HC Deb 18 February 1980 vol 979 cc30-45
The Secretary of State for Trade (Mr. John Nott)

The House may be aware that the European Commission announced this morning its decision on the United Kingdom's application for import quotas on certain synthetic textiles.

My hon. Friend the Minister for Trade and I, together with officials of my Department, have held extensive talks with the Commission to stress the urgent need for action to stabilise imports of those products, in order to check further factory closures and redundancies in the threatened sectors.

For its part, the Commission has been anxious to avoid the application of the United Kingdom leading to a breach in the open trading relations with our main partners. The United Kingdom, with one-third of its GNP sold in export markets, shares that interest in avoiding an outbreak of retaliatory action and damage to our wider trading interests. Moreover, the United Kingdom is itself a major textile exporter. The Commission has therefore been concerned to ensure that any action taken is strictly within the terms of article XIX of the GATT.

Against that background the Commission has agreed quotas on both polyester and nylon carpet yarn at the following levels for the calendar year 1980: for polyester filament yarn, 9,053 tonnes, compared with imports in the final quarter of 1979, running at an annual rate of 15,600 tonnes; for nylon carpet yam, 7,500 tonnes, compared with a 1979 final quarter rate of 9,150 tonnes.

Those quota levels will cut imports back from the very high level reached at the end of last year, but it is our view that they should not be so severe as to provoke retaliatory action or to create damage to the downstream textile and clothing industries, which depend on the availability of low-cost fibres for the competitiveness of their own end-products.

With regard to man-made fibre tufted carpets, our concern has been to avoid the quota on nylon carpet yarn damaging the interests of the United Kingdom carpet industry. For that reason we felt that quotas on both products should be introduced. However, the Commission has had to examine our application against the definition of "serious injury", since otherwise a number of other European countries might also seek quotas for their products, leading to an escalation of protectionism. While the increase in imports of man-made fibre carpets has been substantial during 1979, growing from 1,085.000 square metres in the first quarter to 2,162,000 square metres in the fourth quarter, from non-EEC or preferential sources, the penetration of the United Kingdom market from these sources amounted to only 8.5 per cent. in the final quarter of 1979. In the Commission's view that level of import penetration was insufficient to warrant a quota based on serious injury at this stage. Despite that, we have obtained a statement to the effect that the Commission will monitor imports vigilantly, and that it recognises the necessity for immediate recourse to safeguard action if present trends continue and lead to serious injury.

I am not wholly satisfied with the Commission's response to our application, but we have to acknowledge the overriding duty of the Commission not to provoke a sudden surge of protectionism. On balance, therefore, I think that the outcome is reasonable. Within these constraints the Government will do all in their power to safeguard the interests of the United Kingdom textile and clothing industries. I hope that those quotas, and the very firm statement on carpets, will go a considerable way to stabilising the exceptionally difficult trading conditions that the industry has faced during the past year.

Mr. John Smith

No doubt the Secretary of State will be aware that the almost total failure of the Government to obtain adequate protection against the unfair trading in man-made fibres created by the United States' duel pricing system for energy will cause dismay and alarm throughout the entire man-made fibre industry. Indeed, such alarm is already being expressed by it.

With regard to the detail of the right hon. Gentleman's statement, will he confirm that he has gained absolutely nothing for tufted carpets, apart from an allegedly firm statement? We know what that means in practice. With serious and growing United States import penetration, it is apparent that nothing will be done about the problem.

Is the right hon. Gentleman aware, and will be confirm, that the quota of 7,500 tonnes for nylon carpet yarn for 1980 will mean that imports will, at that figure, be higher in 1980 than they were in the whole of 1979? It is misleading for him to refer to the final quarter of 1979 when the so-called quota is higher than for the year which preceded it, which gave cause for alarm in the first place.

Will the right hon. Gentleman also confirm that the quota for polyester filament yarn will be 50 per cent. higher than for 1978?

In the light of these figures and that analysis of the problem, which I believe to be correct, is the Secretary of State aware of the mounting concern in the industry, over the past six months in particular, and the increasing worry in this House over that period, that the Government have been wasting their time in pursuing a so-called general Community solution to the problem, and that this has been a great mistake on his part? Negotiations have dragged on interminably, and at the end of the day his statement proves that he wasted his time and was hoodwinked by the other party to the negotiations, and that we are ending up with no proper defence against an unfair trading practice. I think that the right hon. Gentleman will agree that in this case we are talking not so much about free trade as about fair trade. Does not his statement today prove that he has neglected a British national interest that it was his duty to maintain?

Mr. Nott

I agree with the right hon. Gentleman that we are talking about fair trade. If we had not sought a Community solution to the problem we would have had to act unilaterally, which, of course, we are entitled to do. But in my judgment, had we acted unilaterally, within six weeks' time we would not have had a qualified majority at the Council for our action, and the quotas would have come off altogether. Moreover, had we acted unilaterally we would have found ourselves quite unable to prevent free circulation within the Community, and the products would merely have been invoiced through third countries and would have come in here in that way.

We were faced with the choice of getting the best agreement that we could through the EEC Commission or taking unilateral action in a way which, in my view, would not have given our industry protection for, probably, more than six weeks. That was the dilemma that we faced.

Throughout the whole affair, which has been an extremely extended and difficult one, we have been absolutely compelled—so would the right hon. Gentleman have been—to act strictly within the terms of the Treaty of Accession and within the terms of the GATT.

If the feedstock question had been the whole of the problem there would not have been too much difficulty, but I think that we all recognise that the problem is partly the high value of sterling in relation to the dollar and also that the American industry has very large economies of scale and is running its plant on three shifts. In many respects, there is a whole body of problems here, of which the feedstock price is only an element.

We applied for a quota for tufted carpets, but the Commission did not grant us one. In the fourth quarter of 1979 the penetration of tufted carpets from restricted sources amounted to only 8½ per cent. of the United Kingdom market.

I have to acknowledge that we must act within the terms of article XIX of the GATT, but 8½ per cent. is not a very large penetration, and we are ourselves substantial exporters of textile products to the United States.

The quota for nylon carpet yarn is highe0r than the 1979 figure but it is lower than the figure for the fourth quarter, as the right hon. Gentleman says. I hope that this will help to stabilise the position. Nylon yarn is a crucial input in the production of many products. Had we gone for too harsh a quota we would have done great damage to the downstream producers who depend upon cheap raw materials for the competitiveness of their end-products.

Finally, on polyester filament, I agree that the figure is roughly 50 per cent. higher than for 1978, but it represents about 13 per cent. of the penetration of our market from restricted sources, against 27 per cent. penetration in the fourth quarter, and it is about 58 per cent. of the level of imports into this country for 1979 as a whole. In 1979, the imports were 12,690 tonnes, and the quota has been fixed at 9,053 tonnes.

Mr. David Steel

Will the Secretary of State accept that we recognise that he has done as much as possible within the constraints that he has mentioned? In particular, will he accept that the warnings that he has given against the surge of protectionism are extremely important?

Will the right hon. Gentleman concentrate, in the Commission, on trying to tighten the rules about the switching of products outside the Community and their being reimported and passed off as Community products? Will he amend his own Department's policy on encouraging public corporations to buy British wherever possible, and in that way try to reduce imports?

Will he recognise that the new machinery for the spinning of yarn, which is extremely expensive, is difficult for our industry to invest in when the Government have cut back on industrial investment grants?

Mr. Nott

I am grateful to the right hon. Gentleman for his comments on the dilemma that the country faces. We are a trading nation, with one-third of our gross national product in exports, and we are the very last country that can afford to set off a round of protectionism in the world. That is the dilemma that we face in trying to help a very important industry that is in considerable difficulties at the present time.

I accept the right hon. Gentleman's point that there is great concern about switching. Where the products are under quota, under the MFA, any switching comes ultimately within the quota set out by the MFA, but I accept that this is a matter of concern to the textile industry, and rightly so.

I take the right hon. Gentleman's point concerning public procurement. I am delighted when British purchasers decide to purchase British goods. But again I point out that we are a main signatory of the GATT, and that one of the recent and most important sections of the multilateral trade negotiations was the agreement on public purchasing policies. As a world trading nation we must be very careful not to be in breach of the MTNs, and public purchasing was one of the central matters in discussion in that respect.

With regard to machinery production, we are, of course, a major exporter of textile machinery—particularly to some of the countries that cause us problems with their exports. I believe that this country has some of the most attractive investment allowances of any developed nation in the world. It is not just to subsidies that we should look. We have highly attractive investment allowances, and the industry must take full advantage of them.

Mr. J. Enoch Powell

What, in the Government's view, is the basis of this policy? Is the importation of these items to be controlled because they are priced too low or because they are priced unfairly?

Mr. Nott

Some of the greatest pressure for control has come from Northern Ireland, as the right hon. Gentleman will be aware. The nylon yarn industry in Northern Ireland has been one of our principal concerns, as I am sure it has been to the right hon. Gentleman. By the introduction of the quota we believe that price levels will be raised within the domestic market and that this will give the industry an opportunity to adjust itself to the surge of competition that has arisen during the calendar year 1979. My answer is that it will have the effect of raising price levels within the United Kingdom market over a period, but not immediately. That will be one of its principal effects.

Several Hon. Members


Mr. Speaker

Order. If hon. Members will co-operate and ask brief questions, I hope at least to call those who have constituency interests.

Mrs. Kellett-Bowman

Has my right hon. Friend received any assurance from the Commission regarding free circulation? Will he assure the House that in view of the drop in textile jobs from 117,000 to 70,000 during the past 10 years he will press Commissioner Giolitti, in charge of the regional fund, to include textiles specifically in the next tranche of the non-quota section of the European regional development fund, as that would be of tremendous help to textile areas?

Mr. Nott

It would be of help to the textile industry to be included in the way suggested by my hon. Friend. I shall certainly look at that matter and communicate with my hon. Friend.

Free circulation lies at the heart of the difficulty that we face, as I am sure my hon. Friend appreciates. The Commission has undertaken that under article cxv, to the extent that diversion of trade occurs it will take appropriate action. That is the assurance that we have had from the Commission on free circulation. I believe that it will abide by that undertaking.

Dr. Summerskill

Will the right hon. Gentleman bear in mind that his statement will be received with extreme disappointment and great dismay by people in Halifax and West Yorkshire? We have waited months for this statement. Apparently, it is the best that the Government can do, yet they have obtained absolutely nothing for tufted carpets. There will be a further steady decline in this part of the industry throughout the whole country.

Mr. Nott

I hope that the hon. Lady is proved to be a little too pessimistic. Certainly the industry is going through very difficult times. I recognise that my statement will come as a disappointment to sections of the textile industry.

The gravest concern has been expressed on polyester yarn. We have in fact got a quota of 9,053 tonnes against fourth quarter imports on an annualised basis of 15,600 tonnes. For 1979 generally it was 12,690 tonnes, so the quota is considerably below average imports of these products for 1979.

I agree that there will be disappointment in the industry regarding tufted carpets. However, we must recognise that the Commission has a duty—indeed, we also have a duty—to ensure that any action that we take comes strictly within the terms of the GATT. Otherwise, this country will become extremely vulnerable to retaliatory action against our exports all over the world.

Mr. Maxwell-Hyslop

Why is it logical to confine the action taken to polyester yarn and not to undyed fabric made up in America from that yarn, which has been produced from artificially cheap oil?

Mr. Nott

Because the action that we are taking is based not upon feedstock input prices but upon article xix of the GATT, which sets out in specific terms when a country can take action where material damage is being done to its industry. Under article xix of the GATT there is no case for taking action on downstream products that use polyester yarn as an input. We have to abide by the internationally established rules in dealing with this matter. I have no choice but to give my hon. Friend the perhaps unsatisfactory answer that there is no case under article xix for taking action on these products.

Mr. Woolmer

Does the Minister recognise that, certainly in Yorkshire, workers will fail to understand the statement that such little harm is being done to the carpet industry that protection in these terms cannot be justified?

Is the right hon. Gentleman aware that we shall be pleased to hear a Minister at last recognise the overvaluation of the pound and the effect that it is having on manufacturing industry? Will he ensure that the Chancellor of the Exchequer is made fully aware of that and, while renegotiating with the Common Market, will he get something done about the foreign exchange rate?

Finally, will the right hon. Gentleman think again about the carpet industry and agree to meet the leaders of that industry, together with the relevant Members of Parliament, and consider whether a more pressing case can be made, because workers are facing not a dilemma but the dole queue?

Mr. Nott

I recognise the concern that has been expressed about carpet imports from these restricted sources. As I said, in 1979 generally—I am taking the average figures—they amounted to only 5.8 per cent. of the British market. One thing that I have had to take into account, as has the Commission, has been that domestic production of these carpets in the United Kingdom rose in 1979, that the domestic market was higher in 1979 and that domestic sales were rising in 1979. Therefore, although there has been difficulty with substantially increased imports from certain restricted sources, production, the United Kingdom market, and sales rose in 1979. That factor has to be taken into account in deciding what action we can reasonably take under international agreements.

Mr. Robert Atkins

Does my right hon. Friend recognise that his comments about polyester filament yarn are not satisfactory? What further action needs to be taken in view of the closures that have taken place, particularly in my constituency, where a Courtaulds mill has closed down putting 2,600 people out of work? What more can we expect my right hon. Friend and his Department to do?

Mr. Nott

I believe that for the time being I have obtained through the EEC the best possible deal that was obtainable in the circumstances. I am afraid that I cannot offer my hon. Friend anything more. If we had taken unilateral action, my judgment is that we would not have had a qualified majority in the Council and all quotas would have come off six weeks later. I have been concerned to get the best possible deal that I could for those firms manufacturing polyester filament yarn. However, I accept that they would have liked a harsher quota.

Mr. Barry Jones

Does the right hon. Gentleman appreciate that Courtaulds' workers, in my constituency, will believe that he has been sold a pup on this one? Will he undertake to fight to improve the current miserable 14 million units of account that are available for restructuring and that the Italians are at the moment almost monopolising?

Mr. Nott

We have a common interest in obtaining what finance we can out of the Community for the purpose of restructuring. Certainly I share the hon. Gentleman's concern in that respect.

As for being sold a pup, if the hon. Gentleman can carry that message on to the Continent for me and perhaps seek out the Germans, the Dutch, the Danes and people in other countries who feel that there is a great danger of reversion to protectionism, I shall be grateful for his assistance. We are now within the Community and we do not have the capacity effectively to take unilateral action.

Mr. Bulmer

Will my right hon. Friend confirm that the United Kingdom market for tufted carpets is more attractive to the Americans because we use the same measurements, speak the same language, and, I might almost add, play by the rules? Will he define the term "serious injury" and indicate, when that point arrives, what further action he might take?

Mr. Nott

Action would be through the Commission. The Commission has specifically and clearly spelt out the circumstances in which it might contemplate safeguard action on carpets. Rather than read it out now, I shall let my hon. Friend have a copy. United Kingdom production of man-made fibre tufted carpets—I am sorry to have to give the detailed facts, but they are important—rose from 94 million square metres to 100 million square metres last year. The United Kingdom market increased and home sales increased. It is not as though the man-made fibre tufted carpet industry was doing anything other than selling more in 1979. The industry is in difficulty, but it actually sold more in 1979 than in the previous year.

Mr. Arthur Davidson

Would it not have been better to take a chance and act unilaterally? In that way the right hon. Gentleman would at least have demonstrated his determination to keep the British textile industry alive. After all, what could be worse than what is already happening?

Mr. Nott

That was certainly a tempting option, and one that I considered. Indeed, if the hon. and learned Gentleman talked to the Commission in Brussels he would discover that the Commission knew that that was an option that we had available to us. However, in the end it was my judgment that we would better help the industry by obtaining Commission action that would last a year or so, rather than taking unilateral action that would have the risk of lasting only six weeks. Even if we had succeeded, after that six weeks we would have had no means of stopping the free circulation of products from third countries. Therefore, though it was an option that I considered, it would have been ineffective in the circumstances.

Mr. Trippier

Does my right hon. Friend accept that it is extremely difficult for those of us, on both sides of the House, who represent textile constituencies to explain to our constituents the problem that the British Government have in dealing with the European Commission on matters of this kind when countries such as France can seemingly get away with unilateral action while we do not take that same effective action? My right hon. Friend has explained to the House why he did not want to take unilateral action before he went to the Commission. He seems to have got little out of the Commission, so could he not consider taking unilateral action now?

Mr. Nott

I got much more out of the Commission than could have been obtained by taking unilateral action ourselves. That is my view. My right hon. and hon. Friends can agree or disagree with it. Naturally I understand that it is extremely difficult to explain this to the general public and to our constituents. It is an extremely complicated matter; that is the difficulty.

What I hope my hon. Friend will explain to his constituents as best he can is that we have to achieve a balance between, on the one hand, protecting our industry from unfair, disruptive imports and, on the other, promoting our exports, on which one-third of our manufacturing industry depends. My guess would be that in Rossendale there are as many jobs dependent upon export markets as there are jobs that are now going through difficult times because of imports. That is something that we must all try to explain to the country generally.

Mr. Straw

Is the Secretary of State aware that in the whole of North-East Lancashire his action will be regarded as too little, too late? Is not the truth of what the right hon. Gentleman has said about the EEC that our membership of the Common Market is now a serious impediment to the defence of our national interests? Could he say exactly what he means by these quotas lasting for a year or so? What is "or so"? When do these quotas come up for review by the EEC? Could the right hon. Gentleman tell us what arrangements there will be for the surveillance of imports? Could he also tell us why he is not taking unilateral action in respect of carpet yarn, when only a week ago, when he made the application, one assumes that the right hon. Gentleman thought that quotas in respect of manmade fibres would he justified under article xix of the GATT?

Mr. Nott

There is a quota on the nylon carpet yarn. We applied for a quota on carpets because it seemed to us that to apply for a quota on the yarn and not the carpets might create difficulties. As I have said, that is the problem, and that is why we applied for a quota on carpets as well as the input. The Commission decided—I must recognise its point of view—that there was not sufficient justification at present for article xix action on carpets. Naturally surveillance will continue on all these products and we shall study very closely the volume coming into this country. That is fundamental. As to the EEC being an impediment, I accept that it has been an impediment in persuading us not to take unilateral action at present. I acknowledge that. But had we not been in the Community I think that we would have been extremely careful and as cautious as we are now being about taking action that could trigger off retaliation against our exports and a new surge of protectionism, particularly at a time when the MTNs have just been concluded. I do not believe that, ultimately, it would have made that much difference whether we were in the Community or not. In the last resort it is our own economy that we seek to defend.

Mr Goodlad

Has my right hon. Friend made any estimate of the effect that stricter quotas would have on the downstream users of these yarns?

Mr. Nott

A stricter quota on nylon and polyester yarns would have helped to a greater extent the producers of those yarns, but it would also have raised the United Kingdom domestic price level more than will happen now and, in that respect, would have increased the costs of those producing downstream products and made them less competitive as a result.

Mr. Park

Is the Minister aware that already 1,500 jobs are at grave risk in the British Celanese factory, in my constituency? The Minister mentioned the observance of rules. Is he aware of the evasive practices of American companies that use their Belgian subsidiaries to evade direct import duty and even get an import duty clawback? Fair competition is one thing; unfair competition is another. Will not the Minister reconsider his position?

Mr. Nott

If the hon. Gentleman can bring to my attention an evasion of the rules, as he puts it, and can show that rules have been evaded, we shall take action to put that right. I should like to have from the hon. Gentleman precise examples. Of course, there is nothing to stop products manufactured in Belgium coming into this country without tariffs, but if rules are being broken or tariffs are being evaded and the hon. Gentleman can give examples we shall look into them immediately.

Mr. Waller

Is my right hon. Friend aware that in my constituency in the last two or three days a carpet factory has closed, with the consequent loss of 300 jobs, and that there is increasing concern about unfair imports of American tufted carpets? If the present level of subsidised imports is not regarded as sufficient, can he say what level of imports would be regarded as unfair so that my constituents may know when to expect some action?

Mr. Nott

In 1979 the total imports of tufted carpets from Canada and the United States—which I think are the countries that my hon. Friend has in mind—amounted to 5.7 million square metres. The United Kingdom production of man-made tufted carpets amounted to 100 million square metres. So although American and Canadian imports may be causing some difficulty, they are a small fraction of the total United Kingdom market.

Mr. Wigley

Will the Minister tell us whether, in these discussions, any representations were made about allied products, such as laminated or coated fabrics, or fabrics covered with polyvinyl chloride, as were made by the Leathercloth and Coated Fabrics Manufacturers' Association? If not, are such representations about to be made?

Mr. Nott

As the hon. Gentleman will know, there must be about 5,000 separate products in this area. Without notice, I cannot give him a firm answer to that question, but if he would like to table a question or drop me a line I shall give him a clear answer.

Mr. Thompson

Will my right hon. Friend confirm that this is the best deal that any Government have ever got since we joined the EEC—(HON. MEMBERS: "Oh".]—in this sort of industrial situation? Whilst doing that, will he realise that some of the firms in my constituency, both wool textile firms and others are very worried about the retaliation that this may attract?

Mr. Nott

I am grateful to my hon. Friend. I am not proud of the fact, but when right hon. Members of the Opposition formed the Government of this country—and they were in government for four or five years—only once did they take article xix action themselves—and that was on television sets from Korea. This is the first time for many years that article xix action has been taken on textiles. Although I do not anticipate that it will satisfy the textile industry—I should like to be able to do that, but I think that I shall have to remain in my present post for a very long time to be able to satisfy all sections of the textile industry—this is the first time that article xix action has been taken and I hope that it will go some way towards stabilising the market.

Mr. McNally

Is the Minister aware that west of the Pennines his statement today will be greeted with despair by hon. Members of both sides of the House? The fact is that we have heard before the hand-wringing and the legalism about the problem. Is the Minister aware that 750,000 jobs are haemorrhaging away? Unless there is more robust action from his Department, the Government will be facing the equivalent of a Corby or a Shotton a month in the textile industry, and all that he will be left to do is to bury a corpse, unless he is willing to defend the industry properly, efficiently and effectively—and that he has certainly not demonstrated his willingness to do.

Mr. Nott

The hon. Gentleman has it so completely wrong that I really should like to debate the matter with him. First, of the 750,000 jobs—that figure is roughly right—a very large proportion are dependent on exports of textiles and clothing all over the world. That is the first thing. Some of those people who export those textile products depend upon cheap fibres to make their goods competitive in world markets.

Furthermore, I remind the hon. Gentleman that the textile industry is a very big and important industry. We are trying to do our best to help it, but we must do so within the environment of one-third of our GNP being earned in world markets.

Mr. Watson

Whilst I acknowledge that this is probably the best deal that the Minister could have got in the circumstances, I wonder whether he would acknowledge that an important share of the market does not need to be particularly large in order to have a dramatic and disruptive effect upon the price structures prevailing within that market.

Mr. Nott

I wholly agree with that. A surge of imports at the margin can have a very serious effect on the domestic price level. I accept that entirely.

Mr. Lee

Will my right hon. Friend accept that many companies in the textile industry have been waiting for today's decision before deciding on possible closures or possible expansion plans, and that today's decision will be taken very pessimistically by the industry, as evidenced by the press release from the British Textile Confederation, issued this afternoon, which describes the measures as "totally inadequate"? Does my right hon. Friend accept that if, tragically, there is a wave of closures in the next few weeks, he will be forced to take unilateral action?

Mr. Nott

I have not seen the BTC's press release, but it does not surprise me that it feels that this is inadequate. I have had many submissions from parts of the textile and clothing industries asking that on no account should we take quota action of the kind for which the BTC has been asking. The textile industry is far from being united in wanting quota action at all, because many people in the textile industry are users of cheap fibres.

As for closures, I realise that the textile industry is going through an extremely difficult time. I have already explained that I do not believe that unilateral action would help the industry one little bit at present, and I have given the reasons why I believe that to be so.

Mr. John Smith

The Secretary of State said that he would be happy to debate these matters with one of my hon. Friends. Will he take that a little further and arrange for a debate on these matters, in view of the widespread concern—echoed in all parts of the House—and, indeed, the widespread dissatisfaction that has been expressed?

On the question of the best deal possible—which is apparently the Secretary of State's defence—may I remind the right hon. Gentleman that for nylon carpet yarn the quota for 1980 is 30 per cent. higher than the level of imports for 1979, when that was 21 per cent. of the United Kingdom market? Can he remember any occasion in the history of British trading when a quota has been fixed at such an absurd and ridiculous level?

Mr. Nott

The nylon carpet industry and the man-made fibre carpet industry are actually purchasers of nylon carpet yarn. If the right hon. Gentleman thinks that it would benefit the carpet industry to take action that would lead to a sudden savage jump in the price of its raw materials, I do not share that view.

As for a debate, I should have thought that since the Government, as I recall, had a debate on textiles some time ago in their own time, if the right hon. Gentleman wishes to have a debate on this subject it might be useful to choose it as one of the Opposition's Supply day subjects.