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Thursday, 30 April 1936

Senator SAMPSON (Tasmania) . - I should not have risen to speak this afternoon but for the fact that when the bill is in committee I shall be in the chair and unable to express my views on tariff policy. Of all debates, those relating to the tariff are the most futile and, perhaps, the most monotonous. I have been a member of the Senate for about ten years. During the whole of that time [ have not heard any member of this chamber break fresh ground with regard to tariff matters, or enunciate opinions that are new. A debate on the tariff reminds me of the title of the popular comedy, " Aren't We All ?" Whenever any member of this chamber or the House of Representatives refers to his protectionist leanings or his fiscal beliefs, we would be wise to take what he says with a grain of salt, because however sound a man may appear to be in theory, either as a freetrader or protectionist, I am afraid that he is deceiving himself. For any honorable senator to declare his fiscal belief dogmatically is, to say the least, a trifle risky. Later his positiveness may be somewhat embarrassing, because every member of this Parliament is elected to safeguard the interests of his constituents and not infrequently tariff duties on particular items, by reason of their effect on his constituents, influence his views and vote.

Having thus cleared the ground, I purpose touching briefly upon the position of an Australian key industry - that of the manufacture of cement. For n number of reasons this is a most important key industry as we should discover if, unfortunately, this country were embroiled in war. As some of us know only too well, if in wartime we were dependent on supplies of . cement from outside, Australia, would be in a very serious position. I am afraid that, on this subject of cement duties, I am a geographical protectionist. I think the same may be said of nearlyall senators in respect of particular tariff items. This is only natural, because, as I have stated, we represent different constituencies in our respective States, and any action that is likely to injure the interests of those who send us here pur-, us on the qui vive to protect them.

The establishment of the cement industry in Tasmania has been difficult and, for those who invested their money in it, an unfortunate experience. I well remember the flotation in 1920, of a company with a capital of £600,000 to exploit the limestone deposits on Maria Island, off the east coast of Tasmania. The venture ended in absolute disaster. It was sponsored by a famous Australian soldier and engineer, the late Sir John Monash, who later left the board of directors to become chairman of the Victorian Electricity Commission. A considerable number of Tasmanian civilians, myself included, invested money in the proposal. The bulk of my deferred pay - I had recently returned from the war - absolutely vanished in the undertaking. I mention this because of the recent hostile criticism of the Australian cement companies which have been charged with profiteering and amassing colossal- profits. Following the failure of the scheme to develop the limestone deposits on Maria Island, there was a proposal to work the shale oil deposits in conjunction with the limestone deposits, the idea being to use shale oil as fuel for the manufacture of cement and also to extract oil from the shale. It was to be a big combined venture - shale oil and cement. Unhappily thu company lost about one-third of its capital. I wa3 not until Dorman, Long and Company commenced construction of the Sydney Harbor bridge that another attempt was made to work the limestone deposits in .Tasmania. Dorman, Long and Company became interested in the' project, hut the company had to struggle against great difficulties, and for many years the ordinary shareholders were on the " outer." It is only in recent years that the company has been able to show a profit and give to shareholders some return on their investment.

Senator Arkins - Why did Dorman, Long and Company come into the matter ?

Senator SAMPSON - Because they wished to be assured of supplies, and to have some voice in fixing the price. They did not wish to be embarrassed for supplies while engaged on such a gigantic undertaking. The adoption of the recommendations of the Tariff Board will mean that British cement will be imported .into Australia duty free, thus threatening the continuance of the Tasmanian cement manufacturing industry. The admission of British cement free of duty would seriously affect the Tasmanian company, because, owing to the relatively small market for cement in Tasmania, SO per cent, of its output has to be disposed of principally in Victoria and in Queensland. The amendment carried in the House of Representatives which provides for a duty of 6d. per cwt., a 50 per cent, reduction of the existing duty of ls. per cwt., actually amounts to only 4$d. per cwt. when allowance is made for exchange adjustment, and is the absolute minimum of protection which should apply to the industry. I do not wish the Australian cement-making industry to be left totally unprotected by allowing British cement to be landed in Australia free of duty. I have always been a " barr acker " for the Tariff Board, because I am convinced that the members of this Parliament have insufficient time to make the exhaustive, inquiries that are made by the board into the rates of duty imposed on the numerous items in the schedule. That responsibility has been deputed to the Tariff Board, which, I am afraid, owing to overwork and the hurried manner in which it has to do its job, cannot always do justice to the investigations entrusted to it. I have read both reports of the Tariff Board on this subject, which are excellent, theoretically, but from a practical standpoint are defective. I do not think that the cement companies in Australia can oper ate successfully on the figures, set out in the board's reports. For instance, the board states that the reasonable selling price at factories should be : Queensland, £2 18s. 2d. a ton; New South Wales!, £2 16s. od.; Victoria, £3 0s. 2d.; South Australia, £3 0s. 2d.; and Tasmania, £2 16s. 5d. It then gives the prices at which it considers Australian cement should be sold in the capital cities, and also the landed cost of imported cement. The reasonable maximum selling prices are estimated by the board as Brisbane. £3 3s. 10d.; Sydney, £3 16s. 3d.; Mel: bourne, £3 Ss. 7d.; Adelaide, £3 8s. 2d.; and Hobart, £3 10s. lOd. The board also sets out the duty-free landed cost of imported cement on the c.i.f. price of 51s. 6d. a ton. which is : Brisbane. £3 lis. 8d.; Sydney, £3 10s. 3d.; Mel: bourne, £3 lis. lOd. ; Adelaide, £3 lis. 10d.; and Hobart, £3 lis. 2d. These figures show the margin between the prices at which the board considers cement should . be sold in capital cities, and the duty-free landed cost of imported cement. It will be noted that the selling price of locally manufactured cement stated by the board is merely the works selling price, plus the freight to capital cities. It overlooks the various agency and merchants' charges, which are inevitable in connexion with distribution. Distribution is a. big problem, as we in Tasmania know to our cost. Importers can always short circuit such charges by selling on an indent basis, and; if forced into such competition, the returns to the Tasmanian manufacturers would be reduced much below the figure allowed by the Tariff Board, thus making profitable production impossible. Quite apart from these aspects, the allowance of 10s. a ton mentioned by the board is entirely inadequate when it is realized tha* that amount has to cover taxation, depreciation of plant, building up reserves, and contingencies. As the Tasmanian company has to ship to the mainland approximately 80 per cent, of its production," it has received no consideration whatever. The inference from the board's report is that the Tasmanian cement manufacturers should confine their activities to that State, because, on the board's own figures, the markets on the mainland would be quite beyond their reach. The Tasmanian industry, which has an output of about 60,000 tons annually, cannot possibly carry on if it is lo be limited to the local market. Recently a member of this Parliament said to me, " Surely you are not going lo hold up the whole of Australia to high prices for cement because there is a tu'penny ha'penny cement show in Tasmania. It would be better if the industry in that State went out of business ". lt is easy for a representative of a mainland State to make such an observation, but the township of Railton depends almost entirely upon the operations of this company. If British cement is imported duty free, the works will have to close down and a large number of highlyskilled men will be thrown out of employment. What is to be done with them ? Are they to go on the dole? Moreover, Devonport would also be seriously affected, as practically every interstate vessel leaving that port takes from 200 to 400 tons of cement. From 100 to 150 tons weekly is shipped .to Brisbane, Mackay, Townsville, and Cairns. The freight on 1 ton of cement from. Tasmania to Queensland is much higher than it is on a similar quantity from Great Britain to Australia. Although cement manufacturers have been accused of profiteering, there has been a steady fall in prices during the last twelve years. Cement which was once £6 10s. a ton is now a little over £4 a ton. Even during the last few months the Tasmanian company has reduced its price by from 5s. to 10s. a ton, and that on the basis of last year's production represents about £15,000. These reductions, however, are insufficient to allow the Australian product to compete with imported cement. If the British product is to be admitted free of duty, the Tasmanian industry will be seriously threatened. Yesterday Senator Foll referred to a circular issued by the Tariff Reform Committer of the Sydney Chamber of Commerce. I received a copy of the circular, and I do not think we .can object to its contents, because the representatives of various interests are entitled to be heard. I asked a representative of the cement manufacturers to let me have some comments on the points set out in this semi-official document issued in Sydney. I have nothing to say concerning the portion that is said to contain threats, because members of this Parliament are accustomed to threats and consequently are not likely to be intimidated in any way. The replies read -

Page 1, paragraph 2. - The duty on cement (British preferential) before the 29th November was not I/is. ; it was 10s. M. Even the Minister for Customs has continually referred to it as 15s., but the formula; for exchange is one-fourth of the duty, or 12½ per cent, of the "value for duty", whichever is the less. In the case of £1 duty, the latter operated and reduced it to His. 9d.; now that the duty has been reduced to 10s. per ton, the former operates and reduces it to 7s. Od. per ton, so the manufacturers have lost 0s. 3d. per ton.

Page 1, paragraphs 3, 4 and 5. - The writer of the circular has evidently not studied the secund report of the Tariff Board, which showed that the 70s. 3d. on trucks Darling Harbour, Sydney, would certainly not leave New South Wales manufacturers 10s. per ton, as the cost of landing English cement was 70s. 3d. per ton, so the New South Wales companies would only have a return of 3s. 10d., out of which taxation, reserves, &c, have to lie provided. Further, the freight of 14s. 8d. to Darling Harbour is comparatively not low, as the works to which this freight applies is not situated at the quarries, and they have to luina; their raw materials (of which they consume 1½ tons to every ton of cement) a distance cf some 30 odd miles. Had the works been erected at the quarries, the freight would have been between 18s. and 10s.

Page 2, paragraph 3. - The British manufacturers were invited to give evidence, but declined; they were also invited to produce their costs, and declined. There is no comparison between the costs of making cement in Britain and in Australia. It is the one industry in which the United Kingdom stands supreme owing to her having raw materials of a very soft nature located on the se;iboard, whereas the Australian article i3 made from a hard crystalline material requiring nearly double the plant and involving heavy freight charges for transport to the coast. However, as the British manufacturers did not give any evidence of their costs it is pure assumption for the writer of the circular to say Hint the 23s. Od. (sterling) f.o.b. England includes all costs and profits. The facts are that England sells for home consumption at 38s., and has been selling for export below 20s. If the writer were correct in saying that all overhead. &.C., and profit were included in the 23s. 6d. as England made about 5.000,000 tons last year her profit must have been nearly £1 per ton or between £4,000,000 and £5,000,000, which of course is absurd. The important thing is that England has a market for over 4,000,000 tons on her own kingdom and this can hear all the overhead, and, like nearly every country in the world, she can afford to sell her excess for export without any overhead loading. There is nothing new in this system of marketing, and, us is well known, Use same is done by Australia with butter, sugar, and other commodities.

Page 2, paragraph 4. - The Australian manufacturer has not taken advantage of the tarriff to force up prices. Evidence was given before the board that one of the leading: companies in New South Wales, and also the only other company in existence in 1921, reduced the price of cement by 13s. per ton in one instance, and by 21s. per ton in the other case, between 1921 and 1931, and this reduction in prices has been made practically each year up to the time of the depression (1931). For the past three years, owing to the considerable slump in trade, it was not possible to make further reductions,but in1936 a reduction was made of as. per ton, and since then of a further 2s.6d. per ton.

It can quite safely bo said that no other building material in Australia has shown such a marked full in price.

Regarding "over-capitalization", the figures given to the board were based on the depreciated value of the plant as certified to by leading city accountants, and, actually, the works cost considerably more than the figures given to the board. Production of cement is in "units" and although with the introduction of the rotary kiln in 1900 a "unit" would be 10.000 tons a year, kilns are now so large that no works would install one under 80,000 tons per annum. In fact kilns are being made in some parts of the world which will give double this output.

In conclusion, some of the remarks referred to in the circular were extracted from the board's first report, when the board estimated the cost of landing English cement at 70s. 3d. per ton. as they would not accept the evidence of the manufacturers that cement could be landed (is. cheaper than this. However, they had ample evidence before them when they dealt with the matter on the second occasion, and, instead of saying that the companies could make reasonable profits at the cost of landing English cement, the board, in conclusion, stated that they " do not suggest that every cement manufacturer can make a reasonable profit by felling at import parity." The board did not inspect any works: had they done sowe think their report would have been on a different basis as they would have appreciated the difficulties of the Australian manufacturer as compared with the English. Admittedly, some of the works did well in the "boom years ". but it must not be overlooked that one company (the National) after many years of struggling went into liquidation and was sold for a pittance and the machinery dispersed: the predecessor of the Goliath Company was the Tasmania Company, which also failed, and was reconstructed under its. present style. The Goliath Company had to write off one-third of its capital last year. The Western Australian Company was the successor to a works which failed. The newest New South Wales company, operating since 1929, has never paid a dividend. The truth of the matter is that the older companies, when making good profits, put these back into plant improve ments and have only paid moderate dividends. This is the only way any industry can succeed. It must not be overlooked that the board fixed 10s. per ton (equal to 10 per cent, gross, and 8 per cent, after paying taxation) as the maximum profit to be made on the maximum output and distinctly said that if manufacturers did not reach their maximum they should not make more than 10s. per ton. As the same overhead would apply, the 8 per cent, net would be reduced more than correspondingly with the reduction in output.

At present, as senators are aware. Australian companies are working on about60 per cent, of their maximum output.

Last: night Senator McLeay stressed the importance of encouraging new efficient industries as one means of rectifying our adverse trade balances with certain countries. Would any one be encouraged to run the risk of establishing new industries in this country when the maximum profit allowed by the Tariff Board, as in the case of cement companies, is 10 per cent, gross or, after taxation has been provided for,8 per cent, net? What new industry would be likely to start under those conditions? From the barrage of " pros " and " cons " on this subject, which, a little while ago, did not loom so important as it appears to-day, several new factors have emerged. For instance, we have been informed officially that the Deputy Prime Minister (Dr. Earle Page) and the AttorneyGeneral (Mr. Menzies) are being seriously embarrassed in the trade negotiations which they are now conducting in London, by the refusal of the House of Representatives to . leave Australian cement entirely unprotected against British competition. That may be the position, but I, for one, doubt very much the truth of that statement.

Senator Collings - It is just a racket.

Senator SAMPSON - I think it is a bogy; it may be bluff. However,I would not like to think that any government ' would try to bluff its supporters. On tariff matters honorable senators are supposed to enjoy the privilege of voting according to their individual judgment. That may be so in theory, but is it so in actual practice? I have grave doubts about it. The Government has got out the whip ; in fact, whips of various kinds are being wielded. Some of them are not very effective, but any old stick will do to beat the dog on occasions. We have been told, and I do not doubt it, that the Government has received a communication from the British Government expressing the view that the decision of the House of Representatives in respect of the duty on cement constitutes a breach of the Ottawa agreement. The Commonwealth Government concurs in that view. I do not say for one moment that this Government asked the British Government to make such a protest, but I submit that the discussion, which took place in the House of Representatives was an invitation to the Government of the United Kingdom to make its protest. Any one who reads the Hansard report of that debate will agree with my statement. In this instance the Parliament of Australia is being charged - and I say unjustifiably - with breaking a treaty. There are merits in the case for some protection on cement, and it is the right of Parliament to amend or impose new tariff duties as it thinks fit. In this matter the Government is sheltering behind' the Tariff Board, but in doing so it is acting inconsistently, because, when it does not agree with a recommendation of the board, it simply says that the board is in error, whilst, on the other hand, when it favours a reduction of any particular duty as recommended by the Tariff Board, it immediately accepts the board's word as infallible and its reports as divinely inspired. Members of the Tariff Board, are not infallible; they are simply human beings who, to the best of their ability, deal with the evidence put before them. The board is absolutely free and independent, and carries out its work according to its lights. The proposal to adopt the recommendation of the board to make the duty on cement - British, free; intermediate, ls. a ton; general, ls. 4-Jd. a ton - is far too drastic. On examination, many of the charges of profiteering which have been made against Australian cement companies will bc found to be most extravagant. Those who voice such charges apparently ignore the initial losses suffered by these companies in launching this comparatively new industry. In pioneering this industry some of these companies suffered colossal losses, and had to pass through a long and trying period, as was the case with the Tasmanian company, before they showed a profit. We should be proud of the pluck and perseverance of those who established and maintained the various enterprises, in spite of the difficulties which confronted them until comparatively recently, when the lifting of the depression enabled them to reap some reward for their earlier efforts. I suggest that the compromise duty of 6d. a ton on' British cement, as was decided upon in the House of Representatives, is fair and should be accepted by honorable senators. Parliament has to decide, whether it is to be the supreme governing authority, or whether it is to ' be merely a creature of its own creation - the Tariff Board. It is for Parliament to decide, and Parliament will no doubt do so. This morning I was told that Australia's national honour is involved in this matter, and I was appealed to, presumably as a man of honour. But is our national honour involved ? I say emphatically that it is not. At the time of the Ottawa Conference the duty on cement was ls. per cwt. With slight fluctuations, that had been the rate for about .20 years. The House of Representatives proposes to make the duty on cement imported from Britain 6d. per cwt.- a reduction of 50 per cent. That proposal is denounced, in extravagant language, as illegal and immoral. As to its legality, I cannot offer an authoritative opinion, because I am not a lawyer. I have, however, read the opinions of counsel, and as far as a layman can understand, the views expressed by eminent counsel and others, it appears to me that the proposal is not illegal. The letter of the agreement has not been broken. But it is a poor look out if we have to depend on the letter of an agreement. We are told that we must remember the spirit of the agreement - the " spirit of Ottawa " must be kept sacred. When all is said and done, what was the spirit of Ottawa? John Bull was there with his sons in an endeavour to enter into a trade agreement. The spirit of Ottawa was the spirit of bargaining. Australia wanted something; John Bull wanted something; the other dominions wanted something. I do not say that the spirit of Ottawa was one of huckstering or haggling, but it was a spirit of bargaining.

Senator Brennan - Mutual advantage.

Senator SAMPSON - That is the sort of term that a lawyer would use; it sounds good, and takes a lot of interpreting. I can imagine the representatives at Ottawa arguing about " mutual advantage ". They went to Ottawa to bargain. [ know something about bargaining, for, on the many occasions on which I have gone into country districts to buy timber, I have always endeavoured to make the best bargain I could for those whom [ represented. The other fellow did the same. This is a commercial age ; the proposals discussed at Ottawa were business proposals. It is all very well to talk about sentiment - the " spirit of Ottawa " - but, after all, the whole conference was a bargain hunt. One delegate said to another : " You give us so much and we will give you such and such.". "Who really knows what was said at Ottawa? Those who were there have not told us anything about the discussions. All we know is that an agreement was entered into, and that this Parliament accepted it.

I apologize to the Senate for having talked at such length on the spirit of Ottawa, but the duties on cement are a matter of concern to me and to my State. I know the business almost inside out, and am to some extent interested in every ton of cement that is shipped from Devonport. I should like to know what there was in the spirit of Ottawa that was different from what I have tried to outline this afternoon. I should not be surprised if my friend for over twenty years, the Minister directing negotiations for trade treaties (Sir Henry Gullett), would himself experience difficulty in defining the spirit of Ottawa. I content myself by saying that it was a bargaining match. To suggest that it was anything else is to insult our intelligence, to put it mildly.

The House of Representatives now proposes to make the duty on cement imported from Britain 6d. per cwt. Par from that proposal being illegal and immoral, it is sound commonsense and a fair compromise. I shall not be a party to throwing an efficient key industry to the importing wolves, and, therefore, I shall support the duty agreed to by the House of Representatives.

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