§ 9.59 p.m.
§ Mr. Tom Boardman (Leicester, South-West)
I beg to move,That an humble Address be presented to Her Majesty, praying that the Import Duties (Developing Countries) Order 1971 (S.I., 1971, No. 1882), dated 19th November 1971, a copy of which was laid before this House on 26th November, be annulled.Although the Motion refers to an Order which makes reference to a large number of industries, I shall be concerned mainly with its impact upon one. I know that some of my hon. Friends and possibly hon. Members opposite will wish to refer to other industries, but my reference will be concentrated mainly on the footwear industry. For that reason I must declare my personal interest. I am the chairman of a group of companies which supplies a large number of footwear components, and to that extent I have an interest in the industry.
I want to make clear that, although the Motion may appear to be critical of the liberalisation of trade, I am a supporter of trade liberalisation. It is right that we should adopt an attitude against protection, first, because of our obligations to the under-developed countries and in common humanity—and I am sure that in that respect I shall have the support of the right hon. Member for Lanark (Mrs. Hart)—and, in the more selfish field, it is not in our interest to be protectionist because, being a trading nation, we are the principal sufferers from protection.
But I query whether we ought to risk jeopardising some of our very important industries and increasing unemployment by extending preferential treatment to some of the countries that appear in the Order. For example, it may seem ironical today that one country which is to receive special treatment is Libya, which has not shown a reciprocal attitude towards us in view of the announcement that we have heard from that country in the last few hours.
The under-developed countries which are to receive preferential treatment under the Order include the Argentine, Brazil, Iran, Mexico and Yugoslavia. Some of those countries have substantial developed 1434 industrial capacities of their own. The majority also have low wage rates, which could put some of our industries at a grave disadvantage.
I agree that the provisions contained in the Order are part of a general agreement made by the richer nations at the United Nations Conference on Trade and Development, but I draw attention to two distinctions in the way in which that agreement has been implemented. The first is that the choice is open as to the products which should be included in this liberalisation. Reverting to the footwear industry, I draw attention to the fact that the Nordic countries and Japan, for example, exclude from their list of liberalised or duty-free imports sensitive footwear items. The United States of America propose to do likewise, but, as we know, they have not yet been able to move towards the adoption of these liberalisation measures and have felt bound to impose additional barriers.
Secondly, the countries which were parties to the conference have adopted different systems of applying the agreement. The European Community has adopted a quota system under which it allows duty-free entry for products up to certain ceilings, which, again in the case of footwear are based on the 1968 level of imports from those countries with a 5 per cent. annual increment and an overall maximum increase of one-third. But the provisions of the Order we are adopting allows tariff-free entry without any quota or quantitive restriction, although we have reserved the right to reimpose tariffs if those imports are seen to be causing or threatening to cause injury to an industry.
What is perhaps somewhat strange is the fact that in 1974 we have to adopt the same system as that of the European Community which at the moment, is operating the quota system. Perhaps between now and 1974 the Community will become convinced that ours is the better system and will revert to that. My right hon. Friend may care to comment upon the fact that we are adopting a system to start in 1972 which does not conform with that of the European Community, but we must agree with them as to the common form by 1974. The impression I have gained from those whom I have consulted is that the quota 1435 system would have been much preferred by industry and the C.B.I. I ask my right hon. Friend whether the C.B.I., which was consulted on this matter in the early stages, did not express a preference for the quota system as against the system which has now been introduced.
I recognise that one of the objections put forward to quotas was that this would be inconsistent with the policy that we were adopting for textiles. That argument is to some extent—I say only to some extent—slightly less valid than it was before today; I recognise as my right hon. Friend made clear today, that the textile industry is a special case and it will have quotas and tariffs. But the argument that quotas were unacceptable because quotas were not to be imposed for textiles is something upon which my right hon. Friend may well wish to comment.
The concern of the footwear industry is that if there is a switch to quotas at some later stage, say in 1974, it will then be forced to adopt as the base figure not the 1968 level of imports, which is that which is adopted by the Community, but the level of imports in 1973, or whenever it may be, which after a period of tariff-free entry may be substantially higher than that which is applied in Europe. It is worth noting that the quota system which Europe has adopted has already in the period between July and November during which it has been in operation been fully taken up by countries such as Yugoslavia and, therefore, the cut-off point has been reached for that industry by many of the main importing countries.
It is claimed that our system will be more flexible and that the cut-off can be operated more quickly and effectively than it could if a quota were applied. I hope that my right hon. Friend will be able to make a little clearer how this would operate.
I apologise for directing my remarks entirely to one industry, but it is easier to relate them to an industry particularly sensitive and of which one has some knowledge. In the footwear industry there is a gap between the date of order and the date of landing or importing of goods. Very often there is a delay of about five or six months, just as in home 1436 produced footwear there is a gap of a number of months between the time when goods are ordered and when they are delivered to the shops. For example, factories are today making what I think is called the "spring range".
Dealing with orders placed by importers with countries which under the Order will have liberalised or tariff-free entry, I ask how the knowledge of imported orders which are, perhaps, on 2nd January to be placed with a firm in Brazil will become available to my right hon. Friend in time for him to take any action before the effect of the lack of orders on our United Kingdom factories may have forced those factories to close. This time lag is important, because the first knowledge that those orders have been placed in Brazil may well be the importation of footwear, and the only indication that the industry will have will be the effect on those who are not receiving orders which they previously received.
Importers and wholesalers will not necessarily go around volunteering the source of their alternative supply. I ask my right hon. Friend what evidence he will expect to receive of the threat of injury to an industry before he exercises the right which he has reserved to cut off the preference that is being given. For example, an edition of the Shoe and Leather News in November contains an advertisement headed "Import In Stock Service" for shoes made in Brazil and saying, "Never less than 20,000 pairs in stock." This is an illustration of the amount of footwear that may well come in from Brazil. I recognise that 20,000 pairs is nothing against an industry's output of 190 million pairs. However, is it a factor which will influence the decision as to whether an industry is to be threatened?
Orders have fallen by 7.4 per cent. since 1970. I do not suggest that this is due necessarily to imports or the threats of imports; I do not know, nor does the industry, nor can it know. The fall in the number of orders to British factories may be due to a variety of causes, and it would be difficult to be satisfied that it was due to threats of imports to such an extent as to justify an Order being made before damage is done and factories close. Factories will close 1437 when orders cease to be placed with United Kingdom factories—that is, many months before the imported footwear arrives here.
An article in the Daily Telegraph of 23rd September was headedBrazil launches export drive in the footwear marketand statedExports this year are likely to exceed 40 million dollars.Will that, together with the other items of evidence that I have adduced, be sufficient to enable my right hon. Friend to recognise that there is a real threat to the industry? I say in all sincerity that this is not an industry which seeks protection. It is not putting up bogeys in whose existence it does not believe, nor is it asking that it should be wrapped in cottonwool. The industry genuinely fears a switch of exported products from markets which were previously open to overseas exporters to the United Kingdom market. For example, it is thought that the imposition of the surcharge in the United States of America will result in a diversion of footwear which was previously sent to the United States to markets which are open here. As the quotas are filled up in the Community, there will be an incentive, at any rate, for countries which would otherwise export to the Community to divert their products to Britain. These are genuine fears that the industry has, because the total output of footwear from the countries listed in the Order is in excess of 500 million pairs per annum. My right hon. Friend may justifiably say that those countries have many more than 500 million feet upon which to put those shoes, but each of those countries has a significant export potential.
This is an extremely sensitive industry. Already there have been imports of 56 million pairs into Britain in the first eight months of 1971, a 20 per cent. increase over the same period in 1970. The industry has felt that it was exposed to additional risks from the system of origin marking; I am delighted that my right hon. Friend is taking measures which will set at rest some of the fears which the industry had on that score. The industry asks, not for protection, but for adequate safeguards. I believe that my right hon. Friend, with his considerable knowledge and experience of commercial matters as 1438 well as of matters of government, understands the problem and can give us positive reassurance.
The purpose of my raising this matter is to enable my right hon. Friend to remove the doubts and fears that exist. Earlier today my right hon. Friend the Secretary of State for Trade and Industry said that the fear is that the Governmentmight not otherwise be able to take action quickly enough to forestall disruption.That was in the context of the textile industry. It is exactly that fear which is genuinely felt by the footwear industry and possibly by other industries. I believe that my right hon. Friend this evening can give us some assurances which will remove those fears and will enable me, as I should like, to support this liberalisation of trade in the interests not only of this country but of those under-developed countries that we wish to help.
§ 10.15 p.m.
§ Mr. Frank Judd (Portsmouth, West)
I welcome this Order unreservedly and congratulate the Government on its introduction. Of course, it will present problems of adjustment within our own economy but we have to see these problems of adjustment against the reality of the world situation with which we are confronted.
At the moment, outside China for which we have no accurate statistics, there is an unemployment rate in developing countries approaching 30 per cent. In the next 10 years there will be 225 million more people of working age to be absorbed in employment in developing countries. This represents a story of gigantic human misery, but also it represents an economic and social problem of explosive dimensions which we would ignore at our peril.
The real test of our commitment to development in the Third World is not the financial or technical assistance which we provide, however important this may be, but our willingness to secure greater justice for the less developed countries in terms of world trade. The most crying injustice of all has been the deterioration in the terms of trade between the developing countries, 85 per cent. of whose exports are composed of primary commodities, and the industrialised countries from whom they import capital equipment and other industrial goods. 1439 This has meant in practice a progressive transfer of real resources from the poor to the rich countries which in some cases has been more than equivalent to the total financial resources received in aid. Within the developing countries themselves the deterioration in the terms of trade has had unfavourable repercussions on agricultural prices and hence on rural incomes, while the benefits of much of the investment in expanding production or improving productivity have gone to the industrialised rather than to the producer countries.
The second form of injustice about which the developing countries rightly complain most concerns the variety of tariff and non-tariff barriers which have restricted their access to the markets of the developed countries. The United Nations Conference on Trade and Development has estimated that in the field of primary commodities the most restrictive trade areas are to be encountered in the case of just the sort of products with which the Order deals. Trade barriers have been too often reinforced by domestic support policies designed to maintain the size of the agricultural sector and reduce the import dependence of the developed countries. In some cases agricultural protectionism has resulted not only in self-sufficiency on the part of these countries but also in the accumulation of exportable surpluses. As a result, the developing countries have found themselves prevented from obtaining a fair share of the market of the industrialised countries commensurate with their comparative advantage, while in the case of some products they have faced the competition of subsidised agricultural exports from the developed world in general and from the European Economic Community in particular.
Last but by no means least in the industrial sector, which represents a rapidly growing proportion of the developing countries' exports, the import régime of nearly all the developed countries has been strongly biased against the so-called cheap labour products which are in general precisely those products in which the developing countries enjoy the greatest comparative advantage.
It is difficult to assess the impact of this Order, still less of similar action by other developed countries, if it were forthcoming. 1440 However, the reduction or elimination of trade barriers affecting primary products should have its effect on the employment situation through the expansion of exports and the resulting increase in output.
Since most commodities, especially in the agricultural sector, are highly labour-intensive, there is reason to hope that the increase in output will be reflected in increased demand for labour, thereby reducing the extent of open and disguised unemployment. Indeed, with the expansion of agricultural productivity as a result of the so-called green revolution, it is clear that increased international outlets simply had to be found if rural employment and incomes were to benefit.
As regards exports of relatively simple manufactured or processed goods, by removing or substantially reducing trade barriers to the importation of labour-intensive products in which the developing countries enjoy cost advantages, we shall be making a direct contribution towards helping the developing countries to accelerate the transfer of labour from agriculture to industrial employment, apart from enabling them to earn more foreign exchange.
How far are other industrialised countries prepared to modify their present policies? There is little sign of willingness on the part of the European Economic Community to reconsider its protectionist agricultural policy, while the prospective enlargement of the Community is seen by several developing countries as threatening their traditional access to the British market. It would be ironic if the extremely enlightened Measure now before us were totally negatived by British accession to the European Economic Community. The Minister must give us clear reassurance on this score. As it is, there are few illusions in the developing countries of the Commonwealth about any priority having been given by our E.E.C. negotiators to generalised trade preferences for them, let alone for the Third World as a whole.
The Order is a step in the right direction, but the O.E.C.D. has made plain that no programme of trade liberalisation can be expected to have a sufficient impact on employment in the developing countries unless it is matched by the 1441 adoption of conscious measures to restructure the economies of the industrialised countries so as to shift productive resources out of those branches of both industry and agriculture in which the developing countries have a cost advantage because of their lower labour costs.
So far, this issue has been squarely faced by no Government, although the European countries have been prepared to envisage far greater economic adjustments as a result of trade liberalisation within the framework of the G.A.T.T., E.E.C. and E.F.T.A.
To say all this is not to ignore the very real difficulties which a policy of that kind may present for parts of Britain. At a time of growing unemployment, we need a good deal more evidence that the present Government have in readiness domestic policies which would ensure that this indispensable policy would not place disproportionate burdens on any particular sections of the British population.
§ 10.23 p.m.
§ Dr. Tom Stuttaford (Norwich, South)
The presence of so many hon. Members here at this hour, but with no whip on, shows how grateful the House is—and people generally are, I am sure—to my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) for directing critical attention to a Measure which is designed solely to increase the export potential of the under-developed countries. The hon. Member for Portsmouth, West (Mr. Judd) dealt with that side of the picture, but there is another side, to which he referred only right at the end of his speech, and it is to this other side of the picture that I wish to refer.
The design of this Measure to increase the potential exporting power of the under-developed countries is not complete, for it is only a national design, and this is a question of international trade. If the Government were working with other Governments throughout the world, that would be absolutely splendid; but they are not. They are working in the Western world almost alone. America, Japan, the Nordic countries and the E.E.C. countries all impose some quota or tariff barrier against, for example, the import of shoes.
Unlike my hon. Friend the Member for Leicester, South-West, I have no interest 1442 in the shoe trade. It is the shoe trade which will be hammered hardest. Let there be no doubt about that. I need hardly remind the House that the footwear industry is labour intensive. It is one in which the underdeveloped countries have a natural, inbuilt advantage. We in this country are catching up. We are mechanising very fast. But we are not completely mechanised yet. We still need large numbers of people to work our existing production. That means that we must find markets for the shoes they are producing. If we become the target for the underdeveloped countries because other countries have refused to receive the 500 million shoes they produce, we are going to suffer. Which constituency will suffer more than any other? I think that my hon. Friend the Member for Leicester, South-West, will agree that it is mine.
In Norwich we have one basic trade which requires manual dexterity and skill—the footwear trade, which has been carried on in Norwich for many centuries. We are now debating an Order which might sacrifice it on the political ideals of men who come from richer, lusher pastures of this country—Kent and the Home Counties. But let us not forget that Norwich has the highest level of unemployment in the South-East and the lowest urban wage rate of the whole country. It is the area which will be hit harder than anywhere else in the country. It will have its basic industry destroyed.
My right hon. Friend recently addressed the shoe manufacturers and told me, in reply to a supplementary question on Monday, that the footwear manufacturers were reassured. I do not know to whom he spoke. It cannot have been anyone from Norwich. I saw the footwear manufacturers in Norwich during the weekend and I have been in constant contact with them this week. Not only did my right hon. Friend fail to reassure the manufacturers, he failed to reassure the unions. The industry has very good relations between unions and management. They work together and they are alarmed that their industry may be knackered and their livelihood destroyed.
If we are not to divide the House tonight we expect something from my right hon. Friend. I, on behalf of my constituents, expect him to agree to the 1443 offer made by one of his junior colleagues in the Ministry to meet a deputation of trade unionists and management representatives from the City of Norwich to explain just how the early warning system is to work. It is doubtful whether it will work at all, but they are prepared to hear an explanation of how it is supposed to work. If my right hon. Friend cannot give an assurance that he will meet them and tell them how the system is to work, I will follow my hon. Friend the Member for Leicester, South-West into the Lobby if he decides to divide the House. If he abstains, I will abstain with him. He is the expert. He has the financial interest—I have not! I have only a constituency interest. If my hon. Friend feels that the Minister replies unsatisfactorily, I hope that he will divide the House.
We do not just have an industry at stake. We have a city at stake—a city with the highest level of unemployment in South-East England, if not in the whole of Southern England, and we are not prepared to tolerate the hazard, let alone the sacrifice of that industry. Whichever way my hon. Friend decides to go at the end of the debate, I will do nothing to support this Order.
§ 10.30 p.m.
§ Mr. John Mackie (Enfield, East)
We all agree that we want to help developing countries and, if liberating trade does so, well and good. I am not sure that I am prepared to follow the hon. Member for Leicester, South-West (Mr. Tom Boardman) and his hon. Friend the Member for Norwich, South (Dr. Stuttaford) into either voting or abstaining; I shall make up my own mind about that. However, I agree with the Prayer. If it turns out that liberating trade results in unfair competition, and, so far as I can see, it will, and if it hurts our industries, that will be bad for everyone, because if our industries are depressed the developing countries will not receive the help which we should like to give them.
The hon. Member for Leicester, South-West spoke about the shoe industry and declared an interest. My interest has nothing to do with that industry. The industries in my constituency are mainly non-ferrous industries, particularly those making what are called semi-manufactures, extruded aluminium, copper 1444 pipes, copper cables, aluminium cables and so on. I do not have any financial interest, except that I use those products in my business.
On many of the raw materials, particularly zinc slab, these industries have to pay a tariff. Semi-manufactures are coming into the country free of duty in competition with the product made in my constituency. This is definitely unfair competition. The domestic industries are worried about the competition from other countries, particularly Yugoslavia.
My hon. Friend the Member for Portsmouth, West (Mr. Judd) talked about the importance to developing countries of labour-intensive rather than capital-intensive industries. There is no question but that the semi-manufactures made of the metals I have mentioned are produced by capital-intensive industries. There is tremendous excess capacity of machinery to produce these semi-manufactures, and it seems ridiculous to give foreign countries completely free access to our markets, thus destroying our industries.
Like the hon. Member for Leicester, South-West, I am intrigued and confused about why we cannot follow the E.E.C. plan of quotas, for everyone would then know where he was. As soon as a quota is filled, imports stop.
§ The Minister for Trade (Mr. Michael Noble)
That is an entirely incorrect way of describing it. Nobody has a quota which, when filled, results in imports stopping. The quotas simply stop the duty-free part; the imports continue.
§ Mr. Mackie
I meant to put it that way, and I am grateful for the correction.
What I cannot understand is why we cannot have such a system in this country. I have had a letter from the Under-Secretary giving the explanation, but it does not seem to be a good explanation. It saysWe decided not to adopt the E.E.C. type of arrangement with tariff quotas because that would have meant giving duty-free entry for all manufactures and semi-manufactures, including textiles.That seems to mean that other industries are having to suffer because of textiles, and I do not understand that, although I have every sympathy for the textile industry. If we enter E.E.C.—and I am 1445 as anxious as anybody that we should—in two years this will be our system; we might as well have that system straight away.
The hon. Member for Norwich, South spoke of a deputation. I led a deputation of the non-ferrous manufacturers and, although its members came away having been delightfully received, they were still dissatisfied and worried about the situation. They were most worried about the safeguards. We know how they are supposed to work—damage has to be proved. But it is a slow process, and usually the damage has been done and action to prevent it comes to late. I had some experience of that as a Parliamentary Secretary to the Ministry of Agriculture, when I had to admit that the safeguards operated too slowly. I know that the system was altered by the previous Government, but it is still too slow and most unsatisfactory. Hon. Members opposite were the first to complain when the Labour Government was in office about the slow operation of the anti-dumping laws, particularly as they applied to milk products. Roughly the same system is used here of having to prove damage, and by the time that is done the damage can be extremely serious.
In my constituency there are three large firms who are very worried about this. They are Enfield Rolling Mills which has a subsidiary called London Zinc Company Limited, E. & E. Kaye, one of the biggest aluminium extruders in the country, and Enfield Cables, which makes copper cables. Three years ago London Zinc put in an expensive modern plant for producing zinc sheets from slab, and has built up this business, which is practically the only one of its kind in the country. Already the pressure is on; prices are being quoted below the cost prices of that company.
There has been an increase of almost 20 per cent. in the unemployment figures in Enfield, where up to a year or two ago labour has been scarce. If the industries I have named are hit as badly as they fear—and I do not think the chairmen and managers of these industries would pressurise us so hard if this were not so—the Minister must be prepared to take speedy action on this early warning system. As I said earlier, if our industries suffer, the developing 1446 countries will inevitably also suffer, and nobody wants that.
§ 10.36 p.m.
§ Mr. Ronald Bray (Rossendale)
I shall be brief and avoid figures as far as possible. The Secretary of State for Trade and Industry in his statement this afternoon dealt with one or two matters on which I was proposing to speak tonight, but there are still 15 or 16 categories broadly affecting the textile and footwear industries which escaped his notice.
This is the second occasion within twelve months on which I have brought before the House issues affecting the footwear industry specifically and textiles in general. I sincerely hope that there will not be a third occasion.
The issue is very simple: should we support developing countries to the detriment of our home-based industries and our economy, or should we not? Over the centuries this country has developed a reputation for being progressive, helping other countries and, perhaps indirectly, helping itself. I am the last person to support inefficient industries, and the last person to support protection when it involves countries with a similar standard of living to ours. Industries, however efficient they may be, can be penalised by virtue of extremely low wage rates in circumstances where Governments are prepared to help export prices to obtain currency.
It is said that the road to hell is paved with good intentions. I submit that the road to unemployment is paved with Measures such as these, unless suitable safeguards are taken for the economy, for employment, for the maintenance of capital and, above all, for the families of those who may be affected.
The issues before us are quite straight forward. Are we to cut off our noses to spite our faces? Are we to welcome the failure of certain industries whose finances and balance sheets are extremely near to the bone now? That will be the definite result of this Order.
I have said already that we do not wish to have protection, but my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) has drawn attention to an advertisement for Brazilian shoes which emanated from a Wellingborough firm. In his speech to the 1447 Boot and Shoe Manufacturers some time last week, my right hon. Friend the Minister for Trade is reported as saying:I hope that importers will bear in mind before placing orders to benefit from the new preference …Importers are not in business just for the sake of it. They are out to get business and make profits. It is no good exhorting them to be good boys. If they did what they are exhorted to do, they would be out of business tomorrow. It is not enough to say kind words to them and to ask them to do nothing which will be detrimental to home industry.
§ Mr. Noble
My hon. Friend is a little wrong about this. What I felt was important, having talked to shoe manufacturers, was that people should not place forward orders for shoes at cheap prices believing that my Department would not act if there was any disruption that would do the importers damage because they thought that they would be getting their shoes at cheap prices and it turned out that they were not. I was trying to give an early warning to prevent people burning their fingers by thinking that I did not intend to take action.
§ Mr. Bray
I am grateful for that intervention. While I agree in principle, I fail to see how it would be effective in practice. As my hon. Friend the Member for Leicester, South-West pointed out, it is difficult to determine a yardstick by which the time factor can be established. The first that we may know is when the goods arrive at the docks, unless there is some form of bush telegraph in Government circles of which we have no knowledge.
I hope that this Prayer will be accepted by the House. We look forward to my right hon. Friend advising us how he intends to give a degree of positive satisfaction to the industries involved.
§ 10.43 p.m.
§ Mr. Edmund Dell (Birkenhead)
It would be wrong to express anything but understanding of the concern which has been voiced on both sides of the House about the possible implications of this Order. But this is no new idea. The problem with which the Order is designed to help is a very old and serious one. It is the problem of dire poverty in large parts of the world.
1448 It was to deal with that problem that the United Nations Conference on Trade and Development was set up, and, at its first meeting at Geneva in 1964, no one played a greater part in advocating this Scheme than the present Prime Minister. It is one of the finest episodes in his career, and I am happy to pay tribute to it.
It would be a pity if we discussed the Order and allowed hon. Members to express their concern about it without also saying that it will be of great importance in helping to relieve poverty in many parts of the world. It is because these countries are less productive that they are poor, and it is because they are less productive that they need this sort of advantage if they are to develop markets for their manufactured goods.
The hon. Member for Leicester, South-West (Mr. Tom Boardman) referred to the manufacturing industries of Latin America and other countries—for example, India. I know these manufacturing industries relatively well. I have visited them. The real point is that concessions on manufactured products included in the Order will not be of any use to under-developed countries which do not have manufacturing industries. It is because they have manufacturing industries that this is a valuable concession.
If we were to say that because Brazil has an industry producing shoes or that Argentina has an industry producing leather goods therefore we shall exclude those products out of fear of the results, we should be depriving those countries of any benefit that they might otherwise expect from this kind of provision.
Of course, there is a risk and there is concern. This is a risk which the Government are consciously taking in an important cause which, if it succeeds to any significant extent, will benefit industry in this country, too, by reason of additional exports which it will be possible to achieve.
There is one point that the House should bear in mind. I think that I am right in saying that, after all, we are talking about a generalised preference scheme, with the emphasis on the word "generalised". Much of what is contained in the Order, if not all, is already granted to Commonwealth countries. Commonwealth countries will gain better 1449 access into the E.E.C. just as non-Commonwealth countries will gain access into this country. It is beneficial to the under-developed countries and it may be beneficial to the developed countries that a process of generalisation should take place.
The hon. Member for Leicester, South-West suggested that one answer might be quotas. Duty-free quotas are used in the E.E.C. As somebody who knows a great deal about commercial activities, he knows that, from the point of view of an under-developed country, there is a serious disadvantage in a quota scheme. Such countries fear that immediately they begin to develop their markets overseas the knife will come down, perhaps not on all imports, but on the duty-free imports. Therefore, they seriously question what resources they can reasonably devote to developing such markets, so this system is better for them.
It is understood that there are circumstances in which the Government of any developed country would have to take action if there were serious disruption. The right hon. Gentleman indicated that he had very well in mind the need for action. I hope that he will not take premature action, although it is understood that there may be need for action in certain cases.
§ Mr. Tom Boardman
I accept the right hon. Gentleman's point about quotas. However, does he agree that a quota which started with a firm amount which could go in duty-free might give a greater feeling of security than an unlimited quota which could be cut off at any time if there appeared to be a threat of damage?
§ Mr. Dell
They estimate at the moment that their exports are not likely to develop at such a rate that they will damage the home industry. However, if a quota was fixed in advance, they would say: "We know what it is. It will apply to all under-developed countries. What share we will have we do not know. When the knife will come down we do not know." It would be a serious disadvantage to them.
I do not complain that concern has been expressed, but I hope that the House will give a warmer welcome to the Order than some of the concern which has been voiced would lead people to expect. I hope that the House will agree to the 1450 Order which will give to the countries in whose favour it is made the advantages which they need to raise their standards of living.
§ 10.50 p.m.
§ Mr. Peter Blaker (Blackpool, South)
I support the Order. I do not support the Prayer which my hon. Friend has put down. I understand the concern which some of my hon. Friends have expressed, and I do not dispute that there may be difficult cases in which the safeguards to which my right hon. Friend will no doubt refer may be necessary, but I think we must remember the main object of the Order. That object is shared by both parties.
As the right hon. Member for Birkenhead (Mr. Dell) said, the negotiations which have taken place over 10 years or more owe much to the Prime Minister, and they were carried forward by the Labour Party when hon. Gentlemen opposite were in power. The object of these long and difficult negotiations has been to ensure the economic progress of the developing world. That has two aspects. First, economic progress for them involves industrialisation. We cannot expect them to go on being hewers of wood and drawers of water, and if they are to be encouraged to industrialise the competition which some of our industries will feel from them must be accentuated.
Second, the best way of helping the developing countries lies—and this is very much a Conservative principle—in trade rather than aid. That is what the Order is all about. One of my hon. Friends complained that we might face competition from low wage countries. But that, again, is what it is all about. They are low wage countries because they are economically backward. The object of the Order is to help them to raise their own wages, and when that happens not only will the competition they offer perhaps be less severe, but they will be more prosperous and therefore able to buy more goods from us.
I welcome the Order as a move towards freer trade, which is very much needed in the present international atmosphere. I believe that it will be good not only for the developing countries but also, in the medium and long run, for ourselves.
I think that the Order is relevant also to the attitude which the developing 1451 countries are likely to adopt to us in the context of our entry into the Common Market. It is often assumed that those countries, when we go in, will raise tariff barriers against us because we shall be applying against them the common external tariff. That is an assumption which needs critical examination.
When one considers this Order along with the offer of association agreements, or trade agreements, in the enlarged E.E.C. which is open to every developing Commonwealth country, 28 out of the 31 Commonwealth countries are likely to have better opportunities of exporting to this country than they have now. I therefore find it difficult to understand why it should be thought likely that they would raise tariff barriers against us if we went into the Common Market. The net result of this Order and of our entry into the Common Market will be a more liberal trading system in general, and therefore I support the Order.
§ 10.54 p.m.
§ Mr. Sydney Chapman (Birmingham, Handsworth)
I propose to refer briefly to that part of the Order which will allow the developing countries to export copper semi-manufacturers to the United Kingdom without payment of duty—goods falling within Chapter 74 of the United Kingdom tariff headings.
The largest firm in my constituency is Imperial Metal Industries (Kynoch) Ltd. It employs 9,000 people, and it is deeply concerned with this aspect of the Order. In particular the wrought copper division of the company, which employs more than 2,000 people in my constituency, and more than 2,000 people elsewhere, feels that it will be seriously and adversely affected.
I want to confine myself to two cases by way of explaining the worry of I.M.I. The first is Yugoslavia which, as hon. Members know, is one of the 91 classified developing countries. It has indigenous supplies of copper. It has an economy which has different standards from ours. It already exports at prices which are unrealistic, and this is already damaging some European markets with existing tariff protection. It is no exaggeration to say that unless safeguards are introduced all hell could be let loose if this protection is removed.
1452 The second case I want to raise is Peru, which is to establish a semi-fabricating plant the purpose of which is to produce 30,000 tons of semi-manufactured copper of which 23,000 tons will be exported and which will naturally be directed towards our markets. This will create even more excess capacity because it will be let into this country duty-free and will wreak havoc.
§ Mr. Raymond Gower (Barry)
Can my hon. Friend say whether it is not a fact that Peru is about to join in a Latin-American common market which is in the process of being formed and that to some extent our future trading processes will be modified by this?
§ Mr. Chapman
I hope my hon. Friend will excuse me if I do not give him a sure and studied reply because of time. I am talking about the situation as it will exist on 1st January, 1972. I could give other cases concerning copper from Zambia and Chile, but I think I have given two cases which underline the concern of I.M.I.
I have every sympathy with the purpose of the U.N.C.T.A.D. proposals, which we must all accept generally. I am all for the liberalisation of world trade and am deeply conscious of the long-term benefits of developed nations helping under-developed nations. I believe that aid to trade should be given to industries in developing countries that are labour-intensive and primarily directed towards the home markets. With copper and its alloys this is certainly not the case.
I know the Government have said—and I much appreciate the Government receiving representations from I.M.I. and the British Non-Ferrous Metals Federation—that they will act to restore tariffs if there is "serious injury or threat" to industry. The Federation has supplied such evidence to the Department of Trade and Industry and to wait until there is serious injury will be far too late. May I put this rather simple proposition which, I hope, does not sound naive. We want to help developing countries; this Parliament has taken a decision in principle to join the E.E.C.; would it not be better to adopt its policy and to introduce at once automatic safeguards and adopt quotas for sensitive goods as they are euphistically called, of which copper is certainly one.
§ 10.57 p.m.
§ Mr. Peter Fry (Wellingborough)
I hope hon. Members will not mind if I come above ground and refer to the boot and shoe industry again. Far from disagreeing with my hon. Friend the Member for Norwich, South (Dr. Stuttaford), I think that my constituency would run his a close second if there were a disaster in this industry. I am only too well aware that I am not speaking on behalf of one of the big battalions, but on behalf of an industry that has had a remarkable strike-free history—with no national strikes since the General Strike of 1926. It is indicative of the good labour relations that both the union and the Manufacturers Federation join in supporting this Prayer.
The success of the policy of fulfilling our obligations towards under-developed countries will ultimately depend on public opinion, and already certain people are saying, "We are being taxed to give overseas aid which is being used to ruin us through cheap imports." The Government must watch this carefully, because these are the words of a constituent of mine. I am aware of the dilemma in which the Government find themselves, and I fully support their intention. I believe that they do intend to provide safeguards for the boot and shoe industry, but I fear we have not had a detailed spelling-out of the working of these safeguards in earlier ministerial statements and I hope we will get that tonight. We appear to be heavily dependent on information provided by the industry itself—indeed, from the very people who will benefit mainly from the importation of foreign shoes.
Second, because of the five or six months' delay between order and import, tremendous damage can be caused during that time to the industry, without there being time in which to do anything about it. There is no doubt in the industry that the Government mean well, but the industry needs to be assured that what the Government propose to be effective.
Looking at the industry as a whole, it is clearly not one that is spread in small units throughout the country. It tends to be concentrated. For example, in my constituency are small towns in which there are virtually no alternative forms of employment. If this industry happened to suffer severe unemployment in 1454 those areas, they would rapidly become depressed areas, simply because there is nothing else for the people to do.
Although I am tonight not speaking on behalf of one of Britain's great industries, I am speaking of a loyal and productive one and I appeal to the Government to see that its interests are safeguarded. As a result of consultations I have had with manufacturers, union representatives and constituents, I can assure the House that there is a feeling that if we must adopt the E.E.C. quota system in 1974 it would be better to adopt it now, for the industry believes that at least when the quota is used up the external tariff of 20 per cent. on non-leather shoes will be considerably higher than our present tariff, so that after the quota is exhausted there would be some degree of safeguard for our manufacturers.
I, too, await with interest the Minister's reply. I shall be unable to support this Instrument. Whether I shall feel obliged to go further will depend on his reply.
§ 11.3 p.m.
§ Mrs. Judith Hart (Lanark)
I find interesting and understandable the view that is sometimes expressed that when the House has before it what might be supposed to be a minor or somewhat obscure matter, a matter in which hon. Members might not be expected to show a tremendous amount of attention, we have some of our most meaningful debates. Such a matter is the relationship between this country and the developing countries.
When we discuss aid we have on both sides of the House a few dedicated hon. Members who are devoted to the principle of aid and who have specialised in the subject. Tonight a number of hon. Members have been raising a really fundamental issue that arises when we discuss the need to assist the developing countries, and I am sorry that this has presented some difficulty for the Minister and the Government Chief Whip, who I see in his place.
I sympathise with and appreciate the arguments that have been adduced by hon. Members who are concerned for the workers and industries in their constituencies, and this presents a real conflict. But whatever we do by way of giving 1455 aid to the developing countries—whatever is contained in the public expenditure programmes that were being discussed earlier, in terms of the transfer of official Government resources or even of private investment to the developing countries—will amount to very little compared with the earning that they themselves can achieve from what they export. This is the biggest problem.
However, to the extent that they pull themselves up by their boot-straps and manage to earn more, increase their foreign exchange earnings and provide for themselves the investment and resources they need for growth and development to end their own poverty, to that extent unless it is matched by a corresponding increase in world trade, they are simply capturing bits of the market that have hitherto been reserved to the rich countries, and this presents a problem.
I must say at the very outset of my remarks that we on this side fully support the Government and warmly congratulate them on introducing this Order, which is our fulfilment of the generalised preference agreement of U.N.C.T.A.D. But as we move further in the liberalisation of trade to protect the developing countries, it is necessary that we think in terms of corresponding planning within our own country. If certain industries are threatened—and there are always liable Ito be little pockets of British industry, whether it be textiles, or shoes, or some other industry, that are particularly threatened at any given point of time by the expansion of semi-manufactured or manufactured goods from the developing countries—we have to plan the adjustments within our own industry which will allow us to sustain that increase in developing countries' trade without sacrificing our own employment.
Is it beyond us to do that? Is it beyond us, as a highly sophisticated, very rich developed country, to make what are fractionally minor adjustments within our own economy in order that we need not regard the liberalisation of trade to benefit the developing countries as a threat, and therefore as something to be opposed?
Let me give one or two indications of the seriousness of this matter for the 1456 developing countries. It is a fact that since 1950 the developing countries have experienced a fall in their share of trade in the world as a whole from 31 per cent., then to only 18 per cent. in 1969. Indeed, if we exclude the developing countries' oil exports, their share of trade had dropped in 1969 to only 12 per cent. It is not the case that during the last 20 years the developing countries have been flooding Britain and the rest of the developed countries with their goods. The fact is that they have been suffering a cut back in their share of world trade, and so have been unable to achieve the investment resources they needed for a more rapid rate of growth.
Every speaker tonight on the Government side has said how much he cares about increasing the prospects for the developing countries. Not one hon. Member opposite, which saying that he is concerned about the industry in his constituency, has not also said: "But we must help the developing countries." But they must realise that the trend of the last 20 years has been to give less assistance through the means of trade rather than more. The developing countries have been up against a steadily increasing barrier against their trade with the rich world—
§ Dr. Stuttaford
Will the right hon. Lady just answer a simple question? Would her party give the same form of protection to British industry that is given by other countries in the richer world, or would she leave it to market forces?
§ Mrs. Hart
I am inclined to believe, especially in the light of recent experience in this country under this Government, that there is little that can safely be left to market forces if people are to be protected, but this is to introduce a party note—
§ Dr. Stuttaford
I want to know what the right hon. Lady's party would do.
§ Mrs. Hart
The hon. Gentleman cannot expect me to give an indication at this stage of what I think hon. Gentlemen opposite should do in fulfilment of their obligations to the British people under the Order, but I do say that it is absolutely essential that as we extend the 1457 liberalisation of trade to developing countries we should match it by a degree of planning and intervention to protect our own people at home. That is a fair statement, and I do not think that I can be expected to go further from the Opposition benches tonight.
I want to indicate two points that struck me as the hon. Member for Birmingham, Handsworth (Mr. Chapman) was speaking. He mentioned copper substitutes and referred to Peru and Chile. One is always most impressed by countries that one has just visited, and it so happens that about two months ago I was in both Peru and Chile. I cannot believe that any worker or employer in the hon. Member's constituency who was concerned about the freer import of semi-manufactured goods from the developing countries included in this Order would wish to impede development in both Peru and Chile, knowing that in Peru there is only one chance in three that a child will live to the age of 5, and that illiteracy there is about 70 per cent., and that in Chile there is desperate poverty in many rural areas.
Nobody knowing those facts would not say, "Right, given that there is a confrontation between our self-interest in the export of our own goods and the interest of a developing country which is trying to eradicate this kind of poverty, the sensible answer is to say, 'Let us find the right way to plan this thing.'" Such a person would say, "Let us see what can be done with our skills, our resources, our manufacturing capacity, machinery and capital equipment, in a general expansion of world trade—an expansion that occurs if the developing countries are able to become a little less poor and can represent new consumers—to extend the liberalisation of trade towards the developing countries and, at the same time, provide full employment for our own people". That is the only way in which we can look at the matter.
§ Mr. Chapman
I do not disagree with what the right hon. Lady has said, but I think that the setting up of this factory to produce 30,000 tons of copper is a bad example. It will provide few jobs in Pent. Many other industries could be set up there with more advantage.
§ Mrs. Hart
But the problem in the developing countries is as complex as it is here. It is not merely a question of creating employment; there must also be the foreign investment which can produce the employment.
I want to make two comments on the contrast between this scheme—which is very generous and liberal—and the E.E.C. scheme. Various people have asked why we cannot have the quota scheme that has been introduced in the E.E.C. One good reason is that the quota system has been condemned by everybody in the development field. The Pearson Commission condemned it, and U.N.C.T.A.D. regarded it as an unsatisfactory scheme. The only kind of generalised preference scheme that wins the approval of those who genuinely want to help the developing countries is the kind that Britain has introduced.
In the discussion on the Finance Bill in Committee upstairs the Minister for Trade made it very clear how much more generous and how much better for the developing countries this scheme was than the E.E.C. scheme. That is sufficient answer to the question. One can say "Introduce a quota scheme, because that will protect our own industries better", but one cannot argue that a quota system will be anything but less liberal for the developing countries themselves.
I ask the Minister for Trade what he foresees as being the result—if we go into the Community—of the harmonisation of this scheme with the E.E.C. scheme. The word "harmonisation" is normally held to be a euphemism for the sacrifice of British intentions to those of the E.E.C. I hope that in this matter the Minister can give us an assurance that he will do his best to ensure that the greater generosity of the British scheme is extended into the E.E.C. scheme, rather than that the British generalised preference scheme should be sacrificed to the much less generous one of the E.E.C. I hope that he will be able at least to give us that assurance while reassuring his hon. Friends that he has been right, as we believe that he has, to introduce the scheme as a whole.
§ 11.15 p.m.
§ The Minister for Trade (Mr. Michael Noble)
Everyone who has listened to this comparatively short debate, in which 1459 12 speakers have put their points clearly and decisively, cannot help being impressed by the dichotomy of views expressed quite sincerely by different people.
There is no doubt that we all want to do what we can to help the developing countries. But we all see that, in certain specific things, the help that may be given could perhaps mean a difficulty for some industry in our particular constituency. I congratulate all those who have spoken on the very balanced and sincere way that they have tackled this problem.
The purpose of the Order is frankly to increase the exports and export earnings of the developing countries by opening up markets for them in the developed countries. This is not a new proposal for Britain, although it is for most other developed countries. In our market we already give duty free entry and tariff preferences on most products from the Commonwealth. We have seen the contribution which this policy has made for many years in increasing the wealth and the economic growth of those developing countries in the Commonwealth. I take the point made by the right hon. Member for Birkenhead (Mr. Dell). The direct result of this has been extremely good for industries in Britain as well.
§ Sir Ronald Russell (Wembley, South)
§ Mr. Noble
When I visit many of these countries they explain to me how much they want engineering products and a whole range of things from our country, but often they cannot afford to buy them unless we buy something from them. So hon. Members should realise that, although there may be difficulties for certain industries in their constituencies, if the scheme is balanced and carried forward sensibly it is highly likely that there will be many advantages for other industries in their constituencies, and we shall keep the right balance.
The right hon. Member for Birkenhead spoke very kindly and appropriately of the part played by our Prime Minister in the first United Nations Conference on Trade and Development. I remind the House shortly of what he said:Surely we ought all now to be willing to move more quickly in reducing import duties on goods from developing countries than we may be able to do in trade between ourselves. We in Britain are prepared to 1460 extend tariff preferences to all developing con-tries. The preferences we give at present are designed for the benefit of Commonwealth countries. These countries might suffer by sharing them with others unless they obtained compensating advantages in other markets. We should, therefore, need to act in concert with the other major industrialised countries to ensure that this is brought about.As the right hon. Member for Lanark (Mrs. Hart) said, this is the principle behind the whole operation. It is a generalised preference scheme, and one for which the right hon. Member for Grimsby (Mr. Crosland), who led the British delegation at the second UNCTAD conference in Delhi, expressed Britain's continuing support and which Governments have steadily supported ever since.
Quickly taking up some of the points raised, my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) said that one problem was that in the E.E.C. the quotas had already been taken up. This is perfectly true, but the quotas were for the period from July until the end of December. We are now in December. The quotas have been taken up but new quotas start in January, so this is not altogether surprising. I agree with my hon. Friend that there is a considerable danger of diversion of some goods which would have been destined for America if the import surcharge had not been put on there. All we can say at present is that the whole House hopes that in the current negotiations it will be possible, as the Americans have consistently said that they would be prepared to do, for the surcharge to come off quickly and for this threat to be removed.
My hon. Friend and the hon. Member for Enfield, East (Mr. Mackie) said that one of the worries of industries—and I understand this—is that the action that we will take over safeguards is of the same type as the action that in the past has had to be taken over dumping. The hon. Member for Enfield, East was a distinguished Minister at the Ministry of Agriculture, Fisheries and Food—a Ministry which has always maintained that the Board of Trade—now the Department of Trade and Industry—is frightfully slow to take action about dumping when the Ministry wants to do something about it. It is not so now. We can generally get the Orders out within a week of hearing from that Ministry.
1461 This is not the same system. I agree that industry may fear that it is, but we have deliberately not put a whole number of criteria into our safeguards; so that, when it is necessary to act, we can act quickly.
My hon. Friend the Member for Norwich, South (Dr. Stuttaford) spoke about the E.E.C. quotas against shoes. I will say a few words on that question when I talk about the quota system, because I do not believe that the E.E.C. system is either better or more effective. I think that it is worse and slower. I should be only too delighted to meet any members of my hon. Friend's industry and of the union, if they wish. I met some of the union representatives and most of the leaders of the industry at their dinner and talked to them frankly and openly, as I am trying to do to the House.
§ Dr. Stuttaford
§ Mr. Noble
I shall be delighted to meet the representatives of my hon. Friend's industry, if he wants me to, but I want to say much more and I have not much time.
On the point made by my hon. Friend the Member for Rossendale (Mr. Bray), I again warn importers that, if they think that they will make a killing out of a whole lot of cheap imports which will disrupt industry, they may well get their fingers burnt; because it is only fair to warn them that we intend to act quickly and firmly if the need arises.
I agree profoundly with my hon. Friend the Member for Blackpool, South (Mr. Blaker) that it is trade rather than aid that we want to develop to help developing countries. This is so obviously sensible that we have to take some risks, though they must not be desperate ones, to develop this policy in the world as a whole.
I sympathise with my hon. Friend the Member for Birmingham, Handsworth (Mr. Chapman) in wanting automatic safeguards. This is possibly the only point about the safeguards of the E.E.C. which may be better than ours, because they are automatic; they come in straight away without any information from the industry.
I want to describe the safeguards in rather greater detail, because this is what 1462 the House most wants to know tonight. The Community employs an automatic safeguard to protect some of its industries. It has been suggested that the same system would be a better safeguard than we shall be introducing. We shall be aligning our scheme with that of the Community after entry. As the House has been informed, it has been agreed that we shall do so on 1st January, 1974. To take up the point made by the right hon. Lady the Member for Lanark (Mrs. Hart), if we can persuade the Community to come our way, we shall do that. In the course of 1973 the members of the enlarged Community will be considering together the changes that will be necessary to the E.E.C.'s present scheme to fit the enlarged Community. In any case, there are not at the moment statutory powers which would permit us to introduce duty-free quotas.
There are some misconceptions about the Community's scheme. The quotas do not, as some people think, limit total imports from the developing countries. The quotas are, in fact, ceilings on the amount of goods from these countries which may come in free of duty in any one year. Once the ceiling is reached for the year the goods simply become chargeable at the full rate of duty, but a new duty free quota becomes available at the start of the following year. The quotas that are now being operated by the E.E.C. cover only the six months following 1st July and new quota ceilings will be open on 1st January. It is, therefore, scarcely surprising that a number of ceilings have already been reached in respect of individual developing countries whose share in the total ceiling for the Community is limited to a fixed percentage.
It should also be remembered that most of the manufactures in the E.E.C. scheme are currently being admitted duty free into the community without any limitation at all. It is only the sensitive goods that have automatic limits applied to the amount of duty-free imports. This is the E.E.C. scheme that we shall be applying in 1971 if we cannot persuade them to adopt ours, which I believe is better.
Until 1974 we shall be operating a different safeguard procedure of our own. I should like to describe this in some detail since I think that our proposals have not been fully understood. What 1463 we have said is that if we are satisfied that the new preferences are causing or threatening serious injury to domestic producers, we shall reimpose the duty either in whole or in part. It will, of course, be necessary to seek parliamentary approval to reimpose the duty but this can be done as quickly as the circumstances require. Once the duty has been reimposed it can remain in force for as long as necessary.
We have not laid down any rigid criteria in advance. It is at least partly because of such rigidity that the antidumping legislation has so often been criticised by industry for being both slow and cumbersome. I am sure that it is right that we should consider cases on their merits and should decide how to establish guide lines in the light of experience. But I can give the House some example of what we have in mind. First, it is clearly necessary that imports under the new preferences shall be likely to lead to real injury. The use of our safeguard would not be justified simply as the result of increased imports. Nor do we have any intention of taking no action until a great flood of imports has arrived and caused the injury. We can and will act if industry can show that serious injury is threatened as the result, for example, of a marked upward trend in the volume of imports or in the rate that orders are being switched. We can take account of low priced orders that would disrupt domestic prices, and this applies particularly to the case of nonferrous metals to which reference has been made in the debate. I can assure the House that the arrangements will be both flexible and quick to deal with any threats that arise.
I should like to say to my hon. Friend the Member for Leicester, South-West that I appreciate his reason for moving this Prayer. I assure him that my right hon. Friend and I are very sympathetic indeed to the problems that he and his hon. Friends have put forward. If necessary we shall move fast and firmly because we must get the balance right between the help we give the developing countries and any possible damage to individual industries.
§ Mr. Tom Boardman
With the leave of the House, in view of the understanding and sympathetic consideration that my 1464 right hon. Friend has given to this matter, and the fact that hon. Members will, no doubt, be able to raise the matter again in future if it is considered desirable, I beg to ask leave to withdraw the Motion.
§ Motion, by leave, withdrawn.
- ADJOURNMENT 12 words