EUROPEAN FREE TRADE ASSOCIATION BILL

HC Deb 15 February 1960 vol 617 cc965-1026

Order for Second Reading read.

3.50 p.m.

The Minister of State, Board of Trade (Mr. F. J. Erroll)

I beg to move, That the Bill be now read a Second time.

My right hon. Friend the President of the Board of Trade had hoped to introduce the Bill, but, unfortunately, he has had to go to Switzerland for talks, so he has asked me to take his place. I hope that the House will bear with me and accept my explanation of the Bill which, I know, can only be less lucid than would have been the explanation of my right hon. Friend.

The House will remember that on 14th December last it accepted a Motion which welcomed the action of the Government in approving the Convention establishing the European Free Trade Association. This Convention has now been signed by Ministers of the seven member States. The text was presented to the House as Command Paper 906 and we shall deposit in due course the necessary instrument for ratification. The House will, I am sure, be glad to learn that there was general agreement among the Ministers assembled at Stockholm, in November, that each member State should endeavour to ratify the Convention by the end of March, 1960. It is the intention of the Government to take the necessary steps to that end.

The Government see the establishment of the European Free Trade Association as part of the wider process of freeing trade in Western Europe, and, indeed, as working for the benefit of world trade as a whole. My right hon. Friend the Chancellor of the Exchequer described to the House on 26th January this year the results of international meetings on commercial policy which had been held since the last debate in the House. He then reaffirmed our hopes and intentions for a wider multilateral association, including all members of Western Europe.

It is not, I suggest, necessary for me today to initiate a further debate on the European Free Trade Association itself. My purpose today is a much narrower one. In the debate approving the estab- lishment of this Association, my right hon. Friend indicated that a short Bill of a minor and technical character would be introduced as soon as possible to enable us to implement certain parts of the Convention. It is that Bill which is now before the House.

Perhaps I might describe—

Mr. Arthur Holt (Bolton, West)

I am sorry to interrupt the hon. Gentleman. I hope that, in view of the importance of the whole subject, the remarks he has just made do not mean that he will confine his speech merely to the details—very technical details—of the Bill, but that he will tell us something about the developing policies of the Government in regard to the whole problem.

Mr. Erroll

I phrased my opening remarks very carefully, because it is our desire—and we thought that it would be the wish of the House—as only a half-day has been proposed for the discussion, to limit ourselves to the points in the Bill itself, which are important, particularly to the industries and organisations affected. If the hon. Member will listen to what I have to say about the Bill, I think that he will find that there is quite enough material for a proper debate without ranging into the wider issues, which would be more appropriate on another occasion.

Mr. Roy Jenkins (Birmingham, Stechford)

The point at issue is not whether there is enough material for a debate, but whether there is enough importance in the not altogether favourable conditions of the last few months and whether the hon. Gentleman could tell us how the Government see the new situation.

Mr. Erroll

I was not proposing to do so, because it seemed to me that we ought to confine ourselves to the Bill.

Major H. Legge-Bourke (Isle of Ely)

On a point of order. While I appreciate that my hon. Friend is standing in at the Front Bench for the purpose of this debate—and we all understand why the President of the Board of Trade cannot be here—nevertheless, Mr. Speaker, perhaps you would help us by giving your Ruling on this matter. Is the debate to be confined strictly to the terms of the Bill, or are we to be allowed to consider all the various factors which relate to the operation of the Bill?

Mr. G. R. Mitchison (Kettering)

Further to that point of order. Are we not entitled, since we are asked to provide machinery, to have such information as the Government can give us as to the purpose for which that machinery is to be used and also as to the sufficiency of the machinery? It seems to me that there is the Stockholm Convention to be considered and that there are matters in it which some of us may feel ought to have been covered and have not been covered.

Mr. John Hynd (Sheffield, Attercliffe)

Further to that, Sir, I should like to be clear about this, because a number of hon. Members on both sides of the House are doubtful about the reports of this movement. Since this is the first instrument to be brought before the House, surely we are entitled to give reasons why we feel inclined to oppose the Bill and to ask the Minister to satisfy our hesitations by explaining some of the wider aspects?

Mr. Speaker

I am not concerned with what information the House is entitled to—to adopt a phrase of the hon. and learned Member for Kettering (Mr. Mitchison)—but with the rules of order, I should conceive it to be in order, on the Second Reading discussion of the Bill, to discuss the necessity for it, the absence of necessity for it, the need for such machinery as it provides, and such matters of alleged omission from it as hon. Members thought fit to discuss.

Mr. Erroll

I am sure that we shall be able to proceed with a very satisfactory debate under the terms of the Ruling which you have just given, Mr. Speaker.

Mr. Roy Jenkins

May I get the position clear? While we are grateful for the Ruling you have given, Mr. Speaker, the point at issue is not so much what the House can discuss, but what the hon. Gentleman proposes to tell the House. Do we understand from the opening remarks of his speech that the Government have no information at all which they propose to give the House, through the hon. Gentleman this afternoon, as to what has happened since we last debated the matter, over two months ago?

Mr. Erroll

It is not a question of whether the Government have information or wish to give it. What we thought would be proper this afternoon, as the whole subject of the Convention had been debated only last December, was to give a short outline of the Bill and its effect on the people who are likely to be affected by it. If the hon. Member will allow me, I shall continue with the exposition of the Bill. If any wider points are raised this afternoon, my hon. Friend the Economic Secretary to the Treasury will be very glad to deal with them.

Mr. Mitchison

With respect to the hon. Gentleman, that is an exceedingly inconvenient way of proceeding. I suggest that we ought to know what happened at the meetings in January and what progress has been made towards the building of the bridge for which this Convention is said to be the foundation. We ought to know that early in the debate, so that my hon. Friends and others might have an opportunity of raising points about it. That is a substantial matter.

Mr. Erroll

I appreciate that it is a substantial matter and in my remarks I referred to these various points, but I do not think that I can add anything this afternoon which would materially affect a discussion of the Bill, which I am sure the House would wish to see go through, as it enables us to proceed with the organisation necessary for the Free Trade Association.

Mr. Anthony Fell (Yarmouth)

I am sorry to interrupt my hon. Friend, and I quite understand that in a short debate such as this he feels that he can discuss only the technical details of the Bill. Nevertheless, this is a matter which will affect this country for many years to come. Therefore, would it not be possible for him at least to say that he will press for another debate on more general aspects at some time in the very near future? Then perhaps the House could discuss the technical matters this afternoon and the general matter on another day.

Mr. Erroll

I think that we might see how we get on this afternoon. I have in mind that we debated this subject very freely on 14th December and up to then. Such developments as have occurred since could be referred to on a separate occasion, so that we could devote our full attention to this Bill itself. If, during the course of the debate, it becomes apparent that further discussion is necessary on the wider issues, I am sure my right hon. Friend the Leader of the House will take that into account.

Perhaps I might now proceed to describe some of the features of the Bill. The principal provisions of the Bill relate to certain technical matters concerned with the question of origin. Perhaps the House will permit me to explain as briefly as I can, as the background to the Bill, what this term means and why it is so important in the context of a European Free Trade Association.

In a Free Trade Area of the kind with which we are concerned, each member country remains free to determine its own external tariff against the products of non-members but reduces and finally eliminates its duties on substantially all the products of the other member countries. It is, therefore, important to limit the free trade to goods which are grown, produced or manufactured within the area, while leaving the ordinary tariff to apply to goods which are introduced from outside.

Major Legge-Bourke

Subject to G.A.T.T.

Mr. Erroll

Yes, subject to G.A.T.T.

If this were not done, there would be an incentive for non-members' goods to enter the area via the country with the lowest tariff and thereafter circulate freely throughout the area, by-passing the external tariffs of the other member countries. These problems of safeguards against deflections of trade, as they are called, and the undermining of external tariffs are solved by according Free Trade Area treatment only to goods which are grown, produced or manufactured in the area and consigned from a port or place in the area.

Of course, with some commodities it is quite easy to recognise that they are grown or produced in the area. Mined coal and other minerals are obvious examples. It is quite easy to tell in which of the countries they have been produced. But a great deal of the trade between these countries consists of manufactured articles which, in these days of economic specialisation, may represent contributions of materials and workmanship from a number of different sources, and in these cases there is admittedly rather a difficult problem in determining whether they are of area origin or not.

A good deal of time and thought has been given to this subject of the origin or nationality of goods, and we in the United Kingdom have always held that the answer, if it is to be an objective answer on which both the traders and the Customs officials of the countries can rely, must be precise and must take account of different types of product and of the particular circumstances for which the definition of origin is required.

I am happy to say that, in contrast with the difficulties which arose during the seventeen-nation discussions in Paris, the Stockholm negotiations soon led to an agreement on these matters, largely because of the co-operative spirit shown by all the countries concerned. As a result, the Convention now contains clear and comprehensive rules of origin as well as measures to safeguard against the corresponding danger, namely, deflections of trade.

Broadly speaking, anything which is wholly produced in the area, or contains less than 50 per cent. of materials imported from outside the area, is regarded as of area origin. But we all recognise that many of the basic materials which are used in manufacture must of necessity come from countries outside the area. In the interests, therefore, of simple administration and in the spirit of an outward-looking Free Trade Area, the member countries of the area have agreed that in these rules of origin such basic materials shall always he regarded as part of the area content of manufactured goods even though the materials have come from outside the area.

As a further measure of simplification, a list of processes has been drawn up. If goods have been produced by the appropriate listed process they are regarded as of area origin without recourse to the percentage criterion. Perhaps I could illustrate this rather complicated matter by a relatively simple example. Suppose we import a wallet manufactured in a member country from leather imported from outside the area. To qualify under the percentage criterion it would be necessary to be able to show that the value of the leather imported into the area was 50 per cent. or less of the value of the finished wallet as exported from the member country in which it was manufactured. Under the alternative process criterion, all that would be necessary would be to be able to show that the manufacturing operations starting from the leather had all been performed in the area.

What we have before us in the Bill, however, is not the rules of origin themselves, but the technical measures required in this country to put the rules into effect. I will deal, first, with the implementation of the rules of origin themselves.

Clause 1 deals with that implementation. It will enable the Board of Trade to make regulations, subject to annulment by Resolution of the House, which will apply the rules of origin to all E.F.T.A. imports into this country. In total, Clause 1 provides a small extension of the existing powers given to the Board of Trade in Section 12 of the Import Duties Act, 1958.

Clause 2 concerns a problem which, though not strictly one of origin, needs to be similarly dealt with. We and our E.F.T.A. partners recognised that free trade should take place under conditions of fair competition, and in that spirit we agreed to the principle that the goods traded between us should be denied the benefits of duty-free entry if the exporting country has given them the benefit of drawback or similar arrangements for remitting duties on the materials in the goods.

The question of duty-free entry and drawback is perhaps difficult to follow. Perhaps I may be allowed to refer again to the wallet. If a wallet, made in this country from imported dutiable leather, is exported, drawback is allowed so that the duty on the leather is repaid. If the wallet is sent to an E.F.T.A. country it would be unfair for it to be admitted duty free. The leather in it would have borne no duty, and home manufacturers in that country would be at a disadvantage, as they would normally have to use duty-paid leather for making their own wallets.

The principle which we and our E.F.T.A. partners have agreed upon is that in cases such as this traders will be allowed to choose between claiming drawback on exportation or claiming duty-free entry into the E.F.T.A, country to which the goods are sent, but not both.

Mr. Holt

Perhaps I have not followed the point at issue, but I should like to know what is the basic difference between this example and the previous example which the Minister gave, apart from the fact that no duty was involved. If the leather is imported into this country duty-free and then goes through one of the processes recognised in Annex B of the Agreement, or the value of the leather is less than 50 per cent. of the total value of the wallet, surely it would go into the seven countries duty free. What is the essential difference between the first and second examples?

Mr. Erroll

I am dealing with the case in which the imported material bears duty and where there would be a refund of that duty when the manufactured article was exported. Where there is no duty we have a state of affairs which is already understood and accepted by the other partners, but where there is duty it would clearly be unfair to refund it and thus place the article which is exported at an advantage over the corresponding goods manufactured in the country to which it is exported. I hope that that will make it clear to the hon. Member.

Clause 2 will enable the Board of Trade to make regulations at the appropriate time to deal with this drawback point, on the basis of the rules agreed with our partners in the E.F.T.A. So Clauses 1 and 2 together provide us with suitable basic machinery. It is all very well, however, to have rules of origin and arrangements for the non-refund of drawback, and so on, but we have to have some assurance that the rules are being observed. The certificates of origin system is well known and we are confident that in this Association it can work smoothly and with little or no impediment to trade. But we have to ensure that there is fair as well as free trade under this system and that the manufacturing and trading communities as well as the Customs authorities have confidence that the system is not being abused. The problem is how to achieve this without a mountain of paper work and cross-checking.

We have agreed on close co-operation between the Customs authorities of member countries for mutual verification of the facts and for action against traders who make untrue statements as to facts. Thus, the authorities of the importing country, should they have reason to believe that an incorrect claim to the Convention rate of duty has been made, may ask the authorities of the exporting country to verify the facts of the particular case, and, if it is found that false information has been furnished, to take 1.he necessary action against those responsible. This is what we seek to achieve in Clauses 3 and 4.

Clause 4 is a somewhat complicated one to read, particularly as it deals with penalties, but I hope that the House will accept that it is necessary to word it in the way in which it has been printed. On behalf of our partners, the United Kingdom Customs will verify the facts and take any necessary action against persons in this country who have committed an offence in this connection. As I have explained, this is not being undertaken solely by the United Kingdom. The Customs administrations of the other member countries will also be called upon to act on our behalf in a similar manner. These arrangements will, we believe, form a valuable safeguard against the abuse of the system of origin devised for the E.F.T.A.

That, then, is the main substance of the Bill, but there are two other main points to which I would like to draw attention before I sit down. The first deals with dyestuffs. As a result of the obligation to eliminate quantitative restrictions on imports, it will be necessary, in respect of dyestuffs and their intermediates—the term for the chemicals used in the manufacture of dyestuffs—to abandon the present system of prohibition of imports except by licence and this, in turn, has entailed a decision to substitute tariff protection.

The Dyestuffs Acts, under which imports were first prohibited, are still on the Statute Book, although they have not been used since 1939. Clause 5 provides the appropriate occasion for repealing these Acts in order to clear the way for the introduction of the tariff. As this is rather a complicated subject, I have asked my hon. Friend the Economic Secretary to deal rather more closely with this matter should hon. Members so desire.

The protective import prohibition is contrary to the general rules of G.A.T.T. Dyestuffs, obviously, could not be excluded from the scope of the E.F.T.A. arrangements. Progressive liberalisation of the import prohibition would, therefore, involve the admission duty-free from member countries of the Association of increasing quantities of dyestuffs of types already produced in the United Kingdom. This, of course, would create difficulties for the United Kingdom industry and, moreover, once imports had been allowed in duty-free from E.F.T.A. members it would become extremely difficult to establish a tariff in the context of any wider free trade area.

It is, therefore, important for us to introduce, as soon as possible, a protective duty on dyestuffs and dyestuffs intermediates imported from all foreign sources. Such a duty would be subject to progressive reductions on imports from E.F.T.A. countries, until, at the end of ten years, dyestuffs from such countries would be admitted duty free.

I felt it necessary to spell this rather complicated matter out carefully to the House, because the repeal of the Dyestuffs Acts is one of the features of the Bill and is thus a necessary step in the changeover from a system of protection by prohibition and license to a system of protection by the tariff for this important British industry. In broad terms, the import of dyestuffs and their intermediates will receive the same treatment as other chemicals and this section of the United Kingdom industry will thus receive the same level and form of protection enjoyed by the rest of the industry.

I need hardly reassure the House that the dyestuffs industry has been duly consulted on the change-over, which will be effected by tariff orders, and that the amendment of the open general licence, operating from 2nd March, will be introduced to the House in due course.

Mr. Roy Jenkins

What is it that the Economic Secretary will spell out in more detail?

Mr. Erroll

The hon. Member will, I am sure, find the winding-up speech of my hon. Friend of great interest.

Mr. Jenkins

What is the point?

Mr. Erroll

The history of the dyestuffs industry and the way it was protected in the inter-war period, because, as I have said, if hon. Members so desire, we could explain why this apparently unusual situation has come about.

Mr. Holt

rose—

Mr. Erroll

I have already given way on a number of occasions.

Secondly, the E.F.T.A. is not designed as a static organisation. Other countries which are prepared to accept the provisions will be welcomed if they care to join. Others might prefer to be associated with it in some other way rather than to accept the Convention as it stands. Again, there may be supplementary trade agreements within the framework of the Convention itself. Clauses 6 and 10 will permit the provisions of the Bill to be applied if appropriate to agreements of the kind I have described.

This, then, is a Bill concerned primarily with the complicated administrative measures designed to implement certain provisions of the Convention, a Convention which the House has already fully approved. I hope, therefore, that the House will be able to give the Bill a unanimous Second Reading.

4.19 p.m.

Mr. G. R. Mitchison (Kettering)

I stand in even greater need than the hon. Gentleman of the indulgence of the House. Not only is this matter somewhat new to me, but two of my right hon. and hon. Friends have been sent to sit on either side of me with pistols in their pockets to make sure that I behave myself.

I shall not question the Motion that the House passed on 14th December, approving the Stockholm Convention, but I shall ask the hon. Gentleman or his hon. Friend the Economic Secretary to give us somewhat wider information than has hitherto been vouchsafed to us. We have had explained with lucidity and in some detail the machinery Clauses of a machinery Bill, but we are anxious to know what progress has been made towards the main purpose for which the Convention was signed.

The right hon. Gentleman the President of the Board of Trade, in his final speech on 14th December, referred no fewer than four times to the Convention as being the foundation of a bridge from those who are known as the "Outer Seven" to those known as "the Six". These things become a little difficult. I understand that the Six may also be called the Common Market, or E.E.C. Speaking E. and O.E., I sometimes find it a little difficult to distinguish between E.E.C. and O.E.C., but no doubt I shall learn in time.

We want to know what has happened. This was treated as a matter of urgency and was said to be something about which the Government were to take early action. On 14th December, meetings were held in Paris. All we know about them—all I know about them—appears from two sources, one being page 151 of the Board of Trade Journal of 22nd January and the other being a very short statement by the Chancellor of the Exchequer, which provoked several supplementary questions, on 26th January, 1960.

I remind the Government that those questions are still unanswered. I leave hon. Members who speak from the Liberal benches to repeat the questions which they then asked, but my hon. Friend the Member for Stechford (Mr. Roy Jenkins) asked this: Is it not quite clear that both the Six and the United States are firmly opposed to any special arrangements between the Six and the Seven involving discrimination? Would it not be as well if the Government now recognised this and also that, whether we like it or not, if there is to be an arrangement it has to be very near to a Customs union?"—[OFFICIAL REPORT, 26th January, 1960; Vol. 616, c. 12.] In short, what my hon. Friend was saying was that if this was a bridge towards the Six it would meet with opposition from the United States. As he said in another debate, that would be more particularly so since at the moment the United States has to deal with an exchange deficit which, in the last year for which we have information, amounted to no less than 4 billion dollars, which is a very considerable sum. The result, so far as we can see, is that, while welcoming the E.E.C. on what are really political grounds—that that is a political as well as an economic agreement, and involves a federation of a part of Europe to an extent for which the United States has always pressed—the United States is somewhat critical of the Stockholm Convention and fears that the result of the two agreements together, especially if the bridge is not built and there is no link between them, may involve some sort of discrimination against United States goods.

The Chancellor of the Exchequer's reply to that very pertinent question was that all these points would be raised in discussion. That magic sentence must have escaped the attention of the Minister of State. We want to know what is happening. We must see what the results of the meetings of the 20 Governments are—20 Governments which are members of O.E.E.C. with observers from the United States and Canada, and, oddly enough, with a representative of E.E.C. They are the people who are to meet. The Chancellor said on that occasion that the terms of reference for their discussions were very wide and would include all these difficult points.

Turning to the Board of Trade Journal, it is extremely difficult to discover what he meant by terms of reference. I suppose that they are … the need to examine, as a matter of priority, the relationship between the E.E.C. and the E.F.T.A. with due regard to the commercial interests of third countries"— especially, I imagine, the United States and Canada— and the principles and obligations of the G.A.T.T. Are those the terms of reference? What is to be done?

We were told on 14th December that approaches had already been made to the Six and that we were to expect to be told quite shortly what their attitudes were in this matter. Is it the position that the Stockholm Convention has been initialled and is awaiting ratification and that at some time in the future there will be meetings, but that at present no one can tell us what those meetings are to be about or what lines will be taken at them?

What was actually decided on the 14th was to establish one or more informal groups for the consideration of these problems without infringing on various other objectives. Not a word has appeared about what has happened. Are we to conclude that although the matter was considered to be of some urgency in December, on 14th January all that had been done was to set up a special piece of machinery for dealing with it, and that no information could be given as to what had happened during the month or more since that special piece of machinery had been set up? We are entitled to more information on that point.

I turn from that to another question, and before coming to it in detail I have to say this, although I am sure that every hon. Member present is already fairly well aware of it. The Outer Seven are a different proposition from the Six, the difference not being merely a difference between the Treaty of Rome and the Stockholm Convention, but a difference of the position of the parties to the agreements. The Treaty of Rome is among a number of countries some, at any rate, of which are equal partners, broadly speaking.

We must recognise that we have a quite preponderant position in the Stockholm Convention. Whether considered from the point of view of population or of trade, we are easily the predominant or senior partner. We, therefore, have a special responsibility to see not only that the Convention serves the main purpose to which I have already alluded, but also that the Convention is fully implemented.

I take as one instance from the Convention an Article for which the Bill does not appear to provide. The Bill is to Make provision for matters arising out of the establishment of the European Free Trade Association.… It appears to be the one piece of Government legislation intended to implement the requirements of the Convention. I have in mind restrictive business practices. Article 15 of the Convention—reading the part which I consider relevant to what I am about to say—says: Member States recognise that the following practices are incompatible with this Convention in so far as they frustrate the benefits expected from the removal or absence of duties and quantitative restrictions on trade between Member States". The first of those comes in paragraph (1, a) which, again taking the words that I consider relevant, says: agreements between enterprises … which have as their object or result the prevention, restriction or distortion of competition within the Area of the Association. As I read the words, "enterprises" is very general and is intended to cover any business undertaking or anything of that sort and is meant in the context to refer to private business undertakings.

I like lager beer. Lager beer is imported into this country from Denmark in fairly considerable quantities. The last figure which I have been able to ascertain shows that nearly £2 million worth of lager beer from Denmark reached this country in 1957. I suppose that that beer will be sold through the usual channels. One of the usual channels is public houses, or licensed premises.

Licensed premises are often run by tenants and not managers of brewery companies. Licensed premises so run constitute an enterprise and when that enterprise makes an agreement with another enterprise, the brewery, it is making an agreement which must not have as its object or result the prevention, restriction or distortion of competition.

In fact, however, the ordinary agreement about a tied house has precisely that object. The result of such an agreement is that the brewers are able to say to the tenant of their licensed premises that he must sell a certain kind of English lager, because those brewers make it, and not a certain kind of Danish lager. It is, of course, up to us, having recognised that practices of this kind are incompatible with the Convention, to take steps to ensure that those practices do not exist and are not allowed to develop, let alone increase.

Will the Government say whether there is already legislation to deal with this matter? I can only say that I doubt that there is. There is no question of monopoly, for, since Mr. Charles Clore is no longer in the field, I doubt whether there is anybody who can say that he controls a third of the trade in beer in this country.

Again, what about the Restrictive Trade Practices Court? In Section 8 of the Restrictive Trade Practices Act, 1956, there are some excepted agreements. One type of excepted agreement is described in subsection (3), which says: This Part of this Act does not apply to any agreement for the supply of goods between two persons … "Goods", even to teetotallers, includes lager beer. … neither of whom is a trade association within the meaning of section six of this Act … So far it is all right. … being an agreement to which no other person is party … An ordinary tied house agreement conforms with that. … and under which no such restrictions as are described in subsection (1) of section six of this Act are accepted other than agreements accepted (a) by the party supplying the goods … or … This is the part that I count on. (b) by the party acquiring the goods, in respect of the sale, or acquisition for sale, of other goods of the same description. What I suggest the publican accepts is a restriction that he is not to buy lager beer or other beer— goods of the same description from anybody but the brewery. Therefore, as I read the subsection, the Restrictive Trade Practices Act cannot apply to tied house agreements. But, equally, it seems to me that the clause in the Stockholm Convention clearly does apply to them and that if the Government, having recognised that certain practices are incompatible with the Convention, do nothing about it to bring in this Bill, then, while being the senior partner in the Convention, and bound, we would hope, to set an example to others, they have refrained from carrying out that Article and have allowed to continue a series of agreements which we all know to be very widespread all over the country and which appear to be incompatible with the Convention.

I have taken that as an instance—there may well be others—and I have taken it as an instance of mischievous purpose. I am well aware that dealings with breweries are a sore matter with the Conservative Party, and we must always go carefully with them from the point of view of hon. Members opposite. However, as I said at the beginning, I like lager beer, and I like to have a free choice in it. I do not want to have any prevention, restriction or distortion of competition about it. Therefore, I should like to have in any public house in this country, so far as this Agreement, when in force, can do it, a free choice between Danish and British brewed lager beer. I should like to know what the Government propose to do to give effect to that Article.

I have taken that as one instance, and it seems to me to be a fairly obvious one, but I wonder whether, when one looks through the whole of the Agreement, the Government really have considered what they are to do. I say it because when one looks, for instance, at the preceding Article, Article 14, "Public undertakings", and Article 13, "Government aids", it seems to me that some of the Government aid which may from time to time be given to industries will need to be considered very carefully in the light of the Stockholm Convention and the obligations which the Government have assumed under that Convention. I should feel happier if I could be assured that all the Government Departments concerned, including the Ministry of Agriculture, Fisheries and Food, have been carefully consulted about the effect of those Articles and whatever it is that they propose to do.

I now turn to one or two minor points. I listened with great interest to the right hon. Gentleman's explanation of the tests for determining what were goods of Convention area origin. I wish to put to him one case, largely because it has been commented on in the public Press. The President of the Board of Trade recognised that a number of industries in this country would be, let us say, at risk as a result of the Convention, and one of them is the textile industry. The right hon. Gentleman's explanation was given, as he put it, broadly speaking, and the particular case that arouses attention not only here and not only in the Press, but also, I understand, in the trade, is that of woollen textiles and particularly what is known as outerwear.

I am never too old to learn. When I saw there was something called "outerwear", and I knew that there was something called "underwear", I inquired whether there was something called "middlewear", but I am told that there is not, and that the jacket that I am wearing at the moment and the overcoat which I put on outside are both rated as outerwear. Therefore, it is a very big range of goods indeed.

The test there, as I understand it—taking the percentage test—will be whether the material imported from some other country and used to make the jacket or overcoat represents less or more than 45 per cent.—I believe that I have the figure right; I think that it is a special figure in this case of the import value or export value, whichever it is, of the garment in question.

It seems to me, though I am not an expert in the matter, that that may open the door extremely wide, that it may allow manufacturers of garments abroad to use material coming not from their own country but from the area of the Common Market Six or, for that matter, from other areas—for instance, from Japan—and got a cheap material in that way, and add a substantial amount to it by way of make-up costs and, therefore, get, indirectly, a benefit which I should have thought goes beyond the wish and the intentions of the House and, equally, beyond the best interests of the wool trade.

I noticed that one or two hon. Members were raising this type of question—I do not know that it was exactly the same one—during our last discussion, in December, and I hope that we shall be told whether any special arrangement has been made about outerwear; if it has been, whether the improbable has happened and I have stated it correctly, and, if not, what the correct statement of it is, and whether at the end of the day it has been accepted by the British Wool Textile Association and other trade interests as reasonably satisfactory.

I feel that in the present state of employment in the textile areas of this country we really must be particularly careful to safeguard the interests of the textile trades in a Convention of this sort. I believe I am right in saying that this is a matter which will have to be reviewed within a fairly short time, and, therefore, we are not pushing at a closed door. If, in fact, the present arrangements, which are neither in the Convention itself, as I understand, nor have been mentioned by the Government today, go beyond what is right or proper, there will be an opportunity of correcting the matter.

I have little more to say. A great many of the points which' the right hon. Gentleman put to us seem to be points which must entail a little more consideration in Committee, and if I may mention one particularly it is in the hope of avoiding spending too much time over Committee matters. The Minister of State explained that Clause 1, which is the main Clause of the Bill, goes a little beyond the provisions of Section 12 of the 1958 Act. I do not know if I am right in my guess, but the point at which it seemed to me to go a little further is in lines 8 and 9 on page 1 of the Bill, under which regulations may be made as to the time by reference to which … the question … is to be decided, I could not find these words in the 1958 Act, but they certainly are an addition, and I shall be glad if the hon. Gentleman who is to reply to the debate will confirm or correct my impression that that is the addition referred to, or if not, tell us what the addition is and explain why that matter is required there.

I am sure that we all understand the absence of the right hon. Gentleman the President of the Board of Trade today. I understand that he has gone to Zürich, and we hope that it has not been necessary to rescue sterling again.

4.41 p.m.

Mr. Leonard Cleaver (Birmingham, Yardley)

Having listened to the hon. and learned Member for Kettering (Mr. Mitchison), I thoroughly well realise that I am extremely "small beer" in standing before you today, Mr. Speaker, and asking for the indulgence of the House, as this is the first occasion on which I have addressed it.

I have on many occasions appeared on playing fields in the constituencies of many hon. Members, and on those occasions the matter was usually controversial, and it was not always settled entirely to my satisfaction. However, I hope that if, on this occasion, I give no provocation, the House will be kind enough to extend to me the courtesy which it usually extends to a maiden speaker.

As hon. Members are probably aware, the division of Yardley is part of the large conurbation of Birmingham, and is perhaps in one of the most intensive industrial areas in the country. Curiously enough, my constituency does not contain an enormous number of factories, probably a dozen or fifteen, but the manufacture of machine tools, wire drawing, the making of motor components and various goods required for transport facilities are among the trades which are carried on then. We are, in fact, a dormitory division for this great city.

The enterprise and hard work which has been characteristic of Birmingham for so many years is not dead, but is showing itself in my constituency in the way in which new churches are being built and old ones renovated and repaired. Any matter which concerns the trade and industry of this great country naturally affects my constituency very deeply. We do not, however, possess that civic centre in the division which is so important and would contribute to its life.

During the last two years I have visited a great many homes in my constituency and could not help being impressed by two facts. One is the desire that the present prosperity of trade in the city should be continued, with employment for the people, and the second is that the weekly pay packet must buy as much in twelve months' time as it does today. Of course, that in its turn means that hire-purchase payments are met, that rent does not get into arrears, and that there are plenty of those things which go into the housewives' shopping bags.

This position can be easily spoiled if inflation raises its ugly head again, as it may well do. No one realises this more than the Yardley housewife, or, indeed, housewives in general, for it is on the housewives that the burden of inflation falls, and they do not wish again to experience the spiral which involves rising prices.

These facts are not entirely unconnected with the matter before us today. If Great Britain enters into a trading agreement which is unsuccessful, or turns out to be to our disadvantage in the end, the industries of my city will suffer, and that, in its turn, will bring unemployment, misery and hardship to many of my constituents. For the City of Birmingham depends on a flourishing export trade. In fact, there is no commercial decision at which this House can arrive which does not affect it very seriously. It is because the bread and butter of so many people are involved that this Bill will be scrutinised very carefully by all those concerned with the industrial and commercial life of my city.

I hope that my right hon. Friend the President of the Board of Trade will be encouraged by the general welcome which has been extended to the Bill, and not only from Birmingham but from many Midlands industries. Many people are now realising the advantages of bulk production, and the large reductions in costs which can be obtained if, in fact, there is a great flow of trade and plenty of orders about. The success of British industry in this field is admirably demonstrated by the motor industry, which plays a prominent part in the industrial life of our city, and has contributed so greatly to the export trade of this country, hitting target after target.

The problem is always to find a bigger market than the 55 million souls who live in these islands can provide. The Agreement between the Seven adds a potential market of something like 26 million people in a very prosperous part of Europe, who have a great purchasing power as well. It is not only those who are engaged on mass production who will benefit, but also those who rely on their skill and the quality of their goods, and they will reap a benefit from the wider opportunities which these provisions will ultimately provide.

We cannot, however, expect people from foreign lands to owe us our living. This House, unfortunately, cannot pass Measures which will ensure that foreign peoples purchase our goods. It cannot guarantee that we shall have easy business or comfortable employment. I was gratified to hear the Minister of State say that provisions were being made to ensure that there would be adequate supplies of cheap raw materials. It is absolutely vital for the continuance of industry in my area that there should be no increased cost whatever in providing raw materials.

The opportunities which the Bill offers will only be achieved if certain requirements are met. First, prices must be competitive. Secondly, delivery dates must be met. Thirdly, design must be up to date, and quality must be first class. These requirements are not beyond the capacity of the efficient manufacturer, but they certainly leave no room for the old-fashioned and inefficient firm. Given these requirements, a great responsibility rests upon our export salesmen, who have a most important job to do.

I sometimes wonder whether people realise that, and give them the status they deserve. I should like to see more chairmen and managing directors of firms going out into foreign markets to consider whether prices are right, whether design is right and investigate all the possibilities. I am sure that this would do nothing but good. Increased activity by our salesmen will be effective only if there is no discrimination against British goods and if there is fair competition. I am thinking of tax subsidies, export incentives and similar devices. I hope that the Minister will be able to assure us that the Government are alive to these problems and that the Bill will enable them to take early action should export subsidies and incentives act to the detriment of British industry.

The Stockholm Agreement contains an Article dealing with complaint procedure, but it is very galling for a manufacturer who thinks that he has been affected by indiscriminate and subsidised competition to be told that his complaint is being considered by a council when all the time he is losing his trade, is probably losing his profits and possibly turning off his workpeople. I hope that if a case such as that does arise and the Board of Trade is put to the test, the batting of the Board of Trade will be more like the M.C.C. batting in Jamaica than another test which took place in another part of the Commonwealth a year or two ago. We want some commercial zip when these circumstances arise.

Another form of competition which must be faced is that of quality. It is possible to sell goods which on the face of them look perfectly all right, but are, in fact, sub-standard and of slightly lower cost. Very often goods coming into this country do not meet safety regulations. Industry would welcome an extension of the activities of the B.S.I. in this field. When the European Free Trade Area proposals come into operation there will be a much greater scope for the activities of that body.

I should like the House to be assured that it is not competition which we want to avoid, but unfair competition which we want to eliminate. It is all right to be playing the other side, but is a little hard for the referee and linesmen to be against one as well. I hope that we shall not be subjected to many low quality and low-priced goods flooding into the country under these regulations. The future and livelihood of our people depend upon the success of our attempts to obtain export business. Everyone in this country must realise the importance of these provisions and how essential their success is to our standard of living. I sometimes wonder whether ordinary citizens of the world realise how important they are.

I want to suggest two things which we should lay down. First, we cannot tolerate inefficiency or obsolete business methods. We cannot afford restrictive practices or anything which harms our export trade. The City of Birmingham would not be the great conurbation that it is if it had not been for efficiency and good management, and its 1,500 trades would not have come where they are and stayed if they had been based on inefficiency and bad management. Among these industries there are some very small ones which are extremely adaptable and very efficient.

Secondly, anything which puts up costs will lose us export markets and be entirely against the national interest. I have mentioned the responsibilities of employers, but I do not think that we should forget the obligations of employees. This is not the time to discuss the reasons or justification for an industrial dispute. I certainly do not want to enter into the realms of controversy, but I should like to refer to the method of settling disputes. If the strike weapon is used it will harm not only the general public, but employees and manufacturers as well. It is bound to put up costs and bound to make delivery dates more uncertain. Nothing annoys a foreign producer more than the non-arrival of his goods and his inability to keep his production programme.

Under the Bill, which prepares for a reduction of tariffs and increased European competition, these are important matters. We cannot expect foreign firms which are importing into this country not to take every opportunity they can to secure every market which is possible. That will be to the detriment of our industry and the standard of living of our people. I hope that those responsible for these matters will bear that in mind.

Some traders will be hit by these proposals. Obviously, there must be give and take in reaching an agreement with six other countries. Those who have to give will not like it and those who have to take will. I hope that we shall not desert the more unfortunate industries in these circumstances. I know from my own experience that some small industries are apprehensive about what will happen. I am thinking of copper smelters and refiners, and bronze and brass ingot manufacturers. Both industries depend on non-ferrous scrap. They feel that, if certain export restrictions are removed, scrap will flood out of the country, will cost them more and in the end will put up the price of their products. The smelters expect to be put out of business. I hope that we shall not forget that and that the Board of Trade will be ready and available to go into action as soon as the necessity arises.

In conclusion, we in Birmingham welcome the Bill as offering to our industries a challenge and an opportunity. It has the challenge that the cold blast of foreign imports will be felt by our industries, but they can be met by the skill of the workpeople and the inventiveness of the manufacturers. It gives us the opportunity of a much wider market, not only for those interested in mass production, but also for those supplying quality goods looking for other markets. Let us enter the European Free Trade Area with mutual co-operation and unity. The opportunity to increase our standard of living is before us. If we could do this and make an outstanding success of it, we could stagger the world and perhaps even surprise ourselves.

4.58 p.m.

Mr. Leo Abse (Pontypool)

I am sure that the House would like to join with me in congratulating the hon. Member for Birmingham, Yardley (Mr. Cleaver) on his speech. Dealing with a weighty subject, he spoke with great liveliness and verve. The whole House will look forward to hearing him speak on equally complicated matters on many future occasions.

My cold is so heavy that I almost have to ask the House for indulgence, but I am prompted to intervene because in my constituency there has been built up an important sector of the man-made fibre industry in this country. It is an industry which is fully prepared, as I am well aware, to face the consequences of any increase in fair competition between the countries of E.F.T.A. It is also an industry which is prepared to look forward to the possibility of building a bridge between the Outer Seven and the European Economic Community.

Unfortunately, it appears that the inevitable effect of the Bill on the industry will be most unfair competition. Paradoxically, the effect will also be that there will be a positive incitement in this type of industry for Common Market countries to remain outside the Free Trade Area. Five of the E.F.T.A. countries produce no synthetic fibres and one, namely, Denmark, produces no manmade fibre of any description.

Few of these countries have any comprehensive textile industry. The consequence is that in several the perimeter duties on yarns and staple fibres are nil or negligible. Some of the countries adopt a liberal attitude, more liberal than the United Kingdom, towards Japanese supplies of textiles.

The origin rules for textiles which Pave emerged from the Stockholm negotiations are, in my view, excessively liberal, and in many cases have been drawn up in such a way as not to favour the home industry but to suit special interests, such as the Austrian spinners, the Swiss embroiderers and the Swedish garment manufacturers.

As a result, the E.F.T.A. markets will, unless adequate safeguards are introduced, be laid wide open to penetration by dumped yarn and staple fibre from Common Market and other non-area suppliers and by low-cost Asiatic yarns and fabrics. Thus, if these regulations are put into effect, it may be possible for synthetic staple fibre to enter the area at dumping prices, paying no duty or very little duty at the perimeter and then be given area treatment after manufacture into spun yarn, fabric or garments. Then, that dumped yarn will come in duty free and circulate in the area as printed or embroidered fabric or stockings; and it will be possible for all outer garments, and even embroidered cloth, to be based on Asiatic or other non-area fabric.

The point I am trying to make is that there is a great fear that as far as the man-made fibre industry is concerned the main benefits of E.F.T.A. will accrue to non-area countries which will not incur the obligations imposed upon members and who are themselves protected by their own tariffs from retaliation by us. Because of this I say that, paradoxically, it could mean, as far as the sector of industry about which I am speaking is concerned, that there would be a positive incentive for Common Market industrialists to remain outside the European Free Trade Association rather than negotiate some form of agreement and so have to face us on fair terms.

If, for example, we look at the experience of 1958 as far as the man-made fibre industry is concerned, we find that there was a large excess capacity. This was true of all the major producing countries, and all of us who have any contact at all with this kind of industry know that the level of fixed and overhead costs is very high, with the consequence that once a surplus capacity comes into existence there is an incentive on the part of the producer to export his excess capacity at a very low cost indeed.

This can occur in many ways. For example, there could at any time in this type of product be an excess of capacity in, say, German yarn. We should then find that that yarn could go to Switzerland and, by minimal processing, could be sold inside the Outer Seven as Swiss woven fabric to the six partners at what, in effect, could be dumping prices.

To take an even more obvious example, we could have the situation in which Italian yarn, which could be produced very cheaply because it could be part of the excess capacity of Italian manufacturers, could be exported with very little carriage cost to Austria and there be made up by minimal processing into something like stockings. We should then have the serious situation of something which was processed dumped yarn coming out of Austria and circulating inside the Outer Seven to the serious detriment of our home industry.

This type of danger prompts me to ask for some assurance from the Government that in taking these powers for the special treatment of manufactures from our six partners they will, in return, ensure not only that our partners do not take unfair advantage, but, perhaps even more important as far as the man-made fibre industry is concerned, that they will not allow unfair advantage to be taken by third parties, by, for example, Germany, Italy or Japan. Unless adequate safeguards are in existence it means that the whole nylon industry in my constituency could be seriously affected by dumping.

I am asking that there should be—indeed, must be—effective anti-dumping legislation not only in this country, but in the countries of our partners. This is particularly vital because, as we all understand, all seven members are not in any way comparable industrially and hence an immediate self-interest is not necessarily a community interest, in contrast to the Common Market position. This disparity in the level of industrialisation as between one country and another demands special vigilance on the part of the Government if the manmade fibre manufacturer in this country is not to receive a severe blow. Indeed, in this connection, I ask the Government, whether, perhaps, it will be necessary for them to consider the amendment of Section 8 of the Dumping and Subsidies Act. It may be that a new formula will have to be introduced if industry is to be adequately protected in this respect.

I have no wish to repeat my point, but merely to stress the fact that in Pontypool we have built up, through the combined efforts of imaginative management, resourceful research workers and hardworking operators, a nylon industry which is the pride of Wales. That industry came to Wales as a consequence of direction by a Labour Government. It came, in no small measure, as a result of the activities of the father of my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins), who, today, is sitting on the Opposition Front Bench. We wish to avoid this great industry being severely damaged by a Tory Government taking this country into a European Free Association without safeguards. As matters stand, it is my view that the industry stands wide open to the abuse of dumped German, Italian or Japanese yarn.

5.7 p.m.

Sir John Vaughan-Morgan (Reigate)

I think that the hon. Member for Pontypool (Mr. Abse) will find that my hon. Friend the Economic Secretary to the Treasury will be able to give him quite adequate assurances when he winds up the debate. As the hon. Gentleman was speaking, I could not help feeling that when a comparable Bill to implement this Convention is going through the Parliaments of the other member countries, similar complaints will be heard, probably directed against this country. I believe that we must retain a sense of proportion in the matter and realise that, if we are to lower barriers, there are bound to be such dangers as the hon. Gentleman has adumbrated, but sometimes the risks have to be taken in the interests of us all.

I wish to reinforce what was said by my hon. Friend the Member for Birmingham, Yardley (Mr. Cleaver) and to congratulate him very warmly on the speech which he made today. I cannot help feeling that my hon. Friend the Minister of State, Board of Trade, who opened the debate, was a little optimistic in thinking that it would be confined to the technical matters contained in the Bill. I cannot see any justification for thinking that in a formal Second Reading debate we should not be able, with your agreement, Mr. Speaker, to raise wider issues.

My right hon. Friend the Chancellor of the Exchequer made a statement—if one can call it such—in January in reply to Questions, but very little information has been available since the debate on 14th December. Having followed these matters closely for two years, and as I still follow them with great interest, I want to know a great deal more about what has been happening in these last eight weeks than we have been vouchsafed today. The Ministerial minuet has continued—a sort of conga line through the capitals—but we have been told very little in the House about what has really happened.

When we discussed this matter in December, we heard a great deal about bridge building. Occasionally, the metaphor was varied and there were references to filling up a ditch. Some would think that a nearer parallel was digging a grave. The prospects of bridge building, or filling up ditches, has not, in my view, been improved by the entry of the United States of America into our discussions on this matter, an entry which has taken place after so long.

I cannot but say that I find that the whole American approach to the free trade area is quite inexplicable. I pay a very warm tribute to America's generosity towards Europe during the years since the war. I pay warm tribute to the extent to which America has liberalised her own trade, enabling us to make great inroads into her markets for our exports. I overlook for the moment such whacking great beams in the eye as Americans have in the shape of duty quota on woollen fabrics and a few other things. The fact remains that the United States does not understand Europe and has never attempted to understand our own peculiar position in these islands.

America has always been well represented at all levels in this country by her Ambassadors and Ministers who, I am sure, always put forward our point of view to Washington sympathetically. But, looking back over the years, I feel that those representations must always have been ignored. The Americans have, as it were, a bias towards thinking that Europe must easily and automatically he united. Just because the Founding Fathers of the United States of America managed to achieve a union of thirteen States with a common tongue and a common seaboard, with a common enemy in ourselves, the Americans think that Europe, with all its complexities and differences, must do likewise. It would be as fair for us to reproach the Americas for not having made a political unity out of the Pan-American League. They never have understood the British approach to any of these matters, particularly our approach to the European Economic Community.

For over two years, we have made it clear, ad nauseam, that, provided our ties with the Commonwealth are unimpaired, we are willing and eager to play our part in the movement towards European unity. I was delighted that my right hon. and learned Friend the Foreign Secretary, speaking at Strasbourg, emphasised the fact that we wish the Six very well in their progress towards making a reality of the Community.

What is the American approach to that? We can sum it up by saying that at the moment America is strictly neutral and impartial on the side of the Six but against the Seven. The Americans appear to be for the Six because of the political content of the union of the Six, despite the fact that it is inevitably somewhat restrictionist and inward-looking—

Major Legge-Bourke

But because it is federal.

Sir J. Vaughan-Morgan

It is, of course, as my hon. and gallant Friend reminds me, federal, and that is the magic word. The Americans are against the Seven, apparently, because they thing, although they are wrong, that it has no political content, despite the fact that the Seven is outward-looking and far less discriminatory against American interests, inasmuch as the mean of six out of seven of the tariffs in the European Free Trade Association is lower than the harmonised tariff of the Six.

The Americans are for the political unity of Europe but against the economic unity of Europe such as it was always put forward in the Free Trade Area negotiations, despite the fact that it is absolutely and completely consistent with the principles of G.A.T.T. which America is the first to invoke when it suits her book.

I cannot help feeling that, if America had not been so blind two years ago, had seen where her true interest and the true interest of the whole of the free world lay, and had thrown her influence on the side of a free trade area in Europe, such a development would have become possible, because at that time America had great influence in the affairs of Europe. It is only now, when America's own interests are in danger, when her own economic situation has deteriorated, that she takes up a firm attitude against a free trade area.

If we had had a statement about the negotiations, we might perhaps have heard that my fears were unfounded and that America really was beginning to appreciate the dangers of an economically divided Europe. Perhaps the Americans are beginning to understand that a Europe divided is far less able to help the under-developed countries and share the burdens which America, with some considerable assistance from ourselves, is now shouldering.

The crowded and rather confusing calendar of conferences continues. The Twenty are to talk. The Seven are to talk. Presumably, the Six are permanently talking. So it goes on. It is my hope that sense will ultimately prevail and the barriers between the Six and the Seven will be lowered. I hope that the rumours that we may be putting forward proposals for wider G.A.T.T. reductions will be substantiated, but we have not been told.

Where do the Seven stand today? We have achieved our own Association, but, apart from that, we seem to be getting nowhere. Looking back over all the negotiations, I think that it is idle to pretend that the seven Powers in the European Free Trade Association have not suffered a series of rebuffs—and I mean the Seven, not the United Kingdom Government, because we are all in this together.

To summarise the past history, we had stage one, the period of O.E.E.C. negotiations when we were led up the garden path by the French. We are now to have stage two, the Atlantic negotiations, when we are to be led into the wilderness by the Americans. There has been a further rebuff of a minor character. France has rejected the proposal to have the European Free Trade Association headquarters in Paris. It ought, at least, to go on record that that is, I think, the first time that any country has refused to have a headquarters. Usually, there is considerable competition to obtain their presence.

It looks as though very little headway will be made in 1960. We are unlikely to obtain any concrete commitments in a year in which there is a Presidential election. What can the Seven do? First, we must continue to take part in all these discussions that are taking place within the Atlantic Community, but there should not be too much compromise on our original aim of obtaining a free trade area for the Six and the Seven. Secondly, we ought to carry out the intentions which my right hon. Friend the President of the Board of Trade had in mind when he said of the Free Trade Association: Let us bring substance, reality, and meaning into it to make it a living and significant thing."—[OFFICIAL REPORT, 14th December, 1959; Vol. 615, c. 1176.] I had hoped that we would hear a little more about that today.

Another point is that we might stop advertising the disadvantages of the European Free Trade Association. We might, as happened in the debate on 14th December, stop being apologetic or deprecating about the Association. My hon. Friend the Member for Halifax (Mr. Maurice Macmillan) put it very wittily when he said on 14th December that we all know that our club is not as good as the other chap's club. That is quite true in many ways, but our club has a great many amenities which the other chap's club has not. It is outward-looking. It allows for the idiosyncrasies of the various nations taking part. It does not conflict in any way with our obligations to the Commonwealth. Above all, it is open to newcomers. So, in theory, is the Six, but in practice it would be nearly impossible for anyone to join the Community without a complete re-negotiation of the Treaty of Rome. That almost means that one could never have a new member in a club unless all the rules were redrafted which is not very practicable.

What can we do to make a reality of the Free Trade Association as it exists today? I do not know what the Government have in mind to put forward at the meeting in Vienna, and I have only a few small suggestions to make. I hesitate to add to the various jaunts and jamborees that take place, but could there not be a conference of Parliamentarians, perhaps on the lines of the recent conference of N.A.T.O. Parliamentarians in Washington? I am not suggesting a formal assembly, but such a meeting would provide an opportunity for the exchange of ideas. The Commonwealth, with the consent of our partners, might be asked to send observers, and we might even have observers from some of our sympathisers within the Six, because we have many sympathisers.

There are other forms of co-operation which might be looked into. The Federation of British Industries, in the vanguard as usual, has taken the initiative in forming an E.F.T.A. Council of Industrial Federations. There are other organisations in this country which might follow suit. Also—and this arises from a point which my hon. Friend the Member for Yardley mentioned—the secretariat of the E.F.T.A., when it is constituted, might consider steps which will lend themselves to harmonising the trading and social policies of the various countries of the Seven. The more that we make a reality of the Seven the easier we shall find it to come to an understanding with the Six, and with America as well.

One of the advantages that the Six have against us at present is that under the Treaty of Rome the harmonising of such matters as social policies is obligatory on them. We can do a great deal on the same lines. We can do something to see that our legislation on dumping or restrictive trade practices is uniform throughout the area. All these things can be done. They can and should be done by the secretariat as a matter of urgency.

Although this is rather a depressing moment for those who want to see Europe united economically, I cannot help feeling optimistic about the ultimate prospects of a European agreement of one sort or another. The position is better in some respects than we might have anticipated. It looks as if the Six will be more liberal-minded and outward-looking than at one time we feared. Certainly at the present time I cannot say that our trade to Europe has suffered. For example, last year our exports to Germany showed a phenomenal increase which proves that trade can, and still will, flow across the barriers although not by as much as we would like. Nonetheless, we must continue to work for European unity—nothing else will suffice.

I thought that the position in which we find ourselves was admirably put by Sir Oliver Franks in a speech that he made the other day. He said: The true interest of the international community is to see that the existing two grouping merge in the end, so that the dream of the free movement of men, goods and ideas comes true in Western Europe, and, in addition, to work with the Six and the Seven, or the group that may emerge, so that together we progressively lower economic discrimination in the free world. The Bill before us is the first faltering step, and the next step is to make it work.

5.27 p.m.

Mr. John Hynd (Sheffield, Attercliffe)

I am sure that many hon. Members on both sides of the House are surprised at, and might even deplore, the strong strain of anti-Americanism in the speech made by the hon. Member for Reigate (Sir J. Vaughan-Morgan), and particularly those hon. Members who have followed closely the development both of the Six and the Seven and the efforts that have been made—to which the hon. Member paid tribute up to a point—by America to bring Europe together poli- tically and economically. I was surprised to hear the hon. Member say that the cause of the trouble was the American failure to appreciate the importance of economic as well as political unity in Europe. I was even more surprised at the comparison which the hon. Member made. He said that when America criticised this country for having failed to bring about a merging between ourselves and the European countries in the federation, they were equally guilty in not having been successful in federating the Pan-American Union.

The two situations are opposite to one another. In our case the failure to achieve the federation of Europe is not because we failed to persuade the others, but because the others failed to persuade us. On the other side, if the South American countries had made a combined move to invite America into a North-South American Federation with America as the dominant partner—as we would have been in Europe—the United States would probably have been only too glad to accept. A comparison between the two is hardly worth considering.

The speech made by the hon. Member for Reigate, and those of other hon. Members, underlines the complaint that some of us made at the beginning, and to which I am sorry that the Minister did not fully respond, that because the Bill, which is the first instrument which has been presented to the House since the conclusion of the Stockholm Agreement, is a purely technical one, we have not been favoured by the Minister with some reflections on the wider considerations and developments that have taken place since the debate last December which have led to this stage where we are now bringing in a Bill to implement some of the agreements that have been made. Unless we know what is happening, unless we know where we are being led in these agreements of the Seven, some of us might find it difficult to support Measures that are brought in from time to time to make the agreements effective.

We were told—this has been said repeatedly in the course of this short debate—that when the Stockholm Agreement was concluded it was an attempt to build a bridge between the Six and the Seven. Other similes have been given. I heard one the other day from the Austrian Foreign Secretary, who described it by saying that the seven members of the Stockholm Agreement, having failed to persuade the Six to agree to a Free Trade Area, had formed themselves into a kind of trade union which would facilitate further efforts on our part to become associated with the Six on a wider Free Trade Area basis or something similar.

If that is really the intention, the Government should be able to tell us at each stage how that trade union is functioning, what demands it has made upon the Six or what propositions it has put before them, and how, in fact, as a trade union, it is functioning for the purposes of creating this new joint community. We have not been given that information. I hope that before the debate concludes at seven o'clock, the Economic Secretary to the Treasury will have armed himself with sufficient information to reassure some of those hon. Members who, like myself, have strong reservations about proceeding further with this community of the Seven until we know precisely what is its basic purpose. It is not merely because we may have a predilection for the Common Market set-up.

In this, I understand, we have had some recent support from the Government. I remember reading in The Times of, I think, 21st January that the Foreign Secretary himself had said publicly that he thought we had made a mistake in not becoming members of the Schuman Plan. That is progress, but it is progress in retrospect and it does not get us very far.

One does not want to go over all the history again, but the fact is that there were good reasons why we hesitated to take part in the first conference on the Schuman Plan. Certain conditions were laid down for our attending that conference which most of us, on both sides, thought were asking a little too much and we were not prepared to go into the conference unconditionally. I should have thought that if the Foreign Secretary and the Government now believe that it would have been much more to our advantage had we accepted that offer, even with the risk that it involved, then, they have still less excuse for not having taken part in the Messina conference, where such conditions did not apply.

General agreement is now spreading, I think, throughout the benches on both sides of the House, and even among the hierarchies of our political parties, that we made our biggest mistake when we did not play our full part in the Messina conference and tried to get, not the Common Market, not a Free Trade Area or Association but a community which would recognise all the difficulties of all the countries and all the special conditions, and which would have catered for any one member like ourselves, or like Sweden or Austria, and would have enabled members to join it without any difficulty or hesitation. We did not do that.

As the hon. Member for Reigate has said, the Common Market Treaty as concluded now makes it exceedingly difficult for us, even if we so desired, to join now. That, again, is because we were not at the conference at which the conditions were laid down, when countries like France were able to get special provision made in the Treaty to meet their overseas and their agricultural problems. By implication, we might well have been able to get similar conditions to meet our special problems. When we refused to take part, we cannot complain that the final Treaty which came out of those conversations does not make adequate provision for the special problems of a country which refused to consider becoming a member or to join in the original discussion.

What is the situation which now faces us? What worries me and a number of other hon. Members, apart from the ideological aspect, is the conception of a federation of the European countries, politically and economically, without us. There are practical considerations involved. It might well be that the explanation of America's present attitude to the Seven is a quite simple one. It might be a little difficult for hard-bitten Members of Parliament to swallow, but it might simply be that after the Second World War America saw the opportunity for bringing together into a federation the countries of Europe, friends and enemies of the past, eliminating all the disputes which had twice brought America into costly world wars, and that America was, therefore, prepared to put up with some of the difficulties which her trade might face in order to realise this conception. This might sound idealistic, but I believe that that is the simple explanation behind the American attitude. Now, however, we have gone beyond the consideration of the idealistic aspect and we are faced with a practical Bill giving practical effect to a practical situation.

What is this practical situation? Great Britain is now linked with the Scandinavian countries and with Switzerland and Austria into the Community of the Seven. We have facing us the Community of the Six, large, important countries, contiguous to each other, which can form a combined and easily managed community, federal or otherwise, whereas we are a mixed bag picked up from odd corners of the map—Great Britain, with Sweden and Norway up there and Switzerland and Austria across and over the top of the Common Market bloc, not only geographically in a difficult position, but, in some cases, politically and economically in an extremely difficult and hazardous situation.

Consider the case of Austria. Austria, quite clearly, has joined the Seven not out of preference, but because of the political implications if she tried to join the Community of the Six, where she would be much more at home economically, because the greater part of her foreign trade is done with Germany and the other members of the Six and only a small part is done with the Community of the Seven. That is apart altogether from the fact that we are so widely separated from her. But we all understand the political reason which has made it difficult, if not impossible, for Austria to associate with the Six.

It is rather far-fetched to suggest that if Austria joined the Common Market group, of which Germany is also a member, this would be equivalent to reviving the old anschluss idea. Nevertheless, that is one of the considerations in the background of the Austrian attitude. One can understand it because of Austria's delicate position and her anxiety that she should maintain quite clearly before the whole world her neutral position. It is, however, an awkward situation which faces Austria.

That is one of the reasons why I feel so strongly that every time we consider the question of the Free Trade Area Association, we should have in our minds how far this Association is moving towards eliminating those difficulties and bringing the two communities together. Unless we do that, we shall crystallise in our positions. We shall consolidate situations which, in the long run, will become impossible and intolerable, particularly for countries like Austria or even Switzerland, and make the division of Europe a fact both economically and politically.

Without wanting to go too far into speculation on how far that could lead us, I would make this short reflection. On Wednesday and Thursday of last week, we had an impassioned debate about providing Germany with atomic weapons. Many views were urged as to whether we were prepared to allow Germany to have atomic weapons, and, if so, under what conditions.

I did not hear a single word uttered about what might easily happen in the near future, namely that nobody will ask Britain's permission to provide Germany with atomic weapons. If the Community of the Six develops—and it may develop against us—it will become a federal community, certainly a political community; and with the present temper of President de Gaulle and his insistence upon developing his own atomic weapons—an insistence he underlined when the explosion took place, saying that this would enable the Community to provide its own atomic weapons—we may well face a position where France and the Community of the Six will have their own atomic weapons without any co-operation with us or opportunity of linking up with us. There might be a political position in Europe where France will be the dominant factor and where Germany, with or without Britain and America, will become a fully armed atomic member of the new Community.

That is a reflection on what might develop out of this, and therefore, in all seriousness, I urge the Government not to ignore these factors and not to be satisfied with measures to implement just the steps towards developing the technical agreements. We expect to be told by the Government what progress is being made towards solving the differences between the two communities and towards providing a bridge between them and making a mutual trade agreement.

I turn from general remarks to a couple of points about the Bill. Clause 1 says that The Board of Trade may by regulations make provision as to … the evidence which is to be required or is to be sufficient for the purpose of showing that goods are or are not to be so treated. That is the question of certificates of origin. Clause 3 deals with the investigation of "certificates or other evidence." The Government are, therefore, to have power to make regulations as to the kind of evidence which is to be required, and that evidence, apparently, can include certificates or other evidence. I gather from the Minister's remarks that he does not think it is a very difficult thing to do.

I should like a little more information about this, because my impression is that one of the biggest snags in the negotiations over the Free Trade Area was precisely how to satisfy all concerned that the system of certificates of origin could be adequately applied. That was one of the big difficulties. I know that some delegates said it could be overcome and that the certificate of origin system was a satisfactory one and could be an effective check, but others were not so happy about it, and I know that many groups of economic experts in this country are not yet satisfied that we can apply a watertight system of certificates of origin.

Therefore, I hope that we shall be told a little more about that, because from the wording of the Bill one might be left to assume that there is no difficulty about it at all, and that regulations can be drafted by the Minister and that the problem will be solved. Perhaps whoever is to reply for the Government will tell us something more about how the system of certificates of origin is to be worked.

Clause 1 (4) provides that regulations shall also be made by the Minister for determining in what cases produce of the sea, or goods produced or manufactured there-from at sea, are to be treated as of Convention area origin I say in all humility that I do not understand what this precisely means, but to me it reads as though the British Government under this Measure are going to take power unilaterally to decide what the conditions are, and what products from the sea and what goods produced or manufactured from the sea shall be regarded as having a Convention area origin. I can hardly imagine that that is the position, but that in fact any regulations or definitions will be made in agreement with the other Powers, and that there is no question here of unilateral decisions by ourselves without complete agreement with the other parties.

Those are the two points on which I should like information about the Bill. I would finish on this point which my hon. Friend the Member for Pontypool (Mr. Abse) made, for I think it is worth underlining. If the Government are genuinely seeking—again, we hope for some more information about this—to bring the Six and the Seven closer together and to build a bridge, is there not some possibility that first steps can be taken in this direction, on the basis of what has already been suggested by implication in an earlier speech, of trying to get agreement between the two parties on common anti-dumping measures?

A lot was said from the other side of the House about the dangers of our being faced with dumped goods from the Community of the Six or even other countries. The Rome Agreement provides against this and provides against monopolies. If the Rome Agreement does that, and the Stockholm Agreement countries want to do that, then it seems to me there should be no difficulty in getting together about it, to have a mutual agreement about dumping.

The same applies to social regulations. The Six, the Common Market countries, have in their articles provided that one of the main purposes of their association shall be to raise the social standards of the various member countries and to bring them into line. I do not think any member of the Seven need feel that they are going to be left behind in the development of social conditions, particularly social security conditions. Therefore, I should have thought that here again was another link which we could adopt for building the bridge.

I believe that if we cannot have the bridge built in one single operation, at least there are these different channels through which we could proceed to get an understanding with the Community of the Six on matters on which, I should have thought, there would not be a great deal of difficulty, agreement on which would be mutually advantageous and which would help to reduce the strains and stresses which would otherwise develop between the two communities. I hope that when the Minister replies to the debate he can give us some information as to what the Government's intention may be in that connection, and whether any proposals of that kind may be implemented.

5.47 p.m.

Mr. Maurice Macmillan (Halifax)

I hope that the hon. Member for Sheffield, Attercliffe (Mr. J. Hynd) will forgive me if I do not follow him down the well-trodden path of ideological and historical speculation that he took us along today, as he has so often done before. It is true that this is a minor Bill of a technical nature implementing the Convention, but it is a Measure of great importance to many parts of British industry, as my hon. Friend the Member for Birmingham, Yardley (Mr. Cleaver) showed in a far from minor maiden speech.

I think that in some ways the extent to which industry does welcome this Bill is remarkable, because there are sections which are damaged to some extent at least by the liberalisation implied in the Convention, and, certainly, even more sectors which are very fearful of some of the effects. This, I think, is particularly true of the textile industry.

I should like, if I may, to congratulate all those who took part in the negotiations on their tenacity and skill in having at least most of the percentage rule taken away from textiles. Most of the range are now included in Schedule II to Annex B and governed entirely by the process rule, with the curious exception mentioned by the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison), whose lead I seem to follow as readily on textiles as I do on building societies.

As far as I can see, it is only in Chapter 61 of Schedule II to Annex B that we have Men's and boys' outer garments, complete and ready for wear and not, curiously enough, only Women's, girls', and infants' outer garments but dresses, skirts, jackets, trousers"— I wonder what other forms of outer garments there are. The range is not inclusive and I should like to hear a little more about the various safeguards not only to this, but to other regulations under Clause 1. I am not particularly happy about the methods of dealing with the deflection of trade. I am not quite clear whether these apply to the home market only or to the re-export market.

Taking the textile industry again as an example, most of the countries associated with the Seven are without a comprehensive textile trade and may well be importing on a low tariff part-manufactured goods, such as wool tops from Uruguay, and they will be re-exporting from there within the Seven these finished or semi-finished articles in competition with the United Kingdom. Arrangements under G.A.T.T. prevent their raising tariffs to meet this point at our request unless they do the same against tops exported from this country. Under Article 5 of the Convention there are provisions against unfair competition in home markets in this country—or any other country so affected—but I am not clear whether United Kingdom producers are in any way protected against such unfair competition in a joint export market, that is, in selling to a third country altogether.

Again, I am not clear whether it is possible for a country to take action in the case of a third State being involved in dumping. There are various safeguards in Article 17, and Clause 3 reads as if it might be possible to take action. If member State A dumps goods in member State B, can member State C take action against the same goods even if its own industry is not affected by the dumping? I understand that under our legislation we are so empowered, but I am not clear whether other countries are or not. If they are not, is it the Government's intention to press for this kind of thing in the Council, as my hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan) suggested among his many other constructive suggestions?

The third point on which I should like some further reassurance from my hon. Friend the Economic Secretary to the Treasury is on the special difficulties that may arise in particular sectors. Article 20 (1, ii) says that where there is a rise in unemployment which is due to decreased demand and that decreased demand is due to increased imports, and the increase in imports is caused by eliminating tariffs, and so on, the country so affected can limit its imports by quotas. Article 20 (1, ii) states that a country can take measures other than the restriction of imports only as the Council, by majority, may authorise.

The hon. and learned Member for Kettering made the point here when he refered to Articles 13, 14 and 15 on Government aid, public undertakings and restrictive practices. Do Articles 13, 14 and 15, together with the qualification of a majority decision, mean that this country cannot take such action as is included in the Cotton Act to protect our industry without a majority decision of the Council?

I am sure that we shall all be glad to have the provision in Clause 10 for the extension of the Free Trade Area to other countries. In this connection, the Paris meeting of the so-called Twenty has done some good work, but, in common with other hon. Members who have spoken, I should like to know from the Government what has been done and what plans they have for carrying on such work. Apparently, they have dealt or are dealing with the question of assistance to under-developed countries and the reorganisation of O.E.E.C. It is quite right that they should do so, because we cannot separate all these various negotiations and organisations one from the other and there is plenty of scope for different sorts of associations.

I should like to see the new Free Trade Association as a model for the smaller area. I think that the time will come when the E.E.C. will be associated with the European Free Trade Association rather than the other way round, the Association being a wider and looser organisation which can have within its framework the E.E.C. and the Nordic community, and similarly associate through the United Kingdom with the Commonwealth in a way similar to that in which France associates the E.E.C. with its dependent territories and West Germany trades with East Germany.

I am sure that we all want the United States and Canada present, as well as the O.E.E.C. countries, in the talks in Paris. Like my hon. Friend the Member for Reigate, I am grateful for all the United States has done for us and for Europe in the past through Marshall Aid, and so on. I find the criticism of my hon. Friend the Member for Reigate that he is anti-American difficult to understand, because if our association with the United States is to have the strength and the power which association between true friends has, then we must at times be ready to criticise each other in detail without being accused of being hostile in general.

I sympathise with the United States on the matter of balance of payments, but we have taken off tariffs and restrictions on dollar imports into this country. Representing the constituency I do, I can never forget that the United States has done nothing yet to remove the tariff quota on woollen goods. I hope that the pattern in future in the reorganisation of O.E.E.C. will lead not to restriction but to greater liberalisation.

Visitors to Europe from the United States have expressed hostility to the whole idea of the European Free Trade Association. The United States prefers the Six for various reasons, among them that it dislikes any form of preferential area and, therefore will favour the smallest possible, and also because it is seen as a method of Franco-German rapprochement. There is great danger in that. It is all very well for Germany to say that she is equally seeking an approach between the Six and the Seven. There are indications that German policy is much more truly concerned with dominating Europe economically and building with France a powerful bloc. There is a grave danger that the present policy of the United States might encourage that tendency on the part of Germany.

I would like to know what Her Majesty's Government are doing, because it is important that European free trade should not be swallowed up in the wider conception of Atlantic free trade, important thought that may be. I believe that this Convention will achieve three objects if it is exploited in the way it should be. First, it will confront the European Economic Community with an organised group, not implying any hostility towards the Community but implying a greater capacity to deal with it successfully.

Secondly, it will prevent the Seven falling behind with the liberalisation of trade and with reductions in duty, a tendency which, if it were allowed, would seriously imperil any future link which I believe must come. The third object which the Association can achieve is to demonstrate the effectiveness of such an association, based on trade and economic considerations without necessarily close economic communication, which Austria, Switzerland and Sweden, to name only a few countries, cannot tolerate.

In fact, it is not so much a bridge as a pier on which a series of bridges can be constructed. Keeping to this metaphor, I again plead with the President of the Board of Trade and the Government generally to emulate Julius Caesar and throw their bridges about a bit.

6.2 p.m.

Mr. Arthur Holt (Bolton, West)

I am glad to follow the hon. Gentleman the Member for Halifax (Mr. Maurice Macmillan) and later I will refer to one or two points he made. First, I will tell the Minister that I now understand the point about wallets and drawback. I realise that there would be a slightly unfair competitive position for country A if, where a tariff is on leather and drawback has been obtained, it would not be adjusted before export. As the Minister read it, it seemed as if there were two different principles involved.

This underlines the fact that although we are setting out a Free Trade Area for the Seven, the first document which this House is asked to approve actually complicates trading and enlarges the bureaucracy connected with the Customs. Of course, it is only a small extension for this country because so much of our trade is already affected in this way. Whether the other countries of the Seven will be as unmoved when they find out by experience the complications in the working of certificates of origin I doubt.

I want to ask a question on a technical matter. Is there any intention at an early date of some modest harmonising of the tariffs of the Seven in certain sections of our tariff schedule? As the Minister will know, there are 21 of these under the 1958 Import Duties Act, drawn up on the Brussels nomenclature. Where there are tariffs on any one of those, which are more or less the same already, will there be any endeavour to bring those into line so that certificates of origin need not be shown in any trade done between the member countries in those articles, such as all the articles in Sections 1, 2 or 15? This may seem to be a small point but it may be useful, and it does not raise any great principle, provided that the tariffs are already near each other.

I agree with much of what was said by the hon. Member for Reigate (Sir J. Vaughan-Morgan), particularly on the line that we should now take on the Seven. I so strongly disapproved of the proposal for the Seven that I voted against it, but now it is a fact, and I am as keen as anyone that if it is to be a bridge we should get on with building it. Obviously, the fact that we have the Seven means that we can build the bridge, but the Government must show a great deal more initiative and drive in the matter than they have done hitherto. It is time that this House exerted its influence on the Government, because I find a growing interest in the matter amongst hon. Members. A year or two ago, only a comparatively few hon. Members on both sides of the House were really interested in it, but there is a growing feeling that we have "missed the boat" and that the Government must be more active.

I noted the speech made by the Foreign Secretary at Strasbourg on 21st January. The right hon. and learned Gentleman did not say, as the hon. Member for Sheffield, Attercliffe (Mr. J. Hynd) suggested, that it was a mistake that we did not go into the Coal and Steel Community. I think that the words used by the right hon. and learned Gentleman were that we made a mistake in not taking part in the negotiations which led to its formation. They may amount to the same thing, but they are not quite the same. That speech of the Foreign Secretary seemed to me to show a considerable advance on the part of the Government. It implied that, eventually, we would have found a way of joining the Coal and Steel Community. I believe that if we had entered into negotiations in a minor way the Community would be slightly different.

The Foreign Secretary went on to say that our present arrangements of association with that Community are not working satisfactorily—I see the hon. Member for Reigate looking surprised.

Sir J. Vaughan-Morgan

I did not want to interrupt the hon. Member, but I was so astonished to hear his remark that I could not help but look surprised. As one who took part in the meetings of the Association for two years, I would say that they worked very well.

Mr. Holt

If the hon. Gentleman will refer to the report of the speech made by the Foreign Secretary, which is in the Library, I think that he will find that I am correct in what I say. Anyhow, I believe that the Foreign Office is moving a little in the right direction at last, and I hope that the Board of Trade and the Treasury will catch up rapidly, because we cannot afford to waste much more time.

I shall ask some questions of the Economic Secretary instead of putting forward a policy, because there are many alternative lines they could take and it is a case of finding out whether they are taking some and getting a move on. Is it the intention of the Government, as was suggested by the hon. Member for Reigate, that they will try to develop the Seven in the direction of harmonising activities in social and economic affairs along the same lines as were made compulsory in the Treaty of the Six? Will they work towards doing this freely in the Seven, in the same way as this is being achieved in the Six?

Will the Seven develop freely in such a way that the differences between those countries and the Six will narrow all the time, and on a suitable occasion the differences will be seen to be very small and we might get the Six and the Seven together? I know that the Government believe that the present time is not suitable. Will the Minister say whether this is the general line upon which the Government intend to act?

I should like to know what is to happen to our obligations under the most-favoured-nation treaties. Does the very act of setting up the Seven auto- matically let us out of those obligations? When we make our first tariff reductions to the members of the Seven in July this year are we going to offer those same reductions to other countries with whom we have most-favoured-nation treaties?

I would have hoped that we would do so, but if that is our intention do we also intend to get a quid pro quo from the other nations concerned, or are we going to act unilaterally, as a gesture? The Government should try to obtain a quid pro quo if possible, but time is getting a little short, and if they cannot do so there is another reason why they might decide that it would be a good thing to act unilaterally. Throughout this year they will no doubt do their best to keep down prices, and at this stage a reduction of about 20 per cent. in our general tariff barrier would be a very useful contribution towards keeping down prices on the home market. This old free trade argument would no doubt serve two purposes this year.

Are the Government prepared to honour their treaty obligations to other countries in G.A.T.T. on their own, or only if the other members of the Seven do the same? We require answers to all the questions that I have raised, and I hope that, in spite of the earlier remarks of the Minister of State, we shall hear something about them in the debate tonight.

6.12 p.m.

Major H. Legge-Bourke (Isle of Ely)

If hon. Members will read the Explanatory and Financial Memorandum to the Bill, they will see that Clause 1 provides that the Board of Trade may make regulations for determining the circumstances in which goods are to be treated as grown, produced or manufactured in and consigned from the European Free Trade Association (E.F.T.A.) area ‖ The only hon. Member who has mentioned the question of grown produce is the hon. and learned Member for Kettering (Mr. Mitchison) who opened the debate for the Opposition. He touched upon the question of agriculture and then ran from it like a hare, spending the rest of his speech sitting in solitude on the Bass Rock, disguised as a puffin and surrounded by empty bottles of Danish lager.

I am sorry that he ran away from the subject of agriculture, because in his few remarks on the subject he said something that had some relevance to the policy of the official Opposition and the Government. He said that he was in favour of complete freedom of choice in the matter of consumer goods—

Mr. Mitchison

In the matter of beer.

Major Legge-Bourke

It may be that beer is best—but if he believes in complete freedom in that direction he ought never to have supported the policy behind the 1947 Agriculture Act, introduced by Mr. Tom Williams. That is an artificial agricultural policy, which has been adopted by both parties. It involves a deliberate action by the Government to stimulate or to reduce production, and it means that our people can have only what the British farmer is encouraged to produce in sufficient quantities, plus what the Government—as in the old days—allow in from abroad. The Convention which the Bill seeks to implement contains some agricultural Articles, the most important of which is Article 21, which refers to a list in Annex D which deliberately excludes many possible agricultural importations from the agreement to reduce tariffs over the next ten years Only a few commodities have so far been brought in. The Anglo-Danish Agreement allows Danish bacon to come in duty-free after a period of ten years. This has caused very great consternation in agricultural circles, which is hardly surprising, in view of the fact that it involves the Government moving out of the field of control over importation whilst retaining the power to interfere in production which they have been enjoying under the Agricultural Acts of 1947 and 1957.

I agree with the hon. Member for Bolton, West (Mr. Holt) that if we say, "Let us reduce tariffs", we must prevent the, Government interfering in production. It is no good saying that we shall have free trade on the one hand and the right of the Government to interfere on the other, because sooner or later the taxpayer will be involved as a result of that interference, and he will ask why he should foot the bill if the Government are allowing cheaper and sometimes better stuff to come in from abroad.

I had supposed that in approving the policy behind the 1947 and 1957 Acts both parties had either agreed that there should be interference artificially to stimulate British agricultural production to such a degree as to ensure that those living in the countryside would be able to enjoy a standard of living comparable to that of those living in the rest of the country. For if that were not done those living in the countryside would enjoy a standard of living considerably below that of the rest of the country.

A measure of the situation can be gained by a short visit to Southern Ireland, where the measure of Government support for agriculture is very small, and the agricultural wage is £5 a week instead of about £8, as it is here. It is only natural, therefore, that with this Anglo-Danish agreement, and the fact that the Government are removing their control on the importation of produce, the farmers will say, "Can the Government, over the years, sustain an agricultural policy of guarantees that both sides were agreed should be operated up to now, once they move out completely from the control of importation?" That is the question which is causing the greatest concern in the agricultural community.

I do not want to refer to the debate that we had in December last. Many hon. Members have done so, and it may be that I am largely responsible by having obtained a Ruling from the Chair at the beginning of the debate. I am trying to show that there is one aspect of the matter which has had very little consideration and yet which is of the highest interest to a large section of the agricultural community.

The disturbing thing about the Free Trade Association Convention is contained in the last sentence of the first paragraph of Article 21. The last sentence of the first paragraph of Article 21 says: The Council may decide to amend the provisions of this paragraph and Annex D. When we look at the regulations to be introduced under this Bill, we find that they are subject only to the negative procedure in this House. I can foresee the day when we may find the Board of Trade introducing regulations which involve amending these Annexes because the Council, at some time or other, may decide that Annex D ought to have certain items extracted from it. In other words, their treatment may well be the same as is afforded to Danish bacon. If that happened, the results could be catastrophic for the agriculture industry.

It seems to me that the form of negative procedure is not good enough for such a matter as this. The Government have to decide how long any Minister of Agriculture, Fisheries and Food who wishes to remain in one piece can put one foot on the tractor of the Annual Price Review which is grinding away in one direction and the other on the jet-propelled vehicle of free trade which is going in the opposite direction. At the moment, the Minister is giving a fine demonstration of the splits and I am wondering how long he can continue it. But it is horrid to watch and very disconcerting to those who live in and represent agricultural constituencies.

Most hon. Members who have taken part in this debate have spoken for their constituencies, and I hope the House will forgive me for having spoken for mine. Although I believe that the European Free Trade Association is a much better form of association than the inherently federal idea of a common market, I maintain that by going into this Agreement we are jeopardising the whole agricultural policy of this country and both parties had better start thinking about that pretty quickly.

6.21 p.m.

Mr. John Biggs-Davison (Chigwell)

Hon. Members are anxious to hear the replies of the Minister to questions which have been asked and I do not want to detain the House for long, but here we are in a half-day debate, with the President of the Board of Trade in Zurich, although I make no complaint of that, passing a Bill which departs radically from a principle which has long been held to be of the greatest importance in the Tory Party and the country, namely, the principle of Commonwealth preference in relation to industrial imports in the United Kingdom.

I know that the Ottawa Agreements are obsolete and eroded. I know it will take time for the European Free Trade Association to come to fruition. It may not be a great matter that there are small boys in this country who play cricket with bats made in Pakistan. It may not be of great moment that there are still Canadian Ford cars imported into the United Kingdom which will lose their preference over cars imported from member countries of the European Free Trade Association. But it is the future which causes me concern.

No longer is the Commonwealth composed of countries which are purely pastoral or agricultural or primary producing countries. Ahead of the Commonwealth there is a great industrial expansion, and I am anxious that we should not lose our share of it, that we should make sure of our Commonwealth trade and raw materials, and and also that we should not enter into such relationships with Continental countries as would cause a diversion of United Kingdom capital from the less advanced member countries of the Commonwealth.

The President of the Board of Trade is reported to have stated that we had to recognise that part of the price for all this so far as manufactured industrial products were concerned would be that Commonwealth exports, though they would still come in free, would no longer have preference over European products which, in due course, would also almost come in free of duty. My right hon. Friend was further reported to have said that that particular sacrifice was worthwhile in the general cause of European unity.

I am not one of those who see contradiction between the cause of Commonwealth unity and European unity, but it should not be our purpose to sacrifice the Commonwealth to Europe. The two causes must march together. It is only by co-operation between Commonwealth and European powers that great responsibilities in Africa and elsewhere can be discharged. A sacrifice of principle and position has been made—my hon. and gallant Friend the Member for the Isle of Ely (Major Legge-Bourke) has mentioned agriculture—but despite this sacrifice of principle and position we find ourselves in Europe at "sixes" and "sevens". That could be very harmful, not only to the general cause of European unity, but to the British and French community of interest, which I believe to be vital to the Commonwealth and to Europe North and South of the Mediterranean.

I wish to say a word about France. They have often been attacked for their obduracy towards the European Free Trade Association. This has proved inconvenient to us, but I do not blame the French. After all, they had to swallow all the medicine which M. Jacques Rueff concocted for them. They accepted swingeing reforms in their national economy and devaluation of the franc to meet their obligations under the Treaty of Rome. I am not surprised that they do not want to expose themselves to even wider competition in a larger zone of free trade. Nor do I see how groups of nations like the European nations as a whole or like the Commonwealth—I think the phrase "mixed bag" was used by the hon. Member for Sheffield, Attercliffe (Mr. J. Hynd)—jealous of their economic independence and political sovereignty can possibly combine in free trade areas or customs unions, interpreted in rigid, doctrinaire liberal terms.

It is more than ten years ago, in September, 1949, that my right hon. Friend the Prime Minister spoke of a "low tariff area" which could "be created in Western Europe, to which such preferential systems as are enjoyed by the Commonwealth could be partially extended." In 1952 I was a witness of the passing in the Consultative Assembly of the Council of Europe of the Strasbourg Plan which would have provided for a preference for other European countries intermediate between the Ottawa and the most-favoured-nation rate. This has not been possible for the reason given last August in the Economist. G.A.T.T. allows for customs unions and free trade areas with tariff barriers wholly removed inside. It makes no provision for 'preferential' zones, with the barriers only partly dismantled. Not for the first time the exigencies of the European grouping"— here we touch the question of reconciling the Six and the Seven— seem to call for a revision of G.A.T.T. G.A.T.T. provides very well for the economic structure of a federated continental bloc like the United States or like the United States of Europe advocated by some Americans and some Europeans like M. Monet. It does not provide for the grouping of sovereign nations of varying resources and needs and unequal economic strength.

For instance, France does not only look to the Continent; she looks across the Mediterranean. Germany does not only look to the Continent, she looks eastward. If we are thinking in terms of a real unity of Europe embracing countries now behind the Iron Curtain, its is certain that we cannot impose the economic liberalism of a Customs union, or even a Free Trade Area on the People's Democracies of the East.

But what next for Western Europe? The Times of 18th December reported Herr Lange, the Norwegian Foreign Minister, as calling for further sacrifices from Britain. The Times interpreted this to mean in effect the end of Commonwealth preference. Herr Lange spoke as President of the Atlantic Council. I do not know whether he spoke for the United States, about which I find myself in great sympathy with much of what was said by my hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan).

It seems that Western Europe is now divided into two trading blocs moving on parallel lines. The parallel lines do not meet in Europe, but somehow they twist round to meet in Washington. My right hon. Friend the Member for Reigate said that American policy was "inexplicable". Why was there this bias towards the Six? I hope it is not undue suspicion that suggests that the United States finds Europe easier to rule when it is divided.

There have been suggestions for the dilution of O.E.E.C. so that it should be no longer a European organisation. The United States is said to insist that the benefits of an accommodation between the Six and the Seven must be extended to the Americans under the most-favoured-nation principle mentioned by the hon. Member for Bolton, West. In other words, it would seem that in some quarters there is an idea that the only solution is to be found in the merging of the Six and the Seven in a Free Trade Area Association of the Atlantic Community. Such a top-heavy arrangement would perpetuate the separation of the Western European nations from their fellow-Europeans behind the Iron Curtain and divide Britain from her Commonwealth partners. Such a solution should be strenuously resisted by European nations whose economic recovery is now achieved.

Mr. Holt

What reason has the hon. Member for saying that it would divide Britain from her Commonwealth partners?

Mr. Biggs-Davison

Because it would be quite impossible for many members of the Commonwealth, particularly the new and less developed Commonwealth countries, to enter a Free Trade Area with the United States, United Kingdom and Canada.

As I wish to be brief and the House is eagerly waiting to hear the Minister, I conclude by saying that the Economist was right when, in the passage I have quoted, it said: The exigencies of the European groupings seem to call for a revision of the General Agreement on Tariffs and Trade. To quote again from this impeccable Liberal source: Any reasonably competent mid year student of economics can demonstrate with triumphant theoretical finality that any international trading system which has the peace and welfare of mankind at heart must be based upon these principles of multilateral convertibility and non discrimination. No sensible person would dispute that they represent polysyllabic perfection. They have only one defect; in the world as it is, they will not work.

6.33 p.m.

The Economic Secretary to the Treasury (Mr. Anthony Barber)

Whatever differences of opinion there might be about the scope of this debate, no one will deny that it has been a very helpful one. As the hon. and learned Member for Kettering (Mr. Mitchison) said, there will be good opportunity during the Committee stage to discuss details of the various clauses. Certainly the speeches to which we have listened have ranged over a wide area.

I should say at the outset that, although this Bill is concerned with the European Free Trade Association—with the Seven, and the Seven only—neither my hon. Friend the Minister of State nor I would doubt that it has been reasonable for hon. Members to express their views, not only on the technicalities of the Bill, but also on the wider and more fundamental question of European trading relationships. There will be ample opportunity, of course, as this is the season of Supply, for the Opposition to raise this question again if it so wishes.

I think I can best describe the scope of the Bill by saying that it provides a rather limited extension of the powers given by the Import Duties Act, 1958, and the Customs and Excise Act, 1952. As the House will have seen, or as those hon. Members who have read the Bill with care will have seen, it is essentially a technical Measure to enable us to carry out in full the obligations we have assumed under the Convention which the House approved on 14th December. There is one point in this connection which might well be borne in mind. That is that the other members of the E.F.T.A. are making arrangements similar to those proposed in this Bill. The result, we hope, will be to ensure the smooth working of the E.F.T.A. system.

The hon. Member for Sheffield, Attercliffe (Mr. J. Hynd) was somewhat concerned about certificates of origin. He wondered whether the system would work and how complicated it was going to be. As my hon. Friend the Minister of State mentioned in opening, some people were a little surprised that we have been able to work out—and work out so quickly—such an effective system. At first sight, the actual mechanics of the system might seem to provide that the operation of the origin rules would be a complicated business with long inquiries when goods were bought and presented to the Customs and so on. I would assure the House, however, that this will not be so.

We have done our best to ensure that there will be the maximum simplicity in Customs formalities and the form for traders' applications is to be as simple as possible. Each trader in each exporting country will be able to complete the declaration himself or, if he prefers, he can seek the assistance of a chamber of commerce or other authorised body and, when they are satisfied on the facts, a certificate can be issued. A further simple declaration is provided for, but it may be added to the normal invoice accompanying the goods.

We do not expect that the provisions about certification and verification of origin will throw a large burden on Customs and Excise or on the administrations doing similar work in other countries. We are making every effort to ensure that this working of verification can be done effectively, but also economically, and that the inquiries shall be restricted to the bare essentials. Inevitably, there has to be some provision for the imposition of penalties in the event of false declaration of origin. It was agreed between the member countries that these penalties should be on the same scale as those imposed by the country concerned for Customs offences in relation to importing of goods. I am sure the House will agree that this is reasonable.

The hon. and learned Member for Kettering declared a special interest—and I am bound to say I share it with him—in lager beer. I have looked into this vexed question. The hon. and learned Member read from paragraph 1 of Article 15 and said that so far apparently we had refrained from carrying out our obligations under that paragraph. He thought there should be something included in the Bill to deal with this point, but I draw his attention to paragraphs 2 and 3 of the same Article. I think that on reflection he will agree that in fact it is not necessary to make any such provision in this Bill.

Mr. Mitchison

I totally disagree with the hon. Gentleman.

Mr. Barber

I am sorry. Obviously the hon. and learned Member has made his speech. I can only tell him with great respect that there is nothing in Article 15 which requires the House to introduce any legislation in order that the United Kingdom Government should fulfil her obligations. There was reference by the hon. Member for Pontypool (Mr. Abse)—

Mr. Mitchison

I am sorry, but the hon. Gentleman cannot leave the matter at that.

Mr. Barber

I can only say this to the hon. and learned Member. No doubt, with the best will in the world, he said there was necessity for some provision to be included in the Bill to deal with Article 15. I have read the Article again and, with respect, I suggest that is not so. Paragraph 2 of Article 15 says: If any practice of the kind described in paragraph 1 of this Article is referred to the Council … It then goes on to say what will happen and, in paragraph 3 (a), it says: In the light of experience gained, the Council shall consider not later than 31st December, 1964, and may consider at any time thereafter whether further or different provisions are necessary to deal with the effects …

Mr. Mitchison

Surely the existence of some default provisions, some penalty for not performing an obligation, is no reason why one should not perform it.

Mr. Barber

I quite agree, but I do not think that adds to what the hon. and learned Member said earlier.

The hon. Member for Pontypool was concerned about anti-dumping legislation in other E.F.T.A. countries. This is important. If a United Kingdom company is suffering from or threatened with material injury as a result of dumping into another E.F.T.A. country, that country is obliged at our request to examine the possibility of taking action to remedy the situation. This is laid down in Article 17 (3) of the Convention. We have no reason to suppose that our partners in the E.F.T.A. will not be prepared to treat any such request seriously.

The hon. Member for Pontypool and other hon. Members made references to man-made fibres. If the disparities in the external duties of the member-countries lead to serious deflection of trade, we shall be prepared to seek an amendment of the origin rules, but we shall know whether this difficulty will arise only by experience of the working of the origin rules.

The hon. and learned Member for Kettering referred to Clause 1 (1) and quoted, as to the time by reference to which, in determining eligibility as aforesaid, the question whether goods are to be so treated is to be decided … He asked why those words were included and why they were wider than previous legislation. The reason is that the words will allow for the origin rules to apply to goods which are made earlier than the date of the regulations. This was felt necessary in order to deal with cases in which the goods are manufactured before the Regulations come into force.

Apart from certain general points which he raised, my hon. Friend the Member for Halifax (Mr. Maurice Macmillan) asked certain questions which were of great importance not only to his constituency but to other areas of the country. They were questions of a somewhat technical character concerned not so much with the Bill as with the Convention. In view of their importance, I hope that he will forgive me if I do not reply to him in detail at this stage. Perhaps he will permit me to write to him and give him a considered answer.

Both my hon. Friend the Member for Halifax and the hon. and learned Member for Kettering referred to the origin rules for outerwear, about which they were concerned. These qualifying processes for origin were agreed in order to permit the use of cloth from traditional non-area sources for making up into garments which qualify for Area treatment, provided that they contain a reasonable amount of workmanship carried out in the area. There is, however, an important safeguard: the rules about which my hon. Friend and the hon. and learned Member were concerned are at present experimental and will be reviewed in due course to see how they are working.

My hon. Friend the Member for Chigwell (Mr. Biggs-Davison) made some comments about the effect of the Convention on the Commonwealth. This matter was debated at length on a previous occasion, but I remind him that throughout the discussions which have led to the E.F.T.A. the Commonwealth has been continuously informed. In May of last year, there were consultations on the proposed E.F.T.A. between the senior officials who attended the Commonwealth Economic Consultative Council. In September of that year there were further discussions at Ministerial level. In addition, the Commonwealth Liaison Committee provided frequent opportunities for discussing the negotiations as they proceeded.

Although in some respects a minor Measure, the Bill is another and an essential step towards the removal of tariffs, quantitative restrictions and other barriers to trade in industrial goods between the seven countries of the European Free Trade Association. This liberalisation of trade will open a new prospect of prosperity for both consumers and producers. It will provide a stimulus and a challenge to the competitive spirit of British producers. As the House knows, our exporters are already looking for new trade openings in other E.F.T.A. countries. It is up to British industry to exploit the opportunities which the E.F.T.A. offers and to make it a reality.

Mr. Mitchison

I am sorry to inter-the hon. Member, but if this is his peroration—and it sounds like it—may we first have an answer to a question which practically every right hon. and hon. Member has asked: what has happened by way of building the bridge between the Seven and the Six?

Mr. Barber

The hon. and learned Member has not appreciated that I have three or four more pages of notes. He may well have heard me during the General Election, in which case I forgive his misunderstanding, for my peroration is sometimes long In any event, for reasons which I have already explained, I cannot say a great deal on the point which he has made.

The opportunities offered by E.F.T.A. are considerable. The population of the seven countries is 88 million. It has been pointed out that the E.F.T.A. is little more than half as big as the Common Market in population, but there is another factor of significance. I will merely refer to it, because it was discussed at great length by the Chancellor when he spoke in the debate on the Convention. In terms of national income the E.F.T.A. is about two-thirds as big and in terms of foreign trade about three-quarters as big as the Six. The other countries of the E.F.T.A. are predominantly importers of manufactured goods. Their economies are not sufficiently diversified to satisfy all their requirements. Among them are some with the highest living standards outside North America. It is these high living standards which place them amongst the world's most desirable markets.

The new Association will, of course, mean difficulties for a number of British industries. We have never denied that. The effect of freer trade must be to increase competition for our manufacturers in respect of those goods which are also produced by our partners in the Association. After all, if you expect to sell more to your friends, you must expect them to sell more to you. I have no doubt that on balance British industry as a whole will have a good deal to gain from this Association.

I congratulate my hon. Friend the Member for Birmingham, Yardley (Mr. Cleaver) on his maiden speech, not only on coming through the delivery so well but, if I may say so, also on its content. He mentioned the importance of having a large market. This is precisely what we are trying to provide in the new Association. He said that he was not averse to competition if it were fair competition. It is a fact that although we shall have increased competition from the other six countries as a result of the implementation of the Convention, that in itself, and quite apart from other desirable aspects, should go some way to maintaining the stability of prices about which the Chancellor of the Exchequer has spoken during the last few months.

The hon. and learned Gentleman the Member for Kettering seemed to assume that the sole purpose of E.F.T.A. was to form a bridge between the Six and the Seven. Certainly we hope it will help, but I hope—and I am sure he will agree—that this Association is in itself intrinsically advantageous for all the Seven countries. However, I shall say something of the developments in the wider field about which he was asking; but I should warn him that I cannot, for reasons I am sure he will understand, say a great deal on this particular aspect.

The Special Economic Committee passed a resolution at its meeting on 12th and 13th of January. As he referred to it I shall not read it all, but the resolution included these words: the need to examine, as a matter of priority, the relationship between the E.E.C. and the E.F.T.A. with due regard to the commercial interests of third countries and the responsibilities and obligations of the G.A.T.T. That resolution was endorsed by the meeting of the twenty Governments in Paris at the same time. As a result, this question will be dealt with by the Trade Committee, which we hope will meet shortly. I would certainly expect it to concern itself with the problem of the Six and the Seven. Meanwhile, this whole subject has been under consideration and has been discussed, as the hon. and learned Gentleman must know, last week by a meeting of senior officials of the Association in London.

I am sure he will agree that the first thing we must try to do is tackle the dis- crimination which will arise on 1st July if nothing is done about it. This was something which was of particular concern to the hon. Member for Attercliffe. Certainly it is very important and is the immediate problem.

At the meeting of the officials there was preliminary discussion to try to find ways of dealing with this matter. Because of its complexity, it will obviously require further consideration and, as the hon. and learned Gentleman knows, there is to be a Ministerial meeting of the Association in Vienna on 11th and 12th March.

If we could cope with this problem of the discrimination between the Six and the Seven, arising chiefly from the tariff reductions which are to come in July, this would give us a breathing space of eighteen months before the next tariff reductions of the E.E.C. and the Association are due. I am sure the hon. and learned Gentleman will realise that while all these matters are being considered by the Seven it would be quite wrong for me, on the occasion of the Second Reading debate of a Bill which is concerned solely with the implementation of a Convention dealing with the Seven, to go any further than that.

Mr. Mitchison

Without going into the merits of the matter, and while realising the hon. Gentleman's difficulty in making a statement now, surely this is remarkably slow moving. This matter has been under consideration for months and months and was treated on 14th January as a matter of priority. Is nothing to happen at Ministerial level until two months after that meeting?

Mr. Barber

I can only say that we—and, I am quite sure, our partners in E.F.T.A.—would like to go as quickly as possible, but the hon. and learned Gentleman will know that there are difficulties to be overcome, consultations to take place, and various matters to be considered. At any rate, I repeat that the objective of the United Kingdom—and the objective, I am sure, of all our partners—remains the same: the establishment of a single European market including all the O.E.E.C. countries.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Chichester-Clarke.] Committee Tomorrow.