ANTI-DUMPING DUTY (STEARINE) (Hansard, 3 May 1967)

§ The Minister of State, Board of Trade (Mr. George Darling)
I beg to move, That the Anti-Dumping Duty Order, 1967, (S.I., 1967, No. 553), dated 6th April, 1967, a copy of which was laid before this House on 13 th April, be approved. This Order hase been made under the Customs Duties (Dumping and Subsidies) Act, 1957. It imposes anti-dumping duties of £15 per ton on stearine originating in Australia and of £9 7s. a ton on stearine originating in Belgium. Hon. Members will know that stearine is a waxlike mixture of fatty acids made mainly from tallow and is used in the compounding of rubber and in toilet preparations, polishes, and lubricating oils and greases. The House will also know that before duties can be imposed under this Act the Board of Trade must be satisfied not only that dumping is taking place but also that this is causing or threatening material injury to a British industry and that anti-dumping action would be in the national interest.
686 In this case the application was made by the Association of Fatty Acid Distillers whose members manufacture all the stearine produced in Great Britain. According to the normal procedure a public announcement was made on 18th November last year inviting representations from interested parties. After the investigation and careful consideration of the evidence and representations received, my right hon. Friend was satisfied that imports of stearine originating in Australia and Belgium were dumped. He was also satisfied that these dumped imports had caused material injury to the British industry and threatened further injury, and that the imposition of anti-dumping duties would be in the national interest.
Hon. Members will probably appreciate that I cannot give detailed reasons for our findings, because these were based on commercial and financial information given to the Board of Trade in the strictest confidence, but I can assure the House that we have made very full investigations, including the costs and returns of the British producers, and we are satisfied that the dumped imports had severely depressed British prices, with the result that the returns obtained by the British producers have been drastically reduced.
The duties came into force on 14th April this year and in announcing the decision the Board of Trade gave the usual warning that if imports of stearine originating in other countries were found to be dumped they, too, would be liable to this anti-dumping action.
I hope that the House will approve the Order.

§ Mr. Patrick Jenkin (Wanstead and Woodford)
I am grateful to the Minister of State for the explanation he has given of this Order. Anti-dumping Orders are not so frequent that it could be regarded as a work of supererogation if I were to say, in two or three sentences, that my hon. Friends and I support the need for anti-dumping protection. Where manufacturers can sell their products in different markets they can cut their prices in one without necessarily affecting the price levels in another. If we were in a Common Market this would not apply; that is one of the advantages of a Common Market.
687 This temptation is enormously enhanced in capital-intensive industries, where the difference between marginal costs and full absorption costs is great and it may still be profitable to keep plant operating at full capacity while selling at a price that barely covers the marginal cost of manufacture. If a firm is suffering at the same time from over-capacity the temptation to try to cover some part of the overheads by selling at dumped prices is very strong. No industry has suffered more than the chemical industry in this respect.
Tonight we are considering a branch of the chemical industry—oleo-chemicals, and the right hon. Gentleman has given the House a description of stearine. I armed myself with particulars of the chemical composition of stearine, but I will spare the House the torture of having to listen to them.
However, although we accept in general the need for anti-dumping protection we should always consider an anti-dumping order with a critical eye. We have to consider the effect it will have on the users of the material in question. The right hon. Gentleman has indicated the wide variety of industries to which stearine goes. Stearine is the solid component of the distillation of fats. It is important to realise that this goes to a wide variety of consumer industries, making products which reach retail shops in common forms. Stearine goes into pharmaceuticals, confectionery, shaving soaps and creams, textile products, polishes, linoleum, and a wide variety of other articles. Therefore, if the Order puts up the price, we must be satisfied that the consequent effect is justified.
Competition from imports can always be regarded as a check on price rings and inefficiency. For some years, the members of the Association of Fatty Acid Distillers were operating a price ring which was effectively broken by imports, particularly from Belgium and Australia. The House would welcome an assurance that the duty will not restore the original position. Of course, the Restrictive Trade Practices Act makes any formal price ring registerable and something which has to be justified, but that can be circumvented. We want to be satisfied that the right hon. Gentleman has adequate 688 undertakings from the domestic industry that competition will continue.6 Another reasonable complaint which users of stearine might have is that the price paid by their competitors overseas, particularly on the Continent are lower than the prices which the duty will produce in this country. How much higher will United Kingdom prices be, and to what extent will this be a disadvantage to the users? Why should they be higher? Does the British industry operate in too small units or have difficulty getting raw materials at competitive prices? Why, in a modern technological industry, containing some of the foremost chemical firms, can they make stearine economically only at a higher price than some of their competitors?
Another worry of consumers is the question of competing in export markets. It is common in many spheres in the chemical industry for supplies of intermediates to be given at special prices for what are called indirect exports. Stearine has never had this treatment, and if the prices go up again, those making the finished products believe that they will again be at a disadvantage. If they get their anti-dumping protection, will the manufacturers offer special prices for indirect exports?
The 1957 Act gives the Board of Trade power to allow drawback for antidumping duty. Does an Order exist or is it intended to pass one allowing drawback in this case on stearine imports paying the duty in the case of products which have been exported? Is the right hon. Gentleman satisfied that United Kingdom capacity will meet the demand? It has been suggested that imports have been necessary because United Kingdom manufacturers have not installed enough capacity, and the House would welcome an assurance on that.
What is the reason for the figures for anti-dumping in the Schedule—£15 per ton on stearine from Australia and £9 7s. for that from Belgium? The difference between export and domestic prices, which is the main justification for the Order, is about £30 a ton in Belgium. The domestic price ranges between £102 and £139 and the export price between £74 and £109. In Australia, the difference is between £50 and £53. Clearly some of this is made up by the normal import duties, but the margin is very 689 much greater than £5 13s., which is the difference between the duties charged on Australia stearine and Belgian stearine respectively by the Order. Is the duty being charged enough in the case of Australian stearine, bearing in mind that there was a £50 difference between their domestic and their export prices?
Could the Minister of State confirm that the Order is legal. The 1957 Act does not appear to envisage that an Order under the Act could cover material from two different sources or two different materials under the same Order. Section 2 says: The power which the Board of Trade may exercise under this Act is a power by order to impose on goods of a description specified in the order a duty of customs chargeable on the import of the goods … Here we have goods of two different descriptions. This seems to require an assurance from the Minister of State that the matter has been looked into to see if the Order is perfectly valid.
The Minister has satisfied me that on grounds of material injury the Order appears prima facie to be justified, but it would be a pity if someone were able to establish that the Order was ultra vires and invalid.

§ Mr. Darling
Dealing with the last question first, the Order, of course, has gone through the usual procedure of being examined very carefully indeed by the legal experts whose job it is to make sure that any Orders any Government produce are well within the terms of the Act from which they spring. I do not think that I need to ask whether in this case the process of examination has been properly carried out. I am quite sure that no Order could possibly come forward through the machine of examination in this kind of case and any mistake be made. No doubt the question asked by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) will be passed on to the legal pundits concerned and they might have another look at it. I am absolutely sure that the wording of the Act, which says "goods of a description "would apply to cases of some other description coming from more than one source. If there is evidence of further dumping from other countries this Order will be extended to cover those countries.
The hon. Member asked whether there was sufficient capacity in the United King- 690 dom to supply all the needs of users of stearine if as a result of the anti-dumping duty we are concerned with imports are reduced. I am assured that the British industry's capacity is more than enough to supply the entire British market without any imports at all.
On the question of the level of duties, the situation which we had to face was that the stearine we are applying the duty to which came from Australia came from different sources. In one case the degree of dumping amounted to £15 a ton and in the other to £44 a ton. After consultation with the trade and the Australian authorities, who of course admitted the dumping, we decided that the best figure to apply was not the higher but the lower one. There were good technical reasons for that. The examination we made of the Belgian situation was that the dumping margin varied and £9 7s. 3d. was the high figure. But here again, because of the amount which was coming from different sources, it was felt that the figure which we put in the Order was the right one to apply in the case of dumped imports from Belgium.
The hon. Gentleman asked whether competition would continue in this industry and whether, with this further protection against imports, we could be certain that the manufacturers in this country would not get together and have a price ring, as had apparently, been done, according to the hon. Gentleman, in the past. Not only would the Restrictive Trade Practices Act take care of that, but I can assure the hon. Gentleman, from what I have seen of the discussions which have gone on with the firms concerned, that any suggestion of their failing to compete with one another or that they might form a price ring is completely out of court.
The hon. Gentleman asked also whether home prices were higher than the manufacturing prices—apart from dumping—of our main overseas competitors. I understand that our home producers can compete abroad, but this is a question into which I should have to go a little more carefully. I do not think that there is any question here of inefficiency or incompetence on the part of the British manufacturers, but whether there are natural conditions which for one reason or another give an advantage to some manufacturers overseas is a 691 question I should have to look into. There is no great difficulty here in assuring ourselves that the home producers will be somewhere near, if not actually on, the same level of prices as their overseas competitors.
Next, the hon. Gentleman asked what would be the effect on the customers. I am told that, although the anti-dumping duties here provided will lead to some increase in price by British manufacturers—that is the purpose of it, to get rid of the depression of their industry caused by the dumped prices—the amount of raw material from this industry which goes into the manufactured products of the customers is such that we need not expect any marked difference in the prices of the finished products. As the hon. Gentleman knows, taking the prices of all the raw materials which go into the range of finished products we have been considering, the trend is downwards, and this trend will, we think, more than balance the increase in prices which will come from this one material, stearine.
I should like to have notice of his question about a draw-back Order. I do not think that there is a draw-back Order in operation, and I do not think that there is any arrangement for prices to be indicated for indirect exports. But I shall have to look into the point and let the hon. Gentleman know.