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Seanad Éireann debate -
Wednesday, 16 Dec 1964

Vol. 58 No. 3

Imposition of Duties (Confirmation of Orders) Bill, 1964 (Certified Money Bill ): Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

The purpose of this Bill is to confirm nine Orders made during 1963 under the Imposition of Duties Act, 1957 and the Finance Act, 1962. Such Orders must be confirmed not later than the end of the calendar year following that in which they are made.

Order Number 132 extended the scope of the customs duties on bars, rods, angles, shapes, sections, sheets and plates of iron or steel. It provides for minimum specific rates as well as ad valorem rates, except in the case of sheets and plates, which are subject only to ad valorem rates. These duties provide protection for a range of rolled steel products manufactured or which it is envisaged will be manufactured at Haulbowline, County Cork. The duties are at present suspended except in the case of certain sections of iron or steel which are now produced at Haulbowline.

Order Number 134 has the effect of bringing certain planed or dressed boards and planks of soft wood within the customs duty on wood. The duty on these boards and planks was inadvertently removed during the reclassification of customs duties in the Brussels Nomenclature. The restoration of the duty is necessary for the protection of the home industry.

Order Number 135 exempted tinplate from the scope of the duty on sheets and plates of iron or steel to which it had inadvertently become subject under the Brussels Nomenclature.

The five Orders numbered 136, 137, 139, 140 and 141 were made in accordance with the recommendations of the Industrial Development Authority after a tariff review. Number 136 reduced the minimum specific duty on drinking glasses, other than drinking glasses of crystal. Number 137 reduced the customs duty on wooden furniture. Number 139 reduced the customs duty on certain kinds of floor tiles. Number 140 reduced the customs duty on certain textile floor coverings and Number 141 reduced the rates of customs duty on thread and ply yarn of flax and on single yarn of flax in ball form.

The last Order, No. 142, effected a second general reduction of 10 per cent in the level of industrial protective tariffs on 1st January, 1964. This was in pursuance of the policy of providing an incentive to industry to re-adapt itself and prepare for freer trading conditions.

An explanatory memorandum has been circulated for the information of Senators. I shall be glad to give any further information which may be required.

In this Bill we have a mixture of Orders extending and reducing duties, and as the Minister has told us there are nine orders in all. Two of them, No. 132 and No. 134, increase the protective duties for one reason or another.

No. 134 does not increase the duty. It restores a duty which was inadvertently removed.

It restores the position that was inadvertantly changed. The imposition or reducing of duties is carried out under the advice of the Industrial Development Authority and, therefore, we know that all the factors have been gone into before making these orders. Order No. 142 is the general one making a reduction of 10 per cent all over in conformity with the policy of getting Irish manufacturers ready for a free trade era into which we are moving. I understand it has been made known by the Government that it was intended that another 10 per cent reduction should have taken place in the new year, but due chiefly to the 15 per cent imposition by the British Government it is being held in abeyance, or a least the reduction will not be carried out until an examination has been made of all the circumstances prevailing at the time.

Industrial development is the concern of all Parties, and it would be well if industrial development, and, perhaps, agricultural development, could be above Party politics, but it would probably be hard to achieve that in the fullest way. I think we all feel nowadays that we are all concerned with industrial development. Above all, the business community feel that any action taken in connection with industry should be primarily for the good of industrial development. It is a question of economy rather than one of scoring political points—what one Party did and what another Party did not do for industry. Anything that can be done for industrial development is welcomed by all. At the present moment we are poised between a free trade future and our previous highly protectionist era and it will be understood that the greatest care and skill are required to change and adjust the different controls to the right degree and at the right time, taking care, of course, on the one hand not to hurt industry by a too precipitous removal of tariffs and on the other hand not to cushion unduly our industrialists in the process.

There has been what I might call a jizzing up of industrialists to make them more efficient than they have been in the past and in order to make them more capable of offering their products at realistic prices so that they can be sold abroad. A lot of these factors have to be borne in mind and there is always a danger that any halt might occur through some Irish industrialists—I do not believe there would be many—failing to adapt themselves to the needs of the future.

That applies not only to industrialists but to industrial workers. It is important that all engaged in industry, both management and workers alike, should gear themselves to the highest degree of efficiency, cutting out slothfulness or any other habits that might tend to increase costs and, therefore, make our industries noncompetitive. There is one other point I should like to draw the Minister's attention to. The Chairman of Seafield Fabrics, addressing his shareholders at the annual meeting this month, said:

I felt you would wish to know what impact the recent 15 per cent levy would have on the future profits of your company. Because of the fact that 90 per cent of the activities of your group is in the field of manmade fibre textiles, we have been confined in our export activities in the UK to selling two types of our merchandise, namely, cotton hosiery yarns and cotton printed piece goods. Were this levy to continue in operation during the whole of the coming year's trading, the net cost after taking into account the Government assistance, would appear to be in the neighbourhood of £16,000, which would not significantly affect the profits of your group and would certainly not cause any reduction in dividends. It is to be hoped, however, that this levy will not, in fact, apply to the full year's trading. Our real difficulty in the British market is the continuance of the penal duties against all man-made fibre products, which, as I have said previously, amount to 90 per cent of your group's activities. The use of man-made fibre yarns continues to make substantial inroads on every section of the textile industry and it is absolutely essential for our future well-being that our Government should give first priority to the abolition of these duties in their forthcoming negotiations with the British Government for a new trade agreement, as the future growth of the Irish textile industry is dependent on increased exports.

I am sure the Minister has heard of that statement. We hope that at the earliest opportunity steps will be taken to get this imposition on Irish exports reduced by the British Government.

The Minister, in his memorandum, says he would be glad to give us any further information we might require. I should like to ask a few questions in relation to Order No. 142. When the Minister states that there have been ten per cent reductions in the level of industrial protective tariffs, does that mean that if there had been a tariff of 40 per cent it is reduced by ten per cent to 30 per cent or that it has been reduced by ten per cent of the 40 per cent to make it 36 per cent? We have had a general reduction for the past two years—ten per cent in January, 1963, and another ten per cent in January, 1964. Are there any figures available to say what has been the general effect of those reductions in each year?

If a tariff of 40 per cent were necessary to keep outside competition out, when it fell to 30 per cent one would have thought that outside competition would have succeeded in getting some grasp on the market or, alternatively, that prices on the home market of the products concerned would have fallen by ten per cent to meet the outside competition. Are there any figures available to show what did happen? Did prices fall on the home market as one might have expected them to fall with the lowering of tariffs, or was the home market closed by any appreciable number of firms to outside competition due to the lowering of tariffs? I ask these questions purely for information which would begin to give us some idea as to how we are faring in the battle to get our firms geared up to free trade conditions.

I shall take up first the last point made by Senator Quinlan which was also referred to by Senator McGuire. It relates to the reduction of tariffs apart altogether from the general ten per cent. It is a fact that both sides of industry—in this context I refer to industries operating in Ireland and industries in Britain—have had a full opportunity of making before the Industrial Development Authority the point of view each has in regard to tariff reductions. Senators seemed to imply that the Industrial Development Authority had come into this exercise of their own volition. That is not the case as a rule. An application to review is made usually as a result of representations to the Board of Trade in Britain by a particular industry in Britain and the standards applied by the IDA, who are the reviewing authority, are that they will continue to give, after they reduce the tariff, the home industry reasonable protection and, at the same time, give a reasonable opportunity to the firms in Britain who share in the Irish market. That is pursuant, of course, to the trade agreements that have been in existence between the two countries for a considerable time.

The other point made by Senator McGuire had reference in the main to the statement of the Chairman of Seafield Fabrics in respect of the duty payable on the importation of man-made fibres or articles containing man-made fibres into Britain. In the old trade agreements with Britain there were a few commodities such as, artificial silk—art silk as it was then known—excepted from the free tariff entry into Britain. When art silk disappeared as a commodity or as a component part of a garment, man-made fibres emerged, of course, but the British applied the tariff exception, as applying to Ireland, to man-made fibres and they continued to maintain a tariff on man-made fibres.

Unfortunately, garments containing man-made fibres, no matter how small the element, were also liable to the full value of the garment itself and the tariff. For example, if there was a 20 per cent duty on man-made fibres and if there there was only a ten per cent content of that fibre in the garment, the tariff would not be levied on that ten per cent content but on the value of the whole article. That is what really made the man-made fibre duty on goods leaving this country on the British market so prohibitive. There have been certain easements in the severity of that duty but nothing sufficient to give the man-made fibre industry generally or the producers of garments containing man-made fibres in this country a reasonable opportunity on the British market.

We have lost no opportunity in bringing home to the British the difficulty that is involved for our exporters in regard to this duty but having regard to the sensitivity of the market in Britain in regard to these commodities, particularly against imports from other countries such as the Far East and certain British dependancies, where labour is of the low cost variety, the British find themselves unable to yield to any reasonable extent to our request to have the duty reduced considerably or removed altogether. I can assure the House that in any new negotiations we will have with the British the man-made fibre duty will be one of the principal topics we will bring up. In fact, on all occasions, both at Ministerial level and senior official level, when these negotiations are conducted regularly, the man-made fibre duty is one of the things to which we give high priority.

In regard to the ten per cent tariff reduction effected on 1st January, 1964, and 1st January, 1965, if I take Senator Quinlan's own example it is the best indication of how it operates. He referred to a duty of 40 per cent, assuming that was the duty before the first tariff reduction was effected. In other words, if 40 per cent was the duty on the 31st December, 1962, the duty operating as of 1st January, 1963, would have been 36 per cent and that four per cent reduction would continue. For example, the duty operating as of the 1st January, 1964, would have been 32 per cent. The four per cent of the original tariff was the measure of the annual reduction. I hope that makes the matter clear to the Senator.

The Senator suggested that because the 40 per cent duty was in operation on 31st December, 1962, if the industry could withstand the four per cent reduction right through 1963, the 40 per cent tariff was too high. The Senator made a suggestion of that nature. One of the purposes of the implementation of that tariff reduction was to induce Irish industry to become more efficient. It was not the only measure we adopted in order to do this. At the same time, we made technical assistance grants available to enable industries to get survey teams, business consultants and technical consultants of all descriptions to have a look at the industrial process involved and to make recommendations as to how the industrial process could be improved. We also made grants available up to 25 per cent of the cost of a major new adaptation scheme which the industry would carry out, or special favourable loans. All these things were done as part of this inducement to Irish industry to become more efficient and the effect of them all, including the ten per cent reduction, was to make Irish industry more efficient and to enable it to withstand the reduction that was being made in the tariffs and ultimately help it withstand the impact of free trade.

I have been told by industrialists, who viewed the first and second tariff reductions with some concern, that this has, indeed, been a shot in the arm to them. By gearing themselves to greater efficiency, by cutting down waste and restrictive practices of one kind or another, they found they were able to take this reduction without any new capital. There were no industrial reductions on the home market, nor any disemployment as a result of these tariff reductions. At the same time, the Senator will remember that there were two rounds of wage increases the industry had to bear. Therefore one, in these circumstances, could not anticipate significant price reductions because of the greater competition Irish industry was being exposed to.

I might say, too, that many of these industries which had certain protection at home are exporting industries as well. In order to broaden their basic production these industries had to try to expand their export markets. As Senators are aware, it is not uncommon practice in export industries to charge slightly less for the exported article than might be charged for it on the home market. Accordingly, as some of our industries expanded their exports they were naturally getting less perhaps for their increased output in price than they would otherwise have been getting. It is not uncommon practice and it is necessary in many instances because, unless goods are produced at a price commensurate with those abroad, they will not naturally compete with goods of the home country or with goods imported from other countries on that same home market. It takes the home market and the export market in many cases with prices married to cover the capital injection into that particular industry.

There are figures available as to the effect of all this including the ten per cent tariff reduction on the prices on the home market. As I pointed out, there were countering elements that could avoid price reductions as a result. I do not think there were any other specific questions asked but, as Senator McGuire pointed out, there was really only one Order which extended the scope of customs duties. Two or three—Nos. 134 and 135 in particular—restored the status quo ante our adaptation of the Brussels Nomenclature. In other words, the adaptation of the Brussels Nomenclature ultimately removed the protection we enjoyed before we adopted the Brussels system. Therefore, two of them were restoring the status quo. All the others, the five specific ones which the IDA recommended, and No. 142 which implemented a 10 per cent overall reduction, were tariff reductions. I think this is one occasion, including last year, when I have been able to come into this House and have not received rebuffs as to the extent of tariff protection we are giving to our industries. There certainly is no feather bedding involved in the legislation I now propose to the House.

I want to ask a question. Nobody will dispute that the Minister requires the money for a purpose which is agreed to by everybody.

No money is required in this Bill.

It is the next Bill.

What is our experience in matters of this kind? Do outsiders come into the country and set up an industry and then make very little effort beyond that or is there any case where they may have got out again? Sometimes people say we should operate all our industries ourselves but we may not have the machinery or the technique to do all that ourselves. Everybody, no doubt, including the Minister, would naturally like to see that and so we have to go further. Is there any instance of any outsider coming in, getting an industrial grant, setting up an industry and then taking very little interest?

I could deal with that now but it would not be appropriate. There will be an appropriate opportunity as soon as we come to the Industrial Grants Bill which will come before the House today.

Question put and agreed to.
Agreed to take remaining Stages today.
Bill considered in Committee.
Sections 1 and 2 agreed to.
SCHEDULE.
Question proposed: "That the Schedule be the Schedule to the Bill."

On the Schedule, Part II, relating to the imposition of duties, No. 142, I just want to return to a few points arising out of the Minister's reply. First of all, I think that I and many others were rather misled by the idea of a 10 per cent reduction. We thought it was from 40 to 30 per cent—in other words, it was quite a big reduction, whereas, in point of fact, a reduction of a tariff from 40 to 36 per cent is relatively small.

The other point to which I want to refer is that I think that, after two years of operation, we should have some factual study available like something done by the Economics Research Institute which would disentangle the various factors mentioned by the Minister. We know that there has been a price rise due to increased labour costs, and so on. We should really like to know the effect of the reduction in tariff. In other words, take an ideal situation where the foreign competitor is waiting outside the boundary, as it were, and the tariff is just right at 40 per cent and he cannot come in and compete with that. Immediately we reduce that tariff to 36 per cent, he has a 4 per cent margin and should be able to compete which would mean that the home competitor would be forced to drop his prices down to the 36 per cent level to meet the competition coming in. Although I am not expecting the Minister to have the information now, we should know how far that has occurred.

I have the impression—it is not any criticism of the Minister or of anybody else—that a 40 per cent tariff would have a certain margin of elasticity in it when imposed and that consequently the outside competitor would not be standing there poised until it would dip below 40 and he would be able to move in. Perhaps he would not be able to move in with another 4 per cent reduction against him and consequently the home producer would be under no compulsion to make any reduction in face of the competition. However, the second year should begin to sort things out a bit. When it drops to 32 per cent then, at that stage, the competition should begin to become more effective and I would say that further reductions will, of course, find the competition becoming much more effective still. There is also the effect that previously outside competitors knew that if they could get in over a 40 per cent barrier there would be retaliation by the Government who naturally wanted to keep the market for the home competitor and that the duty would be pushed up from 40 per cent to shut out such persons.

With a planned, declared policy to go to free trade, the outside competitors know where they stand. They know that the tariff will not go up against them: in fact, it is planned to go down. Consequently, we should begin to see more and more of the effect of competition from the outside. I suggest to the Minister that it is really something on which an independent body such as the Economic Research Institute should be able to do very valuable work. They should be able to inform us how much we are losing of the home market, if any, based on this and to give us their extrapolation over the years ahead in respect of the further reductions to take place because undoubtedly competition will make itself felt much more in the years to come than it did in the first two years of reduction.

It would be difficult to assess the effect of the tariff reductions as scientifically as Senator Quinlan suggests. It is not a matter of putting all the factors into a test tube and adding sulphuric acid and some other acid and getting a result. We did not anticipate that this would reflect itself after the first two 10 per cent reductions to a marked degree. They were 10 per cent of the existing tariff. We really expected that only after the third year would we have any marked effect or an effect marked to a degree that the Institute to which the Senator refers would be able to determine the result.

We are not dealing with basic commodities. We are dealing with articles of trade, articles of fashion, articles of industry. We cannot be sure that we are always comparing like with like. One particular quality of article, say, on the home market may not be the quality that somebody abroad requires. It is not easy to determine specifically the effects in this connection. We feel that if and when the third reduction takes place we shall be in a better position to do so.

With regard to the complaint by the Senator that he was misled as to the meaning of the 10 per cent reduction, I can only suggest that the Senator has not done his homework. The Senator may remember that, as part of our application for membership of the EEC, we proposed a certain rhythm of tariff reduction to bring tariffs down to nil at the end of what was called the transition period, that is, up to the end of 1969. We proposed a series of ten per cent reductions, then increasing in the middle to two of 15 per cent and tapering off with one or two 10 per cent reductions. If the Senator added up all these percentages he would have found that we had a 100 per cent, so to that extent I think I am right in saying that he does not seem to have done his homework.

Perhaps the Economics Research Institute might be the appropriate body to carry out the research for which Senator Quinlan has asked, to some extent at any rate.

We would be glad if they did.

Arising out of the Minister's reply, I know, of course, of the uncertainties in any sort of economic work or any economic forecast but that does not get away from the fact that despite those uncertainties that is what we employ economists to do—to take account of those uncertainties and give some sort of considered judgment of what is happening and point out how things have gone. We would expect that, if the first two reductions had been a success and had achieved their purpose, if there was an overall tariff of 40 per cent there should have been a reduction in prices of up to 8 per cent. If there was not, it meant that reducing tariffs did not really help any industrialist concerned or did not at least in that period act as any real threat to them. The years ahead, of course, contain a threat when the reductions open the gates wider to free trade.

Question put and agreed to.
Title agreed to.
Bill reported without recommendation, received for final consideration and ordered to be returned to the Dáil.
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