Multi-fibre Arrangement (Hansard, 22 December 1981)

§ The Secretary of State for Trade (Mr. John Biffen)
With permission, Mr. Speaker, I should like to make a statement on the stage reached in the negotiations on the renewal of the GATT multi-fibre arrangement on trade in textiles and clothing.
Following the agreement on 8 December by the EC Council of a Community mandate, the Commission has taken part in the final stages of the GATT negotiations in Geneva for a renewal protocol. This has led to a consensus on a protocol which would extend the multi-fibre arrangement for a further period of four and a half years. The Commission representative stated that he would be recommending that the EC Council should accept the protocol for the time being. He made clear, however, that, unless the Council were satisfied with the new bilateral agreements, the Community would have to withdraw from the MFA before the end of 1982.
The Council will consider the Commission's recommendation at its meeting in January. It will do so in the light, among other things, of the outcome of its discussion on global ceilings for imports from all low-cost suppliers, preferential as well as multi-fibre arrangement.
Assuming a satisfactory agreement is reached on the global ceilings and the Council agrees to the protocol on the terms I shall describe, the scene will then be set for the final stage—the bilateral negotiations. It is only after the conclusion of this final stage that we shall be able to judge whether the outcome meets our essential objectives. I must emphasise that many points remain for the further negotiations both within the Community and with the supplying countries. I believe, however, that the House should be informed on where matters stand so far on the more essential points.
First, the Community has agreed on growth rates for the most sensitive products at levels below those which operated under the previous arrangements. These cover over one half in value of our total low-cost imports of textiles and clothing. Secondly, on cutbacks, the Commission has exchanged letters with Hong Kong, South Korea and Macao under which the suppliers note the Community's wish to seek certain reductions in access and indicate their willingness to enter into "mutually acceptable arrangements". The draft protocol also recognises the need to find "mutually acceptable solutions" to problems relating to particularly large quotas from predominant suppliers.
Apart from such agreements as may be negotiated bilaterally on cutbacks, the position on base rates is that 1982 quotas will be used for the calculation of future entitlements. The protocol, however, recognises the difficulties that could be caused by sharp and substantial increases in imports where actual imports have been significantly below quota levels. We have made it clear that there must be, in the last resort, the possibility of the Community taking unilateral action.
The draft protocol refers to a number of other matters which are important to us. Among these are the question of fraud and the need for measures to meet the conditions of a recession. We have placed on record our view that the protocol by itself is not satisfactory on these points. These matters will be pursued further in the bilaterals.
874 I hope that the House will agree that in the stage we have reached so far we have achieved a fair safeguard for our essential interests on the points resolved. The question of global ceilings and the detailed negotiation of the bilateral agreements remain for the future. We shall seek a satisfactory outcome of these points before we give our consent to final Community acceptance of the whole deal.

§ Mr. John Fraser (Norwood)
I recognise that the negotiations have been carried on by the Commission and not by the right hon. Gentleman's Department. Having said that, however, I regard the statement as unsatisfactory, particularly for its lack of hard detail. This must be recognised by the Community in its threat to withdraw from the MFA if there are no satisfactory bilateral arrangements by the end of 1982. I realise that these matters remain subject to negotiation. Can the right hon. Gentleman give the House some idea of the target for global ceilings for the MFA countries and the preferential countries? At this late stage, hon. Members are entitled to be given some idea of the area at which he and the Community are aiming in terms of specific targets.
Can the Secretary of State spell out more detail on growth rates? What are the percentage rates? Can the right hon. Gentleman confirm that those growth rates will be based on actual imports in previous years and not on quotas? Can he say something about the arrangements that he hopes to reach for the surge mechanism and a recession clause? In the exchange of letters with Hong Kong, Macao and South Korea, is there any recognition of reciprocity of trade, say, between Hong Kong and the United Kingdom and other countries? Can the right hon. Gentleman say something about the arrangements into which he proposes to enter with Taiwan? When will he report to the House again?

§ Mr. Biffen
I understand perfectly the sense of frustration felt by the hon. Gentleman which, I believe., is felt on both sides of the House when negotiations that have a material effect on significant parts of the United Kingdom industry are proceeding but from which we are to some extent at arm's length removed, particularly in the House. The hon. Gentleman will also know perfectly well that this is an inescapable fact of life as we now stand in relation to our Community partners.
I am sure the hon. Gentleman appreciates that the issue of Taiwan falls outside the MFA negotiations. I take note of what he says and I shall refer to it at some future time.
In regard to the letters with the dominant suppliers, the matters that the hon. Gentleman raises will form an integral part of the bilateral discussions now to be set in train. We have indicated the considerable importance that we place upon the surge mechanism. The Community has accepted the point. It will be argued further in the bilateral discussions.
On the question of the growth rate, I am afraid that I am not in a position to give any figures that will more specifically quantify the fact I have indicated, that is, that the growth rate for the next multi-fibre arrangement will be at figures substantially below what was experienced under MFA3. The starting point will be the 1982 quotas rather than the 1982 actual levels of imports. This was established some time ago as the European Community's negotiating stance.
On global ceilings, we shall have to await the outcome of the negotiations currently being conducted by the 875 Commission with the preferential suppliers. It is our intention that right across the board, in relation to both the MFA and the preferential suppliers, there will be global ceilings that reflect very much lower rates of growth.

§ Mr. David Steel (Roxburgh, Selkirk and Peebles)
This is perhaps of necessity a rather vague holding statement. We are grateful to the Secretary of State for reporting to hon. Members what has happened so far. I wish to ask him about his reference to the unsatisfactory aspect of the protocol on fraud. The right hon. Gentleman referred to this matter at the end of his statement. Is it not the case that steps could be taken by his Department, for example, in improving the regulations on labelling of the countries of origin of materials as distinct from finished goods and also making greater use of our embassies and high commissions in anti-dumping policing? Is it intended that Hong Kong should be given preferential treatment over and above other Far East suppliers?

§ Mr. Biffen
The answer to the right hon. Gentleman's second point is that that is not the case. I understand that the cutbacks concluded in respect of the countries concerned are broadly of equal significance in their impact.
As for the right hon. Gentleman's first point, I shall, of course, be pleased to receive any representations from him that indicate where the Department of Trade or any other agency of the British Government can act effectively in checking fraud. This is a responsibility, however, that rests pre-eminently with the European Commission.

§ Mr. Nicholas Winterton (Macclesfield)
Is my right hon. Friend aware that the British textile and clothing industries, with which I have been in contact today, are deeply concerned about the vagueness and inadequacy of the draft protocol that appears to have been agreed, despite the hard work of my right hon. Friend and his hon. and learned Friend the Minister for Trade in these matters?
Will my right hon. Friend assure the House that at the next Council of Ministers' meeting he will try to ensure that we adopt a much more resolute approach to the negotiations on the bilateral arrangements that come after the MFA, especially the need for future quotas to be based upon actual imports in 1980 and not on the 1982 quota levels? Unless that is done, the industry believes that, in addition to already unacceptably high unemployment, a further 30,000 people are likely to lose their jobs.

§ Mr. Biffen
My hon. Friend refers properly to anxieties over the fact that what has just been concluded at Geneva could lead to the most serious consequences for Western textile industries, including that of the United Kingdom. It is open to a variety of interpretations. I need only remind my hon. Friend of what the correspondent of the Financial Times said today: The draft text of the extension protocol as agreed so far allows the Community to reduce considerably the growth of imports from developing countries". On all those matters we should pause and take stock of the position that emerges through the conduct of the bilaterals, because that conduct will, to a substantial extent, show how we can interpret the broad principles embodied in the protocol. Although it was the Government's earnest hope that we could secure 1980 876 actual imports as the basis upon which to proceed on quotas, we could not secure the majority opinion for that in the European Community.

§ Mr. Bob Cryer (Keighley)
Will the Secretary of State elaborate on the machinery that will be instituted to provide the unilateral action by the Community to curb imports based upon the 1982 quotas? Will he accept that the industry will be concerned about the 1982 quotas being used? It must be satisfied both that unilateral action is possible and that the Community is willing to take that action. Is the Secretary of State aware that the record of the Community shows that it has not carried out its duties either effectively or in the interests of the Britsh textile industry?

Mr. Biffin
It is clear that the Community has in mind the possibility of unilateral action in dealing with the application of a satisfactory surge mechanism. When one says "unilateral action" one must remember that, as a fact of Community life, it is unilateral action by the European Community and not by Britain alone. The fashioning of that can come only through the bilateral discussions that will now proceed.

§ Mr. Tom McNally (Stockport, South)
Can the Secretary of State confirm that the recession clause, which once was to be the pearl of the crown of MFA3, is no longer obtainable? Will he also take on board the comments of the hon. Member for Macclesfield (Mr. Winterton) and the hon. Member for Keighley (Mr. Cryer) that the British textile industry has grave doubts about the European Community's will to use the textile industry as anything other than a wider pawn in trade negotiations? Those are the real doubts that he must allay.

§ Mr. Biffen
I realise that the hon. Gentleman speaks with authority when he asks me to allay the suspicions of the textile industry about European Community ambitions. The framework in the protocol could provide a satisfactory basis for fashioning the bilaterals and obtaining an acceptable MFA4.
When the hon. Gentleman has had an opportunity to study the protocol—a copy will be made available in the Library as soon as possible, but it is being signed in Geneva now—he will find that paragraph 4 deals with the problems of recession. It may not deal with them in quite the forthright, explicit or regulatory fashion that the hon. Gentleman would wish, but they are matters that must be argued in the course of the bilaterals.

§ Mr. Richard Body (Holland with Boston)
Will my right hon. Friend put to one side the technologies of the matter and acknowledge that any multi-fibre arrangement will have the effect of denying the right of the British people to buy what they wish?

§ Mr. Biffen
Broadly speaking, that must be so.

§ Mr. Stanley Cohen (Leeds, South-East)
I hope that the Secretary of State will recognise the serious concern felt by many hon. Members. He talks about improvement of importation and frauds. Does he remember when the question of cheap imported cloth was raised by hon. Members in the Chamber after a visit to Taiwan? Does he recall that the Taiwanese had woven into the selvedges of the cloth the words "100 per cent. British" or "100 per cent. Huddersfield"? We asked the Government to do something about the position then, and we are asking them again now.
877 I agree that Taiwan is outside the multi-fibre arrangement, but that does not solve the problems of my constituents, who are faced with job losses of 2,000 a month in the textile industry. What steps will the Government take to deal with the Taiwanese, who are outside the MFA, and heavily subsidised Eastern bloc countries, which are exporting cheap cloth to Britain?

§ Mr. Biffen
The hon. Gentleman has recognised fairly that Taiwan falls outside the scope of today's statement, but I assure him that the Department of Trade views with the utmost seriousness any question of fraud and will do all that lies within its power—in this instance it must co-operate with the European Commission—to remedy the position.
The importance that we attach to the question of fraud within the multi-fibre arrangement is such that we were not prepared to accept the matter as dealt with by protocol. We said that we would wish to return to the subject during the bilaterals.

§ Mr. Kevin McNamara (Kingston upon Hull, Central)
Is the right hon. Gentleman aware that many of our constituencies contain firms that depend for the employment of their workers upon their ability to sell goods in the less developed countries and upon the principles of mutuality? Those countries can sell their goods in the United Kingdom and we can sell our machinery and high technology in their countries. Will the Secretary of State bear in mind, when entering into the bilateral discussions, the position of the least developed countries and try to ensure that any percentage diminution in their trade does not equal that of Hong Kong and Taiwan, but that they are given preferential treatment?

§ Mr. Biffen
The hon. Gentleman makes a fair point. The bilateral agreements cannot be a blinkered, protectionist, evangelistic crusade. We must recognise that, especially in the Far East, there are economies, such as Indonesia and Hong Kong, which are developing into major markets for British engineering goods. However, for many years we have tried to strike a balance in the domestic textile industry. The purpose of the next stage of the multi-fibre arrangement is to try to balance as equitably as possible the number of factors therein contained.

Several Hon. Members
rose——

§ Mr. Speaker
Order. I propose to call the four hon. Members who have risen. I shall call two hon. Members in succession from the Government Benches and two in succession from the Opposition Benches.

§ Mr. Albert McQuarrie (Aberdeenshire, East)
Is my right hon. Friend aware that although today's statement will not be acceptable to the textile manufacturers at least they will know that he is trying to arrive at a satisfactory multi-fibre arrangement? That could not be said for the Labour Government, who did not include a recession clause in the MFA. That was referred to by the hon. Member for Stockport, South (Mr. McNally). The lack of a recession clause is the reason for the savage unemployment in Scotland. It has been caused by the vast increase in cheap foreign imports. Is not a recession clause a must in a new MFA?

§ Mr. Biffen
I hope that paragraph 4 of the protocol can be interpreted to provide such protection.

§ Mr. Teddy Taylor (Southend, East)
What is the logic of giving a lot of money in foreign aid to Third countries 878 to build up there industries, while erecting a complex procedure to keep out the products of those industries? Would the Common Market not be in a stronger position to operate in the way that my right hon. Friend proposes if it stopped disrupting world markets by dumping food, coal and steel?

§ Mr. Biffen
The MFA has complexities enough without drawing in the full workings of the CAP. There is nothing neat, clean and logical about the application of MFA, but on the whole it provides an element of domestic protection consistent also with a fairly guaranteed access to Western markets for many of the developing countries in a form of manufacture at which they excel. The MFA still has a useful purpose to fulfil in balancing the relationship between the Third world and the developed countries.

§ Mr. Jack Straw (Blackburn)
Will the Secretary of State accept the thanks of many of my hon. Friends for coming to the House to give progress reports on the negotiations? As the right hon. Gentleman is a consistent critic of membership of the Common Market, does he accept that the progress of the negotiations is further proof of the way in which our membership has failed to serve the interests of British working people and of industry and that it would have been far better had we taken a direct part in the negotiations? Why did Britain fail to exercise a veto against a straight surrender of our view?
Does the right hon. Gentleman accept that the decision to go for 1982 quotas represents a clear defeat for the British position, which was, first, to take 1980 actuals and, as a final fallback, a compromise between 1980 actuals and 1982 quotas? Does he accept that the level of 1982 quotas is so far in excess of 1980 actuals—in some cases between 100 and 200 per cent. in excess—that it will provide little or no protection against a massive growth in imports across all the sectors? Could he say——

§ Mr. Speaker
Order. We are not debating the matter. The hon. Gentleman was called to ask a question.

§ Mr. Straw
I apologise for asking a series of questions. Could the Minister say——

Hon. Members
Throw him out.

§ Mr. Speaker
Order. The hon. Gentleman is not being fair to the House.

§ Mr. Straw
What chance is there within the bilaterals to ensure that growth is restrained below the levels of the 1982 quotas?

§ Mr. Biffen
The hon. Gentleman's early questions about the nature of the European Community were so embarrassing that I am happy to excuse myself through pressure of time.
I do not believe that the use of the veto, as it is popularly called, would have been a viable position for the British, It would merely have ensured that the Community could not have a settled view for the negotiations, so they could not have been started, and therefore the MFA might easily have ground to a halt, given the strict time scales. I do not believe that out of that chaos we should necessarily have snatched a position of much national advantage.
There is a substantial difference between the 1982 quotas and the 1980 actuals in many products. That fact underlines the importance of a surge mechanism. That is why the British were so determined to persuade the 879 Community to make that a central feature of its negotiations and to hold the position open for the bilaterals.
In a sense, it is in the bilaterals that the real shape of the MFA successor will be determined, and we can see how tough and effective a successor it is. But, however tough the negotiations over the bilaterals may be, there can be no question of the issue being reopened with the 1982 quota levels as a starting point.