HC Deb 01 August 1978 vol 955 cc537-47

3.51 a.m.

Mrs. Gwyneth Dunwoody (Crewe)

It may seem perverse at this hour to want to discuss industrial development or the hazards of a developing industrial competition, but for many years this country has produced vehicles, particularly effective heavy vehicles. In my constituency there are at least two lorry firms which turn out products of very high standard. ERF and Foden's in Sandbach have long been known as heavy-vehicle makers, and we have a large pool of skilled engineering workers in the Crewe constituency.

It was therefore with considerable disquiet that we learned, some time ago, that it seemed to be the intention of at least one large Japanese firm—Hino Lorries—to begin to manufacture lorries inside Great Britain. This information was conveyed to us in a number of ways, but most noticeably by the firm itself which, although of Irish origin, made it clear that it was its intention either to manufacture in Great Britain itself or to bring into Great Britain from Ireland made-up lorries which were basically Japanese.

My hon. Friend the Under-Secretary of State will be aware that for a very long time now the British car and heavy vehicle industry has been exceedingly concerned about the whole situation of Japanese competition. It is really not enough to say that as a manufacturing country one must take one's chance on an open market if there is clear evidence that that open market can be manoeuvred by other nations.

It is exceedingly difficult in modern industrial terms to prove whether vehicles of any kind are being dumped. Indeed, as modern industrial processes continue to develop, it becomes virtually impossible to get hold of the information on which charges of dumping can be proved. An even greater complication has arisen since the admission of the United Kingdom to the Common Market, because the original dumping procedures which we were able to apply at a British level have now passed, as it were, at one hand to the EEC Commission. That means that we would have even more complex processes to go through before we would, for example, be able to put into operation anti-dumping techniques in order to protect our own industry.

Therefore, when it seemed evident that an Irish firm acting as agent for Japanese lorries intended to invade the British market, I took action by going rapidly to the Department and asking it for the information that it had. I am grateful to my hon. Friend, who has been not only exceedingly diligent but exceedingly helpful and has gone out of his way to obtain whatever information was available.

The Confederation of Shipbuilding and Engineering Unions was so disturbed by the information that it had received from various sources that it began to take action on its own. It agreed a certain number of procedures which would black Japanese vehicles if they were brought into this country. The Confederation's reasoning was very simple. It was that its members produced highly efficient vehicles and it was not prepared to see its market undermined by Japanese firms bringing their vehicles into this country, possibly at artificial price levels, and certainly at a price which we were told would be about £3,000 per lorry less than the cost of the British manufactured unit.

If that seems intransigent, I ask the House to consider the effect that the influx of heavy lorries from Japan would have on the British market. We have seen in Ireland, for example, that one small firm can take over 80 per cent. of the Irish vehicle market within a very short time of coming into operation. Indeed, it is that firm which is now openly saying that it is its intention to move into Great Britain either through the back door, as it were, of assembling the lorries in Ireland or by setting up a factory unit in Great Britain itself.

After all, the British Government do not provide assistance to industry in such a biased or specific way that they could exclude assistance to any firm that could legitimately set up in a development or special development area. We could find ourselves in a bizarre situation in which the British Government and the British taxpayer, through the Industry Acts, were giving practical assistance to a foreign firm to set up a factory that would decimate the British heavy vehicle industry. I am sure no one doubts that before we accept such a situation we should take action.

The Minister has said—he has given me details of this—that he has an agreement with Japanese industry, which was negotiated at a very high level, which should ensure that no such dumping can take place and that no such unfair competition will be allowed within these shores. Indeed, the MITI undertaking appears to say that heavy goods vehicles will be excluded from the British market. I welcome that statement from Japan, but I must tell my hon. Friend that I have considerable reservations about the efficacy of such an undertaking.

After all, under Common Market legislation, it an Irish firm chose to import goods from Japan, to assemble heavy lorries in Eire and then re-export them to Great Britain as finished vehicles, there would be nothing that the Minister, the Department or the Government could do to stop that trade—and were they to make the slightest effort to stop that trade they would be told very firmly by the European Commission that they were seeking to distort the rules of the EEC. Distortion of competition is, as the Minister knows, one of the greatest crimes in the calendar of the Commission.

One of my strong objections to the Treaty of Rome has always been its calm assumption that the distortion of competition is a bad thing. As a Socialist, I believe that in the present economic situait is vital that we accept a certain degree of planning in our economy. That cannot be accomplished without Government aid, without specific support for industries under attack and without special supplements to the workers and retraining schemes. If we are to be absolutely honest, all of these constitute a form of distortion of trade in its purest form.

Therefore, Mr. Deputy Speaker, you will not be surprised if the engineers in my constituency become exceedingly alarmed at the repeated suggestion that such an Irish firm is to begin to manufacture vehicles in Great Britain.

I should like to say one or two things which occasionally should be said. If such a move should take place—we know we have the Minister's assurance that he does not think it is imminent—we should be in danger of finding ourselves faced with a situation which, in effect, would be the antithesis of democratic government.

If engineers in my constituency—knowing as they do that similar Japanese competition in other manufacturing industries in the North-West has led to the wholesale closure of factories and to the loss of jobs—felt that they could not rely upon the processes of government to protect their employment against unfair competition, they would be driven to take action which, in effect, would be extra-parliamentary action. They would seek to oppose this imposition upon the British market in any way that they were able.

If that meant blacking the importation of Japanese goods at the ports, refusing through their drivers' groups to drive Japanese heavy lorries, blacking the unloading of any lorry which was manufactured in Japan, it would be a line of action which would be condemned by this House and by many people in the media. I should not condemn it, because I believe that it is the responsibility of the House of Commons to look to the protection of men's jobs. It is certainly the responsibility of the House of Commons to look to the protection of an industry as important to us as the heavy goods vehicles industry. We have seen the perpetual inroad of Japanese cars into the ordinary car market. In spite of the many assurances which we have received year in and year out, we see the continual importation of Japanese cars, with the effect that has upon our domestic industry.

Therefore, can one blame the engineering unions if they say to the Minister "Do not say to us 'Be calm, we shall sort out the situation and everything will be well in the future because we have this undertaking'"? We know that in the case of ordinary cars such undertakings have not been worth the paper they have been written on. We cannot sit quietly back and wait for the kind of complete flooding of the heavy goods vehicle market in Great Britain that we have seen even in a small market such as Ireland. Eighty per cent. of the heavy goods market in Ireland is now made up of Japanese goods. Translate that into British terms and one has a job investment and industry loss which would cause a bleeding of a major kind in an industrial situation. Frankly, our engineers do not intend to sit by and see that happen.

I demand of the Government two things. I demand that if there is the slightest danger that through Ireland, or, indeed, any other Community country, the Japanese appear to be mounting a major onslaught on the British heavy goods vehicle market, this Government will instantly and unilaterally, without argument, apply an importation ban, they will follow up that ban with an importation ban on parts for heavy goods lorries of Japanese origin and that they will make it quite clear to the Commission that, whether or not this is acceptable under Community rules, they will not stand by and see this industry devastated by unfair competition from outside. I know that it is difficult for my hon. Friend to give such an undertaking.

One of the hazards of our entry into the Community has been the total and devastating effect of the constant flow of manufactured imports into this country either from the other Community countries or from outside the Community. We were told that we should have access to a much greater market on entry. Far from that being the case, there has been a perpetual erosion of many of our overseas markets. We will not stand by and see this last and devastating invasion take place without taking strong action. I cannot state too strongly that I intend to fight in any way I can to resist such a tide. I trust that I shall have my hon. Friend's counsel and support.

4.6 a.m.

The Under-Secretary of State for Trade (Mr. Michael Teacher)

My hon. Friend the Member for Crewe (Mrs. Dunwoody) has raised, with characteristic cogency and eloquence, an issue which is undoubtedly of major concern in the area she represents and which is certainly seen as constituting a major threat to the industry of which she has spoken.

It is true that for the past 18 months there have been regular rumours of an impending invasion of the United Kingdom truck market by Japanese Hino trucks assembled by J. Harris Limited in the Republic of Ireland. There have been few registrations of these vehicles in the United Kingdom so far. I know that my hon Friend is aware of this. The SMMT estimates that about 60 Irish-assembled Hino trucks were registered in the United Kingdom last year and 61 so far this year. It believes that about 40 of this year's imports were registered in Northern Ireland.

My hon. Friend drew attention to the statement that my right hon. Friend the Secretary of State made to the House on 7th March. My right hon. Friend then indicated that the Japanese Ministry of International Trade and Industry had agreed to give, as it put it, "strong administrative guidances", to the Japanese vehicle industry. These, among other things, covered heavy commercial vehicles. MITI gave an assurance that no heavy commercial vehicles would be shipped from Japan to the United Kingdom. This is, of course, with regard to direct exports to the United Kingdom. As we have always recognised, this leaves the question of indirect exports, whether manufactured in Ireland or, indeed, anywhere else.

My hon. Friend raised the question of an import ban if this threat were to materialise. As she knows, the Treaty of Rome provides that products produced in the Community are entitled to free circulation, and this will apply to the assembly of vehicle components on which Community duties have been paid just as to any other manufacture. This means that no further tariffs or any quantitative limitations may be applied against them under the treaty. It might be possible to challenge the origin of these vehicles on the ground that insufficient work had been done on them in Ireland to give them a right to Community origin, but this would not remove their right to free circulation in current circumstances.

We could seek Community agreement to the suspension of free circulation via the origin regulations only if the United Kingdom had a quota on the same imports from the actual country of origin—in this instance Japan—and that was being frustrated.

That is the position in terms of the treaty. I can assure my hon. Friend that we are concerned about the potential problem. Although the Treaty of Rome permits products manufactured in Ireland to enjoy free circulation, I can assure my hon. Friend that we have made our concern well known and our views plain to the parties concerned. We are confident that while an understanding exists about restraint in this market sector there will not be any significant indirect exports of heavy commercial vehicles to the United Kingdom. If there were, that would clearly defeat the whole arrangement of administrative guidances volunteered by MITI, which, for example, as recent shipment figures have shown, has now begun to influence the volume of cars reaching Britain from Japan.

We also believe that Japanese manufacturers are sufficiently aware of the sensitivity of this sector of United Kingdom industry—I have reason to take this view—not to encourage exports to the United Kingdom of vehicles assembled elsewehere in the Community, even without guidance from MITI. Even so, I can assure my hon. Friend that we are watching what develops extremely closely.

I agree that the threat of sudden and substantial penetration into the United Kingdom market by Japanese or any other imported truck manufacturers is extremely serious. However, it is relevant to remember that our own truck industry can probably do rather more to improve its own performance. Despite the steady expansion of world markets for trucks over the past 10 years to 15 years, our industry has hardly managed to increase production. Of course, Japanese competition has been severe, especially in third world markets. However, other European countries have managed to increase their production and exports at a much faster rate than we have.

The reasons for our relatively poor performance are complex and I do not pretend that they can be easily stated. It is fair to observe that industrial relations have not been nearly as bad on the whole in the commercial vehicle industry as in the car industry, even though disputes among component suppliers have sometimes made the production scheduler's job extremely difficult. Most of the reasons would seem to lie in a combination of under-investment in the past, inadequate production control and generally lower productivity than our main overseas competitors. Clearly, it is part of our problem to ensure that that situation is put right.

Although we have a quite large surplus on our balance of trade in commercial vehicles with the rest of the world—it was about £400 million last year—imports are rising rather faster than exports. Already we are only just keeping our head above water in our trade with the rest of the EEC. If Sweden is added, our trade is in deficit. Only in the past year, taking the first six months of this year and comparing them with the same period in 1977, import penetration in trucks has increased from 13 per cent. to 16 per cent. of the market. That is taking trucks alone and not including vans, so in that instance the increase cannot be ascribed to the Japanese. To that extent it remains true that our main competitors are still European manufacturers.

I turn to the matters that my hon. Friend made the gist of her remarks—namely, the activities of J. Harris Assemblers Ltd. As regards assembly in Ireland, I know that J. Harris Ltd. has been assembling Japanese Hino trucks under licence at Cloughran, near Dublin airport, since 1967. The firm has a substantial share of the market in Ireland. The Hino truck range is Japanese in design but Harris claims that it includes a significant proportion of EEC parts.

Mrs. Dunwoody

A likely story.

Mr. Meacher

That is the claim that is made. I am aware that at the end of June the firm announced that it intended to open a truck assembly plant in the Liverpool area in November. It is not the first time that such statements have been made.

We should not exaggerate the ease with which Hino vehicles could be sold in the United Kingdom even if such sales were tried. The United Kingdom still has an enormous degree of loyalty by handlers and users generally to existing vehicles. Moreover, conditions for trucks are generally much more demanding in Brttain than in Ireland. On the whole, our distances are longer and, on average, trucks are subject to much more intensive use. Therefore, it does not follow that trucks suitable for Ireland will necessarily sell well in England.

Mrs. Dunwoody

I do not know whether my hon. Friend took on board the fact that I have reason to believe that these trucks will be marketed at about £3,000 less than a comparable British truck. My experience is that anyone faced with such a price difference has astonishingly little loyalty to British manufactured goods.

Mr. Meacher

Indeed, I noted my hon. Friend's reference to that figure. I was going to return to it when I came to the question of anti-dumping. It may be that if such a price differential were to materialise, it would be for a truck which was less durable and less suited to conditions in England than in Ireland. To that extent, it might be seen not to perform so well, and that might affect its marketability. I do not know. It does not necessarily follow that a truck that is suitable in Ireland will sell well in England. We believe that Hino may well be conscious of that point.

There is also the question of tax relief. Statements have been made about the claims of Irish subsidies on exports. The scheme of tax relief on export profits provides relief of 100 per cent. from income tax and corporation tax on profits attributable to export trade in Irish manufactured goods up to April 1990. Total relief is given for a maximum of 15 consecutive years and partial relief is given for a following period not exceeding five years.

The Irish Government's scheme of tax relief for export profits has been allowed by the EEC to continue in the light of protocol 30 to the treaty concerning the accession of Ireland to the Community. That recognises, inter alia, the need to take account, in the application of articles 92 and 93 of the Treaty of Rome dealing with State aid, of the objectives of Irish economic expansion and the raising of the standard of living of the population of Ireland.

The Commission is currently reviewing the incentives available in Ireland as well as in the United Kingdom. I am aware that there was a report this week in The Economist on pages 77 and 78, that the EEC Commission had agreed to the Irish tax relief scheme lasting until 1990. That is incorrect. Our latest information is that the Commission is still reviewing the scheme and has not announced a decision on it.

My hon. Friend referred to the very large price differential, particularly in regard to dumping. I think that she is wrong to disregard the potential of the anti-dumping provisions under EEC powers now that those powers have passed to the Commission. The criteria that regulate anti-dumping are almost identical to those which existed under our own legislation. We retain an antidumping unit in the Department of Trade to advise and assist industry in the making of applications, and we would certainly press the Commission for early and speedy action if evidence were available. I do not know whether the £3,000 indicates the likelihood of dumping, but, if so, I hope that my hon. Friend will encourage her friends in the industry to bring forward the evidence.

Mrs. Dunwoody

I spent some time in the Department in which my hon. Friend has the honour to serve, and one of my jobs was directly connected with dumping. Even if the facts of the matter are crystal clear and easily proved, it takes a considerable time to gather together all the evidence. Does my hon. Friend not accept that it is virtually impossible to get the economic data on which dumping by Japan can be proved?

Mr. Meacher

It does take time, but some anti-dumping cases have been carried through quite quickly. Others have taken longer, but a number of cases have been successfully completed by ourselves, when we had the powers, and by the EEC, which has imposed dumping margins on Japanese goods, including printing machines. It is possible to collect the evidence or, on the basis of an investigation, to obtain a satisfactory price undertaking, which has a similar effect. This is not a route which should be ignored and, in view of the urgency of the case, if there were to be an upsurge of imports from Ireland of largely Japanese goods, we would press the Commission extremely hard.

I agree with my hon. Friend that Japanese imports could have severe consequences for our industry, but the threat from Japan of direct sales is not a live issue thanks to the current understanding between the two industries and the administrative guidance given by MITI in Japan. Indirect exports from an EEC base would be extremely unwelcome and would make nonsense of the current restraint being shown by Japanese manufacturers. However, there is at present no evidence that a substantial threat is likely to materialise from this quarter, at least in the near future.

I have listened carefully to what my hon. Friend has said about the extreme seriousness of the situation, the way it is regarded by the industry, the action mooted by engineering workers in her constituency and the general concern which she feels, and which she has repeatedly voiced. I can assure her that we are watching the situation closely. I do not wish to sound complacent, but we cannot take action unless there is a significant increase in imports, and there is none at present. We take the problem extremely seriously. We shall continue to watch the situation closely and will take the action open to us if the threat materialises.