Multi-fibre Arrangement (Hansard, 24 November 1981)

§ The Minister for Trade (Mr. Peter Rees)
With permission, I should like to make a statement on negotiations for the renewal of the multi-fibre arrangement. My right hon. Friend the Lord Privy Seal reported to the House on 18 November on the Foreign Affairs Council on 16 and 17 November, including a parallel session, which he chaired, on the Community's negotiating position for the final round of talks in Geneva on the renewal of the multi-fibre arrangement.
In view of the importance of this subject for many United Kingdom interests, and, in particular, the United Kingdom textile and clothing industries, I will, Mr. Speaker, with permission, supplement what my right hon. Friend told the House and, particularly, report on subsequent events in the GATT textiles committee in Geneva.
On 17 November, the Council decided that it would be necessary to give further consideration to the question of overall import ceilings for sensitive products particularly. This embraces the all-important question of imports of low-cost textiles and clothing from the preferential countries. The House will be aware that the Government place the greatest importance on acceptance by the Community of such an overall approach.
The Council had in mind, however, that the final round of negotiations on the renewal of the MFA was to start in Geneva on 18 November. The Council wished the Commission to be able to participate in these negotiations from the beginning and to be in a position to state the broad Community position clearly, especially since other participants, notably the United States and the developing countries, had put forward formal proposals. On this basis the Commission made a full statement in Geneva on 20 November. I have placed a copy of this statement in the Library. Within the next day or two, I expect the Commission to table a full draft protocol of extension for the MFA in Geneva, essentially a formal expression of the Community's requirements in a renewed MFA.
I should like to summarise for the House the main points of the Commission's statement. The first is the depressed state of the Community's market and the very low rate of growth forecast over the next years. The House will know that this has been estimated at about 1 per cent. on average. Secondly, import penetration in clothing and textiles is much higher in the Community than in any other major importing country. Accordingly, the Community would agree only to small overall growth rates.
Third is the Community's intention to seek a surge mechanism which would guard against a threat presented by under-utilised quotas. I can tell the House that the United Kingdom was instrumental in introducing this concept into the Community position.
Fourthly, difficulties caused to the Community industry in the past as a result of reductions in demand during periods of recession when supplying countries' quotas continued to grow. The House will be glad to know that the Community has decided that special provisions should be negotiated with supplying countries to try to mitigate such problems in the future. The House will recall that this is something that the Government have been seeking for 754 some time, and I believe the mechanism now agreed will go some way towards meeting the industry's concerns in this area.
Fifthly, the Community's statement made clear that we shall be looking very closely at our trade with a few dominant suppliers, including Hong Kong. In particular, the Community will seek "adjustments"—I am afraid that I cannot be more specific on this point—in these suppliers' quotas, possibly with existing access being replaced in part by an element of outward processing quotas. I emphasise that what can finally be achieved in this field, is clearly a matter of negotiation.
Furthermore, and sixthly, the ability of the dominant suppliers to use the flexibility provisions to augment their quotas in particular years will also be reduced. These flexibility provisions enable supplying countries, within specific limits, to anticipate a following year's quota, carry over from a previous year's quota, or transfer quota from one product to another. We expect to negotiate substantial reductions in the ability of the dominant suppliers to use these provisions.
I have given a short summary of the Community's position on important areas of the renegotiation. In general, the Government are content with the position agreed by the Community. I would not wish to pretend, that the United Kingdom has obtained satisfaction on every single point which we have raised, but I believe that no essential British interests have been compromised.
As I have already said, certain essential elements still have to be reconciled—in particular the overall approach to low-cost imports which is a subject upon which I know hon. Members have strong views. The actual quotas for individual MFA countries will have to be hammered out in detail in the course of bilateral negotiations during next year. I believe that the groundwork has now been laid for a new arrangement which will be tough, indeed, in many respects, tougher than the current MFA, and which will provide the United Kingdom industry with the trading climate it needs to plan for the future, while taking account of all the interests represented in the House.

§ Mr. John Smith (Lanarkshire, North)
I thank the Minister for making the statement; it has been requested on a number of occasions in the House. When is the statement to be placed in the Library? It was not available when I inquired a short time ago. Has not the Minister rather delicately obscured the fact that no agreement has been reached in the EEC on the single most important part of these negotiations—the agreement that there should be an overall limit, a global limit, on imports admitted to the EEC? Does not the delicate phrasing conceal the fact that no agreement has yet been reached? Can the Minister say when agreement will be reached? Will he report back to the House on the matter?
I notice that a statement has been made in Geneva which will be followed by a protocol. Will the agreement—or lack of agreement—on this subject be ready before the protocol is submitted?
On quotas, the Minister referred to an anti-surge mechanism. Does not this confirm that growth will be on the basis of existing quotas and not on existing levels of imports which, in some cases, are much lower than existing quotas? If this were not the case, there would be no need for an anti-surge provision to be introduced into the structure of the agreement.
755 The Minister will be aware of the very great importance that was placed on the recession clause by hon. Members on both sides of the House during the debate before the Summer Recess. The hon. and learned Gentleman says in his statement that "special provisions should be negotiated … to try to mitigate such problems in future" and goes on to call this a "mechanism". Will he say what the mechanism is? There is a suspicion that all that has been agreed is talks about talks if there is a downturn in demand. The House asked on a pretty well unanimous basis for some automatic linking of demand in the EEC to the level of imports.
We note what the Minister says about dominant suppliers. Will he bear in mind the need to reduce imports from dominant suppliers so that some of the poorer countries can gain access to this market which is, in many ways, dominated by Hong Kong, South Korea and Taiwan? Will he bear in mind in the negotiations that some of these countries excluding Hong Kong, have high tariff barriers against British exports?
On the most important question of the overall limit, the Minister confirmed that projected growth was likely to be about 1 per cent. in demand. Will the Minister confirm what is rumoured—that the Commissioners agreed to a 1.2 per cent. increase on the eight sensitive products, which implies a greater increase for other products and, perhaps, no limit on Mediterranean associates and other preferential suppliers? Is it the case that the likely increase to be permitted under this is nearer 5 per cent. than 1 per cent. and that this cannot be represented as a victory even in the Community before we get to Geneva?

§ Mr. Rees
I apologise if I misled the House by saying that the statement of the Commission representative was in the Library. I am now told that it is in the Vote Office. I hope, however, that it is equally available to the House.
I am flattered that the right hon. Gentleman said that I had skated delicately, rather than with heavy feet, on the question of global ceilings. The principles by which the global ceilings can, in the end, be determined were very largely resolved in the last ministerial Council, but it will be necessary, I think, to try to reduce those to figures. That is one of the principal reasons why it is not possible for me to give global ceilings here this afternoon. Furthermore, we felt it most important that the global ceilings should also relate to the other bilateral arrangements that have to be negotiated this year with the preferential or Mediterranean suppliers.
On the question of the anti-surge mechanism, it is much more important, rather than to get into almost a theological discussion about quotas which have been very largely under-utilised, to Focus instead on the level of imports. It is by reference to or linked to that that the anti-surge mechanism will finally be devised. Again, I do not want to go into too much detail because, as I am sure the House will readily appreciate, it will hamper the efforts of the Commission, which is engaged in very delicate negotiations, if its entire hand is spread face upwards on the table from the start of the negotiations. The whole House, and certainly the right hon. Member for Lanarkshire, North (Mr. Smith), will recognise that the Commission would be negotiating from a position of weakness.
On the question of anti-recession provision, a perfectly practical arrangement can be evolved from the principles laid down, but again I prefer not to go into the detail of 756 that because I think that it would prejudice the negotiations which are being undertaken on behalf of this country and the other countries of the Community in Geneva
The right hon. Gentleman is, perhaps understandably, robust on the position of dominant suppliers. Certainly the United Kingdom and the Community subscribe to the principle of differentiation in favour of the less developed, poorer countries. I believe that we should recognise the fact that Hong Kong, by contrast with all the other dominant suppliers, is a particularly open market, and this country has, for that and other reasons, a case for being especially tender of the interests of Hong Kong. However, the interests of all the dominant suppliers will have to be resolved in bilateral negotiations with them.
Coming back to the question of the overall limit and the question of growth, I cannot confirm any particular figure, for that, again, has finally to be resolved. But there was certainly agreement in the Community that the growth figure should approximate much more to the expected rise in consumption, and that will involve a much lower figure of growth, I believe, than the figure of growth under the existing MFA.

§ Sir Paul Bryan (Howden)
My hon. and learned Friend has conceded that Hong Kong, with its open market, without protection of any sort, should be better treated than Taiwan and Korea, with their highly protected markets. I am not clear how Hong Kong is to be favoured in contrast with those other two countries.

§ Mr. Rees
My hon. Friend is quite right to draw attention to the point on which I laid emphasis not only today but also in the ministerial Council—that I think that Hong Kong is in a slightly different position. I cannot say at this precise moment in what way Hong Kong is to be favoured, because the position of all the dominant suppliers, including Hong Kong, will have to be resolved in bilateral negotiations subsequent to the conclusion of the MFA.

§ Mr. Richard Wainwright (Colne Valley)
I should like to question the Minister about the Commission's stance on enforcement and policing procedures in the new arrangement. The Minister is aware that under the present arrangement as it operates some gaps have been revealed in enforcement. Can he give any assurance that the Commission intends to press for more complete enforcement arrangements under the new scheme?

§ Mr. Rees
It is not just a question of laying down provisions for enforcement; there is also the practical question of ensuring that those provisions are enforced on the ground. The responsibility for that will lie very much with the customs officers of the individual countries. However, the United Kingdom customs has over the past 12 months recruited extra personnel precisely for this purpose.

§ Mr. K. J. Woolmer (Batley and Morley)
Does the Minister recognise that the anti-surge mechanism's details are extremely important to the textile and clothing industries? If the permitted increase of this mechanism were to be, for example, 10 per cent. a year, does he not accept that that would still be capable of wreaking considerable devastation upon the textile and clothing industries over the lifetime of this agreement? Will there be an automatic trigger under the mechanism to ensure that any increase gets cut off and does not go well over the permitted level before any action is taken?

§ Mr. Rees
I recognise the anxieties about this matter. They have been particularly ably expounded to me, not only on this occasion, by the hon. Gentleman and by other hon. Members. The essence of this mechanism—for reasons that I have explained I do not want to go into too much detail—is that the imports in any particular year may be curbed by reference to the position in the previous year. In other words, account will be taken of the actual position and not of the theoretical or notional quotas.
I take note of what the hon. Gentleman says. It is our intention that, so far as possible, the mechanism should be triggered in certain fairly precisely defined circumstances.

§ Mr. Nicholas Winterton (Macclesfield)
I pay considerable tribute to the amazing grasp of the problems of the textile and clothing industries that has been attained by my hon. and learned Friend in the two months during which he has held his present office.
Is my hon. and learned Friend aware that over 100,000 people in these two industries lost their jobs in 1980? Will he appreciate, therefore, that the quota base levels upon which the MFA is to be established and the growth of quotas established are of paramount importance? Is it correct, as has been leaked to many newspapers, that the quota base levels are likely to be the 1982 levels? That would be unacceptable to the industry, because undoubtedly importers will inevitably pile in their imports to Britain to ensure that these quotas are established at a very high level, and this could be damaging to an industry which could, at present, employ at least 300,000 extra people if it were faced with fair competition.

§ Mr. Rees
I am very grateful to my hon. Friend for his kind opening words. I am deeply conscious of the loss of jobs in the textile industry. Indeed, I have, not once but twice, and even three times, I think, stressed to the Council of Ministers—going a little further than my hon. Friend—the fact that 150,000 jobs have been shed in the industry over the past 18 months, which I think goes beyond anything suffered in France or Italy, which consider, perhaps rightly, that they have slightly comparable problems.
I appreciate the anxiety about the level from which the new quotas, year by year, will start. I cannot conceal from the House that they will start from the 1982 quota level. I recognise at once that this will be a matter of disappointment. I did not conceal that fact at any point. But what is more important, and what I ask the House to focus on, is not the theoretical or notional quotas—any hon. Gentleman who has studied this subject will know that there is considerable under-utilisation—but to relate imports in any year to the imports in the previous year and to make certain, if there has been under-utilisation, that there cannot be a sudden take-up which would result in a surge.
It is precisely to counter that and to limit imports to actualities rather than to notional quotas that the surge mechanism—the United Kingdom can take some credit for having initiated this idea—has been launched, not on an astonished world but on an astonished Council of Ministers. It has been taken up and it will be the basis of the negotiating position of the Community in Geneva.

§ Mr. Barry Jones (Flint, East)
What is the Minister doing to help the man-made fibre section of the textile industry? Does he know that already this year in my constituency 600 redundancies have been announced? 758 What is he doing to counteract American subsidised imports into Britain? As well as his amazing grasp of the matter, may we have urgent action?

§ Mr. Rees
I fully recognise the difficulties that are encountered in the hon. Gentleman's constituency and others. With his knowledge of the problems, he will realise that the multi-fibre arrangement is primarily designed to restrict imports from low-cost producers. The hon. Gentleman will be the first to recognise that the United States of America does not fall into the category of low-cost producers.

§ Mr. Anthony Grant (Harrow, Central)
Is my hon. and learned Friend aware that in the negotiations he has taken a much tougher stance than was ever taken by the Labour Administration, which will be welcomed by the domestic industry because it will enjoy a degree of protection much greater than it had under the Labour Government?

§ Mr. Rees
I am grateful to my hon. Friend for having perceived an essential point. I do not wish to make unfavourable or unflattering comparisons with the Labour Administration. However, the negotiating stance of the Commission on behalf of the countries of the European Community is much tougher on this occasion than on the previous one. Provided that the negotiations are carried through to a sensible conclusion—I have no reason to doubt that they will be—there will be a greater measure of protection which will enable the United Kingdom textile industry to carry on the process of adjustment.

§ Mr. Joel Barnett (Heywood and Royton)
Is the hon. and learned Gentleman aware that the fact that he referred to the 1982 quota levels only in response to a question rather than in his original statement will cause great anxiety in an industry that is already worried not only about the Minister and the Government but about what happened in the past? Now that we and they know that the Commission is negotiating on our behalf the anti-surge mechanism becomes important. Although I recognise the importance of that and how much the Minister has done in trying to achieve it, the matter that will be of importance to the industry—perhaps the hon. and learned Gentleman will tell us about it—is how much flexibility the Commission has in negotiating the anti-surge mechanism given that it is starting from 1982 quota levels.

§ Mr. Rees
I know that the right hon. Gentleman has a deep constituency concern about those problems. There is no question of the starting point for the new quotas having been dragged out of me. The right hon. Gentleman knows—it may almost have been appropriate for me to anticipate the full statement and there was some indication from my right hon. Friend the Lord Privy Seal—that two days ago I received a delegation of councillors from the North-West, accompanied by the right hon. Gentleman, to which I gave a frank exposé of the position. The present Administration have never concealed the negotiating position. My hon. Friend the Member for Macclesfield (Mr. Winterton) can confirm that, because he was on the same delegation.
I recognise the sensitivity of the House, and of those right hon. and hon. Members who represent textile interests, about the operation of the anti-surge mechanism. It will be designed to limit surges. It would be more important for right hon. and hon. Members, and textile 759 interests outside, to concentrate on the real level of imports rather than on theoretical quotas that in many cases are not fully taken up.

§ Sir Hector Monro (Dumfries)
I add my tribute to my hon. and learned Friend for his work on the problem during recent months. Will the agreement cover both coated and uncoated industrial gloves? Does my hon. and learned Friend envisage a reduction in the import of gloves and cloth from the Far East in the near future?

§ Mr. Rees
The answer to the first question is "Yes". I am tempted to say, I hope not frivolously, in answer to his second question "We must wait and see".

§ Dr. Shirley Summerskill (Halifax)
I hope that the hon. and learned Gentleman is not under the impression that the negotiations have ended satisfactorily. On the contrary, he has failed to deal with the serious problem of low-cost import. Until that problem is resolved, there will be little hope for the survival of the textile industry in West Yorkshire, which has passed through the worst year in its history, with mills closing and jobs lost. The problem must receive urgent consideration if there is to be any industry to save at all.

§ Mr. Rees
I am under no illusion that I can win the plaudits of the whole, or even a substantial part, of the House as a consequence of anything that I may or may not have done in Brussels. If I may put it in colloquial terms, this is a "no w in" situation for a negotiator. We must reconcile the interests of not only the textile industry but British exporters to the developing world, consumers and the Third world, I would need an adroitness far beyond that to which I lay claim to be able to balance those interests.
However, the negotiations have not been concluded. All that we have endeavoured to do in Brussels is to establish a common position from which the Commission can negotiate on behalf of the European Community at Geneva. Although there are some important points of detail that must still be resolved, we have given the Commission a tough but credible posture from which to negotiate at Geneva.
I am in no doubt about the importance of low-cost imports. I would not have spent so many days, not to say nights, in Brussels, Luxembourg and elsewhere discussing the subject if I were not profoundly convinced that it is necessary to moderate the flow of low-cost imports into Britain to give the textile industry a further opportunity to adjust.

§ Mr. Robert Atkins (Preston, North)
During his discussions about the multi-fibre arrangement, has my hon. and learned Friend had the opportunity to consider the threat that is being posed to the weaving industry of Lancashire and elsewhere by the rumoured EEC penalisation of cheap but high quality yarn from Turkey upon which many British weavers, with their newer looms, rely?

§ Mr. Rees
I am aware of the position. My hon. Friend knows that Turkey is classed as a Mediterranean or preferential supplier. Negotiations outside those of the multi-fibre arrangement, but in parallel with them, will be conducted by the Commission with those suppliers during this year. I am sure that the point so cogently made by my hon. Friend will be dealt with by the Commission during those negotiations.

§ Mr. James Lamond (Oldham, East)
Has the Minister studied the reports of the debate in another place on 19 November about outward processing? Does he realise that outward processing represents a potential loophole in any agreement that could become important in the future?

§ Mr. Rees
I have studied what was said in the debate and I am aware of the importance of outward processing. The intention is that outward processing will be included within the global ceilings that we hope to set before the Commission.

§ Mr. John Farr (Harborough)
Will my hon. and learned Friend bear in mind that the EEC is already the largest importer of textiles and clothing from the developing world? Will he ensure during the negotiations that the fact is continually stressed that the EEC imports about three times the level of imports allowed into the United States of America?

§ Mr. Rees
My hon. Friend is right to stress that, absolutely and relatively, the countries of the European Community are the largest importers of low—cost textiles in the world. Therefore, some recognition of that should colour the negotiations in Geneva.

§ Mr. Bob Cryer (Keighley)
Does the Minister accept that the industry will have strong anxieties and reservations about 1982 imports being used as the basis for quota levels in the future? Can he confirm that the social clause, whereby International Labour Office conventions are applied, has not been abandoned by the EEC in its negotiations? Also, can he confirm that the EEC mechanism and operation of the multi-fibre arrangement will be more efficient and more rigorous than has hitherto been the case?

§ Mr. Rees
It is appropriate for me to confirm that the social clause will have some place in the draft protocol which the Commission hopes soon to issue. However, I must stress that if the social provisions were too rigorously drawn that would, more effectively than any quota, exclude imports from the low-cost countries. It may be that that is the hon. Gentleman's intention. I mention the matter because I believe that we must view it in perspective. I shall take on board the hon. Gentleman's point about the effectiveness or automaticity of the mechanism to which he referred.

§ Sir Anthony Meyer (Flint, West)
Will my hon. and learned Friend welcome the recognition on both sides of the House that the EEC provides the most effective method of protecting our legitimate interests? Will he also note that Labour Members who are loudest in demanding further restrictions on imports from low-cost producers simultaneously accuse the Government of meanness in helping the interests of the poorest countries in the Third world?

§ Mr. Rees
It is true that the United Kingdom's interests are likely to be best protected if it is part of the Community. The Commission will have a greater negotiating strength by representing all the countries of the Community than any United Kingdom representative alone, however gifted or powerful. I too have sometimes detected a certain inconsistency between the positions adopted on separate occasions by certain hon. Members.

§ Mr. Greville Janner (Leicester, West)
In view of the catastrophic state of decline in the textile and clothing 761 industries in Leicestershire and other areas that have always depended greatly upon those industries, when does the hon. and learned Gentleman expect these proposals to take effect? Is he aware of the enormous urgency in this matter? Unless steps are taken swiftly there will be nothing left by the time low-cost imports are restricted, as his proposals hopefully suggest they will be.

§ Mr. Rees
The MFA expires on 31 December this year, but the bilaterals, which are perhaps of more practical importance, run out at the end of next year. On the other hand, the agreements with the Mediterranean preferential countries expire at the end of this year. That is why there is a certain urgency in the Commission's approach to those negotiations. I very much hope that the conclusions of negotiations, both on a bilateral basis with the various participants in the MFA negotiations and with the Mediterranean countries, will provide safeguards for the textile interests which the hon. and learned Gentleman represents and which I am sure he and the whole House are anxious to achieve.

§ Mr. Roger Sims (Chislehurst)
Further to his reply to my hon. Friend the Member for Howden (Sir P. Bryan), does my hon. and learned Friend accept that the present agreement has worked very much to the disadvantage of Hong Kong, which is an important export market and a colony for which we have special responsibility? Is there a case for applying some sort of recession clause to Hong Kong as a supplying country?

§ Mr. Rees
I recognise the special factors to which both my hon. Friends have drawn attention. Indeed, I have made that point on more than one occasion in the Councils. I believe that the United Kingdom should be particularly sensitive to the interests of Hong Kong. However, I emphasise that at the end of the day we must achieve a Community position, and the Commission will be negotiating with the dominant suppliers, including Hong Kong. I doubt very much whether it will be possible to negotiate some kind of recession mechanism in advance.

§ Mr. James Tinn (Redcar)
I take up the hon. and learned Gentleman's reply about the man-made fibres industry. Does he recognise that the problem of competition runs throughout that industry? The impact is felt not least at the raw material producing end, where firms such as ICI, in my constituency, are disadvantaged by subsidised oil enjoyed by their international competitors. Is that not particularly absurd, bearing in mind that at least we are self-sufficient? Will the hon. and learned Gentleman do his best to impress this point more effectively on his Government colleagues?

§ Mr. Rees
I certainly recognise the problem. This is not the first time that it has been brought to my attention. As the hon. Gentleman was graceful enough to intimate, this is not my direct responsibility. It is more the responsibility of my right hon. and learned Friend the Chancellor of the Exchequer and my right hon. Friend the Secretary of State for Energy. I shall ensure that the hon. Gentleman's pungent comments are brought to their attention.

§ Mr. Geoffrey Dickens (Huddersfield, West)
As the hon. Member for Halifax (Dr. Summerskill) said, the textile industry is particularly concerned about low-cost sources importing at particular levels. The whole industry is deeply concerned at the figure agreed for market growth throughout Europe. We think that will also reflect on the level that will be attached to low-cost source imports. Therefore, it does not matter how many days my hon. and learned Friend spends out there, he must come back with the right figures for the industry, otherwise there will not be a textile industry.

§ Mr. Rees
I reassure my hon. Friend, not for the first and probably not for the last time, that I am conscious of the importance of achieving the right growth figures. I and other Community Ministers have made that point in our deliberations. It is our intention that the new growth figures should relate more exactly to the anticipated growth in consumption in the European Community market.

§ Mr. John Smith
As the 1982 levels seem to have been conceded, will the hon. and learned Gentleman explain how any attempt will be made to stop countries from getting high levels for 1982 so that they can use them for future advantage? If anti-surge provisions are to be the effective protection for British industry, as the Minister seems to imply, does he appreciate that the percentages permitted will be absolutely crucial? The mechanism itself is not a sufficient protection; the percentages will be the test.

§ Mr. Rees
I am aware of the right hon. Gentleman's first point. We appreciate the importance of the basis from which the Commission will start. I do not want to go into detail about that, because it is a matter of some sensitivity and it will have to be explored in negotiation at Geneva. However, the point has not escaped our attention. Equally, I recognise the absolute importance of the figure thresholds and any anti-surge mechanism. I assure the right hon. Gentleman and the House that that point has been well taken on board.