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Thursday, 19 August 1920

Mr GREENE (RICHMOND, NEW SOUTH WALES) (Minister for Trade and Customs) . - I am sure that the House heard with the utmost interest the speech of the honorable member for Flinders (Mr. Bruce), and I wish that it were possible, in the short time at my disposal this afternoon, to traverse the whole case, and to put the position fully from another point of view. I cannot state the whole case, however, because, as I mentioned a little while ago, an action at law has been brought against the Department, and I cannot deal with the legal questions involved. It is an action which challenges the right of the Customs Department to 'claim duties on the basis about which the honorable member for Flinders has been talking.

Mr Tudor - Not the Adelaide case?

Mr GREENE (RICHMOND, NEW SOUTH WALES) (Minister for Trade and Customs) - No ; a case brought in Queensland. It challenges the whole basis of our collection, and particularly the interpretation of section 157. The duty of the Minister is, of course, to see that the law is carried out by his officers; he has sworn to do that. The honorable member for Flinders has shown that if the Department were to adopt the practice which he asks us to adopt, it would get more revenue. We know that that is so, and it shows that in the action we are taking we are not reaching out after revenue, but are standing by principles which we think the law compels us to observe. If it were not for that, the position -would be altogether different. If, as the honorable member has suggested, it were in the power of the Minister to alter the system, and we believed that the principles by which we stand enabled it to be altered, we might move in the direction suggested.

Mr Bruce - If the Minister could not take action himself, he could have brought the question before Parliament.

Mr GREENE (RICHMOND, NEW SOUTH WALES) (Minister for Trade and Customs) - That is another matter. Until the case to which I have alluded is settled, I do not think the law should be altered. We want to have the law determined, because, if the Customs Department is wrong, about £1,000,000 more of revenue will have to be collected, and the commercial community will have to pay it. If we have not collected this revenue, but should have collected it, the commercial community will be called upon to pay it. That, however, is not the question which I wish to discuss this afternoon. I believe that underlying the cases which the honorable member cited, and underlying practically all the illustrations that I have seen, there is a fundamental fallacy in the reference to £100 worth of good3, and not to the quantity of goods that £100 would buy. I think I shall be able to show that any fault rests, not with

Australia,but with the countries of origin. I have given a great deal of thought to this matter, and although I am putting the other side of the argument, I do not wish it to he understood that, once the case to which I have referred is out of the way, we must necessarily stand where we are. Feeling that, however accurate my officers may be, it would be well to have an independent authority who would give us a mathematically correct reply, I put a series of questions to the Commonwealth Statistician. I said to him -

Suppose goods are made in America, France, and England at the same price-

We take those three countries and say, " Your costs of manufacture are the same in each instance." - for example, £10 per unit, converting local cost at mintage rate of exchange in country of origin -

That is, we consider it fair to assume as a basis for comparison that the manufacturingcostsin each country are the same, converting the local costs in francs or dollars into sterling at the mintage rate of exchange - and supposing the rates of duty in Australia ore : - British, 30 per cent; foreign, 40 per cent. : -

(1)   How many units would £1,000 land duty paid in Australia, not reckoning freight; duty being calculated at-

(a)   mintage par rate of exchange;

(b)   commercial rate, reckoning 50 francs to the £1 sterling, and 3.50 dollars.

At that time, the rate had risen to 3.50 dollars.

Conversion into sterling of bill as in (6). Show cost per unit to importers in both instances for each country.

I also said -

Supposing France and America had to buy their raw material outside their respective countries at the rates of exchange mentioned in (b)-

That is, the commercial rate - and the value of the raw material in France or America represented 30 per cent. of the value of the finished product, as expressed in the home consumption value-

That is, of course, in francs or dollars, as the case may be, in the country of origin - what effect would that have upon(a) and (b) above ?

The honorable member for Flinders will admit that those are questions that we have to consider in dealing with a problem of this nature. The answers I received are summarized in the following statement, which shows the number of dutypaid £10 units purchasable by an Australian importer for £1,000, and the cost per unit, calculated on the data proposed in my questions : -


That statement shows most unmistakably that countries with a depreciated rate of exchange can, if they so will, land in other countries far more goods for the same money than can a country with the sterling rate of exchange at par; and the honorable member for Flinders', in his concluding remarks, certainly seems to me to bear that out. But what I am satisfied is happening in countries with a depreciated exchange is that, as the exchange depreciates, manufacturers raise the home-consumption, price ; all the time as the franc depreciates, the French manufacturer is raising his homeconsumption price ; and as. the honorable member says, that is the basis on which we are calculating th« duty. The peculiar position of the markets outside in the world to-day is such that the manufacturer finds that he can still ask the outside price that other countries are asking. I ask the "honorable member which- policy will' sooner right the exchange - a policy of continually raising the home-consumption price, and keeping the French and Italian goods at the world's level, or taking advantage, as it were, of the depreciated exchange to send goods out at the depreciated rate of exchange.

Extension of time granted.

Mr GREENE (RICHMOND, NEW SOUTH WALES) (Minister for Trade and Customs) - The point I wish tosubmit for the consideration of the House, is that as the world's supplies become nearer normal, countries with a depreciated exchange will be unable to get as ready a market for their goods as at the present time. Will they not take advantage of the depreciated rate of exchange to dump their goods wherever they like? I have shown clearly that what we are doing does not interfere with either the protective policy of the country or the preferential rate for Great Britain. I do not say they are doing it to-day, but those countries may take advantage of the depreciated rate of exchange to absolutely destroy not only the protective policy of this country, but also our preferential trade with Britain. France and those other countries find throughout the world a ready market for their goods at the prices they are charging to-day; and I venture to say the French manufacturers, by raising the home consumption prices to the extent of the depreciation of the foreign exchanges, are making fortunes, or ought to be.

Mr Bruce - You take the £10 unit, and say it costs exactly the same amount to produce the article; then you say, " Now there is a chance for the French to keep on gradually increasing the homeconsumption price,, and to make fortunes." That is not so.

Mr GREENE (RICHMOND, NEW SOUTH WALES) (Minister for Trade and Customs) - No. I said, that, presuming the cost is the same in both countries, the country with the depreciated rate of exchange, notwithstanding the cost- in that country, can dump goods in foreign countries. After all. is said and done, the purchase of the bill of exchange is not a transaction directly between the- buyer and. seller of the goods. The purchase of the bill of exchange is a transaction which takes place between the seller pf the goods and a third party; indeed, it is not even, between the seller and the third party. 1 What happens is that the maker or manufacturer takes this billof exchange to his banker and gets the full face value, whatever it may be, in. the currency of the country. The banker then proceeds to sell the bill of exchange to somebody else, to whom the purchaser finally pays the money. But does the fact of a third party intervening in a totally different transaction really affect the question I am arguing ? I do not think so. I have here a very interesting calculation, showing exactly how the duties work out as between the various countries, but I do not wish to impose on the good nature of the House by reading it this afternoon. I hope to be able, a little later on, to put it in the possession of honorable members; and in the meantime I suggest that whatever we do at the present time it is most inadvisable, until the law is finally settled, and we know exactly where we are, to interfere or deal with this question at all. Whenever the question is dealt with, it must be in such a way that there will be no doubt whatever as to the maintenance of the protective principles of our Tariff and our preferential position with Great Britain. These must be secure, whatever any country with a depreciated exchange may finally determine to do when it finds itself in the position, as it will be some day or other, to dump goods on the rest of the world.

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