Belgian Sanitaryware (Hansard, 10 June 1985)

§ Mrs. Ann Winterton (Congleton)
When the United Kingdom joined the European Community, it did so in a spirit of support for the principle of free trade. That principle continues to be a fundamental part of the philosophy of the Conservative party and of the Government, which is exactly as it should be. However, in some areas, the principle is being exploited by our Community partners. There are numerous examples of such exploitation which leave British firms at a great disadvantage compared with their European competitors, simply because Britain obeys the rules and the spirit of our free trade agreements whereas others in Europe do not operate with the same honesty and openness.
One example of such an imbalance in the environment and level of support between a British producer and its European competitors is in sanitaryware. This has been drawn to my attention by the firm Twyfords, which employs about 750 people in Alsager in my constituency, and a further 1,100 people, many of them locally in Stoke-on-Trent and its surrounding areas. I am delighted to see in their places tonight my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle), who has done much to forward the case of the industry recently, and my hon. Friend the Member for Macclesfield (Mr. Winterton), who has supported the industry since he came to the House some time ago.
The name of Twyfords has come to be associated with a British-made product of high quality which is so much is demand that between 25 and 30 per cent. of the firm's products are exported, thereby making a major contribution to our balance of trade. Twyfords is one of the largest United Kingdom producers of sanitaryware, and one of the few manufacturing firms that can boast that virtually all of its raw materials are of domestic origin.
The firm is obviously a major customer for the British clay industry, as well as being a major consumer of gas and coal. In addition, it is a major source of work for the glaze manufacturing industry. In short, Twyfords is a firm producing a high quality product using domestic materials, exporting many of its finished goods, employing many people and thereby making a major contribution to our economy.
The firm is competitive and has to compete very effectively to survive in the world-renowned British sanitaryware market. Therefore, it is essential that the spirit of competitiveness is preserved on a fair and open basis. However, there is a major threat to the free trade environment within the industry. The threat comes from Belgian producers, notably the firm Boch SA, now reconstituted as Noviboch.
Figures show that imports of sanitaryware from Belgium have risen from 92 tonnes in 1979 to 2,300 tonnes last year. That is a staggering increase in value from £88,700 in 1979 to £2.9 million. Such figures should cause us to look into the issue. In few sectors have imports from one country increased 25-fold in volume in such a short period.
In the light of these worrying figures, the British ceramic sanitaryware industry viewed with caution the 731 taking of a stake in the firm of Boch SA by the Belgian Government. This caution was shared by the European Commission in 1982, when it recorded: The Commission considers that the taking by the Belgium Government of a capital holding valued at 475 million Belgian francs is likely to impair the conditions of trade between the Member States to an extent contrary to the common interests, in view of the difficult situation obtaining in that industry in the Community. The Commission invited comments on that matter, and following representations made by the United Kingdom industry with assistance from Mr. Robert Moreland, then a Member of the European Parliament, the Commission reached the decision in February 1983 that aid granted by the Belgium Government to a firm manufacturing ceramic sanitaryware is incompatible with the Common Market and must therefore be withdrawn. The firm referred to was Bock SA of La Louviere. The firm has been making substantial losses for several years, and massive amounts were owed to the Belgian Government for social security payments.
Despite that action by the European Commission, the Belgian Government continued to play a major role in subsidising the costs of Boch SA, to the extent that imports of Belgian sanitaryware nearly doubled between 1982 and 1983. In a letter dated 22 October 1983, Commissioner Andriessen accepted that, contrary to the decisions and rulings of the Commission, From publications in the Official Journal of Belgium the Commission has learned that the Belgian authorities have, nevertheless, the intention to grant further aid to the firm of Boch. As a result of this blatant flouting of the Commission's decision, the Commissioner agreed that the case should be referred to the European Court of Justice. Despite this surge in imports of Belgian sanitaryware, my right hon. Friend the Minister for Trade declined requests that an emergency quota should be introduced to limit the damage done to the United Kingdom industry until such time as the situation was resolved through the court.
Still further capital for Boch was then underwritten by the Belgian authorities in June 1984, despite the proceedings being taken through the court. The sum involved this time was a further 330 million francs. Of that sum, 104 million francs was released to the firm immediately, of which 44 million francs was to cover the running costs of the company until the end of December last year and 60 million francs to cover the costs of reorganisation in the sanitaryware division. A further 20 million francs went towards a feasibility study related to the work force of the firm, and a similar sum went on the promotion of tableware with a view to diversification. The final 191 million francs was used to meet existing debts.
It is seldom in the rather sorry history of our affairs in Europe that such blatant advantage is taken of Britain's free trade commitment by her competitors and that no action is taken that will realistically and speedily bring to an end such a protectionist practice which jeopardises British trade and British jobs.
In January of this year Boch SA went into liquidation, at a time which was blatantly coincidental with the first date set for the hearing before the European Court and which led to a delay in proceedings until 23 May. A meeting with representatives of the United Kingdom industry on 29 March still resulted in no assurance that any 732 action would be taken by the British Government to give any protection to our domestic manufacturers against such unfair practices.
Our domestic industry, let us be in no doubt, is reeling under this blow from Belgium, and urgent action is necessary immediately. Despite its liquidation in January of this year, the firm of Boch SA was resurrected by the injection of a further £5 million of state aid and is now called Novi Boch.
The delay in court proceedings in Europe has allowed Novi Boch to become fully operational and to cloud the legality of its formation out of Boch S A. It is expected that products from the new firm will be fully available throughout the coming year and that the United Kingdom industry will therefore face still further increases in subsidised imports. The adverse effect of this upon our domestic producers, upon firms such as Twyford, will be very serious and possibly devastating.
The court's recent decision to adjourn the case for still longer leaves our industry under severe attack. I consider that we have not only a right but a duty to take action to prevent this undisguised attack upon our markets by an unfair competitor.
The case has been discussed by Ministers and by Members of this House and of the European Parliament for several years. It has been categorically ruled by the European Commission that the activities of the Belgian Government are in direct contravention of their treaty obligations. But the European Court has continually postponed deliberation of the continued breaches of free trade agreements.
If the court is to refuse to take any real action in this way, we have no alternative but to take unilateral action of our own. I am fully aware that in setting up even temporary trade quotas against imports of Belgian sanitaryware we set precedents which may be followed by other nations. However, I do not accept that we have the right to let British manufacturers and those who depend on them for work to be sacrificed upon the altar of free trade dogma.
The European Commission has shown one that it is a toothless and dumb watchdog of our free trade agreements. The European Court has shown that it is not able to deal quickly or effectively with such blatant transgressions of the principles upon which the European Community is founded. We have no alternative but to make our own stand on this issue and to assert in a forthright manner the interests of our nation and industry. Therefore, I ask my hon. Friend the Under-Secretary of State for Trade and Industry to take positive action soon. He should put maximum pressure upon the European Commission to get the case before the court as soon as possible. I stress once again that positive action must be taken soon to prevent further deterioration.

§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. David Trippier)
I congratulate my hon. Friend the Member for Congleton (Mrs. Winterton) upon her initiative in raising this important matter. I am pleased to pay a warm tribute to her for her tenacious stand upon this important subject. Her excellent speech was characteristic of the diligence that she applies to all matters which affect her constituents, and my reply gives me the opportunity to say what the Government have already said direct to the industry: that 733 justified cause for complaint about imports of subsidised ceramic sanitaryware from Belgium. There is nothing between us on that.
Perhaps I might begin with a brief review of the history, as known to us. We are talking abut one firm, Boch, rather than the entire Belgian ceramic sanitaryware industry. A substantially autonomous Belgian regional authority, not the Belgian Government as such, has repeatedly granted aid to Boch by way of subscriptions of share capital. It has done so without securing clearance from the Commission in advance, as required by the Treaty of Rome. The Commission has opened the treaty procedure for clearing state aids, the so-called article 93(2) procedure, no fewer than three times against successive tranches of this aid. It has reached formal adverse decisions under the first two procedures. In each instance it has required the aid to be withdrawn.
Belgium has complied with neither decision. In the former instance, in February 1984 the Commission instituted proceedings before the European Court of Justice against Belgium for failing to comply with its decision. That case has yet to be heard. I shall return to that point later. In the latter instance, Belgium has just instituted proceedings before the European court against the European Commission to have the Commission's decision declared void. The Commission has not yet taken a decision on the third article 93(2) procedure.
Boch was put into liquidation earlier this year, as my hon. Friend has rightly said, but a new company, Noviboch, was set up, with yet more state aid, to take over Boch's ceramic sanitaryware business. Our expectation is that the Commission will open a fourth article 93(2) procedure in respect of that subscription of capital. While this has been going on, imports from Belgium have indeed, as my my hon. Friend said, risen many fold— twice as fast as imports from the rest of the Community. As a result, British manufacturers have had to reduce prices markedly.
We believe that our industry can rightly complain, first, that aid has repeatedly been granted without the prior clearance required by the treaty; secondly, that the Commission's adverse decisions have not been respected; and, thirdly, that in consequence it has had to contend, for what is now a substantial period, with the deleterious effects of subsidised imports from Belgium.
It is a matter of great regret to us all that the Commission has not acted more quickly as well as more effectively and that the hearing of the Commission's case against Belgium before the European court has not yet taken place, but as a result of the debate I am prepared to press the Commission to get the case heard as quickly as possible.
This sorry saga also gives us cause for concern on wider grounds. There is no doubt that some state aids are justified. Like other member states, we assist our industry in. a variety of ways. The treaty recognises and makes provision for this. However, it is equally clear that state aids can distort competition and disrupt markets.
The concept of a genuinely integrated internal market based on fair competition is central to the Community. Its fuller realisation is a major national priority, and I am confident that my hon. Friend shares that view. Therefore, it is right and very much in our interests that the treaty should provide a system whereby the Commission vets state aids in advance and that the Commission should 734 discharge that responsibility firmly, even-handedly and effectively. It must also be a cause of concern to us if that system is seen not to be working.
Reverting to the immediate issue, my hon. Friend is naturally interested in what the Government have done and in what they intend to do. We are concerned with trade within the Community. Therefore, the question of anti-dumping legislation does not arise, any more than it does for trade between England and Scotland. Nor would it be helpful to think of countervailing action outside the terms of the treaty. I can tell my hon. Friend what would happen if we adopted that course; the relevant part of the treaty is an integral part of our national law and our action could be challenged and struck down in our own courts; the outcome would be that the Commission would be pursuing us, rather than the Belgians, for taking the law into our own hands.
It is the state aid provisions of the treaty to which we need to turn and we must remember that, as I have said, responsibility for enforcement in this area rests with the Commission.
I have spoken of the various article 93(2) procedures that the Commission has opened. On each occasion, we have exercised the right that we share with all interested parties — including our industry — to make representations to the Commission about the state aid in question. We have made quite clear our concern about the effect of this aid on competition, on trade within the Community, and, particularly, on our industry.
My right hon. Friend the Minister for Trade has raised the issue with his Belgian colleague. My hon. Friend will understand if I say that the Belgian authorities can be in no doubt about our views.
My right hon. Friend has also raised the issue on several occasions with Commissioner Sutherland, who has particular responsibility within the Commission for these matters. Mr. Sutherland is equally clear about our views. I think that I can also fairly say that he fully understands and shares our concern, and that he is determined to do all that he can to secure effective Commission action. We shall, of course, continue to take similar action whenever appropriate and as the opportunity arises. However, we take such a serious view of this case that we are anxious to go further where we can.
My hon. Friend will recall my saying that the Belgians had instituted proceedings before the European court against the Commission to have its second adverse decision declared void. In normal circumstances, we would take the view that it was for the Commission to defend its decision, and that we should not involve ourselves. But these are not normal circumstances. On this occasion we are taking a different stance. I can tell my hon. Friend that, last week, we applied to the European court to intervene in that case in support of the Commission.
Our objective in taking that course of action is to let it be seen publicly within the Community that the Belgian actions are not acceptable to us and that British industry should not be damaged by illegally subsidised imports from Boch.
I am grateful to my hon. Friend for bringing this important matter to the attention of the House.

§ Mr. John Heddle(Mid-Staffordshire)
On behalf of my constituents, I am glad to be able to support the case made by my hon. Friend the Member for Congleton (Mrs. 735 Winterton). I was pleased to hear from the Minister that, after several attempts by colleagues in the European Parliament and hon. Friends in this House, legal action is at last to be initiated in the Community.
Bearing in mind that Boch in the United Kingdom went into voluntary liquidation 17 or 18 months ago, when does my hon. Friend the Under-Secretary expect the legal action to be taken? The news will encourage my constituents and those of my hon. Friend the Member for Congleton who are suffering from the decision by the Belgian authorities.

§ Mr. Trippier
I am grateful for what my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle) said. I understand that court proceedings would have been held later this year. I am suggesting that that is too long to wait. As a result of what my hon. Friend the Member for Congleton has said, I am prepared to intervene this week as, I am sure, will be my right hon. Friend the Minister for Trade, in the hope of bringing these proceedings speedily to the court's attention. I hope that the matter will be dealt with effectively.