HC Deb 15 June 1981 vol 6 cc836-42

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

11.30 pm
Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

I am grateful for the opportunity to have this debate and I make no apology for raising at this late hour the problem of Japanese import penetration of this country. Indeed, the fact that the hour is late may be opportune, because many people in British industry feel that the problem that faces our industry from Japanese imports is itself late of solution.

This country has, as I recognise, built itself upon a free-trade concept, and it would be anathema to me and to many other people if we went in for wholesale protectionism, but there comes a time, with certain situations, when to take action is common sense, particularly when one has struggled year after year to come to a solution, as one has with the Japanese, but to almost no avail.

The United Kingdom's trade deficit with Japan has grown from £278 million in 1975 to £1,100 million in 1980, and for 1981, if the figures turn out as they look to be now, it is likely to be £1,400 million. The deficit of the EEC as a whole with Japan is likely to be well in excess of £5,000 million. Over the same period, the import-export ratio has declined from 51 to 38 per cent. This situation shows no semblance of stability or change, and 58 per cent. of Japanese imports are in three product areas—vehicles, consumer electronics and electronic engineering.

I do not always agree with the CBI, but I agree when it says: With 2.5 million unemployed, Britain's biggest worry is the danger of losing more jobs. The immediate threat to employment in manufacturing industry is serious enough, but the longer-term threat is to the very survival of some essential parts of our industrial base. I realise that the Government are talking, have talked long and hard, and have had some success in trying to limit the damage that Japanese imports are doing, particularly to our car industry, but still, after all this talk, the deficit grows. It has risen 500 per cent. in six years.

We have had five years of, on the whole, futile talks and mainly empty promises; talks which finally broke down when hopes of an amicable settlement between the EEC and Japan were dashed. The time is surely opportune to take action. The Japanese Prime Minister is in Europe this very day. He does not want to talk about trade, and I do not blame him. The Foreign Ministers meet on 22 June, the Prime Ministers meet in Luxembourg on 29 June, and a Western economic summit is to be held in Ottawa in July.

The people who wish to see action taken cannot be accused of being backwoodsmen, which is the accusation always made by the critics of any kind of import control. Sir Terence Beckett, who helped to build Ford into a great indigenous motor manufacturing company, cannot be called a backwoodsman. Tube Investments, Guest Keen and Nettlefolds and Lucas Industries are not backwoodsmen. They are all companies that see the danger and the need for action.

After five years of gentle persuasion, which has led almost nowhere, we should tell the Japanese, who respect strength and little else, that the time has come for them to brace themselves for direct action. They will talk and they will bow, and still carry on inexorably taking over—as Beckett put it with laser-beam clarity—the industrial prosperity of the Western world. If they will not act and do it nicely, we should do it by direct action.

We should challenge the Japanese policy through the GATT as well, under articles VIII, X and XXIII, all of which clearly cover the problems that we face with Japan. We should do it if we can jointly with the EEC. If we cannot, we should do it on our own. We should with vigour and bluntness press Japan for the elimination of tariff and non-tariff barriers.

We should push the Japanese Government into taking a real interest in seeing that they purchase more foreign goods for public sector industries, about which they can do something. It is easy for the Japanese to wring their hands, saying that they can do nothing, while their industrialists attempt to wring our industries' necks. We should tell them that if they will not agree to open their home markets—and they are not open—we shall set quotas so that a balance comes about.

The Japanese must be told that the continuing imbalance, which is bringing us to a £1,400 million deficit, cannot continue and will not be allowed to. If we go on year after year talking, the Japanese will be content and happy that we should do so, and still the deficit will grow.

There is one thing that we can do. We should immediately ban exclusive franchises, which the Japanese exploit to the point of scandal. This would at least do something to help our hard-pressed components industry in the Midlands.

Of course, the restraint of trade is not to this country's overall benefit. I am sure that my hon. Friend will tell me that we export twice as much as the Japanese, or will make similar statements. Of course, "Rab" Butler was right when he said years ago that this country had to export or die, and that is as true today as it was then.

I do not suggest that we should intervene where we have real free trade markets and genuine trade. All trade needs real freedom and a real balance to flourish. With the Japanese, it is neither real freedom nor a real balance. The Japanese have various conditions that are peculiar to their market, and it is not just I who says that.

An organisation in Europe, the Orgalime, rightly quotes many restrictions that exist in the Japanese market: whether it is their distribution network, which is linked to producers, where nearly 90 per cent. of the electronics goods markets tends to make it a captive market; whether it is the standardisation of Japanese products, which leads to economies of scale unrivalled in Europe; whether it is technical regulations, such as the Japanese electrical appliance law, which constitute barriers to standardisation and certification and which bolster the protection of the market almost to a cartel; whether it is the structure of Japanese groups and the links that they have, where they can virtually control and often select their own imports; whether it is in investment, where it is virtually impossible for countries to take over investments, but they can take over others; whether it is the liaison and the administration that exists between firms and their trade associations; whether it is the cartel links or monopoly situations that exist, which under our regulations in Europe and the United Kingdom would be a cartel; whether it is the practice of high price public purchasing, which enables firms to increase their export competivity; or whether it is—as so often happens—that the Japanese, when it suits them, can say "You are free to compete", but where no freedom exists.

Sir Terence Beckett talked of the single laser beam destruction of some of our industries. He is right. What about the motor cycle industry? It is not, as people like to say, just because of bad British workmanship or lame dogs. It is television tubes in the United Kingdom, electronics in the United States, and photography and optics in Germany. Today, the threat is motor cars, lorries and vans. Of course we must become more efficient—and I believe that we are doing so. It is a painful process, particularly to the unemployed, but it is necessary. Every one accepts that.

We must remember that Japan has grown by protection, and is helped now by protection, most of it by subtle means. Unless we do something urgently, we as a Government will preside over the unnecessary and disastrous growth in unemployment in the United Kingdom and Europe which we can avoid if we wish. The Japanese are planning to produce 14 million vehicles by 1985, when they have a home market of only 3 million. Are we to do nothing and stand in the midst of ruins and say "We kept faith with our principles, at the expense of our people's jobs"? I am not prepared to do that.

I deal, finally, with the Nissan deal, which was heralded as a great golden calf. If we are not careful, it will be no such thing. It will be a Trojan horse. The Economist last week wrote: The last thing Europe needs today is shadow factories that merely bolt together bits shipped from Japan. That would create only token jobs, and little value and damage local component suppliers. The Ford Motor Company had the courage to come here and build cars, and it says that up to 50,000 jobs could be lost if Nissan is allowed to set up a assembly plant without the strictest conditions. In my view, those conditions should be 80 per cent. at least by weight, not by value, where they can fiddle things, as they so like to do. We should impose the strictest conditions. As Mr. Troy of Ford—who has done more for Britain than any Japanese—said, if he was in the component industry he would be terrified.

We have it in our power to ensure that that fear is unfounded, but not by taking another five years. British industry and jobs do not have the time. The need is for action this day. If the Government act wisely and with firmness the disaster can be avoided and they will gain many friends. Speaking up for Britain is a traditional Conservative stance. It was never more needed than now if the industry of Britain is to have a chance to recover—and nowhere more so than in my native city of Birmingham. It looks anxiously, and I am sure not in vain, to the Government to act in Britain's interest, as the Japanese have always acted in their interest.

11.45 pm
The Under-Secretary of State for Industry (Mr. John MacGregor)

I am grateful to my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) for providing an opportunity to debate this extremely important subject and for enabling me, however briefly, to set out some aspects of the Government's position. As he indicated, the consideration of this subject is very timely with the visit of Prime Minister Suzuki this week.

I know that my hon. Friend has visited and been involved with Japan. I should mention that I was a member of a parliamentary group that visited Japan last October. It gave me the opportunity to open my eyes and see a little for myself at first hand. It also gave me the opportunity, with parliamentary colleagues on both sides of the House, to put direct to members of the Japanese Government and the Keidanren the dangers inherent for them in overplaying their trade hand.

I want to begin with a few general remarks to set the context. First, the anxiety about the Community's and Britain's increasing trade deficit with Japan is well founded. My hon. Friend gave figures. The deficit of the Community as a whole with Japan increased from £1,500 million in 1975 to more than £4,000 million in 1980. There has been a further worsening of 46 per cent. from January to April of this year, compared with the same period last year. In the case of Britain—although my figures are slightly different—the deficit with Japan increased from £390 million in 1975 to £1,100 million in 1980. We must put the matter in perspective and remind ourselves that Britain's balance of payments surplus for the first two months of this year, whatever may happen during the remainder of the period, sets that rather in the shade.

We cannot look—and I am sure that my hon. Friend does not look—for a complete balance of trade with Japan, or with any other country. It is true that the United Kingdom has considerable net surpluses with countries, but the scale of imbalance in recent years is threatening the trading system, and that is not in Japan's interest, or anyone else's.

The other major factor is that the rapid increase in Japanese exports is concentrated on specific sectors of industry and not spread across the board. Japan still exports only some 12 per cent. of its GDP compared with Britain's 29 per cent. That is a salutary reminder to us that in an overall trade protection war we would be the losers. Put in another way, Japanese goods still amount to only 3 per cent. of total British imports.

We need to dispel the myth that Japan is unmatchable as a competitor. Overall, it does not have a dominant position. Moreover, in many sectors Japanese industry has no competitive edge. Indeed, the United Kingdom has a positive trade balance with Japan in a number of areas. In sectors such as the car industry, where Japanese imports are high, Britain imports substantially from other industrial countries also. Those facts set the perspective.

However, those remarks mask the fact that Japanese industry has been especially successful in concentrating on certain industrial sectors. I repeat what my hon. Friend mentioned about the director general of the CBI referring in a speech to Japan's laser beam approach. We have seen it in motor cycles and are now seeing it elsewhere, not least in machine tools and microelectronics, where it is making large investments in research and development in industries that are becoming increasingly important to our economic base. They are the industries of the future.

We must agree that Japan's productive efficiency has made Japanese goods relatively cheap and extremely reliable. That benefits consumers directly and provides a stimulus to our industries. However, experience has shown that if Japanese industry—building up often from an originally protected base itself—is allowed free rein with that total blanket approach, entire sectors of European industry can be put at risk—motor cycles being the most obvious example. I think it only fair to add that Japan's success in these sectors is due largely to its doing, very effectively, things that industry in all countries sets out to do.

I am sure that my hon. Friend will agree—he has already said so—that much of what we have seen in terms of Japanese competition underlines the general need to increase the competitiveness of United Kingdom industry. I know that he accepts that blanket protectionism is self-defeating, apart from the fact that it conflicts with our international obligations and with our strong United Kingdom interests in the maintenance of an open trading system. That is not to say, of course, that action should not be taken in sensitive areas to monitor and restrain imports and, as my hon. Friend will know, current bilateral inter-industry arrangements cover about one-quarter of United Kingdom imports from Japan, most notably in vehicles and television sets.

That brings me directly to the motor industry. My hon. Friend referred to it particularly. The Government share the concern that he voiced. Japanese penetration not only of our cars market but of our market for light commercial vehicles remains high. In view of the recently concluded United States/Japanese agreement on restraint of car exports, the Government recognise the fear that that sensitive sector of the European market may be further penetrated by Japanese products.

It is because we recognise the very real problems that this may cause for our manufacturers, at a time when the market is already depressed, that the Government have given their full support to the EEC's attempts to secure from the Japanese a restraint agreement along the lines of the United States agreement, but we have made it crystal clear that any agreement that the EEC can secure with the Japanese must be at least as effective as the present understanding that exists between the SMMT and JAMA.

Just how effective that understanding has been is frequently overlooked by those who are quick to cast us in the role of an easy target. Since the SMMT and JAMA started talking in 1975, Japanese cars have taken a pretty stable share of the United Kingdom market—between 9 per cent. and 11 per cent., but rising exceptionally in 1980. That was at a time when Japanese penetration of the United States market rose to 20 per cent. The SMMT/JAMA understanding is still in force, and we must look to this to continue its restraining role.

Mr. Tanaka, the Minister for MITI, in Japan, has been told this week that we expect the Japanese to hold their market share of cars in the United Kingdom this year below last year's.

Whatever the outcome of the EEC discussions with Japan on cars, and whatever the outcome of the forthcoming Ottawa summit, we have to face the fact that Japanese competition will not simply go away, not least in third markets. We cannot expect to create a wall behind which we can permanently hide from the facts of economic life.

We must, as a nation, adapt to the challenge posed by Japan—and the Government are greatly encouraged by the way in which the United Kingdom, some would say rather late—is rising to that challenge. British Leyland, in particular, has responded well this year in increasing its market share. It is also to be congratulated on taking the initiative in pursuing collaboration with the Japanese industry rather than joining the ranks of the moaning Minnies. It is through activities like BL's collaboration with Honda on the production of the Triumph Acclaim that we will combine the best of Japanese with the best of British. An excellent, independent car company in my constituency—Lotus Cars—has in the past week completed an agreement with Toyota, which underlines the importance of the exhange of technology.

It is because the Government believe that this is the way forward that we have given a warm welcome to the Nissan company's proposal to produce 200,000 cars in the United Kingdom from 1984. When my right hon. Friend the Minister of State announced our welcome—in principle—to the Nissan company in January of this year, he also announced that the company was proposing to source between 60 per cent. and 80 per cent. of its requirements locally. Since the announcement, the Nissan company has made an extensive feasibility study of the United Kingdom as a location, in the course of which it has made many contacts with United Kingdom companies.

I know that some firms in the components industry are concerned about possible Japanese competition if Nissan locates here. To those and to others who have expressed doubts about the value to the United Kingdom of the Nissan project I say this: the Government are aware of the worries. We believe it right that in our discussions Nissan agreed that it will aim to reach 80 per cent. local content as soon as possible, if it decides to come here. However, it is up to those in the industry to do what we believe they can do—demonstrate to Nissan and to other vehicle assemblers that they are capable of producing a fully competitive product. If that is done we can meet the challenge of Japanese imports.

Had time permitted I should have said more about the machine tool industry—in which I take a particular interest—and Japan. However, I hope that I have said enough to show that the Government fully appreciate the importance, in current circumstances, of existing restraint on imports in sensitive areas. We are determined to put across to Japanese Ministers the fact that existing Japanese trading strategies—in particular, concentration on specific industries— are causing great strain. With our EEC partners, we are looking closely at the results of the EEC call for action on the trade imbalance, which is a matter of legitimate concern to all developed countries and which will be raised at the Ottawa summit as a necessary part of the review of world trade.

I turn now to two other points. The first is the opening of Japan's home market, to which my hon. Friend referred. Of course, we recognise that the impetus for that efficiency and drive in many Japanese industries comes from Japan's internal problems, in particular its heavy reliance on imports for energy and raw materials. We understand the Japanese need to export high added value products to pay for those needs. However, we must rightly ask Japan, in its determined and concentrated drive to solve its problem, not to create impossible problems for other nations through the destruction of vital industries and the creation of heavy unemployment.

Now that Japan is a most successful industrial nation, which has built up its industries again, initially and not least through protective trade barriers, its tariff and non-tariff barriers cannot remain as they are. It must take more active note of the complaint that so often it has an impenetrable domestic market. In short, there must be fair play. That is why it is important that the Japanese should show more determination to open up their market to imports and to remove tariff and non-tariff barriers.

I recognise, too, that there are cultural differences in Japan, and other countries, although not in Britain, which cause them to seek naturally to buy their own products. Clearly, there are limits to what can be done about such barriers, but there are the other barriers to which my hon. Friend drew attention, and the Government are actively looking for ways through EEC and bilateral contacts to promote United Kingdom exports to Japan and impress on the Japanese Government the need for determined action to encourage imports. My hon. Friend will no doubt have seen the references in the successive statements of the Foreign Affairs Council of the EEC from November 1980 to May this year, which have our strong backing. We have played a prominent role in forming the initiatives.

I refer briefly to the importance of joint ventures and technology exchange. I am sure that my hon. Friend would agree that the encouragement of Japanese inward investment in the United Kingdom in appropriate areas is a means of strengthening our own economy and reducing imports. Japan built its industrial strength by learning the technology from others, and there are some sectoral areas today in which we can benefit from Japan's new technological advances, as well as, sometimes, from its production and management techniques. However, it is important that it is a two-way process. The Department of Industry is actively promoting the benefits to the United Kingdom of importing technology from Japan by means of joint ventures and other forms of technological collaboration. Industry, too, is increasingly active in that field. In the machine tool industry, for example, several major United Kingdom companies have entered into collaborative agreements.

An important initiative to strengthen United Kingdom industry in high technology areas was the agreement on industrial collaboration reached by the Minister of State with the Japanese Minister of International Trade and Industry in April. The Government are actively preparing, in close consultation with industry, for the follow-up to that. The first joint meeting between MITI and the Department will take place in early September. The Department also intends to sponsor two major studies of technology in Japan on information technology and on the application of electronics to manufacturing processes. It has just gone out to tender on both.

I am sure that my hon. Friend will agree that, just as we have to have regard to the need to protect our sensitive areas in the way that I have described, so, too, it is of great importance to our industry that we benefit from joint ventures and technological collaboration. I hope that the initiative that the Minister of State took in April will lead to many other developments.

I hope that I have said enough to demonstrate to my hon. Friend that the Government are conscious of the problems, and also to show the very much wider context in which relations with Japan must be considered.

Question put and agreed to.

Adjourned accordingly at Twelve midnight.