§ Sir Anthony Meyer (Clwyd, North-West)The subject I want to raise is the need for greater industrial co-operation in Europe. By Europe, I do not specifically and solely mean the European community, and when I talk of industrial co-operation I am not solely referring to ordinary industry; I wish to include the defence industries.
It is a subject to which I propose to return on future occasions because I believe that, if we can inaugurate more far-reaching and more constructive co-operation between the European countries in this field, we can go some way towards tackling the unemployment problem, which must be a matter of concern to every one of us.
Across the European Community, unemployment in the 12 member states is more than 14 million. While much of this unemployment may appear to be structural and as a result of technological change, and some of it may appear to be the result of temporary economic conditions, the fact is that, during the period that this is happening in the European Community, in the United States there has been a startling success in the creation of fresh employment so that unemployment levels in the United States remain at an acceptable level; and in what are undoubtedly our most dangerous competitors, that is to say, the industrialised countries of the Pacific basin, unemployment is at a very low level.
The inference is clear, that Europe is not taking advantage of the assets it possesses in order to strengthen its industrial base and to reduce its unemployment. It is, of course, generally known that the European Community is a long way from being even the common market, which is the most basic of its aims, further still from being any kind of an economic unit which would enable the member states composing it to take full advantage of it as a means of securing employment.
One of the points I will be urging on the Government is that they should live up to their own professions in this matter and that they really should give overriding priority to the completion of the internal market by sweeping away the barriers to trade, and particularly to trade in invisibles, which still exist.
Generally when Members of Parliament say that they conjure up a vision of obstructive Italian frontier officials, French customs arrangements at Poitiers for the import of Japanese goods and German obstructionism in the market of insurance. But there is a very large beam in our own eyes in the habits and mentalities of HM Customs and Excise which regards itself in many respects as being almost above the law. Anyone who has attempted to import anything through any of our ports will not, I think, rush to the conclusion that our customs is much more attractive in these matters than those of other countries.
I do not think that Customs is coming under a great deal of pressure from the Government to be any more easy going in these matters. Of course, we bring forward the arguments about the needs to control drugs and to control rabies, and both are perfectly valid arguments. None the less, it is difficult to avoid the suspicion that these are being used in many cases as a pretext for slowing up the inflow of goods. What is sauce for the goose has to be sauce for the gander, and if we want our goods to flow freely into Europe we must allow European goods to flow 1295 equally freely into us. The Channel Tunnel will be a step in the right direction, provided that other obstacles are not put in the way of the operation of this tunnel.
However, that is not my main point. Sweeping away obstacles to internal trade will undoubtedly assist in the development of a single market. A single market of 273 million customers must be a very powerful home base for any industry. But there is rather more to what I want to say than that. We have witnessed over a very long time span—in Britain's case probably since about 1870—the gradual and seemingly inexorable loss of industrial supremacy.
In the 19th century the United Kingdom was the workshop of the world. Anybody abroad would buy almost anything that was made in Britain, precisely because it was made in Britain. That position has been eroded over the years. Two world wars have wrought their toll. We have gradually seen what were once undisputed British industrial supremacies disappear down the plug hole. What happened to the great British motor cycle industry which at one stage was almost the sole motor cycle industry in the world? Little by little we have seen such industries disappear.
We are at a particularly dramatic moment in this process of disappearance, with the future of British Leyland very much on our minds. I do not intend to say very much about British Leyland, because there has been a debate on that subject. However, when it became apparent that British Leyland would have great difficulty in surviving as a mass car producer because it is very much smaller that any of its competitors two possibilities opened up for it. One was that it should be taken over by General Motors. The other possibility—the one that is being very much trumpeted by my hon. Friends with constituencies in the Midlands and by the Opposition—was that there should be a purely British rescue operation. Neither of these possibilities meets the bill. I accept that the American takeover makes some kind of economic sense, but an American takeover would represent a very large step towards the abandonment of a true, native-based industry. The British solution would lead us back, I fear, to the time when British Leyland was a permament pensioner of the British state.
It is probably too late now for the third and, to my mind, the right alternative. Before we ever got to where we are, there ought to have been in existence the possibility of a partnership between British Leyland and one of the European manufacturers. It need not necessarily have been one of the EEC manufacturers. It could have been Volvo. That would have complemented BL's capacities in such a way as to produce a viable firm that would have been multi-centred and whose ownership would have been basically European. If British Leyland had joined up with one of the German or Italian manufacturers, it might have contained a very large American element. I am not arguing in favour of a policy that would try to shut out the Americans. However, I am arguing that we should seek to have a policy that includes, wherever appropriate, a very substantial European element.
The same set of arguments apply to Westland. My right hon. Friend the Member for Henley (Mr. Heseltine) made a valiant and ultimately unsuccessful effort to mount a European rescue effort for Westland. Once again it was too late, not due to any culpability of Her Majesty's Government but largely because such "rescue" as loomed 1296 up over the horizon from Europe looked more like an attempt by the European manufacturers to snuff out Westland as a possible competitor. The faults are not on our side alone. But when we add them all together we get a failure both by Her Majesty's Government and by the Governments of the European countries to make any use of the Community as an institution to exert its influence as a powerful trading bloc to sustain its own industry.
The argument will present itself in another particularly acute form over the future of the European airbus family of aircraft. I am sorry that my hon. Friend the Member for the City of Chester (Mr. P. Morrison) is not answering the debate, because he has a particular interest in the project. The airbus has been a tremendous success technically. Of course, it is far too soon to prophesy whether the Government, or those who put their money into the project, will make a profit.
We have the siren voice of that once sensible publication, The Economist, urging strongly that the British aircraft industry should surrender without a fight to the Americans and that we should allow all major civil aircraft to be built in the United States, leaving it to Boeing and McDonnell-Douglas to fight it out between them. That is a craven act of folly when the possibility exists of maintaining a capacity in Europe to produce not just an aircraft but a whole family of aircraft capable of meeting the demands of the world market at almost every level. I earnestly pray that the Government will listen not to The Economist but to those Ministers, of whom I am sure my hon. Friend is one, who will urge the vital importance of maintaining a capacity for the construction of civil aircraft in Europe. Here at least is one industry in which we for the moment are not faced with knock-out competition from the Pacific basin and where we should be unwise in the extreme to surrender all our advantage.
That leads me to public procurement, which involves not only Governments but also governmental agencies. One sometimes has the impression that European airlines in all too many cases deliberately operate a "buy American" policy. If the airlines operated a European preference when they make purchases of civil aircraft, that might in itself suffice to sustain a European civil aircraft manufacturing capacity.
The record on public procurement is frighteningly dismal. In 1982, the last year for which figures are available, in all its public purchasing the United Kingdom spent no less than 98.3 per cent. of Government cash on equipment made within our own borders. That left 1.7 per cent. with which to encourage joint ventures overseas. Though a dismal record, it is better than the Germans, who left not 1.7 but 0.3 per cent. for joint ventures; or the French, who left the enormous total of 0.09 per cent., or the Italians, who left nil per cent. of public expenditure to be spent outside their own borders.
This reflects the enormous public political pressure in favour of a buy native policy, and one need sit in this House for only a few hours to hear it, and understandable it is. Obviously, every hon. Member will urge as strongly as possible the arguments in favour of spending public money in his constituency. I remember fighting hard for the retention, for example, of steel-making at Shotton. From a constituency point of view, that was an unanswerable case. Nevertheless, there was a national case which required that steel-making capacity should be 1297 concentrated in those areas where there was a natural case for having steel-making, and Shotton was not one of them. I was, rightly, overruled in that instance.
Whey we talk about the car, helicopter or machine tool industries, two sets of arguments operate at a political level. There is a powerful economic argument which says, "Let us go for the most immediately profitable solution which will bring the best return to the shareholders and give the workers in the industry the best guarantee of maintaining their jobs." That argument often operates in favour of an American, Japanese or even an Arab takeover.
The other argument, deployed by Back Benchers on both sides of the House, says, "The best way to do it is to use public money to maintain a buy British policy, a subsidy, a purely British solution." There will always be those who will argue for a national solution for whatever industry comes into the public domain of discussion.
What never operates is pressure to say, "Let us look for a solution which takes advantage of our membership of the European Community" or, at a lower level, "which takes advantage of our proximity to Europe—be it Switzerland or Sweden—which will enable us to construct an alternative future for this industry or firm and which may, in the short run, not offer the same advantages to the shareholders."
It may not even offer the same security of employment to its workers, but it may offer long-term possibilities for industry and for the future of employment in Britain. That may not be available through a purely British solution entailing a permanent subsidy, or through an American solution involving a total takeover, with the risk that, when the chill winds blow, the Americans will close down their out-stations, as it were, and concentrate production at home—after all, they are subject to the same pressures—to safeguard jobs in their country.
There are no democratic pressures on the Government to exploit to the full our membership of the European Community to ensure the prosperity of British firms and safeguard British jobs. The pressures are all against such solutions. It is for the Government to see matters as a whole and to make the maximum use of our membership of the Community to achieve our objectives. There should be much faster progress of the consolidation of the internal market. A substantial step forward could be achieved by stabilising the exchange rate through the exchange rate mechanism of the European monetary system. All of these matters are major policy decisions which can be achieved only in concert with our European allies. I know how difficult that is until we have a much improved decision-making process in the EC, which means moving away from the veto, but I shall not go into that.
There should be a Minister responsible for coordinating procurement and industrial policies to ensure that, whenever a controversial decision comes up, full weight is given to the European alternative. Several Departments are involved in that. The Department of Trade and Industry is one and the Ministry of Defence is another. Perhaps I should have enlarged on what is happening in the arms industry. Each country, by drawing a narrow specification of its requirements, has made it virtually impossible to achieve European co-operation. The result is that, one after another, we are equipping ourselves with expensive weapons which are unsuitable 1298 for use by our allies. This is a NATO matter—the NATO group in Europe is not maximising the opportunities. The Department of Transport has a critical role to play, and the Treasury is also involved in matters such as I have mentioned.
If, in Cabinet, there was a Minister who could say, "Wait a minute. There may be a better but not so immediately attractive European alternative" we could achieve much more in the Community and in the European part of NATO to sustain jobs and preserve industries which otherwise face a pretty grim future.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)I thank my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) for bringing this subject to the attention of the House. Many of my colleagues have observed his healthy fixation with this matter. He is motivated purely by a desire to help Europe produce a truly common market against which our industrial companies can make their marketing plans and, we hope, go on to achieve success on a world scale having taken advantage of that large and burgeoning market.
My hon. Friend has asked two key questions—does Europe face an industrial problem and, if so, what can Governments do to tackle it, acting together in the European Community? In other words, do we need a European industrial policy and, if so, what sort of policy should it be?
I entirely agree with my hon. Friend that there is a problem—a problem for Europe as a whole as well as for us in Britain. It is a problem of competitiveness: the global competitiveness of some sectors of European industry. It is manifest in the painful process of adjustment that has been necessary in our industrial structures, which is not yet complete. It is manifest equally in Europe's relative weakness compared to the United States and Japan. Success is crucial in the new technologies if we are to create the wealth and jobs that our societies need.
The symptoms are well known. The European Community's share of export markets in some fast-growing sectors has declined. Between 1973 and 1983, for example, the European Commission has estimated that the Community's share of export markets in electrical and electronic products declined by just under 2 per cent., while the United States and Japanese shares in the same sectors increased.
Import penetration in similar sectors has increased faster in the Community market than in the markets of its major competitors. In information technology and electronics, for example, it has been estimated that penetration rates between 1973 and 1982 rose from 10 per cent. to 17 per cent. in the EEC; from around 6 per cent. to around 10 per cent. in the United States; and from around 4 per cent. to around 5 per cent. in Japan. Europe has been less successful than either the United States or Japan in creating new jobs. Since 1972, an additional 19 million jobs have been created in the United States and 5 million in Japan. In Europe as a whole, with a much larger overall population, employment levels have remained virtually static.
What, then, can Governments usefully do to strengthen Europe's industrial capability? Two strategies are sometimes suggested which would clearly not help—indeed, they would make matters worse. One is a strategy 1299 of generalised protection: Fortress Europe. The other is a strategy of generalised state subsidy and state intervention. Both would be costly to consumers and taxpayers. Both would be anti-competitive, distort the market and blunt the edge of the primary stimulus to commercial success. For these reasons, neither strategy would ultimately work.
As I see it, an effective European industrial policy must have three basic objectives. First, it must open up the internal Community market, making a reality of the single, integrated market envisaged in the treaty of Rome. It must improve the climate for enterprise in Europe, not least by tackling regulatory burdens on business. It must encourage closer market-led collaboration between European businesses, above all in advanced technology.
The first of those objectives is fundamental. The sheer size of their home markets and the economies of scale that they afford offer American and Japanese industry a major competitive advantage. The creation of a similarly integrated domestic market for European business is perhaps the most important single step we can take to strengthen Europe's industrial performance.
The goal is a genuine European market of 320 million customers, matching the 230 million customers in the domestic market of the United States and the 120 million in the domestic market of Japan. The European Community has been working towards this goal for nearly 30 years. It still eludes us. True, tariff barriers and quotas have been effectively eliminated in intra-Community trade. But the free movement of goods throughout the Community is still obstructed by "non-tariff' barriers, such as frontier formalities and differing national product standards.
Similarly, the growth of a free and competitive market for services, particularly in sectors such as financial services and transport, which provide essential service infrastructure for manufacturing, is blocked by a range of restrictions in many member states. The efficient functioning of the European market as a whole is distorted by the protective use of public purchasing and other public sector aids. There is a new determination in Europe to tackle these problems. Last June, the European Council at Milan endorsed the broad thrust of an important White Paper from the Commission that set out a detailed plan for action required to complete the internal Community market by 1992.
Mr. Speaker, it may be because of the early hour, but it is interesting to note that in the copy of my speech, the word "internal" looks disconcertingly like the word "infernal". It may be something to do with the typewriter.
The United Kingdom and the Netherlands, as the two countries occupying the Community presidency this year, have produced jointly the action programme targeting more than 100 issues for decision by the end of 1986. It will be a central aim of our presidency, in the second half of the year, to maintain maximum impetus behind that programme.
A second aim of European industrial policy should be to improve the framework within which industry operates. That is partly a matter of action at national level on a wide variety of fronts. We in Britain are increasingly aware of the need to promote more positive attitudes to industry and to wealth creation; to make our education system more responsive to industrial needs; and to cut the burden of regulation on business. They are priority concerns for many of our Community partners, too.
1300 The third objective that I identified was to promote European business collaboration in advanced technology. In telecommunications, for example, about 15 European companies are competing for a share of the European market—as compared with the four or five giant American firms which dominate the United States market. The pattern is much the same in other growth sectors. Collaboration within an increasingly integrated European market is inevitable if a competitive European presence in those sectors is to survive.
Collaboration in reserch and development—spreading risks, spreading costs and exploiting the strength of pooled resources—is one major way forward. The Community has developed some important support schemes to encourage collaborative R and D at the so-called ''pre-competitive" stage. The ESPRIT programme, for example, which is focused on information technology and complementing our Alvey programme, is starting to gather pace. We have the BRITIE programme for industrial technology, and RACE for broad-band communications.
Such programmes reflect a welcome shift of emphasis in Community-funded research. They are directly relevant to industrial needs. They use Community money—public money—to stimulate spending by business. In discussions which are starting in Brussels on a new framework programme for Community R and D in the five years 1987–91 we are determined to encourage this trend towards market-oriented, cost-effective effort.
But action at Community level is not the end of the story. Industrial collaboration in Europe can often usefully extend beyond the 12 member states. The aim must be to develop specific products or services which will be competitive on world markets. Both those elements are central to the EUREKA initiative. EUREKA is giving major impetus to European collaboration in new technology. Eighteen European countries are involved. More than 20 collaborative projects are already at an advanced stage, and British firms are participating in six of them. They are actively pursuing proposals in many other areas. We are currently hosting and chairing the EUREKA discussions. It is fair to say that our thinking has made a major contribution to the shape of the initiative, following its successful launch by President Mitterrand last year.
EUREKA is not, and could not sensibly become, a new financing mechanism. Finance for EUREKA projects is a matter for the participating firms, with support where appropriate from their national Governments under national schemes. I should add in this connection that British firms participating in worthwhile EUREKA projects can qualify for assistance under our existing R and D support schemes.
EUREKA offers two important advantages to industry. First, it will wire British and other European firms into a Europe-wide network for the exchange of information on new collaborative proposals and opportunities. Secondly, and even more important, it will provide a framework in which business and Governments can identify, and put new momentum behind, concrete action in the Community and elsewhere, to open the European market for the benefit of the projects concerned. There could be action, for example, to generate new European technical standards or to liberalise public sector purchasing.
I have outlined what, as we see it, is a co-ordinated European industrial policy and what it can sensibly seek to achieve. I hope that my hon. Friend agrees that no 1301 industrial policy vacuum in Europe is crying out to be filled. The reality, rather, is that the Community as a whole is already acting in the areas I have described to strengthen Europe's industrial base. Progress in those areas is essential for the health and competitiveness of industry in Britain and in other member states. We are throwing our full weight behind the initiatives in hand.
I thank my hon. Friend the Member for Clwyd, North-West for bringing this matter to the attention of the House. I noted his endorsement of the need for what he called a Minister responsible for co-ordinating procurement and industrial policies generally, and his suggestion that full weight be given to the European alternative. No doubt those words, which are now on the record, will be noted in the appropriate quarter. In the interests of the hon. Member for Burnley (Mr. Pike), who, with great professionalism, has decided to launch his debate at 7.34 am, and those of my hon. Friend the Under-Secretary of State for Health and Social Security, the best thing that I can do now is to thank my hon. Friend once again and to wish you, Mr. Speaker, a very good morning.