with that produced by the joint genius of the Commonwealth leaders. In regard to wheat, technically the position was not on the agenda, but, of course, it came up for discussion, not only at the conference, but also among the Ministers concerned, because of its obvious importance. All I can say is that wheat has now been restored to purchase by private hands in this country, and I sincerely hope that we shall continue to take a portion of Australian wheat, both hard and soft wheat. In regard to G.A.T.T., there was, as far as I know absolute identity of view about the need to consult together before revision of G.A.T.T. takes place next October, and there was absolute identity of view on the subject of the general policy to adopt towards the freeing of trade and payments.

On development no actual figure of the surplus was named in these discussions. Of course, on the future outlook for the balance of payments either for the sterling area or for the country here, figures cannot be given with absolute certainty, but we obviously decided that it was necessary to increase the earnings both of the sterling area and of ourselves at home in order that an adequate surplus may be available for overseas investments.

In regard to a debate, if there is to be a debate I personally should be only too glad if that could be arranged through the usual channels.

:Is my right hon. Friend aware that there is considerable uneasiness as to whether the determinations at Sydney will not lead to a lessening of trade within the Empire countries themselves, and can he satisfy us that, to set that off we may expect greater general trade between this island and the rest of the world?

:I am glad that my hon. Friend has made that point, because I think it is quite untrue that there was any intention at Sydney to lessen trade in the sterling area. In fact, looking at the position of what is called a down-turn in trade, or the possibility of a recession, it should clearly be the objective of the sterling area to maintain its own trade, its trade with Europe and non-dollar trade at its present level, and that was our view. I am sorry that any alternative impression, which I think is quite unjustified, should get about. I go further and say that I think that developments as they occur will indicate that the Commonwealth countries intend to increase their trade as far as they possibly can.

Now that the import of wheat has reverted entirely to private hands, if the private traders prefer to import their wheat from North America rather than from Australia, may I ask the Chancellor what steps will be taken by Her Majesty's Government to obtain wheat from where we ought to get it?

I said in my original answer that I think it is certain that, having regard to our need for varieties of both hard and soft wheat, the levels of purchases from Australia are bound to continue either at their present level or at a better level, and, if events occur which are undesirable from the point of view of the economy either of the United Kingdom or the sterling area, the right hon. Gentleman can rely, not only upon the wisdom, but also upon the actions of Her Majesty's Government to intervene.

Why was it that the Chancellor considered it necessary to introduce the phrase "If we are to have a recession"? Whether we have a recession or not, surely that remark must cause anxiety in the minds of a good number of people in Britain, and can he give us any assurance that he is not hinting that we are already on the verge of a recession in this country?

I think much the best indication is in a sentence contained in the much-maligned communiqué—which, incidentally—is criticised in the way that documents of this kind are always criticised. It contains a most important phrase in regard to this question. After reviewing the scene, both in regard to world trade as a whole and in America, and with the experience of the Finance Ministers present—one of whom, Mr. Havenga, has introduced 22 budgets, while the Canadian Finance Minister has introduced six or seven—we came to the conclusion that we could look ahead with confidence on the world scene in the coming year, provided that we did not relax but made greater efforts towards more trade. I hope that will have been noticed by the public, because I think that was a very important statement.

While realising the necessity for avoiding any kind of alarm and despondency, are we to take it that the Treasury now wish us to refer, not to an American recession, but to an American adjustment?

:If so, the hon. Gentleman would be in very good company, because it was the word which was used by the President of the United States.

:Can the Chancellor say whether, again on this occasion, Her Majesty's Government brought forward a proposal for increasing Imperial Preference?

:The question of preference was, of course, referred to, and it was always in the mind of many people among those present, including myself, that it was important that the right conclusion should be reached. While members of the Commonwealth were ready to maintain the existing preferences, they saw great difficulties in extending the area of preference more than it is at present. That was the view which I discussed with each one of the Ministers and which was also discussed by them together.

:In view of the importance which the Chancellor attaches to trade in the sterling area, can he say whether any definite agreement was reached to remove here and now some of the restrictions on that trade?

:It is impossible to interfere with the sovereignty of individual Governments, so that I cannot answer for them, but the importance of relieving the restrictions on trade was not only stressed but was realised by the Ministers concerned, and I do not doubt that when circumstances arise, and particularly if the individual balance of payments positions permit, there will be an easement in this direction.

Would the Chancellor agree that the case of wheat shows how difficult it will be to get the proper development of Commonwealth resources if these things are left to private traders? In view of the way in which the Commonwealth countries made available to us after the war food supplies at prices below those of world markets, does he not think that there is an obligation resting upon us to make absolutely certain that no purchases are made in the American dollar market while there is a surplus in Australia?

:The answer to the first part of that supplementary question is that, had we not restored flexibility and freedom to our economy, we would not have been in the position to give the lead from strength which we gave at Sydney to the whole Commonwealth.

On the second point, any responsible person, including every Member of this House, must have noticed with the greatest interest the contracts we made with the Commonwealth, and the food we receive from them. At the present time and in the future, the future of those long-term contracts will be under discussion between our respective Governments so as to give the right sort of assurance to all concerned and, I hope, to get the food we want so much.

:Having regard to the almost inevitable effect of the Japanese agreement, announced by the Minister of State, Board of Trade, yesterday, in reducing the amount of the textile trade within the Commonwealth, can the Chancellor of the Exchequer say whether the Conference at Sydney discussed this matter and had any views to express about it?

The actual details of the Japanese agreement were not discussed at Sydney, but the question of Japanese competition and the future of Japan and Germany were discussed at great length. In regard to the level of trade with Japan, the hon. Gentleman must remember that while there are obvious anxieties in certain parts of the world about the agreement, British trade and exports as a whole will benefit greatly from the agreement, particularly in oil, shipping and other matters. From that angle the agreement is of value, although we must not underestimate the anxieties of the hon. Gentleman or his friends.

On a point of order. Among the Questions which have been answered by the Chancellor of the Exchequer was one by myself. Quite a number of supplementary questions have been asked by other hon. Members, and I should like to have a chance of asking a supplementary question.

I glanced once or twice at the hon. Gentleman, and he did not rise to begin with.

:Does the right hon. Gentleman realise that the workers of this country are deeply disturbed at the developments in America? Does he not think that he ought to give much greater detail of the specific proposals he has come to, so as to safeguard the interests of the workers, should the recession in America develop further? What discussion took place at Sydney on the extension of East-West trade, despite our ideologies and the clash thereon? Does not the Chancellor realise that the workers throughout the country are deeply anxious that this trade should be expanded, to safeguard their future security?

We agreed at Sydney that the restrictions on trade with China were stricter than upon trade with the Soviet bloc. We saw the advantages of expanding East-West trade and decided to take advantage of them wherever possible. The House must remember that this must be done in company with the other nations of the Paris group and by international agreement. In regard to the anxiety of the workers of the country, the workers should feel confidence that the future outlook both in America and for world trade has now been so carefully analysed by the Finance Ministers of the sterling area and by Ministers of Her Majesty's Government that we may be better able, if things do go badly, to take the right action this time than we have ever been able to do before.