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Wednesday, 2 December 1936

Senator HARDY (New South Wales) . - I was very interested in the speech of the Leader of the Opposition (Senator Collings) and a great light dawned on me when I heard his concluding remark, that he proposed to support the bill. I came to the conclusion that, for the last hour, he had merely indulged inthe time-worn pastime of blowing political bubbles. The difficulty about the policy announced to-night by the Leader of the Opposition is that it is perilously close to the one enunciated recently by himself and his party in connexion with the Constitution Alteration Bills relating to marketing and aviation control. These instances show the members of the Labour party to be entirely unable to make up their minds. Apparently the tariff schedule now before us is to be treated by them as another non-party question - an attitude entirely inconsistent with the stand they have taken in the past.

Members of all political parties, in common with the thinking members of the community, frankly admit that the trade-diversion plan of the Government, as announced by the Minister in charge of negotiations for trade treaties (Sir Henry Gullett), is based on long-range principles, many of which are of a tentative nature. That long-range principles often prove to possess short-range repercussions is a fact amply demonstrated by the complete cessation of trade between Australia and Japan. It would, indeed, be difficult to indict the Government on the ground that indefiniteness and uncertainty are prevailing features of the plan. There are already plenty of debits, and some credits, which can be chalked up as the result of the plan. It must be admitted, even if we are in doubt as to whether the debits exceed the credits, that the proposals have been characterized by boldness of thought and action, for which the Leader of the Opposition did not give credit to the Government. He did not complain about the rapidity of the action taken.

That the issues raised through the implementation of these schedules are inextricably interwoven with the welfare of all those dependent upon the Australian economy is evident. Therefore, it is surely obvious that an analysis of the merits or demerits of the trade plan must not be focussed on the trade relationship of Australia to - Japan, for instance - any one country, but must necessarily involve a review of the complete export field. The apparently illogical action of the Government in erecting barricades against the goods of at least one good-customer country can only be justified by the recognition of certain trends in world trade. It is apparent that emergency measures have been taken by the Government to safeguard the export trade of Australia. Achievement of this objective would justify any plan, provided that the principles on which such plan was based recognized first that the maintenance and expansion of the export trade was essential to the Australian economy; and, secondly, that restriction of that trade was certain if principles of freetrade were applied to nations pledged to national planning and economic nationalism. Those are assertions with which it is difficult to quarrel. It is surely not necessary to emphasize the importance of the export trade, or the drastic re-adjustments which would follow within the nation consequent on the limitation of that trade. That is a point always forgotten by the Leader of the Opposition. When he speaks against any plan designed to increase the export trade of Australia, he does not vision alternatively the effects that would follow on the restriction of our trade. It should be sufficient to stress the well known birt not often appreciated facts - (1) That the export trade represents onethird of the total Australian production; and (2) that the industries concerned contribute one-third of the total national income. It is. only reasonable to assume that recognition of these facts in a world ruthlessly competing for overseas markets has found expression in protective legislation designed to safeguard our export industries. That this legislation, which is the direct negation of the principles of international trade, on which ultimate world recovery must be based, has been drafted only after the closest examination of the factors affecting our export trade, I readily admit. Still, one cannot accept as justification for the policy which the legislation represents the bald statement that the measures are imperative if our export markets are to be conserved. Something more is wanted. There should be three objectives which should be the goal of all legislation designed to influence the overseas trade of the nation. That .their attainment will clash with the policies of certain other nations similarly seised of the importance of an export trade I do not deny. We should summon all our energies to secure the right to - (1) Avoid restriction of our export production; (2) continue to sell our present volume of exports; (3) progressively expand in certain types of export production. Unquestionably the issues raised dovetail into any discussion on the future of Australian trade. Even the dullest of dullards must recognize that loss of existing markets, even contraction of those markets, will automatically force producers - through sheer inability of Australians to consume all goods produced - to limit their production. This is a fact often overlooked by the Leader of the Opposition. What is not realized, even by certain leaders of political parties, is that a restriction of export production, with its consequent reduction of income to the producer, will plunge this country into an economic disaster infinitely more severe than the onslaught of 1931. Would not restriction slash the purchasing power of the nation? Is it not a fact that the collapse of the income of the producer would be swiftly followed by the collapse of those engaged in secondary industries - one of the lessons we learned in the depression - until all sections of the community would be involved in the financial disaster? The lessons of 1931 would fade into insignificance, and the re-adjustment of our own social economy would be so severe that there would be extreme danger of a realignment which has invariably followed drastic alterations in the economic structure of European countries. Surely this is one point on which complete unanimity can be secured. All parties should accept without question the determination of the Government to avoid loss or contraction of export markets, with its inevitable penalty of restriction in production. That is one principle on which we and the members of the Opposition can surely find common ground.

The question, therefore, resolves itself into these two divisions: First, whether the legislation under discussion is based on the principles just enunciated; and secondly, whether it was necessary to risk limitation of trade with those countries in which our right to trade remained uncertain in order to further our interests in those markets which promise the dual advantage of expansion and stability. The uncertainty of world trading and the barriers that prevent access to world markets are strikingly shown in an analysis extracted from a League of Nations publication, headed A World Summary m Trade 1984. The summary not only emphasizes the chaotic condition of world trade, but provides a very excellent and unanswerable reason why Australia should extend preferential treatment to those markets in which it can secure stability of trade. In 1934 there were 17 nations adjusting their economics by the use of import monopolies; 27 nations were issuing import licences; 27 nations were insisting on import quotas; 12 nations were seeking adjustment through export licences; 16 nations were seeking advantages through export quotas; 14 nations were seeking markets by the assistance of export subsidies; and 36 nations were using the weapon of exchange control. It is obvious that the feature of world trade is the uncertainty of trading conditions brought about by the use of one or other of those devices, dearly loved by nations which are seeking to solve their problems through the uneconomic control of trade. Still, it is possible, even in the welter of adjustment and counter-adjustment, to assess in broad terms the trend of the Australian export trade, and to judge from that trend the uncertainty of existing markets. By reading the signs, we are able to plan. Even the most casual analysis reveals two broad divisions, in the export, trade of the Commonwealth. It is a distinction that is recognized by the Commonwealth Statistician in the publication of records, and by every member of the Senate. The first division represents those goods sold by Australia to the United Kingdom and the members of the British Commonwealth of Nations. The second division represents goods sold to foreign countries. These are two unalterable divisions, and no amount of debate will change those economic facts. Now let us face facts. "Why not establish at the outset which division in terms of trade is of the most value to the people of. the Commonwealth? That seems to be the issue, and indicates the guiding principle which formulated the legislation now before the Senate. The year 1934-35 provided cogent figures as to the relative values of the British and foreign markets. The British Empire purchased 66 per cent, of the total Australian exports. In Other words, of every £3 worth of goods Australia sold, the British Empire bought £2 worth. The United Kingdom alone bought 56 per cent. Foreign countries - and the definition covers all shapes and sizes, with people of every colour and creed, from the poppy fields of Japan to the wastes of Iceland - 'bought 35 per cent. Can there be any doubt as to which division must remain paramount in the minds of those who must act in the interests of the Commonwealth? Should there be any uncertainty of action, when action is necessary, to protect those markets, which, apart from the consideration of Empire unity and relationship, have proved to be of the greatest value tO' our producers ? There can be no doubt as to the course to be adopted. The answer to the query as to which countries represent the most valuable market to the Commonwealth, is the answer to those who ask what is the principle of the legislation which has caused these schedules to be tabled in the Senate.

Still, we must admit quite frankly that the adoption of this policy has not been achieved without loss. Adherence to the principle of protecting the interests of our major markets is directly responsible for the trade war which has raged between Australia and Japan. In support of that policy we have gambled with the future of the wool industry of Australia. In support of those princples, we have risked the ire of nations infinitely more powerful than ourselves, and, for the moment, we have undoubtedly sacrificed the goodwill of our most valuable market in the East.

Those losses could not be avoided. They are the debits that were certain to lie entered against one of our broad divisions of trade; but when there are debits there are often compensating credits. I believe that the ultimate credits which will be recorded in favour of that division of Australian trade, which is interwoven with the trade of the British Empire, will outweigh the debits. One thing is certain. Australia could not stand idly by and without protest allow Japan to " mop up " the British share of the Australian import textile trade.

The Leader of the Opposition (Senator Collings) believes that the Commonwealth should allow Japan to secure the whole of the textile trade which we now do with Great Britain.

Senator Brown - He did not say so.

Senator HARDY - He said that the old duties should have been retained, which would have resulted in the British manufacturers of textiles losing the whole of their Australian trade.

Why not ask ourselves the direct question of whether the action of the Government in imposing specific duties on Japanese textiles is justified ? If the action was not justified, the alternative was to permit the position to remain unchecked, and hand the balance of the fast diminishing British imports on a silver platter to Japan. A summary of the position, which clearly reveals the encroachment of Japan in the textile field to the detriment of Britain, is revealed by the following analysis of textile imports into Australia over the years 1926 to 1935:-

1.   There has been no alteration of the per capita imports of textiles into Australia.

2.   There has been an increase of 26,972,000 yards in total imports.

3.   There has been a fall of 61,840,000 yards of imports from the United Kingdom.

4.   There has been an increase of 1 07,415,000 yards in imports from Japan.

The textile import position last year was that Japan supplied 162,637,000 square yards as against 125,931,000 supplied by the United Kingdom. Further evidence as to the intention of the Japanese to capture the whole, of the textile imports into Australia is shown by the following facts which we cannot ignore : -

1.   Artificial silk imports from Japan increased from 8,430,000 yards in 1932 to 65,801,000 yards in 1935, with the announced intention to increase to 100,000,000 yards for the current year.

2.   In cottons, trade increased from Japan from 36,000,000 yards in 1932 to 86,634,000 yards in 1935.

It is certain that had steps not been taken to impose the specific duties against Japan the whole of the textile trade would have passed from Great Britain to J apan. The " mopping up " by Japan of the British textile imports into Australia is obvious even to the most bitter critic of the Government's action. Is it still thought that the desire of the Government to retain for the United Kingdom a reasonable proportion of the Australian textile imports is unreasonable? The action of the Government is a tacit admission of the importance and value of the British market to Australia.

The only alternative to the imposition of specific duties intended to reserve for the United Kingdom at least some of the textile imports required by Australia was to permit the position to remain un checked. We should study for a moment the volume of Australian exports to the United Kingdom over the last few years, and, apart from the prejudices of the existing trade dispute, consider impartially the advantages of the custom of this country against the advantages of the custom of Japan. It is at least mathematical evidence that the action of the Government is correct - 1930- 31 United Kingdom purchased 50.67 percent. total Australian exports. 1931- 32 United Kingdom purchased 43.04 per cent. total Australian exports. 1932-33 United Kingdom purchased 55.70 per cent. total Australian exports. 1933-34 United Kingdom purchased 51.81 per cent. total Australian exports. 1934-35 United Kingdom purchased 56.26 per cent. total Australian exports.

In further support of what should be overwhelming evidence of the value of the United Kingdom market to Australia, it must be remembered that that is not only the best market, hut is also the only market for many of the products of our export industries. The importance of the United Kingdom market is forcibly demonstrated by the following figures : -

United Kingdom purchases 100 per cent. of all chilled beef exported from Australia.

United Kingdom purchases 98.7 per cent. of all lamb exported from Australia.

United Kingdom purchases 95.8 per cent. of all mutton exported from Australia.

United Kingdom purchases93 per cent. of all butter exported from Australia.

United Kingdom purchases95 per cent. of all wine exported from Australia.

United Kingdom purchases 99.6 per cent. of all eggs exported from Australia.

United Kingdom purchases 83 per cent. of all sugar exported from Australia.

They are points which the Government has had to consider in formulating its trade policy. Is it any wonder that we again state that the United Kingdom is not merely our best customer, but the only market for many Australian products? It is to preserve this market, to retain our right to sell, to establish firmly the principle of preference, that action has been taken to prevent the capture of the complete Australian textile trade by the Japanese. That, to my mind, is an unanswerable argument; yet the Leader of the Opposition says that this tariff is a provocative one. As I pointed out in the earlier part of my speech, the United Kingdom market for certain of our export commodities offers unlimited possibilities of expansion. In fact, it is the only market capable of expansion to any degree.

Senator Brown - Do I understand the honorable senator to say that the United Kingdom market offers unlimited possibilities of expansion ?

Senator HARDY - Yes. The honorable senator must remember that the value of the total requirements of the United Kingdom approximates £800,000,000 per annum. If the honorable senator studies the figures, he will find that last year the United Kingdom purchased 52 per cent, of all of its requirements from members of the British Empire, and the proportion is still growing. Last year, in spite of its enormous exports to the United Kingdom, Australia was only successful in supplying 6.5 per cent, of its total requirements. Surely that should convince the most sceptical that opportunity exists to increase our production and to win a greater share of the British market. The possibilities of expansion for export industries are indicated by a comparison of haphazard statistics extracted from English official publications on overseas trade. The United Kingdom buys annually for home consumption chilled beef valued at £14,563,000, yet Australia supplies only £268,000 worth, representing 1.8 per cent, of the total requirements. Who would deny that there is opportunity for unlimited expansion in that direction ?

Senator Brown - How much of it is supplied by the United Kingdom itself?

Senator HARDY - The figures which I have given relate to imports. The United Kingdom buys annually £226,829,000 worth of bacon, but Australia has no share in that trade at all. Of the £6,762,000 worth of cheese imported into the United Kingdom, Australia supplies only 6£ per cent. The United Kingdom buys annually £7,180,000 worth of eggs, yet Australia is only able to supply 6 per cent, of the total. These figures show where expansion possibilities lie. Similarly, the United Kingdom buys annually £17,214,000 worth of' lamb and £40,906,000 worth of butter, of which Australia supplies 23 per cent, and 25^ per cent, respectively. Again, I ask, are we justified in risking our assured market, in which there is such opportunity for expansion, for the uncertainties of foreign trade? This is a problem which, in the welter of economic nationalism throughout the world, the Government cannot afford to ignore. There should, however, be a full and sincere appreciation of the sacrifice that Australia has made in the interests of the United Kingdom. That recognition must come not only from the members of the Commonwealth Government, but also from the members of the British Government. It is idle to deny that, in the event of the continuation of the dispute between Australia and Japan, the loss of trade will have repercussions in Australia. The wool industry, which means so much to this country, will be required to bear the brunt of the effects of the dispute. Realization of the extent of the sacrifice should have a dual result ; it should earn a greater measure of reciprocity from the United Kingdom, and it should spur on. the Government to continue to explore every channel to bring about an immediate settlement of the dispute. I have spoken of the credits; unpleasant though it may be to do so, it is well that I should also check up on the debits. If we do not make an impartial analysis of the effects of the trade diversion policy, we cannot discuss its merits. It cannot be denied that,, during the last five years, Japan has been the second-best customer possessed by Australia, and that to-day, as the result of the trade dispute, Japan has put up the shutters against Australian trade. The next point I wish to make is that, whereas last year Japan purchased 10.71 per cent, of Australia's total exports, valued at £12,095,000, owing to the trade dispute, its purchases this year will be nil. The third point is that our trade with Japan over the last five years has resulted in a net balance of £4'2,0000000 in favour of Australia. That is also a part of the sacrifice which Australia has voluntarily made in favour of the United Kingdom. The final point I wish to make, and it is a very important one, is that Australia has sold to Japan during the last five years wool valued at £42,000,000. Is it any wonder that we ask for a keen appreciation of the facts? Is it any wonder that, while we re-affirm our determination to protect our Empire markets, we urge that every effort should be made to disentangle the threads of the trade dispute with Japan, which is a matter of regret for the whole of the people of the Commonwealth? The right to protect a reasonable proportion of the import textile market for the United Kingdom is unquestioned. I believe that every member of this Senate will agree with that. What is questioned, however, and what will continue to be questioned during this debate, is whether the specific duties imposed arbitrarily by the Government against Japan were unreasonably high. Will the duties entitle Japan to a reasonable proportion of the existing market which its trade with Australia warrants? Are the duties too harsh in character; in other words, do they still permit reasonable trading by Japan? The Government does not hesitate to state that the duties were intended only to reserve for the United Kingdom a reasonable proportion of the Australian textile trade. If the duties prevent a reasonable importation into Australia of Japanese textiles, will the Government lower the duties to enable Japanese manufacturers to secure a share of the market?

It has been the policy of this Government in the past to refer matters of major importance, requiring the imposition or the elimination of duties, to the Tariff Board for investigation and report. Why did the Government depart from this policy in respect of Japanese goods? Surely, in view of the issues at stake and of the possible repercussions in the wool industry, on which, it is freely admitted, Australian economy is based, the proposals to limit Japanese textiles could have been made the subject of detailed investigation by the Tariff Board. Would it not have been more satisfactory to have permitted the wool industry to submit its case? Would our action not have gained greater appreciation in the United Kingdom if the English textile manufacturers had been given an opportunity to state before the board their idea of what represented a reasonable proportion of the trade? Is this not a matter which concerns the Australian textile manufac turer, and would not his evidence have been of value? Would it not have been courteous, in view of the cordial relations that previously existed between Australia and Japan, to invite evidence from representatives of the Japanese textile industry? I am emphatically of the opinion, and I have not deviated from it throughout the dispute, that executive action should have been postponed in favour of Tariff Board action.

Senator Duncan-Hughes - The honorable senator still has an. opportunity to vote on that.

Senator HARDY - I cannot but believe that the imposition of duties without reference to the Tariff Board was not only a dangerous precedent for the Government to adopt, but also a direct negation of the policy which has been followed up to date. I do not advocate that the Government should swerve from the path upon which it has started. I am of opinion that the settlement of the dispute with Japan is in sight; it is only a matter of hours. I re-affirm my belief that it was necessary to take drastic action to divert trade into other channels, but I question the methods adopted by the Government in its endeavour to ensure that a reasonable proportion of the textile trade would be reserved for the United Kingdom. I urge that every effort should be exerted to bring about an agreement between the Commonwealth Government, the manufacturers of the United Kingdom, and the Government of Japan, as to what constitutes a reasonable proportion of the Australian textile market. It is well known that the eyes of the wool industry are upon the Government. The industry has watched the collapse of the wool sales to Japan with commendable restraint, but it now feels that a settlement of the dispute is long overdue. The wool market is firm and buoyant. The statistical position is sound, but it must be admitted that there would be much more buoyancy and much more soundness if Japan commenced to bid vigorously in the Australian market. History is crammed with stories of wars that have germinated from the seed bed of trade disputes. Australia is a con.tinent populated by a bare 7,000,000 people. Japan, our closest neighbour in the Pacific, is a powerful nation, and the

Japanese are a proud people. It is obvious that our relations should be of a friendly and cordial nature, and I feel sure that that is the Government's most earnest desire. While I state frankly that I am not prepared to depart from the principles of Empire trade and Empire unity enunciated to-day, I sincerely trust that some way will be found out of the trade tangle, which must result in serious loss to both sides, and endanger the great wool industry of Australia.

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