STATE BULK PURCHASES

New Zealand Herald, Volume LXVII, Issue 20646, 19 August 1930, Page 11

STATE BULK PURCHASES

RUSSIAN TRANSACTION. ORDER FOR CUBAN SUGAR. GUARANTEE BY BRITAIN. Protests wero recently made in the House of Lords against the granting of guarantees by tho British Government in connection with purchases by the Russian Government. Reference was made particularly to tho transaction in which Cuban sugar was refined in Britain before shipment to Russia. Tho 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. Tho 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 tho importer and exporter. Why was it necessary to extend the export credits system, not to Russian merchants but to the Russian Government ? There was no other case tinder this export credits system wliere Britain guaranteed the 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 a-haif times the amount of credit that all the other merchants of the world were taking, and they were taking that in the 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 bo the position of bills of the Russian Government guaranteed by the British Government and discounted by the holder with banks or fin?»ncial houses in the City of London if diplomatic relations were agaiii broken off with Russia. That, was quite a possibility,that might be necessary even with the present Government, and might even be the result of the inquiry now being made,by the. Foreign Secretary. Viscount Elibank said be had read iii the press that oyer £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 iri! Britain to be re-exported to Russia. That meant that probably not more than 5 to 10 per cent.of the manufacture of th& sugar was British workmanship and that the British Government was guaranteeing! some 60 to 70 per cent, not folri.Jl& but for Cuba, .a dependency of the United States. ....... Bought Below Production Cost.

The Duke of Atholl, - who asked why did the 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 be toleratedby 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 the sugar was bought ..much- below-its cost of production. The cost of refining it could not hare been more- thtm-£150,000 : and he wished' to know ; whether the British export credit, of 60 or 70 per cent, was given on the larger or the smaller sum. If it were on 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 the responsibility of an. advisory committee that these schemes were passed. That committee had to be satisfied there was no risk of their being involved in very considerable loss. In not one case had ( thero 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 the 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 3 and for other countries £4,21,0,000— a total <if £6,466,000. The desire of the Government, had been to improve trade, and this scheme had done so. The Government was mindful of the plight of the 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 men 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 m August last, dealt with the pohtical problem and got it out of the way foi the A visory Committee. By making that:deci«ou thev "made, so to speak, a declaration that, flipv considered Russia would meet hei g."-, regard to .11 U»» mercial transactions; and so far, in a jea , there had been 110 reason to regret the decision By making that decision in August, the Government accepted responS1 Viscount Elibank asked if the Govern, ment 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 the goods to be guaranteed should be British workmanship. Lord. Ponsonby said he was not in aposition to make a; statement on thai matter, but he would communicate Lord Lhbauk. s opinions to the Government. •