§ 3.37 p.m.
§ Viscount TRENCHARDMy Lords, with the leave of the House, I will now repeat a Statement which my right honourable friend the Secretary of State has made in the other place. The Statement is as follows:
§ "The House may be aware that the European Commission announced this morning their decision on the United Kingdom application for import quotas on certain synthetic textiles. My honourable friend the Minister for Trade and I, together with officials of my department, have held extensive talks with the Commission to stress the urgent need for action to stabilise imports of these products in order to check further factory closures and redundancies in these threatened sectors.
§ "For their part, the Commission have been anxious to avoid the United Kingdom's application leading to a breach in the open trading relations with our main partners. The United Kingdom, with one-third of its GNP sold in export markets, shares this interest in avoiding an outbreak of retaliatory action and damage to our wider trading interests. Moreover, the United Kingdom is itself a major textile exporter. The Commission has therefore been concerned to ensure that any action taken is strictly within the terms of Article XIX of the GATT.
501§ "Against this background, the Commission has agreed quotas on both polyester and nylon carpet yarn at the following levels for the calendar year 1980: for polyester filament yarn, 9,053 tonnes, compared with imports in the final quarter of 1979 running at an annual rate of 15,600 tonnes; for nylon carpet yarn, 7,500 tonnes, compared with a 1979 final quarter rate of 9,150 tonnes. These quota levels will cut imports back from the very high level reached at the end of last year, but it is our view that they should not be so severe as to provoke retaliatory action on the one hand, nor, on the other, to create damage to the downstream textile and clothing industries which depend on the availability of low-cost fibres for the competitiveness of their own end products.
§ "With regard to man-made fibre tufted carpets, our concern has been to avoid the quota on nylon carpet yarn damaging the interests of the United Kingdom carpet industry; for this reason we felt that quotas on both products should be introduced. The Commission has, however, had to examine our application against the definition of 'serious injury', since otherwise a number of other European countries might also seek quotas for their products leading to an escalation of protectionism. While the increase in imports of man-made fibre carpets has been substantial during 1979, growing from 1,085,000 square metres in the first quarter to 2,162,000 square metres in the fourth quarter from non-EEC or preferential sources, in fact, the penetration of the United Kingdom market from these sources amounted to only 8.5 per cent. in the final quarter of 1979. In the Commission's view, this level of import penetration was insufficient to warrant a quota based on serious injury at this stage. Despite this we have obtained a statement to the effect that the Commission will monitor imports vigilantly and recognises the necessity of immediate recourse to safeguard action if present trends continue and lead to serious injury.
§ "I am not wholly satisfied with the Commission's response to our application. But we have to acknowledge the overriding duty of the Commission 502 not to provoke a sudden surge of protectionism. On balance, therefore, I think the outcome is a reasonable one. Within these constraints the Government will do all in their power to safeguard the interests of the United Kingdom textile and clothing industries. I hope that these quotas and the very firm statement on carpets will go a considerable way to stabilising the exceptionally difficult trading conditions which the industry has faced during the past year."
§ My Lords, that concludes the Statement.
§ 3.43 p.m.
Lord BRUCE of DONINGTONMy Lords, the House will be grateful to the noble Viscount for having made the Statement. We on this side of the House must express our immediate dismay at the result of what must have been protracted negotiations with the European Commission. I say "protracted negotiations" because the statement mentions the term "urgency". Dealing first of all with the tufted carpet quotas on which the Government have not succeeded in obtaining any concession from the Commission other than a promise of vigilance—whatever that may mean in EEC circles at the present time—one might ask the Government just how they view the Commission's definition of serious injury. The Government are themselves satisfied that the existing arrangements will do damage. What is the difference in their mind between damage and the Commission's concept of serious injury? We take the view that Her Majesty's Government would not have made application at all on the tufted carpet side unless they themselves had been convinced that there was the prospect of serious injury and damage to this particular section of the industry. I ask the noble Viscount to particularise a little further as to his Ministry's discussions with the EEC Commission in this regard.
In regard to the polyester filament yarn quota, this of course represents some 58 per cent. of the annual rate achieved in 1979. I shall return to the question of the annual rate when I come to the next part, dealing with nylon carpet yarn. I refer to 58 per cent. of the annual rate achieved in 1979, but this was the year in 503 which an unprecedented effort was made by the USA in the penetration of the English market, in which they achieved a 30 per cent. share in the final quarter, and the new quota is some 50 per cent. higher than the 1978 figure. I shall be glad to have the comments of the noble Viscount on that aspect of the matter.
We now come to the quota for nylon carpet yarn. Seven thousand five hundred tonnes represents some 81 per cent. of the final quarter of 1979. Why did Her Majesty's Government permit the Commission to shift its base from the full year 1979 which it adopted when assessing the quotas for polyester filament yarn? Why did it allow the Commission to take the last quarter of 1979 as its quota? For a very good reason, my Lords, because the current quota now agreed by the Government with the Commission represents some 30 per cent. higher than the entire imports from the USA in 1979. These represent very serious questions which the Government must answer.
We are well aware of the difficulties in negotiation with the EEC Commission and, above all, in arriving at agreement with the remainder of our colleagues in the Community, who may be variously affected by these matters. I should like the noble Viscount to give us some indication of the attitude of our EEC partners—individually if necessary—towards these arrangements.
In his Statement the noble Viscount refers to the possibility of other member-States also making application for quotas. Why should they not do so? If they are justified, they should do so. I sincerely hope that the noble Viscount will also clarify some of these matters. On behalf of my noble friends, I must express the view—which we are quite convinced will be widely shared in the textile industry itself and by the people at large—that these arrangements are thoroughly unsatisfactory.
§ 3.48 p.m.
§ Baroness SEEARMy Lords, we on these Benches should also like to thank the noble Viscount the Minister for repeating the Statement made in another place. We recognise of course the very considerable difficulties being experienced in the textile areas and in industry con- 504 cerned with man-made fibres. We know full well that the short-term position in those areas is extremely difficult. At the same time, we regard as a far greater risk a surge of protectionism which could bring the greatest possible damage to this country, to the EEC Community and indeed to the world as a whole. Therefore, while recognising the need to give as much assistance as possible to the future of the textile industry, which inevitably has to be for a smaller industry in the longer run, we cannot but agree that it is right to resist the extremes of protectionism which are being demanded in some quarters in this country. The Commission surely must be on the side of avoiding protectionism, and of granting quotas only where they are absolutely vital in the short term. Therefore, understanding full well how unwelcome this news will be in the textile industry and sympathising with the reasons for their distress, none the less we believe that the decision of the Commission is right and that the Government are right to accept it.
§ Viscount TRENCHARDMy Lords, I should like to deal at this stage, if I may, with the points made by the noble Lord, Lord Bruce, and the noble Baroness, Lady Seear. As regards protracted negotiations, I think the noble Lord, Lord Bruce, was really saying that this had taken a long time. Indeed, it has taken a long time, but international negotiations do, and it was not until the end of September 1979 that we had real figures from the industry, particularly relating to the American feedstock side of things, on which to commence detailed negotiations.
We are not accepting a meaningless statement in relation to tufted carpets. The Statement that I read included the phrase:
the Commission will monitor imports vigilantly and recognises the necessity of immediate recourse to safeguard action if present trends continue …So we are not just accepting an empty phrase in relation to carpets. Concerning the size of quotas, as regards polyester the basis is the average of the year 1978 and 1979. In the case of carpet yarn, the figure, although higher and although not such a big reduction on the last quarter of 1979, has to recognise the need to allow the users of United States yarn—and there have been users over a prolonged period—to be able to obtain the United 505 States yarns they want at reasonable prices, or more damage will be done to the downstream industries. I thank the noble Baroness, Lady Seear, for her balanced remarks, My right honourable friend does have a difficult task in balancing the many points of view involved, and we certainly do not want to see a return to one step against another of further protectionism.
§ Lord ALPORTMy Lords, may I ask my noble friend whether he will recognise how many Conservatives will welcome this small return to the traditional Conservative policies of tariff protection and import control, as against the prevailing economic fallacies, which are Liberally originating, of laissez-faire and free trade?
§ Viscount TRENCHARDMy Lords, I believe that we are dealing rather more with the modern Conservative philosophy which believes in giving enough time for the readjustment of industry, to which the noble Baroness, Lady Seear, referred, and which also deals with situations where there is strong evidence that our industry does not face fair competition. In this respect, the feedstock and energy prices have had a major bearing in this subject being raised with Europe and the protection we have asked for.
§ Lord HALEMy Lords, when the noble Viscount made his first Statement I understood him to say a few more words than those he re-quoted to my noble friend on the Front Bench. I think he said they said:
…if the imports increase and the situation gets worse".which seems to imply a rather long time before coming to a decision. You want two facts replaced, and personally I hope that is a mistake and it should be, "or", or at any rate is not intended to indicate a two-pace system involving delay, because the matter is urgent.I should like to thank the noble Viscount for the way he gave the Statement and for his previous assurance, which was at least an advance on the reply we had at the end of the Common Market textile debate which was initiated by my noble friend Lord Rhodes. May I ask the noble Viscount this: If he is considering what is to me a new development, what is the position if companies have amal- 506 gamated across the seas and if, for example, the goods that were being produced in South-East Lancashire last year are now being produced by a closely associated firm in one of the South-East Asian countries which has no special entry into the Common Market?
Finally—and I admit this is perhaps a little outside the question, but I sought to raise it the other day, I think quite properly—has the noble Viscount observed the very sudden contraction in the textile machine-making industry in this country, especially in regard to one of the most respected firms which has been operating for 100 years and which, apparently, is planning to transfer its output of textile machines from that factory to South Korea? Will that not raise a complication, and should I write to him about it?
§ Viscount TRENCHARDMy Lords, I think it would be the wish of the House that I should deal by correspondence with the second two points raised by the noble Lord, Lord Hale, which do not refer to the United States. However, let me just tell the House, with regard to subsidiaries overseas, in the British situation any imports are taken as counting fully against any quota that exists, so it does not matter whom they are made by, and any imports, even outward-processed imports, will count as imports within the quota. Perhaps I could deal with the other questions by writing to the noble Lord.
Lord SPENSMy Lords, is the Minister aware that in 1963 the United States Government under President Kennedy, as an emergency measure, very nearly doubled the import duty on woven Wilton carpets and that emergency import duty remained for very nearly 10 years? Could not the Commission be thinking of something in those terms? As far as I know, no retaliatory action was taken by anyone else because the United States carpet industry was not in those days exporting many carpets.
§ Viscount TRENCHARDMy Lords, the point made by the noble Lord, Lord Spens, is very relevant and my right honourable friend the Secretary of State has taken full note and has discussed with our friends both in the United States 507 of America and in Europe the American systems in relation to the protection of its own textile industry. I personally was not aware of the particular historical case that he mentioned: I shall look it up.
§ Lord DRUMALBYNMy Lords, may I ask my noble friend whether, on the tufted carpet side, the root problem here has really been dealt with? Is not the root problem the subsidisation of feedstock by the United States of America, and is not the appropriate way of dealing with it a compensatory duty so as to equal that? This is fully provided for in GATT and should it not be done in this case, and done immediately? May I also ask my noble friend whether he really thinks that, had we not been moving through the medium of the Community here, we would have dealt with this a long time ago?
§ 4 p.m.
§ Viscount TRENCHARDMy Lords, my noble friend raises another technical avenue which we considered in relation to taking action in this area. More than the question of feedstock energy is involved. We decided that the better course for the immediate protection of the industry and the threatened damage to it was Article 19, and since the rest of the Community were not prepared to back this action this automatically meant quotas, rather than tariffs. That is a technical explanation. I bear in mind very strongly what my noble friend said in relation to the theory of the position, but I think that we adopted the correct tactical route.
§ Lord DRUMALBYNMy Lords, I wonder whether I may follow that up. Can my noble friend tell us why the penetration in this case has been in this country? How have the other Members of the Community been able to avoid it? Also, can he tell us how we are going to avoid that sort of thing in the future?
§ Viscount TRENCHARDMy Lords, the main reasons for this are not connected with tariffs or protection. They have to do with language, with the efficiency of the British distribution system and, in terms of the products concerned, with the particular applicability 508 of the products. So the main reasons for Britain perhaps being the first country to have to cope with a major upsurge of American goods are technical, and are not reasons of protection as such.
§ Lord ROBBINSMy Lords, while not wishing to disagree at all with the Minister in the catalogue of reasons which he has just recited, may I ask whether he would agree with me that there is a reason which has not been mentioned on either side of the House, but which certainly contributes to the growing apprehension with regard to the volume of imports in general; namely, the probable over-valuation of the pound sterling, which is a circumstance which is not due to either party and is partly due to the success of North Sea oil, and partly due to the inflow of capital?
§ Viscount TRENCHARDMy Lords, the noble Lord, Lord Robbins, is quite correct. This was one of the factors outside the feedstock question which led us to take the particular route that we have taken.
Lord BRUCE of DONINGTONMy Lords, the noble Viscount will recall that at the conclusion of my remarks I asked him whether he would make some statement as to the attitude of our other EEC partners on this whole question.
§ Viscount TRENCHARDI am sorry, my Lords, that I did not deal with that matter directly. I mentioned it just now. We have not been able to get support from other EEC countries. Sometimes I worry a little about the current state of development of the EEC, in terms of understanding that different questions affect different countries with greater severity. I know that my right honourable friend the Secretary of State for Trade has this point very much in mind and, with goodwill in the future, I hope that we shall all be more attentive to problems which affect each other. There are cases in the reverse direction—it would be wrong to go into them in detail at this stage—and there are industries where we no longer have a stake, where European industries still do, and where very often we are advocating a freer increase of imports of cheap goods into Britain, which we can then of course recirculate to Europe.