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

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

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

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 10 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 had 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 preferential (UK and Canada), and was made in accordance with the recommendation of the Industrial Development Authority, after a tariff review under our trade agreement 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 (UK and Canada), ad valorem with an additional customs duty of 1/6d. (full), 1/- (UK and Canada), the article, to 60 per cent (full) 40 per cent (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 or 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 (U.K. 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 sq. 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 Senators. I shall, of course, be glad to give any further information which may be required.

Mr. McGuire

The particular items mentioned in the Bill do not call for any critical comment and I think we are all in agreement on the proposals set out in the Bill about the confirmation of Orders, but some general questions do arise and I think this gives us an opportunity of considering certain very important points.

I would suggest that the first question that arises is the Government's policy and actions regarding our entry into EEC or some other such body. We could have a long debate on this subject but I think we know now as a result of the Minister's statements in Dáil Éireann and the debate on this particular Bill in that House that the Government's policy still continues to be based on the assumption that we would become members of EEC by 1970. Everybody, with perhaps a few exceptions, is in favour of joining the European Economic Community if it is possible for this country to do so. The question has been asked as to where the negotiations for our entry into the Common Market stand at present and we are told that the Government are keeping in touch with developments within the European Economic Community and I think I saw today that the Minister for External Affairs may be attending a conference shortly on, I think, the question of agriculture. Incidentally, one of the English Sunday papers, the Sunday Telegraph, carried an article suggesting that even now the EEC might fail and break up on the question of agriculture. However, whether the economic community holds together or not, I think we all know that the trend of the future world is in the direction of freer trade even in a framework which might easily bring in the United States of America. That being so, we cannot shirk the points raised by this particular Bill regarding the Government's policy on tariffs and quotas generally.

It would seem that the Government policy is to continue to reduce protective tariffs and protective methods of all kinds so as to increase our competitiveness in getting exports of Irish manufactures and other Irish products. Indeed, whether we enter EEC or EFTA or not, a high degree of competitiveness will be necessary to expand our economy to meet the needs of developing standards. We would all subscribe to the proposition that if we are to advance economically and socially in this country we must fit ourselves for competition with other nations in selling our industrial and agricultural products. Indeed, one of the Orders mentioned today deals with the very point of low priced competition coming into our own country and provision is made to protect our manufacturers against the competition they have to face at the present moment. It would seem only sensible. The very fact that this sort of goods can come in here at present and invade our own market should be a stimulus to us to try to keep our economy low priced in order that our goods will be able to invade the markets of other countries.

It is obvious to everybody that the cold breeze of competition that comes with the lowering of protective measures brings an awareness of the need to keep down production costs. Costs must be kept to a minimum if competitive prices are to be possible. Behind high tariff walls inefficiency and high costs are enabled to persist and result in an artificial complacency and a lack of enterprise, in people not working hard enough and in all the other evils that go with sheltered forms of industry.

The Minister tells us that by 1965 it is hoped to achieve a 30 per cent reduction of tariffs and quotas. Naturally, there is some criticism and apprehension amongst those who are concerned that protection is being lowered too fast and perhaps without any visible or immediate quid pro quo being sought or given. This is understandable and again I think the Minister is facing this matter pretty fairly in that he has said there is not going to be a headlong break down of the protective barriers and that the situation will be watched as it proceeds. A thing which is not perhaps understood is that these 10 per cent reductions are not all over reductions. The percentage is merely on the existing tariff on each occasion, which is a much lower reduction than would appear than if there was a full 10 per cent on the original tariffs. These are protective measures now rather than that we should have to take drastic ones later on when the time comes to conform to whatever tariffs we might have to work under. The form of protection is being altered to conform with EEC procedures so that time is really being given to industrialists to prepare themselves by degrees.

All that is very well and, indeed, the real question is one of timing the rate of dismantling of protection. This process, and the speed at which dismantling should be carried out, should be done in consultation and co-operation with all the elements concerned. It is fair to say that in modem life, in our Governmental life, there has been a great deal of improvement in this matter in recent times. Trade associations and trade bodies are now being utilised very fully in a consultative way in these matters in which they are particularly concerned.

There is a third point which arises from this Bill and which is not such a happy one. I refer to the Government's responsibility for the efficient and successful operation of Irish industry. This postulates reasonable incentives to industry and the creation of a favourable atmosphere for its prosecution. The Minister for Finance speaking in Dublin recently was reported as saying that exports are vital to our economy and that all sections had a part to play in the stimulation of exports. I fully agree with this. It is up to the employers and management to be efficient and up-to-date and to give the lead in every possible way so that industry will be efficient and fully competent. We look to the workers to play their part to give a fair return for money paid to them, to give a fair day's work for proper wages. There is no doubt that nowadays it can never be said that workers are underpaid. They have the means to see that they are well paid and that they have good conditions of employment in every way. It is important that they should not go too far in demanding more than they give to the economy merely through the weight of their organisations and trade unions.

Finally, we come to the Government. Business people and people generally are accustomed to being urged by Ministers and the Government to improve efficiency and competitiveness, and an occasion like this gives me the opportunity to remind Ministers that the Government have a great deal of responsibility in this matter. It is all very well for Governments and Ministers to call on business people to be efficient and enterprising but all the efforts of business people in that direction can be frustrated if there is inefficiency in the handling of the nation's financial affairs. How can efficiency and price competitiveness be made possible for industrialists and farmers if the Government upsets the production costs and living costs of the whole nation as has been done in recent months? Business people are puzzled by the confusion and chaos which runs in our economic life at present. The cost of living and the cost of labour have made and are making steep and unprecedented rises. Over a very short period from a low cost country we are fast being turned into a high cost country. The Government have thrown the ball to the industrial community to solve problems——

An Leas-Chathaoirleach

I think the Senator is going rather wide of the matter under discussion.

Mr. McGuire

It is to be hoped that all sections of industry will work together to iron out the many problems that face them at present in order to preserve and develop our competitive capacity in both home and export markets. I fully agree with the policy which this Bill is designed to advance, namely, efficiency of industry and the preparation for advancing our exports in original markets but in spite of the ruling of the Leas-Chathaoirleach I think the Government's contribution to this highly desirable aim of making our exports marketable and making them competitive is very important. As I say, I support the Bill with the remarks I have made.

Professor O'Brien

I do not wish to stray from the Bill or to engage in a general argument on the industrial or financial condition of the country. The general policy of the reduction of tariffs Whether we enter the EEC or not is one to which the country is committed. The Government have undertaken to reduce protective tariffs and most people agree with that objective.

I simply would like to remind the Minister, if I am not out of order, that this reduction of tariffs is really part of the Second Programme for Economic Expansion and in order that that programme can be successful it must be consistently pursued. Anybody who has read the programme should be aware of the reference in it to the necessity for consistency in Government policy. There is a certain inconsistency between the reduction of protective tariffs, making it easier to import, and certain measures which make it more difficult to export. I do not wish to go into details but if our exports become more expensive either because of rising incomes or because of rising public expenditure we will find it more and more difficult to compete abroad and simply will not have the necessary exporting capacity to pay for the increased imports.

While the object of this Bill is to make importing easier, that is an object which could be inconsistent with other Government policy that might make exports more expensive, because our capacity to import is limited by our capacity to export, I would ask the Minister to bear in mind that this Bill must be related to the other parts of the Government's Second Programme for Economic Expansion.

Mr. L'Estrange

I entirely agree with the last words spoken by Senator O'Brien. In this Bill, it is the Government's intention by gradual stages to reduce protection and eventually to aim at circumstances in which protection will have disappeared altogether. Senator O'Brien and Senator McGuire are quite correct when they point out that if tariffs are coming down and the costs of production on our industrialists are going up there is no denying that our industrialists will be faced with a hazardous and dangerous period in the future.

As far as our industrial policy is concerned, the country today lacks proper leadership and proper guidance. How can our industrialists plan for the future if they do not know exactly where they are going, if there is changing and chopping in the advice and in the guidance they get from our Government, from our Department and from our Ministry for Industry and Commerce?

An Leas-Chathaoirleach

The Senator will relate the advice and the guidance he is talking about to the matters in the Bill.

Mr. L'Estrange

If we are reducing tariffs, surely the industrialists should know exactly where they stand. A few months ago, it was Government policy to have more or less a Standstill Wages Order and we had a White Paper, Closing the Gap. I dare say that our industrialists believed at that time there would be a relative period of stability in this country and that they could plan ahead on that basis. That is what was pointed out to them at the time by the Minister. Now, due to deliberate Government action in increasing taxation, in imposing a new turnover tax, and by themselves initiating a ninth round of wage increases, they have controverted all that——

An Leas-Chathaoirleach

The Senator must pass from that. The Senator will relate his remarks to the Bill.

Mr. L'Estrange

How are our industrialists to survive in the future if tariffs are being reduced? How are they to survive if material is being allowed in from abroad and at the same time it is deliberate Government policy to increase the cost of living, the cost of production and wages? If we are not entitled to point that out, then I do not know what we are entitled to point out.

The greatest danger is the fact that, if Government policy continues, as it is today, to reduce tariffs and quotas and deliberately to increase costs of production we shall price ourselves out of Europe and all world markets. By doing that, we shall imperil the jobs of our people in industry and we shall provide fewer openings in industry for young people. If we are to hold our own in the competitive period which faces us we must try to keep our costs of production as low as we possibly can. Never was it more desirable, therefore, to have a reasonable period of stability. There is no sign of that reasonable period of stability but the action of the Government in the past few days may again kindle the fires of inflation which may consume us all.

Mr. Desmond

The imposition of duties is an important matter. Further markets are essential for the expansion of our exports. The matter is under examination by the Minister and the Government. What is really more important still is that any easing of duties in so far as our industries are concerned should carefully be considered. There should be no reduction of import duties to an extent that would change the present pattern of employment in our industries.

The first consideration must be to safeguard our industries and to protect whatever employment they give. As was mentioned earlier, labour costs must be taken into consideration but the important point is to keep labour employed where employment is provided at present and to try to create further openings. We must ensure that we keep as many workers as possible employed in the country.

If we lower the duties on some of these industries to an extent that goods imported would outprice the home-produced article then we would damage ourselves. That point must be borne in mind. All the other aspects of the matter are really ones for examination and negotiation.

We must ensure that there will be no reduction in duties which will adversely affect the disposal of goods produced in any of our industries and we must ensure that we keep the labour force at present in employment here at work and if possible increase the number of openings. I am sure the Minister would be anxious to do that, too. We read sometimes about other markets and the EEC and we realise that it is all very important but nevertheless anything that would affect ourselves is bound to come first.

Mr. J. Lynch

I think the kernel of any industrial policy — and indeed that relates to Government and individual industries and firms — is to produce goods of the best possible quality at the lowest possible cost. That policy permeates our whole exercise in relation to tariff reductions at the present time.

Senator McGuire said that the present industrial policy is based on the assumption that we shall be in the EEC by 1970. That, as the House is aware, is the end of the transition period that the Common Market countries set themselves, and at which time they propose to have all the restrictions on movement of goods between themselves abolished. As the House is aware, the other community, the European Free Trade Association, also adopted that as the period in which they, too, would have the import and export restrictions abolished. In the event, the EEC have shortened their transition period by 2½ years so that they hope to have all their tariffs eliminated by mid-1967. The EFTA countries better that and they have set the date for the elimination of tariffs and quotas as the end of 1966. As I stated in the Dáil, that has stimulated the movement of goods within each of these communities. Not only has it stimulated the movement of goods but it has increased the efficiency of the producers of goods. Therefore, if we are to export our industrial surplus to these countries then, too, we must increase our efficiency so as to hold and, if possible, increase our markets in these countries. Therefore, this reduction of tariffs is worthwhile. I said so on a number of occasions.

We cannot afford to ignore this world movement. We cannot afford to ignore the reduction of tariffs that has been effected by the countries representing these two trade blocs and the consequent improvement in the efficiency of their industries. Indeed, they are improving efficiency at a very fast rate. In the short run, it would perhaps be a good thing for our industries here to maintain tariffs at their existing level. As everybody knows, we have a small market here and, by reason of the smallness of our firms and the diversification of the goods they produce, we tend to be high cost producers. Therefore, in order to get bigger runs on production it would be necessary for us to seek export markets, and to seek export markets means that we will have to be sufficiently efficient to compete in them. If we sit back under the umbrella of protection, then people will be inclined to take it too easy and we will not be able for competition abroad.

Certainly, if we are to be members of EEC by 1970 and, indeed, if we are to compete in world industrial conditions, which will operate by 1970, then we will have to be much more efficient in the production of industrial goods than we are now. If we neglected to take the steps we are now taking then we could be accused of neglecting the opportunity of maintaining employment and creating new employment in the long term. The one reduction that has already taken place and the next reduction of 10 per cent in tariff as of the 1st January next year will stimulate our industrial producers to greater efforts and greater efficiency. Indeed, many of them have given testimony to me of that and many of them have told me that they have achieved greater efficiency now than they envisaged would be possible. That has been stimulated to some extent by the reductions that have been effected.

Senator McGuire implied inconsistency in the Government's approach to this matter. Let us examine that allegation of inconsistency which is completely unfounded. We applied for membership of the EEC in the summer of 1961. Our application was formally presented in February, 1962. Immediately on application, in the summer of 1961, there was set up the Committee on Industrial Organisation, which, the House is aware, comprises representatives of trade unions, industrialists and of Government Departments and Agencies. The Committee on Industrial Organisation made, in the first place, three interim reports, two, of which are, perhaps, specially important, in order to indicate the consistency of Government action in this regard. In the first interim report the Committee on Industrial Organisation recommended that loans be made available at favourable rates to industries in order to encourage them to adapt themselves for the greater competition that freer trading was going to bring about. The Government not only adopted that recommendation but made available to industrialists, who wanted to adapt themselves or re-equip for greater competitiveness, grants, as well as loans, at specially favourable terms, I am glad to say, and these loans are being sought after at a very satisfactory rate.

As well as that, the Committee, in another of their interim reports, advocated the setting up of Adaptation Councils. These Councils, representative of certain industries, adopted certain rationalisation methods in getting advice in selling and buying and other matters. Not only did the Government adopt that interim report, as well, but they made grants available to these Adaptation Councils so that they could better do the work that they set themselves to do. Side by side with that, the technical assistance scheme has been improved whereby firms who want to seek consultative advice as to how best they could improve their methods and working systems get a grant now of 50 per cent, instead of what it was, 33? per cent. These are only some of the measures that have been consistently employed and pursued by the Government since it became obvious that we were faced, sooner or later, and sooner rather than later, with conditions of freer trade than we have hitherto been used to. Therefore, I fail to see how this charge, or allegation, or implication, or whatever it is, of inconsistency can properly be levelled at the Government.

Senator McGuire asked what was the Government's contribution. They made a very substantial and significant contribution in order to help industrialists to become more efficient in the conditions facing them. If our assumption is wrong that we will be members of the EEC by 1970, then, at any rate, we will be living in a world where all our competitors in the markets to which we hope to supply goods, will have abolished tariffs inter se amongst the countries in which these competitors live. Therefore, unless we undertook the effort we are now making we might find ourselves completely isolated, with a tariff wall built around us, unable to export anything and living in an ever-declining market.

This is an era of expansion which has happily been achieved in employment and in industry and of expansion which also has happily been achieved in export. It is a rate of expansion which has been assisted in great measure by Government action. I think we are going in the right direction. If, as Senator McGuire fears, the time will come when this will operate towards our disadvantage, then the Government will be perfectly free to take whatever action would be in our best interests.

I said in the Dáil that we were not going to continue willynilly with this reduction of tariffs, but only so long as it is consistent with the best interests of our country, our workers, and our industries. At the same time, I am convinced that it is in our best interests that we should proceed as we are proceeding.

Mr. L'Estrange

Senator McGuire's contention was that lowering tariffs and increasing the cost to industrialists was inconsistent.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee; reported without recommendation, received for final consideration, and ordered to be returned to the Dáil.

Seanad Éireann díospóireacht - Wednesday, 13 Nov 1963