HC Deb 27 October 1982 vol 29 cc1145-52

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

11.25 pm
Mr. Peter Hardy (Rother Valley)

The United States of America reacted strongly to the present steel crisis. Community exporters were taking 6.3 per cent. of the United States market—a modest share. The Community agreed swiftly to reduce its exports and conveniently ignored the fact, known in Brussels and London, that steel was being imported from the United States at surprisingly low prices. The United States might have found a 6.3 per cent. penetration hard to bear, but our position is much more serious, as I hope to demonstrate.

I am indebted to many people for information, not least Mr. Sirs and Mr. Upham of the Iron and Steel Trades Confederation. Their researches show that in the first seven months of this year imports rose by about 100,000 tonnes a month. That is an increase of 39½ per cent. It seems clear that 1982 will prove to be the most disastrous year that our steel industry has known.

To a large extent our Community partners bear responsibility because they account for two-thirds of the imports to Britain. That is after our dreadful cut in production. Although we have reduced production enormously since 1977, Community production has risen by 3 per cent. Imports from the Community have risen from 2.3 million tonnes in 1977 to 25 million tonnes in 1981. That information was provided today in an answer to the hon. Member for Southend, East (Mr. Taylor).

Mr. Allen McKay (Penistone)

A sell-out to Europe.

Mr. Hardy

A sell-out to Europe, as my hon. Friend says.

Imports from other sources have risen. Imports from Brazil since last year have increased by 7,100 per cent. That is despite the serious claim lodged in Europe about dumping, which appears to have met with no response. Imports from South Korea have risen by 2,600 per cent. in the last year. Imports from France and Italy have risen by over 50 per cent. Austria's supported steel industry has increased its exports by 76 per cent. That may include re-exports from West Germany.

Spain's exports to the United Kingdom have risen by 89 per cent. That is serious. The Warsaw Pact countries have joined in the act, no doubt to help to pay for America's grain. They have increased their steel exports to Britain enormously—Poland by 95 per cent. and the others by a factor of at least four.

South Africa has joined the procession. Our steel imports from there have risen by 383 per cent. so far this year. Those astonishing figures expose the brutal reality of the position.

The Government may regard ISTC evidence as special pleading. Other people, including leaders of the private sector, are now despairing. They have for too long been silent. They have suffered destruction with a stoicism that is almost remarkable.

Material has recently reached me, some as recently as yesterday, which demonstrates the detail of the steel industry's case which it has been presenting to the Government for months. The case appears to have met with little response. The interests of the industry and the nation have been ignored. The Government have made an ineffectual response to the Community's arrangements, as they have to the private sector's pleas. We should consider the Community's arrangements more positively.

Our partners have revealed an apparent disdain for Count Davignon's policy. Capacity was supposed to be reduced throughout the Community. Germany's capacity is now less than 0.5 per cent. smaller that it was four years ago. France's former capacity is reduced by one-eighth. Belgium and Luxembourg have reduced their capacities by only 3 per cent. Italy has so ignored the Community that it has substantially increased its capacity. We have cut our capacity by a huge amount.

In a recent issue of Metal Bulletin one reads, from the people who know the steel industry well, that there has been no restructuring of the steel industry in Europe except in the United Kingdom. The Community's arrangements have been bad for Great Britain, and they threaten our industrial base. Little has been done and a horrific position has arisen. I quote again from Metal Bulletin: Loss making companies are permitted to try and dump their products in the marketplace in a desperate attempt to put their economic and financial record straight. Great Britain appears to have been singled out to bear the burden of that approach.

That is illustrated by the fact that penetration of our tool steel industry has reached 82 per cent. The Minister has been informed of the position. As early as 8 June the Government were informed of astonishing cases of apparent dumping. Specific reference was made to 230 tonnes of tool steel from Italy, 361 tonnes of stainless bar from Spain, 101 tonnes of stainless bar from Japan, and 89 tonnes of stainless bar from Poland, which were all dumped. That correspondence showed anxiety about what appeared to be deficiencies in our supervisory arrangements. Customs errors seem to occur regularly, with many examples of misclassification. What was described as forged constructional steel from Austria was found to be more costly tool steel, and at the same time a similar case arose in respect of supposed constructional steel from Canada. Similar suspicions, that seem well justified, have arisen recently in respect of forged constructional bars from West Germany, Italy, Switzerland and France. I could quote scores of similar cases. That evidence has been given repeatedly to the Department, which should be aware by now of such errors and deficiencies. The case has been spelt out fully, but apparently ignored.

I have seen another letter from the private sector to the Department that cites cases of apparent dumping by Switzerland, Austria, France, West Germany and the Netherlands—all based upon misclassified tool steel. The correspondence did not deal only with misclassification. Many examples of the unloading of other people's steel have been provided.

On 15 June the Government were told that emphasis should be laid on exports from Spain and Brazil, which continue despite the lodging of a serious anti-dumping case in Brussels against Brazil. I have seen copies of other correspondence that has been sent to the Government. In July, more examples of dumping were given and described in the letter as "most excruciating". The excruciation has continued. That letter and others referred to failures in supervision, monitoring and errors in records, because during one month we imported, not 180 tonnes of one class of steel but 300 tonnes. During the same month we imported 170 tonnes of French high-speed bar and not 43 tonnes, as the record shows.

There seems to be an urgent need to improve our procedures to provide a proper regime in the face of the vulture approach that is about to destroy our industry.

It is disturbing that the Commission has failed to respond properly to the representations that have been made by our industry. No doubt we are not helped by the relatively high level of sterling, buoyed as it is by what will prove to be an excessively swift depletion of our oil resources. Our competitors are helped by the level of sterling, but that is only one factor.

I have, justly I believe, a high regard for BSC's special steels. That is a significant factor in my constituency and the metropolitan borough of Rotherham. We are accustomed to breaking world records in our modern plant with our highly trained and efficient steel workers. Even there there is despair and angry frustration. It is experienced by the canteen staff who are anxious because they face redundancy so that the British Steel Corporation can reduce the number of man hours applied for the production of steel. Whether or not people are employed in the canteens, the men must eat. I hope that the Government agree with that.

In that successful plant in my constituency there is profound anxiety. There is no justification for the special steels part of the British Steel Corporation to experience unfair competition. It may not appear to BSC in South Yorkshire that some of the dumping is quite so immediately and directly horrendous as it is in the private sector or in other areas, but even so, there is irritation. We are extremely concerned that we are getting unfair trade from Spain. Spain's steel exports to the United Kingdom in the special steels categories have risen by 136 per cent. this year, and Spain ensures that it remains protected. This happened in the 1970s, but the then Labour Government swiftly imposed a 16 per cent. levy to resolve the current unfairness. This Government have not reacted to Spanish protected dumping now.

It is not simply imported steel that concerns us but imported goods made from steel. Here our exposure is bleak, particularly from Spain. We cannot sell our products there because of tariff barriers 30 per cent. higher than those that we erect against Spanish production. We cannot continue with a situation in which penetration in many steel categories is more than two-thirds and, in some cases, 80 per cent.

In the hundreds of individual cases that have been drawn to the Government's notice this year, the Commission appears to be unable to help. Perhaps it is not very interested. It may be assumed that the problem will go away when the British steel industry finally expires. If something is not done soon, the date of that expiration will be fairly close.

I recently read that South Korea was giving Britain close attention. At the end of July, the Government were given examples of dumping from that country as well as from France and Italy. Again, in August, other examples were given to the Government, but earlier this month there were even more glaring cases. Dumping has been evident in tool steels from Germany, Sweden, Italy, Spain, Austria and France. Dumping in high speed bar steels is evident from Japan, France, Sweden and Austria, some of it at absolutely impossible prices. We have also had dumped stainless bar from Germany, the Netherlands, Austria, Brazil, Spain, South Korea, Italy and Poland—all within the recently measured period.

In the face of all that, we see a complacent Government who fail to realise that this dumping is killing off essential and strategically important steel production. This is serious. The private steel finishers are shrinking away. Of course, they then buy less steel from the BSC, which in turn faces greater losses and is liable to greater criticism that the public sector has failed. In fact, it is not the public or private sectors that have failed, but the supine approach of the present Government.

It is entirely wrong that the BSC should have to see further losses mount to pay for the enormous cost of redundancies that, quite frankly, are utterly unnecessary if we serve the nation at all. The failure is not of either public or private sectors in steel. It is a failure of the Government's willingness to react to reality.

This adds up to unemployment, and to a situation in which parts of my own constituency now experience unemployment of one man in three, yet the area affected is not even afforded assistance through Government regional policy.

The Government will say that £22 million was made available months ago to assist the private sector. My information is that, although the money was announced months ago, not a penny piece has been paid out. If there is any further delay, there will be no private sector left to derive any benefit.

We have been in steel crises before, but never before has central direction been quite so dogmatic and unsuccessful. I wonder, even at this late hour, whether the Minister will look at history and learn some lessons.

Our steel industry really developed in the 1850s. and by the middle of that decade there were 1,500 crucible furnaces in the Sheffield area. By the middle of the next decade, I doubt whether there will be many left.

The first major recession occurred in 1873, and we were clearly hurt by our open market, even though other steel producers then applied protection. That is why both the United States and Germany saw steel industry production soar past our own at that time.

A similar situation existed by 1931. Our competitors helped themselves by protection, our exports were blocked, but our market was open. At that time that was felt to be intolerable, and the Import Duties Act 1932 provided protection. That Act led to our steel industry being given a chance. It led to investment, development and the creation of jobs. It led to our being able to survive in 1940 and 1941. The Minister should recognise that jobs are important now because unemployment is higher today than it was when the Act was introduced.

It is no good the Minister saying that membership of the Community prevents action. Italy has looked after itself. France always does so. It is no good the Minister referring to GATT. Article 19 of that arrangement allows action to be taken. It is no good the Minister looking to international example, because no other country practises this degree of indecent exposure. It is no good the Minister blaming the 1980 strike, because the surge in imports has occurred this year. It is no good the Minister offering anodyne comment. Already closures this year have brought strategic disadvantage.

Let us say what steps I believe are necessary. First, there is effective monitoring. The classification errors are intolerable. We should emulate our partners. Perhaps we should send some of our officers to France to see how things are done there.

Secondly, the experience of some of our redundant steel workers could be used in that monitoring exercise. They know the difference between a bright bar and a banana.

Thirdly—and vitally—protective arrangements are essential, not against the under-developed world, because it is not really involved, but against other advanced steel producers.

I hope that the Minister does not believe that the country does not need a steel industry. Steels of special quality are needed—especially as we move, as we must, into areas of high technology. High alloy material is needed, and so is our capacity to produce it. Therefore, we need both the basic and the special industrial base.

The Government seem to believe that we should not take action because we might start a world trade war. I tell the Minister very clearly that South Yorkshire appears to have been in the front line of such a war for some months, and it is about time that the generals down in London understood that hostilities have not only been declared but are violently under way. Already this country has suffered far too many casualties. I hope that the Government will recognise that other people are waging a trade war, even if we have not yet begun it. If some action is not taken, the whole of our steel industry will be forfeit. I believe that we need a steel industry; the Government may not believe that.

It seems to me that for the past few years the Government have sought to prove that steelmen and steel workers were superfluous, but recent events have shown that the steel industry and the steelmen are what we need, and that it is the Government that Britain could better manage without.

11.43 pm
The Under-Secretary of State for Industry (Mr. John Butcher)

I congratulate the hon. Member for Rother Valley (Mr. Hardy) on a pugnacious statement of his case this evening. I am glad that he has raised this important issue.

I shall begin by setting out certain facts about the problems facing the United Kingdom steel industry. The steel industry in this country is not alone in facing a crisis. Steel industries in the rest of Europe and indeed the whole of the industrialised world are going through critical times, with few, if any, major steel mills making a profit, demand stagnant or in decline, and a tendency for international market forces to drive prices down.

The figures for the downturn in the steel industries of the industrialised world are dramatic. In total, Western steel output is thought likely this year to be some 420,000,000 tonnes compared with 460,000,000 last year, a figure which was itself 8 per cent. below the 1979 level. It is estimated that United States production will fall by about a quarter this year, with the United States industry operating at 40 per cent. of capacity. Within the European Community, steel output in the last three months of this year is forecast to be 25.6 million tonnes, compared with 31.6 million in the fourth quarter of 1981, a fall which would bring steel production down to the lowest level for 30 years—since 1951, the date when the European Coal and Steel Community was set up. So the problem is a world-wide one.

It is claimed that imports are destroying our steel industry. It is certainly the case that import penetration of the United Kingdom steel market has increased this year. In total, import penetration for the year to August was 26.9 per cent. The corresponding figure for 1981 was 23.2 per cent. in 1980, the year of the disastrous steel strike, the figure was 33.2 per cent. In the years before 1980, the level was 20 or 21 per cent.

The increase this year is disturbing. The Government recognise that imports present a serious problem for the United Kingdom industry, although a more important problem has been the decline in exports, because of the collapse in world markets. I note that, according to press reports today, the chairman of BSC shares this view. He is quoted as having said in a speech yesterday that imports are an exaggerated factor. By far the biggest problem is the decline in world demand and the collapse in the market".

Moreover, although the United Kingdom import penetration level this year is worryingly high, it should be pointed out that penetration of the United Kingdom market is in fact lower than that in a number of our European competitors, including France, where the figure over the past few years has been around 43 per cent. and Germany, where it has been around 35 per cent.

Nevertheless, as I have said, the Government are extremely concerned about the increase in imports. The hon. Gentleman has a right to ask what we are doing. Imports into the European Community from the major supplying countries are limited by means of voluntary restraint arrangements, negotiated each year on our behalf by the European Commission. By and large, those arrangements have worked reasonably well this year. Steel imports from non-Community countries have taken 8.8 per cent. of the market here so far this year. That compares with 8.2 per cent. in 1978, 8 per cent. in 1979, and 11.3 per cent. in 1980.

Mr. D. N. Campbell-Savours (Workington)

Does the Minister accept that many of our European partners have not stood by the spirit of that agreement? Indeed, some have abused the voluntary restraint arrangements that were introduced by the Community.

Mr. Butcher

I am not prepared to accept that on behalf of a Government Department for which I am not responsible. If the hon. Gentleman will allow me to continue my remarks, he will find that that and other matters are of serious concern to the Department of Trade. The on-going effects upon the industry are very much the concern of my Department. That issue is not being ignored or avoided.

The figure for 1981 was much lower, 5.6 per cent., because of slack demand and low United Kingdom steel prices that year.

While the voluntary restraint arrangements are, as I have said, working reasonably well in general this year, there have certainly been a number of specific cases where problems have arisen. In such cases, the Commission has made representations on our behalf to the partner country concerned. If breaches persist, firm action is taken. For example, a quota was introduced by mutual agreement on United Kingdom imports of steel from Czechoslovakia earlier this year and anti-dumping duties have been imposed on certain steel imports from Brazil and Spain.

I am pleased to report to the House that at the Foreign Affairs Council in Luxembourg yesterday my hon. and learned Friend the Minister for Trade urged on the Commission the need for yet more swift and effective use of the Community's anti-dumping legislation. The onus is now on the Commission—and the Commission is in no doubt about this—to press ahead with the investigation of complaints against unfair imports that are lodged with it. Cases against such countries as Brazil, Venezuela, Argentina, Canada and Spain are in progress or on the stocks.

Mr. Michael Brown ( Brigg and Scunthorpe)

My hon. Friend has just said that the onus is on the Commission and that at the meeting yesterday his colleague asked the Commission for swift action to be taken. If that action does not meet with the Government's approval, does my hon. Friend accept that the onus is then on them to take such steps as they think necessary in order to do what the Commission might fail to do?

Mr. Butcher

The Government will look hard at the strength of commitment from the Commission and the undertakings that it gives on timing. My hon. Friend has also been a staunch defender of his constituents' interests and I agree that there is now a time for action. The period for discussion is rapidly coming to a close.

The mandatory quotas on steel production by European Community companies, designed as a short-term measure to bring supply closer to demand, is one of the measures that we have invoked. The levels of those quotas were reduced significantly in the third and fourth quarters of this year, to reflect the worsened market conditions. We have also asked that the measures on price rules should be applied, which refer to steel producers and stockholders.

Therefore, the Government are determined to ensure that the quota regime and price rules are observed as scrupulously by other countries as they are by us. Responsibility for policing the regime falls to the Commission. As my right hon. Friend the Secretary of State for Industry said in his statement to the House on 22 October, he made it clear to Vice-President Davignon on 21 October that the Government intended to keep the Commission up to the mark. The measures to restore stability to European Community steel markets must be enforced more effectively. The Government accordingly welcome the fact that the Commission has recently increased the number of inspectors policing the production quota and price regime. The Commission's vigilance has led to large fines being imposed, notably for overproduction in excess of the quota levels. During the summer, seven companies—from Italy, the Netherlands, France and Germany—had fines imposed on them. In one case the sum exceeded £5.5 million.

Unfortunately, only three minutes remain to me in which to respond to some of the important points raised by the hon. Member for Rother Valley. He mentioned special steels. The Government are conscious of the particular difficulties that the special steels sector is facing. Special steels are not covered by the mandatory production quotas in the Community. However, the Commission has issued guidelines to producers in other member States concerning deliveries to the United Kingdom market. I hope that my hon. and learned Friend the Minister for Trade will not mind if I volunteer him to respond more fully on that point. I am sure that he will look in particular into the Spanish question, which the hon. Gentleman raised forcefully. I believe that the hon. Gentleman has written to my hon. and learned Friend about the problems caused to the special steels industry by competition from unfair imports. I, too, have seen copies of the correspondence. There is a litany of pointed and specific questions on particular types of steel by origin of manufacture. I am sure that he would not expect me to answer for another Department tonight on those very specific questions, but I am sure that my hon. Friends in that Department will not mind if I say that they will give the hon. Gentleman's detailed requests urgent attention.

In the larger term, it is essential to ensure that other member States do their share in restructuring their steel industries. There are at present grounds for concern that, despite the major contribution made by the United Kingdom, the preliminary figures for cuts in steel-making capacity notified to the Commission by member States do not meet any reasonable estimate of forecast demand. As the Secretary of State told the House on 22 October, he made it clear to Commissioner Andriessen that the Government expected the Commission to apply the rules of the ECSC State aid decision strictly and fairly so that aids would not be permitted unless accompanied by commensurate capacity reductions. It is true that the United Kingdom industry has done more than any other to restructure and to put its house in order. There will be no let-up in the pressure that we shall place on the Commission to recognise that fact when it considers its future policy.

I can give the hon. Gentleman the assurance that he requires. We shall consider the questions that he has raised on dumping, particularly that which arises from misclassification; that will be vigorously pursued. We shall respond strongly to his correspondence, and particularly to the queries that came via the British Independent Steel Producers Association. We shall also consider whether we should improve procedures as a matter of urgency. We shall look to the Commission to make a proper response.

The steel industry will not be allowed to expire. We shall not be supine in our defence of our national interests and we shall be as pugnacious in defence of them as the hon. Gentleman has been in defence of his constituents' interests.

Question put and agreed to.

Adjourned accordingly at six minutes to Twelve o'clock.