HC Deb 08 July 1987 vol 119 cc338-41
5. Mr. Dixon

asked the Chancellor of the Duchy of Lancaster when he next intends to meet the Confederation of British Industry to discuss the trade deficit in manufactured goods.

Mr. Kenneth Clarke

My colleagues and I meet the CBI from time to time. I have no plans for a special meeting on this subject.

Mr. Dixon

Will the Minister call an urgent meeting with the CBI to say what the Government intend to do about our manufacturing industry before there is none left, bearing in mind that when the Tories were elected in 1979 there was a surplus of £5 billion in the trade in manufactured goods, which was turned into a deficit of £8 billion this year? Does the Minister believe that the shipyard workers, the miners and all those who have been thrown out of work in the manufacturing industries should be employed selling ice cream cornets or something like that? Is it not about time that the Government took seriously the situation in manufacturing industry in the northern region, where there was a fall in investment in manufacturing industry between 1979 and 1984 of more than 42 per cent.? Why will he not take the matter seriously?

Mr. Kenneth Clarke

I am delighted by the fact that manufacturing output has risen so sharply since the bottom of the recession. It has risen by 16 per cent. Manufacturing investment is up by 20 per cent. and we are holding our share of world trade in manufactured goods. The CBI forecast for the immediate outlook for manufacturing exports and manufacturing industry is the most optimistic that we have seen for years. I do not believe that the particular figure of the deficit in trade of manufactured goods referred to by the hon. Gentleman is particularly significant. It is one of many economic indicators. It is seized upon by the Opposition only because it is one of the few non-encouraging figures that they can find among a plethora of other signs which show that the whole British economy, including British manufacturing industry, is doing very well indeed.

Mr. Waller

Is my right hon. and learned Friend aware that the CBI, the TUC' and all parts of industry are concerned about the risks from United States protectionism especially the diversion of trade in the textile industry? Will he use every possible opportunity to make clear to Members of Congress that as a result of such diversion of trade we would be bound to take action in the GATT round with our European Community partners, and that no one would benefit from any trade war that ensued?

Mr. Kenneth Clarke

We have made it quite clear that the British Government believe that the current trade legislation before Congress would inevitably lead to European retaliation if it was enacted. We are very concerned about the whole question and we trust that the Americans will not take improper action against our exports to that country.

Mr. Cryer

What is the current balance of trade deficit in manufactured goods with the Common Market? Is it running at last year's annual rate of £10 billion? What will the Minister do to remedy that massive balance of trade deficit? When does he think that manufacturing industry output will reach the 1979 level?

Mr. Kenneth Clarke

We are not currently in balance of payments problems. I know that Labour spokesmen, most noticeably the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersely), were forcasting a balance of trade crisis later this year on the basis of National Institute of Economic and Social Research forecasts which came out towards the end of last year. The national institute has now revised those figures. It is clear that we do not have any particular problem with the balance of trade. It is also clear that our manufacturing industry is going through a substantial and continued improvement, and the outlook has never been so encouraging since the early 1970s.

Mr. Michael Marshall

Will my right hon. and learned Friend turn his mind particularly to the problem of Japan? I support what he said about not looking purely at manufactured goods, but does he see the relationship between manufactured goods and investment and the problem that we currently face, and what can he tell us about current Government thinking about trying to get inward investment into Japan on behalf of British companies?

Mr. Clarke

The most important thing is to persuade the Japanese to continue to open up their markets both to our manufactured goods and to our services. The Government have been devoting considerable efforts to that in recent months, and must continue to do so. We are achieving some success in opening up markets to goods, in getting places on the Tokyo stock exchange and in ensuring that English companies are entitled to a fair crack of the whip when new investment in, for instance, telecommunications comes along in Japan. However, we are looking for a substantial further improvement, as I am sure are all the rest of Japan's trading partners.

Mr. John Smith

Does the right hon. and learned Gentleman not realise how appalling it is for a Minister of the Crown to describe the turnaround from a £5 billion surplus to a £8 billion deficit in the balance of trade in manufactured goods as not particularly significant? Is he aware that, as North sea oil inevitably declines in volume, and, no doubt, in value, Britain will be left hopelessly vulnerable to balance of payments problems in the future unless we build a strong manufacturing industry?

Mr. Clarke

What matters most of all is the state of our manufacturing industry, which, as I have said, is increasing output and investment and has extremely good prospects for the immediate future in world trade. I do not accept that it is right, when we look at the whole range of economic indicators, to place excess weight on any one of them. At present, the economy has a good rate of growth, low inflation and improving productivity. It is a strong economy, and a quite disproportionate emphasis is being put on that one feature. Many wealthy countries go into deficit on manufactured trade from time to time, and, taken in isolation, that deficit does not justify the weight placed on it by the Opposition. I understood their doing so in the pre-election period, hut I am surprised that it is being sustained post-election.

Mr. Dykes

As British and European manufacturing industry have many opportunities to build up an increasing share of free and fair trade throughout the world, does my right hon. and learned Friend agree that they should not, in contrast, seek the excuse of accusing far eastern countries of unfair trading and constantly send complaints to the EEC Commission, as witness the latest anti-dumping complaint that the Commission is launching on compact disc laser readers?

Mr. Clarke

This country, more than most countries, has an interest in a liberal trade regime, with free trade between countries. Our response to free trade if we are in difficulties should be to improve the competitiveness and keep down the unit costs of our products, and improve their quality. Obviously, however, on some occasions unfair trading practices arise and our interests are exposed to dumping. That includes selling below cost and other improper trading practices. It is only right that the British Government should act promptly, and expect the European Commission to do so, when our industries are exposed to that kind of unfair competition.