ZIP FASTENER INDUSTRY

HC Deb 21 April 1978 vol 948 cc961-72

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

4.12 p.m.

Mr. J. W. Rooker (Birmingham, Perry Barr)

I wish to raise in this debate the problems of the zip fastener industry in the United Kingdom. In 1970, the United Kingdom imported £1.2 million worth of zip fasteners and component parts and exported £2 million worth. By 1977, we were importing £10 million worth of parts and completed zip fasteners and exporting only £7.1 million worth. In other words, we had moved into the position of being a net importer of parts and completed zip fasteners.

The problem basically relates, in the substantial change over the last seven years, to the construction of a factory by the Japanese manufacturer YKK Limited at Runcorn, Cheshire, which is being used as a means of substantially increasing imports of completed parts from Japan. It has not been used to manufacture components and completed zip fasteners in this country, as was the intention, and thereby it has not given work to British workers to replace the jobs lost in our own factories.

I have raised this matter on a number of occasions, and I raise it again today because the assurances I have been given on the Floor of the House and in letters from Ministers over the past three years can now be seen to be—shall we say?—erroneous.

In June 1974 I received a letter from my hon. Friend the then Under-Secretary of State for Industry in which he said that the Department had had assurances from YKK Limited that over the next four years it planned to increase substantially the United Kingdom-manufactured content of its products and correspondingly to reduce significantly its imports of both completed fasteners and components.

On 19th February 1975, when I had an Adjournment debate on this very problem, my hon. Friend again said to me: However, in discussions which took place last year, YKK assured us that over the next four or five years it planned to move towards a substantially British operation, with only specialty lines being imported."—[Official Report, 19th February 1975; Vol. 886, c. 1521.] By 5th January 1976, I received a letter from the then Under-Secretary of State for Industry, my hon. Friend the Member for Glasgow, Kelvingrove (Mr. Carmichael) in which he said: The total value of YKK's imports will probably remain at about the present level over the next two or three years, but this is because it is planned significantly to increase exports incorporating imported components. There will, in other words, be fewer zip fasteners and parts of Japanese manufacture coming on the home market in the future. YKK has provided us with estimates of its imports and exports for each of the next three years. We have no reason to question these intentions or to doubt the company's ability to carry them out. We shall, however, continue to monitor the situation carefully and to hold regular discussions with YKK. It is now 1978, and I have the final figures for imports and exports for 1977. The figures were given in a Written Answer on 15th March 1978, which showed that in 1974 the total of imports from Japan, which all came from YKK, was £1.8 million of completed parts. This shot up in 1977 to £4.7 million. In terms of the Japanese percentage of imports, the rise was from 78 per cent. in value terms in 1974 to 80.7 per cent. in 1977.

On 3rd April I was given the figures in volume terms for completed zip parts. Japan had 76 per cent. of all imports in 1974, and this had increased to 83 per cent. by 1977. This meant that some 6.2 million dozen complete zips, or 75 million zip fasteners, were imported from Japan. Therefore, the assurances that I was given on three separate occasions in three different years have been shown to be meaningless.

On 17th March this year, when I asked the Secretary of State for Industry two specific questions about YKK, I incorporated some of the assurances I had received, and I asked what the Department had done. The Minister of State replied to my Questions, and he said: The value of YKK's imports, net of its exports, has not declined as the company has forecast and indeed increased in 1977, though the volume of imports was lower than for 1976. The Department continues to impress on YKK its concern to see the level of imports decline."—[Official Report, 17th March 1978; Vol. 946, c. 363.] That is a pretty wishy-washy answer. It was taken up by business journalists on The Times, who got the message. Mr. Derek Harris wrote an article on 20th March in which he said: The Japanese zip fastener maker, YKK, has failed to live up to assurances given in 1974 that its imports into the United Kingdom would be reduced. I was concerned about the wishy-washiness of the answer, but I then realised that my right hon. Friend the Minister of State was going to Japan to encourage more business men to come to Britain to invest here. Obviously, he was not going to upset the Japanese by making it clear that those already here had failed to keep the pledges given to his Department and through it to the House.

After that article in The Times, YKK was pretty unhappy about it. The chairman, Mr. Takahashi—I have the spelling here for anyone who wants to know, because I cannot pronounce it properly—was somewhat upset about the interpretation of the Minister's answer in the article. The article in The Times on 14th April claimed that YKK had said that it had never given any undertakings to the Government on the level of imports. That made me wonder about the substance of the two letters that I had received.

Before I was successful in getting this debate, I had managed to purloin a copy of the letter which the chairman of YKK (Britain) wrote to the Minister of State and of which he sent copies to the editor of The Times. In that letter, dated 28th March, he told my right hon. Friend that his replies to my Questions showed a complete misunderstanding of the situation. He said that there was no undertaking between your Department or the Zip Manaufacturers Association and ourselves. He also said: Without concrete undertakings, there can be no such talk of failure. He went on to talk of Our plan, which is merely an estimate and not in any way a duty to be carried out to the letter". Why are we encouraging more Japanese businesses to come here, supposedly to stimulate the British economy, create new jobs and increase output, when the direct result of this company coming to Britain has been exactly the opposite? We have lost far more jobs in Birmingham, in Lightning Fasteners and in the factory owned by the Americans in Wales. Other factories have closed down. In the British sector—some of which is American-owned—more jobs have been lost than have been gained through this Japanese plant at Runcorn. In 1976–77 our imports must have been unsatisfactory for Ministers concerned with the industrial strategy.

A civil servant at the Department of Industry, Mr. R. E. Sellers, wrote recently to the Zip Manufacturers Association in Britain claiming that YKK makes at Runcorn 65 per cent. of what it sells in the United Kingdom. We know what the company imports into this country in the way of finished products and that must represent the other 35 per cent. That is on the assumption that it is not importing completed goods for re-export. Since it has factories elsewhere in Europe, that would not make much sense. But if the total import of 75 million finished zips is 35 per cent. of its sales, its total sales must be about 215 million completed zip parts.

The best estimate by the United Kingdom Association of YKK's market share in Britain is between 120 million and 140 million finished zips, or about 50 per cent. of the company's own estimate. Either the figures are wrong or YKK is not manufacturing at Runcorn anything like 65 per cent. of what it sells in the United Kingdom. It is bringing in massive quantities of semi-finished goods to finish at Runcorn and is still importing 75 million finished zips a year—77 million last year—to sell here, although it has a factory which is producing these goods.

I want the Minister to meet my challenge. I have quoted the assertions of the Department of Industry based on the 1974, 1975 and 1976 figures. We can now see the figures for 1977, which are in flat contradiction to the assurances. What action will the Department take? The dumping claims have not been exactly successful. The Department is still seeking new investment. This story should be a warning to other industries about the effects of seeking Japanese investment.

Will the Department toughen up the concessions that it will try to get from YKK to reduce its import content of completely and partly finished goods and to manufacture at a factory in this country using materials obtained at the nearest possible place, manufactured in Britain by British workers? That was the intention.

Has YKK filed its accounts for 1975 yet? I understand that it is lax in filing its accounts. It is therefore more difficult for British industry to see what its competitors are up to. I am not saying that British industry is pristine white in this respect, because some British companies are notoriously bad at filing accounts. British industry needs a certain amount of knowledge about what the United Kingdom branch of YKK is doing. It seems as though YKK is breaking the law by having not yet filed accounts for beyond 1975.

Over 500 jobs have been lost in this small industry, which employed only about 4,500 people four years ago and which now employs fewer. The United Kingdom market for this product involves only about £20 million. It is a small but vital part of Britain's manufacturing industry. It represents a symptom of what is wrong in British industry because we have allowed the Japanese to claim a large share of the market by using allegedy unfair methods.

It is a sorry state when our Government receive assurances and do not ensure that they are carried out to the letter. My constituents can come only to me to put their case to the Government. The Department of Industry has let down my constituents in this respect. It has also let down workers in other constituencies. In the past couple of years two factories have been closed, and the signs do not look good.

Inflation has increased, and so one should forget the cash calculation of what has happened in the industry. But the volume has increased leaps and bounds in the last few years. This factory was supposed to create jobs in Britain. What is the Department going to do about this? I know that there is to be a meeting next week between departmental officials and members of the Zip Fastener Manufacturers' Association. They are fed up to the teeth with meetings. They have attended meetings in each of the last four years. They have received letters and assurances but, frankly, the managers and workers in the industry, particularly at Lightning Fasteners in Birmingham, are beginning to lose any of the confidence that they might have had in the Department of Industry.

They are not looking for protectionism. They are not campaigning to get rid of the Japanese factory. They are prepared to meet competition fair and square. Since I have had the honour to be a Member of the House, I have visited the Birmingham factory on several occasions. It does not seem to be behind in technology or productivity. The workers are not always walking out because of a dispute. They are anxious about their jobs.

It is easy to draw a graph showing what has happened in the last four or five years. The workers can see that if the present situation continues their jobs will disappear. They can see that their firm might go out of business. YKK has made this happen all over the world. It ruined the United States zip industry by flooding the market with cheap goods at less than their production price. This put local manufacturers out of business. YKK monopolised the market and put up its prices.

This company is massive. It is a multinational company, as is Lightning Fasteners, but, at least, other companies play the game according to the rules. Most of British industry, unfortunately, does this. Some of us believe that, if British industry did not play according to the rules, it might do better. That, however, is one of the problems of British industry. I claim that the rules are being broken by this company. Even when it gives assurances it does not live up to them. No amount of statements about the odd dispute on a building at Runcorn will satisfy local manufacturers and workers. They have had assurances, but these have not been kept. They want to know from my hon. Friend this afternoon what the Government will do about it.

4.30 p.m.

The Under-Secretary of State for Industry (Mr. Bob Cryer)

I am most grateful to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) for having once again drawn attention, in his usual comprehensive and thoughtful way, to the problems of the zip fastener industry. I fully appreciate his concern to protect employment, which has prompted him to raise the matter this afternoon. His concern arises at the competitive capitalist system, which involves some sort of race. The winners are the monopolies and the losers go to the wall. He is rightly concerned that this system should not play havoc with people's jobs.

It might be helpful if I begin by referring to the structure of the industry. Although it includes a handful of very small firms, it is dominated in this country—as it is elsewhere in Europe, and, indeed, throughout much of the world—by three large multinational capitalist groups. Their subsidiaries in the United Kingdom probably account for 80 per cent. or more of the zip fastener market. They are Lightning Fasteners Limited, which is owned jointly by British and German interests; Aero-Zipp, which is wholly American-owned; and the third group, which is the centre of my hon. Friend's concern, is the Japanese company, YKK. We are therefore considering an international as much as a United Kingdom competitive situation.

Until 1969, imports of Japanese zip fasteners and components were negligible. Since then, they have increased rapidly, and in 1977 amounted to nearly £7 million. This was an increase in value of 37 per cent. over 1976, and is naturally a matter of considerable concern to other manufacturers in this country who have had, and continue to have, a favourable balance of foreign trade.

Any increase in imports is, of course, also a matter of concern to the Government, both for balance of payments reasons and because we want to see more investment and employment in this country. It is to be expected that competition from YKK will increasingly be from manufacture based in this country.

Since 1972, YKK has spent £6 million in building and equipping a modern factory at Runcorn in Cheshire, as my hon. Friend has pointed out. This factory is not, as has been suggested in the past, merely assembling imported components. YKK is engaged in some manufacturing activity there. The company has announced that it will spend another £5 million over the next two years in further expansion at Runcorn so as to reduce further its dependence on imports.

YKK was the first Japanese company to establish a wholly-owned subsidiary in Britain. At that time, our policy towards inward investment had not been fully developed, and the company was not required to enter into any formal undertakings regulating its activities in this country.

My hon. Friend has advanced criticism based on his concern about what has been done by the Department of Industry. My hon. Friend will appreciate no doubt that we inherited a situation, and that if there are any deficiencies in the amount of legislative action that we can take a very considerable part of the blame must be attached to the Opposition, who have consistently opposed any Government demand to gain extra legislative powers in such a matter.

The company has given the Department forecasts of its imports from Japan and production at Runcorn, with assurances of its intention to reduce progressively its dependence on imports. However, as my hon. Friend pointed out, the company has done this before, and these assurances were repeated by my hon. Friend the Member for Oldham, West (Mr. Meacher) on 4th June 1974, and again by the then Under-Secretary of State for Industry on 5th January 1976. These assurances were obtained from the firm and repeated by Ministers at that time.

My Department has had meetings with YKK from time to time to discuss its progress and future plans. As I have said, the company has emphasised all along its intention of moving towards a substantially British-based operation, with a consequential significant reduction in its need to import complete fasteners and components. But, as my right hon. Friend the Minister of State told my hon. Friend the Member for Perry Barr in answer to his recent Question, the value of YKK's imports net of exports has not declined to the extent that the company had forecast. Indeed, it increased in 1977.

Japanese industrialists are no more immune than any others from the setbacks and frustrations which can occur when embarking on major new expansion projects, or from the uncertainties of world trade. YKK has advanced an explanation to us for being blown off course in 1977. An important reason was that, through no fault of its own, there was considerable delay in the completion of a new component factory which it was building at Runcorn. This particular component is an essential and relatively expensive part of a zip fastener, and until recently all the company's requirements were imported from Japan. YKK had assumed in its forecasts that it would begin to be produced in the United Kingdom six months earlier than in fact was the case. Other factors were the large increase in the price of imports, partly due to the strengthening of the yen against the pound, and a disappointing performance in export markets due to the weak demand still prevailing generally.

While acknowledging the difficulties which often arise in achieving forecasts, and which have arisen in YKK's case, we are nevertheless gravely disappointed at what can only be regarded as an unsatisfactory outturn for 1977 in terms of the balance of trade. My right hon. Friend the Minister of State has therefore written personally to the chairman of YKK (UK) Ltd. emphasising the importance attached to the company's forecasts being achieved and to the chairman's assurance that imports will be considerably reduced in as short a time as possible.

Having said that, I must point out that for the first time imports of zip fasteners and parts from Japan during 1977 were less in volume than in the preceding year. While the reduction in finished fasteners was a marginal 3 per cent., component parts showed a reduction of 18 per cent. I am glad to say that this trend has continued into 1978, the import figures for January and February being about one-third less in both volume and value terms than for the corresponding periods of 1977. I hope that these trends will continue and will not be related to any activity by my hon. Friend. We shall continue to monitor the figures closely and have further discussions with YKK about them, as required.

Since YKK set up a factory here in 1972, under the Conservative Government, our policy towards inward investment has been developed and refined. Our aim when considering new proposals is to obtain terms most favourable to the United Kingdom in such matters as employment in the assisted areas, the highest practicable degree of United Kingdom manufactured content, a high proportion of exports and the reduction of imports. The Government's policy is to welcome inward investment.

I stated this in an answer on 10th April. But this should be qualified by the criteria outlined, together with the ability of the inward investors to work with the relevant industry. There is little point in welcoming inward investment which is simply designed to erode existing jobs and not to improve our export position and reduce imports. Inward investment must do all this and create jobs, not destroy them.

In addition, my hon. Friend pointed out the matter of not filing accounts. This is a matter for the Department of Trade. All companies investing here must obey United Kingdom laws. I shall draw the attention of my right hon. Friend the Secretary of State for Trade to my hon. Friend's remarks.

The company has measured up to some of these criteria since the last debate initiated by my hon. Friend in February 1975. The labour force at Runcorn has doubled to 400. The company is now producing more components at Runcorn. Imports of complete zips and components together now represent about 45 per cent. of the company's turnover, and under its latest estimates this figure is expected to be substantially reduced over the next few years.

YKK has increased its exports out of the United Kingdom from £100,000 in 1972 to a current figure of £2.5 million. This is certainly a rapid increase, but it is not a sufficient increase because it is still in deficit on the balance of trade.

What this amounts to is that the company is proceeding in the right direction as regards inward investment but not as quickly as we had hoped, or as it had said. Its continuing investment at Runcorn is accepted as an earnest of its intention to move towards a substantially British-based operation but it needs to be accompanied by a more rapid reduction in imports from Japan—and on this we are pressing that it should do simply what it has told us it plans to do. We are pressing it to carry out its plans, about which it has told us on several occasions. We expect it to follow its plans on this occasion.

I realise that, as my hon. Friend pointed out, YKK's success has been achieved to some extent at the expense of other firms—and other jobs—in this country. I note that in its report and results for 1977 IMI Ltd, the parent group of Lightning Fasteners, said that it had maintained overall sales volume at the same level as for 1976, though profits were adversely affected by continuing competitive pressures. This report was on the whole of IMI's zip manufacturing interests, not only those in the United Kingdom.

Employment considerations are, of course, a central consideration, and the fact that a large part of the work force is in assisted areas—as indeed is that of YKK at Runcorn—adds to the concern to see a continuing viable British zip manufacturing industry, not only in the assisted areas but in the non-assisted areas, such as those represented by my hon. Friend.

Of course, the Government are anxious that any cases of unfair trading are properly dealt with. I understand that British manufacturers, in concert with their European colleagues, are currently considering initiating further antidumping proceedings against imports from Japan, through the EEC Commission. My Department and the Department of Trade are ready to give any help and advice that may be required by United Kingdom manufactuers, and this applies to any manufacturer in any sector.

My right hon. Friend the Minister of State said on his return from Japan recently that the Government wanted to see here increased Japanese and other foreign investment which is complementary to, rather than competitive with, existing British investment. As I have pointed out, YKK came to this country before our policy on inward investment had developed as fully as now. But there is something to be said for the creation of contacts between YKK and the other manufacturers and for movement towards what would be regarded as normal relations between members of an industrial sector through its trade association.

We are continually reviewing the performance of YKK, which up to now has shown an increase in YKK's trade deficit between imports and exports. YKK has given us, in confidence, some forecasts which show a diminution of imports, but it has done this before. These forecasts were in any case quite heavily qualified in a letter from YKK on 13th April.

If we can reach agreement with YKK to its carrying out its assurances, there will be a much greater element of planning in the agreement. Indeed, investment by multinational concerns is one area where Labour's policy of planning agreements would be a great advantage.

In a short debate such as this, it is not possible to do more than to touch on the issues involved. My hon. Friend will no doubt know—indeed, he mentioned it—that representatives of the Zip Fastener Manufacturers Association are to meet my officials for a further discussion on matters of common concern on 25th April. The Department will, of course, be taking fully into account the points which have been made in this debate.

I am most grateful for the vigilant attention which my hon. Friend pays to this matter. As I have said, I hope that the trend of imports does not follow in a graphic way the attention he pays to it. I hope that the imports are reduced, as YKK has promised, and that its export performance is improved, as it has also indicated will be done.

Question put and agreed to.

Adjourned accordingly at nineteen minutes to Five o'clock.