Dáil Éireann debate -
Tuesday, 5 Nov 1963

Vol. 205 No. 6

Imposition of Duties (Confirmation of Orders) Bill, 1963—Second and Subsequent Stages.

Minister for Industry and Commerce (Mr. J. Lynch)

I move that the Bill be now read a Second Time.

The purpose of this Bill is to confirm three Orders made during 1962 under the Imposition of Duties Act, 1957 which provides that Orders made by the Government under that Act, imposing or amending duties, must be confirmed in the calendar year following that in which they are made.

The Orders are:

(1) Imposition of Duties (No. 128) (Customs Duties and Form of Customs Tariff) Order, 1962.

(2) Imposition of Duties (No. 130) (Customs Duties and Form of Customs Tariff) Order, 1962.

(3) Imposition of Duties (No. 131) (Reduction of Rates of Customs Duties) Order, 1962.

Order No. 128 (Customs Duties and Form of Customs Tariff) prescribed a new form of customs tariff based on the internationally-agreed Brussels nomenclature for use in classifying goods for customs purposes; it also revoked all then existing customs duties, except those on tobacco, beer, spirits, certain hydrocarbon oils, and wine which were excluded because of the number of consequential legislative changes which their inclusion would have involved, and re-imposed these duties, with certain modifications, within the nomenclature classification. This Order was made to bring our tariff code into conformity with the classification generally adopted by European countries, including those which are members of the European Economic Community.

Order No. 130 (Customs Duties and Form of Customs Tariff) made a number of necessary amendments of a minor nature to Order No. 128 which I have just referred to and also revoked, and re-imposed, in accordance with the new tariff classification, a customs duty on wheat.

Order No. 131 (Reduction of Rates of Customs Duties) reduced by ten per cent all customs duties, with the exception of certain revenue and agricultural duties, as part of the movement towards freer trade conditions, and in anticipation of our entry into the European Economic Community.

One of the effects of Orders No. 128 and 130 is to re-impose in their new form a number of customs duties which has been amended or imposed previously by way of separate Orders. There are seven such Orders in question, all of which were made in the year 1962.

The first of these Orders, Order No. 121 (Braid), reduced the ad valorem rate of customs duty on braid (other than braid suitable for the manufacture of laces) from 100 per cent (flat), to 60 per cent (full), 40 per cent (UK and Canada), and was made in accordance with the recommendation of the Industrial Development Authority, after a tariff review under our Trade Agreements with Great Britain.

The second Order, Order No. 122—Iron and Steel Files—reduced the customs duty on iron and steel files from 75 per cent (full), 50 per cent preferential (UK and Canada), ad valorem with an additional customs duty of 1/6d (full), 1/- preferential (UK and Canada), the article, to 60 per cent (full), 40 per cent preferential (UK and Canada), ad valorem, with an additional customs duty of 1/1½d (full), 9d. (UK and Canada), the article. This tariff reduction was also made in accordance with the recommendation of the Industrial Development Authority after a Review under our Trade Agreements with Great Britain.

The next Order—Order No. 124— Overcoats for Men or Boys—amended the customs duty on overcoats for men or boys so as to provide for minimum rates of 75/- (full), 50/- (UK and Canada), the article. This change was made because the existing ad valorem rates were found to be inadequate to give protection against imports of low priced goods.

Order No. 125—Knitted Undergarments—amended the customs duty on certain knitted undergarments so as to provide for minimum rates of 2/-(full), 1/4d (UK and Canada), the article. The existing ad valorem rates proved to be inadequate to give protection against imports of low-priced goods and a specific duty had to be imposed to protect the domestic producers.

Order No. 126—Knitted Fabric— amended the customs duty on knitted synthetic fabrics to provide for minimum specific rates of 1/9d. (full), 1/2d. (preferential), per square yard. Here again excessive competition from low-cost producers threatened the interests of the Irish manufacturers and made it necessary to provide more effective protection for the industry.

Order No. 127—Miscellaneous Customs Duties—made some minor amendments to the Imposition of Duties (No. 114) (Miscellaneous Customs Duties) Order, 1961. This latter Order is the Order which provided higher tariff protection for goods, imports of which are subject to quantitative restrictions, so that, in a situation such as would arise on this country's adhesion to the Common Market, when these quantitative restrictions would have to be removed at once, an alternative form of protection would exist.

The last of these Orders—Order No. 129 (Wheat)—imposed a customs duty of 70/- (flat), per ton, on imported milling wheat. The purpose of this Order was to appropriate, for the benefit of the Exchequer, certain surplus profit which would accrue to millers due to the above-normal use of cheap imported wheat following the bad harvest of 1962. The Exchequer incurred heavy expense in coming to the assistance of wheat growers as a result of the poor 1962 harvest.

An explanatory memorandum has been circulated for the information of Deputies. I shall be glad to give any further information that is required. I may say, in respect of the three Orders which were made increasing the tariff protection, these were made as a result of unduly low-cost imports coming in here from low-cost countries. They did not in any way tend to increase, or in effect did they increase, the prices of these commodities as prevailing on the home market up to then. The main purpose was to protect the employment already being given in these three industries.

Mr. Cosgrave

The discussion on this comparatively short measure, I think, affords an opportunity for asking the Minister to state what is the Government's policy on tariffs and quotas generally. As I understand the Government's policy, and as I think the policy was generally understood when our application for membership of the EEC was at any rate current, the arguments in favour of reducing protection on a gradual scale were made on the basis that if this country became a member of the EEC by a certain specified date, it was necessary by gradual stages to reduce protection and eventually to aim at circumstances in which protection would disappear entirely.

However difficult and whatever the consequences which were likely to emerge from that policy, it was recognised by industrialists, by manufacturers and by those employed in these undertakings that the ultimate prospects for the country of membership of the EEC were such that it was agreed national policy that, although very serious difficulties might emerge for individual industries and for those employed in them, with certain consequences for some of these industries faced with the competition of industrialists and manufacturers in member countries of the EEC, they might be, and very likely would, find the competition and the going too keen and ultimately find themselves driven to the wall.

However, as I have said, it was recognised that taking all these factors into account, the national balance of advantage, with the prospect of the far greater market available in the EEC, and particularly with the fact that Britain had also applied for membership and our very close trading relationship with Britain, whatever certain individual disadvantages there might be, was in favour of EEC membership, and that these tariff and quota reductions were consequential on that decision and involved in the terms of membership which would apply, not only here but to other member countries as well.

That situation has now radically altered, since the press conference last January by the French President. There is no immediate likelihood of either Britain or this country becoming members of the EEC. It is for that reason that I want to question the wisdom of proceeding generally with tariff and quota reductions in the absence of any quid pro quo from member countries of the EEC. As I understand it, the general aim is, by means of these tariff and quota reductions, to bring Irish industry into a more efficient state. This is a very big question and it is not possible merely by tariff reductions automatically to achieve efficiency or to make industries more competitive.

I think the Minister is personally aware, from representations which have been made to him and to his Department, of the very great concern which is felt by certain manufacturers, traders and industrialists who, while endeavouring to make themselves efficient and as competitive as possible, find that the prospect of further tariff or quota reductions in certain cases will bring them below the border line, under which they will find they are meeting competition from manufacturers and industrialists both in Britain and on the continent who have had, in the past, far greater markets available to them; who have a longer tradition of industrial skill and experience and who generally have geared themselves to a higher pitch of efficiency because of the availability of a higher market and having available not only a bigger home market but the advantages which in many of these cases larger units have over some of the smaller concerns.

I notice that in three of the Orders which are the subject of confirmation by this Bill, the rate of duty has been increased because, as the Minister said, they were faced with competition from low-cost producers which militated against manufacturers in this country. It is well, with that experience in mind, to ensure that we will not have to take remedial action in the case of some of the manufacturers who are now the subject, or expect to be in the near future, of further tariff or quota reductions.I have in mind one particular case in my constituency, woollen and worsted manufacturers, but I understand it is applicable to a number of similar undertakings in other parts of the country. These people feel the greatest concern about the prospect of further reductions.

I believe we have to consider this from a number of angles. We have to consider the ability of individual units to keep in production if they find that part of either their equipment or of their factory is no longer necessary. If a factory has to be reduced below a certain level of production, then in some cases it may well be uneconomic for it to continue in production. The reduction of duty may involve the disemployment of some workers and that in itself has a disturbing effect. Obviously it has a disturbing effect on those so affected but equally it has a disturbing effect on those who are retained in employment because once uncertainty is created it does not require much to extend such a very gloomy situation.

As I have said, initially the original basis on which these tariff reductions were being made was that this country would become a member of the EEC. I do not know whether the Minister can indicate whether there is any time-table available for our prospects for ultimate membership. I understand from the statements made in the Second Programme for Economic Expansion that it is ultimately expected that we will become a member in 1970. That is a long time away and it does not seem to me that there is any valid basis for that assumption, other than the hope that by that time circumstances, either in France or elsewhere, will have so altered that not only this country but Britain and a number of others will have joined.

It is true that the EFTA countries have announced a decision to eliminate protection between themselves by 1966. It always seemed to me that that decision was taken in an effort to jump the gun over the EEC countries and was due to an effort to appear to get one up on the EEC countries. On the other hand, I do not know whether the Minister has any information which would indicate whether there is any change in policy in Britain on this matter. Prior to the recent change of Prime Minister there, the man responsible for dealing with EEC and EFTA was the Lord Privy Seal, Mr. Health. His appointment as such has been terminated and he has become Secretary for Industry and President of the Board of Trade. I understand that he is responsible for EFTA matters but the fact that there is no longer a special Minister to whom responsibility is assigned for EEC negotiations would indicate, if not a change of policy, a lessening of the emphasis so far as Britain is concerned on EEC membership in the immediate future. That may be merely accepting the realities as they are and awaiting events before proceeding further with the matter but I believe there is a general view in this country that before we proceed with further tariff and quota reductions, we ought secure some quid pro quo, either from EEC member countries or from EFTA countries.

Our position at the moment is we are not in the EEC and not in EFTA but we are proceeding and taking action on the basis that we will ultimately become members of the EEC. That, as I said, may have been sound enough in the circumstances in which our application was still current. However difficult individual prospects for industrial concerns or those employed in them were, it is agreed that the national balance of advantage lay with taking the necessary steps. That situation has now altered and the time-table for EEC is both vague and indefinite. Whatever our ultimate hopes may be, there is no immediate prospect of membership becoming an actuality in anything like the near future.

Because of the very great concern felt by a number of industrialists, particularly by those employed in the industries I have mentioned, particularly in my constituency—and there are many others wondering what is likely to happen—the Minister should give some indication. On the one hand, this piece of legislation will impose duties, confirm certain Orders and reduce some of the protection, but in three specific cases it increases it. In the light of those two conflicting approaches to what might well be regarded as the same problem, it is difficult to discover what Government policy is on this matter.

So far as bringing our forms of customs tariffs into what is regarded as the Brussels nomenclature is concerned, that is generally accepted as a desirable procedure. Anything that introduces a system which is recognised internationally and which is applicable to European countries has advantages in it. So far as that is concerned, I think the changes are desirable, but I think we should proceed very warily in regard to tariff and quota reductions, unless we get some quid pro quo from the EEC or EFTA countries which will ensure that if we take action here, we will create no disadvantages for the concerns involved or those employed in them.

Mr. Norton

I want to raise on this memorandum which has been circulated with the Bill the Order made by the Government during the past year, the purpose of which is to bring down our general level of tariffs by ten per cent. My purpose in doing so is to elicit some information as to the Government's policy in this matter. So long as the question of our admission to EEC, simultaneously with the British, represented an early possibility that we would be in the European Common Market this year or early next year, one could understand making reductions in tariffs here so that when we went in we would have passed through part of the exercise which the European Economic Community have been going through in reducing their general level of tariffs so that by 1970 no tariffs will be left except whatever tariffs the European Economic Community decided to impose themselves against outsiders.

I was in favour of travelling along with that exercise so long as there was a reasonable hope that this year or next year would see us into the European Economic Community. I am afraid that the whole situation has now changed, and changed in an intangible way so that nobody knows whether we are likely to be admitted this year or next year. Our possibility of entering now seems to revolve, not around all the members of the Community, but around the temperament of General de Gaulle. We have been assured by five of the six member States that they are bursting to have us in, that they are longing to get over all the difficulties, that they are striving openly and by stealth to get us in, but over all these efforts there is the long shadow of General de Gaulle who says that he is not at present prepared to admit the British into the European Community.

He says that he does not want a very big European Economic Community, that Britain is not a European partner in the sense that he understands European partnership and that for these two reasons, he has reached the stage when he thinks the admission of Britain is something which France should not have. In other words, he wants a tailored European Economic Community, a community tailored to the dimensions which he himself prescribes, tailored to the European outlook which he regards as necessary in order that Britain should be a fully-fledged member. He wants a European community which quite clearly acknowledges the right and traditional hegemony of France.

Nobody has stated in the public Press, either here or in Britain, that this is only a transitory attitude on the part of the General, that this is not a fit of pique on the part of the French, something to which we have been treated quite frequently, something that blows up quickly and disappears with equal speed. This is the position which General de Gaulle has taken up and there does not seem to be any question of his departing from it, so that all we can do is to sit down and play patience with him and see if any shift in the world situation will bring about a change in his present mentality. Many people say that we may have to wait until he has passed on, either to the Great Reaper or is discarded by the electorate. There is no one prepared to foretell when he will be prepared to rescind what he has said or what he is doing. Whether you look at him through NATO spectacles, or through EEC spectacles or through the spectacles of nuclear war you can get no line on the General.

He has set himself up as an unpredictable force in Europe and Europe now has to wait and see in what way he will move. Somewhere in that indeterminable situation our interests are to be found. We have to wait until he changes his views about Britain and, even when he changes his views about Britain, there is no indication that he will not become moody and temperamental with us on the ground that we would not be able to bear the burden of membership of the European Community. He may take the view that this is a club for giants, for people with mental muscles, that only the strong people can survive the battle that EEC will make.

He may take the view that a small country like Ireland, a developing country, but with many economic weaknesses, might not possibly face up to all the responsibilities which will be involved in membership of the European club. If he adopts that attitude towards us even after he has conceded Britain's admission, we may still have another wait before General de Gaulle decides that we do ultimately measure up to the situation.

It may very well be, of course, that other events of a world character may telescope completely the present European Economic Community. It may very well be that this European Economic Community will never reach manhood in an economic or political sense. I am not talking about a military sense. In an economic or political sense, it may very well be that it will be overtaken by world events and will never reach the stage originally contemplated.

But we are sitting here repealing our tariffs at the rate of ten per cent per year. Ten per cent has gone; ten per cent will go in January; a further ten per cent the following January and then we will get down to the 15 per cent; and ultimately, after a number of years, all our tariffs against imports will disappear. They will be abolished on the assumption that General de Gaulle—not the French— will allow us into the European Economic Community. If we were certain that he would, perhaps there is a case for continuing this policy of repealing tariffs, but we are dealing with an unpredictable gentleman such as the General has proved to be. I judge him on nothing but his own actions. They have mystified his own people just as much as outsiders. Judging by his own actions, it is quite possible that we may continue to repeal these tariffs by ten or 15 per cent as the case may be from year to year and may get no corresponding advantage from the other six countries. With every one of these Six, we are hopelessly in the red. We buy from them five, six and seven times more than they buy from us. In all these instances, we are buying, individually, from the European Economic Community a very much larger quantity of goods than they are buying from us. Of course, if we reduce the tariffs by ten and 15 per cent and more as time goes on, we are giving them more and more facilities. We are allowing their goods into our market, while they on the other hand give us no industrial or agricultural advantage in their markets.

If we were making it easier for them to enter our industrial market whilst they were doing likewise for our goods in their countries, one might understand it, even though it has always seemed to me and will continue to seem to me until I have evidence to the contrary, that to give us equality of entry to their market for industrial goods, we having started late in the industrial race, is not nearly as advantageous to us as it is to them to be given the same type of entry into our market for their industrial goods, having regard to their highly mechanised background, high degree of capitalisation and the long technical experience which they have inherited.

On the other hand, if we are unable to get our industrial goods into those countries at a lower tariff rate than operates at present, it might be understandable if we could get our agricultural goods in there. But we cannot get either industrial goods or agricultural goods in at lower tariff rates than at present prevailing, whilst we on our part are reducing our tariffs by ten per cent each year in order to let these six countries into the Irish market, such as it is for them.

In time, it may very well be that the first ten per cent and the second ten per cent reduction in our tariffs will not be serious from the point of view of our producers here. Anybody who has any knowledge of the tariff procedure in the Department of Industry and Commerce knows that it is not the full which is the effective rate of protection; it is the preferential. That was put there because what was making the attack on the market here was the attack made by well-placed British products and consequently you had a rate of duty which caught the British and the other was little more than an embroidery rate. So, the others were caught in any case on the British and could never get in on the difference between the British and the full rate.

It may very well be that Irish industrialists will not be worried by the reduction of ten per cent or perhaps 20 per cent but after that, I have no doubt they will have occasion to worry. I have no doubt that they will have occasion to worry even with the 20 per cent reduction in tariffs, which might well be a serious blow to some Irish industries.

There is an item dealt with here that has an interesting background— iron and steel files. The duty on iron and steel files was an ad valorem duty. The tariff was drawn by all the experts who knew how to draw tariffs effectively, after getting a full explanation from the manufacturers of these commodities.It was thought an ad valorem duty would be sufficient to catch the imports which were virtually closing down the only Irish firm which made these commodities. The tariff against British files was fixed in relation to the number of teeth in a file, that is, from the first sharp point you meet to the last sharp point you meet. Let us suppose the stock practice was to make the file with 60 teeth. The British competitors made a new file, one with 59 teeth and got in over the tariff wall and no tariff was payable on it. Or there was another trick. A file has to be a certain width—let us say, a quarter-inch or five-eighths of an inch. They changed the depth of it by a fortieth or a fiftieth, sufficient, in any case, to upset the tariff prescription we had imposed.

It was because of the facility with which they did this that the only way of catching these goods was to put on a minimum tariff per article and that is how the minimum tariff per article in addition to the ad valorem tariff came to be imposed on these files.

When trading in a world in which that kind of device is regarded as good commercial practice, you may very well find that any reduction in tariffs at all can be utilised to your own disadvantage and to the advantage of the country which wants to send its goods to yours, as practically every one of them wants to do.

As I said at the outset, I could understand this policy, and can still understand it, so long as there is an early entry on our part into the European Economic Community, but in the absence of any assurance to that effect, I begin to question the wisdom of the policy. I think you have to prepare for that eventually and for a sudden change-about, which is always a possibility.At the same time, we ought not to have a fixed policy on this. It ought to be as movable as the occasion necessitates.It ought to be as flexible as the interests of our industries demand and, of course, there is always the outside consideration that the British, in their new economic recovery—a recovery of which many of their people are prepared to say it is the best they have hit yet and is likely to continue—may discover that having regard to some of the obligations which the European Economic Community imposes upon them, they would prefer to be clear of it altogether and would prefer to make a deal with some of the emergent countries in the world with which they have had closer ties, perhaps, in the past than they have with some of the countries comprising the present European Economic Community.

It may very well be that a new Government in Britain might not be as enthusiastic about a European Economic Community as the present British Government are, in which case, whether we wanted to go into the European Economic Community or not, we might find the British not willing to go into it. In this matter, our trading relations with Britain are so interdependent that economic sanity demands we should do whatever she does, and a separation of our trading interests would be disastrous from the point of view of this country. In this matter all the right is not on one side and all the wrong on the other. It is a matter of deciding what is the best policy to adopt in present circumstances and having regard to the imponderable situations that lie ahead. I should like to find out, apart from the Taoiseach's new-found inclination to go over to the Free Trade Area, whether it is proposed to continue, without regard to the consequences, the policy of reducing tariffs by ten or 15 per cent, irrespective of how far away we appear to be from our membership of the EEC?

Sir Anthony Esmonde

One would have expected on this occasion that we would have got from the Minister some background to the industrial policy of this country, not only in relation to Europe but to the world as a whole. Only two things emerge from the Minister's short statement to the House: one is that we are still reducing tariffs by ten per cent annually, as was announced by the Taoiseach and the second, that the Government have awakened to the fact that a new feature has presented itself, that the low-cost production countries are beginning to put their goods on the markets of European and other countries to the detriment of home production. The Minister then says we are imposing certain duties to deal with this situation.

We have been negotiating and, according to the Taoiseach's remarks in America, are still negotiating for entry into the Common Market. In view of the fact that we are facing this new situation of low-cost production, we might have had from the Minister an overall statement on industrial policy. I should like the Minister, if possible, to clarify the situation. First, are we negotiating for entry into the Common Market and, if so, are we negotiating on our own or in conjunction with the United Kingdom? Has the Minister or any member of the Government, who must be actively concerned with this, any information as to any negotiations that are going on?

I have listened to many questions posed in this House—not, I admit, to the Minister for Industry and Commerce, who has not the direct responsibility for it, but to the Taoiseach— as to what our position is industrially, agriculturally and otherwise in relation to tariffs or any approach we may be making to bring ourselves within the sphere of any international body. The reply is always entirely negative. We are not having negotiations with anybody.Every country in Europe is tied up with some international organisation, with the exception, as far as I know, of Iceland and Ireland. We only know from what the Taoiseach said in America that we are going to be in the Common Market by 1970.

Is that why the Minister is coming back here and reducing tariffs at the rate of ten per cent annually? Are we reducing our tariffs at the rate of ten per cent globally or in conjunction with EFTA and EEC? If we are reducing our tariffs globally, how does that fit into the picture that we are introducing tariffs as against the low-cost production countries? I entirely sympathise with the Minister's difficulties.I agree the situation at the moment is somewhat complex from every angle. But when the Minister comes to Dáil Éireann with this important measure, he should have been able to tell us in a few short words what our position is generally.

I want to refer now to something in my own constituency. A great deal of our control of imports and our trade generally is covered by the quota system. Every facet of industry and of production has a tariff of some sort imposed, whether that tariff is operative or not. In many cases, it is not operative, and control is exercised by a quota. Now we have this ten per cent reduction in tariffs annually, or whatever the rate of reduction will be in the future. Will the quotas be reduced accordingly? Will any industry covered by a quota be suddenly told: "Your quota will be removed and you will have to move over to the tariff system?" Are they to be told suddenly that some agreement has been reached with other countries, whether through the European Economic Community or in a wider sphere, in which the whole pattern of our industry will be altered? If I were an industrialist —unfortunately, I am not; if I were, I would be a richer man today—I would feel very insecure as a result of the Minister's statement. I would have no clear idea of what the future held for me if I were carrying on business behind a tariff barrier or within the confines of a quota. As I say, I have a certain amount of sympathy with the Minister, because he has to carry on under the aegis of the Leader of his Party, who is conducting the operations, if any operations exist for our entry into EEC, and in that regard my guess is probably as good as the Minister's.

I should like to refer to what Deputy Norton said about the overall position with regard to Europe being entirely at a standstill. It would be very inadvisable for anyone directly responsible for negotiating on behalf of the Irish Government to assume that attitude. One has to remember that France definitely adopted an inflexible attitude last January when she said that the United Kingdom could not get into the Common Market, that she would not negotiate further and that, so far as she was concerned, she would not consent to her entry. We appear to have faded out of the picture straight away. In spite of any remarks made by the Government, we are negotiating in conjunction with the United Kingdom.

Two features have emerged recently, and cognisance should be taken of both. First, it is vital to the interests of France that there should be an agricultural agreement within the confines of the Six as speedily and expeditiously as possible. To a certain extent, it is vital to Holland also, but not so vital in her case because she has a good deal of trade with the United Kingdom. It is also vital for the Six that there should not be any breach in the unity and harmony that has existed and that it should be developed.

Other countries have expressed the opinion that they want the United Kingdom to come into the Common Market as soon as possible. From time to time, leading European statesmen have said that, but bearing in mind the fact that France, if she wants to get agreement with her partners must give in to a certain extent. I say this not to try to show all I know about it but to bring home to the Government that it is possible that France, realising that she must meet her agricultural commitments or must endeavour to get the Six to meet them, is bound to give in and, on the basis of that, I venture to suggest there are negotiations going on at the moment within the confines of the West European Union. The discussions that took place the other day in the Western European Union, which consists of the Six only and the United Kingdom have been postponed to January but during that interval the experts are considering these matters. I put it to the Minister that negotiations are likely to start soon.

It is also possible, as Deputy Norton said, that the United Kingdom may have had second thoughts about joining the European Community on account of the advancing economic success of the other economic organisation to which she belongs, EFTA. Apart from that, there are trade negotiations going on all the time between the Six and the United Kingdom and I take a poor view of it that nobody on the Government Benches— there should be no secret about it— has given any indication that Ireland is having any negotiations with anybody or making any effort to get within this comity of nations which is gradually growing. For that reason, I think it is wrong that the Minister should come in with such an important document as this and not give the House at least a résumé of Ireland's position vis-á-vis the European and the global negotiations that are going on.

The Minister referred to the fact that there is a tariff in respect of purchases of wheat. Last year, when we had a bad season and the world price of wheat was considerably below the price of Irish wheat, it is a curious thing that the millers were unable to accept Irish wheat and bought ad lib on the foreign market. I am glad the Minister is imposing a tariff on them so that at least the State may recoup some of the money gained by the millers. It is significant that this year when the grain situation has changed suddenly and the price of wheat, as a result of purchases by countries that failed to get production due to bad Government, behind the Iron Curtain, China and other places, has gone up, the millers here were able to accept Irish wheat, although in 1962 they turned down 50 per cent of it. I am glad the Minister is recouping some of the money that august body made out of the Irish farmers and I hope he will remember, if they are buying any wheat outside, to make them pay the full price of it so that Irish farmers will be protected.

Mr. Booth

I should like to follow on something which Deputy Esmonde referred to, the question of the possible effects of membership of EEC. I have been corresponding with the Minister about the matter but when new duties are now being imposed, like Deputy Esmonde, I should like to know what the situation will be, when and if we do join EEC.

As I understand it, if we are admitted, all quota restrictions will have to go at once and be replaced by new import duties. That confuses me because I understood originally that all duties within the Community were to be abolished by 1970. I am not sure how we are to arrange this if some industries are protected by quota at the moment and those quotas will go on the date of our admission. I cannot see how they can be substituted by import duties, except at a very low level.

I also share with Deputy Esmonde some concern as to whether the whole question of our protection is being slanted in favour of other members of EEC at the moment or whether we are adopting a policy more in line with President Kennedy's proposals for a general overall reduction of import duties. It is wise that we should have some bargaining points to use when our negotiations are resumed but if negotiations are to be resumed only shortly before 1970, we shall have very little time to bargain. If the Minister can give us any indication on these points, I should be glad to hear it, as I am sure other business people would. We are worried as to whether the protection of quotas having been withdrawn, we are going to find that the substitution of import duty would be of very short duration. If that is so, it is something we should know about now so that we can plan accordingly. If the Minister can give us any indication, we would appreciate it.

At the same time, we understand in the business community that the Minister is in a difficulty in that he is not his own master and the Government are not their own master as regards reopening negotiations. There is tremendous speculation and obviously that must be the case for some time so that all we can reasonably ask is an indication as to how the Government's mind is working.

At one stage in a previous debate, the Leader of the main Opposition, Deputy Dillon, asked the Taoiseach to speculate and the Taoiseach was unwilling to do so and said it was not his duty to indulge in speculation in public, but I am sure the Taoiseach must have some idea of what he proposes to try to do so far as the abolition of tariff protection is concerned.

Mr. J. Lynch

Some of the Deputies opposite, I think, spoke with their tongues in their cheeks or with a degree of naïveté that surprises me. That remark applies particularly to Deputy Esmonde. This Bill is one of limited application, and I do not know why anybody should feel so offended because I did not range over the whole field of industrial policy. In so far as the remarks of Deputies have given rise to the need for some clarification from me, I intend now to give that clarification on what our present tariff policy is. I do not think there is any member of this House or anybody outside it, who thinks responsibly about our present economic position, who does not agree with the declared intention of the Government to seek membership of the European Economic Community. Having applied, I doubt if anybody would disagree with the measures generally taken by the Government to ensure that when we accede to the Community, we should be reasonably fitted for that accession. One of the measures taken was a gradual reduction of our tariffs and the extension of our quotas consistent with that reduction.

As the House and the country are aware, when we made our application, we proposed a certain rhythm of tariff reduction to the Council of Ministers of the European Economic Community, pointing out that their rhythm of tariff reduction, having already commenced, and having been in operation for some two or three years, it would be unreasonable for them to expect us to enter at the stage of reduction they had reached whenever we did enter. We proposed, therefore, a rhythm of reduction extending over the period ending 1969 which would, as we thought, suit us best and do the least possible amount of injury to our industries.

The wisdom of doing that was obvious. In the first place, it would ensure that our industries would not be subjected to the immediate impact of a severe reduction of some 30 per cent or 40 per cent in our tariffs. And, as well as that, by adopting the reduction in the early years at the rate of ten per cent, we would ease our industries into the position in which they could withstand a more serious reduction in later years. Above all, we wanted to ensure that, if we waited until we were members, we would not be subjected to the sudden impact of the degree of free trade existing within the Community.

There was another purpose, one with which I think people generally agreed, that is, that the rhythm of reduction would, in any event, stimulate our producers into a greater degree of productivity in their output and give them a greater degree of competitiveness. It is for that reason that, notwithstanding the fact that our application for membership is now suspended, as is the British application, we announced the initial reduction of ten per cent in tariffs and intend to proceed with a further ten per cent reduction as of 1st January next. Lest anybody is still under any illusion that that ten per cent is ten per cent simpliciter, it is ten per cent of the original rate; in other words, if the original rate of duty is 60 per cent, the reduction is ten per cent of the 60 per cent and the next ten per cent reduction will also be ten per cent of the 60 per cent. The impact is not as serious as a ten per cent reduction of 60 per cent bringing it to 50 per cent and a ten per cent reduction of 50 per cent bringing it to 40 per cent.

We all agree generally, I think, that we cannot here in this island continue in economic isolation. The world, as we know, is moving towards freer trade. At the moment it is doing so through the medium of blocs of States. We cannot, however, ignore the fact that we will have to live in some way in that general economic setup. At the present time, the countries of EFTA are proceeding towards a reduction of tariffs inter se at a faster rate than the countries of the European Economic Community, so much so that they propose to have their tariffs and other restrictions inter se eliminated by 1966, whereas the European Economic Community countries propose, as far as we know, to have these eliminated by 1967.

The result of that exercise as between these countries is that there is a freer flow of goods between them. They are becoming more competitive within these Communities and are, therefore, in a better position to export to other countries. If we did not have our special trading arrangements with Britain, we could not choose to ignore that movement; but because we have special trading relations with Britain, we particularly cannot choose to ignore the movement within EFTA because, within EFTA, the tariff rhythm is quicker, thereby enabling countries which are members of EFTA to get access to the British market at a very fast rate. In some cases, the tariffs EFTA partners of Britain have to pay are less than the tariffs which our preferential position gives us vis-á-vis Britain. On that score alone, we would not, I think, be wise to ignore the situation.

As we all know, our industries will have to depend to a considerable extent on increasing exports in order to survive.Not only that but we will have to depend on our industries increasing exports in order to expand our economy at the rate we propose. It is obligatory on us, therefore, and on our industrial arm to become more and more competitive, not only to hold our position in the British market and in other world markets, but also to ensure that we will be able to hold that position against countries which, because of reduction of tariffs inter se, are becoming themselves more and more competitive. If we did choose to ignore the movement, and refuse to make any downward movement in our protection, then I suggest that we would give no stimulus to our industries to proceed towards a situation of greater competitiveness and greater productivity in order to hold and expand our export position.

That is one good justification for this announced policy of a ten per cent reduction, which has already taken place, and a further ten per cent reduction which will take place at the beginning of next year. By 1965, it will be a 30 per cent reduction approximately in our overall tariff protection régime. As well as that, and apart altogether from exports, it is giving our industrialists and those whom they employ a very necessary stimulus to achieve a state of greater competitiveness.

For many years, from the benches opposite, my predecessor was taunted with accusations about the effects on industry. The tune seems to be different nowadays. The taunt is that we are giving away protection for our industries and getting nothing in return. I submit we are getting a considerable amount in return in that our industries are getting this greater stimulus towards improved efficiency and that we are holding in most cases, and increasing in other cases, our position in the industrial export markets.I think it is a worthwhile exercise if only for that alone.

Industrialists have come to my Department to say that they welcome this exercise because it has stimulated them and encouraged them to greater efficiency than would otherwise have been attained. The same applies to quotas. Side by side with the reduction in our tariffs, it is proposed to expand quotas by the same percentage. I wonder if Deputy Esmonde did not know that. I feel sure he did but it is possible he has forgotten. We did not allow to develop a situation whereby our quotas would suddenly disappear if we gained access to the European Economic Community.

Back in 1961, envisaging a possible date of entry that would provide for a reduction in tariffs from January, 1962, we decided to replace quotas by protective tariffs because since the Common Market countries had eliminated quotas among themselves, we would be faced with the situation of the elimination of quotas immediately on entry. We imposed tariffs in place of quotas but immediately suspended the tariffs, allowing the quotas to continue to operate. Side by side with the reduction of ten per cent in quotas, we reduced those tariffs as well by ten per cent, so there will be no sudden impact on the tariffs that will replace quotas, if and when we join the Common Market and are obliged to get rid of quotas forthwith.

Incidentally, the Taoiseach did not wait until he went to America to announce that we were basing our programme, our policy, on becoming members of the Common Market by 1970. If Deputy Esmonde cares to read the Second Programme for Economic Expansion, he will see that it is stated quite deliberately there, and that was published several weeks in advance of the Taoiseach's visit to America. That is still the basis of our policy—the assumption that we shall become members of the European Economic Community by 1970.

I do not believe there is any change in Britain's official thinking. It is not for me to expound what that thinking is, since I am not a member of the British Government, but even the other day the new British Prime Minister, in a speech referring to Britain's application for entry to the Common Market, gave no indication whatever that he or his Government proposed to abandon their application. With regard to what is happening as far as Britain's application is concerned, I think I could safely say there are no negotiations at the present time, tradewise. There has been established a means whereby Britain will keep in touch with development within the EEC through the Western European Union, of which, as Deputy Esmonde says, the Six and Britain are members.

A meeting took place recently which the new Foreign Secretary, Mr. Butler, attended and I take it he continued to play whatever part Mr. Heath would have played if Mr. Butler had not become Foreign Secretary in the meantime.I want to say it is my belief that the appointment of Mr. Heath to the Board of Trade indicates no change whatever in Britain's thinking as far as her application for Common Market membership is concerned. Rather it takes account of certain changes that have to be effected in the administration, and the fact that Mr. Butler seems to have been designated by the Prime Minister presumably to conduct the discussions in the Western European Union is an indication that his thinking about the Common Market and his desire to become a member of it have not diminished in the slightest.

As far as Ireland is concerned, we naturally wish to keep in touch with developments within the Common Market and it is possible for us to do so through the normal diplomatic channels, and that is being done. Similarly, Denmark wished to keep in touch and they devised a system whereby they will be kept informed of developments within the Community. Norway is in a different position because of a change of Government which has caused an expression of a different policy vis-à-vis the Common Market, but as the Taoiseach announced recently in the Dáil, discussions will take place between us and the Common Market countries in the very near future. Accordingly, the position is that Denmark and ourselves, not being members of the Western European Union, could not keep contact through that medium. Each of us had to make our own arrangements and these have been made. That is the position up to date and I do not think it needs further elucidation.

Sir Anthony Esmonde

Could the Minister say when this contact will take place between this country and the Common Market?

Mr. J. Lynch

Very shortly, but I would prefer an official announcement to come from both sides, which is the usual form for these matters to take. As far as the future rhythm of tariff reduction is concerned, as I said, it has been announced that we hope to achieve by 1965 this 30 per cent reduction of tariffs and quotas. Nevertheless, I agree with Deputies opposite that we should not go into this thing willy-nilly, that the time will come when we will have to look around and see where we are going.

At the present time, we cannot say we are not going in the direction we have set ourselves. I believe the policy we have set ourselves is in the best interests of industry and of those who work in industry, but when we see that that policy may adversely affect our industries and those who work in them, then I think the House can rely on the Government to take full account of whatever adverse effects may emerge.

The only specific case raised here in regard to reduction in tariffs or extension of quotas was that raised by Deputy Cosgrave in reference to the woollen and worsted industry. I am aware the woollen and worsted industry throughout the country conducted a widespread series of meetings protesting against the ten per cent increase in the woollen and worsted quotas. Naturally, they presented their own case to public representatives and trade union representatives as forcefully as they could. They did not, of course, take into account that there is another side of the clothing trade affected by import quotas of woollen and worsted cloth, that is, the makers-up, who also are very big employers of labour and whose interests would be affected unless they had reasonable access to the varieties which these quotas provided. I had to take their interests into account as well.

I want to say to Deputy Cosgrave that I have invited the woollen and worsted industry, together with other affected people, to my office to discuss the whole position of the new expansion of the quota. I do not know whether my invitation reached them or not. I had expected to hear from them last week but have not heard from them. However, I am still open to meet them. I was surprised they did not come this week but I am not suggesting they ignored my invitation. It may not have reached them. In any event, I have disclosed the position as clearly as I could. I do not think any Deputy will require me to utter prophecies but I have given the Government's thinking based on the trend of events as we now see them and based on the best interests of Irish industry.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without amendment, received for final consideration and passed.

An Leas-Cheann Comhairle

This Bill is certified as a Money Bill in accordance with Article 22 of the Constitution.