EXPORT MARKETS (GERMAN COMPETITION) (Hansard, 9 February 1949)

§ The President of the Board of Trade (Mr. Harold Wilson)
With your permission, Mr. Speaker, I will answer Question No. 103, to which my right hon. Friend the Foreign Secretary made reference. I apologise to the House for the length of the answer.
Representations on the subject of German competition in the export market show that concern is widespread, and I welcome the opportunity of making a statement on the whole subject. It is, I believe, appreciated that the volume of German exports must increase rapidly in the next few years if Germany is to be able to pay its way and cease to be a burden upon the United Kingdom and the United States taxpayer. Apprehension about the development of German exports has centred round two main problems. The fear has been expressed, in the first place, that under the pressure of the need to export, the Germans may have recourse to so-called Schachtian methods of promoting their export, multiple exchange rates, special subsidies, and other unfair methods of sales promotion which were a familiar feature of the Nazi regime. In the second place, it is argued that German goods can be sold at a lower level than ours because of the lower German wage rates, which will, it is suggested, enable German exporters to offer goods at a lower price even on a fair competitive basis.
Until very recently, the price of German exports was approved in each case 373 by the Joint Export/Import Agency, who were guided not by the German cost of production but by the world price level for the particular commodity. There was no single conversion rate for the mark and it was not possible to relate production costs to world prices. A large number of contracts concluded for commodities priced in this way are still outstanding and much of the trade to which exception has been taken has undoubtedly taken place on the basis of such prices. The uniform conversion rate of 30 cents (United States currency) to one Deutschemark was fixed last summer, and contracts entered into since that date have been at prices determined by the cost of production (including profit margins), converted at that rate. A number of commodities, at prices so determined, can be sold only with great difficulty on the export market, and in certain cases it would have been impossible to honour old contracts without a special concession in this matter of the conversion rate. The German people's car is, perhaps, the outstanding example of this; the conversion rate which was used before currency reform was 17 cents to one Reichsmark; at this rate, as hon. Members will no doubt be aware, the car is leaving the factory at £200 and selling in Continental markets at a little under £350 retail. On the basis of an exchange rate of 30 cents the price of the car would be nearly doubled, and it would not be competitive. When, therefore, existing contracts have been worked off, unless there is a very substantial reduction in the cost of production the car should cease to be as threatening a competitor as it appears to be at present.
The hard core of the problem consists of those commodities which are competitive at the 30 cents rate. It is thought that these industries, among others, are competitive—chemicals, glass, clay and stone products, certain types of machinery, including heavy engineering and heavy electrical equipment, shipbuilding, scientific instruments, and cement. It is from goods of this category that we must expect continued competition in the future. For the present, there are a number of factors which may reduce the impact of German exports.
In the first place, prices in Germany have still not settled down after the upheaval of currency reform last June. Many prices, and the use to which many 374 commodities may be put, are uncontrolled and this means that stocks of many industrial materials cost much more to replace than before currency reform, and also scarce and important materials are being dissipated and put to all kinds of uses.
On the subject of wages, the wages stop has been removed since last summer and a 15 per cent. increase has been sanctioned. So far, about 50 to 60 per cent. of the workers have benefited from this. It is true, however, that average earnings in Germany are about 60 per cent. of our own. Against this advantage must be set the fact that German productivity is still much below ours.
With regard to the control of export prices, and, in particular, to the use of "unfair" devices to reduce prices, it is our policy to do all we can to prevent a revival in Germany of all forms of practices in international trade generally recognised as being unfair; and it is our intention that the Occupation Statute which is now being prepared will reserve to the Military Governors powers to that end. In this connection, I may add that I shall be glad to take up and investigate cases where German goods are sold at prices substantially below the world level (and I should point out that this is not necessarily the same as the United Kingdom level), or cases where there is evidence to suggest the use of unfair practices in the promotion of German exports.

§ Mr. Jennings
Would the right hon. Gentleman bear in mind that it is essential to keep closely in touch with manufacturers in this country in order to see that this menace does not increase, and will he give an undertaking that he will be constantly in touch with manufacturers in this country?

§ Mr. Wilson
Yes, Sir. I have already consulted the main trade bodies—the F.B.I. and so on—and last week received an important deputation from the engineering industry. I shall be prepared to receive representations from any other industry which feels that it might be affected by unfair trade practices.

§ Mr. P. Roberts
In the list given by the President of the Board of Trade, there was no mention of cutlery. Is he 375 not aware that, in India, Sheffield orders have been lost through drastic underselling from Germany, of which I could give him particulars?

§ Mr. Wilson
Yes, Sir; I am aware of that particular case. I think it was one which resulted from some of the factors which I have mentioned, and they are now disappearing. I should be very glad to keep the situation regarding cutlery in mind if the hon. Gentleman will send me any information.

§ Mr. Vernon Bartlett
The President mentioned the Deutsche Volkswagen Could he give any idea of the number of these cars which would still come in the cheaper category?

§ Mr. Wilson
Not without notice, but I have said that there is a number of contracts continuing for a short period.

§ Mr. Albu
May I ask my right hon. Friend if he will not consider whether the dilemma in which we are placed in Germany in our endeavour to reduce the burden on our own taxpayers will not involve us in rather more detailed integration of the economies and industries of Germany with those of this country, and that mere restriction of German industry will not provide a long-term solution?

§ Mr. Wilson
I think that is an entirely different question, which requires careful consideration.

§ Mr. David Eccles
While recognising that German industrial recovery is essential to the recovery of Western Europe, may I ask the right hon. Gentleman to take note of the fact that, to meet this competition, he must remove the obstacles to British business men selling our goods abroad? Will he press the Chancellor to be more liberal with foreign exchange for journeys abroad, and also ask the Inland Revenue to be more sympathetic in dealing with expenses accounts?

§ Mr. Wilson
While I certainly would not agree with the hon. Gentleman on the question of expenses accounts, I should have thought that the export figures which I announced yesterday would suggest that private enterprise is 376 not being held up by the Government in the export direction.

§ Mr. Edgar Granville
Will the right hon. Gentleman see that nothing is done to prevent the re-export of German production from this country, in which a considerable trade is now being built up here? Will he see that our Consulates throughout the world are given this information, because, in many cases, it is the threat of German competition which prevents buyers from buying our goods, rather than the actual date of delivery of the goods?

§ Mr. Wilson
I will see that my statement and any further statements made on this subject are widely circulated. Regarding re-exports, where these are in the general interests of Western Europe and do not prejudice our own position, we shall certainly encourage them.

§ Mr. Osborne
I think the right hon. Gentleman told the House that German productivity was much below ours. Will he say how much it is below ours, and whether it is due to their equipment or to the fact that they are working fewer hours?

§ Mr. Wilson
The hon. Member must know all the reasons affecting German productivity. I think that recent calculations suggest that, certainly so far as the engineering industries are concerned, they are about 60 or 70 per cent. of our productivity.

§ Mr. Lipson
Will the right hon. Gentleman indicate the extent of this German competition and whether, in point of fact, it is yet, or is likely to be in the near future, a serious menace to the success of our own export drive?

§ Mr. Wilson
It has certainly not reached the dimensions where it is a serious menace to our export drive, but the reappearance of German competition in a number of markets has caused fears, perhaps out of all proportion to the goods involved. We do not believe that anything happening now will seriously prejudice our export drive, and, as I have said, many of the exports which are competitive at the moment will soon cease to be so.