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Capital Equipment (Sales To Usa)

Volume 827: debated on Monday 6 December 1971

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asked the Secretary of State for Trade and Industry what is the total disadvantage in sterling terms that a piece of British capital equipment costing £1,000 has to bear which is sold to the United States of America, after taking into account the import surcharge, the investment tax credit and the revaluation of sterling, since 15th August of this year.

There are different ways of calculating the true cost of an industrial asset and various tax options are open to an American purchaser. But on a fair calculation, the factors to which my hon. Friend refers make the net cost of the British equipment over £160 more than the net cost of the alternative American equipment. This gives the latter a price preference of over 25 per cent.

Does my right hon. Friend agree that this is a very high level of discrimination against British capital goods and carries with it a threat of even higher unemployment? Will he consider going to Washington next week with my right hon. Friend the Chancellor of the Exchequer to make it clear to the American Government that if there is a realignment of parities, there must also be a withdrawal by the American Government not only of the 10 per cent. import surcharge, but of the "buy American" tax credit?

I can assure my hon. Friend that we have regarded this particular part of the package as particularly offensive and entirely contrary to the American obligation to G.A.T.T. We have missed no opportunity of making this absolutely clear to our American colleagues. I do not think there is any particular need for me to visit the United States next week to reaffirm what I have already said.

Will the right hon. Gentleman make clear to the American authorities the considerable anomaly in their position in that while they protest that they are most concerned about imports from Japan, the overwhelming proportion of which are in consumer goods, the two countries whose imports into America are most hit by the restriction are this country and West Germany?

This point has certainly not escaped our notice and we have mentioned it on many occasions to our American colleagues.

While I congratulate my right hon. Friend on the remarks he has made in the United States on this subject, may I ask him to consider, if the United States persists with this flagrant violation of the rules of G.A.T.T., drawing the attention of the American authorities to the possibility that the present position might redound greatly to the advantage of British capital goods manufacturers if the goods of American manufacturers were excluded from our investment allowance arrangements?

There is, of course, always at times like this the temptation to play one off against the other. We think that this particular aspect of the American package will be short-lived. If it is, there is everything to be said for our trying to prevent a trade war starting rather than increasing it, and everything we are doing at the moment is aimed in that direction.