HC Deb 19 February 1968 vol 759 cc129-39
Mr. Michael Alison (Barkston Ash)

I beg to move Amendment No. 15, in page 3, line 39, leave out subsection (2).

The Temporary Chairman (Mr. J. C. Jennings)

It would be convenient to discuss at the same time Amendment No. 16 standing in the name of the right hon. Member for Enfield, West (Mr. Iain Macleod), in page 4, line 25, leave out from "rebates" to "may" in line 26.

Mr. Alison

That would be convenient, Mt.. Jennings.

It is a piece of almost Pavlovian cruelty that the Minister of State, having spent the whole afternoon going through the severance agonies of the termination of the export rebate, should now have to extol the virtues of providing for its reintroduction. These two Clauses, containing the power simultaneously to terminate and to reintroduce the export rebate, surely constitute one of the weirdest conjunctions in Government legislation ever. It reminds me of the extraordinary instrument which the fabulous Dr. Strabismus, who invented a silent motor horn with the object of warning traffic without noise or disturbance. It was singularly ineffective and contradictory and that really reflects the juxtaposition of Clauses 2 and 3 of this Bill.

The difficulty is that we on this side have some doubt about the principle of the export rebate as such but, accepting the circumstances we are in today as being of a particular character. we believe that to sever it is a particularly ill-judged and ill-timed expendient. We know that the Government have done many things to counteract the effect of the alleged bonus to come from devaluation—the extra vehicle charges they are imposing, the higher import costs of materials which go into our exports, and so forth—while the Six are introducing a value-added tax. In our opinion, therefore, the introduction of this Measure amounts to counting our chickens before they are hatched.

If the Government expect there to be a huge surge of exports they had better wait until that surge comes before they begin taking away benefits which exporters felt they had through the rebate. In practice, though not in principle perhaps, this is a foolish time to withdraw the export rebate. But having done that, to compound the folly by taking discretionary measures selectively to reintroduce it is to produce the worst of all worlds. It is bound to make enemies everywhere.

Because it is selective, it is bound to leave most British exporters unrequited because, in the nature of things, it will leave a lot of them out. At the same time, it will succeed in imposing a general statutory threat to all foreigners which they will all feel to be pointing specifically at them, as most people do when these rather dark provisions of a threatening character are imposed in legislation.

But to us the really bizarre aspect of the provision lies in the way in which the selectivity would work out. It is in the light of this and of the damage we think that this Measure will do to the spirit and letter of the G.AT.T. that we ask the Committee to reject Clause 3 as it stands and accept our Amendments in the absence of any further assurance from the right hon. Gentleman.

8.15 p.m.

I want to draw attention to some of the peculiar repercussions of the selectivity feature of Clause 3. Power selectively to bestow an advantage on a certain country seems to be within subsection (3,c). If that is so, the provision is surely meaningless. If the country on which a selective benefit is bestowed is a signatory to the G.A.T.T. then. under the G.A.T.T., that selective benefit must be applied right across the board. In that case, what is the purpose of taking selective powers which must then be applied universally?

If the country concerned is not a signatory of the G.A.T.T., what is the point of applying unilateral benefits to a country from which there is no written-in reciprocity? This would only scandalise our co-signatories in the G.A.T.T. and to that extent lose an advantage in that selected country. Looking at the list of non-signatory countries, one wonders whether there is anything in this for us. It is a diverting pastime. Apart from the Eastern European countries, with which we must make special arrangements because it is impossible to tell whether they are discriminating unfairly or not, we find ourselves involved in possibly bestowing unilateral or one-sided or limited selective agreements with such small countries as Afghanistan, Costa Rica, even Lichtenstein and, most bizarre of all. the Vatican.

What purpose is there in taking special powers to enter into special beneficiary arrangements outside G.A.T.T. with the Vatican, probably annoying many other people in the process?

This sort of thing will arise under the selective provisions of the Clause. I suspect that attempting to bestow a selected advantage is not the purpose behind the Government's drafting. We have the evidence not only of the Prime Minister, but of the Chief Secretary from the way in which he handled this matter when he introduced the Bill. I suspect that the real purpose of this selectivity is not as an instrument to provide selected concessions to small non-members of G.A.T.T., but to be a form of tariff rearmament, and we object strongly to that. We believe that the Chief Secretary was much nearer the mark when on Second Reading he warned us of the dangers of any measures which smacked at all of tariff restriction, when he suggested that even the rebate was liable to do us more damage than good. Yet if the Clause is a defence mechanism, a form of rearmament, a kind of self-defence against measures taken by other States, it is totally unsatisfactory.

I remind the Minister of State that it is completely against, if not the letter, then the spirit of G.A.T.T. to take unto ourselves power to reintroduce an export rebate, across the board or even selectively against certain members of G.A.T.T., as an instrument of retaliation. This is where the selectivity is so bizarre and inexplicable, because if it is a form of retaliation, it must be applied to all G.A.T.T. countries if it is in any sense to pass the test of whether it is a form of tariff discrimination. It must be applied universally. If it is to escape the charge of being simply a discriminatory tariff, a defence weapon, it must occupy the position which it at present occupies, namely, what the Government consider to be a legitimate kind of domestic instrument which is non-discriminatory and not against the rules of G.A.T.T. But if they propose to reintroduce it as a weapon of defence, they will run into all sorts of difficulties with G.A.T.T.

Is it proposed simply to introduce it as a weapon of selective defence against countries which are not signatories of G.A.T.T., which is the impression which we gained from the Financial Secretary? In a rather light-hearted aside, he observed that one very obvious example of the way in which the reintroduction of the export rebate would not be against G.A.T.T. would be its reimposition …selectively in relation to countries which are not themselves subscribers to the G.A.T.T.…"—[OFFIcint, RFPORT, 8th February, 1968; Vol. 758, c. 781.] If that is the purpose, it is a ludicrous situation.

Either the Government are correct in saying that the export rebate has a marginal effect on exporters and is therefore quite unimportant, in which case its selective reimposition as an offset to some act of discrimination by third countries, not members of G.A.T.T., will have no effect at all, because, by definition, it is an instrument which has no effect on exporters, or it is conceded, as it must be in logic from what the Government are doing in the Clause, that the export rebate will have an effect in offsetting some sort of discriminating or tariff restrictionist act by a third country. Then the only effect of its reimposition, with a corresponding relief to exporters in respect of third countries, is to distort and divert trade precisely in the direction of the country against which it is aimed, because exporters will have a built-in incentive to claim the export rebate and to redouble their export efforts precisely in the direction of those countries which are discriminating against us.

The idea of the Government solemnly writing into our legislation, because they believe the export rebate to be an effective weapon of retaliation, a built-in incentive for this country to maximise its trade with countries such as Afghanistan, Costa Rica, El Salvador, Lichtenstein, Andorra and the Vatican precisely because those are third countries, non-signatories of G.A.T.T., which might enter into some sort of tariff restriction is too ludicrous to contemplate, and yet this is precisely the muddle into which the Government get with this kind of selectivity.

Either it is a non-discriminating non-tariff weapon to be universally applied in all circumstances, or it should be abandoned in total. To try to face both ways, to have a kind of Push-me-pull-you, to quote from the current "Dr. Dolittle" hit, to try to march in two different directions at the same time, will get the Government into a hopeless muddle. We hope that the Minister of State will give these Amendments the rational support which they deserve. Otherwise, we shall have to divide the Committee.

Mr. Nott

There has been something thoroughly obnoxious about the way in which the Government have handled the whole of this affair. There is plenty of evidence to suggest that in the talks before the devaluation of the£pressure was put on this country within the Group of Ten, probably from the United States and France, to abolish the export rebate in return for the acceptance by the Group of Ten of the rate of devaluation which we were proposing. There is evidence, too, that pressure came from the United States and France for the abolition of the rebate on condition that financial support to go with devaluation could be agreed. Certainly on my trips to the Continent when I have spoken about devaluation people in central banking have said quite openly that pressure was put on this country to abolish this rebate for these reasons.

Having devalued and having got our financial support, which came to us from the Group of Ten and many countries who had long supported us in all the difficulties which we had faced over the previous 18 months, having had that co-operation, the Government, with thoroughly bad public relations, indicated that they were proposing to take powers to reimpose the rebate by means of an Order. Following devaluation, there was a wave of speculation against the dollar, and none of us in this country or anywhere else have anything to gain from that type of speculation. Understandably—indeed, it was overdue and badly needed—the U.S. Administration were forced to take measures to put right their balance of payments, and they imposed additional restrictions.

8.30 p.m.

At the same time, the United States became concerned about the value-added tax which the E.E.C. countries were about to introduce, and its export rebate element. Pressure was undoubtedly put on those countries not to go ahead with an export rebate and it was said that the United States might introduce some export rebate itself to correct the position which would arise. At that moment, I believe, there were indications that the British Government would take powers to reimpose the rebate by Order and it looked to me as though the Government were ganging up with the E.E.C. to ensure that the United States did not get its way with the Six. My understanding of this may be wrong—I speak completely off the cuff—but it smacks to me of an obnoxious way of handling matters. I cannot think why the Government should abolish this rebate and take these strange powers to reimpose it by Order.

A process of disintegration is going on throughout the world, with the United States forced to contract and impose restrictions. This is becoming increasingly dangerous and the type of Order suggested—which looks like a threat to other countries, particularly to the United States, although I hope that we may hear that this is not the case—implies that we will be with the E.E.C. countries and against the United States on this dispute which has arisen.

Mr. Darling

The hon. Member for Barkston Ash (Mr. Alison) put forward a well-argued case against our proposal, but I remember debates in which we both took part in which complaints were made by hon. Members opposite about the lack of flexibility in Government legislation. It is generally admitted that doing something worth while creates unexpected difficulties, but he has in Committee criticised our legislation as too rigid and not flexible enough. We are here simply asking for powers to deal sensibly, flexibly and selectively with any difficulties in future in this respect and, inconsistently, the hon. Member is now castigating me. It is terribly unfair.

The Amendments would deny the Treasury the power, in reintroducing the rebate by Order, to select the countries to which eligible exports would be sent. The power to reintroduce the rebate by Order could then be invoked only for all exports eligible under Section 7 of the Finance Act, 1964. There is a slight addition to this in the Finance Act of 1966, which makes an exemption for exports to certain E.F.T.A. countries. Leaving that on one side, however, that would be its effect.

The provision for specifying countries of destination is discretionary and not mandatory, and is intended to give the maximum flexibility in catering for unforeseeable circumstances. Both hon. Members went beyond the Amendments—I do not criticise them for this—and attacked the whole idea of our taking powers to reintroduce the rebate.

That issue was disposed of on Second Reading, but some concern was expressed then by hon. Members who wanted to know whether the selective reintroduction of rebate would be contrary to the "most favoured nation" provision of the General Agreement. Whether or not selective application of rebate would be held contrary to G.A.T.T. must depend on the prevailing circumstances. The General Agreement does not prohibit selective defensive or retaliatory measures, like anti-dumping duties, nor would the restoration of rebates, selectively or otherwise, necessarily be the most appropriate measure in response, say, to the introduction of a rebate by another country.

I am strongly advised that to take power to reintroduce rebates selectively could not be contrary to the General Agreement. The Financial Secretary made it clear on Second Reading that the Government, in seeking such power, have no intention of breaching their G.A.T.T. obligations. The Government have made it clear that the rebate would not be reintroduced automatically but would have to be subject to very special consideration in the event of moves in that direction by other countries.

The mere assumption of powers to restore the export rebate on the basis which we suggest in the Bill could not be a breach of the General Agreement, but the question must be faced whether the exercise of the powers on a discriminatory basis could be reconciled with the "most favoured nation" requirement. Our view is that it could be so reconciled, but a definitive judgment on this point would have to rest ultimately with the contracting parties to the General Agreement.

Article I.1 of the General Agreement reads: With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges. and with respect to all rules and formalities in connection with importation and exportation… I do not wish to quote the rest as it gets complicated. But surely rebates could not properly be described as customs duties or charges in connection with importation or exportation. The issue, if any issue arises, would therefore fall within the phrase "rules and formalities". We would claim that they were neither, being in the nature of a discretionary privilege available to exporters on application but not something they were required to accept. We could not be certain that this interpretation would be accepted in any G.A.T.T. consideration of the question.

It may be noted, however, that the G.A.T.T. in resolving disputes traditionally adopts a common-sense and non-doctrinaire attitude, concerning itself less with the rights and wrongs and much more with finding equitable solutions. It is unlikely, therefore, that a measure of the kind proposed would attract the kind of outright condemnation which the hon. Member for Barkston Ash was sure it would if it were introduced in the circumstances of a reaction to a measure by some other country which was itself doubtfully in accordance with the General Agreement.

The Financial Secretary made clear in the debate on Second Reading that the Government had no intention of breaching their obligations under the G.A.T.T. in taking the present powers for selective reintroduction of rebate. That power is in any case only permissive under subsection (2).

Because we take this view, I hope that the Amendments will not be pressed. Clause 3 is a purely precautionary measure in which we think it prudent to provide for ourselves maximum flexibility against the unpredictable events of the future.

Question put, That the Amendment be made:—

The Committee divided: Ayes 116, Noes 175.

Division No. 59.] AYES [8.40 p.m.
Alison, Michael (Barkston Ash) Heald, Rt. Hn. Sir Lionel Osborn, John (Hallam)
Allason, James (Hemel Hempstead) Higgins, Terence L. Osbome, Sir Cyril (Louth)
Astor, John Hiley, Joseph Peel, John
Awdry, Daniel Hill, J. E. B. Percival, Ian
Baker, W. H. K. Holland, Philip Pike, Miss Mervyn
Balniel, Lord Hordern, Peter Pink, R. Bormer
Barber, Rt. Hn. Anthony Howell, David (Guildford) Pounder, Rafton
Beamish, Col. Sir Tufton Hunt, John Powell, Rt. Hn. J. Enoch
Biffen, John Hutchison, Michael Clark Prior, J. M. L.
Biggs-Davison, John Iremonger, T. L. Pym, Francis
Bossom, Sir Clive Johnston, Russell (Inverness) Ranwden, Rt. Hn. James
Boyd-Carpenter, Rt. Hn. John Kaberry, Sir Donald Renton, Rt. Hn. Sir David
Brown, Sir Edward (Bath) King, Evelyn (Dorset, S.) Rossi, Hugh (Hornsey)
Bruce-Gardyne, J. Kitson, Timothy Russell, Sir Ronald
Bryan, Paul Legge-Bourke, Sir Harry Scott, Nicholas
Burden, F. A. Lewis, Kenneth (Rutland) Shaw, Michael (Sc'b'gh & Whitby)
Carlisle, Mark Loveys, W. H. Silvester, Frederick
Chichester-Clark, R. Lubbock, Eric Sinclair, Sir George
Corfield, F. V. McAdden, Sir Stephen Steel, David (Roxburgh)
Certain, A. P. Mackenzie, Alasdair(Ross&Crom'ty) Stoddart-Scott, Col. Sir M. (Ripon)
Davidson, James(Aberdeenshire, W.) Maclean, Sir Fitzroy Taylor, Sir Charles (Eastbourne)
d'Avigdor-Goldsmid, Sir Henry Macleod, Rt. Hn. Lain Taylor,Edward M.(G'gow,Cathcart)
Dean, Paul (Somerset, N.) McMaster, Stanley Taylor, Frank (Moss Side)
Deedes, Rt Hn. W. F. (Ashford) Maddan, Martin Temple, John M.
Dodds-Parker, Douglas Maginnis, John E. Thatcher, Mrs. Margaret
Elliot, Capt. Walter (Carshalton) Mawby, Ray Turton, Rt. Hn. R. H.
Elliott,R.W.(N'c'tle-upon-Tyne,N.) Maxwell-Hyslop, R. J. van Straubenzee, W. R.
Fair, John Milts, Peter (Torrington) Walker-Smith, Rt. Hn. Sir Derek
Fisher, Nigel Miscampbell, Norman Walters, Dennis
Fortescue, Tim Mitchell, David (Basingstoke) Ward, Dame Irene
Foster, Sir John Monro, Hector Webster, David
Clover, Sir Douglas Montgomery, Fergus Wills, Sir Gerald (Bridgwater)
Glyn, Sir Richard More, Jasper Wilson, Geoffrey (Truro)
Gower, Raymond Morrison, Charles (Devizes) Woodnutt, Mark
Grant, Anthony Mott-Radclyffe, Sir Charles Worsley, Marcus
Harris, Frederic (Croydon, N.W.) Munro-Lucas-Tooth, Sir Hugh Wylie, N. R.
Harris, Reader (Heston) Murton, Oscar
Harrison, Brian (Maldon) Noble, Rt. Hn. Michael TELLERS FOR THE AYES:
Harrison, Col. Sir Harwood (Eye) Nott, John Mr. Bernard Weattierill and
Hastings, Stephen Onslow, Cranley Mr. Humphrey Atkins.
Albu, Austen Buchan, Norman Dewar, Donald
Allaun, Frank (Salford, E.) Buchanan, Richard (G'gow, Sp'burn) Diamond, Rt. Hn. John
Alldritt, Walter Butler, Herbert (Hackney, C.) Dickens, James
Armstrong, Ernest Butler, Mrs. Joyce (Wood Green) Dobson, Ray
Atkins, Ronald (Preston, N.) Carmichael, Neil Doig, Peter
Bagier, Gordon A. T. Carter-Jones, Lewis Dunnett, Jack
Barnett, Joel Coe, Denis Eadie, Alex
Baxter, William Concannon, J. D. Edwards, Robert (Bilston)
Binns, John Conlan, Bernard Ellis, John
Bishop, E. S. Craddock, George (Bradford, S.) English, Michael
Blackburn, F. Crawshaw, Richard Ennals, David
Booth, Albert Crossman, Rt. Hn. Richard Ensor, David
Boyden, James Cullen, Mrs. Alice Evans, Albert (Islington, S.W.)
Braddock, Mrs. E. M. Dalyell, Tam Faulds, Andrew
Bray, Dr. Jeremy Darling, Rt. Hn. George Fernyhough, E.
Brooks, Edwin Davidson, Arthur (Accrington) Fitch, Alan (Wigan)
Brown, Hugh D. (G'gow, Provan) Davies, Dr. Ernest (Stretford) Fletcher, Raymond (Ilkeston)
Brown, Bob(N'c'tle-upon-Tyne,W.) Dell, Edmund Fletcher, Ted (Darlington)
Brown, R. W. (Shoreditch & F'bury) Dempeey, James Foley, Maurice
Foot, Michael (Ebbw Vale) Lee, John (Reading) Prentice, Rt. Hn. R. E.
Fowler, Gerry Lewis, Ron (Carlisle) Price, Christopher (Perry Barr)
Fraser, John (Norwood) Lomas, Kenneth Price, Thomas (Westhoughton)
Gaipem, Sir Myer Loughlin, Charles Price, William (Rugby)
Ginsburg, David Luard, Evan Reynolds, G. W.
Gourlay, Harry Lyons, Edward (Bradford, E.) Rhodes, Geoffrey
Gray, Dr. Hugh (Yarmouth) McBride, Neil Robinson, W. 0. J. (Walth'stow, E.)
Gregory, Arnold MacColl, James Rose, Paul
Grey, Charles (Durham) McGuire, Michael Ross, Rt. Hn. William
Griffiths, David (Rother Valley) Mackenzie, Gregor (Rutherglen) Shaw, Arnold (llford, S.)
Griffiths, Will (Exchange) Maclennan, Robert Sheldon, Robert
Hamilton, James (Bothwell) MacPherson, Malcolm Silkin, Hn. S. C. (Dulwich)
Hamling, William Mahon, Peter (Preston, S.) Silverman, Julius (Aston)
Harper, Joseph Mallalieu,J.P.W.(Hucddersfield,E.) Slater, Joseph
Harrison, Walter (Wakefield) Manuel, Archie Spriggs, Leslie
Haseldine, Norman Mapp, Charles Swain, Thomas
Hazell, Bert Marks, Kenneth Swingler, Stephen
Heffer, Eric S. Mason, Roy Symonds, J. B.
Henig, Stanley Maxwell, Robert Urwin, T. W.
Herbison, Rt. Hn. Margaret Millan, Bruce Varley, Eric G.
Homer, John Mitchell, R. C. (S'th'plon, Test) Wainwright, Edwin (Dearne Valley)
Howarth, Robert (Bolton, E.) Molloy, William Walker, Harold (Doncaster)
Howell, Denis (Small Heath) Morgan, Elystan (Cardiganshire) Wallace, George
Hoy, James Morris, Charles R. (Openshaw) Watkins, Tudor (Brecon & Radnor)
Hughes, Emrys (Ayrshire, S.) Moyle, Roland Wellbeloved, James
Hughes, Hector (Aberdeen, N.) Murray, Albert Whitaker, Ben
Hughes, Roy (Newport) Noel-Baker, Rt.Hn.Philip(Derby,S.) White, Mrs. Eirene
Hunter, Adam Oakes, Gordon Whittock, William
Hynd, John Ogden, Eric Wilkins, W. A.
Irvine, Sir Arthur O'Malley, Brian Willey, Rt. Hn. Frederick
Jackson, Colin (B'h'se & Spenb'gh) Orbach, Maurice Williams, Mrs. Shirley (Hitchin)
Jackson, Peter M. (High Peak) Oswald, Thomas Williams, W. T. (Warrington)
Jenkins, Hugh (Putney) Owen, Dr. David (Plymouth, S'tn) Willis, George (Edinburgh, E.)
Johnson, James (K'ston-on-Hull, w.) Page, Derek (King's Lynn) Wilson, William (Coventry, s.)
Jones, Dan (Burnley) Panned, Rt. Hn. Charles Woodburn, Rt. Hn. A.
Jones, Rt.Hn.Sir Elwyn(W.Ham,S.) Park, Trevor Woof, Robert
Jones, T. Alec (Rhondda, West) Parker, John (Dagenham)
Judd, Frank Pearson, Arthur (Pontypridd) TELLERS FOR THE NOES:
Kelley, Richard Pentland, Norman Mr. John McCann and
Lawson, George Perry, Ernest G. (Battersea, S.) Mr. loan L. Evans.
Lee, Rt. Hn. Frederick (Newton) Perry, George H. (Nottingham, S.)

Clause ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

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