Committee on Finance. - Tea (Importation and Distribution) Act, 1956 (Continuance) Bill, 1958—Second Stage. – Dáil Éireann (16th Dáil) – Wednesday, 26 Feb 1958

Committee on Finance. - Tea (Importation and Distribution) Act, 1956 (Continuance) Bill, 1958—Second Stage.

Minister for Industry and Commerce (Mr. S. Lemass)

I move that the Bill be now read a Second Time. This Bill, as I explained, is an essential corollary to the Tea Bill which is before the Dáil and which the Dáil has already given a second reading. The present arrangements for importing tea are based upon the Act which was passed in 1956. When Deputy Norton, as Minister, was presenting that Act to the Dáil as a Bill he indicated that its life was limited to two years and that he thought that two years would be sufficient to enable arrangements to be made for putting the importation of tea on a permanent basis. This other Tea Bill which the Dáil is dealing with and which provides for new arrangements for the importation of tea will not come into operation until the 1st July next unless, of course, an earlier date is fixed by Order by the Minister for Industry and Commerce. As the existing Act is due to terminate on the 31st March, the purpose of this Bill is to continue it until 31st July or for such shorter period as may be possible.

During the course of discussion upon the other Bill some Deputies appeared to think it might be of some advantage to leave a period of some months in which no control on the importation of tea would be exercisable. I think it would be a most dangerous experiment to attempt. Apart from whatever risks it might create for the security of our supplies of tea it would involve other substantial difficulties as well. I mentioned that one of the problems of the present time was to secure an orderly transfer of existing stocks of tea from Tea Importers, Limited to the wholesalers who will be handling this trade in future. That will involve certain obligations upon these wholesalers to take over these stocks, and it may be some time before the process is completed. If we were to have a period during which unrestricted importation might be permitted, everybody knowing it was only going to be a limited period in any case, there would be a risk that Tea Importers, Limited might be involved in substantial losses, certainly in substantial interest charges on these stocks and as the borrowings of that company are guaranteed by the Exchequer any loss that they incurred would ultimately come back upon the taxpayer.

While that is a very important reason, it is not the sole reason why it would be undesirable to allow a hiatus to develop in our arrangements. It is rather difficult to forecast what the position may be this year. Deputies are aware that tea is produced in various parts of the Eastern world, India, Ceylon and Indonesia. In Indonesia there are political difficulties which have led to something tantamount to a civil war in progress at the moment. In Ceylon there have been very disastrous floods recorded in recent weeks. What the effect of these events may be on the total supplies of tea in the world is very uncertain. It may be that stocks of old tea would be sufficient to make up any deficiency of supplies from these countries.

Mr. Sweetman

Has the Minister convenient to him the proportions of the world supply of tea between India, Ceylon and Indonesia?

Mr. S. Lemass

No, I have not.

Mr. Sweetman

Most of the tea is purchased from India and I take it the supply from Ceylon would be very small in proportion to the whole.

Mr. S. Lemass

It is not inconsiderable.

Mr. Norton

The Indian product is by far the greater proportion.

Mr. S. Lemass

So far as we are concerned some Ceylonese tea is purchased also because that harvest comes in first.

Mr. Sweetman

It is very small in proportion to the Indian crop.

Mr. S. Lemass

Taking the world supply position as a whole I would say that a reduction of supplies from Ceylon and Indonesia, would substantially step up the demand for tea in India. In any case there is a situation there to which we have to have regard. It seems to me likely that nobody in this country would make advance arrangements for the purchase of tea if there was a period of uncertainty with unrestricted and unknown imports regarding the coming into operation of the new scheme or a period during which quantities of tea might be brought in, if control was removed.

In order, therefore, to secure the supplies of tea for this country, which must be purchased around June, July and August next, it is necessary to have those who are to be responsible for them know that they will have that responsibility. It would be an unjustifiable risk to adopt any other course. Apart from that, there is the problem of very substantial stocks of tea held by Tea Importers. Discussions are still proceeding as to how the process of transferring these tea stocks from Tea Importers to wholesale merchants can be smoothed over, so that there will be no difficulty for anybody and no loss to Tea Importers, Limited, which would react against the Exchequer. I repeat that the effect of the Bill is to continue the existing Act for a further period of three months.

Dr. Esmonde

The Minister stated that there would be no point in freeing the sale of tea for a short period because everybody would know that it would be only a temporary expedient. From that, I take it that the Minister has completely made up his mind that there must be control over tea for all time in this country. He also says that the Exchequer would have to bear the brunt of any expenses that might be incurred.

Mr. S. Lemass

No. I did not. I said the Exchequer has guaranteed the borrowings of Tea Importers, Limited.

Dr. Esmonde

Why should they incur loss? If Tea Importers place their supplies of tea on the market or if they have successors—my suggestion is that they have no successors and that tea be made free—surely they will naturally buy tea from them. They will not go to Ceylon or India to buy tea. Tea Importers can sell their stocks of tea and the Exchequer will not be at a loss and the Exchequer and the Government can get out of tea altogether. I feel confident that the tea merchants, the wholesalers and the retailers, are themselves able, in a free market, to handle this enormous sale and delivery that goes on in tea. There seems to be no reason whatever for continuing the thing. Surely the Minister can give it a trial for three months and then, if it has failed, start with the new company.

Let tea go free. Let it be a private enterprise and let the people who deal in tea, big and small, be allowed to show that they are well able to conduct their affairs without State interference. That is what the majority of the people want and it is what I understood the Government wanted—sensible private enterprise.

Mr. Norton

The speech which we have just heard and the speeches which some Deputies delivered on the previous day when the No. 1 Tea Bill was under consideration, indicated some misunderstanding of the whole position. Deputy Dr. Browne on the last occasion proceeded to regret what he called the virtual disestablishment of Tea Importers, Limited, on the presumption that Tea Importers, Limited, was in fact a State-sponsored body in the sense of Bord na Móna, the E.S.B. or Irish Shipping or Aer Lingus. Tea Importers, Limited, is not a State-sponsored body. It represents a group of people in the tea trade who have been carrying on the importation and distribution of tea and their method of finances and purchases has been guaranteed ultimately by the State, but the whole thing has remained in the hands of tea people who have devoted their whole lives to the purchasing and marketing of tea.

Therefore, the alterations proposed in what I call the No. 1 Tea Bill, which is now in its Committee Stage, are for the purpose of creating a somewhat similar kind of structure, except that in this second case, it will be on the basis of tea wholesalers putting up a sum of money—I think it is £2,500 each—for the purpose of financing the new tea organisation. You do not need to be a shareholder in the new company to get tea and there is no limitation on the kind of tea you buy. You can buy any priced tea every day of the week wherever you like, so long as it is ordered in the country of origin. Therefore, what we are doing in the way of dismantling Tea Importers, Limited, is not dismantling a State-sponsored body, which I would question very strongly, if it had a good administrative record, but a group of tea wholesalers or tea factors. That is what Tea Importers, Limited, is and anybody who thinks otherwise is guilty of completely misunderstanding the structure of Tea Importers.

The question we discussed on the last day was what is the future of tea control to be? The No. 1 Bill provides for the establishment of this new organisation which will have its own articles of association. It will raise its own capital in its own way and presumably will go to the banks to finance its purchasing and perhaps may come to the State and ask for a guarantee. At all events, that body, which represents the private tea trade in Ireland, will then be the body controlling the purchase of tea; it will be the body that will do all the ordering; and it will be the body which will decide whether the tea is to be bought in the gardens or at the auctions. It will be the body that will decide how the tea will be transported to this country. When the tea comes here, it will be packed here under its authority, it will be stored here and perhaps blended here or sent to wholesalers.

There is really no State control, in fact, over the new organisation which is set up under the No. 1 Bill, once they have accepted the edict: "You must buy tea in the country of origin." I do not understand the case which has been made to let the tea trade go free. Under the new Bill, it will be perfectly free and everybody in the tea trade can buy any way he likes.

Dr. Esmonde

No one can import tea.

Mr. Norton

I am quite sure the Deputy will agree that you cannot change the quality of the tea merely by importing yourself. There are about 50 grades of tea——

Dr. Esmonde

You can change the price.

Mr. Norton

The new organisation will receive an order which may be for 20 lb. of half a dozen different varieties of tea. The person who is ordering the tea will name the kind he wants and they will buy that tea for him at the auctions or in the gardens in India. His order will come back here and will be delivered to him by that organisation, of which he himself is a member. There is no restriction on the quality of tea he will buy or on the price. This body will undertake all the work in connection with it. Apart from the condition that it must buy in the country of origin, the new organisation is free to do anything it likes with the importation of tea. It can buy China tea in China, Ceylonese tea in Ceylon, Indonesian tea in Indonesia or Indian tea in India, so long as it buys tea in the country of origin.

Is there anything wrong with that, or will anybody assert, with any sense of enduring conviction, that you can buy tea cheaper in London than you can buy it in the countries of origin? You may, as I have said, get a small package of tea now and again, perhaps old tea, perhaps an over-plus of a particular kind, more cheaply in London or Amsterdam than you can get it at the particular time in India or Ceylon, but nobody has answered the argument that you can buy tea cheaper in the countries of origin. It provides transport of the tea, the storing of the tea, its packing, insuring and cartage, and all that will be done from Dublin, instead of somewhere like Amsterdam or London. That the new body can buy tea in the countries of origin is sound national housekeeping.

Mr. S. Lemass

We might discuss this on the main Bill.

An Leas-Cheann Comhairle

It seems the Deputy is going wide of the Bill before the House.

Mr. Cosgrave

Deputy Norton's description of Tea Bill No. 1 is perfectly correct, but where I have some doubts on the matter is, why should we compel tea traders to buy in the countries of origin? If, as the case has been made here, the advantage of buying tea in the countries of origin is based on the grounds that it is obviously going to be cheaper, then the tea traders will continue to buy in the countries of origin of their own free will. Why should we refuse them the right to buy elsewhere, if they want to do so? The case has been made that it will give larger employment here, but even that is uncertain. Obviously, there will be more employed in Dublin on the warehousing docks, but, in view of the centralised purchasing in recent years, it is questionable if the same employment exists in the rural towns and villages as existed formerly.

On the other hand, if there is justification for compelling traders to buy tea in the countries of origin, surely the same case can be made for other commodities? On this, we should say whether we are in favour of private enterprise or not. If we are in favour of private enterprise, we cannot at the same time regulate by restrictive requirements, as are imposed under the Tea Bill, the form and the method by which people will trade. There is a good deal to be said in favour of continuing the purchase of tea in the countries of origin, but, if it is so advantageous, both for the traders and the public, the traders will, themselves, continue to purchase their tea there. On the other hand, if they get a better advantage periodically—and while the total consumption of tea from our view is comparatively large—I think it runs in recent years at 24,000,000 lb.— as against the world tea crop, that is a comparatively small amount—if individuals or traders can get parcels of tea at more advantageous terms elsewhere than in the countries of origin, there does not seem to me to be any compelling case why they should be compelled to continue purchasing in the countries of origin.

The Minister says we should apply these regulations to the purchasing of tea, and, if he is correct in that view, then there are a whole lot of other commodities to which we should apply them. The monopoly which existed in recent years is altered under this Bill. Traders will have the right to purchase tea themselves, providing they place their order through the organisation that is to be set up, but only after certain conditions which are laid down in the Bill are fulfilled. If that is sound for tea, then it should be so for other commodities.

Mr. S. Lemass

Of course.

Mr. Cosgrave

If it is not so for other commodities, I do not see why it should be applied only to tea. At the same time, we have had repeated expressions of view that we are in favour of private enterprise, but this is unnecessary regulation or control of private enterprise, of individual traders.

Mr. S. Lemass

I should like to deal with these arguments in the context of the main Bill.

General Mulcahy

The Minister seemed to assent to the kind of supposition that if this is good for tea, then it ought to be good for other things as well?

Mr. S. Lemass

I agree with it fully. It does not, however, mean that we have to set up an organisation in each case to do it.

General Mulcahy

This is setting up a tea cartel. Deputy Norton indicated that the people who are concerned with this are people who have been in the tea trade for generations past. They came together as an organised and unitary group to deal with tea in a cartel under the stress of the war. The idea they have now to go to the countries of origin seems to me to have a very large element of the economic war mind being carried into present conditions, under circumstances in which we are working to-day, with the Common Market and European Free Trade Area pending. It seems to me these are two very awkward ideas to have impinging on our legislation, an element of economic war No. 1, and an element of cartel No. 2, to deal with an important commodity.

If we detach from that the element to import from countries of origin at a time when we are naturally looking for certain concessions and an easing of our position, in having the Free Trade Area in Europe to deal with, we certainly ought to be very careful of our step and of the principles on which we are working.

It is suggested that this is a perfectly free situation. All the tea traders can engage in the tea trade in their own way, but, when you make them go as far as India, Ceylon and Indonesia, then the cartel is certainly in a very strong position. It could be shown very easily that at the present time there is cheaper tea in the Six Counties than in the Twenty-Six Counties.

The Minister may put over the idea of this cartel, establish it and set it going. If he is doing that, then he certainly ought to leave a loophole to enable it to be shown and proved that one can get better and cheaper tea by not going to the country of origin. It is just the reaction against the Minister's intervention in relation to the cartel idea—and I think this is a tea cartel —which induces me to make these remarks at this stage. I doubt if three months is a sufficient extension for this Bill. The matters impacting on us in relation to the Free Trade Area, and the things that arise in connection with that, deserve, I think, to be considered a little longer and the Minister might like to have more than three months continuance of this Bill in order to enable a little more satisfactory thinking to be done.

Mr. S. Lemass

I am quite confident that we can have the new company in existence within three months and start this process of transferring stocks and obligations. I said I did not want to deal with the general problem in the context of this Bill, although it does impact to some extent upon it, as I shall show. We are dealing, in this first Bill, primarily with the problem of 1958. Our aim is to ensure that our tea stock position will be handled properly and our forward tea purchases will be made in 1958. We need not be thinking merely in terms of the future in this Bill, but the general point I have made here does come into this discussion, to the extent that Deputies will understand that anybody who is charged with the purchase of the tea requirements of this country, whether it is a company organised as the existing Tea Importers, Limited is organised, or a group of wholesalers, will have to acquire that tea over a limited period in the middle of the year and then carry the stocks for the rest of the year, until the next harvest comes in.

It is obvious that, in the course of a year, supply and demand will have a definite influence on the price of tea and people buying tea this summer, which will be sold next March or April, may buy it advantageously or not so advantageously. If the price of tea goes up in the meantime, they will have their stocks at a lower price than that at which they could obtain later on, if they were buying from day to day or week to week, and in such circumstances there would be no question of anybody going to Mincing Lane or Amsterdam, or anywhere else, to look for occasional parcels of tea. If the price tends to fall, then there may be occasions when individual traders may be able to pick up occasional parcels at a lower price than that at which they purchased stocks held to meet their requirements.

We have therefore got to think in terms of arrangements which will ensure that we will buy tea, as other countries buy it, on the basis of acquiring a full supply over a limited period and storing it, or else buying from day to day in nearby markets. We have got to think in terms of securing supplies as well as getting better value when purchasing tea at the time of the harvest, in relation to the tea requirements of the country and, whatever arrangements we make to get tea, they must protect our interests on both points.

During the whole period of the operation of Tea Importers, it was far more frequent to have tea for sale here by them at a price below the Mincing Lane price; but there were occasions when the reverse was true and these were occasions when you got a merchant writing to the Press saying that he could buy certain grades of tea in London cheaper than Tea Importers are selling it. These were very rare occasions, however, because the trend of price was, in the main, upwards and consequently a company buying in advance of the market was always more likely to be in an advantageous situation.

According to reports, at the present moment, there is a fairly substantial stock of old tea around the world in the hands of wholesalers. I do not think Deputy Esmonde appreciated that no tea can be bought now except old tea. The new harvest will not be until the end of June or the beginning of July. It is, therefore, now only a question of buying old tea. No matter who is given this task of making arrangements to purchase next year's tea supply, they must know now that they will have that responsibility.

General Mulcahy

Will Tea Importers be the body that will bargain and buy this year's harvest?

Mr. S. Lemass

I think it may be assumed that will be so. Mark you, that is part of the transition arrangement. I should hope to get the individual merchants into the market in time and, if we could devise a system which will ensure that this existing Act will go out of operation and the new Act come into operation before 31st June, that will be done. In practice, as the Deputy knows, we will be dealing with much the same body of persons, so there should not be any problem. I contemplate that it may be as late as September of next year before the final process of transferring stocks and obligations to the individual registered tea wholesalers in the country from Tea Importers, Limited will be completed. We have at least got to provide for that possibility.

General Mulcahy

But Tea Importers, Limited will have gone out of existence in three months.

Mr. S. Lemass

But others will take over from them, and no doubt they will be able to arrange amongst themselves the extent to which Tea Importers will start buying ahead of this year's harvest and at what stage they will step out and the new organisation will step in to act for them. I admit this transition period will present certain problems, but, in view of the fact that the people who will be dealing with this matter on both sides will be much the same people anyhow, I think we will be able to handle these transitional problems.

It would, however, be an impossible task to give them if we did not continue this present arrangement for the three months period. If they could not know to what extent old teas might be purchased and held in the country, to what extent the demand in next year might be reduced by the availability of stocks of old tea in the hands of individual traders, it would be impossible for them then to plan their buying in an intelligent way. As the Deputy knows, there is a substantial amount of money involved in the purchase and storing of these stocks. At a certain period, the bank credit tied up in stocks can amount to as much as £5,000,000. At the present interest rate, nobody would want to undertake that liability to acquire stocks which might not be sold for a long time. This is the only body which knows precisely how existing stocks are moving and what purchases have to be planned and it is the only body which will be able to effect arrangements this year with efficiency and economy.

Question put and agreed to.

Dáil Éireann díospóireacht -
Wednesday, 26 Feb 1958