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Wednesday, 1 May 1957

Mr R W HOLT (WANNON, VICTORIA) .- The Government is seeking parliamentary approval for the terms of an agreement entered into in February of this year between the Governments of Australia and the United Kingdom. In the brief time at my disposal, I propose to offer one or two comments about the agreement itself and the premises upon which the agreement is based, and then to indicate some avenues which we on this side of the House believe the Government should explore very fully in its endeavour to increase Australian trade. The points I want to stress first concern the so-called wheat agreement, secondly, the unbalance of our economy which produces .a trade relationship in which we have all our eggs in one basket, and, thirdly, the decline in our exports of manufactured goods over the last four or. five years.

The Wheat agreement is hailed by the Minister as a successful agreement. He pins great hope and faith on the undertaking, so called, by the United Kingdom to accept 28,000,000 bushels of Australian wheat a year. Australia also has the right not to deliver this amount if Australia can make other arrangements. I have no doubt that the United Kingdom insisted that Australia should, if possible, arrange to dispose of its wheat elsewhere, and that only as a last resort would the United Kingdom consider taking the 28,000,000 bushels under the agreement. As my colleague, the honorable member for Lalor (Mr. Pollard) pointed out, there is in fact no agreement. The terms of Article 6 are so hedged about with qualifications that I, as a lawyer, would not like to place any reliance on that written document. At best it is purely and simply an expression of best intention. There is room, I would say, for far greater certainty and reality in that document than the Minister has so far admitted. According to press reports, when the Minister returned to Australia in November last he hailed the so-called wheat guarantee. Insofar as there is in fact no guarantee but only an expression of intentions, I cannot share the Minister's optimism, and we on this side of the House query the whole basis of the alleged favorable conditions in the agreement.

Mr Turnbull - It is the same one as Labour approved.

Mr R W HOLT (WANNON, VICTORIA) - It is not. When the honorable member for Lalor was Minister, all the loose ends were tied up a lot better than they are under this agreement, lt is for that reason that I feel the Minister is, with complete justification, very touchy on this point. Naturally, politically he does not wish it to be thought that he has been overseas and returned empty handed.

Concerning the reduction of preferential margins on British exports to this country, one can say that Article 7 does give the Australian Government valuable room in which to move - room in which to negotiate more favorable trade arrangements with our neighbours in our near East or to further explore trade relationships with the Middle East.

The inability of the Minister successfully to negotiate an agreement with the United Kingdom is understandable. It arises, in my view, from a fundamental fallacy or a basic fault in the whole orientation of our trade policy. Any arrangement entered into between the United Kingdom and Australia is essentially a bi-lateral undertaking. If we extend such undertakings we are doing the very thing for which the Minister himself has, with some justification, criticized other nations. I refer particularly to the Soviet bloc where the two-way treaty between Soviet countries and those which they are attempting to influence, is the whole basis of foreign trade. We desire freer trade amongst the nations of the world than is envisaged and practised by the Soviet bloc. However, this inability to negotiate successfully the type of agreement that we would like spotlights the basic fallacy or fundamental difficulty in our trade relationships. First, the big difficulty, as I have said before in this House, lies in the fact that we have all our eggs in one basket. In other words, our trade with the United Kingdom is completely unbalanced.

I have here figures published in the statistical bulletin of the Commonwealth Bank for February last. In the year 1952-53, we exported £347,400,000 worth of goods to Britain out of total exports amounting to £850,700,000. In the next year, we exported £295,900,000 worth of goods to Britain out of our total exports of £814,400,000. In 1954-55, we exported to Britain goods worth £285,500,000 out of our total exports of £760,300,000, and in 1955-56, we exported to Britain £257,300,000 worth of goods out of a total of £773,300,000. So we find that far too great a proportion of our exports goes to Britain. We are dependent on her too much.

Shipping freights between Britain and Australia operate adversely for Australia, and increased freights will increase our trade deficit by £14,000,000. Therefore, any move which will spread the risk more evenly over countries in the Pacific area, instead of our relying so much on Britain, will be of great benefit to our economy.

The second aspect is that there is toomuch dependence on one type of export, namely, primary products. I shall indicate one or two measures whereby we can avoid depending so much on the export of primary products. We must endeavour to increase our exports of manufactured goods rather than rely entirely on our primary products. We have been blessed in that wool prices have not just maintained their levels, but have advanced since last year. -Continued reliance on one kind of export -commodity is the unfavorable feature that plagues our trade relationships. It plagues our whole national economy. It was so in 1 93 1 , and it is so to-day. By relying exclusively on this mono-culture - on our trade in wool and wheat - we could face the same position as we faced in 1931, if any great economic recession were to follow the -relaxation of international tensions. The two unfavorable features of our economy which I have mentioned will enter into any of our trade negotiations with any other nation. Other nations know what we have to sell, and they know that we have to sell it now. Therefore, we are placed at a disadvantage.

The second matter that I desire to mention in regard to our trade difficulties is our internal cost structure. Honorable members on the Government side of the House continually refer to the inflationary effect of rising wages upon our trade relationships with other countries. It is alleged that, because of the increase of wages, we cannot compete with other countries that have low wage costs. That is true to a very limited extent, but in the United States of America alone where wages, both the base wage and margins for skill, are exactly double those in this country, manufacturers can compete with other countries in the export of manufactured goods. Despite the cheap labour available in the countries of the East and the Middle East they cannot compete with the product of the skilled labour of the Western Powers. In Western countries, even though the monetary value of labour is higher than it is in Eastern countries, the output per man-hour has increased. It is on the output per manhour that the whole of our cost structure falls down - not so much on the cost of labour involved. With wage costs that are double those in this country, America can compete with other countries. We could do the same if we had greater managerial efficiency, more highly skilled staff men and improved machinery with which to increase the output per man-hour. The physical output of the workers has increased by about 24 per cent, since the war, and they have gone about as far as they can in that regard. There has to be improved business know-how. Greater managerial efficiency is needed to enable our exports of secondary products to increase.

As far as the figures for our exports are concerned, I am at a loss to understand the optimism of various Government supporters who claim to have some authority. Announcements have been made in the newspapers from time to time that our exports of manufactured goods has increased. On the contrary, ' from the figures available from the Government Statistician, it appears that the export of manufactured goods has decreased in the last four or five years. The following are the figures relating to the value of exports of manufactured goods, excluding refined oil:-

These figures reveal a steady decline in the proportion which our manufactured goods exported form of our total export trade. As 1 have said, those figures do not take into consideration the export of refined oil, which has been responsible for any increase in our exports. The Statistician does not include refined oil in the list of manufactured goods. In that picture alone we cannot see any prospect of a bright future for the export of manufactured goods unless certain basic steps are taken by this any future government.

I refer, first, to what is being done in Great Britain. There, the Capital Issues Commission has been granting favorable credit facilities to certain selected basic industries. Greater activity along this line will have to be undertaken by this Government and any future government in regard to the limited capital that is available in this country. Secondly, I think the Government should give increased aid in the export of manufactured goods. Provided adequate precautions are taken in selecting the industries to receive aid, this would ensure that quality goods are produced and that guarantees are carried out. The Government should be able to give greater credit facilities than it has proposed to give under the export credit legislation which was passed through the Parliament last year.

These remarks do not apply only to the export of manufactured goods. We should also encourage the export of services. The Export and. Import Bank of America, from lime to time, has financed the export of American technical know-how in the form of railway projects, irrigation projects and aerial services which have been introduced in Afghanistan. Then there is the ill-fated hydro-electric scheme in Afghanistan, which is now getting under way. The Export and Import Bank of America has supported American private enterprise in going into countries of the Middle East with some government support. This means that the Americans are able to offer more favorable credit terms, including longer credits, so that the recipient nations have fifteen years or twenty years in which to pay America for the services that they receive. I believe that until the export credit system in this country is expanded so as to include the export of services, we shall be debarred from carrying out irrigation works in India and Pakistan, and we shall be debarred also from undertaking schemes, involving the provision of agricultural machinery and the like, such as that which the Indonesian Government wanted to commence six months or eight months ago. It is true that we have sent trade delegations to Japan, India and Ceylon to explore matters of this kind, but unless we have the goods to sell and the means to ensure that the producers of these goods and services in this country can dispose of them with benefit both to themselves and their markets, it is not a bit of good sending missions overseas, because they will have nothing to sell.

Thirdly, the type of tariff protection that we need is one that will provide the fullest protection in the early stages, with a gradual reduction of the tariff to ensure that those commodities which we are most capable of producing are produced efficiently and economically, whilst the commodities which we cannot produce efficiently and economically - that is, the commodities produced by the uneconomic industries - gradually are weeded out. We should concentrate our man-power and our financial resources on those things that we are best able to produce, having regard to the needs of a balanced economy. I do not quibble with the desire eventually to have a freer movement of trade throughout the whole world, but this can only be brought about by a scientific system of tariffs such as I have mentioned.

Lastly, I think that we should take steps to ensure that we meet the representatives of the interested parties and governments in what is to us the near East. We should bring them here - if necessary, pay the cost of their coming here - and discuss with them their needs and the terms upon which we could meet those needs. It would be necessary, having regard to the uncertainties of a number of these markets, for the Australian Government to give adequate assistance to the producers of the goods and services that would be exported to those countries.

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