Orders of the Day — Cotton Industry (Japanese Competition)

– in the House of Commons at 12:00 am on 14th December 1949.

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Motion made, and Question proposed, "That this House do now adjourn.—[Mr R. J. Taylor.]

2.0 a.m.

Photo of Mr Anthony Greenwood Mr Anthony Greenwood , Heywood and Radcliffe

In spite of the lateness of the hour, I make no apology for raising a subject which so vitally affects the people of Lancashire as the threat of Japanese competition. When we last discussed this matter in the House on 2nd March we were told by the Government that there were no grounds for alarm and that we did no service to Lancashire by implying that around the corner there was this terrific threat. Within two months, however, the United Textile and Factory Workers were reporting to their annual conference at Blackpool that, during the year, they sent a message to the Textile Workers' Union of America about the Japanese threat. That message contained these words: In the last two or three years nothing has shaken the confidence (which was but slowly returning) of the Lancashire cotton operatives so much as the recent announcements of the re-growth of the Japanese industry and Japan's re-entry into the export market with alleged low-priced fabrics. I do not think it is any good pretending that the Japanese threat is only a remote one. It is of no use to panic about it, but we must keep our feet on the ground and get the Government to tell us what steps they are taking, if necessary in agreement with the United States, to save Lancashire from a recurrence of the hardships which Japanese competition caused in the past. I am speaking particularly tonight of Lancashire cotton, but my observations apply equally to silk, pottery and bicycles produced in other parts of the country.

Today, textiles play a bigger part in the Japanese export programme than ever before. The latest statistical supplement of the "Cotton Board Trade Letter" refers to an enormous expansion in Japanese exports, which surpassed in volume exports from the United Kingdom and the United States during the second quarter of 1949. Events in recent years have meant that Japan can no longer look for outlets in some markets which were open to her before the war. Particularly would markets in China, Manchuria and Korea be less open to her than in the past. There is a conflict there between Communist and Japanese ideology; there is a deep bitterness against Japan on the continent of Asia; and Japanese pre-war investment in the cotton industry in China means that China is probably independent of supplies from the Japanese textile industry.

Japan is having to look for new outlets for goods and is turning her eyes to places like Indonesia and the British Colonies—to markets vital to the industry in Lancashire. Last year there was an enormous increase in Japanese exports to Indonesia, to which about half of her total textile exports were directed. Figures for the first quarter of this year suggested that this invasion of the Indonesian market might be a temporary phenomenon, but latest figures show that the seriousness of the position is continuing.

At the same time the Japanese threat to our markets in the British Colonies appears to be growing. The irony of the situation is that we are pouring millions of pounds of British money into schemes of Colonial development and the inhabitants of the Colonies are spending the money on Japanese goods. I should like to read an extract from a letter, dated 28th November, sent by the East African representative of a Lancashire firm. He writes: The Uganda Government expect the coming cotton crop to exceed 400,000 bales for the first time. The price will be satisfactory and it is safe to assume that there will be considerable consumer activity in the range of trade goods, and particularly textiles. In spite of this, we are unable to book a single order, even for ready stocks at old rates. The reason for this is that British prices are not competitive and ample supplies are forthcoming from India and Japan. The writer goes on to quote the prices of Japanese piece goods and compares them with the prices of comparable Lancashire goods.

The general conclusion is that Japanese goods are available at about 1s. a yard below the cost of British goods. Figures which I have obtained in regard to West Africa show that Lancashire cloth available at 2s. a yard has to face competition from Japanese cloth at 1s. 3d. The East African agent from whom I have already quoted goes on to say: We know you will be sorry to learn that the products of British manufacturers, including Japanese cloth processed in England, are being freely offered at anything up to 1s. a yard below cost. All this is taking place at a time when Japan, not having devalued the yen, might expect to be at a disadvantage in sterling markets. Even more recently a letter dated 30th November contained these passages: Whilst we quite agree that on world-wide basis Japanese competition might not constitute a threat to Lancashire mills for some time to come, there is no doubt whatever that competition is a growing reality in East Africa. And again: You ask us whether we can find any importers who have received substantial quantities of Japanese goods at prices which would rule us out of the market. The answer is 'yes'. To give another quotation: In prints up to the end of August Japan had supplied approximately 4 million out of a total of 7 million yards. By the end of September we believe that the figure will prove to be 6 million out of a total of 9 million yards. The figures I have received today in a further letter tend to confirm the accuracy of that estimate.

The other Colonies—Gambia, Sierra Leone, Nigeria, Jamaica, Trinidad and Aden—all imported more Japanese textiles than in 1937 in spite of a tremendous decline in Japanese exports. In the first quarter of this year Tanganyika, although imports of Japanese cloth showed a slight decline on pre-war figures, was importing seven yards for every yard from Britain.

Photo of Mr Stanley Prescott Mr Stanley Prescott , Darwen

In view of what the hon. Gentleman has been saying, would he support the pleas from this side of the House for a revision of the Congo Basin Treaties and the exclusion of Japan in future?

Photo of Mr Anthony Greenwood Mr Anthony Greenwood , Heywood and Radcliffe

I hope to touch upon that matter later. Since General MacArthur freed the Japanese textile industry from earlier restraints, the "big ten" combines are going all out and the position in East Africa may be repeated in other markets. "The Times" on 26th October said: The pattern of Japanese trade will now presumably revert to that of before the war. It is true that competition today is less unfair than before the war; wages have gone up, there are holidays with pay, and welfare facilities are being provided. Nevertheless, at the exchange rate of 1,000 yen to the pound, Japanese workers are receiving 2s. 9d. a day and women 1s. 6d.—only a fraction of what is earned in Lancashire.

We do not know whether improved wages and conditions will survive the occupation, or whether, when Japanese industrialists are removed from Western influence, they will revert to those subsidies, low wages and unfair methods which brought financial disaster to Lancashire firms in the past and unemployment and under-employment to hundreds of thousands of operatives. "The Times" in the same article on 26th October reported: Japanese leaders are now pressing also for permission to lower the standard of living of Japanese workers to pre-war levels. Their demand may well be granted. That is the danger which hangs like a cloud over Lancashire at the present time. I did not agree with the Secretary for Overseas Trade when he said in a recent answer in the House that there was no evidence that Japanese competition was harming Lancashire or that a fear of Japan was preventing workers going into the industry. From what I know of Lancashire I believe that the Japanese threat is retarding re-equipment, preventing recruitment, and discouraging firms from setting up marketing organisations overseas. It is no good closing our eyes to these things. You cannot prevent the storm by refusing to read the barometer.

There is a good deal of suspicion in Lancashire that we are not getting a square deal from America in this matter. It is difficult to prove it, but equally difficult to dispel the suspicion.

Photo of Mr Stanley Prescott Mr Stanley Prescott , Darwen

If the hon. Gentleman will be so kind as to meet me after the Debate, perhaps I can give him some evidence.

Photo of Mr Anthony Greenwood Mr Anthony Greenwood , Heywood and Radcliffe

I know the hon. Gentleman has made several efforts to convince the Government on that score. I hope he will be more successful in the future.

Photo of Mr Stanley Prescott Mr Stanley Prescott , Darwen

Now that I have the hon. Member's support I hope I shall.

Photo of Mr Anthony Greenwood Mr Anthony Greenwood , Heywood and Radcliffe

The Textile Factory Workers' message to their American comrades which I quoted earlier also included this passage: There is a widespread feeling that the United States, who are in effective control of Japanese economy, are too much influenced by American cotton growing and marketing interests, and influenced too little by American cotton spinning and weaving employers and operatives."

I do not think that is an over-statement. I have heard some Lancashire interests suggest that America has been a good deal more tender in its attitude to the Japanese cotton industry than in its attitude to the light engineering industry, which is a more serious competitor in American export markets. It seems that in the drama of the Far East America is playing the part of both Red Riding Hood and the wolf. I welcome the decision to send a joint mission to Japan. Until we know all the facts it is impossible to assess the importance of the problem, or to know what steps are needed.

The "Manchester Guardian" has summed up the problem as follows: The Japanese should not have to rely so heavily on cotton exports that they are bound severely and suddenly to damage our trade by desperate measures to expand their own at any cost. I ask what proposals the Government have to make to that end. We cannot, nor should we wish to, smash Japanese industry. That would be bad economics and worse ethics. The Japanese have to live, but the people in Lancashire have to live too. From the long-term point of view the solution lies in international Socialist planning, but tonight I want to confine myself to the more immediate steps we can take, and to ask the Government three questions.

First, are the Government sure that strong and democratic unions are being built up in Japan which will be able to maintain wage levels and working conditions when the Occupation Forces withdraw? Secondly, will the Government consider initiating discussions for an international trade convention excluding from the area of the signatory powers goods produced under conditions which do not conform to an internationally accepted standard? Thirdly, what steps will they take to exclude from British Colonies Japanese goods marketed at a price less than the cost of raw materials and labour represented in similar Lancashire goods?

Those are the questions I want answered, and that Lancashire too wants answered. The cotton industry has done well since the war. The people of Lancashire suffered from Japanese competition in the inter-war years. During the war they played their part in defeating Japanese imperialism. It would be a tragedy if they were to be the first victims of a reborn Japan.

2.14 a.m.

Photo of Mr John Lewis Mr John Lewis , Bolton

I am sure the House will be grateful to my hon. Friend for raising this important question even at this late hour. Those of us who represent cotton constituencies know how seriously this matter is regarded by both sides of the industry, who know that the livelihood of the people concerned depends on a guaranteed market of some kind in the future. Japanese competition is always in the minds of those responsible for the well-being of the cotton industry, and they do not regard the answer which the hon. Gentleman who is to reply tonight, gave me in the House last week, as any encouragement whatever, or as showing that the Government fully appreciate some of the factors concerned.

My hon. Friend who is to reply indicated that he was not aware that recruiting was in any way affected by fear of Japanese competition. From my close connection with trade union officials, I can assure him, that recruitment has been to a large extent, affected by a fear that the cotton industry in Lancashire may not hold out the prospects it does at the present time because of Japanese competition. We know that in the next year or so there is little likelihood that the Lancashire cotton industry will be affected, but we shall be faced by a competitive market in two or three years' time.

In my view there is only one possibility of being able to overcome the difficulties with which we shall be faced; that is on the basis of quality rather than quantity. I am not sure that the present tendency in the cotton industry shows the likelihood of our being able to get into foreign markets with high quality goods, because we are concentrating in the main on producing the maximum output irrespective of quality. The tendency to which I refer is the changing over from mules to rings

May I briefly outline what I regard as a serious blunder that we are making in the industry at the present time? We know, and my hon. Friend the Member for Heywood and Radcliffe (Mr. Anthony Greenwood) will agree, that it is impossible to get high quality cotton goods by using ring frames. We are seeing every day mules being rendered obsolete and rings being installed in order to obtain maximum output. Like many of the trade unions concerned in the industry and like some employers, I regard that as a very serious error. If we are to face Japanese competition we must concentrate on putting the industry in a position in two or three years' time to produce quality goods where prices will not be the sole factor.

I think hon. Members will agree that no useful purpose will be served by making further representations to the MacArthur Administration, because we have very littte hope that they will do anything about it. To my mind, this tendency to replace mules by rings is a grave mistake. I feel that at all times we must have regard to long-term policies in the cotton industry—by that I mean two or three years' time, when we shall be faced with serious competition. Quality alone will be the decisive factor in obtaining markets.

I ask the Government to give serious consideration to this question and say whether or not steps should not be taken in the near future to prevent mules being scrapped, because there is not the labour in the ring spinning side of the industry to make up for the output which will be lost by the scrapping of mules. I ask the Government to give serious consideration to the taking of early steps to advise the cotton industry what to do in these circumstances. At the moment millowners are concerned only with increasing output. I maintain that the essential consideration now should be planning for the future on the basis of quality rather than of quantity of output.

Mr. Frescott:

On a point of Order. Would it not be possible to call one member of the Opposition?

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

The hon. Gentleman had a conference with Mr. Speaker and was told exactly what the position was.

Photo of Mr Stanley Prescott Mr Stanley Prescott , Darwen

The only conference I had with the Chair was confidential.

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

It was within my hearing and within the hon. Gentleman's hearing as well.

2.20 a.m.

Photo of Mr Arthur Bottomley Mr Arthur Bottomley , Rochester Chatham

I ought to make it clear from the beginning that the Government are keenly alive to this threat from Japanese competition in all fields of industry. Having said that, it would be wrong to ignore present circumstances. It is in that sense that answers to questions have been made. The Japanese export trade at the moment is small. No one can deny that. It is small through various causes. We know that the Japanese have not recovered from the economic collapse which resulted from the war. We know, too, that with lower production she has to provide for a much larger population. We know, also, that as far as the sterling area is concerned, because of balance of payments difficulties, she is restricted in the trade that she can do with us.

But having said that, one must acknowledge that she has to close the gap between her consumption of food and raw materials and what she earns in the way of foreign currency by means of exports. Therefore I think that one way in which we can take a reasonable part in seeing that the development of Japan's export trade does not unfairly hamper our own trade is by making sure that there is no kind of development which is likely to make Japan again a potential enemy with strength. The other way is to make sure that what is being done at the moment by the Supreme Commander in the area will, as far as possible, achieve those conditions which will enable Japanese competition to be fair.

I should not like, at this stage, to make any responsible reply, on behalf of the Government, to the three points which have been put, because I think the industry itself ought to have an opportunity to study the position at firsthand. Reference has already been made to the Anglo-American mission which, we hope, will tour Japan with a view to finding out what is involved as a result of the competition of Japan in world trade in cotton textiles. But it is, perhaps, as well to see where there is a real threat to our trade and how the problem is being tackled. I think that all will agree that the real basis of Japan's competitive power in world markets is her lower cost of labour compared with that of the Western nations.

Mr. Preseott:

Child labour.

Photo of Mr Arthur Bottomley Mr Arthur Bottomley , Rochester Chatham

I shall come to that in a moment, although it is to be noted that the present Administration has done away with child labour.

Mr. Preseott:

With respect, it has not.

Photo of Mr Arthur Bottomley Mr Arthur Bottomley , Rochester Chatham

It intends to do away with it. In an overcrowded country it is going to be a long time before this development can be brought about in the way we should want, such as the growth of trade unions and the abolition of child labour. But what the present administration has done is to foster the growth of genuine trade unions and to raise general labour standards. Under the provisions of the Labour Standards Act, which was introduced in 1947, the bargaining power of the workers in Japan has been strengthened.

Let me say what has been done in connection with the recent decision to abolish floor prices. That decision was inevitable because of the automatic increase in the prices of Japanese goods due to devaluation, while the yen remained at the same rate vis-á -vis the dollar. It was inevitable that there should be some change. It was bound to come sooner or later whether devaluation intervened or not. Floor prices were originally imposed in order that General MacArthur could be sure that in a sellers' market the Japanese would not lose the foreign exchange which they had to have. With the present position it was inevitable that there should be some adjustment.

With the removal of control, General MacArthur followed it with the statement that the Japanese Government would be instructed to sell all goods for export at prices comparable with those of goods sold on the home market or at cost of production plus a reasonable profit. The Japanese Prime Minister has reinforced that. He has stated that exporters should not quote unnecessarily low prices, and should not—and this is an important factor to those who represent Lancashire constituencies—frequently alter their quotations. He also said that the Japanese Government had incorporated in their Foreign Exchange and Trade Control Law, regulations that exporters must declare in their export declaration forms that proper regard had been paid to the laws and regulations against unfair competition of the country of destination, and that severe measures would be taken against exporters who exported goods at unreasonably low prices.

It will be necessary to watch this development for some time before we can be in a position to say what really will be the effect on prices, but the actions of General MacArthur and the Japanese Prime Minister to date have shown that they are trying to lay down regulations which will enable production to be carried on under fair conditions, and especially to enable the removal of some of those conditions working for unfair competition which operated pre-war.

Photo of Mr John Lewis Mr John Lewis , Bolton

My hon. Friend says that production is to be carried out under reasonable conditions. Surely in view of what my hon. Friend the Member for Heywood and Radcliffe (Mr. Anthony Greenwood) has pointed out, it is quite obvious that the wages of 2s. 9d. per day cannot be called fair competition in wages. Would my hon. Friend say if he thinks that in those circumstances General MacArthur and the Japanese Government are doing the right thing?

Photo of Mr Arthur Bottomley Mr Arthur Bottomley , Rochester Chatham

I am not suggesting that. What I am suggesting is that an effort is being made to bring about reasonable standards, and let me repeat that, if I can have cases given to me of where Japanese goods are being sold at a rate in the Colonies or elsewhere which is unreasonable or unfair, I shall be very glad to look into them. That is a statement which I have made before, and if the hon. Member will send the material to me and let me have full notice, I can at least examine these cases. The occupying authority has laid down what is really meant. It is up to us to interpret it. But comment has been made that the MacArthur administration encourages the growth of the textile industry and not others, because the textile industry is one with which we, rather than the Americans, are concerned. It would be wrong if that impression were left in the minds of hon. Members.

What General MacArthur has done is to try to diversify industry; the light engineering industry, for example, has developed much more than previously in Japan, and General MacArthur is trying to be fair and to see that certain standards are achieved. We do pay a good deal of attention to international understanding whereby we can get reasonable standards operating. His Majesty's Government is a firm believer in the International Labour Office.

The Question having been proposed after Ten o'Clock on Wednesday evening and the Debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Half-past Two o'Clock a.m.