CUSTOMS AND EXCISE (ITALIAN REFRIGERATORS) (Hansard, 8 November 1968)

§ The Minister of State, Board of Trade (Mr. Edmund Dell)
I beg to move, That the Countervailing Duty Order 1968 (S.I., 1968, No. 1240), dated 2nd August 1968, a copy of which was laid before this House on 9th August, in the last Session of Parliament, be approved. The Order has been made under the Customs Duties (Dumping and Subsidies) Act, 1957, as amended by the Customs Duties (Dumping and Subsidies) Amendment Act, 1968. It imposes a countervailing duty of £1 4s. 3d. per cwt. on domestic, electrically-operated refrigerators with a storage capacity not exceeding 12 cubic feet originating in Italy. In accordance with normal practice, there is provision for relief under Section 3 of the 1957 Act in respect of any consignment on which it can be shown that the full subsidy has not been given.
This is the first occasion on which a countervailing, as opposed to an antidumping, duty has been imposed. However, this does not represent a sudden change in United Kingdom policy in these matters. There have been cases in the past where countervailing duties might well have been imposed but for the fact that satisfactory undertakings were received from the authorities concerned. The Italian authorities were given an opportunity to act similiarly in this case.
The duty countervails 36 lire per kilogramme of the Italian Customs rebate of 45 lire per kilo on exports of these goods to the United Kingdom. Nine lire per kilo was accepted as being a legitimate rebate. It is fairly common knowledge that a rebate of only 9 lire per kilo is given on Italian exports to Italy's partners in the European Economic Community. Our findings were reached after a seperate and quite independent investigation.
Before a countervailing duty could be imposed in this case, the Board of Trade had to be satisfied that subsidised goods had been or were being imported into the United Kingdom, that the subsidisation was causing or threatening material injury to a British industry, and that countervailing action would be in the 1256 national interest. In this case, an application under the 1957 Act, alleging dumping and/or subsidisation, with consequent material injury, was received from the British industry in August, 1967. On the evidence furnished to it, the Board of Trade was satisfied that a prima facie case had been made for an investigation, and a public announcement that the Board was considering the application was made on 8th September, 1967, in which representations from interested parties were invited.
After a detailed investigation, the Board announced on 11th January, 1968, that it was satisfied that imports of Italian refrigerators had not been dumped prior to the devaluation of the pound in November, 1967. However, the Board had still to complete its investigations into the position after devaluation and of that part of the application concerning subsidisation.
After further detailed investigations, my right hon. Friend the President of the Board of Trade was satisfied that, apart from a minor exception, imports of these goods from Italy had not been made at dumped prices either before or after devaluation. However, he concluded in the light of the evidence that no more than 9 lire per kilogramme of the Italian Customs rebate of 45 lire per kilogramme on exports of domestic electrically operated refrigerators to the United Kingdom was a justifiable rebate, and that the remaining 36 lire per kilogramme, equivalent to £1 4s. 3d. per cwt., constituted an export subsidy. Furthermore, my right hon. Friend was satisfied that this subsidy had caused, and threatened further, material injury to the domestic refrigerator industry in the United Kingdom, and that countervailing action against it would be in the national interest.
The House will not expect me to give detailed reasons for our findings in relation to dumping, subsidisation and material injury. They were based on financial and other information given to the Board in strict confidence. However, I can assure the House that the case was investigated most carefully, and that the decision on the question of subsidisation was based on a thorough study of extensive explanatory material and calculations supplied by the Italian authorities concerning the operation of, and justification for, their 45 lire per kilogramme export rebate.
1257 I must emphasise that this is in no way a protectionist measure, as has been suggested in certain overseas Press reports. It is a carefully considered and appropriately limited reaction to a payment which has been judged, after thorough investigation, to be an export subsidy and materially injurious to the British industry. Both the procedure followed in reaching a decision on this case and the decision itself were in conformity with Article VI of the G.A.T.T. and, in relation to the dumping aspects of the case, with the provisions of the International Anti-Dumping Code which was agreed as part of the Kennedy Round negotiations.
The countervailing duty on domestic, electrically operated refrigerators originating in Italy took effect from 10th August, 1968. For the reasons I have given, I hope that the House will approve the Order.

§ Mr. Peter Blaker (Blackpool, South)
I welcome the fact that the Government are prepared to make this Order, and the Minister's assurance that it is not a protectionist move. As I have already said this morning, as a nation we have a great interest in freer trade. It is also true that cheap imports are a benefit to the shopper. But these things are only true provided goods are not dumped or unfairly subsidised.
If Italian refrigerators come to this country without dumping or subsidies, it is up to the British manufacturer to complete, but we are entitled to insist that the competition which he has to face is fair, and it is the job of the Government to act as the policeman to see that the rules agreed in G.A.T.T. and laid down in British legislation are observed.
As the hon. Gentleman rightly said, this is the first Order under existing legislation to impose a countervailing, as opposed to an anti-dumping, duty. He said that one reason why it is not surprising that we have not had previous Orders of this kind is that in past cases satisfactory assurances were received from the exporting countries. I think that another reason is that the practice of export subsidisation has been growing fast only in recent years, but it has now become widespread not only in other parts of the world but also in the 1258 Common Market. We have seen its effect in a number of industries, not least in agriculture.
Therefore, this Order is of special significance. I noted the hon. Gentleman's statement that it does not mark any change in the Government's policy. But now that the Government have learned how to make such an Order, I hope that they will be quite firm in doing it again when circumstances justify it.
The Order originates in an application made by the British industry in 1967 before devaluation. The background to that application is a tremendous growth in imports to Britain of Italian refrigerators. I understand that until 1963 or 1964 they were hardly significant. In 1965 they amounted to £1,280,000, representing at that time still only 7 per cent. of home deliveries. By the first nine months of this year that figure had risen, in spite of devaluation intervening, to £4,600,000. It seems clear that the deliveries by British manufacturers, at least in 1966 and 1967, have suffered in consequence of these very rapidly rising imports.
How is it that the Italians are able to export their refrigerators to Britain at such very low prices? The mere fact that their prices are or have been low is not a proof of dumping or, indeed, of export subsidies. There is no doubt that the Italians are very efficient producers of refrigerators. This is not surprising because I understand that they have only three producers and that between them they have a production which is over twice as much in numbers as that of the United Kingdom. The biggest Italian producer alone produces 50 per cent. more refrigerators than the whole of the British industry.
So far as their prices are the result of efficient production, we have to compete; and it may be that the rationalisation which has taken place in British industry recently will help British manufacturers to do that in future.
Nevertheless, the British industry believes still that there has been dumping. I welcome the hon. Gentleman's assurance that the investigations conducted by his Department have been as thorough as they could possibly be.
1259 However, the British producers point to the development in France, where the French refrigerator manufacturing industry has been very badly damaged by Italian imports. I believe that the production of the French home industry is now only 40 per cent. of what it used to be. A similar evolution has occurred in Germany.
The British manufacturers believe also that the full effects of Italian competition has not yet been felt and that we are on the verge of a very well organised Italian promotion drive in the British market. They also point out that the Italian producers carried the effect of devaluation without increasing their prices. The British manufacturers have their suspicions still that, if the Italian product was not dumped before, it must be now.
I come now to the countervailing duty. The Minister of State explained that it amounts to £1 4s. 3d. per cwt. The effect is to add about 30s. to the cost of a £40 refrigerator in the British market. In this case I understand that the countervailing duty has already been reffected in the prices which are being asked for Italian refrigerators in Britain. Nevertheless, that still leaves a differential of £5 to £10 between the cost of an imported Italian refrigerator and the cost of the British product. I hope that in the absence of an anti-dumping duty but with the benfit of this countervailing duty the British manufacturers will now be able to compete.
I want to ask a question about the Italian customs rebate, part of which the duty is designed to set off. I understand that this rebate has been a bone of contention since it was introduced in the middle 1950s and that it was originally introduced as a form of rebate to exporters of manufactured goods for Customs duties paid by them on imported raw materials. However, some of the raw materials which were then imported are no longer imported. This may be why part of the rebate is no longer justified.
The hon. Gentleman pointed out that for exports to the Common Market countries the Italians have now reduced the rebate to 9 lire per kilo instead of 45 per kilo. Therefore, the action the Government are taking in this Order is parallel 1260 to the move made by the Italians in relation to their exports to the other Common Market countries.
The Minister of State said that the figure had been arrived at as a result of an independent investigation by his Department. I know that he cannot go into too much detail, for reasons of confidentiality, but it would be helpful to the House and to British industry if he were to explain what is the distinction—there must be a broad distinction—between the 9 lire of rebate which the Department regards as permissible to the Italian manufacturers and the 36 lire of rebate which, as reflected in the Order, are not permissible according to the international rules.
The manufacturers have complained in the past about a different form of rebate from which the Italian exporters have benefited, namely, the turnover tax rebate. The Order does not provide anything to offset that rebate. Consequently, the Government must think that this is permissible, and I should be grateful if the Minister of State will say why they do.
I have no doubt that the Minister of State will have explanations of these points, but it would be useful to the House and to the country to have them on the record.

§ Mr. Dell
The hon. Member for Blackpool, South (Mr. Blaker) spoke about the present position in the British refrigerator industry and emphasised the importance of that industry taking full advantage of the rationalisation that has recently been going on to make itself more efficient in face of international competition. I agree with the hon. Gentleman that the industry must be competitive and must not simply try to survive behind protective barriers.
A case like this, where there are accusations of dumping and subsidisation—accusations, in other words, that unfair competition is taking place—is examined by the Board of Trade once a prima facie case is made out and decisions are taken in the light of the facts and in the light of whether material injury is being done to the British industry.
This is what we did in this case. A prima facie application was made. We examined it thoroughly, both before and after devaluation. We concluded that the charge of dumping could not be sustained but that the charge of subsidisation could, 1261 to the extent I indicated earlier, be sustained and that countervailing duties should be introduced to assist the British industry to that extent, as we were also satisfied that material injury was being done to the British industry.
The hon. Member asked about the rebate arrangements that exist in Italy. The rebate of 45 lire with which we are here concerned was introduced by the Italian authorities in 1955 to ensure that their exporters of engineering goods did not suffer from the high prices of Italian steel and the high Italian customs duty then imposed on imported steel. In 1964 these arrangements were prolonged indefinitely at largely unchanged rates on the ground that they now represented a repayment on exports of various internal taxes paid in the course of manufacture of the various goods concerned plus a wide range of customs duties paid on imported materials, semi-manufactures and components. The rebate arrangements now cover some 400–500 different headings in the mechanical and electrical engineering sector.
However, in our judgment, the steel situation in Italy is very different from what it was in 1955. We were satisfied that the 9 lire represented a genuine rebate of taxes paid in the course of production. We were not satisfied in the case of the remaining 36 lire. On the other hand, the rebate of the Italian turn- 1262 over tax of 6.3 per cent. was judged to be justifiable on the basis of the facts revealed in the course of our investigation. Therefore, we came to the conclusion that it would not be legitimate to react against the Italian turnover tax but that it was legitimate to react against this particular export subsidy.
This is what we have done. It gives some help to the British refrigerator industry. However, I am sure that this will in no way stop the industry noting, to the extent necessary, the remarks of the hon. Member about achieving a very much greater efficiency in order to be thoroughly competitive with imported goods. I must say—and this is fair, I think—that we are very encouraged by the increase in its exports this year.