Economic Warfare.

– in the House of Commons am ar 17 Ionawr 1940.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Motion made, and Question proposed, "That this House do now adjourn."—[Captain Margesson.]

4.24 p.m.

Photo of Sir Ronald Cross Sir Ronald Cross , Rossendale

I feel that my main task to-day should be to give the House an account of the development of the economic campaign which we are waging against Germany, to tell the House something of the machinery that has been built up and which we hope to extend, and, finally, to give some indication of the effects of our campaign on the enemy; but before I come to these matters, it seems to me best to attempt some brief essay in what is meant by economic warfare. To my mind, economic warfare aims at attacking the industrial, financial, and economic structure of the enemy, and thus so to cripple and enfeeble his armed forces that they can no longer effectively carry on war. Economic warfare is therefore as old as war itself. It dates from the first siege. But with the passing of time it has become infinitely more complicated. Obviously the mediaeval archer did not have to go very far to get the wood for his bows and feathers for his arrows, and contraband controls would have meant very little to him. But modern warfare requires equipment and materials some of which have to be fetched from the ends of the earth. The object of our attack is, therefore, in some respects larger and more vulnerable than ever it has been before. On the other hand, there is a new human factor. We are fighting a country in which the whole people have been moulded and hammered into one vast economic and military machine, and that country has at its disposal the economic organisation which has long been in preparation against the day of war. That fact, in my view, makes Germany technically stronger than in 1914–1918, but it also makes her more brittle than she ever has been before. If that conclusion is the right one, then it means that the course of economic events in Germany will take a different form from those of 1914–1918.

Profiting from the lessons of that war, the Ministry of Economic Warfare was set up on the very day war broke out and began to function forthwith. Profiting also from the lessons of the last war, we started our work in close co-operation with our French allies. We have been strengthened from the earliest days of the war by the presence in London of a permanent French Mission of Economic Warfare. The French Mission has shared in all our activities, and I have had the further advantage of an opportunity of personal discussions with the French Ministre du Blocus, Monsieur Georges Perrot, both on the occasion of his visit to London, and on the occasion when I had discussions with him in Paris. I am glad to be able to assure the House that in the sphere of economic warfare our Anglo-French relations are of the happiest; indeed, I feel that I could not easily exaggerate the cordiality and good understanding which exist. Let me add further that, after four and a half months' experience, we value the contribution which our French allies are making to our work here, and I am glad to have this opportunity of acknowledging publicly the clear-sighted and vigorous way they are pursuing their economic war effort.

I need hardly add that we have also ensured the closest co-operation with the Governments of the Dominions, with the Government of India, and with the Colonies. At the beginning of November I had the advantage of meeting the Dominion and Indian Ministers then in London, when we were able to discuss both major questions of policy and the machinery for carrying out that policy in the Dominions and India. The main methods of co-operation are our arrangements for carrying out the law about trading with the enemy and enemy exports, for the exchange of economic intelligence, and for the control of exports. This last item, the control of exports, is clearly the most important of them all. Export licensing systems exist throughout the Dominions, in India, and in the Colonies. Every effort is made to render this control as comprehensive as possible. The Empire, I may say, is participating as a whole in the economic war, and we are deeply grateful for the co-operation of the Dominions and Indian Governments and of the Colonial Administrations.

Now let me turn to the position which confronts us in the economic war to-day. Our problem is different from the problem which confronted us in the last war, and is immeasurably more complicated. In the war of 1914 to 1918 nearly all the countries of Europe were, sooner or later, engaged in the fight. There were, consequently, comparatively few gaps in the enemy's frontier through which it was possible for supplies to reach him. But to-day there is only the French frontier that is closed. The rest of Germany's neighbours are neutral and Germany's possible channels of supply are, therefore, enormously increased. The problem is not only different but is also more extensive, and the difficulties which have to be overcome are multiplied. The facts of the position which I have thus briefly described have caused us to adopt what is almost a new technique, or something in the nature of a new system, in framing our campaign.

In describing it, I will begin with the method of economic war which is best known and which is also our ultimate sanction. That is the contraband control. On the outbreak of war, a number of contraband control bases were set up and more have since been added. At these bases shipping, whether Allied or neutral, is searched for contraband, suspected of being destined for the enemy. Thanks to our naval supremacy, very few ships succeed in evading our controls. Contraband control was easy in the first two or three weeks of the war because at that time cargoes had already been despatched from overseas and were openly consigned to Germany. That, of course, has now come to an end. Then we entered on the next phase, in which Germany planned for goods to be sent to neutral persons or firms who, in their turn, sent them on to Germany, and although many neutral countries have systems of export licences, there remain cunning dodges whereby the neutral trader may seek to circumvent the regulations of his own Government. In order to cope with these devices, we require, and, indeed, we have, a world-wide service of information. We require also in my Department officers of the right ability to examine and to piece together this information and thus produce the evidence on which goods may be seized.

It will be readily recognised by the House that there are tremendous difficulties in determining which goods should be detained as suspect of being destined for the enemy and which are the harmless requirements of neutral trade which should not be unduly embarrassed or delayed. That task involves the employment of a large staff. It requires high ability on the part of the administrative officers. The construction of this machinery, which is still growing, is a part of the enormous task which has rested on the shoulders of the senior officers of my Department in constructing a brand-new Ministry of whom the overwhelming majority—I think over 85 per cent.—are volunteers. These volunteers—bankers, professors of economics, commercial solicitors, business men, scientists and technicians—between them dispose of a remarkable body of expert knowledge, and I want to take this opportunity of acknowledging publicly the admirable spirit and the untiring efforts of these men in coping with new and often difficult and delicate problems.

I was speaking of preventing goods from reaching the enemy by passing through neutral countries. It goes without saying, and yet perhaps it must be said, that our campaign is not aimed against neutrals and that we use every endeavour to smooth the path of neutral trade, subject always to the overriding consideration, which is our need to exercise our belligerent rights to the full. There is, I think, a prevailing conception of our economic war as being a sort of wall of naval patrols from Norway to the Orkney and Shetland Islands and across the English Channel, that wall having its counterpart in the contraband control bases at the entrance to the Mediterranean. While the Navy is the foundation of these branches of economic war, that picture is, in some respects, an unfortunate and misleading one. It suggests that the neutral States, as well as Germany, are inside the wall and not outside it, with complete freedom of access to the world at large. I want to say most formally that in no sense is it our desire to build a wall against any neutral State. We are anxious to put nothing in the way of the freedom of neutrals to import whatever materials they need from overseas for their own legitimate consumption. What we do seek to attain is that while such goods may penetrate as far as the German frontier, they shall not pass over it. We seek, therefore, to put our barrier round German occupied territory.

The more we can succeed in shifting this barrier from the sea approaches to the Continent to the actual German frontier, provided always that the efficiency of our control is in no wise relaxed, the fewer will be the delays to neutral shipping and the greater the convenience to bona fide neutral trade. In order to attain this end, we have had to evolve, and we are in the course of perfecting, a technique which goes far beyond anything that was seen in the last war. One instrument of which we are making use is the system of navicerts—a form of commercial passports. This system was used up to a point in the latter part of the last war, but this time we have already introduced it for exports from the United States, from the Argentine, from Brazil, and from Uruguay to some 19 European countries of destination. We are considering the further extension of the system. It enables advance information regarding cargoes from oversea to be examined by my Department before the cargoes are shipped, and in this way we greatly reduce delays to shipping at the control bases. It is a purely voluntary system, but, I am glad to say, we find that it is being warmly welcomed and taken up by traders and shippers. Over 11,000 applications for navicerts have already been received since the system was first instituted on 1st December, and applications are coming forward now at the rate of about 500 a day.

Another means of reconciling our con" traband control with the needs of neutrals is in negotiating war trade agreements. Not only is it the desire of the Government to keep up normal trade with neutrals as far as war-time circumstances permit, but there are also many points at which our rights as a belligerent and the rights of neutrals touch upon one another. It is part of our task to harmonise those rights as far as we possibly can. I say, frankly, that for our part, subject always to our main purpose, we have every desire to facilitate in every way the passage through our control of the regular flow of goods and materials required for legitimate neutral trade and consumption. It is in this spirit that we are carrying on our various negotiations. War-trade agreements are not an invention of the present war. The technique was highly developed between 1914 and 1918. But such agreements then were few; they were often far from comprehensive, and only in the final stages of the war did they begin to play an important part. To-day, I can say that we have completed or are conducting negotiations of different kinds with 14 Governments, and, while I must be reticent when it comes to detail, I can instance the agreement signed with Sweden, the conclusion of negotiations with Belgium and Iceland, and the active conduct of discussions with Norway, Denmark and Holland.

To turn for a moment to a different area, special problems have to be faced in the Mediterranean, where there are obvious difficulties in operating a system of contraband control so far away from home. Owing to these difficulties, neutral shipping in the Mediterranean has, on the one hand, sometimes been exposed to inconveniences not felt in the same degree by shipping passing the United Kingdom, while, on the other hand, it has not always been possible to maintain in the Mediterranean the same effective control as exists in home waters. It is in a spirit of good will that we and the neutral Governments concerned are endeavouring to solve these problems. In this connection I would particularly like to mention the Anglo-Italian Commission which has been set up in Rome and which is empowered to discuss all commercial matters affecting the two countries arising out of the war.

The House will observe that a consequence of the system of navicerts and of war-trade agreements is that fewer goods are detained at our contraband control bases, and a diminution therefore in the figure of goods detained may be, at least in part, a reflection of the operation of this control machinery. We have however not only to stop contraband imports from reaching Germany. We have also, as a result of the Reprisals Order-in-Council, to stop Germany from obtaining resources abroad by means of her exports. Much of the machinery which I have outlined is paralleled by the machinery devised for enforcing the detention of German exports. Here again we have the power to act because our Navy commands the seas, and the Allied contraband control bases serve also as examination points for outward bound shipping. Within my Department the Enemy Exports Committee takes the place of the Contraband Committee, and our consuls abroad issue certificates of neutral origin and interest in the place of navicerts.

But there is this broad difference. Germany is seriously deficient in certain vitally important commodities and, whatever the risk, must endeavour to run consignments through our contraband control. Neutral importers overseas have, however, little or, I think I may say, no inducement to order German products, once they know that they are liable to detention. The mere decision, therefore, to detain German exports is thus, in itself, sufficient to cut off the overwhelming bulk of Germany's exports overseas. The result is that the quantity of goods which are admitted after examination is, and is likely to remain, very small. At the same time I have no doubt—indeed, I know—that the Germans are developing devices to be adopted by their traders in order to camouflage their goods, and I give them fair warning that the necessary steps are being taken to check that practice.

I have described our campaign against Germany's sea-borne imports and exports. There remains another and very important field of economic warfare, namely, the markets and sources of supply to which Germany still has access by land. German propaganda is fond of declaring that our contraband control can have no effect because Germany can import all she requires from contiguous countries. That statement, like many another German statement, is something which is very much less than the truth. In the first place, there are many extremely important commodities which can only be obtained from overseas, and, in the second place, there are other equally important commodities which Germany can- not obtain in Europe in quantities which are sufficient for her requirements. There does remain, over and above that, a very important field of economic war activity. It is a field, which from our point of view, consists very largely of highly competitive sales and purchases in certain neutral countries.

I will not go into the sales, or British export, side of the problem. It is primarily a matter for the Board of Trade, and it was fully dealt with by the Secretary of State for War, when he was President of the Board of Trade, in a speech last month. My Department is concerned with purchases, or, to define our functions more accurately, is concerned with preventing Germany from obtaining essential supplies. This aspect of the economic war, the vital importance of which has been realised in my Department, has been the subject of our work from the very start of the war. We started in this country under a severe handicap. For years past Germany has been conducting her foreign trade, particularly in the Danubian countries, not as an ordinary trader in a free country, but by elaborate clearing and barter organisations which had the effect of giving her a substantial hold over the foreign trade of a number of smaller countries. Germany, moreover, was operating in her natural market, and she had welded her commercial, industrial, and military-political power into an effective instrument of economic warfare, and had been waging such a war against some of her smaller neighbours for some years past.

To attack this enemy position requires new departures in a country which lives under a free economy. We had, it is true, modified our normal system to the extent that in war time the purchase of many commodities was already centred in the Ministries of Food and Supply. On the other hand, the first purpose of those Ministries is to provide for the needs of the community on a commercial basis, and the kind of purchasing with which I am concerned often means paying higher prices than need be paid for the same goods elsewhere. Consequently, it is necessary for the Treasury to come in and foot the bill for the difference in price. Other Departments are obviously also concerned. One of the first things, therefore, to be done was to co-ordinate the Government Departments concerned in order to be able to get rapid decision and rapid action. To this end, two Committees have been set up. One is a Committee of Ministers, of which I am Chairman, to decide matters of policy. The other is a Committee of senior officials under Sir Frederick Leith Ross, Director-General of the Ministry of Economic Warfare, which provides for executive action. I know that Committees tend to be regarded as a joke, with what justice I will not pretend to say, but I can assure the House that these Committees have really cut out the delays normally involved in inter-departmental consideration and correspondence. They have enabled questions to be discussed personally and decisions to be taken rapidly. Especially, in view of suspicions that have appeared here and there, I should like to pay a tribute to the cooperation of my right hon. Friend the Chancellor of the Exchequer The Treasury have never failed on a single occasion to give a prompt and generous decision when my Department have asked them to shoulder a risk, or bear a loss, on a purchase designed to rob the enemy of vital goods.

The House will not expect me to give details of the purchases which have been made in the field of economic warfare. Hon. Members will doubtless make their own guesses as to the nature of goods which we are trying to pre-empt, and some of them would be, I dare say, fairly easy to guess. But I do not intend to give the Germans handles for blackmail and bullying of neutral traders and Governments, nor, indeed, to give the vendors direct incentives to raise their prices against us. I am afraid that even to give the House total figures of the purchases, or contracts, we have made for this purpose would be merely misleading. For it may be possible by spending £100,000 to buy up the whole supply available to Germany of a key material; while we may, quite justifiably, buy goods worth a million pounds in another case merely in order to tighten Germany's industrial belt. The effect upon the enemy is not to be measured by the amount of money we spend. I can only say that very considerable purchases have been made. We have bought goods in countries where we have never bought them before. We have made forward contracts for the national production of commodities, contracts that would make a sober business man in peace time shudder. We have concluded barter transactions. Our agents have ransacked countries to find the last ounce of a vital commodity, and have bought it. Where we have not bought enough to endanger Germany's supplies, our purchases have often made the German supplies a great deal more expensive. In this respect we have been aided in a number of countries by what I might call the intelligent anticipation of the sellers of goods. The mere expectation of a strong market has often meant that German buyers have found themselves confronted with scarcity and high prices. If the German complaints are any true guide, our policy has been very effective.

There is yet one other aspect of our activity about which I want to say a few words. To obtain the supplies she needs from abroad, Germany must either export or borrow, or else must utilise whatever liquid assets she may already have or may build up abroad. It is, therefore, a further task of my Ministry to prevent, as far as possible, the effective use by Germany of existing assets, and to use all legitimate means to prevent their increase. I can give the assurance that this aspect of our work has received the fullest practical attention since the beginning of the war. I can also assure the House that every step has been taken to make certain that our financial resources are not unwittingly, or indirectly, used to the benefit of the enemy.

Let me summarise the economic warfare activities which I have described. On the American continent we have a voluntary development of the navicert system, and hundreds of applications are pouring daily into London. It is a new development which we hope to see grow. On the other side, in Germany, we are anxious to stop the export of goods. In the important centres of most of the neutral countries of Europe there are the expanding consular staffs examining great numbers of applications for certificates of origin and interest, and issuing certificates. That machinery is new and is already effective. As time goes on, and with the greater experience, it will become unquestionably more effective. Then we come to the war-time arrangements that we seek at the present time with 14 countries. Every one of these negotiations involves an exhaustive examination of the seaborne imports of that country, and much more beside. In the background there is always our contraband control system—our ultimate sanction. It continues to be the subject of development and improvement. There is also the whole machinery that leads up to the prize court. The task then is to supervise, in detail, and to some extent to control, the world's exports to Europe, and Europe's exports to the rest of the world. It is a very big business, and, as a separate subject, quite apart from that, there is the business of pre-emption, about which I have been talking, and the negotiations and deals carried through in a number of countries by other Departments concerned.

That is a sketch of our economic warfare development. The House will agree that a brand-new Department has not been idle. I have already spoken of their enthusiasm, imagination, and vigour. They work a very long day, and a seven-day week. A great deal has been built up, and we have now reached a point at which we can see clearly much that remains to be done.

Before I sit down, there is one other question with which I should like to try and deal. What effect is our economic warfare having upon Germany? There are encouraging signs. Our economic attack has come into operation with a rapidity and a suddenness that there is some evidence was not anticipated and which has given the German economy a sharp shock. There was no opportunity on this occasion for filling up deficiencies in the opening weeks of the war. At the end of 4½ months of war, we find Germany in something like the same economic straits as she was in after two years of the last war.

We have a good start, but tougher and slower problems lie ahead. We must bear in mind that Germany has not the same reserves as she had 25 years ago. Her resources in gold and foreign currency are smaller, and her stocks of industrial raw materials are far smaller. The conditions of life are strained. Rationing already extends to clothing and soap, and the inhabitants of Berlin are shivering for the lack of coal which is being used to provide the raw material for synthetic petrol, for synthetic rubber, and is being forced into export markets. There are signs of an abnormal desire to convert currency into goods from fear of future inflation. For example, there has been a rush to buy quantities of such unusual goods as zinc baths, because they are not rationed. A black market for food is growing up for those who can afford to pay.

Let me give the House this contrast: A neutral sent a cake to a German family for Christmas this year. A warm letter of thanks came back, in which the German said his family wondered when they would ever see another. On the other hand, sufficient crayfish are being imported by aeroplane from the Danubian countries to provide a standing delicacy on the table of the party leaders.

But whilst in this sphere there are definite indications of human strain, it is in the industrial sphere that we find Germany's real economic vitals. Germany's difficulties are serious in regard to her supplies of certain materials. Shortages are apparent in petroleum, copper, iron, cotton, wool, oils and fats, and in many other commodities. The requirements of the export trade are very naturally given priority over the home market, since without any export trade Germany would blockade herself. It is this field, therefore, which is the best test of Germany's industrial discomfort. For example, Germany is exporting cars and bicycles without tyres. For some considerable time past Germany has been refusing to export manufactured goods containing copper, tin, and other nonferrous metals, unless she first obtains the raw materials from the prospective purchasers.

We have reports, too, that an important steel works may have to suspend operations shortly through lack of raw materials, and there are definite refusals to supply for export purposes highspeed nickel steel, stainless steel, and so on. Many factories making rubber manufactures in Austria have had to close down through lack of raw materials and others are working a long way below capacity. Even when basic raw materials are available there is frequently shortage of accessories. Thus, furniture factories have been unable to deliver for export to Holland because of a lack of screws, upholstering and stuffing materials, etc. As practically all Germany's supplies of raw cotton and 85 per cent. of her supplies of new wool are obtained normally from overseas, it is not surprising that the textile situation is acute and that rationing has had to be introduced for clothing of all kinds. I have here a ration card for clothing of the type issued for men in Czecho-Slovakia. It is quite an interesting system and works like a parlour game. There are 100 coupons which can be detached and have to last for a year. You give up 60 coupons for one suit. You give up two coupons for a man's handkerchief, so for a mackintosh, 20 or 30 for a shirt, and so on. It becomes pretty clear that at the end of the year you will not be able to obtain a great deal of clothing by means of this ration card. Even so, there is a number of articles, such as overcoats, bed and table linen, etc., which can only be obtained on the production of a licence.

There is one final question to which I ought to give a brief answer. That is, Is our contraband control really effective? The Germans are naturally fertile in devices for evasion, but our net is, I am sure, drawn very tightly. After four and a half months of war I think we can fairly claim that there are no important leakages through the control and that virtually the whole of Germany's imports which can be assailed by this weapon have been effectively stopped. We look forward to the day when we shall so have strangled Germany's economic life that it can no longer sustain her war efforts. We believe that we can bring very much nearer the day of victory, and in doing so we shall have played a great part in saving the lives of our own people.

5.3 P.m.

Photo of Mr Hugh Dalton Mr Hugh Dalton , Bishop Auckland

I am sure the House will have listened with great interest to the statement of the Minister of Economic Warfare. He has delayed his first statement for more than four months, but of that I make no complaint, because he has had a fuller story to tell to-day. It may also be that in the course of these four months obstacles and difficulties have been overcome so that he is in a better position than he would have been earlier to answer certain criticisms that have been addressed, in the Press and elsewhere, to his Department. I was glad to hear what he said about the close co-operation taking place between himself and his French opposite number and the corresponding Ministers in the Dominions. A few weeks ago I heard a French high authority, whom I will not name, praising very highly, not, indeed, everything British, but the information and intelligence department at the Ministry of Economic Warfare. He said that they seemed to know all over the world where every ship was and what was in it. So that part, at any rate of the Ministry's work seems well established.

I want to offer a few observations, some of which will be somewhat critical, not merely on what the hon. Gentleman has said, but on some matters which he has not particularly touched upon. Broadly speaking, as he told us, the work of his Department divides itself into blockade and pre-emption. So far as blockade and the work of the contraband control are concerned, I doubt whether serious criticism can be levelled against it. He referred to navicerts, and I was glad to notice that he pronounced it "navycerts" and not, as the B.B.C. pronounce it, "navvi-certs." The hon. Gentleman's pronunciation is the more natural one, and I hope Mr. Ogilvie will take notice. The system of navicerts appears to be working well. It is very satisfactory that the United States have accepted it with such good will. If the greatest of the neutrals can accept this system of control and co-operation, there seems no reason why any other neutral should regard it as derogatory or infringing upon its sovereignty or its dignity to follow the American example.

With regard to the war-trade agreements with the neutrals, I assume that the hon. Gentleman would agree with me that they should all provide that no commodity should go into a neutral country in greater quantities than it did before the war. If it can be agreed that it shall go in in lesser quantities, all the better, but it should at least be one of the foundations of these agreements that no neutral country should to-day import any greater quantity of any commodity than it did before the war, because if there were any excess of that kind, there would be a presumption that it was passing into Germany. If the hon. Gentleman accepts that proposition, I would ask him whether he is satisfied that there is not to-day going into any of the neutral countries adjacent to Germany increased quantities of commodities having a use for war as compared with the pre-war position. The House should be given an assurance of that kind, because otherwise these war-trade agreements are not being constructed on the right basis.

I will offer one example only. Others may perhaps be raised by other hon. Members in the discussion. Information has been published, which I hope can be denied, that in Holland and the Scandinavian countries there are greatly increased imports of soya beans compared with the pre-war level. I am told there is an increase of several hundred per cent. into Holland and the Scandinavian countries. But their needs and tastes cannot have developed to the extent that they should want themselves to make use of this greatly increasd quantity of soya beans. If that be true, the only deduction can be that it is going into Germany, where it would be very useful. I hope that the war-trade agreements with these countries will provide for a cutting down of any such excess to at least the prewar level of importation.

I turn to consider the question of preemption. In some respects this is the most important of all the matters with which the Minister dealt. It may well be that in contraband control a position of efficiency has been reached, but there is a good deal of concern in various circles in the country with regard to pre-emption. It is feared that we have been very slow to start along this road and that even now we are not doing as much as we could to buy away from Germany goods which contribute to her war effort. That fear particularly applies to South-East Europe. The hon. Gentleman paid a tribute, so warm as to be notable, to the Chancellor of the Exchequer for his kindly assistance in this branch of our war efforts. I feel that the hon. Gentleman did protest almost too much. He said that he always got a very quick decision from the Chancellor. He did not say that they were the decisions he always wanted.

Photo of Sir Ronald Cross Sir Ronald Cross , Rossendale

They were not refusals.

Photo of Mr Hugh Dalton Mr Hugh Dalton , Bishop Auckland

That seems almost too good to be credible. It surely cannot be untrue that in the early stages of the war there was a great inability at the Treasury to realise the importance of pre-emption. If the hon. Gentleman later on chooses to give us further information to suggest that the Treasury have never been a stumbling block, the House will he interested. One hears in many circles and from many different sources of information that the Treasury has, at any rate until quite recently, been postponing decisions on important cases of preemption, and in certain cases, if not refusing, at any rate delaying, qualifying, and obstructing the decisions desired by the hon. Gentleman and his officials. There has been so much talk of this kind that we should like a little more detail in denial of it, if the hon. Gentleman can give it.

I am not going to ask too much about Rumanian oil, but it has astonished many well-placed people that there has been so long a delay over the effective purchase by us of all the available Rumanian oil supplies. I do not know whether the hon. Gentleman is prepared to give the Minister of Supply as warm a testimonial as he gave to the Chancellor, but it has been widely reported that in the early stages of the war the Minister of Supply, in buying oil for the Forces, thought it cheaper and easier to buy from American countries, which are well out of German reach, than to buy it from Rumania, and that it took a great effort to interest him in Rumanian oil. I think the hon. Gentleman is not doing himself credit if he tells us that he has reached the point of efficiency of which his Department can now boast without having had considerable tussles with a number of his colleagues. I believe that he has had great difficulty in carrying some of his colleagues even to the point where he has got them now.

I hope that we have now effective buying agencies in the countries of South-East Europe. It is notorious that in the early stages of the war we were completely outdistanced by Germany, who had buying agents going round all the little villages of Yugoslavia and other countries. They used to sweep up every pig and every other saleable thing they wanted, whereas in this country there was hardly a business man who had had the enterprise to trade in those areas. At the beginning, therefore, we were at a disadvantage, but I hope that it has now been largely overtaken. Much apprehension is expressed that Germany is still getting the major part of the Yugoslavian metal production, which is very considerable, including bauxite, for war purposes. Without pressing for too much detail, I hope we can be assured that we are now exercising a pull upon the mineral resources of that part of the world as well as of the northern part of Europe. In the South-East it has been necessary, no doubt, to make new trade contacts, but I trust the Minister is regarding it as part of the duty of his Department to step in and fill gaps which private enterprise in the past has left unfilled.

Tobacco was not mentioned by the Minister. It is not directly a war product, and therefore a little less reticence can be displayed, and I hope the Minister will be able to answer more specifically the questions I wish to ask about it. There has been a great deal of discussion in the Press about the Turkish, Grecian, and Bulgarian tobacco crops and the possibility of a considerable portion of them being bought by us. There has also been correspondence in the Press regarding the reluctance of the tobacco magnates in this country, the Imperial Tobacco Company and the British-American Tobacco Company, to blend even a small proportion of Balkan or Turkish tobacco with the tobacco which they habitually get from America. There has been a correspondence in the "Times" and other papers, which no doubt the hon. Gentleman has noticed. I hope he will appreciate that it may be necessary to give orders to Lord Dulverton and Sir Hugo Cunliffe-Owen, if their patriotism does not lead them to do it of their own free will, to secure that they will aid our war effort by economising their demand for dollars. It is very desirable to reduce our demand for dollars at present. They should realise that more important things than tobacco have now to be brought across the Atlantic from the United States, and that they should do their part by blending Turkish or Balkan tobacco with the tobacco they at present sell.

I do not suggest anything so drastic as completely substituting Turkish tobacco for American. Personally, I prefer Turkish to Virginian cigarettes, but I am advised that you can blend up to 5 or 6 per cent. of Balkan or Turkish tobacco with Virginian without the ordinary smoker noticing the difference. If Lord Dulverton and Sir Hugo Cunliffe-Owen will not do it by themselves, let the hon. Gentleman take steps to give them orders. There has been some rather displeasing correspondence on the subject in the "Times." In reply to criticisms, Lord Dulverton wrote a self-satisfied letter which did not make a very good impression. I should like specific answers from the hon. Gentleman on this question of tobacco.

Here it is not so much a matter of buying tobacco away from Germany, though that may have a slight importance, but of giving support and economic and financial assistance to the Greeks and Bulgarians and to our gallant friends the Turks. After the terrible disaster they have just suffered, it will be all the more fitting if such a gesture can be made by way of a further purchase of their tobacco. And after all, we have guaranteed Greece against aggression. I propose only a comparatively small purchase by us of the tobaccos of those regions—small, that is, in proportion to our total consumption and so small that, if our tobacco magnates used their brains and their technical skill, they could easily blend it into their products without diminishing their very large profits. If that were done, we should be able to give very great assistance to those three Balkan countries which it is most important we should encourage and assist, countries which in the past used to depend greatly upon the German market, now increasingly closed to them.

I pass from that to the question of the work of the hon. Gentleman's Department in relation to other Departments. My hon. and right hon. Friends have frequently expressed the view that one of the weaknesses in the conduct of the war at present is the lack of one supreme co-ordinating Minister for economic affairs. In spite of the glowing tribute paid to the Chancellor of the Exchequer this afternoon, to which I have already referred, we are not satisfied that in a War Cabinet in which there are four Ministers concerned with the conduct of the war in a military sense—the Minister for the Co-ordination of Defence, the First Lord of the Admiralty, the Secretary of State for War, and the Secretary of State for Air—it is sufficient to have merely the Chancellor of the Exchequer representing economic interests. It appears to me very paradoxical that the Minister of Economic Warfare is excluded from a Cabinet in which four Ministers are present to repr— sent the naval, air, and land forces. Therefore, not for the first time—nor, I can tell the Prime Minister, will it be for the last time—we on this side of the House emphasise that we shall not have maximum efficiency in the conduct of this war until we give to economic warfare, and to our economic activities generally, a more substantial place in the War Cabinet than at present.

The hon. Gentleman disclaimed any concern with the promotion of British exports. Departmentally he was, no doubt, right. He said, "It is not my business to push British exports; it is the business of the President of the Board of Trade." That may be departmentally true, but is it not desirable that there should be some Minister sitting, as it were, above the departmental activities of the hon. Gentleman, the President of the Board of Trade, the Minister of Shipping, and other Ministers with economic functions, and exercising from the top a general co-ordinating function? How often I wonder does the hon. Gentleman discuss with the President of the Board of Trade border-line problems between his functions and those of the President? He told us of two committees. I am not going to laugh at committees, as he said so many people always do. I am only going to say that I hope they are succeeding in their functions. I am glad that he is the chairman of one committee, and I hope that he gets his way when the Treasury representative argues with him. But the kind of committees he indicated are not really a substitute for what we have in mind. He has a committee, over which he presides, which I gather is also attended by the under-secretaries from a number of other Departments. They discuss various matters, but the hon. Gentleman then has to discuss them again somewhere outside, in some other room in some other building, with the Chancellor of the Exchequer if it is a question of money or with the President of the Board of Trade if it is a matter relating to exports. Although we welcome the statement that this committee is getting on with the job, we do not feel that that in itself is sufficient.

I will not speak this afternoon about any matters which do not fall within the hon. Gentleman's Department, but, unless the Prime Minister changes his attitude in the matter, we shall have to ask again at some early date for an opportunity to discuss a number of the larger questions affecting the economic conduct of the war. So far as the work of the hon. Gentleman's Department is concerned, I think that no Member in any part of the House is likely to underestimate its importance. It may well be, as he has said, that the economic operations of which he is in charge may be a decisive factor in the outcome of the war. Alone, they will not suffice to prevail over the German will to world domination, but in conjunction with other factors they may just turn the scale in our favour. Therefore, we must urge that they shall be pressed forward with the greatest vigour. No word has been spoken from the benches behind me nor I think is likely to be, urging the hon. Gentleman to go slow or to do less than he is doing now. All the stimulus he will get from us will be in quite the opposite direction.

We believe that the vigorous conduct of the economic side of this war may save millions of lives, may save years of time, and may save thousands of millions of pounds by shortening the contest and bringing the hour of victory nearer. We recall that in the last war it was said, not untruthfully, that the Allies floated to victory upon a wave of oil. We had it and the Germans had it not, and that, among other factors, including the great gallantry of our airmen, gave us the command of the sky and immobilised German motor transport on the ground. It may be that in that respect this war will move to a similar conclusion, but just how these streaks of scarcity will first appear in, and then spread across, the German economic life it is difficult at this moment to prophesy. We can point to certain commodities; oil, iron-ore, and animal fats, to mention three obvious examples. If there were a great shortage of any of those commodities in Germany —and that is by no means out of reach if we conduct our economic warfare with energy—the German war effort would indeed become very difficult to carry on.

Therefore, having listened to the hon. Gentleman with interest and with appreciation of the effort he has evidently made and is still making in his Department, but with some scepticism as to whether he is even yet getting enough support from certain other quarters in the Government, and even greater scepticism as to whether the economic activities of the Government are properly co-ordinated, none the less we wish the hon. Member well in his efforts, and we hope that the economic attack upon Germany is going to be pressed home with an obstinate determination, with the use of all our available resources, and with a skill and courage, in a different field, not less than that displayed by our soldiers, our sailors, and our airmen.

5.27 p.m.

Photo of Sir Geoffrey Mander Sir Geoffrey Mander , Wolverhampton East

I am sure that the House has greatly appreciated the very lucid, interesting and modest statement which the Minister has made this afternoon in setting forth the work which has been done by his Department. I believe that his Department, within its limitations, and it is severely limited, has been doing a very good piece of work. The Minister is doing his very best, and he is supported by an enthusiastic and highly efficient staff. They are doing everything in their power to achieve the results which we desire to see obtained in this particular field. At the same time I think they might do a great deal more if they were given wider powers, on which point I shall say something later. Towards the end of his speech the Minister drew a rather flattering picture of the success of his Department, saying how well we in this country were doing and how badly things were going in Germany. He pointed to factories in Germany having been closed down owing to a shortage of steel and other things. Has nobody ever heard of a factory in this country being closed down owing to a shortage of steel and other things? I have, and I venture to think it is quite well known that we are not able to point the finger of scorn at Germany in that respect, because we have not all that we need.

There is another side to what the Minister said. In the "Economist" of 13th January I read an extract of information obtained from German and neutral sources which sets out rather a different point of view. It said: The trade situation in Germany is not so unsatisfactory as some feared when war began. The increases made in food rations are evidence of this. It seems not improbable that this is in some part due to the fact that the Allied blockade has not been so complete in its effects as it set out to be. More important is the fact that there has been no large-scale military or air operations. I think we ought to consider whether there is not some foundation for those remarks. I regret very much that in the reconstruction of the Cabinet which has been made on a very limited scale and in special circumstances an opportunity was not taken to do what will have to be done in the end, and we all know it, and that is, as my hon. Friend said, to introduce into the War Cabinet some Minister in charge of the economic activities of the Government. There has been very strong public support for it for a considerable time. The "Times" has published leading articles and a number of letters from prominent citizens upon the subject. The British Association of Chambers of Commerce has expressed similar views and there is a widespread feeling that something of the kind should be done, shared by almost everybody and I imagine by Members of the Cabinet itself—with the exception, up to the present, of a leading Member of it. I cannot help feeling that the machinery which was set up—the Stamp Committee and the Simon Committee—has not functioned satisfactorily, and that some improvement and some change should now be made. The Chancellor said at the time that it was an experiment and that we were not necessarily tied to using that machinery for all time. I think the moment has come when some change should be made.

At the present time no one person is able to give a definite decision on matters of high policy in the realm of economic activity. There is a large number of Departments. The Board of Trade deals with imports, and the Department of Overseas Trade with exports. It is obvious that they should be related in some way. The Ministry of Food deals with edibles and the Ministry of Supply deals with munitions. The Ministry of Shipping has a function which speaks for itself, while the Ministry of Mines has economic activities of great importance. Then there are the Ministry of Economic Warfare and the Treasury. All those activities ought to be closely co-ordinated inside the Cabinet.

In order to indicate the overlapping and the indecision which exist at the present time I would give an example, and perhaps the Minister would be good enough to consider it. Some month or so ago, representations were made to his Department as to the importance of buying for this country by pre-emption foodstuffs which were in a country in southeastern Europe. The reply was to the effect that that matter interested the Ministries of Food and Shipping. The Minister himself was naturally interested, but he was not in a position to give a definite decision; though, of course, he would be able to pass on any information which was supplied to him. He made it clear, as I think he has done also in answer to a question, that anything to do with shipping was for the Ministry of Shipping, even when it covered a matter of pre-emption.

Having received that information, I proceeded to put a question to the Minister of Shipping in the course of Debate, as to whether he accepted responsibility for shipping in those circumstances. He said: "Oh no; that is a matter for the Ministry of Economic Warfare." That shows an astounding state of affairs. There is no one Department in the realm of economics willing to accept responsibility for doing a certain thing in connection with an important matter of pre-emption. I would ask the Minister to be good enough when he replies to say where authority now lies, with what Minister or committee, for taking action in a question of buying, say in south-eastern Europe, foodstuffs which require to be brought to this country and require shipping. Who is the person able to decide? So far, I have had only conflicting replies, and it is very important that the existing position should be known. It may have been straightened out by now.

In spite of the tributes paid by the Minister to the Chancellor of the Exchequer this afternoon, and which may, to some extent, have been in anticipation of benefits to come, it is profoundly unsatisfactory that the head of the Treasury should be sitting as chairman of a committee of that kind. He ought to be powerfully represented on the committee, but the outlook of the Treasury and its traditions in peace time of rigid adherence to sound finance and all that sort of thing, prohibit it from taking the profoundly different point of view which is required in time of war. A great many cases of subsidy arise. The Minister has referred to some of them. How horrible such a thought must be to a Treasury official. It has been well said that, in present circumstances, no device can be too unsound to be made use of in economic warfare. It might even be the right thing to pay an uneconomic price for materials which we do not want, and even to throw them into the sea, or to hire shipping and make no use of it. Those are all matters which may arise and, they may have been done. It may be wiser to buy oil of an inferior kind for economic reasons. What we require is not a purely negative policy of blockade—I gather that the Minister is engaged on this matter at the present time to some extent—but a positive policy of preemption carried out on a bold scale.

I would like to make a constructive suggestion in regard to the future of his Department. A Department of that kind cannot carry on without finance. It is absurd that it should have to go to the Treasury for finance for all of its purposes. It ought to be able to go to the Treasury for a grant, which might be of £100,000, and have, the right to spend that money as it thinks fit. When it had spent that amount it ought to be able to go to the Treasury again and ask for a further grant just as other Departments of State engaged in these affairs are doing at the present time. I would like to give an example. It is within my knowledge that very important negotiations are going on in connection with certain interests in south-eastern Europe. Some of the persons engaged in these negotiations said to one of the officials, a most enthusiastic and admirable person, that they ought to take a definite action of a certain kind in order to push the matter forward. His reply was: "For Heaven's sake do nothing of the kind. We have no authority here to spend money, even on petty cash." The Ministry ought to be placed in an entirely different position and to have money of its own to spend as it thinks fit. Until that is the case, matters will not be satisfactory.

A great deal of difficulty is being experienced now because of the looseness of connection between the Ministry of Economic Warfare and the Ministry of Shipping. They ought to be closely interrelated, more closely than any other two Ministries, in connection with our economic effort. I suggest that, quite apart from the two committees to which the hon. Member has referred, and which, I dare say, are doing very useful work, there ought to be a separate committee, small in number no doubt, representative purely of his Department and of the Ministry of Shipping. It ought to meet daily to settle questions which, I am sure, are lying unsettled owing to the fact that the necessary contact is not being made. I would ask the Minister seriously to consider whether that would not be a very useful thing to do. There might be a representative of the Treasury upon that committee. I think that the public at the present time is living in an unreal world by thinking that everything is going perfectly smoothly and that we have only to wait until the fruit drops into our laps. There will be a rude awakening some day. The change, the larger change to which I have been referring, is inevitable, and the sooner it comes the better.

Now I want to make a specific criticism of the work of the Ministry of Economic Warfare in connection with a matter which has been referred to in the Press. There can be no harm in mentioning the facts, which are well known to the enemy. Within a few weeks of the beginning of the war representations were made by persons in this country, who had full information and who were fully experienced in regard to the matter, about the importance of purchasing certain plant in Rumania that was producing oil. Those persons offered to intervene, offering their services very often in a purely voluntary capacity, but the offers were not taken up and their advice was not taken. The result was that we read in the Press some time ago that a very important concern called the Petrol Bloc, S.A. Romana, had been purchased by Germany. In December we read in the "Times" In addition, however, Germany will be allowed to import, without restriction, oil products from German-control companies in Rumania The petrol bloc, with a daily refinery production of 450 tons"— It gives this figure in the "Times," but the actual amount is 1,500 tons— is one such company. In all, it is thought that Germany will be able to take up to about 45 per cent. of Rumania's total oil exports. Further information about this transaction enables me to say that the purchase of the controlling interest in Petrol Bloc gives the Germans a 25 per cent. interest in the I.R.D.P., which is an oil-producing company. This 25 per cent. interest gives them virtual control, as the other 75 per cent. is spread over numerous people throughout Rumania.

In addition, this Petrol Bloc owns a large number of railway oil-tank wagons. They can make up 10 trains of 50o tons each with them. It is hardly necessary to point out that the Germans who now control the companies will be using these trains all the winter for the transport of oil to Germany. It was stated in the "Times" only a few days ago that while the Danube is closed and other means of access are not open, and ordinary passenger transport is restricted on the railways, exactly what I am saying is now taking place. Trains with the tank wagons in them are running regularly into Germany. It is a serious criticism of the hon. Gentleman's Department that this transaction was allowed to go through. No doubt it has taken the hon. Gentleman some time to rise to the state of efficiency which now obtains in his office, and those matters took place in the earlier days. Nevertheless, I would ask him to give some explanation of how it was that we let this piece of work slip through our fingers.

Something has been said this afternoon by my hon. Friend about tobacco and I entirely support what he said. We were informed, I think it was yesterday, that arrangements had been made to purchase some of the Turkish tobacco. I hope that will be true also of Bulgaria and Greece. Until recently the Greek tobacco crop was still going to Germany. We were permitting the export of German coal into Greece in order that it might pay for the tobacco. I would ask the Minister whether that is still the case, whether we are still allowing German coal to go into Greece. I put a question to him on that matter before the Recess, and he said, "The question is now under consideration." I hope he will now be able to state that no more German coal will be allowed to go to Greece, even if we have to buy the Greek tobacco from them in order to do it. The Minister said something with regard to reprisals and I am very glad he brought them into effect and that they are working properly. I hope he will bear in mind that if they are not completely effective and we find that there are loopholes and that exports are being sent by Germany, there is a precedent of the Reprisals Order of 1917, which was much more drastic in its character and which made ships carrying prohibited articles and the goods which were sent out liable to confiscation, and I believe that had a very useful effect in the last war in certain cases. If that situation should arise I hope the Minister will not hesitate for a moment to use again that precedent of the last war.

With regard to the question of rationing, I entirely support what was said by the hon. Member for Bishop Auckland (Mr. Dalton). If we are making these trade agreements with a number of different countries it should be a fundamental principle that the countries concerned should be rationed, as they were in the last war, to the average amount which they were taking over the previous years. In 1915 and 1916 we built it up and we had a number of effective agreements in operation. There were certain cases where we could arrive at no agreement and in those cases we made them accept our system, unilaterally imposed, and it worked quite satisfactorily. We do not anticipate that anything of that kind will arise. I merely mentioned it to show the length to which we went in the last war to insist on this principle, and I hope the Minister will be able to say that in concluding the trade agreements he definitely ha.s in mind this principle of rationing.

I wonder whether he can give any information on the question whether Sweden has prohibited not only the export of munitions of war to belligerents but the materials from which they can be made. That has an extremely important bearing on this aspect of the war and I should have thought it would appeal to the Swedish Government as being only a fair and neutral attitude to say to those engaged in war, "We will not sell to either side arms, or anything from which they can be made." I have my doubts as to whether that is the position at the present moment.

In conclusion, I would say that I agree with the statement that the blockade cannot win the war. We shall have to do something more than that if we are to make the German people realise they are beaten, although it can play an enormously effective part and an absolutely essential part. I believe the Minister is doing all he possibly can with the powers that he possesses. I only hope that he will be encouraged, strengthened and buttressed, and will be given finance and wider powers, and that he will have superimposed upon him, some person in the War Cabinet, say of the stamp of the late Sir Eric Geddes—some man with wide business experience, with tremendous drive, who would get his way and who would do drastic and unorthodox things if they were necessary without bothering to consult too many committees about it, and a man who would have his say in the War Cabinet itself with the Prime Minister and the other great officers of State. I hope one of the results of this Debate will be that we shall bring that stage nearer and in that way bring the war to an earlier conclusion and save a very large number of human lives.

5.50 p.m.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Stockton-on-Tees

I would like to add my congratulations to the very lucid and interesting statements which my hon. Friend has made. He has given us a great deal of information and, if I may say so, if he has glossed over one or two difficulties that is only natural in the situation in which we find ourselves. It is extremely difficult to carry on a Debate of this kind without all the time wondering whether things may be said which had better be left unsaid. I believe it would be very useful if we could repeat the experiment that we had before Christmas and have in private Session a Debate on the general economic aspects of the war. It would then be possible, without that feeling all the time that perhaps something had better not be said, to get a really comprehensive Debate upon this aspect of the war as a whole.

Meanwhile there are one or two points I desire to raise and one or two questions I would like to ask my hon. Friend. He has, of course, a supremely important task and presides over, I think many of us believe, the most important of all the Ministries at the present time—certainly as important as any of the Service Departments, because he presides over what is one of the most powerful instruments used for the conduct of the war and the defeat of the enemy. In his speech he drew some comparisons between this war and the last war and the situation with which we had to deal then. He pointed out the supreme difference, that the circular blockade is nothing like as complete as it was in the last war. Germany has great land frontiers open to her and she has, or may have, great countries whose resources may be open to her. It is not altogether true to say that time is necessarily upon our side. Time properly used is on our side, but we must not take the complacent view that the mere continuation of the war without any serious military losses to ourselves means that it will necessarily end in our favour.

We have to thank the hon. Gentleman for one decision of vital importance which was taken much earlier in this war than in the last war, and that was the decision to institute the blockade of German exports. Some of us thought this decision might have been taken at the beginning of the war, and that it was perfectly justified by the brutal and absolutely illegal sinking of the "Athenia." At any rate, only a few weeks or months were lost, and instead of waiting two years, as in the last war, we have imposed this immensely powerful machinery within two or three months of the beginning of the war. We know what my hon. Friend's views were on that problem and we congratulate him upon the decision that has been reached, upon the power of the Department which built up the machinery in readiness and upon the skill with which it has been imposed since then.

Upon the purely blockade aspect there are one or two points which have been only touched upon by the previous speakers. In the war-trading agreements which we make with certain countries it is, of course, generally understood that the rationing of commodities should be based upon the average of pre-war years. But there are some differences between this time and last time. I have some figures, but I will not produce them now, because I do not think it would be right to do so; however, I feel certain in my mind that the German authorities have not altogether forgotten the lesson of the last war, and during the enormous rearmament period in Germany, during the six years from 1933 to 1939, I think they were purposely employing the agency of certain neutral and adjacent countries to obtain some of these vital necessities. So the average of those years might be more favourable than it ought to be, because they have been purposely used for building up this vast machinery of war.

I hope this matter will not be taken too easily. I have no doubt that it is in my hon. Friend's mind. It is not only a question of the agreements between the Governments of these countries; it is a matter of how they are worked between the individual trading firms. In the last war we found it necessary to use a black list, to put names on it, and to use it ruthlessly, quite apart from the financial agreements which were reached between the Governments. I hope the black-listing of firms who are not keeping to the rule agreed to by their Governments is once again used with the same power as in the last war.

Passing from that aspect of the blockade to what my hon. Friend called the second part of his task, the new technique as he described it, there is not quite the same feeling of certainty in all parts of the country or of the House that everything is being done that might be done. It is, of course, a new method and requires new machinery to carry it out. It is contrary to the ordinary activities of this country, which is not, thank Heaven, a totalitarian State. It is the kind of thing which our Government were not organised to do and it is contrary to our commercial practice. For that reason it is difficult to organise satisfactorily a technique of that kind. My hon. Friend described the machinery. He said there was a committee of Ministers and a committee of people charged with co-ordinating the views of the Departments. Two of the Departments, the Ministry of Supply and the Ministry of Food, are not interested in this aspect of the blockade and economic warfare. They are interested only in getting food to the people of this country or the supply of material for rearmament or for manufacture.

The onus of putting this part of the economic warfare aspect of the problem into practice lies upon my hon. Friend and upon these committees. He made a very high claim and said he could not remember a single case since the beginning of the war of something which had not been done as the result of these committees and which might have been done. He alone is the judge of that; we can only accept what he has told us. He has a very high responsibility because we have to accept what he tells us. If this machinery works satisfactorily and if everything is done with the highest degree of rapidity, there is no use in altering it merely for the sake of altering it, but I hope my hon. Friend will bear in mind the immense responsibility which he carries. We welcome the attention of the Minister and of some of his colleagues to the general problem of the organisation of this part of the machinery with a view to accelerating decisions and making them with greater promptitude and power.

It is common knowledge that one of the main things of which Germany has a scarcity is animal fats. Nobody really knows what stores of materials they have: even the Government cannot have exact knowledge of German military stores; but we believe that they have a shortage of animal fats. But it is also common knowledge that since the war began they have acquired a very large supply from Balkan countries. From one country they have obtained the whole output of pigs. I know that many of these countries are very frightened of Germany. It is not merely a question of our buying the oil or the cattle or whatever it may be; it is a question of very nice bargaining between the diplomatic powers and financial powers. These countries have to make very difficult decisions. Their decisions will depend partly on the actions of my hon. Friend's Department, but they will depend also on the general progress of the war, and which side the neutral countries think is going to win. That complicates and makes more difficult the problems of the Department we are now discussing. We have, besides making these pre-emptive purchases in order to deprive Germany of certain goods, to consider also what I would call diplomatic purchases of goods in order to create good relations between us and countries whose help is important to us. Tobacco, which was referred to by the hon. Member for Bishop Auckland (Mr. Dalton), is one of those commodities. It is not a question of whether we want one kind of tobacco more than another, but of whether it is desirable, from a diplomatic point of view, to ease the economic problems of a country whose support we want.

I think the House must have been pleased with the confident tone of my hon. Friend, and, if I may say so without impertinence, with the efficiency which he showed in making his statement. Certainly, the tribute which he paid to the members of the staff of this rapidly-constructed Ministry was deserved. It is within the knowledge of anyone who has any kind of contact with this Department that many of its members have been led to join it by an extraordinary devotion to the public service and that they have brought great skill and knowledge to their work. Nevertheless, if I might utter a note of warning, I did detect in the latter part of his observations a certain degree of, not complacency—that would be too strong a word—but of satisfaction, which I think is dangerous in the present state of public opinion. He told us that Germany is in the same position, from an economic point of view, as she was after two years of the last war. That may be true, but remember that Germany has been for five years preparing for this war. She has been for five years building up armaments while we have only just made a beginning. She has vast reserves of many of the necessary materials for war, and I think we run a risk of making our people unwilling to understand how great are the sacrifices they will be called upon to make if we adopt too complacent a view of the sufferings and difficulties of Germany to-day.

My hon. Friend produced the actual physical example of a German ration card for clothing. We ought to have had rationing of almost every article from the very beginning of the war. That is no reason for us to laugh at the Germans; we should have done it ourselves. He told us of the difficulties experienced by the Germans in regard to exports owing to the shortage of materials. That is equally a difficulty in regard to British exports. Our difficulty is not a shortage of markets but our inability to import sufficient raw materials. My right hon. Friend the Chancellor of the Exchequer has on several occasions recently warned the people of this country; and the Prime Minister lifted the curtain, as we might say, in his speech at Guildhall sufficiently to show that when we are deprived—by our own folly, it is true—of the power of borrowing large sums of money from the United States, we can keep our machine going only by voluntarily reducing the standard of life of the community as a whole during the war. We have to ration ourselves, whether by means of ration cards or by any other method that we may adopt. We have to give the maximum amount we can to the exporting industries, in order that they may get the necessary exchange for us to carry on the war.

I hope and believe that the German situation is a very bad one, but do not let us delude ourselves. They have made very long, careful and exact preparations during the years in which we have been living in a fool's paradise, making barely any preparations for war. They have instituted—through this tremendous machine, if you like, of a slave state—an artificial shortage of commodities, in order to reduce the purchasing power of their people and force them to save, so that the State may have money for rearmament which otherwise the people would use for clothing and food. We have great weapons to meet that, and my hon. Friend's Ministry is one of the weapons. But we have to remember that, great as can be the pressure of this Department, Germany's stocks of many of these materials are not now being used. As long as the war is not really engaged, these great resources are not being consumed; therefore, they need not be replenished at the same rate.

That is not my hon. Friend's problem, but he has to take it into account. Welcoming, as I do, his statement of the efficiency and skill with which his Department has been built up in a very short time, and proud as I am to hear that statement, I feel sure that my hon. Friend will do the greatest service to his place in history and to the country by regarding this problem as a tremendously difficult, not overwhelming, but immense, task, and by bringing into play every single method, every possible device of economic warfare, every kind of machinery we can get to increase the pressure on Germany, so that we may win the war within that degree of time which is necessary if we are to preserve any kind of civilisation.

6.10 p.m.

Photo of Mr Morgan Price Mr Morgan Price , Forest of Dean

I am sure the House is glad that the Government have given time to-day for a discussion on the work of this most important Ministry. I entirely agree with the hon. Member for Stockton (Mr. Harold Macmillan) that time is not necessarily on our side unless it is properly used. That is a thing that the general public has to realise. Not long ago I saw an estimate by a group of American economists as to the possibility of Russia being able to supply Germany with materials in the course of the next year or so. The conclusion seemed to be that the state of the Russian transport system and of her general economy was not such as to enable Russian help to make any appreciable difference to Germany in the immediate future, but that there was no guarantee that within about two years German engineers would not be able to get to work in Russia and so transform the system as to make her a serious asset to Germany, and liability to us. I mention that in order to show that time is not necessarily on the side of the Allies, and that unless we make use of the opportunity that we possess of blockading Germany and rendering her position impossible at as early a date as we can, we run very serious risks.

It seems that there are three main weapons which we can use most effectively. The weapon of land warfare seems to have reached a deadlock; whether it will remain so, we cannot say. The air weapon, apparently, cannot by itself bring decisions. Naval action is one of the three most effective weapons, but it seems to me that the other two are equally effective. One is propaganda which will undermine the psychology of the enemy, and the other is what we are discussing to-day, the organisation of economic warfare so as to bring to our aid the economic assistance of neutral countries, and to draw them away from the economic sphere of Germany. We have reason to fear that much valuable time has been lost. It is not satisfactory for us to feel that possibly there are still important leakages. It has been mentioned already that increased purchases of soya beans are probably being made by Germany through the Scandinavian countries. Is it not a fact that there is a very large contraband trade going on to-day through the ports of Genoa and Trieste? I know that our relations with Italy are delicate, and that we do not want to make the position between Italy and ourselves any more difficult than it is; but we should see whether that back door opening into Germany cannot be effectively stopped. I am referring to what has been left undone during this last four and a half months, probably before the Ministry of Economic Warfare got properly into working order. Still, I think it is inexcusable, and we ought to have the reason why Germany has been able to get far better control over the resources of Rumania than she should have done.

The hon. Member for East Wolver-hampton (Mr. Mander) has referred to the purchases of Rumanian oil, and to Rumanian land transport, which has enabled Germany to get increasing supplies of oil. I have also heard of another matter in that connection, which, I think, requires some explanation. I understand that an offer was made to this country of the option on certain oil tankers on the Danube which could be used to transport oil to Germany. An option to purchase them was made to this country, or at least to control them for a certain period, to prevent them getting into the hands of Germany, and that was refused. Moreover, I understand that this information got into the hands of certain organs of the Press, but they were forbidden by the censor to publish the information. I do not know who was responsible, but that is a thing about which we certainly ought to have information.

There is still another point in connection with the South-East of Europe which again shows a certain lack of taking time by the forelock, and that is Bulgaria. Of all the countries in the Balkans, Bulgaria is the most dissatisfied with her present situation and the one most likely to give trouble. She has always traditionally had a sympathy with Russia, dating back to the Russo-Turkish war of 1887, when she was liberated from the Turks by the Russian army. It is known too, that Bulgaria is in need of oil, and of markets for her agricultural products, mainly dried fruits. She vas ready, I understand, to do a deal with us on tobacco not so very long ago, but owing to the fact that the tobacco interests of this country were not prepared to act, she has sent a delegate to Moscow and has fixed up a trade agreement with Russia to deal with her imports of oil and exports of agricultural produce. I do not wish to suggest to this House that we should regard Russia as an enemy, although the fact that she is virtually allied to Germany to-day in this way and has committed this gross act of aggression against Finland makes us justly all the more suspicious of any activities she may be carrying on in the Balkans. Therefore, it is only wise on our part to do everything we can to improve our economic relations with a country like Bulgaria, and steps ought to have been taken in regard to providing her with a market for tobacco in the public interest, no matter what private interests stood in the way.

I was reading only yesterday the speech of the chairman of the Imperial Tobacco Company, who referred to the important assistance which his firm have received from the Government in connection with obtaining foreign exchange for the operation of their great concern. No doubt the Government have been assisting them—there is no objection to that—but the Government have not asked for a quid pro quo, or, if they have, we ought to know about it. A big concern like that, handling an enormous quantity of tobacco, if they get assistance from the Government in regard to foreign exchange, must give some concession in exchange, and that concession in this case should be that we ought to insist upon a considerable blend of Balkan and Turkish tobaccos in the tobacco which that concern purchases from overseas, in the national interest, in the interests of the allies and in the interests of winning the war. The Government have helped other companies like the Imperial Tobacco Company, and it is their business to see that that help is effective.

The war trade agreement with Turkey, which the Prime Minister announced, is of great importance, but, unfortunately, we cannot really discuss it here to-day in all its details, because it does not directly concern the Minister, yet the two subjects are closely interlocked. You cannot discuss the question of preventing the enemy from getting certain products, if you cannot also discuss trade relations between the countries who provide these products. I entirely agree with the hon. Member for East Wolverhampton that it is time that we had a department of the Government, the representative of which we could have here, and, if necessary, criticise, and to whom we could put questions and ask for answers on all these matters concerning this most important subject. For instance, in the case of Turkish tobacco which comes in under this new agreement with Turkey, the matter is all tied up with the question of liquidating certain commercial debts which Turkey owes to us and to France. That cannot be properly done unless we discuss the whole question of credits to Turkey, our imports from Turkey, and our exports to Turkey, which concern the Department of the right hon. Gentleman the Member for Southport (Mr. R. S. Hudson).

We ought to be able in a single Debate to deal with these questions. Our trade agreement with Turkey, which was announced by the Prime Minister, shows that the import of Turkish tobacco is linked with the former commercial debts which are still outstanding between us and the Turkish Republic. That is also linked up with our whole export trade with Turkey. But one cannot expect the exporter of machinery in this country to be bothered with questions concerning the imports of Turkish tobacco. The whole thing leads up to the fact that we ought to have our import and export trades with countries in the South-East of Europe brought under public control in the sense that we ought to have an import and an export corporation, or some organisation through which all these transactions can be carried out. We ought to have a public utility body working under the control of the Government, a sort of import and export board, to carry out these complicated transactions concerned with past commercial debts, the economic blockade of Germany, our import trade with these countries, and our export trade too. All these should come under one Department, and we ought to be able to deal with these matters in this House in one Debate. I know that if I put a question to the hon. Member he cannot really answer it now. The matter ought to be brought up at an early date by pressure from this House, for only in that way can we bring that economic pressure upon Germany which will enable us to use the weapon which we need in order to win this war.

6.25 p.m.

Photo of Mr John Morgan Mr John Morgan , Doncaster

One almost apologises for coming into the Debate at this stage. The atmosphere is so friendly to the Minister, and we are to a certain extent rather fascinated by the scope of his office and the record that he has given us that I feel a little diffident in coming in. At the same time I feel that the importance of this Debate is measured by the simple fact that the whole Nazi philosophy, the whole basis of their economy, is founded not upon some creed that was discovered and propagated by some prophet, but is the result of their experience of the last war. The whole structure of the Nazi economy is to attempt to evade the very instrument that we are discussing here to-day on the simple ground that it is the one thing that brought them down. That is their accepted view of the last war. They take it that they won on the military field but they were beaten on the economic field, and so the importance of this office which is being discussed here to-day is exemplified by the whole structure of Nazism as it has developed in the last few years.

I was glad when I heard the hon. Member for Stockton-on-Tees (Mr. Harold Macmillan) sounding that warning note with regard to the concluding passages of the Minister's statement. One gets the uneasy feeling that there are two things that are happening; that many of the measures taken in Germany to-day—and I have had the privilege of being in Germany and living in one or two households for a while—that the measure of their rationing and the shortage they are undergoing in certain respects, are calculated measures on their part and not enforced ones. It is something that has been well planned, and although they may have less resources than we have, yet by making much better use of those resources than we shall of our abundance they may yet head off a disaster for themselves. That is our danger. There is also a significance developing, of which, I fancy, we shall have to take more account, and that is that Germany is undoubtedly placing some weight upon the value that she expects to get from her Russian alliance. She has not got very much out of it up to the moment, but the fact that she is jeopardising her relationships with other countries, the neutrals in this part of Europe, indicates that she hopes to get Russia into a state where Russia seeks definite economic aid from her so that Germany can actually exploit the Russian resources to a degree that has not been possible up till now. If that is true, then time is not on our side and the American investigator referred to by the hon. Member for the Forest of Dean (Mr. Price) may be near the mark. If Russia has to seek German aid in this way, it may be precisely that for which Germany has prayed, namely, that the Scandinavian countries will involve Russia to such a degree that she will be obliged to get Germany to come in to her aid and get her out of the mess. In that event, the Germans can use the Russian peasantry as helots in the same way as she is using the Poles and the Czechs, compelling them to work for their subsistence and the German economy. That seems to be indicated by tendencies that are developing in the Scandinavian field.

Other Members have referred to the importance of animal fats in the economy of Germany. Well, we shall have reason to find out the effects of economy in animal fats in this country before we have gone very much further. I think of the Danubian countries in this regard. It is often thought that by buying the grain crop of the Danubian countries you are merely buying grain for bread. Actually you are eating up the animal food stores of the Danubian economy, because it is the surplus grain of these countries which feeds the farm animal population of these countries. Our own foodstuff problem at the moment is being exaggerated by a piece of business done by the Ministry of Food in this country. We are congratulating ourselves at the moment that from Canada we are going to have so many million cwts. of bacon the coming year. It looks good, but what is happening? Canada has decided to keep every hit of feedingstuff she has got when we are having trouble with the Greeks over Argentine trade in the same class of material. This is at a time when Canada is not selling to relieve us with foodstuffs for our own poultry and pig population. So one sees how ramified and how fascinating is the scope of the office of the hon. Gentleman on the other side. In buying up the next harvest of the Danubian countries, he may actually put a stop to the source of supply for animal fats to Germany at the same time, and I am sure that that type of discovery is rapidly coming to those in his Department. I think they must be making new discoveries every day as to the reactions of the business that they are doing.

May I ask one or two questions that may be regarded as sufficiently important to attract an answer? I have wondered, in the discussion on the tribute made to the co-operation of the French, to what degree they are co-operating with us on the actual purchase policy connected with commodities. Is France in complete agreement with us and in a position to associate herself with us on the actual cash purchase of stocks of the kind that we have discussed this afternoon?

There is another aspect of this policy. It must be increasing the income of those neutral countries who are so favourably treated for reasons of our own. What are they going to do with this additional income? Are they going to buy from Germany? Germany may not be able to supply the kind of goods that hitherto they have had, but it does raise the question of whether our exporters can be encouraged to provide those countries with this higher income, with the class of goods that they can buy, instead of letting this additional income go to Germany. One wonders whether our export departments and business houses are alive to the fact that possibly some of these countries will register a marked increase in their ability to buy goods from abroad and Germany. There is another point which I felt ought to be borne in mind in discussing the position of countries like Holland and Belgium in particular. It must be embarrassing to the Department to find it is difficult to trade with such countries because of our exchange position. I have had occasion to make inquiries on behalf of one or two firms about trade with Belgium, and I find the Board of Trade are extremely reluctant to deal with that country because of the sterling position there. I was wondering whether his Department ought to be granted a premium position in order to trade with Belgium. Otherwise we shall be forcing Belgium into the German economy, and that kind of consideration must be continually in front of the hon. Gentleman's Department. I can feel that the sympathy of the House is with him in that predicament.

I do feel, when Germany is falling off in her capacity to supply the trading needs of countries, that it is not always necessary to offer increased cash attractions to the neutrals if our own exporters are responding to the trading possibilities so created. If we can at any given time offer those countries goods that are ceasing to flow from Germany, we may be able to offer quite a hard bargain because we are able to meet them on the character of the goods that our manufacturers here have been encouraged, in advance, to make. I am wondering whether the hon. Gentleman's Department of State should set up some kind of contact either with the Board of Trade or commercial institutions, advising them in advance not only of the goods cut off from Germany but the kind of things that particular countries have hitherto bought from Germany and if supplied by us would enable better bargains to be made with those countries. I think assessment of the goods that are likely to fall off can be made in order to put our own people up to the chances that may be taken not necessarily to-morrow but in a year's time. If our people could, by this type of advice, be encouraged to produce goods that could replace German goods and give satisfaction to the neutrals, this, I feel, would be the right kind of approach to part of the problem before us to-day.

I wish to press the point of the next harvest in the Danubian countries; they will be starting soon after June. If there is any way in which we can undertake to handle this harvest, we can direct a shrewd blow at the type of purchases Germany is likely to make for desperate reasons. I think it is a fact that a Hungarian delegation is on its way to this country, or has actually arrived. Their territory is likely to be a bit near the heart of things so far as German economy is concerned, and if we can embarrass the German position by dealing with such an agricultural country, the animal feeding position will be a vital point. Just as we are discovering to-day that our own farmers are breaking up their poultry flocks and destroying their pig herds because they cannot get hold of feedingstuffs; so let us learn from the lesson of our own farming dilemmas at this moment and see how we can disturb Germany by diminishing the farm live-stocks that have hitherto fallen into her hands through buying up Danubian harvests in the grain.

6.40 p.m.

Mr. David Adams:

I would like, with the rest of the House, to offer congratulations to the Minister upon his lucid and extraordinarily optimistic statement to the House. If there is one advantage to be derived from the Debate, that is, the setting-up of a central board of overriding economic authority with a seat for its representative in the Cabinet, great work will have been achieved. That that is necessary an examination of the situation makes perfectly clear. Take one aspect alone—that of shipping. The Minister has been unable to advise us whether the purchases he has made in the matter of exports or imports are to be satisfactorily handled by the Minister of Shipping. My personal experience of that Ministry is that it is remarkably tardy in responding to advances made to it. I put forward two questions of considerable importance. One was that the sending of vessels to more than one port for discharge had had the result of vessels being lost in transit to the second port, and the other was in connection with the transfer from one firm to another of a British vessel. The firms desired this transfer and adhered strictly to all the rules laid down, but could not obtain replies from the Ministry of Shipping. Their business is being held up, and therefore we are entitled to wonder whether the Ministry are making adequate provision for the handling of the goods and for the changes that are taking place in our sea-borne traffic. I was advised recently that the Ministry were encouraging the purchase and building of additional tonnage, but no specific information has as yet been supplied. Thus one is entitled to cast a doubt whether the grip that we are supposed to have on the enemy is effective in reality.

There is another question that has been mentioned—that of feeding stuffs for this country. We know what has recently ensued. We have been driven more and more to rely on Denmark for supplies of bacon, and all the world knows that the moneys we are paying out are in due course likely to pass on to Germany. That transaction could certainly be reduced and perhaps eliminated if there were adequate supplies of feeding stuffs in this country. Feeding stuffs are available, but tonnage is not. Have we been slow in making that provision? That is the important point. Indeed, it is admitted that in some cases it passes into the hands of our enemy. The one point which I particularly desire to mention is whether the important and vital factor in our warfare, that of shipping, is being handled in the way which is desired.

6.46 p.m.

Photo of Mr George Tomlinson Mr George Tomlinson , Farnworth

There is one question to which I wish to refer, and so far it has not been mentioned., The only approach to it was by the hon. Member for Stockton-on-Tees (Mr. Harold Macmillan), who, in dealing with the question of rationing and the comparison which has been made with Germany, approached the question from one angle. I am thinking of the position of the cotton industry in Lancashire. Those who were living there during the last war are anxious that the mistakes which were made on that occasion shall not be repeated. As everybody knows, we lost during the last war a great part of our export trade, and the question which is agitating the minds of many people in Lancashire at the moment, in spite of the fact that they are apparently doing very well, is, What is going to happen when the war is over? Let me give an illustration. I went into a mill last week and asked the manager how they were getting on. He said, "Very well." I was pleased to hear that, and I asked him what proportion of their goods were manufactured for export and what proportion for the home market. He said, "We are doing about 70 per cent. for the home market and 30 per cent. for export." Normally that firm is engaged in exactly the reverse way—70 per cent. for export and 30 per cent. for the home market. If that is happening all round, we are building up trouble for ourselves in the not far distant future.

Photo of Mr George Tomlinson Mr George Tomlinson , Farnworth

It is the manufacture of cotton goods. I know the way in which the shipping of the country is having to be used and the difficulty of bringing in raw materials. It will be necessary for somebody to say what proportion of the raw cotton is going to be available through the shipping that is available. I want to ask whether the resources now available are being used to the best advantage when everybody is allowed to go as you please. If we have to face a situation in which rationing is necessary, ought we not to be taking the necessary steps now rather than wait until everybody has had a good time? I know the temptation for a firm that has been in Queer Street for the last few years, while the going is good, to manufacture goods for the Government or the home market. Is it something upon which to pride ourselves that while the people of Germany are being cut down to one suit a year or two shirts a year, we can have as many suits and shirts as we like? For the time being we can, but are we employing our economic resources to the best advantage when we are utilising our resources in that way? That question has been asked, but has not yet been answered. Many people in Lancashire are anxious about the position. We had an export trade on the last occasion, but we cannot afford to lose any export trade now, and, therefore, anything that is likely to lead to a diminution of that trade is going to increase the difficulties of Lancashire.

We discussed in this House a reorganisation Bill for cotton, but it had to be withdrawn because it was no longer operative in war time. But immediately war ceases and the Government demand for material ceases, we shall have an aggravated problem greater than the problem with which we were faced before war began. I know that we have appointed a cotton controller, who is regulating prices. No question has yet been raised of the rationing of raw material, but to allow people to go on as they are to-day seems to be telling them in effect that they can go on living in a fool's paradise until the Government decide that the situation is serious enough for something to be done. I suggest that a Government which is in earnest will not make the best of things as they are, but will look ahead and plan now for the immediate future.

6.50 p.m.

Photo of Mr Charles Ammon Mr Charles Ammon , Camberwell North

There are two questions I should like to put to the Minister of Economic Warfare. In this Debate we must to a large extent put aside many of our preconceived economic theories and make our sole object the winning of the war. The first thing I want to ask is, whether the professors and technical people of whom the right hon. Gentleman spoke were giving their services free? I should also like to know whether anything had been done by the way of pooling information. It is quite possible that orders may be given to a firm which is already full up with Government orders, or which has not sufficient raw material. Such an order might be lost, and I think there should be some way of transferring such orders to other firms. In addition, we must also set aside any idea of individual rivalry between firms. To a large extent the State must take over all the export trade and control it. In that case there should be some pooling of information; probably it might be done by the Board of Trade.

The other point that I want to suggest is that it is not sufficient to be concerned with the capture of German overseas markets. We have to find some means of entry into those markets to which Germany still has access, and I would suggest that it might be worth while subsidising some trades in order to gain access to these markets. It is one of our weapons in this war, and it might help considerably to shorten it and thus mean the saving of life. We may be able to prevent German overseas trade, but that is not sufficient. We want to do more, to get into those countries where Germany still has access and to endeavour to undercut her in those markets and by this means considerably shorten the war.

6.53 p.m.

Photo of Sir Ronald Cross Sir Ronald Cross , Rossendale

I can speak again only by leave of the House, but several hon. Members have raised interesting points to which I should like to reply. I must express my gratitude for the extremely constructive and helpful manner in which all hon. Members have spoken. We may feel that at least on this subject we are for the time being a Council of State. It will be a great encouragement to my Department, and I might mention in passing that when I used the word "volunteers" in reference to the work of the Department, I meant amateurs; although I am glad to think that some of them are getting paid for what they are doing. A number of points have been raised in the Debate. The hon. Member for Stockton-on-Tees (Mr. Harold Macmillan) suggested that I was a little misleading or might be stimulating overconfidence when I spoke of Germany's difficulties. If he reads the Debate tomorrow, he will, in justice to me, admit that some of the words he used in criticism are almost the words I used myself in the statement that I made. Nevertheless, I am glad that he has called attention to that aspect of the matter.

The hon. Member for North Camberwell (Mr. Ammon) has referred to the pooling of information in respect of export orders. That is a matter for the Board of Trade. He also referred to subsidising competition in countries adjacent to Germany. That again is a matter for the Board of Trade, though, of course, I shall be deeply interested in any such matter, and I can assure him that if any new departure of that kind is necessary, I am perfectly ready to do things which are unconventional and for which there is no precedent. Other hon. Members have spoken of co-ordination in the economic sphere, and said that they wanted one economic Minister. Clearly it is not for me to answer on that point, but the suggestion raises one question in my mind. Do hon. Members really want to put me under an economic co-ordinating Minister? I am not at all sure that it is the right place for the Minister of Economic Warfare, and I invite hon. Members who have made the suggestion to give further thought to the matter. The Ministry of Economic Warfare is not a constructive Department at all; it is very much the reverse. The Departments to which co-ordination might apply are Departments such as the Board of Trade, the Ministry of Supply, the Ministry of Food, and the Ministry of Shipping, but I feel that my Department would more naturally rank alongside the fighting Services, and that its functions are parallel with theirs.

The hon. Member for Bishop Auckland (Mr. Dalton) raised the question whether some neutrals might be obtaining more than normal supplies, and he asked for an assurance that they would not. I cannot give that assurance, because the point to which I address myself mainly in these matters—and it is far and away the most important point—is that we should have complete confidence that certain commodities which pass into neutral countries do not go out of them into Germany. There can be exceptions which are justified. For instance, there may be an increase in the supply of one commodity when the country concerned is getting less of some other commodity of a similar nature. Alternatively, it can, and does, occur that some of these countries are anxious to acquire to some extent stocks of commodities because they fear that in the course of the war they may find it very difficult to maintain their ordinary rate of imports. Where that is the position, it does occur that imports are in excess of the normal. But, in general, I can give the House a definite assurance that where that has occurred we are satisfied that it has not meant that there has been a back-door leakage into Germany. Germany has not got those supplies.

The hon. Member for East Wolverhampton (Mr. Mander) asked a question in connection with a company called the Petrol Bloc. In reply to that question, the purchase of a minority share in a small concern at a high price is not always the best way of preventing supplies from reaching the enemy. I think that, with the understanding I have of this subject, I can give the hon. Member an assurance that we have not lost anything through that, but the subject is not one which, speaking in the conditions in which we are, I can pursue in any more detail. The hon. Member for Doncaster (Mr. J. Morgan) spoke mainly on the subject of French pre-emptive arrangements. Where we have agreed with our French allies to make certain purchases, the practice so far has been for one country or the other to undertake to make those purchases, and where it is, as I think in the case which the hon. Member had in mind, a question of a commodity on which it is probable that a loss will be made, it is the intention that the loss shall be divided between the allies on a pre-arranged basis, and I take it that, unless exceptional circumstances appertained to a particular deal, that basis would in general apply for the future. The hon. Member also dealt with other problems. I would ask him to believe that they are matters which we have very much in mind, but they are not matters which can be easily discussed in public; nor are they matters on which we have taken actual action as yet. They are things with which we are trying to get to grips. I think the moral of what the hon. Member had to say was that the encouragement of exports is the corollary of the encouragement of purchases, and I endorse that statement very heartily. It is entirely the view taken by my Department.

The hon. Member for Consett (Mr. David Adams) called attention to shipping matters, which are rather beyond the immediate reach of the Ministry of Economic Warfare, but I feel he will be glad to hear that we work in the very closest co-operation with the Ministry of Shipping. There is, indeed, a Neutral Tonnage Committee attached to my Department, so that in making either shipping agreements or war trade agreements we are certain that we are marching hand in hand. The hon. Member for Farnsworth (Mr. Tomlinson) referred to a matter which I know is very near his heart, and which he knows is very much nearer to my heart than it is to my Department—namely, the export of cotton yarns and cotton piece goods. I think the hon. Member knows enough of me, particularly in connection with the Cotton Bill of last summer, to be certain that wherever I come into touch with that matter, I cannot forget the interests of the county from which both he and I come.

The hon. Member for Bishop Auckland asked a question with regard to tobacco. A very large part of the answer to that question is, of course, the responsibility of the Board of Trade, and I understand that there is a Parliamentary Question on the Paper for to-morrow on which the Board of Trade will be making a statement on their side of the question. I ask the hon. Member to allow me to leave that part of the answer to the Board of Trade. The Ministry of Economic Warfare have an interest in the purchase of tobacco from another point of view. The House will remember that before the Recess the Government offered to make purchases of tobacco, on certain conditions, from Greece. A delegation headed by the Greek Minister of Finance is in London at present, and we are having discussions with him concerning the terms on which these purchases might be made. There is also a number of other questions concerning the mutual trading relations of Greece and the United Kingdom which are likely to come up in the course of the same discussions. With regard to Turkey, it has already been announced that, as part of the general political arrangements with the Turkish Government, the Government have agreed to take part of the service of the loans which have been made to a Turkish Government in the form of tobacco.

Photo of Mr Hugh Dalton Mr Hugh Dalton , Bishop Auckland

As I recall the statement made to the Press, it was that an agreement had been reached for the purchase of, I think, £10,000,000 worth of Turkish products, and raisins, figs, hazel-nuts, and so on, were enumerated, but tobacco was not mentioned in the list. The hon. Gentleman now says that we are to take part of the service of the loans in tobacco. Presumably that relates to future transactions in distant years. What I and other hon. Members are concerned about is whether, at this moment, when Turkey is subject to additional difficulties owing to the terrible misfortunes that have come upon her through the earthquake, we are going to buy part of the present crop of tobacco.

Photo of Sir Ronald Cross Sir Ronald Cross , Rossendale

The point which the hon. Member makes is met. As he said, the service of the loan would clearly not become due until a certain time had elapsed, but I understand that service is being anticipated by immediate purchases of tobacco which in due course will play the part of being the service of the loan. It is simply a question of some detailed financial arrangement on which I cannot speak with any certainty, but the effect is immediate purchase.

The other matter to which hon. Members have in the main addressed themselves has been that of purchases in the Balkans. I feel it is desirable that we should get the importance of the Balkans to Germany as a source of supply correctly and proportionately in our minds. Germany has obtained only about 14 per cent. of her pre-war imports from the countries of South-Eastern Europe, and as that 14 per cent. constituted a very large proportion of the exports of those countries, it is obvious that any possible increase in Germany's imports from those countries cannot go very far to fill the gap which is caused by the cutting off of her sea-borne supplies, which constituted 52 per cent. of her total imports before the war. I say this because I think it puts the problem into its right proportion. Moreover, many of the German imports from South-Eastern Europe are commodities which, from the point of view of economic warfare, are of only secondary interest, and to attempt to buy them all would undoubtedly be a serious waste of our reserves of gold and of foreign exchange. It seems to be certain that it would not be possible to buy on so extensive a scale if we were dependent on our exports, as I think we ought to be, to pay for these purchases.

I would make this further point: We have to remember the position in which all these small neutral countries find themselves. The bulk of their populations are, I think I am right in saying, overwhelmingly anti-Hitler. Perhaps it would be too much to say that they are all friends of ours, but they are certainly anti-Nazi. The political position in which these countries find themselves is, however, a very different matter. They live under the shadow of aggression. They are, as I know, frequently subject to threats, and they are extremely anxious to maintain their neutrality and to avoid giving Germany anything that could appear to be a pretext for violating that neutrality. On the other hand, we are determined to use our power to the full to ensure that the neutrals do not favour Germany, and I think that the consequence of those two opposing forces is that a correct attitude of neutrality is observed. I am confident that, from our point of view, no inducement or persuasion could possibly cause those countries to depart from that correct attitude of neutrality. If they were to discriminate in favour of one country, by selling the whole of their production or an unduly large part of their production, to a belligerent country, the consequences can be very easily imagined. In point of fact, I am sure that no neutral country which felt itself threatened—and it is difficult to say which small European country does not feel itself threatened—would be willing to place itself in such a position.

The hon. Member for Bishop Auckland also asked whether we had purchasing agencies. We have purchasing agencies of one kind or another in all these countries for the commodities in which we are interested. We use the existing channels as far as we can, but where it is necessary we would not hesitate to create new agencies. We are quite ready in this matter for new departures. We are ready to adopt new methods which may be found of advantage in securing our preemptive needs. While these matters are under the most active consideration by my Department, I would ask the House to support us in the adoption of such methods in the future as may be found necessary.

Photo of Sir Geoffrey Mander Sir Geoffrey Mander , Wolverhampton East

Would the Minister be good enough to deal with the point which I put, not for the first time, in regard to where the responsibility lies in connection with shipping for pre-emptive purposes? Should an approach be made to the Ministry of Shipping or to his Department for a decision on that matter; and will he also bear in mind the differing replies that I have received from different Departments?

Photo of Sir Ronald Cross Sir Ronald Cross , Rossendale

Shipping for pre-emptive purposes is an extraordinary example about which I am sure other hon. Members must be puzzling their brains. I would say that the policy in a matter of that kind would emanate either from the Foreign Office or from my Department in the first instance—it does not matter from which—and as for the rest, the actual responsibility for chartering or signing the charter would be the responsibility of the Ministry of Shipping.

Question, "That this House do now adjourn," put, and agreed to.

Adjourned accordingly at Fifteen Minutes after Seven o' Clock.