Textile, Clothing and Footwear Industries

HC Deb 26 February 1981 vol 999 cc980-5

Mr. Speaker

I have selected the amendment in the name of the Prime Minister.

Before I call upon the right hon. Member for Lanarkshire, North (Mr. Smith), I remind the House that, as I have indicated, there are two important debates. There will be eight Front Bench speakers in the course of the two debates. At least one hon. Member who has the status of the Front Bench is seeking to catch my eye, but three others who intended so to do have withdrawn. I must tell the hon. Member who is seeking to catch my eye he is very unlikely to do so because I propose to recognise or to call, first of all, only hon. Members who are Back Benchers with direct constituency interests, apart from those Front Benchers who are taking part in the debate.

3.49

Mr. John Smith (Lanarkshire, North)

I beg to move, That this House deplores the worsening crisis in the textile, clothing and footwear industries which is caused by Government economics, industrial and trading policies. I shall seek to be brief so that a number of hon. Members on both sides of the House may take part in the debate.

Manufacturing industry in this country is in a terrible crisis. The year 1980 saw the most rapid fall in output since the Second World War, and, as 2,400,000 of our fellow citizens are painfully aware, we are returning to the unemployment levels of the inter-war years. That is bad enough. But perhaps the most depressed sector of our depressed manufacturing industry is that of the textile, clothing and footwear industries. It looks as though well over 100,000 jobs have been lost in those industries in the course of 1980— 40,000 jobs in the clothing industry alone. Therefore, in one year about 10 per cent. of the work force of those industries has gone. In recent months, and over the last year, we have seen a spate of large closures, with firms such as ICI and Courtaulds shedding labour at an alarming rate.

There can be no doubt, therefore, that these industries are in deep crisis. I regret to say that there appears to be no sign of improvement. Indeed, the fear and despondency running throughout those industries were evident in the large lobby of Parliament which the TUC organised last week. I am sure that many hon. Members will know at first hand, either from their constituents or from their constituency interests, of the worry which the management and work force in those industries feel about their immediate economic future.

There is also no doubt that the sharp acceleration in the decline of those industries has been caused by the Government's economic and industrial policies. First, the over-valued pound has hit exports particularly badly. I believe that that situation will get worse in the months to come. It has also had the effect of cheapening and stimulating imports, which is a recurrent problem in those industries.

Regrettably, a large amount of distress borrowing has also taken place, and that has been badly affected by the chronically high interest rates from which we are suffering as a result of the Government's monetarist policies. In those industries we also see the effect of depressed demand. Those industries are particularly sensitive to cycles of consumer demand, and at present they are being hard hit. We should not forget the retreat from an effective regional development policy—again, one of the strands of Government policy. That has particularly hit industries that are located in many of our older industrial areas.

Mr. Robert Kilroy-Silk (Ormskirk)

Does not my right hon. Friend agree that it is not just the Government's economic policy which has done positive harm to the textile industry, but also their appallling complacency in the face of often-repeated complaints from firms such as Courtaulds, in my own constituency, where 150,000 men and women were made redundant last week? They have repeatedly told the Government that they were suffering from a high exchange rate, artificially high interest rates and a disastrous artificial energy policy. It has been the Government's failure to act in the face of those repeated protestations of distress from the industry which places more of a responsibility on the Government.

Mr. Smith

I am grateful to my hon. Friend for drawing that matter to our attention, and also for reminding us of the effects of the Governments energy policy and the lack of any form of assistance to industry in the shape of relief from high energy prices. Some of those industries are suffering particularly in that regard.

In what I think will be the Secretary of State's first textile debate since he took office, I hope that he will show some of that flexibility which he was urging others to adopt in a recent television interview. I hope that we shall see some "constructive pragmatism", and examples of all the other phrases which are flying about the Conservative Party at the present time. I hope that the right hon. Gentleman will take on board some of the serious problems which the industries are facing.

I turn to the question of trading policies. I should like to mention briefly the multi-fibre arrangement. Some of my hon. Friends and some Conservative Members may wish to debate the details of that. We know that it takes a fairly long time to work up to the multi-fibre arrangement negotiations. I do not expect the Government to make explicit statements about their attitude or negotiating position today, but I hope that they will listen to the House. In particular, I hope that they will study carefully the possibility of getting some form of recession clause in the new multi-fibre arrangement.

Above all, we ought to seek to have the levels of imports related to the circumstances of the domestic market. I hope that the Government will take that matter on board and seek to pursue it in the negotiations.

As to trading, the main disruptive effect over the last year or two, particularly for the textile and clothing industries, has come not from the traditional low-cost producers, but from a large surge of imports from the United States. That has caused a sharp) turn-round in our trade balance.

Mr. Robin Maxwell-Hyslop (Tiverton)

Does the right hon Gentleman agree that one of the MFA's greatest weaknesses is that each new country brought in is given a quota on top of the existing quotas rather than a percentage within a global limit, and that that has proved to be the greatest hole in the bucket?

Mr. Smith

There are many problems associated with the multi-fibre arrangement of which that is one. There is also the problem of outward processing as well as the problem of free circulation. Many difficulties are involved in what is basically a good framework agreement. We ought to learn from our experience of the difficulties, encountered under successive Governments, of enforcing some aspects of the MFA. The Government should seek to try to block some of those loopholes if they can in the forthcoming negotiations.

I do not underplay the importance of the MFA at all. However, in this debate we ought to turn our attention to the problem of the United States. We have seen a sharp acceleration in imports from the United States. Of course, the benefit of the relationship between the pound and the dollar is itself the result of the Government's economic and financial policy. However, the sharp stimulus to American exports to the United Kingdom, particularly in bed linen and articles such as that, has derived from America's cheap energy pricing policies and from the unfair advantage which America has conferred on itself as a result of its energy pricing policies.

That was recognised some time ago. During the negotiations on the Tokyo round the Council of Ministers, at the instance of the United Kingdom Government, was persuaded to pass a resolution about this problem. It was linked to the conclusion of the multilateral trade negotiations. The Council resolution of 3 April 1979—only a month or so before the general election—was as follows: In the event that artificial differences in the price of energy and petroleum raw materials available to certain world synthetic fibre producers lead to, or threaten to lead to, a disruption of the Community textile market, the Community will have recourse, without delay, to the appropriate provisions of GATT. The present Government did not follow up that resolution, which was a wise precaution taken by the previous Government. It was reported to the House on 4 April 1979, and we made clear the importance that we attached to some action being taken by the Community to deal with the rapidly emerging problem posed by American exports.

For months after that, the Government did nothing in the Council of Ministers or elsewhere. Finally, in 1980, we got some quotas on some of the sensitive items. Quotas were imposed on polyester filament yarn and nylon carpet yarn, but not on tufted carpets. We argued at the time that those quotas were too high and that it was largely a case of shutting the door after the horse had bolted from the stable.

On the other hand, at the end of the year we found that the Government were not renewing the quotas at all for 1981, thus leaving the industry without any protection whatever. The Government said that we need not worry so much about that because a new initiative was being taken by the European Commission with the United States Administration which they thought would lead to a resolution of the problem. Those consultations have taken place, but I am afraid that from the report given to the February meeting of the Council of Ministers it now looks as if that initiative is a total failure and that the Community has made no impact whatever on the United States Administration.

I draw the attention of the House briefly to what was said at the meeting of the Council of Ministers. The Commission drew attention to the American intention to decontrol oil prices. That was nothing new. It had existed before and it took a long time coming. It drew attention to the American Administration's decision to decontrol gas prices over a long time. However, we know the difficulty there—the President proposes but Congress disposes. Some effective lobbying will take place in the United States, and it will be surprising if we see any rapid movement on gas prices. I think that that advantage will remain with the United States. Reference was made to an intention to remove restrictions on naphtha exports, but they are of little relevance to the textile industry.

The worst part of all was when the Commission solemnly reported to the Council of Ministers that the United States Administration undertook to convey the concern of the European textile industry to the American industry. All that it is doing is conveying concern.

It is interesting to note what was said in the European press about that and what was said in the American press. "Europe", a journal in the EEC said: Council notes encouraging results of textiles consultations". An article in an American newspaper, the Daily News Record, of 11 February 1981, states: The Reagan Administration has told the European Economic Community that it won't press U.S. textile and apparel firms to restrict exports to Europe despite European pressure for such crackdown. After two days of meetings here, top trade negotiators from the EEC left Tuesday without achieving their main goal: winning assurances from the White House that European-bound exports would be curtailed. The European team, headed by Sir Roy Denman, the EEC's director general for external relations, was told politely that the U.S. couldn't 'under any circumstances' ask for such restraints at this time … The Europeans were equally unsuccessful in winning Administration assurances on another contentious issue: U.S. deregulation of natural gas. It is clear that the United States has not paid the slightest attention to the representations made by the European Commission. It is equally clear that the problem of unfair trading will continue into the foreseeable future.

Sir Frederick Burden (Gillingham)

Does not the right hon. Gentleman accept that there is room for negotiation with the United States? In 1978, the flow of knitted fabric was a mere trickle. In the next year its value rose to £17 million. There is a duty on English worsteds and woollens of 45 per cent. in addition to a strict quota. There should be room for manoeuvre between the Governments so that our products have greater opportunities when it comes to penetrating the American market.

Mr. Smith

I hope that the Government will achieve something along those lines. Indeed, the hon. Gentleman has drawn our attention to the fact that the United States has a protected textile market. Anybody who believes that there is international free trade in textiles is living in cloud-cuckoo-land. All the major consumers of textiles are protected in one way or another. The United States is not slow when it comes to seeking protection for its industry. Nor is it slow to seek export markets. The American textile industry is making a determined export drive. That drive has proved far too successful and has obtained a large share of the British market.

When the Minister told us that the Government were not pursuing quotas, he was asked what would happen if the initiative failed. My hon. Friend the Member for Norwood (Mr. Fraser) asked what would happen if the Government did not get anywhere with the American Administration. The Minister replied: If the initiative fails, we have open to us a range of options under article XIX of GATT and elsewhere. We would consider those in the light of any failure."—[Official Report, 15 December 1980; vol. 996, c. 49–50.] The Secretary of State might as well be honest with the House. He can tell us that the initiative has failed and that the United States will not budge. There is ample evidence to show that. Unfortunately, the Minister of State was not in the Chamber when I quoted an American newspaper article, but his right hon. Friend the Secretary of State for Trade heard me. Will the Secretary of State tell us precisely what is happening about the negotiations? What does the right hon. Gentleman propose to do if they end in failure, as I believe they will? The Government must spell out their position. They must tell us what action they intend to take to defend the interests of our industry. After all, the quotas were not replaced on the understanding that this initiative would take place.

As the hon. Member for Gillingham (Sir F. Burden) reminded us, there is no international free trade for textiles. Countries must look robustly towards the protection of their own interests. The Government should bear in mind that if they are weak about dealing with imports that flood in from the United States they will gravely weaken their hand when they negotiate with the low-cost producers from less prosperous parts of the world. Why should there be any restrictions on their products, they will say, when the richest nation in the world is allowed such free and ready access to our markets? It is in the interests of the Government's trading policies that they should take a firmer and more robust line with the United States.

Mr. Robert Atkins (Preston, North)

I do not necessarily dissent from the right hon. Gentleman's view. However, if we take action against the United States of America over textiles, is the right hon. Gentleman worried or concerned about any backlash that might affect, for example, British Aerospace? We already have some difficulty breaking into the American market and the Americans might take action against successful industries, such as British Aerospace, and prevent them from intervening in their market.

Mr. Smith

I had not noticed such a connection, but under the multilateral trade negotiations I believe the Americans have entered into certain agreements about aerospace products. One would expect them to adhere to them. However, one must have an effective policy and one must make judgments. We cannot lie down every time the United States vigorously asserts its interests.

This year is important, because we are approaching the renegotiation of the MFA. the Government must start to lobby opinion within Europe. They must take a strong and determined line, because the problem is serious.

With regret, we feel obliged to highlight the sad state of the textile, clothing and footwear industries. However, we have a duty to draw the attention of Parliament and of the nation to the rapid and accelerating decline in employment, business opportunities and confidence. Those businesses constitute one of the worst hit sectors of manufacturing industry. It is vital that the Goverment should reverse their economic and industrial policies, which are aggravating the problem. They should follow a robust trading policy that protects the interests of these important industries, which are also large employers.

I hope that the Secretary of State will take his own medicine. Following the interview that he gave on Sunday and the advice that he gave to his colleagues to be flexible, I hope that he will announce some changes in the Government's policy, the difficulty is that at the time the Secretary of State said that he advised people not to listen to what the Government said but to watch their actions. I am prepared to make an exception in the right hon. Gentleman's case. We shall listen to what he says this afternoon, and we might even believe it.