Foreign Affairs Council (Trade) (Hansard, 23 February 1983)

§ The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd)
With permission, Mr. Speaker, I will make a statement on the trade aspects discussed at the same Foreign Affairs Council on 21 and 22 February.
The council endorsed the agreement reached with the Japanese by the Commission providing for export restraint by Japan, agreed that the Commission should pursue vigorously the opening of the Japanese market, and should by July this year review the state of the Community's trade relations with Japan and make any necessary proposals for further action.
The problems that the Community is having with the United States of America over agricultural trade were discussed. The council endorsed the continuing efforts of the Commission to resolve these problems with the United States of America and agreed that the presidency—the German Foreign Minister—should send a message to the United States Secretary of State underlining the political need to work together to avoid any worsening of the problems.
Finally, the Commission gave the council an interim report on its continuing talks with the Spaniards on problems relating to the EC-Spain 1970 agreement. My right hon. and noble Friend the Secretary of State for Trade underlined British concerns, welcomed the Commission's undertaking to pursue further its efforts with the Spanish Government, and made it clear that we looked for precise improvements in the operation of the agreement and the question of tariff imbalances.

§ Mr. Peter Archer (Warley, West)
The House will wish me to thank the right hon. Gentleman for that statement, but would he be surprised if it gave rise to something less than dancing in the streets? On the agreement with Japan, is it true that the matter that occasioned great anxiety in the Community was the import of video tape recorders from Japan? Will the right hon. Gentleman confirm that the agreement limits the import of video tape recorders from Japan to 4.5 million per year?
Is it true that of the 5 million imported into the EC last year, about half were imported into the United Kingdom? If the purpose of the agreement is to help to protect and nourish a European industry in high technology consumer goods, do not this country's interests lie in producing more video tape recorders in Britain? What industrial policy do the Government have in mind to ensure that a limit on the import of Japanese tape recorders does not result simply in the import into Britain of higher priced French and German recorders? Can the right hon. Gentleman confirm that the agreement includes 8 mm video tape recorders, which many people believe will in any event shortly replace the present 16 mm ones?
Have the Government now realised that the EC and the United States of America are in danger of moving towards a subsidy war in which more and more taxpayers' money will be poured into surpluses to be exported at knock-down prices to the Soviet Union? Whatever the view of other European Governments, is it not in the interests of this country to get rid of the common agricultural policy and to ensure that any future subsidies are reflected in lower prices to our consumers?
949 On the talks with Spain, are not the French Government insisting on resolving the problems for French agriculture before the EC proceeds to Spain's accession?
Are the Government displaying a corresponding zeal on behalf of the car, steel and footwear industries in Britain? Will the right hon. Gentleman now answer the question that I put on Monday to the Minister for Trade, which somehow escaped answer? How long is it likely to be before the British car industry sees an end to the situation in which Spanish cars can be imported into the United Kingdom at a rate of duty that is slightly more than one tenth of the duty paid by British exporters of cars to Spain?

§ Mr. Hurd
I confirm that the overall ceiling for video tape recorders in the new arrangement negotiated by the Commission is 4.5 million units. I understand, subject to correction, that that covers all types. We had to take into account British industry's need for kits as a result of the arrangements negotiated with the Japanese. The Secretary of State pressed that point at the council and received an assurance that the Japanese could supply, under the new arrangements, adequate numbers of video tape recorder kits at economic prices to meet the needs of our industry.
As the House knows, we want to change the operation of the CAP in a fairly radical way. We also want to avoid the subsidy war and the clash between these two trading giants. Because we are worried about the political implications we agreed that the German Foreign Minister should represent those worries at this stage to the United States Secretary of State while discussions with the Americans are still going on about the technical problems.
As regards Spain, we are dealing with the defects, well recognised throughout British industry, of an agreement in 1970 between the Community and Spain. Part of that is the implementation of the agreement and the way it is carried out, and part of it is the tariff imbalance to which the right hon. and learned Gentleman referred. My right hon. and noble Friend pressed hard again yesterday for the Commission to take vigorous and continuing action to alleviate both those problems. We are also taking every opportunity—I shall have an opportunity tomorrow when a Spanish Minister comes here—to impress our concerns vigorously on the Spaniards themselves.

§ Sir Julian Ridsdale (Harwich)
Is my right hon. Friend aware how much one welcomes the industry-to-industry talks to try to correct the imbalance of trade between Japan and the EC? Will he assure the House that these talks will not bar the way to getting high technological Japanese investment in the United Kingdom?

§ Mr. Hurd
That is an important point on which I agree with my hon. Friend.

§ Mr. Bob Cryer (Keighley)
I notice that the Minister said that the Community has reached agreement about export restraint by Japan, and will review the position after 12 months with a view to taking further action. What is he doing about the volume of cars, which is four times greater, coming into the United Kingdom from other EC countries? Does the Minister not realise that if Japanese cars represent a problem, imported EC cars represent a far greater problem? This year our car production has been at its lowest since 1957. Over the last 10 years there have 950 been 1 million fewer vehicle units. If we do not do something about it the EC will take over our motor vehicle industry and destroy it.

§ Mr. Hurd
I would argue in return that Japan is a special case. As a Government we do not want to get into the business of erecting restrictions against every supplier whose goods our customers wish to buy. We certainly do not want to get into a trade war with other members of the Community in which we would stand to lose more than we would gain.

§ Sir Charles Fletcher-Cooke (Darwen)
Is my right hon. Friend aware that we very much admire the brevity and conciseness of his statements about the Council of Ministers but that he sometimes overlooks the functions of the Council and the functions of a legislature? We never seem to get reports about how draft directives and draft regulations are treated by this important legislature. For example, can he tell us what progress, if any, there has been with those old friends, the product liability directive or the fifth directive on company law? Several of these matters have now been before the Council for about 10 years. When shall we hear something about them?

§ Mr. Hurd
I have the impression that these statements are so long as to be somewhat wearisome, and I hesitate to add to them. As my hon. and learned Friend knows well, we have a system by which the scrutiny committee examines precisely the documents in which he is interested, and decides which of those ought to be discussed fully in the House. Debates are then arranged. That is a better system than trying to go into the details of each directive and draft regulation at the time of statements.

§ Mr. Arthur Lewis (Newham, North-West)
The Minister will probably not have had time to listen this morning to Radio 4. Will he ask for a transcript of a programme in which a prominent American made a frightening statement about the possibility of the United States entering a trade war against Common Market countries and threatening to take serious action? If that were to happen, it could have a deleterious effect on Britain and on the rest of the Common Market and would upset all the plans and discussions that the Minister had yesterday.

§ Mr. David Ginsburg (Dewsbury)
Name him.

§ Mr. Lewis
I will not because I cannot remember his name. I have asked the Minister to get a transcript so that he can judge the matter. It was a prominent person, and his statement was frightening. The Minister should not sit there grinning and sneering. He should get the transcript and look at it because what was said was frightening.

§ Mr. Hurd
I shall certainly follow the hon. Gentleman's advice. There are protectionist voices on the other side of the Atlantic. I agree with the hon. Gentleman about the bad results for us if we got into a major trade war with the United States. There are also protectionist voices in the House. We have heard some of them this afternoon, and the same comment applies.

§ Mr. Jim Spicer (Dorset, West)
Does my right hon. Friend accept that, of course, hon. Members understand that priority should be given to discussions with Spain? At the same time, the Portuguese are indulging in unfair trading practices. Will my right hon. Friend give an 951 undertaking that in the coming months he will examine what Portugal is doing in advance of its entry into the Community?

§ Mr. Hurd
Staring at us at the moment is the problem with Spain. If my hon. Friend has particular problems as regards Portugal that he wants us to study or act upon, no doubt he will let us know.

§ Mr. K. J. Woolmer (Batley and Morley)
In regard to Spanish trade and the high tariff barriers that Spain exercises against our commodities, may I draw the Minister's attention again to the way in which the French are prepared to hold up Spanish accession to protect their agriculture, while Spain exercises a 30–32 per cent. tariff on wool fabric and a 33–36 per cent. tariff on knitted woollen garments? Is this not a demonstration that the French are prepared to talk about the principle of Europeanism but look after France, while this country appears to be selling British interests down the river in the interests of Europeanism?

§ Mr. Hurd
I remind the hon. Gentleman that Spanish accession, when it occurs, will solve the problem that he has raised. That is to say, at the end of the transitional period, which remains to be negotiated, the tariff imbalance would disappear. Therefore, we must not cut off our nose to spite our face. We have made it clear that since the earliest possible date for Spanish accession is later than expected, we cannot be expected to wait until then to solve our problem. That is why, both in the Council and directly with the Spaniards, we are emphasising the need for action by them on both aspects I described—the way the existing agreement is carried out and the tariff imbalances that it contains.

§ Sir Anthony Grant (Harrow, Central)
Does not the Commission deserve congratulations, rather than carping, on the sensible arrangements it reached with Japan? Would not the most likely cause of a trade war, from which Britain would suffer as mach as anyone, be the implementation by us of the fatuous import control policy advocated by the Opposition?

§ Mr. Hurd
I am sure my hon. Friend is right. The arrangement negotiated by the Commission and approved yesterday by the Council is a step forward as regards the Japanese. It is not a complete answer but it is a step forward, and it would he sensible to welcome it as such. I agree entirely with the comment in the latter part of his remarks.

§ Mr. Ron Leighton (Newham, North-East)
Does the Common Market believe in the virtues of unrestricted free trade? If so, why does it seek to raise obstacles to imports from Japan? If on the other hand it believes in trade management should not the Minister realise that our trade deficit with Germany is three times as great as our trade deficit with Japan? Should he not consider negotiating trade management with Germany before industry in places such as the west midlands is destroyed completely?

§ Mr. Hurd
Germany is an open market in which we can sell without hindrance. That is a major difference with Japan. The treaty of Rome and the Community show a general instinct towards free trade and competition but all member states agree that in certain industries and in certain circumstances it is necessary to protect our own. That is what we are doing through the arrangement we have been describing.

Several Hon. Members
rose—

§ Mr. Speaker
Order. I propose to call those lion. Members who have been seeking to catch my eye throughout.

§ Mr. Hal Miller (Bromsgrove and Redditch)
On the subject of trade with Spain, will my right hon. Friend accept that the tariff disparities in the case of the automotive industry are not just limited to the 37 per cent. tariff on the 108 per cent. of the cif value but that internal taxes raise it to an effective 66 per cent? Will he accept that his right hon. Friend the Secretary of State for Industry stated publicly in October that these discrepancies were grotesque and intolerable and that the situation was very much in the "Action" file. Is he aware that action is needed in the light of the fact that the Spanish industry is now bigger than ours and that further access to this market of a new Vauxhall model is about to take place? Does there not have to be some definite timetable for a conclusion to these negotiations?

§ Mr. Hurd
My hon. Friend is right. We are dealing not only with a tariff imbalance that appears in the agreement but with the way in which the Spaniards, through their administrative processes, implement the agreement and their own arrangements. That bears particularly hard on our car industry. We are dealing with an agreement between Spain and the Community. We are seeking to tackle it on a Community basis because that is the best way. We are continuously and energetically—my right hon. Friend, my hon. and learned Friend the Minister for Trade and Foreign Office Ministers—impressing on the Commission the need for action. We are also taking every opportunity to ram home our concerns direct to the Spanish Government.

§ Mr. Ginsburg
Will the right hon. Gentleman accept that there is a genuine, cautious welcome for what he says about the need for export restraint by Japan and the agreement that has been reached and also for what he says about opening up the Japanese market? This is a very difficult market to penetrate. Will he consult the Secretary of State for Trade to see what more can be done to assist British firms to gain entry to that market?
On the question of Spain, there are, of course, difficulties. Will he also accept, however, that it is important that Spain should enter the European Community to demonstrate that the spirit of internationalism—there is a newly elected democratic Government in Spain—is not totally dead on these Benches?

§ Mr. Hurd
One reason why it is important that Spain should enter is precisely that it would solve a problem of which hon. Members on both sides of the House are painfully conscious. As the hon. Gentleman says, there are other reasons. We shall continue to support the negotiations.

§ Mr. Keith Best (Anglesey)
Is my right hon. Friend aware that one of the best means of dealing with Japanese imports is to encourage inward investment of Japanese companies into Britain so that their goods can be manufactured by British labour? Is he further aware that Wales has a larger number of Japanese companies than any other comparable region in the EC? Does he not agree that one of the principal reasons for those companies setting of in Wales is that this country is a member of the EC? Does 953 he not think that this process would be seriously inhibited and jeopardised if this country were to withdraw from the EC, as advocated by the Opposition?

§ Mr. Hurd
My hon. Friend puts it well. Nothing would knock new investment in this country from overseas more firmly on the head than any real likelihood of our withdrawal from the Community.

§ Mr. Tam Dalyell (West Lothian)
Are we to understand that the Department of Trade or the Foreign Office are investigating the alleged sale of Exocets to Sudan? If the Council of Ministers is not the right forum to discuss end-user certificates, which is the right forum? It has become a dangerous fiasco when politicians in Third world countries, or other countries, can apparently pocket some £200,000 for signing a certificate for arms going to an undesirable place. That is the situation.

§ Mr. Hurd
The right approach, so far as the hon. Gentleman is concerned, is either to table a question on the matter or to write to a Minister whom he thinks should be able to reply.

§ Mr. Teddy Taylor (Southend, East)
As the Common Market spent over £7 million a day last year dumping cheap food on world markets and as the surpluses are growing steadily, does not the Minister think that the best contribution we could make would be to put forward any kind of meaningful plan to reduce the amount of surplus? Was there any talk in these discussions about the horrifying information revealed by the Minister for Trade yesterday to the effect that our deficit in manufactures with the Common Market last year was over £5,000 million? That is equivalent to a drain of about 700,000 British jobs.

§ Mr. Hurd
There was no discussion on the second point. As regards the first point, I broadly agree with my hon. Friend. We have consistently stated in our approach to these long-term discussions that the priority must be to get effective control of the agricultural spending. All the other proposals put forward by the Commission, some of them good and some not so good, will not achieve the end that we have in mind unless there is more effective control than exists at the moment.

§ Mr. Nigel Spearing (Newham, South)
Does not the range and importance of the matters on which the Minister has reported reflect the extent to which the Government and this House can no longer decide on them? In respect of the agricultural war with the United States, is it the 954 contention of the Commission that the United States is subsidising its exports to a greater extent than the Commission and the EC? Can the Minister say what the rough proportions are? If not, is it not time that the EC cut down the subsidies?

§ Mr. Hurd
It is abundantly clear that here one has two major agricultural producers, the Community and the United States, both of whom, through different practices, spend a great deal of money protecting their agriculture and achieving surpluses which it is then difficult to dispose of. We have seen recent American sales of subsidised flour to Egypt, which is not a traditional American market. It is a symptom of the problem which we will get into if we are not careful.

§ Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)
Will my right hon. Friend accept that most Conservative Members will agree that where competition is fair, British industry must shift for itself because we are a large exporting nation and industry must take its chance with other fair competition? Is he not aware that the Spanish situation is a great deal different? Many of us are disturbed by the emphasis that the Minister places on the EC negotiations, which is like trying to move through a sea of treacle. Will my right hon. Friend accept that the problem we are talking about is urgent and exists now? Will he agree that Spanish car exports to this country are growing at a rate of over 30 per cent. a year and that if the Government do not soon take action, unilateral if necessary, because the situation is so unfair, at least another 20,000 jobs will be lost in the west midlands? Is he aware that those jobs can be saved if resolute action is taken now rather than continuing to talk for month after month?

§ Mr. Hurd
Anyone who has visited Birmingham, Manchester or other main industrial centres recently will agree with my hon. Friend's analysis. This is something that is sorely felt and where urgent action is required. It will, I think, be much better to achieve that action on a Community basis for the reasons that I have already given. As regards unilateral action, I hope that it will not come to that.