§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]
§ 4.25 p.m.
§ Mr. John Nott (St. Ives)
After the Foreign Secretary's statement and the tragic circumstances surrounding it, I think that the House will find it difficult to effect the change of mood which our debate on trade requires. As my hon. and learned Friend the Member for Beaconsfield (Mr. Bell) said a few moments ago, we have just been discussing a deeply emotional matter which causes the whole nation grave concern. To switch from the horrors of the Rhodesian incident to economics is no easy task, not least because I should like to discuss world trade issues in a fairly free-ranging manner.
I hope that the House will forgive me if I attempt to effect the transition in a gradual way. In order to do so, I have had to change the content of the early part of my speech because the House's mood will be rather different from what I originally anticipated.
By choosing the subject of trade for this debate, we are not in any way seeking to pillory the Secretary of State. We chose the subject because it is topical and of great importance to the nation. Yet it is virtually never discussed in Parliament as a separate issue. We are accustomed to frequent debates on foreign policy. Trade comprises the most important part of our foreign policy. But trade is in 1978 still a somewhat turgid, if not sordid, parliamentary subject, unsuitable for gentlemen and certainly for hon. Gentlemen in the House. I think that the Secretary of State would agree that that is the general attitude towards it.
Because of that, the Secretary of State has been able to pose among intellectuals outside the House as almost the creator 1061 of modern mercantilism—a type of messiah of modern mercantilism—criticising foreigners such as the Germans for inconsistencies and implying that only he mixes genuine free trade sentiments with political reality, as if political reality exists only in Birkenhead and that it does not worry Bonn or anyone else. In the process, it tends to be forgotten that half the Secretary of State's parliamentary colleagues and a fair proportion of the Cabinet are emotionally wedded to putting a ring fence around Great Britain, to creating a kind of fortress around Britain out of which I believe that they would successfully subjugate the British people.
The Prime Minister himself is threatening to pull up a drawbridge of the fortress unless every other country in the Western world inflates its economy as fast as we would wish to inflate our own, given, of course, that the Prime Minister shortly will be seeking re-election.
I hear—I think that there must be some truth in it, and no doubt the two members of the Cabinet who are present will confirm this—that, this time more than any other, there is a real determination to achieve something concrete at the summit, rather than a vacuous communique with no commitments, which would suit the personal inclinations and the political situation of the Prime Minister very well indeed.
As the multilateral trade negotiations come up to the 15th July deadline, what is increasingly demanded of the present Labour Government is a firm statement against the proliferation of State aids and subsidies which have come to represent perhaps the most bizarre array of devices for unfair competition among the Western nations.
A country such as Britain, which depends upon an open trading system almost more than any other country for the maintenance of jobs and for the prosperity of its people, is now considered to be—I make the comment objectively—perhaps the most protectionist-minded and to have the weakest Government in resisting pressures among all the Western allies. Perhaps, therefore, the Secretary of State will take the opportunity of telling us what the Government intend to say in these months leading up to the summit about the charges that are 1062 increasingly made against the Cabinet that we are the leaders of the world in the field of political subsidy and of devices—non-tariff barriers—to restrain the open trading system.
Having said that, I understand the political argument for import controls and for greater protection which are frequently advanced by Labour Members below the Gangway. I understand the political argument all too well. The hon. Member for Tottenham (Mr. Atkinson) is not present in the Chamber today, but I take one quotation from what he said recently:If the whole of the Socialist case is about planning the economy, how can we plan it in the absence of controls on our external trade?"—[Official Report, 3rd November 1975. Vol. 899, c. 10.]Of course, the hon. Gentleman is right in his own terms. By that statement, he demonstrates his Marxist credentials admirably. A protected Britain would inevitably be a Socialist Britain, necessitating planning agreements, the central allocation of resources and a sort of Stakhanovite determination to increase investment at the expense of personal spending.
§ Mr. Alan Clark
As a matter of historical accuracy, perhaps I may say that this country has been protected in the past, and very successfully protected, in terms of Conservative Governments. I do not remember any Socialist Government doing it.
§ Mr. Nott
In the content of my speech, I shall be comparing the hon. Member for Tottenham, in his likeness, with Joseph Chamberlain. I shall be referring to the right hon. Member for Down, South (Mr. Powell) as being the modern reincarnation of Herbert Asquith. Certainly the arguments for and against free trade have not varied much. It is just the people who have changed. If my hon. Friend the Member for Plymouth, Sutton (Mr. Clark) wishes to align himself with the hon. Member for Tottenham and Joe Chamberlain and other famous 1063 characters in British Tory Party history, that is fine by me. I shall be coming on to the arguments for and against free trade in a moment. Perhaps I may continue with the political arguments before I get on to the party and economic arguments involved.
I think that controls upon our imports of the kind suggested by the Cambridge school—I shall go into some of its arguments shortly—would not only provide a growth in monopolies on both sides of industry but would be an invitation to endless lobbying, the peddling of contracts and the corruption of bureaucracy which has been evident in virtually every country that has pursued the course of import controls of the kind advocated by Labour Members.
I say to my hon. Friend the Member for Sutton that in the process the British housewife would pay much higher prices for her goods and would have much less choice from which to choose when she went to her supermarket. Her husband, if he had a job at all, would still be working in an ill-equipped large factory in heavy industry. In this perhaps one can say that she and her husband would come to share some of the pleasures of living and working in the Soviet Union, but it is not precisely what the British people want.
The tendencies to which I have referred in our country under Socialism today are there already; I say no more than that. They can be seen even without a wall of controls around our foreign trade. To justify those controls on political grounds, as I have been saying, I can understand. They would help to bring about a truly Socialist society. But to justify them on economic grounds seems to be a grave mistake, because the political arguments are not really arguable. I do not understand how an Englishman such as the hon. Member for Tottenham could really want the kind of political society which he is seeking for the British people, but it is an unarguable fact that he does, and it is so astonishing to me that there is nothing much that I can say in answer to it. However, when the hon. Member seeks to argue the case on economic grounds the point is arguable. That is what I shall attempt to do, briefly, in my speech.
1064 Up at Cambridge there is some disagreement about whether we should describe the economic process, which according to Cambridge calls for import controls, as the de-industrialisation of Britain, or as what Lord Kaldor calls the pastoralisation of the British economy. I suppose that Lord Kaldor's description is a rather more romantic Hungarian one than that of Wynne Godley. But both of them, if they were to succeed in achieving their objectives—I say this without any demur—would reduce Britain to a Socialist slag-heap and would create just the type of political society that Labour Members below the Gangway want.
I see the Secretary of State essentially as a single blade of grass, rooted rather insecurely in the industrial slag-heap of Socialism. I admire his pertinacity. I admire him very much. Far be it from any of us to reduce his salary. He has been extremely effective, and of all among his colleagues I think that he is grossly underpaid.
I wish that I could say that of the right hon. Gentleman the Chancellor of the Duchy of Lancaster. He does not take any salary at all. Yet, in my view, he costs too much. He is an expensive hobby. Despite his personal charm—which I acknowledge, and which all of us in the House admire—in public life the Chancellor of the Duchy of Lancaster—I am glad to say that he will be winding up the debate—is an inflator, a compulsive debtor, and he is as capable of speaking for free trade, free enterprise and a free society today as he is of voting against all of them tomorrow. In that, I think that he is a true social democrat.
I come back to my hon. Friend the Member for Sutton. I come to the question of the arguments for and against free trade. As I have said, I do not think that they have much changed since 1900. I think that that was more or less the period to which my hon. Friend was referring. The only difference is that both sides now have computers—the Cambridge model on the one hand and the Oxford model on the other hand—and into these computers are programmed whatever assumptions are necessary in order to bring about the desired result. That is virtually the only 1065 change that has come into all the arguments.
I think, however, that the vocabulary and the jargon have changed and, most of all, there is now no attempt whatsoever at intellectual consistency. One might expect that the Tribune Group would be the leading castigators of the Multi-Fibre Arrangement. One might expect it to castigate the MFA as a trade conspiracy against the poor. If one looks at it in terms of the workers in Bangladesh, one realises that that is precisely what it is.
Many Labour Members, perhaps rightly, spend much of their time shouting about the poor conditions in which Tamils work in the tea estates in Sri Lanka. They spend much of their time, I think rightly, castigating, let us say, Consolidated Goldfields for exploiting black miners in Southern Africa and in Cornwall—which it is good at; I say that with the help of parliamentary privilege, which I should not do. Yet those same hon. Members find it possible for their hearts to bleed for the workers in Bradford and those in Bangladesh at precisely the same time.
Similarly, their hearts bleed for a newborn lamb produced by a New Zealand farmer on 10,000 acres at the same time as they bleed for the agricultural worker in Wales earning £43 a week and for the Welsh hill farmer. There is a grave inconsistency there.
It is not obvious to me why it should be sensible for the United Kingdom to become dependent on world gluts of food but not on world gluts of steel, shoes, ships and textiles. I do not believe in this country becoming dependent on surpluses of either, but it is inconsistent that the Labour Party wants us to be dependent on world surpluses of food but puts up its hands in absolute horror at the thought that we should erect barriers against world surpluses of shoes, ships, steel and textiles.
Some controls are advocated purely to isolate specific industries from foreign competition. In a way, the arguments here for the Multi-Fibre Arrangement are an extension of the traditional argument for protecting infant industries. In some cases the wish is to protect senile industries, but the economic arguments are fundamentally the same. The attempt in 1066 a way is to construct an argument for protecting the senile industries with precisely the same economic arguments as traditionally were used for protecting infant industries. The most prominent advocate of that view is Commissioner Davignon in Brussels.
On the other side—this is a more interesting argument to discuss—it is proposed, as part of a coherent strategy to increase output and employment in this country, that we should have general import controls. The argument for it is that by that method one could set up a system which would bring about adjustments in the balance of payments without creating the inflationary pressures which are caused by changes in the exchange rate.
But, whether one brings about a correction of the balance of payments by a depreciation of the currency or by import controls, a curb to domestic spending by lowering real wages is essential. It would have to happen in both cases. Any gain from a marginal change in the terms of trade would be lost by even the most modest retaliation or any lowered efficiency.
At least, if one is seeking this adjustment—that is what the Cambridge school is seeking—surely it is better to operate on the currency, because that not only benefits the import side of the equation but also makes exports more profitable. It is wrong economically to look at only one side of the equation—imports—and ignore currency adjustments, which help exports and bring the economy back into balance.
If we sought controls, where would they come? Presumably the controls—I am now talking of the Cambridge school's proposals, which have great support in the Parliamentary Labour Party—would not be put on imports of machinery. There has been a faster increase in imports of machinery in the last 10 years than of anything else. Machinery is what industry needs to compete with foreign goods. That is at the heart of the cry for greater productivity and more investment.
Presumably the controls would not apply to food, drink or tobacco, because, in spite of the common agricultural policy, imports of those goods have fallen sharply in the past 10 years as a proportion of total imports. Therefore, the only area 1067 available, as I understand it, is light finished goods and consumer goods.
On the figures, an improvement of about 5 per cent. of our gross domestic product—roughly what the Cambridge school is seeking—would require a tariff of about 250 per cent. on a wide range of light manufactured and consumer goods. The figures of the Cambridge school, as I believe other economists have conclusively shown, are completely unacceptable.
If one rejects the concept of import controls, which we do, in favour of an open trading system, where can we look for our markets? The options are narrowing day by day, and, unless the summit can reverse that downward slide to protectionism, where shall we find our markets? Now, 27 per cent. of our gross national product, of all we produce, is exported. The figure for Japan is 8 per cent. and for America 12 per cent. Where shall we find the markets for those goods in a world of increasing protectionism?
I am sure that the foundation of our trade policy must lie within the EEC. In 1978 it provides us with an almost unique area—namely, a reliable free trade area in an increasingly protectionist world. We are dealing here with a large trading bloc, representing one-fifth of world trade. It is large enough for us to develop our technology, it is rich enough for us to sell our goods up-market and it is large enough again for us to test our competitiveness within it and develop the industrial and commercial specialisation without which we could never compete in the wider world.
So, whether hon. Members are for or against the Common Market for political reasons—I understand the arguments both ways—nevertheless, for the benefit of the nation's prosperity, whatever one's view of the political aspects, I cannot understand how anyone can wish to see trade barriers between Great Britain and the EEC. That is one sure open market for our goods in the world today.
§ Mr. Nott
Of course we are. We have been in deficit with virtually every country. As our general trading deficit reduces, so our trading deficit with the EEC reduces. The critics of our trade 1068 performance with the EEC should ask themselves where they think we shall sell those goods—27 per cent. of our GNP—if trade barriers are erected in the Community. I hope that hon. Members will answer that question.
Within the Community, our policy towards the United States and Japan should be based on reciprocity—on the mutual and balanced elimination of tariffs and non-tariff barriers. Here the outcome of the Tokyo Round is vital, and in this respect our Government have a major sacrifice to make by abandoning their commitment to the array of subsidies which they have erected. The Tokyo Round will not succeed and the summit will come out with another vacuous statement unless the British Government are able to show that they, too, are prepared to make their sacrifices.
I believe that our voice within the EEC must support, of course, the strongest negotiating stance towards the United States and Japan, but it should also be a voice for liberalisation, particularly in agricultural products, in State monopoly and in industrial subsidy. It is in these latter areas that the British have under the Labour Government been world leaders.
§ Mr. Mike Noble (Rossendale)
The hon. Gentleman said that we should show courage and abandon subsidies. Will he be precise and say which subsidies a Conservative Government would abandon?
§ Mr. Nott
I am happy to be precise, but all I have time to do is to give one example. Less than six months ago the Government provided 110 per cent. credit and massive subsidies for the export of ships to Poland. I give just that one example. That is an industrial subsidy that the Conservative Government would never have given.
I come now to the LDCs.
§ The Chancellor of the Duchy of Lancaster (Mr. Harold Lever)
I am curious to ask the hon. Gentleman whether he really believed the latter part of his statement, namely, that the Conservative Government would not have given a similar subsidy or did not give dozens of similar subsidies when they were in office.
§ Mr. Nott
Yes. The reason why we would not have done so is that even on a political calculation there are far more people working in our shipping industry—about 100,000—than in our shipbuilding industry. That is not a reason in itself, but there is nothing to be gained for the people of this country by our being world leaders in a credit race. I should be astonished if the right hon. Gentleman and the Secretary of State for Trade within the Cabinet actually supported the Polish shipbuilding deal. Indeed, if the Secretary of State did it would be a good reason for reducing his salary. I absolutely cannot believe that any Secretary of State for Trade would ever have dreamt of such a thing, but we shall have to wait for Richard Crossman's successor round on about 13th October to tell us the answer to all that.
I come now to a difficulty—our policy towards the less developed countries. This is the area which interests the hon. Member for Rossendale (Mr. Noble), who is waiting for me to put my foot in it so that he can campaign in Rossendale—which he cannot hope to win—on the argument that the Tories will abolish the Multi-Fibre Arrangement, that they will open the floodgates to imports and that they will "ruin your jobs". I know that he is busy at that game now and that hon. Members with marginal seats in Lancashire will talk all kinds of conceivable nonsense they can to delude their constituents.
I think that the less developed countries pose problems, not least because of their extreme economic nationalism and the manner in which they have—take the shipping industry—done great damage to our interests as a nation. Nevertheless, I think that we should support the transfer of resources to the poorer nations, but it must be on the understanding that it may be necessary to offset some gain to them by trading agreements for the orderly marketing of their products in our domestic markets. I am referring to items such as the MFA.
Towards the Eastern bloc we should remember that a vast proportion of the accumulated debt to the Western world of $40 billion has found its way into the arms programme of the Soviet Union. We have been paying it too much to destroy us. It is time we put our trade 1070 with it on a sensible strategic and commercial basis.
In general, our policies would involve the phasing out of subsidies. I emphasise "the phasing out of subsidies". I believe that we, like the present Government, would wish to be—indeed, we always have been in the past—a firm and resolute opponent of unfair trading practices, particularly dumping. I am personally far from satisfied that the Commission is yet equipped to handle antidumping cases expeditiously. We are doing our best to see, for instance, how the MFA is being monitored. That is a very important feature of our present trading arrangements.
It is also essential that we obtain a revision to Article 19 of the GATT—a new safeguard clause—to protect jobs against sudden and temporary surges of imports. As long as it is policed by GATT, it is fair and proper that we should have that protection against unfair trade.
So where do I criticise the Government for their policies for trade? I shall take a few minutes more in saying where. I have made it clear that as a nation our jobs and our standard of living are being eroded by the lead that the Labour Government are giving in "unfair trade". I also think—I address this more to the Chancellor of the Duchy of Lancaster than to the Secretary of State for Trade—that the Prime Minister's emphasis on demand, on macro-economic policy, for the summit is utterly misplaced. The constraints on real growth do not lie in a deficiency of consumer demand in Germany any more than they do here. I think that Chancellor Schmidt is right and that Premier Callaghan is absolutely wrong.
If the Chancellor of the Duchy of Lancaster is looking towards a new monetary regime which would replace the post-war system and deal with the massive surpluses in Germany and Japan, I would debate that with him freely, but to look to the stimulus of demand at this important juncture in the Western world would, in my view, only create renewed inflation.
The way to achieve real growth in world trade as well as in the British economy at present is to remove the multiplicity of constraints to flexibility, employment and output. All of them 1071 lie on the supply side of our economy and none of them on the demand side.
The Government's housing policies have contributed to an immobile society. People are trapped in public sector housing and families cannot move to new and better-paid employment.
The Government's employment policies are now a significant disincentive to recruitment in new and smaller industries. The Government's tax policies concentrate tax assistance on capital-intensive, low-return sectors of British industry. They are driving our most talented young business men into American industry and banking. They force our entertainers, our musicians, our artists, to live abroad. The hon. Member for Newport (Mr. Hughes) laughs, but what I have said is true, and the work of those people could be an important source of income for this country.
The Government's tax policies ensure that venture capital is institutionalised instead of personalised, by taxation at nil for institutions and at 98 per cent. for persons. The Government's financial policies crowd out the growth sector of our economy from access to development capital at reasonable rates of interest. How can any money be available out of what we produce in this country for private sector small, growing companies at reasonable interest rates when the Government have a borrowing requirement of £8½ billion? The money cannot be there.
The Government's exchange control policies and exchange rate policies are, in my view, misguided. Exchange control should be concentrated on removing exchange control restrictions which damage the invisible sector and smaller companies which wish to trade and invest abroad. In fact, the Government go the other way. The exchange rate policy surely should aim not at a stable currency, a stable exchange rate, with all the consequential money supply problems involved, but at generating a genuine two-way flow of capital funds by British residents and firms, as a result of a relaxation of exchange control. The Secretary of State is scribbling on his pad. I hope that he has heard all that I have said.
I want to see stability of the exchange rate achieved by a two-way flow of personal 1072 funds across the exchange rate, not by the Bank of England intervening with the parity of the pound and creating the sort of money supply problems which the Secretary of State himself well understands.
I shall not go into the greatest restraint of trade because I want to draw to an end. The greatest restraint of trade will always be a restrictive practice. It has been this Government's policy to enhance the monopoly power of some of our most powerful unions in almost every field of our political and economic life. Our trade union structure remains the single greatest obstacle to the prosperity of the nation. But here we shall have to bide our time. One day, one union, deluded by the arrogance of its own power, will overstep the mark just once too often, and then the nation will return to balance.
A trade policy is not about, or should not be about, putting more money into the British Overseas Trade Board or into overseas exhibitions financed by the Government—looking for new growth points here and growth points there, spending new money on the trade departments of our embassies overseas—all the minutiae of Government action, Government intervention and Government selective assistance, involving an ever-growing bureaucratic back-up. That is not what a trade policy should be.
A trade policy should be directed at removing the constraints about which I have been speaking. I believe that it would be possible to have a trade policy which was based unashamedly on national interests and which was not dictated solely by sectional pressures or by a bleeding heart.
I say not that it would be easy but only that it would be possible, and what we must do is move in that direction in the next few years. What is remarkable about our economy today is that, possibly, we still have the most efficient agriculture in the world, the second largest invisible sector in the world, and a great mass of small and medium-size companies which are the leaders in their field in exporting throughout the world. If these companies can survive the climate of the past four years—and together with our large companies they are now contributing 27 per cent. of our gross national 1073 product in export markets—one has only to imagine what our trade in the wider world would be like if we were to remove some of the constraints of which I have spoken.
§ 5.2 p.m.
§ The Secretary of State for Trade (Mr. Edmund Dell)
First, I thank the hon. Member for St. Ives (Mr. Nott) for raising this subject in the House today. As he says, we have too few opportunities to discuss these trade matters, which are nevertheless of considerable importance. I am especially grateful that the hon. Gentleman is not proposing to reduce my salary. In the House of Commons as it is constituted at the moment, one cannot be wholly confident of what would have happened if he had felt it necessary to move to reduce my salary.
I apologise to the House, as I have already to the hon. Gentleman, for not being able to be present later on to hear the winding-up speeches. In the course of pursuing the policy which the hon. Gentleman recommends we should pursue to a successful conclusion in the multilateral trade negotiations, now entering a further stage, I have this evening to go to Luxembourg to help to launch them on this further stage.
The hon. Gentleman compared these debates to foreign policy debates. I understand that it is the practice in foreign policy debates to engage in what is called a tour d'horizon. The hon Gentleman has engaged in something of a tour d'horizon, and so shall I, though perhaps selectively.
The hon. Gentleman referred to my so-called mercantilism. I assure him that the speeches which I have made, especially over the past two years, on international trade issues I regard simply as a modest contribution to open government. Rather than mouth the traditional pieties of liberal economics, I prefer to talk about the real questions which engage Governments in the course of international trade negotiations. I think that the traditional pieties of liberal economics, as I call them, tend to conceal rather than reveal the real questions on which nations engage when they discuss these matters.
Nations talk about the real interests of their people, as they perceive them, 1074 about achieving perceptible benefits through the trading system and about achieving a better balance in the trading system. In my view, the best way of achieving a more open trading system, and, indeed, the best way of ensuring that the trading system, open as it is, remains open, is to ensure for nations the possibility of achieving benefits from the trading system, for once they begin to believe that those benefits are retreating they will soon depart from it.
The open trading system has no such guarantees in the political structure of the world, or otherwise, which will guarantee its continuance if nations begin to believe that they are losing rather than gaining from its operation.
The hon. Member for St. Ives, I know, is a dedicated free trader—until one comes to specific examples. I always listen with interest when the eloquence about free trade turns to consideration of particular issues. I was waiting for that point in the hon. Gentleman's argument when he would begin to justify the Multi-Fibre Arrangement, because I observe that on the Benches behind him were certain Members who would be interested if he condemned the MFA.
Sure enough, the hon. Gentleman found a reason for justifying the Multi-Fibre Arrangement. The paeans of praise for free trade continued up to the point at which he had to meet a specific political problem—a political problem on his own side and an employment problem in the country as a whole. At that point, the hon. Gentleman became a mercantilist. I welcome him to our ranks.
The hon. Gentleman accused me of believing that there were political problems in Birkenhead but not in Bonn. I say at once that there are political problems in Birkenhead, though I hope that I shall be able to surmount them at the forthcoming election, whenever it occurs. I am only too appreciative of the fact that there are political problems in Bonn, and part of my endeavour in international discussions is to get people to talk about their own problems overseas as though they had political problems just as we have.
I take, first, the example of agriculture. The hon. Gentleman, I believe, would like a rather more open policy on agriculture. That is the British Government's 1075 position, too. We have argued that case in the Council of Ministers of the European Community. I listen regularly to the paeans of praise for free trade which issue from the mouths of German Ministers, as I have listened to them today, until the question of agriculture arises. I should like a little assistance from them on agriculture.
We are at present negotiating or, rather, pressing within the Community that there should be better access for Australian beef and New Zealand cheese, not to undermine the common agriculture policy but to give other countries which also have their standard of living to earn in the world an opportunity within the European Community market. I should like a little assistance on that from all those within the European Community who argue the free trade case. I do not want them to be selective any more than we are sometimes required to be selective, but they are selective. People in Bonn are aware of political problems.
The same might be said to be true of shipping. I have never claimed that the organisation of world shipping is a miracle of competition or free trade, but at any rate it is a lot better than the system which it is proposed to establish under the United Nations liner code. I should like a little assistance from all those within the European Community who argue the free trade and competition case in order to avoid the coming into operation of the United Nations liner code at least in the way it is currently suggested. But I find that there are political problems in Bonn, and it is suggested there that the United Nations liner code should be adopted.
As for the steel industry, I have noticed no difference in Bonn. True, there is talk about restructuring. Talk about restructuring is only too often the tribute which vice pays to virtue, and the essence of the matter is whether in the current difficult employment circumstances in all our countries we shall sustain our steel industries.
We know about the difficulties with regard to insurance. We should like as much of a common market in insurance as there is at the moment in goods.
I believe that the objective of British trade policy—indeed, this is what it is—is to preserve the open trading system. 1076 It is more difficult to preserve it today because of the economic conflicts in the world. Those conflicts are increasingly sharp because they appear to represent an increasing threat to employment, because fewer people see the benefits from the international trading system.
I want to preserve the system. I think it right that the British Government's objective should be to preserve it. But in preserving it we must take some account of the realities of what that open trading system, as we have built it since the war, really are. It is not a system that is perfectly free, perfectly open, perfectly multilateral. Indeed, if it were, we should not now need the multilateral trade negotions going on in Geneva.
The system does not have those characteristics for certain very clear reasons, among which is the fact that nations have determined for themselves, within their own sovereign jurisdiction, that they will maintain certain industries in their countries, whatever the competitive circumstances. The prime example is agriculture, but there are other examples, including steel. Given the industry's present excess capacity, we are approaching a world arrangement for the steel industry. Does anyone imagine that any country with a significant steel industry will allow it to succumb to competitive forces? Of course, countries will not. They will try to ensure that their steel industry adjusts, to ensure that it is preserved.
Much may be said at present about textiles.
§ Mr. Tim Renton (Mid-Sussex)
I was very interested in the right hon. Gentleman's comment that he thought we were approaching a world arrangement for the steel industry. Does he really confidently expect that that arrangement will be able to embrace brand-new producers of steel, such as Venezuela, Iran and Mexico, which have relatively small domestic markets and have so far been uninterested in joining such an arrangement?
§ Mr. Dell
The hon. Gentleman is absolutely right to correct me. When I was talking about a world arrangement for steel I was thinking of the European Community, the United States and Japan. He is absolutely right in pinpointing one area of great difficulty, the protected steel 1077 markets in certain developing countries which are used as a launch basis for significant exports of steel.
The reason I have given is one of the reasons why we do not operate, and will not operate, a totally free trading system in the world. To approach the discussions on the subject as though there were such a system, or could be one, is to be totally unrealistic.
We also have problems of protecting employment, an important consideration that Governments all over the world take very much to their hearts. It does not happen in this country alone. We have arranged selective import controls with the Japanese in relation to cars and other products that they export to us. But that is not done by the United Kingdom alone. We are not in the lead in following a protectionist path. It is done by the United States, as in the case of the footwear arrangement with Korea, by France, Italy and virtually every major industrial nation which in one sector or another wishes to accommodate the adjustment of its industrial structure to the economic realities of the modern world.
I am glad that the hon. Member for St. Ives came to the conclusion that, even with the general scope of his views, he could support what had been achieved in the Multi-Fibre Arrangement. That negotiation was successful. I believe that it has given confidence to British industry. It should ensure to the British textile industry a more secure market, both within the United Kingdom and within the EEC.
The position in respect of Mediterranean suppliers is still a little worrying, but the Commission must meet the obligations that it entered into on 20th December regarding Mediterranean suppliers generally. I hope that the matter will be settled satisfactorily to us. I think that in the Multi-Fibre Arrangement we have given valuable guarantees to the British textile industry.
For a series of reasons, when we talk about preserving the open trading system we are not talking about the preservation of a perfectly open, perfectly free international market. We are talking about preserving the current reality and improving it by steps if we can.
§ Mr. Max Madden (Sowerby)
Does not my right hon. Friend agree that in facing this reality, those who uphold the prin., ciples of free trade will face an increasing threat from those low-wage Asian economies with great growth potential and access to technology? Does not he believe that we shall have to build into the world trading system an arrangement whereby those countries which do not observe fair labour practices must pay an adjustment to recognise their non-observance of practices which prevail in other, predominantly Western, countries?
§ Mr. Dell
It is very difficult for this country or any developed country to try to control the social conditions in other countries. Nevertheless, my hon. Friend has pinpointed a developing problem, one that we propose to deal with in part through the multilateral trade negotiations. I hope that it can also be dealt with in part by beginning to open the markets of at any rate the more developed of the developing nations, by their beginning to accept certain of the responsibilities of the open trading system, from which they see benefits.
I understand that developing countries, even the more developed developing countries, wish to have a secure position. They do not wish to go into debt more than they can avoid. Therefore, they insist on maintaining a degree of control on their international trade much greater than the Western developed countries do. They show what the hon. Member for St. Ives called extreme economic nationalism. I understand why they do. It is because their position in the world is insecure. But I believe that the more developed of them need to begin to recognise the responsibilities as well as the opportunities of their trading position.
§ Mr. Nigel Forman (Carshalton)
On the question of the super-competitive countries and the appropriateness of a British or European response, what weight does the right hon. Gentleman's Department give to the following idea? Given that we shall not have a pure free trade system, for the reasons the right hon. Gentleman has given, would it not be much better for some of the money now going in large quantities to the purposes of protection, whether directly or indirectly, to be allocated to adjustment 1079 assistance in those same developed economies to help vulnerable sectors make the transition to areas in which they might enjoy a comparative advantage? How much work is being done in that regard?
§ Mr. Dell
A great deal is being done by way of adjustment assistance, or what is called adjustment assistance. But the hon. Gentleman should face the practical reality. It is easier to spend money on adjustment assistance than to achieve adjustment. If the mere expenditure of money on adjustment assistance sufficed to move people from one employment into another, I would expect that it would suffice to move the people currently out of employment into employment. That is a process upon which no country in the developed world has recently had a remarkably successful record.
We are dealing with a trading system that is mixed in its character, with protectionist elements in it, fortunately with a large open element, with different countries operating in different ways and in different relationships to it, with most developing countries following highly protectionist policies. Nevertheless, I believe that it is important to retain the greatest openness possible and to sustain the open trading system. It is in peril at present, although not primarily from any action proposed or intended by this country.
My first reason for believing that we should sustain the system is political. We have built up in the Western world a political relationship which it would be very difficult to sustain if we were launched into trade war. We have built up a defence system which might be imperilled by a trade war between the main elements in that defence system. Advantages to the consumer and to us arise from the system. If we thought of acting unilaterally, we should bear in mind the serious danger of retaliation against this country's exporting industries.
Contrary to the argument that I sometimes hear, other countries do not believe that this country is in so special a position, that it is so privileged by the nature of its problems, that a special dispensation should be granted to us to continue to export to markets overseas while protecting our own market, exceptionally, from imports. I do not support that 1080 course of action. I wish to sustain the open trading system, because I do not believe the Cambridge hypothesis. I do not believe that protection equals growth. That is a proposition for which I believe there is little evidence. Certainly we can point to some countries which have developed fast under conditions of protection. Equally, we can point to countries which, given protection, have failed to adjust and have sunk deeper into economic difficulties.
The only thing that can be said about protection is that perhaps thereby it is possible to guarantee survival. But we cannot be sure even of that. I do not deny that under the pressures of current economic circumstances, given the continuation of high levels of unemployment, the world might grow increasingly protectionist. But those who take comfort in that thought—from the fact that thereby growth will be stimulated—are misconceiving the realities of the situation. The dangers which exist today to the open trading system come from the lack of economic growth in the free world. This is widely accepted among the developed nations, certainly among those represented a few weeks ago at the OECD ministerial council.
Lack of growth makes problems of adjustment more difficult, although it does not make them less necessary. If we do not adjust we accept an economic cost which, ultimately, can be very great. Dangers come from the level of unemployment in the Western world. They come from the continuing Japanese surplus, the existence of which makes it more difficult for the rest of us to accommodate the matching deficits which the OPEC surpluses require. I understand very well the feeling of insecurity in Japan which led to the adoption of policies which, in turn, have led to these surpluses. Undoubtedly, the shock to the Japanese of the oil price increase was exceptionally great. But they must, as they have said, reduce this surplus and do so by opening their market, by importing more manufactured goods, not just by filling tanks with OPEC oil.
§ Mr. Julian Ridsdale (Harwich)
The right hon. Gentleman has been talking about growth. Surely an important element in encouraging growth is the recycling of capital, both from the Arab 1081 world and Japan. Is not this another side of the argument concerning the reduction of the Japanese surplus? We should encourage the import of capital and thereby produce the conditions that would enable us to deal with some of our unemployment. The Japanese would be willing to export the capital.
§ Mr. Dell
As I said the other day, I would certainly welcome Japanese investment in this country, if that is what the hon. Gentleman is proposing. If the Japanese are to invest in the European Community, I would prefer that they invested here rather than in any other of the countries of the Common Market.
§ Mr. Nick Budgen (Wolverhampton, South-West)
Would the right hon. Gentleman comment upon the last attempt made by the Japanese to open a television factory in this country, something which was greeted with a great deal of opposition, principally, I suspect, from the trade union movement, which opposition the Government did very little to condemn?
§ Mr. Dell
That attempt was also opposed by the employers. I say to the hon. Gentleman that I wish that the possibilities for inward investment in Japan were as open as the possibilities of inward investment in this country. I should like to see Japanese investment located in this country. My right hon. Friend the Minister of State for Industry has recently been there.
It is arguable that there is a limit to which even the Japanese Government can control the operations of Japanese industry. Certainly one thing which the Japanese Government could do at this moment to improve the atmosphere in the negotiations over the multilateral trade arrangements is to make a much better tariff offer than they have so far done. The tariff offer which has been made is totally unacceptable and if it is left on the table as it is I believe that the European Community will have to react accordingly in respect of its tariff offer. There are also problems which arise from the United States' deficit. a deficit stemming very largely from the size of its oil imports and from the rise of protectionist sentiment in the United States.
1082 This brings me to a brief discussion of the present situation in the multilateral trade negotiations. So far these have largely taken place between Japan, the European Community and the United States, although very soon all other countries will be clamouring to join. The arrangements cannot be finalised without the participation of many other countries.
The United States already has a large surplus with the European Community—about $6 billion in 1977. It cannot hope that, to help it pay for the oil, the European Community should accept an even larger deficit with the United States. I hope that that will be in the minds of the American negotiators when they discuss the various difficult issues still to be settled within the multilateral trade negotiations.
There is first of all the subject of agriculture. We are willing to help here. We wish to provide better access for external supplies of agricultural produce into the European market. If we can achieve that, we would also hope to help Australia and New Zealand with their current requirements of the European Community in respect of better access. I hope that part of this problem will be tackled successfully through the International Wheat Agreement, and I hope that we, for our part, will achieve—notably for the benefit of our Scottish whisky producers—the wine gallon assessment system. There is no problem for this country over our relations with external suppliers of agricultural goods. I believe that all this can be done without in any sense undermining the common agricultural policy.
I turn now to the subject of tariffs. Here the position is, unfortunately, still rather unsatisfactory. In this negotiation we were aiming to achieve not just a reduction of tariffs—phased over eight years with a break clause over five—but a harmonisation of tariffs. The characteristic of the American tariff has been that it has a series of high peaks. We thought, correctly I believe, that only by harmonisation would real reciprocal benefit be achieved. I cannot say that the United States' offer represents a satisfactory offer. There is one notable example of great interest to British industry, and that is to do with woollen textiles, where the 1083 United States' offer is altogether insignificant and comes nowhere near meeting the requirements.
I have the pleasure of negotiating with the United States from time to time on civil aviation matters. There is no figure on the American scene for whom I have learned to have a greater admiration than that of Mr. Alfred Kahn, the chairman of the Civil Aeronautics Board, who, the House will remember, is a devoted exponent of competition in civil aviation. I wonder whether I might modestly make a suggestion to President Carter to the effect that he should remove Alfred Kahn from the chairmanship of the CAB, where he is no longer needed, and put him in charge of the textile industry, where exactly the same philosophy of competition would be of mutual benefit. So far, we have not achieved, in the United States' offer, the sort of response by way of harmonisation which I would have expected.
§ Mr. Nott
Almost everything the right hon. Gentleman says about the position of the United States is correct. Certainly no one is asking the British Government to declare their hand in what will be very difficult negotiations, but would it not be possible to say that we, too, have a few beams in our eyes? Is it not the case that the Americans are asking us to make some concessions on regional policies, industrial subsidies and other of our non-tariff barriers? Will the Secretary of State actually listen to what other people think about us?
§ Mr. Dell
The hon. Gentleman is absolutely right. Not merely do I listen to what other people say about us; I frequently tell them what they should say about us. I frequently say that there are many beams in our eyes and that those beams represent our political realities. I ask that others should be as honest with themselves in what they say about their own policies. I entirely agree with the hon. Gentleman. I do not go into any negotiations pretending that in this country we have a pure free trade policy. I do not go into any negotiation pretending that we do not have protective arrangements in respect of these voluntary arrangements that we have with a number of sources of outside supply and the rest. The subsidies that we give, so-called, are, after all, public facts. But they must for their part conduct this discussion on 1084 exactly the same level of acceptance of these realities. This is exactly the point that I am trying to make. We shall arrive at better understandings if it is in these terms that we discuss them.
On subsidies, I always listen with particular interest to the hon. Gentleman, and, indeed, to anyone else who was a member of the previous Conservative Government. My mind goes back to the Industry Act 1972, which I criticised again and again from the Opposition Benches as the most lavish handout ever proposed by any British Government to British industry. Is it the subsidies provided in the Industry Act 1972 to which the hon. Gentleman was referring? I hope that we can come to some arrangement about subsidies which will enable us to achieve success in the multilateral trade negotiations, but this cannot be allowed to undermine the regional and industrial policies which we follow in the United Kingdom, and which are followed widely in the European Economic Community. It cannot be on that basis that we achieve any such understanding.
I should love to see the abandonment of subsidies to the American shipping industry. That, no doubt, would do a great deal of good. There must, indeed, be understanding of each of our interests before we can come to an agreement.
§ Mr. Dell
If the hon. Gentleman will examine once again the Industry Act 1972, he will find that there was no level of subsidy whatever that could not be provided under that Act, and therefore the assurance that he is asking me to give would be meaningless.
In the multilateral trade negotiations, the Tokyo Round, we have a long way to go on a number of issues. The timetable is pressing. The date has been agreed as 15th July. Whatever we can do by 15th July, clearly a great deal of detailed tidying up will be necessary thereafter. But all those who are participants in the negotiations accept that it 1085 is vital that they should be successful, not even primarily for economic reasons but for political reasons. It would be a damaging blow to the entire world trading system if we failed to come to a successful conclusion in these negotiations.
We shall try to make the negotiations a success. Rules provided in the negotiations for the further development of international trade will not, however, be enough. If the open trading system which we have established is to survive without crumbling further, we shall need faster economic growth, a better balance in trading relationships, an understanding of each other's trading problems, and a willingness to discuss and to negotiate about them. The negotiations are to reconcile national interests in as peaceful a way as possible, without trade war, and with mutual advantage. If we can achieve that objective, I think we can preserve the open trading system from further serious crumbling. That, at any rate, is the objective to which the British Government are dedicated.
§ 5.34 p.m.
§ Mr. Michael Shersby (Uxbridge)
We have listened to two very interesting and very wide-ranging speeches this afternoon, and I should like to follow them with a speech that is designed to look at a rather narrower aspect of Britain's trade with the world.
I was very glad indeed to hear the Secretary of State say that the objective of British trade policy is to preserve the open trading system, although, of course, he entered some reservations about the way in which an open trading system should work. There is no doubt that Britain lives by its trade. It is often said and we all know that it is true. But we all know that it is increasingly difficult, in the competitive times in which we live, for many companies in this country to operate as effectively and efficiently as they would like to do.
We also know that many companies in Britain today are facing very stiff competition indeed, not only from other member countries of the EEC but from Japan, Korea, and other countries in the East where high quality goods of low cost are a challenge which we in Britain 1086 have to face if we are to be able to trade effectively with the rest of the world.
The result is that Britain today is a substantial importer of many manufactured products which only a decade ago were made in Britain. We are, for example, importing a substantial quantity of the motor vehicles which are used in our country. High quality motor cars and commercial vehicles from Continental Europe and from Japan are immediately available in any colour and in any model, whereas to obtain a new British vehicle of equivalent specification often means a very long wait indeed.
Production is a very important element in the whole business of trade with the rest of the world. As we all know, the production of motor cars in Britain is far too low. For example, I am told that, in Britain, Ford produces eight cars per man year, and that British Leyland produces three cars per man year. That compares with the production in Japan of about 65 cars per man year. It is small wonder that we in Britain have to face very stiff competition indeed from those producers.
While I am on the subject of motor cars, perhaps the Secretary of State would be interested in one figure which came my way over the weekend. I think it is significant when we are looking at the problems that we are facing in terms of international trade and in terms of the Japanese motor industry. Over the weekend a dealer told me that warranty claims in respect of British vehicles produced by British Leyland amounted on average to £10 a year, whereas, in respect of a Japanese agency which he had taken on during the last year warranty claims had amounted to between £2 and £3 a year.
If we are looking at world trade and at imports from countries of high productivity, high efficiency and low cost, such as Japan, we can see the problem that we are up against in terms not only of delivery but of reliability. There is no doubt, as has been said today—the Secretary of State touched on it—that the Japanese are highly sensitive to the trade imbalance which their success is in danger of creating. Japan does not want to see a trade war in the West which would weaken Western cohesion. Of that I am quite sure.
1087 I hear, for example, that in addition to the measures which are referred to in The Times today, following the visit of the Minister of State for Industry, the Japanese Government are encouraging Japanese companies to buy trucks and other vehicles from Britain which are paid for by the Japanese but which end up in other countries where they have, say, a construction project in hand. All this helps, and we must not, therefore, knock the Japanese as one way of trying to overcome the very real difficulties which British trade faces. That is no solution to our problem.
What is to be done in order to boost British trade with the rest of the world? Clearly, we must increase our trade with the developing countries. We must begin to correct the North-South imbalance, which is a very serious problem. This has already been touched on in the debate.
I believe that the Britsh Government should also look at the possibility of providing some sort of guarantee to British companies operating in those developing countries against the danger of direct or indirect expropriation. But these measures alone will not be enough.
What must be done, then, to boost our trade? Should we go for protection and import controls, which are advocated by some and, as my hon. Friend the Member for St. Ives (Mr. Nott) pointed out, have been advocated consistently by one group or another since the turn of the century or earlier? If we do, then we all know that we shall invite retaliation, restrict the consumer's choice and make it even more difficult for the consumer to obtain the products which he wants.
Should we subsidise production? The Secretary of State has made his case for subsidies of one kind or another as part of the restrictions which he believes are inherent in an open trading policy. But if one looks at the Polish shipping deal, where we are building merchant ships for a country which will then use those ships to undercut and drive our own merchant fleet off the high seas, one can understand the real worry and state of depression which exists among many companies in this country. How can we possibly expect many small business men, for example, to understand that it is a good thing to be spending £35 million or more of taxpayers' money in subsidising this particular activity when they find it so 1088 hard to increase their own business activities?
The short-term benefits to employment in the shipbuilding industry have been spoken about in the House, but I believe that they will have to be paid for later with longer term difficulties for our own merchant fleet. Therefore, I do not believe that subsidised production is really the answer to our problem. But, as the Secretary of State said, it is the policy of the Government to have an element of subsidy as part of the overall picture of an open trading policy. What we need is higher productivity, higher wages, higher production and lower direct taxation. Above all, we need to make it profitable for small firms to expand and to provide more employment. But they will do so only if they are sure that taxpayers' money is not being pumped into unprofitable activities.
In an article in The Times last September, William Rees-Mogg made clear that at one time it was argued that the cause of low productivity was that workers resented private capitalism and that public ownership would allow productivity to rise. In fact, the opposite has turned out to be the case. In general, productivity in publicly owned industries is below that in private industries. [HON. MEMBERS: "Rubbish."] For example, even with the added incentive of union loyalty to a Labour Government the steel industry has run into considerable difficulties, and the gap has been very wide, indeed.
I believe that what Britain has to do in order to boost her trade with the world is to ensure that we do well the things that we can do better than anyone else, and to boost our trade in consequence. Invisible earnings are a good example of what we in Britain can do—banking, insurance, and so on. But there are other things that we in Britain do well, and do better than many other countries, for which we have special skills, which we can still claim to be exclusively British, and where British technicians can make an enormous contribution which could given an even greater boost to trade were the policy pursued by the Government to be more sensitive.
One such industry is the British feature film industry, about which I should like to say a few words. It is not asking for 1089 an enormous subsidy from the taxpayer. It was, and could once again become, a fairly substantial employer of both skilled and unskilled labour. For example, in 1967 the main British studios employed a permanent labour force of about 3,800 craftsmen and technicians. The current labour force is under 1,000. Those figures speak for themselves. But the industry is facing considerable difficulties in expanding its trade. One of its problems is the Government's continued failure to take the necessary action to create the right climate to help it.
Let me give the Secretary of State a few facts. Production of feature films has declined from 70 in 1973 to 57 last year. Investment in production over the five-year period 1973 to 1977 was between £33 million and £45 million, of which 75 per cent. came from overseas. Although we welcome investment from overseas—the Secretary of State made the point that he wants to see more investment from overseas—we must recognise that we need investment from our own country as well if we are to benefit in terms of our balance of trade.
It is that particular aspect of the film industry's problem on which I want to concentrate. Above all else, the industry needs the kind of tax incentives for both corporate and individual investors which exist in other countries, notably the United States, Germany and Canada. The Secretary of State knows this, yet he has apparently failed to persuade the Chancellor of the Exchequer to make the vital tax changes which are needed. The result has been a substantial loss of foreign earnings.
We have recently seen in the British cinemas a wonderful film called "Star Wars". It represents all that is best in British technology. It was made at Elstree Studios, mainly by British technicians, but most of the finance for it was American. In consequence, it is the United States and not Britain that will benefit principally from the enormous success which that film, and others like it which will follow in due course, has achieved.
For example, the original James Bond films were made in Britain, but I understand that the latest one will not be made here because the star will not come to Britain in view of the crippling taxation 1090 which he would face. That situation is a fact of life, whether or not Labour Members like it.
Mr. Eric S. Heifer (Liverpool, Walton)
§ Mr. Shersby
What, then, is needed to ensure that once again superb films employing British technicians are made in Britain and that British money is again made available for films to be made at Elstree, Pinewood, Shepperton and other studios which are famous throughout the world? What is needed are tax changes to enable Britain—
§ Mr. Deputy Speaker (Sir Myer Galpern)
Order. We cannot have two speeches being made at the same time.
§ Mr. Shersby
As I was saying, what is needed are tax changes so that Britain can compete on level terms with countries such as the United States, Canada and Germany.
The Secretary of State and the Chancellor both know what changes are needed, but nothing has been done. I say they know because the British film production industry has made representations setting out very clear details of what is required. Therefore, there is no question but that the Government know what is needed. The Secretary of State knows that there is an investment tax credit system for films which operates in the United States. He also knows that there are tax reliefs in the three countries that I have mentioned, which all give an immediate write-off possibility in the year in which the investment is made by the investors, corporate or individual. In the case of Germany and Canada, the write-off can be geared up so as to increase the benefit of the write-off, but in all cases the subsequent income as and when it arises becomes taxable in the hands of the investors, thus having the effect of deferring their tax liability.
The Secretary of State knows that very well. He must know that for the British film industry to compete, similar tax incentives are needed here. But has he persuaded the Chancellor to include such proposals in the Finance Bill? Apparently not. The result of this failure is that there can only be a further decline in British 1091 film production. British films which could be made here in Britain, with British investors backing them, will not be made, and will not be shown abroad, thereby not increasing Britain's foreign earnings and boosting our trade.
Therefore, I can only appeal to the Secretary of State to ask the Chancellor of the Exchequer to look again at this matter before we get to the Report stage of the Finance Bill, and I hope very much that we shall see some amendments to take account of what I have said. Surely it is better to allow corporate and individual investors to defer tax on money put into British films than to see the investment in films such as "Star Wars" bring very little benefit to Britain in terms of foreign earnings.
I have mentioned the British film industry because its problems in terms of tax incentives needed are a good example of what could be done in Britain today to help offset the cost of imports of foreign manufactured goods and the cost to the balance of payments.
I believe that we must support high technology British industries. The Government must give encouragement to high profit, high technology British companies at the same time as they encourage higher productivity in our more traditional industries. It is only by a combination of these measures that Britain can increase productivity, profitability and job opportunities and at the same time boost its trade. Whether the present Government will ever be able to bring themselves to provide those incentives, only time will tell. I always feel, when listening to Ministers talking about the need to boost trade, that the trouble is that they are unable to motivate people to increase production, to employ more people and to trade more effectively with other countries. The Government still seem to believe in high public expenditure, high taxation and high employment protection. It is the combination of these three disadvantages which act as a certain amount of lead weight to some of those industries which could do more and do it really well.
I hope, therefore, that the Secretary of State will take very seriously what I have said about the British film industry. It is an industry which can do a great deal for Britain. It is an industry which once again can make our name 1092 famous in terms of a high quality product which is in demand in almost every country. A great opportunity awaits the right hon. Gentleman, and I hope that in consideration of his open trading policy he will look again at this matter and then get cracking and persuade the Chancellor of the Exchequer to do something about it.
§ 5.53 p.m.
§ Mr. Mike Noble (Rossendale)
I do not intend to take up any of the remarks of the hon. Member for Uxbridge (Mr. Shersby), other than to congratulate him on his ingenuity. I have never heard the prescription for our economic ills described in such a fashion before. The thought of curing Britain's economic problems by bringing back James Bond and making the rest of us film extras is quite beyond me, but perhaps it is a subject which the hon. Member will pursue on another occasion.
I was also intrigued by the speech of the hon. Member for St. Ives (Mr. Nott), who has now left us. I can understand his difficulties in making such a speech in the light of the present strife within the Conservative Party. Those of us who looked at The Guardian today see that there is not simply a two-way split in the Conservative Party on economic matters but a three-way or even a four-way split. For example, there is a split on such important economic matters as taxation. Conservative Members cannot decide how much they will lop off taxation and, more important, they cannot decide from where they will get the money. That will be of great interest when we analyse the speech of the hon. Member for St. Ives.
I come to the third split. We also read in The Guardian today that the chairman, director, president or secretary of the National Association for Freedom has resigned. It may be that the hon. Member for Chingford (Mr. Tebbit) will be taking his place shortly.
These contradictions in the Tory Party's policies for the economy were well described by the hon. Member for St. Ives, especially when he turned to the subject of subsidies. I am sure that many of us who represent constituencies in the North will have been interested in his comment to my right hon. Friend the Secretary of State when he suggested in an 1093 intervention that subsidies should be returned to 1974 levels. The world had not entered the kind of recession that we face today. It had not felt the effects of a 500 per cent. increase in oil prices. In those circumstances, the kind of support that is needed for industry obviously will be totally different from that which was needed in 1974.
The hon. Member for St. Ives also attacked the idea of protectionism and extolled the virtues of free trade. Then, just before he sat down, he mentioned that we still had the most highly efficient agricultural system in the world—the most protected sector of the British economy. The hon. Member really must sort out his ideas before he tries to put forward Tory Party policies on these matters.
Before turning to the general issues of world trade, perhaps I may raise two specific matters with my right hon. Friend. First, he referred to Portuguese textile imports. We in the textile areas are aware of the pressures from Portugal to have increased access to the United Kingdom market for its textile goods. The fear in the textile areas is not simply that Portugal will secure increased access but that this will then be used as a precedent by the other Mediterranean nations to secure increased access for their goods.
I should like my right hon. Friend to say whether the Government have any intention of pressing the European Economic Community not simply to withstand the pressures from Portugal now but to enter into formal arrangements with the Mediterranean associates for next year, since I understand that the present arrangements last for only one year and that what we need is an MFA-type agreement with these countries rather than these informal understandings.
The other specific matter that I wish to raise concerns footwear. We in the footwear manufacturing regions are aware that there was a fall in the general level of footwear imports at the beginning of this year, and we welcomed that. But concern is being expressed about problems caused by imports of South Korean footwear, and I should like some information about what the Government are doing to deal with them, since they are causing serious concern in my constituency and elsewhere.
1094 With regard to the general debate on trade, it seems to me that three courses have been posed. Two of them were put forward by the hon. Member for St. Ives, who spoke of a completely free trade system, provided, of course, that it did not affect industries in the more sensitive areas represented by Conservative Members of Parliament. He was advocating basically a system of out-and-out free trade. Then he put forward a second course, one normally associated with the Cambridge group of economists—the Wynne Godley arguments.
My right hon. Friend was much more pragmatic in his approach. His argument—and I agree with him to a large extent—is that what is needed is neither free trade nor all-out protection but to look at the situation case by case in terms of securing international agreements on these matters.
There is an obvious weakness in the argument advanced by the hon. Member for St. Ives that we should have a system of free trade and that we should press for this. I think that we all accept that within certain limitation we should press for it, and in fact my right hon. Friend said that the objective of our policy was to preserve the open trading system. But free trade does not exist. We all know of countries—Japan is a good example—where securing access for almost any British goods is virtually impossible because of the artificial barriers to trade erected by those countries. It is no secret that many overseas nations have what is known as "a dirty tricks trade department" which can find one reason or another for not allowing goods into their countries. These are hidden and in many ways artificial barriers to international trade. I speak to many industrialists who tell me that we need to be a little more realistic in our attitude towards international trade in this respect.
Then we have the problem with the so-called managed economies where it is very difficult often to determine whether trade is fair, given the GATT definition of what is fair trade, or unfair—whether goods are being off-loaded here at subsidised prices.
Finally, we have the problem of dumping. I agree with the hon. Member for St. Ives that the machinery for dealing with dumping is by no means as efficient 1095 as the machinery that foreign exporters have for dumping their goods in this country. The problem of deciding whether an industry is suffering material damage is a very difficult one to overcome. What is meant by "material damage"? Is it measured in terms of a lack of investment? Is it measured in terms of unemployment? This is rather unclear. This is something that we must come to terms with. In addition, we have to devote more manpower to investigating much more quickly cases of dumping brought to the attention, now unfortunately, of the EEC.
§ Mr. Tim Renton
The hon. Gentleman has just said that we have to come to terms with the question of the definition of what constitutes material damage. Is it not the case that there is a certain advantage in that definition remaining obscure, so that exporters from other countries to this country do not know at what point in time the Department of Trade will act against them, whereas if it were clear that material damage meant damage to, for example, 40 per cent. of an industry they would know exactly at what point they would trigger off action against themselves?
§ Mr. Noble
The hon. Gentleman has a point. I think that the question of having a precise definition of that kind could result in our being too precise. The problem arising for British manufacturers is that often they present a case and neither the Department of Trade nor anyone else can decide in precisely what terms there is dumping or material damage.
This brings me to another definition which should be subject to revision—the definition of what fair trade itself is. I would assume that if we were considering fairness in this context we would consider it as being in the same category as fairness in a 400 metre race—that is, the athletes run exactly the same distance, and when they reach the finishing line one can then decide who has run the 400 metres the fastest. They have staggered starts to help them with the bends so that at the end of the race they have all covered the same distance.
But with international trade that is not the case. The textile worker in my constituency may work in what is still a fairly satanic mill in that many of these 1096 mills are old and should be replaced, but he enjoys a reasonable if not excessive wage, he has a social security system to defend him against the ravages of unemployment, sickness and old age, he pays his taxes in order to send his children to school, and he himself is well educated.
But let us compare that with the situation in some of the developing countries. A friend of mine has recently returned from South Korea, where he studied the footwear industry. There the best employer was paying his male footwear workers 65p an hour and the female workers 45p. But they were working a 54-hour-week—a nine-hour day. He described the factory as a beehive. There may be reasons for that.
It was discovered that the factory, which employs 22,000 people in one complex, had its own militia, and that the basement was full of guns. I am not saying that the bosses proposed to turn those guns on the workers—I do not think that that is the case. They were all to be pointed towards North Korea.
The point is that in an atmosphere of that kind there must be a great deal of fear and uncertainty, and in such circumstances the place would be a beehive. The workers would work in a way that we have not seen in this country or anywhere else in the developed world for tens if not hundreds of years.
§ Mr. Ridsdale
I have visited that factory, and, whilst I did not see the underground armaments. I can say that the hon. Gentleman is exaggerating the conditions. The conditions are certainly low, but by Asian standards they are high.
§ Mr. Noble
I do not disagree that by Asian standards the conditions are high. I said at the outset that this was the best employer. But what do we get from the worst employers? What about other parts of the world? We 'were told by the Hong Kong Government recently, with considerable pride, that wages in Hong Kong for textile workers had now reached 50p an hour and that they actually got six days' holiday per annum. These are people who are competing against this country.
§ Mr. Roy Hughes (Newport)
The hon. Member for Harwich (Mr. Ridsdale) suggested that my hon. Friend was exaggerating in his description of the conditions 1097 in the factories in South Korea, but I am sure that other hon. Members must have seen the same BBC programme as I did, which gave full facts and details of the situation along the lines that my hon. Friend is describing.
§ Mr. Noble
I thank my hon. Friend for that comment. The report I saw was prepared privately by one of the people in that programme.
Hong Kong is a jewel of South-East Asia in terms of working conditions and wages. Let us compare it with Thailand. There, textile workers are paid 18p an hour. I do not know whether they get holidays—I doubt it. I should like to know what kind of social security system they have for when they are unemployed or are injured at work.
The point I am making is that we are not comparing like with like when talking about fair trade but are comparing civilised employment standards in this country, where workers are protected by trade unions through collective bargaining, by legislation and by the Welfare State, with what in many cases can only be described as wage slavery in South-East Asia. Therefore, we have to look very carefully at the question of what is and is not fair competition.
We must ask ourselves where the capital comes from that provides jobs in South-East Asia which are competing with our own workers. The answer is that a very large amount of the capital comes through multinational corporations based in Japan or, very often, in the United States. That could be one of the reasons why the Americans have from time to time been a little difficult about things like the MFA and controlling trade in footwear, since their interests could be damaged directly or indirectly through the possible deflection of trade.
These multinational corporations invest—I would not quarrel with that—and thereby, it can be argued, raise the standard of living among indigenous workers. Perhaps we should ask some of the former hand-loom workers in Indonesia, for example. They had an industry employing 320,000 people. One of these multinational corporations came in and wiped that industry out. Now there are 70,000 workers as opposed to 320,000. The wage rates went up by about 10 per 1098 cent. The evidence is that the workers in these companies gain very little benefit, at least immediately. The wages paid are at about the indigenous level or only a little above.
The hon. Member for St. Ives accuses us of having bleeding hearts for the Tamils in Sri Lanka. We have, because we want to end the exploitation of such people through the introduction of a social clause to deal with this kind of problem.
§ Mr. Norman Tebbit (Chingford)
Will the hon. Gentleman face the point that, unless the world's market in textiles expands, anything he does by improving the conditions of those workers to make them less competitive in order that our workers can produce more of the textiles which will be sold will result in more unemployment in those countries? Will the hon. Gentleman make up his mind which of his hearts is bleeding?
§ Mr. Noble
The hon. Gentleman has it wrong, as usual. The fact is that those people cannot afford to buy even their own products. This is the point of the argument. They are employed for 50, 60 or 70 hours a week at miserable wages, manufacturing shirts to be sold at low prices in this country, and they cannot afford to buy those shirts themselves. When I see every worker in South-East Asia not simply with a shirt, a pair of trousers and a pair of shoes but with a change of clothes as well, I shall think that we are getting somewhere. But where do they live? In Hong Kong, for example, many of them live on rafts in the harbour. That is the kind of standard that we on this side of the House intend to raise and which the Opposition are so intent on keeping depressed.
The arguments put forward for out-and-out free trade do not hold water. My right hon. Friend the Secretary of State said that in the world today there is a harsh regime. The most ardent free traders are free traders only as long as it suits them. They relax into economic nationalism when it does not so suit them. No better example is found of that than in the United States. The fact is that the world is interdependent. We need some means of resolving the problems that the recession has thrown up. The free trade picture that is portrayed in the economic 1099 textbooks that are avidly read by Conservative Members, which seem to have little bearing on what is happening in the real world, does not exist.
The analysis of the Cambridge group is extremely attractive. It argues that because of the weakness in British manufacturing industry there is a need to erect tariff harriers around the country, behind which we can shelter and recover. That argument has its attractions, but we would have to be too selective, even to the extent of saying that import controls would have to be selective rather than general. That is because there are so many areas where British industry is weak. We could not produce to meet the demand.
An example is that there are significant sectors of the textile industry that have been under attack for so long that they can no longer produce goods that are required for the home market. The Multi-Fibre Arrangement had to take account of that in establishing the level of imports.
I well remember the introduction of restrictions on Portuguese imports that took place some two or three years ago. The following week, cloth manufacturers in my constituency told me that they could not get the yarn they needed. They asked me to have a word with the Secreary of State to see whether they could have a special dispensation. In the end they managed to get the yarn that they needed from British sources. That, however, is the sort of problem that exists.
Another example is the footwear industry. There are substantial sectors of that industry in which we no longer produce many of the products that are consistently in demand. There is some danger, though often exaggerated, of retaliation. We would need to embark on some careful thinking before we could go all the way with that argument.
The half-way house—what I call the pragmatic assessment of our trading and industrial needs—is an alternative. My right hon. Friend the Secretary of State wrote an article entitled "Politics and Protectionism" which appeared in June. He commented on the international trading situation, and it seems that he was anticipating the thoughts of the hon. Member for St. Ives. My right hon. Friend wrote: 1100if countries are in major difficulties then, in the end, they are going to protect themselves. There is no use imagining that the international trading system could continue on any other basis than the recognition of that ultimate right. What we have to do is to find ways of avoiding acts which lead to reaction and to the collapse of the whole system.That is a reasonably pragmatic and realistic approach. We should be considering the changes that we need to achieve.
The hon. Member for St. Ives spoke of amending article 19 of GATT. I entirely agree with him. We need to introduce an effective safeguard clause in the General Agreement on Tariffs and Trade so that when the necessity arises we may buy time to avoid the dislocating effects of a sudden flood of imports. The nature of the textile industry is such that it is so sensitive that even an increase in imports over three or four months is sufficient to create dislocation. If we are to amend article 19, the amendment will have to be extremely sensitive and capable of immediate operation if it is to be an effective safeguard.
That leads me to the argument of the hon. Member for St. Ives about senile industries. He spoke of senile industries that would be propped up and protected. He did not define them. It would be interesting to know exactly what industries the Conservative Party considers to be senile. The hon. Gentleman placed the senile industries in the same category as the infant industries of the developing nations. What does he mean? Surely, the definition of senility as a description of an industry is one that needs great care but an industry from which we cannot expect a great deal of vigour and where the life expectancy is relatively short.
I am sure that my hon. Friends, the British public and especially the 25 million members of the British public employed in industry and commerce would like to know the areas of industry that the Conservative Party believes to be senile and of short life expectancy. That is a reasonable request to make.
The Conservative Party is good at butterflying around, butterflying from one flower to another. It may be better to describe the Conservative Party as a bee taking pollen from one flower and then another while leaving pollen in other 1101 flowers. It never leaves us with a complete picture of what it would inflict on the electorate if it ever came back to power. We read about the "gang of four", but it never tells us what it would do.
§ Mr. Noble
But we know from reading The Guardian today that it is at it again. Surely it is reasonable to ask its members what it would do.
The Government and Labour Members can say that we have evolved an industrial strategy. At last the effects are beginning to work through. That has taken some time, and I have been critical, but at least industrialists know what is going on. For example, footwear manufacturers are not satisfied with the present situation. I was asked by a number of them to give my hon. Friend the Under-Secretary of State another hearty kick on the shins to remind him of the problem of imports. However, they said "We know that the Government have a scheme for the footwear industry." It may be that that is a subsidy that the Opposition would like to wipe out. It may be that footwear is one of the senile industries. The retailers in the footwear industry have said "We shall enter into a commitment with the manufacturers to assist them with the problem of imports." The effects are working their way through, partly as a result of the industrial strategy and partly as a result of the footwear report. The footwear industry knows where it is going, and that is true of other industries. However, industry does not know where it stands with the Opposition.
The second change that we need to make concerns our attitudes to developing nations. In this month's copy of Overseas Development, my right hon. Friend the Minister of State for Overseas Development wrote that we needto extend the concept of intervention and planning"—
§ Mr. Robert Boscawen (Wells)
I am one of the Members who signed the footwear industry report. I ask the hon. Gentleman kindly to tell the House what subsidies the report recommended. I 1102 recollect that, except for some minor subsidies concerning the bringing in of design personnel and management personnel from other areas into the industry, very few subsidies were recommended in the report.
§ Mr. Noble
I acknowledge the hon. Gentleman's work on the footwear study group. He signed a report that, I am delighted to say, included the recommendation of a planning agreement between the British Shoe Corporation, the unions and the Government. He asks about subsidies. The subsidies were introduced under the Industry Act 1972, which was enacted by a Conservative Government, as outlined by the hon. Member for St. Ives. Apart from bringing in assistance for consultancy and for projects, quite considerable assistance was recommended for introducing modifications in enclosing loom machinery. The sum total as an initial allowance is £4.5 million, which is a considerable sum. That has been welcomed by the industry.
I was quoting my right hon. Friend the Minister of State for Overseas Development, who wrote:we now need to extend the concept of intervention and planning from the national to the international level … we must now determine that we shall solve our shared and common problems only by a firm rejection of any illusion that there is a free world market economy'.Of course, that is an illusion. There is no free world market economy. There is a system of competing economic blocs and competing political blocs, but the idea of free trade as outlined by the disciples of Adam Smith on the Opposition Benches does not exist. We need to come to terms with that fact.
We must enter into strategic arrangements of the MFA type for a whole range of other sensitive products if we are to protect workers in the developed world against dislocation and give them time to restructure industries to meet competition and at the same time allow workers in the developing world an increasing and agreed planned access to our developed markets. That implies some control and recognition of the multinational corporations.
I return to the point made by my hon. Friend the Member for Sowerby (Mr. Madden) in an intervention regarding a 1103 social clause. Until we can persuade Governments that they are intervening in the interests of humanity, we shall have wage slaves in South-East Asia and unemployment in Europe. I suspect that the arguments which have been erected against the United Kingdom intervening to improve the living standards of workers in South-East Asia are the very arguments which were erected against Lord Shaftesbury 150 years ago when he was seeking to do something for factory children in this country. The examples of exploitation which flow from South-East Asia are heart-rending and overwhelming. We must try to control that situation.
There are two arguments against it. First, it is said that it would be unwarranted interference in the affairs of other countries. I am amazed that today people talk about unwarranted interference in the affairs of other countries on the one hand and do it on the other hand. We have to consider carefully an international approach, through the United Nations or GATT, to secure that a social clause is attached to international trading with countries which seek to expand in textiles, footwear, electronics and a host of other industries and thereby to undermine jobs in this country. By doing that, despite the peculiar economic arguments put forward by the Opposition, we shall be assisting not only those countries but ourselves.
The second argument is that we do not have the resources to do it. We need to be able to train workers in the theory and practice of trade unionism and of collective bargaining. It is one thing to be able to say to States "You must have some kind of social security system" but it is another thing to go to those countries and persuade workers to join trade unions. Often those countries have repressive labour laws which reject the very concept of trade unions. For example, Hong Kong has trade unions in the public sector, but they never get off the ground in the private sector. That is reflected in conditions in factories there. I suggest that we lack not the ability but the political will to do something about this matter. I hope that when my right hon. Friend replies we shall have a more optimistic answer on this matter than we have had in the past.
1104 Finally, I should like to respond to the point about the consumer 'which was made by the hon. Member for Uxbridge. I concede the argument about the consumer if we are talking of protection. Of course, some imported goods can be bought more cheaply here. Often, because of transferable technology, they are as good in quality as those manufactured in this country. For example, Hong Kong shirts are often superb, and many imported shoes are of excellent quality.
§ Mr. Noble
I agree that many of them are poor. That is not the basis of the argument. It is the marginal, not the direct, costs of imports which matter. It is the cost of the worker without a job and the cost of supporting him and his family. It is also the cost of seeing our industrial base eroded. That is the argument about import controls, not the marginal argument about the consumer. The consumer on one day is the producer the next day. The argument is about producers who are often the consumers of the goods that they are seeking to bring in on the one hand and to produce on the other hand.
Many of us would be grateful to have assurances on the two matters that I mentioned earlier: first, Portuguese textiles and the Mediterranean associates, and, secondly, footwear from places such as South Korea.
§ Mr. Deputy Speaker
Order. I am compelled to advise the House that, if we are to have Back Bench speeches lasting 32 minutes, it will be impossible for the Chair to accommodate even a fraction of those hon. Members who are anxious to take part.
§ 6.25 p.m.
§ Mr. Richard Wainwright (Colne Valley)
I take note of your remark, Mr. Deputy Speaker.
I am glad to follow the hon. Member for Rossendale (Mr. Noble) in his engageing, if misguided, speech, because it enables me at once to correct a vulgar Lancashire error into which he, like so many others, has fallen—I hope that it is an error, not a deliberate tactic—of 1105 presenting to the House a non-existent entity called the textile industry, as though people who produce innumerable different types of cloth have in some ways unified aims, strategies and results. That is not so.
The wool textile industry, which employs many of my constituents, differs from the industry of which the hon. Gentleman was speaking because it has an enormous export trade. Therefore, it has its horizons far away in the world and is not preoccupied with little England ism of the kind which all too often we hem advocated.
The hon. Member for Rossendale was misguided, for instance, in suggesting that Japan's markets are virtually impenetrable. Many Japanese are extremely well dressed, because there is an ample market for fine worsted in Japan. I suggest to the Chancellor of the Duchy of Lancaster—I hope that he will mention this matter in his reply, to which we are looking forward—that it is far easier to take fine Yorkshire cloth into Japan than into the United States of America. It is about time that the badly dressed Americans realised that situation. Presidents come and go, but a stupid tariff of about 50 per cent. on fine Yorkshire cloth, the Americans cannot make, persists.
My constituents are perhaps too tolerant in accepting from Governments, who come and go in our ludicrous box-and-cox system, the mere statement that they have tried their best but that the Americans will not see sense and we must continue to put up with a ludicrous series of barriers which are by no means limited to this 45 to 50 per cent. tariff.
The Secretary of State for Trade, to his great credit, cultivates a deserved reputation as a dealer in political realities. I hope that in the present round of GATT negotiations he will show that flair in dealing with the United States. It should not be very difficult. The fact is that Americans are denied many of the best material things of life by the stupid protectionism of their own Governments. They are not well dressed. Through their stupid product liability insurance, which makes many people in this country terrified of exporting to the United States because of the possible penalties, 1106 Americans are denied many of the medical and surgical benefits which people in this country and in much poorer countries freely enjoy. Surely it should not be beyond the wit of British Governments and embassies to point out to the Americans what they are losing because of these incredibly short-sighted concessions to worthless lobbies in the United States.
The hon. Member for St. Ives (Mr. Nott), in his engaging speeches, does himself an injustice by not lifting his horizons above those of the the little bethel of the sectarians, which the Conservative Party has become under its present leadership. For example, he said that he did not think either the country or the House cared much for discussing trade, as though it is rather sordid. I assure him that in the streets of Huddersfield people discuss little else. That is why Frederick Engels rightly described it as one of the fairest of English towns. I always feel that debates on trade bring out the fine flower of the two Front Benches—at any rate, in relative terms.
I thought that the hon. Member for St. Ives was more elegant than profound. His remarks about free trade reminded me of remarks made by my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) some 15 years ago. My right hon. Friend referred to some of our most venerable Liberals at that time as old lifebuoys who were gradually dropping astern. The hon. Member for St. Ives has not come to terms with the harsh realities of the modern world. To that extent he is an old lifebuoy before his time, which is a great pity. I hope that we can do something to rehabilitate him.
The hon. Member for St. Ives, in a curious fit of nationalistic masochism, described this country as the most subsidy-ridden and one of the most unfair competitors in the world. But he was ignoring the record of many of our competitors. American industry is riddled with subsidies which do not have the merit of being openly discussed in a Chamber such as this. They are subsidies which come from the appalling system of American public contracting which puts billions of unearned dollars into the pockets of certain fortunate companies. Japan has a feudal economic system where profit scarcely counts at all. 1107 These systems make our competitors torrn!dable subsidisers with whom we have to try to compete.
I prefer the Secretary of State for Trade's approach, because he acknowledges the difficult realities. I feel that we are not really grappling with the problems. Today we have been speaking in terms of ideal generalities. There has been much talk of "the steel industry", as if there is such a thing, and "the motor car industry", as if there is such a thing. What do we mean by those terms? In my constituency the people are not so arrogant as to describe their industries in such grandiose terms. They describe themselves realistically as top-makers, spinners, dyers, finishers or weavers. They realise that it is misleading to talk about these vast industrial processes in simple general terms.
When we talk about the motor industry, are we talking about the people who are condemned to bolt the things together as they go over their heads on a belt or are we talking about the marvellous people who make sophisticated components and who could go on selling them even if we were unable to continue bolting motor cars together? The situation needs more careful analysis.
I hope that the Chancellor of the Duchy of Lancaster will be able to say something about the danger that, in our anxiety to be humane and sensible when dealing with industries that are in secular decline, we may gravely handicap the export prospects of new industries which offer marvellous prospects to our well-educated young people coming out of our new education system.
I hope that we can have an assurance that the Government are not prepared to press their temporary help to old-fashioned industries, admirable though that is, to the point where it provokes the rest of the world into inhibiting our trade in modern goods.
§ Mr. Tebbit
I wonder whether what the hon. Member for Colne Valley (Mr. Wainwright) calls old-fashioned industries or industries in decline are what one of my hon. Friends calls senile industries. Is the hon. Member going to tell us which ones he means?
§ Mr. Wainwright
I am talking of those sections of industry to which the lion. Member for Rossendale referred.
Mr. Ivor CIemitson (Luton, East)
Those industries without a name.
§ Mr. Wainwright
Not the nameless ones. I am talking of those industries producing relatively crude goods which can be produced to an almost similar quality by people who are far less well educated, enjoy a lower standard of health and have worse working conditions than workers in this country. That must apply to certain sections of the steel and motor car industries. That is why I am pleading for the matter to be discussed in a more carefully analysed fashion.
§ Mr. Roy Hughes
How many people in the hon. Member's constituency actually work in the car and steel industries?
§ Mr. Wainwright
I am happy to take up that question. Every Yorkshireman would feel the same. I rejoice to say that in Yorkshire we have virtually nothing left of what used to be called the heavy woollen industry, which, in unpleasant conditions, used to produce cabbies' overcoats and other outer wear which a centrally heated country no longer requires.
We have made the adjustment with pleasure. It has removed from our scene a low-wage and unpleasant industry. Now our young people are able to do something better. In my constituency the lowest end of the trade is being eliminated gradually with relatively easy adjustment for those who are not over the age of 55 years. We have gone over to making tractors and other goods, and better wages are being paid.
I am not frightened that the position in my constituency should be cited as an example. I ask the Government to bear in mind, however, that there comes a point when the excessive subsidisation of some failing industries inhibits our export industries by invoking retaliation. In some sections of industry we might be on the verge of being in that unfortunate position. It is silly to give the Americans, for instance, even the vestige of an excuse for maintaining high tariffs against our high-quality goods because they say 1109 "You British are a nation of dumpers in respect of some of your State industry products."
Protectionism, whether it masquerades under some type of sophisticated antidumping provision or whatever hypocritical title it is given, will not produce any new jobs. It might possibly shore up jobs for people who would have done better if they had been forced to move a little earlier. It is no great help to a man to keep him in a job until he is over 55 years of age when, if he had to go out into the labour market before he was 50, he might have done better.
I hope that we shall hear from the Government that the termination of the promises of aid to Chrysler, for instance, is only the beginning of a realistic policy under which failing industries are assisted and there is reasonable provision for adjustment but which recognises that enough is enough. Enough is reached when aid to failing industries inhibits the progress of new industries.
§ 6.38 p.m.
§ Mrs. Renée Short (Wolverhampton, North-East)
Like my hon. Friend the Member for Rossendale (Mr. Noble), I found the speech of the hon. Member for St. Ives (Mr. Nott) rather depressing and disappointing. I thought that he would come forward with a long list of tough policies which he saw as the Conservative Party's answer to all our economic problems. But that did not happen. I hope that the hon. Member for St. Ives will not be too shocked when I tell him that I agreed with what he said about dumping. I am pleased to hear that he is against dumping. I am glad that he referred to GATT as a possible means of protecting us against the unfair trading activities of other countries. I hope that he will join us in persuading the Secretary of State to take steps in that direction.
The hon. Member for St. Ives seemed to ignore the fact that every country in the Western industrialised world including every country in the EEC, is in a similar position to us. Their problems are similar whether they have Conservative, Liberal or Social Democratic Governments and whatever are their trading and economic policies. Other countries perhaps experience different degrees of 1110 problems and perhaps they involve different areas of economy.
No one has yet referred to the figures that were released last week by the Central Statistical Office which indicate an improved growth rate. That improvement is good news. In the first quarter of this year the growth rate was almost 1 per cent. If maintained, that works out at about 3½ per cent., which is very much better than the rate last year, which was only 1 per cent., or in 1976, when it was only 2 per cent.
The decline in the seasonally adjusted unemployment figures, also announced last week, is small but it shows some movement in the economy and a movement in the right direction. It seems that this is a consumer-led movement rather than an export-led movement. That is something that causes all of us a great deal of concern.
If we are to improve our position at home and to reduce unemployment, quite clearly we need to export more and somehow to compensate for the inevitable rise in imports that will be brought in if manufacturing industry is to perform better. This is what the Prime Minister has attempted to stimulate in anticipation of the meeting in Bonn next month. If we export more, it is clear that others have to import more. That is where the problem lies. However, I agree with my right hon. Friend the Secretary of State that it is essential that the Bonn meeting should reach a successful conclusion. We shall all be in difficulty if it does not do so.
Last week, some of us who are members of the Select Committee on Expenditure went to Brussels to look at what proposals the EEC had for dealing with unemployment, which is widespread throughout the EEC. We found only gloom about the future level of unemployment. The period to 1983–84 was mentioned as the period ahead of us during which we could not expect to see any improvement in the unemployment situation. If that is the view of our partners in the EEC, quite clearly we cannot simply sit back and trail along behind them. We must act in our own interests to build on the present improvement. There are special regional and industrial dimensions within the national picture. 1111 My hon. Friend the Member for Rossendale mentioned that, as did the spokesman for the Liberal Party, the hon. Member for Colne Valley (Mr. Wainwright). This is well known on both sides of the House.
Perhaps I may comment on my own region. In the West Midlands, five major manufacturing sectors account for nearly 70 per cent. of manufacturing output, as compared with 45 per cent. nationally, and employ 70 per cent. of those employed in manufacturing industry altogether in the region, whereas nationally less than 50 per cent. are so employed. Now—pace the Liberal spokesman again—these industries build vehicles of all kinds—motor cars, trucks and all sorts of things—and metal goods of all kinds and are engaged in metal manufacturing, mechanical engineering and electrical engineering. These have been the basic industries for a long time in the West Midlands. But new technology has reduced employment. Foreign competition has reduced our markets. We have not devised new products, nor have we challenged our competitors at their own game. Therefore, in vehicle manufacture aircraft manufacture, the production of electrical machinery and the production of engines we now employ only two-thirds of the work force of 10 years ago.
The result is increasing unemployment. In 1973 less than 2 per cent. were unemployed in the region. Today, the figure is 6 per cent. This decline should have compelled us to get into other areas, such as high technology industries, where world demand was expressing itself.
Present schemes run by the Manpower Services Commission are providing employment for a large number of young persons and adults who would otherwise be unemployed. Some of these are rather short-term jobs. But, as the Government have provided more resources for the MSC, schemes can be extended and increased. However, the decline in apprenticeships and the general ill-preparedness of a certain number of school leavers for entering industry bodes ill for future jobs and for trade development.
My hon. Friend the Member for Rossendale has mentioned textiles, knitwear and footwear manufacture which have been badly hit by imports from not only the Far East but from EEC countries. In the East Midlands the situation 1112 is equally critical. We must, therefore, make two major changes quickly. We must invest much more rapidly in new technology in general and in micro-electronics in particular. We must impose strict control on imports from countries with which competition is unequal and unfair.
The Advisory Council for Applied Research and Development is said to be working on the impact of micro-electronics. It must hurry up if we are not to be overtaken in this area as we have been in others previously. America is already well into micro-electronics. I do not suppose that Japan is very far behind. It never is far behind. We know that Sweden has already started in this field.
Some members of the Expenditure Committee also went to Sweden recently. We were told of exactly the same inroads by Far Eastern manufacturers into the Swedish footwear and clothing trade. Sweden now has only one footwear manufacturer and only a tiny part of its former clothing industry. However, we were told that Sweden is cutting its losses in these industries and is also developing micro-electronics.
In 1977, the total world expenditure on micro-electronic circuits was about £2,000 million, providing jobs for 300,000 people. Only about 3 per cent. of those jobs are in Britain. Clearly, therefore, we must get a move on and make progress in this area. The export potential is vast. The cost of manufacturing in this field decreases dramatically as production rates increase. This is something that can be used in all manner of products that are in world-wide demand and products that we could sell very easily—the obvious things such as pocket calculators, but also electronic games, super-accurate watches and computers, as well as electronically controlled machine tools. All the electronically controlled machine tools that I have seen in the factories in my constituency come from America. Why should we not be manufacturing these ourselves?
To do this successfully, we must be prepared to invest considerable amounts of money. My right hon. and hon. Friends on the Front Bench will have to look at the areas in which we do a fair amount of investment and give support at present. We must be prepared to go into a wide variety of products and not 1113 simply concentrate on one or two, and do it on a world-wide basis.
We must be prepared to back smaller and medium-sized manufacturers and not rely on the giants which have always got other fish to fry. There are jobs to be created and there is a great deal of the world's export trade to be won. If only we support and encourage really good small and medium-sized firms. Here the National Enterprise Board has a considerable role to play.
There is one other area of industry in which we talk a great deal about winning support and about injecting new lifeblood into the economy. It is an industry which is always referred to when we are thinking of how we can do something to get the economy moving. That is the construction industry. It is a key industry, but not enough is being done to stimulate it. This is really an urgent matter.
I suggest two things that might be done and which could have a very swift result. That is surely what we want. If hon. Members look at the kind of industrial buildings in their constituencies, they will see that there is a very considerable stock of outdated derelict buildings. This is the cause of bad conditions for the work forces. The buildings are cold, dirty and noisy, with primitive sanitary and eating facilities. Whenever I visit foundries in my constituency, and some engineering works, I see workers eating their sandwiches sitting beside their benches. In this day and age, that is quite unacceptable. The facilities in the buildings of many firms are quite appalling.
Many firms would like to renew their industrial buildings, but at present this would remove their profitability. Why do we not put industrial building on the same basis as industrial plant for taxation purposes? I am sure that this would have a very dramatic effect on the building industry.
The other area in which building is urgently needed is that of arts centres, sports centres and decent football stadia. If we were to provide these and help local authorities to build them, not only would we improve amenities but we would be able to cut out some of the vandalism and hooliganism that occurs at football matches.
§ Mr. Clemitson
Would not my hon. Friend agree that one reason for the decline in employment in building and construction is technological progress in that industry? Are not the examples that she has quoted—industrial buildings, sports centres and so on, which I agree we greatly need—precisely the sort of buildings for which advanced production techniques are used, and which thus have much smaller employment consequences?
§ Mrs. Short
Not necessarily so. Not all industrial building needs to be more than one or two storeys. It depends what kind of building is needed, how big it is and what industry it is intended to serve. I do not agree that most of our advanced firms are not into modern methods of building. We have led the way in some respects. But there is scope for that kind of building and of the less sophisticated type to renew the vast amount of derelict industrial building that this country still has. I hope that that will be considered so that it may lead fairly rapidly to new activity when so many building workers are unemployed. We must be tough and adventurous to win back the trade that we have lost, but I believe that it can be done. I hope that we shall see some progress and that we will hear the Minister's views.
§ 6.52 p.m.
§ Mr. William Shelton (Streatham)
I followed the speech of the hon. Member for Wolverhampton, North-East (Mrs. Short) with great interest. There was little in it with which I would disagree, save for her reference to the speech of my hon. Friend the Member for St. Ives (Mr. Nott), which I thought was outstanding. I suspect that the Secretary of State felt the same, since he followed it closely. He disagreed with little that my hon. Friend said. Interestingly, he even used the same pronunciation of "mercantilism", which I hope will enter the House of Commons vocabulary.
A pragmatic approach to trade barriers is the most sensible. If one wants to take a moral view, one should talk of aid rather than trade. I am happy to see trade barriers, free trade or a mixture of the two—whatever is to the best interest of this country, whatever will further our people's interests, trade and prosperity. There is no doubt that prosperity depends on trade.
1115 One can understand the popularity of protectionism, which seems like a magic wand to get rid of nasty foreign competition and enable one to sell much more. There are advantages in protecting in some situations, as all who have spoken today seem to agree. We are talking about dumping and the protection of fledgling industries, as permitted under the Treaty of Rome. I do not propose to enter the argument about senile industries.
I would not object to protection if it could be shown that it increased competitiveness in certain industries, if only the barrier could be one way—if one could keep others out without leading them to keep us out. That, of course, is not possible; the world is not like that.
The history of the last 40 or 50 years shows that the more we can move towards free trade, the better we shall do. The decline in world trade in the 1930s was partly responsible for the tragedy which hit so many countries then.
The restriction of consumer choice by trade barriers must also be considered. The hon. Member for Rossendale (Mr. Noble), the thread of whose speech I lost after the first 40 or 50 minutes, in all that time did not once mention consumer choice or acknowledge that, if one stops the importation of an attractive gadget from Hong Kong which a housewife prefers, one limits her freedom of choice and probably makes her pay more. Automatic limitation of consumer choice is the other side of the coin of trade protection. If we can move towards free trade in an imperfect and difficult world, we should do so.
§ Mrs. Audrey Wise (Coventry, South-West)
I do not know how much shopping the hon. Member does, but how is a housewife's choice limited when in so many places she can buy only the Hong Kong product and she might prefer something made in Britain?
§ Mr. Shelton
If the hon. Lady is right, that is an opportunity that I hope English manufacturers will take. It is sad that practically all electrical equipment, such as television sets, comes from the Far East, but presumably this is because the great British public in their wisdom have chosen to buy those products. I can see no other reason. I deplore it, but it is unhappily a fact.
1116 If one limits foreign imports, inevitably there will be a fall in the consumer's standard of living. As in most things, one must strike a balance—between encouragine one's own production and giving the consumer the maximum freedom of choice. The balance is difficult and one should be fairly pragmatic. One should approach the matter with an open mind, remembering that history shows that free trade is more important to us than restriction.
My hon. Friend the Member for St. Ives rightly said that the constraints are on supply rather than demand. We have not given as much attention to supply as we should. My hon. Friend the Member for Uxbridge (Mr. Shersby) mentioned motor cars. The Government have been pressing Japan to restrict their car exports to us. I can understand that, although I do not believe that it comes into any of the categories that I mentioned—dumping, helping fledgling industries or increasing competitiveness. It may be all very well, but it is damaging people as well as limiting consumer choice.
For instance, a distributor of Japanese cars in my constituency—a small but important employer—told me why he handled Japanese cars. He said that in 1969 he had handled Ford cars as a second dealer in a two-tier system and that he had four traumatic years. This culminated in his getting a contract to sell a fleet of 250 cars for three years. Ford cars were never on time and never in the quantity he needed. In 1972, his allocation was 150 and 17 were delivered. In 1973, he was allocated 150 and received 47. He terminated the contract.
In other premises he had an Austin, MG and Wolseley franchise. He had dealt with them before. In 1970, they changed distribution and he had MG and Wolseley only. Until he terminated the contract two years later, he did not receive one MG car. In that period he had four Wolseley cars and he never had enough Austin cars. For both those franchises he had to buy special tools and repairing equipment and stock spares. He said that in 1971 a Japanese car manufacturer said "You can have the spares on sale or return and a quota of 150 cars." In the first year he sold more of that Japanese car than all the other franchises that he had together. He sold 1117 about 250, and 250 were delivered to him.
How can that man be blamed? He now sees his livelihood endangered by the Government's pressure to limit the exportation of Japanese cars to this country, with the consequent limitation of choice. The sale of that model of Japanese car is going comparatively well in that part of London, presumably, only because people are choosing to buy them.
My hon. Friend the Member for Uxbridge mentioned warranty repairs. I can give more details. In 1977, from British Leyland they were £14 per unit for the year, from Ford they were £9, from Chrysler they were between £9 and £14 and from the Japanese company they were less than £1.
I asked that motor dealer in my constituency "How is it possible that the inspection procedure of this Japanese car manufacturer is so excellent that the warranty is under £1?" He said "I went round the factories there. They have a very simple system. They have a checker on the coachwork, a checker on the engine, a checker on the wheels, a checker on the transmission, and so on. If he finds a fault, he gets a bonus for each car. If he does not find a fault, those on the production line get a bonus." I said "It sounds to me a remarkably sensible arrangement. Why do not we operate it in this country?" He said "I do not know. I suppose either the unions or the management do not want it, but I do not think it is done." It seems to be an excellent idea. The results are seen in the warranty repairs and, consequently, in the choice shown by the British public for these cars.
I make an appeal to the Government on behalf of the consumer who decides to buy products—whether they are Japanese cars or any other manufactured goods—brought in from abroad because he prefers them on quality grounds or on grounds of price or for any other reason. Surely, before the Government cut back on the importation of such goods and thereby create unemployment, possibly in my constituency in South London, it is necessary to put up a convincing argument that by so doing we shall in some way materially help the British car industry. If I can be shown that that is so, I shall have to accept it. Of course, I do 1118 not accept it; I do not believe it to be so. I believe that the result of such a cut-back is merely that more French or more German cars will be brought in instead. I do not believe that by restricting the importation of, for instance, Japanese cars we would sell more British cars. The problem with British cars is not demand but supply.
So my first question is, does it help the British car industry? Secondly, if we are restricting the importation of, fur instance, Japanese cars, are we using this as a lever, because this is the way trade should be negotiated, to help to open the Japanese market to us? I am sure that everyone in the House would rather see us selling much more in Japan and the Japanese selling much more here than the Japanese selling much less here and us selling much less in Japan.
§ 7.4 p.m.
§ Mr. Roy Hughes (Newport)
I agree with the hon. Member for Streatham (Mr. Shelton) that our primary concern must be with the interests of Britain. However, I think he will agree with me that the debate has tended to focus on the contribution of the hon. Member for St. Ives (Mr. Nott). I suppose the hon. Member for St. Ives can claim credit for that. He made a "light contribution" in defence of free trade. I contend that free trade is no longer any good for Britain.
The hon. Member for St. Ives was very critical of import controls. Apart from rhetoric, it appeared that he had little constructive to offer by way of policy. He said that some of us who have been proposing a policy of import controls have not been consistent. He said that we were in favour of buying up cheap food on the world markets but that we believed in putting tariffs on our manufactured goods.
The hon. Member for St. Ives should look at the mote in his own eye because he supports the Common Market. The Common Market has, on the one hand, the common agricultural policy, which is perhaps the most advanced stage of protectionism that has ever been invented, and, on the other, a policy of free trade in manufactured goods. We in the House must be concerned about what is good for Britain.
My greatest criticism of the hon. Member for St. Ives was that as I recall 1119 from my intent listening he made no mention of the very high figure of unemployment. He castigated the Cambridge school of economists. He referred back to Joseph Chamberlain, and so on. People such as the hon. Gentleman made the same criticism of Keynes in the late 1930s, but eventually as a result of his policies being adopted there were 25 years of full employment in Britain.
Then the hon. Gentleman argued that there would be less choice if we acted on import controls. If people at certain times have to wait three months for a motor car, it could be argued that this will bring them to a sense of reality about our present economic difficulties which have worsened over the years. The highest possible priority should be given to curing our massive unemployment.
The hon. Member for St. Ives did not mention the fact that alongside import controls some of us have called for massive investment in British industry so as to make manufacturing industry more efficient and give that power to the British workers elbow which has for so long been enjoyed by workers in Germany, Japan and elsewhere.
§ Mr. Michael Neubert (Romford)
Does not the hon. Gentleman recall that in the report of the "Think Tank" Lord Rothschild revealed that the British car worker with the same power at his elbow as the Continental car worker produced just half as much per shift?
§ Mr. Hughes
It is so easy to criticise the British car worker. In view of the way our car workers have been castigated by, for example, the British Broadcasting Corporation, it is easy to understand that morale in the car industry has been at the lowest possible ebb, although it is to be hoped that it is on the upturn again. I speak with some experience of the motor industry because I spent at least a decade in Coventry. Despite all the criticism that is levelled at him, I have the highest possible regard for the British car worker.
The Secretary of State did not spell it out today, but the Government do not seek to expand the economy as much as they would like to expand it and as much as they should expand it for fear of sucking in imports with the consequent adverse effect on our balance of payments.
1120 Likewise, in their wisdom, the Government have given the highest priority to curbing inflation. They reason that to expand the economy without increased productivity would simply drive up labour costs, which would, in turn, make inflation worse. But they should be reminded that when plant is under-utilised, this in itself is inefficient, since unit costs are higher when plant is operated below capacity.
Moreover, as my hon. Friend the Member for Rossendale (Mr. Noble) pointed out, we must take into consideration the high social costs now being carried, with huge amounts being paid out in social security benefits.
This Government have had an abundance of good will, especially from the trade union movement, but with over 2 million unemployed today—that is the real figure if one takes into account all the Government-sponsored schemes of one sort and another—that good will is not likely to continue indefinitely. We have a grave youth unemployment problem. Our young people could eventually rebel and assert their right to a job. Equally, they could turn to crime. We have a manifestation of that now in all the muggings, particularly in London, of which we constantly see reports in the Press.
As I see it, the only way to return Britain to full employment is to curb imports. I do not say that this is in any way desirable, but I think it inevitable that the Government will have to do something along those lines. I do not speak in any sense from the point of view of Marxist dogma. Indeed, it seems to me that the dogma has come from the Opposition. My wish is that the United Kingdom shall survive as an industrial nation, and I remind the hon. Member for St. Ives that there is no monopoly of patriotism on his side of the House.
If we do not want to see the whole of our oil resources dissipated, we must do something along the lines which I have advocated. Some 25 years ago we were importing only half our food and raw materials for our manufacturing industry. Today, huge expenditure is involved in the import of manufactured goods. An attempt must now be made to curb these imports or at least to arrest the persistent upward trend which has continued over recent years.
1121 Alongside that, we need massive investment of our oil resources in manufacturing industry. My belief is that eventually our Government will have to come round to that view. I should prefer them to act sooner rather than later.
§ 7.15 p.m
§ Mr. Norman Tebbit (Chingford)
I shall not follow the line of argument presented by the hon. Member for Newport (Mr. Hughes). I should very much prefer not to follow him into his vision of the Socialist Utopia of the future in which it may be possible to acquire a motor car if one queues three months for it, and, presumably, if one has a priority certificate as a Member of Parliament, a civil servant or an occupant of one of the quango boards which will be operating the system for preventing people from importing motor cars. I imagine that it would do a power of good to some people in this country, such as those selling single airline tickets out of Britain, because I do not see that there would be any wild enthusiasm among most people for living in the only modern Western industrialised country in which one had to put in for a permit and wait in the queue to get a motor car.
I shall direct myself almost exclusively to aspects of trade policy involved in air transport policy. I know that my hon. Friend the Member for St. Ives (Mr. Nott) did not mention those matters. The field is so wide in a debate of this kind that it was possible for him to use the whole of the time which he could reasonably take without coming on to these matters. I shall therefore confine myself to them.
The Secretary of State is the sponsoring Minister for both the British Airports Authority and British Airways. I know, therefore, that he will have seen with great interest the Boyle Report on the salaries of the board members of those two organisations. I am sure that he will already have a view about those matters. I know that he will not want to say much about it today, but I hope that he will say whether he thinks it reasonable that, for example, the director of planning and finance of British Airways should now be paid £3,000 a year less than his deputy who reports to him. That anomaly is shot right the way through the 1122 nationalised industries. The director of safety of the Civil Aviation Authority has, I believe, no fewer than five people now reporting to him who draw a higher salary than he does.
I do not know whether that is part of the same grand design which will require people to wait three months for a motor car or whether it is some accidental byproduct of Socialism. But it cannot go on. If our air transport is to be successful, we must do something to restore sensible differentials at the top end, as well as all the way through other parts of the organisation of our nationalised industries.
At some points in its organisation, British Airways is lacking the skilled engineers which it needs because of the same problem. That is not directly under the control of the Secretary of State for Trade, but he is directly responsible for seeing that the board members whom he appoints are paid sensible salaries and do not continue to see their standard of living fall until it is grossly below that of their subordinates.
Moreover, the Secretary of State must make a decision soon, with his Cabinet colleagues—
§ Mr. Roy Hughes
Can the hon. Gentleman give us some figures to back up his argument on the relative salaries paid to these gentlemen?
§ Mr. Tebbit
Yes, I can. They are public knowledge. The director of planning and finance of British Airways receives £16,500 per year and his deputy receives £19,500.
§ Mr. Tebbit
If the hon. Gentleman wishes to say that that is too much anyway in this Socialist world, he is entitled to that view, but I can tell him that the consequences of maintaining it is neither he nor the Secretary of State will continue to find men of quality to do those jobs when in any other country they would receive a better salary. Indeed, if they emigrated to the Soviet Union they would have a wider differential by far—probably by a multiple of 10—than they have in this country. The hon. Gentleman must make up his mind. He may not think that he is worth very 1123 much, but there are some people in this country who are worth a lot of money.
I was about to come to what the Government will do about the request of British Airways that it should purchase 19 Boeing 737 aircraft. This is at the very heart of trade. Are we in favour of free trade between countries in products of that kind, or are we in favour of protectionism?
In the absence of any of his colleagues, I put it to the Under-Secretary of State, the hon. Member for Oldham, West (Mr. Meacher), who is sitting on the Front Bench waiting for someone else to come back to reply to the debate, that it is we who stand to gain most from freer trade and we who stand to lose most if we go in for protectionism. The prospects of discrimination in the United States against British Aerospace exports are high. In fact, they are not even prospects.
We have had discrimination for years whenever the Americans have been able to discriminate without being absolutely obvious about it. We have no cause to give them further excuse to discriminate against the success we are now enjoying with the export of, for example, Rolls-Royce engines and other parts of collaboratively produced aircraft from Europe to the United States.
It would be pertinent to ask whether the Secretary of State is standing up for the board of British Airways, which has a statutory duty to run the affairs of British Airways and not those of British Aerospace. If the Secretary of State has confidence in the commercial judgment of the board, some members of which he appointed and others of whom he has confirmed in office, it is time he said so. If then, despite the fact that he feels that way, he thinks that other factors should override their judgment in the particular case of the order of the 737s, that is fair enough, as long as those facts are set out precisely and clearly and the directors of British Airways are told in public what they are and why their commercial judgment should be overridden.
If, however, the Secretary of State does not have confidence in the commercial judgment of the directors of British Airways, I think he would agree that it would be wrong to leave them in their posts. Indeed, I suspect that some of them might feel that at the salaries they are 1124 paid it would be wrong to remain in their posts without the confidence of the Minister who appointed them.
Then there are the broader issues. What is the Government's policy these days towards air fares and the future of IATA? Do the Government have a policy towards fares in the international market place? As a free marketeer, I must point out at once that competition in world air transport is not always fair, nor is it even based entirely on economic considerations. Some airlines are purely commercial. Some are instruments of national policy but none the less pay heed to commercial considerations. Others are just political creatures, flag wavers rather than flag carriers or buyers of foreign currency at a discount. There can be no fair competition between airlines which are such different creatures, so I accept that there must be a substantial measure of Government intervention, directly or through airlines and through IATA, in the fixing of fares in many parts of the world.
We all share a desire to see low fares. I noticed that British Airways News of 16th June had the headline:Air fares bonanza is coming".It was slightly spoilt by the fact that on the right-hand side of the page one read:Fares for the coach service operated by British Airways between Heathrow and West London and Victoria terminals are being raised to £1.20 for adults on June 18th.But on the broader issue of the air fares British Airways has it right.
§ Mr. Tebbit
My hon. Friend has it right, too—new low fares.
We know that somehow or other we must ensure that those low fares are introduced at the lowest levels possible while still making a return for efficient carriers. If we put British Airways or other carriers back into the "red" again in the short term, we do very little good for the customer in the long term.
In the past, IATA put a floor on fares, a floor which was much too near to the ceiling for my liking and for the liking of most customers. But now IATA has been increasingly undermined in recent years, first by the charter operators and then most notably recently by Sir Freddie Laker.
1125 When we consider these matters of fares, it is worth recalling where the Government stood on the matter of the Laker Skytrain. In these days one sometimes has the impression that the British Government were at Freddie's elbow all the time, egging him on. But I turned back to Hansard of 31st July 1975, where I found that the Under-Secretary of State who deals with these matters said on that day:I would contend that Laker's own assumption as to profitability and certainly his assumptions about enjoying a monopoly with this service were unrealistic … Laker would withdraw but it would not be a simple situation consequent upon the withdrawal, because he could leave behind a fair measure of chaos.The Under-Secretary of State spoke of profitability being possible for a short time, but added:it would be for a fairly short period—Skytrain could earn substantial profits for Laker if it were introduced now. But the level of profitability depends on several factors, which in my judgment would not continue for long, and are based on a series of assumptions which I described before as unrealistic."— [Official Report, 31st July 1975; Vol. 896, c. 2329–34.]Yet only very recently we heard that Freddie Laker had become Sir Freddie to mark the Government's appreciation of his great service in bringing Skytrain into operation for the benefit of the British people and the air transport industry.
The Under-Secretary of State also said:My next point is that British Airways would operate with more empty seats, which would make complete nonsense of the policy that we have been trying to establish".— [Official Report, 31st July 1975; Vol. 896, c. 2338.]Is British Airways operating with more empty seats because of the Laker Sky-train? No. Because of the Laker Sky-train, the air fares bonanza is coming, in the words of British Airways itself.
Anyone who cares to look back to the debates not only in 1975 but in 1976 will see that the previous Secretary of State for Trade, now Secretary of State for the Environment, said on 11th February 1976 in reference to the Laker Skytrain service:Moreover, having regard to the existing facilities that are available for cheap travel, it would confer no really worthwhile benefits 1126 to the consumer."—[Official Report, 11th February 1976; Vol. 905, c. 443.]We have all changed a great deal since then—
§ Mr. Tebbit
Indeed. Clearly, there still exists somewhere the mood that if only we could make people queue for three months to get a seat on Skytrain, as they should queue for motor cars, it would be a much better, happier and more prosperous world.
Since then, we have had a great rush of low fares. But, being an old cynic, I suggest that it will not be long before not only is IATA dead but the ennobled Sir Frederick Laker enters as son of IATA proposing a floor to air fares to prevent unfair competition. That is when we shall all have to watch it very closely to make sure that we do not have a new round of restrictionist concepts in air travel, with the fares going back up again to unrealistic levels.
What is the Government's policy on that? Is it to let unfair competition lower fares indefinitely, to the harm of the United Kingdom carriers, or if we had no IATA would the Government put floors on fares on a bilateral basis? If the Government do that, how will they prevent leakage of United Kingdom traffic to third countries on the North Atlantic routes, for example?
There is no end, fortunately, to human ingenuity in getting round restrictions imposed by bureaucrats. The hon. Member for Newport (Mr. Hughes) will be interested in an advertisement I noticed recently for Air Wales. An entrepreneur has discovered that he can offer a service out of Cardiff to connect more conveniently with intercontinental services via Brussels with Sabena than he can via Heathrow and Gatwick and the British carriers. No doubt if Sabena's fares were lower, because the British Government had put a bilateral floor on the fare from the United Kingdom to North America, we would suffer that leakage. Therefore, bilateral arrangements clearly do not entirely answer the problem.
The most important bilateral arrangement that we have had in recent times is the Bermuda Agreement. Here it is a puzzle to know what is the Government's policy. The United Kingdom position at 1127 the time the new Bermuda agreement was made was based on single designation. Lord Oram made a great virtue of it. He referred to the Los Angeles route and said:we believe that traffic at Los Angeles will be insufficient to justify more than two carriers for some time to come.… We see no justification for putting a second British carrier on that route and adding to the over-capacity that is likely to result from the existing three airlines."—[Official Report, House of Lords, 21st July 1977; Vol. 386, c. 596.]At the moment, it looks likely that Her Majesty's Government will approve Sir Freddie Laker as the second British carrier, making him the fourth carrier when, less than a year ago, three were already excessive on that route.
Now President Carter has told the Prime Minister that he wants to designate a second United States carrier from Boston to Britain. What is our Government's reaction? Last week at Question Time the Secretary of State gave the Government's reaction. When I asked him about this matter, he said:The President offers 'comparable comparative opportunities'. We are considering what 'comparable comparative opportunities' should be. One possibility which would be of great advantage to the United Kingdom would be the transfer of an American airline to Gatwick … But we are prepared to consider what the United States has in mind".— [Official Report, 19th June 1978; Vol. 962, c. 12.]Is this the way to conduct the negotiations for the British air transport industry—we are prepared to consider what the United States has in mind"?Do we not have anything in mind that we want in return for granting the Americans the concession of a second carrier on another route, a principle which is totally opposed to that with which the British Government went into negotiations on the Bermuda Agreement? Perhaps the Government intend to support British Caledonian's bid to operate into an additional seven United States cities. If so, would it not be a good idea if it were the Government who made the proposal to the United States instead of asking meekly what the Americans have in mind for us? Or is it that the Government are going back to the mood of 1975, 1976 or 1977 when they were against more opportunities for innovative British carriers?
1128 I end with a plea to the Secretary of State. If he does not know what to seek in a deal with the Americans or what to do about air transport policy, I advise him to play for time. Let him wait until October when my right hon. and hon. Friends will help him out—and help him out of office too.
§ 7.33 p.m.
§ Mr. Ivor Clemitson (Luton, East)
I shall resist the invitation of the hon. Member for Chingford (Mr. Tebbit) to "Come fly with me" even at a reduced rate. I wish to begin with three simple propositions which we ought to take into account when considering the question of trade. The first is the obvious point that the traditional picture of trade, so beloved of school teachers, namely, that we import food and raw materials and export manufactured goods, has long since ceased to bear much relationship with reality.
By my calculations, in 1977, only 22 per cent. of our imports by value were from those countries which in the statistics are classified as either developing or oil-exporting countries, and only 26 per cent. of our exports went to those countries as compared with 36.4 per cent. of our exports going to the other members of the European Community and 38.4 per cent. of our imports coming from other member States..
To take up the point touched on by the hon. Member for St. Ives (Mr. Nott), by my calculations, in 1970 we had a deficit with the EEC—at that time we were not a member—of £81 million. Last year we had a deficit of £2,033 million which, even allowing for inflation, is quite an increase.
§ Mr. Clemitson
I am merely noting that the traditional pattern of our trade, with us being importers of food and raw materials and exporters of manufactured goods, has long since ceased to represent reality. I was putting on record the trade deficit with the EEC. I fully accept the 1129 hon. Getleman's point that our deficit or surplus with other parts of the world may have changed correspondingly. On the other hand one of the great arguments advanced in favour of entering the EEC was that we would have a much larger market to which to export. Of course, it was equally true that the rest of the EEC would be able to export its goods to us. However, I do not want to get involved in that argument.
My second simple point is that our export performance is not bad. It is really rather good. By my calculations, between 1970 and 1977 our exports went up by volume by 54.3 per cent. while our exports of manufactured goods went up by a similar figure, 53.4 per cent. which is a pretty good performance. By value, our exports went up by 182 per cent. and 176 per cent. respectively. By contrast our import record is not very good at all. I calculate that between 1970 and 1977 our imports of manufactured goods went up by volume by 125 per cent.
The third point I want to make concerns the phenomenon of the supranational company. I prefer to use the term "supra-national company" rather than "multinational company" because it seems better to describe the reality. The phenomenon of the development of the supra-national company has made the traditional political map of the world at best a half truth. It seems to me that it has also made the traditional trading map of the world at best a half truth because we are talking these days not just about trade as between one nation and another, but about trade within the context of supra-national companies, within those companies themselves. This development can produce a considerable distortion of the traditional balance of payments statistics as between countries.
Starting with those simple points, what conclusions do we draw? Do we conclude that we need either total or partial controls? This is at the heart of the discussion. The argument for the desirability of free trade is weaker, it seems, when trade ceases to be a necessity. Clearly we cannot grow certain foodstuffs. We do not produce certain raw materials. We need to import these. But we do not need to import goods which we do or can make ourselves.
1130 The argument for trading between nations becomes the much weaker one about consumer choice. Unless we still live in the mythological world of perfect competition, that is a difficult argument on which to put too much weight. What we are so often talking about is a choice between virtually indistinguishable products. What I call the consumer choice argument or the philosophical argument for free trade is weaker nowadays than perhaps it was because of the changing pattern of trade.
What are the positive arguments for protection and restriction of trade? It seems that basically they come under two headings. The first is concerned with unfair competition. All hon. Members agree that dumping is a practice which should be deplored and that it is legitimate to take action against it. I think that we can take that as read.
But what about a subject which has already been touched upon this afternoon—labour practices in certain competitor countries which we may find undesirable? We may think that wage rates are too low. We may think that people are being exploited. We may think that labour laws in those countries are repressive, certainly by our standards. We may think that safety is given a rather low priority in those countries. All these things may well be true, I merely raise the question: is the right way to combat those undesirable practices through the restriction of trade? It may be; it may not be. I merely raise the question.
Another point is that other countries may operate barriers against our trade. If those barriers are overt, it is perfectly reasonable to retaliate against them. The trouble is that quite often—this is alleged in the case of Japan—the restrictions are not overt but covert, and are much more difficult to combat. There are certain questions there which I do not attempt to answer. I simply ask: is the best way to combat certain undesirable practices through the restriction of trade?
The second of the arguments which seems to me to be of particular interest, and which certainly interests me much more, is that about employment consequences. Obviously, if an industry declines, or disappears altogether, there is a loss of jobs. That is so obvious that it 1131 hardly needs saying. But there are several questions I should like to put. For example, is it necessarily desirable to support industries when other countries can produce articles more cheaply than we can? Is it necessarily desirable that we should continue to support our industries? Is it desirable to do so particularly when the competitor country may be a developing country, towards which we may feel that we have certain moral obligations?
Is it necessarily a wise policy to continue to support and protect industries which may have been the mainstay of the early phases of the Industrial Revolution? If I remember my economic history correctly, it was, after all, in the cotton industry that the first factory employing 1,000 people was built, in Preston. But is not our trouble historically that we have been far too slow in changing our industrial pattern? Have not we for too long tried to cling on to certain industries instead of getting on to newer waves? Was this not the case at the turn of the century, when we were very slow to climb on to what I might call the second phase of the Industrial Revolution—the phase of the motor car, the phase of electricity as the main source of power, and all the rest of it? Did not we to a certain extent miss out then, and have not we continued to miss out all the way along the line?
Is not the logic, then, that we should be looking to develop newer industries, with more advanced technology? I am not saying that all advanced technology is good. That would be an absurd proposition. I am saying that as a general proposition we should be looking in that direction.
Should we not face fairly and squarely the employment consequences of doing that? If older industries are to continue, it must be with greater efficiency, with more investment, and therefore with fewer job opportunities. Incidentally, one of the reasons for the decline in employment in the cotton industry is precisely that the cotton industry has become more technologically advanced, because investment has been put into it. With respect to my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short), this was precisely the point that I was trying to make about the building industry, although it is not particularly germane to our discussion, that the decline in employment in the building industry is 1132 not to be accounted for completely by the decline in the demand for building. By my calculations, there has been a greater increase in percentage terms in investment in plant and machinery in the building industry, albeit from a low base, over the last few years than in virtually any other industry. One of the reasons for the decline in employment in the building industry is precisely the technological advances in that industry.
If we are to develop new industries, with higher technologies, will they not themselves tend to offer lower employment opportunities, that is to say, lower in total terms, although arguably much higher opportunities in terms of the quality of the jobs, the skills required and so on?
If we are to face the problem of employment and what is to happen to employment in the future, should we not be looking not for a policy of job preservation for the sake of job preservation but for a policy of wealth creation, with the object of using the wealth to fund various alternatives to unemployment? Work is one, but there are many others. It may be that we would prefer a shorter working life. It may be that at long last we shall take education through life seriously. It may be that we shall extend the principle of sabbatical leave from university professors, who need it least, to workers on the track, who need it most. I speak with feeling as many of my constituents work on the track.
§ Mr. Tony Durant (Reading, North)
I am grateful to the hon. Member for giving way. I am following very closely his very impressive speech, and I agree with most of it. There is one aspect that he has not touched on in his formula. I refer to the service industries, which are a growth area and use up a lot of manpower. Would he care to touch on that aspect?
§ Mr. Clemitson
I did not wish to make a speech about employment, much as the subject interests me, but merely to touch on employment in the context of trade. Very briefly, I broadly agree with the hon. Member for Reading, North (Mr. Durant), but I think that, looking to the future, the service industries will also, in the long term, become increasingly susceptible to technological change. I do not think, therefore, that we should look too much to them. I think we should look 1133 to the public service sector. I am not talking about bureaucrats. I am talking about people in face-to-face work. For example, the statistics show that the cheapest way to create jobs is to put money into the National Health Service. That may say something about wage rates in the NHS, but that is a fact.
The conclusion I draw from what I have very briefly tried to delineate in the last moment or two is that the strongest case for selective import controls is to be found in the case of new developing industries, to allow those industries to become established. As I remember my economics, even the most fervent free traders have usually conceded the infant industry argument for control, or at least have looked at it with some sympathy.
I think that there is a strong case for protecting an industry in its early days in order to allow it to become established. If we are to protect older industries as a purely short-term move, it should be on a strictly limited time scale with conditions built in for modernisation and concentration on particular sectors which are susceptible to technological advancement and improvement. Indeed, as a general point, I would say that any measures of protection which we take should have conditions built into them in terms of investment and so on.
While it is important to regenerate industry, which is a fairly widely held view on both sides of the House, and while it is important to aim for a reasonable balance of trade—I am talking about trade in goods as opposed to balance of payments—we should not thereby denigrate other methods of paying our way or assume that there is some inherent moral superiority in manufacturing industry. At times I think that we come a bit close to doing that. Historically, there is a movement from primary employment to secondary employment to tertiary employment. This is true within our own country and it is true within every advanced country. Arguably, it will become increasingly true on a world scale as well.
Therefore, whereas historically at one time we may have been the workshop of the world, there is no reason why we should necessarily continue to be so. It may be that those countries which are now the developing countries will in their 1134 turn become the workshops of the world, and we may find ourselves increasingly earning our way by other methods. We may do so not only by manufacturing in the high technological areas but by earning our way in the service sector as well. There is nothing necessarily morally inferior about doing that.
I believe that we must come to grips with the question of the power of supranational companies. I am convinced that this cannot be done on a national basis. It can be done only on an international basis, whether we are talking about relationships between nation States, relationships between trade unions in different countries and so on. Again, the creation of tariff barriers is not necessarily the best way to do this, but ways must be found. As I have said, I merely note the point without offering any solution.
I believe that we should adopt neither a doctrinaire free trade attitude, which I felt the hon. Member for St. Ives came very close to doing, nor a little England attitude. Selective controls on imports, with conditions attached, are justifiable in certain circumstances. But if we are not careful we could be sidetracked from fundamental questions such as "What do we do with multinational companies?", "How do we raise the living standards and labour practices in certain countries?", and perhaps. above all, "How do we tackle employment problems?". We could be sidetracked from looking seriously at that whole agenda of problems by looking for some simple panacea in the form of a trade policy.
If that sounds like a criticism of some things which have been said on this side of the House, that criticism is as nothing compared with my criticism of certain Conservatve Members. To imagine that we can tackle the problems of supra-nationals, employment and all the rest by so-called free enterprise doctrines adumbrated by the hon. Member for St. Ives is to live at least 150 years behind the times.
§ 7.55 p.m.
§ Mr. Tim Renton (Mid-Sussex)
I start by joining with my hon. Friend the Member for Chingford (Mr. Tebbit) in deeply regretting the continued absence of the Chancellor of the Duchy of Lancaster, who is to reply to the debate. We see 1135 him all too rarely in this House, but however good a scribe the Under-Secretary of State is, and however many powers the Chancellor of the Duchy of Lancaster has, I never attributed to him until now the power of osmosis, which in this case I would define as "the gift of receiving information transmitted in this Chamber while he is sitting on a chair in a considerably more comfortable place." The Chancellor of the Duchy of Lancaster has not been here since the opening speeches, and it is a great pity that he has not been here to take part in the debate.
I listened with great interest to the speech of the hon. Member for Luton, East (Mr. Clemitson). For a long time, as perhaps was his wish, he kept me on tenterhooks as to just which side of the fence he would land. Much of his speech was fair. On balance, I would agree with a lot of what he said. However, I hope that the hon. Gentleman will not mind my saying that particularly towards the end of his speech, when he advocated selective controls, he indulged in what I can only call, in the phrase of George Orwell the newspeak of protectionism—fair but controlled trade, pragmatic approach, voluntary quotas. import adjustments and structural reorganisations. They are all words that we have heard this afternoon. In my book, however, they all come down to meaning one thing in business terms, which is "You are making X products better than I am. I am frightened that you will drive me out of business. Therefore, if I cannot stop you in the market place I shall get a politician to stop you for me."
In my book there is always a case or an excuse for protectionism, but it is almost invariably unjustified, particularly in this country, because we rely for such a high percentage of our gross domestic product on international trade—about 27 per cent. compared with 6 per cent. in the case of the United States—and also because protectionism without exception leads to the saving of jobs today at the expense of tomorrow's growth. It is because it leads to the saving of jobs at the expense of tomorrow's growth that politicians throughout the world indulge so frequently in acts of protectionism. If protectionism is to be avoided, it means trusting in a multilateral organisation to see that all politicians stand together to 1136 stop the increasing recession in world trade.
This brings me inevitably to GATT and the current round of multilateral negotiations going on at Geneva. It is on that subject that I should like to spend some of my time. I believe that the trade negotiations going on at Geneva are the most important current developments for all our British industries. The outcome of those negotiations will decide whether within a protective barried our industries shrink or whether, in a difficult, expanding but competitive world, they will grow in the 10 or 20 years ahead.
There is a paradox here. The GATT negotiations receive no publicity at all. It is far too remote a subject. Tariffs, duties and non-tariff trade barriers mean nothing to the British public, nor, indeed, to the public of most of the industrialised countries, yet it is on the outcome of the negotiaions of GATT and also at Lomeé and UNCTAD that whether we have a 5 per cent., a 3 per cent., a 1 per cent. or a nil growth in the years ahead will depend.
But, as I have said, I do not believe that politicians have the strength to act single-handedly in these negotiations. We are all Luddies when it comes to our constituently interests. We all tend to defend industries, be they infant or geriatric, when they affect our constituency interests, and it is quite understandable why we do so.
I do not believe that any exhortations from the Prime Minister will be successful in persuading Chancellor Schmidt or President Carter to inflate more quickly in their domestic economies than they wish to do, because they are politicians as well. So I do not see any other solution than the multilateral negotiations at Geneva. If they do not succeed. I am sure that the consumer will go on saving more because he will be worried increasingly about the future, oil will get progressively more expensive, the steel and other basic industries such as the motor car industry will suffer, unemployment will rise, and thus the vicious circle will be completed, leading to more protectionism, shrinking world markets, less growth, higher unemployment and thus more protectionism again.
It is fair to say that there is one other alternative to this vicious circle, which 1137 is war. There is no doubt that a war would, for example, greatly increase demand in the steel industry throughout the world. It has traditionally done so in the past. But, clearly, that is an alternative which is unacceptable to us all. So I am led back to GATT.
Very little is known about what is going on in these negotiations at the moment. In responding to my hon. Friend the Member for St. Ives (Mr. Nott), the Secretary of State for Trade said that he hoped that the 15th July deadline would be met. I hope that the Under-Secretary of State will pass on to the Chancellor of the Duchy of Lancaster my request for a better indication of how he thinks that the 15th July deadline could possibly be met. My impression is that it is very unlikely. From what I hear, the Americans and the Australians are complaining increasingly about the protective nature of the Common Market in terms of agricultural produce. Unless they are given some concessions which will open the EEC in a greater degree to farm produce from the United States, Australia and New Zealand, the GATT negotiations are likely possibly to founder and certainly to drag on for a very long time.
But, clearly, if such concessions can be given—and I think that they should be given—there is a quid pro quo which can be wrung from the Americans. They can alter their definition of anti-dumping to include the necessity to show material injury in the United States before antidumping duties become effective. The fact that in many cases this does not happen at the moment in the United States makes it very much easier for the United States to bring in anti-dumping provisions than would be the case otherwise.
The quid pro quo could be very important to this country. It is noticeable at the moment, for example, that as a result of the anti-dumping allegations, which have been made in the United States, the British Steel Corporation may lose sales of 1 million tons of business in the United States in the current year. That represents more than £100 million worth of exports, and that underlines the degree to which we are dependent on each other in the GATT negotiations.
Going beyond that, I believe that an act of vision is now required by OECD 1138 statesmen if the world is not to sink into a further spiral of depression comparable to the 1930s. But this will have to be a multilateral act of vision. As a result of it, I should like to see coming out of the conclusion of the GATT negotiations tariff concessions equal to those which took place within the Kennedy Round.
As for non-tariff barriers, I remind the House of what the director general of GATT, Olivier Long, said last November when he estimated that the percentage of international trade affected by the restructuring of imports decided upon or merely envisaged by the industrially advanced countries was now between 3 per cent. and 5 per cent. of international trade. That does not sound a very high figure but, as Mr. Long pointed out, it represents trade to a value of between $30,000 million and $50,000 million, and that in a matter of barely three years. This shows the extent to which, especially through non-tariff barriers, since the Kennedy Round the industrialised nations are now protecting themselves.
It is essential that GATT should set up an institute as an affiliate of itself permanently to study and to publish details of non-tariff barriers which exist in the industrialised nations. In order to do this, it should have access to the necessary records. Its job would be to call attention and invoke public hostility to the increase in non-tariff barriers. Its aim then would be through GATT to obtain agreement on the harmonisation of non-tariff barriers and their eventual reduction.
I say this because I believe that there is a great deal of ignorance among business men throughout the OECD countries about precisely what non-tariff barriers exist in the countries to which they are exporting. Japan is a notable example of this. So often we hear that it is very difficult to do business with Japan, and the comment is made that MITI, the Ministry for International Trade and Industry in Japan, is all-powerful. However, when I was in Japan 18 months ago I met some MITI representatives who impressed upon me that it was a very small Ministry with only a few hundred people, that it had very little power and that what was heard about it abroad was a mere charade. We need to get at the truth far more easily about the non-tariff 1139 barriers which exist, notably in Japan but in other countries such as the United States.
We read in the Press that at the moment great business is being done in selling second-hand Minis to Japan and that the company doing it cannot get hold of enough second-hand Minis. If secondhand Minis can be sold there, why cannot new Minis be sold there in much greater numbers than at present?
It is for that reason that I should like to see this permanent body available, publicising details of non-tariff barriers, administrative regulations, specifications, standards, public purchasing policies, and all the red tape which can represent almost insurmountable obstacles to anyone seeking to export to a new market, in order that this can be very much more visible and dealt with more easily than it is at present.
I move on to UNCTAD. The countries of the Northern Hemisphere must take a far more positive attitude to the negotiations which have taken place at UNCTAD than they have done in the past. I realise that it is very irritating for the representatives of an OECD country to go to an UNCTAD meeting in Nairobi, for example, and to be lectured and called capitalists in economic policies. But this rhetoric must not be taken too seriously. The great potential for growth for the OECD countries lies in increasing the purchasing power of the less-developed countries so that they are capable of buying more.
Apart from the morality of that, I am sure that the dictates of self-interest demand that we contribute far more to UNCTAD than the Government have so far done. I believe that the fault for this lies in the fact that there has been a division of responsibility between the Secretary of State for Trade and the Minister of State for Overseas Development, so that much of the attention to UNCTAD and the North-South dialogue has fallen between these two Hart and Dell stools. What has happened, for example, to the initiatives suggested three or four years ago by the right hon. Member for Huyton (Sir H. Wilson) at the Kingston conference? Great attention was paid to them at the time, but they have disappeared out of sight. It is only in helping the Southern Hemisphere to move to 1140 a faster growth rate that there lies a real chance for the Northern Hemisphere to help itself out of depression.
Tariffs are one thing, but in the end, of course, one has to have the right product to sell, and here I say to our industries that we really should at times stop belly-aching about the Japanese. We should instead go out and emulate them. They have been the great imitators in the past. Let us and our industrialists imitate them now. Let us design and sell new products to meet the needs of the next five or 10 years, products that can sell throughout the world.
One can think of many products that we all use, household names, that are now Japanese when they used to be British-made. Among these are the Honda moped, when the household names for such products used to be the Norton and the Raleigh. There is the Yamaha outboard motor, when the household name was the British Seagull. All these are light products which are easily used by young people. They are well thought out, cheap and well designed. One can think back over the last 20 years to products that we could sell in Britain or in the old imperial markets throughout the world.
It is for these reasons that in part, I believe, our industrialists have fallen so far behind. I remember one British manufacturer of valves who was suddenly finding for the first time that he was facing a great deal of competition from new manufacturers in the EEC in his traditional export markets. He was complaining about this to me. Then he said "We have reached a satisfactory compromise. They have agreed that my company will make the inch size and that they will make the metric sizes." He thought that this was a good solution. Whether his company is still in business I do not know, but it would not be surprising if it were not.
We cannot expect encouragement from the Labour Government for private industry in this task because a Labour Government do not believe, as we have found out so well over the last four years, in the success and wealth creation of private enterprise. Doctrinally, it is impossible for a Labour Government to accept these as the goal of private industry. But there is no doubt that it is in this direction that private industry must move, and there is still a great 1141 capacity within our country not simply to sit back and be raped by Japan but rather to see what Japan has done in the last 10 years and emulate it.
We have to be bold to preach and practise free trade and to take a positive approach in the North-South dialogue when national resources are short and there is such pressure—and it may be increasing—in this country for the protection of jobs at home. I believe, however, that it is the only long-term way out of our present economic recession.
Against the background of the tragic events in Rhodesia over the weekend and of the invasion of Kinshasha province in Zaire by Angolan rebels, led by Cuba and inspired by Russia, I want to quote from a speech by Mr. Robert McNamara in Montreal in 1966. He said:In a modernizing society security means development. Security is not military hardware, though it may include it; security is not military force, though it may involve it; security is not traditional military activity, though it may encompass it. Security is development, and without development there can be no security. A developing nation that does not, in fact, develop simply cannot remain secure for the intractable reason that its own citizenry cannot shed its human nature.It is worth bearing in mind in the background the definition by the World Bank: that the poorest of the poor in the developing countries, the many hundreds of millions of them, can expect only $4 a year maximum growth in income for the rest of their lives. Clearly, therefore, at present they see no hope of development. It is for that reason that I believe that an act of determination and vision comparable to that of Marshall Aid is required from the statesmen of the OECD, acting together, in order to produce the sustained development of which Mr. McNamara spoke and on which the success of the 1980s now depends.
§ 8.16 p.m.
§ Mrs. Audrey Wise (Coventry. South-West)
We have heard a lot from the Opposition about consumer choice and the need to protect and preserve it. It is a curiously old-fashioned world that they live in when they are talking about consumer choice. They seem to live in a world where competition is perfect and where production is determined by what the consumers choose to buy quite freely. If that world ever existed, it does not exist now.
1142 I think that some hon. Members opposite are consumers at second hand rather than at first hand, and do not perhaps engage in the day-to-day purchasing in the market as much as some of the rest of us, otherwise they would know better.
I made a choice recently. I chose to buy some sports shoes marked "Made by Dunlop". That is a household name. Surely, then, I was choosing to buy British. Nothing of the sort. They were labelled "Dunlop" but were made in Hong Kong. What is happening to my choice as a consumer in that sort of situation? I might choose to buy cutlery labelled "Viners"—another household name. But again it is rather improbable that the cutlery will have been made in this country.
Free choice by consumers is really a myth. The choices that are being made are far more choices by multinational companies about how to manipulate production, where production should take place, and what that production should be—in other words, what seems to be in their interest as multinationals and not to the advantage of the British economy.
Coventry depends very greatly on manufacturing industry, and we are deeply interested in trade and related questions. Indeed, in Coventry, two-thirds of our employment comes from manufacturing industry, which is exactly twice the national average. When I visit local factories, I am told by managements that they would prefer to buy British machine tools—and often that would mean locally-made machine tools because in Coventry we have several large machine tool factories. However, I am told by local managements that they cannot get what they require. I am prepared to believe them when they say that they would prefer to buy British machine tools. I have to ask myself whose fault is it that they cannot obtain what they require.
It seems that some of the investment incentives that the Government lavish on companies find their way into maintaining employment not in Coventry or elsewhere in Britain but in further increasing our import propensities.
What has been happening in the machine tool industry during past years, in the light of the fact that the jobs of 40,000 machine tool workers have been destroyed in Britain since 1970? The majority of the jobs have been destroyed 1143 by giant multinationals, which control about 40 per cent. of United Kingdom machine tool production.
In Coventry we believe that the conglomerates bought machine tool firms when quick profits could be made in a rapidly expanding world market and that only a minute fraction of the profits that were made in the good years was ploughed back for the long-term future of the industry—for example, into research and development. Now that international competition has stiffened, the multinationals are taking their profits at the expense of the workers. They have cut back production on machine tools to little more than half what it was in 1962 in real value terms.
Increasingly, manufacturers make their money not from manufacture but by acting as middle men and buying and selling foreign machine tools. Sometimes I wonder how much the Department of Trade knows about trade in Britain. I have made repeated endeavours to ascertain from the Department what is happening to apparently British manufacturers. For example, I have tried to establish how much they are acting as middle men. It is extraordinarily difficult to obtain any firm information from the Department. That is not because the Department is secretive but because it does not know the role of apparently British manufacturers in preferring to act as mere importers. I find that totally unsatisfactory
In Coventry we assert that it is a fact that machine tool manufacturers are increasingly preferring to act as middle men. Some are shifting their capital out of machine tools into other areas of business. The result of this drastic so-called rationalisation is a sharp rise in imports, so that only half the machine tools bought in the United Kingdom are made here. That is extremely serious. Its importance is emphasised by the fact that the Government have made genuine and well intentioned endeavours to increase investment in British industry, which means increasing possibilities for the machine tool industry but which are being lost.
What has been the response of workers in Coventry? They have been looking in vain for a suitable response from the Government and they are now making their own endeavours. For the past year they have been trying to build an organisation 1144 that unites workers from different firms and unions, both manual and white collar. They are doing so with the full blessing of the district committees of the AUEW and the Confederation of Shipbuilding and Engineering Unions. They are spending a great deal of time in investigating and discussing the crisis in their industry to develop their understanding of how to combat it. They are beginning to prepare trade union plans for the future for the machine tool industry with a strategy for the short, medium and long term that protects the jobs of workers, and builds on their efforts, skill and experience.
In taking that course, the Coventry machine tool workers committee is following a path that is increasingly being blazed by workers. In a slightly different way, but with the same principles, it is following the example that was set by the Lucas Aerospace shop stewards combine committee. In that instance there is the astonishing fact that an important company prefers even to forgo the chance of profitable sales rather than respond to the plan made by its workers. It is an amazing fact that the Lucas Aerospace management commissioned a market survey which indicates that there is great potential in the production of heat pumps, one of the products advocated by the shop stewards combine committee, but despite the result of its own market survey Lucas Aerospace is declining to go ahead with that production.
The company is declining also to go ahead with the production of other exceedingly useful items that could have great potential for fulfilling the needs of real people in the United Kingdom and abroad. There is enormous export potential. The company is declining to respond, and no pressure seems to be being put on it by the Government.
I believe in trade but I believe in the sort of trade that is about fulfilling the real needs of real people. The products that are presented by the Lucas workers span such projects as the road-rail vehicle and the combined battery and internal combustion engine. They are products in which we could lead, to the great benefit of employment. That would be a rational development of trade. Instead, we are becoming increasingly subject to import penetration. As my hon. Friend the Member for Newport (Mr. Hughes) 1145 reminded us, my right hon. Friend the Chancellor of the Exchequer finds that his economic policies are constrained because he is afraid of encouraging the sort of boom that would result in a massive further flooding of our markets with imports.
The Department of Trade could play a useful part in getting some sense into our production and trading policies. To some extent, that would certainly necessitate import controls, which I consider should be fairly wide ranging. That would be necessary to buy time while we went ahead with sensible developments. However, import controls are not a panacea, or a complete policy in themselves. They are merely one tool that should be used.
The time that is bought by using import controls must be used to develop sensible production and to enable companies to consider their product ranges to ensure that they are producing what is needed. If they are not willing to do that, the Labour Government must find ways of ensuring that all the incentives and encouragements, including financial incentives, that are given to industry are tied to an insistence that product ranges are reviewed so that production becomes more sensible and employment is maintained.
In my constituency, Massey-Ferguson is cutting jobs by little fewer than 1,000. That means that during the next few years this large number of young people who formerly could have relied on jobs at Massey-Ferguson, producing tractors, will no longer find those openings. Massey-Ferguson has taken that decision without making any specific approaches to the Minister of State for Overseas Development to see whether she can offer any advice, suggestions or help. I trust that my right hon. Friend the Chancellor of the Duchy of Lancaster will agree that it is deplorable that a large company should prefer to cut jobs rather than to enter into discussions to find out whether the Government can help and, if possible, advise on where increased trade can he found.
I understand from my right hon. Friend the Minister of State for Overseas Development that there are more openings for trade in light agricultural machinery than in some of the items at present being 1146 produced. Therefore, it would appear to be sensible to diversify production into the light agricultural machinery which is needed. I am sure that Coventry workers would be capable of making it. Yet they are not given any alternative. Instead, jobs are cut.
The Departments of Trade and Industry are separate Departments, but I believe that they should co-ordinate their activities and that the Department of Trade should play a more positive role than it now plays.
I hope that in reply to the debate my right hon. Friend will have something constructive to say about ensuring that we are given less exhortation about increasing exports, but that the Department will develop import substitution polices and that the Goverment will respond to workers' plans for rational production patterns so that we can maintain employment and satisfy people's needs by trade and production.
§ 8.32 p.m.
§ Mr. Giles Shaw (Pudsey)
I do not wish to follow the hon. Member for Coventry, South-West (Mrs. Wise) in her argument. I find it difficult to follow the concept of real and other people. As far as I am concerned, consumers, manufacturers, employees and employers are real people who have real problems which we try to tackle to the best of our ability.
It is wise and proper to have a debate on trade linked with prosperity. I am glad that the Chancellor of the Duchy of Lancaster is in his place and preparing to reply to the debate.
I suspect that it is within the small business sector that some of the best lessons for trade and prosperity can be learned. I readily recognise that, as my hon. Friend the Member for Mid-Sussex (Mr. Renton) pointed out, major negotiations on the world trade scene are effectively concerned with very large economies and in which there tends to be a dominance of the larger industrial sector. Pudsey is not representative of the larger industrial sector. It has a sector made up fundamentally of the smaller businesses.
I want to make only three points in my contribution to the debate. First, the Government have an overall responsibility 1147 for trade policy on three levels. The first is the grand international regulation of the Geneva or UNCTAD type. That has always been the way in which major elements in the world marketing scene are set. I trust, as everyone else trusts, that the international negotiations will succeed in clarifying world objectives not only to free access into more markets but to fair trading standards.
Secondly, the Government have a direct responsibility for negotiations in trading conditions within our domestic market, which is now the European Community. They can and should take steps to ensure harmonisation of trading standards between the Community markets. Such steps should be taken quickly and sensibly and should not redound to the difficulty and discredit of those operating within the United Kingdom.
Thirdly, the Government have the general and overriding responsibility for exporting as the crucial concern of the British economy and for achieving, through the development of creative products and effective prices, an income on which the nation may survive.
I do not wish to discuss the major international problems involving GATT and UNCTAD because they have been adequately covered. I wish to discuss the problems of negotiations within the domestic market and the EEC, for which the Department of Trade bears an important responsibility.
This weekend my local newspaper carried the headline:Shut down—76 workers lose jobs.A total of 76 workers in the small town of Pudsey is a substantial number. The newspaper was referring to the closure of a local tannery—J. & G. Mohun Ltd. which was established originally in Leeds in 1856, moved to my constituency in 1914, was rebuilt and re-vamped in 1947 and is now going out of business. The closure of this family busness is of great and direct interest because it underlines the points I wish to make.
The leather industry has a big problem of foreign penetration. There is substantial penetration from Brazil which in 1974 imported 1.4 million sq ft. of leather valued at £300,000. In 1977 it imported 20.3 million sq. ft. of leather valued at £7.8 million. Entry of leather products 1148 into Brazil is subject to a tariff of 170 per cent. It is not surprising that the overall market in which that small family business operated was heavily depressed, with a resultant fall-off in orders.
The second problem, since it involves international negotiations, is the responsibility of the Department of Trade. It concerns the EEC regulations on guarding the drums in which the tanning process takes place. New regulations were issued which were to a different standard from those required in the United Kingdom. Because of these regulations the company was required to spend £15,000 of capital investment. The third problem encountered by the firm involved the factory inspectorate which decided, probably for good reasons, that the factory required total re-wiring. That involved a capital cost of another £15,000. The Department of Employment is responsible for the factory inspectorate.
That small family business was required to spend £50,000 with no increase in output and no reduction in costs. That was against the background of a falling British market in the leather for shoe manufacture. As a consequence the company closed down. That is sad, but it is typical of the problem. The whole pattern of trade and of Government involvement is evident in this story.
The story involves the international trading scene, with heavy protection for the Brazilian market, with vast penetration into the United Kingdom market, not necessarily at dumped prices but at prices which are artificial in relation to the production of the raw material. Tanning follows that and produces a cost which is not a true reflection of the United Kingdom equivalent.
Then there are the EEC regulations and the factory inspectorate requirements. The managing director, to whom I spoke this morning, has no argument about the necessity for re-wiring or increased guarding for the tanning vats. But the coincidence of all these matters led to his small company going out of business.
We must ask whether it is within our power to prevent the sudden increase in pressures which destroys a small business, destroys jobs and perhaps destroys a valuable industrial sector. So often in our discussions on trade we concentrate on the 1149 mote in our brother's eye—the question of tariffs and protection. Infrequently we look at the beam in our own eye. The Department of Employment required certain standards, the EEC required another set of standards.
By this tale I show how frequently our small industrial problems are of our own making, are accidents of administrative incompetence because they happen to coincide in their application; or they are perhaps intelligent suggestions carried out according to a time scale which is disruptive to a company trading in an industry where there is fall-off in the demand for products.
It seems to me, that frequently we could, if we applied our minds to it, phase our problems slightly differently. We could take a little more time. We could perhaps decide not to implement a series of regulations this year but next. We could perhaps phase the implementation of regulations over a longer period.
The wool textile industry, in which I am also closely involved, has great problems of this kind with regard to effluent charges. It is right and proper that the polluter should pay, as I think all parties are agreed, but the phasing in of these charges is traumatic to the industry, and it has discovered that within the EEC similar charges are not carried by its competitors within the domestic market.
I conclude that, in the general context of trade, it is not so much the great discussion between free trade and protection which is crucial to our smaller industries. It is often the coincidence of events within our own control. We can take a slightly more consultative view. We can try to prevent small amendments which are required from becoming an overburdening on a management team. So often management teams in small companies do not have the resources suddenly to expand and obtain expert opinion.
Those are the sorts of things that seem to have a place in a debate on trade and prosperity. I think that we in this House would agree that the only real chance of increasing prosperity is to lighten the load on business, to increase the opportunity for fair trading under fair conditions, without restrictions on either employment, on the one hand, or on the 1150 entry of goods, on the other. I do not see any real virtue in import controls. I do see virtue in encouraging the development of smaller businesses.
§ Mr. Deputy Speaker
In the remaining 20 minutes before the winding-up speeches I should like to accommodate three hon. Members who have been present throughout the debate. Whether I can do so depends on each hon. Member who is called to speak.
§ 8.42 p.m.
§ Mr. Alan Clark (Plymouth, Sutton)
Having sat here for four and a half hours, I have heard a number of interesting speeches, and I am now rewarded with having the Chancellor of the Duchy of Lancaster included in my audience. This is a great honour, because his flexibility and receptivity to new ideas is, as my hon. Friend the Member for St. Ives (Mr. Nott) said, matched only by the rigidity of his voting habits.
In the speeches to which I have listened, nobody has drawn attention to the enormous latent strength of the British economy. The United Kingdom is preeminent amongst Western industrialised nations in being at the level of self-sufficiency—not absolute but considerable—in its natural resources. We should be preeminent among trading nations. We and our subjects should have a positively Roman existence in this country, and we have only to imagine, uncomfortable and embarrassing though it might be, what the Germans or the Japanese would be doing if they had the level of self-sufficiency in energy resources that we enjoy to realise the extent to which we have declined and the unhealthy condition from which our economy currently suffers.
That is because British industry is at the moment so diseased and demoralised, so encumbered with restrictions, controls, over-weighted subsidies, fines, taxes, every kind of governmental interference, private misgiving and lack of confidence that it has become totally uncompetitive in almost every sector. It is, therefore, necessary for it to be given by us, the legislature, a period of a completely free market, in which it can come to its senses and recover.
1151 When my hon. Friend the Member for St. Ives was discussing the various ailments which presently afflict British industry, he dwelt—it was very natural that he should do so—on the restrictive practices of the trade union movement. I believe, however, that these arise largely because the trade unionists themselves allow their leaders, on the shop floor and at higher level, to conduct what is essentially an obstructive campaign. simply because all of them realise, consciously or subconsciously, that they are in declining industries, that their days are numbered and that they must prolong their employment to get as much out of it as they can while the going is good.
If one could remove those fears and give trade unionists the confidence—which management and industrial leaders also need; I shall come to that matter shortly—which would come with assuring them that the market for the goods that they are making is protected against foreign competition, we could get, particularly with the new and moderate leadership that is coming to the fore in the trade union movement, a very considerable and enormously important change of attitude.
It is exactly the same with managements. They do not really have any fundamental confidence in the future of large sectors of manufacturing industry. They blame the backlog of Government interference, the restrictive practices and the lack of incentives, certainly. One of the planks of the Conservative Party is to restore incentives and to reduce taxation. However, unless that is coupled with other long-term measures to bring back real confidence, the corollary of the obstruction and the restrictive practices of the trade union movement will simply be seen at management level with further flights out of the currency into quick-return investments, and not with any positive and substantial effect on the long-term future of manufacturing industry in Britain.
It has been said that if one punches out a computer card differently or if one programmes a computer as one wishes, one will get the desired result. That may well be true. Certainly the jargon in which much of this argument is expressed is incomprehensible, and, indeed, it can be adapted to suit practically any case. One does not need a computer or jargon. All 1152 that one needs is that celebrated economic instrument which was so denigrated when it was first produced by a former Member of this House, now Lord Home of the Hirsel—a box of matches.
All that one needs for one's arguments is to look at the sectors in which goods are being manufactured abroad that were formally manufactured in this country, be they radios, electronic goods, motor cycles, aircraft, shoes or whatever else, and simply subtract or add one's matches on the table. One will then see that people who used to be making these goods in Britain are no longer making them because they are being made abroad. Therefore, it is plain that the people who used to be making them do not have the job opportunities that they used to have. Therefore, it is plain that the foreign currency which is being used to buy these goods that are being made abroad is adding to our balance of payments deficit.
I should like to develop this argument further, but in deference to your request. Mr. Deputy Speaker, I shall not do so. However, I should like to put at rest the mind of my hon. Friend the Member for St. Ives, in this respect at least. He mentioned Joe Chamberlain. Indeed, protectionism was rampant to a very large extent under Neville Chamberlain also, in the 1930s, very much later, and to a large extent it was responsible for the recovery in our terms of trade and in the prosperity of Britain that took place between 1933 and 1938.
But those of us who argue this from the Conservative side do not envisage protectionism encumbered and packaged with all the apparatus of control with which it is presented and, indeed, favoured by Labour Members below the Gangway—none of whom is present at the moment.
§ Mr. Clark
I am certainly not doing so. I am arguing that protection should be accompanied by other financial measures—incentives, reduced taxation and the lifting of the burden of other forms of governmental interference. That will pay, because if we protect, which costs the Treasury nothing, we shall be free of the obligation, if such it is, to subsidise, to divert money in concealed forms to ailing industries.
1153 The Government's sole duty in protecting the livelihood, earnings and prosperity of their subjects is to prevent the penetration of foreign goods into this market. Once they have done that, it is for management and the work force to work out their future protection under the laws which we pass.
I do not follow the argument that we depend upon an open trading system. We are in a deficit wherever we trade under that system: we are being cut to pieces. The research department at Transport House has supplied me with an alphabetical list of industrial sectors—from aerospace production to surgical instruments, synthetic resins, textile machinery and so on. On every item, import penetration increases year by year. If that continues, the present plight of British industry will be steadily worse.
§ Mr. Charles Fletcher-Cooke (Darwen)
Does my hon. Friend have a list of those sectors where the export penetration of British industry increases year by year? It is probably just as good as a list of import penetration.
§ Mr. Clark
With respect, it cannot be, can it? That is an obvious mathematical truth. If we are in permanent deficit, as we are, on trading account in manufactured goods, the penetration, so-called, of our exports must be exceeded by the deficit arising from imports. That is mathematically self-evident.
In deference to you, Mr. Deputy Speaker, I shall not develop this argument at much greater length. In the celebrated Red Book produced at the time of the Budget, there were forecasts which were meant to justify the Chancellor of the Exchequer's measures. Copies of this book have probably all gone into the wastepaper basket by now, but I have kept one.
On page 14, a variant with a stronger trade performance appears in the right-hand column. For some reason, the authors left out the variant with a weaker trade performance, which should have gone into the left-hand column. It is that variant that we are in now, and we shall stay in it. Unless we introduce protection, and the sooner the better—British industry needs not a breathing space but an oxygen tent—the variant with the weaker trade performance will increase 1154 in size and scale and will vitiate all other forecasts made in this book and by many of my right hon. and hon. Friends.
§ 8.54 p.m.
§ Mr. Michael Neubert (Romford)
In a speech lasting three minutes, it is scarcely possible to contribute anything to such a wide-ranging debate, but in the dying moments I think that someone should spare a dozen words on the subject of tourism. I must use nine of them to declare a professional interest.
It is astonishing that in a debate on our trade policy no one has thought it sufficiently important to mention what a major contribution to our economic wellbeing and balance of trade is made by tourism. There are even some people who, astonishingly, resent our very success. It seems that after so many stories of depression, faced with the success story that tourism undoubtedly is, they are affronted, even offended and in some cases hurt. They resent the fact that nowadays we should rely for our prosperity on a service industry such as tourism which previously they had perhaps associated with countries with lower standards of living than ours. It is an unfortunate, and perhaps in certain cases unacceptable but none the less unavoidable, fact that in the future we shall have to abandon our traditional heavy industries for the newer industries, of which tourism is one.
Tourism makes a major contribution to our economy. Although here in our capital city, in the centre of the country, we have to put up with problems arising from the influx of tourists every year, we must recognise that that is part of the price we pay. It is a price we have no choice but to pay. There are possibilities for the Government to ease the shoe where it pinches. It pinches in London. It must be recognised that the vast majority of the 11 million or so foreign visitors to these shores will, in the early stages of our development as a tourist country, come to London.
The Government must ensure that the local authorities, which at present are the instruments for providing the necessary facilities for tourism, are co-ordinated at national level. This is not a parochial pump matter enunciated by a London Member. It is a matter of a national 1155 industry which needs Government attention.
To those who would turn away the tourists and say that they are an affliction, I would say "What alternative do you offer?" Do those who present that argument want the tourists to be turned away at Dover like another episode of "Exodus", with the poor, wretched Europeans in sight of our shores not allowed to come here? Or do they want them to come here and to force them away by making life so unpleasant for them while they stay here that they will return to their home countries and tell their friends about it so that nobody would ever come here in the future? Or will they put a tax on tourists? What a spiteful Socialist idea that is.
I contend that tourism will find its own level. There is nothing that one can do but welcome it. It brings immense benefits to the people of London and to the country at large, not only in providing employment but in the contribution that it makes to our essential overheads. Where would, for example, the theatres, the cinemas, even the churches, be without tourists? Even our own church of St. Margaret's is financed in part by the proceeds of brass-rubbing sessions that the tourists support there.
It is not only these perhaps more elevated cultural activities. Foreign visitors contribute £50 million to the income of London Transport. Residents in central London may well resent the crush and congestion at this time of year, but where would the network of services which they enjoy at peak rush hours be without that contribution?
In those three minutes, that is the only point I wish to make. I now make way for my hon. Friend the Member for Harwich (Mr. Ridsdale).
§ 8.58 p.m.
§ Mr. Julian Ridsdale (Harwich)
Three weeks ago I was at a British industrial exhibition in Korea. One of our machine tool manufacturers complained to me on three counts. His first complaint was that he asked why we lent billions of dollars to the Soviet Union at 4½ per cent. interest for them to manufacture machine tools exactly the same as ours. The second complaint he made was "Cannot you do something to see that taxation is reduced so that incentive is given to 1156 produce more of our own machine tools in Britain?"
The third complaint he made—I am glad that the Chancellor of the Duchy of Lancaster is here—was that the machine tool industry contracts much of the work to smaller companies, and he said that it was a disincentive to some of the smaller manufacturers to have the Employment Protection Act acting against them. The reason is the lack of delivery of machine tools in our own country.
In the one minute remaining to me, I say that if we wish to reduce taxation we do not wish to see the Government finding so much capital by taxing the British people. The real way they can do it is to show that conditions are right in Britain for capital investment from abroad. I found on recent visits to America and Japan that there was in those capitalist countries a desire to invest in Britain. Alas, they are doubtful about the conditions here.
That is what the Government must look to, because the capital investment per industrial worker in Japan is £30,000 and the capital investment per industrial worker in West Germany is £23,000, while the capital investment per industrial worker in the United Kingdom is £6,000. That is the challenge. There are foreign investors who want to help. We must create the conditions of the market economy here so that they may do so.
It is now 9 o'clock, and I thank you, Mr. Deputy Speaker, for allowing me those few moments in which to speak.
§ 9.0 p.m.
§ Mr. Cecil Parkinson (Hertfordshire, South)
It is almost inevitable that a debate on trade should cover a wide range of subjects, and today's debate has been no exception. We have had some very interesting speeches. I mention, first, what was said by my hon. Friend the Member for Uxbridge (Mr. Shersby) about the film industry. My hon. Friend did not ask for grants or handouts. He simply said that if a tax system of the kind that the Chancellor of Duchy of Lancaster talks about but never does much to produce were to be introduced, our film industry would flourish. The hon. Member for Liverpool, Walton (Mr. Heifer), in typical fashion, snorted 1157 "Who cares about films?" I shall tell him. My constituents at Elstree Studios and those who work at ATV care a great deal about films. Films are a valuable source of earnings for this country, and all that my hon. Friend was saying was "Give us the right tax climate and a film industry will be created."
My hon. Friend the Member for Rom-ford (Mr. Neubert) took up the same theme, referring to the contribution which tourism can make and is making, and he, too, argued that the tax system is one of the principal drains on that trade.
I heard the almost amazing speech of the hon. Lady the Member for Wolverhampton, North-East (Mrs. Short), who, if I say so without costing her her seat, made a first-class Tory speech. I only waited for the final moment when she would announce, as I was sure she would, that she was planning to cross the Floor. But she did not do that. She sat down.
§ Mr. Parkinson
As my hon. Friend says, that comes in October.
My hon. Friend the Member for Chingford (Mr. Tebbit), in a typically interesting speech, talked about aviation. The past 12 months have seen the beginning of the collapse of the IATA cartel, thanks, in the main, to the activities of Sir Freddie Laker, aided and abetted by other independent operators. At long last, the myth has been exploded—the myth so dear to the Government, that the high price is the right price. Although hon. Members on the Government side now act as though they invented Sir Freddie, the truth is that Skytrain eventually took off after the right hon. Gentleman's predecessor as Secretary of State had tried in every way he knew how to stop it.
Since that time, fares across the Atlantic have tumbled dramatically, and now the pressure is building up to bring down fares on other routes. The Government should recognise that this pressure is here to stay. The public will have little sympathy with those who try to maintain fares higher than necessary, especially, for instance, on the European routes.
My hon. Friend the Member for Uxbridge talked about shipping. He pointed out the damage which was being 1158 done to our shipping industry by subsidised competition from Eastern bloc shipping fleets. I agree with what he said. I have found it hard to understand the Government's attitude, knowing what they now know, to such deals as the Polish shipping order. When the Chancellor of the Duchy of Lancaster asked my hon. Friend the Member for St. Ives (Mr. Nott) whether he was saying that the Conservatives would not have done such a deal as the Polish shipping deal, my hon. Friend replied firmly "No", and he meant it. The truth is that it was one of the most shabby and foolish deals which even this Government have entered into, perhaps matched only by the gift of ships to the Indian merchant fleet. When these ships are handed over, they will effectively represent dumped shipping capacity at a time when there is already a surplus of shipping capacity. We shall be creating subsidised competition for one of our most important industries.
Hon. Members on the Government side squeal like mad about cheap textiles, cheap shoes and cheap suits coming into this country, and quite properly call for better anti-dumping. At the same time they cheer the Government for dumping ships on the world market, although that damages our long-term interests.
Labour Members have a similar hang-up about cheap food. They see it as a right, but cheap shoes and cheap clothes are a threat, in the Government's view. Apparently, farm workers' jobs do not matter, but textile workers' jobs do. Those are strange arguments for Socialists.
§ Mr. Neubert
Does my hon. Friend agree that the two deals he mentioned, with Poland and India, may well be matched, indeed exceeded, by the recently concluded deal by British Aerospace with Romania, which it is reported provides for increased imports of steel, glass, textiles and other clothing? It seems to go completely counter to much that we have heard today from the Government.
§ Mr. Parkinson
My hon. Friend points to yet another example of a rather strange deal cooked up by the Government, the full details of which have never been made available to the House, so far as I know. The House has a right to know the terms. Then we can form a judgment on them.
§ Mr. Tebbit
My hon. Frien dis right. We do not know the full details, and therefore it would be wrong to prejudge them in their entirety. But I have had a letter from the chief executive of British Aero space, who assures me that the deal was on a strictly commercial basis. Whether it is attached to a trade deal on other matters, we shall have to wait and see.
§ Mr. Parkinson
I am glad to have my hon. Friend's assurance. I find it more reassuring than any I might have received from the Government.
A moment or so ago I mentioned cheap textiles. The hon. Member for Rossendale (Mr. Noble) introduced the subject and other hon. Members took it up. The hon. Gentleman introduced a new aspect to Labour mythology—the Korean employer who stores rifles in his basement as a means of getting higher production from his labourers. If the hon. Gentleman will believe that, he will believe anything. I advise him not to build too many of his speeches around that example
The hon. Gentleman is always twitting us about our lack of direct expertise on textiles and the shortage of Conservative Members from textile areas, although he recognises the quality of those that we have, including my hon. Friend the Member for Pudsey (Mr. Shaw). May I reassure the hon. Gentleman on one point? We are planning to increase our representatives from the textile areas. We are planning to take his seat. We shall find out in October, or as soon as the Government like to go to the polls, whether out plans materialise.
The renegotiated Multi-Fibre Arrangement has been in operation for only a short time. It is far too early to say whether in practice it will work out as intended. One of the objectives of the renegotiation was to give our textile industries a chance to regroup and modernise. It was never intended that the MFA should offer the industry permanent protection. It is a short-term measure. In fairness, I should add that that is all that the industry asks for—the chance to regroup and to face competition. It does not seek permanent protection against competition.
The other major objective was to retain access for developing countries to markets such as ours. I was concerned to see that the first four months' statistics 1160 show that this might not be working out as planned. The last available figures show a marked increase in imports from the developed countries and a 7 per cent. fall in our imports from the poorer developing countries.
It is worth reminding ourselves, as The Economist did this week, that the rich countries have a huge and increasing trade surplus with the poor countries in manufactures. It would be very unwise of the Government to neglect the important safeguard of the interests of the poorer developing countries. A number of places, such as Hong Kong, were forced to make cuts in their exports. They were assured that that was to make way for the poorer developing countries, but it does not seem to be working out. I hope that the Minister agrees that this is a trend that will need to be watched.
§ Mr. Nicholas Winterton (Macclesfield)
Does my hon. Friend not consider it rather unfortunate that at such an early stage in the new MFA the EEC should be seeking to increase the quotas on textiles coming into the EEC from Portugal? Is this a situation which will give our textile industry an opportunity to regroup, to reorganise and to get that new encouragement which I and many others feel the industry deserves?
§ Mr. Parkinson
My hon. Friend is knowledgeable about textiles, but I would rather not join him in speculating about what is at present a rumour.
§ Mr. Parkinson
The truth of the matter is that there is a procedure for dealing with imports from Portugal, which is built into the MFA. It is quite possible to take action against those imports if what my hon. Friend says is happening is indeed the case.
As my hon. Friend the Member for Mid-Sussex (Mr. Renton) said in his extremely interesting speech, the next month will be crucial for those interested in maintaining a liberal system of world trade. The GATT renegotiations, which started in a very different climate six years ago, are due to reach agreement on general principles and are due to report to the Summit effectively next month. As my hon. Friends the Members for St. Ives and Mid-Sussex have said, it is vital that the Tokyo Round ends in success.
1161 It is worth reminding ourselves of what that round is intended to achieve. Weaknesses have appeared in the GATT system as renegotiated in the Kennedy Round. The objectives of the renegotiation was to tackle four main weaknesses. The first concerned the principle of nondiscrimination, which had been the corner-stone of the GATT system and which had become more honoured in the breach than in the observance. The second weakness affected the special status which had been negotiated for agricultural products in the original negotiations and which excluded them from the process of liberalisation. The provisions for market disruption, for dumping and allied problems, had not worked satisfactorily. There was a generally agreed need to renegotiate article 19. Finally, there was great concern about the absence of a complaints and arbitration procedure, which meant that small companies in particular had little prospect of achieving satisfaction in trade disputes, especially with the major trading powers.
It is important for the House to recognise that the GATT negotiations have not been concerned only with the liberalisation of trade within an accepted framework of rules. What is taking place in Geneva is wholesale redrafting of the rules. We are attempting not just to reduce barriers within an established framework, but to create a brand new and much more sophisticated framework.
Listening to the debate it would be easy to form the impression, especially from the speeches of Labour Members, that the negotations were simply about reducing tariff barriers. The truth is that tariff barriers are only a part of the negotiations. The development of rules on non-tariff barriers, on subsidies, on countervailing duties and especially Government procurement are vitally important.
The negotiations cover the development of a satisfactory system of safeguards. I recognise that the absence of satisfactory rules on these subjects has been the basis of the growth of a range of subsidies, grants and hidden barriers which bedevil the trading system. Labour Members give the impression that we are the last of the free traders and are constantly being taken for a ride by the wily foreigners. As my hon. Friend the Mem- 1162 ber for St. Ives pointed out, the Government offer a range of subsidies, grants and discretionary grants designed to create the unfair competition about which they love to complain.
The Prime Minister, in replying to last Wednesday's economic debate, called ardently for the success of the multilateral trade negotiations. He regarded them as a very important part of the Government's plans. But as reported at column 1134 of the Official Report, just before he had made his remarks about the importance of freer trade, he listed a number of industries receiving just the sorts of subsidies that the GATT negotiations are aimed at eliminating. He is all for having renegotiation, he recognises the importance of the GATT negotiations, but then he boasts about the way in which his Government have been getting around the GATT agreements.
Only last week the Secretary of State was busy attacking import controls and protectionism. A few days later he was reported to have said that if the latest attempts to prop up the European steel cartel failed, Britain would take unilateral action to protect her steel industry. He talks of protecting our steel industry as if we are the innocent yet many people in the world community feel that nationalised steel industries such as ours, which can make huge losses with impunity, are the very industries against which they need protection.
§ Mr. Noble
In view of the fact that the hon. Gentleman has been talking about subsidies, will he list quite clearly and categorically, for the benefit of people in the House and outside, which subsidies a Tory Government would withdraw, and say whether they would be in favour of central arrangements for protecting industries under threat?
§ Mr. Parkinson
The hon. Gentleman talks very authoritatively about trade, and I had actually begun to believe that he understands it. The GATT negotiations are precisely about eliminating the type of subsidy that he is talking about. We recognise that it is in our interests, and in the interests of the world trading system as a whole, to eliminate non-tariff barriers, hidden subsidies and the whole welter of things about which I was talking. The answer is that the subsidies that we are hoping to remove are precisely 1163 the same subsidies that his right hon. Friend the Secretary of State has gone to Luxembourg tonight to talk about. We are in exactly the same business. The hon. Gentleman had better wake up to what is happening over there in his name.
We know why the Secretary of State talks tough whenever he can. It is because he knows that a growing number of people in his party prefer the alternative strategy put forward by the new Cambridge economic group, the Tribune Group, and by the Trades Union Congress. We know that the right hon. Gentleman the Chancellor of the Duchy of Lancaster despises the Tribune Group and has a very low opinion of the new Cambridge economic group. Does he despise the TUC equally? Would he care to comment on that?
§ Mr. Parkinson
I have not noticed many of those being put forward today. I hope that the Chancellor of the Duchy of Lancaster, when he replies, will give us a better answer than that.
The strategy about which I am talking was summed up very well by the hon. Member for Luton, West (Mr. Sedgemore) in an article in The Guardian, in which he said:What is becoming abundantly clear to all those who care seriously about our future is the need for a broadly supported alternative strategy which involves not merely planning and protection but plans that can be translated into action through a reorganised Whitehall machine, the Scottish and Welsh Development Agencies, the National Enterprise Board, the trade unions and the local authorities.Britain, if this prescription is to be believed, is to try to win the economic world cup with a team of guaranteed all-time losers. The key to Britain's future, according to this particular gang of three, is an ever bigger role for those who many would say are the causes of many of our problems. The only role for the private sector, according to the hon. Member—and he speaks for the Tribune Group—is to be planned and directed by those who have a very dubious record in 1164 discharging the responsibilities which they already have.
Several of my hon. Friends have attacked the case for import controls and made the case against them. I agree with the Secretary of State that the Cambridge hypothesis, that protection equals growth, is very much open to argument.
At this point I should like to comment on the Secretary of State's question to us about the CAP and our attitude to agriculture. It will be extremely difficult for the EEC to expect to maintain the CAP in its present form, and to keep its markets closed to the agricultural products of other countries and not expect retaliation against its own industrial products. As my hon. Friend the Member for Mid-Sussex said, if the EEC would just show a little imagination, and bend a little and accommodate such people as the Australians, the EEC overall would gain.
I have spoken to a number of members of the Australian Government. Quite frankly, they are fed up with the inflexible approach of the EEC, and they will retaliate. There is no need for me to remind the House that the EEC has a substantial surplus with Australia and that Britain and Germany are the main trading partners. We stand to lose a great deal if the EEC remains totally inflexible in this particular area.
As many of my hon Friends have said, import controls are unfair to the consumer and the housewife who are forced to pay more than they need to pay for the products which they want. They protect sleepy managements and institutionalise inefficiency and restrictive practices. My hon. Friend the Member for Plymouth, Sutton (Mr. Clark) argued that behind the shelter of protectionism British industry would modernise itself. I do not think that there are any grounds on which he can make that assertion.
Let us examine the really protected industries of this country. Let us take newspapers, which by their very nature are protected. There is no foreign competition for the newspaper industry. It is one of the most overmanned, inefficient, resistant-to-change industries in the country. I would argue that my hon. Friend's assertion that behind the framework of protection thousands of employers would get on with the job of modernising their companies ignores the fact that 1165 we have a craft-based trade union system which has an entrenched dislike of change.
Does my hon. Friend really think that the trade unions in British Leyland would be even prepared to discuss manning levels with Michael Edwardes if they knew that there was no alternative for the British purchaser than to buy British cars? They are prepared to co-operate, and talk about co-operating, because they know that if they do not meet the need the customer has an alternative. Increasingly and sadly, the customer is taking advantage of that.
§ Mr. Alan Clark
Yes, I believe that they would, because I believe this would have to come hand in hand with a complete removal of wage control, a return to free collective bargaining and with enormously increased employment opportunities. The pressure upon the unions would come from the trade unionists themselves. They would compel their leaders to fit in with the new arrangements in this new climate.
§ Mr. Parkinson
That is not the impression that I get when I am visited by trade unionists. By a coincidence, I was recently lobbied by a group of printers. The argument was simply "I did five years' apprenticeship. I spent five years training. I now find that my job can be taken away from me by a machine which any sensible person could learn to operate in a few weeks. What are you going to do about it?" There was no suggestion that "My job in this particular industry has come to an end and, therefore, I must look around for new opportunities in a new industry". My hon. Friend suggests that people would have new opportunities in a new industry. Such an attitude is very optimistic. I put it no higher than that.
I believe that import controls would almost certainly invite retaliation and that in a variety of ways they would undermine our export performance by siphoning off labour and resources. But, far more important than any of these things, coupled with exchange controls they represent a vital and major step towards the Socialist State which we must assume all Labour Members want, although we recognise that some, such as the Chancellor of the Duchy of Lancaster, want 1166 it a little later than others. If the Government control the flow of goods and the flow of capital, the direction and control of investment and compulsory planning agreements follow as night follows day and essentially planned economy is well on its way.
Today, the Government parade before the House a pair of Trojan horses, the Secretary of State for Trade and the Chancellor of the Duchy of Lancaster—and, if I may say so, a most engaging and agreeable pair of Trojan horses. I have no doubt that the Chancellor of the Duchy of Lancaster will do his usual trick of assuring us that he despises the alternative strategy, deplores the suggestion of import controls, believes passionately in private enterprise, and is not really a Socialist at all.
The truth is that he and people like him and the Secretary of State for Trade have been in the majority in Socialist Governments and Socialist Cabinets since the war and have presided over the steady spread of nationalisation, the steady expansion of public expenditure and the steady increase in taxes which are the distinctive achievements of Labour Governments. The Left, which has been consistently in the minority, has consistently, if slowly, had its way.
The Chancellor of the Duchy of Lancaster, the Secretary of State for Trade, the Chancellor of the Exchequer and the Prime Minister all recognise that the private sector holds the key to the nation's future success or failure. They point out consistently that taxes are too high, that differentials are too low and that profits are too low. Yet, when the Opposition move amendments to cut one and restore the other, the Chancellor of the Duchy of Lancaster votes against us, having identified both as necessary. Does he agree with the Minister of State at the Treasury, who replied to the debate on the amendment to reduce the top levels of direct taxation, that we, the Opposition, were promoting the class war and favouring our well-heeled friends? I am sure the Chancellor of the Duchy of Lancaster will take it as a compliment when I say that he is walking evidence that not all the well-heeled are Conservatives. The right hon. Gentleman supported the Minister of State with his vote. Did he support his argument?
1167 The question of dividend controls will arise shortly. The right hon. Gentleman knows better than most that dividend restraint damages the interests of millions of pensioners who are dependent on the institutions which are the main shareholders. His noble Friend Lord Diamond has identified the vast majority of personal shareholders as the holders of small quantities of shares and the recipients of small dividend incomes. Will the right hon. Gentleman be pressing this knowledge on his right hon. and hon. Friends, or will he once again go along with them in pandering to the prejudices of the Left?
Did the right hon. Gentleman see the Labour Party political broadcast 10 days ago in which profits and private ownership were described as the sources of most of the nation's problems? Did he agree with that diagnosis? If not why does not he disown it?
The right hon Gentleman will pronounce his usual comforting words tonight. He and his right hon. and hon. Friends will present themselves as a solid bulwark against their colleagues. They will say that they will continue to resist the demands of the Left, the TUC and their annual party conference. The truth is that they have not succeeded in the past, and the result is a country in the state which our country is in today. The British people have no confidence in the right hon. Gentleman and his colleagues and, in October, they will give them their well-deserved come-uppance.
§ 9.28 p.m.
§ The Chancellor of the Duchy of Lancaster (Mr. Harold Lever)
I am grateful to the Opposition and to their two spokesmen today for opening a discussion in an area where I am passionately concerned.
When I learnt that there was to be no vote to reduce the salary of my right hon. Friend the Secretary of State for Trade, it not being possible to reduce my own, I hoped that we should be saved the party knockabout which disfigures so many of our economic debates—not because party differences ought not to be explored openly when they are relevant, but because I do not think that it adds usefully to a very promising debate when, for example, the Secretary of State and I are described as Trojan horses. I must confess that as the Oppo- 1168 sition have difficulty in projecting either of us as a red revolutionary, the only discreditable alternative that they could think of was to describe us as Trojan horses. I had understood that it was some of my hon. Friends rather than the Opposition who regarded us in that light.
§ Mr. Ernest G. Perry (Battersea, South)
My right hon. Friend mentioned that the Opposition could not move a motion to reduce his salary. Does he not wish that they had done that, since it would have saved him income tax?
§ Mr. Lever
I am grateful for my hon. Friend's concern for my fiscal safety, but I am not sure that it is accurately directed at this particular point.
This has been a very interesting debate because, as everyone is conscious, we are in a great world recession. Everyone is conscious that there is widespread disillusion about the way in which our present system is working and that desperate so-called remedies are around which are the children of that desperation, born of the sense of danger, unemployment, monetary instability, payments imbalances, shrinking world trade and all the things which seem to threaten our prosperity and security.
Not surprisingly, many hon. Members on both sides of the House—it is not true to say that it is confined to one side—have been asking whether it is not the protectionist remedy, which contracts out to a greater extent than the present system, that is a possible way of improving our situation. I want to make my own position abundantly clear, even at the risk of astonishing hon. Members at some future date by voting in support of my own Government—a not unusual procedure, I find, at any rate if one wishes to remain a member of that Government.
To the hon. Member for Hertfordshire, South (Mr. Parkinson), who thinks it surprising that I should go dutifully into the Lobby in support of my own Government's proposals and invites me to comment on the more colourful expressions of colleagues in the Government, I say that these are shallow and insubstantial points. It is absolutely inevitable for all of us that every time we make a judgment on a vote we make a judgment not only on that vote but on the alternative to that 1169 vote. If I am tempted sometimes to be rebellious in the Division Lobby, I have only to look at the alternative to be reassured that any sin on my part would be even greater if I voted the other way.
I make clear that my position is, add is likely to remain, one of clear-cut opposition to increases in protectionism, not on theological grounds but on the severely practical grounds that it is not in this country's economic interest, nor in our political interest, and that it generally offers no hope for our future to tread that road. It is a road of desperation. It is a road that we trod in the world before the war and which led to the rate race and the political disasters, and to the ultimate calamity of the Second World War and the villainous regimes brought into being by desperate European populations suffering high unemployment and wriggling to get out of it.
I do not want to tread that road again, the more especially since the post-war prosperity was achieved by following precisely the opposite road—the road of co-operation between nations, with each nation seeing its prosperity in the success and prosperity of the whole community.
What alarms me most in the whole of the discussion that has taken place within the debate is that whenever the less developed countries make new industrial achievements, which are modest on a world scale but important and significant to them, instead of seeing the creation of new wealth in sterile, arid and poverty-stricken areas as a promise for the peoples of the world, we see it as a threat.
That is a threat only if we are so bankrupt of ideas and strategies that new achievement threatens us instead of offering us the hope, as history has always shown us it can, of a higher standard of life for us all. We should deal with the understandable anxieties of some of my hon. Friends and some Opposition Members about unemployment and their desire to cure it by the reaction of protectionism.
§ Mr. Lever
I shall give way in a moment.
The co-operative system is fairly fragile, and in my view it is silly to debate the relative hypocrisies of countries. We 1170 should start from where we are now. As my right hon. Friend the Secretary of State rightly says, our object must be to reduce the element of protectionism and not to increase it. It is no good sermonising at each other on past faults. We shall get nowhere doing that. If we want to improve co-operation and the liberalisation of trade, we must accept that we are where we are and start from that position to reduce tariff barriers and non-tariff subsidies.
We should start reflecting on the contracting out into protectionism with the thought that one of the things that economists have been agreed upon for about a couple of hundred years is that the route to greater wealth lies in the increased division of labour and that prtectionism is the enemy of increased division of labour and the improvement of wealth.
If we move into protectionism, we are saying that the aggregate wealth creation will be less but that we shall do better within the aggregate.
§ Mr. Lever
The hon. Gentleman says that that is right. His box of matches nearly burst into flames as he spoke. He has simplified the whole argument for me by confirming my point. The hope is that we shall get more wealth in a world that is achieving less wealth. That is not an encouraging starting point for a protectionist campaign.
I turn to consideration and rejection of a non-theological character. I shall do it briefly rather than itemise the arguments of every hon. Member who has spoken. The first argument is that of self-injury. That has been well made by the hon. Member for Colne Valley (Mr. Wainwright). Protectionism forces us to subsidise the less efficient, to put burdens on the efficient, and very often to engage in a hopeless battle to continue producing what is being produced elsewhere better and more cheaply.
The hon. Member for Colne Valley gave the example of motor cars and motor components. Our motor car production has diminished because it is inefficient compared with other industries. The production of the motor components industry has increased because it is 1171 efficient compared with other such industries. It must be borne in mind, too, as my hon. Friend the Member for Luton, East (Mr. Clemitson) said, that tariffs do not get us exports. In a world in which we have to pay for our imports by our exports, we have to be efficient enough to sell competitively. No amount of tariffing will get us exports.
Thirdly, there is retaliation. At times of high unemployment, we shall not be alone if we say "Let us do well even if the method we use will do injury to the aggregate prosperity of our trading partners. If the process is started and encouraged further by his country, for example, we shall have a great number of countries saying "Let us get more wealth out of a world that is getting increasingly impoverished because of the damage done by widening protection." There is not a very encouraging promise of prosperity by that route.
There is another factor that has to be faced. When we engage in protectionism, we are arresting the better division of labour, especially in areas which have not yet achieved development.
§ Mr. Lever
Let me finish. We are preventing the advancement or industrialisation of backward countries most of all.
I am not arguing for a topsy-turvy, unlimited, uninhibited advance of freedom of trade. We must have an orderly system. I was impressed when the hon. Member for Hertfordshire, South, in his serious moments, rightly attached importance to the Geneva discussions, because they represent a sophisticated and advanced attempt to preserve our liberal trading system not by theological passion but by a careful analysis of what is required to permit an orderly advance without disruptive consequences—in other words, to increase the international division of labour and wealth creation but at a pace which is manageable and allows countries to get their breath on the way.
We must do that because, as hon. Members know£and this applies in other countries—when constituents are put out of work it is not the normal practice of Senators or Members of Parliament to congratulate them on their contribution to the better international division of labour. On the whole, a somewhat more constructive response is expected.
1172 Although I am strongly against the cruel folly of attempting to inhibit the advance of industrialisation and deve lopment in impoverished regions, I recog nise that this must go at an orderly pace which can be managed and dealt with. But I urge all right hon. and hon. Members to think again before seeing in protectionism some contribution to the solution of unemployment.
§ Mr. Lever
I will finish this sector and I shall then give way. The hon. Gentleman must allow me to finish this point.
In fairness, protectionists are always a little defensive. They always recognise what I have said to be true. They are always saying "It is not permanent. It is a finite period of retreat into protectionism." But this half-hearted tribute of vice to virtue is unconvincing. If Britain retreats in this way, other countries will follow. There will be an organic change in the world's trading, economic, monetary and even political structure which will not readily be reversed. Therefore, let us not deceive ourselves. If we opt in the direction of the rat race—or, dare I say, further in the direction of the rat race than we have already gone—it will not readily be reversed and we shall not readily restore the spirit of co-operation and of liberal trading.
§ Mr. Deputy Speaker
Order. To whom is the Chancellor of the Duchy of Lancaster giving way? I think that the hon. Member for Chingford (Mr. Tebbit) was first.
§ Mr. Tebbit
The right hon. Gentleman has put his arguments, if I may say so, not like a Trojan horse but like a most vigorous stallion in these matters. I hope that he will not be a gelding in Cabinet when it comes to the point. May we expect him to announce now that British Airways will be authorised to import foreign aircraft, or is he still in favour of protectionism in that area?
§ Mr. Nicholas Winterton
Will the Chancellor of the Duchy of Lancaster give way on a matter which I think is relevant?
§ Mr. Lever
I shall give way in a moment; one at a time. I wish that I had suggested that the hon. Gentlemen had tossed up and that the hon. Member for Chingford (Mr. Tebbit) had lost the toss.
Disillusionment with our present arrangements is fully justified. I have much sympathy with those who, even if they go down or urge the wrong road through lack of thought, will not echo the complacent platitudes of the hon. Member for St. Ives (Mr. Nott), because he did not give us any answers. He posed the questions but did not give us the right answers. He merely repeated conventional, oft-repeated platitudes. We must find answers to the kind of anxieties that people have about employment and our economic prospects.
We must see what has gone wrong that has reversed that remarkable progress of prosperity which marked the first 25 years after the war. What has gone wrong is that our present adjustment system is not compatible with the prosperous interdependence of the world and of liberalised money and trade. Unless we make the system compatible with prosperity, interdependence and liberalised money and trade, we shall see the gravest and most dangerous erosion of liberalisation of trade and world co-operation.
At the risk of sounding a little eulogistic, I believe that our Prime Minister's initiative in relation to the summit has such a special relevance and is of such special value because it is addressed directly to the weakest parts of the adjustment process.
The weakest parts of the adjustment process are that we fail to achieve stabilisation of currency and, linked with that, that we have failed to achieve an adequate financing of current account deficits between nations. That is inevitable in a vigorous and expanding world where continuous equilibrium is a notion of Utopia rather than of real life. It is 1174 neither desirable nor attainable in real life.
We have also failed to deal with the ocean of rolling money which immediately magnifies every current account imbalance as it arises and often speculatively anticipates a current account imbalance and produces a major disruptive effect upon currencies.
What does the hon. Member for St. Ives recommend in order to achieve stabilisation of currencies? He answered the question in a sentence. He said that all we need is that private balances should match. I am not sure why he supposes that this will happen autonomously or what has stopped it so far, apart from his catalogue of Labour Government shortcomings. It is not apparent why the inflows and outflows of dollars, yen, deutschemarks, francs and so on have not produced that balance which would have gratified the hon. Member. If the hon. Member is dealing seriously with these questions, it is not enough for him to mouth simple phrases. He must tell us how he will achieve that end and how he will get that balance to match.
§ Mr. Nott
The right hon. Gentleman has misunderstood me. I was saying that if one endeavours to maintain a stable currency by intervening in the exchange rate—which I understood to be the Government's view—one is then taking in deutschemarks and yen. I suggested that the currency should float more naturally, which would make the problem less severe for the money supply. I was also suggesting that there should be greater freedom in exchange control. That is different from what the Chancellor suggested that I said.
§ Mr. Lever
I took a careful note of what the hon. Member said. He said that we should seek to have private inflows matching private outflows and not have central bank intervention. Leaving the matter to the private flows did not stop the dollar depreciating sharply, to the alarm and disruption of much of the trading world. Even though the central banks of Britain, Germany, Japan and Switzerland intervened heavily in support of the dollar, a decline in the dollar occurred which was so grave and threatening that even now it dominates all financial and business calculations throughout the world.
1175 If we followed the hon. Member's platitudinous prescription and left it to the private balances to deal with, I wonder where the £60 billion that was put up by the central banks would have been replaced. I can tell the hon. Member that there would have been chaos in the world monetary markets if the central bankers of Germany, Japan, Britain and Switzerland had last year refrained from intervention.
The hon. Member for St. Ives said, in effect, that we should float and correct imbalances of trade by letting currency devalue, as it were, and not by tariffs. So he offers us a charming constructive alternative to tariff wars: currency wars. That is not very encouraging either. In the present situation, free floating is a bust. It is a complete washout for currency correction. It is a recipe not for balance of payments correction but for slump, trade war and economic disruption on a scale that would make the present slump move to the dimension of the 1933 slump if we failed to take action.
§ Mr. Fletcher-Cooke
I want to know what the right hon. Gentleman proposes. He has been swingeing with my hon. Friend the Member for St. Ives (Mr. Nott), but he has admitted that there is a great problem. We want to hear what he and the Prime Minister propose.
§ Mr. Deputy Speaker
Did the hon. and learned Gentleman say that he would extend the debate by 10 minutes?
§ Mr. Fletcher-Cooke
What I said, Mr. Deputy Speaker, was that if the right hon. Gentleman put his mind to it he could explain anything in 10 minutes.
§ Mr. Deputy Speaker
I thought that the hon. and learned Gentleman was going to extend the whole business by 10 minutes.
§ Mr. Lever
The correct way of achieving currency stabilisation is by co-operation between the great nations of the 1176 world to accept and finance imbalances larger in size and longer in duration on both current and capital account than we have experienced and found acceptable so far. If we fail to accept and finance these capital movements and current account imbalances with more vision than we have shown before, the world will continue in its slump. We shall deepen the slump by false remedies and false roads along which people will feel themselves to be driven, and the Prime Minister has recognised that in seeking to focus the summit on achieving that stabilisation.
I think that part of the remedy is that surplus countries must deploy their surpluses in part of the process of financing the current account and capital account imbalances of the deficit countries. What else would anybody think was constructive to be done with surpluses of this kind? In other words, we have to find the means at the summits to achieve a strategy for dealing with he disruption on capital and current account caused by the present monetary disorders.
I think, too, that we have to turn our eyes to the needs of the poorer countries from the point of view of providing adequate finance for those countries to enable them not only to contribute to world trade at least to their present levels but to secure their development and their political stability.
I think that it is no good talking about ruling out protection. The hon. Member for St. Ives can twit me with my votes and so on, but it is no good his ruling out protection and then advocating the positions that would lead to protection. He has to give answers to the unemployment question, to the currency instability and to the current account imbalances.
It will not be very helpful if those of us who are struggling to meet this problem suffer from unkind vulgarisations of our position. The hon. Gentleman said that I was an inflator and borrower. If being an inflator means that I do not accept his thesis that today's level of demand is acceptable, with all the unemployment and waste that go with it, I am content to be called an inflator.
§ Mr. Lever
We are trying to create the conditions in the world that will enable us to expand our demand, safely and securely, by providing the adequate funds to finance over a sufficient period of time the imbalances of trade which are inevitable in the kind of situation in which the world finds itself at present.
§ Mr. Lever
The answer is that every deficit has a surplus, and surpluses and deficits must be matched together so as not to allow surplus and deficit to injure the deficit country and, in the end, to injure the surplus country.
It is no good the hon. Member for St. Ives repeating nineteenth century incantations, such as that Schmidt is right and Callaghan is wrong in seeking to improve the demand situation in the world. Callaghan is not some Bolshevik eccentric in seeking to improve employment in the countries of the Western world. The Prime Minister is addressing himself, in a way that the hon. Member evaded, not merely to the platitudes about protection, free trade and the like. He has addressed himself to creating the conditions that will favour the continuation of that.
§ Mr. Richard Wainwright
Does the right hon. Gentleman agree that to make a success of the Bonn summit, of which he has stressed the importance, it will be necessary for our Prime Minister to address himself over the heads of Ministers at Bonn to the peoples of the United States and the other countries represented?
§ Mr. Lever
That is a splendid liberal precept, but not necessarily a rewarding one.
In conclusion, I want to say this about the Bonn summit and the Bremen summit. Everyone is rightly warning us against having dangerously high expectations. But there is another danger, too. That would be to have no expectations from the summit. It would be too easy a ride for all the leaders there if we did not have any expectations. We must have very firm expectations that they will show the developing common purpose—to get the world out of this stagnation, unemployment and threats of our present disorder economically and monetarily.
1178 We do not expect a complete set of answers from the summit. We do expect convincing evidence of common purpose and of work immediately to be undertaken in support of it. I hope that that will come out of the summit.
I think that the summit should demonstrate that the world is going to see a solution to its problems in extending, not diminishing, the collective monetary and economic security which was set up after the Second World War, from which we retreated a few years ago and from which we have not moved forward again with the kind of visions that inspired the architects of Bretton Woods. Bretton Woods went out of date, but it is miles in advance of the near-anarchy that marks the system now prevailing in the world.
The great archetypal advance in thinking, vision and generosity was the Marshall Plan. The great lesson of that plan is that though it was the most imaginative and generous act of enlightened self-interest in world economic history, long after it has been concluded and forgotten—alas, forgotten too soon by its beneficiaries—there is not one citizen of the United States who is worse off economically or politically by that remarkable act of vision and generosity.
The great lesson for the summit is that vision and generosity between trading partners and allies pays in the modern world. It does not cost one money. It is that vision and generosity which I hope to see greatly in evidence as a result of the summit deliberations that are shortly to be upon us.
§ Motion, by leave, withdrawn.