Industry and the Common Market-3
Competition in the British Market
By RICHARD BAILEY
WHAT are the effects of Britain joining the EEC likely to be in the home market? This is the piece of the whole European jigsaw that really brings the Common Market home to us. If Britain joins, then our tariffs on goods from the Six and any other countries joining the Common Market will be reduced to zero by 1970 at the latest. This will be done by an initial cut of 50 per cent. on entry, with the remainder coming off in cuts of 10 per cent. The effects of removing tariffs will be to bring down the landed cost of imported goods from the Com- mon Market countries.
Whether they are then competitive with British products depends on production and transport costs, and whether they are able to use the existing channels of distribution. This is perhaps the most important factor in deciding the level of trade between manufacturing coun- tries. Clearly a continental firm that has to set up its own network of retail shops here is going to take very much longer to show a profit than one that is able to sell through the multiples in every High Street. The system of distribution is more highly de- veloped in Britain than in any of the Six. France has a small but growing number of super- markets, but is still largely served by small shop- keepers. The same is true of Italy. Only in Ger- many is there anything resembling the multiple chain stores.
Some increases in imports from the Six are likely in food and clothing, the so-called soft consumer goods. These are the items where easy distribution channels can be most helpful and where the likes and dislikes of the customer have most effect. The development of self-service food stores provides an ideal outlet for tinned goods and manufactured foods, such as 'Buitoni' pasta and 'Motta' confectionery from Italy, and 'Olida' tinned meat from France. The level of imports of manufactured goods is not likely to be high, however, as most of the firms in this industry operate on a fairly small scale. None of •them are in the same league as Unilever, Tate and Lyle or Associated British Foods.
British manufaCturers are likely to be hard to beat on such things as knitwear, ready-made dresses and men's suits. The Fashion House Group, consisting of twenty-five leading ready- to-wear manufacturers, has given London a new reputation as a fashion centre. The mass pro- duction of ready-to-wear clothing that is also chic is much farther advanced here than on the Continent. Competition will be toughest in fabrics, although dress accessories such as but- tons, bows and belts will probably be increasingly imported. Cotton textile firms are likely to find tough competition in the Common Market, be- cause many continental firms have recently mod- ernised their equipment. The hardest competition in this sector, however, comes from the low-cost producers of the Asian countries, especially Hong Kong. Membership of the Common Market could mean a new allocation of quotas for these imports which would ease the concentration on the British market.
The winkle-picker invasion has shown that, when it comes to starting a trend, price doesn't matter. Italian styles of footwear were quickly taken up by British manufacturers and total sales of imported Italian shoes still do not amount to very considerable quantities. Indeed, total imports of footwear from all the Common Market countries put together at present repre- sent only a tenth of home sales. As the duties on shoes vary from 10 to 25 per cent., some in- creases in imports are likely when these are removed. The British shoe manufacturers have taken considerable pains to adapt their designs and styles to continental fashions, however, and they are not likely to be caught flat- footed when toes next change their shape.
One aspect of membership of the Common Market that has a wide appeal is the prospect of lower prices for wine, especially the better qualities. The big difficulty here will be on the supply side. There are just not enough decent burgundies, clarets, moselles and hocks to satisfy the potential demand. The Italians, with the biggest surplus of wine, are likely to be the main gainers. The effect on British wine lists is likely to be that the good wines will be dearer and the rest cheaper, but increasingly ordinaires.
What other changes are likely in the High Street shops? In consumer durable goods the continental manufacturers will be up against the same problems that their British opposite num- bers have in the Six : differences in standards of insulation, voltages, plug and socket sizes and other built-in inconveniences which add up to a considerable headache for manufacturers and traders.
The radio and television industries have not yet had any considerable competition from the Continent and look like being more troubled by Japanese transistors than German portables. In -tape-recording and dictating machines, the Ger- mans already have the reputation of producing the best equipment and are likely to see their sales here go up considerably. These machines will be cheaper with Britain in the Common Market and consequently even more competitive.
Motor-cars present a number of difficult prob- lems. At the present time the smaller continental' models, such as the Volkswagen, Dauphine and Fiat 600, are already selling in Britain in spite of the handicap of paying duty at an effective rate which is well over 30 per cent. because of the way purchase tax is levied on landed price plus tariff. The success of continental cars will depend on how far they can provide something that is different and better value rather than cheaper. The higher-priced models are more likely to succeed than run-of-the-mill family models.
In the engineering industry, competition in the home market is not likely to be in terms of price, but of design, quality and delivery dates. Machine tools are a case where particular types may be bought abroad because they have special features and are available. Some of the biggest losses will be in the heavily protected industries, such as watches and clocks, cameras and scien- tific instruments. All of these enjoy tariffs of 30 per cent. and upwards and will find parts of the market, at any rate, overrun by the Germans.
The pottery and glass industries are also likely to meet very keen competition. A higher per- centage of total exports of pottery goes to the Commonwealth than of any other product. The high-quality china from Britain's potteries is un- equalled in quality, but the cheaper lines will have difficulty in facing competition, especiallY from Germany. The same is broadly true of glassware.
What will be the broad effects of entry into the Common Market? Will prices rise or fall? Will some workers lose their jobs? Will there be a wider choice of goods? Short answers to these questions are not possible. Prices will fall on those products on which tariffs at present restrict competition. Cars, watches, clocks and cameras are examples. But over the broad range of soft consumer goods the changes are likely to be in the direction of increased choice rather than lower prices. The most difficult thing to predict is the effect on employment. The Common Market will make the regular re-equip- ment of industry a necessity and those firms that have gone on getting by with old-fashioned techniques will be caught out. A great deal will depend on government policy, not only in inject- ing the right degree of expansion into the economy, but also in the level of depreciation allowances.
Not all continental industrialists regard the British market as a potential source of vast profits. Many complain that by our insular habits we have built up a second line of defence behind our tariff wall. The British system of paying for the social services largely out of general taxa' tion instead of as a levy falling mainly on the employer is one example. Our system of taxation; which gives no encouragement to exporters, is regarded as making the home market more at- tractive for the British producer and therefore less so for the foreigner. But the feature of our economy that raises most controversy is our system of weights and measures. The Germans and French argue that to compete in the British market they must turn out special goods made in British sizes and weights. This situation emphasises the differ- ences between Britain and the Six. When the time comes for taking down the tariff walls and letting trade flow freely in an enlarged Com- mon Market there will still be more differences between Britain and the rest than between any two of the other members. It is quite admissible to say that this is an argument for staying out' It is more realistic to say that it is this yea reason which makes it possible and necessary for Britain to go in. Another result of removing tariffs on trade with the Six will be that all sorts or goods that it is not worth trying to sell over a tariff wall will become available. These will include French kid gloves, German cameras' Italian glass, Belgian leather goods, German toys and a whole range of textiles and accessories. Thus for the housewife, British membership 01 the Common Market opens up a wonderful nel prospect—that of having some of the most efficient and skilful manufacturers in the going all out to cater for her needs.
Previous page
