COTTON TEXTILE INDUSTRY (Hansard, 15 December 1966)

§ Mr. Arnold Gregory (Stockport, North)

In raising the question of the level of foreign imports, I introduce a matter that has long given concern and anxiety to the Lancashire cotton industry. I know that my right hon. Friend recognises this, and the way in which it challenges the very existence of our domestic textile industry; the way it attracts future investment, the possibilities of establishing long-term plans for the modernisation of the mills in Lancashire and Cheshire and, indeed, in providing a secure place and livelihood for the workers in the industry.

In a debate at such a late hour as this, one could get a depressed point of view of what the industry is like, so I will quote from an article in the Manchester Evening News on 6th December, on the part that the Lancashire cotton industry is playing. It is headed: Old King Cotton fights back. and it speaks of the cotton industry as being among the first of many other sophisticated and advanced industries. It says: The spectacular advances made by man-made fibres in recent years have tended to mask the importance of cotton as a textile fabric. While the synthetic fibre boffins have been hogging the headlines with one exciting breakthrough after another, Old King Cotton has been more concerned with picking himself up off the deck and fighting hard to get into tiptop shape for the battles ahead. Yet cotton, the product of one of the most widely cultivated plants in the world, is still by far and away the most important textile fabric of all. The statistics are interesting. We learn from the article that Cotton accounts for 62 per cent. of world consumption of all fibres. Man-made fibres can claim 29 per cent., and wool only 9 per cent. Dealing with the modern mill, the article says: The familiar outlines of the dark satanic mills now often conceal startling modern interiors equipped with all the resources that twentieth-century science and technology can provide. 846 Investment in new plant and machinery has risen from £8½ million in 1958—when the industry was twice its present size—to an annual rate of more than £25 million. This fact, coupled with extended shift working, has resulted in a remarkable increase in productivity—in general output per head in spinning and weaving is 30 per cent. higher than in 1959. Some firms have doubled and even trebled their productivity. Large and small firms throughout the industry are engaged in an intensive and continuous programme of re-equipment leading to radical changes in working methods and conditions. This is very encouraging.

I have a fairly good first-hand experience. I am, I believe, a third-generation member of my family to be employed within the industry. I hail from Salford, which is a cotton town by the Irwell. I spent a large part of my life in Manchester, which is world famed as "Cottonopolis", and I represent a part of Stockport, which still boasts many a mill even though many have not for a long time known a cotton bale. These facts probably justify talking cotton in this House so late at night, or so early in the morning, whichever way one looks at it.

Efforts to deal with the problem by new global quotas have given rise to great hopes in the industry. On 15th July the Statist said: Lancashire needs a bit more breathing space to put its house in order. This has been the struggle since the Cotton Board Act, 1959, and the first agreements with principal Asian suppliers of cheap cotton goods, with a strong emphasis for voluntary limits to be imposed on such shipments.

I shall not attempt to deal tonight with rationalisation and modernisation in the industry, bu one hopes that the plans announced by my right hon. Friend the President of the Board of Trade to establish a new Textile Council will be successful. Members on both sides of the House will give every support and encouragement to it and the industry to create a new era of expansion that will weld together and represent the interests of both cotton and man-made fibres. There was a detailed debate on Tuesday evening, when the Order was approved.

On 20th October, The Times gave this warning, which cannot be ignored: The present state of textile politics is that the Government has given warning that 847 the industry has only a temporary breathing space ''— again, we find that very challenging phrase, which is ever related to the doubtful condition of the industry's respiratory system— until 1970 to put its house in order behind the protective barrier of a global quota system which limits imports of textiles into Britain. The year 1970 might well see a General Election—with possible backward or forward adjustments as the situation demands. That point is not lost on The Times, which continued: Indeed, it is doubtful if the industry could survive in anything like its present shape if it had to withstand the full blast of low-cost imports from Commonwealth Asian textile producers. Already imports of textiles into Britain account for some 40 per cent of the home market compared with average 8 per cent imports penetration of European markets. That is an alarming state of affairs, and it naturally strikes fear into the hearts of those dependent for a living on the cotton industry. If we are to examine in some depth the problems caused by cheap imports, it is clear from the outset that quota arrangements are not designed to solve the problem of price as opposed to quantitative disruption.

My right hon. Friend will readily concede that anti-dumping legislation is notoriously difficult to invoke in cases of suspected dumping of imported textiles, since there is no provision against such disruption. Piecemeal erosion rather than wholesale destruction is not catered for within the anti-dumping legislation.

That kind of Measure is virtually impossible to invoke for the following reasons: first, the difficulty of establishing home market prices for comparable products in exporting countries, because of the variety of production that is a feature of the textile industry; secondly, the difficulty of establishing enough evidence to prove that sporadic imports of particular fabrics at low prices are injurious to the industry, even if they present a direct challenge to only a limited sector.

In more general terms, it must be pointed out to my right hon. Friend that disruption within the quota arrangements remains a possibility unless the categorisation arrangements take full account of Lancashire's production capacity, related as it must be to home demand in each of the sectors. An 848 obvious illustration of this point is pillow cottons, where 80 per cent. of the supply is now accounted for by imports. Apparently, that is now also the case with sheets and sheetings, where import prices are between 20 and 30 per cent. below Lancashire prices. It must be stressed that it is not possible to put sheeting looms to use for other kinds of production.

I suggest to my right hon. Friend that there is the strongest possible case for my right hon. Friend the President of the Board of Trade getting together with industry in relating in more positive terms category levels within quotas to our own productive capacity and home demand.

Even with the limited time available tonight, we should pay some attention to the shortcomings and loopholes provided under existing arrangements for a limited application to products containing 50 per cent. or more cotton only. Clearly, this creates an arbitrary distinction and obviously serves as an inducement to substitute minority cotton blends with man-made fibres, so as to avoid quota control. The effect of this has already been seen in a sudden influx of 55 per cent. rayon, 45 per cent. cotton blends from the Far East. I suggest that existing arrangements do not touch or contain this problem in the faintest possible way.

It is also the impression that the import surcharge, that ended without a hint of drama on 30th November, 1966, somewhat aided the cotton textile industry, certainly in household textiles. Yet I think it is fair to say that the fall in imports of cotton textiles in 1965 was not due entirely to the import surcharge as such. Indeed, the fact that existing quotas were not filled is probably due as much to uncertainty over quota arrangements at the end of 1965, and in particular to the decision of my right hon. Friend the President of the Board of Trade in not allowing a carry-over in 1966.

To be more precise on this, the impression to be gathered is that the surcharge did have a temporary marked effect on prices quoted, but prices have in fact been reverting to the pre-surcharge levels since mid-1965, very probably in anticipation of its removal, as I have mentioned, in November of this year. I suggest to my right hon. Friend that all this gives more 849 than a strong hint of the need for a permanent, as against a temporary, duty in combination with quota control which would have a more positive and lasting effect in helping to control prices. We are all aware that a tariff on cotton imports is by no means a new suggestion, in whatever form it might take, even as a levy returnable as Government aid to the qualifying exporting country concerned.

At the Cotton Board Conference at Harrogate in October 1965 the President of the Board of Trade said this: There are very natural fears that, even though global quota is enforced, price disruption may occur, and investment in the process be impeded. This issue also is being studied now by the Board of Trade, in the light of practical proposals which the Cotton Board have made to me. I cannot here this morning express a final view on what can he done; but I hope to do so in the very near future. I can add, however, that having committed ourselves to the controls I have described, we cannot of course allow them to be undermined by subterfuge or evasions of any kind". That speech and the paragraph I have just quoted was taken very seriously by the delegates at the conference. I know the atmosphere, because I was present at Harrogate for most of the time at the conference. Indeed, the speech was given wide publicity throughout the land and an almost embarrassingly enthusiastic reception in the Press. For example, The Times, in posing the question, "Too much Protection?" on 19th October, 1965, described the speech of the President of the Board of Trade as: Mr. Jay, the President of the Board of Trade is the textile industry's darling after the Cotton Board Conference". No one will really doubt that after such a grand performance.

Mr. John Horam in the Financial Times of 21st October, 1965, wrote: Mr. Jay's weekend speech has given those attending the Cotton Board Conference plenty to think about. Cheap imports have long been Lancashire's sore, and the path to be regularised and reasonable measure of protection has been strewn with disappointments, half-measures and broken promises. But now the present Government has accepted the main plank in the industry's case and negotiations with the affected countries are in full spate. All will he over in a matter of months—but Lancashire is avid to know its fate". Those are strong words, showing considerable enthusiasm, but I realise that the Minister is not entirely responsible for what is written in the Press. What 850 is clear is that the industry, workers and management, after a very tough time, took my right hon. Friend's words very seriously as, in the final analysis, an undertaking by the Government that they would give serious study to the problem of price disruption and measures to deal with it.

It must be said, alas, that any practical and constructive results are far from apparent. Can my right hon. Friend help to clear the air tonight and give us a real and effective guarantee that these undertakings will be carried out, and when? In his winding-up speech at the end of the economic affairs debate on 30th November, 1966, the President of the Board of Trade told us that, In the case of textiles, the Cotton Board is now carrying out a major survey of productivity in both the cotton and man-made fibre industries, and will examine in depth methods of improving productivity in the widest sense. I see this as one part of the programme for modernising the textile industries, together with the special import restriction scheme which is to run, as the House knows, until 1970."—[OFFICIAL REPORT, 30th November, 1966; Vol. 737, c. 584.] We all look forward to the result of the survey, and we are encouraged that the Cotton Board will study in depth methods of improving productivity within the industry. All this is most welcome. We might well recall the words of Sir Frank Kearton, F.R.S., then Mr. G. F. Kearton, chairman of Courtaulds Limited, at the same Harrogate Conference: It is time the Government asked itself how much longer it can carry out its oft-declared and proclaimed intentions to promote economic growth, while exposing a major industry to the effect of lopsided free trade. In no other country in the world is our industry treated in the way which has grown up here. The question becomes serious for the nation when it is recognised that a new integrated 'cotton' mill would efficiently utilise £6,000 per person employed, and the labour content of net output would fall from 68 per cent. shown in the 1958 census to under 40 per cent. This figure of under 40 per cent. is much better than the average for all manufacturing industry. Again, challenging words, and they are still in the main as pertinent today as when they were uttered at Harrogate. They complete the scene in which the President of the Board of Trade himself, as I have said, addressed the conference on the following day, and his own words were then shaped to meet the situation existing within the industry.

851 The problem of price disruption is at the core of things. The assurances which were given were taken very seriously. It is essential that policies should not—to use my right hon. Friend's words—"be undermined by subterfuges or evasions of any kind". I put these questions, therefore, to my right hon. Friend the Minister of State. First, has a study group been set up to consider the effects of price disruption and measures to deal with it? Second, how soon will there be a report to the House and industry in general on action taken as a result of the Government's undertaking to study this important question? Third, has the idea of price surveillance related to vetting of import licences been considered, and what conclusions have been drawn?

These are important questions deserving an answer, and I hope that the Minister of State will have some encouraging news tonight.

§ The Minister of State, Board of Trade (Mr. George Darling)

As my hon. Friend the Member for Stockport, North (Mr. Gregory) has said, this is the second debate on the cotton industry which we have had this week. If I may say so in parentheses, I agree with some remarks which were made earlier and hope that we can get to morning sittings—sittings in what we normally think of as the morning and not this time of night—as quickly as possible.

I am glad that my hon. Friend has drawn attention to the encouraging developments within the cotton industry in the last few years. It is quite wrong in Lancashire or outside it to be gloomy about the present situation, or about the future prospects of the industry. I think that my hon. Friend will agree that quite a number of speeches and remarks now being made about the temporary turn down in trade, which affects not only the cotton industry, but many other industries, are far too gloomy and do not present a proper picture of the industry.

My hon. Friend has drawn attention to what The Times has called the breathing space which the industry has 852 —until 1970—to put its house in order. There is no doubt that the progress which has already been made in modernisation and in concentrating production in the best equipped mills is certainly doing the industry a great deal of good. It is perfectly true that as production per unit of machinery is increased, the number of operatives employed in the industry is reduced, but that, of course, is what modernisation means—if there is bigger output per man, fewer people are required. Not enough attention is paid to this side of the picture.

Right up until July of this year, in many parts of Lancashire there was an actual shortage of labour in the cotton industry and even at present in North-East Lancashire, which, according to certain speeches, is almost a depressed area, the level of unemployment is still well below the national average. In these circumstances, we can ask those engaged in the industry to be far more encouraging and less gloomy in their remarks.

My hon. Friend quite properly voiced the fears which are held in some quarters in the industry about what will or might happen when the present quota import arrangements come to an end. He suggested—anyhow, I think that he did; he certainly did it in a subtle manner—that there might be a tariff arrangement of some kind at the end of this quota arrangement period.

Much has been said about price dis ruption and the need to set up some kind of body to keep under review the level of import prices—not only the quantity, but the cheapness of imports, a point which has been made consistently—and to tell the Board of Trade when antidumping action is required where there appears to be evidence of price disruption. Although the Board of Trade has had a number of complaints about prices charged for imports, I must stress that there is very little evidence of price disruption. One can complain about low-priced imports coming into this country.

It was suggested, not by my hon. Friend, but in the debate on Tuesday, that we should do something about low-priced imports from countries where the wages of cotton operatives were lower than in this country. This is a very dangerous argument. Our biggest export market is North America. If we were 853 to say, as a matter of principle for all countries to follow, that there should be a limitation or complete refusal of imports from countries where wage levels were lower than the importing country, as the wage levels of the United States and Canada, generally speaking, are about three times higher than those in this country, we would be in appalling difficulties. Of course, we could not help the developing countries as we would wish if we worked on that basis. I am sure that my hon. Friend is not one of those who wish to attack the low-priced imports problem in that way.

What we are concerned about and the only thing about which we can be concerned is evidence of price disruption which comes from dumping. When dealing with dumping one has to prove two things—first, that the prices of the goods coming into this country are below the prices charged in the country of origin, and, secondly, that these low-priced imports do material damage to the appropriate industry in this country.

We are willing always to examine any evidence of price disruption caused by dumping. Under the international rules we have to work to, we can take action about dumping, but we must have evidence. We have no legal authority either under the international rules or in our own legislation or anything else to take action unless we have the evidence. I am not saying we need proof. That is something to be discussed when taking the appropriate measures. But it is evidence that we require. I repeat that we have very little evidence of price disruption due to dumping, in the way I have described it—which is the only way it can he described—of cotton goods in this country.

My hon. Friend referred to the speech my right hon. Friend made in Harrogate in October last year, in which he said that the problem of price disruption was being studied. I have to tell my hon. Friend that the studies we undertook and which we finished some time ago have shown that there is no practicable and 854 internationally acceptable solution to the problem. It has been suggested that we might have Government purchasing through a commission which would adjust prices to suit our home market, particularly in the form of categorisation, or that we might have an imposition of an import levy that would automatically be imposed if the prices came down to too low a level, thereby having the same effect as dumping, or that we could exclude imports which fell below a certain price. Every single one of these suggestions is contrary to G.A.T.T. and, because we gain from sticking to the international rules over the whole range of our industries, we obviously could not undertake to introduce measures contrary to our international obligations.

There is no doubt that imports from developing countries are cheap. That is why they are sold here. It is equally true that many of our exports to the U.S. and Canada and other countries could be considered cheap in the same way, and we do not want to break our international obligations so that we would encourage other countries to take that same kind of action.

We are always willing to examine evidence of price disruption. I would say this to my hon. Friend. The modernisation of the Lancashire cotton industry that has been going on, the setting up of the Textile Council which will bring in the man-made fibres industry to this new association and other measures which will be put in train, will, I am convinced give the textile industry, as we must now know it, a very good future because it will be capital intensive and thoroughly modernised. It is going to be capable not only of satisfying our home market but, I am convinced, of establishing a very good export trade as well. I am convinced also that, as time goes on, we will be able to deal with foreign competition in a most satisfactory way.