STATE BULK PURCHASES

Evening Star, Issue 20586, 11 September 1930, Page 1

STATE BULK PURCHASES

RUSSIAN TRANSACTION ORDER FOR CUBAN SUGAR Protests were recently made in the House of Lords against the granting of guarantees by the _ British Government in connection with purchases by the Russian Government. Reference was made particularly’ to the transaction in which Cuban sugar was refined in Britain before shipment to Russia. ’ . . The question was raised during consideration of legislation extending the system of guarantees for export trade. The Government representative. Lord Ponsonby, said that since the ban on trade with Russia , was,, removed in August of last year, the increase in the amount of contracts had been very considerable. The total contracts issued since October 1, 1929, amounted to £5,118,000, of which contracts with Russia represented £2,260,000. Viscount Brentford said the Russian Government was the importer and exporter. Wliy was it necessary to extend the export credits system, not to Russian merchants but to the Russian Government? There was no other case under this export credits system where Britain guaranteed tho financial stability of the Government of another nation. That was not insurance; it was entirely a political question. TRADE AND DIPLOMATIC RELATIONS. Russia was now taking one and ahalf times the amount of credit that all tho other merchants of tho world were taking, and -they were taking that in tho form of short-term loans. If they went on at the same rate, the trade which would be guaranteed with Russia would be something like £6,000,000. a year, and the liability of the British Government something under £5,000,000 a year. He asked what would be the position of bills of the Russian Government guaranteed by the British Government and discounted by the holder with banks or financial houses in the city of London if diplomatic relations were again broken off with Russia. That was quite a possibility that might be necessary even with tbo present Government, and might even be the result of the inquiry now being made by the Foreign Secretary. Viscount Elibank said he had read in the Press that over £1,000,000 worth of sugar was to be exported' from Britain to Russia guaranteed to the extent of 75 per cent, by Britain. He' understood that this was Cuban . sugar refined in Britain to bo re-exported to Russia. That meant that probably not more than 5 to 10 per cent, of the manufacture of the sugar was British workmanship, and that the British Government was guaranteeing some CO to 70 per cent, not for the, British colonies, but for Cuba, .a dependency of the United States. i BOUGHT BELOW PRODUCTION , COST. The Duke of Atholl, who asked why did tho Government not 'insist ' on British sugar being supplied, said the guarantee system was being used as ■ a cloak at the public expense to assist trade with Russia in a manner which would not bo tolerated by more open methods, such as a State loan. It was understood that a British firm sold 130.000 tons of Cuban sugar valued at £1,000,000, to_ Russia, with British Government credit. Apparently tlio sugar was bought much below its cost of production. The cost of refining it could-not have been more than £150,000 and ho wished to know whether the British export credit of 60 to 70 per cent, was given on the larger or the smaller sum. If it were bn “the £1,000,000, it was a scandal that the Government should give credit to help Cuba to off-load its sugar, and if it were on the smaller sum, the matter was not worth bothering about, and could ' easily have been arranged without Government credit. NO , BAD DEBTS ' WITH RUSSIA. Lord Ponsonby said that it was on tho responsibility of an advisory committee that these schemes were passed. That committe had to be satisfiedthere was no risk of their being involved in very considerable loss. In not one case had there been a bad debt as far as Russia was concerned, and the advisory committee was therefore inclined to consider it good business and to pass applications in connection with Russia. As far as the case they were discussing was concerned, the refining process, he understood, represented about 30 per cent, of the value. The guarantee was given on tire face value .of the whole contract. The total guarantees in regard to Russia since the beginning of the export credits scheme had been £2,256,000, and for other countries £4,210,000 —a total of £6,466,000. The desire of tho Government had been to improve trade, and this scheme had done so. The Government was mindful of tho plight of tho colonies regarding sugar, and were giving their serious attention to the question of relieving that plight. Viscount Brentford asked what was the good of referring to any advisory committee of business riien the question whether the Russian Government was likely to pay its bills when they became due. That was a matter on which only the Government could give a decision, and it was not right that they should shelter themselves behind an advisory committee. GOVERNMENT’S RESPONSIBILITY Lord Ponsonby said the Government, in coming to the decision they did in August last, dealt with the political problem and got it out of the way for the Advisory Committee. By making that decision they made, so to speak, a declaration that they considered Russia would, meet her obligations with regard to all these commercial transactions; and so lar, in a year, there had been no reason to regret tho decision. By making that decision in August, the Government accepted responsibility. Viscount Elibank asked if the . Government would issue an instruction to the Advisory Committee that for the future “partly produced” meant that at least 75 per cent, of the workmanship of tbo goods to be guaranteed should be British workmanship. Lord Ponsonby said he was not in a position to make a statement on 'that matter, but he would communicate Lord Elibank’s opinions to the. Government.,