§ Mr. H. Rhodes (Ashton-under-Lyne)
I beg to move, in page 6, line 33, to leave out "cost of production" and insert "export price".
§ The Deputy-Chairman
I think it will be convenient to discuss at the same time the two other Amendments to this Clause, both in page 6, line 42, one to leave out "cost of production" and insert "export price", and the other which seeks at the end to insert:Provided that the Board of Trade may by order provide that in relation to goods of the description specified in the order this subsection shall have effect with the substitution for references to twenty-five per cent. of the export price of references to some other percentage thereof.
§ Mr. Rhodes
I can assure the President of the Board of Trade that we would be 686 prepared to be gracious and add our names to his if he would treat us as he has treated the hon. Member for Kidderminster (Mr. Nabaro), whom he has treated very generously in giving way to him on the previous Amendment. We would be prepared to append our names to the right hon. Gentleman's Amendments if he would treat us in the same way.
As Clause 8 stands, it stipulates that an added value of 25 per cent. is sufficient criterion for establishing national origin. This is one of the most important points in the Bill. We seek, by this Amendment, to give the Board power to vary the percentage for specific purposes. As the Bill now stands, processed steel, processed cloth, or any other commodity which acquires an additional 25 per cent. in value in a country of export, is regarded as having originated in that country. I put it like that because that is as clear a definition as I can get in this very involved subject.
May I give an example of what I mean? Let us suppose that Germany imports Japanese cotton cloth and processes it, adding 25 per cent. to its value. That cloth can then be exported to this country, within the terms of the Bill as it now stands, without any definition whatever in respect of whatever dumping qualification there may be in it. I mention Germany in particular because Germany, when it imports cloth from a low-wage country like Japan, does not allow any of that cloth to be sold in Germany; it must be exported, and it is reasonable to assume that much of it will be directed to markets here.
My next example is this. A country desirous of dumping into one country can find another country—Sweden is an example—with a very large home market for a particular type of textile, but which is very good in the working and processing of, let us say, prints on grey cotton cloth or bleached cotton cloth, very able and clever with design but with a comparatively small home market for that particular type of material. There are very few sales into the home market in Sweden, since it would not be possible to sell the goods anyway, yet that would, according to the Bill, determine a fair market price for the product. In fact, it might be considerably below the home 687 market price in the country which has dumped the stuff in Sweden to be partially worked and then sent it here in order to undercut our own trade in that cloth.
This is my third example. A dumping country may select a well-known processing country, for instance Holland, which is first-class at processing textiles and many other things, or Switzerland, where people show great skill with the intermediate processing of raw materials from elsewhere. The dumping country can create a low market figure in either Holland or Switzerland by dumping into those countries as well, lowering the value of the goods, thus giving the dumping country the opportunity, through either Holland or Switzerland, to get those goods into this country and obtain the trade. This is rather different from my second illustration because in those circumstances a fair market price is, or could be, produced because in the intermediate country the price has been reduced through the impact of the material in that country.
What is the position likely to be as regards intermediate products from countries such as America or the Iron Curtain countries at present? Let me take a likely commodity, nylon polymer; many American industrialists are engaged in the manufacture of nylon polymer and are hoping to supplant rayon in the tyre fabric trade. It would be perfectly easy for them to ship their surplus product to Germany, have 25 per cent. added on, and thus have the product regarded as a German material inside the Free Trade Area.
It might be thought that there is a slight exaggeration in these examples, but I assure hon. Members that there is not. The instances which I have given are as nothing compared with the kind of tortuous path which materials took in the days before we introduced the antidumping Regulations in 1931. Indeed, there is no more justification really for some of the principles which have been expounded on the subject of the Free Trade Area now than there was years ago. I do not see that we are in any better position to compete today than we were at the time when the Regulations were introduced in 1931.
The Board of Trade is taking too narrow a view. It ought to lift its sights a little and look into the other countries 688 which may be offenders besides the likely ones which process materials. It should be remembered, in regard to some of the commodities which we have imported from abroad, that the home prices in the original country for certain of them have very often been higher than the prices of the same product exported from an intermediate country, when the original country has been wanting the trade.
If it is said that the variation in percentages cannot apply, does the President of the Board of Trade think that we shall get within the percentage plan if we join the Free Trade Area? I do not think that it is possible to get away from the percentage variation. When it comes to settling the conditions of trading in the Free Trade Area there will have to be calculated a whole series of graduated percentages on materials and the working of materials in the transition stage between now, when the variations are applied, and some years hence, when the variations are completely removed. If the graduated percentages apply in cases of that sort, we can make them apply in this case.
One of the important objects of these proposed powers to vary orders about the 25 per cent. origin qualification is to enable the President to fix a higher percentage and to get a proper qualification of origin in other countries. I ask the President of the Board of Trade seriously to consider this matter.
While I am on my feet, I should like to pay a compliment to the Minister of State, who has been so courteous in the talks which I have had with him.
§ Mr. Richard Fort (Clitheroe)
I want to add one more point to what was said by the hon. Member for Ashton-under-Lyne (Mr. Rhodes). It is to ask my right hon. Friends whether the use of the export price would not simplify the operations of the Customs and Excise. I should have thought that the Customs and Excise would have found it a good deal more difficult to operate on the costs of production, which are much more easily juggled by adjustments of overheads and so on. One of the arguments for the use of the export price is the simplicity of administration.
The other matter on which I should like to hear their comments is whether or not the use of the export price would, 689 as has been suggested to me, make the operation of the whole Free Trade Area rather easier, in the sense that it is more likely to be the basis for the prices on which variations in that area will be based, than will cost of production. Perhaps my right hon. Friend will be able to cover those two small points when he replies.
§ Mrs. Eirene White (Flint, East)
I should like to say a few words in support of my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes). Owing to absence on a Parliamentary delegation, I was not able to take part in earlier discussions on the Bill. I know from my connections with the rayon industry, which has very large factories in my constituency, that the manufacturers of manmade fibres are very concerned about the Clause. They are very anxious that there should be a possibility of variable provision, because the disparity between the different man-made fibres will make for very great variety. What would be very suitable for one branch of manufacture may be quite unsuitable in another.
This is an industry in which fresh discoveries are made almost every day. It is felt that a fixed percentage, as suggested by the Clause, would not necessarily be the best way of protecting ourselves from possible dumping. I am enboldened to say a few words because of the remarks of the Minister of State when he suggested that we might return to this matter on Report.
It has been suggested to me that one of the arguments in favour of having a variable percentage is precisely one of the matters to which he referred, that it is possible that this method may be favoured in negotiations on the Free Trade Area. If that is so, it would be more sensible to have our own legislation framed in a way that could dovetail with that. On the matter of whether one should have a basis of export price rather than production cost, I am not an expert in this matter, but the former method seems to me to have some clear advantages. The people in this country who are most concerned—because they themselves are manufacturers—are very worried about the possibility of unfair competition and are dissatisfied with the Clause as it now stands. They have sent urgent representations to some of us on 690 this matter, and I feel that we are entitled to further justification by the Government of their attitude. We hope that they will be able to accept the Amendment.
I cannot help feeling that when disquiet is felt, as it clearly is, by people who have spent their lives in the trade and who are very great exporters and who have considerable experience in Commonwealth countries as well as in this country, we need a much more substantial explanation than was given by the Minister of State earlier about why the Government persist with the proposals in the Clause. Perhaps they have had second thoughts and are now rather more flexible about the matter.
§ Mr. Gordon Walker (Smethwick)
We have heard two very well argued speeches from my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) and my hon. Friend the Member for Flint, East (Mrs. White). I hope that the President of the Board of Trade will have an open mind on this matter. There are two clearly related issues. One is whether we should work on export price or cost of production. As the hon. Member for Clitheroe (Mr. Fort) said, there is a good deal to be said—leaving aside the major issue, which comes later—for substituting export price for cost of production. Cost of production is a somewhat metaphysical sort of thing which is very difficult to define—there can be all sorts of arguments about it—whereas an export price is a precise, known and knowable thing. From that point of view, I should have thought that the first two of the Amendments which we are discussing together would be desirable, whatever may be thought about the third and main one.
On the main Amendment, there is a very grave difficulty to which we will expose ourselves in what might be called dumping at one remove. I do not mean that this should be used just as a protection measure, but we might get dumping, as defined in the Bill, at one remove and be powerless to do anything about it. A country could export to another country something which would be dumped in the terms of the Bill, but that second country could add only 25 per cent. of the value in processing which, under the 25 per cent. qualification, would change the 691 nationality of the goods so that those originally dumped goods would become the goods of the new country which could then export the goods to us. They would be no longer dumped within the terms of the Bill, because there would be no longer any difference between the cost of production of the then exporting country and its export price to us. In fact the thing would be dumped, and would be dumped by dumping as defined in the Bill.
If the United States, for instance, sent processed goods to Belgium at a price which would be a dumping price under the terms of the Bill, and then Belgium added 25 per cent. to the value, they could be imported here, as I understand it, under the Bill without our being able to do anything about it. I have not at any time wanted to turn the Bill into a general protection Measure, but I want it to be truly an anti-dumping Bill, and it does not seem to me to be a truly antidumping Bill without the proposed Amendment.
From all we hear it seems that the Free Trade Area is to define country of origin in the terms of some sort of shifting scale of percentage. That seems to be extremely probable. If we do not make this Amendment now the final Act will have to be amended, because if that does happen we shall have to have powers to operate in the same sort of way as other countries in the Free Trade Area.
The President will notice that we are giving him a power but not giving him an order. This is a permissive power. Of course, we all hope that it would not have to be used very often. The President himself on Second Reading of the Bill said of the Bill as a whole that he hoped it would have to be used at most only very occasionally. He said that the fact that the powers existed would make it unnecessary to use them. That argument applies here. We certainly hope this power will not have to be used, that the existence of the power will make it unnecessary to use it except in very flagrant cases. We think that if the power exists people will be careful not to bring themselves within the mischief of this provision. They will not, if they know it exists.
As my hon. Friend the Member for Flint, East (Mrs. White) said, it would be easier for us to enter the Free Trade 692 Area without having to amend the Measure again if we had this power in it. This power would enable us to go into the Free Trade Area; and if it decided to define country of origin by a sliding scale of percentages, we should be able to participate without having to amend this Measure.
So for reasons of convenience and administration, and because there is a real risk that genuinely dumped goods which will not come under the terms of the Bill unless the Amendment is made may get into our home market, I very much hope the President will seriously consider making this change, either using the words we propose or, if necessary, by causing an Amendment to be made in another place.
§ Sir D. Eccles
As the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker) said, there are two questions here. The first one is whether we base ourselves upon the export price or the cost of production. In asking the Committee to stand by the cost of production I hope it will be remembered that what we are trying to do is to find the most proficient system for dealing with goods in which there is a partial element of dumping. We want to stand by the cost of production, because if the percentage which we choose as a qualification for putting on the duty—the percentage of dumped components or raw materials—is based on the cost of production, the manufacturer knows all about it. He has the requisite knowledge. He can certify the facts, that is to say, the cost of the material before he processed it, the cost at which he purchased it, and, the other thing which is important, the amount spent on the processing itself. The exporter does not know that and it would be very difficult indeed to get from him the real facts which we want to know to determine whether the percentage selected is exceeded or not.
The export price, of course, contains a profit and various other additions, and those can be much manipulated so that the very object of the Bill which we desire, that is to catch the dumped proportion, may be defeated, may be obscured by the addition of a very fat margin, or two margins or three, by the time the export price is calculated.
If hon. Gentlemen will consider what it is we have to do, which is accurately 693 to determine that content in a mixed article which is the dumped content, they will see that we cannot get it as well by basing ourselves on the export price as we can if we base ourselves on the cost of production.
§ Mr. John Cronin (Loughborough)
How will the information about the cost of production be obtained? Will it be obtained simply from a simple declaration by the producer? He is the original potential dumper.
§ Sir D. Eccles
The manufacturer will fill up a certificate and then we shall check that in the country of origin.
§ Sir D. Eccles
My right hon. and learned Friend the Minister of State says it will be authenticated, but it is going to be difficult to get at the information. This is a problem, and I have no doubt that, at any rate to start with, it will tie only the really blatant cases in which we shall be able to proceed, cases in which there is no doubt at all about dumping. As we go on we may, perhaps, get greater experience of how to check these domestic figures.
The object of the Clause is to prevent indirect dumping. Country A sends dumped goods, or unfairly priced materials, to country B, Which processes them and then exports the finished article to the United Kingdom. The question is, how much work should be done on those dumped materials before the content of the dumping can be considered to be removed? Naturally, that is a matter of judgment, and naturally it does, no doubt, seem rather arbitrary to take a fixed percentage over the whole range of goods.
However, the advantage of having a fixed percentage known to both importers and exporters over the whole range of goods is very great indeed and should not be lightly abandoned. We had this figure of 25 per cent. in the Safeguarding of Industries Act. It is used for determining the origin of goods qualifying for Imperial preference. We do not rest our case on those two examples, but the latter is in fact still working. We believe 694 that to add 25 per cent. is about right to prove that a job has been done on the material in another country.
If we were to accept the Amendment we should have a flexible rate. In other words, there would be no foreknowledge in respect of a particular article what proportion of that article we considered it was necessary to have added in order to escape an anti-dumping duty. Hon. Members will realise what that would mean for the Board of Trade. Every industry that thought it was going to be injured would say that in its case 30 per cent. would do. The next would say 40 per cent. and the next 50 per cent., and, as the right hon. Member for Smethwick very rightly said, that brings in protection.
If we do not provide for a rate of 25 per cent., attempts will be made to use the Bill as a protectionist Measure. We have said from the beginning, and the Opposition agrees with us, that this is an anti-dumping Bill. I am quite clear that we must have a percentage, otherwise we would come to have the case, for example, that Japanese screws are dumped into Belgium and put into a Belgian locomotive and the locomotive manufacturers here say to me that because there is an element of dumped goods in the Belgian locomotive I must put a duty on it to keep it out. We should always be arguing these cases, and I do not see how we could avoid having pressure to use the Bill for straight protection and not against dumping. That is one reason against the Amendment.
Another reason is that no other country has this legislation at present, and it is very dangerous to put into a British Act of Parliament a power which we might use very sensibly but which if copied might have the gravest effect upon our exports. It is certainly in our interest as a great trading country to be as precise as we can when we take powers of this kind.
The hon. Member for Ashton-under-Lyne (Mr. Rhodes) asked me about the European Free Trade Area. I must tell him that one of the things which we tried our hardest to do in Paris the other day was to get the European countries to have as clear and simple rules as possible for the pulling down of their tariffs and the abandonment of their quotas. I cannot see anything more calculated to 695 permit evasions and bring all we have hoped to do into a general muddle than to allow every country to have a flexible percentage for the qualification.
In that case it would be largely the qualification of origin because, of course, it is at that point that this particular machinery will be so necessary, since we shall have free trade, we hope, between a number of countries whose external tariffs are different. It is, therefore, necessary to determine very carefully the origin of goods, otherwise they might come in through one country and be shunted across into the next one.
I think that I am right in saying that all the experts of O.E.E.C. would agree that anything like a flexible rate would be disastrous. We should not know where we were. We should not give so bad an example in our anti-dumping Bill when so great a negotiation is round the corner. I do not think that the Committee should accept the Amendment. I fully agree that 25 per cent. is an arbitrary figure and that some industries could do with less and some would like very much more, right up to 50 per cent., but this 25 per cent. is a figure which is already in operation and it is one which we could defend against the charge of using the Bill as a general protectionist Measure. I am very anxious that that charge should not be sustained against us in view of the things that are happening in Europe.
I appreciate that there may be industries which would like more. Hon. Members opposite have spoken about them and my hon. Friend the Member for Clitheroe (Mr. Fort) has had in mind the cotton industry, which would like to see 50 per cent. substituted, but it would be against the interest of United Kingdom trade, looking at it as a whole.
§ Mr. Ronald Williams (Wigan)
I have a difficulty which arises in this way. It seems to me that, in addressing himself to the question of the 25 per cent., the arguments of the President of the Board of Trade were misconceived. I see how that has arisen, and I shall explain it clearly in a moment.
If we were saying in our Amendment that we considered it wrong to have an arbitrary percentage in the Bill and that we wanted a flexible one, then the right 696 hon. Gentleman's arguments would have tremendous force; but we are not asking for that. We appreciate his difficulties. Nowhere have we said that 25 per cent., although it is an arbitrary figure, is wrong. We have not tabled an Amendment which in any way challenges the 25 per cent.
We are disturbed about this matter, and I ask the right hon. Gentleman to believe that we are trying to save the Bill. If Clause 8 goes through in its present form, the basis of the Bill can be set aside by evasions which have been referred to as methods which are even now being advertised and publicly used. Hon. Members on both sides of the Committee who have great experience in these matters have brought forward arguments in support of their contentions to which the right hon. Gentleman must pay attention.
We say that in these circumstances one should first fix one's line of policy. The right hon. Gentleman has decided upon 25 per cent. That is all right. However, he should not carry out his policy in such a way that it can easily be evaded by the dumper, because if that is so the dumper will simply put his thumb to his nose and the Measure will not be much help in preventing dumping. We do not urge the Minister to turn the 25 per cent. into 50 per cent. and invite retaliatory measures. The Minister of State was right at an earlier stage when he drew our attention to that danger. In the event of the evader coming along, we ought to have some reserve power in the Measure itself to enable us to cope with the evasion.
Surely it is clear that, if that were to be done by an Order of the Board of Trade, the Department would not act capriciously and against the wishes of the President and the House. The Order would be a responsible one made to repel an attack which would undermine the Bill if it were successful. I put it to the President as strongly 'as I can that he will not be giving up a fixed percentage for a flexible percentage by accepting our Amendment. He will merely be putting himself in the position of having a reserve power, which he may never use but which would exist as a warning to a prospective dumper who thought of using the methods referred to so forcibly by my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) 697 and also by the hon Member for Oldham, East (Sir I. Horobin) at an earlier stage.
I am sure the Minister will appreciate that in our Amendments we have sought to be constructive. I must also say that he and the Minister of State have been most helpful in meeting us wherever possible. Nevertheless, they do not seem to understand that in our Amendment we are not putting forward a debating point or an argument for a flexible rate. We are uttering a warning based on the expert knowledge that we possess and that of experienced people dealing with exports every day, and our arguments have been reinforced by arguments from the other side of the Committee, with the exception of the Government Front Bench. No argument has been put forward to rebut the views which have been submitted in support of having some means of dealing with the dumper.
If all the arguments advanced from both sides of the Committee are correct, the Bill is in danger unless something is done about it. We have pointed out the danger. We have drafted an Amendment and put it before the President. The Amendment does not mean a flexible rate; it merely gives him an additional power which we should like him to have. I say with all the force I can command that if our Amendment, which has drawn his attention to the danger, is not quite what he wants, and he is not prepared to accept it, he ought to deal with the matter in another place.
§ Mr. Cronin
I join my hon. Friend the Member for Wigan (Mr. R. Williams) in expressing disappointment at the Minister's reply. He very courteously allowed me to intervene in his speech on the question of using the basis of cost of production instead of export cost, but I do not regard his reply as entirely satisfactory. I asked him how one would obtain the true cost of production, and after consultation with his right hon. and learned Friend the Minister of State he said that it would be authenticated. Presumably, to authenticate something is merely to find out the truth. That can hardly be an answer to my question.
§ The Minister of State, Board of Trade (Mr. Derek Walker-Smith)
It is a technical term.
§ Mr. Cronin
The Minister of State is throwing out an even bigger cloud of obscuration over the whole problem. It seems that to find out the true cost of production would be a very difficult problem indeed, even for the expert attention of the President of the Board of Trade and the Minister of State.
I feel fortified in my argument by some remarks made by the Minister of State himself when we last discussed the matter. In discussing Clause 5, when the purpose of one of our Amendments was to give the Board of Trade discretion to obtain information other than about the country of origin, the Minister of State said that it would be very difficult to obtain the information from the country of origin. Surely, that argument applies just the same to the cost of production. It would be equally difficult to obtain that information from a foreign country. The cost of production is something which the would-be dumper would have every possible wish to obscure if he proposed to dump in the nefarious way that we are trying to prevent.
Reverting to the question of the 25 per cent. basis or a flexible percentage, I am sorry that the Minister quoted the Safeguarding of Industries Act, 1921. Most people who have made a study of that Measure will appreciate that the 25 per cent. was one of the most unsatisfactory aspects of it and it had largely to be abandoned as a useful method.
The Minister referred to the advantage of a fixed percentage. To whose advantage would the fixed percentage be? The would-be dumper would have to make only a simple sum and calculation to evade the Bill completely. There can be little purpose in foreknowledge, because, as my hon. Friend the Member for Wigan pointed out, the whole thing is entirely discretionary; there is no necessity to use this power which the President of the Board of Trade is being given.
The President also suggested that a varying percentage would mean that various trades and businesses would put pressure upon him to bring in various forms of Protectionism. That could hardly be a valid argument. The whole purpose of having a Board of Trade and a President is to prevent vested interests from putting undue pressure upon the country's economy in cases like this. The right hon. Gentleman may well smile, but 699 it is no doubt a smile of modesty, because we have the utmost confidence that he could do that if he wished.
The right hon. Gentleman gave as another reason that no other country has a similar legislative process in which a flexible percentage scale is used. If we are always to base our legislation on the precedents of other countries, very little progress will be made.
In the discussion of a previous Amendment the President showed that he was prepared completely to change his mind when the reasonableness of an Amendment was brought home to him. I hope that on this occasion he will see the point that we are making and ensure that the principle of the Amendment is debated when the Bill is considered in another place.
§ 8.45 p.m.
§ Mr. H. Rhodes
I hope that the President will consider this matter again. He says that no other country has this legislative process. That does not mean to say that the other countries in a Free Trade Area would not introduce all the powers they would be able to introduce under G.A.T.T.—and this power could be brought in under G.A.T.T. The object of the exercise is not merely to find out whether or not 25 per cent. is correct. The reason for putting in a figure—whether it is arbitrary or flexible, or can be varied—is to assess the home market price of the commodity. If it does not measure up to that it is not doing its job. We cannot make an overriding percentage to suit a kind of average trade in which we might be engaging.
I must also press the President upon the question of production costs. He seemed to agree that a sworn statement should be made, but the Minister of State then interposed and said that an authenticated document should be supplied. What does that mean? Are the Ministers going to get a sworn statement from producers that the costs that they put on their invoices are correct? It is quite easy to shift some of the variable and fixed overheads on to other parts of a factory organisation, so that the true situation is not disclosed. The President would be well advised to agree to the Amendment.
§ Amendment negatived.700
§ Clause ordered to stand part of the Bill.
§ Bill reported, with an Amendment: as amended (in Committee and on Recommittal) considered.