§ The Prime Minister (Mr. James Callaghan)With permission, I should like to report to the House on the meeting of the European Council in Copenhagen which I attended at the end of last week with my right hon. Friend the Foreign and Commonwealth Secretary.
The Council expressed to the people of Italy its distress at the cruel abduction of Signor Aldo Moro in Italy. There was agreement on the need for close co-operation among the Nine in countering terrorism and to reach conclusions on the proposals put forward by President Giscard with the aim of improving judicial co-operation among the member countries.
The nine Foreign Ministers, meeting separately for part of the time, reviewed a number of current international problems, including the current position in the Middle East. The Council deplored all recent acts of violence in this area and the events in Southern Lebanon and expressed support for the new United Nations Force and for the integrity of the Lebanon. The Council emphasised that the momentum of the peace process in the Middle East should be maintained with a settlement based on Security Council Resolution 242 in all its parts and on all fronts.
A statement was issued by the Council supporting efforts of the five members of the Security Council to bring about a peaceful solution in Namibia. My right hon. Friend the Foreign and Commonwealth Secretary gave an account of recent developments in Rhodesia and the Council expressed their continuing support for a satisfactory solution based on the principles of the Anglo-American plan.
On Community affairs, the Council agreed that the legislative procedures in the member States were sufficiently advanced to select the dates of 7th to 10th June 1979 for the first direct elections to the European Assembly. Each member State will choose its customary day of the week. For Britain that would be Thursday 7th June 1979. The Council adopted a declaration on democracy reaffirming the link between membership of the Community and the observance of democratic 984 principles, which is valid for both present and future member States.
Following the "Amoco Cadiz" disaster on the French coast, the Council called on member States to adopt common attitudes in preventing pollution of the sea and in particular to co-ordinate action on compulsory shipping lanes and on effective control over vessels which do not meet the minimum standards for the operation of ships.
It was agreed that a European foundation should be established, in Paris, to promote cultural and other contacts within the Community.
The main focus of our discussions, however, was the unemployment of both human and material resources within the Community. The growth rate of the Community during 1977 was 1.9 per cent, and it was agreed that we should develop a common strategy designed to reverse this unsatisfactory situation. The strategy should cover five broad areas—economic and monetary affairs, employment, energy, trade and relations with the developing world—similar to those I recently suggested to President Carter, as areas in which the industrial world needs to take collective action. It is the Council's view that agreement in these fields would be an important contribution to world economic recovery, higher economic growth and the creation of new jobs. The Council laid stress on the need to prevent inflation as part of the same objective.
It was decided to aim for a Community growth rate of 4½ per cent, by the middle of 1979 and to define the margin of manoeuvre that would be open to member States as a result of co-ordinating their actions. The possibilities should be known when the Council next meets in Bremen in July. It was agreed to recommend a doubling of the capital of the European Investment Bank.
An improvement in the general employment situation would be a key objective of such a common overall strategy. The Council agreed to examine whether work-sharing measures should have a supplementary part to play in alleviating the present grave employment problems.
There was a discussion on the European aspects of what are called "industries in distress" and agreement to set up tripartite committees on a European 985 basis made up of Governments, employers and trade unions to overcome the serious problems of structural overcapacity and to restore the industries to world competitiveness.
Work is being set in hand on these matters and on the imbalances of current account surpluses and deficits which lead to currency instability, as well as on measures to reduce demand and increase supplies of energy in the Community. It was also recognised that there is a need to reach a successful conclusion on the present multilateral trade negotiations and for an increase in capital flows to the developing countries.
It is intended that conclusions on these matters should be reported to the next European Council in Bremen early in July. This meeting will be followed by an economic summit between the United States, Canada, Japan, Germany, France, Italy and the United Kingdom in Bonn on 16th and 17th July. It will thus be possible to present a European dimension to the wider summit. I am glad to say that the agreed statement announcing the wider summit also recognises the need for concerted and mutually supportive action in the main areas I have mentioned, and the participants agree to develop their policies so as to take account of this, both in preparing for the July meeting and in any action they take meanwhile. The Budget to be introduced by my right hon. Friend the Chancellor of the Exchequer tomorrow will take this into account.
This recognition of common purpose must now be reflected in the work that will take place and must lead to concrete action in the coming months and at the July summits. The discussions so far held with Heads of Government within and outside the Community have now to be made effective by policy measures which taken together will offer the best chance of bringing about a change in the direction of the world economy and an improvement in world confidence.
§ Mrs. ThatcherThe Prime Minister has made a very long statement and it would neither be possible nor desirable for me to comment on each and every point, especially as much of it will be the subject of debate later in the week. I shall confine myself, therefore, to my usual few points.
986 First, is the Prime Minister aware that we welcome any strong action by Governments which will bring terrorists to justice and which will prevent further violent acts of the kind which we are seeing far too often in Europe, that we welcome the setting of the date for the direct elections, and that we welcome the declaration of democracy which makes it clear that there is no room in Europe for any one-party State?
Secondly, as there appears to have been a great deal of discussion on international currency and exchange rates and a good deal of confusion—indeed, contradiction—in the reports, it would be helpful if the Prime Minister could clear up some of that confusion and, in particular, if he could say whether there is any change in the Government's policy of allowing exchange rates to float either against all currencies or specifically against those of our Community partners.
Thirdly, will the Prime Minister say whether there has been any change in the very firm view taken at the Downing Street Summit—I am aware that it was of a different composition—against trade protection? He will remember that at the Downing Street Summit there was a communiqué which said that protection would foster unemployment, increase inflation and undermine the welfare of our peoples. Is that still his view about a country which exports as much as we do?
§ The Prime MinisterI am obliged to the right hon. Lady about what she had to say on the question of terrorism and its suppression. The Bill concerned with the suppression of terrorism, which is now going through Parliament, will, I hope, be of assistance in this matter.
As regards exchange rates, as I think that the House is aware through Press briefing, the President of the Commission and others have put forward proposals. Copenhagen is a rather ill-omened place for such proposals, I seem to recall. However, we should examine everything and anything that is put forward that would lessen the turbulence in the exchange markets. I should be very happy to do that, but we must be clear that lessening the turbulence in the exchange markets does not of itself either promote or reduce unemployment. Present Government policies continue to exist. Ideas are always being bruited about and they should be 987 examined, but there is no more to it than that at present.
As regards trade protection, I found a growing concern among a number of Heads of Government about this matter, to some extent caused by the previous point that the right hon. Lady raised—the turbulence in the markets either forcing up some currencies or forcing down others—and to some extent because of the transfer of technology from the advanced industrial world to the developing countries. It would be profoundly politically dangerous if we were to use protection as a defence against that consequence, but it is throwing up new problems for the middle 1980s. Studies are beginning on that.
For the meantime the right hon. Lady knows my view—I have expressed it often enough—that a country such as our own which exports so much of its products must be extremely careful in any measures of protection that it would be asked to consider.
§ Mr. GouldCan my right hon. Friend confirm that we are not likely, either as a move towards economic and monetary union or otherwise, to re-enter the currency snake? Will he also agree that any efforts to re-establish stability in world currency markets should be made in conjunction with the United States, Canada and Japan?
§ The Prime MinisterI am not aware of any proposition to the effect that we should re-enter the currency snake. I have expressed my view to President Carter that, if at all possible, it is far better that we should regulate the currency markets on a world basis including the dollar rather than excluding it from our consideration.
§ Mr. PowellIn the context of countering terrorism, was any progress made in reducing the role of the Irish regime as a base for the conduct of terrorist operations in the United Kingdom?
§ The Prime MinisterI had discussions with the Prime Minister of the Republic of Ireland in the margins, but we did not discuss it in the terms that the right hon. Gentleman has put this afternoon. I think that the sensitivities of the matter are well known. It is the task of the British Government to ensure that terrorism in the North of Ireland is put down and at the 988 same time to maintain good relations with the Republic of Ireland, which is co-operating with us in doing so.
§ Mr. RoperDid my right hon. Friend and his colleagues on the European Council review the state of progress of the Community's negotiations with Japan over trade matters, and, if so, were they satisfied with the state of negotiations?
§ The Prime MinisterNo, we were not satisfied with the state of negotiations. The Japanese surplus looks like being extremely large again during the current year. That in itself is bound to make for greater problems in securing some stability in the currency markets. The Commission has therefore been asked to take the matter up again with the Japanese and a further report will be made to the next European Council at the beginning of July.
§ Mr. ThorpeDoes the Prime Minister agree that the Community is the only world trading Power which has its own internal world exchange rate difficulties? Therefore, was consideration given to pooling part of the reserves of the Nine, possibly in the European Monetary Fund, to act as an exchange stabilisation fund? Was any consideration given to producing a new unit of account which would be a parallel European currency which could be used on a voluntary basis? Was there a determination to harmonise the rate of coverage of VAT? Does not the Prime Minister agree that all of these would produce a degree of stability which would produce investment which would bring in new jobs?
§ The Prime MinisterIt is clear that the exchange rate difficulties in Europe spring from the fact that we have nine sovereign countries. However, to obliterate exchange rate difficulties does not necessarily mean that there would be an equal rate of growth throughout all parts of the area concerned. If it were so, the Lehigh Valley in the United States would be prospering as much as Texas. Therefore, we have to be extremely careful in trying to find a solution to these problems. I cannot say that there were any discussions at Heads of Government level about the proposals that the right hon. Gentleman put forward, though I am sure that discussions are going on—and rightly going on—about these matters, because 989 we wish to overcome them, if that is possible without hampering our own economic progress.
§ Mr. MacFarquharIn view of what my right hon. Friend said about difficulties with Japan, would he consider suggesting to the next summit at Bremen that, in addition to the now regular confrontations between trade Ministers and trade commissioners and their Japanese equivalents, it would be advisable for European Heads of Government to meet regularly with the Japanese Prime Minister in order to extend the range of contacts and, perhaps, avoid these confrontations?
§ The Prime MinisterI have been in communication with Mr. Fukuda, the Japanese Prime Minister, to explain to him the thoughts I have had about trying to get a collective agreement on a number of issues which, whilst individually not very attractive to the countries which would be asked to undertake them, taken together might create a greater atmosphere of confidence. We shall be meeting Mr. Fukuda when the summit meets in Bonn on 15th and 16th July, but discussions will go on before then, too.
§ Mr. Fletcher-CookeReverting to the question of European solidarity against terrorism, is the Prime Minister aware that in the European Parliament the Irish delegation was equally solid with all others in a unanimous vote that all members of the European Community should ratify the anti-terrorist and anti-hijacking conventions? In his conversation with the Prime Minister of the Republic of Ireland, did the right hon. Gentleman remind him of this and ask him what proposals the Prime Minister of Eire had for ratifying this convention, Eire being the only member of the Community that has not so far done so?
§ The Prime MinisterI did not raise this matter with the Prime Minister of the Republic. I think he is aware of our position on this matter and he will know what force of international opinion is playing upon the Republic, but it is for him to take a decision.
§ Mr. John MendelsonWhen the Prime Minister and Heads of Government discussed the problem of terrorism, were they made aware that at about the same time the International Air Pilots Association 990 was publishing a very firm declaration requesting action against hijacking and that it decided in principle that if such action were not to be taken by Governments in the near future, the pilots would themselves take action and pronounce a boycott against countries which did not take action against hijackers or allowed them to organise their terrorist activities within their territory? Have the Heads of Government any attitudes in the near future to take on this important problem?
§ The Prime MinisterThat matter was not discussed, although I read of it in the public prints. This will be taken account of by those who have still to take action on the ratification of the Act concerned.
§ Mr. DykesIs the Prime Minister aware that his new-found enthusiasm for EEC economic solidarity is much to be welcomed in all quarters? Since he had to concede last Thursday that the real rate of unemployment in this country is much higher than in the other European member States, pro rata, what specific anti-unemployment proposals did he make in the context of those economic discussions?
§ The Prime MinisterThe comparisons that are constantly being made across the Floor of the House always neglect the fact that the increase in unemployment since 1973, which is the measuring rod that I take, has been as great—or greater—in some other countries as it has been in this country. But I think that we are all agreed that the tendencies in all the countries are the same. Some are at a different stage in the process, but the tendencies are the same and the prospects for unemployment in the 1980s will cause all countries the greatest concern.
It was for this reason that we discussed the possibilities, or asked our colleagues to discuss them, of, among other things, work-sharing and the creation of jobs in other ways. I hope that there will be a more detailed report in July.
Mr. Alan Lee WilliamsI warmly welcome the Prime Minister's statement about the foundation of the European cultural organisation. Will he say something more about this and agree to place in the Library further details of this organisation?
§ The Prime MinisterYes, I shall consider what can be placed in the Library. The details have to be worked out. It was a proposition that came from Prime Minister Tindemans' report some time ago. I am glad that it has been adopted. There can be no harm, whatever view we may take about the Community, in getting to know the other people of Europe better.
§ Mr. MartenIs the Prime Minister aware that since July 1975 there have been nine summit meetings and that each communiqué that I have read has mentioned unemployment and growth? Yet precisely nothing seems to have happened. Does it not illustrate the ineffectiveness of this type of co-operation, welcome as it is?
Secondly, on Rhodesia, noting that our partners in the Community support the Anglo-American initiative, can the Prime Minister say why it is that he never takes up in that circle of friends the question of sanctions busting by our partners in the Community? I know that the matter is taken up in the United Nations. Why is it not taken up in the Common Market itself?
§ The Prime MinisterThe hon. Gentleman has a point, though I would not say that those discussions are ineffective. It illustrates both the common nature of the problem that surrounds the Western world at present and the difficulty of finding a solution, because all the countries concerned want to find a solution if they can. I do not know that we have yet found a solution. I am not ready to sit back and do nothing about these issues. That is why in my own way I have been trying to put forward a collective plan for concerted international action. I hope that it can succeed. However, it illustrates—the hon. Gentleman is quite right—the profound difficulty into which the Western world has fallen, in particular since 1973.
On sanctions busting in Rhodesia, I have not always said so, but I have raised the matter, more particularly when I was Foreign Secretary, at the Council of Foreign Ministers and brought a number of illustrations to the attention of the Council of Foreign Ministers. Action was taken after that. I shall bring the hon. Gentleman's question to the notice of my right hon. Friend.
§ Mr. SkinnerWhen my right hon. Friend went to Copenhagen did he tell them that since we have been writhing with this European cobra we have paid, in total, £3,000 million in relation to subscription, trade deficits and so on? Did he point out that unemployment has doubled in this country—and, for that matter, in many others inside the Common Market—since 1973? Did he also remind them of the terrible inflation that this country has suffered partly through being in the Common Market? Did he deal with those matters?
Does he understand that the British people are yearning for him to raise the question of the Common Market once again, not in terms of whether it can solve the unemployment problem collectively but in terms of whether he is big enough to say that the matter has not been finally settled?
§ The Prime MinisterSome of my hon. Friend's questions were raised by me. For example, the United Kingdom will, I think, this year be the second largest net contributor to the Community after Germany. This, in my view, is not a satisfactory position, because the common agricultural policy is neither in the interests of Europe as a whole nor in the interest of Britain, and there should be reforms. It seems to me that the balance is all wrong when so much of the funds of the Community are devoted to supporting agricultural surpluses that are not needed at a time when there is such great unemployment throughout the Community
On inflation, with respect to my hon. Friend, that is more due to the levels of the money supply in the early years of the 1970s than it is to our entry into the Community. However, he need have no doubt that, within the general ambit of the decision of the British people. I shall pursue British interests on all these matters as forcefully as possible, as I find all my colleagues do.
§ Several Hon. Members rose—
§ Mr. SpeakerIf the hon. Members who have been standing are brief, I hope to call them all.
§ Mr. BiffenIn respect of currency exchange, is the right hon. Gentleman aware that there is nothing so turbulent 993 as a Government forlornly trying to defend a fixed rate which has parted from market reality? Will he remind the President of the Commission that the House is sufficiently jealous of its ability to decide what are the appropriate patterns of taxation for this country and to hold the Government accountable for the control of money supply that it will not lightly trade in either of those for some scheme of economic and monetary union?
§ The Prime MinisterI do not think that that is a complete analysis of the situation. Of course, it is axiomatic that one cannot defend a fixed rate if it is unreal. The hon. Gentleman seems to be neglecting the great force of the market today, especially in the Eurodollar area, in which the currencies sweeping across the market can create conditions against the level of a currency which are totally unrelated to what should be a competitive value. I hope that the hon. Gentleman will not be so wooed by market forces that he will say that we should stand helpless in the face of these gales. If so, I totally disagree with him.
§ Mr. FauldsWill my right hon. Friend contemplate whether it is not time that he and others of his colleagues among the leaders of the Nine adopted the sensible and responsible attitude of Chancellor Schmidt in declaring that the Palestinian people have the right to self-determination?
§ The Prime MinisterThe British Government's view of this matter and the view of the Nine is well known. It would be as well to stand by the formula that is now being worked out in the Middle East and with the United States on the position of the Palestinians in determining their own future. I do not think that we should go out individually and severally on this matter. The combined efforts of all the Nine are more likely to yield better results than if each of us states his own personal position.
§ Mr. GowAs the Prime Minister of the Irish Republic was present at the conference in Copenhagen and as the issue of terrorism was on the agenda, and as terrorism is being mounted against the United Kingdom from the Republic, is it not inconceivable that the 994 Prime Minister can tell the right hon. Member for Down, South (Mr. Powell) that the issue of terrorism from the Republic was not even discussed by the Irish Prime Minister with the English Prime Minister?
§ The Prime MinisterThat is not what I said. Nor is it what I meant. I think that the House is well aware of the nature of our relations with the Republic of Ireland, and those relations will not be helped, in a situation in which the Republic is as opposed to terrorism as we are, if people such as the hon. Gentleman try to stir up trouble between the two countries.
§ Mr. WatkinsonCan my right hon. Friend clarify the 4½ per cent. growth rate? Is it the intention that member countries should aim for that growth rate individually or will it be an average growth rate? If that be the case, does it not imply that certain countries will have to grow much faster than others? Can my right hon. Friend say what is the attitude of the West German Chancellor to these matters, as that is pivotal to the growth of Europe?
§ The Prime MinisterThis would be an average growth rate to be aimed at. As the House will see from the figures I gave, it would mean a large increase, considering that the average growth rate in the Community was only 1.9 per cent. during last year. [HON. MEMBERS: "What was ours?"] Ours was lower. I invite the House to await the Budget tomorrow. Let us see what it contains. I shall be as interested as anyone else.
As for the future growth rate of 4½ per cent., this is an average for the Community as a whole. It clearly implies some countries going ahead faster than the average and some slower. The West German Chancellor is quite clear about this point. He wishes the German economy to grow as fast as it can. What he is perhaps more sceptical about than some others is how far it can be persuaded to grow. That is one of the areas in which there will have to be discussion between now an the summit in July.
§ Mr. Alan ClarkIs the Prime Minister aware that his somewhat qualified comments on protectionism have been noted? Does he not agree that there is a case at least for protecting 995 the livelihood of Her Majesty's subjects against imports from areas which are themselves, in one form or another, highly protectionist and take very little from us in exports?
§ The Prime MinisterThere should be no ideology about this. It should be a matter of practical, cold, hard calculation. That is what Her Majesty's Government will apply to every case that comes in front of them. In the matter of the textile industry, for example, it was possible through the Multi-Fibre Arrangement, with our other Community colleagues, to reach an agreement that has been of great value to this country—I would guess probably better than we could have achieved if we had negotiated individually. We should take each case on its merits.
§ Mr. Christopher PriceIs my right hon. Friend satisfied that all obstacles to direct elections are now removed? Did the Prime Minister of Luxembourg repeat his suggestion that he might not complete the final formalities until he had received a guarantee that Luxembourg would remain the seat of the Assembly in perpetuity? Does not my right hon. Friend think that it is rather silly for the European Assembly to build spec-built parliaments all over Europe which give it a reputation for extravagance and not first decide where its seat should properly be, which is in Brussels?
§ The Prime MinisterThe Prime Minister of Luxembourg did not raise this matter. As for the legal position regarding the date, all the proper decisions have not yet been taken. The Bill has still to complete its progress through the House. Then it will be necessary to ratify the decision under Article 10 of the Council Act. That will require another action by the House. Other countries have to do the same. I believe that only Denmark and Ireland have so far completed all the procedures.
The decision taken on Saturday was a political decision in the sense that we thought that the progress that had been made justified fixing a date in the middle of 1979. But the legal procedures have still to be completed.
§ Mr. RidsdaleAs the Japanese position will be extremely important at the summit, may I press on the Prime Minister 996 the need for more intensive private diplomacy and not so much public diplomacy? Does he realise the danger that so many people are trying to make political capital out of the matter and making the Japanese the scapegoat for some of our ills?
§ The Prime MinisterYes, Sir, but the hon. Gentleman and I live in a rather old-fashioned world. Nowadays it seems to be important that everything should be publicly known at the earliest possible opportunity, no matter what the consequences may be for any discussions that have taken place.
§ Mr. MaddenDoes my right hon. Friend agree that the European textile industry needs further attention, bearing in mind that only last week a Common Market agency forecast 1.7 million redundant European textile workers by 1985? If the Common Market is unwilling or unable to protect the British textile industry against grossly unfair imports, is there not a need for Britain to act and to impose selective import controls to protect this vital industry?
§ The Prime MinisterAs I am sure my hon. Friend will know, because he is a great expert on this matter and follows it very closely, there is no evidence for his proposition. Indeed, the evidence is to the contrary, that we got a very good deal out of the last round of the negotiations. I find no complacency on the part of my colleagues, the Heads of Government, about these issues. It is a question of the right way to tackle them. In the case of a number of industries about which we are deeply concerned at present—steel, shipbuilding, textiles, clothing, footwear and others—the same problems are being repeated throughout Europe. I can see every advantage in having discussions and consultation and maybe decisions taken on a common basis if it will help us all.
§ Mr. Ioan EvansIn view of the high unemployment in all the Common Market countries, the fact that this was the main item on the agenda will be welcome. Will the Common Market leaders be making positive proposals to the summit conference in July for dealing with structural unemployment? What machinery will be set up to monitor the increase in economic growth that is proposed?
§ The Prime MinisterThe Economic Council has been asked to take this matter into account, together with the tripartite committee that already exists among trade unions, Government and employers, to report to us in July. A further conference of all three groups will be held in September. But I believe that it we are to get movement on this and on economic growth, we must get movement on the other factors that I have outlined as well. We shall not get anything done individually. There must be a collective decision for united action. I do not know whether it will succeed, but I think that it is the best prospect that we have.