I should like to welcome this Bill as a step in the right direction towards the rationalisation of the location of industry in the country. At a time when emphasis is being placed more and more on the necessity for producing for export, it becomes quite essential that industry should be localised in the most intelligent manner and this Bill is part of the programme of industrial development outlined in the Grey Book and in the White Paper.
That grants should be given to industries to help them to begin operations is perfectly accepted nowadays. In Great Britain a great deal is done to help the so-called Special Areas and in Northern Ireland a great deal is done to start up factories. Therefore, we are not doing anything at all exceptional or unorthodox in giving grants to help industries in their early stages.
I do not wish to go into the whole question of the history of Irish industrial protection since 1932. It has been debated recently in the Seanad on the Bill for the amendment of the Control of Manufactures Act. As I said on that occasion, I think it was inevitable, and although it may have possibly been pushed rather too fact, too far and perhaps indiscriminately, at the same time one must admit that it did attain certain benefits.
The history of Ireland is that of a country which was backward industrially and it would have been too much to expect that an independent Government would not have done something to try to push industry forward, even if it did so, as I said, rather indiscriminately and too fast. It provided a certain amount of employment in the country which would not otherwise have been there, it reduced a certain number of imports, and in that way helped the balance of payments, and it produced a certain amount of Exchequer revenue through customs duties. Therefore, the old policy of industrial protection had certain justifications. But even the people who were most in favour of it 25 years ago now accept that that phase is over, that the home market has been pretty well saturated and that if we want an industrial future we must try to produce for export markets.
Whatever may be said for a policy of industrial protection—that is to say, attracting industries inside a national area by means of tariffs—very little can be said for artificial localisation inside that area. The exchange of goods between areas, national or international, is a reasonable transaction based on the fact that the cost of production in different areas will differ —what the economists in their jargon call the law of comparative advantage. If industries are left alone to settle down by themselves without any political interference, every industry will tend to settle down at the point of minimum cost of production and consumers will benefit by the exchange of industrial products from the places where they are produced at a minimum cost, subject always of course to the limiting factor of transport costs.
The essence of a policy of industrial protection is to interfere with that national and international localisation of industry. What an industrial tariff does is to raise transport costs—to increase the cost of transporting a commodity into a nation, not by actually increasing shipping or rail rates but by putting up a protective barrier which has the same effect as the raising of freight costs. A tariff is really the equivalent of an addition to transport costs. Therefore, to that extent it limits the area of profitable international exchange of goods and to that extent it tends to bring about a certain artificial localisation internationally which may be justified on all sorts of grounds.
Every country in the world pursues a policy of protection today. Therefore it would be unrealistic to argue the pure, undiluted free trade doctrine that there should be no protection in any country. That would not be suitable for an assembly of this kind and we have to accept that for various reasons, some good and some bad, every country in the world has protected its industries and has to that extent raised the price of certain articles to the consumer and has interfered with the optimum localisation of industry as dictated by considerations of production costs.
Once an industry has been attracted into the national area, once the tariff has succeeded in attracting an industry behind it, it should be allowed to be located inside the area at the most advantageous point. The law of comparative advantage—the law of the interchange of goods based on different costs of production in different areas— applies nationally as well as internationally. Any attempt to interfere with the localisation of industry inside a national area simply has the effect of raising the costs of production a second time, making the protected article doubly expensive to the consumer. By the original tariff the industry has been attracted into an area where, without the tariff, it would not have grown. Then, by trying to divert it from the point of minimum cost inside that area to another area, the costs of production are raised a second time.
That has two adverse consequences. The first is that the price of the article is raised to the domestic consumer more than it would have been if the industry had been allowed to settle down at the point of minimum cost. The second is that the chance of developing an export industry based on fairly low costs of production is considerably reduced if the industry for some reason or other is diverted to a higher cost area. Therefore, by attempting to interfere with the natural location of industry inside an area, the costs of production have been raised twice. Therefore, prices have been raised. In that way the domestic consumer is being unnecessarily penalised and the possibility of exports is being reduced.
We ought to be clear in this discussion that the unit of economic welfare is the nation, that is the nation as a whole and not any particular part of it. Therefore, inside the nation, mobility of the factors of production should be tolerated and not in any way discouraged. We should attempt to have our labour force and national advantages exploited to the maximum. It is a very archaic and indefensible position that any distribution of population inside a nation is sacred, and any attempt to freeze the existing population distribution is really an attempt to go against natural population movements and to resist progress. After all, human progress has depended very largely on the movement of labour and capital from points where it is less profitable to points where it is more profitable. Whereas that may be impeded internationally for national motives, to attempt similar impediments inside a nation requires extremely strong justification and the onus is certainly on people who would advocate such a course.
That point has been put very well in the Grey Book, at page 159, where it is stated:
It has been general policy for many years to favour the decentralisation of industry with the aim of bringing to areas away from the larger centres of population some share in the employment and other advantages resulting from industrial development. It is time to consider whether this is a correct policy to maintain in the conditions which we are now facing... In our present circumstances, with virtually the whole country undeveloped, it seems wasteful to subsidise remote areas specially by providing more extensive grants. Special subsidisation of this kind entails additional burdens on the community as a whole and retards progress in the most suitable areas where concentrated effort could give better results.
Those passages from the Grey Book were written before recent developments in European trading areas, and if they were true when they were written they are even more true today. I take it those passages in the Grey Book form the basis of the Government's policy of industrial localisation which is enshrined in this Bill? I do not suggest for a moment that there may not be social reasons for attempting to prevent the depopulation of particular areas too rapidly. That point was made by Senator Lenihan. Everybody must agree that there may be exceptional circumstances in which efforts must be made to prevent too great a depopulation of particular areas in the country. Therefore, if this principle is admitted within limits, a certain amount of encouragement of localisation in those areas can be justified.
But it must be clearly realised that this is something for which an economic price is being paid in order to reap some sort of social gain. It must be remembered that industries of this kind will of their very nature be less efficient than industries located in places where employers find costs lower. Industries of this kind should, therefore, certainly not be export industries; they should be home market industries. The consumer will be asked to pay an additional price for the products of these industries over and above what he would be asked to pay as a result of the straight national tariff. I am not saying for a moment that that price should not sometimes be paid, but we must clear our minds on the position. We must be perfectly clear as to the fact that artificial localisation of that kind does incur costs. We must incur those costs with our eyes wide open and we must try to reduce them to the minimum.
Whatever we may do in relation to the artificial localisation of industries for the home market, any attempt at localisation for the export market is doomed to failure. As has been said frequently in the Seanad in recent months, the foreigner has no duty to buy our products unless we produce them at a price competitive with other countries. In addition, building up industries behind a tariff in order to localise them artificially in high-cost areas is, of course, highly contrary to a policy of attempting to build up export industries. I assume that the principles I have been trying to expound are embodied in this Bill and that is why I recommend it.
Preference is still given to the undeveloped areas in many respects. That can, I suppose, be justified on social grounds. In the Dáil a distinction was made between the undeveloped areas and the underdeveloped areas; the area west of the Shannon could be described as undeveloped and the rest of the country as underdeveloped. Using that distinction, this Bill attempts to help industries in the underdeveloped as apart from the undeveloped areas. It contains a great many improvements on existing legislation. Procedure is simplified. The number of authorities concerned is reduced. There is less overlapping between the various authorities concerned with industrialisation. There is, too, the possibility of making grants to existing firms which, of their nature, are more likely to expand than new and untried propositions. The amounts available are increased making it possible to start larger industries with a greater potential for export. Both the scope and purpose of the grants is increased. Machinery and equipement may now be assisted in areas outside the undeveloped areas. There is no doubt that this Bill, if it is intelligently administered, should help in the export drive and, in that way, help our balance of payments problem, which is becoming more and more acute, without injuring the legitimate expectations of the undeveloped areas which still have a claim, on social grounds, to a certain preference.
The very fact that this Bill was attacked by almost every speaker in the Dáil is rather a good sign. Everybody seemed to think it would benefit someone else's constituency at the expense of his own. Representatives of the undeveloped areas said the Bill would help industries in the underdeveloped areas and representatives of the underdeveloped areas said it would help the undeveloped areas. Rural Deputies were all agreed in the usual anti-Dublin complex and said that the Bill ought to be amended so that no assistance would be given to the City of Dublin, which is too well off already. All this seems to me to indicate that the Bill will probably do good all round. Everybody in the Dáil seemed to be jealous of the benefits other people would get out of the Bill. That indicates to me that pretty well everybody will get benefits out of it; even the despised City of Dublin, which everybody's hand is against, might receive some benefits under this Bill as far as I can interpret it.
In order to clarify the position, I want to make it quite clear that there may be reasons of a non-industrial kind, a non-economic kind, for giving particular assistance to certain areas on what I shall describe as cultural or social grounds. The best example of that is, of course, the Gaeltacht. The policy of the Government with regard to the Irish language is something everybody accepts. These areas, therefore, must be assisted as far as possible. That is agreed in the Grey Book at Page 156 and subsequent pages. There are organisations like Gaeltarra Éireann concerned with "the fostering of industry in Gaeltacht areas." It operates tweed and toy factories, organises cottage Knitwear industries and markets the various goods. It has now been established as an independent board.
On Page 157 it says:—
Allowing that the Gaeltacht is a special case and needs individual treatment, it should be possible for Gaeltarra Éireann, under the general directions of Roinn na Gaeltachta, reasonably to meet the needs of that case. Other remote areas may also have special natural advantages in the spheres of tourism, fisheries and afforestation and their potentialities in these respects can be exploited... For industrialisation generally, remote areas do not, on a realistic appraisal of our conditions, appear to have any good case for special treatment through the medium of a separate body.
I agree with these statements and they have, in principle, been embodied in this Bill.
I wish now to summarise the arguments I have been trying to make in order to clarify some of the issues to which this Bill gives rise. If the object of industrial policy is to build up exports, then there must be no tampering with the optimum localisation of these industries. If they are tempted into the country by means of tariffs, export bounties and other incentives of that kind, the people running the industries must be allowed to be the best judges of their own interests and they must be allowed to locate these industries at the point of maximum advantage, at the point where labour is available to produce as cheaply as possible and, therefore, to export. Secondly if the object of the Bill is to prevent too great a depopulation in certain areas, certain home market industries must be directed there. But it must always be appreciated that consumers in other parts of the country will have to pay a tax for the benefit of the people in these areas and there is, therefore, a taxation plus subsidy transfer being made between different areas of the country. I do not say that can never be justified, but it must be clearly understood that something uneconomic and expensive is being undertaken for some purely social purpose.
If it is desirable to maintain industries in special areas because of their Irish-speaking characteristics or other reasons of that kind, very well, they can be artificially maintained for cultural gain, in circumstances of that kind. I would regard them in the nature of social services and I would be inclined to put all the estimates for them together with expenditure on universities, museums and art galleries. It is something in the nature of a social service that industries should be artificially encouraged in the areas where the language is spoken. I do not, for a moment, say I dissent from that. All I am trying to do in these few remarks is to clarify thinking on the matter, and see what are the issues involved.
Finally, I would say this very strongly and I hope that the people whose duty it is to administer this Act when passed will bear this in mind, that in view of our present circumstances in this country the onus of proof on people urging artificial localisation is extremely great. The onus of proof is on those people and cannot be lightly discharged, especially in the case of export industries. The new developments that are taking place in Europe today are all against artificial localisation. All the reduction of tariffs inside the Common Market, and inside "The Seven" is against artificial localisation. It is in favour of free trade in the broadest sense of the word, in allowing production to take place at the points of optimum advantage. That is the trend in our time.
In the first half of the present century centrifugal forces were at work. The centripetal forces have now taken their place and, instead of Europe falling apart, as it has in the last 50 years, it is now coming into larger trading areas, and we must bear this in mind. For us to bring about an artificial localisation inside a very small national area, at a time when all the countries of Europe are seeking larger industrial areas, would be a retrograde step, a step we could not afford, a step that would condemn us in the eyes of the world, a step that could condemn us an unintelligent and out of step with the forces around us.
The fact is that the recent developments in Europe have created difficulties for this country and the straight speaking of Mr. Cahan, naturally a great friend of ours, the Deputy Secretary of O.E.E.C., was a very needed awakener for Irish public opinion. Industrial protection in this country is going to be more difficult in future than it has been in the past. The whole trend in Europe is towards larger trading areas, fewer tariffs, less interference with markets dictated by cost considerations. We have to swim with that tide or sink. Therefore, as Mr. Cahan told us, Irish industry in the future cannot rely on a protected market at home. It cannot rely on preferences abroad, and Ireland has become less attractive as a field for investment by foreigners as a result of recent developments.
I wish the new Minister for Industry and Commerce success in his office. I should not like to be in his place because I think he is entering on a very difficult operation at a very difficult time, but this Bill clearly is one step in the right direction at a time when the whole of the Europe is steering towards a more intelligent localisation of industry. This Bill is trying to get Irish industry more intelligently localised than it has been in the past, and to break down those artificial interferences with localisation which have been raising costs of production, raising costs to the consumers of protected products, and making it more difficult than it would otherwise be to break into export markets.
