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Wednesday, 29 April 1936

Senator ARKINS - Freetraders and protectionists are usually governed by geographical considerations.

Senator DUNCAN-HUGHES - The views of representatives of different States certainly vary according to whether the States which they represent are or are not engaged in manufacturing. I shall have something to say on that point before I conclude. I want to make it clear that I do not speak as an absolute freetrader. I may inform the honorable senator that I was a follower of the late Joseph Chamberlain 30 years ago. The honorable senator in those days was interested in farming pursuits, and probably was not a protectionist at all. So my support of protection extends at least as far back as his, but I stopped at a certain point. Senator Arkins mentioned the geographical factor in the tariff issue. On the 21st August, 1935, an article appeared in the Adelaide News containing figures supplied by the president of the South Australian Chamber of Manufactures which had become alarmed owing to the drift of manufacturing industries from the less populous to the larger States. I can quite understand that alarm. The president of the chamber, Mr. J.A. Binder, made the following, statement on behalf of the committee, and covering its investigations up to date: -

The increase in population for the Commonwealth as a whole between 1921 and 1933 was 21.97 per cent., whereas the gain in South Australia was only 17.33 per cent.

The State's actual loss over seven years had been more than 17,000.

During the past six years the average annual increase in the number of persons employed in primary industries in South Australia was 370.

We cannot, therefore, look to the primary industries to absorb the 5,000 boys who leave school each year, or to provide work for the unemployed.

He went on to say that there is not likely to be any great increase of the market for Australian primary products in Europe. I believe that he is right. It is shown by Mr. Rinder that in South Australia, which is essentially a primary producing State, only 376 men per annum are going into primary industries, . and that the balance, if employed at 'all, are going into secondary industries. He stated that this is due to the fall of the price of wheat and the difficulty of obtaining land suitable for primary production. He did not, however, say that this is due also to the fact that the secondary industries are more profitable than the primary industries and that they can afford to pay their employees better wages. While the primary producers could employ only an additional 376 annually over the last six years the secondary industries were able to take a much larger number. I am not saying anything against that, but am criticizing the fiscal system which makes that possible. The secondary industries desire to employ as many men as they can, and they are in a position to do so.

Senator Leckie - .What does the honorable senator suggest should be done with those men if they could not find employment in the secondary industries?

Senator DUNCAN-HUGHES - They would go to work in the country. I know that many farmers would be only too pleased to employ an extra man or two if they could only afford to pay the wages. They cannot do so, because they are not operating in a protected market. They have to sell their wool and their wheat in the world's markets.

Senator Brown - How can -we overcome that? Does the honorable senator suggest that the manufacturer should be dragged down to the level of the farmers ?

Senator DUNCAN-HUGHES - That is not the proper way to put it. If the honorable senator speaks about dragging the manufacturers down, he should first say that they have been dragged up. By dragging them up too high, the honorable senator and persons sharing his beliefs have caused an unfavorable reaction against the class that supplies the real sinews of war. Due to the fact that it is heavily sheltered, the manufacturing section is able to make profits and give employment which the primary section - in my opinion, the more important section - is unable to do.

Look now at the converse side - the debit side. Increasing numbers of persons are finding employment in factories; but I submit that there are certain drawbacks which must be considered in this connexion. It is doubtful whether anybody, either primary producers or manufacturers, is satisfied. Manufacturers do not spend their time admiring one another; they enter into intensive competition amongst themselves. A great deal of jealously and distrust on the part of the smaller States is also created. I draw attention to two reports on the effects of protection which were published by South Australia for 1932-33, and hy Western Australia for 1934. The results of the investigations of the committees which compiled these reports are set out on page 7 of the latter report, which states, inter alia -

It may be well to summarize the conclusions reached by each of the three bodies hereto mentioned as to the per capita burden of protection on Western Australia. . . . That calculated by the South Australian committee for the year 1932-33 is £2.97. The Western Australian committee, as the result of the present inquiry covering the vear 1933-34, estimates the burden at £2.70.

That indicates that even the governments of the States are becoming vitally interested, and are having these matters expertly investigated. Restlessness is not confined even to the smaller States; persons resident in some of the larger States foresee the dangers which lie ahead. I was impressed by the fact that the United Australia party conference, held in Sydney about a week ago, passed the following motion: -

That the Australian tariff be adjusted to encourage international trade and to prevent reprisals from other countries.

When such a sentiment is expressed in Sydney, honorable senators may be sure that some persons there also can see the writing on the wall. Certain notable instances of this development have occurred in recent months. One of them arose out of the intimation of the Tariff Board that it cannot take into account uneconomic production. If a business man is capable of producing with the maximum of economy, facility and efficiency in Melbourne, the board will not give any special consideration through the tariff to another individual who wishes to engage in the same business in Brisbane, Hobart, or Adelaide. That policy seems inevitable under the high tariff system; but the result will be that factories must flow more and more, as they have been flowing in the past, from the capital cities of the smaller States to Melbourne and Sydney. It is perfectly obvious that if a business man is producing at a distant centre, far away from the main market, and is not to be granted any allowance in respect of his geographical disadvantage, he must in time be driven to the big centres of industry. If the manufacturers discover that they are obliged to sell in other States 93 per cent, of the motor bodies made in South Australia, they will sooner or later move to Melbourne or Sydney, where the demand is greatest. Nothing can arrest that tendency. The more competitive an industry becomes, the more inevitable is this change.

Senator Hardy - For that- reason, some of us advocate the formation of new States.

Senator DUNCAN-HUGHES - I am gratified that the honorable senator should be among that number; I have never heard him make a speech on that subject, but I am quite prepared to listen with great interest - although I do not promise that I shall support him - to any contentions which he may advance for the formation of new States. Ten years ago in the House of Representatives several honorable members used to deliver speeches on this subject ; but to my knowledge, no motion in this connexion has ever been moved in the Senate.

Senator Hardy - I submitted a motion, and the other speakers jumped on me.

Senator DUNCAN-HUGHES - I cannot recall having heard the honorable senator make that speech. The smaller States, I am sure, do not grudge,, and most of them have no objection, per se, to the production of a number of different commodities; but, when they realize that the inevitable result of the present policy must be that the wealth, men and factories will be congregated in the big capital cities, they, without any hostility to those cities, oppose that tendency.

Senator J B Hayes - How would the formation of new States prevent that?

Senator DUNCAN-HUGHES - I must allow Senator Hardy to explain that aspect. I note, also, a further development - the manufacturers themselves are beginning to become alarmed at the prospect. This afternoon, Senator Leckie mentioned that he favoured the distribution of factories over the various States. The manufacturers realize perfectly that, if other parts of Australia, apart from Sydney and Melbourne, are to be denuded of factories, political hostility to high tariffs will become more pronounced. For this reason they would prefer to see factories well distributed throughout the Commonwealth. Considerable discussion has, consequently, arisen regarding the advisability of establishing branch factories in the smaller States. Speaking in general terms, I consider that nobody in the smaller States will object to that; in fact, they will welcome the establishment of more factories within their boundaries, but for my part, I do not desire that a glass factory, for instance, should be founded in South Australia at the cost of the barley-growers of that State, whose services are of far more importance than are those of an artificial industry which may close down at any time.

Senator Leckie - Is not a branch of the glass industry being established in South Australia because the raw materials are located there?

Senator DUNCAN-HUGHES - Yes; but the barley-growers have been estab lished for years. Must their output be sacrificed in order that the glass industry may prosper? I prefer that the barley-growers should be permitted to carry on rather than that an artificial industry should be founded at their cost.

I notice also an increased hostility to the granting of bounties. ' Apparently Senator Leckie ignores the fact that the tariff schedule now under consideration contains protection for nearly every form of manufacture that can be devised ; yet on two occasions I have heard him state that he regards with great misgiving the increase of the number of bounties - the granting of, say, £9,000 to orangegrowers or £10,000 to some other form of primary production. I point out that the primary industries concerned in these bounties total, perhaps, 20 or 30; the manufacturing industries concerned in this schedule must number, if not thousands, at any rate, hundreds. Is. that consistent? The average primary producer, as I know and understand him, does not start out with the desire to obtainany assistance from any government; but he sees that his costs of living and production have been forced so high that he is bound, in self-protection, to ask for aid. The Government grants it in the form of a bounty, which is much easier to check than is protection given to an industry by the tariff. The Constitution provides for the granting of bounties, which I regard as a far more sound and scientific method of assisting an industry, whether primary or secondary, than is the tariff.

Senator Dein - Some primary industries receive both forms of assistance'.

Senator DUNCAN-HUGHES - I am aware that two different bounties were paid on cotton, which also enjoys tariff protection. The bounties and the tariff protection were passed in the one session.

Senator Arkins - Is any country in the world pursuing a policy of freetrade?

Senator DUNCAN-HUGHES - I do not think that that interjection answers my contention. Whether Ecuador or Czechoslovakia are freetrade or protectionist is not relevant to the argument; Australia has to meet its own problems and decide whether the imposition of high tariffs, not only now, but also in the future, will be beneficial to the Commonwealth as a whole.

Senator Dein - Does the honorable senator refer to protection in respect of both primary and secondary industries, or only in respect of secondary industries ?

Senator DUNCAN-HUGHES - I refer in this instance to both primary and secondary industries. The bounties payable to the primary industries have been rendered increasingly necessary by the high protection extended to secondary industries.

Senator Dein - Is the honorable senator aware that no country practises freetrade at present?

Senator DUNCAN-HUGHES - Great Britain prospered under a policy of freetrade, with certain exceptions, for a large number of years.

I propose now to consider what will be tlie effect on Great Britain of the adoption by Australia of a high tariff policy. The last annual report of the Tariff Board sets out in detail the preferences granted to Great Britain. I emphasize that statements which appear in the British newspapers and pronouncements by bodies such as the British Chamber of Commerce must be taken into account by honorable senators whether they like them or not; and the following report is significant : -

Tlie Association of British Chambers of Commerce has adopted the report of a special committee that was appointed to consider the Ottawa agreements. The report urges the Government to reserve the right in any revision to impose duties and quotas on dominion products if this is found to be necessary for safeguarding British industries. " There is considerable dissatisfaction in many industries " the report adds, " with the way in which the articles of the Ottawa agreement have been carried out, and also with the methods of tariff boards, which are often complicated and too slow". Some of the Tariff Board's decisions have caused considerable anxiety, notably the Australian Tariff Board's interpretation of article 10, -which does not conform to the interpretation generally placed on it in Great Britain. Moreover, the level of tariffs in some cases lias been insufficiently reduced to compensate for Australian currency depreciation. In view of these differences the British and Australian Governments should reach a new agreement, recorded in clearer language.

It will be within the memory of honorable senators that when the Ottawa agreement was made, Mr. Lyons, on behalf of the Commonwealth Government, informed. British Ministers that it would be impossible for the Australian Government to enter into any detailed agreement with Britain, because he had given an undertaking that all matters relating to tariff duties would first be submitted to the Tariff Board. The British Government replied, in effect, "Very well, we shall not expect you to make any detailed agreement. We shall give you certain specified benefits and ask you, in return, to observe the general conditions contained in articles 9 and 10 of the Ottawa agreement. We shall rely upon your carrying out the spirit of the agreement; we shall observe it in the letter." That, in brief outline, was the arrangement made with Great Britain at that time. The question for our consideration now is : Have the terms of that agreement been fully observed? On this point I have just read a statement of the views of the British Chamber of Commerce. That body says that we have not observed the spirit of the agreement. I said three years ago in this chamber that unless we honoured that agreement in such a way that there could be no dispute about it, when we came to make a new agreement with Great Britain we should find that the British Government would not be satisfied with anything less than a detailed arrangement.

Senator Herbert Hays - The benefits? of the Ottawa agreement were mutual.

Senator DUNCAN-HUGHES - Of course, the benefits from the Ottawa agreement were expected to be mutual; but, as I have explained, the benefits given by Great Britain were specified, whereas in the case of Australia, they were in general terms with which we are expected to comply. The Minister for Trade and Customs (Mr. White) in the House of Representatives emphasized recently the effect of the tariff reductions, and pointed out that they related mainly to non-competitive items. His statement really requires to be contrasted with the language of article 10 of the Ottawa agreement, which provides that the Australian Government shall give to British manufacturers a reasonable opportunity to compete in the Australian market. If, as the Minister for Trade and Customs has declared nearly all tariff remissions made relate to non-competitive items, what becomes of our undertaking to give British competitors a reasonable chance of selling their products in the Australian market? The Minister went so far as to give actual figures relating to the reduced duties, and showed that from the 5th December, 1933, to the 30th June, 1934, the proportion of competitive to noncompetitive imports was 6 to 40.1, or 13 per cent., much the same percentage as for the last six months of last year. That does not indicate that we have given British manufacturers a reasonable opportunity to compete in our market. I mention this fact to show that before the present schedule was brought down the British Government had some ground for complaint.

Senator JamesMcLachlan this afternoon referred to primage. I discussed this subject when dealing with the budget last year, and I recall that Senator Hardy and I crossed swords over it. I followed my speech with a question. If Senator Hardy will read the answer he will find that we have not carried out our undertaking, as regards the reduction of primage to anything like the extent that was expected of us.

Senator Hardy - Does not the honorable senator think that primage is linked with the protective incidence of exchange in respect of which we have made concessions in the tariff schedule?

Senator DUNCAN-HUGHES - I agree with the honorable senator. I do not wish to be unfair. That is one thing which we have done. We have made an adjustment on account of exchange, although we were not compelled to do so under the Ottawa agreement. I had made a note of the matter, and had intended to refer to it before resuming my seat if the honorable gentleman had not mentioned it by way of interjection.

Senator Dein - If we have not observed our obligations under the Ottawa agreement, how does the honorable senator account for the tremendous increase of imports from Great Britain?

Senator DUNCAN-HUGHES - A senior official of the Customs Department would be able to furnish a more satisfactory answer than I can, but I remind the honorable senator that a considerable volume of the increased importations represents machinery for the expansion of our secondary industries. Attention was directed to this fact by the Minister for Trade and Customs in the House of Representatives. We must remember also that after the lifting of the depression many people in this country suddenly found themselves in a better position than they had been for some years. I suppose that some of the extra goods imported are intended for the improvement of their homes. There has also been an increase of importations of galvanized iron, due to the fact that the Australian industry was not in a position to supply the whole of the requirements of the local market. Without pretending to be an authority on this subject, I would not be very much perturbed by the rather heavy expenditure overseas this year. The large number of Australians who attended the late King's jubilee last year would take out of this country a considerable sum of money. That would affect our trade balance, but I believe there is no reason to be unduly worried about the present state of our London funds.

As honorable senators are aware, I have given somewhat close attention to the effect of primage on British imports. In 1933-34, the total amount raised by this form of taxation was nearly £1,650,000, and in 1934-35 it wa3 still over £1,550,000. The reduction made in the budget for this year amounts to only £45,000. I am not sure if Senator Johnston mentioned this subject, but Senator J James McLachlan did, and, as I indicated about a year ago, I must support the view that as we ' undertook to remove the primage duty as soon as our finances permitted we are not carrying out our agreement. I feel sure that the majority of honorable senators will agree with me on this point.

Senator Leckieexpressed a doubt that Great Britain was really doing very much for Australia under the Ottawa agreement by providing markets for our products. I should like to place on record what has been said elsewhere on this subject. This is what Great Britain does for Australia: It takes 90 per cent, of our export wines, 83^ per cent, of our currants, 64 per cent, of our sultanas, 93 per cent, of our butter and cheese, 99 per cent, of our eggs, 98.7 per cent, of our lambs, 95.8 per cent, of our mutton, 94.7 per cent of our pears, 83.5 per cent, of our' apples,83.7 per cent. of our sugar, 96. 5 per cent. of our canned pears. Averaging the whole of our exportable primary products of these kinds, Great Britain takes 89 per cent. of all we send overseas. If that is not a substantial market, I do not know what is, and since we are losing our markets elsewhere 1 suggest that we should do our utmost to retain the British custom.

Senator Hardy - We should not do anything to weaken our preferences in that market.

Senator DUNCAN-HUGHES - I agree with the honorable senator. But unless we carry out, genuinely and fairly, the general provisions of the Ottawa agreement, can we reasonably expect to have similar treatment from Great Britain in the future? I never make a speech on the tariff without remembering that the protection given to us by the British Navy is the one thing that enables us to compete at all.

Senator Brown - Hear, hear !

Senator DUNCAN-HUGHES - I assure the honorable senator that this is not a subject for laughter; and I am sure he would not treat it with levity if he had passed through the Mediterranean inwar time, as I did, and noted that every port on the route was controlled silently and effectively by the British Navy.

I turn now to the foreign position. Sir Henry Gullett recently returned from an extended visit to European countries for the purpose of negotiating trade treaties. Upon his arrival at Fremantle he was, interviewed by a representative of the Melbourne Argus, and this is what he said-

Australia, in a trading sense, is extremely unpopular with all continental governments and industrialists.

One is not surprised that Australia is unpopular with industrialists in other countries, but that it is unpopular with European governments is a far more serious matter.

Any step that foreign wool-buyers can take individually or collectively to avoid the Australian market, to promote scientific research for substitutes, or to bear down wool prices, will continue to be taken in the absence of trade treaties.

He went on to say that he had conducted negotiations with France, Belgium, Germany, Czechoslovakia, Poland and Switzerland, and added -

Treaties could be made with most of the countries mentioned, but the question to be decided by the Cabinet was whether the benefits likely to be received by Australia represented a fair exchange for the concessions Australia would be called upon to give.

The fact that this is a time of almost unparalleled difficulty in international affairs, and that Britain buys over 90 per cent. of our total exportable surplus of primary products covering a wide range, should be taken into account. We are faced with the problem of our trade balance with various countries. Australia's exports to Belgium for 1935 were valued at £5,689,965, whereas Australia imported from that country goods to the value of only £500,485. Can we expect the people of Belgium to be pleased with that state of affairs ? Australia had a favorable balance of trade with France in 1935, its exports to that country being valued at £6,186,419, whilst its imports were valued at only £758,605. France is not likely to be content with that position. Australia also had a favorable balance of trade with Japan amounting to £7,475,115, and with New Zealand amounting to £1,628,431. Senator Collings and Senator J. V. MacDonald, who have been in New Zealand, will be glad to know that Australia has a favorable trade balance with that dominion. I should be better pleased if the figures were closer. Like Australia, other countries are endeavouring to improve their financial position by entering into trade arrangements with the object of equalizing the balance of trade. With some countries Australia has an adverse balance of trade. For instance, its adverse trade balance with Canada is £3,557,169, with the Netherlands East Indies it is £3,624,325, with the United States of America, £7,748,305, and with Germany, £742,164. Some years ago, when this subject was being discussed in the Senate, we were told that it is not possible to have our trade with other countries absolutely balanced. No one really believes that that can be done, but the aim is to keep the figures as near to balance as possible. Senator Hardy dislikes bi-lateral agreements and advocates multi-lateral treaties. If it is impossible to enter into an agreement with one country, what chance is there of making an agreement with three countries? If we are not satisfied with our trade with the

United States of America, we can understand that France, Belgium, and other countries may not be satisfied with our trade with them. They insist on a certain correspondence between import and export figures - not an exact £1 for £1 arrangement. What has been the outcome of the efforts of the Minister directing negotiations for trade treaties (Sir Henry Gullett) ? The Minister returned to Australia some months ago, but, so far, I have not seen any full statement by him as to the result of his efforts. We have before us a schedule which contains the old three-deck tariff. There is to be an intermediate level for use when bargaining with other countries. With what countries are we bargaining and entering into agreements? It seems years since I first attended a deputation in regard to the export of barley to Belgium, but the most that has resulted is an agreement for a few months. The whole country is asking what agreements and trade treaties are being arranged with those countries which seem inclined to refuse to accept our products.

Senator Herbert Hays - Every country is endeavouring to supply its own requirements.

Senator DUNCAN-HUGHES - There is truth in that interjection. We must not be astonished if nations from which we will not buy prefer to trade with other countries. While we delay, markets are slipping from us. I am aware that, during recent years, Germany has bought a good deal of our wool, not directly but indirectly. But if we examine the position carefully we shall find that markets in those countries which have been the chief purchasers of our products are slipping from us. If that state of affairs continues, there will be increasing distress among our primary producers, because every customer we lose reduces competition, and in turn leads to reduced prices. There will be a further drift to the cities, and we shall have to rely on our secondary industries being able to sell their products overseas in sufficiently large quantities to pay our way. Although in some respects our export figures for secondary products show a slight improvement, for a long time we cannot expect that our high costs of production and heavy freight charges will fall sufficiently to enable us to sell large quantities of oursecondary products overseas. However good the quality, the high cost of production will prevent our competing successfully in the world's markets. (Extension of time granted.)

We must not ignore the fact that high tariffs cause hostility and antagonism, and are likely to lead to war. During this debate it has been suggested that the present world position is due largely to the desire of each nation to be self-sufficient.

Senator Herbert Hays - That desire is very pronounced in Great Britain.

Senator DUNCAN-HUGHES - The very fact that Australia is a large and wealthy country with a relatively small population makes it more an object of hostility and antagonism than if it were a small and poor country, or had a large population. It may be said that I have overstated my case; 1 have tried not to do that. Sir William Beveridge, director of the London School of Economics and Political Science, in a lecture which he delivered in 1931, said -

Looked at internationally, as a way of escape from a world crisis, can anything be more patently insane than tariffs?

Every honorable senator will admit that the present is a time of crisis. I make a present of that quotation to any honorable senator who thinks that he is capable of refuting it. Sir William Beveridge may be wrong, but I remind the Senate that he is a world-famous economist.

Senator Collings - The United Kingdom did not take his advice.

Senator DUNCAN-HUGHES - Shakespeare lived long before the present age of economics, but looking through The Merchant of Venice recently,I found the following: -

The Duke cannot deny the course of law. For the commodity that strangers have With us in Venice; if it be denied, Twill much impeach the justice of the state : Since that the trade and profit of the city Consisteth of all nations.

At one time Venice was the centre of trade for the whole of the Mediterranean. I believe that passage to be just as true now as when it was penned.

SenatorMcLEAY (South Australia) [9.42]. - Having listened with a great deal of interest to this debate, I congratulate the Government on its position. The discussion has revealed great diversity of opinion among honorable senators, for Senator Leckie believes that existing tariffs are too low, whereas Senator Johnston is of opinion that they are too high. If we put our trust in the Tariff Board, which has gone into these questions thoroughly, and has expert knowledge--

Senator Collings - 'Shelve our respon sibility !

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