§ 3.18 a.m.
§ The Minister of State, Board of Trade (Mr. Edward Redhead)
I beg to move,That the Import Duties (General) (No. 4) Order 1965 (S.I., 1965, No. 1170), dated 24th May. 1965, a copy of which was laid before this House on 28th May, be approved.The effect of the Order is to increase from 10 per cent. ad valorem to 20 per cent. ad valorem the full rate of import duty on certain forms of fatty alcohols as defined in more technical terms in the text of the Order. I am sure that the House will feel that this is a highly invigorating subject to bring to its attention at this hour. I shall try not to expend too much impassioned oratory on it, but I think that I should explain why the Order is considered to be necessary.
The alcohols concerned are used mainly for the manufacture of detergents of a type that has only recently been developed on a large scale. I think that the House will be aware that traditional detergents produce a good deal of lather and that the persistence of their foam when passed through sewage works and discharged into rivers has given rise to very considerable inconvenience and anxiety.
262 Hon. Members will be familiar with photographs in the newspapers of foam covering our rivers from bank to bank, and I recall reports from the United States of water coming foaming from the taps in people's homes, although I have not heard of any such incidents in this country. Nevertheless, this subject has given rise to considerable concern. The trouble is that this detergent foam, that which arises from the detergents currently in use, is not easily destroyed by bacterial action, or to use what is the technical term, is not bio-degradable as is foam from soap, so that it persists for a long time instead of disappearing after the detergent has been used and has been carried away in the sewage system. There is a Standing Technical Committee on Synthetic Detergents, I understand, under the auspices of the Ministry of Housing and Local Government which is currently examining the problem, as indeed it is being examined in other countries.
Certain so-called soft detergents, to give an ordinary layman's term—that is detergents which quickly lose their foam when discharged into rivers or through sewage systems—are known but, until recently, the cost of producing them has been too high for them to be competitive, except in special fields such as the production of shampoos and liquid detergents. Some two years ago a British firm, appreciating the growing need for such detergents and anticipating an increasing market for the materials from which they are made, invested considerable sums in setting up modern plant to produce the fatty alcohols which are the subject of the Order we are discussing. This plant—and I think the firm is to be congratulated on its initiative in tackling what is undoubtedly a problem—took advantage of technological advances which made it possible, given large-scale production, to produce fatty alcohols suitable for the manufacture of these so-called soft detergents at a cost which rendered them able to compete with the older types which produce persistent foam.
The British firm found that it had to face severe competition from overseas. There are two reasons. Almost simultaneously with the establishment of the British firm, a new German firm set up in the same field, whose capacity, taken together with that of the existing German 263 producer, was many times in excess of the requirements of the German domestic market. I have been given some figures but I will not weary the House. In these circumstances, it was not unnatural that our German competitors should make exceptional efforts to capture the United Kingdom market, and should offer goods at prices cut to the lowest possible level—prices which the British manufacturers have to meet in order to compete in their own home market, and also in export markets in third countries.
Secondly, the British firm suffers a further disability in as much as it has higher costs than its foreign competitors, because it has to pay more for its raw materials. These are primarily natural animal and vegetable oils and fats which in this country are dutiable at rates of 10 per cent. to 15 per cent. ad valorem, giving very valuable preference to Commonwealth suppliers, whereas in other countries no import duties or very low ones are payable. In Western Germany the duty ranges from only 0.6 per cent. to 1.8 per cent. ad valorem.
There is a further factor which I think justifies this Order. That is that the British firm is located in a development district and it employs one-fifth of the male workers in the town concerned. Further, subsidiary occupations depend on the prosperity of the firm and its employees. The position is that a new industry has been established at considerable initiative and foresight on the part of a British firm and at considerable cost, to make a product for which there should be a growing demand throughout the world. If successful, it may be expected to make a valuable contribution to our balance of payments, both by exports and by import saving. This industry is socially desirable both because of the contribution it can make to eliminating pollution of rivers and maintaining a pure water supply, and also because it gives much-needed employment in a development district.
The enterprise was, however, threatened by great pressure from imports at particularly low prices, while at the same time the British firm had to overcome the initial obstacle of paying more for its raw materials than do foreign competitors. In those circumstances, after the most careful inquiry, we have concluded, 264 as I am sure the House will conclude, that the industry ought to be given tariff protection at a level which would offset the disadvantage of relatively high import duties on its raw materials. This has been done by the Order, which I commend to the House.
I have explained that the tariff is not bound under G.A.T.T. We have no international obligations against it. While it may appear inconsistent in a sense with our objective in the Kennedy Round to increase any tariff at this time, there must always be some exceptions, and we believe this tariff to be truly of an exceptional character in the interests of the domestic economy. The volume of trade involved, I am advised, is small, and as our exceptions list in the Kennedy Round is much the shortest of any of the main industrial countries, nobody can say that by this action we are impeding the widest possible settlement in the Kennedy Round. In all the circumstances, I commend the Order to the House.
§ 3.27 a.m.
§ Mr. John Hall (Wycombe)
The Minister will forgive me if I suggest that he had a very long brief for this time of night. I listened with interest to his lecture on chemical reactions, and if I had not already been here for 12 hours I should have been able to absorb the details of the chemical reactions more intelligently than has been the case.
He went to considerable length to justify this protective tariff—which is what it is—and to explain that it is only a little one and that it did not depart from our general attitude on the Kennedy Round and towards creating a wider Free Trade Area. But he will agree that all protective tariffs must increase the prices of finished products. The consumer will be asked to pay more as a result of a protective tariff which would not be imposed were it not necessary to keep out similar products at a lower price.
Although I concede that it is sometimes necessary to have a protective tariff to allow a developing industry to get off the ground, the Minister will agree that this method should be used sparingly and only when the production concerned could not be contemplated unless the protection were afforded. The Minister will 265 also agree that the protective tariff should not be maintained longer than is absolutely necessary to enable the industry to become competitive.
May I ask some specific questions? First, is the United Kingdom producer concerned a large or a small company? Is the amount which it has put into present production and is likely to have to put into continuing research, large in relation to its resources? If it is a small company and the amount is very large in relation to its total resources, and if it has to spend a great deal of its potential revenue on research, the case for protection is much stronger than if protection is being given to a very large company with adequate resources to carry it over the period until it can become more competitive with exporting countries. Is West Germany the sole or main competitor?
Is legislation likely to be produced by the Government to require detergent manufacturers to introduce the necessary chemicals which will prevent the foaming to which the Minister referred and which we all regret? We all know the problems which are created in sewage works and rivers by the foaming, in many cases the unnecessary foaming, of detergents which are poured into our sewers. Do the Government intend to introduce legislation which would make it essential for manufacturers to introduce chemicals to prevent foaming? If so, it will open up for the manufacturers of these chemicals a very large and profitable market. In those circumstances any reasonably sized firm in this country, with all the advantages of its inner lines of communication and the present protection of the 10 per cent. surcharge—which I have a faint suspicion may continue a little longer than at first expected—should be able to compete successfully in such a large potential market without being given a protective tariff. If there is only one producer in this country, which I understand is the case, is this likely to lead to a monopoly position which would draw it to the attention of the Monopolies Commission because it would be the only manufacturer of that product in this country?
§ 3.30 a.m.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
Before the Minister replies, may I add one more question? Over 266 the years I have had to read the Reports of the Cremer Committee, the Committee to which the Minister of State referred, on this problem of biological oxidation of detergents in sewage works. That Committee has studied the problem at considerable length. There have been experiments on the River Lea at Luton, which were nothing like as conclusive as the promoters had hoped, but one must now accept that the biological soft detergent is one which must be introduced in the interests of river and sewage purification.
Has the Minister's attention been drawn to the recent report, I think from America, which suggested that there were some undesirable by-product effects of the soft detergents in their effect on fish life in the rivers into which sewage is deposited? It seems to me that this is a development of which not all the implications have been fully studied, and here the Government are now proposing to give substantial tariff support to the manufacturer of this material in this country. Are the Government satisfied that all the technical aspects of this have been thoroughly explored? Has the Cremer Committee recommended that this tariff support should be given in the interests of the manufacture of fatty alcohols in this country?
§ Mr. Redhead
I agree entirely that powers of this kind should be used sparingly. It is only after the most careful consideration that we are satisfied that this is an exceptional case which warrants the proposed protective duty. There is no fear that this firm will in any sense become monopolistic in its operations under this minor increase in tariff protection. Indeed, the firm has given satisfactory assurances that it does not intend to increase its prices unnecessarily, but only to be competitive.
The firm is able to point to its experience with regard to other manufactures where prices have been substantially reduced. The firm is not a large one by the normal criterion of measuring firms of this character. It is a modest firm working in a development district, but it has committed considerable investment to the development of these fatty alcohols and, therefore, it is justified in receiving the measure of protection proposed.
§ Mr. John Hall
May I press the Minister on one point before he resumes his seat? I do not think he answered it, possibly due to an oversight.
Could he tell the House whether the amount of expenditure involved was a large proportion of the resources available to the company? I want to get down to the absorption of non-fatty alcohol as soon as possible and, therefore, I do not wish to detain the House any longer than necessary, but I should be grateful if I could have an answer to that question.
§ Mr. Redhead
I cannot give precise details, but I am advised that the amount is considerable. On the further point concerning general legislation to prevent the pollution of rivers, together with the question raised about fish, these are obviously subjects for the technical committee to which I have already referred.
§ Question put and agreed to.
That the Imports Duties (General) (No. 4) Order 1965 (S.I., 1965, No. 1170), dated 24th May, 1965, a copy of which was laid before this House on 28th May, be approved.