Clause 3.—(FURTHER REDUCTIONS OF CUSTOMS DUTIES ON E.F.T.A. GOODS.) (Hansard, 14 May 1963)

§ Mr. G. R. Mitchison (Kettering)
There are one or two questions that I want to ask the Government about this Clause. It relates to the lowering of import duties on a number of things coming from E.F.T.A. countries, particularly, as the White Paper tells us, on beer and matches, which will cost about £125,000 a year by way of reduced tax.
I have been looking at the Treaty of Stockholm and so, I am sure, have the Treasury Bench. Under which Article is this happening? There was a reference in the Chancellor's Budget speech to eliminating the protective element in revenue duties, and when I looked through the Treaty I found provisions for progressively eliminating the effective protective elements in the duty, and a reference to the date on or before 1st January, 1965. 1224 This fitted in so remarkably with what the Chancellor said that—I refer to the subject of the previous debate—I thought that I bad spotted a winner. But that was not so, because two pages later I came to an Article entitled "Import duties" I suppose that these are also revenue duties, but import duties they most certainly are. I found that Article 3(2, a) provided a nice little timetable for not applying import duties at levels exceeding certain percentages and providing, in effect, for a 10 per cent. reduction over a number of years, including this year.
These are hardy annuals. We had one last year when, for some reasons, we reduced the tax on gas lighters, but they have been left untouched this year. What are these minor differences when we consider a wide question of principle such as this? Which is the part of the Treaty under which the Government are operating? As these are import duties, why could we not be told that this was the position? I cannot believe that the Chancellor got the Treaty wrong. It is I who must have done that, but I should very much like to know what the position is.
I want, next, to refer to the question of imported beer. The Financial Secretary will remember the days when he was Economic Secretary and when we had a little machinery treaty about E.F.T.A. duties which has become the European Free Trade Act. It is mentioned in the Bill. I then raised, as one always does about beer, a high question of principle. I should like to know what will happen in respect of imported beer, because according to the Treaty which we are carrying out there must be no discrimination in these matters and we must not frustrate the benefits expected from the removal or absence of duties —that is precisely this case—by restrictive business practices, one of which is the agreement between enterprises which has as its object or result the prevention, restriction or distortion of competition within the Area of the Association. When this machinery Bill, as it then was, passed through the House, I pointed out to the present Financial Secretary that this kind of restrictive practice exactly applied to this beer and that the object of these concessions was partly eliminated by 1225 the practice of having tied houses, because there was restrictive competition.
I pointed out that the practice of having tied houses was just this sort of agreement between enterprises which resulted in the distortion of competition, because the tied house, having made an agreement with the brewer—there are other forms of it, but that is the simplest to take—the result was that the brewer's lager was given preference over the imported lager beer. About £2 million worth of imported lager comes from Denmark alone and rather more, undoubtedly, from E.F.T.A. as a whole. It is a substantial item. We have here these illusory concessions in the way of gradual reduction of duties but we submit it to these discriminatory practices.
The hon. Member then laughed at it rather lightly. The following comments were addressed to me on 15th February, 1960: I can only tell him with great respect that there is nothing in Article 15"— that is the Article to which I have been referring— which requires the House to introduce any legislation in order that the United Kingdom Government should fulfil her obligations."—[OFFICIAL REPORT, 15th February, 1960; Vol. 617, c. 1021.] I ventured to point out to him that the effect of there being no penalty did not usually relieve a respectable sovereign State from carrying out what it had undertaken to do.
7.45 p.m.
Has there been any progress since then? If we agree to the removal of part of these discriminatory duties in favour of E.F.T.A., shall we then find that the tied house system still exists in this country and that preference is still given to the beer of one British brewer or another aga[...] the imported beer in favour of which this concession is supposed to be made? This is a question of principle. Questions of beer so often are. For instance, there is a Clause which we shall reach later, called "Brewers not for sale", which clearly raises the most important issues.
I would say, not more seriously but equally seriously, that both sides of the Committee are glad to see the active functioning of E.F.T.A. year by year. Even if the Government as usual slip up a bit in the performance of their 1226 obligations, they appear to be on the right path in this matter.
May I make a point which will probably arise in answer to the first question: are corresponding concessions of this sort being made by other E.F.T.A. countries at the same rate and what is the Treaty position in respect of this type of duty? There was reference, I think in the Chancellor's speech—I may have got the wrong place for it—to some hastening of the removal of duties in connection with E.F.T.A. May we be told shortly—and I mean shortly—what sort of thing that is? At what rate is it proceeding? I hope that I am not belying myself speaking for too long in these fascinating questions, and I hope that I shall be given an answer.

§ Mr. Barber
I assure the hon. and learned Member for Kettering (Mr. Mitchison) that our partners in E.F.T.A. are reciprocating by taking similar action in favour of our exports to them. I cannot—and he would not expect me to—give specific details, but this is the general position. I am grateful, as I am sure are most hon. Members who take an interest in these matters, for his observations generally about E.F.T.A. and the progress which we have been making, particularly recently.
In the short time which we should like to devote to this Clause, I hope that I may also refer to the First Schedule, because the two are linked. The Clause and the Schedule together make a further reduction in the rates of customs duties on certain, and only certain classes of goods if they are E.F.T.A. goods—that is to say, goods originating in and consigned from a place in the area of the European Free Trade Association. The rates of Customs duty on similar goods imported from other sources are not affected in any way by the Clause.
The E.F.T.A. Convention provides, among other things, for the gradual reduction and eventual elimination of import duties on most kinds of industrial products—that is to say, if they are E.F.T.A. goods, as defined. The Convention, as the hon. and learned Member pointed out, draws a distinction between import duties; between what are sometimes called protective duties, on the one hand, and revenue duties on the other. In general, protective duties have to be 1227 progressively reduced and eventually elminated vis-à-vis other E.F.T.A countries. Revenue duties, on the other hand, are charged primarily, as one would expect, for the purpose of raising revenue, but they may nevertheless, as have some of our revenue duties, have a built-in protective element.
There is an obligation under E.F.T.A. to reduce and again ultimately to eliminate any such protective element in the revenue duties on industrial E.F.T.A. goods. The hon. and learned Gentleman asked me under what Article we carried out this procedure of eliminating the protective element in the revenue duties. The answer is under Article 6.
At the outset, we were given the option under this Article of gradually reducing the protective elements in successive reductions, correspondiing to those which were prescribed for the reduction of protective duties, or—as I am sure the hon. and learned Member will remember, because we have discussed this on a previous occasion—eliminating protective elements on or before a fixed date, which was 1st January, 1965. Again, I will not go into details unless the hon. and learned Member wishes me to do so, but we decided to go for the second option, that is to say, to incur the obligation to eliminate protective elements on or before 1st January, 1965.
It was considered desirable that we should carry out the elimination of the protective elements in these revenue duties in stages. Apart from anything else, we thought that this would be convenient for British industry. The first step was taken in the 1962 Budget. The reductions which were then made and which we considered in the Finance Bill of last year affected the same goods as the reductions which are now proposed and which are set out in the First Schedule.
The hon. and learned Member referred to beer other than black beer—he will have noticed that point. Black beer is a particularly strong beer, as I understand it, which is frequently used for medicinal purposes. The hon. and learned Gentleman might like to consult his doctor about it. The present duty reduction brings the rate of duty charged on E.F.T.A. beer to the same level as the duty charged on beer entitled to Com- 1228 monwealth preference, which is £1 per 36 gallons below the rate charged on non-E.F.T.A. foreign beer.
As the hon. and learned Member pointed out, the type of beer which is particularly affected by the duty reduction is lager beer. This accounts for about 3 per cent. of the total United Kingdom beer consumption. Danish lager, which will certainly benefit from the reduction, represents about one fifth of this specialised market. British lager is unlikely to be seriously affected because the reduction in the duty amounts to rather less than ½d. a pint and it is obviously not easy for a reduction of that order to be passed on.
To my surprise, the hon. and learned Member then raised the subject of tied houses and our obligations under the E.F.T.A. Agreement and particularly the Stockholm Convention and he referred to Article 15 on restrictive business practices, which I read very carefully when we discussed this previously. I had forgotten all about it and I have not had time to read it fully since, but I am convinced—and I hope that the hon. and learned Gentleman will be satisfied—that the answer which I gave on the previous occasion was correct.
I am sure that if I had been in error in anything I said—which, broadly speaking, was that although we had an obligation to do certain things and consult about them, it went not very much further than that—on a matter as important as this, as both the hon. and learned Gentleman and I recognise, the error would have been brought to my attention.
Perhaps I should say that the cost of the reductions is only about £125,000 so that this is—I was about to say "small beer"—but it is not a matter of great significance. It is sensible to take this action in this Budget and, after all, we are acting in accordance with our treaty obligations.

§ Mr. Mitchison
This is also an international match as well as being small beer. I cannot accept as satisfactory what the hon. Gentleman has just said. His answer last time about tied houses was that while we might be breaking the treaty, nobody had yet taken any steps to enforce it. We have a remarkably patient collection of partners in E.F.T.A. if they can be treated like that. His 1229 answer was so obviously unsatisfactory that it merits nothing more than the rapid passing of the Clause.