HC Deb 30 July 1959 vol 610 cc711-31

1.21 p.m.

Mr. John Taylor (West Lothian)

The subject of this brief debate is the European Free Trade Agreement and the paper-making industry in Scotland. The purpose is to extract from the Government, if possible, a clear statement of their intentions. This will be a very short debate and several of my hon. Friends who, like myself, represent constituencies containing paper mills in Scotland, are hoping to catch your eye, Sir, to make brief contributions. Therefore, it seems to be my responsibility also to be brief in order that they may possibly have a chance to do so. Consequently I have not time for sketching in any background, but in any case the background is already known to the President of the Board of Trade and to his right hon. Friend the Secretary of State for Scotland.

Also, in a recent debate on industry and employment in Scotland my hon. Friends the Members for Edinburgh, East (Mr. Willis) and Fife, West (Mr. Hamilton), who are in their places on these benches today, have also endeavoured to pursue it in questions. So far, however, we have not received any satisfactory answer to the direct question whether the Government intend to encourage any safeguarding arrangements for this important British industry or whether they regard it as expendable. Was any attempt made in the Stockholm talks to put the point of view of the British paper and board-making industry to the Scandinavian Governments?

The White Paper, Cmnd. 823, which has been published since we tabled a request for this debate, entitled "Stockholm Draft Plan for a European Free Trade Association", gives not the slightest indication that the industry was even mentioned during the talks. There is not a word in the White Paper about the industry. There are special arrangements to protect Danish agricultural products and there is a proposal submitted by the Norwegians to protect fresh and frozen fish and other products.

These industries are of special importance to the countries concerned and we can readily understand and appreciate that the alert and efficient Governments of those countries defended the economic interests of their citizens. The industry most likely to be severely affected in Britain by E.F.T.A. is the paper making industry. There is no other major industry in Britain which is likely to be affected to such an extent as this one, and it seems unbelievable that the British Government made no attempt to secure a quid pro quo by negotiating an arrangement to safeguard the industry.

The exploitation of the United Kingdom market for paper must have been uppermost in the minds of the Scandinavian Governments, and in particular of the Swedish Government, as the outstanding potential advantage to them of the E.F.T.A., particularly when previous markets in the European Economic Community, in the countries of the Six, are becoming increasingly closed to them. Therefore, we want to know on behalf of our constituents employed in the industry—there are 17,000 of them in Scotland alone—and on behalf of the good firms who have undertaken heavy capital investment to modernise their plant, equipment and premises, what steps did the Government take or do they propose to take to safeguard the future of these jobs and investments?

Why does the White Paper contain no mention of any British proposal to lay down such safeguards? Did the Government, in fact, take such steps? Did they table any such proposals? Do they intend to do so? These are important questions and the answer vitally affects the jobs and the security and the future of thousands of our people. It is possible, I should think it is highly probable, that the President of the Board of Trade will direct our attention to paragraphs 19 to 23 inclusive of the White Paper which deal with difficulties in special sectors. I will read paragraph 19, because it is necessary that we should have an explanation of what it means. It says: If a Member experiences difficulties in a particular sector of industry or a particular region, and there is an appreciable rise in unemployment in that sector or region resulting from a spectacular decrease in internal demand for the domestic product because of imports from other Members, the Member concerned shall be able to take certain protective measures. Any such measures shall be applied non-discriminatorily to all Members, and Members should not be treated less favourably than third countries. Obviously the paper and board industry is a particular sector of industry and an important sector of industry in Britain. Obviously that sector will experience difficulties if E.F.T.A. is operating. Obviously these difficulties will be more severely felt in Scotland, where the paper-making industry is a major one. Obviously the comparative effect in Scotland as a whole of E.F.T.A. will be disadvantageous because the advantageous results of the association will be in those manufacturing industries of which Scotland has not a normal share.

The White Paper seems to me to say that if an industry is so hard hit that it is in danger of collapse, the Government may take certain unspecified "protective measures". What exactly is in the minds of the Government and the other countries? What protective measures have they in view? Why not take protective measures before the industry suffers? Why not take them now before things go too far? The only way effective protective measures can be taken is by inserting in the Agreement a safeguarding section for the paper-making industry, as has been pro- posed for Danish bacon, for Norwegian fish and in the special steps to protect Portuguese interests.

The matter is urgent. We must have the assurance today. Parliament will be rising in three hours' time from now and will be dispersed for three months. In our absence the Government may present us with a fait accompli. They may have ratified the Agreement, or at any rate, may have gone too far with it, and so put themselves beyond hope of retrenchment, which would be disastrous to an industry built up with efficiency and pride in our own country and in our own constituencies.

The next Government will not, of course, get rid of this Agreement. They will probably strengthen it, but if it has gone too far and we have the difficulty of inserting a clause into the Agreement which has already been made, it will be a long and difficult process. I ask this Government and I plead with the President of the Board of Trade to give us an assurance today, at this eleventh hour, that they will do their duty by this industry and by those who work in it.

1.31 p.m.

Sir James Duncan (South Angus)

Like the hon. Gentleman the Member for West Lothian (Mr. J. Taylor), I want to be brief. Therefore, I will try to make my speech in almost telegraphic form. I do not share altogether the fears of the hon. Gentleman, but I recognise that the employment position in Scotland is much more sensitive than it is in England. I do not complain in the least that hon. Gentlemen opposite have raised this question today for that reason. With double the rate of unemployment in Scotland to that in England, any action that might increase that unemployment in a particular trade to benefit the United Kingdom as a whole is bound to be looked at with some care by Scottish Members.

I have a paper mill at the edge of my constituency and I received a letter from those concerned in it when they first heard about this proposal. I think that they got the wrong end of the stick and exaggerated the fears that were expressed in the letter they sent to me, because they thought that the tariff would be abolished in five years. That was never the proposal and is not the proposal today, as can be seen from the White Paper, Cmnd. 823.

On studying that White Paper it seems to me that there will be quite a number of safeguards for the paper industry. Paragraph 19 of the White Paper, which the hon. Gentleman read in full, is, I think, a material safeguard. First, if there is an appreciable rise in unemployment, or a spectacular decrease in internal demand for the domestic product, certain protective action can be taken by the Government. Secondly, according to paragraph 20, the Government can limit imports by a quota if there is danger to the home trade. According to paragraph 23, the agreed rate of tariff reduction can be slowed up if harm is being done to a particular trade. Paragraph 41 deals with a different aspect of the position.

One of the things which the paper-makers require is a free and fair market for their pulp, which they require to make their paper. At present, there are, I think, cartels in Sweden and Norway which may artificially reduce the price of pulp to the Swedish manufacturers. I think that I am right in saying that by paragraph 41, which deals with restrictive practices, these cartels will have to be abolished and there must be the same price paid for pulp by the Swedish and Norwegian manufacturers as by the British manufacturers. Therefore, there will be a fair market for the pulp. The British paper manufacturer, being nearer his own market for home consumption, ought to reap some benefit from that if we bear in mind that the British paper manufacturers' market is at home and the Swedes and Norwegians will have to bear the cost of insurance, freight and so on.

Finally, there is a further safeguard. In paragraph 44 it is definitely laid down that members can take anti-dumping action if anything goes wrong and one of the seven nations does not play the game. We are free to retain, each of us, our anti-dumping regulations.

I do not think that the paper-making trade has much to fear, bearing in mind that the tariff reductions are to be spread over a much longer period than was originally contemplated and all the safeguards exist for dealing with special difficulties.

Looking at it from the other point of view, the advantage to Scottish trade of the Stockholm Agreement seems to me to be overwhelmingly in favour of the Government entering into such an agreement. I do not want to go into this at length, because I believe that Scottish trade, the wool trade, for instance, will reap great advantages from it.

There is one aspect, if I may trespass on the time of the House, which worries me. The British forestry industry is expanding rapidly. In 1965, in Scotland alone, there will be an output of 18 million cu. ft. of timber, equivalent to about 645,000 tons. In 1975, there will be 28 million cu. ft. output from British forests, equivalent to about 950,000 tons. The British Forestry Commission is planting in the United Kingdom about 50,000 acres of trees a year and private woodland owners are planting 30,000 acres of trees a year. This process is going on and the marketing of that timber is a problem which I do not believe we have adequately thought out.

One outlet, and it may be the main outlet, from the thinnings of these vast acreages which are coming into marketable form in the next twenty years, will be pulp. This is a young, growing industry and I hope that the Government, in negotiating this "Little Seven" Agreement, will not do anything to hinder or hurt the output from British forests, because I believe that it is an industry which we ought to foster, being of very great importance for the Highlands of Scotland.

I hope that the suggestions made both by me in the Scottish Grand Committee on the 3rd July and by various noble Lords in another place on 28th July, reported in HANSARD, will be studied by my right hon. Friend and the Board of Trade with very great care to see that in spite of what is being done, which I support, in the "Little Seven" Agreement made at Stockholm, no action will be taken to impair confidence in the future of tree growing in this country either by the Forestry Commission or by private woodland owners.

We are doing out best, and woodland owners' associations have been formed in Scotland and England. We must not hinder or hurt their efforts. I believe that there will be very great benefit to employment in the Highlands of Scotland if nothing is done which might hinder or hurt this new industry which will be growing into such importance in the next twenty years. I would only add that the Forestry Commission and the British taxpayer are as much interested in this as anyone else today. It is in the interest of the taxpayers, as much as anything, that I make this plea.

1.40 p.m.

Mr. E. G. Willis (Edinburgh, East)

The hon. Member for South Angus (Sir J. Duncan) might at least have had the courtesy to acknowledge that it was the Opposition which initiated the debate on forestry in which he spoke and that it was the Opposition which drew the attention of the Government, in the first place, to the fact that we ought to have some pulp mills in Scotland and that the time had come when the Government ought to be starting them.

Sir J. Duncan

I was trying to be brief.

Mr. Willis

The extra words would have been much more welcome than the remarks made by the hon. Gentleman.

I agree with the hon. Gentleman to the extent that this matter is exceedingly important to Scotland. I believe—it is difficult to disentangle the figures—that we in Scotland have rather more than our share of the industry. We have a very high unemployment figure in Scotland at present. Unemployment has gone up again this month when it ought to be going down, and our economy is less resilient than that south of the Border. The Scottish economy is less able to absorb the few hundreds of unemployed, who may not appear important south of the Border, but are exceedingly important in Scotland. For these reasons, the matter is of great importance to Scotland.

There is also the fact that we have a very large number of small burghs built around the paper mills which would be very seriously affected. I regret that my hon. Friend the Member for Midlothian (Mr. Pryde) could not be present today to put his point of view. He has put it very vigorously in the Press, and I am sure he would put it most picturesquely and vigorously in the House, because he has several such burghs in his constituency.

I have previously raised the subject in connection with the largest burgh in Midlothian, which has a very large mill. I raised the subject with the President of the Board of Trade on 16th July, and the right hon. Gentleman pointed out the safeguards which the Government were trying to secure in respect of pulp. I understand from the Scotsman today that the Paymaster-General did the same with the deputation which met him yesterday.

Sir J. Duncan

A Conservative delegation.

Mr. Willis

It was a Tory delegation which was rather peeved that the Labour Opposition should have dared to raise the matter on the Adjournment. Having slept in, the Tories tried to make up for it by going in a deputation to the Minister.

On these occasions we are always told what the Government have done about pulp. On 16th July the Minister said that we should have access at the same price as the Scandinavian mills to pulp and that our mills would also be able to make investments there. As I understand the position, what the paper-making industry fears is the importation of paper. I agree that the question of pulp is important, but I understand that the industry fears more than anything else the importation of paper.

It is feared that the 630,000 tons of paper at present going annually to the European Economic Community area might be diverted to this country. That is what the mills fear, and, I think, with some degree of justification. We have had no guarantees at all on that. After giving his guarantees about pulp yesterday, the Paymaster-General said that if the situation warranted special action, that could and would be taken.

Paragraphs 19 and 20 of the White Paper say exactly the same. However, I wish to ask the President of the Board of Trade whether we in Scotland have to wait until there are several thousand more unemployed before the Government do anything about it. That is the point which was raised by my hon. Friend the Member for West Lothian (Mr. J. Taylor). We do not want guarantees that something may be done when unemployment has been created. We have had such guarantees before in Scotland. The fact is that the unemployed are not absorbed. That is our problem in Scotland. That is why we are lagging behind England so much in this respect and why our unemployment figure has gone up again this month.

I would point out to the President of the Board of Trade that it is not good enough to say that if things go wrong—in other words, if 5,000, 6,000, 7,000, or even 10,000 out of the 17,000 at present employed in the industry become unemployed—'the Government will do something about it. That will be too late, and in the meantime an unnecessary amount of suffering will have been caused.

The workers in the industry feel that they are simply regarded as pawns in a gamble which the Government are taking in the hope that they can create something with which to bargain with the European Economic Community. My constituents—I am sure it is the same for other workers—do not like being treated as pawns in a game without some guarantees that their livelihood and standard of life will be protected. The Government have not done much about that.

I have pointed out that paragraphs 19 and 20 deal with the situation which might arise; that is, unemployment, after it has arisen. Paragraph 23 deals with the situation after the first cut of 20 per cent. in the existing tariffs on 1st July, 1960. The industry expects that that first cut will itself lead to unemployment. Paragraph 23 speaks of the situation after the initial reduction. Consequently, we are bound to regard this with a certain apprehension, because it does not seem to give the people in the industry any guarantees that the Government have grasped the serious nature of the problem.

I join my hon. Friend the Member for West Lothian—I could have said much more about the problem, but this is a very short debate—in asking the Government to give us a specific assurance. Why should not the paper industry be treated in the same way as agriculture and fisheries? Why should not special arrangements be made? I can see no reason why not. In the first letter that I received from the President of the Board of Trade about the matter, he seemed to be treating the whole thing in a most cavalier manner. He brushed it aside and said, "We are going on with it." That was the spirit of the right hon. Gentleman's first letter to me. I do not know whether he wrote to other hon. Members like that. He must treat the matter much more seriously.

Why cannot we have some guarantees about paper making in addition to the guarantees that the right hon. Gentleman has given about pulp? It is all right for him to tell us, as he told me on 16th July, that the paper makers can invest in Sweden. That might enable them to secure pulp at the same price as the Swedish manufacturers, but it does not deal with the problem which the industry fears. I understand that, for technical reasons, the Swedes would still be at an advantage because through having paper making mills alongside the timber they cut out a process. Consequently, if the British manufacturer is to enjoy the same advantages as the Swedes, he must take his paper making mills to Sweden and not simply get pulp at the same price as the Swedes. As I said in a supplementary question, this would not provide employment in Scotland. Rather, it would put 17,000 people out of work.

These companies have invested large sums of money in capital equipment. In my own constituency hundreds of thousands of pounds have been spent in the Inveresk mills. It is very difficult for these people to stop this development and go to Sweden. And it would not help the workers in the industry.

I appeal to the right hon. Gentleman to give us something better than we have had to date. Nobody in Scotland to whom I have spoken, neither workers nor management, is satisfied with the present position. We want something better, and I sincerely hope that we will get it before the House rises.

1.50 p.m.

Mr. William Hamilton (Fife, West)

I want to protest at the Government's cavalier treatment of this industry. I understand that there were no prior consultations between the Government and this industry before this Agreement was reached, and that subsequent consultations have been due to the industry's initiative in arranging them.

The hon. Member for South Angus (Sir J. Duncan), who through us was given the opportunity to speak in this debate, said he thought that the position was being exaggerated by the paper-makers, but he went on to say that the Scottish position was a special one because we were peculiarly sensitive to the unemployment position. We initiated this debate because of the unemployment problem.

The Secretary of State for Scotland took a contrary view. When the local authorities and the paper manufacturers wrote to the Secretary of State asking him to meet a deputation from them, the right hon. Gentleman bluntly refused. The letter of 10th July to the five county councils states: The Secretary of State appreciates the interest of Scottish local authorities in whose areas the paper industry is an important employer of labour, but as there is no distinctively Scottish aspect of the problem, … he feels that no useful purpose would be served by his meeting the proposed deputation. Who does the Secretary of State think he is? What does he think he is employed for, if it is not to meet such deputations when unemployment is being threatened?

The recent figures of unemployment in Scotland have been mentioned. These figures highlight the argument that we are putting forward. The President of the Board of Trade knows that the industry cannot exist in the face of Scandinavian competition without protection of some kind.

Mr. Alan Green (Preston, South) rose

Mr. Hamilton

I cannot give way because I have only a short time available in which to speak.

My information is that the 20 per cent. reduction in the tariff next year will cause the marginal firms to go out of business. Less than an hour ago I was talking to a representative of the trade in the Central Lobby. He told me that when the 20 per cent. tariff reduction comes into operation next year, marginal firms in England will go out of business If that is the case in England, how much more is it the case in Scotland?

Another point that has been mentioned is that four out of five mills in Scotland are in rural or semi-rural areas. The Cairncross Report in 1954 was at great pains to point out that the Government ought to take action to safeguard the future of these places. They would be dealt a body blow if the Agreement went through unamended.

Not only are these mills in rural or semi-rural areas, but very often whole families are employed in them. In my division, three or four members of a family are employed in the same mill. If the mill closes, there will not be just one income less in the family but the whole family will be out of work at one blow. This will happen in places where, as everyone knows, it is extremely difficult to find alternative employment.

We know what the Government's reply is likely to be, so does the trade. The Government's attitude is that the trade has ten years in which to put its house in order and make itself competitive. The trade's reply is that it cannot be competitive with the Scandinavian industry. Scotland deals with specialised papers, the market for which is not capable of great expansion and the industry itself is incapable of mass production methods.

The industry today is not inefficient. Between 1951 and 1957, £15 million was invested in the Scottish paper industry, mostly in the last two years of that period. I was told yeterday by leading members of the trade that, because of this threat of the Agreement, they are already stopping capital investment in the industry, or at least slowing it down. That is the position today.

The paper industry representatives know what the Swedes did in the early 1950s and that it is no good hoping that the Swedes will play the game. A written agreement is the only way in which our paper industry can be protected. It is well known that the Common Market in Europe will mean a smaller outlet for the Scandinavian industry and that this, in turn, will mean that the Scandinavian people will look for a profitable market in this country.

The President of the Board of Trade will correct me if I am wrong, but I believe that France is putting a high tariff on foreign pulp. This means that pulp will be directed from the European market to this country. That is a fear which the trade has expressed.

I understand that the Austrian and Swiss paper manufacturers are in close consultation with their Governments. The attitude of the Austrian and Swiss Governments is very different from that adopted by this Government to the British paper industry. The trade in this country is concerned about the approach of the Government to this problem.

I understand that the trade made representations to the Ministry of Labour yesterday. It is a pity that a representative of that Ministry is not here. I have seen a copy of the document in which the trade put forward its case and made one or two proposals, which I hope the right hon. Gentleman will seriously consider.

The first proposal was that the trade would prefer a longer period of readjustment. I understand that the original proposals allowed a ten-year period for readjustment. The second proposal dealt with the largest tariff reduction of 20 per cent. in the first year. The trade's proposal is that the smallest reduction should be made initially so that it can get a little additional protection to readjust itself. Thirdly, the trade suggested that there should be some kind of quantitative restriction on Swedish imports, at any rate in the initial period. In other words, the trade frankly thinks that the safeguards in the White Paper are not enough. The safeguards will only come into effect in very exceptional circumstances and when the damage has been done.

Another point which affects my constituency, and which was mentioned by my hon. Friend the Member for Edinburgh, East (Mr. Willis), was the effect on the coal industry. The Scottish paper industry uses 800,000 tons of coal a year, and the British uses 3 million tons. Moreover, it uses precisely that sort of coal which the Coal Board cannot sell, namely, small coal. If the industry has to contract the effect will be felt in the coal industry and in other industries, such as the machinery manufacturing industry and the chemical industry.

I ask the right hon. Gentleman not to underestimate the importance of the representations which have been made to him and the anxieties which are felt in the industry. If he will give an undertaking that he and the Minister of Labour will examine the document presented to him yesterday and give a reasoned reply to it, the industry will be very grateful.

Mr. Deputy-Speaker (Sir Charles MacAndrew)

Sir David Eccles.

Mr. J. T. Price (Westhoughton)

On a point of order. I should like your guidance, Mr. Deputy-Speaker. I would not like it to go on record that in this short debate the only Members who have protested are Scottish Members, simply because you have only called Scottish Members. The problem certainly is not restricted to Scotland. I wish to register a protest on behalf of my constituents in Lancashire. I appreciate the limitations of time, but it would be a lopsided representation of the situation if it were not put on record that Lancashire protests just as Scotland does. I feel duty bound to point that out.

Mr. Deputy-Speaker

As the hon. Member knows, there is a list of three Members who have put their names to the debate on the paper-making industry. They are the three hon. Members whom I have called, and I called them in the order in which they appeared on the Adjournment List. I had no option.

2.0 p.m.

The President of the Board of Trade (Sir David Eccles)

I understand the objections of the hon. Member for Westhoughton (Mr. J. T. Price), because there are three great paper-making areas in the United Kingdom. The largest is in Kent, near London; the second is in Lancashire; and the third in Scotland. The hon. Gentleman is correct in saying that this problem affects the whole industry. That is why the Board of Trade sees deputations from the industry, and why my right hon. Friend the Secretary of State for Scotland—with whom I am in close consultation about this matter—passes the delegations on to me. That is quite right, because this problem affects the whole industry.

Mr. William Ross (Kilmarnock)


Sir D. Eccles

Yes, but I am coming to the Scottish problem. We recognise the reasonableness of the anxieties felt by certain parts of the paper industry as to the results of the Association of the Seven, but I want to take issue at once with the hon. Member for West Lothian (Mr. J. Taylor), because I think I heard him say that he was not sure that Scotland would benefit from this Association. That is not our view. We believe that as a result of the Free Trade Area of the Stockholm group there will be more and not fewer jobs in Scotland.

Mr. Willis

In what industries?

Sir D. Eccles

I am coming to that.

At the same time, it is obvious that when a number of countries join together in a free trade area the producers with the best natural advantages will do better than those less fortunately placed. If any country which was a candidate for a free trade area tried to make certain that every single branch of its trade would show a gain, that country would not be elected to the club, because the purpose of the free trade area is to expand trade in general. We must examine the position from time to time to see whether that results in any special difficulties.

There is no comparison between Danish agriculture and the case of the paper makers. Danish agriculture did not ask for protection. What it asked for was a chance to sell somewhat more of its products in the markets of the remaining members of the Seven, because it knows that Danish industry will be very badly hit when the tariffs go, because its industry is not as advanced as industry in some other members of the Stockholm group.

Mr. J. T. Price

Surely that is a fallacious argument, isolated as it is to Denmark, because Denmark is primarily an agricultural and not an industrial country, as we are.

Sir D. Eccles

The hon. Member must realise that there are industries in Denmark and that they are at risk, probably far more than our paper industry, as I hope to show.

The belief of all the members of the Stockholm group is that their total trade will be substantially greater as a result of the Association. It is confidently expected that throughout the area demand in general, output and trade between the countries concerned will expand. That will assist the general health and expansion of United Kingdom trade, and it will be of special benefit to Scotland.

The hon. Member for Edinburgh, East (Mr. Willis) raised the question of employment being more vulnerable in Scotland than it is in England. The House has been considering for the last six months on what conditions we can best tackle the difficulties of employment in Scotland. The first and foremost condition is that there should be a high state of activity of trade in the United Kingdom as a whole, because only then is it reasonably easy to steer industry to Scotland. That is one of the benefits that we shall get from the association of the Seven.

I now turn to particular Scottish industries. We have considered the matter carefully, to see where the benefits will be. Wool textiles, hosiery, printing and important sections of the engineering industry can all be expected to increase their exports, because other members of the Seven are at present importing the products of these industries from America or from the Common Market, and we shall have opportunity to get some of that trade. The Scottish tourist industry is also likely to gain, because there will be much more travel to and fro between Scandinavia and the United Kingdom, and the natural ports of call for Scandinavians are in Scotland.

Dr. J. Dickson Mabon (Greenock)

What kind of engineering will be expanded as a consequence? Is much of it located in Scotland?

Sir D. Eccles

I believe that it is earth-moving equipment and heavy industry of a kind to which a tariff removal of 20 per cent. makes a considerable difference.

On several occasions recently hon. Members have rightly remarked that the absence of a Free Trade Area has reduced the attraction of the United Kingdom as a field for American investment, and that is true. This is a point of particular interest to Scotland, because the opportunities there for American firms have already been proved up to the hilt by some very successful ventures. The Stockholm Agreement will be the green light to American firms to follow in the tracks made by those who have already done so well.

Miss Margaret Herbison (Lanarkshire, North)

The right hon. Gentleman talks about the attraction of Scotland to American firms, but what guarantee have we that the Government will do everything possible for the paper industry, to ensure that alternative employment in the industry is available in some of the isolated places? I would refer to one such area—Caldercruix—where the blotting paper of the House of Commons and Government Departments is made. What guarantee have we that that area, where unemployment at present is over 7 per cent., will not be left without any industry at all, as a result of which people have to move their homes? This has often happened in my constituency.

Sir D. Eccles

I can give the hon. Lady the assurance that if it does happen—and I do not think it will—that there are patches of serious local unemployment because the paper industry is being hit by competition, we certainly will use all the powers we have.

The general expansion in trade which will come about because the United Kingdom is very well placed in this Free Trade Area of the Seven countries will give us, I have no doubt at all, fresh expansion in different industries, and we will have to do our best to steer it, as we intended to do in any case, whether there is a paper crisis or not, to Scotland.

I now want to mention this, because I think that hon. Gentlemen opposite have not got the facts right about the paper industry.

Mr. Ross

We have got the facts about the Government right.

Sir D. Eccles

When we were discussing the Free Trade Area for the 17 countries, we had consultations with the papermakers, who told us that, after giving the matter a good deal of thought, because Sweden was in the 17, on balance, they were in favour of the Free Trade Area of the 17 countries. [Interruption.] Allow me to give the facts. They said that very many of them welcomed it. They know, of course, that any expansion of trade always results in a higher standard of life and a higher consumption of paper. We have only to look across the Atlantic and see that the consumption of paper per head in the United States is double that in the United Kingdom. We have got to equal this and we will.

Now, the papermakers have represented to us that the Association with the Seven is something much more serious for them than that with the 17 countries, since it includes the biggest paper exporters in Europe, but excludes the big consuming countries of the Common Market. I believe that these fears are exaggerated. About one-fifth of the United Kingdom paper industry's output is newsprint, which is duty-free and will not be affected at all. At the other end of the trade, there are whole ranges of specialist papers which are proof against competition. [HON. MEMBERS: "No."] Yes. Excuse me, but I must be allowed to give the facts as they are known to the Board of Trade.

Where the Scandinavians have an advantage is in certain papers in the middle group, where the integration of the industry from log to paper give them an edge, but a very large section of the United Kingdom industry is based on blending wood pulp and rags or wood pulp and waste paper or esparto pulp, and is not in competition, and will not be, with the Scandinavians. We reckon that only one-fifth of the whole of the output of paper in the United Kingdom is directly vulnerable to competition from the Six.

I now come to Scotland. Half the paper output in Scotland is based on esparto, and, therefore, is not in direct competition with the paper made from pulp from Scandinavia. Another quarter is cardboard. The cardboard industry generally in this country uses a high proportion of waste paper, and it is very much easier to collect large quantities of waste paper cheaply in a highly populated country like the United Kingdom than it is in sparsely populated countries. We have an advantage there, and we do not see why the section of the trade, the raw materials of which are not wood pulp, should be severely attacked by Scandinavian competition.

Mr. Willis

I am sorry to interrupt the right hon. Gentleman, but is there not a point here that the price difference becomes so great that there is a change in consumption from the higher grade papers?

Sir D. Eccles

We do not believe that that is so, because the great competition has come—and this is really the point—from the concentration of new mills round London. They are the people—not the Scandinavians—who are making their way in this market in certain lines.

There is another advantage which we have over the Scandinavians, and one which I think is going to grow. Nowadays, a modern form of production is to manufacture the paper and convert it into a package or carton so that it is ready for the insertion of the product which is to be put inside the package. That is becoming very much more common in America and is a very modern form of production. Therefore, we have a complete advantage over Scandinavia, which will not be able so easily to send us the packages, and I think that that form of paper manufacture is likely to grow.

All in all, we calculate that not more than one-fifth, mostly Kraft paper and board, of the whole output of paper in this country is at risk from Scandinavian competition. I think I should mention that in Scotland the proportion is probably less, because only about 5 per cent. of Scotland's output is Kraft paper.

Then, I would refer to the fact that there is a ten-year period for the reduction of the tariffs as envisaged in this preliminary draft for the agreement. That will give time for the industry here and its counterparts in other countries of the Association to make orderly adjustments, which, indeed, the Swedes have said they have in mind.

Mr. Ross

The 20 per cent. cut is very steep.

Sir D. Eccles

We have to start with a 20 per cent. cut, for this reason. The Common Market has already made one 10 per cent. cut, and will make its second 10 per cent. cut on the 1st July next year. It must be good sense that the Free Trade Area of the Seven should have the same timetable. We have, therefore, to make a first cut of 20 per cent., so that if, as we hope, by the time we come to an association with the Six, our tariff schedules will very easily be married.

As my hon. and gallant Friend the Member for South Angus (Sir J. Duncan) said, fair competition is provided for in this draft, in paragraphs 34 to 47, and we certainly intend to write in these rules. I am quite clear in my mind that unless free trade means fair trade it is not worth having, and, therefore, we have to be particularly careful. It is in the interests of the United Kingdom that the whole world with which we trade should observe the rules of fair trade. That is why we have G.A.T.T. and other instruments.

Some paper makers fear that the Scandinavians might divert all their exports from the Common Market countries to the United Kingdom. Of course, there is absolutely no reason why they should. Why should they? They have got a good market in the Common Market countries now over the existing tariffs. Why should they not go on selling over the existing tariffs? Indeed, that is what the Swedes have said. In fact, we had talks about paper in Stockholm, and two representatives of the British paper industry were there at the meeting.

The Swedes said that they have no intention of abandoning their markets inside the Six, and, equally, no intention of trying to expand their markets in lines in the United Kingdom where they recognise that the United Kingdom has a great advantage.

I think, therefore, that these fears are exaggerated. The industry has done very well in the last two years. Of course, that stems precisely from the extraordinarily high quality of the investment in the paper-making industry which has been made in the past few years, leading to very large runs of production on very efficient machines. I think that our paper-making industry will come out of this fairly well.

I should like to repeat, that eighteen months ago the papermakers said that they would not object to, and many of them welcomed, a Free Trade Area with the Seventeen. We are making the Association of the Seven precisely because we believe that is the best way open to us to get what we all want, which is a wider free trade area embracing the Common Market of the Six.

If one considers the interests of Scotland generally, I think it is clear enough that if the United Kingdom did not enter into a Free Trade Area in Europe, Scotland's trade as a whole would suffer and Scotland's ability to attract American and other overseas investment would be reduced. There must be, as a result of a Free Trade Area, a greater volume of goods changing hands and going across the frontiers—this at a time when packaging is steadily coming to the fore and when the consumption of paper is increasing. It always goes up as income is more widely spread, as the population grows, and so on. The British paper industry may have to change a line here and there, but it will find lines which are profitable and it will come out well.

Finally, one comes to the safeguards in this document which say that if very rapid and very serious unemployment is caused in any industry—

Mr. Hamilton

What does that mean?

Sir D. Eccles

—then the matter will be brought before the institution.

Mr. Hamilton

What do those words mean?

Sir D. Eccles

It is absolutely impossible to say in advance, because, as one hon. Member said in this debate—and it is interesting and true—paper is practically the only British trade which is fearful. But imagine what it is like in the other countries, where they have the prospect of the full force of British industry coming into their markets. Therefore, for us to try to get special safeguards in the way of quotas or tariffs before we are hurt, and in a case where certainly the Board of Trade is not by any means clear that anybody will be hurt, would be to offer an example to the rest of Europe which would be very much to the disadvantage of our country.

I hope, therefore, that hon. Members who have paper mills in their constituencies—and they are not very widely scattered—will find in today's debate some comfort for their constituents.