§ 9.27 p.m.
§ Mr. Robert Hicks (Bodmin)I beg to move,
That an humble Address be presented to Her Majesty, praying that the Agricultural Levy Reliefs (Frozen Beef and Veal) Order 1977 (S.I., 1977, No. 76), dated 19th January 1977, a copy of which was laid before this House on 28th January, be annulled.The principal reason for our wishing to draw this matter to the attention of the House is that the order has fairly wide implications, as it affects the whole principle of imports of meat from thira countries when there is surplus capacity and surplus production within the EEC or the United Kingdom itself.The provisions outlined in the order arise from the European Council Regulation 3167/76, which was agreed on 21st December 1976. This requires our Ministry of Agriculture to allocate and generally administer the United Kingdom share of the quota for levy-free import of frozen beef and veal. I understand that the regulation took effect on 29th January this year. This thus provides the House with a timely opportunity to discuss the important and sensitive issue of attempting to obtain the correct balance between supply of and demand for beef and veal and their associated products, and in particular-whether sufficient attention is being given by United Kingdom producers of livestock to producing the right kind of balance of all the various types, cuts and forms of beef required by both the domestic consumer, as fresh meat, and the trade, with its different needs for beef suitable for manufacturing and processing purposes.
I appreciate that any change in emphasis cannot be achieved immediately and that I am speaking in the context of a 10-to-15-year development period. However, that does not alter the fact that the Minister is seeking our approval for a scheme of frozen beef and veal imports from third countries free of levy and that this beef is for the United Kingdom meat manufacturing industries' immediate requirements.
We must consider the foreign aid aspect, since the imports concerned are from underdeveloped countries, particularly Botswana, Kenya, Madagascar and 1358 Swaziland. We realise that the export of beef and veal is a key feature of their economies. We do not want to prejudice their development or to give the impression that we are trying to hinder their export of a vital commodity. We certainly have no objection to this important aspect, particularly since the products are required by the United Kingdom national market.
Nevertheless, the underlying consideration is that, within the EEC and the United Kingdom, there is a surplus production of beef and a surplus capacity to produce. We currently consume 1.17 million tons of beef a year, 80 per cent. of it from domestic production. Of the rest, 14 per cent. comes from other EEC countries, primarily the Republic of Ireland. Of the remaining 6 per cent. or so, the major exporter to us is Botswana, which sends just over 1 per cent. of our annual requirements.
Probably between 14 and 18 per cent. of our supplies of beef are required for manufacturing and processing. Exports from the countries that I have mentioned provide this necessary market with the kind of beef that it requires. However, there is a surplus production of beef within the EEC and within this country. Figures provided to me by the Ministry at the end of last week confirm that within the United Kingdom about 3,600 tons of beef are in intervention, unsold. The figure for the EEC as a whole is 265,000 tons. Unfortunately, the surplus production and the requirements of this section of the meat processing and manufacturing industry do not match up. The majority of the beef in intervention is not suitable for manufacturing and processing purposes. It comes largely from steers and heifers from our own national herd, and that which is imported from Denmark and Ireland comes from similar types of animal.
At present, the only meat that we ourselves produce which is suitable for manufacturing and processing is the cull cow, the old cow beef. For obvious reasons, the meat from those cows does not always end up in the particular outlet that I am suggesting. On many occasions, they are fattened at the end of their lives for the obvious reason that the farmer can get a higher rate from the market for those between 2 cwt. and 3 cwt. That probably represents an increase to the 1359 farmer of between £30 and £45 per animal.
In debating this instrument this evening, we are seeking to draw the Government's attention to the need for the United Kingdom somehow to gear its production so that we are able to produce a higher quantity of meat of limited fat content that is suitable for the manufacturing and processing sector. What is required is the very lean meat capable of being processed and able to withstand the heat process to which manufactured meat is subjected.
The purpose in our praying against the order is to provide the House, and the Minister in particular, with the opportunity of saying a word about the Government's attitude in respect of a very important sector of the meat-consuming industry which also has implications for the domestic producers. Can the Minister say, in particular, what action his Department has taken in respect of this sector? Can he say whether discussions are taking place with the trade, the Milk Marketing Board and other interested organisations and bodies?
We are debating the principle of imports of a product from third countries in respect of which we are also producing certain surplus capacity and have extensive reserves at home. I am sure the Minister will agree that the implications that follow from the provisions contained in the order should be the subject of close Government scrutiny.
It is not my object to go through all the trials and tribulations which have faced the United Kingdom livestock producer during the past two or three years. I am sure the Minister will agree that, since the manufactured meat sector takes between 14 per cent. and 18 per cent. of all the beef consumed in this country, it is important that the Government should at least give close examination to the possibility of adopting some kind of system whereby we might encourage the domestic production of the kind of meat required by the manufacturing and processing meat industry.
The Opposition have no objection to this order. We realise the significance of frozen beef and veal to the economies of the exporting countries concerned. But we would welcome an informal and pos- 1360 sibly rather guarded statement from the Minister indicating how the Government see over the next 10 or 15 years our achieving this correct balance between the supply of meat and the demand for meat from all sections of the meat industry, and for beef and veal especially.
§ 9.41 p.m.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. E. S. Bishop)The House is grateful to the hon. Member for Bodmin (Mr. Hicks) for the responsible tone of his speech. It may be that he ranged a little wider than the scope of the order. However, what he said was relevant to this discussion because, while we are continuing schemes which have been a feature of previous years, it is in order for hon. Members and the industry outside to have allayed any fears or doubts which they may have about their effect on our own market.
I want to make a few remarks about the purposes of the order. In it, we are concerned with the continuation of powers which previously have been notified to the House. My right hon. Friend made a statement to the House on 23rd December of last year in which he referred to the import regime and the possibilities of the GATT quota.
I should explain that the quota which we operate in the United Kingdom is part of a wider EEC quota. The Community has for many years admitted a specific quantity of frozen beef from third countries free of the variable levy which is otherwise applicable to beef imports. The size of the quota is bound in GATT. When the Community was enlarged in 1973 by the accession of the United Kingdom, Ireland and Denmark, the quota was increased to take account of the requirements of the new member States. It now stands at 38,500 tonnes a year for the whole Community. This quantity is divided out between the member States at the beginning of each year by a decision of the Council of Ministers in proportion to each country's requirement for imports. This requirement is measured principally by the quantities of beef actually imported by each country over a recent series of years—about three years. Because of our historic position as a beef importer, the United Kingdom normally secures the largest share. Our total share for 1977 is 12,750 tonnes.
1361 The overall size of the quota is hardly significant in relation to total production either here or in the Community as a whole. This is possibly reassuring to the hon. Gentleman, although I do not doubt that he will want more than that. The 38,500 tonnes compares with annual production in the EEC of between 6 and 6½ million tonnes. Our own production is in the region of 1 million tonnes: our quota share is 1.3 per cent. of this. Because of the Community's GATT obligations, imports under the quota have been allowed to continue without interruption over the past three years, even though there have been general restrictions on importing beef during this period. In other words, the GATT quota has been unaffected by the application of the safeguard clause. This has involved no risk to the level of market prices generally or the level of returns to Community cattle producers because of the small quantities involved.
Nevertheless, the scheme is, in our view, useful. It has been particularly valued by our importers during the period of restrictions on imports, since it has enabled them to keep alive their links with third country supplies. This is a modest scheme of some importance. It has, in a sense, been their lifeline for the past three years. But in more normal times also it is a useful basic source of supplies of the kind of beef which cannot be produced in the Community. The beef which comes to us from Australia or Argentina, for example, is from leaner cattle than those produced within the Community, and is suitable for different purposes.
I have explained the general significance of the quota, for us and the EEC as a whole. I will turn now to the details of the scheme. I have said that the Council of Ministers decides the division of the quota between member States. The Council also settles certain basic rules of the scheme, such as that the normal Customs duty should apply to imports under the quota; and that the Commission may make recommendations for a revision of the allocation between member States, if appropriate, on the latter part of the year. Apart from this, however, each member State is left free to administer the scheme, and to devise a system for allocating its share of the quota 1362 in a way consistent with its own legal and administrative system.
We have now been operating the scheme in the United Kingdom for about four years, since we joined the Community, and we do not intend to make any radical changes for 1977 in the system which has worked satisfactorily in earlier years. Many tariff quotas are operated on the "greyhounding" system, that is to say, the quota is declared open on a certain date and can then be taken up by importers on a first-come first-served basis until the total quantity available has been exhausted.
For the frozen beef quota we have decided against this system because the total quantity available is so small in relation to total requirements and might easily be taken up by one or two large importing companies very early in the year. Instead, the basis we have adopted is preallocation—that is, specific shares in the quota are allocated in advance, at the beginning of the quota period, and those who receive allocations are then free to use them as and when they wish, up to the end of the quota period.
The major part of the quota is allocated to individual beef importing companies on the basis of their recorded imports of third country beef and veal during a certain reference period. For 1977 we are allocating 9,000 tonnes out of the 12,750 tonnes in this way. Then each year a smaller quantity—not more than a third of the total United Kingdom share—is allocated to those Government Departments which are involved in large-scale catering. This gives the taxpayer some direct benefit from the quota. For 1977, we are setting aside 3,700 tonnes for the use of these Departments.
The details of these arrangements are agreed in consultations between the Ministry of Agriculture, trade representatives and representatives of the Departments concerned.
Particularly full consultations were held before the arrangements for 1976 and 1977 were finally settled. This was necessary because the restrictions and the various special import arrangements introduced since 1974 have influenced patterns of trade. And these special factors had to be taken into account. The outline of 1363 the arrangements is clearly described in the order.
The hon. Member for Bodmin has rendered a service to the House by drawing attention to some of the misgivings that might arise. I hope that my comments about the scheme will give the hon. Gentleman some assurance. However, I shall say a little more about the subject in order to assure the hon. Gentleman and the country that the situation is satisfactory.
The hon. Gentleman drew attention to the current situation of the beef market and pointed to proposals for changes to be made in the beef import arrangements to come into effect on 1st April. He argued that we might be moving too far in the direction of relaxing import restrictions when the market apparently is still uncertain. I would remind the hon. Gentleman that the new arrangements for beef imports, due to come in on 1st April, were decided by the EEC Council of Ministers last December and were reported to the House by my right hon. Friend the Minister of Agriculture, Fisheries and Food on 23rd December and I think that they were warmly welcomed. The arrangements concerned are designed to replace the "safeguard clause"—and the various special arrangements operated under the safeguard clause. In broad outline, the new import regime will be similar to that which the Community operated till the middle of 1974; it will be based on variable levies. However, in some important respects the new scheme will give better protection to producers. As in the past, levies will be dismantled by stages when market prices rise above the guide price and imported beef is needed. But a new feature will be that levies will be increased by stages when market prices fall below the guide price; and a maximum rate of levy of 114 per cent. will be applied if market prices are below the intervention price level to curtail the volume of imports in these circumstances.
§ Mr. Geraint Howells (Cardigan)I am grateful to the Minister for seeking to put our minds at rest. May I ask what discussions he has had with the NFU or with members of the meat trade, and whether they object to these meat imports?
§ Mr. BishopI was about to come to that point. Producers have no need to be apprehensive about this arrangement, indeed, the NFU expressed itself well content with the arrangement when it was first announced. The hon. Gentleman mentions an important matter, and I am glad to give him that assurance. This should ensure that the home market is adequately protected when prices are low by the mechanism of levy and other safeguards.
I wish to seek, therefore, to reassure those hon. Members who are concerned at the changes being made in beef import arrangements that the regime to be introduced on 1st April has been carefully designed to give adequate protection to the market. It should ensure that market prices here and elsewhere in the Community cannot be undermined by imports from third countries. On the other hand, it should automatically allow imports to balance the market when prices are firm, and imports are needed. So far as the GATT quota is concerned, this is an arrangement which has continued in operation throughout the period of import restrictions, without any adverse effect on the market. As I said earlier, the quantities involved are very modest in relation to the total size of the market so that the effect on prices will be negligible. On the other hand, the quota provides access, free of levy, for a basic quantity of beef from third countries and the United Kingdom has the largest share of any EEC country of this quota.
The hon. Gentleman mentioned the effect of the import régime possibly leading to a fall in beef production. The revised import arrangements should allow us to import the beef we need without undermining production prospects here. The levy arrangements will ensure that import prices do not get out of line with domestic prices. This is an important matter. The major source of beef in the United Kingdom is the dairy herd, which is already on the upturn and is expected to increase further this year.
I have talked about the effect on the producer, but what about the effect on the consumer? That is why we are concerned with imports. The EEC import regime allows imports on to the market when they are needed to supplement home supplies. There are special provisions to cater for types of beef that 1365 are not produced in the EEC and the balance sheet scheme for manufacturing beef is the most important of these for the United Kingdom. It will help to meet the requirements of our processing industry.
As to the attitude of third countries to the new import régime, I mentioned just now the importance of this nominal link and I can also say that the traditional exporting countries have given a general if cautious welcome to the prospect of restoring these links. It is a cautious welcome because this is not opening the gates for a great flood of imports, by any means, but it is a nominal trickle that will be helpful to them and not unbeneficial to us. The GATT quota has been helpful in maintaining these links during the period of restrictions. Our general policy—which the industry will appreciate—is one of gradual liberalisation whilst carefully watching the effect on home producers.
As to beef prices this year, this is another factor that is difficult for anyone to predict, but in view of lower home production, market prices—underpinned by higher support levels—should continue firm.
As to the comments made by the hon. Member for Bodmin about the longer-term policies, these are outlined in our White Paper "Food from Our Own Resources". But we are still in the process of considering the Commission's proposals, and while we wish to see prices fixed at a level that will provide a fair return to efficient producers—and we think particularly of our own producers when we talk about efficiency—we are concerned that due account will be taken of the need to contain inflation and structural imbalances. This was an important point that was made by the hon. Member for Bodmin.
One thinks of the situation and the changes and difficulties over the last few years since the debate in 1974 when we were not without difficulties, and of the beef premium scheme. It is useful that the Commission has proposed a continuation of the beef premium scheme into the 1977–78 marketing year, pending a fundamental review of beef support arrangements. But we shall have to consider what would be an adequate period of extension in this context. We are in the 1366 middle of the Community agricultural support and price negotiations now.
I hope that what I have said will help to reassure the hon. Member for Bodmin. I know of his deep concern for farmers in his constituency. I am also pleased to see the hon. Member for Cardigan (Mr. Howells) here tonight, because I know of his interest in these debates. I am sure that he is here to listen to what can be done for his constituents.
I assure the House that we shall do what we can to keep the balance of the market and demand under continual review. The House will be aware that on many occasions we have made known our views on surpluses and have also made clear our insistence on the rôle to be played by the United Kingdom producer in supplying the needs of the Community.
If the order were to be annulled, we should have to stop licensing imports for admission free of levy under the quota and it would be regrettable if we were no longer able to derive the benefit of this beef. I hope that I have persuaded the House that those who have misgivings about the order should withdraw their Prayer and allow the order to continue in operation. I particularly thank the hon. Member for Bodmin for giving me an opportunity to give assurances that I hope will be useful to the industry
§ Motion, by leave, withdrawn.