HC Deb 26 May 1978 vol 950 cc1942-54

12.53 p.m.

Sir Paul Bryan (Howden)

I start by thanking the Minister for hurrying back from his foreign travels to take part in this important debate. The House does not often have the opportunity to discuss the affairs of Hong Kong. I should like to use this occasion to report on the reaction of the people of Hong Kong to the recent Multi-Fibre Arrangement and to devote the main part of my speech to British exports to Hong Kong, with all the benefits that an expansion of these exports could bring to Britain in this time of severe and intractable unemployment.

I declare an interest as a friend of Hong Kong and as chairman of the all-party Hong Kong group in the House. However, I should add that I have spent most of my working life in Yorkshire and Lancashire textiles during the period in which the industry has suffered its longest decline so I have direct experience of the effect of imports from Hong Kong and elsewhere on the home textile industry.

The people of Hong Kong were upset by the MFA for three reasons. The first was its severity. Hong Kong's exports to Great Britain have been under restraint for 20 years. The bulk of its exports were restrained under the old MFA to growth rates of ½ per cent. or so per annum. Its textile exports are being undercut by Korea and Taiwan. In 1977, Hong Kong with less than one-tenth of Britain's population, lost as many jobs in textiles as Britain's average annual rate over the last 10 years. It has coped with this by improving the quality of the textiles and garments sent to British customers. Although the value of exports has risen, the volume has been pretty well static.

Hong Kong has long experience of dealing successfuly with restriction, either in the form of quotas or wage competition, but the restrictions imposed by the latest MFA are so severe that, even in the event of the economic recovery that we all hope for here, Hong Kong cannot benefit.

Hong Kong's second complaint is the unprecedented arrangement by which newcomers to the trade—by which our Government say they mean poor countries—are to have a greater share of the United Kingdom market. That sounds charitable enough until it transpires that imports from rich countries are not to be reduced to make room for imports from the poor. Imports from America, Japan, EFTA and EEC countries remain unlimited by quota. It is Hong Kong, a comparatively poor country, which is required to make sacrifices for the benefit of the very poor.

Can the Minister say how the newcomers' share of the quotas of the British market is to be allocated?

Hong Kong's third complaint is that the British Government, which was expected to act as its representative at the MFA negotiations, appeared to take a leading part—and, indeed, has since boasted of taking a leading part—in imposing these restrictions on Hong Kong.

Hon. Members with textile constituencies have justified these restrictions in various ways. Some have said that less-developed countries would receive greater sympathy if they did not impose punitive tariffs on exports from Great Britain, but Hong Kong has no tariffs on textiles from Britain, which are among its principal purchases from this country. Yet Hong Kong was among those especially discriminated against in the renewal of the MFA. Other hon. Members have justified restrictions by reference to wages and social conditions in the colony. This is a strange argument from us in Britain because we are in exactly the same position when exporting to Germany, which could, no doubt, complain that our wages are only half those of the Germans.

Hong Kong wages are rising fast and are now second only to Japan in the whole of Asia. As to social conditions and housing, the miracle is that this tiny territory, with no raw materials and with a population which has multiplied seven times in the last 30 years, now has housing, social conditions, education and health facilities that have improved at such a pace and on such a scale that they have become a subject for study and admiration in all Asian countries. The only threat to these social improvements would be a spread of world protectionism because it is on trade, and trade alone, that Hong Kong depends for its standards of life to continue to rise.

Working conditions in the best of Hong Kong's factories are not merely the best in Asia; they stand comparison with any in the world, including this country. When buying imports from Hong Kong, no one need feel that he is enjoying the fruits of sweated labour. Their purchase is much more likely to help the ordinary factory worker to pay instalments on his television or fridge, or to eat out—a pastime which is more widely indulged in by workers in Hong Kong than in England.

I turn to the subject of our exports to Hong Kong. I shall begin with a few startling figures to show how Hong Kong compares in importance with our other export markets. At £270 million last year, Hong Kong bought from Britain two-thirds as much as Japan, which has a population of 110 million—25 times that of Hong Kong. Hong Kong's 4 million citizens bought as much from us as India's 600 million citizens, despite a large proportion of India's purchases being paid for by British aid. Hong Kong's 4 million citizens bought four times as much as China's 900 million citizens. Hong Kong bought £60 a head from Britain last year, while Japan bought £4 a head and other Asian countries spent minute amounts.

In spite of these extraordinary statistics, imports from Britain constitute less than 5 per cent. of Hong Kong's imports. In the early 1960s Britain had 10 per cent. of the Hong Kong market. Then me merchandise trade between the two countries was in balance. Today there is a deficit in merchandise trade, probably balanced by invisibles, including the usual financial, insurance and shipping items, the bulk of Cable and Wireless profits and that economic curiosity of profit arising in British Airways through the United Kingdom's being the only European or American country with landing rights at an Asian airport at its disposal.

Has the Minister any figures to illustrate the benefit that we get from invisibles? I understand that Lloyds brokers draw hundreds of millions of pounds in insurance premiums from Far Eastern Hong Kong offices. Clearly, more could be made of this market by British exporters.

Let us examine the market and the many British success stories from which one can glean lessons for the future. It is a highly competitive market, but it does not have many of the problems that are found elsewhere. There are no tariffs or quotas. Duties are charged on a few items—alcohol, tobacco and petroleum products—to raise revenue, but that is all The language of business is English and the law follows British patterns. There are no non-tariff trade barriers. Documentation is simple and payments are prompt. There is no restriction in the movement of money.

Communications by air, sea, telegram, telex and post are excellent. The container port is the most modern in the world, and among the four biggest. Above all, there is sustained economic growth and a vast long-term programme of public works in building new towns. Exporters who are not in this market need not feel that they have missed the bus. Many more are coming.

I turn to the subject of British successes. Power station equipment worth £100 million has recently been sold to China Light and Power. This is the biggest overseas sale of power station equipment ever achieved in this country. The ECGD has guaranteed its biggest ever loan in this connection. It amounts to US $360 million. Contracts for the further £100 million will be going for transmission and distribution equipment. Later this power station will have to be doubled in size.

The Mass Transit Railway has placed contracts in this country for £160 million in goods and services and is to be extended. The railway to the border is to be double tracked and electrified.

Electrical machinery and vehicles are the leading exports from Britain. Textiles come next. Woollen textiles, particular, have done well. Hong Kong imports more high-class worsteds than does the United States of America. Hong Kong is our best single customer for fabrics made of synthetic fibre mixed with wool. Britain needs those types of exports most. They create jobs in the areas of heavy industry and textiles where unemployment is most severe.

Only last week a ship on order for Swires was launched at Austin and Pickersgill's yard in Sunderland. Yorkshire mills are in need of woollen orders.

About 1,750,000 tourists visited Hong Kong last year. They spent about £270 million in the shops. That figure happens to be precisely the value of the total British exports to Hong Kong. High-quality consumer goods are what this market demands. Our fellow members in the Common Market seem to do better than we do. The French have persuaded the Chinese in Hong Kong that brandy promotes virility while whisky induces impotence. The result is that Hong Kong has the highest per capita consumption of liqueur brandy in the world.

Independent sales initiated by Hong Kong entrepreneurs are Rolls-Royce aeroengines for Cathay Pacific, ships for Hong Kong owners, and construction equipment for Jardine's undertakings in Indonesia. It would be interesting to know the sum of these sales, not all of which figure in Hong Kong's trade statistics. These projects do not represent the total indirect sales generated in Hong Kong. Japanese department store operators are known to travel to Hong Kong to see what Hong Kong stores are selling—and it should be British. Hong Kong is a shop window in Asia. If British goods are not seen there in a British colony Asian buyers will not bother with them.

There is yet another way in which Hong Kong can help the economic growth of an advanced industrial country such as Britain. This is in joint ventures with part or all of the manufacturing and all the marketing from Hong Kong. If shipping costs and those of some of the more labour intensive parts of manufacturing could be reduced a market for some products could be developed in Asia, where straight exports would be unmarketable. This way into the Asian market, where rates of economic growth are consistently high, should also be explored by British firms.

The market is there. What is being done to make this known to British exporters? Are the resources devoted to exports to Hong Kong comparable with the potential result? Other markets might seem more prestigious, but Hong Kong has shown by results what it can do. What is done by the Minister's Department to stimulate exports to Hong Kong? Is the staff devoted to this end comparable in size to that dealing with exports to India, which is a market of a similar size?

The Hong Kong Government are doing more than their fair share of promotion. The Governor is taking the lead. I attended an admirable seminar at the CBI which was addressed by the Governor and successful exporters, such as Lord Nelson, of GEC. This was the first of seven such seminars to be held.

Hong Kong is a dependent territory. That means that the House, the Government and their Ministers have responsibility for the welfare of its people. Hong Kong does not ask much of Great Britain, but offers a great deal. The disillusionment about the Government's treatment of the colony over the textile negotiations has not affected Hong Kong's willingness to buy British. There is a fund of good will towards Britain in Hong Kong. Its market is competitive, but open and straightforward.

Industrialisation and trade have done more for Hong Kong than aid could have done. Other Third World countries are finding the same. Hong Kong presents a challenge to Britain. If Britain fails to come to terms with industrial enterprise and economic growth in this small part of the Third world for the Government of which it is responsible, it cannot expect to contribute much towards or gain much reward from the industrialisation which is now rapidly developing in East Asia and other parts of the Third world.

If, on the other hand, Britain can develop its markets for its exports in Hong Kong and use its technology in combination with Chinese ingenuity for manufacturing and marketing, it can set a firm practical example to the rest of the developed world which professes to wish economic benefits on the Third world.

1.11 p.m.

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

Having left Baghdad at 4 a.m. this morning I turn with particular relish to the topic raised by the hon. Member for Howden (Sir P. Bryan), who made an eloquent plea for greater atteneion by British industry to the potential of the export market in Hong Kong. I agree with the hon. Member that Hong Kong is an extremely important market for the United Kingdom, providing, as he said, a shop window for British goods for the booming markets of the Far East and South-East Asia.

I accept the hon. Gentleman's general point that there has been some neglect of Hong Kong by British exporters in the past. Too many have regarded it as a traditional market, and that attitude has meant a sad decline in the United Kingdom's percentage of Hong Kong's total imports. However, I think that there is a change in the situation, and I should like to indicate the signs there are of that.

Let me first comment on the hon. Gentleman's opening remarks about the effect on Hong Kong of the renegotiated Multi-Fibre Arrangement. Let me give the general background. In its approach to the MFA textile negotiations, the EEC had two main objectives. The first was to secure more effective quotas generally with more realistic base levels and lower growth rates related to the circumstances of the textile and clothing industries in the Community. The second was to seek to stabilise import penetration for the most sensitive products by restricting all low cost imports within a single limit.

The Community agreed that if it was to secure its overall objective in bilateral negotiations, the terms of the agreements for Hong Kong—which through a combination of high base levels and generous growth rates had consolidated its position as easily the EEC's largest supplier—had to be severe. This applied also to other dominant suppliers, such as South Korea and Taiwan. In particular, for the eight most sensitive products it has been necessary to set quota levels for 1978 for the dominant suppliers which in many cases are below the 1976 levels of trade. This is essential if the overall limits are to be maintained and some room made for new suppliers.

The hon. Gentleman said that we had perhaps not represented Hong Kong's interests to the degree that we might have done. We have fought hard, however, for Hong Kong's interests inside the Community. It is only because of the repeated and strong attempts by us that Hong Kong has progressively been given most of the benefits of the Community's generalised system of preferences scheme.

In particular, I disagree with certain of the hon. Gentleman's conclusions about the new MFA and its effect on Hong Kong. The overriding concern of the United Kingdom was to ensure adequate protection for the home industry from low-cost imports whilst allowing for some measure of growth in exports from the supplying countries. Whilst the Government certainly recognise their obligations in representing Hong Kong's interests, the facts are that cumulative import penetration by low-cost suppliers was causing serious disruption in the European textile industry with the United Kingdom one of the chief sufferers.

I am aware of the disquiet expressed by Hong Kong over the outcome of the negotiations, but I disagree strongly with some of the criticisms voiced by the hon. Member.

First, although there have been some cutbacks in Hong Kong's exports of certain products, there are items where import penetration into the EEC as a whole has reached very high levels and for which restraints have been placed on all low-cost suppliers. I need hardly say that there was certainly no question of special discrimination against Hong Kong. It would be entirely wrong to suggest that. Secondly, cutbacks were necessary to allow room for entry into the market of new suppliers amongst the developing countries. It is spurious to argue, as the hon. Gentleman did, that restraints should be placed instead on the United States, Japan and other high-cost suppliers. The whole intention of the MFA is to limit imports of low-cost textiles and clothing. Finally—this is most important, because it is the other side of the coin—the new agreement does in fact allow Hong Kong to increase her exports to the EEC by about 2 per cent. a year, which will enable her to maintain her position as the largest supplier of textiles and clothing to the EEC.

Let me turn now to the main burden of the hon. Gentleman's speech, which concerned exports. I very much agree with his presentation. He produced some interesting comparisons. I cannot immediately confirm the figures that he gave, but they seem to be about right to me, and they present a picture which I hope British industrialists will examine with increasing care. I hope, too, that they will take note of the general conclusions about the attractiveness of the Hong Kong market.

In 1977 United Kingdom exports to Hong Kong totalled Hong Kong $2,192 million out of total imports of Hong Kong $48,701 million. This is only a 4.5 per cent. share. We should be doing much better than this, although there are obvious areas, such as basic foodstuffs which Hong Kong has to import, where we could not be competitive. My Department, in conjunction with the British Trade Commission in Hong Kong, is making strenuous efforts to ensure that British industry is made fully aware of the opportunities and potential of the Hong Kong market. The importance of the market is recognised by the British Overseas Trade Board, which has a separate trade advisory group for Hong Kong. The senior British trade commissioner in Hong Kong has recently visited the United Kingdom to participate in a series of seminars throughout the country. The hon. Gentleman referred to that. The Hong Kong Government have co-operated with us is this effort, providing us with guest speakers at the various seminars and also working with the trade commission in analysing British export performance to the territory. This assistance has been of considerable value, and I am pleased to say that the response from British industry at the seminars was very encouraging.

I see this as one sign of growing appreciation by industry of the real potential of the Hong Kong market. One straw in the wind and a relevant indicator of this growing interest is that when my Department organised a major British industrial exhibition in March of this year, the response from British companies to participate was so large that we were unable to accommodate the applicants, even though the largest available site in Hong Kong was put at our disposal. In all, almost 150 companies took part and, during the week of the event, orders to the value of £800,000 were placed, and there are good expectations for follow-up orders amounting to about £2.75 million. That is some indication of the trend of growing interest by British industry in this market.

In addition to this, we have seen in the last few years substantial British involvement in a number of major projects in Hong Kong. Again, the hon. Member quite rightly drew attention to a number of these. I echo what he said. In the transportation sector, British exporters have been engaged in the construction of the cross-harbour tunnel and, most recently, are substantially involved in building Hong Kong's mass transit underground railway. I add here that it was very pleasing to note that the first rail cars for the underground railway, supplied by Metro-Cammell of Birmingham, were despatched to Hong Kong earlier this month, which was almost two months ahead of schedule.

British exporters have also recently been awarded a contract to supply one of Hong Kong's electrical utility companies with a power station to the value of well over £100 million.

My Department also has plans to support British participation in a furniture exhibition in Hong Kong later this year, and several of the outward missions, about 14 in number, scheduled to visit Hong Kong this year—again, this is a considerable number—will concentrate on consumer products.

I should like to add a comment about the relationship between Hong Kong and China, to which the hon. Gentleman referred. We are also very much aware of the growing industrial and exporting interest in China as a market. Considerable efforts are being made to support new initiatives in selling to China, and we are seeking to associate this effort with promoting exports to Hong Kong. The Hong Kong link is of real value to the United Kingdom. To draw further attention to the potential of the Hong Kong market, it has recently been agreed that BOTB-supported outward missions to China from Britain will have their attention drawn to the advantages of spending a few days in Hong Kong on the Far Eastern visit.

However, there is another special feature of the Hong Kong market which is of particular relevance to our trading relationship with her and which deserves mention. This arises from the very substantial holdings which British interests have in the territory's major trading and service houses. It is a known fact that with their world-wide trading interests, these houses are in a position to place—and, in fact, do place—substantial business in Britain, which features in our exports not to Hong Kong but to third countries.

The hon. Member referred to this matter and asked if I could give some quantification of this. A typical example is the recent purchase by Cathay Pacific Airlines of Tristar airliners, with the customer's specification of RB211 engines. These engines will in due course appear in the trade statistics as exports from Britain to the United States of America. For indirect exports of this nature, I understand that one large trading house—this is, perhaps, as far as I can go in giving some quantification—has recently estimated its purchases from Britain for delivery to third markets as approaching £100 million per annum. I certainly agree, therefore, with the hon. Member's general point that there is a substantial export trade here which does not enter directly in the trade statistics between the United Kingdom and Hong Kong.

Another example—again, this was mentioned by the hon. Member—is shipping. By world standards, Hong Kong has a significant merchant fleet. I need hardly say that we would welcome more of her own flagship purchases being made from British yards—a matter which I know British Shipbuilders is actively pursuing—the picture is by no means entirely negative. I understand that at least one Hong Kong fleet owner has ordered ships in Britain for registration under a third country flag. Once again, that is substantial business which does not feature in the statistics as an export from the United Kingdom to Hong Kong.

Then, of course, there is the invisible account. Here again, the hon. Member asked whether I could give figures. In what is a complex, dynamic and faschanging trading situation, I do not think that it is possible to quantify with any real degree of accuracy the value of our invisible trade balance with Hong Kong. But it is clear that with its involvement in banking, shipping, insurance and other service industries, Britain is—I readily accept this—a substantial net earner in Hong Kong.

It is realistic to point out—perhaps I may be brief about the other side of the coin—that the benefits are not all one way. Throughout our long historic link with the territory, which goes back to 1841, the United Kingdom has increasingly featured as an outlet for Hong Kong products. About 10 per cent. of Hong Kong's exports come to Britain. We imported £450 million worth in 1977 and no less than 60 per cent. of those imports were in textiles. Currently, on the visible account—again, from looking at the general impact in terms of Hong Kong trade—the overall exchange is approximately 2:1 in Hong Kong's favour.

Therefore, I very much welcome what the hon. Member said about the importance of this market to exports. I think that this is an area that we have neglected. I hope that the hon. Member is convinced that my Department is doing all it can to promote trade in Hong Kong. We hope that British industry will take advantage of all the benefits of increasing trade with Hong Kong that the hon. Member rightly mentioned.

I am sure that the key to the relationship between the United Kingdom and Hong Kong has always been and will continue to be the development of two-way trade. I expect to see increases on both sides. I am sure that they will increasingly continue to be to the benefit of both sides.