Anglo-Japanese Commercial and Navigation Treaty

– in the House of Commons at 12:00 am on 31st October 1962.

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Motion made, and Question proposed,That this House do now adjourn.—[Mr. Chichester-Clark.]

10.0 p.m.

Photo of Mr William Taylor Mr William Taylor , Bradford North

I am glad to have the opportunity in this Adjournment debate of drawing the attention of the House to the serious controversy which exists between the wool textile industry and the Board of Trade over the provisions of the new Commercial and Navigation Treaty which is now being negotiated between this country and Japan.

I notice that many of my hon. Friends are here to lend their support to what they hope I may say and that the hon. Members for Ashton-under-Lyne (Mr. Rhodes) and Huddersfield, West (Mr. Wade) grace this Chamber with their presence. This gives some indication of the interest and concern of hon. Members in the question which I have the privilege to raise. I am deeply concerned with this matter because of the possible ill effects which may be suffered by the City of Bradford and the West Riding, in which I have a principal constituency interest.

There have been many meetings and representations on this matter in recent months. Hon. Members will have received, as I have received, a flood of correspondence from the firms engaged in the wool textile industry, not only in the north of England but in other centres also. In June this year, the representatives of the Wool Textile Delegation, which is the authoritative body entrusted with the affairs of the wool textile industry by that industry, met my right hon. Friend the President of the Board of Trade. Following that meeting, the Wool Textile Delegation representatives met the Prime Minister and placed before him their views and expressed their deep concern. Despite these meetings and the intervention of many Members in the past few months, the industry remains extremely doubtful and worried about the outcome of these negotiations.

The central issue is the extent to which Japanese wool textiles are to be admitted into the United Kingdom. The industry is entirely unconvinced that adequate safeguards against Japanese dumping will be provided in the trade agreement shortly to be presented to Parliament. We who are concerned in this matter have to acknowledge that when the treaty is laid upon the Table it will be laid after it has been signed, and we shall have no opportunity of exercising our influence on my right hon. Friend and his Department until the vote is taken, when we can merely protest if we disagree and vote against the treaty.

In addition to the question of the extent of imports, the industry is deeply concerned about the continuance of Japanese trading malpractices. I will say a little more about this in a few moments. The details of the proposed agreement have not yet been disclosed, but all the evidence seems to indicate that the Board of Trade has completely ignored the evidence produced by the industry on this vital subject.

It has not been denied by my right hon. Friend or by any of his officials that Japanese exporters receive remission of taxes on the value of their exports and are provided with finance at specially low rates of interest. It has not been denied that the profit margins in Japanese home market goods are kept artificially high. This device provides a means of operating a dual pricing system. It has not been denied that Japanese firms are compelled to export at all costs because only by so doing can they secure the release of machinery kept in storage by decree of the Government. What is known as the sealing-off of looms, and so on, is part of the normal procedure of control in Japan. Finally, it has not been denied, nor can it be denied, that there are frequent and flagrant cases of deceptive labelling by Japanese manufacturers. This is nothing less than plain dishonesty.

The question that I want to put to my hon. Friend the Parliamentary Secretary to the Board of Trade, who is to reply, and, indeed, to the House, is this: is it not reasonable to demand that the Japanese should abandon their unfair trading practices before being admitted to membership of the General Agreement on Tariffs and Trade? If Japan wishes to join the international club, should not she be compelled to undertake to abide by the rules of that club which are laid down and accepted by international traders for the benefit of all concerned? I am sorry and disturbed that apparently the Government do not think that such a condition should be imposed on Japan. This will not do, and it is for that reason, principally, that I sought the opportunity to speak tonight.

If my right hon. Friend consistently refuses to accept that as a condition, surely the wool textile industry should be protected by quota against the Japanese dumping until such time as Japan accepts the recognised international code of commercial practice and fair play. I cannot exaggerate the feelings of members of the industry on this vital matter. They are really up in arms about it, and I believe rightly so. It is not only the employers but members of the trade unions as well. This is a case where, as I firmly believe, the industry, with its experience, knows better than the "Man in Whitehall". In recent years the industry has had some bitter experiences of the results of the ill-judged policies of the Board of Trade which have lost millions of yards of export orders for this country. This time the Board of Trade is being told in advance what is likely to happen. There was the case of Japanese dumping of wool cloth in the United States, with the consequent introduction of tariff quotas on imports by that country. On that occasion the Board of Trade failed to obtain adequate safeguards for the United Kingdom industry and that policy reacted more on the United Kingdom than on Japan. We lost 9 million yards of British wool cloth exports to the United States as a result of the folly of my right hon. Friend's Department.

In the same period or at the same time, corresponding Japanese exports were doubled. That is an indication of what can happen when a policy is not properly thought out. I repeat that this time the Board of Trade is being told what will happen, and I submit that it is up to my right hon. Friend to heed the advice which is given to him. It is no use talking about possible advantages which the Treaty may bring in the way of increased exports of some wool products if at the same time the home market is ruined by a flood of Japanese imports. It will not then be an Anglo-Japanese matter. The whole of the export business of the industry would be in jeopardy.

I think I can say categorically that the industry does not fear competition from any quarter, but that competition must be on fair and equal terms. It is the duty of the Government to ensure that there are such terms and not leave it until the home industry is disrupted before taking action. That would be a case of bolting the stable door after the horse has gone. We are told that in some vague way safeguards will be introduced at some point in time, but we are not told how that point is to be decided. Inevitably any delay in the bringing in of remedial measures will cause great damage and, indeed, chaos in the industry. As was said in a leading article in a northern newspaper a few weeks ago, there is no remedy worse than one which comes too late.

I submit that the industry deserves better treatment than it is at present receiving. Its export performance ranks among the first six of this country. It has a magnificent record. Its current earnings of £160 million are evidence enough of its drive and competitive efficiency in the face of import restrictions overseas and highly developed textile industries abroad, particularly on the Continent of Europe, and, of course, in the face of subsidised competition from Japan. We must therefore control the imports of Japanese wool textiles into the United Kingdom until any fears of unfair competition have been removed, and until experience has taught us—to put it frankly—that the Japanese can be trusted to play fair.

I beg my hon. Friend and his right hon. Friend not to ignore the advice of the Federation of British Industries on the matter. That august body recommended to the Government that no treaty with Japan be concluded until Japan undertook to abandon Government malpractices which are known to exist and have been proved to exist. Evidence of the existence of these practices is in the possession of my hon. Friend's Department, and the Wool Textile Delegation and the Federation of British Industries have taken great trouble to see to it that such evidence is made available.

In a Written Answer to a Question which I put down we were told that the text of the Treaty will be laid on the Table very shortly. Then Members will have an opportunity of expressing their opinions.

I was also told by my right hon. Friend in another Written Answer that the Prime Minister of Japan has expressed the hope that the Treaty will be concluded during his visit to this country next month. We should take note of our own people and our own interests in this matter. I am a little bit suspicious when hopes are expressed from that quarter, because I know perfectly well from experience that those hopes are not based of a lasting interest in the benefit of Britain.

Therefore, I would say to my right hon. Friend, let him not be in too big a hurry about this; let us have real discussions, and let those best able and qualified to give advice be taken into the full confidence of the Board of Trade and thereby enable to be threshed out a treaty which is a practical, workable and fair proposition for all.

10.16 p.m.

Photo of Sir David Price Sir David Price , Eastleigh

In reply to my hon. Friend the Member for Bradford, North (Mr. W. J. Taylor), I must apologise for the fact that it is I and not my hon. Friend the Minister of State who is replying on this very important subject. As my hon. Friend knows, my hon. Friend the Minister of State is in West Africa promoting the cause of British trade, the same cause which brings us here tonight. My hon. Friend the Minister of State recently discussed the subject of this debate with my hon. Friend and would, I know, welcome the opportunity to answer him in the House tonight. However, in his absence the task falls to me.

As I see it, and my hon. Friend the Member for Bradford, North confirms me in my view, the wool textile industry's doubts and criticisms about the commercial treaty with Japan are concentrated upon four major matters of substance. First, many of them see no reason for the Government to negotiate a commercial treaty with Japan at all. Secondly, they think that the proposed safeguards in the treaty are insufficient to protect their interests. Thirdly, they allege that the Government have not fully consulted them about the treaty in order to give weight to their views; and lastly, they urge that in any event we should not sign the treaty unless Japan gives proof of her immediate intention to abandon various unfair trade practices of which they complain.

I do not wish to anticipate any more than is necessary the White Paper which will accompany the treaty when it is signed and laid before the House. I am sure that my hon. Friend the Member for Bradford, North will be pleased to learn that we are publishing a White Paper, since this was a point which he himself raised when he came to see me in August. Moreover, as the House will readily understand, I shall have to observe some reticence in discussing a treaty which is still under negotiation lest I should prejudice the results of the negotiation.

Since the end of the war we have had no settled framework for trade with Japan. In commercial matters we have refused to grant her, even in principle, the long-term trade rights which, through the General Agreement on Tariffs and Trade, we have readily granted to almost every other country outside the Communist bloc.

Photo of Sir David Price Sir David Price , Eastleigh

As time goes on, and as Japan's firm commitment to the free world is increasingly demonstrated, the invidiousness of such discrimination against her becomes ever more obvious. That is one reason why it has now become urgently necessary to put matters on a different footing and to regularise our trading relations with Japan on the same most-favoured-nation terms as we have with almost every non-Communist country. But these political considerations are no more important than the increasingly powerful economic reasons for seeking to put our trade relations with Japan on a normal and settled basis. Here again it is important to appreciate the changes which have taken place in the last few years. Japan has now become one of the leading industrial nations. Her economy has been expanding at a remarkable rate, and with her large population on a rising standard of living she offers a growing market for our exports. She has liberalised her trade steadily and rapidly over the last two years. The wool textile industry itself has a substantial interest in the Japanese market, which is worth more than £6 million a year to the industry. Our principal competitors in Japan, the Germans and 'the Americans, have already obtained long-term guarantees of most-favoured-nation treatment for their exports to Japan. As our stake in the market increases, we cannot risk the continuance of a situation in which, because of our failure to give more favourable treatment to Japanese goods, the Japanese Government are under constant pressure to discriminate against our trade in favour of that of our competitors.

Finally, it is necessary to put an end to the uncertainties and inconveniences inherent in the present system of annually negotiated trading arrangements. We cannot encourage our traders to go all out to exploit the Japanese market unless there is a settled framework of commercial relations within which they can operate.

Turning to the treaty itself, the broad shape of the treaty which we axe in the course of negotiating is, I believe, already known to hon. Members. The essence of it is that formal mostfavoured-nation rights will be exchanged between the two countries who will then enter into G.A.T.T. relations with each other. These most-favoured-nation rights will cover the whole field of establishment and goods. There will be, however, two safeguards against disruptive competition. The first, a general safeguard that can be invoked in the case of disruptive competition, and the second, a sensitive list of items peculiarly and immediately vulnerable to Japanese competition and on which restrictions will be maintained after the treaty comes into force. I would point out that the general safeguard and the sensitive list are not normally included in commercial treaties. They are a particular feature of these negotiations with Japan. I hope that my hon. Friends recognise this.

The general safeguard will enable us to take up with the Japanese any case in which a sudden increase in imports from Japan threatens serious injury to our own manufacturers. If the threat cannot be averted in any other way, we shall have the right to impose discriminative quantitative restrictions at the level we consider necessary. I emphasise that "we consider necessary". In urgent cases we can act while consultation is still in progress. This is a safeguard which does not exist in our relations with any other countries outside the Communist bloc and in the Government's view it shows a statesman-like attitude on the part of the Japanese that they should be willing to include these safeguards in the treaty and thereby provide us with a special guarantee against that disruptive competition which has sometimes been a feature of Japanese trading and which is the fear of my hon. Friend tonight.

I turn to the sensitive list. In addition, there is a list of sensitive items on which discriminatory restrictions may be retained after the treaty comes into effect. If this were to cover any and every case in which disruptive competition might conceivably at some time in the future develop, it would clearly be unnegotiable, besides being unnecessary in view of the general safeguard. The list has therefore had to be confined to cases where there is a strong presumption that, if restrictions were removed, the British industry concerned would suffer immediate disruption from Japanese imports.

My hon. Friend complains that we do not define disruptive competition and fears that we would not operate the safeguard quickly enough go to give effective protection. While I cannot disclose the detailed terms of the safeguard at this stage, it is certainly the case that it will not contain any hard and fast definition of disruptive competition. In our view, a safeguard which enables us to take action whenever serious injury is threatened gives much more protection than any detailed provisions devised in advance which might not fit the unforeseen case.

As for the evidence which might be required before the Government would feel able to act, we believe that if serious injury is really threatened sufficient evidence will be available soon enough for effective action to be taken.

Photo of Mr Geoffrey Hirst Mr Geoffrey Hirst , Shipley

Will my hon. Friend forgive me—

Photo of Sir David Price Sir David Price , Eastleigh

I am afraid I have only a few moments. [HON. MEMBERS: "Give way"] I am doing my best to answer my hon. Friend the Member for Bradford, North; it is his Adjournment debate.

In any event, I believe that the industry exaggerates the likelihood that it will be necessary to invoke the general safeguard and underrates the determination of the Japanese Government to avoid the sort of friction which has arisen in the past from disruptive trading practices by Japanese firms. The Japanese know very well that we will not hesitate to invoke the safeguard in any necessary case. They know that this would involve a fresh discrimination against their trade which is the very thing they want to avoid.

My hon. Friend mentioned consultation. As he knows, the wool textile industry's representatives have been seen by my right hon. Friend the Prime Minister and twice by my right hon. Friend the President of the Board of Trade on the subject of the treaty, in addition to frequent contacts at official level. No industry has had fuller opportunity to take its views on the treaty known to the Government. The industry, however, seems to misconceive the purpose of consultation, which is to enable the Government to obtain the views of the industry and to give industry confidential information about matters affecting their interests, and not, as the wool textile industry would appear to believe, to obtain the industry's sanction for any and every decision of the Government.

This brings me to some of the points made by my hon. Friend about trading malpractices of which the industry accuses the Japanese. I do not want there to be any misunderstanding of the Government's position on this. We are not concerned to defend the propriety of all these practices, but we are concerned to put them in perspective and to draw the necessary distinctions between them. My hon. Friend mentioned tax remission. This is an export subsidy of a type listed in the G.A.T.T. Declaration on export subsidies. This Declamation is an undertaking signed under the aegis of the G.A.T.T. by all the major industrial countries other than Japan to eschew export subsidies of any type, and in particular of the types listed in the Declaration.

Photo of Sir David Price Sir David Price , Eastleigh

Since Japan has not signed the Declaration she is not in breach of it in continuing her tax remissions—[HON. MEMBERS: "Oh."]—but we have impressed very strongly on the Japanese Government our view that Japan should abandon this practice and sign the Declaration as soon as possible, thus coming into line with other important trading countries. The House will have noted that the Prime Minister of Japan has recently stated his Government's intention to abandon the tax remission scheme.

Photo of Sir David Price Sir David Price , Eastleigh

As for misleading markings and the like, these seem to be matters essentially for settlement between the two industries, and I am glad to learn that arrangements are being made for discussions between them. Similar discussions between the cotton textile and pottery industries of the two countries have been very fruitful. I cannot go further on dual pricing, but the general safeguard covers disruptive imports of every sort including those which are dumped.

In conclusion, I wish to emphasise two points. First, our economic objective in negotiating this treaty is the furtherance of our export trade. Secondly, contrary to what the wool textile industry has sometimes alleged, there is no question of our sacrificing its interests to those of other industries. By means of the treaty we intend to benefit our export trade while still retaining the protection necessary to safeguard the home market.

Photo of Mr William Taylor Mr William Taylor , Bradford North

While thanking my hon. Friend for that reply—which seemed to be somewhat vague, to say the least, and very unsatisfactory—may I ask if he will prevail upon his right hon. Friend to receive a deputation of hon. Members from all parts of the House to discuss this matter in greater detail with him, so that we might have the opportunity at close quarters of saying how dissatisfied we are with the present state of affairs and of bringing to his notice even more clearly what we think should be done?

Photo of Sir David Price Sir David Price , Eastleigh

I will convey my hon. Friend's proposals to my right hon. Friend the President of the Board of Trade.

Question put and agreed to.

Adjourned accordingly at half-past Ten o'clock.