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Wednesday, 13 November 1935

Senator HARDY - Yes; I think it is essential that such a matter should be mentioned in the platform of a political party.

Senator Collings - Is it mentioned in the platform of the Country party?

Senator HARDY - Yes; not only do we support the ideals of the League of of Nations, but, unlike the Labour party, we ave prepared to observe the obligations placed upon us by the Covenant of the League. When speaking on the Appropriation Bill 1934-35, Senator Collings, replying to a question by Senator

Grant as to whether Australia's expenditure on the League of Nations was advisable, said -

I hope that nothing Senator Granthas said will influence honorable senators to favour a reduction of the provision for Australia as a member of the League.

I hoard Senator Collings express a similar view to-day. If he is prepared to support Australia's membership of the League, is it not logical to expect him and his colleagues to honour the obligations placed upon Australia through such membership ?

Senator Collings - Apparently, we must have another war to save the League !

Senator HARDY - In the first debate in this chamber on the Italo-Abyssinian dispute, Senator Collings read a statement of the policy of the Australian Labour party on that matter. The Leader of the Senate (Senator Pearce) said that he doubted that the Leader of the Opposition thoroughly understood the implication of the Covenant. Senator Collings did not say then that he thoroughly understood its implications. But let us see what the honorable senator said in December, 1934, when speaking on the Appropriation Bill 1934-35, as recorded in Mansard, page 1063-

It is true that the League has not been able to accomplish many of the objectives embraced in its constitution, and it is also true that the League on some occasions has failed. But it is much more important for us to remember, not its failures, but its successes.

Less than twelve months ago the honorable senator advocated concentration on the successes of the League, yet almost the whole of the honorable senator's speech last week was devoted to the failures of the League. In support of Senator Collings' tale of failures, other Opposition senators criticized the League for its inaction in connexion with the dispute between Japan and China. In December of last year Senator Collings saw fit to reprimand Senator Grant in the following terms: -

I suggest to Senator Grant, and to other honorable senators who agree with his views, that they should make themselves fully acquainted with the constitution of the League of Nations, the work it has attempted to do, and what it is actually accomplishing, not only in Geneva, but throughout the world.

Despite those words of praise for the League, the Leader of the Opposition now refuses to support it in its greatest test. Compare the honorable senator's words on that occasion with his latest utterance on this subject -

The Australian Labour party is opposed to sanctions because it is opposed to war. The Labour party saw more clearly and more immediately than any other party that sanctions mean war.

I propose now to quote from an editorial in the Labor Daily, which is the official organ of the Labour party in Australia.

Senator Collings - That is not so.

Senator HARDY - I am pleased to hear that, for I desired to be assured that there was still some difference of opinion between the Federal Labour party and the New South Wales Labour party. On the 22nd August, 1935, the Labor Daily, in an editorial, said -

Articles 10 and 16 of the League Covenant are the two fundamental articles of the whole Covenant upon which the entire system of collective security is bused. If they are jettisoned international anarchy must result.

Early in September Mr. Lang held an anti-war meeting in Sydney, and this was the occasion for a complete change of policy. As he thought that it would be bad policy to be in alliance with any other political party on any question, the Labor Daily turned a complete somersault, and said that in future sanctions would be opposed because they meant war. In an another part of the same article the following appeared : -

Another similar conflict to that of 1914-18 is unthinkable, butthe rape of Abyssinia would represent a direct challenge by Italy to the entire system of collective security that must be met by effective application of economic and financial sanctions.

I hope that, when the Leader of the Opposition a.gain speaks on this subject, he will attempt to reconcile that statement with his more recent claim that the Australian Labour party saw the issue more clearly and more immediately than any other political party in Australia saw it. The attitude of the Labor Daily, if generally accepted, would mean the ushering in of international anarchy. Last week Senator Collings said -

What is the cry to-day. Save the League of Nations in the interests of collective security.

Asa rallying cry this is one of the cleverest, subtlest and most specious that has ever been raised in the cause of war.

How different is that from the view expressed about twelve months ago, when the honorable senator took Senator Grant to task ! Indeed, how different from the view expressed by the Labor Daily only six weeks ago!

Senator Brownsaid that there was a considerable body of opinion in the British Labour party opposed to sanctions. For the information of the honorable senator, and of the Senate generally, [ shall read the following extract from the Economist of the 5th October, 1935:-

Labour decides. - The overwhelming vote in favour of sanctions at the Labour Conference on Wednesday demonstrated how very largely personal is the much-advertised " split " in the party. A majority of 2,168,000 to 102,000 or over 20 to 1, was recorded in support of the League Covenant. Dr. Hugh Dalton, who proposed the resolution embodying the official party policy, made a clear, crushing and unanswerable case.

Sanctions, he said, do not necessarily mean war. On the other hand the scrapping of sanctions as a reserve force behind international law certainly means war - war soon and in a far more terrible form than even a war between Italy and Abyssinia. A threat of sanctions may be enough to prevent war . . . But if Mussolini is so lunatic as to resist the united League of Nations by force, let it be so. He will order the firing of the first shot, and ho will take the consequences of that order.

That this was the opinion of the vast majority of the delegates, was proved by the final vote. Before the vote was taken, however, there was a long and dramatic debate in which, the picturesque personalities of the minority spokesmen did something to conceal the numerical weakness of their supporters. Sir Stafford Cripps, most of whose adherents appeared to be in the public gallery, argued thathehad changed his mind about the League because he had only recently come to the conclusion that it was a League of sated imperialist powers - an " international burglars' union." Yet the only significant change in its character, coincident with Sir Stafford's conversion, has been the adherence of Russia! Lord Ponsonby laid great stress on the League's lack of universality, compared with the original intentions of its founders. Mr. Lansburyspoke the language of unqualified Christian pacifism: "They who take the sword shall perish with the sword." The delegates were sympathetic, but not persuaded. In reply Mr. Bevin tellingly remarked that those who did not approve of sanctions should have openly declared their opposition to the League years before.

Every honorable senator who claims to understand the Covenant of the League of Nations should have opposed sanctions years ago if hebelievedthat they meant war. Why it is that the Labour party has waited until now to voice its opposition to the Covenant? The reason is that there is a world of difference between the Australian Labour party and the British Labour party. What are the sanctions for which the Covenant of the League provides? First, the Covenant provides that the aggressor nation shall be prevented from getting arms. Does the Leader of the Opposition object to that? If so, it means that he is prepared to assist Italy to obtain arms. This bill is an attempt by Australia, in common with over 50 other nations, to prevent a covenant-breaking State - in this case Italy - from obtaining arms.

Senator Collings - Italy will still get all the arms it wants; British armamant makers will supply them.

Senator HARDY - The point at the moment is not the willingness of British armament makers to supply arms to Italy, but the willingness of the honorable senator to assist Italy to obtain them. The second object of sanctions is the prevention of a covenant-breaking State from getting essential raw materials. In my opinion, there is no essential difference between supplying a machine gun and supplying the lead out of which bullets for machine guns may be made. Is Senator Collings in favour of supplying a covenant-breaking State with raw materials for the making of ammunition?

Sitting suspended from 6.15 to 8 p.m..

Senator HARDY - I have said that it is hard to concede that the attitude of Labour is logical in view of the fact that the party has taken sixteen years to discover that it is not prepared to subscribe to the principle of sanctions, although in the present circumstances their application is clearly required under article 16 of the Covenant of the League of Nations. The Senate has now to decide whether it will support the bill before it, which provides for the application of sanctions against Italy. I believe that I am correct in saying that the Leader of the Opposition, in replying to the Leader of the Senate (Senator Pearce) said that he will fight the bill at every stage, because he considers that sanctions mean war. But every honorable senator who has spoken in opposition to the measure, when pressed for a reason for that assertion, has been unable to justify it. The attitude of the opponents of the bill is entirely illogical.

As I have already indicated., the first object of the application of 'sanctions is to prevent a covenant-breaking State from obtaining arms. That is one of the purposes of this legislation. We contend that a nation which has deliberately broken the Covenant of the League, to which it has subscribed, and has set out on a policy which threatens to bring western civilization to its knees, by embroiling the world in a turmoil similar to that experienced in the years 3914-1S, should be regarded as an enemy of peace. If sanctions mean war, I would rather impose them than permit a belligerent nation like Italy to be supplied with arms to carry ou its cruel attack upon Abyssinia. If the Leader of the. Government said that it had been decided to allow the small arms factory at Lithgow to export its surplus arms to Italy, on the ground that this would provide work for Australians, would not the Leader of the Opposition claim that it would be wrong to employ trade unionists in the manufacture of arms that were to be sent overseas? The Labour party cannot consistently claim that it supports the League of Nations if it opposes the imposition of sanctions on a belligerent nation which breaks the Covenant of the League. What, would be the attitude of the Leader of the Opposition to the employment of members of the Australian Workers Union on the large grazing properties distributed throughout the Commonwealth, if this Parliament did not. prohibit the export to Italy of wool, which is required to clothe the Italian troops now engaged in harassing Abyssinia?

The second object of sanctions, as 1 have previously remarked, is to prevent a Covenant-breaking State from obtaining essential raw materials. The third object is to inflict severe economic and financialloss upon such a nation. Italy has defied all the laws of humanity, and has deter- mined to wreck the peace of the world. By subjecting that country to economichardship we shall be trying to restrain it from pursuing its career of slaughter; but the Labour party tells us that we should not apply sanctions, because they mean war. What would the Labour party substitute for this bill? A conflagration threatens Europe, but that party takes refuge behind an academic argument. We have looked in vain for a constructive proposal -from it, but none is vouchsafed. It is illogical for the Opposition to condemn this measure, which aims at collective security within the League. The fourth object of sanctions is to give economic and financial aid to the nation which is the victim of aggression, but the Opposition is not prepared to give such aid. Only a year ago we heard the Leader of the Opposition reprimand Senator Grant, and advise him to study the Covenant of the League in order to obtain a proper appreciation of its implications. Why did he not then voice his protest against sanctions? It is said by the Labour party that sanctions will fail to achieve their object.

Senator Collings - We have not said that.

Senator HARDY - I have heard it said in many places that, because sanctions will fail, they will merely irritate the people of Italy, and cause a war. I invite honorable senators to consider whether sanctions will be effective. To-day Germany. Japan and the United States of America are outside the League, and, of course, if Italy possesses sufficient gold, it will be able to trade with those nations. Within the last few days we have read in the press that the exports from the United States of America to Italy have increased tremendously. It may be said that Italy could purchase the raw materials it needs from Japan: hut I venture the opinion that it cannot expect the co-operation of Japan, whose official spokesman has declared that that country is interested in the stability of Asia, and is determined to lead the coloured races. So it is unlikely that Japan would help a western nation to crush Abyssinia. I am prepared to admit that Germany now has a large export trade with Italy.

Senator Collings - Did not Japan help Britain to suppress Germany?

Senator HARDY - No. Although Italy can obtain supplies from countries that are independent of the League of Nations, it is only reasonable to assume that in a time of war its purchases will have to be made with gold. In considering whether sanctions will prove effective, we have to study the internal economy of the aggressor country against whom they are directed. Italy is not adequately equipped to-day, financially or industrially, to undertake a protracted struggle in Abyssinia, and is it not reasonable to assume that it would be less able to engage in a world-wide war against all the nations which constitute the League?

Senator Collings -Italy is marching on !

Senator HARDY - I shall quote a statement relating to Italy's financial position from one of the leading financial journals of the world. It says -

Italyhas not the natural or financial resources at its command to face a protracted struggle. It imports, normally, practically all of its cotton, copper, and mineral oil; 95 per cent of its coal; 80 per cent. of its wool; and 53 per cent. of metals other than copper.

Allowing that preparations have been going on for some time, supplies available can be sufficient for only a brief campaign. No matter what the accumulation, it cannot cover every need. Outside purchases are necessary.

The point I desire to emphasize is that the external market in which Italy can make purchases is limited to two countries. Fifty-one nations of the world declare that they will have no transactions with Italy which will assist Mussolini to prosecute this war. Their unanimity is sufficient justification for Australia to follow their example.

Senator Collings - The majority of those nations are so small that they do not weigh one jot against the United States of America.

Senator HARDY - The statement continues -

These depend on Italy's capacity to pay - cash or deferred. Its cash resources are expressed in its gold and its foreign credits. These, a month ago, totalled probably less than £90,000,000 in sterling equivalent.

Nor can Italy view its credit standing as AI.

Italy's budget deficits must read disquietingly to Italian financiers and economists in the light of the wide expenditure to which the Government was committed the moment its troops crossed the Abyssinian border on the 2nd October. The deficits read - For 1930-31. £11,317,000; 1931-32, £65,967,000; 1932-33, £60,367,000; 1933-34, £107,633,000 (all in sterling equivalent). That position would not inspire confidence in the money markets in normal circumstances. Its appeal to a financial world determined onpeace may be imagined.

Those figures represent the internal economy of a country which is prosecuting a war in Abyssinia, and which, according to the Australian Labour party, might if sanctions are imposed, conduct a war against 51 nations. The statement proceeds -

Since August, the chief avenues of credit have been closed to Italy. Thus, from this angle, and from the angle of its inability to pay cash beyond a certain point, economic sanctions merely frame an already painted picture.

The United States of America Governmentcontrolled Export-Import Bank has refused to grant short-term credit.

When the Labour party opposes the bill, it should take that point into consideration. Upon analysis, it will be understood that the impositions of sanctions cannot, in any circumstances, give rise to a world-wide war. Turning again to the statement I find that -

On the 18th September, £2,060,834 was outstanding to British creditors under the AngloItalian trade agreement. (A million was mentioned as owing to coal exporters alone).

Dues to the Suez Canal Company for war traffic have been stated at £600,000 to the end of September.

The review concludes with a statement that the money and commodity markets of the world will be closed to Italy. Is it any wonder that, as a result of the internal difficulties of Italy herself, this journal says that " economic sanctions merely frame an already painted picture " ? -

And all expenditure figures expand rapidly once hostilities are commenced.

The money markets and the commodity marts of the world will be closed to Italy. And, more than that, war necessities result in internal production being diverted into abnormal channels, thereby throwing normal production out of gear, and increasing the demand on imports.

A further review shows how sanctions are being applied, not through the desire of governments, but through the commercial sense of the countries involved.

I have taken the following extract from the Economist, of September: -

Will Signer Mussolini's '"forward" foreign policy be hold back by economic difficulties? Many people are asking that question; and certainly a number of reports in the last few days indicate that the Duce's preparations in East Africa have given the economic screw in Italy a severe twist. First, the bank rate in Italy was raised last Monday from 3½ to 4½ per cent. This follows a drop in the gold reserve from 5,523 million lire to 5,257 million lire in the last ten days of July. Thus, despite the strict control of Italian citizens' and firms' foreign securities and assets, gold is flowing out; and this emphasizes the reason for the recent decree abandoning the statutory requirement of 40 per cent. gold cover against notes and sight liabilities.

Senator Collingswill realize that the most powerful instrument of the belligerent nations in the last war was the gold reserve. The payment by Germany of gold in certain Pacific ports enabled the Emden to carry on its raiding. Ifa country goes to war, although its internal credit may be sound at the time, it must have gold to purchase its requirements in markets abroad.

Senator Collings - The gold reserve of the Commonwealth is not very large. We had better be careful.

Senator HARDY - But Australia is not going to war. Mussolini has ordered the mobilization of all foreign credits and fluids belonging to Italian citizens -

Secondly, the need for transport of goods andmen in East Africa has led to the withdrawal of many Italian ships from the Black Sea route, and to the crowding of tramps and transports through the Suez Canal. Many foreign ships, chiefly Greek, are under charter for this purpose: and it is reported from Germany that thirteen vessels, with a total tonnage of 120.000 have been purchased by Italy from foreign countries, while negotiations are continuing for further ships.

Thirdly, Italy has been trying hard to' buy cotton-

If there is one commodity that a belligerent nation must have above all others - Senator Brand will readily endorse this - it is cotton for big gun ammunition - but she has met with a rebuff-

Not from Great Britain or any other member of the League, but- in the United States, where the Governmentowned Export-Import Bank has declined to grant short-term credits to American exporters of United States cotton to Italy despite the huge American stocks of a commodity which is one of the " sinews of war ".

Although the United States is not imposing sanctions, the very internal economy of Italy is imposing a sanctions programme on nations outside the League.

Senator Collings - Then we need not worry.

Senator HARDY - For a gentleman who does not worry, the honorable senator looks particularly upset at present. I venture to say that the easiest way out of his difficulty would be for him to vote for the bill. The Economist continued - fourthly, it is reported that Italy already owes South Wales and Durham exporters over £1,500,090 for coal; that the sum of £1,770,792 was still outstanding on 7th August under the Anglo-Italian trade agreement and awaiting transfer to British exporters, and that in view of her indebtedness to British coal exporters, Italy has chartered seven Greek ships to transport new Italian purchases of Polish coal to Italy.Italy's industries, more than those of any otherEuropean great power, ourselves included, depend on imported raw materials.

The greatest asset we have in our sanctions programme is the internal and economic position of Italy. This extract is taken from Fascism at Work, by El win -

The national debt amounted to about. 95,000,000,000 lire in 1922-23. The expenditure for unproductive needs, such as military police, colonies, &c., induced budget deficits of 3,000,000,000 and even more. In the ten years of Fascist rule, the internal debt has risen from 95,000,000,000 to at least 135,000.000,000 lire, in round figures, over 10,000,000,000 lire of new debts per day.

Yet this is the country which, according to the Leader of the Opposition, will enter into a world-wide war if sanctions are imposed against it. Italy will be hard put to make further progress with the conquest of Abyssinia. The national wealth of Italy is estimated by Mortara, an eminent economist, at only 450,000,000,000 lire, so that here exists a state of affairs hardly to be met with elsewhere, even in a colony, let alone among the great powers of Europe! The first part of the bill, which outlines the prohibition of the export of arms, is one which the Leader of the Opposition does not propose to support, and this is most illuminating. If the bill were stripped of its camouflage and merely provided that Australia should join with the other nations in prohibiting the export of arms, the Leader of the Opposition. to be consistent, would have to oppose it. because it would interfere with the freedom of Australia to export arms to Italy.

Senator Collings - Australia does not manufacture sufficient arms to defend itself.

Senator HARDY - I propose to quote figures showing the world's export of munitions for 1933. My authority is the Blue Book of the League of Nations. The United Kingdom, itself one of the parties to the proposal to impose sanctions, exports 33.8 per cent. of the total supplies. Is it not reasonable to assume if over one-third of the exportable arms are suddenly cut off, Italy must feel the effect of the cessation, or does the honorable senator advocate that England should continue to export 33.8 per cent. of the world's armaments? The United States of America, which has been so often referred to as a country outside the League, exports about 16.7 per cent. France, a member of the League, exports 14.6 per cent. Of the three great exporting nations in the munition world then, two of them, who represent 50 per cent. of the total, are members of the League and are applying sanctions. But even that fact does not impress the Leader of the Opposition who says that to apply sanctions is to interfere with freedom - that the very fact that these countries will not export their arms to Italy will create war.

Senator Collings - Once again, Mr. President, I rise to protest against statements being made about me. The last assertion of Senator Hardy was most deliberate. I never used the words, and never thought them. I do not desire the honorable senator to withdraw; I merely desire to draw attention to his inaccuracy.

Senator HARDY - I realize that the Leader of the Opposition does not appreciate my deductions. He has spoken against the prohibition of the export of arms.

Senator Collings - No.

Senator HARDY - The honorable senator has spoken against the application of sanctions, and they include a prohibition of the export of arms. Two nations are responsible for 50 per cent. of the total export of arms. The complete table, which may interest honorable senators, is as follows: -


The Leader of the Opposition (Senator Collings) may say that that does not prove my case, but I venture to suggest that if he were asked to give a definite vote as to whether we should supply Italy with arms to conduct war against Abyssinia his reply would be in the negative. Well, then, I ask him to support the bill.

I now come to the subject of credits, which, as I have already pointed out, are extremely important for they are necessary for the prosecution of war. Although a modern army may have a constant supply of arms and munitions to prosecute a campaign, as Senator Brand and Senator Sampson know, it needs about ten men in the supply organization to keep one man in the field. To obtain these supplies gold is necessary. The. surest way in which to limit a nation's ability to buy in the world's markets is to restrict its credits. There is no moral difference between sending 1,000,000 rifles from Australia for use by the Italian army and sending £1,000,000. Both are used in conducting military operations and consequently come under sanctions. There are two classes of credits. There are credits owned by a country before the commencement of hostilities, and those secured by it after the outbreak of hostilities. Let us examine the credits in existence at the outbreak of war. They include foreign currency within the country; foreign securities within the country ; commercial balances and instruments abroad; and branch houses, real property, abroad. Before the commencement of hostilities, a nation must attempt to marshal its credits Mussolini has already acted on these lines. After the commencement of hostilities it is an entirely different matter, because it can then extend its credits only on interest and dividends on securities held - provided there were no sanctions; commercial balances from exports - provided that there are exports; borrowings by commercial houses - provided there are no sanctions preventing borrowing; credits or loans secured by the government - provided there are no sanctions; credits or loans secured by municipalities or credits transferred from a third country. When honorable senators analyse the provisions of the bill and the credit machinery they will find that the only source of credit available to Italy, apart from its internal gold reserve, is that available in the United States of America, Germany and Japan. If we analyse Italian loans since 1921 to the present day we find that all of these three countries, particularly the United States of America, are creditor countries which, in commercial terras, means that there is no balance to be transferred. Therefore, Italy cannot obtain credits abroad and the only credit available is its rapidly diminishing gold supply. Over 51 nations are co-operating in a campaign to prevent Mussolini from bringing western civilization to its feet. If the position which I have outlined does not impress the members of the Australian Labour party I do not know what will. The only conclusion I can come to is that the Australian Labour party is opposing this bill because it does not wish to work in cooperation with any other political party however great the national emergency may be.

The only other point I wish to stress is the fact that the major portion of the speech of the Leader of the Opposition - I did not hear it, but I read it carefullyagainst the application of sanctions was an attempt to ridicule the Government because Italy is securing petrol supplies from the United States of America. I have heard members of the Labour party in this chamber say that sanctions cannot be effective because petrol, which is used extensively by a mechanized army, is flowing freely out of the United States of America into Italy. The Leader of the Opposition said -

Deny Italy petrol and immediately its capacity to attack Abyssinia and prosecute the present conflict would be prejudiced.

Does the honorable senator realize the significance of those words? He has admitted that sanctions can be effective in stopping war.

Senator Collings - I was stressing the point that petrol had not been placed on the list of commodities covered by sanctions, and I told the Senate why.

Senator HARDY - In that admission the Leader of the Opposition has shown that a continuation of the war can be preven ted.

Senator Collings - The honorable senator has quoted only a portion of a sentence.

Senator HARDY - If we assist to prevent Italy from receiving raw material we can perhaps stop the present war.

I now wish to deal briefly with the subject which has not yet been touched upon during the debate. I refer to Australia's export trade. I may be asked whether that is relevant to the bill. It is in this respect: We have to consider the consequence, if collective action fails. The League of Nations is the only instrument ever devised to ensure international peace, and if we abandon it what are the consequences likely to be?

The PRESIDENT - The honorable senator has exhausted his time. [Extension of time granted.]

Senator HARDY - If the League and collective action fail each nation must inevitably adopt a policy of selfsufficiency or economic nationalism, which will ultimately force Australian export trade to its knees. A short time ago the German Minister for Agriculculture said " We shall never be forced to our knees as we were forced a few years ago ". Because of the fear engendered among European nations they have been forced to adopt a policy of selfsufficiency. We must not remove the only instrument which stands between Australia and complete economic chaos. Fully one-third of Australia's produce is exported, and if we are to maintain peace and ensure a continuance of existing trade conditions we must support the bill.

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