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Silicone Fluids (Customs Duty)

Volume 581: debated on Wednesday 29 January 1958

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7.20 p.m.

I beg to move,

That the Anti-Dumping (No. 1) Order, 1958, dated 1st January, 1958, a copy of which was laid before this House on 6th January, he approved.
The Customs Duties (Dumping and Subsidies) Act, 1957, became law last April and this is the first Order to be made under it. I said during the debates on the Bill that I hoped the powers for which we were asking would prove to be a deterrent and would not have to be used very often. Nobody likes imposing a duty aimed at a particular exporter or exporters. However, when the case is made out, we must be prepared to act if our own producers are not to be subject to unfair competition.

The House may like to know that since the passing of the Act we have had a fair number of applications for duties, but only two or three of the applicants have so far made out a prima facie case for investigation. I think that proves that the deterrent effect of the Act is working.

This Order relates to silicone fluids manufactured by a single firm in France and sold in the United Kingdom at prices below those at which the same fluids are marketed in France. Silicones are comparatively new products. They have water-repellant and anti-stick properties which make them useful for polishes, varnishes, wrappings and finishes, and demand for that kind of product is steadily increasing. Its uses are increasing in the aircraft and electrical industries; and I am told that new uses for these silicone fluids are expected. In other words, this is a branch of the chemical industry which is expanding and from which much can be hoped.

The French manufacturer is protected by a 35 per cent. duty and also by severe import restrictions. The result is that he does not need to worry about competition in his home market. The firm, therefore, is able to sell those fluids at home at high prices, and, no doubt, the profits thus gained assist him in selling at much lower prices abroad. Hence, this is a classic case of dumping.

The British manufacturers on the other hand are not protected. There are neither import duties nor import quotas on the French silicone fluids coming into this country. The two firms in the trade here are Imperial Chemical Industries and Midland Silicones. Both firms are efficient and both are building up their production. I am not asking the House to give them a protective duty. This is not a duty which is to give them any form of tariff protection, but is simply to offset the unfair dumping of a single competitor. The duty of 4s. a lb., which is specified in the Order, will do just that and no more.

The Board of Trade considered that a very careful examination into all the facts of this case should be made, especially because this was likely to be the first Order made under the Bill. We want other countries to see that we are not imposing duties under the Act without the most scrupulous examination of the facts. This examination has taken longer than I would have wished. One reason was the partial devaluation of the franc in August last which changed the calculations of the price in France relative to the price in this country. All those calculations had to be made again. I am now satisfied that dumping does exist in respect of these fluids and that a duty of 4s. is not unfair.

I am also satisfied that material injury is being done to the two British manufacturers. They are efficient producers. They were losing orders in the home market to the French firm and they had capacity idle. I am also satisfied that the users of silicone fluids in this country will not be seriously prejudiced by having to pay the 4s. duty if they continue to import from France. The fluids are only a small proportion of the finished products, and I am sure that it is in the national interest to move against this kind of dumping.

The French manufacturer did not deny that he was selling at lower prices in the United Kingdom than in his domestic market. He claimed that the higher prices in France were due to the smaller quantities sold in that market. We took that into account and made allowance for it, and we still found that there was dumping. It seems important, if we are to make great changes in our commercial policy, such as the European Free Trade Area, that manufacturers in Europe and also in this country should accept their Governments' moves against unfair trading practices. We cannot have free trade unless it is also fair trade.

Therefore, I hope that the House will think that this Order, the first antidumping Order which hon. Members have been asked to approve, is right and fair.

7.28 p.m.

This first Order under the anti-dumping legislation is indeed a most interesting event. It is pleasant to hear the President of the Board of Trade bringing to bear an argument used against us at the time the Bill was before us. Time and time again the Minister of State argued with us that we could not do these things because we were ourselves guilty of a two-price system, both in coal and in steel. It seems that some of these arguments have come home to roost.

Will the President give the House a few more facts about this matter? Is there a price ring here between I.C.I. and the other firm? Have they a controlled system of prices when they sell to manufacturers in this country? It is stated that a Customs Duty at the rate of 4s. per lb. will be imposed. Will the President give us an idea what that involves in relation to the product when it is marketed in this country? We are entitled to know whether this commodity is imported from any other source besides France. If it is, would this Order cover such an eventuality?

7.30 p.m.

It seems to me that the President of the Board of Trade has made a strong prima facie case, but I should like to ask him two more questions. Under Section 1 of the Act, the Board of Trade has power to make these Orders in a variety of circumstances. One of the circumstances is when there is any suggestion that the firm which exports the goods to this country is getting a subsidy. Will the President of the Board of Trade say whether, in this case, there is any suggestion that the firm is in receipt of anything in the nature of a subsidy from the French Government?

Secondly, will the right hon. Gentleman say whether the French company, to whom alone the Order applies, is the only French company which exports silicone fluids to Great Britain and whether it has a monopoly in France, or whether there are any other French companies importing silicone fluids at any differential rate?

7.32 p.m.

This first Order, under the very important Act under which it is laid, should not pass without one word of commendation from the back benches on this side of the House. It may be of great importance to the development of European free trade, and from the agricultural viewpoint it also may be of very great importance. Indeed, the very threat of one of these Orders last summer protected the British early potato trade from subsidised dumping by the French. Therefore, I welcome the Order, the terms of which my right hon. Friend has explained. In doing so, he made a very good case.

The hon. Member for Ashton-under-Lyne (Mr. Rhodes) asked what was the proportion of duty to the value of the silicone fluid. My right hon. Friend has explained that it is only a small proportion of the selling price of the goods. That, however, is not the real point. Here we are dealing with a British industry, employing British workers, producing a product which is likely to develop, with the likelihood, therefore, of employing more British workers. The industry, however, is at present hamstrung by unfair trade. The question of free trade does not enter the picture. It is unfair trade, because, as my right hon. Friend explained, it is a classical case of dumping.

I hope that my right hon. Friend will not be afraid, if circumstances warrant, to bring further Orders before the House. The Order will have the effect of showing manufacturers abroad that the Government of this country have a duty, which they are prepared to carry out if necessary, to protect their industries against unfair trade.

I have only one question to ask. There is nothing in the Explanatory Note about the time lag between the application by the industry and the date of the Order. Throughout our discussions on the Bill before it became an Act, I emphasised the importance of speed of action. The present Order, possibly, is not a good case to argue, but there may be cases in future when speed of action will be of great importance. For the record, there-ford, can my right hon. Friend state the date of application by the industry and why, if it was as long ago as July or earlier, it has taken until 7th January, some six months or more, for the Order to become effective?

7.35 p.m.

As the right hon. Gentlema the President of the Board of Trade and other hon. Members have said, this is the first Order under the Customs Duties (Dumping and Subsidies) Act, 1957, and it is, therefore, important that we should clarify points, because this is how precedents get built up from the first practice. The Order deals only with the dumping provisions of the Act and not with the Question of Government subsidy; that was what I understood the right hon. Gentleman to say. There is no question of a Government subsidy behind the Order. Therefore, we are not creating any precedent under that head; we have a precedent merely under the head of dumping.

The prime definition of dumping in the Act is that the export price is below the fair market price of the goods in the home market of the exporting country. We had a lot of discussion about this when the Bill was passing through the House. How does the President of the Board of Trade set about determining what was the fair market price? Does he make an arbitrary decision about this? Does he collect statistics about it? How does he find out what is the fair market price in France for this particular product?

In that connection, the right hon. Gentleman should tell us, as my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) asked, whether there are other French manufacturers of this product or whether the Order is concerned with a monopoly manufacturer. If there are more than one, do the manufacturers all sell at the same price, or are there varying prices in the French market?

Does the 4s. duty exactly equate the difference between the export price in France and the home market price in France, or has the right hon. Gentleman left something in hand? From his argument, there would appear to be nothing to prevent the firm shifting its price again. From what the right hon. Gentleman said, it appears almost to have a choice. He said that the firm has a completely protected market; within broad margins, it can sell at whatever price it likes at home and to that extent cheapen its exports. If that is true, there would be nothing to prevent the French firm from doing it all over again. Then, I suppose, there would be the delay to which the hon. Member for South Angus (Sir J. Duncan) referred. Perhaps the President of the Board of Trade has dealt partly with this by making the 4s. tax bigger than the gap which he was trying to cover. In that case, I am not sure that he has properly carried out the terms of the Act. Nevertheless, perhaps he will tell us whether the 4s. is intended merely to equate the difference that he is trying to fill.

I should like to ask a question concerning the drafting of the Order. The Act lays down three conditions about which the President of the Board of Trade must be satisfied before he issues an Order of this nature. One is that the goods must be dumped. The right hon. Gentleman has told us about that. The second is that it must be in the national interest to impose the duty. That is set out in the Order. Those two things are recited and rehearsed in the Order.

There is, however, a third condition which is laid down in the Act, which states that the right hon. Gentleman must be satisfied that the dumping will
"cause or threaten material injury to an established industry in the United Kingdom".
The right hon. Gentleman told us that he was satisfied about that. Why has he not included that condition in the Order also? The Act specifies three conditions. In the Order, the right hon. Gentleman has recited two of them. He has left one out. What would be the effect if the French firm challenged the Order in the courts? The courts would certainly be able to say that the dumping and national interest requirements of the Act were covered, because they are rehearsed in the Order; but if those two things are written in and the third is not, one might very well argue that the President of the Board of Trade could not have been satisfied on the third point, otherwise he would have included it and, therefore, he must have had a reason for leaving it out. This seems to me to be a point which should be considered.

There is also the question of what is "an established industry". I understand from the Financial Times of the 7th of this month that manufacture of the product in question began in this country only in the last few years and that before that time, according to the Financial Times, we imported primarily from the United States. Can an industry be established if it has been going only for a year or two, or does this wording mean merely "an industry"? Does the word "established" mean anything at all?

Finally, can the Minister tell me why the Order refers to silicone fluids and not to silicone emulsions? Does the French firm not produce silicone emulsions, or if it does produce them and export them, does the Order apply in the case of emulsions as in the case of fluids? Silicone emulsions are also important in many ways similar to silicone fluids, but are a distinct product. I am informed that under this Order in the case of the French firm the export of silicone emulsions would not give rise to a countervailing duty. I should be grateful if the right hon. Gentleman could answer my questions as well as the others which have been put to him.

7.41 p.m.

Perhaps by leave of the House I might speak again to answer the questions that have been raised.

The hon. Member for Ashton-under-Lyne (Mr. Rhodes) asked about the relationship between the 4s. duty and the price. There are a number of prices for these fluids, but, roughly speaking, 24s. is about an average price. Therefore, it is 4s. on 24s. Naturally, in our investigations we inquired whether there was a price ring or an arrangement between the two suppliers here, and we were satisfied that there was not. So far as I know, there are two manufacturers in France. One is the firm named in the Order, and the Order refers only to its product. The other manufacturer does not export here.

The hon. Member for Islington, East (Mr. E. Fletcher) asked whether there was any question of a subsidy to the French manufacturer. No, there is no question of a subsidy.

I agree with my hon. Friend the Member for South Angus (Sir J. Duncan) that this matter seems to have taken a long time. Indeed, the application was put in almost directly after the Bill became an Act. However, we felt that in this case we should make the most careful inquiries. It is very important that other countries which have anti-dumping legislation should not think that we apply ours without very careful consideration, because they might then apply theirs similarly against our products.

The inquiries were made largely in France. We were able through our representatives to check the domestic prices both of the firm in question and of the other manufacturer. There is no doubt that the prices were considerably higher. According to the quantity and the quality, as I understand it, the prices ranged from 2s. to 8s. per lb. above the price at which the same articles were sold in this market. Therefore, we did not make a whole range of duties. We took 4s. as being in the middle of 2s. and 8s., and we think that is about fair. [Interruption.] The 4s. is not quite in the middle, but, judging the different quantities, we thought that was about right.

On the material injury point, I have no doubt that this is an established industry and that it is suffering material injury. We judged that first by the very large capital investments, particularly in the factory in Glamorgan, and by the fact that there is idle capacity. The industry is not producing all that it could produce, and it has lost orders because of the French imports. I think that is fairly clear evidence. I did not put in the Order the point about material injury because I did not think it was very suitable. It is not very easy to prove except in relation to a particular firm, and I think that, on the whole, it is better left out.

I was referring not to the wisdom of it but to the necessity for it. The Act says that the right hon. Gentleman shall not act unless he is so satisfied, and he has not now provided any evidence that he is so satisfied. Why does he mention only two out of the three conditions which are statutorily laid upon him?

I was advised that there was no need to put it into the Order, and I do not think that it is very likely that I should be challenged by a French firm on this point.

The right hon. Gentleman also asked me why the Order would apply only to fluids and not to emulsions. If the franc had not been devalued, the Order would have applied to emulsions. The result of the devaluation of the franc, according to our calculations, was to take the range of emulsions out of the Order on dumping but it still left fluids within the range I hope that, with those explanations, the House will approve the Order.

The point raised by my hon. Friend the Member for Smethwick (Mr. Gordon Walker) is most important. If the right hon. Gentleman had included the third reason, the Order would have set out that material injury was one of the reasons. Although Hong Kong textiles may not be considered as dumped here when the price is the same as it is in Hong Kong, if the third reason had been included in the Order we might have been able to use it against the Government in respect of cheap textiles from Hong Kong.

7.48 p.m.

Perhaps I might have the leave of the House to speak again, as this is an important matter and I take a view rather different from that of my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) and on this occasion I propose to come to the assistance of the President of the Board of Trade.

It is probably relevant to tell the House that the Select Committee on Statutory Instruments, of which I have the honour to be Chairman, considered the form of the Order at its meeting yesterday and passed it. I think it is important that the House should know that the Order is in a form similar to a number of other Orders which the Committee has to consider.

I would draw attention to the distinction in this case. Where an Act says that a Minister can make an Order provided that he is satisfied about A and B, it is very desirable, if not absolutely necessary, that the Order should recite that the Minister is satisfied about A or B. However, it is not the case here that the Act says that the Minister shall be satisfied about A, B and C. The Act says that the Minister shall be satisfied about A and B, and it goes on to provide that if the Minister is not satisfied that the dumping produces a material injury to an established industry he shall not make an Order. Therefore, the third reason is not really a requirement but is a proviso in a different category.

I hate to differ from my hon. Friend the Member for Ashton-under-Lyne, but, in the interest of the form in which these Orders are made and as it may have some relevance in the future, I thought it important to point out that there was that distinction in the governing Act.

Surely no case would have been made to the Board of Trade if there had not been some material injury to the firms in question. It is in relation to that proviso that objections have been lodged to the import of French silicone fluids.

7.50 p.m.

I am advised that the hon. Member for Islington, East (Mr. E. Fletcher) has made the point correctly for me, for which I am obliged. I am afraid that the hon. Member for Ashton-under-Lyne (Mr. Rhodes) has got it wrong, because he forgets that we have power to impose this duty in respect of goods coming from a non-G.A.T.T. country where no material injury need be proved at all. Therefore, it is certainly not necessary to provide for it in an Order. The hon. Member will not find that, because the provision is not in the Order, the Board of Trade is any less zealous in applying the powers under the Act in respect of cases properly made out. I assure him that it will not make any difference whether it is in the Order or not; and it ought not to be in the Order, if only for the reason which the hon. Member for Islington, East gave that it is a negative provision. It is legally permissible to insert it or not to insert it in the Order.

Question put and agreed to.

Resolved,

That the Anti-Dumping (No. 1) Order, 1958, dated 1st January, 1958, a copy of which was laid before this House on 6th January, be approved.