HC Deb 14 February 1977 vol 926 cc12-3
6. Mr. Sims

asked the Secretary of State for Trade if it is his policy to encourage third country trading by British merchant houses.

Mr. Meacher

Yes, Sir.

Mr. Sims

Is the Under-Secretary aware that the recent restrictions on the use of sterling in third country transactions is making this type of trading particularly difficult, and that the more flexible and cheaper facilities offered by the United States and Continental banks mean that valuable confirming business that took place in London is in danger of being lost? Will the hon. Gentleman discuss with the Chancellor of the Exchequer the way in which the new restrictions are operating, and particularly how they are affecting trading of this type?

Mr. Meacher

Perhaps the hon. Gentleman could give us some examples. I am well aware that the new exchange control rules announced on 19th November require British merchants to borrow foreign currency to finance merchanting operations involving third country transactions, but there is a limit to the extent to which we can afford to tie up our external reserves in trade that is not directly geared to the future of this country. But even in that respect I certainly hope that the Eurocurrency market centred in London will be able to provide sufficient foreign currency for such transactions. The banks have indicated that that is their expectation.

Mr. Neubert

Whether or not the Under-Secretary is aware of it, it is the case that, because of our traditional relationships or the relative weakness of the pound against other currencies, some suppliers and producers will insist in dealing in sterling. As our foreign competitors can continue to do so, are we not, for the sake of this once-and-for-all gain, prejudicing permanent benefit to our invaluable invisible earnings by this rather short-sighted measure?

Mr. Meacher

That is not the view taken by those dealing in this field, but if the hon. Gentleman can give me significant evidence we shall consider easing the arrangements.