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Wednesday, 19 May 1920

Mr BRUCE (Flinders) .- There is one matter of considerable importance to which I wish to draw attention. I would have mentioned the subject some time ago but for the fact that the Minister for Trade and Customs (Mr. Greene) has been away ill, and I was anxious that he should hear what I had to say,because I believe it is something upon which no single Minister can give a decision, but which must go before the Cabinet as a whole. I refer to the basis upon which the Customs authorities calculate for Customs purposes in the payment of duty the value of goods bought in the currency of any other nation. At the present time the high cost of living is one of the most burning and vital questions we have confronting us.' We are also very much inclined to protest how much we owe to our Allies in the late war, and how much we are willing to do to assist them to once more regain their position in the world. But what we are doing in regard to the administration of our Customs Act is a little startling to ' any one .who is not aware of what is the actual position. There are a few facts I wish to bring under the notice of honorable members, because I do not think they realize what is happening, or they would not indorse it or approve of it. By our administration of the Customs Act we are actually rendering it almost impossible for France and Italy, probably our two greatest Allies in the late war, to trade in Australia, and are driving the whole of our overseas trade into the hands of neutral countries, or countries which made the smallest sacrifices on behalf of the Allies during the war. There are many people who are Protectionists, and there are many who are Free Traders, but I do 'not think that any of them believe that a preference other than the deliberate and considered preference given by this Parliament to Great Britain should be extended to any country under our- Tariff. The startling position to-day is that we are giving a most extraordinary preference to certain countries to the detriment of others.

Mr Tudor - That is under the rates of exchange.

Mr BRUCE - That is so. During the period of the war certain countries had to completely cut off their exports. They had their commercial and industrial centres ravaged and overrun, and, for the time being, the whole of their trade ceased. The result after the war has been that the world's exchange is absolutely against those countries, and their currency in the world's market is hopelessly depreciated. On the other hand, countries which continued to trade during the period of the war became the great exporters of the world. Gold flowed to them, and their currency is now at a great premium in the world's markets. We all know that that is the position to-day, but sometimes we forget that it is only recently it has come about. Exchanges the world over were maintained artificially during the war. Take the case of Great Britain, where we have seen the value of the sovereign come down to 3.35 dollars as against the par value of 4.85 dollars. That has only happened since the Armistice and since the artificial safeguards that were taken to maintain exchange were removed. We never got below 4.70 dollars or 4.75 dollars during the war. The result of the removal of the artificial safeguards has been that we have had extraordinary variations of exchange which prior to the war did not exist. In pre-war days the franc might have varied from 24 francs to possibly 25.50 francs to the £1 sterling, but that would have been an enormous variation. It was the same with other exchanges, and so it continued during the war. But to-day the position is completely altered. The ordinary economic laws coming into force, we have seen variations in the franc up to 60 francs to the £1 sterling. These variations bring about most extraordinary results in the payment of Customs duties, for the reasons that the Customs Department here always operate upon the basis of the par value of exchange and take no notice whatever of the value of exchange at the time when the goods were purchased. Before giving actual instances of what has happened, I would like to give a very simple illustration, from which honorable members will have no difficulty in seeing what is done. If a person goes to any country and buys £100 worth of goods, and the invoice comes through to Australia as £100, the Customs authorities look at the date the invoice bears, and look up the rate of exchange on that date. If the goods were bought in France they proceed to turn the £100 into francs at the rate of exchange on the date the invoice bears, and if at that date the rate of exchange was 50 francs to the £1 sterling, they say, " The £100 is 5,000 francs." Having turned the sovereign into francs at the rate of exchange at the date of purchase, they then proceed to bring it back into sovereigns on the pre-war or par basis of exchange, namely, 25 francs to the sovereign. The result is that, although the purchaser has paid £100, and only £100, for the goods, when he goes to the Customs authorities and tenders his duty, which, we will say. for the sake of argument, is £25, they say to him, "No; we will not accept that. The duty is £50, because these goods cost you £200." That is rather a startling practice, but it is taking place every day. It is unjust, and everybody is protesting and trying to demonstrate the injustice, but can get no remedy. Apart from the fact that it is making Australian people pay more than they should pay by reason of the fact that the goods are being loaded with duties that ought not to be paid, and which Parliament never authorized, I take the broader point of view that we are by this action penalizing nations that, in the war, were our friends and Allies, and throwing the trade into the hands of neutrals who did not help us at all. or Allies who helped us very little. I shall relate to the House what happens in connexion with £100 worth of goods purchased in Prance, Italy, and America respectively. Take, firstly, £100 worth of goods purchased in France. Say the exchange of the day is, as it has been for some time past, 50 francs to the £1. That means that 5,000 francs have been paid for the goods. When the goods land here, the £100 is first converted into 5,000 francs, and then reconverted at 25 francs to the £1, that being the par value. That gives a value of £200. Assuming the duty to be 25 per cent., the importer pays £50 to the Customs Department upon goods that had cost him £100. Take now the case of £100 worth of goods purchased in Italy. The exchange is, as it has been for some time, 75 lire to the £1. That £100 is immediately converted into 7,500 lire. That is reconverted at par value- 25 lire - which means that the importer is said to have paid £300 for the goods, and, at a duty of 25 per cent., he pays to the Customs Department £75 on goods that cost him £100. In regard to America, assuming the exchange to be $4 to the £1, although it has been as low as $3.35, the £100 is converted into $400. That isreconvened at $4.85 to the £1, the par value which gives a result of £82 10s. The importer is then held to have paid £82 10s. for the goods for which he actually paid £100, and at a duty of 25 per cent., he pays to the Customs Department between £20 and £21. Therefore, on £100 worth of goods subject to a 25 per cent. duty, France would pay duty to the extent of £50. Italy to the extent of £75, and America to the extent of £20.

Mr Wienholt - That is "greasing the fatted pig."

Mr BRUCE - That may not be a very pleasing expression, but it is perfectly true. We must remember that, during the war, France and Italy, by reason of the tragic circumstances in which they were living, were cut off from the world's markets. America, Japan, and other nations stepped in, and catered for trade that had belonged to Italy and France ever since Australia had commenced importing. The war gave these other countries their opportunity, but in hardly any instance have they served Australia as well as France and Italy had done bef ore the war. Yet, because of the system upon which the Customs authorities calculate exchange, it is almost impossible for France and Italy to recover the trade that went from them, because of the fact that they were fighting on our side.

Mr Jowett - Upon the instructions of whom is this system operating ?

Mr BRUCE - Upon the instructions of nobody. . It is a system- that was justified, and extraordinarily effective under pre-war conditions.

Mr Fenton - Has the honorable member the figures in regard to Japan?

Mr BRUCE - I have not worked them out for Japan, but the system works to the advantage of J apan in much the same way as it works to the advantage of America. Japan is getting a marked preference as against France and Italy. This system of calculating exchange is excellent, and, indeed, is the only possible one, under normal conditions. We cannot expect the Customs Department to recalculate every fractional difference in exchange for every invoice, simply because the importer says that he paid exchange on a basis of between, say, 24.50 francs and 25.50 francs, but to-day it is a question, not of a fractional difference in the rate of exchange, but of an absolute prohibition of imports from the countries of two of our Allies.

Mr Tudor - If the Customs Department altered the procedure those who had imported and paid the rates under the old system would be placed at a disadvantage in comparison with the man who imported under the altered conditions

Mr BRUCE - That is so, and in the event of such an alteration probably there would be few firms that would leave on hand more goods for which they had paid too much than, would the firm with which :\f am connected. But I should not; mind that in the least. Everybody would have to get out of the trouble as best he could. My point is that the present system is an iniquity. We are penalizing the very nations that we should be trying to help, not only for sentimental reasons, but because it would be for the benefit of the whole world if we could get trade back into its normal channels and the exchange of the world adjusted.

The point which will be raised is very obvious. The Customs Department, faced with a position like this, would say that it could not calculate the rate of exchange on every single invoice and alter it. At first sight that appears to be a. good argument, but unfortunately the Department is doing that very thing to-day. I pointed out that in respect of importations, expressed in sterling value, the Department is finding not the slightest difficulty in looking up the rate of exchange on the date of the invoice so that it may first convert it prior to reconversion at par value. There is no reason at all why the Customs Department should not operate on the basis of the rate of exchange at the date on which the goods were invoiced, which shows the home consumption value. Therefore, I say there would be no difficulty whatever in altering the present system if it were considered just and right to do so. I personally can see no reason why, in order to avoid any real difficulty for the Customs Department, it should not require that all goods that have been purchased in- foreign countries should be invoiced in foreign currency. On receipt of the invoice in. Australia the Customs Department could convert francs or dollars into sterling value at the rate of exchange obtaining on the date of the invoice, which could be found by reference to the records. It would then have the actual value of the goods in the country of origin converted into sterling value at the actual rate of exchange applying at the date on which they were invoiced.

We should realize that a system such as this, which works such hopeless injustice and borders on an iniquity, must inevitably lead to efforts at evasion. That is very undesirable. Whilst the Customs authorities may think they know everything that is to be known, I personally have grave doubts that, when the incentive is as great as it is in this case, dishonest traders will not devise means of defeating the Department. I suggest one means by which that can be done. The trader gets an invoice drawn up in the, currency of France. The franc is to be converted by the Department at 25 francs to the £1. Suppose that he bought £100 worth of goods in France, and that they were invoiced properly and legitimately at the rate of exchange at that date, say, 50 francs to the £1 ; the value of the goods would appear as 5,000 francs. But an astute trader will invoice the goods as worth, not 5,000 francs in ordinary currency, but 2,500 gold francs. If they are actually gold francs it is right to convert them at 25 to the £1. One man will be invoicing goods at 2,500 gold francs and the other at 5,000 francs ordinary currency. In both cases the actual amount paid is £100, but when the two invoices are converted by the Customs Department at 25 francs to the £1 there will be a lot of difference in the duty paid. 1 do not suggest that any trader is following his practice today, but I warn the Government that if an iniquity like this is perpetrated we shall inevitably have dishonest traders doing something to evade it. In urging this question upon the attention of the Committee I put aside the question of the effect upon the unfortunate people who are being made to pay double and treble duty upon the goods they consume. I put aside also the plight of the merchant who has to try to get rid of the goods on which . he has paid these duties. Both of these are minor considerations. The main point is that we have been loud in our protestations of gratitude for the help we received' from our gallant ally, France; yet, by the policy pursued by the Customs Department, we are doing our best to handicap her out of these markets which we say are open to everybody, subject to a Tariff which was. fixed by Parliament and which gives no preference to any nation except the Mother Land.

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