HC Deb 20 July 1983 vol 46 cc379-86 3.35 pm
The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe)

With permission, Mr. Speaker, I will make a statement on the outcome of the foreign affairs council held in Brussels on 18 July at which I represented the United Kingdom and at which my right hon. Friend the Minister for Overseas Development was also present. I will also take this opportunity to comment on the special council which met on 19 July to discuss the future financing of the Community.

I shall deal first with the discussion about the decision of the United States Administration to impose import curbs on certain special steel products. Coming so soon after the Williamsburg commitment against protectionism, this decision has caused great dissatisfaction in the Community. I made that quite clear both to President Reagan and to Secretary of State Shultz during my visit to the United States last week.

The European Commission has already taken this up with the United States Administration on behalf of the Community, but there has been no sign of American willingness to reconsider or amend the decision. The Commission therefore proposed to seek consultation in the GATT and to raise the issue in the Organisation for Economic Co-operation and Development.

The council strongly supported the Commission's proposals and agreed to issue a statement of conclusions setting out the Community's position. A copy of this has been placed in the Library of the House.

The council made satisfactory progress towards agreeing its position on negotiations with the African, Caribbean and Pacific countries on a successor to the Lome convention, which are due to open in October. There will be further discussions on the, outstanding points of the Commission's negotiating mandate at the September meeting of the council.

The annual report of the Committee of Permanent Representatives on relations between the Community and the countries of EFTA was accepted by Ministers, who expressed their support for the strengthening of the relationship.

The council reviewed progress on Greenland's application to withdraw from the Community. Ministers agreed the need to make progress in the negotiations and in particular the desirability of an agreement which satisfactorily balanced the development of Greenland's fisheries with the proper needs of the Community.

In informal discussion of United Kingdom refunds in respect of 1982 and 1983, decisions on which are for the Budget Council which is meeting today and tomorrow, I underlined the need for full and correct implementation of what was agreed in October 1982 and at Stuttgart.

In the context of political co-operation, Ministers of the Ten also briefly discussed progress at the Madrid meeting of the conference on security and co-operation in Europe and the situation in central America and in Poland.

Finally, the Ministerial meeting with the Portuguese reviewed progress in Portugal's accession negotiations.

Yesterday, my right hon. Friend the Financial Secretary to the Treasury and I took part in a meeting of the Special Council to discuss the future financing of the Community and other issues covered in the Stuttgart declaration. I explained our views on a number of issues, particularly on a safety net scheme for limiting net contributions to the Community budget and on strict financial guidelines for controlling agricultural expenditure.

Mr. Eric S. Heifer (Liverpool, Walton)

Will tare right hon. and learned Gentleman explain why copies of his statement were not in our hands until 3.15? That did not give us time properly to examine it. But on the other hand, having read through it quickly, I can see that there is not much in it anyway, so there was not much to examine.

Was there any discussion about trying to create policies for the whole of the Community to get the EC working and unemployment down? One omission from the Secretary of State's statement—as has been the case in the past—is any indication from the Government that any effort is being made by the European countries to reflate the economy and get our people, in Britain and throughout Europe, back to work as quickly as possible. Perhaps the right hon. and learned Gentleman will explain precisely what the intentions of Her Majesty's Government are on that.

As for the United States—EC steel conflict, does the right hon. and learned Gentleman agree that that is part of a wider trade conflict and that the protectionism of the common agricultural policy has fuelled it? Does he agree that the United Kingdom steel industry has been squeezed between the steel policies of the EC and the agricultural protectionism of the United States? When he discusses this with the GATT, will the right hon. and learned Gentleman draw attention to agricultural matters as well as to the problems of steel?

We have heard statement after statement from various Ministers about VAT and refunds to the United Kingdom. No doubt the right hon. and learned Gentleman will say, as many other Conservative Ministers have said, that there is no intention to raise VAT in this country. That cannot be guaranteed, but will he guarantee that there will he no further increase in the VAT contributions to the Community budget or own resources, which is the only way in which it can be done at the moment?

If, as is quite likely, the European Assembly decides to block the budgetary proposals, what do the Government intend to do? The Assembly is flexing its muscles and it is clear that after the Athens summit it intends to say, "We want extra powers, we intend to get them and we will get rid of the Commission if we do not like what is being proposed." How would the Government respond to that?

Will the right hon. and learned Gentleman assure us that the Government will tell the House in detail what is happening in the Community as early as possible, so that we can have a real discussion about the proposals and the House can make its views clear?

Sir Geoffrey Howe

On the hon. Gentleman's last point, I shall certainly see that the House is kept informed in this fashion and other customary ways of what is taking place between the Government and the other countries of the Community.

On the procedural point, I cannot understand why the hon. Gentleman did not have the document, which he was certainly entitled to. I believe that it left my office at 2 o'clock. I shall try to ensure that such an incident does not happen again.

The hon. Gentleman asked about the intentions of the Parliament. The Parliament adopted similar positions at different stages of the procedure last year. In answer to a question in the House on 17 December, I said that we should take action to protect our position if it became necessary in the light of what the Parliament was then threatening to do. In the event, the Parliament did not do what it had threatened to do. I think that I ought to wait before answering a hypothetical question.

The creation of sanctions in the United States against European speciality steels is one manifestation of a tendency towards protectionism which ought to be deplored on both sides of the Atlantic. It does not arise out of the agricultural policy but is a separate and distinct point. However, I agree with the hon. Gentleman that one of the reasons for wanting to reform the common agricultural policy and to curb agricultural subsidisation everywhere is that it gives rise to undue protectionist tendencies.

The hon. Gentleman asked about the VAT own resources measurement. If the Community can satisfy the conditions outlined by the Prime Minister, we are prepared to see whether a case can be made out for an enlargement of own resources. As I have already said today, a case that we can accept has not yet been made. That point is linked with the hon. Gentleman's first question. He asked whether we had taken action to get the Community back to work and reduce unemployment. He asked why we had not achieved any reflation. The answer is that all the member states of the Community recognise that reflation is the wrong method of combating unemployment. That question therefore does not arise in the Community.

Sir Anthony Kershaw (Stroud)

Was there any discussion about the enlargement of the Community? Is it still the view of the Council of Ministers that enlargement cannot take place until the common agricultural policy has been reorganised?

Sir Geoffrey Howe

Enlargement was one of the propositions agreed upon at Stuttgart. It was in that context that we met the Portuguese Ministers at the Council meeting yesterday to review progress on their accession negotiations. The Stuttgart agenda includes getting on with the process of enlargement, the reform of the common agricultural policy and the improvement of the budgetary procedure. Those matters are all going ahead at the same time.

Mr. Russell Johnston (Inverness, Nairn and Lochaber)

Will the right hon. and learned Gentleman accept that even if a reform of the common agricultural policy and an equitable budgetary solution are achieved, there will still be an urgent need to increase the own resources element in the Community budget if we are ever to achieve anything in the regional or social field? Can the right hon. and learned Gentleman assure us that he will not oppose such an increase, given that he achieves agreement on the CAP and the budget?

Sir Geoffrey Howe

Even if agreement is reached on reform of the agricultural policy and a fairer budgetary procedure, it does not follow that own resources should be increased. The burden of showing that the Community needs and should have an increase in own resources would still rest upon those who seek it. It would be a transfer of resources through Community institutions, for which the case has not, on the face of it, been made. The hon. Gentleman is entitled to his views. We are prepared to listen to those who argue the case and to consider it on its merits.

Mr. David Howell (Guildford)

There will be a warm welcome for the bold and imaginative-sounding speech made by my right hon. and learned Friend yesterday, in which he opened up new possibilities for the reform of the common agricultural policy. Does he envisage that that reform will involve new legislation in national Parliaments, or amendment to the treaty of Rome? Beyond the idea of a ceiling on the CAP, does he foresee the development of new support systems for agriculture in the separate countries?

Sir Geoffrey Howe

There are national agricultural programmes, which differ in various respects, but my right hon. Friend should hesitate be believe that it is necessarily right to move from one form of subsidisation to another, or indeed to place one on top of another. We have to keep a balanced view.

It is still a matter of consideration whether my objective of giving the force of law to the guidelines which would limit the rate of growth of agricultural expenditure should be achieved by treaty, regulation or other Community legislation.

Mr. Roland Boyes (Houghton and Washington)

Is the right hon. and learned Gentleman aware that I was present this week at a meeting attended by Viscount Davignon? Viscount Davignon produced figures showing that the British steel industry had made twice the sacrifice in terms of tonnage that the German steel industry had made, despite the fact that the Germans produce more. He also issued a press statement saying that further sacrifices would have to be made. Who is to be sacrificed?

Sir Geoffrey Howe

Like other steel industries, the British steel industry has been required to make formidable sacrifices in the face of pressures in the world steel market in recent years. It is true that a larger proportion of those who work in the British steel industry have lost their jobs in the past four years than in most other steel industries. Sadly, that is because our industry remained uncompetitive for much longer than the industry of any other country. It is also due to the fact that in the early years of the previous Labour Government, for example, our steel industry lost a large share even of our domestic market, because of industrial action in our own steel industry. All those things have contributed to the fact that, sadly, there has been a greater loss of jobs in our steel industry than there need have been. Our industry is now more competitive than that of any other country in Europe, and should be better placed to face the future.

Mr. Nicholas Fairbairn (Perth and Kinross)

As the cost of the CAP in the Community, as presently sized, is the principal budgetary problem—my right hon. and learned Friend has made proposals for its reform—and as it is the Government's policy to agree to the accession of Portugal and Spain, which has a three-year agricultural development policy, have Ministers considered the economic effect on the CAP of the admission of Spain, and to a lesser extent Portugal, and what will the cost be of buying off their products to stop them ruining British agriculture?

Sir Geoffrey Howe

It is because of the possible implications of accession by those Iwo countries that negotiations are still not completed. A transitional period will certainly be necessary. Account mast also be taken of the political advantage to the prospects for democracy in Europe of Spain and Portugal's accession to the Community. It is worth recording that, if the CAP were done away with and replaced by a deficiency payments system in this country, the cost would be formidable—probably about £2 billion.

Several Hon. Members


Mr. Speaker

Order. We have a heavy day before us and an imporant debate. I propose to call those hon. Members who have been standing in their places, but I would ask them to keep their supplementary questions brief.

Mr. Donald Anderson (Swansea. East)

Ministers must have had evidence before them oi' increasing covert assistance being given by the American authorities to the rebels fighting against the Sandinista Government in Nicaragua, and the United States of America is now making a show of strength that could lead to a naval blockade. At what point will European Ministers distance themselves from the United States' policy in central America, take the Americans aside, and tell them what only best friends can say—that a continuation of their current policies can lead only to a situation such as that which existed in Vietnam, which is not in the interests of the Western Alliance?

Sir Geoffrey Howe

If Ministers consider the question of central America further, they will certainly bear in mind the arguments advanced by the hon. Gentleman, but they will also remember that the number of military advisers deployed by Cuba in the three key countries of central America is now estimated to exceed by tenfold those from the United States of America. They will also recognise that there is clear evidence of a Soviet-Cuban-Nicaraguan link, bringing arms and disruption to that area. Although we want to promote policies that will lead to pacification of the area, we take a balanced view of that responsibility.

Mr. Nigel Forman (Carshalton and Wallington)

If my right hon. and learned Friend's idea for a new budgetary safety net were introduced into Community finances, which member states would pay more, and which less?

Sir Geoffrey Howe

My hon. Friend can analyse and answer the question for himself—[Laughter.] I do my hon. Friend the credit of believing that he understands the question as he poses it. Those states that are below the Community average — the poorest states — would not expect to be net contributors at all. On the other hand, those that are significantly above the Community average —of the six richest states in the Community, five are net beneficiaries under the system—could expect their budget contributions to increase. In other words, the system would be designed to place the burden more fairly, having regard to the relative prosperity of the member states.

Mr. James Lamond (Oldham. Central and Royton)

Every time an Opposition Member asks for a little protection for any of our industries he is given a stern lecture about retaliation from the Minister responsible, so can we take it that America's steps to protect its steel industry have made that country quake in its shoes, because we and other EC countries will strike back if the Americans do not take heed of what we have told them?

Sir Geoffrey Howe

There is no doubt that one of the factors that is likely to persuade a country, including the United States of America, to reconsider the wisdom of introducing such measures is the prospect of our claiming our entitlement under GATT, first in the form of compensation and then, if that is not met, or is unsatisfactory, by way of retaliation. Sadly, when trade protectionism breaks out, that is the way that it is brought to an end. Those factors will be important to American considerations.

Mr. Tony Marlow (Northampton, North)

In the event of an increase in own resources, how would ratification be put through the House? Would it be primary legislation or something else? Will my right hon. and learned Friend his European colleagues that a majority in the House believe that we should, and can, secure a fair budget contributions without having to go for an increase in own resources, and that there is also a majority in the House against an increase in own resources for the EC, because it would mean, first, more European expenditure and more public expenditure; secondly, more expenditure which would he controlled by Europe, and it has yet to prove that it can control it efficiently; and thirdly, more policies which would be controlled by Europe, which—

Mr. Speaker

Order. The hon. Gentleman cannot ask three supplementary questions.

Sir Geoffrey Howe

I shall answer one or two of my hon. Friend's questions. Legislation would be necessary for own resources to be increased, in every Parliament of every member state. It is a fact—as I well understand from what my hon. Friend has said—that many hon. Members would regard an increase in own resources as unwelcome. That gives me no doubt that we should place the burden of proving the case for an increase upon those who seek to make it.

Mr. Derek Foster (Bishop Auckland)

The Foreign Secretary is rightly concerned about the growth of protectionism, but is it not largely the result of pursuing the sort of economic policies that he advocated throughout Europe? Is not the only sure way of removing the threat of protectionism to have a co-ordinated expansion through Europe'? Why is not the right hon. and learned Gentleman pursuing such policies with our European partners?

Sir Geoffrey Howe

That would be inconsistent with the convictions of this Government and with the convictions and aspirations of all our European partners.

Mr. David Crouch (Canterbury)

May I remind my right hon. and learned Friend that, as members of a member state Parliament, we have no influence on the agendas drawn up for the Council of Ministers in the EC, but I hope that we still have some influence on the Government. Will he bear in mind the fact that, although we recognise the value of the EC looking outwards towards the central American problem and the Madrid conference, there is an urgent need for him to use his initiative as quickly as possible to bring the middle east question to the fore in the Council of Ministers, before it is too late?

Sir Geoffrey Howe

That was of course the subject of discussion and conclusions at the Stuttgart conference. We shall regularly turn our attention to that matter. I certainly share my hon. Friend's anxiety about the middle east, and, within the limits of our capacity and power, we shall continue to focus attention on it.

Mr. Robert Parry (Liverpool, Riverside)

Was the question of the continued detention of leaders of the Turkish Peace Association and DISK discussed? Will the Government support them and call for their early release?

Sir Geoffrey Howe

That was not discussed.

Hon. Members

Why not?

Mr. Richard Body (Holland with Boston)

When the interests of the ACP countries were discussed, did my right hon. and learned Friend raise with his colleagues the subject of the great hardship caused to ACP sugar countries? They have to gain the foreign exchange that they need by exporting half their sugar on to the world market, at the same time as the EC is dumping between one quarter and one fifth of its supply on the world market, causing the price to fall below the cost of production in every country in the world.

Sir Geoffrey Howe

My hon. Friend is right to draw attention to that result of the way in which agricultural policies interact on each other.

Mr. Dennis Skinner (Bolsover)

Will the right hon. and learned Gentleman guarantee that in no circumstances will there be an increase in VAT or an increase in the amount of VAT money paid to the Common Market? Is not the truth of the matter that, after 10 years and £3,800 million of British taxpayers' money in net contributions, this autumn this much-vaunted Common Market, with its talk about partners and colleagues, will reach the point of bankruptcy and will have to be bailed out with some of the others that are swilling around the world?

Sir Geoffrey Howe

I can say nothing to add enchantment to the hon. Gentleman's jaundiced view of almost everything he looks on.

Mr. Heffer

I return to the question raised by the hon. Member for Carshalton and Wallington (Mr. Forman) about the future of financing the so-called safety net. Will the Foreign Secretary tell us a little more about how much support he is receiving from other EC countries? Is he receiving any support, especially, from the French in view of the statement by the French Foreign Minister which was reported in the press?

If the situation in central America worsens, will there be further discussions? What sort of representation is likely to be made to America by the EC Governments, especially Britain? Does the Foreign Secretary not recognise that any argument about Nicaragua's link with Cuba and so on is irrelevant, because if war develops in central America we could be faced with a dangerous global problem? Are the Government just coming forward with the bland statement that we have heard or will they be making some representation to the Americans to hold off and begin to act reasonably and intelligently in central America?

Sir Geoffrey Howe

The European Ministers are concerned with the prospects in central America, but it would not be wise to take so narrow a view as the hon. Gentleman takes of the sources of the problems of that area.

There is increasing understanding of and support for the case that Britain is making for a safety net. If the Community is to manage its resources sensibly, it needs a different way of handling its budget. It needs a fairer budgetary mechanism. A budget along the lines that we have been describing is called for. A number of other member states are beginning to look with interest on our proposal.