WOOLLEN MILLS

Evening Post, Volume CXVI, Issue 23, 27 July 1933, Page 12

WOOLLEN MILLS

LOCAL INDUSTRY

CASE FOR PROTECTION

REQUESTS TO COMMISSION

EFFICIENT FACTORIES

A general statement on behalf of the N.Z. Woollen Mill Owners' Association, was placed before the Tariff Commission, today. The Comptroller of Customs (Dr. G. Craig) presided, and associated with him were Professor B. E. Murphy and Messrs/ J. B. Gow and G. A. Pascoe. A summary of the case, which was presented by Mr. J. Evans, is as follows:— 1. We submit that it is imperative to: (a) Maintain the present duties on textiles (over a certain value) on underwear, hosiery, and yarns; (b) increase the. duties (by other means or in combination with ad valorem) on materials made from shoddy or mungn. 2. That the New Zealand woollen industry and all its ramifications and close association with allied trades is of considerable value to the revenue of New Zealand. COMPARISON OF WAGES. 3. That New Zealand money wages, after allowing for all wage reductions, are approximately 54 i)er cent, higher than wages in the United Kingdom. 4. That the cost of land, buildings, and plant and machinery is probably on an average 25 per cent, higher in New Zealand than in the United Kingdom. 5. That in the event of such a reduction being made in the tariff as will lead to reduced output in the New Zealand mills, the obvious tendency will be to create further unemployment. 6. That the New Zealand woollen industry is a "key" industry and is adding to the natural wealth of the country. 7. That the New Zealand .woollen industry is complementary to British industries. 8. That the individual mill in New Zealand as opposed to rationalised mills, in the circumstances in which we are placed, is the best unit to conduct the manufacture of woollen goods on economic and efficient lines. 9. That internal competition will afford the greatest protection to the buying public. GENERAL TARIFF. 10. That the general tariff on foreign woollen goods should be increased with the object of diverting our surplus requirements in woollen goods to the United Kingdom. 11. That any of the mills associated herein will be pleased to submit further information in, support of the general figures contained in this statement and also supply samples and costings of representative lines'which will go to prove that we are an efficient industry and that our businesses ar« run on economical lines, not only in t!»6 interests of the shareholders in the various companies, but also in the interests of this DominAon of New Zealand. Mr. Evans traced the growth of the industry, which commenced with the establishment of the first woollen mill iii 1859. About 1870 the Otago Provincial Government offered a bonus of £500 for the production of textile goods on a commercial basis, and the Mosgicl mill, which commenced active operations in 1871, was soon able to lay claim to the bonus offered by the Government. As climatic and other conditions in New Zealand were ideal for the manufacture of woollen goods, the Mosgiel Company was followed by Kaiapoi (1878), Koslyn (1879), Oamaru (1882), Petone (1883), Bruce (1897), and other mills since the latter date. The first worsted plant south of the Line was in: stalled at the Eoslyn Mills in 1886. Since the latter date Mosgiel, Oamaru,, Ashburton, Kaiapoi, Petone, and Bruce had likewise installed worsted plants with the result that the Now Zealand woollen industry was able to cater for all branches of the woollen trade; A STEADY GROWTH. In 1886 the wool purchased by New Zealand mills was 1,879,9991b, and in 1932 the quantity bought was 7,000,001b. The average number of employees for the three years (1930-32) in the nine mills concerned in the application was 924 males and 1538 females. The annual average of the wages paid was £363,667. Although the figures relative to employment'of workers were interesting, they did not indicate truly the growth of the industry, as it would be admitted (as in most industries) that with the adoption of improved methods and machinery the personnel of staffs ' did not increase relative whail^ to the output over a term of years. On the other hand, the increased output of the mills had created more employment in the selling, distribution, transport, and warehousing of this increase in production. A "KEY" INDUSTRY. "The New Zealand woollen industry is a 'key' industry, as the'great Bulk of its raw material is the wool produced by the farmers of New Zealand," said Mr. Evans. "Although it is not generally recognised by the lat.ter, the competition of the New Zealand mills plays a very important part in the prices realised for all classes of wool grown in New Zealand, particularly merino, halfbred, and fine crossbred. If the competition of the local mills was eliminated, we affirm that"the tendency would be towards lowered prices, especially for finer wools. The value of the competition of the Now Zealand mills.in this respect cannot be overestimated, and should be recognised by the Government and the farmers of New Zealand. "We maintain that the value of the woollen industry to New Zealand is an all-important one in the clothing of the people. If the New Zealand woollen industry with the allied clothing industry had not been firmly established when war broke out in 1914, it would not have been possible to have dispatched something like 100,000 men fully clothed and equipped with' uniforms and woollen underclothing made in the New Zealand mills. The fact that New Zealand was able to equip this body of men, and also to keep up further supplies to the men in the field, was of great assistance to Great Britain, whose woollen factories were very severely taxed_ in meeting their own requirements during the war years. Apart from the clothing of troops, the New Zealand mills were able to cope with the requirements of the civilian population during this unfortunate period. "NATIONAL INTEREST." "If the woollen industry had not been firmly established in 1914, our people would have suffered considerable hardships during the years 1914-1920, as practically every source of supply in this direction was cut off, and'it was common knowledge that stocks were almost wholly depleted. As the woollen industry practically makes us self-con-tained in the matter of clothing our people we maintain that it should be reasonably protected in the national interest." In 1932 the industry paid in direct taxation (Government and local body), and in the same year the wholesale value of the output was £1,007,467. Ap.art from income taxcontributed b^ employees in the indus-

try, in 1932 they paid £18,323 in unemployment tax. In New Zealand coal tho mills jointly consumed 18,593 tons annually, at a cost of £22,176. It was the general policy of all the New Zealand mills to buy the whole (if possible) of their overseas requirements in materials and machinery from Great Britain or the British dominions. Although the output of the New Zealand woollen mills might affect tho British hosiery and textile trades, the New Zealand woollen industry was of considerable value to many other industries in Great Britain, notably manufacturers of all classes of woollen mill machinery, dyes, and chemicals, machine parts and tools, card clothing, needle manufacturers, and many other smaller industries too numerous to mention. VALUE OF PLANT. The book value of- the plant in 1932 was £485,738. These figures had naturally been written down, and it was probable that the original amount expended was in excess of £1,000,000. The plant in the New Zealand mills was as up-to-date as will be found in any mills in the world, so therefore the Commission would appreciate the value of the Now Zealand woollen industry in its relation to tho industries in Britain which were catering for this industry throughout the world. Owing to the great advance in perfection of manufacturing machinery it would be further appreciated what the replacement of old machines meant to the machinery makers. Owing to the severe competition of local and foreign mills, no New Zealand mill could afford to lag behind in this respect. "The New Zealand woollen industry cannot be described as a highly protected industry, as 'protection is known in some of the other Dominions," said Mr. Evans. "It may be of interest to quote the protection which has been granted by various Governments since the establishment of the woollen industry in 1871. We have no information regarding the position prior to this date. From' 1871 to 1888, as far as we can learn, tho protection granted to all woollen productions was 15 per cent. In 1888 the protection was increased to 20. per cent. The protection on textiles has remained at 20 per cent, from 1888 to the present year, 1933. The protection on hosiery and underwear was increased to 20 per cant, in 1888, and remained at this figure until 1907 when it was increased to 25 per cent. The latter duty remained in operation until 1930, when it was increased to 27J-per cent., 1931 32J per cent., and reduced as a result of the Ottawa Conference in 1932 to 27*-per cent. "We might add that the increases in 1930 and 1931 were made for purely revenue purposes, as no request for 'any increases was made by this association in the years referred to. • COMPETITION OF SHODDY. "Mr. Evans said that the Australian tariff was substantially higher than that in operation in New Zealand. However, the New Zealand industry was not seeking any increase in the duties on hosiery, underwear, or yarns, but they strongly advocated that their recommendations placed before the Minister of Customs on numerous occasions in respect of shoddy or materials made from remade wool should receive the earnost consideration of the Commission. • The following were their requests in this respect:— "That in addition to _ any duty otherwise payable a special duty_ be imposed on tweeds, serges, and suitings of wool, or containing wool weighing not less than six and one-half (6i) ounces per sqnare yard, the current domestic values of which for every 16 inches in width or fraction thereof do not exceed the respective values, set forth hereunder: — f Where the current Rate of duty for every domestic value for 16 inches in width or every 1G inches in fraction thereof (in width or fraction addition to any Custhereot toras duties otherwise payable). 1. Does not exceed 2'4d per yard lOyifl per yard 2. Exceeds 10% d but l'^d per yard ' does not exceed Is per yard 3. Exceeds Is but does %d per yard not exceed Is Hid per yard / EXTRA EMPLOYMENT. If these duties were imposed on all imported shoddy materials, they had no hesitation in saying that the industry could employ something like 300 to 400 extra workers in the Now Zealand mills. This added production of pure wool textiles would mean the employment of hundreds of extra workers (male and female) in the clothing and mantle trades, and also increased purchases of wool, including greater competition for crossbred wools. Although the first cost for the pure wool clothing would vbe slightly higher, the consumer would got better service, and therefore better value for the money expended. Much apparel or material which came into New Zealand under this Heading is manufactured from "shod,dy" or "mungo" NEED FOR PROTECTION. "The New Zealand woollen manufacturer needs protection in our home market for the same reason that the British manufacturer demands protection for his industry in Britain, i.e., on account of higher production costs as compared with tho foreigner," said Mr. Evans. "We have, the same need for protection against Britain and foreign countries (particularly Japan) on account of the higher standard of wages paid in the industry in New Zealand, and also the fact that owing to the higher wages paid in every other direction, tho whole of the services rendered by other trades and industries cost tho New Zealand woollen manufacturer more than what is paid for the same services in Great. Britain and foreign countries. This particularly applies to coal, power, lighting, and transport. EXCHANGE RATE. "Contrary to the statements made by certain organisations, the New Zealand woollen manufacturers have not taken advantage of the 25 per cent, exchange rate, as prices have not been advanced by them since- the exchange rate was advanced to 25 per cent., notwithstanding tho fact that the New Zealand mills, as compared . with the British manufacturers, are paying this exchange on all their wool and other raw materials," said Mr. Evans. "The added cost on the finished goods in this respect would be approximately 8 per cent. Wo have already referred to tho keen competition which exists between the New Zealand mills, and this factor alone is sufficient to safeguard tho buying public in respect to this doubtful benefit of a high exchange. "Statements have been made on numerous occasions to tho effect that the New Zealand woollen manufacturers baso their factory celling prices on British prices plus duty, exchange, and landing charges. Wo give these statements an absolute denial. In many cases, particularly as against competition with imported textiles made from shoddy, we are compelled to cut our prices unduly to meet this unfair competition. In regular lines our prices aro based entirely on the actual cost of production irrespective of the landed cost of similar goods. Local competition again compels this. OVERHEAD AND OUTPUT. "If, however, duties were decreased, tho tendency would bo for increased imports with a corresponding reduction of the market available for Now Zealand mills. This in turn would increase relative overheads and costs of production in New Zealand, and thus still further tend to hamper the local industry. Our contention is that increased output means decreased costs and vice versa. As far as we are aware, no British manufacturers of textiles and hosiery have so far pre-

sented requests for a reduction in our present direct tariff on woollen goods. Any such requests which have been made appear to have come from manufacturers' agents whose interests arc naturally on the lines of expanded importations. This was supported by an article in 'The Hosiery Trade Journal' of March last. VOLUME OF IMPORTS. Having regard to requirement 7 of the Commission's schedule, Mr. Evans said that they would have liked to be able to quote figures showing the relative proportions of the Dominion's consumption taken care of respectively by Dominion, and British woollen industries, but from the fact that the Customs tariff items in several respects arc of an all-embracing nature, it was difficult to show how the importations compare with local manufactures. Only in two items were they able to institute anything that was at all comparative. They had taken ono year only, but other years were reasonably in relation. According to the New Zealand Year Book, 1933, importation of woollen textiles into New Zealand for the year 1931 from all sources amounted to £401,513, of which the United Kingdom's share.-was £361,886. The output of the New Zealand mills was £306,608 for the same year. Under the heading of "hosiery" in the Year Book, the total importations are £347,463, of which the United Kingdom supplied £217,097. The output of nine mills in New Zealand under hosiery and knitted underwear and outerwear for 1931 was £403,448. The figure quoted for Dominion mills covered the hosiery and other items which, in the official statistics, were included under the heading of "Apparel," but it could be said without hesitation that the proportion of hosiery included in the New Zealand figures did not exceed one-third of the total quoted, that was to say, approximately £135,000. These were the only two items upon which they could make any reasonable sort of comparison, and they maintained that these served to show that British manufacturers _ already enjoyed adequate opportunities for "reasonable competition" on the New Zealand market as regards the lines quoted as called for under Article 8 of the Ottawa Agreement, and^ that the measure of protection at present afforded the New Zealand producer was thus already on the level contemplated in the Ottawa Agreement. Accordingly they felt that their request for continuance of the present duties was strictly reasonable. CAPITAL INVOLVED. The total capital invested in the New Zealand woollen industry in 1932 was £1,674,084. The Now Zealand mills were compelled to make their purchases of wool within a period of approximately four months in competition with the world's buyers, and therefore a good deal more «apital was required under this heading by the New Zealand mills as compared with the British manufacturers. Another factor in production costs was the price paid for loan capital.- Until quite recently the New Zealand bank rate, and for a number of years prior to 1933, was between 6 per cent, and 7 per cent. —this rate being 1 per cent, to 2 per cent, above British rates. It willbe obvious that this additional capital charge permeated Now Zealand charges (direct and indirect) throughout. A flourishing clothing industry meant:—(a) Increased purchases of wool by the New Zealand mills, (b) Increased production of textiles and lowering of costs, (c) Employment to many young New Zealanders leaving school every year, (d) Cheaper clothing for the people.., (c) Increased purchasing power by extra people employed in all the allied industries, (f) Additions to Government revenue in the ! form of taxation, etc. END-OF-SEASON LINES. ', The New Zealand clothing manufacturers wero confronted with -two prob-1 lems which have their reaction on the woollen industry: (a) Importations of clothing made from shoddy materials; (b) end of season jobbing. The woollen manufacturers supported the submissions of the clothing trades in Tespect to the importations of clothing made from shoddy materials. End of season jobbing, particularly in the. women's section of the clothing trade, was also a very serious problem confronting these trades, and they strongly supported the contentions put forward on these points. As already pointed out these industries were very closely allied to the woollen industry, so therefore any further reductions on woollen or con-taining-wool apparel must have its effect on the woollen industry.