Orders of the Day — Anti-Dumping (Silicone Surfactants)

– in the House of Commons at 12:00 am on 4th April 1968.

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9.5 p.m.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Exeter

I beg to move, That the Anti-Dumping Duty Order 1968 (S.I. 1968 No. 384), dated the 14th March, 1968, a copy of which was laid before this House on 18th March, be approved. This Order has been made under the Customs Duties (Dumping and Subsidies) Act, 1957. It imposes an anti-dumping duty of 5s. 9d. per lb. on silicone surfactants—the detailed chemical formula is set out in the duty Order—originating in the United States of America and produced by the Union Carbide Corporation or the Dow Corning Corporation. Silicone surfactants are used in the manu facture of polyurethane foam for upholstery and similar purposes.

The House will be aware that, before duties can be imposed under this Act, the Board of Trade must be satisfied that dumping is taking place, that it is causing or threatening material injury to a British industry, and that anti-dumping action would be in the national interest.

In this case, an application under the Act was received on 11th December from Imperial Chemical Industries Limited, which is the major British producer of this material. On the evidence presented by I.C.I., the Board of Trade decided that there was a prima facie case of dumping and of material injury to the British industry, and a public announcement that the Board was considering the application was made on the 22nd December, 1967, inviting representations from interested parties.

After careful consideration of all the evidence submitted, my right hon. Friend was satisfied that imports of silicone surfactants originating in the U.S.A. were being sold at dumped prices: and, secondly, that dumped imports from the Union Carbide Corporation and the Dow Corning Corporation had caused material injury to the British industry and threatened it with still further injury.

The House will, I know, understand that I cannot give detailed reasons for these findings because they are based on commercial and financial information given to the Board in strict confidence. But I can assure the House that we investigated the case very carefully, including the facts of dumping and the costs and the return on capital of the British manufacturer.

We also considered the national interest, including the consumer interest. Two firms told us that the United States product was more satisfactory for their needs than the British product. We considered their representations and came to the conclusion that there was no overriding technical difficulty about the use of the I.C.I. material for nearly all purposes. However, we appreciated that action against the American suppliers would put I.C.I. into a very strong market position. Accordingly, we sought two assurances from I.C.I., which it gave to us very readily. The first was that it would not, without our consent, increase its prices above the level ruling at the time of its application in December, when its prices were already depressed by the clumping. The second was that it had more than enough capacity to supply all potential United Kingdom customers with their requirements in 1968. We consider that these assurances adequately protect the consumer interest.

The procedure that we have followed h reaching a decision on this case, as in other cases, was in conformity with tie provisions of the Anti-Dumping Code which was agreed as part of the Kennedy Round negotiations.

The Board of Trade is often criticised Ear the time that it takes to consider anti-dumping applications. In this case, vie took anti-dumping action in 3 months from the receipt of the application. This can hardly be described as undue delay.

The duty on silicone surfactants took effect from the 19th March, 1968, and, for the reasons I have given, I hope that the House will approve the Order.

9.8 p.m.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I am sure that the House is grateful to the hon. Lady for her very full explanation of this relatively simple Order.

Having spent some time in the industry, perhaps I am in a better position than she is to pronounce the names of the chemical which appears in the Schedule, but that is about as far as I can claim to go. Certainly I do not intend to read the Schedule to the House.

On the face of it, this is a clear case of dumping, and one might say that this instance offers an almost model case for the operation of the 1957 Act. Here was a company seeing a market for a new product developing in about 1960 in the rapidly expanding sphere of flexible polyurethane foams. It wanted to get into it, but it had no suitable product.

It was refused a licence for the product b y the American manufacturer and, therefore, it set out by research and development to discover its own. It was costly, but it was successful, and the company w as able to break into the market. By the end of 1967, I.C.I. had achieved a 50 per cent. penetration of the British market and had also achieved a flourishing export business which was greater in volume than its home market, and this is a very significant fact.

During this period the price of the product had fallen substantially due to the strenuous competition which existed. Indeed, eventually the price of the material came down to the level at which the imported material was being dumped within the definition of the Act, even though it had protection of only a 10 per cent. duty.

It is something surprising that a material of this sort, which, by its chemical definition, contains carbon atoms, is not a synthetic organic material qualifying for protection at the higher rate. I think, however, that this is outside the terms of the Order, and I shall not expect the hon. Lady to comment on it.

A second company, Dow Corning, then came in and undercut an already low price. This provoked the domestic manufacturer, I.C.I., into approaching the Board of Trade to seek protection against the dumping. The complaint was followed by a prima facie case and the usual advertisements, and the Order was made. I should like to reinforce what the hon. Lady said about the speed with which her Department acted in this case. This has attracted favourable comment, not only from the firm concerned, and indeed not only from the industry, but from industry generally. I hope that it is a foretaste of things to come, and that as experience of operating this Act, which is a complicated piece of legislation, develops, the Board of Trade will be able to match, and indeed improve upon, the speed with which it worked in this case.

Last night, because of the timetable, we were precluded from debating the Amendment Bill which, if it had been in force, would have empowered the Board of Trade to impose a provisional duty once it is discovered that a prima facie case had been made out, and then retrospectively to confirm that if, in the end, it was satisfied that dumping and material damage had been done. It is interesting to note that the three months' period for the provisional duty is the main period built into that Bill, and that if it reaches the Statute Book in its present form it will just about cover the period which elapsed between the application being made and the Order being published.

The hon. Lady referred to the assurances which she received from I.C.I. about capacity, and one would have thought that this was justified. It runs an 800-ton plant, and expects to commission a 1,200-ton plant by the end of the year. Equally, the undertaking about price seems to be appropriate, the firm having undertaken not to increase the price as a result of the anti-dumping duty—and it is important to make this proviso—above the level operating when the application was made. If costs should rise substantially for any reason, naturally the firm will feel free to take such action as it considers appropriate.

I was not wholly satisfied with what the hon. Lady said about the question of quality. It is clear that the surfactant with which we are dealing is a critical cost component in the costs of manufacturing the polyurethane foam into which it goes. Not only is it a major cost item, but the specification of the material that is used is equally critical, and from information which I have been able to gather it appears that there are different grades of surfactants which are used in different qualities of foam. They have different properties, and it cannot be said that one grade is suitable for all purposes, or that a grade which does for one will do for another. I was interested to hear the hon. Lady say that there were two manufacturers facing this problem.

For part of the output of one manufacturer, material supplied by I.C.I. will not suffice, unless the firm succeeds in changing its process. This is a quite important factor. This particular foam requires a surfactant which is non-hydrolisable. This means that it must not absorb water, must not undergo any chemical change if it is mixed with water. This is very important, because in making this particular type of foam the surfactant is mixed with water. Furthermore, it has to be mixed with water to enable it to be stored for a long time, partly to get the benefit of bulk deliveries and partly to ensure that the material is chemically stable. The United Kingdom material does not meet these requirements, therefore the firm in question is going to have to continue for the time being to use the imported material, on which they will have to pay the anti-dumping duty at 5s. 9d. in the £. In the meantime it is their intention to try and adjust their process to see if it is possible to switch to the I.C.I.-produced material.

I should like to make one point on this and to ask the hon. Lady if she would answer one question. It cannot be assumed that the imposition of a dumping duty, even in so clear-cut a case as this, is going to be an entirely painless operation. Somewhere along the line somebody is going to find himself in difficulties. We all support the antidumping legislation: it is an essential part of a trade framework within which one hopes that trade is steadily getting more and more liberalised, but it does not necessarily mean that nobody is going to get hurt.

The question I want to ask is what attitude the Board of Trade takes to a case such as this, in which there is a genuine point of substance raised by one or more of the users of the material relating to the specification, the quality or type of material they are able to use. Has the Board of Trade considered the possibility of making a limited exception for material that meets a certain specification so that, where the importing firm cannot buy it from the domestic manufacturer, it can nevertheless import the material for this limited purpose, meeting this much narrower specification, from the overseas source? It seems to me that there is a danger that one is imposing an unnecessary cost which may hinder the firm in its operations and, although the dumping duty is as eligible for drawback as any other duty, this could impose additional burdens on an industry without giving any additional protection to the United Kingdom manufacturer because he could not meet a demand for the material to that specification.

Having said that, if the Parliamentary Secretary can give me some answer to the question I have just posed, I see no reason why we should not allow this Order to go through.

9.18 p.m.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Exeter

I should like to comment on one or two of the points raised by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin). The user interest is one of the most important factors we take into account in considering the national interest. I think the hon. Member knows that our antidumping legislation is unusual in having this national interest criterion.

In this case, as I have said, there are two consumers, not one, who claimed that they needed the American material for technical reasons. I understand that non-hydrolisable material can also be used with a different type of lubricant, and we cannot make limited exceptions for users, but we do make drawback provision for export.

The other point about non-hydrolisable material is that we believe it is only required because of storage problems and are convinced that these can be overcome with I.C.I.'s help. A case was made to us by both the users and we felt that one failed to present a good case while, as regards the other, I.C.I. felt that they could meet the user's needs subject to minor changes, with which I.C.I. would help them considerably. The user did not satisfy us that the domestic product could not meet his needs with a little goodwill and give and take. In any event, anti-dumping duty does not prevent the user buying the American material, as the hon. Gentleman said, at an undumped price, although this means that he would pay a price much more like that paid by the American consumer, which is a distinct increase on the price which they have been paid.

But the valid argument, which the hon. Gentleman himself made, is that the purpose of this legislation is to protect industries which make up a valid case to the Board of Trade and reason that we have brought this form of legislation into play is that we were convinced that this was a clear case of dumping. It was carefully investigated by the Department and we felt that, although there were certain limits within which some of the users might have felt that they would face difficulties, those difficulties could be overcome, and that, therefore, the order should go ahead.

Question put and agreed to.

Resolved,That the Anti-Dumping Duty Order 1968 (S.I., 1958, No. 384), dated 14th March, 1968 a copy of which was laid before this House on 18th March, be approved.