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Tuesday, 24 August 1937

Senator A J McLACHLAN (SOUTH AUSTRALIA) (Postmaster-General) . - by leave - The International Sugar Conference held in London from the 5th April to the 6th May of this year, was, in effect, the culmination of prolonged efforts by many sugar-producing countries to deal with the related problems of excessive stocks of sugar, world overproduction, and very low prices in world markets.

The sugar depression started nine years ago, and so preceded the general world economic depression by some years.

For the nine years up to the end of 1936, the price of raw sugar in the world's markets was little more than one-half of the cost of production, even in the most efficient countries which employ native labour. The London price of raw sugar in bond during that period was usually between £4 and £5 a ton, compared with the estimated cost of production of about £9 a ton, which would enable the great sugar-producing countries, such as Java and Cuba, to function at a profit and also pay reasonable wages to their workers.

The long-continued period of abnormally low sugar prices produced suffering and great loss in those countries in which sugar is the principal crop. Overproduction and excessive world stocks, which a few years ago reached 9,000,000 tons, forced Cuba to reduce its annual production from 5,200,000 tons to 2,300,000 tons, and Java to do so from 2,900,000 tons to as low as 450,000 tons. This abnormal and uneconomic position caused unprecedented chaos and losses in some countries which export all or most of their production. Other countries which produced some part of their own consumption of sugar were obliged to meet this situation by bounties and payments to enable their producers to meet at least the cost of production.

Australia, happily, did not require to increase its' domestic price, but actually was able to reduce it four years ago. This was due partly to continued improvement in the already high efficiency of our sugar industry, and partly to lower wages and other costs which followed from Australia's general economic readjustment during 1931. Even so, sugar exports from Australia have been returning unsatisfactory financial returns, despite assistance from exchange and British and Canadian tariff preferences, so that the industry's position had become substantially weakened, to the marked detriment of the producers, as is clearly shown, apart from other evidence, by the very small amounts now received from sugar producers in respect of Federal and State income taxation.

Reverting to. the general world sugar position, honorable senators may remember that, in May, 1931, the International

Sugar Agreement, known as " the Chadbourne plan ", was signed by representatives of Cuba, Java, Germany, Czechoslovakia, Poland, Hungary, Belgium and Peru. The objects of this plan were the immediate reduction of world sugar production to something below then current consumption, and the segregation of excess stocks held by the signatory countries for the purpose of liquidating all excess stocks within five years, and thus restoring remunerative world prices.

The eight countries which adopted the Chadbourne plan severely reduced their production and exports, and even went so far, subsequent to signing the agreement, as further to reduce their outputs. Unfortunately, however, several countries outside the Chadbourne plan concurrently increased their production and exports, and thus nullified the sacrifices of the "Chadbourne" countries. In these circumstances, world market prices remained hopelessly unprofitable to any sugarexporting nation.

There was such distress in sugarproducing countries that the problem of sugar was brought up at the World Monetary and Economic Conference of 1.933, which was held under the auspices of the League of Nations. That conference decided to hold an international sugar conference to deal with the problem. The United Kingdom Government was requested to convene the conference at the earliest practicable date. It was clear, after the experience of the Chadbourne agreement, that no international agreement could hope to succeed unless the great bulk of the world's sugar production and export fell within its ambit. In consequence, all the principal sugarproducing countries of the world were invited.

Towards the end of 1935, it was expected that the conference would be held about March, 1936, but owing to difficulty on the part of several large producing countries in sending representatives at that time, it became necessary to postpone the conference until April, 1937, when the attendance of 22 nations was 'secured, representing about 90 per cent, of all production and exports of sugar in the world.

Preparations for the participation of Australia in the conference began some time before its meeting in London. Considerable correspondence by despatch and cable was exchanged with Great Britain during the eighteen months prior to April, 1937, in order to ensure that, when the conference met, Australian interests should not suffer.

The Government appointed the Treasurer (The Honorable R. G. Casey) as principal delegate to the International Sugar Conference, together with the High Commissioner, the Right Honorable S. M. Bruce; and the Premier of Queensland, the Honorable W. Forgan Smith, who went to London on the invitation of the Queensland sugar producers to watch their interests, and was given recognition by the Commonwealth Government as a substitute delegate.

The 'British Empire countries met " frequently to decide their attitude towards new situations that frequently developed as the conference proceeded. .The conference held a large number of meetings, both in public and in private. The conflicting interests of a wide range of countries necessitated protracted negotiations. It was the aim of all those concerned with the preparation and presentation of Australia's case to endeavour to obtain the right to export as high a tonnage of Australia's raw sugar as was possible from the lands already devoted to sugar production. In 1936, Australia exported 409,000 long tons of raw sugar. The 1936 season had been propitious, and we were fortunate in being able to secure that discussion of future export tonnages at the International Sugar Conference should be on the basis of the 1936 production, and not on that of any earlier, and, for Australia, less productive year.

By reason of the long years of experience which Australia has had of the economic control of sugar production, and because of the not inconsiderable interests that we had at stake, the Australian delegation took a leading part in the manifold negotiations of the conference, both in the international sphere and in the discussions with the representatives of other members of the British Empire. There were many occasions when the work of the conference seemed doomed to failure, but the fact that failure to agree would have meant a continuance of conditions approaching chaos in the world's sugar market forced acceptance of the allocation of quotas that eventually emerged.

The International Sugar Agreement contains a carefully devised five-year plan, to commence ou the 1st September, 1937, for establishing and maintaining an orderly relationship between world supply and demand in respect of sugar with the object of securing average prices in the free markets of the world that will 'be equitable to both producers and consumers. By " free markets " is meant those countries which purchase sugar unassisted by import quotas, preferential tariffs, or any other means. The quantity of sugar so involved is approximately 3,600,000 tons per annum. The agreement constitutes one of the few outstanding achievements to date in the realm of international economics. There has not previously been a world agreement, dealing with a commodity, signed by so many nations, or covering such a complex problem as sugar. Already the agreement has stabilized the free-market price at nearly 50 per cent, above the average level of the last nine years, and it is not impossible that further price rises will occur in the world's markets. It guarantees to Australia an irreducible basic export, quota of 400,000 long tons, or 406,423 metric tons, for each year of the agreement, starting on the 1st September, 1937, and also, after the first year, an addition to that quantity representing Australia's proportionate share of any increase of consumption by those parts of the British Empire which import sugar. The minimum quota of 400,000 long tons is actually only 9,000 tons less than the export surplus available from the record 1936 season, which was partly due to phenomenally good climatic conditions in nearly all the sugar-producing districts. When considering this result, it has to be borne in mind that practically every other sugar-producing country in the world experienced substantial reduc-tion of its previous export total.

Australia, therefore, emerges from the International Sugar Conference under happy conditions. T.t is clear that we shall at least be able to maintain the full production that at present exists and that there will be no reduction of the areas under sugar or of employment in the industry. With the prospect of increased exports in the future as consumption in Britain rises, as it is now doing, even better conditions in our sugar districts are more than probable. When this agreement comes into force, the present British tariff preference of £3 Jus. a ton on dominiongrown sugar of 96 degrees polarization will be renewed for the term of the agreement, namely, five years. Furthermore, when he was in London, the Treasurer wa3 able to ensure retention of the valuable provision whereby the British Government must give at least eighteen months' notice of any intention to modify this preference of £3 15s. a ton on Australian sugar entering Great Britain-

The agreement will be administered by an International Sugar Council and an executive committee. The Government has appointed the High Commissioner, Mr. S. M. Bruce; his Official Secretary, Mr. S. G. McFarlane, and the AgentGeneral for Queensland, Mr. L. H. Pike, to act as Australia's representatives on the council. The two first-named gentlemen have already been appointed to the provisional council which is doing the preliminary work necessary to bring the agreement into force on the 1st September next. For the very important first year of the agreement, when all the administrative machinery will be created, and most of the problems of world control will be determined, Australia has been fortunate enough to secure a seat on the executive committee, which will meet far more often than the council, and will be responsible for most of the work arising out of the agreement. Mr. Bruce has been appointed to represent Australia on this committee, with Mr. Pike as alternate representative. The Government took the necessary steps some weeks ago to ratify the International Sugar Agreement, and the instrument of ratification is now in the possession of the Government of the United Kingdom as required by the agreement.

The safeguarding for 'five years of a minimum market for Australian raw sugar, practically equal to our previous record exports, and ut improved prices, is a satisfactory outcome. The net return on our exported sugar at to-day's price is about 30s. a ton higher than the average for 1936. This is a direct result of the success of the conference. On an export volume of 'f00,000 tons, this return represents increased export income to Australia at the rate of about £600,000 a year. I need hardly say that the references which I have made to higher prices for sugar relate solely to the markets of the world outside our shores, and have no relation to she retail price of sugar within Australia, which, of course, will remain unaltered.

The position of the Australian sugar industry to-day is that it has a greater measure of security than it has ever enjoyed, with consequent benefit to over 30,000 sugar fanners and workers and their wives and families, and the large amount of capital invested in the industry. Reflex influences of an equally favorable character will he felt by the many towns, business people, and municipal authorities in the sugar districts of Queensland and New South Wales, and by State railways, ports, and general finances. The maintenance of sound, vigorous settlement in the far north is of great importance to Australia for national reasons, and the sugar industry, which is hy far the most significant factor in such settlement, has now been assured of the opportunity to continue at its present level, and, indeed, to expand as the years go on.

Senate adjourned at 8-25 p.m.

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