The purpose of this Bill, as the House is no doubt aware, is to make provision on a permanent basis for the continuance of the policy of importing this country's tea requirements direct from the countries in which the tea is grown. That policy has been in operation now for over ten years.
During that time, it has been implemented as a temporary arrangement through the organisation known as Tea Importers, Limited, which is a central purchasing and importing organisation, established, at the instance of the Government, by the tea trade, as an emergency measure during the second World War. Tea Importers, Limited, is a non-profit-making body and its operations are financed by banking accommodation under the guarantee of the Minister for Finance.
It has always been intended that that temporary monopoly should be terminated as soon as circumstances permitted, that is to say, as soon as arrangements could be brought into operation which would restore to individual traders the right to purchase tea on their own behalf, according to their particular requirements and subject only to compliance with the policy of purchasing those requirements in the countries in which the tea is produced and importing their purchases direct to this country. Accordingly, discussions were initiated with the Wholesale Tea Dealers' Association which was a body fully representative of the wholesale tea trade. These discussions centred around the arrangements which should be made for the purpose of restoring freedom to the tea trade, subject to the policy of purchasing in and importing direct from the country of origin.
In the course of these discussions, it was urged by the Wholesale Tea Dealers' Association that it would be necessary to include in the permanent arrangements suitable provisions which would ensure that the competitive position of the smaller trader, vis-a-vis the larger trader, would not be more disadvantageous than it was before the second World War began, when practically all this country's requirements were purchased in London.
The reason urged by the association in support of that claim was that, because sales in India of the grades of tea which formed the bulk of this country's requirements are limited by the seasonal nature of the crop to a period of four to five months in each year, it is necessary to purchase 12 months' requirements of these grades of tea within that limited period, and that small traders would not have the necessary financial resources to enable them to pay for stock on that scale.
In order to meet that position, the Wholesale Tea Dealers' Association proposed the establishment, by the trade, of an organisation that would provide the necessary financial assistance for the smaller trader and which would also function as the sole importing agent for the purchases made by all traders. The association contended that the conferring of sole importing agency rights on the proposed organisation would put that organisation in a strong position to obtain the requisite banking accommodation so that they could assist traders to make their purchases, and it urged also that the centralising of all imports would undoubtedly result in a very substantial economy in freight. I regarded that proposal as reasonable and it has been enshrined in the Bill now before the Seanad.
Before going into the provisions of the Bill in greater detail, it may be considered necessary to emphasise that the policy of purchasing the country's tea requirements in the producing countries has been, as I said, in full and satisfactory operation since the end of the war. During that period, Tea Importers, Limited, purchased the tea requirements of traders in India, Ceylon, Indonesia and elsewhere, and succeeded in passing on its purchases to traders here at prices which compared favourably with the prices prevailing on intermediate markets for similar grades and, on occasion, at prices which were substantially lower than those prevailing on the intermediate markets.
While it is satisfying to record that satisfactory position and to pay tribute to the directors of Tea Importers, Limited, for the services they have rendered, it will, I think, be generally agreed that, in present circumstances, the continuance of a State-sponsored monopoly to purchase and import our tea requirements can no longer be justified. The main principles of the Bill are that the policy of direct purchase of this country's requirements from the producing countries should be continued; that the business of purchasing these requirements should continue to be retained in the hands of Irish citizens; and that within these limits, and subject only to these conditions, the greatest possible freedom should be permitted to individual traders.
With regard to the first of the principles which I have enunciated—that of direct purchase of requirements from the producing countries—the experience of Tea Importers, Limited, during the years it has operated has established that adequate supplies of suitable quality tea can be purchased in the producing countries on better terms than they could have been purchased on intermediate markets and can be landed in this country at prices which compare favourably. There has also been the advantage that this country has established unquestionable claims to quotas of tea in each of these countries, which may obviate a recurrence of our unfortunate experience during the last war, when we were denied a reasonable share of the available supplies from the intermediate markets on which we were dependent.
Finally, there is the very important consideration—the aim of developing Calcutta and Colombo as the world's tea markets. The Governments of both India and Ceylon restricted the quantities of tea which may be exported to other countries for re-export sale. Evidence of the effect of that policy upon the intermediate markets of the world is contained in the British trade returns which show that the re-export of tea from Great Britain last year represented less than 5 per cent. of British imports of tea for the same year.
It seems clear, therefore, that, apart from any other considerations, on account of this policy of the Indian and Ceylon Governments to which I have referred, tea purchasing countries must, in order to get best value, deal direct from these countries, or in certain intermediate markets operating on limited supplies. That is borne out by the fact that all the large tea consuming countries, including Canada and the U.S.A., buy practically all their tea requirements from the producing countries and many European countries buy substantial quantities direct from the same source. That, in outline, is the case for continuing the policy of importing this country's tea requirements direct from the countries of origin.
In regard to the second principle which I mentioned, I consider it necessary to explain, in order to avoid misunderstanding, that the provisions of this Bill which are designed to ensure that the business of purchasing tea shall be retained in the hands of Irish nationals simply continue a position which has been in operation since 1947. Those provisions of the Bill involve no interference with the position of existing traders and they are designed solely for the purpose of preventing the re-entry into this country of external trading concerns which never performed the function of a bona fide tea wholesaler and which were, in fact, an unnecessary link in the chain of distribution. The provisions specify that entrants into the business of purchasing tea for importation must be Irish citizens, but otherwise they do not preclude any person whatever from engaging in that trade. The aim of the provisions is to ensure that all existing wholesale tea merchants and all new entrants who are Irish citizens will have complete freedom to purchase their requirements of tea in the producing countries.
With regard to the financing and importing agency mentioned in the Bill, I should like to make it clear that it is not proposed that the monopoly at present enjoyed by Tea Importers. Limited, should pass to the new company. The new company will have no functions in the purchase of a trader's requirements of tea. The company will act simply as an importing agent for traders who will purchase their individual requirements of tea and, where necessary, will assist them in the financing of such purchases. The Bill, however, contemplates that, in the event of a threatened emergency making it desirable to build up stocks of tea, the Minister may authorise the company to make the necessary purchases, but the Bill does not create a tea-purchasing monopoly, as was suggested in discussions elsewhere.
The draft memorandum and articles of association of the new company which have, I understand, already been made available to the House, show that the share capital will be £250,000, divided into 100 shares of £2,500, that one share only may be allocated to each shareholder, and a share may not be allotted or transferred to any person, unless he is a tea trader registered under the Bill. These provisions are intended to ensure that control of the company will be in the hands of Irish nationals.
Another provision in the articles of association will restrict the amount of dividend that may be paid to shareholders. That provision is designed to ensure that the company, which will, of course, serve both shareholders and non-shareholders, will not have any inducement to overcharge for its services and thereby benefit shareholders by returning the overcharges in the form of dividends. The memorandum and articles of association of a company can, as Senators know, normally be altered without any difficulty by a majority of the shareholders. In order to ensure that the articles to which I have referred may not be so changed, the Bill provides that the articles of association of the company shall not be altered without the prior permission of the Minister for Industry and Commerce.
It will also be observed that the Bill provides that the proposed company will act as an importing agent for any registered tea trader, whether or not that tea trader is a shareholder in the company. The purpose of that provision is to safeguard the position of small traders and to ensure that the small traders, however small, will have the way open to them to purchase from the producing countries supplies of tea to meet the requirements of their own businesses.
Tea Importers, Limited, the existing organisation, holds substantial stocks of tea at present, stocks which were purchased to supply to the tea trade, and which were financed by bank accommodation secured under guarantee by the Minister for Finance. It is necessary, therefore, to provide for the orderly disposal of these stocks, so as to prevent the risk of trading losses which would have to be met by the Minister for Finance on foot of his guarantee for these borrowings. The Wholesale Tea Dealers' Association has agreed on behalf of its members that each member purchasing tea for importation will enter into a binding undertaking that, for each consignment of tea imported on his behalf in the transition period, he will purchase also an appropriate share of the stocks of Tea Importers, Limited. Suitable provision is made in the Bill to implement that undertaking and to ensure that the same conditions will apply to other tea traders who propose to purchase tea for importation.
This Bill had a somewhat difficult passage through the Dáil, mainly, I think, because of misunderstanding of its provisions and implications. In essence, the Bill is a simple measure, the principal objects of which are maintenance of the claim which we have established to quotas in the producing countries in the event of a recurrence of emergency conditions, and the application of common-sense methods to the procurement of our tea supplies in the primary markets where our experience, and the experience of other countries, have demonstrated that the best value can be obtained. It is on these grounds I recommend the Bill to the favourable consideration of the Seanad.
