HC Deb 02 February 1970 vol 795 cc144-58

8.45 p.m.

Mr. Raymond Fletcher (Ilkeston)

This has been a day of very high productivity for the Board of Trade. Two Bills and what I hope will be a major statement of trade policy constitute a memorable hat trick for my right hon. Friend.

I have raised this subject in no sense as a critic of the Board of Trade's policy in relation to trade with Japan. As my right hon. Friend will undoubtedly point out, there is a success story to be told. I believe in applying to politics and trade the good old military maxim, "Always reinforce success". What I shall be asking for is a reinforcement of what I believe to have been a successful policy.

In some respects, I am a pupil addressing his master, because, in the happy association which I had with my right hon. Friend before it was disrupted by circumstances beyond my control, he encouraged me to think about Japan, to study the Japanese economy and, eventually, to go to Japan, to follow in his footsteps. I went, and I was astonished. One sees in Japan—one can almost feel it—a rate of economic growth which is unprecedented, I believe, in world economic history. It is in this context that I want to present my arguments.

Economic growth can be charted in many different ways, and all statistics are dull, but I will cite one calculation from the Economic Planning Agency in Japan which gives some idea of where this economy is going and the fantastic rate at which it is expanding. It is calculated by that agency that, in 1985, the Japanese economy will have expanded by approximately four times over 1965 in terms of the gross national product. If this target is hit, and most Japanese economic targets are hit, it will mean that, by 1985, the Japanese economy will have multiplied tenfold in half a century. I am not an economist, although we all tend to be amateur economists in this House, but that, I think, is a rate of growth absolutely unprecedented in economic history.

When we travel to foreign countries, there is forced upon us a secondary rôle in addition to those of politician and journalist which we naturally assume at first. As citizens of this country, we must look at these other countries through the eyes of business men. This economic growth is actually creating problems, some of them very familiar to us in this House—problems of pollution and the whole range of problems which we encompass in the generic term, "the environmental problem", but it will also create serious gaps in the Japanese economic structure.

New needs will be created which have to be satisfied by imports, and, to the business man, one country's need is our country's trading opportunity. This means that we can take advantage of two factors; first, the obvious desire of the Japanese Government to improve the industrial infrastructure of that country—the road network and so on—and, secondly, the visible and marked rise in pro-British feeling in Japan, as exemplified by the enormous success of the recent British Week. The success of that Week continues to reverberate in Japan.

In addition, the potential for exports to Japan will undoubtedly be enormously increased by the Japanese Government having set a course towards trade and capital liberalisation. Japan is not only one of the world's major trading nations but is rapidly becoming one of the financial centres of the world. It has become in recent years a major capital exporter.

In Japan this has created a problem—we can help to meet it by our exports—of labour shortage. There is a growing shortage of skilled labour in Japan and this has inevitably driven more and more Japanese industrialists towards automation as a solution. This opens up widening markets for automated equipment.

I discovered when I was there—what I observed was subsequently confirmed by officials of the Japanese External Trade Organisation, a remarkably efficient body which was modelled on a comparable organisation in this country; as has so often been the case in Japanese history, the model has been outclassed by what was modelled on it—that there will be a growing market for, for example, numerically controlled machine tools and perhaps an even vaster market for packaging and food processing machinery, ship loading equipment and textile machinery. We can make these machines, and the Japanese not only need them now but will need them more in future. As I said, their need is our trade opportunity.

Tokyo is probably the most fantastic city on the face of the earth. It changes almost weekly and it suffers from all the problems of the twentieth century in such a highly concentrated form that it is almost frightening to contemplate those problems. I was struck by the many areas in that country's economy that are being opened up as the Japanese Government's new policy of paying more attention to domestic problems begins to emerge. It is obvious, for example, that anti-pollution equipment will be in increasing demand. The same can be said of chemical engineering equipment and medical electronics.

A vast expansion in Japan's medical services is taking place. Scientific instrumentation is an obvious top priority for any industralist who wants to expand into the Japanese market. Also, we must not forget that Japan has an atomic energy industry which is totally committed, and is likely to remain so if the present state of public opinion prevails, to peaceful purposes. We must try to fit ourselves into their plans and export the sort of goods they need now and will continue to need.

It was pointed out to me that both agricultural machinery and office equipment will be required in increasing quantities as the Japanese economy continues to expand. Here again, as my right hon. Friend knows far better than anyone else, we can supply the goods. We have the goods, and we must be ready to supply even more of them.

One thing that was pointed out to me in Tokyo—and, again, this has been confirmed by the Japanese External Trade Organisation here in London—is that there is a growing international market in what the Americans call know-how: organisational skills; technical knowledge; all the arts of management. Here, we can get co-operation. Strange as it may seem when we contemplate the fantastic economic growth over there and feel that there is absolutely nothing we can contribute to it, there is in Japan a tremendous respect for and increasing knowledge of British managerial know-how. I believe that in engineering consultancy there is great scope for the expansion of invisible exports.

There is another respect in which opportunities exist and which ought to be seized. The Japanese have in recent years gone in for associations with outside firms, and some of our larger industrial concerns already have links with corresponding Japanese concerns. For instance, Imperial Chemical Industries, Dunlop and Shell are involved in joint enterprises with Japanese enterprises. This is a trend of our times, and it is a very healthy trend. I believe that this kind of association, this kind of expansion of trade, is possibly the most creative force operating in the world today, because it is axiomatic that whatever one may do with a good customer one never dreams of engaging in hostilities against him. Therefore, economics help politics, and both help to keep the peace of the world.

It seems to me, however, that while opportunities for joint ventures are being seized by the big firms, they are not being seized to the same extent by our medium-sized firms. I should like my right hon. Friend to tell us what the Board of Trade's attitude is towards this trend; and what is being done to encourage medium-sized firms to achieve the same link-up with Japanese enterprise that is becoming fairly common with the industrial giants here, in America and on the Continent of Europe.

Obviously, since I am calling for an expansion of exports to Japan and since I believe a vast expansion is possible, I have to take into account the other side of the trade balance, because trade is a two-way process. I do not intend to bore the House with figures—my right hon. Friend will no doubt quote those which are relevant—but whilst we have remarkably increased our exports to Japan there has not been the same rate of increase in our imports from Japan. This unbalanced situation must at some time be corrected.

I notice from the statistics that I have available, though I shall not quote them, that where one expects, as we have seen from European experience, trade between industrialised nations in machinery to grow, there has been a lack. I wonder what obstacles still exist that are likely to be moved in the talks on trade liberalisation which my right hon. Friend has already had, and which all of us expect to continue this year? What are those obstacles? To what extent can they be removed? At what rate are they being removed?

It is important to stress a factor which I have mentioned earlier. It is something which strikes every British visitor to Japan these days. This is the rising tide of pro-British feeling. British Week, which I think has been the most successful of such enterprises, undoubtedly made a contribution. But British Week in itself was merely part of a larger process and I think that this process will also be accelerated and magnified by the undoubted success I expect from the British contribution to "Expo 1970" in Osaka. Having seen the British pavilion, I pay sincere tribute to the people who designed it and to those who erected it. It is a magnificent visual display of everything that is best in this country and everything of the best that British industry can do.

This rising tide of pro-British feeling is there. It is something we can take advantage of. It is best typified by the simple fact that anyone who goes to the headquarters of Jetro, the external trade organisation in Tokyo, will see a familiar sight from the front window of the main office. They will see a British pub, the King's Head Tavern. If they look a bit to the left, they will see the American Embassy, which does not look very much like an American Embassy, but the first thing they will see is the King's Head Tavern. In other words, British business men can feel perfectly at home when discussing business in the appropriate section of the Japanese Ministry of Trade—which incidentally, is rather wider than our own Board of Trade, even wider than our Ministry of Technology, since it is the Ministry of Trade and Industry.

I believe in a far closer association between our two countries than we have had so far and that rather pernicious myths about each country are fully propagated in the other. We are influenced by too many artistic films and tend to think that the Seven Samurai still ride through Japan and that the 47 Ronin still commit suicide every day. We have also believed too long that Japanese labour is sweated labour. I assure the House that it is not.

If my word for that is not enough, I point out to the House that I was in Japan at the same time as Mr. Clive Jenkins, who can detect exploitation with that sensitive nose of his at 3,000 miles distance. He confirmed my observations that in Japanese industry wages and living standards are rising very rapidly. In the Matsushita works—a remarkable works in many ways—trade union leaders told me that they had a programme to double real wages over five years and were bang on target. The Matsushita works, which is sometimes smiled at over here because the founder is regarded as a paternalistic kind of employer—I must say that I liked him very much—there has been equal pay since 1966. We plan to introduce it in five or six years' time. That is another myth about Japan. Undoubtedly, myths about this country are running about loose in Japan.

So, the closer we are in trade the more these myths will be demolished. Japan and Britain, are in a sense, in comparable situations, for we are both off-shire islands struggling to find a new rôle for ourselves in a rapidly changing world, and the more this association grows the better it will be for the citizens of both countries. But the key to a better and healthier situation is trade, and I ask my right hon. Friend, who has a very good record in this respect, to keep improving on that record—improving, improving, and improving all the time.

9.5 p.m.

Mr. Julian Ridsdale (Harwich)

I congratulate the hon. Member for Ilkeston (Mr. Raymond Fletcher) on raising this very important subject. I should like to say how glad I am that the President of the Board of Trade himself is to reply to the debate. I know that the right hon. Gentleman has taken a very keen interest in expanding British trade with Japan and has paid a personal visit to Japan as a Minister, like I did when I was a Minister.

I felt tempted to talk, as the hon. Member for Ilkeston did, about the success of the Matsushita Electrical Company, which I visited, in Japan. I thought that he might advocate one import from that company which I should like to see, which is its management-employee relationship. As the hon. Gentleman and the President of the Board of Trade know, having studied trade union organisation in Japan, the negotiation there is done on a plant basis. Possibly one of the reasons for Japanese expansion is that trade union negotiation is done on a plant basis. However, I should be out of order if I were to continue to talk on trade union relations in Japan.

The story of our trading relations with Japan is a success story. What is so good about it is that it is not a success story that has happened overnight. It is a continuing story which had gradually built up, and I am glad that there are no party differences in the House about that. Since 1960, when I went to Japan and helped to form the Anglo-Japanese Parliamentary Group, the background of political relations with Japan has improved all the time. Obviously we want to do everything we can to improve it still further, because it is the background to trade expansion. However, the expansion in trade with Japan has been steady and good. I cannot give exact figures, and they would not mean anything if I could, but trade with Japan has expanded from about £50 million a year to the present figure of about £120 million a year. It is a balanced trade between the two countries.

I would give one warning about our trading relations with Japan. As the President of the Board of Trade and the hon. Member for Ilkeston know, the Japanese economy is becoming very sophisticated. We are no longer trading in textiles and iron and steel products and in the manufactures of heavy and old industries. We are now, rightly, at a new stage. We are in the age of computers. We are in the midst of a technical revolution. Japan's trade is expanding. Japan's investment in her industry is expanding. This is why she can achieve growth in her economy. The amount of capital investment which we made in manufacturing industry in this country last year was about £1,200 million. Japan's investment is double that amount.

The hon. Member for Ilkeston said that Japan was short of skilled labour. He should have pointed out that the amount of skilled labour in Japan at present is much greater than the amount in this country. When we talk about increasing our trade with Japan in the future, let us look at our own house and realise that we shall be trading with a sophisticated country which will have an expanding market and which, as the hon. Member for Ilkeston said, may be the financial centre of Asia, particularly the Orient. That is why I welcome the invisible links which have been developed between the City of London and Tokyo. It is vital that we continue to develop them.

Japan is obviously a springboard for our own financial interests and I hope that we shall long continue our good relations with Japan, so that we have a trade and economic ally which will help us to expand our trade not only with Japan but with other Asian countries. That is the future I foresee.

The hon. Member for Ilkeston referred to the opportunity of small firms to trade with Japan. I can speak only of some small firms in my own constituency. One is Vacumatic. I have been impressed by how its managing director has been out to Japan and by how many of the goods made in Harwich by that firm are exported to Japan. Another small firm, which makes marine engines, exports some to Japan. Not everything is right, but it is encouraging to see how small and medium firms are becoming export minded and outward looking.

As one who has always taken a great interest in Anglo-Japanese relations and Anglo-Japanese trade, I should like not only to congratulate the hon. Member for Ilkeston on raising this subject, but to congratulate the many others who worked so hard in British Week in Osaka and who are now working for the Osaka Fair. Anyone who, like the hon. Gentleman, has seen what we are doing cannot help but be impressed. We are doing our best to continue and build on the good relations which we now have.

I should like to make an important comparison.

Our trade with Japan is about £120 million a year, balanced equally between imports and exports. Our exports to the Soviet Union are £120 million a year. Unfortunately, our imports from the Soviet Union are not nearly so balanced, and at present reach more than twice our exports. I am glad that that is not happening with our trade with Japan, and I hope that in the next few years we shall have the sort of expansion we have had in the last few years.

9.13 p.m.

The President of the Board of Trade (Mr. Roy Mason)

As my hon. Friend the Member for Ilkeston (Mr. Raymond Fletcher) so rightly said, I visited Japan twice and took a great deal of interest in Japan prior to becoming a Minister. I have visited Japan as a Minister since when I was responsible for the shipbuilding industry.

I sensed what my hon. Friend the Member for Ilkeston mentioned in his speech—the seething economic activity in the country. Anybody who goes from the Western world is bound to sense it, almost on arrival. Secondly, I have read reports of my hon. Friend's visit. It is always pleasing and informative to the House to listen to a fresh, objective analysis of our efforts in the Japanese market and to hear about the possibilities of further trade. I should also like to thank him for informing me of some of the points which he intended to raise.

I shall not go into all the points made by the hon. Member for Harwich (Mr. Ridsdale), especially on man-management relations. I particularly studied that subject when I looked at the Japanese shipbuilding industry. The Japanese have a good industrial relations atmosphere and one of their good techniques is to have a strong middle management. That is a stratum in management which we do not have in Britain, but it assists the Japanese considerably.

The continuing expansion of our exports to Japan, while gratifying, is not a sign that we can afford to slacken our efforts in this market. During the last decade, Japan's gross national product has increased at an average rate of more than 10 per cent. a year. It has become the second highest G.N.P. in the free world. The Japanese are confident that they can maintain this momentum and their estimates of future growth are impressive.

It is likely that some time during the mid-70's they will surpass us in per capita income. Exports rose between 1955 and 1967 by 520 per cent. while imports increased by 470 per cent. Imports are expected to continue to increase. The average increase forecast for manufactured goods, machinery, etc., is 16.5 per cent. in the period 1967 to 1972. Up to now, the Japanese performance has been consistently better than their estimates: there seems no reason why this should not continue.

This economic growth has justly been called the Japanese miracle. Their achievements in the 25 years since the end of the war are indeed impressive. From our point of view, it means a rich market that is expanding rapidly. Its characteristics are that high quality consumer goods and luxury goods are in growing demand. The taste of the Japanese is growing for many western goods. The enormous pace of industrial development leads to a demand for advanced technology and know-how which can be met in full only by looking abroad. There are openings, too, for sales of the latest and most sophisticated machinery and equipment.

It is interesting to see that the Japanese are concerned not only with material prosperity, but also with the quality of life in Japan. They are becoming increasingly conscious of the need to improve their urban environment. Rehousing, town planning, the problems of pollution of air and water brought about by the Japanese fantastic rate of industrial progress are demanding, and are now receiving, attention. In many of these respects there is scope for the sale of British know-how and British technology.

The opportunities are there—broadly they exist across the whole range of British products and services. But it would be wrong to assume that the market is an easy one. There are obvious difficulties, such as distance and language. There is a complicated distribution system which must be contended with. But if the difficulties are substantial, so are the rewards. Careful study and preparation followed by perseverence in the cultivation of the market can pay valuable dividends.

We are constantly urging businessmen to visit their overseas customers. This is perhaps more important than ever in the case of Japan where personal contacts count for a lot. The opening of the polar air route has made travel much easier.

It was very encouraging news from Moscow last December that we had reached the basis of an agreement with the Russians whereby the Trans-Siberian route between London and Japan is to be opened up to B.O.A.C. and Japan Air Lines later this year. This will cut more than 1,000 miles and approximately three hours from today's fastest time to Tokyo, the 17½ hour, 8,000 mile Polar flight via Anchorage in Alaska.

The Board of Trade and the B.N.E.C. are ready and anxious to help all those tackling or thinking of tackling the market. In the last few years there has been built up a considerable volume of knowledge about selling to Japan which we are anxious to share with them. There is no lack of advice and assistance.

During 1969, more than 30 selling missions sponsored by B.N.E.C. visited Japan, most of them during the period leading up to British Week. These missions consisted of exporters of consumer goods, but a number of them, particularly those from chambers of commerce, having among them exporters of capital goods. So far, B.N.E.C. is committed to sponsor in 1970 17 more missions.

In the British Week year of 1969, our Tokyo Embassy's main promotional effort was directed at consumer goods. The follow-up to a British Week is, of course, extremely important. The Embassy plans to produce market reports at a rate of one every two months with a view to encouraging British manufacturers in selected fields to consider Japan as a potential market and to take part in trade exhibitions.

Also, encouragement is being given to missions from Japan. For example—this should please my hon. Friend, because he specifically mentioned this—an inward mission to the United Kingdom covering water anti-pollution equipment is under consideration by the British National Export Council; and the Foreign Office and the Central Office of Information are making plans for a 60-strong urban study mission which will shortly be visiting the United Kingdom.

Much has been written and said about the restrictions which the Japanese Government maintain on imports. The point should not be overstated. There are many fields—machinery is one, for instance—in which there are no quota restrictions. It is the declared policy of the Japanese Government to liberalise imports of goods and capital as quickly as they feel able to do so. We for our part are seeking to negotiate the early liberalisation of the few remaining items which are still under quota, and where we have a substantial trade interest. Naturally, to do so will involve us in lifting restrictions which we maintain on Japanese exports to the United Kingdom. We have already offered a programme for this. Our aim is a complete removal of obstacles on both sides where either country has a trade interest, but of course this raises many complicated problems to which there is no easy solution. However, talks are proceeding and we hope that they will be successful.

I am pleased to say that total Anglo-Japanese trade has been growing in recent years at a very encouraging rate.

Our imports from Japan rose from £91.2 million in 1967 to £115.1 million in 1968. In 1969 they fell slightly to £104.4 million. This was primarily because reduced catches of fish led to a fall in imports of canned fish products—and this is a particularly important item for Japan. The import deposit scheme may have also contributed to this result. On the export side the corresponding figures, including re-exports, were £87.4 million in 1967, rising to £98.4 million in 1968 and to £128.6 million in 1969. In 1969, therefore, our exports to Japan increased by 30.7 per cent. over the previous year, compared with a decrease in our imports from Japan of 9.3 per cent., giving a visible trade balance in our favour for the first time since 1961.

It is impossible to measure with any precision the effect of individual promotional efforts. But we are sure that the substantial increase in 1969 reflects the great effort which was put into the organisation and presentation of British Week Tokyo last autumn. This event was the most ambitious of its kind and it can, I think, be regarded as one of the most successful. The co-operation of the major Tokyo departmental stores—these are far and away the most important retail outlets—was wholehearted and gratifying.

While the main emphasis fell on consumer goods, the capital goods side was not overlooked and a successful exhibition was staged as part of the Week. There was considerable emphasis on the cultural side, as befits a country where this is regarded as very important. Both here and in Japan, our efforts were backed up by excellent publicity. The gracious presence of H.R.H. Princess Margaret and her husband won unstinted praise and admiration wherever they went. As a result, I think we can claim that the Week was as instrumental in furthering Anglo-Japanese understanding as in promoting trade. One important consequence was the great increase in business men visiting Japan. As well as attending the Week itself, many went in preparatory and follow-up missions. The Government scheme of contribution towards fares and expenses of missions was a great encouragement. There was a two-way movement with many inward missions of Japanese buyers.

On this, I should like to pay tribute to all those many people, officials and others, for the effort which they put into organising this promotion; also to the British firms who supported it, in particular B.N.E.C. and its Asia Committee. The Chairman, Mr. Michael Montague, deserves special mention. Mr. Montague's drive and ideas were an inspiration to all concerned. It is now our task to ensure that the momentum generated is maintained and increased. Already nearly 20 missions, including several sample shows, are projected for 1970. Plans are well advanced for a number of store promotions and shopping weeks. In these we will be seeking to increase the demand for United Kingdom consumer goods in the main towns outside Tokyo.

Mr. Tam Dalyell (West Lothian)

As one who had the good fortune to visit Japan as a member of the I.P. delegation, of which my right hon. Friend was a previous, very successful, member, may I ask him to emphasise the importance of the point of going outside Tokyo, particularly to Osaka, where our excellent consulate is doing a very valuable job? The point which my right hon. Friend makes of the importance of working outside Tokyo could not be exaggerated.

Mr. Mason

I am much obliged to my hon. Friend for his pleasing comments. I have myself visited Osaka, and Kyoto. My hon. Friend is quite right—we must make efforts outside Tokyo, as much as we have been making efforts in the major city during the past year.

We must also do everything possible to expand the sale of capital goods. The commercial department of our Tokyo Embassy has in hand a programme of market surveys. These will pinpoint those sectors where the opportunities are greatest, and provide basic information for businessmen. We shall continue to study the market and try to improve the information available. We are looking also to participation in trade exhibitions in joint ventures with industry as a means of increasing sales. Every encouragement and help will be given to suitable inward missions from Japan, both officially and by the British National Export Council. My predecessor visited Japan at the time of British Week in October last. I hope to go there myself before very long. I believe that inter-Ministerial visits are very important as a means of strengthening ties and of informing ourselves at first hand of the problems of commerce and industry.

I am grateful to my hon. Friend the Member for Ilkeston (Mr. Raymond Fletcher) for raising this very important debate. Apart from the points I have covered he mentioned two or three specific matters. One was on know-how. Among the comprehensive lists of papers which we have prepared on various aspects of trading with Japan there is one on some of the special problems of trading in know-how. Those papers are available to any interested party.

Secondly, on the question of medium sized firms and their possibilities since Japan started the process of liberalisation of inward investment, the extent to which any joint ventures or licensing arrangements is practicable or desirable must, of course, remain very much a matter for careful analysis and decision by the firms concerned. This type of arrangement might well be profitable for the B.N.E.C., and we would hope that any company with a good product to sell would be encouraged in investigating joint venture possibilities in Japan, and would not be discouraged just because of the size of I.C.I. or Shell. For small and medium-sized firms there are good opportunities now for joint ventures in Japan.

Then, of course, my hon. Friend mentioned capital goods possibilities. The Asia Committee of the B.N.E.C. has decided to ask its Japan trade group to study particularly the possibilities of capital goods exports to Japan and to stimulate the interest of the industries concerned in opportunities which exist for British products. In this context, the list which my hon. Friend referred to in his speech, and, indeed, in his notes he sent me in advance, will be helpful, and the attention of the group will be invited to the items he has already mentioned.

I am pleased that this debate has given me an opportunity to indicate the importance which we attach to increasing Anglo-Japanese trade and to express appreciation of the efforts of all those involved. With their help we increased our share of Japanese imports in 1969, but this share is still only about 2 per cent. of the total. I believe we can and will improve still further our export performance in this rich and expanding market in the months ahead.

There is still a long way to go. I do not think that we can ever match what the Americans have managed to do. They have managed to get 27 per cent. of the market. Our proportion of 2 per cent. is too low, but there is no reason now, with the increasing trade possibilities and liberalisation, why Britain should not in the years ahead do much better than 2 per cent.