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Wednesday, 13 May 1936

Senator DEIN (New South Wales) . - I do not propose to cast a silent vote upon this much-discussed matter of cement duties. Unfortunately, in addition to the merits and demerits of the case itself, the matter of whether or not the duties, as proposed in the schedule, constitute a transgression of the Ottawa agreement has been raised, in my opinion quite wrongly. The position is, briefly, that the agreement having been drawn up and agreed to by this Parliament, the Tariff Board held an inquiry into the then prevailing duty on cement, viz., £1 a ton. The board, in its wisdom, decided that that duty was too high, and recommended that it be decreased. Members of the House of Representatives, while agreeing with the board as to the necessity for some reduction, were not prepared to accept the board's finding in its entirety. The British Government protested against a partial reduction of the duty amounting to 6d. per cwt., as it was quite privileged to do. This Government agreed with its view; hence the request which has been proposed in this chamber is in conformity with the views expressed by the British Government. I find myself in the position that, if I accept the Government's contention that, as a supporter of the Ottawa agreement, I am in duty bound to support it in this matter, it will mean that every time the Tariff Board recommends an increase or reduction of duty, I shall be similarly bound. I am not prepared to so bind myself. When a member of the House of Representatives, I supported the adoption of the agreement, because I understood that in matters of this kind I should have a free hand. I do not deny that the Commonwealth has received great advantages under the Ottawa agreement, and I believe that wo should support it because its repudiation would bring disaster to a large number of our primary producers.

As I believe that the agreement does not enter into this discission, I feel at liberty to vote on the merits of the case. The Tariff Board has conducted two inquiries within the last two years into the cement-making industry, and its reports, which have been carefully and impartially prepared, contain -remarkable disclosures, some of which have already been mentioned during the debate. For instance the .board has stated that one factory is producing only 16 per cent, of its total capacity, and another only 18 per cent. One naturally asks why a factory producing only 16 per cent, of its capacity should continue to operate, and why it should have installed expensive plant which it did not intend to utilize. I presume that after it commenced operations it was absorbed by the cement combine, and was satisfied to make a low or a reasonable profit. The board also stated that the net profits of the cement companies range from 6 per cent, to 32 per cent. The company producing only 16 per cent, of its capacity may be that which is making a profit of only 6 per cent. A remarkable feature of the industry is that the ring has apparently fixed its prices at a figure which would enable the company producing only 16 per cent, of its capacity to make a reasonable profit. If a company can make a reasonable profit on that basis, what must be the profit made by the company producing up to 74 per cent, of its capacity? Probably that is the company which made a profit of r}2 per cent. Senator J. V. MacDonald -did not object to one company making a profit of 32 per cent., because others were making only 6 per cent. A net profit of 32 per cent, is outrageous. Mr. J. Symonds, the general manager of the Commonwealth Portland Cement Company, was examined by the Tariff Board and the report of a portion of his evidence reads -

Question.- " That naturally raises the question as to whether or not some works ought to bo continued as operating concerns ; ' does it not? - Yos. I contend that half the works ought to be shut down. Still, how can you do that?- I cannot be a law to other' people.".

Question.- " I have heard of other means of shutting them down than by law? - Yes, there are. Still, they ought never to have come into existence, but there you are, they have machinery agents running around telling the people what they ought to go in for, and 1 suppose this is duc to the commission they get." " What I am putting to you is not original, and my colleague raised it earlier in the day - they came into existence because the flowers were blooming too prolifically, so to speak. The thing appeared to be too attractive? - Yes, and some of my friends came into the thing quite blindly without any consideration of the costs at all."

Why should the consumers have to pay excessive prices merely because some persons invest their capital in these companies without a thorough preliminary investigation. Before the cement ring was formed New South Wales Water and. Sewerage Board invited tenders for cement. One company, which was not then in the ring, tendered at a certain price, but on the 31st March the contract expired and fresh supplies had to be obtained. Tenders were not called because it was known that every tenderer would submit a similar price, and the board had to pay an increase of about 12s. 6d. a ton for its supplies. I understand that the Public Works Department of New South Wales obtains its supplies of cement from the .Kandos. Company at £3 4s. a ton, but those engaged in road construction and other similar work have to pay £4 lis. a ton. I venture to suggest that as soon as the contract expires the department will be forced to pay the price fixed by the cement ring. That is an aspect of the industry which makes it impossible for me to support its claims. I was glad to hear the Postmaster-General (Senator A. J. McLachlan) refer to the excessive profits made in this industry. Excessive profits are made in other industries, and some effective check will have to be placed upon those who are not satisfied with reasonable returns.

In matters of this kind the Government should move carefully, otherwise there may be serious repercussions. Prior to the depression, the imports over a period of six years averaged 21,176 tons per annum, with exchange at par and a duty of 20s. a ton. During the depth of the depression in 1931-32, when the exchange moved to about 13s. a ton, which, together with a duty of 20s., afforded protection equivalent to 33s. a ton, only 245 tons were imported. In '1932-33, under similar duties, but with a gradual improvement of conditions, imports increased by 220 per cent. In 1933-34 they increased by 178 per cent, over the previous year, and in 1934-35 by 115 per cent., showing quite conclusively that considerable supplies of British cement were finding their way into Australia. It is easy to visualize that, with the acceptance of the board's recommendations, large quantities of British cement are likely to be imported into the Commonwealth, which will affect employment in Australia and our overseas trade balance. The matter does not rest there. The companies should reduce prices to the consumer, for they have the protection of 13s. a ton afforded by exchange, which should be nearly sufficient to prevent overseas manufacturers from obtaining an unfair advantage. I cannot support the duty of 10s. a ton, representing an effective duty of 7s. 6d. a ton, because the latter amount together with the 13s. a ton mentioned, would mean a protection of 20s. 6d. a ton, which the Tariff Board stated quite clearly is too high. I am not prepared to support the 6d. a ton now embodied in the schedule, because that would enable the ring to continue to exploit consumers. On the other hand I feel very reluctant to support the Government's proposal that British cement should be admitted free of duty, because that would leave a protection of only 13s. a ton. The Tariff Board, in its supplementary report, stated that if exchange were at par it would recommend a duty of 15s. a ton as reasonable and adequate. The hoard is somewhat inconsistent when it recommends free admission when exchange is equivalent to a protection of 13s., and they say with exchange at par, 15s. a ton would be reasonable and adequate. I feel that a duty somewhere between 13s. and 20s. 6d. a ton would be fair, but the Government would not . accept such a suggestion, because it would besaid to be an infringement of the Ottawa agreement.

Senator SirGEORGE PEARCE (Wes- tern Australia -Minister for External Affairs) [9.58].- I should like to remind honorable senators of what the Ottawa agreement actually provides. To understand the spirit of the agreement, we have to remember what transpired at the Ottawa Conference, and interpret the intention underlying articles 10, 11 and 12. At that gathering the representatives of the British Government submitted thespecific and definite proposals contained in articles 1 to 7. Those articles refer to schedules, including schedule b, which sets out the specific duties which the British Government is imposing on foreign wheat, butter, cheese, apples, canned and dried fruits, condensed milk and other commodities entering Great Britain. The representatives of the British Government having stated the concessions they were willing to make to the Commonwealth, naturally asked what the Commonwealth was prepared to do. An agreement is an arrangement into which two parties enter, and when one party offers concessions it is only reasonable to assume that the other party will reciprocate. Articles 8 to 15 provide what the Commonwealth is to do. When the agreement was considered the duties imposed were higher than they had been at any previous period. They were soaring to Himalayan heights. It is unthinkable that the British Government offered the specific advantages to Australia, which are set out in detail in the agreement, and, in return, accepted something which might have meant that the. Scullin tariff would remain in force; those were the duties existing at that time. Obviously, the British Government did not view the matter in that light; it did not contemplate for one moment that those duties were to remain; and the Australian Government never intended that they should. Consequently, in articles 9, 10 and 11 of the agreement principles were laid down under which the Australian Government should proceed. Why did not the Australian Government do as the British Government did?

Senator Sampson - It could not.

Senator Sir GEORGE PEARCE - That is true; it was bound by its election pledge. The Labour party had raised tariff duties without reference to the Tariff Board ; the two parties opposed to the Labour party pledged themselves that they would not bring in a tariff without a prior reference to the Tariff Board. Consequently, the Australian Government said, in effect, to the British Government, " We cannot undertake to do what you undertake to do. but we recognize that you would not accept our present tariff as a fair bar- gain; therefore, we undertake that there shall be a review of all our duties ". That is the essence of the undertakings given by the Australian Government under the Ottawa agreement. It was the primary step necessary to the carrying out of the agreement. Then, in other articles the principles which should govern such a review were set out. One of these was that the duties to be imposed against British goods should be such as would allow of reasonable competition. The Australian Government then gave another undertaking that it would not impose any duty against Great Britain higher than that recommended by the Tariff Board.

Senator Gibson - After the board had reviewed the duty.

Senator Sir GEORGE PEARCE - Yes, obviously, after review by the board ; otherwise the undertaking would be meaningless. If the review does not operate on that principle, what is the good of it? It would be saying to the British Government, " We leave ourselves free to maintain the 1929 tariff". That was the Scullin tariff. Do honorable senators believe that the British Government would have undertaken to give those specific advantages to our trade over foreign trade, if Australia were to remain free to maintain the 1929 tariff after the Tariff Board had recommended reductions following a review of those duties? If honorable senators review the history of this agreement they must realize that the British Government intended, that the Tariff Board review should be a real thing and not a sham. If this were not so, its representatives would not have been so foolish as to enter into the agreement. That reviewwas meant to be a live thing; it was intended that the conclusions of the Tariff Board, after it had made its inquiries, should be acted upon. I suggest to honorable senators that they cannot console themselves by splitting straws over the meaning of the words " existing duty " ; they cannot shelter themselves in that way from the charge of departing from the spirit of the agreement. Although I could say much more on this matter I do not propose to continue my remarks at any great length. In conclusion, I urge honorable senators to study our position as an exporting country, and to remember the importance of the exporting industries to the economic life of this country, and also their importance to the welfare of the secondary industries, including the cement industry. What would be the effect on our economic life if our exporting industries could not maintain their present volume of production and exports and could not expand? I urge honorable senators to study actual facts in regard to world trade to-day, remembering, as we are obliged to do, that, excepting for wool and wheat the United Kingdom is our only market for primary products. I ask honorable senators to look at the schedules of the Ottawa agreement and to study the advantages we enjoy thereunder in respect of our primary products generally. The existence and growth of our primary industries since Ottawa have been due entirely to these specific duties which were imposed by the British Government entirely as the result of the Ottawa agreement. Australia is a young country, and if we are to hold it we must have a greater population; how can we expand our industries if we disregard the United Kingdom market? To-day, two Ministers of this Government are in the United Kingdom seeking an expandingshare of the British market for our primary products. Australia is not the only country which has representatives in Britain at the present time with the same object in view; agreements with other countries are now being considered by Britain. In these circumstances would it be wise at this juncture to start quarrelling with the best friend we have as to whether or not we have observed the Ottawa agreement?

Senator Duncan-Hughes - And we must, consider world conditions as they are.

Senator Sir GEORGEPEARCE.Yes. I suggest that in the light of the facts which I have described, and which cannot be disputed, we would be unwise to enter into a discussion as to whether or not, according to the legal phraseology of the agreement, we shall be breaking that contract by imposing certain duties on cement. Whatever may be the fact in that respect, the British Government regards the imposition of a duty on cement higher than that recommended by the

Tariff Board as a breach of the agreement; that is the essential point to be considered. In the light of the Tariff Board's report, and the facts elucidated in this debate should we enter into such an argument with Great Britain at this juncture ?

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