§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Arbuthnot.]
§ 10 pm
§ Mr. Anthony Steen (South Hams)
As it is close to bedtime, I shall tell the House a bedtime story. Although it is a bedtime story, it is a nasty story about cheating, dirty tricks and commercial chicanery. It has a devious plot. The one ray of light is the guardian angel, personified by the Minister for Trade who is on the Front Bench tonight. It is a delight to cast the Minister in the role of guardian angel, which I know he will prove when he replies to the debate. If everyone is sitting comfortably, I shall begin.
Let us set the scene. Worldwide, 100 million bicycles are made every year and 40 million of them are built in China in some of the most modern plants ever to be constructed. They look like something one would expect to see in a James Bond film—meticulously clean with thousands of Chinese rushing around in the Chenzhen free trade zone near the China sea.
How can the Chinese afford to build such modern and wonderful factories of which Britain would be envious? They can do it thanks to the World bank, to which Britain made a contribution of £110 million in 1988 and more subsequently. The World bank generously offered soft loans to China for its emerging industry, as it is called. However, not much is emerging from an industry that has 40 per cent. of the world market.
The clever Chinese are producing bikes in ultra high-tech plants solely because of the World bank's money to which Europe and the United States have contributed. One could say, "Good for the Chinese," but the impact on Europe has been devastating. It has been like asking a unicyclist to compete in the tour de France.
We should not get it wrong; the Europeans are no fools either. They are still in the story by virtue of the fact they have put a ceiling on EC bike imports which is expressed as 9.5 million ecu from what are called generalised system of preferences—GSP—countries. As China is a GSP country, the bikes can come in free without any tax whatsoever. Above that figure of 9.5 million ecu they have to pay, in theory, 17.1 per cent. tax per bicycle. As the plot unfolds, we shall see that they do not pay a penny in tax; they have managed to find a way round it.
Under GSP there are a number of countries that enjoy special preference which allows them to import into the EC free of tax. When China realises that it has reached the ecu ceiling on imports, it does not stop manufacturing bikes; on the contrary, it surreptitiously arranges, through subsidiary companies and agents, for its bikes to be sent to other GSP countries such as Thailand, Indonesia, Malaysia or Hong Kong. As all those countries enjoy special GSP status, each can import to the EC—free of tax –9.5 million ecu worth of bikes, thus avoiding the 17.1 per cent. tax that would have been added if they had not switched through the other GSP countries.
Taiwan, unfortunately, is the odd man out: it has no GSP status. It therefore relocates its bicycle manufacturing industry in GSP countries. Even Taiwan has Chinese factories, with thousands of Taiwanese rushing around in ultra-modern plants making bicycles. That is swelling the number of bicycles in China, which means that more and more bicycles made in China are not moved from China to 980 Europe, but go to some of the other GSP countries that have not used their quota of the EC allocation and then go to Europe.
The Chinese employ other, rather shady devices. They send their bikes out of China to Hong Kong in unmarked crates with false destination labels. In Hong Kong, the bikes are repacked and sent to the United Kingdom in different containers, unassembled, in what is known in the trade as a knock-down condition, which attracts only 8 per cent. tax on accessories. That is the process of last resort, when all the other tricks have been exhausted.
Let us take a look at Thailand, Malaysia and Indonesia —all GSP countries. Bicycle exports have gone through the roof: they have grown sixfold in the past two years, not because any of those three countries are building more bikes—the Chinese and Taiwanese are building more bikes in China, and sending them to Thailand, Malaysia and Indonesia for shipment into Europe. It is a very shady story, and I know that my hon. Friend the Minister will be greatly troubled by it.
Some of those listening to this story will say, "So what? So Chinese bikes are being dumped in Britain." It matters a great deal, because Britain's bicycle industry is being squeezed into extinction. Britain used to have one of the largest bicycle industries in the world, and we were very proud of that industry; today, thanks to the Chinese and the Taiwanese, we have only 1.2 million bicycles out of a world production of 100 million bicycles a year.
§ Mr. Andrew Robathan (Blaby)
Perhaps a parallel could be drawn with the method by which the Japanese have undermined our motor cycle market in past decades. They ruined that market, only to up their prices as soon as it collapsed.
Will my hon. Friend comment on the fact that, although Nottingham is the home of the Raleigh bicycle, not many Nottingham Members seem to be present to listen to his sensible comments?
§ Mr. Steen
I cannot see any hon. Members on the Opposition Benches. Perhaps I am suffering from restricted vision after writing one of the best speeches that I have ever written, but my hon. Friend's point is very telling. When a scare story was put out that the British motor cycle industry was going to collapse, everyone said that it was not true; then the industry collapsed. Now the same is happening with the British bicycle industry.
It is not that Raleigh and other leading manufacturers have not modernised their plant; on the contrary, they use robots, lasers and other innovatory products. Raleigh and Dawes, two of the leading manufacturers, are aggressive and dynamic. But how can these industries in Britain compete with the sweatshop labour in a totalitarian country that pays pence, rather than pounds, an hour, where management will stop at nothing to see that their bicycles are landed on our shores? Where is the cavalry? Who will rescue our industry? The Canadian Mounties found that cheap imports were being dumped on their doorstep. Within five months those goods had been banned, blocked and stopped at the port of entry. Why has not the cavalry responed like the Canadian Mounties to protect Europe from this influx of bicycles? The single market and the free trade will not be much good if they are unable to,prevent illegal products from flooding in.
981 The people in Brussels, I am told, are not too concerned about the dumping of bicycles in Britain, so long as they have their steak and chips and chocolates. We have to rely on the votes of member states to ensure that the dumping will stop. While our industry is bleeding to death, while our people are being put on the unemployment heap, the Eurocrats continue to make merry with a glass of Burgundy. While Brussels continues to party, Raleigh has already laid off 500 staff in the past few months because of Chinese dumping.
We are witnessing a commercially corrupt process aided by the World bank and making any competition virtually impossible. The Treasury is using taxpayers' money to put our own people out of business.
But the story does not end there. We have the Taiwanese also to deal with. My hon. Friend should watch out for the Taiwanese bicycle company whose fax came into the possession of a British bicycle company. The Taiwanese have a wheeze whereby they send their bikes to Britain through a GSP country, knowing that the rule that 60 per cent. of the components have to be made in that country and that the condition of GSP preference is that 60 per cent. of the product be manufactured in that country are being broken.
There emerges the picture of ruthless men in the east aiming to destroy our bicycle market. We are dealing with cunning Chinese business men who are making a killing on the manufacture of bikes and throwing our work force on the dole.
When Raleigh buys Shimano gears from Japan it has to pay duty of 8.1 per cent. The far eastern bloc avoid paying any tax on any part of any bike as a result of the devices that I have outlined. This is a horror story. Free trade is being choked. State-run dictatorship is destroying yet another manufacturing industry in Britain. Where is the guardian angel? Where is the Minister for Trade? Have his wings been clipped? Will evil triumph?
There is a sub-plot. European Community officials are trying to correct the balance by instructing the Chinese to pay 34.4 per cent. tax on every bike imported. They believe that that is the figure that is needed to correct the unlevel playing field. Yet Commissioner Brittan has been prevented from signing. Why will he not sign? Has something been done to his right hand? Is he part of the plot? Is there something going on about which we do not know? Let us not forget the clever lawyers being employed in Brussels by the Chinese to help them to corner the market.
But the Chinese will clearly have the last laugh. Their bikes are not safe. Often, their brakes just do not work in the rain and do not conform to BS6102. When the European Community finally put on the 34.4 per cent., the unsuspecting British public will find themselves unable to stop as they head towards a brick wall.
§ Mr. Harry Greenway (Ealing, North)
With the permission of my hon. Friend the Member for South Hams (Mr. Steen) and the Minister for Trade, I shall speak for one minute strongly to support my hon. Friend. I speak as chairman of the all-party parliamentary friends of cycling group. I wish to give two statistics which should be laid before the House.
In Denmark, 11 per cent. of the population still cycle to work whereas in the United Kingdom the figure is only 4 982 per cent. People here have enough to contend with, such as dangerous roads, without having dangerous bicycles from China foisted on them.
It must be said that the ruthlessness with which the Chinese have set about getting bicycles into this country has to be observed in practice to be believed. It is only right that our great cycle industry—Raleigh and other companies have been mentioned—should he allowed a level playing field on which to operate. However, they demonstrably do not have a level playing field, as my hon. Friend the Member for South Hams so graphically outlined. We are looking to the Minister for Trade to ensure that the industry has a level playing field in the interests of our nation and of cyclists in particular.
§ Mr. Gary Waller (Keighley)
I am grateful to my hon. Friend the Member for South Hams (Mr. Steen) for providing me with a brief opportunity to support him in the debate. He made his strong case with flamboyance and sincerity.
In a brief intervention, my hon. Friend the Member for Blaby (Mr. Robathan) drew a comparison with the destruction of the British motor cycle industry and, of course, in many ways he is right. However, there is one difference. We must admit that the Japanese stole a march on our motor cycle industry because, in many respects, their products were technologically more advanced but the products of the British cycle industry are technically supreme. Hon. Members who saw examples of its frames recognised that the most modern technology—space technology—is now being used, and nothing can compare with those frames.
My hon. Friend the Member for South Hams mentioned anomalies which, for example, allow importers to pay nothing on components which are popular with all purchasers these days—Japanese components such as brakes and gear sets—whereas United Kingdom manufacturers importing the same components have to pay 8 per cent.
My hon. Friend also referred to dumping and the fact that injury has been proved by a European Community investigation. More than 2 million bicycles have been dumped on the United Kingdom market since 1987. Now that the United States has taken action to deal with dumping, we can expect to see more diversion into our market. The downhill path has been rapid because in six years imports from the far east have grown from 29 per cent. to 70 per cent. That is an unimaginable change in such a short time.
The message to the Minister is clear. There must be ratification as soon as possible of the anti-dumping measures which are now regarded as justified by the EC investigation. It is necessary to deal speedily with the anomalies that enable far east importers to undercut our excellent home-produced bicycles.
§ The Minister for Trade (Mr. Richard Needham)
I have seen the yellow peril knocking at the door, and I understand my hon. Friends' concern. I fully support their comments about the lack of interest shown by the Opposition, especially as many Labour Members represent areas in which bicycle manufacturing still exists.
983 We must consider a series of issues. My hon. Friend the Member for South Hams (Mr. Steen) rightly said that the matter falls under European Community competence. He knows perfectly well that the only power I have is to try to move on the debate in Europe. I am not sitting at the elbow of Sir Leon Brittan, giving him the pen. Were I in that happy position, he would no doubt have already signed the anti-dumping measure that we have supported in the European Community. However, it is an EC matter, and two separate issues are involved. One is the GSP—the generalised system of preferences—problem about bikes coming in up to a quota level which, as my hon. Friend the Member for South Hams said, because of the way in which the rules operate, can then be circumvented by the Chinese continuing to export bikes until a GSP abuse has been proved.
The key question is dumping, because that introduces an element of a tax of 34 per cent., which represents a considerable additional benefit compared with 8 per cent. Put another way, after the devaluation of the pound, that 8 per cent. has disappeared to our benefit because of that devaluation. Even so, we accept that there has been a proven case of dumping and that we should move against it. We are doing what we can, and will continue to do so, to pressurise the Community to move in that direction.
The Chinese ride around on bikes. They may produce 40 per cent. of the world output of bikes, but—I do not have the figures with me—they are also by far the world's biggest riders of bikes. It is no good our now saying that China is a backward third-world country which is not capable of making modern bicycles. The Chinese can make them. My hon. Friend the Member for South Hams says that they have been supported in that effort by the World bank. So they have, as have many other third-world countries, with the aim of trying to modernise their industries and raise their standards of living.
I accept that Chinese workers are paid much less than British workers. Unfortunately, that does not preclude them, under the rules that operate not only in terms of the Community but in terms of GATT, manufacturing products that they sell to this country. If all Chinese workers were paid as much as British workers, no doubt it would be a truly level playing field, but they are not and I am not clear what my hon. Friend suggests we should do about that.
We have an advantage in that our workers are paid, including the social cost, half that of German workers. Are we to make the same argument about dumping British products in Germany because our workers are paid half as much as theirs? That would be a dangerous route to take.
We must look at the matter of fair trade, and my hon. Friend raised a series of questions about that. He asked whether the Chinese were trying to get round the 8 per cent. by moving their finished bikes to Thailand, Indonesia, Malaysia or wherever. If my hon. Friend has evidence to that effect, he should let us have it. The only way we can tell whether a bike comes from Indonesia or China is to ask the relevant authorities in, say, Indonesia whether it is an Indonesian bike. If they say it is, we must believe that, unless we are given evidence to the contrary.
I cannot see why the Indonesians, who are not rich, should take massive numbers of Chinese bikes into Indonesia to bring them here, unless there is that level of 984 corruption. In relation to Indonesia, Thailand or Malaysia, what would be the reason for them doing that? Perhaps they are Indonesian bikes, and that is one of the problems. If duties were imposed on China, perhaps they would, as my hon. Friend the Member for South Hams suggested, move out of Taiwan and start making bikes in Indonesia, which they might move to somewhere else, perhaps to India or Sri Lanka. So the problem is that one is continually chasing a chain which it is hard to catch. But if my hon. Friend is right about the bikes being moved, we shall act on that.
My hon. Friend did not make the point—I will make it for him—that it seems strange that one should have to prove the case twice. In other words, if there is an anti-dumping measure against China, it would seem reasonable to assume that one should not then have to prove further damage because China exceeded its GSP quota. I assure my hon. Friend that we shall take up the matter with the Commission to see how we can bring it to bear.
My hon. Friend the Member for South Hams raised the question of safety. I appreciate why we need a level playing field in regard to bikes—otherwise, he is right in saying that we might go downhill and crash into a wall if the brakes did not work. There are the environmental health officers; there are the pedal bicycles safety regulations. My hon. Friend is a great expert on the subject, as are some of my other hon. Friends. Why are those regulations not being enforced? If the bikes are unsafe and fail to meet British standards, what are the environmental health officers doing? What is the Department of Transport doing?
§ Mr. Needham
It is indeed, but as this is the first time that the matter has been raised before us, or before you, Madam Speaker, I am not in a position to answer it tonight—except to say that I shall raise the matter with the Department of Transport and the environmental health officers to find out what they are doing. If the bikes are dangerous, I need my hon. Friend to give me the details.
§ Mr. Steen
I am grateful to my hon. Friend for what he has said so far, but two points arise. The first matter that troubles me is that there is a world of difference between trade between Britain and Germany, which are parts of the same European Community, and trade between China and Britain, in which China is using its cheap labour to bring in bikes that are undermining our industry—we have precious little manufacturing industry left in this country —and causing gross unemployment. Secondly, there is now overwhelming evidence that many of the Chinese bikes are unsafe in wet weather.
§ Mr. Needham
I am grateful to my hon. Friend for those allegations, but they must be proven. If they can be proven, action will be taken.
My hon. Friend said that partly assembled bikes were flooding into the country to be made up here. Customs and Excise tell me that they have a monitoring system and have checked a number of consignments of bicycle parts from China, and that they have found no evidence of the practice. As a member of the party in government, my hon. Friend knows perfectly well that the Government cannot 985 act on such matters unless there is proof of the malpractice. I give him a categorical guarantee that, if we have such evidence, we shall act upon it.
The fact that some countries have cheaper labour than others—whether we are talking about us against Germany or China against us—is not a reason for excluding goods from third-world markets. This country has always stood for free trade. As my hon. Friend said, the reasons for the demise of the British motor cycle industry were significantly different from those that we now face.
We shall do everything that we can to assist our bicycle industry and protect it against dumping and any unnecessary abuse of the world's trading system, but my hon. Friends will have to accept that we must work within the rules laid down both in the Community and by the GATT. I hope that my hon. Friend will not take this amiss, but his speech is not so different from the speech that President Clinton made recently about airbus subsidies, steel dumping in the United States, and so on. Those things, too, affect British jobs.
I accept what my hon. Friend says about dumping and the misuse of existing regulations—we all agree on that 986 —but we must be careful not to wind up the people of this country into believing that a way to solve the problem is to introduce protectionism by the back door. That would not benefit us as a nation.
I agree that our manufacturing base is narrower than it should be, and that we have to build it up; but we can do that not least in a market such as China. In China there are enormous opportunities for us to build power stations, transport networks and metro underground systems, and to set up factories ourselves. We can do enormous business there, in the fastest growing economy on earth, which will create many British jobs in future.
It is all a matter of balance. We shall do whatever we can to stop unfair trading practice, but I am sure that my hon. Friend will accept that we must maintain the balance and continue to support fair trade—because free trade is the salvation of our manufacturing industry.
Question put and agreed to.
Adjourned accordingly at Twenty-nine minutes past Ten o'clock.