HC Deb 22 January 1970 vol 794 cc839-50
Mr. Speaker

Before we open the debate on the first Statutory Instrument, perhaps I may say that I understand that the Instrument covered by the Prayer, Motion No. 3 on the Order Paper, That an humble Address be presented to Her Majesty, praying that the Import Duties (General) (No. 4) Order 1969 (S.I., 1969, No. 1719), dated 2nd December, 1969, a copy of which was laid before this House on 5th December, be annulled, merely corrects a slight error in the first Instrument.

I suggest to the House that we take both Motions together, if there is no objection. So be it.

10.1 p.m.

Mr. Peter Blaker (Blackpool, South)

I beg to move, That the Import Duties (General) (No. 3) Order 1969 (S.I., 1969, No. 1413), dated 30th September, 1969, a copy of which was laid before this House on 22nd October, in the last Session of Parliament, be withdrawn. I am much obliged, Mr. Speaker, for your suggestion that we take at the same time the second Motion, which, as you have said, is of a minor character.

The main topic of this debate is the Import Duties (General) (No. 3) Order, and it merits a substantial debate. I have a number of questions which I shall be putting to the hon. Lady, the Parliamentary Secretary. The order merits a substantial debate because it does two things. It consolidates, amends slightly, and improves the whole of the United Kingdom tariff. Second, and more important, it puts into effect the second instalment of tariff reductions by this country which were agreed in the Kennedy Round discussions which were concluded in Geneva in 1967. The then Minister of State, Board of Trade, when we debated the first two slices of reductions in May, 1968, described the Kennedy Round as the most ambitious attempt ever made to lower barriers to world trade.

That is a fair description. About 50 countries took part and those countries accounted for about 80 per cent. of world trade. The reduction in our tariffs on dutiable industrial goods amounted to close on 40 per cent., and the Common Market countries, the United States and Japan agreed on reductions in their tariffs of similar magnitude.

Before this order, we had already cut our tariffs by two-fifths of the agreed amount, and the effect of this order should be to cut them by a further one-fifth or, to put it in another way, the effect of the order should reduce further, by more than 7 per cent. on average, our industrial tariffs. According to the agreement in Geneva, other countries should by now have made three-fifths of their agreed reductions.

We on this side have already made clear that we welcomed the Kennedy Round agreements. That is natural, because the discussions were set under way when the Conservative Government were in power, in May, 1964. We also welcome the fact that, as far as we know, the reductions are proceeding as agreed. It is obvious to people who follow the world tariff scene that developments which have occurred since the agreement was made in Geneva have made the Kennedy Round cuts even more important than they were then.

I have in mind the importance of maintaining the momentum towards freer trade in face of signs of pressures in the opposite directions in different parts of the world, and the increasing tendency towards bigger companies inside nation States makes it more important that the winds of international competition should blow.

Before we approve the order I should like to make some comments and to ask the Minister some questions. My first comment is that the Kennedy Round reductions received their initial impetus from a particular situation. The American Administration expected that the United Kingdom would join the Common Market, and it wished to ensure that the tariff barriers round the Common Market, with Britain inside, would be as low as possible against American goods. Britain is not in the Common Market, but it remains true that the reductions will lower the barriers to British goods seeking to enter the Common Market even if, regrettably, we do not get into the Common Market.

These reductions do not eliminate the political case for entry, and I do not believe that they significantly affect the economic case for entry, but it is true that, ii we do fail to enter the Common Market for the time being, the economic disadvantage of being outside will be somewhat reduced.

Mr. Speaker

Order. I hope that the hon. Gentleman will not discuss the Common Market in detail on this Motion.

Mr. Blaker

I take note of what you say, Mr. Speaker. I have no wish to trespass on your generosity.

I was about to come to my second point, which, I hope, is directly related to the order. I refer to the position of the Communist countries. They did not take part in the Kennedy Round negotiations and they have made no concessions to the countries which did, but they will benefit from the reduction of our tariffs made by the order. That effect will be more significant the more our imports from those countries are freed from quota limitations, a direction in which the Government have been moving. British industry will hope that the Government will be vigilant. I am not criticising the Government on this score; I am simply expressing the hope which British industry feels that they will be vigilant to protect it in appropriate cases against dumping from those countries.

My third observation is that the cuts made by the previous order must be one of the factors which have encouraged the remarkable increase in international trade occurring in 1968 and 1969 which has been such a tremendous help to us in improving our balance of trade with the rest of the world since devaluation. Whatever the prospects for the growth of world trade may be this year—the outlook is, perhaps, not certain—we hope that the present order will have a similar effect. Devaluation, which occurred after the Kennedy Round agreements were made, is another reason for pressing on with the duty reductions agreed in Geneva in 1967, since it has put us in a position of great advantage, and one which we did not expect to have at the time the agreements were made, compared with other countries which took part in the negotiations but did not devalue. It is much to their credit that our exporters are taking such splendid advantage of this situation.

It is 18 months since the first instalment of cuts was made by this country and by many others, and two years since the first cuts in tariffs were made by the rest. It should be possible for the Government to give the House some facts about the results and draw some conclusions.

First, what is now the value of British exports and imports affected by the reductions? Second, can the hon. Lady give the House an estimate of the effect of the cuts so far made in stimulating trade? World trade in the industrial products subject to the cuts amounted in 1964 to about 40,000 million dollars. What is the value at the latest available date, and can we now see whether trade in the items which were subject to the reductions has risen faster than trade in other items?

Next, at what level will the weighted average of tariffs on industrial goods be left as a result of the cuts which are being made on 1st January this year in the United Kingdom, in the United States, in the Common Market and in Japan, the principal countries concerned?

Could the hon. Lady say something about the relationship between this order and the statement made by her right hon. Friend, the then President of the Board of Trade, on 22nd July last year about imports of textiles from Commonwealth countries? She will remember that he said that the Government would introduce tariffs on imports of textiles from Commonwealth countries, 6½ per cent. on yarn, 15 per cent. on cotton cloth, and 17 per cent. on most garments. The Geneva agreements of 1967 provided for a tariff cut of about 20 per cent. on dutiable imports of textiles as a group into the United Kingdom, and in many cases the tariff on imports of Commonwealth textiles is already nil.

The House would like to know whether the Government policy announced by her right hon. Friend will involve reversing the process which is put into effect by this order and the order of 1968 and raising duties on Commonwealth textiles which are now being reduced by this order, or is it simply a question of imposing tariffs where none now exists? Are we free to raise these tariffs on Commonwealth textiles, or will we have to secure the consent of Commonwealth countries to do so? If so, will it mean that we shall have to give those countries concessions in relation to other products covered by this order? I am asking the hon. Lady about the machinery for putting into effect these proposals.

The rest of my questions concern the action being taken by other parties to the Geneva Agreement since we should know before we approve the order whether the other countries are keeping their part of the bargain. I should like to know whether all the other parties to the agreement are making the cuts which they should by now have made.

Will the hon. Lady say something in particular about the position of the United States? In the negotiations one of the most difficult points was the existence of what is called the American Selling Price, which I shall refer to as the A.S.P., for benzenoid chemicals, which has had the effect of virtually prohibiting importation into the United States of that sort of chemical. In Geneva, after hard negotiation, an agreement was eventually reached on a package in two parts. The first part involved a reduction of 50 per cent. in American chemical duties, with some exceptions, and a reduction by ourselves and the Common Market countries of a lower order of magnitude. The second part of the package involved the passage by the American Congress of legislation to abolish the A.S.P.

In return for that undertaking the Common Market agreed to extend its cuts in chemicals tariffs to a larger extent, Japan agreed to do the same, with some exceptions, and we agreed to make some reductions in our chemical tariffs and to reduce by a quarter the Commonwealth margin of preference on manufactured tobacco.

In connection with chemicals this was an important package of great value to the British chemical industry and to international trade in chemical products. But it all depended on the passage by the American Congress of legislation to abolish the A.S.P. The agreement was drawn up in such a way that if this did not occur by 1st January, 1969, the deal would collapse unless the parties to the agreement agreed to extend that final date.

Unfortunately the American Congress has not abolished A.S.P. Legislation was introduced under the administration of President Johnson, but did not reach the Statute Book. Would the hon. Lady say what is the present position?

Mr. Speaker

Order. I may be wrong, but we are not discussing, so far as I am aware, the Kennedy Round. We are discussing certain specific aspects in relation to these cuts. I feel that the hon. Gentleman may be going too wide, though I may be wrong.

Mr. Blaker

I take note, Mr. Speaker, of what you say.

The point I was trying to make, which I had hoped was in order, was that before we approve the order covering the British tariff, which contains this slice of reductions in the Kennedy Round, we should know whether other parties to the agreement are carrying out what at the time they undertook to do as part of the package. I ask the question with specific reference to the United States, which is one of the most important parties to the agreement, if not the most important.

In a message on foreign trade, to Congress on 19th November, President Nixon said that he proposed the elimination of the A.S.P. and recognised that it was viewed by America's principal trading partners as a major symbol of American protectionism. Would the hon. Lady say what progress is being made with that legislation, and will she confirm that it has been agreed by other parties to the agreement that the terminal date has been postponed to a date later than 1st January 1969?

The hon. Lady will be aware of the view of the British chemical industry that the package agreed at Geneva, in which it has already made concessions, should be put into effect before we go on to further international discussions on non-tariff barriers or other subjects.

I put another question to the hon. Lady about the attitude of the United States. She will be aware of the recent decisions of the United States Tariff Commission that certain workers in the United States had lost their jobs as a result of increased imports due in major part to concessions granted under trade arrangements. She will also be aware that this decision opened up the possibility under the Trade Expansion Act of assistance by way of restoration of tariffs or import quotas to American firms or industries which suffered as a result of concessions granted under trade arrangements, which must include the Kennedy Round arrangements. She will be aware of the recent speech by President Nixon in which he proposed the alteration of American legislation so that relief to American industry by way of increased tariffs could be provided whenever increased imports are the primary cause of actual or potential serious injury.

Mr. Speaker

Order. With respect, the hon. Gentleman appears to be discussing the Kennedy Round itself and American policy on it. We are discussing certain specific reductions in pursuance of a policy under the Kennedy Round. I hope that he will not go too wide.

Mr. Blaker

I take your point, Mr. Speaker. I hope to make it clear that I am confining my remarks to the order.

My point is that the Government are proposing to make certain reductions as part of a package deal, and I want to know what happens if we make the reductions and in other countries the process is reversed. Is there any remedy once the reductions are made? That is a relevant question which requires an answer before we approve the order.

If I may elaborate on the recent proposals of President Nixon, he was proposing the alterations of the U.S. legislation so that relief could he given by way of increased tariffs whenever increased imports are the primary cause of actual or potential serious injury. The increase in imports would not even have to be related, as it has had to be in the past, to a prior tariff reduction. He made other proposals for relief to firms by way of taxes and so on which could be given when increased imports are found to be a substantial cause of actual or potential industry.

It is important that the House should be clear about the implications of these proposals. As I understand them, they could involve the taking of action which would undo much of the good done by the Kennedy Round reductions. They are not limited to cases of damage resulting from dumping, where action would be proper under the Kennedy Round agreements. They go much wider than that.

As I was saying, by this order we are proposing to reduce our tariffs significantly in accordance with the 1967 agreement, and I hope to hear that the United States has done the same as from 1st January. At the same time, the American President is proposing legislation which, if enacted, could arrest the impetus towards freer trade given by the Kennedy Round reductions. I can see that much would depend on how this legislation was administered, but there is a danger here of which we should take note.

Let us suppose that, as a result of this new legislation, British exporters are prevented from taking advantage of the greater access to the American market which the Kennedy Round cuts should give them. What is our remedy? By this order, we shall have made certain cuts which will give benefits to American exporters. Could we again raise the tariffs which are cut by this order if, regrettably, this eventuality should occurr, or would we be prevented from doing so by the G.A.T.T.? In this connection, is there a difference between the duties which are bound under G.A.T.T. and those which are not? This is the most important question that I have put to the hon. Lady, and I hope that she can deal with it fully.

Will she say whether the American Administration are able to raise tariff or other barriers consistently with the G.A.T.T. and the Kennedy Round agreements? Will she say whether we have made any representations to the American Administration on the subject, and whether she would agree that it is of sufficient importance to be raised with the American Administration by the Prime Minister when he visits the United States next week?

10.23 p.m.

The Parliamentary Secretary to the Board of Trade (Mrs. Gwyneth Dunwoody)

I was glad to hear the hon. Gentleman the Member for Blackpool, South (Mr. Blaker) pay tribute to the importance of the Kennedy Round to world trade. This was a most imaginative step, and it has undoubtedly produced a great impetus in the right direction for the whole of world trade.

The hon. Gentleman has raised a number of detailed questions, and I hope to be able to give him some, if not all, of the answers. He began by talking about the No. 3 order, and he is asking for it to be withdrawn. He said that this implemented the second instalment of the tariff reductions which we are obliged to make as a result of the Kennedy Round agreements. The No. 4 order is simply to put right a drafting lapse in the No. 3 order.

We started to implement our part of the Kennedy Round bargain on 1st July, 1968, when we reduced most of our duties by two-fifths of the total agreed cuts. The Minister of State, Board of Trade, indicated when introducing this first step to the House that it would have to be followed by further cuts on 1st January, 1970, and again in 1971 and 1972. The No. 3 order makes the cuts due on 1st January, 1970.

The hon. Gentleman went slightly wide of the order and asked me about the effect that it would have upon our trade with the Communist countries, making the not invalid point that, if they benefited from tariff reductions without themselves being a party to the G.A.T.T., it was obviously a question which we should regard with some care. I am sure that he does not need reminding that the Board of Trade has legislation which it is able to use to protect our markets against dumping.

Recently, we piloted through the House an amendment to the anti-dumping legislation which makes it easier for us to deal with the problem that we had hitherto, in dealing with centrally controlled economies, of fixing the price at which goods should be sold in this country. The hon. Gentleman will remember that we have these facilities available to us. Should there be any danger to our markets from dumping by eastern European countries, means are provided not only to make the case to the Board of Trade, but also to ask it to investigate urgently, if need be.

The hon. Gentleman will be glad to know that our trading partners are all continuing to implement their obligations under the Kennedy Round agreement in accordance with the agreed timetables. Indeed, Canada, which the hon. Gentleman has not mentioned, for her own special reasons, has done more than this and already made her tariff cuts in full.

The hon. Gentleman mentioned his concern about the American Selling Price system and the whole question of har- monisation of the American industries. It would be foolish to pretend that there is not widespread disappointment that the United States has not yet abolished the American Selling Price system of valuation for certain chemicals. Certain concessions were agreed in the Kennedy Round conditionally on abolition of A.S.P., and abolition would be significant for the whole impetus of further effort to reduce the remaining tariff and non-tariff barriers to international trade.

The United States Administration have, however, introduced a Bill providing for the abolition of A.S.P. Meanwhile, we and the other parties to the Kennedy Round agreement relating principally to chemicals have extended it until the end of this year, which is the question to which the hon. Gentleman particularly wanted an answer, to allow time for the United States to act in 1970.

The hon. Gentleman mentioned certain proposals in President Nixon's message to Congress, dated 18th November 1969. The first of these deals with the conditions that U.S. industry has to satisfy to qualify for "escape clause action". President Nixon proposed that these conditions be made slightly less onerous, partly by terminating the present requirement that the increased imports said to be causing injury must be shown to be due to a trade agreement concession and partly by relaxing the injury criterion.

Secondly, he proposed to extend the Administration's existing power, which relates only to agricultural products, to retaliate against the goods of countries placing unjustifiable restrictions of imports from the United States.

At present, I would say only that we shall follow with the closest attention the course of the Bill's passage through Congress. President Nixon stated that his proposals should not be misconstrued, nor should they be allowed to turn us away from the basic direction of our progress towards freer exchange", and his message as a whole strongly confirms his determination to continue liberal trade policies.

I find the hon. Gentleman's point about the need to make representations to the United States Government a slightly clumsy phrase. I think that he will agree that there is a continuing process of consultation. It is in the interests of both trading nations not to throw up unecessary barriers to world trade. I think that we are sufficiently in touch with the American Administration to be able to express our views to them adequately. I am convinced that they are well aware of the situation and will naturally expect us to be taking an interest in the progress of the Bill through Congress.

Nevertheless, the hon. Gentleman asked me a number of questions, one of which related to our alteration in the proposed tariff on cotton textiles. This is rather free of this Order. We intend to replace the present system of quotas, as from 1st January, 1972, by a tariff on cotton textiles imported from the Commonwealth preference area. I should point out that we undertook no obligations during the Kennedy Round on cotton textiles. Our intentions in this sphere—which has long been treated internationally as a special case—imply no departure from the general policy which we followed to secure the success of the Kennedy Round.

The hon. Gentleman raised a number of other points about the effect of the Kennedy Round tariff reductions. I am not able to give him precise answers tonight, and I do not believe that this will come as any surprise to him. Evaluating the effect even of a single tariff change is a hazardous operation when trade is subject to so many other influences. I would, however, point to very large increases in the imports of those countries which account for the bulk of world trade between the year immediately preceding, and the year immediately following, implementation of the first instalment of Kennedy Round concessions.

The following figures are for sections 5 to 8 of the Standard International Trade Classification (Revised) which cover the sectors in which the main tariff concessions were exchanged. In these very important sectors, Japanese imports rose by more than 15 per cent., our own by more than 16 per cent., E.E.C. imports by 25 per cent. and United States imports by more than 30 per cent. The value of these imports increased in this one year by more than 9,000 million dollars. I need hardly point out that one country's imports are another country's exports. This remarkable increase in international trade was not, of course, due solely to the Kennedy Round, but we believe that it played a very significant part.

Similarly, I cannot quote figures for the weighted average on industrial goods in the various countries mentioned by the hon. Gentleman as at 1st January, 1970. The data needed for such a calculation are not available and, in any case, interpretation would be hazardous for the reasons that we explained in the White Paper on the Kennedy Round.

I hope that I have managed to deal with the points about which the hon. Gentleman was particularly concerned, but I would say that any movement towards a liberalisation in world trade is welcome not just by the Government but also, I believe, by the business world in general. This country is doing a remarkable job in the export field, assisted by the services which the Board of Trade provides not only to business men but to all industries right across the board, and the advantages that we gained at the time of devaluation in price terms and in other ways has given us just that leeway that will enable us to produce even more impressive results in the coming years.

There is no doubt in my mind that these orders should stand, and I hope that the hon. Gentleman will accept that whilst we are quite happy to discuss these questions in the House and to realise that there are still some aspects of world trade which will obviously need to be watched, we nevertheless believe that this order is one which will and can only contribute to a greater success in the future.

Mr. Blaker

I a grateful to the hon. Lady for answering my questions in such a satisfactory way. For the removal of doubt, I should like to make it clear that our Motion was put down to allow an opportunity for a debate, and I believe the House will agree that it has been very useful.

Question put and negatived.

IMPORT DUTIES (S.I., 1969, No. 1719)

Motion made, and Question, That an humble Address be presented to Her Majesty, praying that the Import Duties (General) (No. 4) Order 1969 (S.I., 1969, No. 1719), dated 2nd December 1969, a copy of which was laid before this House on 5th December, be annulled.—[Mr. Maker.]

put and negatived.