Footwear and Textile Industries (Leicester) (Hansard, 30 June 1988)

§ Mr. Keith Vaz (Leicester, East)

This is the first time that a debate has taken place in this House specifically on the subjects of the footwear and textile industries in Leicester. Those two industries are embellished in the history of the city. They are interwoven in its social fabric. I would like to pay tribute to the National Union of Hosiery and Knitwear Workers, its president David Lambett, the National Union of the Footwear, Leather and Allied Trades and its president Bob Stevenson, the British Textile Confederation, the Knitting Industries Federation and the British Footwear Manufacturers Federation and its new president, John Church. Both industries are blessed with good industrial relations and a unity of purpose of workers and management for prosperity and growth. I commend them all.

As early as 1520, of the 151 freemen admitted in Leicester, over one third gave their occupations as connected with the textile and leather industries. The hosiery industry was established in 1640. By the mid-18th century, the county of Leicestershire had become the chief centre for hosiery manufacture in England and the midlands remains its principal seat. The shirt trade began in Leicester in 1796, sock-making became extensive in 1810 and glove-making reached its zenith in 1845.

Today, the textile and clothing industries account for over 9 per cent. of total employment in manufacturing industry. They supply more than twice as many jobs as the motor vehicle and parts industry, and more than three times as many as the aerospace industry. They contribute an estimated £5,104 million to the national economy. That is the good news. The had news is that textile imports by volume increased by 18 per cent. and clothing imports by 27 per cent. in the first three months of the year. The deficit for the quarter increased to a staggering £939 million.

In the knitting industry, 34,000 jobs have been lost since 1979, with total employment reduced to around 80,000, from which must be deducted the 700 redundancies recently announced by Corah of Leicester. These redundancies have, in some measure, arisen off the back of productivity improvements, but by far the greatest number of them are attributable directly to the industry's continued over-exposure to unfair, low-cost competition. The east midlands accounts for about two thirds of the industry's current annual turnover of about £1,600 million, and well over half of the two thirds is to be found in the city and county of Leicester, where the industry accounts for over one in 10 jobs in manufacturing.

There are three issues that are of concern to the Leicester textile industry. First, serious problems are being caused to the industry by present exchange rate levels and the instability of sterling. The low value of the dollar, and the fact that many of the textile and knitwear exporting countries in the far east link their currencies to it, to a greater or lesser extent, mean that these countries have secured a major cost advantage in the British and other European markets. In the first quarter of this year, imports of pullovers from dollar-related countries have increased by 8 per cent., blouses by 43 per cent., dresses by 56 per 625 cent., tracksuits by 31 per cent. and T-shirts by 31 per cent., even despite the restraints that exist under the multi-fibre arrangement.

Secondly, Turkey is a major problem for the textile industry in Leicester and elsewhere. Turkey's subsidies to its textile industry—assistance that is related to a company's investment, and which can amount to more than the total cost of the investment—and the fact that it can export duty-free to the EEC while it charges about 116 per cent. on our knitwear exports to Turkey, are particular grounds for justified complaint by the textile industry. Turkish garment exports to the United Kingdom increased by no less than 66 per cent., in terms of numbers of garments, in the first quarter of this year.

Thirdly, negotiations are due to take place shortly with China for renewal of the EEC's agreement with it under the MFA. China is now our second largest source of garment imports. It increased its sales in the United Kingdom in the first quarter of this year by 27 per cent. It is important that this dominant market position, and the fact that it has a state-controlled economy enabling it to price its exports at less than the economic rate, should be taken into account in the negotiations. Offering large-scale concessions to China would certainly result in major damage to the United Kingdom textile industry.

There is the issue also of the trade policy of the United States. The Textiles Bill, which is currently passing through Congress, would impose global quotas on all textiles and apparel imports into the United States for the next 10 years. It is vital that the Minister makes appropriate representations to the American Government to warn the President and Congress that if the Bill becomes law the Common Market will retaliate against United States trade interests because of the quotas.

I have referred to Corah, which is a Leicester firm. Despite its management problems, which were related to me by the chairman of the firm in a letter that he sent me last week, it appears that during a period of 12 months a total of 59 people were recruited by the knitwear division, even though there are grave financial difficulties. The 700 or so redundancies at Corah, including the closure of its knitwear department, are not a problem that is specific to Corah. There is a problem throughout the companies manufacturing knitwear. There is growing evidence of short-time working, and we know from recently published accounts from local Leicester companies and others that they are also experiencing problems in their knitwear departments. The publicised redundancies in Corah can only cause the industry more problems in recruiting skilled workers.

People, especially school-leavers, will not enter the industry to undertake training unless they see that the industry has a future. There is already an acknowledged shortage of skilled workers in the industry, especially sewing machinists. This is partly related to the image of the industry and to the failure of the industry to put resources into the training of skilled people.

Companies will now be considering investments in new machinery that will become productive in 1989 to 1992. Knitting machinery is becoming increasingly expensive, with a full set of knitting machines costing probably over £ million. Companies will undertake this level of investment only if they are assured that they can obtain a 626 return on the capital that they are planning to invest. The MFA and its associated quotas will end in 1991. To ensure that companies start planning their investments now, they will need an assurance that the MFA or some other international agreement will be maintained when the current agreement expires. An assurance from the Minister this evening on the continuation of controls on the import of clothing and textile products is essential once the MFA has been concluded.

In the city of Leicester some 25,000 people rely for their livelihood on the prosperity and continued existence of the clothing and textile industry. It is for the future of those 25,000 people that I am seeking assurances from the Government. For women in Leicester, clothing and textiles is the biggest single employer and for about 20 per cent. of female school leavers the clothing and textile industry provides the first job.

The problems are not dissimilar in the footwear industry in Leicester. The first boot and shoe manufacturer was William Moore, at Ansty in 1863. By the 1920s and 1930s, Leicestershire remained the second largest footwear-producing region in Britain specialising in women's shoes, for which it remains the leading area. In 1924, Leicestershire produced a quarter of the total output of footwear in Britain. By 1939, Leicestershire supplied half the output of children's shoes, two fifths of women's shoes and one twentieth of men's shoes in Britain.

That pre-eminent position has been altered dramatically as a result of the huge number of imports from abroad. It is worth reminding the Minister that last year we exported £186 million-worth of shoes and imported £797 million. Import penetration was 62 per cent. of the market in terms of numbers and 52 per cent. in terms of value.

Four countries stand out as having dramatically increased their exports in Britain. We imported 27 million pairs of shoes from Taiwan; 17 million pairs from South Korea; 4.47 million pairs from Indonesia; and 2.87 million pairs from the Philippines. The high level of import penetration is causing massive problems to firms in Leicestershire.

I welcome the decision by the European Commission to investigate imports from Taiwan and Korea. That represents a major change in the Commission's approach which until now has handled footwear import complaints on a country-by-country basis. Several other Common market countries have also lodged complaints about Taiwan and Korea. The fact that the Commission is prepared to act collectively on the issue shows that it is concerned for the future of the footwear industry. I urge the Minister to monitor the position and ensure that the European Commission fulfils its task.

Another concern of the footwear industry relates to 1992 and the arrival of the single European market and the possibility of VAT being imposed on children's shoes. I remind the Minister of the findings of the Munro report, commissioned by the Chancellor of the Exchequer in 1972. It concluded: There is a strong connection between foot defects and ill-fitting shoes. Pressures on feet may pass unnoticed by children whose bones are not fully ossified, but may lead to serious problems, and even immobility in middle or old age." The economic effect will be even more devastating. The report suggests that if VAT is imposed on children's shoes home production would decline by 3.6 million pairs. 627 Although that would be offset by imports of 2.2 million pairs, there would be a net loss on the market of 1.4 million pairs. The report states: There would be a net loss of 1,500 jobs in manufacturing and 200 jobs among retailers … most of them small, independent businesses of the kind the government is most anxious to foster. I seek the Minister's assurance tonight that he will not impose VAT on children's shoes before harmonisation or after it takes effect.

There is also the generalised scheme of preference. As the Minister is aware, under GSP rules a tariff ceiling is imposed on each of the beneficiaries. Once that level has been reached, full customs duties may be imposed at the request of a member state. The industry's view is that the figures currently being produced show that the Government should ask the Commission to restore duties on rubber and plastic footwear from Indonesia and Thailand, and on textile footwear coming from the Philippines. The crisis in the Common Market footwear industry is such that we cannot afford to let that opportunity go by.

It is impossible for me to pick up a Leicester newspaper without reading of some crisis in the local footwear industry. John Stone and Jeff Evans, who are correspondents for the local newspaper, have produced banner headlines such as "Worries over rise in shoe imports," "Probe into cheap shoes," "Huge rise in imports" and "China floods the shoe market". That last headline led into this extraordinary opening paragraph: Hot on the heels of the 21p a pair Chinese knickers revelations comes an avalanche of 53p a pair Chinese shoes being sold at up to £3 a pair in British shops. Yesterday, I received the sad news that the Wallace shoemaking firm in Moores road, Belgrave, in the heart of my constituency, is to close, with the loss of 25 jobs. That is put down to the fact that imports have been rising.

It is not all had news. In Leicester, we take pride in the work done at Leicester polytechnic's school of design. It offers the only first degree and now higher degree courses of their kind in the country in shoe design. Last month, the polytechnic. with the help of Mr. John Irvin, a governor, who is chairman of Glovese Shoes, launched an appeal for a computer to help polytechnic students to design and manufacture shoes. The appeal is for just £30,000. If the Minister has brought the Government's cheque book with him tonight. I ask him to make a contribution to that worthy cause. I remind the Minister that the Government promised to assist the best practices task force, which was established to advise the industry. If the Minister has his cheque book with him, I hope that he will ensure that those funds are restored.

We all wear clothes and shoes. They are basic essentials without which we cannot survive, and the footwear and clothing industries cannot survive without the Government's support. That is why we want them to act. Rising imports, consequent British job losses, and the decline in morale are worthy of immediate and urgent action. Promises about the future will not save those industries. At two separate meetings with the Minister earlier this year, he asked for proof of damage. We have that proof and we urge him to act.

It is time that the Government backed British manufacturers and encouraged cities such as Leicester, which has historically produced some of the finest 628 footwear and garments in the world. Those two Leicester industries are crying out for help. The Government and the Minister ignore their pleas at their peril.

§ The Minister for Trade (Mr. Alan Clark)

I have listened with great care to the speech of the hon. Member For Leicester, East (Mr. Vaz) and congratulate him on making a very full survey of two important industries and the problems they face. I would have preferred it had the hon. Gentleman been a little more generous in his reference to their achievements, which are by no means unremarkable.

Together, footwear and knitting provide about 29,000 jobs in the county and contribute in turn 17 per cent. and 22 per cent. respectively of national employment in those sectors. Footwear and textile firms have fought back hard since the recession of the 1970s and the early 1980s. I am very pleased to note improvements in productivity derived in many cases from the use of new technology.

The hon. Gentleman referred to a significant increase in import figures, but increases in exports, achieved in the face of ever-rising competition from low-cost and other overseas producers in export markets, have reached over the past 12 months 10 per cent. in footwear, 15 per cent. in knitwear, and 15 per cent. in clothing. Those industries deserve every congratulation on their achievement. The combination of increased imports and increased exports is largely a function of the general rise in prosperity throughout the United Kingdom.

I shall refer briefly to the widespread problem of skills shortages. Although I cannot make any immediate commitment in response to the question that the hon. Gentleman put to me relating to the Government's cheque book, I shall certainly consider his comment and write to him about it.

Training is primarily the responsibility of employers, who are best able to know their needs. However, the Government have given a lead by more than doubling expenditure on training since 1979. The Department of Trade and Industry is helping four colleges in the east midlands to update clothing and knitting equipment under the textile and clothing education equipment scheme. I am confident that improved experience for students and better courses for those already in industry will result.

Leicester firms are affected by the rise of imports into the United Kingdom, particularly in relation to ladies' fashion footwear and knitwear from the far east. As the hon. Gentleman said, we have discussed that matter on two previous occasions.

A surge in footwear imports is repeated in other EC countries. In response to separate approaches by the United Kingdom and other member states, the Commission has decided to carry out an investigation into footwear imports from Taiwan and South Korea. We have asked that the effect of Taiwanese imports on the ladies' fashion sector be particularly studied. As the hon. Gentleman knows, British footwear manufacturers are already substantially protected by a range of restraint measures against low-cost imports from state trading companies.

None the less, as the hon. Gentleman stated, despite the encouraging success of recent years, I recognise that the footwear, textile and clothing Industries in Leicester still face some real problems. Recent fashion trends appear to 629 have led to a decline in demand for knitwear and some styles of footwear, and that is undoubtedly giving manufacturers in Leicester considerable problems.

The hon. Gentleman mentioned the strength of the dollar. It is true that some of the newly industrialised countries of south-east Asia have their currencies tied to the dollar, although the United States is as anxious to break that link as we are. As the hon. Gentleman knows, the dollar has appreciated over the past few weeks. However, that has led to increased imports of textiles and clothing.

Our bilateral textile trade agreements under the multi-fibre arrangement, which govern much of the trade, do not place tight quotas on all textile imports. Many quotas have been under-utilised in previous years and are only now being fully used. Therefore, the rate of increase may slow down this year. For other textile categories, restraint action can be taken against a supplier country only when a convincing case of disruption to United Kingdom industry due to those imports can be made. I made that point clearly when the hon. Gentleman came to see me.

I can assure the hon. Gentleman that I am ready to consider pressing Brussels for action on unrestrained textile imports within the rules of the MFA or associated arrangements when a clear case of injury can be demonstrated. There are perfectly plain set criteria for establishing that, and my officials are in consultation with the industry and will be glad to assist in preparation of the case.

There has been a great deal of concern in the textile industry recently about trade with Turkey. The hon. Gentleman made that point succinctly, and I recognise that that is a highly unsatisfactory area and one that requires attention.

Turkish exports of textiles and clothing are covered by separate informal voluntary restraint arrangements between the EC and the Turkish textile and clothing export associations. The restraint arrangement was renewed last autumn after difficult negotiations. As a result of our express concern about acrylic yarn imports, 630 a new restraint level was included. That level was higher than we in the industry would have liked, but at the time of the negotiations we had insufficient evidence of serious disruption.

Success in an anti-dumping complaint depends not only on establishing dumping but on showing that the injury is directly attributable to imports from the country in question. In the case of Turkish acrylic yarn, this is not proving easy. Although Turkish imports rose significantly in 1987, overall import penetration fell from 55.4 per cent. to 49. per cent. and the latest import figures that I have show that Turkish imports of acrylic yarn are much reduced this year.

I want to refer briefly to the draft Textiles Bill which has gone through the House of Representatives but on which the Senate has yet to vote. Although there could be another presidential veto, the textile and footwear lobby in Congress might still have this proposal enacted if it could obtain the necessary two thirds majority in both the House and the Senate to override the veto.

The United Kingdom Government and the Community continue to urge the Administration to stand firm against the Bill, and we emphasise that the Community will retaliate in the general agreement on tariffs and trade if the Bill is enacted in its present form. I remain optimistic about the outcome here.

Finally, I want to make a general point about the return of textiles and clothing to normal GATT rules. It is one of the many issues under consideration in the Uruguay round, but progress will depend heavily on progress on the other issues, including the discussions on tariffs, non-tariff measures generally, subsidies, dumping, the balance of payments and infant industry provisions in GATT, the safeguard clause and protection of intellectual property rights. In other words, it will not be treated on its own but will be nurtured very carefully and subsumed into the whole spectrum of progress in the GATT talks. We would wish to ensure that no undue disruption of the United Kingdom market in textiles and clothing would result from a return of textiles and clothing to normal GATT rules.