§ 10.12 p.m.
§ The Minister of State, Board of Trade (Mr. A. R. W. Low)
I beg to move,That the Additional Import Duties (No. 1) Order, 1956 (S.I., 1956, No. 537), dated 10th April, 1956, a copy of which was laid before this House on 13th April, be approved.I think I ought to give a short explanation of this Order. This Order which the House is being asked to approve increases the duty on fresh bananas from 2s 6d. to 7s. 6d. a cwt. and it also increases the duty on lime oil from 10 per cent. to 25 per cent. ad valorem. In this way the margins of preference on colonial bananas and on colonial lime oil are substantially increased, since bananas and lime oil from Colonial Territories come in free of duty. Thus, we are deliberately assisting the producers of bananas in the Colonies—particularly in Jamaica, Trinidad and the Windward Islands in the West Indies and in the Cameroons Trust Territory in the Federation of Nigeria.
We are deliberately assisting the producers of lime oil in the West Indies—that is in Jamaica, Trinidad and Dominica—which has a direct effect upon the lime growing industry in those territories. We are free to increase the margins of preference in this way because of the waiver, known as the colonial waiver, negotiated during the review session of G.A.T.T. early in 1955. We are now able without breach of Article 1 of G.A.T.T. to increase margins of preference on imports from the Colonies subject to certain conditions, which do not prevent our action in the case of bananas or lime oil.
First I will say something about bananas and then about lime oil. There are no restrictions on the imports of bananas from countries outside the dollar area, Japan or the Iron Curtain countries. This has been the position since July, 1955. The main foreign suppliers of bananas to us are at present Brazil and the Canary Islands. Of 6 million cwt. of bananas imported in 1955, 75 per cent. came from the Commonwealth, practically all from the West Indies or Nigeria, and 25 per cent., amounting to 1½ million cwt., came from foreign sources. Of this, 870,000 cwt. came from the Canaries and 600,000 cwt. from Brazil.
160 The banana industry is important socially and economically in the West Indies. With increasing world supplies and increasing colonial supplies it is important that the colonial producers should be protected in their main market, which is the United Kingdom. In addition, as the House will know, there is the price assistance scheme for West Indian bananas which was announced last year. As the increased preference will tend to maintain the price obtained for West Indian bananas in the United Kingdom market, it will reduce the likelihood of the Government being called on to make heavy payments out of price assistance funds.
The new duty of 7s. 6d. a cwt. is equivalent on 1954 prices to just under 16 per cent. and on 1955 prices to just over 13 per cent. on foreign banana imports. The old duty of 2s. 6d. per cwt. was equivalent, when imposed in 1932, to an ad valorem duty of about 14½ per cent. Once it was agreed that an increase should be made, we had to take into account a number of considerations before fixing the size of the increase. Competition from Brazil rather than competition from the Canary Islands was felt to constitute the main threat to the West Indies. The West Indies were anxious that the original incidence of the duty on Brazilian bananas should be restored. We had also to bear in mind our obligations to Brazil with whom we had an agreement binding the duty of 2s. 6d. per cwt.—an agreement made in 1947 during the G.A.T.T. negotiations which the right hon. Member for Huyton (Mr. H. Wilson) will remember.
In the outcome we decided that 7s. 6d. was the right figure, mainly for the following reasons. First, it was high enough to benefit the West Indies; secondly, that it was not so high as to exclude foreign bananas completely; thirdly, that it would roughly restore the pre-war incidence of the duty on Brazilian bananas particularly, and fourthly, because we thought it would be negotiable under the G.A.T.T. We have been able to negotiate satisfactorily with the Brazilian Government so that in return for our increasing the bound duty on bananas, we remove the duty on Brazil nuts. That has been done by another Order which came into force on 16th April, the same day as this Order which is before the House.
161 The effect of the Order is to add about Id. per lb. to the duty on foreign bananas. Whether this will all be passed on to the consumer, I cannot say, but the great majority of bananas will continue to bear no duty at all, and the United Kingdom will get the benefit of competition between the various colonial producers and of the competition of foreign producers over the tariff.
May I say a word about lime oil so that the House may be in possession of the facts as we see them. The average price obtained by West Indian lime oil producers in recent years has fallen sharply. The main reason for this has been the large and efficient production of lime oil in Mexico coupled with the devaluation of Mexican currency. The general case for increasing the preference on lime oil is that if the present low prices continue the harvesting of limes and the production of lime products will decline. Since Mexican lime oil accounts for about half the supplies reaching the United Kingdom market, and since there is no restriction on such imports West Indian prices are almost bound to follow the Mexican price.
The former duty of 10 per cent. ad valorem with free entry from the Commonwealth has therefore been raised to 25 per cent. ad valorem with free entry for the Commonwealth. The main food uses of lime oil are in soft drinks and confectionery. Lime oil is also used in perfumery, and when I made inquiries I discovered that it was mainly used for hair cream, if hon. Gentlemen would like to know that. In all these things the lime oil forms only a small ingredient in the finished product. I hope, with that explanation, the House will be prepared to approve this Order, which I am sure is of great benefit to the colonial industries concerned.
§ 10.20 p.m.
§ Mr. A. G. Bottomley (Rochester and Chatham)
The Minister of State has explained the Order and what it tries to do, but I want to mention one or two things that I think it will do which the Minister has not mentioned. First, a tariff at any time has the result of increasing the price of a commodity—and the cost of living is high enough already without adding further to it, especially in the case of fruits like bananas, or oils used in soft drinks, which go very well 162 with other drinks. I am not alone in the view that it will increase the cost of living, because I think that the Minister himself will have received representations from the National Federation of Fruit and Potato Trades, which gives support to this view.
The Minister is to be congratulated for the first time upon appearing at the Dispatch Box and trying to do something for the Commonwealth and Colonies. In that sense we support him. But it is the Government's own doing that has brought about the necessity to give further protection to the Colonies, for the reason that in this free-for-all it has been made possible for other countries to get into the United Kingdom market and undercut the Colonies, which they could not do when controls operated.
As the Minister said, lime oil comes chiefly from Mexico, but our supplies have always come from the West Indies. The real reason why the Mexicans can undercut the West Indies is that they have always had the dollar markets as a base, and although they may also have more efficient production, the dollar market has been the substantial reason for their being able to sell cheaper in this market. Supplies in the home market have come in only since the Government have done away with all the controls which operated at one time. They follow their doctrinaire policy to the extreme, and in this case it has been hurting the very people we all have an obligation to help, namely, those in the Colonies. I would not like to lose the opportunity of saying that the West Indies themselves should try to get into the dollar market, in order to help the whole sterling area and, in time, be able to produce as cheaply as the Mexicans.
As the Minister has said, bananas come primarily from the West Indies, the Canary Islands and Brazil. The Minister mentioned that supplies coming from the Canary Islands and Brazil have risen, in one case considerably. The amount of bananas coming here from the Canary Islands in 1955 was double the amount coming in in 1954. We have reason to be careful about trade with Spain, because she has not been the happiest of partners. She has not given the United Kingdom the consideration which it deserves. Leaving that on one side, however, I suppose that it was necessary to do something to protect our friends in 163 the Colonies, and for that reason we have no objection to the imposition of this tariff. I would add that we make the plea to our West Indian friends not to use this occasion as an opportunity to push up the price of bananas. Our experience of past agreements—especially the Sugar Agreement—shows that the West Indies are usually very honourable in this respect, and do their best to supply goods to us at reasonable prices.
In the case of the Canary Islands, and the supply of bananas, we can do what we like, because Spain is not a member of G.A.T.T. In the case of Brazil we certainly had to do some bargaining. I presume that the lower tariff on Brazil nuts was part of that bargain. If so, I only hope that the general give-away is ultimately for the benefit of the United Kingdom. We do not know the details of all the discussions which are going on, so I can only assume that that is so. But I want to register a protest, not only because I believe that the increased tariffs will add to our cost of living but also because I believe that the doctrinaire party policy adopted by the Government not only results in increasing the burden upon home consumers but damages the interests of the Colonies, for whom we also have a responsibility. While I am not urging my right hon. and hon. Friends to vote tonight, I do say that the Government, in the country's interest, really ought to give up this doctrinaire policy and consider some of the things which were done during the period of the Labour Government with advantage to the home consumer and to the Colonies.
§ 10.26 p.m.
§ Mr. H. Rhodes (Ashton-under-Lyne)
The Minister has made his case very eloquently. All I will say is that I hope that it will not be long before he comes to the Dispatch Box again with another Order substituting the word "cotton" for "bananas".
§ 10.27 p.m.
§ Mr. J. C. Forman (Glasgow, Springburn)
The Department has not been fair to the trade. The trade did not learn 164 about the action of the Government until 14th April; there was no consultation of any kind with the trade, and it only got the information from the Board of Trade Journal. There was no time to consider a case against the Government action, and all that those in the trade have been able to do is to send on a very strongly worded protest to the Department.
The decision on Brazilian bananas and Canary bananas will affect the trade very considerably, and ultimately will hit the consumer. There is a fairly long-term arrangement as regards carriage required to be made with Brazil, and, in view of that fact, the trade feels very sore indeed. Ultimately the consumer will suffer.
By their action in this case, the Government have done very much as they have done in other cases; they have failed entirely to protect the consumer's interests in this country. I associate myself with my right hon. Friend in making this protest about the Order.
§ 10.28 p.m.
§ Captain J. A. L. Duncan (South Angus)
I welcome this Order. I shall just ask one question. In the old days, I was always much more keen on specific tariffs because, in those days, currencies were stable and tariffs were to be preferred. The reason for this Order tonight is to be found in the instability of currencies, yet the specific duty has been raised to a higher level. In view of the fact that the reason for the alteration in the tariff arises not from international causes but from the instability of currencies and inflation, it would seem worthy of consideration whether we might not have used the ad valorem duty in order to keep the inter-relationship between currencies right, rather than have a specific tariff. If the inflationary system either in this country or Brazil, or somewhere else, alters again, the Government may have to come to this House at some future date to ask for another Order raising, or perhaps lowering, the specific duty to suit new currency arrangements.
§ 10.30 p.m.
§ Lieut-Colonel Marcus Lipton (Brixton)
I am unable to follow the hon. and gallant Member for South Angus (Captain Duncan), because he seems to overlook the fact that the duty on the 165 lime oil is increased on an ad valorem basis, whereas the duty on bananas is increased from 2s. 6d. to 7s. 6d. per cwt.
My only reason for intervening is this. In the division which I have the honour to represent there are large numbers of citizens from the West Indies. Anything which will improve the economic prospects of the West Indies will be acceptable to me and to the citizens I represent, because it is due to the unsatisfactory economic conditions over there that we have this fairly considerable emigration from the West Indies to this country.
The right hon. Gentleman presents me with the dilemma, that either we must accept the higher prices for bananas or we must have more immigration from the West Indies to this country. I am prepared, somewhat unwillingly, to accept the higher price for bananas if it will help the economic stability of the West Indies. The only disadvantage of an increased duty is very well exemplified in the proposal now before us. It will be seen that whereas the duty on bananas is increased by 5s. per cwt., the cost to the consumers will be in the neighbourhood of another id. per lb.—which is very much more than 5s. per cwt.
§ Lieut-Colonel Lipton
I am prepared to make a forecast that if the duty on bananas goes up by 5s. a cwt. the consumer will pay at least ld. a pound more for them. It remains to be seen whether or not my prophecy is correct.
As my right hon. Friend has pointed out, the advantages to the West Indies are likely to exceed the disadvantages which may accrue to the consumers of bananas in this country. Incidentally, I did glean one new piece of information of which I 166 had hitherto been unaware. Apparently lime oil enters into the constitution of hair oil. I must confess that, probably like the Minister, my interest in hair oil is beginning to be more and more academic, but if he thinks that any useful purpose is to be served by increasing the duty on lime oil I am not prepared to raise any difficulties at this stage.
It seems to me that in this instance we have to balance the advantage to our fellow citizens in the West Indies against the effect on our cost of living. I think that, by the narrowest of margins, the economic advantages to our fellow citizens in the West Indies just carry the day. For that reason, and with less reluctance than usual, I find it possible to agree to this further increase in the cost of living of the British consumer.
§ Mr. Ronald Russell (Wembley, South)
I am glad that the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) is at least a little less pessimistic than his two colleagues in his forecast of the extra cost of bananas that may result, but the extra cost will surely apply only to foreign bananas, and the whole object of the increase is to keep out foreign bananas to the benefit of the West Indies in particular and to other parts of the Colonial Empire. Let us, therefore, hope that there will be no increase in the cost of living. The same argument applies to the lime oil.
I welcome this Order as a step which many of us on this side of the House would like to see taken in relation to other commodities in the interests of the Colonial Empire in general. If we are to develop that Colonial Empire we must provide markets for its products. This Order is a step in the right direction. I welcome it warmly, and I hope that we shall see many more similar agreements in the future.
§ Question put and agreed to.
That the Additional Import Duties (No. 1) Order, 1956 (S.I., 1956, No. 537), dated 10th April, 1956, a copy of which was laid before this House on 13th April, be approved.