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Tuesday, 5 May 1936

Senator LECKIE (Victoria) .- I regret that the Minister has put the balance of trade with the United States of America and Canada in the forefront of this discussion. I admit that his arguments on t'his point were very sound, but if any industry can stand on its merits and prove by its own efforts that it is worth having, it is that of the manufacture of agricultural implements. Australian harvesting engineers have practically led the world; it was due to the enterprise and brains of the Australian artisan in this industry that the wheatfarmer was enabled to stop on the land and grow any wheat a>t all. Consequently, I am amazed at the absolute ingratitude of those who claim to represent country interests in this chamber, and yet are " putting the boot " into these manufacturers. Why have they adopted this procedure? They say it is because they may get their implements cheaper. The absurdity of such a claim is seen when the prices of Australian agricultural machinery are compared with those of similar machinery in New Zealand, South Africa, and Argentina, into which countries these machines enter free of duty. In every instance, the Australian price is lower. One can imagine what would happen to the farmers of Australia if they were at the mercy of overseas combines; they would soon realize that they .would not get their machinery at cheaper prices than they pay to-day. The makers of agricultural machinery in Australia have saved our farmers. I cannot allow to pass unchallenged the statement by .Senator Badman, that the benefits enjoyed by the Australian manufacturer as the result of the existing duty costs the country £5 a head or £30,000^000 a year. The fact is that of all imports of a total value of £70,000,000, the value of those subject to protective duties is only £9,571,000. The latter figure represents the value of the imports bearing duty and not collections of duty. However, I suppose the misleading statement to which I have drawn attention will circulate among the farmers of Australia, and thus cause a great deal of harm. I advise Senator Badman to revise his figures and not to repeat wild statements of this nature. Obviously such misrepresentation does harm to his own ease because it is so easy to refute. The history of prices of Australian agricultural machinery shows that there has been a continual reduction over a large number of years. Just haphazardly I shall quote figures to verify this statement. A 6-foot stripper harvester, which in 1925 cost £122 10s., now costs £106 15s. 3d. ; an 8-foot header harvester has been reduced from £185 to £144 15s. 6d. ; a stump-jump disc plough, five furrows, from £53 13s. to £44 17s.; and an 8-foot, reaper thrasher from £190 10s. to £152 Ils. 9d. These figures show that in all cases present prices are lower than those ruling nine years ago; yet it is alleged that the manufacturers to-day are making 'a " welter " of it.

Senator Herbert Hays - The cost of raw material has come down ; and wages also have been reduced.

Senator LECKIE - The honorable senator is apparently suggesting that the exchange rate of £2'5 is a protective duty.

Senator Herbert Hays - I did not say anything about the exchange; I said that the Australian raw materials are cheaper to-day than they were nine years ago.

Senator LECKIE - The price the Australian manufacturer has to pay for raw material is the English price plus the £25 exchange.

Senator Guthrie - The Australian manufacturer does not import all his raw material from England.

Senator LECKIE - That does not matter ; in any case his costs are as I have mentioned.

Senator Herbert Hays - That is nonsense. Timber is one of the raw materials, and the price of it has decreased.

Senator LECKIE - The honorable senator is wrong if he says that the Australian manufacturer does not pay for his raw material the overseas cost, plus the £25 exchange. Only last week Senator Guthrie quoted figures to show that whilst the Australian manufacturer pays ls. 2-Jd. per lb. for his wool, the English manufacturer gets it for 10|d. sterling. Therefore the Australian manufacturer pays the English price, plus the £25 exchange. The net protection advantage of exchange is from 5 per cent, to 8 per cent, according to the proportion of imported components in the manufactured article. I. want to disabuse the minds of honorable senators of the idea that the £25 exchange is equivalent to 25 per cent, duty; its protective effect is very small. "When it is realized that the rise of the exchange rate has increased living and production costs by £5,000,000 annually, it will be seen that the manufacturer has to rely upon any tariff duty this Parliament grants him for the protection of his industry. I repeat that of all industries in Australia the manufacture of agricultural machinery is one of the most successful, and that it has been of greater advantage to the Australian farmer than any other industry. It has reduced the price of his machinery from 30 per cent. to 40 per cent.; it has given him better machinery and it has enabled him to stop on the land, because* without it he would have been unable to compete on the world markets.

Senator Sir GEORGEPEARCE (Western Australia- Minister for External vened in this discussion but for the fact that Senator Leckie deprecated the action of the Minister in raising, on this item, the matter of our trade balances with the United States of America and Canada. I suggest to the committee that this is a most important phase of this item, and no matter what his fiscal beliefs may be no honorable senator can afford to disregard it. At present Australia's trade balance as a whole is satisfactory, but the seasonal prospects are far from being so. The opening of the present season has not been auspicious; a drought would confront us with a serious adverse trade balance. With some countries our trade balance is favorable, but with others ii is unfavorable. The country with which it is conspicuously against us is the United States of America. The Minister has quoted figures showing that before the depression our excess of merchandise imports from the United States of America over our exports to that country during a period of five years was no less than the staggering figure of £144,000,000. Even during the depression, from 1930 to 1935, our excess of merchandise imports from the United States of America was over £36,000,000, whilst for the seven months of 1935-36, this excess already totals over £5,250,000. With Canada also we have an unfavorable trade balance, although in respect of that country the position is not so serious. Honorable senators cannot afford to disregard this phase. An increase of our imports from the United States at this juncture would intensify one of our most pressing, national problems - a problem that has been causing the Government concern for the last, two years. How would honorable senators face the position were they entrusted with the responsibilty of government and found the trade balance so unfavorable that the country could not meet it's interest liabilities overseas? Have they ever thought of what the Government must do under such circumstances? It would have the choice of several courses. Our currency could be further depreciated by increasing the rate of exchange. That in itself would have the effect of checking imports in the same way as an increase of the tariff. I do not agree with Senator Leckie's remarks on exchange ; the incidence of the present rate of exchange is much more protective that he has admitted. If should he faced with a lean season in the coming twelve months, the raising of the exchange rate is one of thecourses we shall have to consider. I ask honorable senators to bear in mind not only the effect of this course in respect ofduties on agricultural implements' and our trade with the United States of America, but also its effect upon our imports as a whole. An alternative would be the flotation of a loan overseas.Can honorable senators contemplate light heartedly a resumption of borrowing overseas in order to rectify our trade balance? Do they appreciate what would be the effect of that step on Australian credit? Another alternative is that what was adopted by the Scullin Government, namely, the imposition of embargoes and prohibitive duties. Honorable senators must realize that whatever government is in power it cannot repudiate its overseas obligations, and therefore one of the alternatives I have mentioned would have to be adopted. We are now faced with a proposal to assist the United States of America, which is principally responsible for our adverse trade balance, for unless the request contemplates an increase of importations from that country, and a further widening of the margin now existing between our exports and imports from the United States of America, it is meaningless. I appeal to honorable senators, having regard to the responsibility which they must shoulder, the knowledge which they possess of our trade figures, and the delicate position we have been in for the last twelve months, to realize that at any time a drought may come upon us. We have had a long series of good seasons, and according to the normal cycle we are due for a. period of bad seasons. Honorable senators should not lightly disregard these factors. I can assure them that they are real and are pressing upon the Government with a good deal of weight at this juncture.

The other country involved in this connexion is Canada, with which we have a trade treaty. That treaty is more favorable to Canada than it is to Australia, and within the next few months we propose to endeavour to get the treaty amended, to make it more favorable to Australia. We have been informed by the Canadian Government that a delegation will be visiting Australia with the object of entering into negotiations. I ask honorable senators if it is wise, at this stage, to give away something which we may have to give when negotiations are about to commence? All treaties are matters of bargaining, and of concessions by both sides. Is it wise that we should give anything away before we know what Canada is prepared to do? There are many concessions which Canada could give us, and there is no reason why at this stage we should part with any advantages which we enjoy in this respect.

Senator McLeay - Those countries are not exporting to Australia large quantities of the implements covered by the request.

Senator Sir GEORGE PEARCE - They are exporting agricultural implements.

Senator McLeay - The value of those exported to Australia in 1935 was low.

Senator Sir GEORGEPEARCE.Some lines of agricultural machinery, perhaps not those covered by this request, are exported to Australia.

Senator McLeay - Will the Minister give the import figures in respect of the implements under consideration?

Senator Sir GEORGEPEARCE.The value of the imports has been considerable. We know that an agreement between one of the largest implement manufacturers in Canada and one of the biggest manufacturers in Australia, has been entered into which has resulted in the two organizations entering into a partnership to manufacture in Australia.

Senator Gibson - There is also a trade combination between a manufacturer in the United States of America and an Australian firm.

Senator Sir GEORGE PEARCE - I was not aware of that. This is not the time to give an advantage to Canada, which we might be prepared to give later. The committee should consider these points before making a present to the United States of America of decreased duties as is suggested. The attention of the Government of the United States of America has been directed to our tremendous adverse trade balance, and it has been asked to say what it is prepared to do. Some time ago we read speeches delivered by the Honorable Cordell Hull concerning the great blessing that will be conferred upon the world when economic nationalism ends, and tariffs are lowered, but in response to our request to the Government of the United States of America, we have received very cold comfort.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - I have been informed to-night that our request for negotiations has been .refused.

Senator Sir GEORGEPEARCE.That is so. The Commonwealth Government received no encouragement whatever. Some time in the dim and distant future, the United States of America may be prepared to discuss trade matters with Australia. When conditions in that country clear up, its Government may be prepared to do something. The United States of America is conducting trade treaties with other countries where it hopes to obtain greater markets for its manufactures; but so far it has not shown the slightest inclination to meet' us.

Senator Plain - Why should it, when it is having its own way in every direction ?

Senator Sir GEORGE PEARCE - Yes, why should it? Without getting anything from the United States of America, we are asked to grant that country further concessions. What is the United States of America doing with our primary produce? What is the duty on Australian wool entering the United States of America ? It is one of the few countries in the world which penalizes our wool and it imposes a duty of about 15d. per lb. Can any Australian wheat, fruit, or butter enter into that country under saleable conditions? Surely, if we are hoping to find expanding markets for our primary products we should say to the

United States of America, "If we are prepared to admit your agricultural implements at reasonable rates of duty, will you accept some of our agricultural products?" That country will not accept anything from Australia. Australia sells a larger quantity of its wine on the British market than in the markets of any other country; but when the United States of America abandoned prohibition and we asked for a quota, for Australian wine, we were granted a quota which was infinitesimal compared with what we sell in the British market. Before we make concessions to the United States of America, we should bo sure of receiving a quid pro quo. I submit these points to honorable senators for their consideration, quite apart from the fiscal issue and the relative merits of the machinery produced in the United States of America, and the price at which it is sold. The Tariff Board has already shown that there is nothing wrong with the prices at which the locally-manufactured implements are marketed. I again appeal to honorable senators to give due weight to these considerations before supporting a request which, if adopted, would further intensify the difficulties of this country in regard to its overseas trade balance.

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