ECC 16th REPORT: TEXTILES AND CLOTHING INDUSTRY

HL Deb 12 July 1979 vol 401 cc1038-95

4.23 p.m.

Lord RHODES rose to move, That this House takes note of the 16th Report of last Session of the European Communities Committee on the textiles and clothing industry. The noble Lord said: My Lords, may I first thank the powers-that-be for allowing us to debate this afternoon the 16th Report on the EEC. May I also offer my thanks to the noble Viscount, Lord Trenchard, who was to have replied to the debate but who, because he has been called elsewhere, cannot now do so.

I wish to make a reference to the question of the publication of the report. Some local authority representatives who expressed a desire to come to listen to the debate about textiles attempted to obtain a copy of the report from the Manchester branch of Her Majesty's Stationery Office, but that branch did not have any copies. We in this House are giving our time and expertise—in many cases we are putting in long hours, particularly on matters of this kind—and I consider that a report such as this should be in the hands of every textile manufacturing company in this country. I should like a reply from the Government on this matter, perhaps by letter.

I feel honoured to initiate the debate, because it is concerned not only with a prosaic collection of pieces of evidence; it is not just a matter of whining on the part of an industry that is vital to the well-being of our country; it is about people. It is about folk with whom I have been bred, born and brought up, and whom I am proud to know. They are the kind of people who will put the kettle on when you go into their houses, not as you are going out. That describes the type of people on whose behalf I have the honour to speak this afternoon.

The purpose of the report is to draw attention to the serious difficulties besetting the textiles and clothing industry in Europe and to discuss the Commission's proposals for it, which are contained in the report in the form of guidelines. We are encouraged in our deliberations by the fact that we have at the Department of Trade a Minister who, on 9th April this year, said: Following the expiry of the present regime in 1981, it will he necessary to continue with a regime for the orderly marketing of textiles within the Community. As a new Government we will exert our full influence within the EEC to ensure that a vigorous and effective policy for textiles is continued That was stated by Mr. John Nott, who is now Secretary of State for Trade; and I hope that the noble Viscount, Lord Long, who is to reply to the debate, has come with the right answers.

The guidelines make proposals for a European textiles and clothing industry policy. It was successful in provoking a good debate in the industry here and in Europe. The guidelines do not set out detailed proposals for the textiles and clothing industry, but propose general objectives. The more specific suggestions have to do with research, innovation, EEC financial aids, what to do with EEC social funds, exhibitions, and the like. The main issues for discussion have been multifibre arrangements, outward processing, enlargement of Community State aids. and the role of the Commission. It would take too long to deal in detail with all these items, but my noble friends who are so loyally supporting me this afternoon in the debate will deal with some of them.

The Industry has had some hard knocks through world recession and fierce competition from countries developing their own textile industries—a matter which I do not propose to enlarge upon. So, production has declined in Europe, but imports have risen dramatically. Twenty five per cent. of textiles and clothing sales in the Community are imported. In this country the penetration is much higher—in some areas by as much as 40 per cent.—and so we have low profitability and mounting unemployment. But it is still an industry vital to the economy of Europe and the United Kingdom, especially as our industry is the largest in Europe. It employs nearly 800,000 people, many in high unemployment areas such as Northern Ireland where 50,000 men and women are dependent upon this industry for a livelihood. It affects other industries, too, particularly the chemical industry. Between 1969 and 1976 imports into this country doubled, and as a result 245,000 jobs were lost.

This is a serious matter; but, to be fair, not all the decline was due to imports. There was a little bit due to productivity—and do not forget that the textile industry has as good a productivity record as any in the land—and there was a little bit due to economic recession; but, mainly, it was through cheap imports. Here I would draw attention to Question 16 in the evidence given by a witness from the Department of Industry—and this is a fact that we should bear in mind during our discussion. In reply to a question by the noble Baroness, Lady Hornsby-Smith, that witness said: England of course has the best distribution system of any in the world. A foreign buyer can come here and go and see the buyers of our largest stores and do his business in one day and he knows that he has a market here. If he tries to do the same thing in certain other places in the Community he will he lucky if he gets round in three months of the season that he is trying to cover". That was evidence by a witness from the Ministry of Industry, not from the trade. Here may I say that the tariffs in the Common Market are the lowest in the industrialised world.

My Lords, the main response by the Community to our textile problems has been the negotiation of protective trade agreements to counter the worst effects of imports from low-cost countries; and, secondly, to provide a better balance in world trade in textiles and clothing. It is known as the multi-fibre arrangement, and so that Members can understand it perhaps I should elucidate on it. This is the topic which has aroused the most interest in the trade because, by and large, since 1977 it has been reasonably successful and, naturally, the industries concerned want to keep it so. The multifibre arrangement stemmed from the long-term arrangement for cotton textiles in 1962. In 1974 this was replaced by the multifibre arrangement to incorporate wool and man-made fibres, as well as cotton. It was hatched during a period of good trade, and was a product of the general euphoria prevalent before the world recession and the oil crises. It was generous. It gave importers a growth rate of a minimum 6 per cent. This could have been borne if there had been a corresponding growth in the European economy, but there was not, and by the time it came round for renewal in 1978 times were bad.

To its credit, the Commission jibbed at this renewal on the original basis and demanded that the 6 per cent. growth of imports should go out and that bilateral agreements with low-producing countries should come in. The Community won the day, in our view in GATT, and arrangements were made with 25 textile-producing countries in consequence. This arrangement is due to expire in 1982, but the textile and clothing industries in this country and in Europe are adamant in their opinion that the present arrangement must continue indefinitely. The Commission has said that advantage must be taken of adaptation and restructuring in the years between now and 1982, but anybody listening to the debate yesterday had ample evidence that you cannot perform miracles in the alteration of our industrial set-up in this country. Lord Soames, Lord Campbell and Lord Watkinson were all eloquent on the same point. It is a slow process that we have to go through to get back to efficiency, and it is no use the Commission saying arbitrarily that this will not continue after 1982. It must.

There are no signs that a dramatic change for the better is coming. Indeed, the guidelines say that there are too many textiles for sale in Europe now—a position likely to be even worse when Greece, Spain and Portugal add their production to that of the Common Market. This will be dealt with by other speakers who are to follow me. So the first question is—and I have given the Minister plenty of notice of it: Will the Government give a clear statement on the future of the multi-fibre agreement and its effective application after 1981?

My Lords, my next point is about outward processing. This may sound a very difficult term to understand, and I shall attempt to describe it briefly. Outward processing is the practice of exporting semi-manufactured goods, such as yarn or cloth, produced within the Community, to be further processed in third countries with lower labour costs than the EEC, for subsequent re-importation into the Community. This does not apply only to the textile industry. If anybody is interested enough and goes into Grundig's premises in George Street, they will there see ample evidence from the tags on the machines how the thing works. It is a way of cheapening the product, but in many ways it is also reducing the labour requirements in this country. Outward processing is a normal commercial practice which we do not want to block, properly managed. But outward processing trade must be counted against normal trade quotas. An imported shirt is an imported shirt whether outward processed or wholly produced in the supplying country. Early in 1979 the EEC introduced outward processing allocations for Portugal and Greece in addition to normal trade limits. These were offered to member States and were taken up wholly or in part, notably by Germany.

Out of this comes the question of free circulation, and the committee are of the opinion that we should be very careful indeed in the continued absence of satisfactory regulation concerning outward processing. I understand that this is still in draft form, and is deficient in one major respect; namely, that the definition of firms entitled to engage in outward processing is far too wide. We believe, too, that any significant extension of outward processing would represent an export of jobs if carried too far; and a significant extension of outward processing can represent an export of know-how. The more experience outward processing countries get in clothing manufacture, the greater the attraction of expanding upstream into textile manufacture; and, ultimately, it could destroy, or at least weaken, the Community textile régime as we know it.

It is interesting to observe, on page 33 of the report, in paragraph 6: It should be noted … that under the provisions of the Treaty of Rome, goods which are returned to the Community after being subject to outward processing in Mediterranean countries with whom the Community has preferential agreements (including Greece. Spain and Portugal) are in 'free circulation' and can move without restriction between Member States". The same applies to Comecon. We must be very careful about this. I hope that the House will unanimously support what we have to say about it. I now want to come to something which will probably amaze most Members of this House—the rapidity with which a situation can develop. What I have to say is to do with man-made fibres. The situation in the United Kingdom in the man-made fibres industry arises out of the American policy regarding the price of oil and gas. Is it generally known, or instance, that American producers of man-made fibres can buy oil and gas feed-stocks at prices in some cases only 60 per cent. to 70 per cent. of the corresponding prices in this country? How can you maintain a viable industry with that sort of manipulation going on? No wonder President Carter has departed to Camp David. Cheap oil and gas is not only available for the feedstock but is also available to textile producers downstream; so that they get the advantage of it, too.

Time was when the dollar was strong and the United States had a buoyant home market. In those days the impact on this market was small. Now the dollar is weak and an artifically-held price for oil means that every increase in world oil prices makes things worse. So the US producers are able to move into the profitable European man-made fibre market—which means, in effect, the United Kingdom; because we are the easiest country by far to sell to in Europe. We do not want to forget that. I am going to quote one or two figures which will shock your Lordships. Take the case of polyester staple fibre! In the year 1977, our imports of polyester staple fibre amounted to 220 tons. Do your Lordships know what it is running at now, in 1979?—it is at an annual rate of 2,160 tons per annum. This is shocking. One cannot expect any industry to stand up to this artifically-manipulated situation. Take tufted carpets. In 1977, a couple of years ago, for the year the total was 122 tons. And today?—it is running at the rate of 6,712 tons. Take polyester textured filament yarn. In the year 1977, 159 tons; now, 3,132 tons, with a price differential of anywhere from 15 per cent. to 30 per cent. to 40 per cent. It really is time that we got down to serious consideration about these problems. It is not just a matter of whining about the fact that we are having a serious situation imposed upon us; it is a matter of survival.

Coming to the end of my speech, I reiterate the questions that I have addressed to the Minister. We need a clear Government statement on their future attitude to multi-fibre arrangements; and we need to get down to a policy with regard to the growth of imports from Mediterranean suppliers being subject to the same constraints as other low-cost suppliers. That will be dealt with by others. I have dealt with man-made fibres. Others will deal with the China situation. What I urge upon the Government—and we are not pleading we are just stating the facts this afternoon; and it is up to intelligent people to interpret the facts—is action which will help ordinary folk, who were looking to this Government to give them a lead, as to what is going to happen to the textile industry of this country in the context of Europe.

Moved, That this House takes note of the 16th Report of last Session of the European Communities Committee on the textiles and clothing industry.—(Lord Rhodes.)

4.45 p.m.

Baroness HORNSBY-SMITH

My Lords, I am sure that your Lordships will join with me in congratulating the noble Lord, Lord Rhodes, on having the initiative to put down this Motion and to extol it in his usual forceful and very knowledgeable manner, particularly in view of the vital importance of this question to so many people in this country. I should also like to pay tribute to him for his robust and skilled chairmanship of the committee which produced this report. Thirdly, I should be remiss if I did not thank him personally in particular for having invited me to join this investigation by the committee. I felt very privileged that he allowed me to do so.

The textile and clothing industry, as the noble Lord has said, employs 800,000 people—no mean number, although far less than in years gone by. It is our sixth largest exporter. Its future is therefore of profound importance to the economy of this country and I regret that it receives so little attention in both Houses of this Parliament. This report focuses attention on the industry. It provides an invaluable record and an evaluation of the record—what the industry has achieved, its problems and its requirements—as seen by management and unions alike.

Unlike the motor industry or the shipbuilding industry, which is confined to a few giants, the textile industry by its very nature and the immense variety of goods that it produces is, and inevitably will be, a fragmented industry. There are a few giants, mainly in the fibre lines; but the industry must inevitably be made up also of thousands of small, specialised companies. When one considers the variety of its products, that is the only practical solution. I hope your Lordships will bear with me if I give a little graphic description of what I mean. Consider what is produced by the industry, from bed linen to boiler suits, from table cloths to tee-shirts, from soft furnishings of all shapes and kinds to swimsuits, also of all shapes and kinds, from the mass market to haute couture, all backed by widely different yarn and fabric manufacturers. It is then divided by fashion and by the seasons. It is again then divided by sex: male and female garments. It is then divided by age groups: babywear; children's wear; teenagers; young, and the older. It is then divided into outer garments; top garments; under garments; nightwear and sportswear. Thus it is no good people philosophising and saying: "Why cannot it all amalgamate into half a dozen great companies?". It will remain a highly specialist and fragmented industry. Thus, thousands of small companies specialise in one or two of these groupings, and over generations they make their name by that specialised knowledge in many industries.

One of the great strengths of the textile industry is its very fine record of industrial relations. Families succeed families working in it, and it is proud to show a quite unusual proportion of members who remain within the same firm for the whole of their working lives. Because of the multiplicity and specialisation of small companies, their job losses—because the companies are small—do not hit the headlines. But as was repeatedly stressed in the economic debate a fortnight ago, and as the noble Baroness, Lady Seear, emphasised, it is in these small companies employing 50, 100 or 200 people that, given stability and confidence, there is the chance of increasing employment, 10 here, 20 there and 50 somewhere else. But these undertakings, in an intensive labour-using industry, and exporting, must have that confidence, and I am sure that they can make an enormous contribution to mopping up our tragic unemployment situation.

But, to return to the report, may I make it clear—and I think it needs to be made clear—that the textile industry in its representations to us on the committee is not seeking "protection" in its accepted sense; it is not seeking high tariffs such as those imposed by Latin America—up to 200 per cent. in Brazil—nor indeed the 15 to 28 per cent. higher tariffs which goods from the EEC going into the United States have to jump above anything that their goods coming into the EEC have to pay.

The industry is not seeking to eliminate fair competition; it is not seeking to avoid its commitments to the developing countries and all those undertakings that it has entered into under GATT, MFA and other agreements. In fact, in relation to the developing countries, the extent to which we have absorbed goods from those countries, puts us extraordinarily high in the league table. We have more than honoured our commitments.

Nor is the textile industry seeking excessive millions of taxpayers' money for investment, as does the steel, shipbuilding, motor car and other industries. I acknowledge that the Government produced £15 million of Government aid for the clothing industry; but the clothing industry itself matched that with £75 million of their own investment. Given fair competition, given stability and confidence, they will in the main find their own investment for the future.

What the industry represented so forcefully to us on the committee, and what they sought to rectify, is, first, the uncertainty created by the then pressures not to continue the MFA and other agreements beyond 1981, which would virtually remove all limitations on imports and encourage wholesale dumping—I know that it is called other fancy names nowadays, but to me dumping is dumping. At the same time, in many areas countries are increasingly putting up tariffs against us. The greatest fear in the industry arose from the proposals in the EEC textile policy guidelines, which were the main purpose of investigation by this committee, that the agreement should be phased out. Therefore, with the noble Lord, Lord Rhodes, I warmly welcome the recent firm statement by Vicomte Davignan, the EEC Commissioner for Industry, who has undoubtedly listened to representations and changed his former views since our report was published: The position of the Commission is therefore clear: it sees the continuation of the MFA as an essential element of the Community's strategy for textiles". This is a very great step forward from the woolly conjectures of the guidelines paper and is warmly welcomed by all sides of industry.

The industry has a good textile export record. In the 10 years 1968 to 1978, textile and garment exports from this country rose from £453 million to £2,074 million, four and half times. In the same period, imports coming into this country went up seven times. I shall not weary your Lordships with the figures. Many firms—large, small and specialist—contribute, as I have said, to that export trade; but they can only do so from a firm basis of a reasonable home market. The industry is not backtracking on any of its former agreements, but it protests at the flagrant abuse of agreed quotas and the very devious methods of subsidy practised by many of our competitors abroad. As one textile leader put it to me last week: "We play the game and they play their own damned game".

Let us consider these dubious "games". First, there are the hidden subsidies and tax relief covertly paid, in particular to the Greek textile industry and firms, and in many Far Eastern countries. Then there is blatant over-riding of agreed quotas under MFA or other Mediterranean agreements by State and by State-operated industries. Portugal went over; Turkey went over; and Greece went over. One must be fair. Portugal, having exceeded its quota, has agreed to abide by the limits; but Turkey and Greece in particular have completely ignored the EEC complaints and are, in the first six months of this year, disastrously over their quotas to an even greater extent than last year.

The noble Lord referred to the United States, and he has already mentioned their advantageous fuel pricing. Not only is their fuel cheaper than ours anyway, but a heavy energy consuming industry like the textile industry has a special dual pricing which provides fuel at an even cheaper price than the standard rate. Also, incredibly, their wage rates, particularly in the South, where they have large numbers of Mexican, Puerto Rican, negro and Chinese labour, are lower than we pay in this country. Then we are aware that massive professional analysis has been made for the United States industry into the EEC markets which is to be followed by a full-scale attack of exporting to Europe. In relation to carpets, I would have liked to add to the figure that the noble Lord gave to remind people what a magnet our market is. Of the 2,750 extra tons, 1978 above 1977, of carpets from the United States which came into the EEC, 2,600 tons came to the United Kingdom alone.

We should consider very seriously the very firm pledge made by President Carter on 11th November 1978. This is what he has agreed to do for the American industry: 1. Import surges will be aggressively controlled whether they occur from one source, or many, under agreements or otherwise; 2. Prompt enforcement of United States international rights including the use of MFA articles 3 and 8". The United States can impose an embargo in a fortnight: it does not take three years, as our new procedures do.

3. Import growth will be regulated on the basis of the growth of our home market". Would that that had happened to us! We would have been sitting high and pretty! 4. In the event that the MFA is not renewed or a suitable arrangement is not put into place, legislative remedies will be proposed to allow the President authority unilaterally to control imports of textiles and apparel consistent with this enunciated policy. 5. Speedy and stronger customs controls and monitoring. 6. A vigorous programme to tear down foreign trade barriers against United States exports. Those proposals from the enormous complex of the textile industry in the United States are far more precise and stringent than anything so far implemented in favout of the European textile industry and, in particular, that of the United Kingdom. To our exporters I would say: it is hardly going to be fun exporting to the United States under those terms.

Now I turn to the Eastern bloc, where the markets are among the most difficult in the world to break into. They "dump" by the method of "political pricing". As the State controls all manufactures, distribution and sales, so they fix all the prices. Thus the mark-up on the home market is often 300 per cent., which enables them to export a percentage of their overall production way below cost, and still trade overall in that item at a profit. Suits landed in the United Kingdom at £12.50 and sold for £30 are £90 to £100 in the Eastern complex itself. Every complaint made to the Board of Trade—and I put questions to the former Government—that the Eastern bloc were exporting at prices which were a denial of the agreed procedures, being far lower than those which they charged their own people in their own market met with the answer—the truth of which I do not deny—that the Eastern bloc will supply no figures on which the evidence can be confirmed and so a case cannot be lodged. My Lords, that is not good enough.

Next, through agreements with West Germany, goods from the Eastern bloc—and this was raised with the committee—enter West Germany via East Germany with the greatest of ease and are then rerouted to the EEC nations under the Community's trade arrangements. They avoid tariff barriers, they avoid quotas and they come in at "political prices".

In theory, the MFA and other agreements are subject to controls to curb these infringements but in practice protest after protest, accompanied by overwhelmingly-documented evidence, makes a slow progress through the Department of Industry and even slower progress through the EEC—so slow that the British Textile Manufacturers' Association have been informed that three flagrant cases submitted to them are unlikely to be considered by the appropriate EEC Committee for three years, during which time surplus goods continue to pour in, far exceeding the agreed quotas. Korea, Greece, Brazil, Turkey, the Eastern bloc and others must be laughing their heads off. I should like to ask the Minister how many cases of infringement have been lodged by the industry with the Department of Industry and how long it is estimated it will be before we see any action.

Further, there is another source of evasion—what are known as the "basket extractor arrangements", which were intended to cope with sudden eruptions in the production and export of textiles by newly-developing countries not previously covered by quota agreements. The arrangements have been totally ineffective and, as one of my robust colleagues in another place remarked: "The chap who thought up the name 'basket' had foresight and a sense of humour".

The suggestion is put forward by those who understandably want to purchase goods at the cheapest possible price—and we had representations from the retailers' consortium and from the Consumers' Association—that the Multi-fibre Agreement was intended to give a breathing space so that the industry could become more efficient and the agreement could ultimately be phased out. That is true; but the suggestion that the agreement should be swept away in order to allow competition just honestly cannot hold water. When one appreciates the enormous increase in imported textile goods in the last ten years, who on earth can say that the MFA has prevented competition?

I know others of your Lordships want to speak so I really must curtail what I was going to say; but I do want to endorse what the noble Lord said about the magnet of our market. We think of America with its vast chains, but their position is very different. There is far more local autonomy for the local chain stores there because of the enormous distances, the differing climates and, of necessity, the different demands in different types of clothing. If one wants to sell, for example, to Macey's stores throughout the States, one has to go to Chicago and cope with Illinois, go down to Texas and cope with Texas—because you will find they want an entirely different range of goods—go to California, and so on. Meanwhile, the boss says: "Your swindle-sheet is £9,000. How on earth did you spend that?" You will have been flying around in jet aircraft all over the States, whereas you can come to London and see four of the great chains in two days. That is why we are such a magnet.

Also, I think it is fair to point out that the manufacturing industry faces competition that the High Street never sees. If a Korean syndicate set up a chain of stores in the High Street opposite our great chains, they would not be allowed to employ people at £5 for a longer working week. But if they could do so, then the multiples and USDAW would appreciate the sort of competition we are facing against producers abroad. I will give your Lordships one last set of figures which I think are extremely telling. From various international sources I have obtained the following quite staggering figures. I have tried to simplify them by taking the United Kingdom base as 100—it could be 100 pence or £100. The United Kingdom worker gets 100; in comparison, Hong Kong gets 30; Tunisia, 28; Taiwan, 15 to 20. South Korea, 11 to 25, according to skills; the Philippines 6; China 5; and Sri Lanka—at the bottom of the league table—4. That is one twenty-fifth of the rate we pay.

I have seen many TV programmes, all with different groups pleading for more employment for some of the different ethnic immigrant groups in this country. In the textile industry, we employ many thousands of Asian immigrants with their natural and undoubted skills, and very fine workers they are. Of course, they get our union rates of pay, as is absolutely correct. Other fellow-immigrants—hard-working and astute shopkeepers—start small clothing shops. I regret to say my Lords—I will put it no more strongly—that many of these immigrant shops sell exclusively garments imported from the very countries which refused to take them in when African countries encouraged them to leave. They could do a great deal to help their own ethnic unemployed by stocking a few more British goods from the country of which they are now citizens.

Years ago, when the noble Lord, Lord Hale, used to thunder forth for Lancashire and the noble Lord, Lord Rhodes, did the same for Yorkshire woollens—it is only 12 or 15 years ago—then the issues in the House were Indian cotton against Lancashire cotton and the manufacturers from Hong Kong. Who, then, even thought of Korea? After 10 years, she has increased her exports to us from 2 million dollars to 31 million dollars? She has increased her exports to us over 15 times in 10 years. Who, then, ever considered Turkey, Greece and Portugal as significant exporters? Who would ever have thought in a thousand years that the EEC would have to make special agreements in relation to the great export surge of textiles from Tunisia, Cyprus, Tahiti, Peru, Uruguay and Guatemala? They are only a few of the 36 countries who, 10 years ago, we would never have dreamed of as textile exporters.

In this connection, I should like to express some sympathy with Hong Kong—a country bearing an intolerable burden of excessive numbers of refugees, postwar and present, greater than any country of similar size in the world. Under very severe pressure from both Governments, the present one and the last one, they limited exports and were pressed to sacrifice part of their quotas in order to find breathing space for Taiwan and Korea. When they see them ride roughshod over their quotas, is there any reason why they should not ask "Why limit us and not them?"

Every developing country has been encouraged to launch into textiles to the extent that they could well glut the market and ruin us, and themselves, in the process. Korea aims by 1986 to more than treble her exports and to produce as much as the whole of the EEC countries put together. Then we have the threat of China, which is preparing for the biggest explosion in textiles that has ever been known in the world, with a target of 1985. By then China, too, will be producing more textiles than the entire production of the EEC countries put together. At the moment, their current home consumption per head is a mere three kilos of textiles per annum, and even if this is trebled they will still be using only a fraction of their production.

There is a very serious feeling in the industry that, with the possible exception of certain valuable concessions gained in wool textiles, the industry as a whole was sold down the river in the Tokyo Round; and I cannot over-stress the concern that the Chinese, who are unable to pay cash, will use their vast surplus of textiles for barter against the engineering goods that they want to buy from the West. Without some effective measures of control, and notably the continuation of multifibre rings, how can you reasonably expect United Kingdom industry to commit itself to vast investment expenditure? A brand-new factory, which is the last word in modern equipment and methods, was opened a few months ago in Northern Ireland. It has £28,000 worth of investment in equipment for every man and woman employed in that works. With the political troubles of Northern Ireland and the problems of the industry, that is indeed an act of faith. But if they are not given some guarantee that in the future there will be stability, that there will be reason and balance in the world textile trade, how can we encourage or expect investment on this scale?

The industry is not asking for rigid protection. It is seeking to impress upon your Lordships that there must be some order in the world textile explosion, and that arrangements voluntarily entered into must be honoured. That is why the committee felt it necessary—and the noble Lord, Lord Rhodes, so ably moved this Motion today—to ask your Lordships to endorse the continuance of MFA, and to ask the Minister, in particular, for effective application of its provisions, for an ordered textile industry with fair competition, and prompt and effective action against those who dishonour their agreements.

5.15 p.m.

Lord HALE

My Lords, I apologise for what may seem an unwarranted intrusion into a debate which already has comman- ded so many experts, so many people of greater knowledge and, as the last two speakers have shown, so many people who can speak with outstanding ability upon this subject. But I feel that this might be a time when it would be not inappropriate for me to visit an old battlefield, on which I regularly and constantly suffered defeat for 25 years. The noble Baroness will know that one of the difficulties in another place, in regard to the textile industry, is that it does not command more than five constituency votes—or did not some years ago; with the present organisation it might be a dozen or more—and the party leaders were never able to generate a great deal of passion

I regard the Commission's paper, in as much as it contains no concrete proposals of any kind, as being a tentative paper calling for discussion mainly on the multifibre arrangement, and upon the point, that is emphasised from time to time, that it was originally due to expire at the end of 1981. It is coming very near. Some of the papers are writing about four or five years' time, but it is near enough for us to take the matter seriously. I have no doubt that the members of the Commission are people of earnest ability. I have no doubt that they want to see the EEC a success. We now know that the textile industry, as now classified and constituted with the clothing industry, too, is one of the largest industries in the EEC, and that the United Kingdom is the largest of the EEC countries so far as the combined textile industry is concerned.

When I first read this document, I had a new feeling of hope about many things We know the history of the textile industry. It is rather strange that the Commission's document for consideration does not seem to display any knowledge of the fact that we have gone all through this before. Not once, not twice, not three times, but year after year the workers have been diverted for a special purpose. Year after year, old-fashioned economics have dominated the Government. I was asked to go out earlier on, and appeal to the workers to work harder and bring their wives back into the industry, after they had been driven out, and so on. I asked "What happens when they do the same thing in every other European country? Who buys the stuff that they produce? There is no one to do it." The Commission document talks about the nature of the problem. It might be of interest to the noble Lord, Lord Trevelyan, that the nature of the problem is set out in his relative's most distinguished chapter "The State of England in 1685". There he draws attention to the fact that the loom worker, who in those days was generally thought to be worth a shilling a day, if he could get it, was unable to get it because of competition from the Far East. That is going back a bit. Those were semi-prosperous days; those were the days when the cotton industry in Oldham was one of the greatest of our industries. Nobody would care to recall in detail the events of the years between the end of one world war and the start of another. Those were years when the mills were empty; they were not even filled by people sending postal packages or carrying on the sort of temporary occupations which followed later disasters.

One thing which we can always obtain from Governments is advice, but they have the curious habit of always being wrong. People are now advised to restructure their factories and to buy new machinery. Although quite a number of enterprising mills did so in the years before the next crisis came, those mills were the first to go into liquidation. They could not keep up the payments on their machinery, since the money they had borrowed for that new machinery bore very high interset rates.

Who is going to say today, whether in the Common Market or elsewhere, that one can finance these enterprises at 13½ per cent. and be sure that something will not happen in America which will put up that interest rate to 15½ per cent.? Since the end of the First World War we have not been in charge of our own currency. We finance ourselves on the basis of the dollar. I used to say—and therefore I was sometimes called proCommunist—that it was strange that, after all the help which America had generously given to us during the war and after all our friendship and association during the years which followed the war, the economic development of our country was incompatible with America in full competition. I do not wholly blame them. However, most of the employment which we have been able to generate faces competition from the massive power of America. The noble Lord, Lord Rhodes, has told us today about the oil. There have been other statements about American policy. The Americans have managed to get themselves into something of a financial crisis, because of their failure to use their external surpluses to benefit their own poorer people.

When I first read these documents, I was greatly encouraged by what they contained. First, there is a superbly drawn document from a committee made up of people with very great ability, knowledge and business judgment. However, Comitextil is now in existence—I myself am in touch with the British Textile Federation which is closely concerned with those matters with which my political life has been concerned—and Comitextil represents the industry with great ability. They have submitted their views on behalf of the whole of the EEC textile industry. It is a very strong document. Instead of the rather too many small trade unions which existed—and which still exist, I am very happy to see, because I get more friendship from them than from anybody else in Oldham—the TUC has submitted to this committee a paper which contains advice from their very experienced advisers, with their great knowledge.

So far as the multi-fibre arrangement is concerned, they all say the same. Herbert Morrison used to say—it was a favourite quotation of his—that we always watch the signs until they are all pointing in the same direction, but they never are. Everything is pointing in the direction of the absolute necessity to continue, for a considerable time at any rate, the multi-fibre arrangement. This is overwhelmingly in the interests of the Community. It is a little late for them to say that they think that a matter of principle is involved. However, I do not think that this is likely to happen.

Our committee made one suggestion which was accepted with pleasure by the Lords' Committee; namely, that they should publish a regular, three-monthly report and that they should establish a new machinery for providing figures. There—dare I say it?—was Daniel come to judgment. The figures which were presented to us when I was a member of this committee were hopeless. They had never been co-ordinated. We were given books of statistics. They contained about 25 pages of statistics which were translated into nine different languages, or thereabouts. It was rather a silly and futile way of wasting paper, because most countries do not want all that information every time there is a briefing. Columns intended for British figures were blank. I know this information had been published in this country through our own organisation—which is pretty good at this—two years before. There is no machinery for collecting them, and something at least was said about this in the course of the discussions. We are told at least twice in the evidence in the report that the matter was received with agreement but that they had not enough staff to perform all the duties that were imposed upon them.

If one glances for a single moment at the complexity and the immensity of the organisation one realises that it certainly needs a lot of work. In our evening papers we see articles about the bureaucrats of Brussels. I have not been to Brussels for a long time, but everyone who mentions it seems to think that they have never been able to perform many of their duties. The noble Baroness, Lady Hornsby-Smith, speaks very forcefully, and with her own great charm and ability, of the possible leakage through Eastern Germany. They cannot check it. Indeed it is one of the troubles that Western Germany may check it. I do not know. We are told that they are doing their best but that no great leak has been detected. We used to be told that in another connection about the Northern Ireland border. So, my Lords, I hope that at least in that one extremely important connection we can look forward with certain confidence.

We are now in a position in which there is a European Parliament sitting. However one talks about its limited powers, Parliament will find methods and Parliament can find means. We have a majority of members from this country in favour of the Common Market and anxious to see it succeed, and who can bring help. We are now talking about taking part in the common money policy of the Common Market, which is essential and which our own financial position at the time made it quite impossible for us to establish and participate in on reasonable terms; but the indications at this moment are that we are approaching a position which offers the possibility of entering into negotiations. Indeed the Prime Minister has intimated that to be her desire.

We can avoid industrial trouble, whether it comes from the Left or whether it comes from the Government. Nobody can say that I am speaking in a Party sense; I am speaking in the opposite sense. There may be a chance. We should not worry too much about allegations that we are betraying some vague principles in favour of countries which have more. My Lords, I have taken much longer than I intended to take and I have said less than I intended to say. I wanted to commend to the House the proposals of the British Textile Federation, which are presented so cogently. Most of them, of course, are already endorsed in the committee's report, and those who are to speak later know much more about these things than I do. I would accept, as indeed almost everyone accepts, the point on caution about processing. We used to have a problem of grey cloth and its importation and exportation, which caused us trouble; but, given goodwill, given unity, given a determination to work together, I still hope, more than I have hoped for a long time, that the British textile industry, as part of the EEC textile industry, will be able to continue as one of the most powerful industries in the Community and face the difficulties, which I think are quite serious, from the accession of the three new countries.

5.37 p.m.

Lord CAMPBELL of CROY

My Lords, the noble Lord, Lord Hale, has complimented the Select Committee on this report and I hope it will not be immodest of me in following him to say that I am speaking as a member of Sub-Committee B which carried out the studies and prepared the draft of this report for the Select Committee. In that context I should like to mention the chairman of that sub-committee, the noble Lord, Lord Trevelyan, because his sub-committee has been very active and its fruits have been coming to this House to be debated while he has been away in hospital. He is now recovering from an operation. Three weeks ago we debated the report on shipping, introduced by my noble friend Lord Rochdale, who I am very glad to see is to speak today. I am sure we all wish to express again our hope that the noble Lord, Lord Trevelyan, will soon make a complete recovery. One thing which he did, and upon which I should like to congratulate him, was to enlist the noble Lord, Lord Rhodes, and my noble friend Lady Hornsby-Smith. This afternoon they have shown their immense knowledge of this industry and the contributions they were able to make. The noble Lord, Lord Rhodes, took the chair on this subject.

I was able to hear all the oral evidence which is appended to the Committee's report. The subject is not new to me because over the years I have followed events concerning the Scottish woollen industry, which today employs about 10,000 persons in about 60 firms. I do not possess—nor pretend to possess—anything like the knowledge of the noble Lord, Lord Rhodes, who so ably introduced this debate, and I congratulate him upon the way he did it. I should like to emphasise the point he made about the multi-fibre arrangement. It cannot be allowed simply to run out after 1981; something on the same lines must be negotiated to take its place. It is understood by all the countries which have been affected by it, and accepted.

If my noble friend Lord Long is not in a position to make a statement about this today I ask him to take to his colleagues in the Departments of Industry and Trade the fact that we expect a statement by the Government on this subject as soon as they are in a position to make one. If a reassuring statement cannot be made today—and, if it is all still being worked out and consultations are taking place, I can understand that—we do ask that one should be made before long.

The two matters to which I should like to draw attention are two of those which the noble Lord, Lord Rhodes, said would be expanded upon by speakers later in the debate. The first is the effect of enlargement—that is, the membership of the three countries who are expected to join the EEC. Secondly, the negotiations now proceeding with China. As regards the first, the new members, I was a member of the Sub-Committee which produced the report about a year ago on enlargement of the Community, and in our report, which was debated in your Lordships' House, we pointed out that the textiles and clothing industry was likely to come under new pressure when those three countries joined. The United Kingdom textile industry is the largest in the EEC. Consequently, Britain has a greater interest than any other member in the possible effects of the proposed additional membership of Greece, Spain and Portugal. They all have substantial textile industries, and Portugal's industry, with lower labour costs, is a very significant competitor to our industry.

Since the Select Committee's report which we are now considering was completed, Greece has signed the membership agreement; on 28th May the Treaty of Accession was signed, meaning that Greece will become a member from 1st January 1981. As expected, there are transitional arrangements over periods of years before the EEC regimes are fully adopted. The British Government, I suggest, must ensure that in this case of Greece, and later in the other two cases, these rival textile industries are not given special treatment at our expense. As regards the Treaty of Accession concerning Greece, there is the normal safeguard clause. It provides for restraining action should imports during the transitional period threaten disruption to the Community's industry. But that safeguard clause is worthless unless there is a will on the part of the British Government to invoke it if circumstances justify it. I hope that it will be possible for my noble friend to state this evening that the Government will press for the clause to be invoked should it appear that the textile and clothing imports coming into this country from Greece threaten the industries of existing members, particularly Britain.

Then I turn to State aids and regional policy. There is a protocol concerning Greece on the same lines as that granted to Ireland when Ireland acceded, with us and Denmark, in 1973. The regions of Greece under that protocol, will be eligible for national State aid and for aid from the European Regional Fund after their accession in 1981, and the regions will be designated after that date. Let us compare what happened in the case of Ireland in 1973. Special arrangements were made whereby industries in Ireland have benefited during the transitional period, particularly from 1973 to 1976, but the textile and clothing industries in Ireland benefited particularly.

For example, American enterprises set up in Ireland during that period with remissions of tax on a very great scale, and in that way they obtained access through Ireland to the Common Market. Similar developments could occur with all three of the new members. If aid on this scale were authorised for Greece, and later for the other two applicants, the present members of the EEC would face subsidised competition not from just one country, Ireland. Ireland always seems to be an exception in so many cases and we in Britain always make exceptions where we can for Ireland, but to have three more countries enjoying these special advantages would be a very serious situation.

I would draw attention, where Greece is concerned, to the EEC Commission's own estimate of the position of Greece in 1981, which will be its first year, vis-à-vis the EEC Budget. A special financial mechanism, as your Lordships will know, has been arranged for Greece, as indeed it was for the United Kingdom when we joined. As a result of that, and taking it into account, the Commission estimate that in 1981 Greece will receive from the Community Budget a net benefit of about £54 million. There is great goodwill in this country towards Greece and also towards Spain and Portugal. But our altruism will be put to a very severe test if, besides accepting our share of this extra budgetary burden where Greece is concerned, we have at the same time to withstand increased competition in textiles from a new member enjoying special industrial advantages. I fear the Greeks, not because of the gifts they are bringing but because of the gifts that may be bestowed upon them. And this will apply to Spain and Protugal, too, no doubt, as the accession negotiations proceed with them.

I turn to my other point, the negotiations with China. These are almost completed, as I understand it, so that the preservation of the essential United Kingdom interests in the textile and clothing industry is a very urgent matter. China controls the main supply of raw materials for high quality knitwear and certain woollen garments; namely, cashmere and other fine animal hair. It is a curious arrangement that providence has made—that these materials, like pig bristles, are to be found almost only within the confines of the country of China. But China knows that it is in her best interests to ensure that her good customers continue to have access to those sources.

In this context there is, however, one part of the United Kingdom industry to which the Government must now give special attention. That is the manufacture of cashmere knitwear, which is almost all concentrated in the Scottish borders. The principal competitor in those garments is China. The present arrangements allow the Chinese to export 44,000 garments to this country a year, but not more than 4,000 of those may be cashmere or its equivalent. These arrangements are now being renegotiated through the EEC Commission, no longer direct with the United Kingdom Government. It is essential, therefore, that this inner limit of about 4,000 garments now governing trade between the United Kingdom and China be accepted as a principle in these future arrangements. Since most of the threatened knitwear industry is situated in one town, Hawick, in the Borders, it could be disastrous for that area if this inner limit principle is not continued for the EEC as a whole in relation to State trading countries and in particular, China. I would emphasise, that failure by the negotiators to continue an arrangement well understood by the Chinese could lead to specialist firms closing down. This would be a calamity for the area of the Borders concerned, an area of high skills and where a very large proportion of the manufactures are exported.

I am in full agreement with the conclusions of the Select Committee's report, having participated myself in reaching them. We want to help the developing countries. We want to help raise their standards of living. They are very low in some cases, and that is the reason for the low costs of labour and the low costs of the goods which they produce and which can therefore compete—as we think, unfairly—with some of our own. But, in helping the developing countries, we are determined not to allow the standards of living of our own employees in these industries to be depressed, because they are industries where there is high efficiency; a great degree of skill; and the industries themselves are adapting to new situations and continuously keeping up to date with technology.

Only the continuation of orderly arrangements in the coming years, which are of interest to all the parties concerned—including the developing countries—can solve the problem. It will be a few years—certainly well beyond 1981—before those arrangements can be abandoned. Therefore, having drawn attention to two of the points which the noble Lord, Lord Rhodes, raised at the beginning of this debate, I hope that the Government will take all these matters into account.

5.52 p.m.

Lord DRUMALBYN

My Lords, it was a great privilege for me to serve on the sub-committee over which the noble Lord, Lord Trevelyan, asked the noble Lord, Lord Rhodes, to preside. No one in the House has more experience of the textile industry than he has, having started his own firm and seen it grow to success, and having spent most of his life in the textile industry when he was not the Lord Lieutenant. He is in a very good position to judge the effect of the guidelines that we are considering today. My noble friend Lady Hornsby-Smith dazzled us with an absolutely brilliant speech, as usual. I share with the noble Lord, Lord Rhodes, and my noble friend, the privilege of having held the same job in the Board of Trade, into which of course came textiles. That, I am afraid, is the limit of my particular experience with textiles, except that when I was a Member of Parliament I had textiles firms in my constituency with which I became extremely familiar. However, I do not have the practical production knowledge of the noble Lord, Lord Rhodes, or the marketing skills of my noble friend. I should like to associate myself with every word that has been said by my noble friend Lord Campbell of Croy. He never fails to be a wonderful champion for Scotland, and he has been so today.

I shall begin my remarks with the origins of the consultative paper—which is also called a Communication from the Commission—as explained in the introduction to the communication itself. It says that the paper is a reply to the following statement of the European Council meeting held in December 1977, with the aim of adapting the European production machine to the new conditions in the Community and world markets. Solutions to the structural problems which are common to all member-States must increasingly be sought at Community level, particularly for the iron and steel, textile and shipbuilding industries". In this instance we are considering the textile industry. I am bound to point out—and this was implied by what my noble friend Lady Hornsby-Smith said—that the conditions in those three industries are very different (and in particular in the textile industry very different in structure) from the iron, steel and shipbuilding industries.

The Commissioner himself said: The aim of this communication, which is based on the declaration made by the European Council in December 1977, is to outline general guidelines for adapting the textiles and clothing industry to the conditions of international competition after 1982". It seems to me that the two main questions that arise are first, how far is the Commission apt to control the restructuring of the textiles and clothing industry? Secondly, what situation will the industry confront in 1982? Those are the two questions which seem to me to stand out. At present the industry is working within the framework of the Multi-Fibre Arrangement of 1974, as modified in the last two years, and that is to last until 1981. In the sub-committee we found that the first question that arose in the minds of the witnesses concerned was what was to happen after 1981. We were told that the Commission regards the 1978–81 arrangements as a "breathing space" for adaptation and restructuring Paragraph 11 of the report says: The Commission states"— and it does— that it is essential for Europe to have an efficient and competitive textiles and clothing industry which can provide"— and these are the important words— a high level of long-term employment". So, whatever arrangements are made, they must be aimed at providing a high level of long-term employment because that, said the Commission, is essential.

The principal Department of Industry witness said: Her Majesty's Government is committed to maintaining a strong and viable textile and clothing industry in the United Kingdom". Therefore, I am bound to ask my noble friend who is to reply whether the Government accept that commitment. We must know the answer to that question, and I hope that he will confirm that they do. I should also like to remind my noble friend of the Conservative Manifesto which said: We fully support the renegotiated Multi-Fibre Arrangement for textiles and will insist that it is monitored effectively and speedily. We also believe in a revised safeguard clause under GATT to give us a better defence against sudden and massive surges that destroy jobs". I am sorry to say that it now seems unlikely that the Tokyo Agreement will provide that better defence and the revised safeguards. All the same, the existing safeguards are not negligible and we want to be assured that they will be used when necessary. Needless to say, the low-cost developing countries do not like the 1977 revisions. It was disappointing for them that the annual rate of growth of 6 per cent. had to be cut back. It was disappointing for us, too, that growth in demand for textiles and footwear within the Community was well below 6 per cent, as it turned out in later years, and for the United Kingdom itself it was virtually negligible.

What are the lessons to be drawn? I suggest that the first one is that, whatever may be the future form of the Multi-fibre Arrangement, it should not commit developed countries to accept a rigid annual rate of growth in imports. Secondly, whatever rate of growth may be agreed from time to time, it should be the rate of growth of total imports of each of the various categories of textiles and clothing under the agreement, and should not be the rate of growth of exports from each country. In other words, it should not be the rate of growth of exports from each country, but a global amount for that year of imports into the Community, which is not the same thing at all. When we come to consider—and this has already been mentioned so frequently in the debate—that there is very rapid development of investment in textiles and the clothing industry in a number of other countries, countries that are not already included in the Multi-Fibre Arrangement, they are all likely to press for higher facilities.

Without some such arrangements, the Community's objective of an efficient and competitive industry providing stable long-term employment simply cannot be achieved. Surely it must be accepted that every major developed country considers itself both entitled and bound to have a substantial textile and clothing industry as a social and strategic necessity. Furthermore, however efficient textile and clothing enterprises are or may become, they cannot compete with low-wage countries or State-trading methods, as my noble friend Lady Hornsby-Smith has made so clear.

It is not only the lower end of the trade that is affected, because some of these State-trading countries have very long traditions of fine workmanship. This is likely to spread from the bottom up. There is no dispute about this; there certainly was no dispute from our witnesses or within the committee. There was no dispute about allowing the volume of imports from low-cost countries to grow, provided that growth is orderly and in keeping with a share of the market. There is no dispute about not propping up inefficiency, but there is a dispute about the length of the breathing space. Four years is not enough for adaptation, re-equipping and restructuring. Nor does it make sense to expect undertakings—large, medium or small—to invest in modernisation without knowing what will be the framework within which they will be trading at the end of the breathing space. Industry would like renegotiated arrangements to continue for longer than four years; every speaker has said that they should. At the very least there should be another renegotiation of the Multi-Fibre Arrangement in good time before the present modifications end. I submit that such renegotiations should cover "outward processing". I need not add to what has been said about this, but it occurs to me that some way should be found of including the value added by a developing country within the allocation of exports to each developed country. If that were done, it would largely meet the difficulties. Whatever arrangements are made, they must cover those Far Eastern countries which are planning a vast expansion in manufacturing capacity and, as has been made plain already, have already expanded so greatly.

I wonder whether my noble friend Lord Long would also consider the following. Should there not be a reallocation of the shares of the Community's total of imports between member-States in the course of any renegotiation? At present, as I understand it, they are divided up in proportion to the level of imports in 1976.

Will my noble friend tell us, in broad terms, what these proportions are? If he cannot, perhaps we could table a Question and receive the Written Answer. Can he also say what is the degree of penetration, first, of non-EEC supplies as a whole and, secondly, of supplies from low-cost countries, in particular into the United Kingdom as compared with those into other member-States? Is it not true that more than our allotted share might come into the United Kingdom—and although it is not subject to quotas, the noble Lord, Lord Rhodes, made a very strong point indeed about what is coming in from the United States in the form of carpets—as, once goods have been imported into a member-State, they can be transferred to any other member-State? As the noble Lord made clear, ours is the easiest State to enter. Is there any way of monitoring that? I do not believe that there is. However, I submit that there should be.

I turn from that to the policing of the arrangements. The sub-committee received evidence of delay in taking steps to ensure that quotas are not exceeded. One must ensure that once a supplying country has exhausted its annual quota for any one importing country, no more supplies should be admitted into that country in that year. We are talking about the industry becoming more efficient. Would it be impertinent—it would certainly be pertinent—to ask what the Commission is doing to make itself more efficient in this respect? Because they are the people who control this. I hope that my noble friend will endorse what the principal Department of Industry witness said last November. He said: We are giving a tremendous amount of access to developing countries, hut we must insist that access is orderly and in keeping with the market conditions appertaining at the particular point in time". This is the flexibility of which I have been talking.

I turn now to financial assistance. What is to be done to help the industry to restructure; that is, to re-equip, to regroup and to improve productivity and so competitiveness? Some undertakings in the United Kingdom are flourishing, but the industry as a whole is not exactly flush. The Knitting Industry Federation, which gave evidence to the Committee, drew our attention to the fact that: Every study in the EEC has shown that the lowest and least productive return on capital employed is in the textile industry". When we are talking about restructuring and modernisation, this is not a particularly good prospect or good omen for the future. Help will be needed. Who is to give it and who is to control giving it? Is it to be the Commission, the national Government or the banks and the other financial institutions?

The guidelines mention help to assist restructuring from the European Social Fund, but is not that simply directed towards providing alternative employment where a firm closes down? What about assistance to firms which can become competitive? The Department of Industry thought—and again this was last November—that this would be better handled by national authorities than by the Commission, for the national authorities are much closer to the industry in their own territory than the Commission could ever be, and much better placed to make judgments about individual firms or sectors of the industry.

Of course, there is no reason why the Commission should not share the cost. It might not be whimsical to suggest that the highest national share should go to the country saddled with the highest share of low-cost imports. But what is Her Majesty's Government's attitude to financial assistance?—whether in the form of sectional schemes or of selective assistance. We know that there is in existence a Wool Textile Scheme, a Clothing Scheme, and a Footwear Scheme. Do Her Majesty's Government intend to carry on with these sectional schemes and with selective assistance under Section 8 of the Conservative Industry Act 1972?

I hope that my noble friend will be able to tell us and the industry the attitude of Her Majesty's Government to these problems, and, I should like to add, what they judge to be the attitude of other member States. Do they share the view of our witnesses that the welfare of the textile and clothing industry—the fourth largest industry in the Community, accounting for 8 per cent. of industrial value and 10 per cent. or 8.6 per cent. of employment (two separate figures are given) in the Community—really is important, especially at a time of high unemployment in member-States? Do they share the view that the Commission should not attempt to control this great industry? Even though it can certainly assist and co-ordinate—it can negotiate agreements; it can see that they are observed; and, above all, to borrow the telling phrase in the Committee's report, it can create the right environment in which firms can take the necessary decisions, especially by providing a truly common market, free from internal barriers, and providing an external trading regime that will give the industry stability and confidence.

6.11 p.m.

Lord ARDWICK

My Lords, we are playing in the northern union this evening. If you look at this impressive list of names you see the names of the noble Lords, Lord Rhodes, Lord Hale, Lord Barnby, the noble Viscount, Lord Rochdale, and my own name, Ardwick. It is a formidable, hard sounding northern thing. Then of course there are the two Scottish Peers who have taken part, and the noble Baroness who comes, I think, from London, but who came to the debate today clothed in the garments of righteousness and made a most notable and interesting speech.

I felt that I shared to a certain extent the kind of dèjà vu feeling that the noble Lord, Lord Hale, had at the beginning of his speech. I too was brought up in Lancashire, and since my earliest days people have been saying, "Lancashire must reduce her costs and recover her export trade". My mind goes back to the days of the Japanese competition in the 1930s; of the "more looms per weaver" controversy, and of the automatic looms. Then of course my knowledge ends. Thirty years ago I was the editor of a paper in Manchester, but since then everything has changed, and my knowledge is out of date. My feeling for the people of Lancashire—and not only for the operatives but for the managers, the mill owners, and the merchants too—remains very strong. Whenever I hear British management criticised for being amateur I think back to those people who knew the world, and the technicalities of their product. In my day some of them were even equipped with oriental languages, but that too may he a thing of the past.

Once again we have to acknowledge a report from the Select Committee which is a model of clarity, and which is both comprehensive in its scope and wise in its judgment. This is the kind of exercise that ought to raise the deplorably low level of public debate in Britain on the affairs of the Community. Indeed, the recent European election campaign—if it can be called a campaign—seemed to concentrate on an important but very narrow range of subjects: the CAP and the British contribution to the budget, et cetera, and the unanswerable questions of whether the European Parliament's powers could, or should, be increased.

In this industrial country one would have thought that the achievements and deficiencies of the Community's industrial policy would have been a major topic, but I think it had barely a mention. During the campaign I myself visited several textile constituencies, and nobody raised the question of the Multi-Fibre Arrangement or the GATT, and nobody responded when I tried to speak to people on the doorstep about them. I got no response. They had not heard of them. Yet the GATT negotiations represent a most important aspect of the Community's work.

This country would have come far worse out of the GATT negotiations if its interests had not been represented by the Commission with all the muscle power of the biggest trading community in the world at its disposal. This indeed was one of the benefits of membership which was almost unacknowledged, and indeed almost totally unknown in this country. During the election campaign the BBC put out a beautiful and sensitive but intellectually rather lightweight documentary on Bradford. One would have thought that the work of the Commission described in this report would have had an important part to play in that programme. After all, Bradford is a major textile city. But not a bit. There was simply a complaint about unfair competition from German textiles as a result of the processing abroad and the textiles then being sold in Europe as goods of wholly European origin. Of course the complaint, as people have made clear this afternoon, has some justification, and the report itself makes that clear. But the beneficent work of the Community for the British, as for other European textile and clothing industries needs to be known and acknowledged.

So I wonder, my Lords, whether we should be content merely to publish these excellent reports of the committees. Is it within our power not only to publish but to publicise them too? To see, for example, in this particular case that the correspondents of the newspapers in the textile areas, or the specialised textile journals and trade union journals, are alerted to the findings of the committee, and encouraged to print them and comment upon them. I make this suggestion not to publicise some of the best work of this threatened House, but to get European affairs dicussed with reason against a background of fact instead of irrationally against a background of ignorance and prejudice, which is so often the case.

Your Lordships must forgive me if most of you have been looking at Europe through British eyes this afternoon. I am still disorientated; I am still looking at Britain from Europe. I have spent four years there dealing with these particular problems. Those of us who have served in the European Parliament have been impressed in the past year or two at the efforts of the Commission to evolve an industrial policy. This is a fairly new aspect of the Community. In the golden years up to 1973 there was no need for such policies at European level. Against a background of full employment, of easy economic growth and increasing prosperity, any problems of restructuring or of the creation of new industries were easily soluble within the nation States.

But even after the collapse of the Bretton Woods system, even after the world recession caused by the oil crisis, even after the emergence of the new industrial competitors from the third world, the need for a community industrial policy was not immediately recognised. It is gradually coming to be recognised. However, even now the Community has not yet worked out a coherent philosophy, largely because it means moving away from the virtuous but rather simple idea that all good flows from competition and from free trade.

Although this might be a basis on which to start, it cannot end there. We have today massive unemployment throughout the Community; indeed throughout the whole of the industrialised Western World. We have to face a further heavy increase in the price of oil, and a long-term energy crisis whose implications we have not even yet fully grasped. Our current expectation is of another recession and another unwanted bout of inflation. Indeed, at Tokyo there was no talk of a co-ordinated expansion; none of that optimistic mood which had prevailed at the Bonn Conference of major industrial nations only a year before.

The great old industries in the Community—not only textiles, but shipbuilding, steel, and so forth—are facing a period in which they must restructure, re-equip, and, alas, shed labour. So we are going to face difficult social problems, and problems of finding and starting new industries and training workers for them. All this has to be undertaken in a most discouraging climate of recession. I think that it is absolutely essential that the Community should lead, inspire, and coordinate the efforts to solve these problems, although of course they have to be carried out at national level, and carried out by industries rather than by Governments. During this period, and perhaps beyond it, these threatened industries must be safeguarded.

We are all of course against protection if that means sheltering incurably uneconomic industries against fair and legitimate competition from abroad. We are against subsidies, if that means simply providing a wheelchair for every lame-duck industry and firm. But regulations which enable industries to restructure and subsidies which enable them to re-equip and become more competitive are a different matter entirely and, to change the metaphor, I think the general feeling in Europe is that the Community itself and the Governments of the member-States may supply springboards but not feather beds.

The moral problems have been looked at in the Community although they have not yet been resolved. Some inroads have had to be made into the concept of perfectly free trade and the needs of producers, of both firms and employees, have had to be set off against the needs of distributors and consumers. We cannot disregard the needs of the developing countries, nor can we regard them as paramount. The best expression of the new mood of the Community was given last year in a report to the European Parliament by Mr. Vandewiele, a Belgian Christian Democrat. A return to protectionism, he said, would be catastrophic for a Community which made the opening of frontiers one of the reasons for its existence, a Community which had become the largest importer and exporter in the world. Indeed, the Community itself could not survive in a world which had reverted to protection. To quote him: It is not acceptable for the Community authorities to stand by powerless as imports flood in from third countries in more and more sectors of economic activity. The new redistribution of labour which is coming into being between industrialised countries and developing countries will inevitably give rise to a painful effort to restructure, which will mainly affect the declining sectors and depressed regions". So Europe is, I think, proceeding from free trade towards managed trade, and although free trade may again be the eventual goal, it will lie at the end of a longer road than it is perhaps possible to envisage.

The report of the Select Committee contains a letter from Mr. Ridley, of the Department of Industry, to Viscount Davignan, the Commissioner for Industry. Mr. Ridley mentions the Commissioner's address to a world textile conference in London. Most of the people at the conference, said Mr. Ridley, accepted the need for the Community's textile and clothing industries to use the next five years to adapt to intensified competiton. But some of the people at the conference gathered that after five years the Multi-Fibre Arrangement would lapse and all measures to stabilise the world textile trade would disappear. There was a danger that that belief might take root and damage the confidence of the industries and their will to make the necessary adjustments. I thought Viscount Davignan's answer was not very satisfactory. He said: I agree with you. There will probably be a third Multi-Fibre Arrangement. What I wanted to say was that a future agreement could in no way be as restrictive as the present one". Of course the Commissioner at that time—I have the greatest respect and warmest regard for him; I sat with him for many months in committee on this subject—dared not say anything at that moment which would encourage firms to lie back in the expectation of long-term protection, and he could not commit his successor. He had to accept what at that time was the Commission's collegial view, that such arrangements as the MFA could not be permanent, or even long-term, and so on. However, I was delighted to hear from the noble Baroness what I did not know; namely, that he had been able to make a firmer commitment about the future of the MFA. As the report of the Select Committee hints, without some degree of stability, the industry dare not make the investment that is so essential.

What is to be done about it? I hope that not only the Commission but also President Jenkins will read our committee's report. I hope too that they will take a further glance at the comprehensive report on textiles which Mr. Tom Normanton, another Manchester man, presented to the European Parliament last year. I thought Mr. Normanton got the balance right between freedom and regulation and the needs of the newly industrialising countries. I welcomed his proof to the general public that this is not an old-fashioned, out of date industry. On the contrary. It has developed into a multi-fibre, multi-sector industry with a higher rate of productivity than manufacturing industries as a whole enjoy. Mr. Normanton said: Unless the Community is prepared to accept the gradual disappearance of its textile industry and the consequent social problems, it is essential that a consistent textile policy should be elaborated and applied". I believe that message comes not only from him but has come very strongly from noble Lords on both sides of the House in this debate. He went on: We must not preach protectionism, but we must regulate the world trade in textiles until balance has gradually been restored". Our committee, I am glad to say, consider that the Multi-Fibre Arrangement and associated agreements are not only desirable but should not be abandoned precipitately after 1981 and 1982 if that would nullify the efforts of the industry to adapt itself, as undoubtedly it would.

President Jenkins is going to leave the Community with one important legacy—the return to a system of fixed and adjustable currencies, the European Monetary System, which may or may not be a precursor of monetary union. I wonder whether he could leave us an additional one: an industrial policy balancing the needs of industry with those of consumers and distributors in the Community and with the obligation to extend world trade and help developing countries to subdue their own poverty by industrialisation. It is not easy. It requires the reconciliation of competing and contradictory interests, but it is essential if we are to achieve clarity and consistency and save great industries from distruption and decay.

6.28 p.m.

Viscount ROCHDALE

My Lords, I am very pleased indeed to be speaking following the noble Lord, Lord Ardwick, being, as he is, another Lancashire Peer. I congratulate the noble Lord, Lord Rhodes, both on the way in which he introduced the Motion and for the excellent report that he in particular and his colleagues have presented to us for discussion today. It is a most valuable report, not least because it contains, as well as the report itself, the full minutes of evidence, various memoranda from different expert organisations and a valuable appendix of statistics. It is certainly a report that needs very careful study if one is to get all the various points included in it in fair perspective. It is difficult to do that for anyone, although—if I may say with an appropriate degree of humility—it is perhaps a little easier for those of us who have spent many years of practical working in the textile industry, but I feel sure that even we find it not too easy.

I have no practical experience in the clothing industry, though I appreciate that their problems are obviously very similar to those of the textile industry. I shall confine my remarks to the textile industry, and if I roam a little wide in time I hope I may be forgiven; I shall do so not merely because I wish to reminisce but because I think I can make the point of the continuation of the Multi-Fibre Arrangement better by drawing on the experience some of us have of the past.

Like the noble Lord, Lord Rhodes, when I started work in industry after I left university I began in the woollen industry, at a place only a few miles away from the noble Lord, though I think that he would have been a few years in advance of me. In passing, I should like to emphasise a point that the noble Baroness made when she referred to the excellent support that the industry receives from its trade unions. I can recall no occasion when I was working with the trade unions in both the woollen industry and later the cotton industry (which I want to say something about shortly) when they were not most helpful and co-operative companions with whom to work; and I believe that this is typical of the textile industry.

At the time of which I speak, all sections of the wool industry, for a number of reasons which I will not attempt to elaborate here, did not suffer anything like the same destructive penetration of cheap imports from underdeveloped countries such as the cotton industry did. Today, of course, the situation is different. The wool industries are not in such a favourable position, and, as I see it, their position is just as much at risk in this way as is that of any other industry. That was a point that my noble friend Lord Campbell of Croy made when he was discussing the industry in Scotland.

When in the late 1960s I became independent chairman of the Cotton Board—a board established under the Industrial Organisation and Development Act 1947, but which has since ceased to exist—I found a very different situation, and I was most rudely made aware of the very deep penetration into the cotton industry. Incidentally, as I understand it, that board is almost an ancestor of the British Textile Confederation (though there are many differences) which gave evidence to the sub-committee during its consultations.

In an address that I gave in 1961 to the Manchester Statistical Society I made the following statement, which I think is worth mentioning because it shows how little many of the problems have changed. I said: By far the most serious problem facing the United Kingdom cotton industry is that of imports from low-wage countries. This development is one that embarrasses not only our own, but all the more developed Western economies, and it is not incidentally confined to cotton goods". I said that in 1961, and really it is exactly what we are discussing today. In fact that issue probably took up more of our time than anything else, even then. There were many low-cost exporting countries involved (as there are today) but at that time, as other noble Lords have said, our main problem was the duty-free imports from Commonwealth countries—India, Pakistan, and Hong Kong.

In the event our efforts resulted in an "understanding" (and I use that word carefully, because that is what it was called) which in effect evidenced a willingness—rather a reluctantly given willingness—by those countries for reciprocity, and provided some modest limitation of imports which justified substantial Government aid for massive closures and reorganisation. When I say "massive" I should like to quote just two figures: 49 per cent. of our spinning spindles and 40 per cent. of our looms were scrapped. This provided the climate for a really healthy investment and reorganisation of the industry, with a considerable degree of diversification, as well as the introduction of new industries which over the years has paid off very well, and the results can be seen in the North West of this country today.

All this may seem old history and out-of-date but I believe that unless we understand the arguments and issues of the past, and that the problem we are considering is one that has been with us, with varying degrees of intensity, ever since the end of World War I (over 60 years ago), we shall not arrive today at the right diagnosis of the problem, and therefore we shall be in danger of drawing up the wrong prescription.

Textiles have always been the ideal industry for the underdeveloped countries to start off with on the industrial ladder. They can start in a small way without using too much capital and can provide useful employment for their people, as well as a positive way of earning the currency that they need. Therefore the problem in those early days was whether the competition from countries with an abundant supply of low wage operatives, working with fairly simple machinery (often second-hand, from the West) could be countered with more sophisticated modern machinery, higher skills, and of course much higher wage levels and a higher standard of living at home. But as we have heard from other noble Lords, the situation today is quite different. Today many of the developing countries of the Third World and the Mediterranean are perfectly capable of operating the most modern and sophisticated machinery despite their low wages and living standards, even if at first their efficiency may not be quite so high as it is in the West. It follows that re-equipment and modernisation, important, indeed essential, as it is, is not necessarily, and in some cases not at all, the answer to the problem at home.

I may have been oversimplifying the issue; it is very easy to oversimplify this sort of issue. The problem is obviously different in different countries, and as has been stated, it is different in different sections of the industry, whether it is the domestic section, the furnishing trade, the fashion trade, or in the very wide range of industrial requirements, many of which no doubt are outside what may be called the sensitive areas because of their specialist nature. But looking at the picture as a broad whole I cannot see how the present situation can be regarded—as I get the impression from the Communication that was considered by the sub-committee—as one of mere crisis of limited duration, calling just for an urgent and once-for-all transitional arrangement, so that everything can be put right, and then we can carry on without any arrangement at all.

In my view, so long as there continue to be such wide variations of living standards around the world, the problem will continue with us. I would agree, in theory, with the high-sounding aim of the Communication that the Community should attempt to reduce barriers to international trade in textiles. That is all right; but in practical, working terms today—and, I suggest, into the next century—if we want to retain viable textile industries in Europe at all, which I regard as absolutely essential (and every other noble Lord who has spoken today has agreed) then a renegotiation of the Multi-Fibre Arrangement and the many bilateral agreements is of the greatest importance—and that on a continuing basis; not merely for a further period of four or five years.

I entirely agree with the view—and this, too, has been referred to—expressed by Comitextil at the bottom of page 35, where it says—and I quote: …those who speak with authority within the Community should leave no doubt of their intention to see the MFA renewed in 1981, preserving the basic principle of regulating world trade in textiles". I was delighted to gather that, as recently as 9th April this year, Vicomte Davignan, the Commissioner for Industry, has virtually confirmed that view. There seemed to be some doubt in the minds of one or two noble Lords whether or not that was so, but I very much hope it is. There will, of course, by many difficulties, and they will not always be the same. The question of enforcement of the bilateral agreements has been mentioned; and there is the need to limit new capacities which would otherwise aggravate the world situation—notably, of course, in South Korea, but in other countries as well. Then there is the problem of the Mediterranean countries; the particular problem, of course, arising from the enlargement of the Community, with Greece, Spain and Portugal; and other problems so well summarised in the report in the submission by Comitextil, again, at the foot of page 34.

I am certainly not advocating a degree of protection which would blunt determined, essential enterprise. Sometimes, that enterprise may have to be ruthless. We must maintain that competitive enterprise, whatever happens. But these and similar problems will be with us for a very long time, just as they have been with us in the past; and we in Europe must be constantly on the lookout and prepared to play them with the utmost and continuing tenacity, but again with a considerable degree of flexibility. Having said that, I realise that there is obviously another side to this coin, and that is the view clearly and cogently put forward by the Retail Consortium. There clearly must be a right balance between the two requirements: as between the needs of the buying public, on the one hand, who want cheap goods, and the preservation and encouragement to greater efficiency of the industry, on the other. I feel there is a parallel here with the impact of cheap food, but what was its effect on the farming community? There is a parallel there.

Do not let us forget that the European textile industry and the United Kingdom industry, I think, in particular—and, as has been mentioned, it is by far the biggest textile industry in the Community—have already over the years had to contract enormously. I do not think this has come out quite as much as I should like to picture to your Lordships today. The statistics in the report are useful, but they do not go anything like a sufficient number of years back to give the picture of the contraction one has known. I am now going right back, and for the moment I am referring only to the cotton industry, because these are the figures I happen to have.

In 1913, when our cotton industry was at the height of its fame, it used to be said that the industry produced all that was necessary to fill the home market before breakfast, and that all the production for the rest of the day was exported. The peak figure in that year was 7,000 million yards a year. By 1961, that 7,000 million yards had dropped to 400 million yards; and those of your Lordships who read yesterday's Financial Times—and I am now talking about all textiles—will have seen that the latest figures show that we are net importers of textiles. That terrific change emphasises the position. However, I must in fairness say that, as I understand it, those latest figures include some imports from Western countries, and in particular from the United States—a point that the noble Lord, Lord Rhodes, made when he was discussing the effect of the unfair pricing of energy in that country. Nevertheless, to me those figures are aboslute evidence that we have gone far enough in the decline in our textile industries. Whatever we do, we must see that we maintain the present position and not allow it to be penetrated and go lower down, because if we go further down the scale it will be difficult to maintain viable industries in Europe, whether or not we have outward processing.

My Lords, I am therefore convinced that we must press ahead with the renegotiation of the Multi-Fibre Arrangement and with the appropriate bilateral agreements, and maybe with other bilateral agreements as they come along. Like my noble friends and other noble Lords on all sides of the House, I very much hope that my noble friend the Minister, when he comes to reply, will be able to give us some encouragement about the Government's view on that matter.

6.48 p.m.

Lord BARNBY

My Lords, I am so happy to find myself following my noble friend Lord Rochdale, because I have such a great admiration for him. It is certainly proper that in a textile debate like this he should participate, because he is singular in this position, that, having been brought up in the textile trade, which is now under such pressure, he should then have devoted his talents to the shipbuilding industry, which is perhaps in a worse state than the textile industries. Anyhow, I would emphasise that his knowledge of textiles must be great because, as a wool controller in World War I, I remember the great contribution his firm made to the essential requirements of textiles in World War I; and his firm was then probably the largest producer of that particular product in the world.

My Lords, speaking at this time in the debate one can do little more than underline the many points that have been made, in the hope that my noble friend who is about to reply will have been so impressed by the number of repetitions that he will tell us there is every prospect that there will be what every speaker who has taken part in this debate has urged—that is, a renewal of the Multi-Fibre Arrangement.

I want to thank the noble Lord, Lord Rhodes, for introducing this debate. There is nobody more fitted to have done so. He has been in the textile industry all his life, he speaks with practical knowledge, and also has a been Minister in the Department of Trade. All other speakers have hammered home a particular point, but in the course of doing so they have introduced a wealth of details, figures and statistics in support of that main point. The noble Lord, Lord Rhodes, of course emphasised the importance of the industry. The industry is an important one. It is among the large employers not only in Britain but in the EEC. However, I am sure that all those kinds of details have been paraded today.

The industry is composed of so many large federations; and it has so many appropriate bodies not only among the employers but also among the workers. I should like to explain to the House that I, myself, have been in the textile industry all my life—in the earlier part of my life in the States and then in this country—so that, naturally, I could not resist the desire to say a few words in support of the Motion of the noble Lord, Lord Rhodes. Repetition of the points already made is unnecessary; and I shall try to do my best to support the Motion by a few personal points. I should like, first of all, to say that I have always absolutely disagreed with the philosophy that we, together with some others of the developed countries, owe it to the developing countries to be indulgent and generous in sacrificing our own market, by giving them generous opportunities to import in competition with us.

The noble Viscount, Lord Rochdale, referred to the question of efficiency, as did my noble friend Lord Drumalbyn. First, I want to disagree with any allegation that there can be inefficiency in the industry. One of the testimonies reported among the wealth of information in this most informative report is that of the British Importers' Confederation, who were of the opinion that a protective tariff is only going to produce inefficiency. Well, my noble friend Lord Rochdale of course referred to that. There is a point which I should like particularly to raise because it rather caused me disquiet—a disquiet which has been intensified by the quotation that he gave: that we are now in deficit in balance. We, the greatest textile exporting country in the world, are now in deficit. Surely that is something to be frightened of.

The British Importers' Confederation, in their submission to the Committee, said: Continued protection at the expense of developing countries will only stave off defeat for the inefficient firms, and at considerable cost to the economy, and leave a legacy of resentment at the crushing of the legitimate aspirations of the developing world". What absolute nonsense that is! But, perhaps it is wrong to select one small quotation like that one out of the wealth of information contained in this impressive report, with which I am sure every speaker has familiarised himself.

My Lords, I have been connected with tariff-making and protection all my life. During that experience I have had ample opportunities to see what can be the effect upon industry and upon a country's employment as a whole if there is not reasonable confidence of a continuing possibility of success. That is one of the things that is so important at the present moment. But I go back a long time. I can remember Taft's election in 1908 in the States. A year or ten months before that, the textile industry was paralysed because of the uncertainty as to whether such protection as there was would be removed or continued. I, personally, was a member of President Taft's Tariff Committee which made all the recommendations which were subsequently adopted. But the absence of that assurance paralysed the trade. There was also the Underwood Bill in 1913 which put the US practically on to a free-trade basis. There was almost a collapse of the textile business in the few months which followed it. Then came the war; and the industry was again saved.

There was then the period in this country of the safeguarding of industries, of the McKenna duties—all the different variations of protection and recommendations as to what the Government should do. So it is that I venture to indicate to your Lordships how much the industry must depend upon the reasonable assurance of a continuation of work and profit; and during the economic debate yesterday my noble friend Lord Boyd-Carpenter made a brilliant extemporary speech bearing upon this aspect of industrial success.

But, my Lords, I must pass on. I have referred to my previous experiences of uncertainties about tariffs causing distress to the trade. That is the situation even today with the uncertainty as to whether the MFA will be efficiently and energetically applied. The textile industry in Yorkshire is suffering heavy unemployment because of the imports which, as my noble friend Lord Rochdale has emphasised, are coming in in such increasing volume. How can it be expected, under those conditions of uncertainty, that there will be a readiness among employers for generous expenditure on capital for new equipment? It is uncertainty of that kind which can contribute, inevitably, to inefficiency in the industry.

But, apart from that, there is the tremendous unemployment problem. It has been reported that a few years ago there were 5 million workers in the textile industry. Of those, some 400,000 already have lost their jobs. Think of the scale involved in this country if there is not adequate protection from the developing countries. Again I stress: why should we in this country sacrifice our workers as well as our capital to the other countries—to whom we are giving such generous aid—and throw our markets open to them? It just does not make sense.

I remember how the textiles industry in the United States showed how employment can be increased by their prosperity and how the opposite is dangerous. The defence angle is something which should be remembered. People forget that in World War I the British wool textile industry supplied the total uniforms for the fighting forces not only of the United Kingdom, but of France, Belgium, Holland, Yugoslavia, Portugal, Brazil and the United States. The first battalions that came over from the United States in 1915 had no spare clothing with them. They came over just with what they stood in. They had two typewriters per battalion. For defence it is important to consider: how could we put the troops in the field? It is true that one can have synthetics, but they do not have the value of wool.

The point of this debate is to bring home to all the authorities concerned that there is going to be encouragement in the belief that the Multi-Fibre Arrangement will be continued and, in the interval, there will be an effective Government attitude which will prevent our industry being swamped by low labour cost goods.

7.2 p.m.

Viscount LONG

My Lords, may I begin by congratulating and thanking the noble Lord, Lord Rhodes, for so kindly instigating this debate on this vital subject of textiles and the 16th Report of the EEC on textiles. In his usual way, the noble Lord, Lord Rhodes, stared straight at me, pointed a finger and said: "I want every answer by tonight or do not go home!" I shall try my best to enlighten him from these Benches and hope that he will be happy at the end of the day.

I should also like to congratulate the noble Lord, Lord Ardwick, on his new appointment to the Opposition Front Bench. I can assure him it is a very comfortable Bench; I was there for a number of years and I hope that he will enjoy the many hours of authority there, because it is very interesting being in Opposition. I congratulate him on his new position. I should like to mention briefly that the noble Lord, Lord Trevelyan, has, I understand, been ill; I am sorry that he is not here to enjoy the debate which the noble Lord, Lord Rhodes, has instigated, and I hope that he too will soon be well recovered.

I have an apology on behalf of my Minister, my noble friend Lord Trenchard, who was unable to be here to join in this debate. He very much wanted to do so, but unfortunately he was called away. He will read all that has been said tonight in Hansard. Having said that, I should like to go on with the debate and try to unveil sonic of the difficult problems that have been raised in your Lordships' speeches.

There can be no doubt of the significance of the textile and clothing industry for our economy. With a labour force of some 800,000, it is our third largest manufacturing industry, and had a turnover of £93 billion in 1978. The industry is of vital importance to some parts of the country. Much of the industry is capital intensive and highly modernised, although the old image of a labour intensive and out of date Lancashire or Yorkshire industry dies hard. There are very large sophisticated firms in the industry, and also, at the clothing end, thousands of small manufacturers often with only a handful of employees. My noble friend Lord Barnby mentioned that just now.

Easy generalisations about such an industry should, given its great variety of processes, products and companies, be avoided. But the textile and clothing industry is perhaps above all an industry which must be acutely sensitive to customer requirements. I know that the United Kingdom industry possesses the wit and flair to respond and adapt readily to inevitable change. Despite the difficulties the industry has faced in recent decades—the impact of the growth of the use of manmade fibres, changing techniques, capital re-equipment with increasingly sophisticated machinery, the loss of export markets, the rapid expansion of competing industries abroad, inevitable restructuring, the general economic climate within which it has had to operate—despite all these, the industry remains a major contributor to our net United Kingdom output. It is worth noting here that last year our exports of textiles and clothing accounted for over £2,000 million. I break into my speech here to say that there was pride running through all the speeches on this great industry, and it was very pleasant to hear your Lordships who know so much about this great industry of textiles.

What of the future? Subject to world trading conditions and the general economic climate, the future of the industry is in the hands of its own management and workers. It is not for the Government to dictate how the industry should run its own affairs, or how it can best organise itself to compete successfully in the modern world. But the Government are determined to create a climate in which industry generally in this country can operate effectively, a climate in which initiative and entrepreneurial spirit can be exercised without the level of State activity which has had such an inhibiting effect in the past. Only in this way can the country make the best of all its resources—including the workforce—and create the basis for a prosperous society.

We have made a start along this road in the Budget, and shall continue to move in this direction. But it will not be easy. The economic prospects at home and abroad are not good, and the need to get inflation under control with a sound monetary and fiscal policy must remain a priority. We just cannot afford to price our products out of the market with an inflation rate higher than that of our competitors. And we cannot insulate ourselves from world economic pressures.

It is against this background that the Commission's proposals for guidelines for a textile and clothing industry policy, and the Select Committee's report have to be seen. We do not believe that it is possible or desirable for the Community to lay down a detailed and comprehensive policy for this large and diverse industry. The most that the Government and Community institutions can do—and this is generally recognised by the Commission—is to set a framework within which the industry can take full advantage of its opportunities.

We can accept many of the points made in the Commission's guidelines paper, and shall play a constructive part in Community discussions on any detailed proposals which the Commission puts forward to the Council. I would particularly commend the Commission's view that it is the industrial drive of individual companies which should be the prime mover of progress and adaptation in the industry and that competitiveness is the only guarantee for maintaining jobs in the long-term. We agree, too, with many of the conclusions reached in the Select Committee's report.

The noble Lord, Lord Rhodes, put a number of questions and I will try to answer them to the best of my ability and to give him from tonight onwards confidence that the Government are going to press on with endeavours in the Council to make sure that this report is fully understood. I should like to have been able to answer all these questions, but I cannot. However, I will write to the noble Lord. He also mentioned the need for a clear Government statement on the future of the MFA and its effective application after 1981. The noble Lord and others were worried about that dateline. The noble Lord also referred to the need for growth in imports from Mediterranean suppliers to be subject to the same constraints as those from the other low-cost suppliers. The third point raised by the noble Lord concerned concessions which could be made to China in the current negotiations.

So far as international trade in textiles and clothing is concerned, this has long been recognised as posing special problems. The Government fully support the Multi-Fibre Arrangement and I recognise the need for a continuation of orderly marketing arrangements when the current MFA expires. The precise arrangements will be a matter for decision by the member-States of the Community and the Council of Ministers closer to the time. As noble Lords will know, the Council has already made it clear, when approving the outcome of multilateral trade negotiations, that the Community's concessions on textile tariffs were effectively subject to a mutually acceptable arrangement for international trade in textiles being secured after 1981. The Government fully appreciate the significance of the global ceilings. However, as your Lordships will know, these were originally agreed in December 1977, and since then things have moved on. Development in international trade, for instance, in relation to Mediterranean suppliers, made some breaches inevitable, but I can assure the House that the Government are doing their utmost to keep such breaches to a minimum, and will continue to do so. Also, in the Government's Manifesto we pointed out that we shall vigorously oppose any kind of "dumping". My noble friend Lady Hornsby-Smith mentioned this point and, if I may, I should like to return to her question later, when I should be able to give more details.

Reference was made to difficulties over the imports of textile and clothing from the Mediterranean associates of the Community. The Government cannot take unilateral action in the case of over-shipment by Mediterranean suppliers, but through the necessary channels in Brussels we shall be doing everything in our power to see that they abide by the agreements. The Commission has negotiated comprehensive agreements with the majority of Mediterranean suppliers, and the Government support the Commission's efforts to reach an accommodation with those countries which have not yet signed an agreement: Turkey and Cyprus. It will have been noted that an acceptable agreement has been reached between the Community and Malta.

During the debate reference was also made to the position of China. I recognise the industry's concern about the great potential of China in the long term as a major force in the international trade in textiles and clothing, and I note the Select Committee's view that an agreement with China is urgently required. In the current negotiations we and the Community will be seeking an agreement on quotas at a level which is realistic and consistent with the Community's overall policy on textiles. My noble friend Lord Campbell of Croy referred to the problem of cashmere and the quotas, and so perhaps I can refer to that while on the subject of China. It is the Community's intention to seek an inner limit for cashmere products and quotas for knitted jerseys, and so on—the products covered by MFA Category 5 in the current negotiations. It is also intended to obtain an inner limit on those products for the United Kingdom. I can assure your Lordships that the Community intends to seek a guarantee of access to raw cashmere supplies from China. My noble friend Lord Campbell mentioned that the meetings had already agreed in Peking—I believe I heard him say—but a further meeting is taking place within the next few days to tie up some loose ends regarding Scotland. I agree it is vital that we get some agreement on this.

Lord CAMPBELL of CROY

Hear, hear!

Viscount LONG

During the debate many questions were raised and some very fine speeches were made, if I may say so, and I felt that I should take into my brief a little more—just to keep Members opposite waiting a little longer for their next debate! I certainly endorse the Select Committee's concluion that the existing MFA agreements should be implemented effectively and speedily. It has been suggested that this is not happening, in that imports from some low-cost sources are running higher than the agreed quota levels. It is, however, misleading to compare the level of a quota with import statistics for any particular year. The latter figure includes certain elements such as the previous year's shipments, imports, re-exports and imports allowed under free circulation, which do not count against quotas. In the case of formal quotas, the United Kingdom authorities will not issue import licences in excess of agreed levels, and there have been no breaches of United Kingdom quotas.

I would not agree that the Community's "basket extractor procedures" are ineffective. Several new quotas were secured by the use of a "basket extractor" last year. Admittedly, delays resulted in imports being higher than might otherwise have been the case, but the Commission and member-States were treading new ground and we hope that the position will improve following the discussions which took place in Brussels earlier this year. During 1979 the lack of import statistics, as a result of industrial action in the Civil Service earlier this year, has so far prevented the United Kingdom from initiating "basket extractor" cases; but it is expected that the statistics will shortly be up to date. The difficulties in relation to import statisics have caused no problems in connection with formal quotas which are already established. These are kept under tight control by the import licensing procedures. That was a point mentioned by several speakers.

Regarding enlargement, we are conscious of the problems for our textile and clothing industry which are likely to arise from the enlargement of the Community. As regards Greece, which was mentioned by one or two of your Lord- ships, a general safeguard clause has been negotiated in the Treaty of Accession under which, for a transitional period of five years, a member-State can seek authority from the Commission to take protective measures in the event of a serious difficulty arising. We shall expect to negotiate similar safeguard clauses with Spain and Portugal, but it has to be recognised that there would be greater difficulty in obtaining authority from the Commission to control imports from another, poorer, member-State than in acting against a non-member of the Community. Too much reliance, therefore, cannot be placed on the safeguard clause mechanism.

I can understand the Select Committee's concern that discussion should begin as soon as possible on ways to assimilate the industries of the African countries with least damage both to them and to the Nine. But in the last resort, and subject to the safeguard clauses that I have mentioned and to the Community policy on, for example, State aids, it will be for individual firms in the existing member-States, as well as in the new member countries, to adjust to the new dimension afforded by the enlargement. My noble friend asked me to say that he fully understands this, and will be reading tomorrow what I have said.

On outward processing, noble Lords have drawn attention to the disquiet in the United Kingdom industry about the development of outward processing in the Community. As the Select Committee points out in its report, this has potential dangers for the textile and clothing industry and for employment in the United Kingdom. Nevertheless, outward processing exists, and the Council of Ministers has agreed Community level outward processing restraints for certain products from certain Mediterranean suppliers. We need to consider the position very carefully, and are playing a constructive role in Community discussions on a regulation to control outward processing restraints where these have been established. We shall take full account of the views expressed by noble Lords, by the United Kingdom industry and by unions.

I was asked a further question regarding the dangers to sectors of the textile industry. These are now a reality in the case of carpets, stemming from the United States energy policy. Although imports from low cost sources are part of the major problems facing the United Kingdom textile and clothing industry, this should not be regarded as the whole of the import story. Imports from developed countries have also been rising rather rapidly.

I take first the United States. With the weakness of the dollar against the pound in the last six months the exchange rate against the dollar has risen 10 per cent—and continuing inflation here has seriously affected the competitive position of the two countries' textile industries. In addition, the increasing divergence—flowing from wider world energy developments, with which noble Lords are familiar—between the controlled, and thus lower American oil and gas prices and those in Europe means that for synthetic fibre textiles the competitive position of the United Kingdom and Community industry has further worsened. The picture is complex, due to the varying mixes of the oil and gas feedstock components in different products. But for a number of major fibres, the US advantage in this respect is significant and could lie between 14 and 29 per cent.

Industry is, reasonably, worried about this state of affairs: some imports are rising, as the noble Lord has pointed out. The problem, however, is not yet universal. What can be done about it? The Commission should be discussing it today and tomorrow in its twice yearly high-level discussions with the US. The industry, through its Community level trade federation, is pressing the Commission for Community action to control these imports The Government are closely following developments and will do their utmost to ensure that quick and serious consideration is given to these representations. But actual or threatened disruption, and detailed information about the extent of the advantage enjoyed by the US producers, will have to be displayed to the satisfaction of the Commission and other member-States, if there is to be some Community action. The ideal, of course, would be for the Americans to remove the source of the disruption of competition, by bringing up its oil and gas prices to levels comparable to those facing the Community. That would also be good sense for energy policy.

The noble Lord also mentioned the American Government's textile programme, and that Government's expressed commitment to assist the American textile and clothing industry. I am aware of the American programme, but I am not sure that it is so very different from what we are doing. But we are looking at this point. As I have explained, we, too, fully support the MFA, and its effective monitoring and implementation. In the Community's arrangements, there is provision for introducing new quotas against low-cost imports which rise to unacceptable levels, and, like the Americans, we, too, are paying special attention to the most sensitive textile and clothing products.

I know that the American programme envisages a more tight control on imports from low-cost sources during the remainder of the MFA, but I am not sure how this is working out in practice, or whether the outcome will be significantly different from the Community's arrangements. But we shall not hesitate to learn from the Americans, if that is consistent with our overall objectives. Again like the Americans, we are keeping in close touch with the industry and the unions about the operation of the MFA arrangements. And the textiles EDCs and sector working parties, together with the NEDC's Joint Textile Committee could be regarded as our equivalent of the American high-level Industry-Labour-Government Policy Group, which has been established.

As noble Lords will know, the EEC Council of Ministers has declared that it will have recourse without delay to the appropriate safeguard provisions of GATT, if foreign producers of synthetic textiles try to take advantage of artificially cheap supplies of energy and feedstock materials to threaten disruption of the Community market.

Secondly, there is the question of United Kingdom competition with the rest of the EEC. Imports from that quarter increased, often substantially, in 1978. There may well have been some temporary bottlenecks—for example, in United Kingdom capacity—which contributed to the scale of the import increase in 1978. But the opportunities are undoubtedly there within the United Kingdom and Community markets, and our industry is no doubt taking the necessary steps—on design, marketing, quality; all important factors, as well as price—to improve its market share. There should be good scope here, particularly in view of our relatively favourable labour costs, for our firms to perform well in competition with other developed countries. I accept that it will not be easy, even so, but the chances should be there.

I was asked about the advisability of discouraging additional investment in textiles and clothing in developing countries, particularly those, such as Korea, with excessive ambitions. It would certainly be unwise and contrary to their own interests for developing countries to continue to invest in areas of excess capacity in textiles and clothing, and I very much hope that the Commission has made this clear to developing countries. In the final analysis, investment decisions are for developing countries themselves to take, although I should hope that by now the dangers for the Third World of over-dependence on particular industries are well recognised.

Noble Lords referred to the need for a greater reciprocity in international textiles trade, as did the Select Committee in its report. Different countries do, of course, adopt varying methods of protection for their domestic industries. Our policy will be to try to secure the fairest trading opportunities that are possible for our own industry. I recognise that nearly all low-cost producers at present maintain high tariffs on textiles and clothing products. Naturally, we would welcome liberalisation, although this could affect our own interests in maintaining EEC restraints on imports from low-cost sources. No doubt this issue will, as the Select Committee suggests, be looked at when the MFA conies up for renegotiation in 1981.

Time is getting on, and we have covered a great deal of ground. Perhaps noble Lords will forgive me if I cut out one or two of the less important items in the middle of my brief. My noble friend Lady Hornsby-Smith also raised the question of dumping. The Government are committed to opposing all kinds of dumping. Specific cases are investigated thoroughly by the EEC Commission, and the Department of Trade is always ready to give guidance to sectors of United Kingdom industry wishing to present a case to the Commission. There is, of course, no concept of dumping in trade between member-States of the Community, although there is provision in the Treaty of Rome for action to be taken against firms abusing a dominant market position in the Community. If my noble friend has any reason to suspect anybody, perhaps she would let me know after the debate.

In discussing the MFA, there is a temptation to consider the position of the United Kingdom textiles industry in isolation. But we do not operate in a vacuum. Within the EEC we have to press the United Kingdom's case and seek to persuade other member-States of the merits of our views. We cannot expect always to succeed. The EEC has to do the same within the international trading community. Essentially, international trade policy is a question of negotiation. We and the Community are in a position to impose our will unilaterally on the rest of the world without consideration for the interests of our trading partners. This said, we shall continue to pursue United Kingdom interests on textiles matters vigorously, but we cannot ignore our wider interests and the realities of our position in the EEC and in the world trading community.

And at the domestic level, as the Chancellor of the Exchequer made clear in his Budget speech, we should do well to acknowledge the limit to our capacity as politicians to influence the course of economic events for the better. At the risk of repeating myself, I think it is worth emphasising that in many fundamental respects the future of our textiles and clothing industry is in its own hands. We shall play our part on international trade matters, within the constraints I have mentioned, and at home the Government will concentrate on creating conditions in which enterprise can flourish and provide more secure and better-paid jobs. It will be for the efficient and responsive textiles and clothing firms to take full advantage of their opportunities. I thank noble Lords for their patience.

7.32 p.m.

Lord RHODES

My Lords, I do not intend to make a speech. I shall ask the Minister only one question. Which department provided the noble Lord's brief? Was it the Department of Industry, or was it the Department of Trade?

Viscount LONG

My Lords, it was the Department of Industry.

Lord RHODES

My Lords, I thank the noble Lord. Then I have an answer to my first request about the distribution of this report. Newspapers which are competent and which comment on the textile trade, such as the Oldham Chronicle—which knows this industry inside out—have referred to this report as the best which has been produced in years. What has happened to the damned thing? Copies of the report were printed. The House of Commons Vote Office received 40; the House of Lords, 100; the Holborn Stationery Office, 175; the House of Commons European Committee, six; witnesses, 25; and Manchester, six.

I ask noble Lords: what are we playing at? What on earth are we supposed to be doing upstairs in this committee? We spent hours on this subject. We occupied the time of clerks, and this report was printed at great expense. Do noble Lords want us to carry on with this sort of thing, or do they not? We can easily sell our know-how, believe me, to the people we have been having discussions with overseas. It is about time that we took hold of the question of distributing information outside this place, where there is so much expertise; but we are not taking advantage of it. This is an example of not taking advantage of that expertise. For goodness sake! can we not do something about it, so that there is a real distribution of information? Every textile company, with more than 50 employees, should have a copy of this report.

To give noble Lords an example, I had something to do with the House of Commons Blue Book on the question of the textile trade, and immediately afterwards I went to Japan where I visited the Toyo Spinning Company—a gigantic organisation—where I found that they had a copy of the Blue Book in their safe. They said, "This will be our bible for the next few years". It is about time that this report was distributed to the textile trade as their bible for the next few years.

I shall not comment on what the Minister had to say in the gabbled version of his reply, but I shall return to it.

On Question, Motion agreed to.