HL Deb 14 December 1954 vol 190 cc378-90

5.10 p.m.

LORD BARNBY rose to ask Her Majesty's Government if, as a result of current discussions at Geneva, admission to G.A.T.T. is accorded to Japan, by what means is it contemplated there will be adjustments in connection with entry of consumer goods from Japan into the United Kingdom or the Colonies to meet the much lower wage costs ruling in Japan than in the United Kingdom. The noble Lord said: My Lords, this Question arises from the considerable change in the timetable of the economic part of the debate on the Address. I would ask your Lordships' indulgence if I take a little time in explaining the reasons for the Question, which has no angle of partisan politics, because it is a matter of interest to all workers in the country. I refer particularly to the perplexity caused by the statement made in your Lordships' House by the noble Viscount, Lord Swinton, who, with his long administrative experience, is exceptionally familiar with this subject, and also the statement made in another place by my right honourable friend the Secretary of State for the Colonies. I will not take up time in quoting to your Lordships the passages to which I refer, but they are, of course, recorded in Hansard.

During the debate my noble friend Lord Balfour of Inchrye raised this question at some length, and I felt that he received an insufficient reply. The noble Lord, Lord Lucas of Chilworth, raised the matter from the angle of Japan, and referred particularly to the admission of Japan into G.A.T.T. I find myself in entire agreement with him as to the propriety of Japan's admission to G.A.T.T. while it exists; indeed, it would be inconsistent to deny her entry, and it is obvious to us all that she must be allowed to export to survive—as, indeed, the noble Viscount, Lord Swinton, emphasised in the debate. I am perplexed, however, about the apparent reasoning as to the results of such a step The Japanese, as all of us who have been to Japan know well, on a traditional preferred diet of fish and rice, are, and always will be, able to under-sell us in the consumer goods industries, because the British working man needs his beef, white bread and beer (and thank heaven! he can get them) which makes the cost of his labour higher. Here I come to one of my perplexities, though this is not the main purpose of my Question.

The noble Lord, Lord Lucas of Chilworth, seemed to doubt that, should unemployment on a large scale arise in this country from the import of low-labour cost products at a time when the Socialists happened to be in office, they would face strong demands for the application of corrective measures. He seemed to think that such demands would be rightly refused. I go on record as saying that I feel convinced that, if that should happen, whatever Government were in office, they would find great difficulty in long opposing such demands. I remember raising the same point on another occasion, and the noble and learned Earl, Lord Jowitt, then seemed to think that such protection would be quite natural. His view seemed consistent with the usual demands of organised labour for protection in varied forms.

I particularly make a plea now for the textile industries from the rigidities of G.A.T.T.—and I may say that I am interested in the textile industries. In the Dominions there is uneasiness as to G.A.T.T. Australian labour calls for more protection. Surely, the import restriction technique there, which is properly condemned by G.A.T.T., will remain as part of their protective system, whatever may be our hopes. Organised labour in Australia is strong on that principle; and it is, indeed, discriminatory. South Africa invokes special measures to deal with low labour content imports, whether from within or without the Commonwealth. To them imports from India are as menacing as those from Japan. And it must be remembered that some day China, too, will become an exporter of manufactured goods. Labour costs in China will long remain low. Her population increases each year by a fantastic figure, and when they get organised for export they will be extremely serious competitors.

With your Lordships' permission, I should like to refer to my own experience when I had the privilege of going to Japan some years ago on a semi-Government mission, being familiar, through personal association, with the cost of operating textile mills in the United States, in England and in Poland. The cost in England was then half that of the United States, and the cost in Poland half that of the United Kingdom. We found that the cost in Japan was, in turn, half that in Poland, and when we went to the mainland of China, it was obvious that no Japanese could compete with the Chinese on the mainland, because the cost in China was half that in Japan. I mention that point because it presents a problem with regard to this matter which seems to me to be exceedingly difficult.

I will anticipate a reminder that Canada is an ardent supporter of G.A.T.T. It is true that she has accorded entry to Japanese exports under the General Tariff, but I prophesy that, when the full impact of low wage imports of consumer goods, from whatever origin, has produced enough unemployment, and has gradually disintegrated various light industries in Canada, whatever Government is then in power in Canada will be driven to apply protective measures. Naturally, and rightly, any countries thereby affected will do their best to oppose such measures. We hear the argument that Canada, to sell her wheat, should risk the destruction of her consumer goods industries to facilitate wheat exports to the countries that cause it. That refers, of course, to such imports as are admitted from countries with sufficiently low labour costs as to make competition difficult. Why should any country buy wheat from Canada when it is heavily protected by special Government measures, such as the Canadian Wheat Board practice, when those countries can buy the wheat more cheaply from Russia or elsewhere? Canadians, perhaps rightly, think that British wages, at only one-third of theirs, are too low; they certainly fear severe competition from Britain under those conditions. Why do we press for more consumer goods imports by Canada, imports which would produce unemployment there, when other types of imports from other possible Wheat-purchasing countries should first displace the immense quantities of semi-durable and capital goods which are at present imported from the United States? Those would not produce unemployment in Canada, because Canada has not the installed manufacturing capacity to produce them.

That brings me in my perplexity to the special measures adopted by the United Kingdom to protect the workers of Dundee from the competition of low-wage-cost imports from India. Users of these products in this country are subject to the uncertainty of the present system. Take yarns for the carpet industry. In addition to the high price, Government control, still lingering on, compels users to order at least six months ahead. How hazardous under present conditions! The recent raw material modification may help, but Government control remains. Surely, it is the first duty of any Government in this or any other country towards its own nationals, who are entitled to protection against impossible competition from wherever it comes. The noble Lord who is to reply is himself familiar with the carpet trade. He gave it signal service for a period when he acted as its independent chairman.

The United Kingdom appears, in these circumstances or from these reasonings, to circumvent G.A.T.T. when it suits herself, but opposes other countries' quests to protect their own workers. We have not heard any vehement demand from the Opposition for the removal of control from the United Kingdom jute industry, and this might be said to make for perplexity in their own reasoning with regard to G.A.T.T. Certainly what might be workable for the heavy industries is menacing for the consumer goods industries. Here I would say that I well remember, when I was President of the Federation of British Industries, the frequent conflict of view between the consumer and the capital goods industries, and how the preponderance of influence always lay with the heavy industries.

At this point we should remember that amendments to G.A.T.T. have already proved necessary with regard to horticultural produce. We bind ourselves and loyally implement any agreement, but other nations will suit their own convenience under pressure, even the United States, if they ever ratify. The Ottawa Agreement prevents a change in preferences, while G.A.T.T. prevents an increase of duties. That is a confusion with regard to G.A.T.T. which is known to all and, indeed, it has been frequently stated here by my noble friend Lord Balfour of Inchrye. Now we find perplexity with regard to Eire. Why should we permit free entry of Irish manufactures into the United Kingdom while Eire imposes a 40 per cent. duty on goods from the United Kingdom to Ireland, or even, as she has done, arbitrarily imposes complete prohibition of entry on selected items? We must remember that the United Kingdom herself, under the plea of exchange control, prevents entry into the United Kingdom of manufactured goods which could undersell United Kingdom products.

The United Kingdom cotton industry is concerned about the competition of Japan. I have heard many speeches in this House, and we have read plenty made in another place, concerning the competition of Japan. Nowadays there is concern about the import into this country of goods in the grey from India, where the wages are low. Is it contemplated to limit the entry of goods subsidised in India which are at present entering the United Kingdom duty free, when there is a duty of 50 per cent. or more on goods entering India from the United Kingdom? These are serious illogicalities.

I look at this matter in the light of practical business experience. It is now a lifetime since I first was sent out to the United States to manage a business there, and ever since I have been actively in business with the exception of the times when I was serving the Government, either on active service or in a civilian capacity. I have had practical experience in a great variety of countries, and I have travelled a great deal as an exporter for the United Kingdom, watching how these things work. What I say is based on a lifetime's experience. I was all last week in the West Riding of Yorkshire, attending to my business. I listened to accounts of competition by Japanese semi-manufactured and fully manufactured exports at ruinous prices which the wool textile industry is meeting in every part of the world. Export subsidies and currency exchange rate manipulation are punishing our exporters and in time, unless countered by special measures, will threaten employment here. These G.A.T.T. does not condemn in principle, but it does deny retaliation. This rigidity of G.A.T.T. has as much practical sincerity as the Russian pretence that they do not wish to proceed to communise the world.

Flexibility is essential to permit tariff adjustments to correct the basic differences of wage rates between competing countries. As a boy, I attended every one of the great national gatherings at which Joseph Chamberlain appealed for tariffs for the development of the Empire against free trade folly and rigidity. This was finally demolished by the McKenna Duties and the Safeguarding of Industries Act. In some ways we are to-day a high-protection country, and organised labour has certainly prospered under it. But I repeat that I doubt whether, should there come a time—we have seen it in the past and can remember the competition in the 'thirties—when there is a demand for protection against ruinous competition from low wage cost countries, it can be refused. There is another angle. Perhaps our Government, in its support of G.A.T.T., contemplates the gradual abandonment of textile exports (and textiles appear at present to head the list of exports) and other consumer goods exports by a contemplated expansion of exports of semi-durable and capital goods. As a long-range policy for internal redeployment of labour this is possibly far-sighted. I suggest that it calls for clarification by an authoritative statement from the Government.

My question is, what special measures, as indicated, by Government spokesmen, are contemplated to secure adequate flexibility under G.A.T.T.? I seek, before it is too late, to persuade the Government to modify its credulous philosophy on G.A.T.T. I suggest realism instead of idealism. International trading is a tough business and other nations will surely practice opportunism. Such difficulties we can see, but we cannot clearly depict the threatened worse alternatives. Better the devil we know than the devil unknown. At any rate, I anticipate that the reply will be reserved in tone. Whatever it be, the Rules of the House deny me the chance of comment so I shall have to reserve that for another time. I beg leave to put the Question standing in my name.

5.31 p.m.

LORD MANCROFT

My Lords, the noble Lord, Lord Barnby, has given us an interesting and wide-ranging speech, based on his extensive practical experience. I hope that he will not think me in any way discourteous if I do not follow him into the wide economic fields in which he has browsed. I hope, too, that the noble Lord, Lord Calverley, will not think me discourteous in asking to speak now. I thought it might be for the advantage of the House if I were to try straightaway to answer the noble Lord's Question in its narrowest sense, in the way in which it appears on the Order Paper. Then I shall be happy to listen to the noble Lord, Lord Calverley, later.

The discussions which are taking place in Geneva at the present time are not concerned with the possible accession of Japan to the G.A.T.T.: their purpose is to review the provisions of the G.A.T.T., and they are general, rather than particular, in their application. The contracting parties recently voted their approval of a recommendation for tariff negotiations to be arranged with Japan as a first step towards Japan's accession to the General Agreement. The United Kingdom Delegation abstained from this vote. These tariff negotiations between other contracting parties and Japan have not yet begun, and the question of Japan's accession may not be considered again by the contracting parties collectively until the tariff negotiations have been concluded in the course of the summer.

My noble friend Lord Barnby will, therefore, understand that the question of the attitude of the United Kingdom Government will not arise for some time, but, of course, the matter is being watched very carefully and the issues involved, to some of which he has drawn attention, are the subject of continuing consideration. In reaching their decision, the Government will have due regard to the considerations to which my noble friend Lord Barnby has referred, and to the possible effects on our own industries, not least, of course, the Lancashire textile industries and the potteries, of unrestricted Japanese competition in our domestic and Colonial markets. Her Majesty's Government will also consider carefully the international implications of the problem of Japan's accession to G.A.T.T.

May I again remind the noble Lord, Lord Barnby, and the House of the views recently expressed by my right honourable friend the President of the Board of Trade in another place: that our eventual decision must depend on whether an acceptable basis can be found to enable us and other countries to undertake relationships within the G.A.T.T. towards Japan without any violent disturbance of existing trade patterns or the development of disruptive or unfair Japanese competition. My noble friend's mention of Japan's lower wage costs is, of course, very relevant to any consideration of our commercial relations with that country. Though any accurate comparison between wages here and in Japan is almost impossible, because of the very different conditions of work in the two countries, it is calculated that, speaking broadly, the level of wages paid in Japan may be taken at, on an average, about 40 per cent. of that of the United Kingdom.

However, Japan is handicapped in competing in world markets not only by the relative inefficiency of much of her labour but also by the facts that a good deal of her capital equipment is out of date, that in many respects her industrial techniques have not caught up with modern development and that she has to pay high prices for many of her raw materials. In a number of fields of industry these disadvantages offset, and more than offset, her lower wage costs. In other important industries, however, notably in cotton and rayon textiles and in some branches of engineering, Japan is fully competitive. I should like to remark next on the emphasis which my noble friend placed on consumer goods.

LORD BARNBY

May I interrupt the noble Lord, before he passes on? Although I referred considerably to Japan, I should not wish it to be inferred that that showed an attitude unfriendly to Japan. I repeat that I would strongly support the view that Japan must be allowed to export to survive. It was to correct the differences in the wage rates alone, be it Japan or any other country, one against the other, that I used the illustration of Japan, but not to be unfriendly or discriminatory against Japan.

LORD MANCROFT

I quite appreciate what the noble Lord says, and I am sure the House is glad to hear him emphasise it as clearly as he has done. Reverting to consumer goods, no doubt the noble Lord, Lord Barnby, had in mind, and very rightly so, that it is in the field of consumer goods that we have in the past most felt the impact of Japanese competition and where, in some cases, we are feeling it already again. But let there be no thought that Her Majesty's Government regard the consumer goods industries as less important than the industries concerned with capital goods. It may well be that, with the growing industrialisation of so many markets abroad, capital goods will form a somewhat higher proportion of our total exports than they did formerly. But our economy depends on the well-being and expansion of both capital goods and consumer goods industries, and we draw no distinction between them.

Lastly, I should like to say a few words on the one aspect of Japanese competition with which the Government are closely and continually concerned; that is, the use of copied designs, especially of textiles. The Government have many times brought to the notice of the Japanese Government, both here and in Tokyo, the great importance which we attach to the acceptance by Japanese industry of the ethical standards adopted by other countries. The remedy must come ultimately from a change of heart in the industries in Japan concerned. Very useful talks have taken place between representatives of the United Kingdom and Japan's pottery industries, and discussions between representatives of the cotton industries of the two countries have been opened. The Government very much hope that these also will be helpful.

Her Majesty's Government, when they come to make up their minds finally on this all-important problem, will, of course, bear in mind all the points which the noble Lord, Lord Barnby, has made and which other noble Lords, now that I have finished speaking, may wish to make. It is on the basis of similar arguments and similar difficulties that the eventual decision must be taken.

5.39 p.m.

LORD CALVERLEY

My Lords, I have come down specially from Yorkshire to support the noble Lord, Lord Barnby, on this Japanese question. I do not know the Rules of the House as well as does the noble Viscount, Lord Swinton. I will accept a ruling from him if he thinks that I ought to sit down.

THE SECRETARY OF STATE F0R COMMONWEALTH RELATIONS (VISCOUNT SWINTON)

I did not make any observation at all.

LORD CALVERLEY

Then I will carry on. Frankly I am hoping that the President of the Board of Trade, before he gives his consent and his vote for the admission of Japan to G.A.T.T., will obtain adequate guarantees as to the good faith of those in Japan, particularly those who belong to the textile trade, not only in woollens and worsteds, but also in cotton fabrics. It is no new situation with which we in the North are faced. It is not only a question of unfair or rather severe competition; I want the noble Lord, Lord Mancroft, to bring home to the President of the Board of Trade that what we object to is unscrupulous competition. The Japanese copy our designs. As Lord Mancroft has properly observed, one cannot understand their ethical standards. I do not understand the ethical standards of the captains of industry in Japan. They copy our designs, but, what is more serious, they forge the copyright names which are used by all reputable firms in the North of England. Recently Mr. Yoshida visited the North of England. I read his speeches; I listened to him, and I tried to fathom what he was talking about when he replied to the Manchester Chamber of Commerce, but, for the life of me, I could not understand him. He walked all round the mulberry bush and, as they say in good Lancastrian English. "He talked but he said nowt."

I want to emphasise the fact that the President of the Board of Trade is in a strong position, not in regard to dictating terms but in regard to laying down reasonable conditions before we take Japan underneath our international umbrella. Since Mr. Yoshida left this country and went to Washington and was received by the State Department in Washington, the world has been subjected to an implied threat by the State Department that unless those competing with Japan lower their tariffs the Americans would not lower their tariffs to us. To me, that is one reason why, when such things appear in the Press, the operative classes, who see just as far as their noses (but they are jolly good noses for smelling with), may misunderstand what is happening in the State Department in Washington. I am hoping that I may have sufficient confidence in the President of the Board of Trade to believe that he is going to uphold our interests.

We know that the operative conditions in Japan are nothing like those in this country. It is not just a matter of living on rice and fish; these people, especially the women, are barracked and live in conditions that would apply rather more to conscripted operatives than to free human beings. I offer this little piece of advice to the Japanese Government: that they might try to copy the Welfare State in this regard. Seeing that we tax ourselves up to the hilt in order to maintain our Welfare State, the Japanese Government might tax Mitsui & Company and similar institutions in order to create better conditions of life and living for the Japanese operatives. It might send the cost of their materials up, but it would do some good.

I view with some trepidation the immediate future in regard to Japan. Since Mr. Yoshida went back to Japan he has received from his own Party what they would call in Wigan "his cards." There is a new Prime Minister. He is simply a "caretaker" Prime Minister, maintaining his position on the condition that he orders a General Election in March. There is an upsurge of nationalist feeling amongst the ordinary people in Japan, who are perhaps as decent as we are. Therefore, I am hoping that something good will come out of this Question which my noble friend, of thirty-six years' standing—we have always differed—has put down. I believe that we are going to have some trouble with Japan. General MacArthur adopted these magnates as his "blue-eyed boys"; yet there is not a blue-eyed innocent amongst them. Now Mr. Dulles has adopted them, which makes our position more difficult. But I want the President of the Board of Trade to stand up even to Mr. Dulles and his implied threats, and to see to it that this country gets a square deal. In this respect speak not only for the operatives but also for the larger interests that Lord Barnby represents, and has represented in his ninety-five trips across the Atlantic. This is by the way, but the other day they made him a birthday present—it was a portmanteau so that he could make a hundred more. That is all I wish to say. This is a serious matter. The coming General Election in Japan may turn out badly for this country, and I am certain that the Foreign Office will take particular note of it.

5.47 p.m.

LORD LUCAS OF CHILWORTH

My Lords, I was most interested in the views expressed by the noble Lord, Lord Barnby, and I am delighted that he has had an opportunity of expressing them. For any responsibility that rests upon me that they were delayed, I apologise to him; but with the consent of my noble and learned Leader I agreed with the noble Viscount, Lord Swinton, to altar the time-table of the economic debate to which he has referred, and it was not until afterwards that I heard that it had inconvenienced not only the noble Lard, Lord Barnby, but also many other noble Lords. However, as I think he realises, the decks had to be cleared for naval action, so, of course, we ordinary mortals had to lake second place.

At this late hour I will not even attempt to comment on the wider issues of this subject, but on the narrow issue which, from a wealth of experience, the noble Lord, Lord Barnby, has so eloquently put forward, I would just say that we can no more do anything to keep Japan out of G.A.T.T. than we can keep Western Germany out of a European alliance. I must say that I find myself completely on the side of the noble Lord, Lord Mancroft. I do not for one moment deny the substance of what the noble Lord has said about the delinquencies of Japan in the field he has mentioned, but I am certain—

LORD BARNBY

May I interrupt the noble Lord? I hope I do not misunderstand him. I should not oppose the entry of Japan into G.A.T.T. I have consistently believed that Japan should be admitted to G.A.T.T.

LORD LUCAS OF CHILWORTH

I believe we can go a long way within the framework of G.A.T.T. to overcome all the difficulties which the noble Lord has mentioned. It is an interesting comment that whereas we consider Japan is a low-wage, almost sweated labour, country, America thinks the same about us. I sincerely believe that we in this country have to look to the future and to a wide expanse of almost free trade within the conditions which the present times impose, upon us. We are the greatest trading nation in the world; we have to seek our markets in every country in the world and we, of all countries, must surely benefit most from an absence of restrictions, import tariffs, quotas, call them what you will. I would also impress upon noble Lords that the Japanese economy is in bad shape. Unless we and otter countries in the Commonwealth and America do something to rehabilitate the Japanese economy there may be serious repercussions upon the peace of Asia.

LORD BARNBY

And there is Indian competition.

LORD LUCAS OF CHILWORTH

Yes; but since when have we in this country been afraid of competition? One cannot go round this country and the world wrapping up various countries and various industries in cotton wool—one has not enough cotton wool. We all have our vested interests when you scratch upon our surface. My latest information about what is happening in Geneva—perhaps the noble Lord will contradict me if I am wrong—on a point about which the noble Lord is most apprehensive, is that agreement between other countries and ourselves, Canada and America, is getting very close. I have great hopes that we shall emerge from the conversations at Geneva upon the General Agreement a better and stronger community, and I sincerely hope that we shall be able to build up a real international trade organisation such as was envisaged at Havana many years ago and which was ruined through circumstances that I will not now mention here. I hope the noble Lord will not take offence, but I believe his fears are somewhat old-fashioned. After all, we and the world have moved a long way since the days of the Ottawa Conference in 1932. In the context of 1954 I believe the policy of Her Majesty's Government on this particular issue of G.A.T.T. is correct. I would only say, show a little more courage and do not leave it wholly to America to be the chief exponent in urging Japan to join G.A.T.T., for we know that Japan eventually will become a first-class member. We should help her, as the noble Lord, Lord Mancroft, has said, to recognise that if she is a member of a decent club she cannot go and steal things out of members' pockets and that she has to play the game. I am certain that if we play our part as a country, G.A.T.T. can be made a useful organisation.