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Wednesday, 2 December 1936


Senator BROWN - I imagine that one reason for the trade diversion policy was the knowledge that Australia has to pay interest amounting to £30,000,000 a year to the Old Country. MrForgan Smith, the Premier of Queensland, when in London, told the authorities there that if Britain did not purchase Australian goods, our debts could not be paid. How much the servicing of our debt has had to do with the diversion of trade I do not know, but it is just as well for the public to realize that if Australia's debts are to be paid, Britain must trade with Australia.

Insofar as this measure will assist to develop Australian industries, the Labour party will support it. That party has always stood for the encouragement and development of the primary and secondary industries of this country. The policy now being pursued by the Government is at variance with that which has been followed in the past. The Labour party has had to fight vigorously against measures which were not in the best interest of Australian industry. It is generally admitted that Japanese textiles had secured a hig hold of the Australian market. Only a few weeks ago the Labour party fought strenuously for an alteration of the tariff to give assistance to an. Australian industry. I refer to the manufacture of denims and jeans. Honorable senators will remember that certain cloths were subject to varying duties according to whether or not they weighed 6 oz. to the square yard. Japanese manufacturers had beaten their British competitors by sending to Australia cloth weighing 6 oz. to the square yard and dyeing and sizing it in Australia, thereby being in a position to sell it at a price with which Australian and British manufacturers could not compete. When the Labour party pointed out that the weight, instead of being 6 oz. should be 4 oz. or even 3 oz. to the square yard, its proposal met with strong opposition from the Government and its supporters. It is now clear that, had the Government accepted the proposal of the Opposition, Japanese competition in the cloths referred to would have been less powerful, and Australian manufacturers could have competed with Japanese goods more satisfactorily.

I come now to motor car engines. Everyone will agree that Australia should make every effort to produce its own requirements of motor car engines, but whilst we on this side commend the efforts that are being made in that direction, we cannot forget that it is only a year or two since we battled vigorously but unsuccessfully for an Australian industry established in Queensland and Victoria, namely, the making of Diesel engines. At that time I had with me a. number of patterns made by 'Walker Brothers Limited of Maryborough, Queensland, and I stressed the need for an alteration of the tariff to enable that and other engineering firms to compete with Diesel engines imported from other countries. Notwithstanding the sound arguments advanced, the Government, in its lack of wisdom, would not consent to an amendment of the tariff to enable Australian engineering firms to compete with overseas rivals. Had the Govern7nent listened to the advice of the Labour party, the present provocative and discriminatory tariff, which came as a bolt from the blue, would not have been necessary. In this matter I wish to make my' attitude clear. I agree that Australia has every right to say whether or not certain goods shall enter this country. No other country has a right to dictate to Australia in this connexion. Nevertheless, I am of the opinion that the Government would have been wiser had it followed a policy which, while not being provocative, would have assisted * to develop an Australian industry, and made this country less dependent on the rest of the world. There is a vast difference between a policy which provides for the gradual development and encouragement of Australian industries, and a provocative policy such as is followed by the Government. Its policy having failed, the Government comes along with a policy of prohibitions and embargoes.


Senator Hardy - Was not the Scullin tariff of 1929 provocative?


Senator BROWN - That policy was rendered necessary by the conditions which prevailed at the time. The present High Commissioner for Australia (Mr. Bruce) has admitted that no other course was open to the Scullin Government. The position is entirely different to-day. Had the present Government been wise, it would have given an impetus to Australian industry without antagonizing Japan and the United States of America. It could have avoided action which has endangered the wool industry of this country. Among the wool-growers of Queensland, and probably in the other States also, there is strong condemnation of the foolish policy followed by the Government.


Senator Hardy - How much has the price of wool fallen recently?


Senator BROWN - .Senator Guthriehas already dealt with that subject. The Government has, undoubtedly, been lucky in regard to the price of wool. It should have exercised intelligence, and avoided the risks associated with its discriminatory trade policy. We have been told on numerous occasions, that the Government was determined to alter the balance of trade, and would not trade as heretofore with bad customer countries. The United States of America was considered to be a bad customer of Australia because the value of its purchases . from Australia was far below that of its sales to Australia. But that argument could not be applied to Japan. Figures have frequently been quoted to show that Australia had a favorable trade balance with Japan, whereas the reverse was true in respect of the United States of America. When the present trade diversion policy was put into operation, Australia's trade with the United States of America was undergoing a change. As a result of a campaign of publicity in the United States of America, Australia's trade with that country began to increase, and in 1935 Australia's exports to America were valued at £5,800,000. The Telegraphthe tory newspaper of Brisbane - stated ihat, just as the United States of America was becoming a better customer, the Government saw fit to administer disciplinary measures as a punishment for having been a bad customer previously. That was most unwise. Australia's trade with the United States of America has varied considerably, but in certain respects it has shown an improvement in recentyears, particularly in regard to skins of various kinds. Members of the Pacific Coast Chamber of Commerce have expressed the opinion that there is scope for a big expansion of trade with Australia in regard to various commodities, including coke, hides and wine, if Australia will make a determined effort to develop that trade.

Recently I asked a question as to the reason why Australia was not represented at a convention recently held at Chicago. Apparently, because of the determination of die Government to pursue its policy of trade discrimination, it would not send a representative to the convention. The Labour party does not stand for such action, and it condemns the Government for not having done its best for Australia. A good deal has been said about Parliament not having been consulted before the new policy was put into operation. Parliament has been ignored. In 1934 Australia sent a goodwill mission to Japan. Its leader was Sir John Latham, who carried out his duties to the satisfaction of Australia. The good impression then created has not remained. The Government has told us that if we will exer- cise patience the trade dispute with Japan will be settled. "We were told in July last that the Japanese were prepared to listen to reason, and that negotiations with that country would be resumed. The negotiations are still proceeding. It is true that they were held up for about nine and a half months while the Minister directing negotiations for trade treaties (Sir Henry Gullett) had a trip to Europe. The Government, which ignored Parliament, conferred with representatives of wool-growers before taking action. I have no objection to the Government consulting various institutions, associations and individuals who may be affected by its policy. At the same time it is ungracious of the Government practically to ignore the Parliament in this matter. Mr. J. S. Teasdale, in his presidential address to the Primary Producers Association of Western Australia, on the 11th August - and five federal members, supporters of the Government, were present - said -

Wool-growers have been seriously concerned as to the effect on prices at the forthcoming sales should Japan withdraw from the market . . The subject was discussed at the Australian Woolgrowers Council meeting in June, at which you were represented by Mr. Hitchins.

Mr. Hitchinshad been "seriously concerned " to the extent of saying that "Bradford threatened us with much more drastic treatment than Japan has done; the Australian people are again to be sacrificed to Bradford " -

Sir HenryGullett gave details of the reasons for the Government policy, and outlined the progress of negotiations. He asked the organizations there present to avoid public controversy pending finalization of the negotiations.

But, Mr. Teasdale proceeded, "the negotiations have been more protracted than expected, resulting in another meeting of the Woolgrowers Council at Melbourne in July " -

On this occasion the Prime Minister personally discussed the matter with the council for some hours. The confidential information and documents displayed to the wool-growers by Mr. Lyons were instrumental in relieving wool-growers' minds to a considerable degree. Naturally, it is impossible at this stage to make public the information presented. Mr. Lyons repeated the request for avoidance of public controversy until the negotiations are finalized.

Month after month this practice has continued. While Parliament has been ignored representatives of the wool industry have been supplied by the Prime Minister with confidential information in regard to the trade dispute with Japan.


Senator Marwick - But it satisfied them.


Senator BROWN - Parliament, too, may have been satisfied with that information. The action of the Government in ignoring Parliament in this respect provided an important digression from customary policy. In this vital matter Parliament should certainly have been consulted.


Senator Marwick - It kept them quiet, even if it did not satisfy them.


Senator BROWN - Some leaders of the wool industry are making urgent representations to the Government to reach a settlement with Japan at an early date. The Minister directing negotiations for trade treaties (Sir Henry Gullett) is probably doing his best in this connexion. I do not wish to make any personal observations against that gentleman; I believe that he is actuated by the highest motives and is just as serious in his efforts to bring about a settlement of the dispute as is the Labour party. But. in my opinion, Sir Henry Gullett is the last nian in the world who should be allotted the duty to negotiate trade treaties with Japan or any other country. Temperamentally, he is unfit, for such delicate work.

Honorable senators have referred at length to the industrial methods employed by Lancashire, and to Great Britain generally. While the Opposition believes that Australia should do its best to assist the Mother Country to expand its trade, at the same time we should realize that Lancashire has been somewhat backward in developing its industry, with the result that it has lost a considerable percentage of its foreign trade. The Nineteenth Century magazine, which is not a Labour party bulletin, contains an excellent article on the cotton industry, by W. S. Ascoli. He stated that the loss of international trade, compared with 1913, was only 15 per cent.; Lancashire's trade in proportion should therefore be 6,000,000,000 yards; but, according to Sir Ernest Thompson, leader of the Manchester trade delegation to Australia this year, the figure is only 2,000,000,000 yards at the present time. The writer of this article expressed the hope that the British Government would intervene in order to open up new channels of trade, with a view to regaining for Lancashire sales of 5,000,000 yards. This additional business would give employment to all operatives in the industry. The writer contended that modern plant was not enough ; what was required was the modern mind, directing the use of modern plant 'through the best channels; but Lancashire to-day has fewmodern minds. Thus he appealed to theLancashire business interests to bring tobear a modern mind as well as modern, plant, in order to compete successfully with the goods of other countriesThrough two generations prosperity came to Lancashire, and there was no need for the. intense economic organization that is so necessary at the present time. Such was the lack of organization that there was profligately scattered throughout Lancashire plant and personnel over an area of 2,000 square miles, withoutthought of economy in operation. In respect of this aspect, he stated that the war paralysed Lancashire's exporting activities, and gave a great fillip to the industries of India and Japan. Peace induced an orgy of 'buying, which culminated in a frenzy of recapitalization at exorbitant figures under the auspices of the great banks. One of the outstanding revelations contained in the article is the neglect by Lancashire of the real economic re-organization of this industry, with the result that control of the textile industry generally was assumed by the banks; but it was recapitalized at such a high figure that it was practically impossible foi- the industry to win out in competition with the rest of the world. The writer attributed some of this difficulty to Britain's return to the gold standard and the subsequent deflation. Therefore, apart from the cheapness of Japanese labour, there are other considerations to account for the inability of Lancashire to compete with the textiles manufactured in low-wage countries. Admittedly, Japanese labour is cheap relatively to conditions in Australia and Great Britain; but, as Senator Payne rightly stated, the Japanese wage, in relation to the standard of living enjoyed by the people, is equal to that of certain other countries.


Senator ALLAN MACDONALD (WESTERN AUSTRALIA) - He said that they have all that they need.


Senator BROWN - That is so. If they wanted the luxuries which we require, their wages would necessarily have to be increased. I do not desire to be misunderstood in regard to this matter. The Labour party has always adopted the attitude that our workers should be safeguarded against the inroads and competition of goods of low-wage countries like Japan. For a generation or more, the Labour party has vigorously pursued a policy of self-help and internal development in Australia; it has always contended that we must safeguard Australia against, not only the inroads of such people, but also their competition in respect of cheaply-produced articles.

During the war, India was able to improve its position in regard to the production of textiles. It raised protective, duties by 25 per cent., and, in some instances, 60 per cent. As the result of this action, Lancashire lost a market for 2.000,000,000 yards of textile materials. In the Old Country, special legislation was introduced in an endeavour to rehabilitate the textile industry. It was suggested that a spindles board of three 'members be set up; this authority was to be given practically absolute power to purchase plant, enforce levies, prevent extensions, and stop the entry into the industry of new enterprises. Provision was made in the bill for the removal and destruction of an undefined quantity of spinning plant. The intention of this legislation was to create a shortage of supply, and thus raise prices; but the proposal was strongly resisted by. solvent industrialists, because the carrying out of the plan would involve the expenditure of nearly £2,000,000, which they would be called upon to contribute. The Lancashire Cotton Corporation was then formed; it was really a financial corporation - a creature of the Bank of England. This institution became practically an octopus, and neglected the real industrial basis necessary to make competition effective against Japanese goods.

I paid close attention to the remarks of Senator Payne in connexion with the efficiency of this industry. I have a cutting from the Melbourne Herald in which it is pointed out that Japanese methods are wholly efficient. The article states -

In equipment Japan has 9li per cent, of the most up-to-date plant as against 24 per cent, in England. Japan has only 300,000 looms, but one-half of that number are automatic while of England's 050,000 looms only 30,000 of that number are automatic.

That must exercise a big influence on their ability to market their commodities it competitive rates. When Lancashire sent a trade delegation to Australia to request us to take action contrary to our usual policy, it should at least have been frank enough to admit that it had retrogressed in. the manufacture of textiles, due to the fact that its plant was not up to date. Further, the delegation should have confessed that before Lancashire could regain its foreign trade, the textile industry would have to be re-organized. This extract proceeds -

A further very important comparison is to be found on the business capital side. In Japan there are, in the cotton trade, 71. establishments with a capital per establishment of 7,680,000 yen. In England there are 207 establishments with a capital per establishment of 2,550,000 yen. But whereas in Japan each establishment has abundant reserve funds, in England, owing to the increase of capital, during the boom period after and during the Great War, the production of interest and dividends is absorbing all reserves. This also explains the difficulty in replacement of obsolete equipment and plant.

That bears out my contention that the financial magnates of England fastened themselves like an octopus on to the cotton industry. Now Australia is expected to adopt a course contrary to its general policy, in order to satisfy the demands of those who by their methods have practically ruined the Lancashire textile industry. At all times the Labour party has stood for the vigorous development of our primary industries. If the Government had been wise enough in its day and generation to accept the advice of the La'bour party, it would have carried out a gradual policy for' the progressive internal development 'of Australia. Further, it would have informed the public plainly that it stood : first, for the internal development of Australia; and, secondly, for the British Empire; and that it would refrain from discriminating between country and country. The Government is making a great mistake in placing too much reliance upon the Statistician's figures relative to trade between country and country, because by so doing it is liable to make grave errors. Mr. S. M. Bruce pointed this out in the United Kingdom on several occasions, when speaking of the " madness of bi-lateralism ". Unless Australia exercises considerable caution in following out the policy of bi-lateralism - the Minister in charge of the bill denies that we are doing so, but facts point to the contrary - it will be in a far worse position than ever before. We must give greater encouragement to our internal development, realizing all the time, ai the Minister stated, that revolutionary changes are taking place all over the world, necessitating a new policy of economic development. We cannot possibly solve our problems merely by diverting trade, or by discriminatory measures against the United States of America, Japan, or any other country. We must encourage the internal development of Australia. So far, we are on the right track, but we must go further. Our object and aim should be the development of all industries in this country for the betterment of the whole people, and not for the private profit of a few.







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