§ 1.10 p.m.
§ Mr. Walter Fletcher (Bury)
Since the idea of raising this matter on the Adjournment was agreed, two things have occurred which might appear to emphasise the need for raising it; first, the statement made by the President of the Board of Trade yesterday in reply to a Question, and then the statement made by the Chancellor of the Exchequer yesterday. That statement had as one of its main themes—which was plugged very successfully by the right hon. and learned Gentleman—the vital need for the British Empire and this country to get as many dollars as possible as soon as they can. That reinforces the need to consider the position of rubber which, with tin, is the greatest dollar earner in the British Commonwealth of Nations. The statement made by the right hon. Gentleman the President of the Board of Trade was a modestly worded mea culpa though, as a matter of fact, everybody knows perfectly well that he is not the real culprit.
I should say at this stage that in the traditions of this House I could be thought of as an interested party, for I have been a rubber merchant and dealer most of my life, and still am an active one, but I would like also to say that it is not from any such angle that I raise this point, but that simply, having the requisite knowledge, it may be useful to use that knowledge to bring out into the open a question of real importance. Before coming to the actual occurrences at Geneva and to what has happened since, it would be useful to give a picture of what has happened in the world of raw rubber and synthetic rubber for some time past, because unless there is a complete picture, agreements made there cannot be fully understood. It is a slightly technical matter with a certain amount of figures, but it should be made quite clear.
2063 Before the war about 50 per cent. of the world needs in rubber came from British possessions, and about 50 per cent. from non-British, chiefly in the Far East. Of this a small amount came from Africa, but it is hardly worth mentioning. Germany had developed a large synthetic rubber industry, partly for strategic purposes but partly to save her foreign exchange, she being to some extent in the same position then as many other countries find themselves in at present. After the fall of Malaya at the beginning of 1942, the accumulated stock pile of the United States and other countries, including this country, was totally insufficient for the rapidly expanding war production needs, particularly in America, and the enormous task of creating an entirely new large-scale industry in war time was successfully undertaken and solved by the genius of the American people in under two years.
It really was one of the finest parts of the war effort of the Allies to go from the extremely difficult process of practically pilot plant scale in America up to productions of hundred of thousands of tons of a new material without which the war machine would have stopped to a great extent. It is important that that should be realised because, when the raw rubber interests talk now about the possible harm synthetic rubber may do today, they must bear in mind the great debt of gratitude that this country and the world owes to synthetic rubber, and also because it will assist them in understanding the American point, of view about synthetic rubber plants and their retention, because that must play a great role in all negotiations which have taken place and may take place. The fact also that America consumed more than half the raw rubber of the world and produced no raw rubber before the war, had made of rubber something like political dynamite, and for many years before there had been a great deal of strong feeling about rubber produced by us being held at higher prices than it should have been against America. There was no substance in it, but people whose whole life blood is centred in transport, which is based on rubber, and are not producers of it, are naturally likely to be a little tender on that subject.
Towards the end of the war and after, the problem of natural versus synthetic rubber had to be tackled. After the 2064 reconquest of Malaya, the Government production unit handed over to private enterprise the rubber production in Malaya, and in spite of enormous difficulties, such as the high price and lack of rice and transport, and labour difficulties of every sort, with the country still not under complete law and order, remarkable progress was made and, at the end of 1945, 1946 and 1947 infinitely greater amounts of rubber were produced than were anticipated by anybody including Government estimates. It is worth while pointing out that, although that was done, even then the optimum production of rubber in Malaya has not been reached. In spite of those handicaps, rubber production really was extraordinary, but, on the other hand, the continued chaos in the Dutch East Indies and in Indo-China meant that those countries—the producers of about half the world's rubber between them—have not been and are not likely for some time to be as big producers of rubber as they might be, until there is greater inducement at any rate.
Meanwhile, the United States had not made up its mind finally as to the future of synthetic rubber, for many reasons. Synthetic rubber was looked at by them from two angles. First, the strategic. America never again wishes to be in the position she was in in 1942, of finding her whole war economy bogged down because she had not enough rubber. Therefore, rightly I think, she was entitled and wished to maintain a certain level of synthetic rubber production and plants capable of expansion if the need should ever occur, and anybody who argues against that is not facing the realities of the situation.
It is difficult to say what is the correct price of synthetic rubber because it is still, to a great extent, semi-subsidised in the price at which plants were handed over and are still run, but it must be taken as axiomatic that America must retain a certain minimum output potential of synthetic rubber capable of great expansion. I believe the minimum output figure which would give her the opportunity for expansion if necessary should be somewhere near 200,000 tons. That, undoubtedly, might be disputed in America, but all the same I think it is fair and adequate to include strategic needs and improvement in quality.
2065 It is worth while saying that from the strategic point of view, in the new sort of war one can foresee, it may not be the right thing to do, because the well-dispersed stock pile of raw rubber, which keeps much better than synthetic, may be combined with a minimum pilot plant to make the perfect pattern. The stock pile is certainly immediately available and in a war which is likely to be very swift, in many ways what is available may play a greater part than what can be produced, even over a relatively short period. From the economic angle there is no doubt that it is far from being decided yet whether raw or synthetic rubber is better. Synthetic rubber is a young synthetic product and it may take years, if not decades, to get it right. At present it is not as good as real rubber, except from the angle of resistance to oil. It does not last nearly so well, it tends to deteriorate from the time of its manufacture, and it is not very good from the stock pile point of view. It is also much more difficult to work in the factory.
While America is trying to make up its mind as to its policy as between raw and synthetic rubber, there was passed in America what is known as the Crawford Act which was really the basis of the Geneva negotiations. In order to safeguard the synthetic rubber industry, the Crawford Act insisted on American manufacturers using at least one-third of synthetic rubber in everything they produced. That was a dangerous thing to do in a way, because it created an embargo on the import of raw rubber into America to a considerable extent. I have borrowed the word "embargo" from the hon. Gentleman who is at present Under Secretary of State for the Colonies, who used it about six months ago in a speech on this subject. There is no doubt about it that unilaterally at the moment we are seeking for international trade agreements to impose on manufacturers of a county that they must use or not use more than a certain amount of something which has to be imported is exactly the same as if you put on an exclusive tariff. One could understand why it had to be done, because until a decision is made between raw and synthetic rubber America had to protect her synthetic products.
The change for the British Empire was disastrous. American consumption is going up and world demand is, I believe, 2066 unlimited—it is only factory potential which limits it. Factories are not fully equipped to chew up rubber and make it into tyres, which use about 70 per cent. of rubber. The public demand is quite enormous, but meanwhile the effects of excluding what would be about a third of the import was disastrous on the rubber market and brought down the price very considerably. For 1947 it cut out something like 100,000 tons of rubber, which would otherwise be imported into America and paid for in dollars, and reduced the price by 3d. a lb.
At present America is consuming 600,000 tons of rubber a year and the prevailing price of 400 dollars a ton means 240 million dollars a year earned by the British Empire, largely by Malaya, who are carrying a large part of the burden. Every effort has to be made to see that the maximum amount is produced without harm to others. What could not be done with that 40 million dollars? It is a very large sum indeed. A further penny a lb. on rubber means £10 a ton or 40 dollars, and on the 600,000 tons now consumed in U.S.A. the difference in each means something like another 40 million dollars.
The quality and price of rubber are going to make a very great difference to the import of foodstuffs, machinery and everything else desirable represented by dollars at the moment. The price question must be dealt with rather carefully. Complaints are made by His Majesty's Government and many other people, and uneasiness is caused everywhere, at the very high prices we have to pay in America and other parts of the world for foodstuffs and other things. That is obviously true, but here is an article produced in the Empire which is vitally necessary in all those countries from which we buy these goods, and, compared with the pre-war price and with prices of other goods, its price is entirely out of line. At present the price of rubber is only about 20 per cent. above its pre-war price, although the costs of production have gone up in exactly the same ratio as for everything else. Tin, the other article which is a parallel, has increased in price to £500 a ton from about £215 before the war and is still low.
Rubber is one of the few articles where the rise in price would be so enormously spread over such a huge public that it could not harm the individual consumer, 2067 as in the case of so many other commodities. In tyres 70 per cent. of rubber is used. A set of four tyres for a car can be used for about a year, and a rise of 1d. in the price of rubber would make a difference of about 5s. per annum, as only about 10 lbs. or 12 lbs. go into a tyre, and a greater amount of cotton; and other things. The labour costs, and costs of cotton and so on, are infinitely greater than the cost of rubber in a tyre. The rise in the price of rubber, which I consider is one of the targets at which the Government should aim in the new negotiations, would be perfectly reasonable. It would be of enormous benefit to countries so badly needing dollars, and of no harm to the consumer. The cost in public transportation is infinitesimal and the rises in petrol costs are 10 times as much as in rubber. I believe the United States recognise this, and the United States Government are fully aware that, if properly negotiated, it would be one of the best means of increasing our dollar earnings, and would be a perfectly normal and natural way of bringing one of the articles we produce into line with what we have to pay for what we buy from them.
There is in everyone's mind a sort of mental hazard in regard to a shilling price for rubber. I beg the right hon. Gentleman the President of the Board of Trade, and those who are to start the new negotiations, to bear in mind that there is no economic blessing in a shilling price, or a price of about a shilling. I am not suggesting an absurd price, which could not be justified, but the extra earning of dollars which could result from a rise to 1s. 6d. or 2s. would, I believe, be a great help to both parties in the long run. A 6d. rise would bring in 120 million dollars. That is the picture to some extent as a result of the Crawford Act before the negotiations took place in Geneva, which cut out something like 100,000 tons a year, which would have been imported to America and other places.
When the agreement was signed in Geneva an error was fallen into in this way. Under the Crawford Act the basis of calculation on which the 33 per cent. use of synthetic rubber was made was the total of raw rubber plus what is called "G.R.S.", which is the normal synthetic rubber in America, and did not 2068 include reclaimed rubber. Reclaimed rubber is the rubber which after tyres have burst, or come to an end of use, is extracted by a highly scientific process and is still useful in various ways. Into the Geneva agreement has been slipped the use of reclaimed rubber, which made a difference of 280,000 tons a year, and the result was that what was intended by our negotiators to be an improvement, from our point of view, was not an improvement at all, but rather the opposite when altered from 33 per cent. to 25 per cent. On the basis of 280,000 tons of reclaimed, the alteration from 33 per cent. to 25 per cent., makes us not better Off, but worse off. In his very modestly worded statement yesterday the right hon. Gentleman said:It is quite true a misunderstanding arose in the last stages of the Geneva negotiations."—[OFFICIAL REPORT, 18th December, 1947; Vol. 445, c. 364.]That word "misunderstanding" is very interesting. I think that in using it the right hon. Gentleman meant, as he is entitled to do, to smooth over what we should call a blunder. The word "misunderstanding" is more correct, because I believe no one there had sufficient understanding of this matter to be able to spot it. The whole statement gives the impression that they suddenly found themselves put into a most difficult position at the last moment, and not able to refer the matter back to anyone who had the requisite knowledge. Therefore, this mistake slipped through. It is the most awful indictment of his own Ministry that he could possibly make. Ministers and their officials, particularly in the Board of Trade, have to deal with the widest possible variety of subjects. They cannot be expected, and it is unreasonable to expect them, to have the competent technical knowledge. This Government are great worshippers of science and technique. These are just as necessary in negotiation and in business knowledge as in production and manufacture
With that in view the Ministry set up a special Rubber Study Group some time ago, with three sides to it—production, consumption and distribution, which was included afterwards. That is a body quite capable of giving advice and supplying answers to questions at any moment. But this particular question of rubber and the Crawford Act had been a matter of Concern to the Government for six months or 2069 more. The question of raw rubber versus synthetic rubber has been discussed for two years. When I was that unfortunate hybrid, a temporary Government servant, I was studying this question, and saw what was going on. This is a matter which has been chewed over and gone into, not for months but for years. The Government have at their disposal half a dozen or 20 people in the Rubber Study Group who could have given the answer to this at once. This particular negotiation at Geneva was probably the most important there was. How is it possible that such a mistake, such a misunderstanding, could have arisen, when 20 people, including myself, could have told them the effect of including reclaimed rubber, and that that was something entirely different from what those who were negotiating thought?
I would like to have a specific answer to this question: was there or was there not present at Geneva anyone drawn from the Study Group, which is the machinery which the Government have created for this matter, who could have advised them on the spot? If not, surely this was not negotiated in a matter of hours. A telephone call to London or the sending of a plane to bring someone over could have set this matter right. A serious thought is raised in people's minds, when negotiations about 250 million dollars worth of a product are going on, that it should be handled in such a way that, I use the Minister's own words, a "misunderstanding" arose, and there was—he says "unfortunately"—no attempt made to get the full consultation which he should have had on the drafting of this condition. Surely, the right hon. Gentleman had the draft during these negotiations, which dragged on for some months. Surely, they were not conducted in such a way that this vital aspect was left until the last minute, and, therefore, there was no chance for consultation—that it had to be signed on the dotted line.
How did it happen that there was no one present in order to put this point or give our negotiators the right guidance? I am not blaming the high officials who went there. They were obviously men trying their best in very difficult circumstances towards the end of the Conference. I am not blaming the Minister for not knowing. But the country will want to know if this incident is typical of, the way negotiations are conducted on our behalf. What chance is there of 2070 similar mistakes about foodstuffs, raw materials and other commodities? Unless there is full confidence between the Minister and the association of the trade concerned, so that we are able at a moment's notice to get the help of elected advisers—elected by the trade and not selected by the Minister—so that the Government should have available at a moment's notice somebody to put them right, it is a very disturbing thought.
Always in the forefront is the dollar aspect. There is one other aspect on which I desire a reply; that is, how this considerable blunder occurred, and what steps are to be taken in the new negotiations which are now to be undertaken, to see that really competent advice is available. I would remind the Minister that I myself saw his predecessor, the present Chancellor of the Exchequer, and also the ex-Chancellor of the Exchequer, on this matter two or three months ago. I have written memoranda for them, and others have done so also. That makes this mistake, and the apparent vast haste, even more inexplicable.
What is the American attitude? In a most responsible part of the American Press it has been stated quite openly that "they have got something for nothing." I do not for one moment believe that that was the intention of the American Government. I think they behaved quite admirably in this matter. Indeed, the only good thing to come out of it so far is that the honesty of the Minister in coming forward and saying that there has been a misunderstanding, which being translated means that there has been a mistake, the fact that he has "come clean," has created an atmosphere in which the Americans say, "We quite understand; we are not trying to put something on to you which you feel is harsh and inequitable; we will not discuss how it arose." I expect their negotiators went over, and said, "We went so fast over there that it was a push-over so far as London was concerned." I imagine that that is what they reported. Certainly, out of disaster an atmosphere has been created in which I hope that a new and considerably better arrangement can be made.
I would draw attention to one other matter which I hope will be taken up. Every dollar we can get is necessary for us and we should get every dollar which 2071 comes from our production in the British Commonwealth. Quite recently Dutch interests—I cannot say whether it is with the agreement of the Dutch Government—have been buying rubber in Singapore, bringing it back to Holland and reshipping it from Holland and Claiming dollars for it. They sell slightly under the New York price. The whole time they sell at a cent or a half cent less in New York than the current price and, therefore, exclude the British shipper from selling. They take dollars out of the pocket of this country which should be coming into it.
It might be said, "Why does not the Exchange Control, which allows the licences for the export of rubber to be given when the Dutch buyer appears, stop it?". Firstly, it is not the business of the Exchange Control to be a police force. For a number of years I have worked with the Exchange Control through the Bank of England and the Treasury, and no more fair-minded or competent body exists. They look at everything put to them with great knowledge and extreme fairness, and they judge a thing on its merits. They have done more to grease the wheels of such international trade as is possible than almost any other international organisation.
If a Dutch buyer says that rubber is wanted for some European country, he is perfectly entitled to export rubber. The Exchange Control position is that if someone comes along they will accept what they say and allow them a licence, but when they see, as in the last two or three weeks, nearly three to four million dollars worth of rubber being taken out of Malaya, earmarked "Shipped to Holland" and then it is re-shipped from Amsterdam or Rotterdam—I checked this on the telephone with America last night, and every word will prove to be correct—I recommend that to the Minister as something which he should set about stopping. It is not only bad because it represents a loss of dollars on a big scale, but because it hits at the root of international working together. What is the use of going to Geneva and getting a modicum of success if all the time countries are going to try to pull too much of the blanket over their side of the bed? That is extremely unfair, and I recommend the right hon. Gentleman to consult with the Chancellor of the Exchequer to see what means 2072 can be taken to stop this. It is bad from another point of view. It shows other cats—and there are black cats as well as white ones—the way to the dairy, and if too many cats approach the dairy our share of the milk will be found to be very deficient, and we need it badly.
I think I have let the Minister down very lightly, largely because I dislike appearing to blame somebody who, though he has the technical responsibility, is, as we all know, not personally responsible. I hope that when he approaches the new negotiations he will have in mind, first and foremost, that it is necessary that he should have the right team to carry them out. That can be achieved only if there is an elimination of the suspicion which so frequently arises in the minds of Government Departments that people from trades and industries are grinding their axes the whole time. I ask the right hon. Gentleman to believe that the trade will help him in every possible way. The rubber trade has been allowed, in contradistinction to the cotton trade, to have open markets throughout the world, and has done so with conspicuous success, as the Government Department which looks after them—the Bank of England—will confirm. Everything that has been asked has been provided. If the right hon. Gentleman would show confidence in the body put forward by the rubber growers, he will get the best possible advice, in complete confidence and completely disinterested.
Let him equip himself in that way, and remember what the effect in Malaya of his actions will be. In Malaya there is the greatest unrest and uneasiness. The supply of rice is extremely small—much too small. The Minister of Food himself has said that he is very disquieted about it. Four ounces of rice, supplemented by a certain amount of black market rice, is really insufficient. The cost of everything has gone up, and there is great uneasiness from the political point of view, which I am not going into at the moment, because we must eventually have a Debate on it. If the right hon. Gentleman will realise that the prosperity of Malaya, and the consequent relative political calm there, will arise from a better situation in rubber, he will realise that the target he is aiming at is two-fold, not only the securing of the necessary dollars, but the stabilising effect 2073 on the only point which is relatively stable in the Far East. All the rest is chaos.
Let him remember, in pressing for a new agreement, that in the maximum amount of raw rubber used as a constituent with synthetic rubber, 10 per cent. of synthetic rubber would, I believe, be nearer the mark, with the increased consumption in America, than 33⅓ per cent. He will never get that. He will probably have to compromise. When he gets opposite his American colleagues in the negotiations—and they are colleagues as well as people sitting on the other side of the table, as they have shown in the negotiations and in the way they have accepted the request to reopen the matter—let him put forward as part of his theme song—and nobody is better than the right hon. Gentleman in cooing like a turtle dove when it is necessary—the facts and reasons in order to show that more production can come from the Dutch East Indies. A higher price will help to stabilise the Dutch East Indies. Other people require dollars, and we must not be dog-in-the-manger about this.
Let him persuade his American colleagues—and I am making an appeal to the American Government and the American public also—that here is a great opportunity, without any new legislation, without any great change and without the slightest harm being done to a single individual in America, for they will be deprived of nothing, to help to fill our larders and keep our workshops going. Out of evil cometh good. The mistake he has made, and the confession he has made in the most winning terms—which would merit absolution, I feel sure, in another world—has brought with it a very great opportunity for the right hon. Gentleman to come back to the House in a short while and say, "We have made a mistake, through not taking the right advice. We have now done the right thing. We have been met most admirably the whole way through. Machinery, production and distribution have helped us. The American Government and factories have fallen into line. We are now able to present a picture in which we are going to get more dollars and pacify the difficult areas in the Far East." If he does that, I will predict for the right hon. Gentleman a triumph equal to the dire confession of failure which he made yesterday.
§ 1.45 p.m.
§ The President of the Board of Trade (Mr. Harold Wilson)
The subject raised by the hon. Member for Bury (Mr. W. Fletcher) is one of immense importance. I do recognise that he has not raised it in [...]y sense from the personal angle, but from the national angle. I can certainly confirm, if confirmation be necessary, that in all our dealings with him and with the industry we have always had the very closest co-operation and help in anything affecting the national life either in war or in peace.
The hon. Member covered a very wide range of subjects. I am in agreement with a very large part of what he said, and I hope that the value of what he said will not be confined to the few who have been here listening to him or, necessarily, to this country. I hope that the points he has made will be understood in every place and in every country before the negotiations begin. We agree with him about the importance of this subject, not only in its effect on the economy of Malaya and Ceylon, but also as an important and integral part of the sterling area balance with the dollar area. That has been uppermost in our minds throughout the recent negotiations, and will be in the negotiations that are to take place.
As he says, the synthetic rubber industry in the United States was built up very successfully and speedily to meet the military requirements of the Allies immediately after the fall of Malaya. I agree that the view taken by the United States administration on this matter today is far more closely bound up with strategic sites than economic sites, and the decisions which have to be taken must clearly rest with the United States Government and people and Congress, in the light of their feelings about those strategic sites involved. But we ourselves have a direct interest in these decisions, because they will affect the level of consumption of natural rubber in the United States, which accounts for about half of the total world consumption at the present time.
The consumption of G.R.S. is at present maintained through specification controls established in a series of Rubber Orders issued under the President's emergency wartime powers which have been so far extended to the present time. On various occasions, such as the Rubber Study Group meeting in Paris last July, 2075 we have taken the opportunity of pressing the United States to reduce their consumption of G.R.S. to the minimum which they consider compatible with their national security. Partly as a result of this pressure the compulsory minimum amounts of G.R.S. to be consumed have been steadily reduced from 55 per cent. of the total of G.R.S. plus natural rubber, in April, to the present level of 33⅓ per cent.
I cannot accept the kind suggestion of the hon. Gentleman that I was not the culprit in so far as there has been a misunderstanding—and there has been. I must take the responsibility, and I do so gladly for what happened at Geneva. Let me at once repudiate the suggestion made in certain quarters that we have had a fast one pulled over us. It was a misunderstanding from start to finish. Quite frankly, we felt that it was difficult to reconcile with the general basis of a multilateral non-discriminatory trade agreement that state of affairs in the field of world rubber consumption. We recognised that, as the hon. Member said, strategic considerations were paramount in this matter. At the same time, we felt that it was fully in accordance with the spirit of the negotiations taking place at Geneva on quotas and all such questions, that we should press for a reduction in the synthetic rubber percentage. We also felt—perhaps this was even more in our minds—that with the gathering dollar crisis it was essential to press hard to get something done there. Throughout the summer we had pressed for a reduction in this percentage. We pressed for a reduction from 33⅓ per cent. to the lowest practicable figure we could get. Indeed, we pressed for the complete withdrawal of the mixing regulations though, as the hon. Gentleman said I doubt whether that was really a starter because of strategic considerations.
Figures such as 10 per cent., 15 per cent., and 20 per cent. have been very much to the fore in the discussions during the summer. I need hardly say that, particularly in the early stages, our, pressure on this was strongly resisted from the American side. In the concluding stages, when certain difficulties had arisen, as the House knows—I shall be making a fuller statement on this after the Recess—on the question of tariffs and preferences, we proposed to the United States Government some limited concessions in return for 2076 guaranteed reductions in the American statutory rubber percentage. On this occasion we made it clear, and the point was understood and taken on the other side, that the change we proposed from 33⅓ per cent. to 25 per cent. was on a strictly comparable basis. That point was taken. But, at the same time, the proposal was not acceptable to the United States apparently because of the constitutional difficulty that their Administration could not commit Congress on future legislation. This was a matter requiring legislation.
Some days later, following what seemed to be a deadlock on the tariff versus preference issue, new proposals were worked out literally at the very last minute, and these included a new offer on Colonial preferences from our side. In order to meet the constitutional difficulty to which I have referred, we said that this would be implemented only when the synthetic rubber percentage fell to 25 per cent. and that it would be maintained only for as long as that synthetic rubber percentage was maintained at a. figure not higher than 25 per cent. Naturally, our negotiators put this forward on the assumption that the same definition was being used as had been used up to that time. It was, literally, not until the last minute that these proposals were made. It was not possible to check a form of words with the industry——
§ Mr. Fletcher
How long before the signature was the draft containing the word "reclaimed" put forward? That is the hub of the whole position. A draft was put forward which the Minister said he thought was on a comparable basis to that which they had already discussed. For the first time appear these words including the word "reclaimed." How long was that before the end of the negotiations and, therefore, what opportunity, if the requisite advice had been there, was there for the thing to be put right?
§ Mr. Wilson
I think that I would want notice of that question, but speaking from memory I think it was in the last two days of the Conference. I am sure that the hon. Gentleman realises that the thing was very much complicated by the fact that, for printing and other reasons, the whole thing was set against a deadline, as the Americans would say, and the thing had to be put in literally in a matter of hours.
2077 The hon. Gentleman asked whether there were rubber experts on the team at Geneva. The answer is that they had been there for most of the summer and then, when the thing had been dropped, they had been withdrawn. The American side at Geneva were also under a genuine misunderstanding on this matter. Using a formula supplied by Washington and based on total rubber consumption, they did not realise that this was different from what we had intended. I would like to stress that this Geneva Agreement, if it had been carried out, would not have led automatically to a decrease in the consumption of natural rubber. What it removes is the hope of the increase for which we were striving.
Also, I would deny that it is a useless Agreement. I think, in itself, it would have been quite valuable. It would have provided a useful insurance against any fall in United States rubber consumption to prewar levels. If ever we are going to see a slump in the United States taking back rubber consumption to anything like, say, the 1939 consumption, then I am sure that the hon. Gentleman would agree that if the American Administration were to insist on an absolute minimum consumption in terms of tonnage—such as, for instance, the 250,000 tons recommended in the Batt Report—that would have a most devasatating effect on the export of natural rubber from Malaya and elsewhere. To the extent that we safeguarded the position against that, it was a definite and useful gain. But that was not what we were hoping to get as a result of these negotiations.
We have taken up the matter with the United States Government and, as I said yesterday, they have been extremely helpful in their approach to the matter. They have stated that they would prefer that the operation of an undertaking based on a misunderstanding should be suspended. Therefore, both concessions on our side and on theirs are to be held over pending the re-negotiation. At present, of course, hearings are being held in Congress on the question of the proposed permanent legislation to govern the future level of synthetic consumption after the Emergency Powers expire in March, 1948. While those hearings are going on, it would be inappropriate for me to say too much in public. We must see how these hearings go, and then proceed to the 2078 resumed negotiations to which the hon. Gentleman has referred.
I can assure him that on these resumed negotiations we shall be extremely careful to see that all technical points are fully covered. In fact, I can tell him that as soon as this business arose after the signing of the Agreement at Geneva, I made an offer to the United States Government that we would send over representatives from the Government, including rubber experts, go into the whole business to see whether the difficulties could be smoothed out. Now that the United States Government have agreed to resume negotiations, my proposal to send skilled technicians still stands.
I should also add—because it takes up what I think was the main point of the hon. Gentleman's remarks—that in our most recent approaches to the United States Government we have stressed that there is no single thing that could make a bigger difference to the balance of payments with the dollar area than an extended United States consumption of natural rubber, or, shall we say, extended United States imports of natural rubber whether for the purpose of consumption, stock piling, or anything else. I have noted what the hon. Gentleman said about price. I must confess myself to be in agreement with much of what he said. We have to consider, of course, the comparison between natural rubber prices and the price or cost of producing synthetic rubber; but I think that the points he made are points of great validity.
Finally, to come to the matter that he mentioned about what is going on with the Dutch in the matter of buying up Malayan rubber and selling it in the circumstances which he has described, I must say that I take a very poor view of what has been going on. We have been aware that these transactions have been taking place. We have taken the opportunity of the current discussions with the Netherlands Government to raise the matter with them. I am glad to say that the Netherlands Government agree with our point of view in this matter. I understand that they have already taken steps to put a stop to this trade. I am sure that the hon. Gentleman will agree that that is the best way of dealing with this matter rather than attempting to set up 2079 the Exchange Control as a policeman, which is not entirely appropriate.
I thank the hon. Gentleman for raising the matter in so friendly a way. I have given the assurance he asks for in relation to the Dutch transactions and also in relation to the renewed negotiations. I can assure him and through him the rubber growers and the rubber industry that we have this matter very much in our minds both as a means of helping to rebuild the war-shattered Eastern economy and as a means of making an important contribution to the sterling area balance of payments with the dollar area.