Restraint of Trade (Trading in Motor Vehicles)

– in the House of Commons at 4:36 pm on 17th August 1991.

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Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley 4:36 pm, 17th August 1991

I beg to move, That leave be given to bring in a Bill to abolish restrictive practices and cartels in the trading of motor vehicles. Consumers in Britain are being ripped off by having to pay far more for their cars than is the case in many other European countries. A Consumers' Association report shows that a Peugeot 405 costs £2,000 more in Britain than in Belgium, while a Ford Orion 1·4 litre costs nearly £3,000 more.

I accept that some surveys have exaggerated the differences in some respects by not taking special factors such as discounts into account, but even when they are taken into account there is still a massive difference. The price variations, with the fairly free markets in America and Japan, are even more startling. [Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. Can I just say to the hon. Member for Workington (Mr. Campbell-Savours), who is mouthing things from a sedentary position, that they looked suspiciously like threats aimed in my direction.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

The best thing that the hon. Gentleman could do would be for him to go to his constituency now.

Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley

Car buyers in Japan and the United States consistently pay 30 per cent. less for their cars, ex-tax, than they do in the United Kingdom. The main reason for that is the trade barrier, known, somewhat ironically, as the gentleman's agreement which restricts trade in vehicles.

However, from the end of next year that is due to be superseded by a European Community-wide trade barrier which will cover not just markets like Britain, France, Spain and Italy—which already have national trade barriers on cars—but also the free-trading European nations, such as Germany, Holland, Belgium and Denmark.

The Commission has also been proposing that cars made in Japanese-owned United Kingdom plants should be classed as Japanese and therefore be subject to quota limits, even though they have well over a 60 per cent. European content. That is one of the daftest suggestions ever to come out of the European Commission. It would mean that cars made in American-owned Ford and General Motors plants in Europe would be counted as European and have free circulation within the Community, but that cars made in Japanese-owned plants in Europe would not, even though cars made in Honda's American plants would be counted as American and would, therefore, be subject to no import quotas.

The Commission sometimes says that this is not meant to be taken seriously—that it is just intended as a bargaining counter in its talks with the Japanese—but history has shown how capable the Commission is of concluding covert trade deals. I have no doubt that most of the Commissioners hope that, while on the face of it there will be import quotas only on Japanese-produced cars, surreptitiously this will include limits on the number of cars made in Japanese-owned plants in Britain. The implications for job creation in the United Kingdom are serious, unless cars produced at the Honda, Nissan and Toyota plants in Britain can be freely sold anywhere within the Community, just like the cars of any other European producer.

The problem with trade barriers is not only that they raise prices for consumers, but that they restrict choice. That is especially damaging in the case of the gentleman's agreement and other car trade quotas. In Japan there is a class of car called the microcar—small high-tech hatchbacks with engines below 550 cc. They typically cost between £2,000 and £4,000 ex-tax. British consumers do not have access to such cars because trade barriers compel Japanese producers to make up for low volume with high value by concentrating on large and more expensive cars. The microcar would be a boon in our traffic-choked cities. It is less environmentally damaging than larger cars and it would offer low-cost, high-tech motoring to people whose income now gives them the choice to buy only second hand cars or geriatric eastern bloc models, but such people are being denied the opportunity to buy the microcar.

Behind the gentleman's agreement and other such quotas lies pressure on the Commission to introduce an EC-wide quota from a cartel of large European and American car manufacturers who are afraid of what open competition would do to their profit margin.

Of course, they would not put it quite like that. They say that they need to protect jobs. I understand that argument and I have some sympathy for it, but it is not new. Indeed, when 150 years ago almost to the day Richard Cobden was elected to this place as the hon. Member for Stockport on a free trade and anti-Corn Laws platform, the Stockport Advertiser, which had supported the Tory candidate, who, I am ashamed to say, backed the retention of the Corn Laws, bemoaned the result as follows: To the working classes must the shopkeepers look for support and if they have little or no money as a result of this measure after the purchase of their cheap loaves where will you sell your cottons, your silks, your teas and your sugars? The idea that consumers are also producers and that they need protection to be able to afford to buy goods from other producers is superficially alluring but wholly spurious. First, those with the greatest lobbying power inevitably receive the most protection and subsidies. At best, trade barriers shelter jobs in protected industries in the short term, but they compound inefficiency and put off the evil day when the industry must sort out its fundamental problems. Meanwhile, many jobs are lost elsewhere as people pay over the odds for goods, and resources are diverted from efficient to inefficient producers.

In the case of cars, according to a survey by the Organisation for Economic Co-operation and Development, import quotas add about £4 billion to the cost for British consumers. What could all those resources have achieved and how many other jobs could have been created in other industries if that money had been freely directed by the choice of consumers?

One of the main arguments used by those who want trade barriers is that Japan itself is a closed market, and I shall deal briefly with that issue. It is interesting that as Madame Cresson was saying that Japan was an "hermetically sealed market", Peugeot—the most virulent of the lobbyists for tougher trade barriers in Europe—was on target to increase its sales in Japan by 21 per cent. despite a 13 per cent. fall in the Japanese market. Of course, other European manufacturers have not tried even to get into the Japanese market. For example, Renault's chairman, Raymond Levy, is quoted as saying that he was not bothered about Japan because it was not an important enough market. However, the prize for hypocrisy must go to Volkswagen whose chief executive, shortly after announcing that his company had created 750 new jobs to boost production for the Japanese market where its sales were booming, warned that the Community should limit access to Europe for Japanese cars. Incidentally, German car sales to Japan exceed in value Japanese exports to Germany.

The argument is that Europe must close its market because the Japanese trade unfairly represents the worst type of self-serving special pleading by European car manufacturers. The truth is that it has been far too easy for far too long for European and American industrialists to make exaggerated claims about trade barriers in order to excuse their own failure to market competitive models domestically and in Japan. However, the insincerity of car producers can be illustrated by the fact that the American producers, who are part of the lobbying effort for trade barriers in the EC, sell literally millions of Japanese-made vehicles under their own names in Asia and in the United States.

The problem is not that the Japanese market is closed, but that Japanese producers are more efficient. Toyota's lead time for a brand new model is three-and-a-half years compared to Volkswagen's six years. While Toyota assembles a Corolla in 13 hours, it takes Volkswagen 20 hours to bolt together a Golf. We should learn from their processes instead of taking the easy option of erecting trade barriers because the cost of those barriers is huge. According to an EC Commission report, the removal of all internal EC barriers would result in a gain of £50 billion to the EC economy, and intensified competition would reduce monopoly profits, creating 5 million new jobs and cutting prices to the consumer by an overall 6 per cent. If the EC Commission can see such huge advantages to free trade within the EC, why is it so blind to the wider benefits of freer external trade?

There is a broader issue. We are now in danger of seeing the global economy break into competing trade blocs as happened in the 1930s. According to an OECD report, only four of the OECD's 24 industrialised member states ended the 1980s with freer and more liberal trade regimes than they had at the beginning. Covert trade restraints such as quotas and spurious anti-dumping duties have multiplied and bypassed the general agreement on tariffs and trade, covering everything from semiconductors to steel, and televisions to photocopiers.

The danger is not merely that of a trade war between the three trading blocs based on north America, Europe and east Asia, but of tensions with other areas. Goods from the Soviet Union and other eastern bloc countries are being restricted by the European Community. Thus, as they grope towards a free market system, we appear to be telling them that our espousal of the free market ends when it comes to the very goods that those countries are able to produce competitively, such as steel, food and textiles.

According to a recent World bank report, the trade barriers of wealthy countries against third world nations cost the poorer nations more than the total of the aid that we send them. Therefore, trade barriers impoverish not only us, but hit those that are far less well off. They do not even help protected industries; they merely ensure that they become ever less competitive. It is time that we took a long-term view and rejected the craven entreaties of the cartel of European and American car manufacturers and ended the great rip off of our consumers by abolishing all trade restraints on cars at home and in Europe. In doing so, we would help not only consumers, but the European industry by making it face the need to tackle the underlying uncompetitiveness which is at the root of its problems.

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Does the hon. Gentleman wish to oppose the Bill? If so, when I put the Question at the end of his speech he must voice his opposition. Is that understood?

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove

Although I agree with much of what I think that my hon. Friend is aiming for in the last part of his speech, I must point out that it was only because of the voluntary restraint agreement—negotiated under Government auspices, let us make no mistake about that —between British and Japanese manufacturers that he and my hon. Friend the Member for Derbyshire, South (Mrs. Curry) are about to benefit from the creation of a Toyota plant in their area. There is no prospect that Japanese manufacturers would have been encouraged to set up the manufacturing centres which are providing for our indigenous manufacturers the excellence in standards of training, of employment and of quality and which are teaching us how to compete more effectively and no possibility that the Toyota, Nissan and Honda plants would have come to this country but for the voluntary restraint arrangement.

Therefore, although I agree that the arrangement has a limited usefulness, it has proved most beneficial for this country and for all hon. Members who have constituencies that contain car plants and component-making plants. The result of the introduction of new manufacturing methods and new purchasing methods such as we have seen at the Nissan plant in Sunderland and such as we are beginning to experience with Toyota—I declare an interest because I hope to be a supplier to Toyota—and the standards that they demand of our component plants are uplifting our whole industrial effort and our employment attitudes in much of our industry.

I take exception to the rather cheap jibes about the Consumers' Association report at the beginning of my hon. Friend's remarks. On the basis of a little further research, he will find that the report was based on a comparison of list prices and took no account of the discounts available, of the differences in specification, of exchange rate movements or of differences in inflation rates. Those same mistakes were perpetuated in the consultant's report by Karl Ludwigsen for the Monopolies and Mergers Commission.

I draw the attention of the House and of my hon. Friend to the report in the Financial Times earlier this week on the research conducted by the firm A. T. Kearney on behalf of General Motors. It examined 98,000 invoices and demonstrated that in many of the areas of purchase of volume cars, the on-the-road price in this country was lower than that elsewhere on the continent. Before we jump to easy conclusions, we should bear in mind the commercial facts and the efforts being made to provide not only jobs in this country, but better jobs, better terms of employment, better skills, better quality and more competitive products. On those grounds, I feel obliged to oppose the Bill.

Question put, pursuant to Standing Order No. 19 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business ):—

The House proceeded to a Division; but no Member being willing to act as teller for the Noes, MADAM DEPUTY SPEAKER declared that the Ayes had it.

Bill ordered to be brought in by Mr. Phillip Oppenheim, Mr. Patrick Nicholls, Mr. Nigel Forman, Mr. Bowen Wells, Mr. Dudley Fishburn, Mr. Michael Brown, Mr. Anthony Coombs, Mr. Donald Thompson, Mrs. Edwina Currie, Mr. William Hague, Mr. John Watts and Mr. Nicholas Ridley.