Dáil Éireann díospóireacht -
Tuesday, 24 Nov 1964

Vol. 213 No. 1

Committee on Finance. - Control of Manufactures Bill, 1964: Second Stage.

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

I move that the Bill be now read a Second Time. The Bill proposes to set a date, 1st January 1968, from which the Control of Manufactures legislation will no longer operate, and in the meantime, to make some amendment of the law as it stands.

The restrictions imposed by the Control of Manufactures Acts were considerably relaxed by the Industrial Development (Encouragement of External Investment) Act, 1958. In addition to providing that certain small concerns would be exempted from the Control of Manufactures Acts, the 1958 Act enabled companies to be established whose business was primarily for export, without requiring that their shareholdings, et cetera, should be in accordance with the provisions of the Control of Manufactures Acts. This modification was in the interest of encouraging and facilitating external capital investment in the establishment of industrial undertakings in this country having the development of exports as their prime objective.

The Second Programme for Economic Expansion envisages that for the purpose of further facilitating increased investment in manufacturing industry the remaining restrictions on external investment in industry in this country will be removed by the repeal of the Control of Manufactures legislation during the currency of the Programme. This Bill gives effect to this by setting the date from which the Control of Manufactures legislation will cease to operate. The date of 1st January 1968 has been selected as a reasonable one to give industrialists time to adapt themselves to the new situation.

Pending the final repeal of the Control of Manufactures Acts from the 1st January, 1968, as proposed in section 2, the Bill also proposes, in section 1, that companies which have been continuously engaged in manufacture here for five years before the passing of this Bill, should be free from any restrictions imposed by the Control of Manufactures Acts. The same will apply to subsidiaries of such companies provided the latter hold more than half the issued shares and at least two-thirds of the voting shares.

During the passage of the 1958 Act, the question was raised as to why the Control of Manufactures Acts were not then being entirely repealed. The view was taken, however, that the time was not then ripe for total repeal and that there was still a case for retention of certain provisions of the Acts in the interest of firms which had come into existence because of the assurance given by the Acts. That was six years ago, however, and since then very much has happened on the industrial front—in particular, the development of a very strong international movement towards the freeing of trade in manufactured commodities. I am saying that in the full knowledge of the imposition of the British import charge which in recent times is accepted as likely to be of a temporary nature.

As Deputies are aware there has been in progress for some time past a very searching investigation by the Committee on Industrial Organisation of the ability of Irish industry to survive in freer trade conditions and substantial financial aid has been provided to enable industry to make the necessary adaptations to enable it to do so. The Government consider that in addition to the adaptation grants already made available manufacturing firms which have been operating here for five years or more should, in anticipation of the repeal of the Control of Manufactures legislation on 1st January, 1968, be given the opportunity, should they need it, of seeking external capital and "know-how" to strengthen further their competitive position. Section 1 of the Bill provides this opportunity.

I recommend the Bill for the approval of the House.

Mr. Donegan

It is quite an extraordinary situation that the Party whose economic policy was one of Sinn Féin over all the years, and who were most insistent that our development here should be an entirely Irish one, should now be in the position of introducing this legislation. They were the people who said we would do just as well if every ship were at the bottom of the sea and who sought to build walls around us. Because we on this side of the House held more liberal views, we were accused of being free traders, the implication being that, with free trade, you put people out of employment here.

It is apparent, in modern situations, that this Government have got to be more free in the approach to foreign investment. It is a pity that this was not done after the war. Holland and many of the countries ravaged by all the dreadful calamities of the Second World War built themselves up on external investment. During all that time we were turning away the moneys that could have built up this country.

If you relate profits to the amount of money paid in labour in any industry, day by day and year by year, the situation becomes far more apparent that profit, in relation to the amount of wages paid to the people who do the work, is very small. We here in Ireland have, perhaps, what no other country in Europe has, namely, a plentiful supply of excellent labour. There is no doubt that the quality of labour here is quite extraordinary. I had a certain experience in relation to a small industry recently, a branch industry of the parent industry in Britain. A director of this industry said to me that they were getting a far better production per person here in Ireland. I said I could not understand it because this industry is so small in relation to the parent company in Britain. He replied: "It is very easy to find out why. All one has to do is to sit in his car outside the gates at 6 o'clock and to note the quality of the boys and girls who come out." They are healthier people and are mentally more alert. In every way, they are preferable to people who, for several generations, have lived in a smoky city in industrial Britain and have been working in, perhaps, not as good conditions as are now enjoyed.

We on this side of the House have always felt that a balanced approach to the investment of outside moneys here was a very important factor in our development and particularly in our industrial development. From that point of view, we welcome this Bill. On the other hand, there is a great difference between the operation of coming in here and setting up a new industry and that of buying all or the greater portion of the shares of an old-established industry.

We feel that old-established industries here should be protected as we move towards the Common Market: we do not seem to be moving as fast now as we were. As we move towards a freer trade situation, these old-established industries should be given —as they are being given at the moment—time in which to develop and encouragement in the shape of industrial grants and, indeed, capital, if required. The snag about this situation is that, with 1968 approaching— and the date of the Bill becoming law approaching—foreign combines and foreign companies will come here with a view to buying out old-established businesses. This is something that, perhaps, has not been fully considered by the Government.

The Government would do well to see if they can protect these older industries, particularly if they are public companies, from bids which they may find themselves unable to refuse. The directors of a public company are honour bound to do for their shareholders what in their opinion is best economically: their first duty is to the shareholders. Where a continuance of the old policy might mean employment for Irishmen, with the purchase of the company in conditions of freer trade by an outside combine it might mean the extinguishing of employment. This is something which we do not put up as a strong Opposition move against the Bill but we suggest that the Minister should, perhaps, consider this aspect of the matter.

The provision whereby the general approach of the Bill would apply before 1968 to a company that had been carrying on a manufacturing process here for five years or more is, I think, only fair. It is proof that we do not regard a person as a "runner" until he has been here 25 or 30 years. It is a fair approach and it is justified. We welcome the move of the Government towards the enlightenment which, if they had it in the years after the war, would have seen far greater industrial expansion than that which really came about.

Mr. Corish

We have no objection to this Bill. It is a short Bill and the opening statement was brief. I do not think anybody can forecast the effect of the entire repeal of the Control of Manufactures Acts. I assume that this is another step in the movement towards free trade. I also assume that if ever we become members of the EEC it will be one of the conditions of our membership that we shall have no control over the investment of capital by foreigners in this country.

I do not know whether or not it would have been possible or desirable to have these Acts repealed after the war. I am still not satisfied that a certain amount of protection is not needed for the type of industry mentioned by Deputy Donegan, the old-established industry. How one can legislate for particular industries, I do not know.

I, like Deputy Donegan, have other industries in mind which certainly will not be able to withstand the impact of free trade generally. Under the Control of Manufactures Act, 1958, as the Minister said, companies were unable to establish here whose businesses were primarily for export. We assume this Bill will allow these people to invest here in established factories under the Act of 1958 and will be free to go into competition in the home market. Could the Minister say whether I am correct in assuming that?

Mr. J. Lynch

Some of them are bound by agreements they have made with An Foras Tionscal or where grants have been advanced to them.

Mr. Corish

I do not know whether the Minister is satisfied that the terms of An Foras Tionscal can be implemented, so to speak. There will be lots of try-outs. This means that many of these industries will be in competition with the home producer and on the home market, and that can cause an effect. This may be the general policy of the Government, the decontrolling of investment by industrialists or manufacturers in this country, but it still may be, as I have said, a requirement for membership of the EEC.

It has been recognised in recent times, apart from the imposition of the 15 per cent surcharge by the British Government, that many changes would be necessary in the movement towards free trade. A lot of things are being done on the assumption that we will be members of the EEC by 1970. I do not think this is as big a certainty as it was before the election in Great Britain and not the same certainty it was when General de Gaulle decided that, unless Britain accepted the conditions, she could not become a member. So, strong as the feeling may be in the present British Government against EEC and the conditions to be imposed in its general policy, I think it must be recognised that in recent years the previous British Government, the Conservative Government, faced the same difficulties, even though they wanted to become members, in gaining admission.

I appreciate the Minister's difficulty and the difficulty of the Government in all these things. It is pure speculation as to whether we will become members of the EEC. It is not as speculative that we are going into an era of free trade, whether in the EEC, in some other organisation or within a general world policy. I think we can be a little too drastic in our preparation for free trade. I believe if we are to go into a group such as the EEC, there should be a greater understanding of Irish problems, and particularly Irish industrial problems. No matter what our criticism may be of Governments, no matter what our criticism of ourselves may be, the State is relatively young and it is even younger still in the wide establishment of industry.

I do not think we are big enough. I certainly do not think we are strong enough that we should willy-nilly throw up all the protection we have. I am not suggesting this measure will do that in any great way. It still is a proposal which, to me, means that there will be some reprecussions for certain types of industry, perhaps the type of industry I complained about last week, the industry that did not avail of the generous assistance available from Government sources.

Whilst we do not disapprove of this Bill, I do not think that either the Minister or any other member of the House can say what its real effect will be. We trust in any case that it will not have any bad effect on Irish industry and on industrial employment.

Mr. Cosgrave

I believe this Bill is overdue. In fact, it was our view that, when the amending Act was going through in 1958, it should have gone as far as this goes now. As the Minister said in introducing the measure, this Bill has been introduced six years after the 1958 Bill. During the time that has elapsed, considerable changes have taken place, in particular, the general movement towards freer trade. The Government apparently have now decided that the restrictions which have been in operation may be relaxed as from 1968.

There is, however, one aspect of this matter which I think should receive some attention. In that regard, what has happened in the case of the sales of land to foreigners is an example and, to some extent, a warning. I believe there is a clear distinction between newly-established factories or undertakings, or newly-established industries where foreign capital is involved, and the acquisition by foreigners of already established Irish firms, businesses or industries, as the case may be. So far as factories which are established de novo are concerned, the investment here by outsiders of capital and know-how in the establishment of these undertakings is a development which everyone welcomes. It is one which has been agreed policy for a considerable time. Both inter-Party Governments, and certainly the second one, went to considerable lengths to attract external capital and external know-how in order to build up still further industrial development and to secure both capital and know-how in order to supplement the capital available here or to provide, where know-how was not available, the technical knowledge and skill for the purpose of starting particular industries, so that whatever deficiencies existed in the industrial arm would be made up in so far as the attraction of outside capital or know-how could do so.

There is no conflict of opinion on any side of the House on that aspect of industrial development or on the attraction of outside capital or outside know-how in order to expand or develop industry. I believe that, in some cases anyway, there may be a danger in the future of take-over bids by outside industries in the case of firms already established here or industrial undertakings already functioning, or in the case of old-established industries. It is possible that in certain cases an advantage might accrue to a particular industry, if it were the subject of a take-over bid and in certain circumstances solid grounds would justify such action.

On the other hand, if take-over bids become the pattern of development as applied to existing industrial concerns or old-established firms, certain risks might eventuate which would act as a note of warning as to the general development of such a trend. I believe that in this measure, before it is passed through the Committee Stage, power might be taken by way of amendment to ensure that the Minister and the Government had adequate resources available and adequate powers to prevent undesirable extension of take-over bids and the undesirable acquisition by outside interests of old-established concerns.

There may be certain cases where it might be in the interest of the particular firm, for financial, technical or other reasons, to be taken over by outside interests, perhaps, through the death or retirement of existing directors. For a variety of reasons it is possible to imagine circumstances in which the take-over might be in the interests of a firm. On the other hand, there are dangers and risks to the economy in the wholesale application of the take-over procedure, even in circumstances in which the shares of a company are held by family interests and because of the death or sale by an individual member of that company of his or her interests to an outside concern ultimate control or an important shareholding in the particular concern might be acquired by outside interests, and be contrary to the interests of the company, the country and the other shareholders.

In these cases, circumstances might operate to the extent to which it would be necessary for the Minister or the Government to have power to intervene and prevent such a development if it appeared to be growing to the extent to which it has been found necessary to take power in the recent Land Bill by way of amendment to ensure that powers existed to prevent the sale of land to outside interests. This situation has not yet developed here but one of the greatest defects in the Acts now being repealed was that there were so many loopholes and evasions and as many methods of circumventing the Control of Manufactures Act as there were factories which operated under it.

I believe that the changes we are making are desirable but I think it is important that we ensure that power is available to prevent wholesale acquisition by means of the take-over procedure which may be a possibility. It may well be that it will not develop to anything like the extent which some people fear but circumstances might arise in which it would be contrary to the interests of those concerned and those employed in these concerns that they should be acquired by outside industrialists. Subject to that warning and to certain amendments which we may introduce on the Committee Stage, we believe the proposals in the Bill will find general approval.

Mr. M.P. Murphy

Even though this Bill is a relatively small one, its consequences could be wider than we anticipate at the present time. Everybody is satisfied that many Irish industries could not survive in a free market and that, without protection, a number of them will cease to exist. The Minister's idea in this legislation is to bring in external investment. Whilst we all realise that the emphasis on external investment is growing, I thought that a wind of change had been blowing in recent times, that this idea of depending to a large extent on external investment was not bearing fruit and that we were going to try to do for ourselves what others were not going to do for us. I cannot see why we should not be more self-dependent and more confident in the resources of our own country.

Sufficient capital could be provided at home for the development of soundly-based economic projects without bringing in capital from abroad and also bringing with it the management and control of these particular industries. This is definitely going to be the case in three years' time when it is proposed to repeal the controls entirely. I do not see why we should not try, with the available know-how we have, to establish the type of industries we expect foreigners to establish for us. We have had experience of foreigners coming in here, we have welcomed them, but we have been disappointed to find that a number of the industries so established have been failures. In respect of my own constituency, I sincerely hope that a number of recently established industries will survive. It is all very well to import know-how if we have not got it but we should keep control of our own business.

As far as competition in export markets is concerned, and the finding of new export markets for our goods, we are well represented abroad. We have lavish embassies, with numerous personnel in many cases, and I suggest that these should be better utilised to find export outlets for goods manufactured here. As time goes on, I am becoming more convinced that industries established here with the aid of Irish capital and Irish people, utilising raw materials produced in Ireland, are much more likely to survive than industries established by foreign industrialists who, we must all agree, have no great love for us. From the cold, businesslike point of view, they come in here to invest their capital to make a profit for themselves.

I am inclining towards the view held by an increasing number of people that we must do for ourselves what others cannot be expected to do. I am not too enamoured of the idea of bringing in outside capital. We have had that policy since the Minister established Foras Tionscal and it has not achieved the results we then anticipated. We all like free trade, but only last year we had a question in the House as to why the contract for the supply of pens and pencils to Government offices in Dublin was given to an outside firm. The reason given by the Minister was that the lowest tender had been accepted. We found that that firm was able to send in a lower tender even though they had to pay a duty in the neighbourhood of 40 per cent or 50 per cent. Despite that duty, that heafty imposition, they were able to supply at a lower rate. What will the position be when protection is wiped out altogether?

It is all very well to favour free trade, as this measure does, but is it to be assumed that factories can be closed down which are giving reasonably good employment, reasonably good wages and good employment conditions? This Bill will give scope to international firms to take over existing Irish firms and may lead to a position somewhat similar to what is happening in local trade where dishonest methods are being used to take over smaller competitors. Everyone knows what I am talking about. We have supermarkets offering such items as biscuits, particularly cream crackers, at prices lower than they pay to the manufacturers. Surely that is not honest trading. In order to attract custom and give a false impression to the public——

An Ceann Comhairle

I do not think it relates to the Bill by a long stretch.

Mr. M.P. Murphy

Not directly but indirectly.

An Ceann Comhairle

I knew the Deputy would say that.

Mr. M.P. Murphy

If people from abroad are free to come in, they can undersell Irish firms because any foreign firms which may be established may be subsidiaries of bigger companies abroad, very well able to carry losses over a number of years in order to wipe out local competition here. Is not that directly related to the Bill we are discussing? You could have a British or a German firm, free not only to export but to compete in the local market. Naturally, they would undersell for a number of years until they had wiped out competition on the home market. Then they could recoup themselves by increasing their prices.

The Minister has a very big problem to resolve in this measure, which is aimed at making free trade here. Advantage could be taken of this Bill, by large combines from outside to undersell and wipe out local manufacturers. Our first duty in this House is to protect our own people as far as possible and I have offered these comments on this measure with a view to bringing the Minister's attention to our duty to try and ensure that this legislation will not work to the advantage of outsiders and the disadvantage of our own manufacturers.

Mr. J. Lynch

I am glad the Bill has received such a measure of support from the main Opposition speakers. Deputy Cosgrave said the Bill was overdue. It is true that during the passage of the 1958 Industrial Development (Encouragement of External Investment) Act, he made the point that the Act did not go far enough. However, I do not agree with Deputy Donegan's suggestion that the Government have turned completely about face as far as their industrial development programme is concerned. Nobody will deny that were it not for the policy pursued from 1932 up to and immediately after the war, it would not have been possible to build industrial development as far as it has gone and consequently it would not have been possible to encourage outside investors to take advantage of the skills that had been built up here in the meantime.

Were it not for that policy we would still be importing a great deal of the consumer goods now manufactured at home. Deputy Donegan alleged that because legislation of this kind was not introduced immediately after the war, we lost the opportunity of attracting outside manufacturers, from West Germany and other devastated countries, after the war. That is not true. Even if it were, Deputy Donegan's Party had the opportunity in the three immediate post-war years to bring in such legislation and did not do so.

In the 1932 and 1934 Acts, there was provision for the giving of new manufacture licences by the Minister for Industry and Commerce whereby a commodity not being manufactured in Ireland to a sufficient extent, and not likely to be manufactured, could be manufactured under a new manufacture licence without the provisions of the Control of Manufactures Act applying to a company whose majority of shares was held outside the country. Especially since 1958, the encouragement given by that Act for the establishment of outside industry, mainly for export purposes, has certainly not deterred in any way foreign industrial investment in this country.

There is another point that ought to be remembered. With the movement towards freer trade and with the possibility that in six or seven years we might have complete freedom of movement of goods between one country and another, is it not better, if cheap goods are to be manufactured and brought in here, that instead they be manufactured in our own country by our own labour? That is a consideration that some Deputies may not have taken into account.

With regard to Deputy Cosgrave's point of the danger of take-over bids, I do not think this is the Bill on which an amendment such as he advocated should be considered. This Bill will repeal the Control of Manufactures Acts, and, having done that, it will die. There will be no continuing provisions that will be required in the Act itself. I referred to the possible danger of take-over bids in this country on a number of occasions during and subsequent to the passing of the Companies Act, 1963. At that time we had particular regard to the recommendations made in Britain by the Jenkins Committee, the Committee set up to examine the companies legislation in that country. We decided that the volume, if any, of take-over bids in this country was not such as required to be dealt with under that Bill. Subsequent to the passing of that Act, I have adverted to the possibility of take-over bids affecting our industrial structure and growth. Again I have said that up to the present, there seems to be in no danger that these take-over bids will in any way upset our industrial advance or prejudice Irish companies; but, if we see that danger arising, it will be possible, under the companies legislation, to have the matter properly dealt with.

Mr. Cosgrave

Would that require an amendment of the Companies Act?

Mr. J. Lynch

It would. Deputy Corish mentioned that this Bill seems to be introduced in the light of our possible membership of EEC by 1970. That is partly true. As the House is aware, the obligation of membership of EEC imposes on us acceptance of the right of establishment, that is, the right of people from the Member Countries to establish industries and other businesses in any one of the countries. But it also envisages the free movement of goods—the fact we will in one way or another be facing free trade conditions by that time. As I have said, if goods are to come in here without tariffs to compete with goods manufactured in our own country, it is better that we should create facilities whereby these goods can be manufactured in our own country. At the same time, we are not ignoring the desirability of ensuring that our own industries will be capable of meeting free trade competition. That is the purpose of our efforts to induce our industries, by way of grants and other inducements, to build up their efficiency so they will be able to compete with goods brought freely in here.

I do not think there was any other point made that requires any specific reference by me. I want to say again I am glad the House has accepted the Bill in the spirit it has.

Question put and agreed to.

Committee Stage ordered for Tuesday, 8th December, 1964.