§ [Relevant documents:
§ Unnumbered European Community Document on common rules for imports of certain textile products originating in third countries.
§ European Community Document No. 11775/82.
§ Department of Trade memorandum of 13 December 1982.]
§ 7.3 pm
§ The Minister for Trade (Mr. Peter Rees)
I hope that the House will not find difficulty in switching its mind now to problems of trade. No one, I am sure, will question the appropriateness of a debate on trade. It is right that, in a period of world recession, the House should re-examine the principles by which we have ordered our trade policies for many years and assess the United Kingdom's performance under them.
I should like to make it clear at the outset that, notwithstanding the over-clouded sky of the world recession, the Government believe that the United Kingdom—and, indeed, the world—benefits, and will continue to benefit, from the maintenance, strengthening and extension of the open market trading system. Whatever disagreements there may have been at the GATT ministerial meeting in November, it should be noted that the 88 signatory countries, which between them are responsible for about 80 per cent. of the world's trade, reaffirmed their commitment to the principles of the open trading system and, in several areas, initiated work to strengthen and extend that system. That cannot have been an accident induced by the fatigue of five days of continuous discussion and debate.
Having been privileged to take part, I like to think that it was a sober and considered view. Indeed, in commiting themselves to the final communiqué, the Government were only reaffirming principles which have found favour with many previous Administrations. I cite, because he puts it so succinctly and attractively, the words of the right hon. Member for Stepney and Poplar (Mr. Shore):This country can only prosper if it is part of a world trading system in which we are able to trade freely with the other five continents of the world.In case it should be thought that the right hon. Gentleman was speaking to some esoteric body, it was apparently a speech made to the Southampton constituency Labour party in June 1974. The right hon. Gentleman was addressing the grass roots. I have no doubt that his remarks evoked a warm response.
I refer also to the wise words of the right hon. Member for Lanarkshire, North (Mr. Smith) who, as Secretary of State for Trade, in December 1978, said:We in Britain remain convinced of the desirability of defeating creeping protectionism and of the benefits of maintaining, if we can, the open world trading system.How right those words were then. How right they are today. I hope, therefore, that a strong consensus on these lines will emerge from the debate.
Leaving aside philosophic considerations, the facts and figures should, I believe, persuade us that the United Kingdom has not been doing badly under the present system. At a time when the volume of world trade fell significantly, the volume of United Kingdom exports increased by 1 per cent. The United Kingdom exported £37 billion of manufactured goods in 1982 compared with £35 billion in 1981. That is a creditable performance when the 352 House recalls that world trade contracted by 3 per cent. It is hardly the sour fruit of an industrial wasteland as some hon. Members, although perhaps not those now present, are prone to describe this country at present.
Our trade in invisibles was about £31 billion in 1982—an increase of 6.5 per cent. over 1981 and an increase of 21 per cent. over 1980. Since over 11.5 million of our fellow countrymen are employed in the service sector, this must be reassuring news for them. Our current account surplus in 1982 was over £4.5 billion—almost as high as the record surplus in 1981, which came to over £6 billion. Our cumulative surplus for the last three years has been over £13 billion. That is not the performance of a country in irreversible decline.
Credit must, of course, go first to British exporters. However, as they would no doubt be the first to admit, there has also been a positive commitment by the Government to aid and support expanding exports. The British Overseas Trade Board deserves particular mention. Its export intelligence service alone provided opportunities which led to sales of £1 billion in 1982. In 1982, the BOTB supported over 340 United Kingdom joint venture stands at overseas trade fairs compared with fewer than 300 the year before.
The Export Credits Guarantee Department also provides a service as flexible and comprehensive as that offered by any other country. It is currently doing business worth about £30 billion a year by way of insuring and helping to finance United Kingdom exports. Despite all the risks round the world today, the ECGD's commitments to exporters stand at about £38 billion. Again, the aid and trade provision budget—that part of the aid budget specifically related to projects—has been increased from £55 million in 1982–83 to £66 million for the next financial year. I believe that this programme is good for the recipient countries since it is channelled into projects that they want, but that it is also good for the United Kingdom because it goes to support competitive bids by efficient United Kingdom companies.
§ Mr. Dan Jones (Burnley)
I think what has been recited so far is accurate, but has it been selective enough? Places which were predominant in the textile industry at one time have not got even a rag to manufacture. That is my point about being selective.
§ Mr. Rees
I hope the House will not think me churlish if I do not give way too often, but this is a short debate and I have much ground to cover. I shall be coming to the textile industry and to the importance of the multi-fibre arrangement.
The ATP programme, which is not relevant to the textile industry, since its inception, has been used to make aid grants and loans of £247 million associated with United Kingdom project business worth over £1 billion, and has created and sustained many thousands of United Kingdom jobs. I regard this as exceptionally good value for money.
While no one should doubt the Government's commitment to the open market system, I hope no one will regard this as stemming from blind ideological conviction. It is tempered by a pragmatic, not to say practical, concern for special cases and for special sensitivities.
The Government have recognised, as have previous Governments, and still recognise the special problems of the textile and clothing industries—the often painful process of readjustment which has involved shedding 353 about 180,000 jobs in the last three years. That is why, to enable them to adjust to competition from low-cost suppliers and not inconsistent with the general principles that have influenced our trade policies, we have supported the European Commission in its prolonged negotiations for a tough multi-fibre arrangement—tougher, I must remind the House, than the MFA which preceded it and which was negotiated by the Labour Government. [Interruption.] I wonder. I think the storm clouds were there to see, judging from earlier debates in which possibly the hon. Gentleman did not take part.
I need hardly remind the House that the protocol was signed in December 1981, and 25 new bilateral agreements were entered into before the close of last year. As soon as they are formally signed, they will be laid in the Library of the House for hon. Members to study in detail. They cover the sensitive group 1 and the slightly less sensitive groups 2 and 3. Since the detail is enormous, I hope the House will forgive me if I do not attempt to summarise the agreements here tonight, particuarly because I made a full statement just before Christmas.
I should, however, emphasise that this MFA will involve a lower growth rate than under the previous MFA—in the case of group 1 just under 1 per cent.—a cutback on the dominant suppliers of around 7.5 per cent.; an anti-surge mechanism to prevent the rapid take-up of previously unused quotas; a basket extractor mechanism to enable new quotas to be opened; a special recession clause; and measures to deal with fraudulent imports. I believe that this MFA will provide a breathing space for these hard-pressed industries of which they will be able to take full advantage. Indeed, because I might appear to concentrate too strongly on the problems of these industries, I should like to congratulate them publicly on the level of their exports, which amount to about £2 billion per annum. That again demonstrates that there is a good deal of resilience, strength and entrepreneurial skill in those industries, and I do not think that we should write them down.
Of course, this MFA has a price. It is a price which has to be paid largely by the United Kingdom consumer. In all these cases a balance has to be struck between the interests of our consumers, producers and exporters and even of the developing world. If the developing world cannot sell into our markets, it will not be able to buy from us and it will not be able to service its debts. It is right that I should emphasise that.
§ Mr. Leslie Spriggs (St. Helens)
The Minister has attached importance to the MFA. On what date will the new agreement be placed in the Library? Textile industries in St. Helens are waiting expectantly for it.
§ Mr. Rees
I understand the concern of the House and of the industries. The outlines are by now fairly well known. The industries have been keeping a watchful eye on the negotiations, as many hon. Members can confirm. I am afraid it does not lie with me to say exactly when the agreements will be signed. I have no doubt that it is a formality. None the less, I cannot lay these agreements until they have been formally signed and can be regarded as documents to be put before the House. I shall bear in mind what the hon. Gentleman said and will communicate his concern and that of the industries to the Commission.
§ Mr. Tony Marlow (Northampton, North)
My hon. Friend has talked about the textile industry. It is normal, 354 when talking about the textile industry, to talk also about the footwear industry. I do not know whether my hon. Friend intends to come to the footwear industry. I think he is aware that the footwear industry has felt somewhat of a Cinderella industry in regard to its treatment by Governments over the last 10 years. It has been left on one side and has not had a fair crack of the whip. There has been a problem not only in Canada, Brazil, Australia and Japan, but within the Community, where we are supposed to have free trade. There is strong resentment that, for example, in Italy the industry does not carry the overheads and pay the taxes that our manufacturers have to bear. We import from Italy twice as much as we export to the rest of the world. What will be done within Europe against the Italians and the French, who, for one reason or another, compete unfairly with our industry which is suffering so severely?
§ Mr. Rees
My hon. Friend will no doubt have a chance to catch your eye, Mr. Deputy Speaker. It is no: usual to debate the multi-fibre arrangement and the footwear industry in the same breath. I am well aware of the concern on this subject in Northampton. As my hon. Friend will know, there is a whole range of voluntary restraint arrangements to which the Government have given support. I understand my hon. Friend's concern. I shall be coming to the internal market, if I am given sufficient time.
Perhaps I may turn rapidly, and rather more succinctly, to Japan. It follows from our commitment to the open market that we expect other developed economies to accept the same obligations as we do. Our trade deficit last year with Japan—some £2 billion—may in part reflect the efficiency of Japanese industry in certain sectors, but we believe it also demonstrates very clearly that the Japanese market is not as open to our exports as ours is to its exports. Indeed, Japan's imports of manufactures, as a proportion of gross domestic product, are only half those of other developed countries, such as the United States and the countries of the European Community.
We have not hesitated to make our case robustly to the Japanese Government and to Japanese industry, not only bilaterally but through the Community. Indeed, the Community is now pressing its case against Japan before the GATT under article 23 and has asked for the case to be considered by a GATT working party. Commissioners Davignon and Haferkamp will again be in Tokyo this month. They are in no doubt about the need for identifiable progress on this front.
It would, however, be churlish not to recognise that the Japanese have taken a number of steps over the past year to help to improve access to their market. Of particular interest to our exporters was the reduction by 12 per cent. in the tariffs on confectionery, biscuits and chocolate. It seems, too, that gradual progress is being made towards eliminating other difficulties, such as onerous testing and inspection procedures. Furthermore, Prime Minister Nakasone has made a public appeal on the need for Japan to increase its manufactured imports, and we shall be pressing for some genuine follow up by action—for example, through major purchases of our aerospace and other capital equipment products. But I have to emphasise that we shall not be satisfied until we have secured a fairer deal for our exporters.
The Government are also concerned about the acute imbalance in trading opportunity between the United 355 Kingdom and Spain, and in particular the tariff disparity that stems from the 1970 agreement between the Community and Spain. I am well aware of the concern in the west midlands on this subject. The disparity may have been justified by the relative backwardness of the Spanish economy in 1970, but it is now totally archaic. The problem is further exacerbated by Spain's failure to observe with any exactness its obligations under the 1970 agreement and by its vigorous policy of export promotion.
As in the case of Japan, we have taken action through the Community. The Commission is pursuing the matter with a greater sense of urgency with the new Spanish Government. Several sessions of talks have already been held—most recently in Brussels on Monday 31 January. The Commission made an interim progress report at the Community's January Foreign Affairs Council and a full report will be given to the February Council. We have made it clear that we need early and effective action in Madrid. We require early improvements in the opportunities for United Kingdom exports to Spain.
I should, in passing, emphasise that in all these areas our negotiating position has gained considerable strength from our membership of the European Community. I should be the last, in the aftermath of the south Atlantic conflict, to underestimate our capacity for national action. However, I have to point out that in trading questions our exposure to retaliation is diminished, our muscle is increased, and our opportunities enlarged by our membership of the largest trading bloc in the world.
§ Dr. John Cunningham (Whitehaven)
The matters to which the hon. and learned Gentleman has been addressing himself have, of necessity, been those of the broad brush and the large scale, and have therefore included some strengths and some weaknesses; and he has now mentioned Europe. Therefore, I should like to put two points to him about trade in Europe. The first concerns the chemical industry and the second the British paper industry, both of which are at present losing their share of the British market, mainly because of imports from European countries. This is particularly ironic as our trade surplus is based on energy exports, and it is the very cost of energy that these industries say is undermining their position.
§ Mr. Rees
I am aware of the concern about the petrochemical industry's overcapacity in Europe. If the hon. Gentleman can bring to my attention any cases of distortion of trade in this industry, I shall bring the subject up in Brussels. The paper industry's greatest concern is with imports from European Free Trade Association countries. Again, we are happy to look at any specific cases.
I know about the three large lay-offs in the north-west, which are matters for the companies concerned. I am concerned about these matters, but I notice that Wiggins Teape has a £9 million expansion programme in other parts of the country.
Yesterday I attended a Council of Ministers in Brussels. It was devoted exclusively to questions of the internal market of the European Community. This was the first such Council to be held and was largely prompted by the Government. It was designed to initiate a programe of measures to eliminate barriers to trade—to make internal trade easier—in the internal market of the European 356 Community in conformity with the decision of the European summit held in Copenhagen on 3 December 1982.
The subjects discussed included third country access, a single administrative document for goods crossing intra-Community frontiers, information exchange about standards, reducing frontier formalities, and a system of postponed collection of VAT. The subjects are highly technical and complex, but they relate to the central theme of liberating trade in our largest export market.
Further meetings of the Council are likely to be held before the European summit in June this year. In particular, the Council will hope to begin consideration of questions relating to trade in services.
It is of the essence of the Community that there should be a free market for the exchange of goods, services, capital and labour. I hope that this and subsequent Councils will make a significant contribution to the attainment of this objective.
This leads me back to the grand theme of this debate. Last week the Leader of the Opposition, with both his shadow trade and foreign affairs spokesmen strangely silent, apparently sought to overturn this country's commitment to the open trading system in the event of a Labour Government being returned to power. His analysis of the problem and his prescription have the air of engaging eccentricity that increasingly marks his pronouncements on serious subjects.
I am sure that the House will have noticed the right hon. Gentleman's recent pronouncements at the Labour party rally in the MacLellan galleries, Glasgow, on Saturday 22 January. In case his lapidary words escaped the House's attention, I should like to refer to some of the more telling passages. In the first place, the right hon. Gentleman appears to have been rather badly briefed as he suggested that the Governmenthave succeeded in losing a balance of payments surplus of £6 billion.The figures that I have given to the House show that the trade surplus in the last year was over £4.5 billion and in the previous year £6 billion. Where he thinks the balance of payments surplus has been squandered or lost, he alone can say.
The right hon. Gentleman went on to say:They have squandered our foreign currency reserve and inflation will be rising.On what facts he bases that extraordinary proposition, I do not know, but perhaps his hon. Friends taking part in the debate tonight will enlighten us further.
Admittedly, the December 1982 trade figures had not then come out, but, even so, it would have been possible for anyone who had studied these matters, with the vast resources of the Labour party's research department, to forecast that our current account balance would be well in excess of £3 billion. It was nearly £4.5 billion.
The right hon. Gentleman then said:Socialist France under President Mitterrand has shown us some of the answers".I hesitate to comment on the policies of a friendly neighbour in the European Community, but to what can he be referring? The French current account balance? Surely not, since that is likely to amount to a deficit of 80 billion francs in 1982, equivalent to a deficit of £7.5 billion. Its rate of inflation? Surely not, since that it is now about 9.5 per cent. The stability of the Frence franc? But the slide in confidence has been halted only by a deposit of $4 billion by Saudi Arabia in Paris.
357 The right hon. Gentleman then continued—this is worth studying as this will presumably be the basis on which the Labour party will go to the polls—by saying:What we have to recognise is that the present free trade system is an obstacle to world recovery.The right hon. Gentleman cannot have consulted his right hon. Friend the Member for Leeds, East (Mr. Healey) when he said that. His right hon. Friend as recently as 13 November last year told us:Some Socialists were tempted to seek salvation through trade restrictions or competitive devaluation when they are faced with the difficulty of unilateral reflation … Such beggar-thy-neighbour policies if pursued on the scale required to offer any hope of escaping the dilemma are more likely to lead to a trade or currency war than to insulate their sponsors from the recession of the outside world.How right his right hon. Friend was. What a pity that the right hon. Member for Ebbw Vale (Mr. Foot) does not talk more regularly to him, or, if he does, talks of other subjects. What a pity, too, that the right hon. Member for Stepney and Poplar did not talk to his right hon. Friend the Member for Leeds, East before suggesting his 30 per cent. devaluation. Will the Opposition Front Bench spokesman confirm that that, too, is part of the Labour party's economic policy?
§ Mr. Rees
We shall see. I hope that we shall get some applause, although I do not claim any of the credit for that.
However, I revert to the Leader of the Opposition. The right hon. Gentleman seems to claim that his proposals for planned trade based on import controls are something entirely separate from old-fashioned protectionism. The difference is too fine for me to grasp. His major difficulty seems to be that the distinction is likely to be too fine for our trading partners also to grasp when they find trade barriers erected against the growth of their exports. If we can plan trade with them by controlling their exports, they can presumably plan trade with us in exactly the same way. That is still a trade war by any other name and still a risk to which a country that exports over 30 per cent. of its gross domestic product should not be exposed. It was the right hon. Member for Leeds, East who again, in a speech in March 1980, said:People talk of planned trade as the answer. But it takes two to tango, and trade can be planned only by agreements with one's trading partners.How right he was.
§ Mr. Douglas Jay (Battersea, North)
Do the hon. and learned Gentleman's remarks this evening in praise of free trade apply to agriculture? Has he consulted his right hon. Friend the Minister of Agriculture, Fisheries and Food about this matter?
§ Mr. Rees
The right hon. Gentleman and I have had this exchange before in the context of my GATT statement. From his experience under the various Labour Governments, of which he was an adornment when we were outside the European Community, the right hon. Gentleman will recognise that no country fails to support its agriculture to some degree. If the Labour party is coming out against any support for agriculture, perhaps it had better incorporate that clearly in its election manifesto.
The truth is that the Leader of the Opposition's casual readiness to disregard painfully negotiated international agreements and treaty obligations, his conviction, in 358 contradiction to almost all the world's leading international trade experts, that free trade is a major obstacle to, rather than an essential precondition of, world economic recovery, and his desire to withdraw first from Europe and then from the rest of the world behind tariff barriers must have already helped to raise doubts in some minds about our reliability as a trading partner. If such policies were to be implemented, they would be a disaster for our economy, a disaster for our consumers and a disaster for our exporters. The Leader of the Opposition appears to have forgotten the lesson of the 1930s when world trade in manufactured goods contracted by 40 per cent.
I hope that the House will unhesitatingly reject such reckless and ill-thought-out solutions and recognise that the trading policies of this country are best left in the practised and careful hands of the Conservative party.
§ Mr. K. J. Woolmer (Batley and Morley)
The words of the Minister for Trade, who is faced by the economic disasters that his Government have perpetrated in this country, fall ill from his lips. I shall say more later on that matter.
First, however, I shall say a word about textiles and clothing, as the hon. and learned Gentleman mentioned those matters in the early part of his speech. I know that the House would have liked to discuss these matters today in the light of the documents and details that we had all hoped would be available before this debate. Unfortunately, that information and the assessment of the implications of the agreements are not yet available. This is a regrettable delay, however understandable it may be, in the context of this debate. I need hardly remind the House that these industries have experienced a rapid decline in employment in recent years, and the remaining 600,000 workers will expect Parliament to look carefully at the latest agreements, when they are available. I hope that the Minister will tell us that time will be allowed for their proper consideration when the documents are available. In the meantime, I shall make a few brief comments and await that further consideration in due course.
I remain worried by the apparently considerable gap between actual imports last year and the quotas fixed for 1983. There is still considerable scope for significant import penetration if and when an upturn comes. The treatment of some clothing imports from eastern Europe and ASEAN countries is already causing concern.
Now that the agreements have been made, I shall put three important points to the Minister. First, there must be strict and thorough monitoring and control of imports, in line with the agreements, and they must be made to stick. Secondly, the potential advantage of the agreements must not be thrown away in dealings with other sources of imports, such as Turkey and China. Thirdly, we as a country must seek an early reduction in the unequal and often high tariff barriers that are put up against textile and clothing exports from this country in countries such as the United States, Spain, Australia, South Korea and Brazil.
The Government have now been in office for nearly four years, and the time has long since gone when they could blame others for the failings of their policies. Rarely have I heard Ministers claim so much credit for so little success, and disclaim responsibility for so many failures.
359 It is difficult to know whether the damage that has been wrought by this Government is the result of intent, over-optimism, or incompetence.
The Chancellor of the Exchequer, when in opposition, told The Times on 3 August 1978:Of course we"—the Conservatives—should not want to proceed in such a way as to produce what some people would call a dramatic short term recession.That was the pre—election promise. Since then, unemployment has risen by 2 million, our national income has fallen by 3½ per cent., manufacturing output has fallen by 19 per cent., manufacturing investment has fallen by one quarter, and the CBI economic report published only yesterday forecasts an unprecedented fourth consecutive year-on-year decline in manufacturing investment. How can the Minister come here tonight and criticise the Leader of the Opposition for putting forward policies, on the argument that they might cause a disaster to this country? Frankly, I do not understand his gall.
When the Prime Minister put her oar into the pre-election waters last time, she dropped this pearl of wisdom in Darlington in April 1979:Another Labour accusation is that the Tories plan to increase unemployment. But we Tories believe in policies that will create real jobs … We say Labour isn't working. They are the party of unemployment. We are the party of opportunity".The truth is that 1,200,000 people have been unemployed for over a year now. If the Prime Minister went to Darlington now and told the unemployed there that hers was the party of opportunity she would get very short shrift. She should tell the story of opportunity to the record number of firms which have gone into liquidation and bankruptcy during the past year. She should look at what her party of opportunity has brought to the industrial regions of our country, the real wealth-creating areas of Britain. Since 1979, unemployment in the northern region has risen by over 100,000. The north-west has seen unemployment increase by 250,000. Yorkshire has seen an increase of 200,000. The west midlands, which 10 or 15 years ago was the bedrock of our industrial prosperity, has had an increase of unemployment of 250,000 under this party of opportunity. Even the south-east has had an increase of unemployment of nearly 500,000, and Scotland has borne its burden of 180,000 extra unemployed.
To be fair to Conservative Ministers, they at least have the virtue of consistency. They misled the country before they were elected, and they have continued to mislead the country since. The Prime Minister told the country in January 1981 that 1981 would be the year when results showed. Indeed, 1981 was the year in which results showed. Unemployment in this country rose by 764,000. The Chief Secretary to the Treasury told the country last May:the evidence of a start of a recovery is all about us and not even the most blinkered pessimist could fail to see it".Unfortunately, 300,000 more unemployed people have failed to see the signs of upturn all around them.
The truth is that the economic policies of this Government have been a disaster for the industrial areas of Britain. Now, after four years of sitting on their hands and watching our industries suffer, trade Ministers have 360 joined in the chorus of self-deceit. The Secretary of State for Trade, commenting on the trade surplus for 1982, said that the surplusmeans that Britain is making a success of itself".How can 3½ million unemployed people, a fall in national output, a collapse of manufacturing investment, and a massive fall in manufacturing output in all honesty be called a success?
Emboldened by his gall in regarding the destruction of jobs, industry and investment as a success, the Secretary of State told a meeting as recently as 31 January:The task before us in 1983 is to lead this country out of recession".We have heard that before. He said:The signs of success are already there".We have heard that before. He said:We must build on that success".If this is success, thank goodness the Government did not fail.
Unfortunately for the Secretary of State, the Government published their expenditure plans yesterday, and only one or two days after talking of success in the year ahead, those plans reveal that the Government expect unemployment to rise by another 280,000 in the current year.
What then has the Department of Trade achieved in its policies since 1979? Ministers have failed for far too long to face up to, and to oppose, the disastrously over-valued level of sterling on the foreign exchanges. For three and a half years British producers have had to operate in export markets as if they were carrying a huge tax on their prices and have had to face import competition that effectively received a substantial subsidy. The miracle is that so many firms have stayed in business. Under this Government it has been an achievement, not to succeed, but simply to stay in business.
The success of British industry has been despite and not because of Government policies. Ministers at the Department of Trade have been misled by their own rhetoric and by that of their over-optimistic economic Ministers. In a deep recession, one would have expected imports to have fallen in the past three or four years, but imports of manufactures have increased since May 1979. There has been increasing import penetration in addition to a lack of domestic demand. I could assume from the Minister's remarks that manufactures were doing well and thriving, but exports of manufactures have fallen by 10 per cent. since May 1979. The same picture of a fall in the volume of exports and a rise in the volume of imports is true of trade in all goods, other than oil.
That brings me to what has saved the Government. The real explanation of Britain's trade surplus and the Government's sham claim to success lies in the enormous benefit that the Government have gained from North Sea oil. North Sea oil should have been a source of new investment, new growth and prosperity, but it has been used as a crutch to prop up an economy laid waste by incompetent policies. It has been used to finance unemployed workers to stay at home, instead of being invested in new industry to provide new jobs so that they no longer needed to do that. North Sea oil has been used to conceal the failures of trade policy and not as a bonus to expand trade and industry.
During this Government's term of office, the balance on non-oil visible trade has deteriorated by £3 billion per year. The balance on oil trade has improved by £6.5 billion 361 per year as North Sea oil has come on stream. Oil's contribution to the balance of trade has increased sharply in recent months. In December, oil exports were running at an annual rate of £12.5 billion. The net balance of trade in oil was running at an annual rate of £8 billion in December. It is little wonder that on 4 January 1983 the energy correspondent of The Guardian described our trade position not as a success—as the Government would have it—but as a current account cover-up.
What has happened to the bonus of North Sea oil and gas? What benefits have they brought this country and how have Government policies made that bonus work? How will it help the future and present prosperity of Britain? The Government have made it clear that their economic, trade and industrial policies stand aside from such problems as how to make the best use of North Sea oil and gas. The trade policy of the Minister and his friends has not ensured that oil is channelled into the positive development of Britain. Instead, the oil revenues have been frittered away and wasted. They should have been channelled into new industries and into our established industries, which will be needed when the oil runs out. However, a hands-off economic policy and a laissez-faire trade policy has resulted in our oil wealth pushing up the value of sterling for more than three years, thus bringing hardship and collapse to many of our home industries. The Minister did not want to talk about that. He only wanted to talk about what he called success.
Many people in the industrial areas have come to regard North Sea oil, and the Government's handling of it, not as a boon, but as a curse. For three or four years, of course, those in financial institutions were willing to welcome a high pound and to receive the high interest rates that the Government perpetrated on industry. It is only in recent weeks that the longer-term reality has begun to get through to financial markets. The pound has begun to move towards a more realistic level at which our industries can hope to compete in export markets and against imports. The House will have noted the article that appeared in the Financial Times on 1 February, which argued in some detail that sterling remained greatly over-valued against other currencies, such as the deutschmark and the yen.
The Labour party has not been apologetic in arguing that the value of the pound should be lower. Indeed, our arguments of the past two or three years have been justified. The Government are embarrassed to agree that they welcome the fall because it will give trade some chance of recovering. Trade Ministers have stood idly by, proclaiming the virtues of free market non-intervention; oblivious to the consequences for British industry and jobs, and oblivious to the wasted opportunity of North Sea oil and gas.
What of the future? What trade policy do the Government have to cope with the falling value of our oil and gas resources in the not-too-distant future? The City experts Phillips and Drew recently forecast that the output of North Sea oil would drop precipitously by 1990. We do not have to agree with the details of that forecast to accept that the broad thrust of the problem is clear for all to see. The company argued, with some justification, that the production of oil and the revenue prospects for the Government are likely to deteriorate fairly soon, whichwill cause major problems for the next Government, whatever the political party in power.At the conclusion of the debate, perhaps the Minister will give us his assessment of the position in the next few 362 years. How are we to replace oil revenues and exports, and how are we to continue to finance even the current level of imports? If we are to expand the economy and get people back to work, how will he cope with the increased level of imports that will result from present policies? The Minister made a meal of what he considered to be the views of the Labour party and the views put forward in our policy statements. However, the Labour party believes that the Government have a duty to put the right to 'work at the top of their priorities. That requires expansion, not continued deflation.
Private industry and commerce have as much to gain from expansion as the public sector. Trade policy must be closely aligned to an industrial policy. Taken literally, the so-called free trade system—the Minister was careful to use the words "open trading system" as perhaps more appropriate than "free trade system"—would rule out not only active trade intervention policies, but positive industrial policies as well.
In reality, many countries have clear interventionist Government policies towards industry and trade. Meanwhile, the British Government appear to be one of the few who are not willing to intervene on any systematic basis in industry. They are one of the few Governments who appear to play by the rules of the game.
My hon. Friend the Member for Whitehaven (Dr. Cunningham) mentioned the paper industry. The Wiggins Teape group has closed the New Bury paper mills in Bury, Lancashire. When asked why that was so, management said that the work force could not be held responsible. The work force, in co-operation with management, had demanned, improved productivity, accepted redundancies and increased flexibility. Even if the work force had agreed to no wage increases for two years, the mills would have had to close—partly because of import prices and partly because of energy costs. The hon. Gentleman said that continental competitors often have advantages that we do not have. For example, they often have the advantage of low energy costs.
Many people in Britain cannot understand why that should be so when we are self-sufficient in energy. They cannot understand why we cannot tailor Government policies to industries, such as paper manufacturing, that are energy-intensive. Why, if we have energy, are we incapable of enabling our energy-intensive industries to compete on equal terms?
What type of free or fair competition is it when Italian firms that employ 30 or fewer people are relieved of paying social security contributions? Why does the chemical industry face import penetration that has risen from 32 per cent. to 40 per cent. while the Government have been in power, while production has fallen by 9½ per cent? Is there nothing that trade and industry policy can do? Are the Departments of Trade and Industry working together in the interests of our basic industries?
The Labour party believes that we must carefully examine the way in which the world economy is going. There are deep worries about the way in which the present international system operates. In some respects, the international trade system is supposed to eliminate discriminatory practices but not prevent interventionist policies. In practice, GATT appears to tolerate discrimination but to discourage intervention.
There is a dilemma here. In the present depressed state of the world economy, any country that tries to expand its economy and create jobs for its people, even at rates that 363 were regarded as modest a few years ago, runs the risk of a balance of payments problem. There is a growing realisation that all countries would like to share in mutual expansion, but no one is clear about how to get it started.
The Labour party believes that the initiative to start Britain's expansion must lie firmly with the Government. It would be nonsense if that expansion were to be cut short by an unwillingness to control the growth of imports. That growth would benefit foreign producers and workers much more than the recession and depression policies of the present Government.
The Labour party wants an expansion of our economy and jobs, helped by sensible trade planning and industrial policies. The real danger that faces the world is that critical international financial problems, combined with inaction on policies for expansion, could lead to full-blooded protectionism of the type that the Minister for Trade mentioned.
The worst of all worlds would be if countries were afraid to expand their economies and tried to create jobs at home by shutting out imports. Simply working to prevent "beggar-my-neighbour" protectionism is not enough. The world's political leaders must inject a sense of urgency into measures that are aimed at promoting growth and employment.
Working within the present framework of thinking in GATT will not be adequate. Much has changed since GATT was established. There has been a wide spread of capital, technology, know-how and skills. There has also been a wide spread of the sophistication and mobility of financial capital. Moreover, there has been an increased sense of sovereignty and political equality in the multitude of nations that make up the world.
The Labour party believes that an adapted framework for international co-operation to expand employment, output and wealth is needed to come to terms with the world of the 1980s and 1990s. The Government came to office promising to be the party of opportunity. Instead, their policies have devastated industry upon industry, and region upon region. Unemployment has risen by 2 million, and this year it promises to rise towards 3½ million.
Government trade policy has thrown away many of the benefits of North Sea oil and gas. By refusing to intervene in market decisions, they have allowed the strength of oil revenues to destroy much of our manufacturing industry. Where there should have been new investment there have been closures. Trade Ministers have stood idly by while an incompetent Chancellor opted for a grossly over-valued pound for far too long. Imports have risen and exports have stagnated. Oil revenues have helped to hide those failures of Trade Ministers, but trading circumstances, far from being a success, have been fundamentally weakened.
At the heart of the Government's weak position is the fact that they have no industrial or trade policies. Faced by the failure of their reliance on market forces, they have no alternative but to blame someone else, whether it be the trade unions, the previous Labour Government or the international recession. They either blame someone else or promise that an upturn is still just round the corner.
The fall in the exchange rate will be a considerable help in the next few months. The Labour party believes that a positive and vigorous trade and industry policy, based on a willingness of Government to plan with and assist industry and the financial system, is urgently required. A 364 planned growth in trade, combined with expansionary policies that are aimed at getting people back into jobs, will offer real hope where at present the Government can only offer fatalistic despair.
§ Mr. Deputy Speaker (Mr. Paul Dean)
Order. Before I call the first Back Bencher, I remind the House that the debate must end at 10 pm. The winding-up speeches are expected to start at about 9.40 pm and many hon. Members wish to speak.
§ Sir Anthony Grant (Harrow, Central)
While I was listening to the hon. Member for Batley and Morley (Mr. Woolmer), I thought that we were having a debate on unemployment, and therefore I was just about to remind the House that when I ceased to have responsibility for unemployment the figure was 600,000. Within two years of the right hon. Member for Ebbw Vale (Mr. Foot) getting his hands on it, unemployment had increased by 1 million. Therefore, because of its record, I do not take seriously anything what the Labour party says about unemployment.
The debate is about trade. I listened eagerly to discover precisely what is the Labour party's official policy. As far as I could gather, it is a return to inflation behind some sort of new tariff barrier or import control. If I am wrong, I understand that the hon. Member for Batley and Morley will put me right in his winding-up speech. We wait, agog with excitement, for further enlightenment on that subject.
It is right that many hon. Members should wish to raise constituency points. I shall confine my speech to the greatest economic danger that faces the world—the possible growth of protectionism. Indeed, it is more than an economic danger. If one examines history, one finds that the protectionism that occurred in the 1920s and 1930s was one of the factors—only one, but a substantial factor—that gave rise to the second world war.
At the end of last year the secretary-general of the OECD said that in his view there had been a serious deterioration in international trade relations in the previous two years. This has shown up less in the imposition of traditional trade restrictions—the Spanish example is a glaring case in point; it is ridiculous that our exporters should have to overcome a tariff of 38 per cent., whereas we have only a 4 per cent. tariff—though these have been on the increase—but rather in the increasing use of such techniques as voluntary export restraints, monitoring of imports and the growth of domestic subsidies propping up uncompetitive industries that have grown up behind the scenes. They are a concealed form of protectionism. This has caused a drift towards seeking bilateral solutions to what are essentially multilateral problems.
Protectionism does nothing to make British industry more efficient and competitive. It does nothing but harm to the newly industrialised countries, which can service their substantial debts only out of export earnings. Inevitably, protectionism invites retaliation, which would probably damage this country more than any other, because, as my hon. and learned Friend the Minister said, we probably depend on a higher percentage of exports of our gross domestic product than any other country in the western world—30 per cent. compared with Japan's 12 per cent., for example. If we do not export, we do not eat. It is as simple as that.
§ Sir Anthony Grant
I would rather not.
Protectionism does nothing to help the consumer, who seems to have been all too forgotten in the debate. His freedom of choice is restricted. Protectionism hinders rather than helps the world pull out of recession and loses more jobs in the long run than it appears to save in the short term.
The Prime Minister summed that up well in the debate in November on the Loyal Address when she said:For a time, the protection road is more comfortable, especially for the slow coaches, but there would be no surer way of destroying our own competitiveness. Why should companies exert themselves to reduce their costs and improve their products if their overseas competitors could be shut out of our domestic market? They would, instead, subside into a comfortable mediocrity—with poor design, outmoded technology, lower production, higher costs, poorer job prospects and the slow suffocation of effort and enterprise.That sounds remarkably like the constituency of the hon. Member for Bolsover (Mr. Skinner).
§ Sir Anthony Grant
I shall not give way at the moment. I shall finish my quotation first. My right hon. Friend went on to say that consumers wouldpay higher prices for a more restricted range of poorer quality goods. They would be losers all round."—[Official Report, 3 November 1982; Vol 31, c. 22.]I give way to the hon. Gentleman.
§ Mr. Lamond
I thank the hon. Gentleman for his courtesy. Will he tell us why all the things that have been prophesised for a country that gives way to protectionism have not happened to Japan, about which he was complaining a moment ago?
§ Sir Anthony Grant
We could have a whole debate on Japan, but I shall give the hon. Gentleman one answer. Japan has had the good fortune to have a more sensible trade union system than this country.
I am extremely glad that Ministers have followed that policy. To be perfectly fair, the Labour Government also opposed protectionism when they knew the real facts. The Leader of the Opposition said that import controls in the 1930sled to retaliation and deepened the nature of the slump."—[Official Report, 29 January 1976; Vol. 904, c. 802.]The right hon. Member for Cardiff, South-East (Mr. Callaghan), the former Prime Minister, said, in more vivid language, that import controlswould benefit some home industries but only at the expense of the livelihood of everyone working on exports. We should be robbing Peter to pay Paul.The deputy Leader of the Opposition said that in the process of improving import controlswe could finish by dragging the country down to the sort of prolonged depression which it experienced in the 1930s."— [Official Report, 17 December 1975; Vol. 902, c. 1409.]
§ Sir Anthony Grant
They do not say that now because, now that they are in opposition, lunacy has set in again.
Like my hon. and learned Friend the Minister, I studied the remarkable speech delivered to the faithful by the Leader of the Opposition in the McLellan galleries in Glasgow on 22 January. He started with the startling discovery that 366If each country bought more, its imports would be matched by exports to the other expanding countries.One could argue that if each country bought less, its imports would be matched by exports. The right hon. Gentleman inveighed the free trade system. He then announced in ringing tones Labour's message to the world. We awaited it with bated breath, and here it is:Labour believes in planning production and planning trade.We have heard that before somewhere. What on earth does it mean? I do not know. In the immortal words, "I think we should be told." The answer is that import controls work only in a totally managed state, as in eastern Europe, in a society in which the acolytes of the right hon. Member for Bristol, South-East (Mr. Benn) would dole out to us what they thought was suitable for us from the limited resources that were left.
Furthermore, there is substantial humbug in the Opposition's attitude to trade. They pontificate volubly on aid, the North-South dialogue, and the Third world, but no sooner do those unfortunate nations get an industry going and try to sell their products than a great squawk of outrage erupts from Opposition Members, on the ground that their constituencies are being ruined.
§ Sir Anthony Grant
I shall not give way any more, least of all to the hon. Gentleman, who has come into the Chamber at a late stage of the debate and will pro 3ably go out again.
§ Sir Anthony Grant
The whole subject of trade is riddled with myths. For example, one might wonder why, with a big surplus of £4½ billion on our balance of payments, we need protection at all. That question perplexes many of our friends abroad. The Opposition are always telling us that it is made up more out of the service sector than the manufacturing sector. What is wrong with the service sector? It employs 11.5 million of our fellow citizens—three out of five people are employed in the service sector. It contributed a record £17 billion—worth of exports last year. Why is there greater merit in making costly goods that people do not want than in performing efficiently services that people do want, such as tourism, transport and many other activities in the service sectors? Is there an element of inverted snobbery that says that if one cannot make ships that people do not want, it is better to draw the dole than to work in hotels that people want? That is the inverted snobbery of people who object to the service sector.
What on earth is wrong with oil contributing? I do not hear people saying, "Those poor Saudi Arabians have to depend on such a big proportion of oil for their gross domestic product." After listening to the hon. Member for 367 Batley and Morley, one might think that we should be ashamed of having North Sea oil rather than being very pleased.
There is also the myth that leaving more money in people's pockets by taking less tax causes a flood of imports unless controls are imposed. However, only one third of imports are finished manufactured products. The rest are raw materials, food or semi-finished articles. The increase in the propensity to import is more among industrial than among non-industrial consumers. Products such as black and white television and shoes, which show the highest import penetration figures, constitute only a small proportion of total consumer expenditure.
Of course there are special cases, such as textiles, about which my hon. Friend the Member for Macclesfield (Mr. Winterton) is particularly concerned. I congratulate my hon. and learned Friend the Minister on achieving the success that he did in the MFA negotiations. Of course there are many barriers to trade. Of course there are strange and subtle restrictions in Japanese trading practices, although it is all too easy to treat Japan as scapegoat for some of our ills. Never let us forget that we export successfully to Japan. We export chemicals and textiles. Of course there are too many hidden subsidies in world trading, but we are not backward in imposing subsidies ourselves, as our foreign competitors tell us. We do quite a bit of subsidising for milk, steel and motor cars.
The policy should be to remove obstacles, not to create new ones. There is absolutely no justification for the panic that seems to prevail in some quarters, most noticeably in the Opposition. I believe that the Government are on the right lines and should stick to their policy.
I pay tribute to my hon. and learned Friend the Minister, who has to bear a heavy burden. If I had more time I should suggest that the Departments of Trade and Industry should come together again, but that would be the subject of a separate debate. I urge the Minister and his colleagues to redouble their efforts, first, to eliminate the use of standards in the EC as a concealed form of protectionism; and secondly, to support West Germany in its fight for freer trade within the EC and to press the Commission to speed up proceedings against some of the ridiculous French non-tariff barriers against European and Japanese imports.
Thirdly, I urge the Minister to press for the service industries to be brought into GATT and to make much more rapid progress towards removing barriers against service industries across Europe. They provide a great opportunity for Great Britain.
Fourthly, I urge the Minister and his colleagues to back fully my hon. Friend the Under-Secretary of State for Trade in his battle for free ports against some of the mugwumps of Customs and Excise. It is absurd that there are about 400 free ports in about 70 countries, including the EC, yet there is not one here.
We wish the Under-Secretary of State for Trade luck in what he is doing. Above all, the Minister should continue the successful battle against inflation, because that, more than anything, will enable us to trade successfully when we emerge from the recession.
By all means let us buy British where the goods or services are the best in quality, price and delivery—as they often are—but they will be best only if they are made or performed within a free but fair trading system.
§ Mr. Douglas Jay (Battersea, North)
The Minister started his speech with a paean of praise for the open trading system. Meanwhile, he is a member of a Government who support, as does the hon. Member for Harrow, Central (Sir A. Grant), a common agricultural policy which is the most extreme and vicious protectionist system there has ever been. In a debate such as this we are not helped by the sort of sweeping statements about protectionism and free trade made by the hon. Member for Harrow, Central. We should take the subject rather more seriously.
It is absurd to assume that either general free trade or general protection is somehow always good for all countries at all times. The amount of free imports or protection that is desirable depends on which country, which period and which industries one is talking about. One might as well say that it was advisable for everyone to take unlimited quantities of brandy at all times to the exclusion of anything else as to talk in such generalities.
In Great Britain, in the modern world, the correct recipe for achieving growth and high standards is free trade in the import of food and raw materials with direct support for agriculture and some restraint on the import of manufactured consumer goods. We must live by the export of manufactures because our labour costs and standard of living depend materially on keeping down the cost of our food imports. While we have followed such a policy this century, we have succeeded. When we departed from it there were difficulties.
In the 1920s and 1930s, a period which tends to be caricatured, we were thrown into imbalance and unemployment by the excessive imports of manufactures. Then, in 1932 a Conservative Minister, in a largely Conservative Government, wisely introduced a moderate tariff on imported manufactures and left the imports of food and raw materials entirely tax free.
Contrary to the sweeping reference by the hon. Member for Harrow, Central to the 1930s, what actually happened was that from 1932 to 1937 under that system there was a major recovery of British industry in output, employment and investment. British steel production rose by nearly 50 per cent. between 1932 and 1937. If it had not, we should have been poorly placed when war broke out in 1939. After the war, a policy of restraint on manufactured imports and free imports of food was followed by both Governments until the end of the 1950s. Until 1960, while those policies were followed, we enjoyed rising production, trade and living standards, and unemployment of 1½ per cent. or 2 per cent. During those years we had the fastest increase in the volume of our exports that we have ever had in modern history.
In 1959, the Government, no doubt with the best of intentions, removed the quota restraints on manufactured imports and the whole position began to change. The figures for our manufactured imports are remarkable. In 1950 manufactures represented 18 per cent. only of our imports. By 1960 the figure had already risen to 33 per cent.. It reached 51 per cent. in 1970, and 61 per cent. by 1978. Perhaps the Minister can tell us the figure for 1981 and 1982, which I suspect is about 80 per cent. It is a sweeping change from the 1950s and an explanation for our present position.
The abandonment of import quotas in 1959 led to growing deficits in the 1960s and devaluation in 1967. In 369 addition, the major blunder was made in 1973 of simultaneously forcing up all our labour costs by imposing up to 100 per cent. taxes on imports of food and removing suddenly all tariffs on manufactured imports from the continent. That is what brought us to our present position. Anyone could have seen that that policy would lead to major difficulties. In fact, it has led almost to disaster in our trading position which is masked only, as my hon. Friend the Member for Batley and Morley (Mr. Woolmer) has said, by our temporary oil exports and huge oil earnings. The combination of higher United Kingdom costs and free entry of manufactures introduced in 1973 was bound to lead to a huge deficit in our trade in manufactures with the continent.
Rather surprisingly, even the Foreign Office—20 years too late—grasped the essential point. In a remarkable booklet published a few weeks ago by the Foreign Office called "The Budget Problem", we are told:The cost of EEC policies to Britain is more than just its net budget contribution. Britain is a net importer of food"—a great discovery by the Foreign Office.
It buys food from other member States at Community prices which are higher than world prices. The resulting cost to Britain is not matched by equivalent gains on the industrial side because the Community does not have a comparable system of price support for industrial products.It would have been better had the Foreign Office discovered that 20 years ago, but I am glad to have confirmation of it now.
I estimated, modestly, in 1968 that the deficit in manufactured trade with the continental EC would rise to £300 million or £400 million a year, at 1968 values, which would be about £1 billion today. I apologise for my understatement 15 years ago, because the deficit in manufactures with the rest of the EC last year was not £1 billion but £4.5 billion, as the Minster said in answer to a question only last week.
It has been asked why we quote figures for manufactures but do not include oil. The reason is simple. Had we not joined the EC, we should be selling just about the same amount of oil to Germany, France and the continental EC as we are now, because those countries need our oil. That is the easiest way for them to obtain it. If we were to leave the EC, they would probably buy much the same amount of oil from us. Therefore, if we are trying to estimate the consequences of our membership of the EC, our trade in oil must be omitted because it is not affected either way. The trade in manufactures has been affected by present policies because tariffs were removed on each side and because our labour costs have been increased artificially.
The striking point about the £4.5 billion deficit in manufactures last year is that such a deficit has arisen since we joined the EC. In 1971, we had a surplus in manufactured trade with the present EC countries of about £140 million, but now we have a deficit of more than £4 billion. Some people say that that swing into deficit was due not to membership of the EC but entirely to lack of competitiveness and the decline of British industry. However, the official figures prove that that is untrue. In the same years, our trade in manufactures, again omitting oil, with the non-EC world has improved, not worsened, from £2.4 billion in 1971 to £6.5 billion in 1981. The deficit in trade with the EC cannot be due to the alleged inefficiency of British industry.
The overriding lesson of the story is that the mutual removal of tariffs on manufactures between Britain and the 370 EC has produced a swing of more than £4 billion a year. More importantly, it follows that the restoration of a moderate tariff both ways would swing the balance back towards where it was before. If one reverses the policies, it is only reasonable to suppose that one will reverse the consequences.
If we left the EC, at least two options in trade policy would be open to us. It is better to examine those than to make sweeping statements about protectionism and open trading. We should remember that the contintenal EC, especially Germany, has an extremely strong motive to retain as free an entry as possible into our market for manufactured goods, which is extremely valuable. We could grant such free entry to the EC and the other EFTA countries that now enjoy it. If we took that option, we should have the advantage of lowering our labour costs as a result of the elimination of the common agricultural policy, and we should retain mutual free entry into both EC and EFTA countries. That would be the best policy.
The alternative, because so much damage has been done during the past five years, is to impose a temporary moderate tariff on EC industrial imports. The obvious tariff to impose would be the EC's common commercial tariff on industrial imports from outside the Community, which averages about 9 per cent. The Community countries would then apply the same tariffs in response. If we do that, we should reverse the policy that we adopted in 1973 and it is likely that the deficit would be reduced.
I favour the moderate tariff solution, whatever we do about the exchange rate, for some time, with the possibility that at the end of that period we could return to the EFTA agreement that we should never have left 10 years ago. I prefer that solution because a moderate restraint on industrial imports is now essential for employment and growth in Britain.
I have been conducting correspondence with the CBI about the effects on employment in Britain were we to leave the EC. Interestingly, the CBI estimates that about 2.5 million people in British industry are employed in producing manufactured goods to sell in the EC. Since the ratio of our manufactured imports from the EC to our exports is about 4:3, it would follow from the CBI's estimate that our present manufactured imports from the EC are costing us about 3.25 million jobs. That means that, on balance, if we eliminate the manufacturing, deficit, so far as one can calculate such matters, we should gain about 700,000 to 750,000 jobs.
I have no reason to believe that the CBI estimate is other than reliable. The total increase in jobs from leaving the EC would be much larger than that because of the reduction in labour costs due to freedom from present agricultural policies. For all those reasons, I have no doubt that we shall not return to full recovery or employment until we have freed ourselves from the economic handicaps, which are now so clearly understood by the Foreign Office, that are inflicted on us by our EC membership.
The hon. Member for Harrow, Central (Sir A Grant) said how wonderful it was to be earning billions of pounds by exporting oil. That would be so if the oil was permanent. As we all know, those earnings will decline in 1990. The Minister rightly said that the current balance of payments surplus last year was £4.6 billion. The present benefit from North Sea oil, taking into account import savings as well as export earnings, is about £10 billion to 371 £12 billion. Apart from oil, we are running an annual deficit of £5 billion or £6 billion. If we continue in that way, in the 1990s we shall clearly face disaster.
§ Mr. Nicholas Winterton (Macclesfield)
It is a great pleasure to follow the right hon. Member for Battersea, North (Mr. Jay). There is always a consistency to his argument and a basic pragmatism which I greatly admire. I do not agree with everything that he said about the European Community, but the Government should heed some of the points he made. There is no doubt that our manufactured goods have lost out within the European Community.
I am sorry that my hon. and learned Friend the Minister for Trade has left his place because I intended to refer to an occurrence which will take place in the EC on 11 February. It relates to agriculture. I understand that the French Government intend to put up barriers against dairy products going into France from all other countries, including countries within the European Community. They will demand a veterinary certificate with every delivery of dairy products.
What immediate action do the British Government intend to take in retaliation to this action by a member of the European Community?
I do not agree with my hon. Friend the Member for Harrow, Central (Sir A. Grant). I think that he made far too many sweeping generalisations. His reference to a free and open market means that he is living in cloud-cuckoo-land, and his feet are well off the ground. We must live in the real world.
Let me deal with the clothing and textile industries, as I know them well, and consider some of the tariffs that are levied against our goods by developed and developing countries.
The United States Government have put up a 13 per cent. tariff against cotton yarn from the United Kingdom; Spain has put up a tariff of between 25 and 27 per cent.; South Korea 30 per cent. and Brazil 150 per cent.
The tariff against wool yarns from the United Kingdom to the United States is between 15 and 20 per cent.; in Brazil it is 85 per cent. and in South Korea it is 30 per cent.
The United States imposes a tariff on cotton fabrics from this country of between 16 and 20 per cent.; Spain between 32 and 35 per cent.; South Korea, 50 per cent.; Australia, 40 per cent.; and the most amazing figure is Brazil, 205 per cent. Yet my hon. Friend is preaching what I describe as open, free and fair competition.
I agree with fair competition, but when other countries expect us to import their goods and put up that sort of tariff against our goods, I do not believe that is either free or fair competition. We are not doing right by the workers in the textile and clothing industries, which are among the largest employers in this country, if we tolerate this situation.
§ Mr. James Lamond
Has the hon. Member for Macclesfield (Mr. Winterton), whose words I listened to wth great interest, had even a whisper from the Government of the possibility of retaliation against countries that have high tariffs? We are told that is the reason why we cannot have tariffs.
§ Mr. Winterton
I do not believe that retaliation will often occur. If it does, we can often retaliate and do more damage to them than they can to us.
I shall now deal with garments, because they are the finished product. The United States has a tariff against our knitted outerwear goods of between 21 and 40 per cent.; in Spain it is between 33 and 36 per cent.; in Australia—a friendly country of the Commonwealth—it is between 80 and 100 per cent.; and Brazil has that amazing figure of 205 per cent. again.
As for woven outerwear, tariffs against our goods in the United States are 30 to 40 per cent.; in Spain between 36 and 39 per cent.; in Australia between 70 and 100 per cent.; in South Korea, 50 per cent.; and in Brazil 205 per cent. yet again.
This shows the reality of the trading situation. Our Government have a duty to ensure that we maintain a proper and full manufacturing base.
§ Sir Anthony Grant
I am sure that my hon. Friend misquoted me through inadvertence. He referred to "free and open trading". I was careful to say "free and fair trading". He will also note that I regarded textiles as a special case. I am sure that, like me, he will congratulate my hon. and learned Friend on the MFA negotiations.
§ Mr. Winterton
I am happy to apologise to my hon. Friend if I misquoted him in any way. I am equally happy to withdraw those remarks. Like my hon. Friend, I congratulate the Minister for Trade on the wonderful job that he did in negotiating the MFA that is currently in force.
Representatives of the knitting and hosiery industry who came to the House of Commons this afternoon made it clear that while the MFA is not exactly what they wanted, it is a jolly sight better than what they expected, and they are grateful to the Minister for the work involved in negotiating it.
My hon. and learned Friend is well aware of my concern about the 1983 quota levels compared with the levels in 1982. That is the whole basis of the new MFA with which we are now dealing.
§ Mr. Winterton
I shall do so in a moment.
Is my hon. and learned Friend aware that in 1981 imports of cotton yarn totalled 1,721 tonnes, whereas the quota for 1983 under the present MFA is 2,607 tonnes? In 1981, imports of spun synthetic yarn totalled 1,712 tonnes, yet, under the new MFA, the quota is 3,610 tonnes. In 1981, towel imports totalled 2,921 tonnes, yet, in 1983, the quota is 4,912 tonnes. Imports of bed linen in 1981 amounted to 1,001 tonnes, but the quota in 1983 is 2,737 tonnes. In 1981, 849 tonnes of household linen were imported, yet the 1983 quota is 1,954 tonnes. The import of blankets in 1981 totalled 293 tonnes, yet the quota for 1983 is 503 tonnes. The import of cotton fabrics in 1981 totalled 35,110 tonnes, yet the quota allowed in 1983 is 57,968 tonnes. Total fabric imports in 1981 amounted to 50,897 tonnes, yet the quotas negotiated under the new MFA, which is now in force, total 76,540 tonnes. That is the problem that our textile and clothing industries must face.
The textile and clothing industries are concerned about the possible growth within the quotas that have previously 373 been underused. My hon. and learned Friend will see what I mean if he studies the statistics that I have just quoted. It is impossible to know the extent to which supplying countries will be able to fulfil those quotas in future, but this is a real problem for anyone planning to invest in clothing or textiles in the United Kingdom. Therefore, it would be helpful if my hon. and learned Friend made a statement that the anti-surge mechanism to which he made brief comment will be used to the full on every occasion when it is necessary.
There is also the question of free circulation—the arrival of goods in the United Kingdom via another EC member state. Such goods are not counted against United Kingdom quotas, but the Government have the right to ask the Commission for permission to block these imports. Under article 115 of the treaty of Rome, the Commission has the power of decision. We do not have that power. Therefore, I urge the Government to put pressure on the Commission to be more responsive to requests from United Kingdom industry to block disruptive imports, as such action would be helpful, particularly to the textile and clothing industries and would prevent further redundancies and closures.
Turkey is a major problem at the moment. Its exports of cotton yarn, cotton fabric, knitted shirts, towels and bed linen have grown enormously in the past 18 months. Cotton yarn is covered only by a voluntary restraint arrangement which is currently non-operational because of a dispute inside the Community, and for 1983 there are no restraints on the other products. I fear a large-scale import surge, such as there was in 1982 when restraints on fabric and knitted shirts were introduced during the year. There is a serious risk that high-level damage could be done before the quotas for which the industry would ask could take effect. Therefore, I hope that pressure will be brought to bear in Brussels for rapid and firm action when such action is required.
I also ask my hon. and learned Friend for an assurance that the 1983 quotas will not be based on the inflated levels of trade built up in 1982 as a result of the EC's inaction and delay. Apart from anything else, that would be most unfair to other Mediterranean countries which reach voluntary agreements with the EC.
I wish to put one or two matters in perspective. The right hon. Member for Battersea, North made a very constructive speech. The views that he expresses are always consistent, and the House is the wiser for that. The total volume of imports into the United Kingdom—I am speaking not just about textiles and clothing but generally—rose by 21 per cent. between the first and fourth quarters of 1981. Over the same period, imports of finished manufactures, to which the right hon. Gentleman also referred, rose by 28 per cent. in volume and 42 per cent. in value. Import penetration in the textile industry has more than doubled in the past 10 years; and imports of canned vegetables, for example, have risen by 51 per cent. in the same period. Import penetration in respect of built-in ovens grew from 20 per cent. to 47 per cent. between 1973 and 1981.
Motor vehicles are extremely important to the economy of this country. Import penetration in the second quarter of 1982 was 35.8 per cent. The forecast for the first quarter of 1985 is 44.2 per cent. That massive increase of 23 per cent. in import penetration will result in many further redundancies in our car industry and in the many companies that supply it. We must not forget the domino 374 effect that the collapse of our motor industry would have. There will also be huge import increases in relation to other major sectors of our economy.
I believe that my hon. and learned Friend is familiar with the following calculation. If each of the 20 million households in the United Kingdom switched, on average, £3 per week from spending on imports to spending on British goods and services—I agree with my hon. Friend the Member for Harrow, Central on the importance of services—350,000 jobs could be created within two years. Is that not something that the Government would wish to happen?
§ Mr. Cryer
The hon. Gentleman makes a number of good points and the information that he gives is most valuable. Will he make it clear that the Government can do something to help if people decide to buy British? The Government should require that garments made up in this country from imported cloth should not be labelled as having been made in the United Kingdom. Only garments made up in the United Kingdom from cloth made in the United Kingdom should be labelled in that way.
§ Mr. Winterton
I intended to mention labelling. I entirely endorse the hon. Gentleman's remarks. Labelling is still inadequate. Many of my constituents return home after buying what they thought was a British-made shirt—for example, because the label on the collar bore what they regarded as a traditionally British title—only to find a small label somewhere halfway down one of the sleeves stating that the garment was made in Taiwan, Hong Kong or wherever. That is highly misleading. Indeed, I go further than the hon. Gentleman. I believe that mail order catalogues should give full details as to the country in which the article was made, in which the cloth was made and, in the case of garments, in which the garment was actually made up. I commend that proposition to the Government.
I hope that the target announced by the "Think British" campaign has the support of my hon. and learned Friend and of the public. There are signs already that the proposition first announced last June, is beginning to get through to people in that imports in the last two months of 1982 were marginally lower than expected. If the 20 million households in this country switched not just £3 but £8.60 per week expenditure from imported to home-produced goods, more than 1 million jobs could be created in two years. The figures that I give are not picked out of the sky but are based on an exercise carried out for the campaign by the Economist Intelligence Unit.
The "Think British" campaign has investigated the sheeting industry, in which jobs have been reduced by two thirds in the past 10 years, aggravating an already serious unemployment problem in the north-west, where so many of the textile mills are situated. Only 25 per cent. of sheets, pillow cases and duvets sold in the United Kingdom are manufactured entirely in this country, although if the orders were there we could cope with 40 per cent. of the demand. A shift by consumers to British-made sheets would have an especially beneficial effect on the textile industry.
My hon. Friend the Member for Harrow, Central seemed to miss the point that when large numbers of people are out of work, purchasing power in retail stores is bound to be less. That is especially true in areas north of Watford. I intend no slight in that comment. I do not 375 suggest that people south of Watford are inferior and those north of Watford superior, but large numbers of people are out of work in the east and west midlands, the north-west, the north-east, Yorkshire and Scotland. There is thus a domino effect in terms or purchasing power in retail stores. Therefore, it is in the best interests of the big multi-outlet stores—not just Marks and Spencer, which is setting a fine example—to promote and sell British products.
I was recently informed that the National Health Service, which is a very large consumer of sheeting, buys a large quantity of imported products. That is a matter of serious concern. In my view, there would have to be an extremely good reason for that practice to continue, as the long-term health of an entire sector of British industry and the future availability of supplies at reasonable prices should surely be a factor in the buying policy of the NHS, the Ministry of Defence and all Government Departments.
My hon. Friend the Member for Loughborough (Mr. Dorrell) and others may argue that all contracts and tenders must be advertisd, because this country is a member of the European Community; but that applies only if the cost of the contract is estimated at more than £25,000.
Why do we not break down the contracts—as the French and most European Community countries do—so that they are below £25,000? In that way, our industry would benefit—[Interruption.]
§ Mr. Stephen Dorrell (Loughborough)
So that my hon. Friend does not fall into the trap of knocking down paper tigers, he may wish to know what I was saying to my hon. Friends. I said that I hoped that overseas customers of companies based in my constituency would not take the view that he has advised British purchasers to take. If they were to do so, we could not sell our exports.
§ Mr. Winterton
That is not accurate. There is a great movement by the British people to buy British. Is Marks and Spencer unsuccessful in selling abroad? I am sure my hon. Friend would agree that it is not. Yet that chain store overtly and forcibly practises a think, sell and buy British policy. If Marks and Spencer can do it, why cannot so many other chain stores, companies and Government Departments in Britain?
The debate has been interesting for me. It has given me the opportunity to get many matters about which I feel deeply off my chest. I have addressed myself to a Minister who has shown much ability in negotiating, and who is also very understanding about the problems of the industry that has been the basis of most of my remarks.
If my hon. and learned Friend cannot deal with all the points that I have raised, will he respond by letter? I assure him that the British people—especially those in the clothing and textile industries, which employ more than 600,000 people—are very interested in what the future holds for them. Our trading policy will dictate what future they have.
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
I remind the House that 22-minute speeches at this hour mean that many hon. Members will not have the opportunity to contribute to the debate.
§ 8.51 pm Mr. Doug Hoyle (Warrington)
The debate has been interesting if only because it has given us an opportunity 376 to hear the contrasting views of Conservative back benchers. It is difficult to believe that the hon. Members for Macclesfield (Mr. Winterton) and for Harrow, Central (Mr. Grant) sit on the same side of the House. I always listen with rapt attention to what the hon. Member for Macclesfield says about the textile industry. We have fought many battles on behalf of that industry. While we may disagree on the majority of political matters, we certainly agree that the textile industry should have a future.
I am sorry that the Minister is leaving the Chamber. I was disappointed with and distressed by his speech. Listening to him today, one would not have thought that Britain's industries were facing tremendous problems, many of which are due to the Government's economic policies. They are the problems of an over-valued pound, rising imports, industrial energy costs and lack of modernisation, yet we have heard nothing from the Minister about the real issues.
It would be batter if the Minister moved away from Dover and into the real world of the regions. He would find that we are fed up with hearing pontifications from the Dispatch Box. We heard about the Japanese again today. I have told the Minister and preceding Ministers that the Japanese will talk and talk and talk again so long as no action is forthcoming. The Japanese are, of course, stringing along the new Ministers who have been sent to Japan to speak to them.
The Minister must come to the regions to see that the open trading system about which he speaks is not working. It is beginning to destroy vital industry. The Government's complacency will not do. My right hon. Friend the Member for Battersea, North (Mr. Jay) remarked on the idea that we can solve our problems with our revenue from oil. The world's oil resources are finite, and no other oil-producing nation in the world has dissipated its resources in the way that we are doing.
Other countries are using the revenue from oil to modernise their industries to make them more com-petitive. Indeed, many of them are restricting imports to build up their industrial base. Britain is doing the opposite. We shall rue the day when the oil begins to run out. Everyone will condemn the Government, and other Governments, for their lack of action when oil was plentiful.
The remark made during the debate about the destruction of the vital textile industry could be applied to the motor, steel, glass and electronics industries. I wish to concentrate on one industry that is suffering greatly—the paper industry. Not only is it facing all the problems that have been mentioned, but it is trying to compete with competitors who have the benefit of subsidised energy costs. The result is that we are destroying the British paper industry.
What has happened to the industry since 1979? Exports have fallen slightly, while imports have risen from 49 per cent. in 1979 to 59 per cent. in 1982. Our production figures for 1982 were ther lowest for 25 years. As has happened in the textile and other industries, foreign paper manufacturers are turning to Britain as their markets collapse—and they are finding it easy to enter the British market.
Dr. Lenton, the managing director of Bowater, said that foreign competitors eye the United Kingdom as a nice little offshore island. Of course they do. It is easy for them to send their products to Britain. What has been the effect of 377 that on the paper industry? In 1978 it employed 60,000 people, but by 1982 the figure had fallen to 30,000. There were 140 mills in 1978—there are now 111. The number of machines in the industry during that period dropped from 300 to 225. Twenty-five years ago 70 per cent. of all our requirements were manufactured in Britain. In 1980, United Kingdom manufacture for the home market had fallen below 50 per cent. The real tragedy is that the figures between 1980 and 1982 show that the 50 per cent. supplied by British manufacturers had fallen to 40 per cent.—a collapse of 10 per cent. in two years.
Far from competition subsiding, it will increase. That is the tragedy. The Scandinavians have the advantage of low-cost energy supplies because of their hydroelectric schemes. They also have a plentiful supply of timber. One matter of great concern to the industry is that there have been large devaluations in both Sweden and Finland. We have been told that the EC is our saviour.
My right hon. Friend the Member for Battersea, North was right when he commented upon the large deficit in manufactured goods in our trade with the EC. Many hon. Members on both sides of the House agree with him. I am sorry that more SDP Members are not present, because they bear the heaviest responsibility for taking Britain into the EC and the consequent destruction of British industry. I see that the hon. Member for Stockport, South (Mr. McNally), an SDP Member, is nodding his head. If he agrees with me he will try to convert his colleagues—[Interruption.] I did not not catch the remarks of the hon. Member for Stockport, South.
What is happening in the paper industry? While we are trying to play fair, what is happening in Belgium? The Government there are propping up the loss-making Intermills with huge subsidies. There are large-scale subsidies to the industry in France also. In addition, energy costs in the EC countries for large users of energy, such as the process industries, are far lower than in this country. In Italy, electricity to such industries costs 50 per cent. less than in Britain. In France it is 40 per cent. cheaper and in Germany 25 per cent. cheaper. How can we expect our industries to face that kind of competition?
Time after time we hear excuses from Ministers that some action will be taken or that they are working through the EC to remove this kind of subsidy, but while they are doing that the industry itself is dying, and if no action is taken there will be no industry to discuss in the House. That would have two grave consequences for Britain—the loss of jobs and a flood of imports, which would have a disastrous effect on our balance of payments.
In 1982 we had 2,400 redundancies in the industry. This year, 1,900 redundancies are already forecast, almost as many as in the whole of 1982. This is grave news. We know that 1,000 jobs are to be axed by Wiggins Teape, 740 of them in Dartford, 200 in Newbury mills and 70 out of the 240 at Lincoln. In my own constituency, Thames Board Mills Ltd. has already declared that it will close its mill completely, which will mean the direct loss of 800 jobs and 200 more lost indirectly. These figures demonstrate the immediate nature of the crisis in the industry.
We cannot reduce imports under this handicap of high energy costs. I have already described the present situation. If we look into the future, we see that the competition will increase, because while we are talking about doing something, our competitors are taking action. In West Germany alone, 8,000 million deutschmarks were 378 set aside last year for energy efficiency assistance over the next four years. We can guess what that will do for the West German paper industry in relation to our own. Also in 1982, the Dutch completed a study on energy efficiency in this industry, as a result of which the Government intend to invest in 18 new combined heat and power plants using gas turbines. Again, modern and efficient mills will be competing against ours. Germany, France and Sweden are all giving huge grants for efficiency measures. They have thus directly strengthened their industries, which are already competing more than efficiently with ours because of the handicaps from which we suffer.
I deal now with the effect of this on the regions. If I am parochial in referring to the situation in my constituency, with the loss of 1,000 jobs, I make no excuse for doing so. I want to describe what the death of a large board mill means to a town like Warrington, an area which in the whole post-war period up to 1979 had enjoyed prosperity because, unlike many of the other towns in the north-west, it had diverse industries—steel, engineering, paper, soap, wire drawing, chemicals and clothing.
Steel has largely disappeared. As the hon. Member for Macclesfield will know, clothing, too, has almost disappeared. Many other industries are in severe trouble. This has meant an increase of unemployment from 5 per cent. in 1979 to over 14 per cent. now. The closure without warning of Thames Board Mills Ltd. therefore comes as a body blow. I visited the mill only three months before the announcement. The company had troubles, but it was thought that they could be weathered.
Before describing the effects on the town, I should like to place on record, for the benefit of Conservative Members, the fact that the closure is not due in any shape or form to labour troubles. The management acknowledges that the labour force has been pliable and efficient. There has never been a strike. The need to accept new working conditions and flexible operations to try to raise efficiency has always been accepted.
§ Dr. John Cunningham
Is it not a fact that throughout the paper industry industrial relations have been good and innovation and investment have also been good? There is no real reason why this industry should not be maintained in our economy.
§ Mr. Hoyle
I agree with my hon. Friend. There have been no labour troubles. As in the textile industry, the employees have been prepared to co-operate. In fact, what has been stated about the paper industry and the textile industry is true of most of British industry. I am only sorry that Conservative Members do not recognise this fact often enough. They do not speak about it often enough. A different climate of opinion would exist over labour relations if they did.
For the 1,000 employees who have lost their jobs, the closure of the paper mill is an absolute disaster. Their standard of living will be severely cut. In an area of high unemployment, their chances of obtaining a new job are remote. Among them there is already a sense of hopelessness, stemming from the fact that a large concentration of the 4 million unemployed are to be found in the north-west.
One has to consider the impact on other businesses in the town, especially the retail trade, which will feel the effects of the loss of purchasing power of the 1,000 people and their families. There will be a disastrous effect on 379 transport contractors. One company conducted nearly all its business with Thames Board Mills Ltd. The outlook for employees of that company is bleak. A number of small engineering companies and other subcontractors depended heavily on the mill. It is clear that the effect of the closure will be cumulative. It means the blight of the town of Warrington.
Can that be allowed to happen? Is it not time that action was taken? Is it not time that help was extended to such areas? Is it not time for sensible policies? The mire in which we find ourselves is partly due to the world recession, but it is largely due to the economic policies of the Government. The answer must lie in planning our economy and our trade. We must restrict imports. That does not mean stopping trade. It would lead to more trade with the world as a whole. However, we should push back imports in areas such as textiles and paper, where they have reached a dangerous level. We ought to restrict them to give our industry a chance to recover while we make the necessary investment.
Industries such as chemicals, paper and board are asking that they should not be subjected to competition from countries that subsidise energy costs. If they have that kind of competition, they want action to be taken here to provide similar subsidies for them. That is the only way in which they will be able to compete on equal terms. It is the failure to take such action that is causing the destruction of the paper industry.
We should address ourselves to two problems. First, how can we make ourselves more efficient so that we can compete? Scorn was poured by the Minister on the idea of devaluation. We are already seeing devaluation, whether the Government like it or not. Already they are singing a different tune and saying that it will help our exports. Of course it will, because an overvalued pound is no good to British industry. Secondly, our interest rates are no good to British industry. High interest rates make it difficult for industry to compete. Who will invest in new methods to bring about higher productivity if they face high interest rates?
I couple with that the need for sensible controls on imports that are damaging vital industries. We can delay no longer. Something must be done about energy costs. We must think again about unfair competition and we must do something to save industries such as the paper industry before it is too late.
§ Mr. Christopher Murphy (Welwyn and Hatfield)
In contributing briefly to this debate on trade, I wish to concentrate upon the responsibilities of the Department listed relating to policies for tourism and to congratulate my hon. Friend the Member for Aberdeen, South (Mr. Sproat) on the vigorous approach he has adopted as, in effect, the Minister for tourism. He has been right in seeking to tackle the requirements of this key sector of the economy and in appreciating the importance of tourism to our future industrial and trade development.
Tourism turns over £8 billion annually, of which £4 billion is in foreign currency, and employs 1.5 million people. On these simple figures alone, its value in economic terms is clear. Yet, with the coming growth in the leisure industry, already evident in many areas, it 380 seems appropriate to query whether enough emphasis is being placed by the Government upon the potential of this development.
To illustrate that concern, I cite the delineation of ministerial responsibilities—my hon. Friend the Under-Secretary of State for Trade, my right hon. Friend the Minister for the Arts, and my right hon. Friend the Secretary of State for the Environment whose Department is responsible for many aspects of our heritage. The time has surely arrived—many might say it was overdue—for there to be a Department embracing all three functions because each impinges upon the other.
What of our future tourist industry without the arts and heritage? What of the success of many arts events without the setting of the heritage and the support of tourism? What about our continuing heritage divorced from the arts and the tourists of the world? All the Ministers involved have shown their individual and valuable commitment. I know also of the interest in the arts and our heritage of my hon. and learned Friend the Minister for Trade.
Such co-ordination becomes ever more self-evident and the need for co-ordination runs deeper even than this. For a thriving tourist industry to have an input when transport policies, such as good signposting, are decided is essential. For it to have an input when industrial policies are decided is vital to avoid the duplication of scarce resources. For it to have an input when fiscal policies are decided is essential to ensure that maximum advantage is gained from overseas visitors with minimum discomfort. These are but a few obvious examples.
My hon. and learned Friend has rightly set up a radical and comprehensive review of the way that we handle tourism—a step that should be welcome on both sides of the House. Tourism can be yet another example of the excellent workings of the social market economy—the Government providing a backcloth against which private enterprise should be allowed maximum freedom to operate, and the individual being encouraged to give full rein to the entrepreneurial spirit. New opportunities are springing up not only from overseas visitors, but from closer to home. Leisure for our constituents—if not for us as hon. Members—is on the increase.
Lest it be thought that my words this evening are purely conviction rather than backed by experience, I humbly draw the attention of hon. Members to the fact that my constituency has at its centre the splendour of Hatfield house, under whose shadow, almost, I live. This magnificent building surely epitomises the bringing together of the arts, our heritage and the tourist industry. Hatfield house shows clearly how each is interrelated, and is most definitely private enterprise.
§ Mr. Tom McNally (Stockport, South)
I hope that those who organise these matters in the House will have noted both the informed nature of the debate and the large number of hon. Members who wish to participate, and that they will see this as significant and allow us more debates on trade, as the debates obviously attract much interest. I agree with the hon. Member for Welwyn and Hatfield (Mr. Murphy) in advocating a vigorous policy of expansion of tourism. I hope that tourist policy will be tied to regional policy. Investment in tourism is a good job creator. I know that the Under-Secretary of State is aware of the need to tie development of regional airports to tourist expansions.
381 The Minister has already appreciated the flavour of the debate. Hon. Members wish to campaign against unfair subsidies to industries abroad and also want subsidies for our industries. Hon. Members wish us to penetrate the export markets and want the Minister to argue that our competitors should show restraint. Hon. Members wish our utilities to buy British and attack French chauvinism. Like the late Jimmy Maxton, the hon. and learned Gentleman has the job of riding two horses at once. It is not only in the circus that that is a required art, but in the Ministry of Trade.
The right hon. Member for Battersea, North (Mr. Jay) made it clear that there was no clear argument between free traders and protectionism any more. There is a whole range of shading and subtleties. Nevertheless, it is important that the country should see the direction in which the various parties are going. The official Opposition have some clarification to do about where they stand on protectionism and on our future relationship with out largest industrial market, the European Community.
I shall not try to interpret the past ten years, of the EC, as did the right hon. Member for Battersea, North because we do not know what would have happened if we had stayed out. All I know is that we would have been operating alone in an increasingly hostile world of trade. Hon. Members cry "EFTA", but it is amusing that they are now talking about the problem of our industrial deficit, when the alternative to the Community would have been an industrial free trade area, which would have presented us with the same problem that hon. Members are now complaining of with regard to the Community.
We have to get this clear. My party and hon. Members who were in the House at the time take a pride in saying that we gave a majority for going into the Community. Many statistics have been bandied about tonight—one thirtieth of the SDP is here tonight, but only one thirty-fifth of the parliamentary Labour party.
It is clear that we need a trading system that gives the industrial economies time to adjust, train, retrain, and invest in new industries. That in itself makes a move towards total laissez-faire impossible. I ask those hon. Members who in the past have taken pride in their internationalism to accept that we can offer hope to the Third world, the less developed countries, only on the basis of access to our markets. The industrial centres of the European Community have quite a good record in development programmes, as has the British textile industry. It has understood the need for access by the developing countries, and it has worked with them. It is not a bitter, narrow and chauvinist industry.
The hon. Member for Batley and Morley (Mr. Woolmer) made a valid point when he said that a secure home market was important for a successful export industry. Indeed, it could be said that the most attractive market for British industry to win now is the British market. However, hon. Members on both sides should remember that much of the penetration has taken place because millions of individual consumers have opted, for reasons of price, design or quality, to buy goods of other than British origin. It would be as well for us to consider quality, design and price so as to win markets abroad and here at home.
I agree with the hon. Member for Warrington (Mr. Hoyle) about relations with Japan. The best thing for world trade would be to have a good co-operative understanding between the United States, Japan and the European 382 Community. Those countries have the capacity to be the engine room of a real world trade expansion. However, if Japan, an economic super-power, does not contribute to a stable and orderly world trade, that hope will be frustrated. The hon. Member for Warrington was right. We hear time and again of missions from Brussels banging the table and telling the Japanese what is what, how tough we shall be, and nothing happens. Political patience is fast running out.
From Japan we want two signs. The first is the tangible sign, which can only be in figures and goods, of her own market being opened up to her trading partners. The second is for technology and investment to go the other way, towards her trading partners. That is the way to achieve a stable trading partnership.
I hope that the Minister will also pay considerable attention to our relationship with the United States. Over the past two years we have had too much conflict with the United States on steel, the pipeline, textiles and a number of the other matters. There is a strong case for a permanent commission between the European Community and the United States on trade matters in an effort to fore see and thus avoid many of the problems.
Let us be under no illusion: the pressures for protectionism are growing strong in the United States, and if they gain the upper hand, as that country moves towards a presidential election period, they will endanger our living standards and employment prospects.
I shall not go into detail on the multi-fibre arrangement because, in his usual robust fashion, the hon. Member for Macclesfield (Mr. Winterton) gave the Minister a precise list of points that need to be answered. However, we need to spell out to those in the textile industry that they have a future and that the Government and the Community will defend it.
In the past 20 or 30 years the industry has never had more than a year or so in which to look ahead. Negotiations have always been in process, but on the basis of retreat. The textile industry still employs more people than the shipbuilding, steel and coal industries combined. For a long time the industry has suffered a Corby or Shotton a week as jobs have disappeared. There does not seem to be any sense of urgency or commitment towards its long-term survival, particularly in Brussels. We roust make it clear that the textile industry is not dispensable. We want it to have a long-term future. As has been said, when the British textile industry produces goods of quality and at a good price, it should not be barred from markets through discrimination.
§ Mr. Barry Sheerman (Huddersfield, East)
Does the hon. Gentleman accept that many of us who represent textile areas know that the goods are the finest quality and that the work force is the best, yet we still cannot sell our goods in the markets of the world, particularly those that are protected?
§ Mr. McNally
In his years in the House, the hon. Gentleman has put over that message forcibly. We should like to have some evidence that Ministers take that message to both multilateral and bilateral trade negotiations.
The Minister mentioned invisibles. We in Britain tend to get a little irritated when we are told that if our competitors have improved in some areas, we must understand it, and take our medicine like men. We are told 383 that we must accept that other countries are producing the right goods. However, the service industry is producing the right goods, yet the industry is discriminated against, both in the Community and elsewhere. I hope that the Department will confirm that it is adopting a clear and firm line with the Community and in bilateral trading negotiations on shipping, insurance and banking in order to promote British invisibles. The same could be said of the airline industry. The Under-Secretary of State for ever gives us optimistic statements about what he will do to the Europeans, yet precious little seems to happen.
§ Mr. McNally
I bet I am.
Obviously, such debates as this are likely to concentrate on industries that are in difficulties. It is right that those problems and difficulties should be aired in the House. However, as the Minister said, this country exports 30 per cent. of its gross domestic product. That means that parts of British industry are doing things right. Some of our firms are getting the right orders to the right people. However, we want an assurance that the embassies and various governmental agencies will give British industry a chance to sell in the world. We should like the British media to reflect on what is good in British industry. That is the way forward, if our industry is to become technological and competitive enough to win markets in the Community and third countries and, most important, to win back the confidence of the British consumer.
§ Mr. Kenneth Carlisle (Lincoln)
I agree with the hon. Member for Stockport, South (Mr. McNally). It is high time that we had a debate on trade, because this touches on many aspects of life in Britain. Like most things, even the election date, it is subject to fashion.
When I was first in industry there was a tremendous passion for rationalisation, for turning businesses into larger units and diversification. A year or two later, the rage, with equal passion, was for turning businesses back into smaller units and concentrating on what one did well.
Similarly, today, there exists in trade a growing and dangerous fashion for protectionism. It is easy to understand how that has happened. During a world recession, we all have factories in our constituencies that are under threat. It is pleasant to save jobs by advocating constituents' interests, and it is a source of anguish if those jobs are lost.
The Government have a duty to look through fashion. They must avoid private interests and stick by what is in the interests of the public. If they do that, I know that they will find overwhelmingly that Britain's long-term interests lie in the open trade system. I am glad that my hon. and learned Friend supported that so strongly.
We all know that Britain is a great trading nation. We export more in goods and services, as a proportion of our gross domestic product, than any other country. It is evident that if world trade expands we become richer, and that if it diminishes we suffer.
Between the two world wars, trade contracted. We went back into protection. As the volume of trade shrank, 384 the effect on Britain was bad. We all know the results. After the second world war, and in a different spirit, trade was liberated under GATT and in the 1960s under the Kennedy round. Tariffs were reduced, trade expanded and prosperity in the West grew.
In the light of that evidence, and more, it is clear that we benefit from free trade, but there are special pressures on all constituencies in Britain and in other countries. One can understand why video recorders must be imported to Poitiers. One might ask why one does not import machine tools into Britain through Betwys-y-coed. I understand that 100 Bills on import controls are proceeding through Congress. The danger of rising protection grows monthly. The Government have a duty to expose the fallacies that lie behind the seductive call of protectionism.
We benefit from an increased volume of trade. That is self-evident. We cannot scoff at the threat of retaliation. There are examples of that. We can all remember how the failure to increase the quota on textiles from Indonesia led to a far greater cut in Britain's exports to Indonesia. If we withdraw from the Common Market, we cannot be sure that a common external barrier will not be raised in our largest market. Serious retaliation would destroy the case for import restrictions. There is no guarantee that our balance of trade would be helped. Resources would move out of exports to satisfy the home market. Marketing effort would be spent at home and we would not necessarily create extra capacity to export goods. Inflation would be worse. The British Consumers Association estimates that we pay between 15 and 40 per cent. more for textiles as a result of the MFA restrictions. If we put up more tariffs, the inflationary pressures would grow.
Many people argue that import controls would last for only a short time, but all experience shows that once they have been erected they continue. That has been the experience of the MFA. What is initially made for a short time is extended. The MFA is now in its third stage. By their nature, import controls must be imposed for a long time if they are to encourage the necessary investment in import substitution in Britain.
Import controls weaken the economy. They act as a hidden subsidy. They encourage scarce resources to stay in the protected industries instead of moving out to the growth industries. They nurture inefficiency and as such are a type of restrictive practice. They need a complex apparatus to administer them. That bureaucracy would weigh more heavily on the productive sector of the economy.
Is that the road that we really want to take? Do we want to become a remote, little Britain? That is what Labour's programme of 1982 proposes. I am chilled by its call for import controls, tariffs and quotas. This is a very important point. If we want to help the Third world, we owe it to those countries to provide a market in this country for their goods.
For those reasons, and others, the Government have a duty to explain why the growing passion for protectionism is bad. They have a duty to stand up for free trade. Of course, they must also advocate fair trade. We have been through that argument. We must not delude ourselves that it is in the long-term interests of our country to follow the course of protectionism. We must be tough against unfair trade. We must work with the Common Market countries in this great trading area for free trade, because in growing trade lies our prosperity and that of the world.
§ Mr. Barry Sheerman (Huddersfield, East)
The Labour party does not believe in protectionism. I do not believe that we get anywhere by caricaturing our opponents' arguments and policies.
There are strengths and weaknesses in our trading position. Anyone who looks at the past 100 years of British economic history realises that we have severe problems, which were caused not by one party or Government. What can we do about those difficulties? We do not serve anyone well by erecting false dichotomies between a free world order of trade and a narrow, protectionist stance. As intelligent men and women in the late part of the 20th century, we all want the country to be prosperous and to create wealth to be shared among our people. Therefore, we must look at the problems, analyse them, and find specific answers.
The Opposition believe that we must have a proper exchange rate policy as part of the programme to put things right in a measured way and that there must be massive industrial investment to counter the decay of many years. There has been a lack of investment, particularly since the Conservative Government came to power.
In the short term, and probably in the medium term, some areas of trade must be planned to give British manufacturers the chance to compete and grow. That applies only to some areas of industry. Some must have protection in the short term. That is sane and sensible for any party or Government facing the realities of trying to make strong the weak parts of our economy. The Opposition can do that.
At the next election the electorate will choose our positive policies—not hand-wringing, but positive—to put men and women back into jobs and to get our trade and exports moving again. My constituency is at the centre of the exporting and industrial wealth creating sector. It is unlike Dover or the south coast. We create the wealth of Britain. We do not expect the destruction of 25 per cent. of our industrial base. We do not expect the closed mills and factories that we pass every day in our constituencies. We know that those mills and productive units will never come back into production. This is not a stop-go part of our economic history. It is a stop, stop, stop part of our history. Unless we have positive policies for control of the exchange rate, planned trade, of planning for growth and of creative planning—there can be such a thing—we are doomed as an industrial and trading nation.
§ Mr. John Fraser (Norwood)
The Opposition are grateful for even a half-day debate on trade matters. We do not discuss often enough matters that are vital and essential to this country's success. Our gratitude to the Government, however, should not prevent us from being outspoken about the extent to which the Department of Trade and its Ministers have been associated with adverse trade balances, losses, failures and lack of effective action.
The Minister for Trade is a fine advocate. He would not have his style and title were that not so. He can put a good face on almost everything. By the end of his speech one would have thought that the country had few problems and that the only trade problems faced by his Department were likely to come from intervention, from following the policies advocated by the Labour party and from protectionism, which the Opposition describe as matters 386 of common sense. A greater degree of intervention to assist Great Britain's trade in manufactures surely cannot cause so much disruption. I am sure that the Minister did not convince Conservative Members, in particular the hon. Member for Macclesfield (Mr. Winterton), and he certainly did not convince Opposition Members.
The Minister of State's able exposition of the Government's case is a dangerous masquerade. I should be extremely worried if I thought that he believed what he was saying.
The trends in visible and invisible trade are horrifying. The horrific nature of the trends are masked only by the balances from North sea oil. In assessing the long-term prosperity and future of this country and its trade, we cannot ignore the finite nature of North sea oil. We cannot aggregate all the elements of our trade and say that, because Great Britain had a surplus of £6 billion in one year and £4.5 billion in another year, everything in the garden is rosy. We have to look at the prospect for our trade in manufactures for 50 or 100 years, and not allow it to be distorted and covered by favourable balances of trade as a result of North sea oil.
The Government have allowed what could have been our greatest asset to become one of our greatest liabilities. I did not use the word "horrific" lightly. Let us look at three consequences for visible trade. I understand that, for the first time since the reign of Elizabeth I, this country has an adverse balance of trade in manufactures. The Government have brought about an extraordinary position.
The non-oil balance in visible trade—these figures were given by the Minister on Monday last week—was in deficit last year by almost £2.5 billion, whereas in 1978 we had a favourable balance on visible trade of £500 million. More terrifying than anything is the fact that our deficit on manufactures with the rest of the European Community is a staggering £5 billion per annum. We cannot ignore such figures by putting them alongside what is likely to be a temporary surplus on oil trade. The figures show the devastation to British manufacturing industry, what lies behind job losses, and the depths of industrial dereliction to which Britain has fallen as a result of the Government's policies. The terrifying prospect is that a fall in the price of oil, or a diminution in supply as it begins to run out, will leave us exposed to massive deficits.
It is grossly irresponsible of the Government and their supporters to ignore those projections and the finite nature of oil and to behave like people on a limited supply of hallucinatory drugs. The clear message from this debate is the failure of the Government to recognise the reality of the exposure of Britain when the oil runs out.
The Government have not only failed on visible trade. Several hon. Members mentioned tourism. We used to have a healthy surplus from tourism on the invisible account. At one time it was about £1 billion a year, but now it is a deficit of £500 million a year. That, again, is a direct consequence of the Government's policies on the exchange rate. No one can say that tourism suffered because of the behaviour of workers or their wage claims. It suffered because the industry was made uncompetitive by the Government's operation of the exchange rate.
The Government's achievement, as was clearly demonstrated during the debate, is to shift jobs and money out of Britain and to bring foreign goods in. They have weakened their ability to control those matters by relying 387 upon negotiations with the European Community, where they have often neither the power nor the resolve to deal with such matters.
I do not doubt for one moment that the Minister for Trade was vigorous in the GATT negotiations. The trouble is that he was vigorous for the wrong group of countries and for the wrong objectives. The negotiating team was concerned with the preservation of the protectionist common agricultural policy and the disturbingly large subsidised dumping of food exports on other parts of the world. The Minister had to be associated with that because he was a member of the EC negotiating team. That did not help in negotiations with the Americans, and he was not associated with the European stance of freeing the trade in services. For example, if as a member of the EC one is trying to reach agreement with America on synthetic fibres, America's ability to retaliate against the other members of the Community is much greater. It would be better to have bilateral arrangements with the United States than to be tied down to negotiating as part of the EC.
No one who examines the disastrous trends in both visible and invisible trade, especially in manufactured goods, can be reassured about the future of his job or trade while the Government preserve their present noninterventionist policies. There must be a change of heart, although there is not likely to be a change of heart in a Government who have an ideological attachment to nonintervention. The prospects for better trade and employment will come not from a change of heart in Ministers, but from a change to a Government who will adopt policies that are devoted to increasing employment and prospects for our working people.
§ The Under-Secretary of State for Trade (Mr. Iain Sproat)
We have had a wide-ranging debate. I am sure that it would have been wider had many of my hon. Friends who sat through the debate—the Members for Bristol, North-West (Mr. Colvin), for Loughborough (Mr. Dorrell) and for Perth and East Perthshire (Mr. Walker)—caught your eye, Mr. Speaker.
In the 10 minutes that are left, I shall cover several of the points that were raised.
Several hon. Members raised a wide variety of points relating to the conclusion of the bilateral textile agreements negotiated last year by the Commission under the terms of the new multi-fibre arrangement.
I am grateful to hon. Members on both sides of the House for the kind words they have said about the Government, in particular about the contribution of my hon. and learned Friend the Minister for Trade and the tough line that he and the Commission took.
Several hon. Members have expressed concern and reservation about the level of protection that will be provided under these new arrangements.
The clothing and textile industries operate in a highly competitive international environment. This is inescapable. The success of the United Kingdom industry is apparent in its substantial exports to the rest of the world—some £1.7 billion in the first 10 months of 1982. This is something upon which the industry should be congratulated. It was a good performance by any standards. The House and the country should be proud of it.
388 Secondly, the Government accept that in the especially difficult circumstances that have faced the industry in recent years, continued protection is necessary against certain low-cost imports where the industry has no reasonable hope of competing successfully in the immediate future. The level of protection now offered under the new MFA is without doubt higher and more extensive than that available to the industry under MFA2.
Under the MFA and associated arrangements, my Department currently operates more than 600 specific import quotas on clothing and textiles. They represent a massive level of protection. The Government believe that protection is necessary. There must be no doubt in hon. Members' minds, whatever their reservations, some of which have been expressed this evening, that the level of protection afforded is massive and far greater in absolute terms than that given to any other part of the private sector.
It is no good hon. Members saying that a higher level of protection could have been negotiated. The Government believe that the European Commission negotiated the toughest deal that it was realistic and possible to obtain. To have sought greater restrictions on supplies—for example, by seeking to base 1983 quota entitlements on the exceptionally low level of imports in 1980—would not, in the event, have been a realistic negotiating aim.
Were the Community to force such a proposal on our partners in the developing world, I am quite sure that we would have had no new MFA and no new bilateral arrangements. We would have been thrown back onto our normal safeguard rights under the GATT, and any action on that would need to be agreed by the rest of the Community. That alternative did not commend itself to the Government, and it is not an alternative that would have been acceptable to British industry.
As my hon. and learned Friend said, there is a price to pay for the high level of protection which the clothing and textile industry will enjoy for the next four years. The Government believe that it is worth paying that price to help the industry face the exceptionally difficult problems with which it is confronted. The House should not be misled into believing that such massive protection, even though necessary and warranted, does not have to be paid for in terms of increased costs to the consumer and its effect on our trade relations with supplying countries.
I have been asked by my hon. Friend the Member for Macclesfield (Mr. Winterton) and the hon. Member for Batley and Morley (Mr. Woolmer) to give certain undertakings on the detailed aspects of the Government's textile policy. I am happy to give an undertaking that the Government will, as in the past, closely monitor imports from countries with which the Community has signed bilateral arrangements. The Government will try to ensure that those are honoured.
I assure the House that we shall closely monitor imports from the Community's preferential Mediterranean suppliers, and that the Government do not propose to allow excessive imports from those countries to undermine the good work that was achieved in negotiating the MFA bilaterals.
We shall also be taking a realistically firm position on the renegotiation of the bilateral agreement with China, which falls to be done in 1983. The Government are fully aware of the importance of the clothing and textile industry to this country. The new MFA gives substantially 389 increased protection for the next four years, and that should provide some certainty for the industry in its planning.
It is an extraordinary fact that too often people in Britain do not seem to realise what an exceptional and unique exporting record this country has today. We are always too eager to play down our own achievements and to play up our own failings. That is one of our less sensible national characteristics. It needs to be said loud and often that British exporters are at present doing a superb job for the country.
Let me spell out just three examples of what I mean—examples that are far too little known at home and abroad. First, this country exports a higher proportion of its GDP than any other major industrialised nation. We export more than the United States, Japan and West Germany. We export almost 30 per cent. of what we produce—almost double the proportion that Japan exports. That is something of which our exporters can be justifiably proud.
Secondly, while the gloom merchants—many of them on the Opposition Benches—have been moaning about the United Kingdom becoming a commercial and industrial desert, since the Government came to power the United Kingdom has turned in massive balance of payments surpluses each year. That is a tremendous record.
Thirdly, few people realise that while last year world trade by volume was falling by about 2 per cent., British exports were rising by 1 per cent. That is a remarkable achievement at a time of worldwide recession.
In short, of course this country is suffering from the effects of worldwide recession; of course parts of the country and parts of our industry have been hit particularly harshly; of course there is still a long way to go to restore profitability, competitiveness and employment to the levels that we all want to see, but we must not forget or fail to acknowledge the splendid achievement of Britain's exporters in both goods and services. It remains the Government's strong resolve to enable them to continue with that good work.
In the few minutes remaining, I should like to comment on the splendidly robust speech of my hon. Friend the Member for Harrow, Central (Sir A. Grant). I particularly liked his remarks about how the Saudis depended on oil and about how we never heard anyone say, "Poor Saudi Arabia, its economy depends on oil." Why are people so critical of us when oil, quite rightly, plays such an important part in our economy?
My hon. Friend was absolutely right to identify protectionism versus open trade as one of the major themes of the debate. We Conservatives are firmly on the side of open trade—
§ Mr. Sproat
Had my hon. Friend the Member for Bristol, North-West been called to speak, he would have pointed out that shipping is one of our most important industries and that 68 per cent. of our earnings from shipping comes from cross-trades—our ships plying between two ports neither of which are in this country.
390 How on earth would we be able to continue to benefit from that 68 per cent. of earnings if our ports were closed to other shipping? How could we expect others to keep their ports open to our ships? That is a classic example of the benefits of free trade.
If Labour Members think that no other country is warning us against going down the road of protectionism, they should read the speech of Ambassador Brock to the Senate finance committee on 25 January, when he made it quite clear that if the United Kingdom went down the road of protectionism, the United States would be forced to go further down that road.
There is no question but that the true interests of this country lie far more in the direction of open trade, and that is certainly the direction in which my Department intends to go. I am very pleased indeed that my hon. Friend the Member for Harrow, Central said that right at the beginning of the debate.
§ It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.