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Thursday, 7 July 1949

Mr BEAZLEY (Fremantle) .- The speech of the honorable member for Warringah (Mr. Spender) was so realistic that it might have been one of the efforts of Sir Stafford Cripps himself. I refer to the first 30 minutes of the speech, in particular. I do not think, however, that the honorable gentleman has grasped the nettle so firmly as Sir Stafford Cripps usually does. When he was concluding his argument about the economic position of Great Britain, he seemed to imply that the solution of the problem was to be found in another dollar loan. I am inclined to think that that is unquestionably one way in which to postpone a depression. But we ought to remember that Great Britain has done that once, for it borrowed 3,750,000 dollars from the United States of America. The question arises, how often can a country raise loans as a means of postponing the day of reckoning, particularly when the discrepancy between imports and exports is as great as it is in Great Britain's trade relations with the United States of America? The honorable member was very realistic and, I think, very honest, in his analysis of the economic position of Great Britain. We should think very carefully before we accept the sort of clap-trap that is published in the Sydney Bulletin, and repeated by some honorable members in this House, that the declining standard of living in Great Britain is associated with the political complexion of the government in power there. The honorable member spoke of the loss of Great Britain's overseas investments. In 1939, Great Britain had in North America £700,000,000 worth of investments. In order to obtain arms from the United States of America, Britain sold the factories, the railway shares, and the fixed capital assets which were paying for imports from the United States of America, so that they would not have to be covered by exports from the United Kingdom. It is of no moment to say that Great Britain obtained far more value than it gave, because the United States of America provided Great Britain with something like £1,000,000,000 worth of food each year during the period of the war, and sent to Britain arms valued at far more than the capital investments that Great Britain has held in North America. The point is that what Great Britain got from the United States of America was consumer goods. What Britain lost in the United States of America was fixed capital which, year after year, had earned consumer goods. In other words, Britain consumed its foreign capital because of the war conditions. In South America until 1945, before the recent confiscations were made, Britain held investments valued * at £1,000,000,000. Most pf that money was represented by obsolete nineteenth century investments on railways whereas in the same area American investments were very largely made in the modern motor car and other modern industries. The whole of the £1,000,000,000 which Britain had invested in South America, particularly in Argentina, earned only £19,000,000 in interest, the average return being 1.9 per cent. Britain earns from its investment of £489,000,000 in Australia, £20,000,000 sterling per annum. iSo, an investment in South America twice as great as Britain's investments in Australia, obtained only about the same- amount in interest. Britain had investments in China valued at £400,000,000, principally in physical assets such as cotton mills in the Yangtse valley, but they were destroyed by the Japanese army during the war. Britain' also had investments valued at approximately £585,000,000 in India but the maintenance of the British Army in India and food purchases from India ultimately turned Britain's favorable position vis-a-vis India into a debt which now stands at £1,200,000,000. The truth of the matter is that before the war Britain had very many people working for it abroad. Goods came into Britain by way of interest which did not have to be paid for by goods sent out of Britain. To-day, Britain has to send more goods out of the country in order to get the same quantity of goods which it got in 1939 by way of interest. Irrespective of whether or not a Conservative government had remained in office in Britain the fundamental situation would not have changed. Britain lost most of its capital investments in the United States of America and Canada in 1940 when a Conservative government was in office. Although Britain was governed by predominantly Conservative governments during the war years, that did not prevent the destruction of British capital in China nor did it prevent the financial relations between the United Kingdom and India deteriorating to the disadvantage of the United Kingdom as the result of the need for maintaining a large army in India for the defence of that country.

I join issue with the honorable member for Warringah in respect of certain statements made by him, particularly in reference to the British steel industry. Between 1935 and 1939 the British steel industry had many scandalous and slovenly features associated with it. I am speaking of the industry as it was operated by private enterprise. One of the major scandals was the deliberate suppression by the steel ring of the most modern steel plant in Britain established at Ebbw Vale. Because so many obsolete steel concerns were operating on which a return of capital had to be obtained the steel ring did not desire the competition of the modern plant established at Ebbw Vale. By agreement between the steel companies the plant at Ebbw Vale was kept at a very low rate of production for some years. Britain has little to thank the steel companies for in pursuing a policy of that kind nor has it cause to be grateful to the steel ring for having kept the British steel industry with obsolete plant. Naturally a tremendous amount of government money was expended on the industry during the war years as part of the war effort.

What really surprised me was the demeanour of Opposition members when the Prime Minister stated that the United States of America might have felt the breath of a recession earlier had it not been for its magnificent policy of Marshall aid and loans to other countries. I cannot see why that statement should have surprised honorable members opposite. That is exactly the position which this country is in to-day. We have sterling balances in London exceeding £350,000,000. We have exported goods to that value in excess of the value of our imports from the United Kingdom. We have not been paid for our exports in goods. Is it suggested by honorable members opposite that if we had not exported those goods, we would not have felt a sharp depression in this country? The effect of our transactions has been that for the goods we exported our exporters were paid money incomes in Australian currency which enabled them to purchase their requirements throughout this country. If we had not exported the goods we should be feeling a recession to-day. The honorable member for Warringah was profoundly right when he said that if we approach this matter as a question involving restrictions, all that we shall do is to bring about another depression. I think that that was the logical implication of the honorable gentleman's argument, though I do not pretend that those were his words, and I agree with it. Whether or not we should obtain a loan from Canada is a question on which it is almost impossible to hazard a guess. If we obtained such a loan and bought capital equipment, as the honorable member for Warringah has suggested, and with that equipment produced goods, the policy would be sound only if, having produced the goods, we could find a market for them which would provide us with dollars with which to pay the interest on the loan and something more. If the world trade situation changed and there was a freezing of trade such a policy would probably not be justified. If the United States of America did not change its policy and it started to buy more freely from the sterling area all we should find would be that we would have a greater dollar deficit because we would have to pay out more dollars to meet interest on the loan.

I cannot feel the same respect for the statements made by the Leader of the Australian Country party (Mr. Fadden) as I felt for those made by the honorable member for Warringah. The Leader of the Australian Country party has referred again to Argentina and has stated that, of the petrol which Britain was sending to Argentina, 90 per cent, came from dollar sources. Why he should imagine that that strengthened his argument in relation to petrol, I do not know. If anything, it weakened it. Right in* the middle of the right honorable gentleman's diatribe in relation to the dollar position was his statement that the United Kingdom supplied Argentina with 117,000,000 gallons of petrol in exchange for meat. He proceeded to draw the astonishing conclusion that the United Kingdom should be providing us with petrol and that that constituted an argument against the continuance of petrol rationing. His argument appears to me to point in the opposite direction. Officials of the Department of Health are at present in Great Britain. One of them is a personal friend of mine. A great deal of nonsense is talked about juvenile health in Great Britain. The observations of my friend, who has made a very close study of the position, show that whilst as the result of special attention to their diet young people in the United Kingdom were in magnificent health, she had come to the conclusion that she had never seen a poorer adolescent population than is the adolescent population of Great Britain at the present time. At the age where rapid growth takes place, diet is of the utmost importance. People may talk as much as they like about calories and vitamins .but it is an undisputable fact that adolescents need proteins. They must have meat and the protein content of the United Kingdom diet has fallen far below danger level with consequent damaging effect on the health of the people, particularly of rapidly growing adolescents. Consequently, if as we believe Argentina offered to Great Britain the choice of two alternatives, one that it was to be paid for its meat in dollars, and the other that it was to be paid for its meat in petrol, the United Kingdom Government was driven by overwhelming circumstances to accept the second and to provide petrol which might otherwise have been directed to this country as a means of liquidating some of Great Britain's sterling indebtedness to Australia. The argument advanced by the Leader of the Australian Country party was unworthy. of him. On both occasions when he has spoken on this subject, the right honorable gentleman has mentioned, in the middle of his speech, a fundamental fact which has contradicted his whole argument. I express the conviction that were Labour in Opposition and playing party politics with petrol as the right honorable gentleman has been doing, and were a Labour leader to make a speech similar to that made by the right honorable gentleman with respect to the AngloArgentine agreement, every newspaper throughout the Commonwealth would have headlined that part of his speech in black letters and would have published leading articles which would have shown how completely it contradicted the argument which he had sought to advance.

A few days ago the Prime Minister spoke about three trading blocs. We should not omit to look at one of them and examine its relationship to the United States. That matter has not been fully discussed in the course of the debate to-day. In 1946, the United States of America had a very big trade with Russia. Undoubtedly, Russia has gained a great deal of capital equipment from the United States during the last four years. Let us examine the cold figures in relation to the trade between I he two countries. In 1946, the United- States exported to Russia goods of the value of 357,900,000 dollars and imported from Russia goods valued at 100,500,000 dollars. That gave to the United States what is ordinarily called a trade advantage, but which I prefer to describe, in terms of realistic economics, as rather an advantage to Russia. In other words, American exports to Russia exceeded its imports from that country by 257,400,000 dollars. In the following year the United States commenced a trade restriction policy with respect to Russia. In 1947 it exported to Russia goods to the value of 149,000.000 dollars and bought back from Russia goods valued at 76,900,000 dollars. That meant that as far as Russia was concerned it had a trade deficit with the United States of America of 72,100,000 dollars. In 1948, the American Congress made its trade restriction policy with Russia even more drastic. In that year the United States exported to Russia goods valued at 27,800,000 dollars. The decline was due to the American policy of establishing a stockpile of strategic materials. For the benefit of our Communist friends, I may add that Stalin is at present maintaining a pretence that he fears that Russia may be attacked by the United States of America. The trade figures relating to the two countries show that Russia had been exporting to the United States of America manganese, chrome and other strategic war minerals. In 1948 it accumulated a surplus of dollars with which it was able to sell goods to the United Kingdom in exchange for materials. If Stalin really fears an attack by the United States of America, he is providing that country with the means of making it, in which case we should be hearing from our Communist friends about " Scrap Iron Joe ".

Mr Menzies - Hear, hear! I thank the honorable member for that kind remark.

Mr BEAZLEY - The point I make is that by these exports Russia has enabled the United States to establish a stockpile of strategic minerals. The restrictive policy adopted by the United' States has since been intensified. In the first two months of 1949 the United States exported to Russia goods valued at only 400,000 dollars and imported from Russia goods valued' at 4,900,000 dollars. Thus, there has been a spectacular fall in trade between the two countries. The aggregate American-Russian trade in 1946 was valued at 458,400,000 dollars. If trade between the two countries is maintained at only the existing volume it is doubtful whether it will amount in the aggregate to even 25,000,000 dollars this year. We might look at the matter "from the political point of view and say that the United States is absolutely justified in restricting exports to Russia. I do not argue on that score. One conclusion is, however, inevitable. If a trade restriction policy is applied for political reasons there must, as a consequence, follow a heightening of political tension between the countries affected. It is a vicious circle. Politics lead to economic restrictions, and economic restrictions lead to further political tension. A sober analysis of the trade relationships between Russia and the United States of America appears to confirm that view.

The honorable member for "Warringah has suggested a dollar loan as a possible method of assisting to meet the difficulties of the present situation. I hope that that suggestion will not be rejected without full consideration. It is impossible to decide whether or not that policy is a correct one. If a loan were obtained, much would depend upon the trade position of the world afterwards. I think that a young country like Australia, which requires further capital equipment and apparently cannot obtain it from the United Kingdom, will ultimately have to incur a debt and obtain it from the United States of America. That was the realistic point of the speech of the honorable member for "Warringah. Although a loan might lead to some difficulties, it must be borne in mind that when a country has invested money in another country it is often forced to take further economic measures to protect its investment. If the United States of America, for instance, lends this country a considerable sum of money, it will ultimately be forced into the position that the United Kingdom was in in the nineteenth century. The British Government adopted a policy of free trade in .the nineteenth century because Britain had investments abroad and had to allow goods to come in as interest on the investments. The United States of America is undoubtedly the world's provider of capital goods now, and it will have to abandon its excessively restrictive trade policies. The trouble is that we are in a transitional period when the United States of America is only just assuming fully the position of the economic leader of the world and the provider of capital goods for the world. Consequently, -it has not yet realized that its position necessarily involves the lifting of restrictions on the inflow of goods. There is one thing that is quite certain. Although a borrowing policy may lead to disaster, a policy of restriction will undoubtedly lead to disaster, because it can only result in a depression. That important point was made in the speech of the honorable mem- ber for "Warringah, for which the House is indebted.

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