HC Deb 08 June 1976 vol 912 cc1395-404

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Coleman.]

1.31 a.m.

Mr. Edward Lyons (Bradford, West)

It is just after 1.30 a.m., and I am taken somewhat by surprise, since I had anticipated not having to rise until about 11.30 this morning. However, despite the short notice, I propose to address the House on the very serious threat that now exists to the prospects of the television manufacturing industry in the United Kingdom. I want to talk about it particularly in relation to the threat of Japanese competition.

The television manufacturing industry in the United Kingdom is not in a healthy state. The Japanese have recently accomplished a very substantial feat. They forced the closure of the Skelmersdale factory of Thorn Consumer Electronics at a cost of 1,400 jobs, £20 million a year on the balance of payments, and the serious weakening of the television manufacturing industry in the United Kingdom. They did it by maintaining prices for Japanese tubes without any increase at all throughout 1974 and 1975. In fact, between October 1974 and October 1975 the price of tubes from Japan actually fell.

What happened was that the moment they knocked out one-half of all the tube production in the United Kingdom, their prices rose steadily. In March 1976 the Japanese increased their prices very substantially, and we in Britain will have to pay the piper for that.

I mention those facts because the same thing is happening in relation to television sets. Having got the tubes under their belt, the Japanese are now moving in to knock out the British television manufacturing industry, using similar methods.

The value of the yen has risen substantially in the last two years in relation to sterling. Consequently, it will take more and more pounds to buy a Japanese tube or a Japanese television set. But until the Japanese knocked out the Skelmersdale factory, the price of tubes did not rise. Up to the moment, no price rises have occurred in Japanese television sets, although they have now found it necessary to increase the price of tubes, because they are no longer worried about local competition. Why do they not increase the price of television sets?

Japan has a 10 per cent. inflation rate, which should raise Japanese manufacturing costs. That should be another reason why Japanese television sets should cost more in the United Kingdom. However, by a remarkable feat, they do not cost more here, although the prices in Japan have been raised. The Japanese have increased the price of television sets in Japan but not in the United Kingdom and Western Europe. That is because they are pursuing the same policy with regard to television sets as they have pursued in relation to television tubes. They will wait until Thorn Consumer Electronics, which is making over half of our monochrome sets and one-third of our colour sets, is forced to close down production, or a substantial part of its production.

The purpose of this debate is to ask the Government what they propose to do about this matter. The industry has been on to the Government. The Minister of State—my hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman)—has said that the Government intend to see that the United Kingdom television manufacturing industry thrives, but so far nothing has happened. The Japanese had an arrangement, industry to industry, with United Kingdom manufacturers, that when business was bad in the United Kingdom, and when consumer demand was low, they would export to this country fewer sets, in order that our industry could remain viable, and that they would import more sets only when our consumer demand was booming. They have refused to renew that agreement since the end of 1975, because they have decided to move in for the kill on our television set manufacturing industry.

The Government now have the full responsibility for negotiating with the Japanese on behalf of the industry. There was a move to prove that the Japanese have been guilty of dumping tubes, but the Japanese were very quick with their footwork and, at the same time, they took advantage of the curious phrasing of the remit in connection with dumping. The result was that nothing was established, although it is quite clear that the tubes were sold at a lower price than that at which they should have been sold. In other words, the Japanese are prepared to sell goods at an uneconomic price for a time in order to achieve their long-range economic objectives. It is quite clear, therefore, that what we are seeing here are unethical business practices, with the long-range objective of destroying sectors of Western European industry.

I want to make it very clear that the television manufacturers in Britain are not objecting to fair competition. The European competition they regard as fair. If costs rise in Europe, the price of European television sets rises too, because their manufacture costs more, and therefore more has to be paid by Britain in buying a European article, just as British manufacturers, when their costs rise with inflation, have to increase their prices. However, the Japanese, until they have knocked out an industry, keep their prices steady.

If trading is fair, it is impossible to understand how it is that the Japanese have had to raise the price of tubes at this late date, but after a year or two still do not have to raise the price of colour television sets.

Basically, therefore, the ball is in the British Government's court. They must honour their pledge to see that we have a thriving industry. If the Japanese knock out this section of industry, thousands of jobs will be lost. We have lost 1,400 at Skelmersdale. In Bradford we have Thorn Consumer Electronics, which was, and perhaps still is, the largest colour television factory in Europe. The number of workers there has dropped dramatically, unfortunately, but there are still between 2,000 and 3,000 people employed there. If the Government do not act, in the long term—perhaps even in the medium term—we shall see a loss of employment in Bradford.

I do not want to be alarmist, but in a business sense we are dealing with ruthless people, when we are dealing with the Japanese. I should also include mention of areas into which the Japanese have expanded for the purpose of manufacture, because now an enormous number of television sets are coming from Singapore and Taiwan. The Japanese have a finger in those pies. They are increasing their export to Britain of portable monochrome television sets at a fantastic rate. It is likely that they will take 50 per cent. of the market this year.

Last year it was suggested to the Japanese that they restrict their exports of sets to this country to 175,000. They exported 209,000 sets. At the moment, we are importing Japanese sets, taking the figures for February and March, at an annual rate of about 300,000. When one adds the other Eastern countries we can expect imports of television sets into Britain to number about 500,000 this year. That will not do, unless competition is fair. Faced with subtle pricing policies which are not based on honest commercial criteria the British industry will go to the wall. If it goes to the wall there will be a loss of jobs, which I shall find unacceptable. This is a Labour Government and I am a Labour MP, but if the factory in Bradford closes the Government will have a lot of trouble on their hands from Labour MPs.

Tonight we are giving advance warning. A lot more will be heard about the colour television industry, because it is the largest employer of labour in Bradford and we are not prepared to see it close for want of action. We simply cannot have that, and the balance of payments situation in this country cannot stand it. We have already been seriously weakened by the loss of the television tube industry-50 per cent, of that has gone—and we will not allow the colour television and monochrome television industries to go without a fight. Workers in Gosport now have their jobs threatened by the avalanche of Japanese sets coming into this country.

These are some of the matters that I would like the Minister to consider tonight. What we want is a stiffening of British attitudes in negotiations with the Japanese. If they will not conform to proper and reasonable standards by limiting their exports to us or ensuring that their pricing policies relate to the cost of manufacture of the set, the British Government must take serious action. That is the message that I bring to the Minister tonight and I hope he will give some answers to it.

1.43 a.m.

The Minister of State, Department of Industry (Mr. Alan Williams)

I am grateful to my hon. and learned Friend for raising this subject. I am fully appreciative of the importance attached to it in his part of the country. I should emphasise—and my hon. and learned Friend has himself intimated—that public interest and public involvement in this industry is not confined to any one part of the country. There are 20,000 employees and, in addition, there are substantial numbers in supporting component industries.

As has been suggested by my hon. and learned Friend, the most important aspect of the industry is the colour TV set. Last year, which was a bad year for the industry, over 1,500,000 United Kingdom colour television sets were built, with an ex-works value of £260 million. In addition, 500,000 monochrome sets were built, with a value of £25 million. However, the industry has been going through a difficult period.

One must see this problem in a slightly longer-term perspective and not just in relation to the events of the last 12 months. One must take into account the strains imposed on the industry by the irresponsible activities of the Conservative Chancellor, Mr. Barber, when he unexpectedly removed all credit controls in 1971, unleashing a demand that the domestic industry was not capable of meeting. Consumer demand rose from 400,000 in 1970 to 2.6 million in 1973. Inevitably, imports were drawn in, the industry expanded, and committed capital to meet this extra demand, and domestic output rose from 500,000 colour sets in 1970 to 2 million in 1973. That was a remarkable expansion.

But then, as irresponsibly as the credit controls were removed in 1971, they were stringently reapplied in December 1973. Firms had made their financial commitments and deployed their resources, and consumer demand fell sharply as a result of the Conservative Chancellor's decision. The figure for United Kingdom production slipped to just under 2 million.

Then the recession deepened, in part as an inevitable reflection of the worldwide situation. One must accept that at that stage the VAT rate of 25 per cent. was not exactly helpful to the industry's prospects. Output fell eventually to 1.6 million. By the end of last year the United Kingdom colour set manufacturers were working to as little as 50 per cent. of capacity.

Naturally the Government treat this situation as serious and want to do what they can to help. In December, the credit controls were eased and in April the VAT rate was halved to 12½ per cent. We believe that the benefits of these decisions will be felt more fully as the upturn is reflected in consumer demand generally and that we have therefore eased the trading circumstances for the television manufacturers.

Nevertheless, it would be ridiculous to be complacent or to suggest that that in any way resolves the immediate problem, or that we shall return to something like the boom year of 1973. I see no prospect of that. The demand for colour sets over 1976 as a whole may still show little change over the figures for 1975.

Despite the substantial and commendable increase in exports of colour television sets—in other words, finding alternative markets—from 10,000 in 1971 to 200,000 last year, I regret to say that the under-loading in the set and component factories has continued and that individual firms will need to consider their production plans carefully in the light of their assessment of the market trends.

The critical point raised by my hon. and learned Friend—I fully understand his concern—was the problem of import competition, particularly from Japan. In colour television sets, which are the most important part of the industry, accounting for 90 per cent. of output and the bulk of employment, import penetration of the United Kingdom market has actually fallen, from 25 per cent. in 1973 to 20 per cent. in 1974, then to 16.5 per cent. in 1975, and the first four months of this year shows an annual rate of only 13 per cent. That rate is half that which applied in 1973.

But the largest single source of colour television imports is Japan, and its share of our market has remained constant at about 10 per cent. throughout this period. At the end of 1975, the Japanese Government discontinued its statutory controls on the export of colour sets to the United Kingdom, but there has been no subsequent increase in the Japanese share of our market. It still stands at 10 per cent. for the first four months of this year, but that in no way leads us to be complacent. We are aware of the apprehensions of the industry. My right hon. Friend the Chancellor of the Exchequer said that the need for continuity of restraint is well understood by the Japanese Government and ourselves.

My hon. and learned Friend will recollect that the Department of Trade has set up a surveillance licensing system to monitor developments and to give early warning. We hope that that system will enable us to respond rapidly to any marked and important change.

Mr. Edward Lyons

My hon. Friend has not yet dealt with monochrome television sets. There has been a tremendous jump this year in monochrome set imports, and it looks as if Japan and other Far Eastern countries will take not 10 per cent., but over half of the production of monochrome sets.

Mr. Williams

I am trying to isolate the problems, so that we see them in perspective. If my hon. and learned Friend will excuse me from replying immediately, I shall come to those points.

I know that the United Kingdom industry is concerned that the average landed price of Japanese colour sets has so far failed to show the increase that might have been expected as a result of rising raw material costs and fluctuating exchange rates. The interesting feature is that, despite this, the Japanese have not expanded their market share of colour television sets in this country, as might have been expected were their objectives those described by my hon. and learned Friend. The ability of the Japanese—and this applies across the board—to maintain or reduce their prices does not necessarily indicate unfair trading practices. We should have to take into account our international trading colleagues were we to take the course of action advocated by my hon. and learned Friend. The ability to maintain or reduce prices might reflect higher productivity, or greater willingness to absorb costs or accept reduced margins.

Mr. Edward Lyons

Are not the only reasons why our colour television industry has not been smashed up the PAL licensing system—which denies the Japanese the right to send to Britain colour sets with screens bigger than 20in.—and the agreement that has just expired and will not be renewed, for the voluntary limitation of exports to Britain of colour television sets? Without those two safeguards, our colour television industry would already be in ruins.

Mr. Williams

My hon. and learned Friend must bear in mind that the end of the agreement came at the time of the decision on credit controls, and we might have expected repercussions in terms of the market share. We have subsequently had the Chancellor's Budget decisions. If the surveillance system showed a marked change in the circumstances, we should want to look at that more closely.

We must not overlook the onus that rests on the industry to establish its case. If there is reason to think that dumping is occurring—the general criterion is that the price charged in the United Kingdom is lower than the price charged in the exporting country's domestic market—the Department of Trade is always ready to consider anti-dumping action of the type available to us, but before taking such action the Department requires the application for action to show evidence of domestic prices in the exporting country and evidence of the extent to which the United Kingdom industry is being injured or threatened.

My hon. and learned Friend said that he would not stand by and see jobs lost because of lack of action, and it is very much to his credit. That is the view of the Government, as well. But if the United Kingdom television industry wishes to press a case for anti-dumping action, it should proceed accordingly and follow the guidance that I have given on the action to be taken, although, if it is to do that it would be sensible for it first to discuss the position with my officials.

I have explained the position about colour television sets. The situation is rather different in respect of table monochrome sets. There, the market has fallen, and imports present no problem. My hon. and learned Friend is mainly concerned about portable sets. Imports from Japan, Singapore and Taiwan are well entrenched—slightly more so than he suggested. The market for portable models has risen markedly in this country, from 300,000 in 1972 to over 700,000 last year. Here, we come across a somewhat different pattern of trends in terms of market penetration. Having fallen from 71 per cent. of the market in 1972 to 62 per cent. in 1973 and 43 per cent. in 1974, the share of the market held by imports rose again in 1975 to 57 per cent., and has reached 67 per cent. in the first four months of this year. In numbers, imports of portable monochrome sets almost doubled in the last four months, compared with the same period last year.

Therefore, I must repeat what I have said, We fully understand the concern of the industry about imports into the radio and hi-fi markets and my hon. Friends' concern about the Thorn factory in Skelmersdale. We understand that they want action against imports from the Far East. But I reiterate that the Government have made it clear that they are willing to consider selective import controls if it can be shown that the survival of a British industry is threatened.

But the industry must bring forward relevant evidence and information. Our international obligations require that such controls could in any case only be temporary. A number of factors have to be taken into account, including the risk of retaliation in the sale of our own products and the long-term prospects of the industry concerned.

I urge my hon. and learned Friend, and the industry, if they feel that the evidence is as overwhelming as he has suggested and that it would be practicable to bring forward the data to demonstrate that there has been dumping, to make that information available to the Department at the earliest possible moment. I am sure that my right hon. Friend would be very ready to investigate such evidence urgently.

Mr. Edward Lyons

What we want is a tough negotiating position by the Government to persuade the Japanese to bring in the sort of arrangements, voluntarily to restrict their exports to this country, which we had until last December. We do not need to prove dumping only.

Mr. Williams

I assure my hon. and learned Friend that the Government will be making the necessary representations to the Japanese Government in the light of the figures that have become available, but in terms of the drastic solution that he seeks—namely, unilaterally to curb imports—it would be necessary for an appropriate case to be made by the industry. If he wishes to discuss this with me further in the Department, I shall be happy to have such discussion.

Question put and agreed to.

Adjourned accordingly at Two o'clock.