Foreign Affairs Council

HC Deb 27 October 1982 vol 29 cc1043-50 3.35 pm

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym)

With permission, Mr. Speaker, I will make a statement on the outcome of the Foreign Affairs Council held at Luxembourg on Monday 25 and Tuesday 26 of October.

Agreement was reached yesterday on the implementation of the agreement of 25 May on refunds for the United Kingdom for 1982. This is subject to final confirmation within three days by the French Government. I am arranging for the text of the Council conclusions to be placed in the Library of the House together with a short explanatory note.

The main issue discussed by the Council was the method of financing the refunds. In particular, the agreement of 25 May provided for relief for Germany without specifying how the relief was to be given. This has now been satisfactorily resolved, and I am satisfied that the arrangements correctly implement the agreement of 25 May.

The Council had a useful discussion of East-West economic relations and of the Community dimension of the current discussions with the Americans. There was general support for the efforts being made to reach agreement on a framework for the handling of East-West trade and economic issues.

As the House will be aware, there remain certain commercial restrictions between, on the one hand, the United Kingdom and other countries of the Community, and, on the other, Argentina. We have discussed this with our partners and I am glad to report that the Council agreed that the Community should put to the Argentine Government immediately a proposal for the reciprocal lifting of these restrictions.

A ministerial conference with Spain in the margins of the Council made progress on a number of points. There will be a ministerial conference with the Portuguese in November, and the Council reviewed the preparations.

The Council agreed a mandate for the negotiation of the trade regime with Cyprus for 1983. There was also a meeting at ministerial level of the European Community Cyprus Association Council. The Community announced its agreement in principle to a second financial protocol for Cyprus to enter into effect on 1 January 1984.

The Council also discussed a number of important trade issues for which my hon. and learned Friend the Minister for Trade was present.

Points connected with the preparation of the Community position at the forthcoming GATT ministerial meeting were remitted to officials for further work. Meanwhile, the Community will continue to participate constructively in the preparations for the meeting on the basis of the guidelines endorsed by the Council in July.

On relations with Japan, the Council deplored the lack of progress so far in the consultations under the dispute settlement procedures of the GATT. A copy of the Council's conclusions is being placed in the Library of the House.

On steel, the United Kingdom pressed strongly for a tighter and more realistic import regime for 1983.

On textiles, the Commission reported on the negotiations for new bilateral agreements under the multifibre arrangements , and was given instructions to reopen negotiations where agreements remained to be concluded.

Mr. Eric Heifer (Liverpool, Walton)

Is the right hon. Gentleman aware that his statement is very unsatisfactory? Apart from anything else, there are no figures in the third paragraph of the statement. I accept that the figures are given in the explanatory memorandum, but they are not before the House and so hon. Members cannot discuss them now. Therefore, we are unaware of the precise details of what was agreed at the meeting.

Is it not clear that what the Financial Times today referred to as a "tortuous Community solution" is, in reality, no solution at all, that the budgetary agreement is only for 1982 and that there are likely to be more tortuous Community discussions for a long time? Have not the Government again failed to obtain what the House voted for at least twice and what the Prime Minister said that she wanted—that the budgetary issue should be resolved speedily and permanently?

Does the right hon. Gentleman recall that it is just on three years since the Prime Minister said that she did not intend to play Lady Bountiful to the rest of the EEC'? Can he therefore tell us what is meant by the statement reported in The Guardian today? I do not know whether the report is accurate, so I put this as a serious question. The Guardian states that Britain's gross payments to the EEC budget, which had been forecast at £841 million earlier this year, will in fact approach £1 billion this year. Can the right hon. Gentleman explain that? Does it mean that Britain's contribution is rising rather than falling as the Government suggest? Secondly, why did the Prime Minister tell Herr Kohl that the British Government would be pressing less urgently for a long-term solution? We are told that the 25 May agreement is being kept. That agreement stated categorically that a decision would be made before the end of November 1982 on a solution for 1983 and later. Has that now been abandoned?

Perhaps I may make one or two further comments on the right hon. Gentleman's statement. [Interruption.] It was a long statement which dealt with just about every issue except the budget. Very little was said about that main item.

The right hon. Gentleman's point about Argentina is most welcome. I trust that it will be a move towards stepping up trade relations with the whole of Latin America and with Argentina in particular.

The right hon. Gentleman referred to steel, but he did not mention that 67 per cent. of all our steel imports come from the EEC. What do the Government intend to do about that? Is it not time that we began to negotiate our way out of the Treaty of Rome instead of continuing to face the difficulties that membership of the Common Market brings?

Mr. Pym

The main item on the Council's agenda on this occasion was the implementation of the 25 May agreement. The longer -term budget negotiations were not part of the agenda. We shall be receiving proposals from the Commission on that next month for 1983 and later years and it will be on the agenda for the November council, but I should make it quite clear that it was not on the agenda on this occasion. I made my statement as brief as possible in view of the vast range of subjects that were taken, but if the hon. Gentleman wishes to have further details about the budgetary arrangements perhaps I may summarise the situation as follows.

There are four elements. First, the basic British refund will be about £600 million gross. Secondly, the Germans will receive their basic refund also out of the 1982 budget. Under the own resources system, we have to contribute to that in the first instance and arrangements were agreed yesterday to compensate us for that. Thirdly, the risk-sharing payments, including those arising from the German refund, will also be brought forward and will be made from the 1983 budget and not from the 1984 budget as originally agreed. Fourthly, the Commission has undertaken to transfer the whole of our £600 million from its cash balances in other member States rather than running down its cash balances here as was the case in previous years.

I believe that those four elements add up to a solution that meets the requirements of the 25 May agreement. I think that it is a bit hot for the hon. Gentleman to chide the Government for not having taken steps to deal with the budget refund when the Labour Government did nothing about it at all and we inherited a situation in which no progress had been made. So far, we have got back £1,685 million gross and we have now negotiated more. I think that that is a very good start.

Several Hon. Members rose—

Mr. Speaker

Order. I propose to allow questions to run for 20 minutes. That is a very good run, as there are two other major statements to follow.

Sir Anthony Meyer (Flint, West)

Does my right hon. Friend agree that the difficulties with the budget stem from the Labour Government's disastrous renegotiations? To keep the matter in perspective, does he also agree that the budget contribution must be seen as part of our contribution to the membership of a Community which alone in an extremely dangerous world in which protectionism is running out of control can maintain some effective protection policies for British industry on a temporary basis?

Mr. Pym

The Government have always made it clear that, whereas on a strictly fairly calculated basis we might expect to be net beneficiaries rather than contributors, we have none the less accepted that we shall be and are prepared to be modest net contributors. Nevertheless, we believe that it is extremely important to reorganise and rearrange the financing of the Community so that it will be fair not only to Britain but to all other member States. It would be extremely helpful if it were possible to achieve a long-term solution, and that is what I am trying to achieve all the time. I hope that it can be done.

Mr. Geraint Howells (Cardigan)

We appreciate the Foreign Secretary's good work in relation to the European budget, but does he agree that millions of pounds of taxpayers' money could be saved if our surpluses in Europe were sold to other countries and not to the Russians? Does he agree with his Cabinet colleague the Minister of Agriculture, Fisheries and Food that no surpluses should be sold to the Russians in the future?

Mr. Pym

That issue has certainly been most carefully discussed in the Community and we all agreed that it would be quite wrong to sell food or indeed other goods to the Russians on a subsidised basis. There is a problem in disposing of the surplus food, but it would not be right to sell it to the Soviet Union on a subsidised basis.

Mr. Douglas Jay (Battersea, North)

As it is clear that on the EEC budget the agreement is for one year only, can the right hon. Gentleman tell us what will be the gross United Kingdom payment to the EEC budget in the following year if there is no relief?

Mr. Pym

No, I cannot yet say that, but it will be a modest contribution. It is not possible to quantify it precisely as the year is not yet over.

Mr. Terence Higgins (Worthing)

Is it not absurd that the countries represented at the meeting continue to grant export credits to the Soviet Union and its satellites which enable them to modernise their industry at rates of interest far below those available to our own manufacturers? In the light of the Polish debt experience particularly, what steps are being taken to remedy the situation?

Mr. Pym

In the discussions among NATO Foreign Ministers in Canada about a month ago and in subsequent discussions between ourselves and the United States, we are coming to a position of agreement that it is quite wrong for trade to be undertaken with the Soviet Union on credit terms that are in effect a subsidy and too advantageous to that country. That is one of the issues that will form part of the framework of future trade agreements with the West that we are trying to agree among ourselves. I agree with my right hon. Friend that this practiice should not be allowed to continue, and we are working in that direction.

Mr. Ben Ford (Bradford, North)

Which textile bilaterals are outstanding and what is the remit of the negotiators?

Mr. Pym

They are those with the ASEAN countries and with some of the dominant suppliers. I think that that is the answer to the hon. Gentleman's question.

Mr. Anthony Nelson (Chichester)

Is my right hon. Friend aware that there will be widespread relief and satisfaction that the substantial gross refund of some £600 million will be paid not only in full but, apparently, ahead of the time expected? Will he confirm that, although it may be unreasonable to expect a long-term solution by the end of next month, the Government remain committed to achieving a favourable long-term solution as soon as possible and that the Prime Minister herself may discuss this during her forthcoming visit to Germany?

Mr. Pym

I am working in every way that I can to achieve that long-term solution. My right hon. Friend the Prime Minister may raise it at the Council, but that is still some six weeks away and we had better see how we get on in the meantime. A number of commentators and others believe that a solution will not be achieved next month, but I shall continue to try to achieve it. I should point out that a number of member countries believe that a permanent solution to the problem is unlikely to be achieved before the Community is enlarged by the accession of Spain and Portugal and before there is further debate about the 1 per cent. resource. That may be a year or two away. Despite that, and despite the views held by other countries, I am still trying, as the Community knows and as hon. Members know, to achieve a long-term solution which would be beneficial not only to Britain but to the whole Community.

Mr. Nigel Spearing (Newham, South)

Will the Foreign Secretary confirm that since any refund for next year, let alone the long-term solution, will depend entirely on the good will of the other members of the EEC, we are in effect a client State? Will he also confirm that the £600 million refund can be spent only on public projects in this country which are permitted by Brussels?

Mr. Pym

I think it is for my right hon. and learned Friend the Chancellor of the Exchequer to decide how the money will be spent. My task is to secure the implementation of the 25 May agreement. The hon. Gentleman is correct. There is no agreement yet about the refund of our contribution for 1983 and later. That will be high on the agenda for the next Council meeting.

Mr. Nicholas Winterton (Macclesfield)

In view of all the refunds that are being made, will my right hon. Friend tell the House who is paying for the European situation because the House would be delighted to know? Is my right hon. Friend aware that the multi-fibre arrangement is a catastrophic disaster, that the bilaterals are not working and that the general agreement on tariffs and trade is anything but an agreement with which the British people agree? Many textile companies in Britain are being driven out of business—not least the Northgate Group which is a subsidiary of the Courtaulds apparel group—not because of inefficient management, bad industrial relations or bad on-costs but because of unfair competition. When will the Government and the European Community do something about it?

Mr. Pym

My hon. Friend is quite right about the textile industry which is a source of anxiety to him and to many other hon. Members. There is a tough negotiation about the multi-fibre arrangement in progress. That is likely to be substantially tougher than the second multi-fibre arrangement, but it has not yet been concluded. We are making the best possible progress.

I agree with my hon. Friend about unfair competition. The issue of how we can improve the arrangements to ensure that the competition is conducted on a fair basis and not an unfair one is of major importance to the Government. We are giving particular attention to the matter.

Dr. David Owen (Plymouth, Devonport)

With unfair trading, the Community's commitment to free trade becomes a mockery. While I agree with the Council and the Foreign Secretary's statement deploring the lack of progress with Japan, to which might be added Spain and particularly the question of cars, I should like to know when action will be taken. Surely the European Community must within the next few weeks use its economic, political and trading strength to insist on fair trading and to take action.

Mr. Pym

The right hon. Gentleman is correct. A great deal of attention is being given within the Community to preparation for the GATT ministerial meeting, which we regard as extremely important in the context of the right hon. Gentleman's point.

Mr. K. J. Woolmer (Batley and Morley)

Will the Foreign Secretary confirm that, in regard to the multi-fibre arrangement negotiations, the Council of Ministers has rejected any weakening of the negotiating mandate? If there have been any changes or weakening, will the Foreign Secretary say what those changes are?

Will the right hon. Gentleman confirm that the Commission has been asked to draw up contingency plans in the event of those negotiations not being concluded by the end of this year? Finally, in view of the great importance of this matter to 600,000 workers, when will the House have an opportunity to cross-examine the Minister on it?

Mr. Pym

The hon. Gentleman has raised an important matter. I shall give him the assurance for which he asks on the first point. There is and there will be no weakening—in fact, the mandate for negotiations with our dominant suppliers was reaffirmed without alteration.

On the hon. Gentleman's second question, contingency plans are being prepared but it would be inappropriate to give any details a: this stage.

Mr. Tim Rathbone (Lewes)

In the many areas that my right hon. Friend covered in his discussions, which of those have been of benefit to this country because of our membership of the group discussing them and which. if any, have had the opposite effect?

Mr. Pym

All of them gained from the benefit of being conducted and dealt with on a Community basis rather than individually. At a glance, I do not think that any of them would have been easier or more effective had we done it on our own.

Mr. Bob Cryer (Keighley)

First, does the Minister accept that any refunds are payments of our own money back to us?

Secondly, will the right hon. Gentleman ensure that at an early stage in the new Session the Minister for Trade, who has been giving him all the details of the MFA, makes a statement to the House? It is disgraceful that this crucial arrangement for the textile industry is dealt with only as part of a massive statement covering a huge range of subjects. Is it not reasonable for the House to know what contingency plans exist if the MFA breaks down? Surely having contingency plans is a negotiating posture to ensure that a strengthened MFA is negotiated. More than 1,000 jobs have been lost in the Keighley textile industry since the Tories came to office. We wish to ensure that no more jobs will be lost.

Mr. Pym

The answer to the hon. Gentleman's first question is "No". On his second point, the Minister for Trade, my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), made a number of statements to the House. Indeed, the Leader of the House, in his former capacity, did the same thing. We have taken particular care to keep the House informed.

With regard to the hon. Gentleman's third point about contingency plans. I refer him to the reply I gave to the hon. Member for Batley and Morley (Mr. Woolmer) a few moments ago. It would be inappropriate at this stage to go into further detail, but I acknowledge, as the House does, the serious position in the textile industry and its implications for jobs.

Mr. John Page (Harrow, West)

I listened, as always, with care, respect and admiration to my right hon. Friend's statement. He said something about the Community deploring something about Japan. Will he expand on it so that we may know a little more about it?

Mr. Pym

I said that the Council deplored the lack of progress in the consultations under the disputes settlement procedures of the GATT. On her recent visit to Japan, my right hon. Friend the Prime Minister had a number of meetings and continually reiterated the importance of trade relations with Japan in correcting some of the present imbalances.

Mr. Ioan Evans (Aberdare)

In his discussions about Argentina and trade with Argentina, did the Foreign Secretary spell out the long-term future of the Falkland Islands? If he is to have discussions with his European partners, is it not time that we had a full statement, with all the various implications, since the subject is likely to be raised again in the United Nations?

Mr. Pym

I have kept my colleagues in the Community fully informed of our position with regard to Argentina and the Falkland Islands. They are aware of the position from our point of view.

Mr. Teddy Taylor (Southend, East)

In view of my right hon. Friend's rather depressing words, despite all his efforts, about the prospects for a long-term budget settlement, is it the Government's intention to pay the full estimated net rebate of about £1,000 million for 1983 in the absence of such an agreement, or will the Government be prepared to withhold contributions as a bargaining weapon?

Mr. Pym

We have not yet started discussing and negotiating about 1983 and later. Of course, it is my intention to achieve a negotiated settlement, and we must see how we get on. We have only just completed the details of the 1982 settlement. I think that is satisfactory.

Mr. Dennis Skinner (Bolsover)

Does the Foreign Secretary recall that when the Prime Minister came back from one of the previous meetings of the "top ten", or whatever it is called, she said that there had been discussions about the rescheduling of debt. At that time, 26 countries were involved, but the number has grown to 40 with debts of about $650 billion. During the recent discussions—the Foreign Secretary did not mention this—has there been any joint approach by the Common Market countries which together are supposed to deal with these matters? Will the right hon. Gentleman tell the House whether his statement, or any future statements by him, will be vetted by the Prime Minister's Foreign Office spy, Sir Anthony Parsons? The House and the country wish to know.

Mr. Pym

I am giving the House a report and answering questions on the Foreign Affairs Council which has just taken place. While the subject to which the hon. Gentleman first referred has been discussed in the past, it was not discussed this week.

Mr. Kenneth Lewis (Rutland and Stamford)

Is my right hon. Friend aware that we on the Conservative Benches congratulate him on achieving a speedy deal on the £600 million rebate from the EEC, apparently without any acrimony? There is much concern about the steel industry because of the belief that there is dumping of steel from the EEC. Is there not a danger that the £600 million will have to be spent on shoring up our steel industry unless an arrangement can be made with Europe to prevent further dumping of steel? Can my right hon. Friend give us any hope?

Mr. Pym

I can give my hon. Friend hope. The issue is still a major topic for discussion. I shall discuss the point that he raises in greater detail with my right hon. Friend the Secretary of State for Industry, but we are doing all that we can to bring about improvements.

Mr. D. N. Campbell-Savours (Workington)

Does the Foreign Secretary realise that the European steel regime relies on countries complying with voluntary arrangements? As a number of plants are mooted for closure nationally, should not the agreements be mandatory? Is he pressing for that in the Council of Ministers?

Mr. Pym

That could be considered, but voluntary restraint agreements provide a better means of controlling trade in steel than other more disruptive measures, such as anti-dumping action. The topic is receiving a great deal of attention.

Mr. Ivan Lawrence (Burton)

Is not the danger of a universal slide into protectionism the most important single problem facing industrial nations trying to bring an end to the world recession? Was the issue discussed as a general problem at the meeting? What is the EEC view, and what is our view?

Mr. Pym

The matter was discussed, albeit briefly. I entirely agree that it is an important topic. The danger of a slide into protectionism could turn the deep recession into something worse. It will be a major objective of the GATT ministerial meeting in November to prevent that from happening and to maintain the open trading system which has been the basis of the vastly increased prosperity that many countries have enjoyed.

Mr. Tony Marlow (Northampton, North)

As my right hon. Friend the Prime Minister had a successful trip to Japan to discuss our deficit in manufactured goods of £2,000 million with that country, will my right hon. Friend say what discussions he had with our European partners about the running deficit in manufactured goods with the Community of £5,000 million and the devastation that that is causing to our industry? What does he intend to do about it, particularly as much of it arises from unfair trading and competition within the Community?

Mr. Pym

The trade figures are reasonably satisfactory—[HON. MEMBERS: "Oh!"]—but of course they can always be better.