§ Question again proposed, That this House do now adjourn.11.22 am
§ Mr. Wiggin
I was being drawn by the hon. Member for Bradford, South (Mr. Cryer) on the multi-fibre arrangement. I misled him. I have had an opportunity to check my figures. The Silberston report estimated that the MFA costs United Kingdom consumers £980 million a year and that the cost of each job saved works out at about £29,700, which is three or four times the average earnings in the two industries. It would not be profitable for us to have a quid pro quo argument about it. If one has textile workers, one supports the common agricultural policy as long as one keeps in line on the MFA. There are similar arguments about the CAP and the MFA and about whether one should give a sector of industry special support.
I defend the CAP on the ground that it is not as costly or damaging as its critics would have the world believe. My right hon. Friend the Minister of Agriculture, Fisheries and Food spelt out that to compare current world prices with the price that the consumer pays is a wholly artificial exercise. I am sorry that farmers have not been swifter to make capital ,out of the accusations. Instead they have allowed them to become established as folklore.
Sugar has been mentioned. I work for British Sugar plc. We produce only half the sugar that we eat in Britain. We could produce it all, but we have various arrangements that involve supporting third-world countries. Some 5 per cent. of world sugar is traded on the world market and it is cheap. The Americans are in the forefront of protecting their sugar growers. They are an absolute model of protecting a sector of industry. I do not hear too much about them volunteering to undo those arrangements.
In my travels I have heard almost unanimous complaints from countries outside Europe about export restitutions. I have visited New Zealand on several occasions and I keep in close touch with its representatives. Only yesterday we were discussing its difficulty in operating on a world market with wholly unsubsidised agriculture. Perhaps I should remind the hon. Member for South Shields what happened to the Government who swept away subsidies in New Zealand. They were swept out of office. New Zealand's representatives rightly say that it is unfair for them to sell their butter on a world market subsidised by the taxpayers of Europe. They struggle to operate in that environment. I have some sympathy with that.
I did not get an answer from the hon. Member for South Shields on the problem of what should be done about surpluses. The National Farmers Union is technically correct to talk about supply management. I prefer to call it quotas because it is a simpler and more easily understood phrase. Quotas have worked for years for milk and sugar and previously worked well for hops. A quota system could be introduced for many commodities. I am sorry that the NFU did not subscribe to that view many years ago. It has come round to it only recently—so recently as to be disruptive in the negotiations that my right hon. Friend the Minister seeks to hold. If we could all agree that the problem of surpluses, not the concept of the CAP itself, causes difficulty, we could make progress.
554 The food industry has been incredibly slow to remind us how important export restitutions are to that industry. It happens to be a fairly strong element of our export contribution. Confectionery and biscuits are a particularly strong element. The proportion of the value of those goods represented by export restitutions has been demonstrated to be considerable. We must be cautious. I share the view of my right hon. Friend the Minister that our Community partners will not lightly change their political attitude at this stage.
I am reminded that 100 years ago the political debate was very much about protectionism. Indeed, the modern Conservative party, founded by Chamberlain, my great-grandfather and his friends in Birmingham in the late 19th century, was founded on the basis of protecting our manufacturing industry. In those days we were a protectionist party. As circumstances have changed and because we manufacture less, it has become in our interest to take a wholly different view.
I am persuaded by many of the arguments that a successful conclusion of the GATT round will be very much in the interest of not only Britain but all trading nations, especially third-world countries, which currently suffer such deleterious effects from constraints not only on fibres and food but on many other products where there are restrictive practices—none so severe as those of the Japanese and the Americans.
With considerable cheek, the Americans have asked for a huge reduction in subsidies when they are perfectly well aware of the political problems that we shall face even in achieving a 30 per cent. reduction in support prices. The Canadians take the rather more sensible view that it should be 55 per cent. We must bear it in mind that Canada currently subsidises transport and milk and plenty of other goods and services. Once one assists one part of agriculture, there is a knock-on effect on the rest of the industry.
Agriculture is our core industry. Historically it has always been disastrous to allow agriculture to sink into too poor an economic condition because shortly other industries follow. We must remember the lessons of history. One is that it is sensible and wholly in the national interest to maintain a viable and prosperous countryside and farming community.
§ Mr. Ted Garrett (Wallsend)
Both opening spokesmen employed some competent arguments, but I disagreed with one statement which they both made. They said that farmers were there to protect the interests of the countryside. We should not let that assumption go unchallenged. In East Anglia there has been vandalism. In the counties in the north, dry walls are left crumbling. Everywhere we see tractor damage to our public highways and pollution of our rivers and streams by the farming industry. So that statement must be qualified.
I have always had an interest in agriculture, although admittedly somewhat low key. Older hon. Members will remember that the first Select Committee on Agriculture was created by the Labour Government under Harold Wilson. I served on that Committee with some Tory Members, and it was an exciting one. It is a matter of history now that the Labour Government abolished the first three Select Committees on Agriculture, on Science and Technology and on Education and Science—because 555 we had the audacity to ask to go to Brussels to view agriculture abroad. George Brown, then Foreign Secretary, assisted in their abolition. It was left to the incoming Conservative Government rightly to reinstitute Select Committees, which are now firmly established.
I am sorry that the Minister of Agriculture, Fisheries and Food has left the Chamber. I have some sympathy with his case. For the past 12 years I have been a member of the Council of Europe and I serve on its agriculture committee. It is the most difficult thing in the world to get the committee to agree on any report. It is the most conservative organisation that it has ever been my misfortune to serve on. I understand the problem. I see politicians from Germany, France, Austria, the Baltic states and the Iberian peninsula. We deliberate and argue, but once it comes to making a decision to improve the agricultural interests of Europe, they will not support it. We all know that it would be political suicide for them to do so. Unless we can find a way round that, our Minister, of whichever party, faces insufferable difficulties. The same problem translates into the European Economic Community.
I tremble at the prospect of the failure of the general agreement on tariffs and trade round. It would be disastrous for Britain and for all those who work in our different businesses. If the Uruguay round fails we can only expect our growth prospects to diminish. I am lucky that the Secretary of State for Trade and Industry is present for my speech, I hope that he may reply to it favourably.
It is an elementary fact that as a nation we must depend on exports, and now more than ever. As an island nation we depend more than most countries on openness and the freedom to sell goods and services. Those are simple economic premises. The Minister of Agriculture, Fisheries and Food was right that the current GATT round is in crisis. it has major problems to tackle, not least in agriculture. There are vested interests in agriculture which are concerned to ensure not that more jobs are created but that the rotten status quo is maintained.
I do not want to spend valuable time going over old ground. I want to draw attention to what is at stake in this Uruguay round. The United Kingdom is a world leader in many areas, particularly in services. Services is an umbrella word which covers sectors as diverse as telecommunications, insurance, computing and banking. They are growth areas in which we as a nation can take a lead. Agriculture pales into insignificance compared with the service sector.
In the EEC, agriculture accounts for only 3 per cent. of gross domestic product. In this country services account for more than 50 per cent. In the United Kingdom, banking, insurance and finance account for 12 per cent. of our total work force. Services are important to our future interests. At a time when eastern Europe is opening up, British businesses have wonderful opportunities to sell their services, technology, electronics and engineering and civil engineering expertise. If we can put those aspects of our society in the front line, we shall do the nation a great service. I wish the Secretary of State well in his new job. He has tremendous responsibility. I urge him to give priority to those matters in his work at the Department.
It would be criminal if the EEC stumbled over agriculture and sacrificed all the other business interests that are at stake.
§ Mr. Cryer
Does my hon. Friend agree that it would be terrible if the interests of the textile industry were ignored because, as a Conservative Member said today, we shall somehow save money if we import clothing and textiles from countries which have child labour, no health and safety at work legislation, no trade union rights and no limitation on the hours worked? Does he agree that if we imported clothing and textiles produced through massive exploitation, therefore at low cost, it would be unfair to the decent standards of our industry?
§ Mr. Garrett
I wholly agree with that statement.
I am not alone in expressing some of these views. This is one area where I wholly agree with the Prime Minister. Some weeks ago when I asked a parliamentary question I was in the unique position of receiving frowns from my hon. Friends and praise from some others for my views. Hon. Members who were in the House that day will recall that most of those who congratulated me were Tory Members. When I think about the Prime Minister's position today and about that time, I feel a certain sadness.
As I said, we must not allow agriculture to hamper the development of business. I recognise that we need good GATT rules. If we do nothing else, we must send a strong message to the negotiators. The people who slog behind the scenes and spend interminable hours in committees are good negotiators. They must be made to realise that our national long-term well-being is at stake, and the House should support their efforts.
§ Mr. Paul Channon (Southend, West)
I agree with much of what the hon. Member for Wallsend (Mr. Garrett) said, particularly his remarks about the importance of the trade in services. The new GATT round provides the opportunity to make a breakthrough, although perhaps we shall hear more about whether it will succeed. Such a breakthrough would be of immeasurable benefit to the United Kingdom and many other countries.
The GATT round discussions about which we have been talking are largely about agriculture, but that is not the only item on the agenda. Textiles, about which the hon. Member for Bradford, South (Mr. Cryer) speaks, are not the only other issue on the agenda. I have noticed in trade debates over the years that hon. Members whose constituents have a vital interest in these matters contribute, but hon. Members do not usually speak from a more generous point of view and talk about the GATT round as a whole. I want to address myself to that aspect.
It is essential that the GATT round should succeed. If it does not, long-term trading prospects will be in danger. I should like to put a specific point to my right hon. Friend the Secretary of State for Trade and Industry. My right hon. Friend the Minister of Agriculture, Fisheries and Food made an encouraging speech. I did not get the impression from him that the GATT talks were likely to fail. However, every time I open a newspaper, I read that the GATT round is in a state of crisis.
I wonder whether my right hon. Friend the Secretary of State will tell us how he views the prospects. Is there to be an agreement in December? Is this agreement wishful thinking, or is there still a real chance? Are efforts being made to postpone the date, if necessary? What is so magic about 3 to 8 December? It is far more important to reach a solution than to stick arbitrarily to a date by which the 557 GATT round is meant to end. I am all for keeping that date as a discipline, if that is what is being done, but I hope that, if necessary, the talks will be extended.
There is concern that the fast-track approach of the United States Congress may end. I suspect that, if Congress debates these issues in detail while they are being negotiated rather than having a fast-track approach, the GATT round would be in grave difficulties. As I understand it, the fast-track approach does not expire until March. It would be helpful if my right hon. Friend the Secretary of State would estimate the likely prospects of success and the dates involved. I, too, wish my right hon. Friend extremely well in his task, particularly in these negotiations.
The House is probably aware that, if the talks fail, there is a great danger that, over the next few years, protectionism will grow strongly in the United States of America. Protectionism is already strong enough in Japan, although the situation may be better than it was in the past. Anyone who has negotiated for a long period, as I have, on such tricky issues as whisky and entry to the stock exchange—I am glad to say that the position on both is much better now—will know just how protectionist the Japanese are. We all know from our study of history just how protectionist the United States can be, and frequently has been in the past.
Let us be under no illusions—given half a chance, the European Community would go protectionist. One of the British Government's major achievements over the years has been the fact that we have managed to keep the Community on a free trading basis, with the support of the northern countries and often without the support of the southern countries. I believe that, given half a chance, the French and Italians would wish to see a fortress Europe and much more protection. That would be a great mistake for us and Europe, and it would be disastrous for the Third world. It would be a disaster politically as well. I urge my right hon. Friend the Secretary of State to use his influence in the Community to persuade it to do a deal, even if it is not perfect. It is better to have an imperfect deal than no deal.
When I went with the then Minister for Trade—my hon. Friend the Member for Plymouth, Sutton (Mr. Clark)—to Punta del Este for the negotiations, we aimed to get a successful round going and to defend our vital interests, and we did that. We also wanted to make progress on services and on intellectual property. It was difficult to define "services". I do not think that at that time anyone was precise about exactly how many services could be included in the GATT round, how many it was practical to imagine or about the timetable. In principle, there should be fair trade in not only goods but services.
In those days, the United States was fanatically keen on free trade in services and on including them in the GATT round, but I now read that it is much less keen. I should be grateful if my right hon. Friend the Secretary of State would spare a few moments to tell us about negotiations on services. We are entitled to argue our corner.
As the hon. Member for Wallsend pointed out, this could be good for the United Kingdom in terms of banking and insurance. The House should be under no illusion that banking and insurance do well throughout the world already, although they could do better. Often, the 558 most difficult place for them to do well is the European Community, where so many protectionist measures still exist. Look at the scandal of shipping in the European Community. It is ridiculous that, although there are free seas around Britain, it is impossible for us to get cabotage or make progress on shipping negotiations in the Community. The negotiations on aviation are much better, but they are not improving sufficiently fast. We must convince not only the developing world but the Community.
I shall not enter into the detailed discussion on agriculture which we have had this morning. When we were negotiating this round, we had immense difficulty in getting Community agreement, but in those days only the French held out. The French Agriculture Minister flew to Uruguay to put some backbone into the French negotiators, and it was only with great difficulty that we managed to have an agreed Community line. It is a great pity that the Germans have joined the side of those who argue for more protection.
Of course there must be transition. Of course the rights of farmers must be protected. Of course we cannot have our countryside laid waste. Luckily, most of my farming friends seem to have left the Chamber for the moment, but I must say that I share the doubts of those who do not like the common agricultural policy. It needs major reform, even if we do not go as far as abolition.
No doubt we shall soon hear about textiles from the hon. Member for Bradford, South—good luck to him and to any of my hon. Friends who want to speak about textiles. But they must face the fact that there has been protection for textiles for about 16 years under the MFA. That must be phased out. Of course, it must be done in a way that does not do grave damage to the textile and clothing industries, but I believe that that can be done. There is not necessarily great disagreement between us on that point.
In any case, am I not right in saying that the penetration of our market by foreign textile and clothing industries comes much more from developed countries than from the countries with whom we have the MFA? The French, Italians and Portuguese penetrate markets.
I am sure that the spokesmen for the textile and clothing industries—not the hon. Member for Bradford, South—often exaggerate the effect that gradual withdrawal of the MFA would have on those industries. As time goes by, our real competition will be from the much more up-market industries of the European Community, Hong Kong and a few other areas. Be that as it may, I hope that a deal will be struck that will not fatally wound our textile and clothing industries or agriculture but will allow us to make some progress.
Not surprisingly, GATT must be seen as a package. It must be acceptable to developed and developing countries alike. Everyone must gain from it; otherwise, why on earth should people sign up to it? We must gain from it. The developing world, including the Americans and the Japanese, must gain, for unless every country has some benefit from the GATT round, they will have no interest in reaching a satisfactory conclusion.
§ Mr. Corbyn
The GATT negotiations are not fair. While the discussions are portrayed as a battle between the United States and western Europe, in reality the people who are losing out worst on the food and farm production side are Third-world producers, who are not in a position 559 to negotiate against dumping because of the debt crisis and the economic power that the United States uses against them.
§ Mr. Channon
There must be some benefit for the developing countries from GATT; otherwise, they will not agree. Indeed, they were suspicious from the start. But with the increased access of their goods into the developed world, there should be something in it for the developing world as well. If that does not happen, it is unlikely that the round will succeed. There must be something in the package to make the developing countries feel that they too are benefiting. That is likely to happen, due to better access for their goods in the developed world, and no doubt there will be other benefits as well.
Will the Minister give a realistic assessment of what is going on in the negotiations? I am sure we are unanimous in believing that, if the talks fail, that could in the long term lead to disaster for Britain, which exports more of its GDP than many other countries, and for the other countries. I urge the Government to press for a solution, if necessary an imperfect one. Nothing would be worse than a final breakdown, with the world breaking up into bilateralism or great trading blocs, with protectionism returning. That would damage the interests of developed and developing countries alike.
§ Mr. Richard Livsey (Brecon and Radnor)
Agriculture is a vital issue in my constituency and I am an agriculturist. It is clear that, under the GATT round, we welcome the principle of the liberalisation of world trade. The free access of goods to markets and the free flow of goods and services are highly desirable aims, but I fear that the real world will make those aims difficult to achieve. In France, for example, there are few Japanese cars, and in Japan there are few British cars. Trade is distorted throughout the world and that will remain the case for many years to come. Even so, we must try to do something to remedy the situation.
The way in which such distortions impact on industry in general, and on food and farming commodities in particular, can be severe. That is particularly so in agriculture in the third world. As the hon. Member for Weston-super-Mare (Mr. Wiggin) pointed out in his capacity as Chairman of the Select Committee on Agriculture, the effect on agriculture in the United Kingdom can be equally severe. It is easy to say that the CAP has many faults and should be scrapped. I would not say that. The CAP has been a great success to the agricultural communities. The policy has faults and must be reformed, but it has led to the success of rural areas.
The trouble is that we all want to play on a level playing field. We discuss world prices, but in reality there are none, because such prices are distorted by subsidies. It is impossible in agricultural terms to discuss real world prices, for not only can we not define such prices but they do not exist because of the hidden subsidies that distort them.
Any negotiations concerning agriculture are made difficult because, for the last 40 to 45 years, most developed western countries have had intricate agricultural support systems. We have had the Agriculture Act 1947, United States legislation since 1948 has supported that nation's 560 agricultural community, and the 1960s saw the creation of the CAP, all aiming to support agriculture and rural communities.
The present negotiations are bound to be difficult when, for example, we have the United States speaking with a forked tongue in requiring a 75 per cent. reduction on the GATT round, yet Congress has not even discussed the matter. It is doubtful whether Congress would support such a radical proposal, even in American terms.
The European Community proposal is for a 30 per cent. cut in agricultural support, at a time when British farmers are receiving 1980 prices for their livestock and when they have suffered a reduction of up to 25 per cent. in their incomes in the last 12 months. A proposal of that kind represents a difficult pill for them to swallow, if they can swallow it at all. In other words, we are dealing with an extremely complex matter.
The proposals put forward by the European Community in the GATT round are aimed at progressive reductions in agricultural support, and the 30 per cent. reduction would relate to the main agricultural products of the Community and deal with adjustments of export restitutions. The European Community wants recognition of the progress that has been made since 1984 in reducing agricultural support in the EC. Such progress has been successful in relation to milk quotas, extensification and the stabilisation of many products. In other words, it is inaccurate to say that the EC has not attempted at least to begin to put its house in order.
In its proposals to the GATT round, the Community states categorically that it wants support levels to be frozen on the 1988 basis. There is no question but that support prices will be reduced, with a reduction in production in Europe. One is bound to wonder whether other countries that are negotiating as part of the GATT round will make equivalent efforts. Will they implement any measures that are agreed, and will such measures be politically acceptable in their countries? For example, my reading of EC documents relating to the livestock sectors leads me to believe that we are expected to see a support price change of at least 4.7 per cent. less per annum up to 1996. That will be a large cut for the industry to sustain.
Many of my hon. Friends represent areas in which textiles and the woollen industry are of vital importance. They wish me to say that we must have a 10-year programme which guarantees equivalent access to third-country markets which at present place barriers against our products. They want to see access for textile products in those markets within that timescale. They believe that it is possible to export one's way through the present maze, so long as there is a level playing field.
We do not want the MFA to be abolished immediately. It should be phased out over, say, 10 years, and the phasing-out process must be very gradual indeed. We need fair trade as well as free trade in that respect.
Returning to the subject of agriculture, it is worrying to note the disparity that exists between the United Kingdom and the Community at large. There is no fairness in the pricing system in the Community and in Britain. For the Community, with the CAP, to negotiate on the GATT round with existing disparities, such as the green pound and the monetary compensatory amounts, represents a worrying scenario for British agriculture.
What worries me particularly is how British agriculture—and especially agriculture in Wales, which is the part of the country that I represent—will move from the present 561 disastrous price reductions that we have witnessed in the autumn of 1990 even as far as 1992, when the single market comes into being? It is not good enough for the Minister of Agriculture, Fisheries and Food to say that he will accept the 30 per cent. cuts without enacting some domestic support for United Kingdom farmers who are extremely hard pressed and many of whom will go out of business.
A survey conducted by the agricultural economics department at Aberystwyth university has stated clearly that, if things go on as they are, at least 12,000 farmers will go out of business in Wales in the next three years. That will devastate the rural areas in Wales and will have a knock-on effect on the rural communities. We cannot ignore that. That is the result of the present situation, let alone of accepting the 30 per cent. GATT cuts.
We must not only have environmental payments; we must accept social responsibility for the rural areas, and especially for our family farms. Some form of income support must be introduced to ensure that our rural areas are not devastated. I agree entirely that surpluses are a major part of the problem and that they must be tackled within the context of the CAP. However, some of those resources must be switched back into support for our family farming units otherwise, as I have said, devastation will be the order of the day.
Hon. Members have talked about increasing Community surpluses. Access from the eastern European countries into the European Community is adding to surpluses in the beef sector. Why do we hear stories about the USSR facing famine this winter because of its immense problems of food production, when eastern Europe is exporting to a market that is already over-supplied? Why can we not find the money to switch that production and to pay the eastern European producers for that production in good currency? Production should be switched to Russia to save its people, literally, from starvation this winter. We must address that scenario.
There are also disparities within the Community on agricultural credit. Why can farmers in the Community have access to credit at half the rates that currently prevail in the United Kingdom—at anything from 5 to 7 per cent., compared with 15 per cent. in the United Kingdom? That is unfair competition, and it must be sorted out.
Why are our sheep farmers facing great cuts in their receipts this autumn of up to 30 per cent., but not receiving the same ewe premium payments as the farmers in the rest of the Community, at over £20 per head? I do not agree with that; I agreed with variable premiums in the past, but we must accept that the system that has been imposed within the CAP is one in which our farmers are losing a great deal.
I make a plea for time in which to adjust. We cannot have these sudden switches and changes. Farms in Wales are half the size of those in England, and farm incomes in Wales average £9,000 and less per annum, which is not a proper living wage and which does not give an adequate return on the capital invested.
We must take account of the knock-on effects on the rural communities, on the villages, shops, transport contractors and all the rest. There must be a gradual change; otherwise, I fear complete disaster for the rural areas of this country.
§ 12.4 pm
§ Sir Hugh Rossi (Hornsey and Wood Green)
I shall decline the invitation of my right hon. Friend the Minister of Agriculture, Fisheries and Food to enter into a discussion with him at this stage on the relationship between good farming practice and the rural environment, important though that is. I wish to take up the much narrower point raised by my right hon. Friend the Member for Southend, West (Mr. Channon), who referred to the importance of a serious discussion of service industries at the Uruguay round.
I raise this point, which is specific and narrow, in my capacity as chairman of the Lords and Commons solicitors group. We are concerned about the issue of foreign legal consultant regimes. I start with the proposition that legal services are a critical part of international trade. Immediate access to advice on the variety of laws and the variations in laws from one country to another, and on international law, are often vital to firms that are seeking to trade in other countries.
It is important that United Kingdom solicitors should be able to provide their services outside the United Kingdom, either by regular visits or by the establishment of offices under their own professional title and names, without—this is the important consideration—having to satisfy the requirements for admission to the host state's legal profession. Indeed, it is not necessary for them to do so, because they are not concerned to have access to the activities that are properly reserved for the host state's legal profession, such as access to the courts there or to real estate transactions. They are there to advise on the laws of our country and on international law, to enable foreign countries to trade with us more readily and easily.
At the Geneva round, the prevailing view was that the professions as a whole did not require a sectoral annexe that would provide special interpretation or exemption from the framework principles. No doubt that is true for medicine, engineering and architecture, for which the laws of nature which govern the human body, or of physics or mathematics, are universal, but it is not true of man-made laws, where there is disparity and variation between one nation and another and where experts must be in place personally in order to give the necessary advice and services and to facilitate trade. That was recognised by the United States negotiators at Geneva, who proposed an annexe applying the principles that I have tried to enunciate. Probably their annexe was too wide for acceptance.
Therefore, I advance a possible solution, which is that the concept of foreign legal consultant regimes should be recognised in an annexe, with suitable definition, so that there is a peg upon which to hang subsequent negotiations on matters within the GATT framework. The central element in such a definition would be along the following lines: "'foreign legal consultant regime' means a regime under which foreign lawyers are permitted to be established in a host state to provide foreign and international legal services under their own home state title and firm name without having to satisfy the requirements for admission to the host state legal profession". I offer that to my right hon. Friend the Secretary of State for Trade and Industry, and I urge him to raise it and to press it at the Uruguay round.
§ 12.8 pm
§ Mr. Graham Allen (Nottingham, North)
I welcome the debate, not least because GATT and trade issues are one of the areas in which it is often difficult to get one's mind round the subject because it is so far-reaching and fundamental. It is often easier to tackle the simpler and more local questions. I have found the issues to be very complex and I put forward my comments in all humility.
I shall touch first on some of the fundamental economic consequences of the GATT round, and then on the philosophical basis of our policy towards trade—whether free trade or protected trade—which has made and unmade Governments in Britain and elsewhere. I shall also refer to the politics of subsidy. To some extent, and in some form, all the nations of the world subsidise and protect the areas that they regard as important. Finally, I shall deal with the whole question of intergovernmental co-operation, of which GATT is one example and for which I hope the new post-cold war era will offer many opportunities, not only in trade but in wider respects.
The specific consequences of GATT and the outcome of the negotiations starting on 3 December among Trade Ministers—in an attempt to find some solution in the final stage of the GATT negotiations—will have specific consequences for my area. A number of hon. Members on both sides of the House have referred to the consequences for the textile industry. I have received a number of constituency-based representations from trade unions, local authorities and employers on the consequences that will flow for the local textile industry if the multi-fibre arrangement is not renegotiated on a satisfactory basis. I know that my hon. Friends will press that further. The GATT round will also have specific consequences for the Third world, which will be penalised if we fail to secure an appropriate outcome from the negotiations. I know that my hon. Friend the Member for Islington, North (Mr. Corbyn) will seek to discuss that further. That consequence is so evident that Mr. Barber Conable, the president of the World bank, was moved to say that the world's poor stand to lose most from the failure of GATT. I hope that all hon. Members will bear that in mind.
Let me start with the philosophy of trade. The choice between free trade and protectionism cannot always be seen in terms of black and white. There are degrees of free trade and degrees of protectionism and it is for nation states to get the best deal from international negotiations. All such negotiations are a function not of altruism or of wider human values but of the political and economic needs, and the interests of the people and nations participating. If it benefits a nation state or a trading bloc, free trade—or protected trade—will be adopted.
However, circumstances change and it may be difficult, in the short term, to change one's position because, in adopting free trade, one adopts the rhetoric of free trade and one educates and trains people to respond to the weasel words of that rhetoric. The same applies to protected trade. When economic circumstances demand that a change be made, rhetoric may obstruct the movement towards it. That is what has happened in the Uruguay round. That is why the round has been so protracted. It is also a reason why the round is in some trouble.
The most powerful seek to set the agenda according to the self-interest of nations and national trading blocs. The one exception to that may be the United Kingdom because 564 the overlying rhetoric has been believed by our Government and our politicians. Being dogma-driven, they have not seen the necessity for subsidy in industry. We are playing by the rules laid down in our own rhetoric. We are playing cricket and everyone else is happy to allow us to do so because they are playing football in the World cup and they are playing to win.
That cannot be said to apply to the United States' negotiating stance. The United States has moved its position considerably in recent years and Carla Hills has now stated that the official position is that the United States is in favour of free competitive trade in which Michael Porter's "competitive advantage of nations" can work to its fullest extent and, it is to be hoped, to the unrestrained benefit of everyone. It is up to our negotiators to ensure that that flood of fine free market rhetoric is made reality for those participating in the GATT round.
That position is a far cry from the United States' protectionist view—above all on agriculture but also in steel, textiles and sugar—alluded to by the hon. Member for Weston-super-Mare (Mr. Wiggin). I understand from today's newspapers that the United States is even going so far as almost to abolish most-favoured nation trading status. The concept is still there as a carrot to try to bring people on board in GATT, but it seems that one of the cherished weapons of the protectionist era is on its way out.
Why has that change taken place? Hon. Members on both sides of the House have referred to GATT in general, and I understand that the right hon. Member for Southend, West (Mr. Channon) talked about the subject at length. But the major driving force for the current GATT round is agriculture, and agriculture lies at the political heart of the debate. There is one simple political reason for that. In most nation states, farmers have traditionally been at the centre of the conservative electoral coalition and that fact has been most obvious in western Europe and the United States. But in the United States, that central part of the coalition has diminished in political value. In 1930, 30 per cent. of people in the United States worked on the land. The figure is now down to 3 per cent., so the electoral pay-off for over-defending the inflated incomes of highly protected farmers no longer outweighs the financial penalties incurred in that defence. That is not so in Europe. Europe has 10 million farmers who would be up in arms if the Governments of Europe accepted the demands of the United States. The Christian democratic and Conservative parties would suffer massive electoral consequences which would put the social democrats or democratic socialists in power for more than a generation.
The new Prime Minister will therefore have a difficult decision to make. I think that the pro-American stance adopted by the current Prime Minister will change and that, in future, the Government will adopt an increasingly Community-based position. That may affect the support given by the Minister of Agriculture, Fisheries and Food and the Secretary of State for Trade and Industry to the current American position in the GATT round. Whoever wins the contest for the Conservative party leadership, there will certainly be changes.
Through CAP and other supports, a massive and illegitimate political tax is being levied to sustain the electoral base of a number of political parties including, historically, the Conservative party. Some Conservative Members are finally beginning to realise, in their own interests, that there is more to be gained by reducing the 565 £14 per week food tax that is levied on every family in the United Kingdom than by buying off, and continuing to buy off, a shrinking farming constituency. That is why the debate about Europe will focus increasingly on the 60 per cent. of the European Community budget that is wasted on an inefficient means of supporting farmers and farm prices. No one objects to the rational, logical support of farmers and the food industry. However, 60 per cent. of that support does not go to the farmers but is used to pay for storage, transportation and other matters. That is not the best way to support our food industry.
Despite all the wind from the Secretary of State, the Government should be ashamed of their failure over 11 years seriously to make an impact on the common agricultural policy. There must be a far greater attack on the problem, whatever party is in power, over the next five or 10 years so that money may be properly spent. I am sure that all hon. Members have learnt from the European experience that there should by all means be a subsidy of one sort or another. However, initially there must be an attempt to track the real market price so that the subsidy can be effectively administered. Where there are three, four or five different layers of subsidy or protection, it is difficult to track back and discover the original market price on which to base a sensible judgment about support and subsidy.
I hope that the GATT round will be used assiduously by the relevant Ministers to ensure that real pressure is brought to bear on the common agricultural policy. The GATT round is a weapon that can be used, at least on the table if not in reality, to impose some sense on the CAP. The arguments can again be opened and won over two, three, five, or 10 years.
Either an incoming Labour Government or the present Government must address food price levels, the efficiency of farming for consumers' benefit and the political reasons why subsidy works to the benefit of conservative parties. A Labour Government must do that on the basis not of free trade, but of fair trade. Free trade can be a misnomer. It can be expensive, not least for the Third world, a matter with which my hon. Friend the Member for Islington, North will deal. Some of the basic principles of fair trade can be agreed by all countries. Where support is necessary, for social reasons or for small farmers, it could be paid directly, perhaps by some form of income support. Fair trade also needs to encompass all that has been said about textile imports which can undercut domestic industry, not because of better quality but essentially because of lower wages, sometimes slave wages, child labour and poor working conditions. Such things lead to disbenefits for the producers and for our domestic economy because people may be thrown out of work.
Conservative Members have problems with the social charter of the European Community, but in a sense this is the social charter aspect of GATT. We need to look at the other side of the argument, not just at the straightforward bottom-line subsidy costs of trade agreements. We must look at the social costs which inevitably lead to the undercutting of our domestic industries.
Japan is a difficult area and the difficulties are often cultural. We should try to understand those difficulties and not merely dismiss them as restrictive practices. They need 566 to be respected to a degree that has not so far been apparent. If not, they will not be understood and we will not be able to negotiate those practices away.
So far GATT has been quite successful in its examination of tariff barriers, but it has not yet tackled the main problems of non-tariff barriers, export subsidies, import protection, access barriers and price supports. We must make GATT work because if we fail we may have to accept alternatives that will be less palatable than a properly worked-out GATT round. For example, a subsidy war would be an even more expensive CAP. We could see a retreat into trading blocs by Europe and north America and possibly the Pacific rim or even, as has been floated in the past couple of months, a strengthened OECD taking on some of the trade negotiating powers of GATT.
We must accept that, in relation to GATT, we shall have to give up some degree of national sovereignty. That is the basis of negotiation and agreement. Give and take by all parties, all trading states, is essential if GATT is to be made to work. However, at present GATT is not tackling the central problem of agricultural subsidies. I understand that those subsidies currently cost about $500 billion. Part of that money could certainly be better spent in other areas to reduce overproduction, end the squeeze on the Third world and third-world prices and assist Third-world development.
GATT needs to be kept afloat because it is the embryo of future intergovernmental organisations that could tackle world problems. GATT is failing because in itself it is illegitimate. It does not have the support of the nation state parliaments and faces the problems that we sometimes face in the European Commission. We send people to negotiate on matters that our Parliament has not had an opportunity to discuss. In many ways we behave like a multinational company which sends directors to a board meeting rather than involving all the people who will have to participate in taking decisions. The illegitimacy and the undemocratic and unaccountable nature of many intergovernmental conferences leads to many of the problems which arise because people have not participated in initial discussions. That undermines the basis of decisions.
It is crucial for the next Labour Government to build on democratically accountable intergovernmental organisations. Only then will we be able to tackle problems that go far beyond trade difficulties. Those problems reach into international debt, currency trading, the movement of capital round the world, assistance to the newly democratised countries of eastern Europe, the environment and above all the Third world, not least in terms of wages. Those matters need proper enforcement and policing, and it will be for the next Labour Government not only to conclude this GATT trading round but to build on it and to extend the concept of world co-operation through intergovernmental organisations so that we may tackle some of the even bigger problems facing the world.
§ Mr. Bill Walker (Tayside, North)
I must make my apologies in advance to my right hon. and hon. Friends on the Front Bench, because I shall be dashing off to catch a plane to Scotland.
567 The successful conclusion of the GATT round is critical for both Scotland's farmers and manufacturers. Scotland's splendid export achievements are at risk if restrictive trade practices and protectionist policies are implemented by individual trading blocs such as the European Community or the Cairns group.
The hon. Member for South Shields (Dr. Clark) spoke critically about the Government's policy, but he did not take into account the fact that Scotland's premier exporting industry is the Scotch whisky industry. The status of that industry in 1979, when the Government came to office, should be remembered. It was overstocked, distilleries and bottling and blending plants were being closed, and home and export sales were flagging. The situation today is vastly different. Stocks are more in balance, sales at home and abroad are buoyant, distilleries are reopening and the jobs in the bottling and blending plants are more secure.
The hon. Member for Wallsend (Mr. Garrett). in his thoughtful and constructive speech, mentioned my right hon. Friend the Prime Minister. I shall also mention her, because I believe that she has been the best Prime Minister that the country has had this century. It is thanks to her policies and the determination of her Government that Scotland's premier exporting industry is in better shape. Competition, both at home and abroad, but particularly that from the European Community, has contributed to that.
Exports of Scotch whisky are £1,400 million. 'Nell in excess of £1,000 million is paid by the industry to the Chancellor of the Exchequer. It exports at least 90 per cent. of everything that it produces outside Scotland. When I listen to some of the theoretical humbug from the Labour party, I think that it has forgotten how important are such industries. The Scotch whisky industry directly employs 14,000 people and many more thousands are employed indirectly.
I have two examples of countries operating tariff barriers that were detrimental to the Scotch whisky industry, both of which export massively to the United Kingdom and Europe. The first is Japan, where, after tough negotiations, the situation has been much improved. However, in South Korea, much improvement is still required. We shall not obtain that by erecting tariff barriers in the United Kingdom. The Scotch Whisky Act 1988, for which I can claim some responsibility, has also made a contribution to maintaining the quality and standards of our premier export.
The Scotch Whisky Association has two questions to which it would like answers. The first is what steps have the Government taken to ensure that the EC Commission's negotiating position in the current GATT round takes account of the objective of the Scotch whisky industry and others to eliminate, or at least reduce, tariff and non-tariff barriers facing products in world markets? Secondly, are the Government aware that the United States Government's proposed "zero for zero" approach for the elimination of tariffs on distilled spirits has the full support of Community spirits producers, including the Scotch whisky industry, and will the Government take steps to ensure that the EC responds in kind? The Scotch whisky industry considers these matters to be of major significance. A reduction in tariffs, especially the "zero for zero" approach, would help exports and is the way forward.
568 In a debate such as this, one must mention the farming industry. Every farmer in Scotland recognises that barley is one of the major components of Scotch whisky. A healthy Scotch whisky industry is therefore good for Scottish barley farmers. Farming industry problems can be removed only by realistic Community policies, and the Government are right to demand a fair deal within Europe for British agriculture. They must also ensure that we get a fair deal in world markets.
We must never forget Scottish and British dependence on our manufacturing industry. We hear much about the so-called destruction of manufacturing industry, but in Scotland our manufacturing industry is producing more in real terms than at any time, and we are exporting more. We want a fair deal for British industry, both within the Community and outwith it. We want to see positive proposals put forward by the Community in the GATT round.
We in Scotland recognise the difficulties that the Government face. If, by chance, the deadline date cannot be met, we must continue with the present arrangements until a new regime can be put in place.
§ Mr. Martyn Jones (Clwyd, South-West)
Hon. Members on both sides of the House have acknowledged the importance of the Uruguay round of the GATT negotiations. It is important for industry, the Third world and consumers. Restrictions on trade, whether by tariffs, quotas, voluntary restraints or administrative barriers, raise prices and reduce consumer choice. Protectionist measures often have a disproportionate effect on poorer consumers, but not only consumers will suffer if the round fails. Failure of the round would be disastrous for international relations and the British economy. Increased protectionism and trade disputes would lead to slower growth and reduced export earnings. There would be damaging consequences for employment in industry and commerce.
A recent study by the Centre for International Economics in Canberra suggests that, if fortress Europe becomes a reality, it will cost the Community $52 billion a year. If the Community's protectionism was met by United States retaliation, the Community would lose $132 billion, while the United States would lose $64 billion. Protectionist measures hurt the countries that use them as much as their trading partners.
The Minister implied that the concessions made by the EC, including a 30 per cent. cut in agricultural support—that is the major barrier to an agreement in the GATT round—would not harm British farming unduly, and that this will result in an agreement. It will not. The United States will not be satisfied. I visited the United States with the hon. Member for Weston-super-Mare (Mr. Wiggin), and I share his feeling that United States and Canadian farmers will not accept a 30 per cent. cut in agricultural support. They know, as the Minister said this morning, that we are halfway along that route already. I would dispute his assertion that we are going that way already because of GATT. We are doing so because of the problems within the CAP and the collapse of its financial basis. There is a determination to press the point that 15 per cent. is not enough.
The Minister acknowledged in an intervention in the speech of my hon. Friend the Member for South Shields 569 (Dr. Clark), who spoke from the Opposition Front Bench, that farmers will have trouble meeting the reduction in support. The farmers that I meet will not survive such a cut under the present system of support. I repeat that the proposed cut will not be enough to meet the demands of the United States. After all, it is calling for a 70 per cent. reduction in European Community support.
The United States route to an agreement will be a continuing disaster for United Kingdom farming. It has been put to me by many farmers in my constituency that the present position is a catastrophe. Prices in the local markets in my constituency are lower now than they were last year, and they were poor last year. Farmers are facing bankruptcy throughout my constituency.
Mr. Andy Stewart
Does the hon. Gentleman agree that the problems of the livestock industry, especially in the area that the hon. Gentleman represents, were exacerbated by the attitude taken by the Labour party to the bovine spongiform encephalopathy scare?
§ Mr. Jones
As most of my farmers are sheep farmers, that is hardly likely. The hon. Gentleman would do well to study my speeches in Hansard. I was deeply involved in the study on BSE, and I know a good deal about the disease. I say with some humility that, as someone who knows something about the disease, I could not dispute the stance taken by my hon. Friend the Member for South Shields. The disease is worrying and needs to be studied. The Government did not move quickly enough to allay people's fears. I hope that those fears have now been allayed. Beef is safe, although I am not so sure about offal. There is a question mark over specified offals that are banned, and I hope that that ban will continue.
The farmers in my area are suffering. The price for sheep is devastatingly low, and beef is another problem. It is interesting to note that the prices in the shops have not come down for either of those commodities. [HON. MEMBERS: "Hear, hear."] I am glad that Conservative Members agree with me. It says a great deal for profiteering in the middle areas of distribution to the consumers.
Sometimes farmers cry wolf and complain. There is always something wrong with farming, whether it be the weather or the markets. However, in this case the figures prove that their concerns are justified. There has been a rapid increase in farming support, from 11 billion ecu in 1980 to 280 billion ecu in 1990. However, that has been accompanied by a collapse in the United Kingdom's farming economy. In real terms, it is down to a half of its level 10 years ago, and investment has also dropped by a half during the 1980s. Those figures, together with the problems created by interest rates and the effect of inflation on the input into farming, make it clear that the industry is in deep recession, and it can only get worse.
The GATT negotiations threaten the interests of all EC farmers. A settlement would involve cuts in EC support of 30 per cent.—or 75 per cent. if we agree to the demands of the United States. It would involve freer access for Third-world products into the EC market, clarification of existing import controls and their reduction by 30 per cent.—or 75 per cent., if we follow the USA line; God forbid. It would involve cuts in EC export refunds and cuts in internal support.
570 United Kingdom agriculture cannot stand all that. All the palliatives suggested by the Commission would not benefit even the lowland farmers of England and Wales, most of whom are too large to benefit from structural measures and too rich to benefit from regional measures. The palliatives certainly would not benefit farming in the highlands of the United Kingdom, including my constituency.
Farmers are aware that the Uruguay round is about reducing support levels, and they are not surprised that the EC is offering concessions. However, the EC and the other parties to GATT must concentrate not on cuts for cuts' sake, but on putting world trade in agricultural products on a sound basis. The great criticism of the CAP arises from its subsidised export of surpluses, as support for those surpluses represents by far the greatest element of EC spending on farm support. If that could be eliminated, a considerable amount could be saved on support measures. That may go some way towards meeting the demands at the GATT negotiations.
Supply management could be the way to remove surpluses, while maintaining internal EC prices. That would make economic farming possible. It could be designed to enable the EC to meet its GATT commitments and to keep EC farm support spending at politically acceptable levels. Farmers would need to continue their efforts to improve efficiency and to ensure that production meets the ever-changing requirements of the market. Supply management is not an easy option, but under it the evolution of farm practices, land use and farm structure will continue. There must be an orderly transition into the 1990s, not a catastrophic collapse of the rural economy, which is what is now happening.
Agreement on the EC's GATT offer is only the first stage. We do not know the terms of the final settlement or how it will be implemented in the EC, but we do know that the EC surpluses and budgetary problems are intensifying and that the Government want to make further cuts. With or without the new GATT commitments, the EC will need to change the direction of its agricultural policy if there is not to be irreparable damage to farming.
The Government must reject the idea of moving towards a completely free market and instead develop a new system that will keep farmers farming. We must pay the social price for our countryside and for ecologically friendly farming. We missed a valuable opportunity to do that in reforming the common agricultural policy by insisting on support cuts of 30 per cent., which will in any case be insufficient, and which will do drastic harm to the farmers in my constituency.
§ Miss Elizabeth Peacock (Batley and Spen)
I was sorry to learn on Tuesday that the House was not to have its planned debate on the textile industry on Wednesday evening. Having sat here today for three and a quarter hours and heard hardly a mention of textiles, I am even more sorry. We have heard a lot about agriculture, but although we realise its importance, other aspects of the GATT round should have a strong voice in this debate.
All aspects of GATT are important, but I have a particular interest in strengthening the GATT rules in respect of textiles and clothing. The textile industry is looking not for protectionism but only for free and fair 571 trading and a strong linkage between the phasing out of the multi-fibre arrangement and the phasing in of strengthened GATT rules.
The industry has annual sales of £15 billion, and exports this year are likely to reach £4.5 billion. It also has a work force of 480,000, which emphasises the industry's importance to the British economy. It has invested heavily, to the extent of £2 billion over the past five years, and is a world leader in design, quality, innovation and exports. When my hon. Friend the Minister for Trade visited Yorkshire, he had an opportunity to see for himself some of the investment made in high technology.
In another place recently, the American ambassador, Mr. Henry Catto, addressing a dinner, said of GATT that it is a high-stake poker game. I do not play poker, but I understand from its rules that something is always thrown away on a bluff. I hope that, in the GATT round, textiles will not be thrown away to safeguard another agreement, because that would be disastrous for Britain.
I will quote briefly from a letter that many right hon. and hon. Members received from the secretary-general of the Apparel, Knitting and Textiles Alliance:We strongly support fair and free international trade in textiles and clothing. However, we are not prepared to see our industry seriously damaged by distorted trading practices which benefit our overseas competitors, nor traded off to ensure that a Uruguay Round agreement is reached at all costs. Textile and clothing issues in the Round must be assessed on their own merits.That is all that the industry has ever asked of the Government.
The Punta del Este declaration, which opened the round in 1986, explicitly stated that textile and clothing trade should be integrated into GATTon the basis of strengthened GATT rules and disciplines.That is a key phrase. In 1986, the then Secretary of State for Trade and Industry, my right hon. Friend the Member for Southend, West (Mr. Channon), was instrumental in obtaining international acceptance of that wording, which at that time was regarded by the Government as being of major importance.
In 1988, the then Minister for Trade, my hon. Friend the Member for Plymouth, Sutton (Mr. Clark), said in a debate on the multi-fibre arrangement:I can state that, if the multi-fibre arrangement is to be discarded and if such an action is not accompanied by a satisfactory liberalisation and by a genuine strengthening of GATT rules and by proper discipline, I will not be the Minister who comes to the Dispatch Box and announces it."—[Official Report, 9 December 1988; Vol. 143, c. 620.]We realise that he is no longer the person to make such an announcement, but I hope that, when my right hon. Friend the Secretary of State winds up, he can assure the House that no Minister will come to the Dispatch Box to make such a declaration.
The multi-fibre arrangement plays an essential role in allowing some regulation of the growth in imports, although not always enough to prevent damage to the British industry of the kind seen in my constituency, with the importing of acrylic yarn from Turkey. It prevented a war in a sensitive sector of trade and provided guaranteed access for poorer developing countries. However, we are not protectionist and accept that it should be phased out over an adequate period. I emphasise to my right hon. Friend the Secretary of State and to my hon. Friend the Minister that the industry agrees that the MFA should be 572 phased out, but is looking for a strong link to strengthen GATT rules and disciplines at the same time. It would be helpful to receive that assurance today.
We are looking for a phasing-out period for the MFA of at least 10 years, and most Community Governments agree with that time scale. Some textile and clothing industries in the community, the United States and Canada have asked for 15 years. Many developing countries would support 10 years. We support the EC proposal that increases in import growth rates should be limited in the first stage of the phasing-out period and increased gradually. There must be an effective means of enforcing respect for the GATT rules and disciplines at each stage of the phasing-out period—perhaps, I suggest, by suspending further import growth of any supplying country that fails to open its market.
The United Kingdom clothing and textile industries are strongly in favour of fair and free international trade. They are efficient and are using modern equipment and high technology to produce goods of high quality and good design for an increasingly international market. Thousands of metres of high-quality worsted cloth are sitting in warehouses in west Yorkshire which were all made with special personalised selvedges for sheikhs in the Gulf. Money has been invested, and when the Gulf crisis is resolved, we hope to be able to re-establish that trade. It is not possible to send that fabric to any other country, because it is personalised, and those sheikhs paid highly for it.
It is not acceptable that the MFA should be phased out without significant strengthening of the GATT rules and disciplines. I know that Ministers will probably be sick and tired of hearing me say that, but it cannot be said too often or too strongly, because it is very important.
The terms of the MFA phase-out period must be tightly drawn and linked at each stage to progress in implementing strengthened rules and disciplines. The Government's approach in Community discussions must be vigorous and they must continue to fight for the interests of our industry. A case for fairness and balance in international textile and clothing trade must be approached on its merits in the closing stages of the round, which in the next couple of weeks will be very important indeed.
We all agree that a strong manufacturing base is crucial to the nation's future and prosperity. A strong home manufacturing market is central to a strong export market. Some people may say, "You would say that, because you represent a manufacturing area," but it is more than that. I was born and brought up and have lived for most of my life in manufacturing areas, and I therefore feel with some humility, as the hon. Member for Clwyd, South-West (Mr. Jones) said, that I have some knowledge of what we are discussing.
I was much encouraged by my discussions with my right hon. Friend the Secretary of State and my hon. Friend the Minister on Wednesday. When my right hon. Friend replies to the debate, I hope that he will give the House and the textile and clothing industry, which is listening carefully and will carefully read what has been said, the Government's position on the phasing out of the MFA and the phasing in of the strengthened GATT rules. If he assures us that the Government are fighting for a long phasing-out period—that was my impression from speaking to them both this week—it would encourage the textile industry to invest even more. Someone is on the 573 verge of announcing a £1 million investment in a project not many yards from my boundary, not because he sees that the wool textile industry is at its best now, but because he sees a future for it. Some reassuring comments from my right hon. Friend the Secretary of State today would help to release that £1 million investment, which we desperately need.
I apologise to my right hon. Friend for the fact that, regrettably, I cannot be here to hear his reply to the debate. Like many hon. Members this morning, I have cancelled constituency engagements at short notice to be here. With the help of British Rail, if its trains are running again, I must go back north to continue my constituency work. I hope that my right hon. Friend will accept my apology. I assure him that on Monday I shall read extremely carefully in Hansard what he says, in the hope that we can all reassure the textile and clothing industry that it is of prime importance not only to the Members of Parliament who represent textile areas but to Ministers, who will put emphasis on the negotiations as we approach 3 December.
§ Mr. Alan W. Williams (Carmarthen)
I shall address most of my remarks to the implications for agriculture of the GATT negotiations. It is critically important to Britain that GATT succeeds and that the latest round produces tangible results.
Britain has stood for free trade for centuries. Indeed, we could even claim to have invented world trade back in the 18th and 19th centuries in the colonies. Britain devotes a larger proportion of its GDP to trade—imports and exports—than any other country. We devote about 30 per cent., so liberalising trade is important to us.
This morning, many hon. Members have alluded to the intricate web of subsidies in world agriculture. I have read an estimate that about $200 billion-worth of subsidies have evolved worldwide. To get rid of those subsidies over a period of 10 or 15 years would offer almost as much saving in Government expenditure internationally as defence cuts.
The way in which we insulate agriculture but no other industry is incredible. I represent a constituency which has been at the sharp end of the rundown of the coal industry in the past five or six years. The coal industry has no subsidies. Nor does the motor industry. In no other industry do we guarantee a price well above world prices and guarantee a market even when there is no market for any surplus products.
The common agricultural policy is in desperate need of reform or scrapping. It costs £20 billion—or, in terms which the housewife will appreciate, £16 a week for every household in Britain. To guarantee prices way above world prices—not 10 or 20 per cent. above world prices but sometimes treble or four times those prices—stimulates the production of unwanted surpluses. In turn, those surpluses are dumped on the world markets. They are subsidised exports which undermine the exports of other economies.
The United States is perhaps the motor for changes in agricultural subsidy. Subsidies frustrate American export efforts, given that country's balance of payments deficit. I returned a couple of weeks ago from a short visit to the United States. I was struck forcibly by the price of food 574 there, both to buy in supermarkets and to eat in restaurants. That vast continent can produce huge amounts of food, but the Americans deliberately under-utilise their vast potential.
Dumping on world markets automatically affects Third-world economies. Such countries are poor and often some specialist food is the only commodity they can export. We undermine and undercut their market and frustrate their development.
We have already heard that the storage and disposal of those surpluses uses up more than half of that £20 billion. What is most absurd about this absurd policy is that rich farmers get the largest subsidies. The September newsletter from the Commission of the European Communities office in Cardiff talks about the MacSharry proposals and says:At present 80 per cent. of the EC's resources go to 20 per cent. of the recipients.Last month's newsletter from the National Consumer Council, which we all received, tells the same tale with different statistics. It said of the CAP:Around two thirds of CAP price policy support goes to the largest 28 per cent. of Community farms.It is absurd that two-thirds of the subsidies go to a quarter of Community farms. It means that the other three quarters receive only one third of the total between them. That means that the average big farm receives in subsidy five times as much as those among the other three quarters. It is a crazy policy which allocates bigger subsidies to the largest farms and richest farmers because they produce more. All the subsidies are production-based, so if a farmer has 500 cows, he receives five times the subsidy of a farmer with 100 cows. To add insult to injury, our poorest households spend relatively the most on food. Therefore, the price of the CAP is paid for by low-income families and the benefits go disproportionately to rich farmers.
There is a strong environmental argument against the CAP. In the past few decades, agribusiness has grown up parallel to it. It involves destroying hedgerows to make larger fields, spraying, and the extensive use of fertilizers, pesticides and so on. The CAP is the most destructive environmental policy that could be invented for agriculture and should unquestionably be dramatically reformed or scrapped. As my hon. Friend the Member for South Shields (Dr. Clark) said in his opening remarks, it is a tragedy that the Government and Europe have not used the opportunity of this round of GATT negotiations dramatically to reform the CAP.
I fully support the 30 per cent. policy that the Government have pursued in Europe, but we must protect small farmers during the transition that should take place in the next decade. Another problem with the CAP is that it is remorselessly driving farmers out of business. I represent a rural constituency and many small farmers. There are probably more farmers in my constituency than in any other in England and Wales and, probably, in Scotland. My constituents have small dairy farms, but more and more sheep have been introduced since the quotas. As the hon. Member for Brecon and Radnor (Mr. Livsey) said, the past year has been traumatic, with big decreases in the price of lamb and beef. If there are 30 per cent. cuts in agricultural support across the board, many of those farmers will be driven to bankruptcy. There is no question about that.
Small farmers are important because they form the fabric of rural communities. Their support is critical for 575 rural schools. The Welsh language is under attack in my part of Wales when agriculture is under threat. I was brought up in the country and have lived all my life in my constituency. Many of my relatives are farmers. Over my lifetime, I have seen the amalgamation of small farms. As they come on to the market, they are gobbled up by larger farms. That amalgamation in Britain has gone ahead in a way that has not occurred in France, Germany or Italy. The average farm size in Europe is much smaller than in Britain. The last thing that we want in agreeing to the 30 per cent. cuts is for those cuts to be imposed across the board. That would drive small farmers out of business.
We should support small farms, because that is environmentally friendly agriculture. It is less intensive agriculture. It works with nature rather than attacking it. We need to reform agricultural support. Historically, the common agricultural policy has been production-based. We need to change the emphasis, so that it is environment-based. The purpose of the CAP should be to protect the countryside and the livelihoods of small farmers, to keep them in the countryside and to protect the landscape that they look after. That means giving conservation grants and support for less intensive agriculture. It means attacks on pesticides, a penalty on the use of fertilizers and support for organic farming.
We need to consider giving deficiency payments and income aids for small farmers. The present policy gives most to the largest farmers, but if we had a more uniform policy which worked more on a per farmer basis, the cost would be far less than the cost of the CAP. About £2,000 or £3,000 a year per farmer could be given through income support, income aids, conservation grants and green premium payments to protect the countryside rather than to produce unwanted supluses.
Internationally, we need to get rid of all agricultural subsidies. We need to develop free markets and a free trade in agricultural products. Britain has nothing to fear from that free trade, because of our efficient agricultural sector. In making these changes, we must protect small farmers. Public opinion is overwhelmingly hostile about the absurdities of the CAP, but the public would support some of the money—this proposal would cost about £1 billion—being used to protect the countryside.
§ 1.8 pm
§ Mr. John Greenway (Ryedale)
Having asked my right hon. and learned Friend the former Leader of the House for an urgent debate on agriculture and the GATT round, I warmly welcome this debate and the opportunity to contribute to it, but I find it difficult, if not impossible, to concentrate and comment on this important GATT issue without some reference to yesterday's events.
We have lost a great Prime Minister. Yesterday, she put the country and the party first, something that many people said she would never do. It is ironic—as my right hon. Friend said, it is a funny old world—that we are debating this matter.
I was in Rome this week. A month ago my right hon. Friend the Prime Minister was in Rome. I believe that what occurred at the Rome summit might be called the catalyst for her ultimate resignation. History will show that she was right when she said in Rome that the priority for the EC now is not to set an agenda for further developments in the Community but to demonstrate that 576 the member countries can work together and reach practical and sensible positions on the issues that are of real concern.
The threat of a trade war if the GATT negotiations break down must be of greater concern to the people of Europe, and of the wider world, than plotting some further development in economic and monetary union. It was essential to reach agreement on GATT, and the Minister of Agriculture, Fisheries and Food deserves credit for his persistence in the negotiations. Unfortunately, those negotiations took too long to complete and the speeches today have demonstrated the concern that is felt about British agriculture. The time that it took to reach agreement in the EC on GATT and farm prices served only to strengthen anti-farming sentiment, and that has been bad for farmers everywhere.
We need to reach agreement in the Community on how to resolve internal trade disputes. The disputes that occurred this year with, for example, the German and French ban on beef and, more recently, over the export of livestock into France demonstrate the protectionism that exists in Europe. Protectionism in the Community cannot be tolerated, so we must establish a better mechanism to ensure that when disputes arise they can be quickly settled. The United Kingdom has been communautaire throughout the negotiations this year on farm policy and that has been the test of our Euro credentials. Collaborative action, rather than rhetoric and ideology, must be the principle that guides us in the development of the EC and the single market.
Hon. Members on both sides have said that the proposed reduction in farming support is hard for agriculture to grasp at this time. I am in no doubt that agriculture is in crisis. The cost of the CAP is growing, yet farmers in my constituency, as in the constituencies of other hon. Members, face ruin and bankruptcy. So reform of the CAP is essential, but how are we to achieve it? Reaching a settlement in the GATT round is the first step to CAP reform, because unless we establish the size of the budget and the terms for world agricultural trade, we cannot begin to consider the changes that are needed in the CAP.
Although I say that agriculture is in crisis, I agree with others that much of the cost of the CAP does not go to farmers. I am not convinced that reductions in support for farmers would result in major reductions in food prices in the shops. For example, although the prices being reached for livestock in markets in my constituency and elsewhere—for beef, lamb and livestock generally—have shown a substantial reduction this year, the housewives in my constituency tell me that they have not noticed much of a reduction in prices in the shops. The answer is all too obvious. The cost of the raw materials—the animals that are sent to the slaughterhouse—is such a small part of what housewives pay in the supermarket these days——
§ Mr. Livsey
Does the hon. Gentleman agree that it is intolerable that farmers in my constituency are selling lamb at 82p per pound but that in the past fortnight housewives in the supermarket have had to pay £3.99 per pound for the same product?
§ Mr. Greenway
That reflects what I have seen in my constituency. Perhaps we shall need a debate on another day about the structure of the livestock market and the number of people involved in the chain to try to find a 577 better way of ensuring the lower prices that the housewife wants. Many hon. Members of all parties seem to think that by reducing agricultural support we shall see a substantial reduction in prices in the shops, but all logic dictates that that is not the case.
If we need to reform the CAP, how do we go about it? First, we must recognise that we belong to a club of 12. Competence in agricultural policy rests with the European Commission, not with national Governments. Whatever we seek to achieve must be approved by all our colleagues in Europe. I do not believe, and never have believed, that the collapse or wholesale destruction of the CAP is the answer. Hon. Members have referred to the fact that we had the opportunity in Copenhagen in 1988, but that it was not taken. I fundamentally disagree with that view. The past three years have proved that that was not the correct judgment. Our Prime Minister went as far as she could at that time to press our colleagues in Europe about CAP reform. All that has happened since has served only to demonstrate that the wholesale collapse of the CAP would mean wholesale bankruptcies for farmers, the collapse of that industry and higher—not lower—prices in the shops.
Although the task that we face is urgent, change must evolve. There needs to be a change of emphasis. I remember saying to some farmers three and a half years ago in the election campaign that we should recognize—far more than we do—the important role that they play in protecting our environment. Suddenly, everybody is suggesting that that is part of the solution.
There is much debate about the alternatives—whether we should continue to pursue an open market philosophy or whether some form of supply management would be a better bet. The attractions of the two are clear. However, British agriculture has endured the financial effects of a long and painful restructuring process. If all goes according to plan—I accept that that is a big if—we should be on the verge of reaping the reward of that painful restructuring. I am reluctant to see us throw all that away. I think back to the debates that we have had in the House in the past three years about the need to persuade our colleagues in Europe about the merits of a fair deal in terms of the green pound. All that is within our grasp.
It is appropriate that my right hon. Friend the Secretary of State for Trade and Industry is to reply to the debate because, from talking to farmers, I have found that it is the effects of inflation, high interest rates and the uniform business rate on some of their diversified occupations—as much as anything else—that are causing them concern. That dictates that we must get our economic management policies right, as well as looking at the policies that affect agriculture alone.
An open market does not mean that there should be no support. Appropriate measures for the environment are being developed. It was the Conservative Government who first proposed the establishment of environmentally sensitive areas. We are right to use the hill livestock compensatory allowances scheme to support less-favoured areas.
Let me take this opportunity to refer once again to the north York moors farm scheme, launched in my constituency earlier this year by my hon. Friend the Member for Skipton and Ripon (Mr. Curry), the 578 Parliamentary Secretary in the Ministry of Agriculture, Fisheries and Food. That scheme has been on the back burner for two or three years. We want farmers to realise that the presence of sheep and suckling cows on the moors is crucial if we are to maintain the moors in their present state but that the numbers need to be limited. We must make environmental payments to support that policy. Similarly, Government support is required if we are to keep our landscape and our buildings, stone walls and hedgerows. We should take the opportunities that we have not taken in the past.
There are dangers in a control of output policy. Britain tends to play fair; others do not. I was arguing with a representative of a British company in Italy this week. He seemed to feel that all that mattereed was that one should agree with the principle and make it appear as though one was going along with everything. I do not believe that that is the answer for the Europe of the future.
The control of output will also freeze the farm structure. Are we satisfied that the present structure is entirely in Britain's interests, especially given that it is almost impossible for youngsters to go into agriculture? If we freeze that structure by controlling output, we shall prevent the United Kingdom from exploiting the more efficient methods that we all know exist.
With hindsight, milk quotas are often cited as having been a success. They certainly brought profitabiity back to the dairy industry but their introduction was a rather different experience. It was very traumatic and I remember it being extremely unpopular during the Ryedale by-election in 1986. We must face the fact that there are still major problems in our dairy industry and that even our present quota arrangements cannot continue completely unchanged.
There is a danger that output control may be used by other member states to protect small farmers. Pressure for the protection of small farmers has been seen all too clearly this year, with the outrageous attacks in France on British consignments of lambs. Two of the attacks by demonstrators, seen on television throughout the world, were on consignments of lambs from my constituency. This is perhaps not the time to enter into a detailed debate about the merits of live exports. I fully understand concerns about animal welfare, but I cannot let this opportunity pass without suggesting that if we stopped the export of live sheep and lambs to the continent, there would be disastrous consequences for sheep farmers in my constituency and, I dare say, in the constituency of the hon. Member for Carmarthen (Mr. Williams).
We should recognise the need to develop policy and take note of the fact that under GATT, restrictions would apply only to support that aids production. We can do much to help farmers that does not involve directly giving aid or encouragement to production.
In the proposals of my right hon. Friend the Minister of Agriculture, Fisheries and Food—in the position that the Government have taken in the Community and GATT—we have gone as far as we should go. They are enough. We need no more, and fairness has to be the watchword. Agriculture in Britain is undoubtedly at a watershed. We now have the opportunity of a generation to ensure the future profitability of agriculture. That issue is far too important for us to allow our rural communities to be used as a political football. It is the responsibility of the House to ensure that we are successful in the 579 negotiations and in the reform of the CAP. That is a great responsibility, and what we do now will dictate the pattern of our rural economy for many generations.
As my right hon. Friend the Minister said, we have a moral responsibility to the rest of the world. At prayers every day in the House we say:Give us this day our daily breadThe CAP has ensured that not only has Europe been fed but housewives have been offered a greater and wider choice of food than ever before. In the GATT round we must defend our own interests and we shall. We should also work to ensure that the world is fed and success in the GATT round is the key to that.
§ Mr. Jeremy Corbyn (Islington, North)
This is an interesting and extremely important debate. It affects everybody in Britain, and in a short time the outcome of the GATT negotiations will affect the world. We are debating a serious issue, which plainly affects jobs in many parts of Britain. It also affects the world's environment and the relationship between the northern and southern countries.
It is disturbing that the whole issue is presented as if it were a question of negotiations between, primarily at the moment, the United States and the European Community and that when they sit at the negotiating table they start talking to representatives from the southern, mainly Third-world, countries. There is an extremely important and powerful missing player representing the interests of multinational corporations, most of which are in the United States but some of which are in Europe.
I should like to quote from a fascinating article by Chakravarthi Raghavan in the most recent issue of Resurgence, a magazine produced in Penang, Malaysia, by the Third World Network. He said:It is really a worldwide economic charter for transnational companies to gain 'extraterritorial rights' in all countries, and for foreigners to have untrammelled rights to property not known since the end of the colonial era''.That was the comment of an American observer who was watching what was going on in the early stages in this Uruguay round of GATT negotiations.
We must look at the matter in the light of the world's present state. Two thirds of the world's population do not enjoy anything like the standard of living enjoyed by the majority of people in north American and western Europe. There is an annual capital flow of $150 billion from the poor southern countries to the banking systems of the north. That is mainly interest paid on the huge debt of southern countries, and that debt has been brought about by a mixture of circumstances—the very high interest rates charged in the northern countries, dominated in particular by the federal deficit of the United States, and by historically low prices for Third-world commodities. Commodities from the Third world are at their lowest price for 20 years.
There is increasing impoverishment in a large part of the world. To some extent, the GATT negotiations undermine what should be going on through the United Nations Conference on Trade and Development, because the motor driving the GATT negotiations is the free-market policy of the United States and British Governments. At the end of the day, that policy leads to the loss of jobs in Britain's older industries, bankruptcies among Britain's small farmers and impoverishment in 580 Zimbabwe, west Africa and Latin America. We are seeing a struggle between the rich, the big and the powerful, and the small and voiceless who will suffer at the end of the process.
The transnational corporations are certainly prepared. In July this year, they had their first outing at the Group of Seven industrial leaders' summit meeting in Houston. The multilateral trade negotiations coalition is chaired by the former United States trade representative, William Brock. It includes American Express, General Motors, IBM, General Electric, Cargill, Citicorp, Procter and Gamble, and other companies, as well as the United States Council for International Business, the American Business Conference, the National Association of Manufacturers, the Coalition of Service Industries and others. It describes itself asa broad alliance of American private sector interests committed to a strengthened and more effective multilateral trading system. The Coalition includes an array of business, farm, consumer and trade associations".They have joined together to try to influence or dominate the GATT round. They are powerful, well financed and effective. One can see from the initial stages of the GATT negotiations just what effects they are having.
At the end of the sessions, the Brazilian ambassador, Rubens Ricupero, issued a statement on behalf of the Third-world delegation, in which he said:Developing countries wish to reaffirm their readiness to negotiate constructively … (but) will reject any attempt to impose upon them a pre-negotiation package agreed only by a few. It is with profound concern that developing countries find themselves compelled to declare that, if the current situation is not changed soon, the Uruguay Round will be in serious jeopardy as a result of the lack of political will of the major participants.He quite correctly makes that rather guarded comment because the demands that have been put on the table will have enormous effects in many cases.
For example, the transnational corporations want larger markets for their goods. They want to be able to control those markets, and above all they want to control the ability of Third-world producers to compete. There is growing evidence that the multinational corporations that own patent rights to new manufacturing processes carry them out in western Europe or north America, but do not allow local manufacturers in Third-world countries to operate them. That is a kind of economic colonialism in manufacturing ability. This has been demonstrated in the production of CFC alternatives, and time and time again in high-tech industries, particularly electronics. These corporations are permanently trying to dominate what goes on.
§ The Secretary of State for Trade and Industry (Mr. Peter Lilley)
Can the hon. Gentleman give examples of this phenomenon? As I understand it, it would require a national Government to uphold a patent the use of which was deliberately suppressed in satisfying the needs of its consumers nationally, which would be a rather unusual practice.
§ Mr. Corbyn
The most obvious example is the one that I have already given—the production of CFC alternatives. They can be manufactured only under licence granted by the owner of the patent, so if a Third-world country wishes to encourage the development of the CFC alternative—an ozone-friendly product, for want of a better word—it can do so only by paying a large fee to the original manufacturer. That was one of the issues raised by Mrs. 581 Gandhi at the conference on global warming and the destruction of the ozone layer. There are many other examples.
We should also be concerned about the effect on the environment of the growth of free trade policies. There is understandably a welcome growing concern about the effects on the environment of the destruction not just of the rain forests, tragic though that is, but of the temperate forests and the savannah grasslands, and the pollution of the southern oceans. These are the three major areas of the change of carbon dioxide into oxygen. We are right to be concerned about this.
If we adopt a trade model that encourages the maximisation of the use for agricultural purposes of land that provides an immediate return on capital rather than a long return, the result is the destruction of more rain forests, because one can produce a little more beef for a short time, never mind that in the long term it is disastrous.
I hope that the Secretary of State will tell us what work has been done on the environmental effects of the free trade policies being promoted. It is all very well for the British Government to increase the funds that they make available to the environment commission of the United Nations. I am glad they have. I welcome that move, but there must be a recognition that the destruction of the environment comes from many sources, including the trade policies that are now being followed.
The development of free trade policies benefits the richest and the most powerful throughout the world. We are not dealing with free trade that is fair. There is a contrast between a large grain-producing operation in the mid-west of the United States, or Canada, with all the cheap production facilities that are available to it, along with a high degree of mechanisation, good transport infrastructure and everything else, and a small farmer in Zimbabwe attempting to grow maize for the local market.
We find throughout the world that large subsidies are given to large producers. We find also that many of the products of Europe and north America end up being dumped into third world markets. For example, wheat is sold for $160 a tonne as a guaranteed price in Europe or north America, and it finds its way to Nigeria as a dumped product, where it is sold for $60 a tonne. That depresses local productive ability, because the local product cannot be sold at that sort of figure. Local farmers go out of business because of the impact of imported wheat.
It is ironic to find in Zimbabwe and throughout southern Africa, which is a beef-producing area, that European beef is being sold while local farmers go out of business. If self-reliance in Third-world agriculture is to be promoted, as the United Nations and many others suggest, trade policies and the trade environment will have to reflect that. The United States Secretary of Agriculture John Brock, has said:Self-reliance in Africa is a romantic anachronism.His agenda is extremely clear.
There will have to be three objects for farming and farm products. First, we must end over-production. The over-production that is taking place in Europe and the United States is damaging and obscenely wasteful. It is damaging to the environment, and it is obviously obscenely wasteful when products that are the result of over-production are being burnt in an attempt to maintain prices. The 30 per cent. reduction in subsidy will mean that 582 farmgate prices will increase by about 7 per cent. in real terms over the next five years. The people who will suffer most as a result of that are the small farmers that my hon. Friend the Member for Carmarthen (Mr. Williams) was talking about, not the large producers in Europe or north America.
Secondly, we must end export dumping. Instead, we must promote aid and trade policies that encourage self-reliant production, which is more protective of the local economy and less dependent on the economies of western Europe and of the United States. Such production would obviously require less transportation.
Thirdly, what happens to the political sovereignty of poor countries that do not have the infrastructure that is available in Europe and north America when they are told that, because of the debt crisis, they must open up their economies to multinational capital to do whatever it will, and when the IMF and the World bank tell them that they must cut social expenditure? They are now told that they must pursue free trade policies for farm products. Those policies add up to disaster for poor countries.
I hope that the Secretary of State will show when he replies that he recognises that the policies that are being promoted by the Government that he represents, by the United States Administration and by the European Community are not beneficial to environmental protection throughout the world or to the poorest people in the poorest countries. They are a continuation and extension of the growing impoverishment of two thirds of the world, which has been going on ever since the end of the second world war.
We need to think about the world in a global sense, about the obscenity of poverty throughout the world, and about the danger that environmental destruction creates for every person in this world. The GATT round provides the opportunity to deal with some, if not all, of those issues.
§ Mr. Gary Waller (Keighley)
I am sorry that, during this important debate, so little time has been devoted to discussing textile issues. I remind my right hon. Friend the Secretary of State that the textile and clothing industry still employs 480,000 people—many fewer than the 700,000 that it employed when I came to the House, but nevertheless a substantial number.
No one could exaggerate the importance of pending decisions to be taken by the Government and their European partners as they approach the climax of the Uruguay round during the next few days. If the right decisions are taken, the industry will continue to be one of the great contributors to our future economic growth. But if our industry is betrayed, there will be empty shells of once-thriving mills, a serious contraction in the industry, and many more of its work force walking the streets. Those directly employed in the industry and their dependants add up to well over 1 million people, most living in the midlands, the north and in Scotland, and a large percentage of them currently represented by Conservative Members. They will pay close attention to the words of my right hon. Friend when he replies to the debate.
Matters of the utmost national importance are involved. I hope that my right hon. Friends the Members for Henley (Mr. Heseltine), for Huntingdon (Mr. Major) 583 and for Witney (Mr. Hurd) will also give some thought to those issues during the next few days, even though I fully appreciate that they have many other matters on their minds. I shall draw my remarks and those of other hon. Members who have spoken in the debate to the attention of my right hon. Friends. I am sure that they will wish to remember just how many of our fellow citizens will be affected by the GATT decisions.
The textile industry knows full well, from bitter experience, that many other countries that erect barriers to our exports and put obstacles in the way of free trade have never ceased to drag their feet when pressed to do so. By now, it should be fully understood that they will not yield ground voluntarily. A tough negotiating stance, linking the gradual ending of the multi-fibre arrangement derogation with a GATT agreement that really points towards free and fair trade, is vital. That appears to be well understood by a number of our EC partners, which are arguing in favour of a phasing-out period of 10 to 15 years. Compared with the position when MFA4 was negotiated four years ago, we now appear to be taking a less robust line.
I am afraid that my right hon. Friend, in his speech to the British Clothing Industry Association, blew a hole in our negotiating stance when he said that the Government continue to argue that 10 years would be too long a transitional period. I understand that because of divisions among members of the Community on that issue, the British stance could prove to be decisive. We should be arguing in favour of a longer, rather than a shorter, phase-out period. It should be clearly understood that the speed of its implementation is linked to the willingness of other countries to abide by more open trading rules.
It is essential that a strong mechanism should link the stages in the phasing out of the MFA with clear signs that progress has been made in implementing strengthened GATT rules and disciplines. Unless a formal mechanism exists, it is unlikely that some states will abide by their obligations. If they believe that the MFA will be abolished regardless of compliance with the rules, they will merely wait for that development. It would also be disastrous for substantial additional access to be given to the import of textiles and clothing in the first stage of the phasing-out period, and for excessively large increases in import growth rates to be given before the existing distortions in world trade have been affected by the new GATT regime.
We must point to the many, many examples—I do not have time to cite them—of countries with enormous barriers to our exports. For example, India has a substantial number of potential purchasers for our high-quality goods, but it prohibits the import of textiles and clothing similar to those produced domestically, and it charges tariffs of 200 per cent. and more on the remainder. How can anyone excuse the United States for charging 36 per cent. import duties on British wool cloth—more than twice as much as the duty imposed on any goods flowing the other way across the Atlantic? The United States has graciously offered to knock off a few percentage points, but nothing off such important British exports as sweaters.
It is all very well to talk glibly of strengthened rules and disciplines. We hear words, but commitments are strangely lacking in respect of subsidies, the theft of designs—which is all too prevalent—dumping and safeguards. We are still miles away from reaching a satisfactory conclusion.
584 Will my right hon. Friend aim at a 10-year phasing-out period for the multi-fibre arrangement? Until recently, the Government argued for six years, and my right hon. Friend the Secretary of State said that 10 years would be too long. However, a few days ago, he seemed to imply that 10 years might be about right.
When the fourth multi-fibre arrangement was negotiated, we seemed to be in the middle range of EC countries in terms of the objectives sought, but many others are now being much more robust than we are. Their textile and clothing industries are arguing for as long as 15 years to phases out the MFA, as are the United States and Canada. It is illogical to abandon all its safeguards well before GATT rules and disciplines can properly be put into effect.
Will my right hon. Friend the Secretary of State make reciprocity a central tenet of his policy, so that any country that fails to open up its market will be denied import growth into the Community? Will he advocate a staged phasing-out of the MFA, so that import and export growth rates are gradual, as stronger GATT rules and disciplines take effect, with appropriate safeguards against import surges?
Let no one doubt the impact that failure would have. If agreement is reached to phase out the MFA without a strong successor regime to replace it, our counterparts in the United States Congress will inevitably insist on overruling the presidential veto and, by rejecting the Uruguay round, create a cocoon of even greater protectionism round America. That would bring in its wake a diversion of trade to which the United Kingdom market would be more vulnerable than any of its fellow European member states.
If such developments come to pass as a result of inadequate and indeed spineless action on our part, who knows what the effect will be in terms of job losses? Will the number be only 33,000, as Professor Silberston estimates—although his figures are challenged by almost everyone in the industry—or 100,000, as the Trades Union Congress suggests?
I plead with my right hon. Friend the Secretary of State never to say again, as he did recently, that over the economy as a whole, the gains to employment from freer trade would exceed the losses. Fair trade would probably create more jobs, rather than bring unemployment—but one-sided free trade will certainly bring job losses in textiles that could never be replaced. Such losses, which would be concentrated in areas where no other employment is available, could never be compensated for by the vague prospect of a marginal increase in jobs spread thinly throughout the country.
God forbid that any Minister should be allowed to think that the British textile industry can be traded off against others. It follows that any agreement to phase out existing protection, however desirable, must be accompanied by a genuine commitment on the part of all concerned to fair and free trade, must be conditional on the latter—and should not be regarded as the prior condition for it.
We heard on the radio this morning that the contenders for the leadership of the Conservative party would not have to concentrate on the House of Commons today because it was not holding an important debate. Perhaps this debate is more important than some people think. If the textile and clothing industries, which are vital to so many people, are driven towards the precipice, that folly 585 would blight irretrievably the honeymoon period of any incoming Prime Minister. The subject of today's debate may be his first vital test, and one that he and other members of the Cabinet must not fail.
§ Mr. Andy Stewart (Sherwood)
After the heady days of the past week, it is a welcome return to the real world of debating a major issue of much importance to my constituents—the final outcome of the Uruguay GATT negotiations.
A successful outcome is paramount for two major industries—agriculture and apparel knitwear and textiles. Those industries employ more than 5,000 people in Sherwood, whose jobs are at risk in the European Commission's position weakens in favour of our competitors.
A battery of television cameras, the like of which we have never seen before, was assembled outside the House on Tuesday night because of interest in one job. Can you imagine, Mr. Deputy Speaker, the success that we would have in achieving our aims if pro rata coverage were given for the 1 million jobs that depend on prosperous agriculture and AKT industries? As that clearly would not happen, I felt duty-bound to be here today to remind my right hon. Friend the Secretary of State of the crisis in agriculture and the views of the AKT industries, which lie beyond the end of the multi-fibre arrangement.
My right hon. Friend the Minister of Agriculture, Fisheries and Food is aware of the near panic among farmers about declining profitability and uncertainty. Since 1979, farmgate prices have risen by only 60 per cent., whereas the retail prices index has risen by 150 per cent. Real farming income has fallen at an average annual rate of 24 per cent. since 1979. Compare that with one supermarket chain that recently announced half-yearly profits of £273 million—a return on capital of 7.3 per cent. In agriculture, the figure is nearer 2 per cent., but for many farmers there is no return at all.
I believe that there is a future for agriculture, but my right hon. Friend the Minister must ensure that that is so by insisting, when the GATT negotiations are completed, that the settlement bears equally on farmers in the United States, the European Community and worldwide. It must be implemented within the EEC in a way that does not discriminate against Britain's farmers.
Working alongside the mining industry in my constituency's towns and villages is the textile and clothing industry, which employs 2,300 people. They are concerned about the removal of the multi-fibre arrangement. I must thank my hon. Friend the Minister for Trade, who is responsible for this industry, for visiting my constituency on 1 November to hear the views and concerns of constituents who are dependent on the AKT industry. To restate the case against is unnecessary, but I must remind my right hon. Friend the Secretary of State that an MFA phase-out period of less than 10 years would be unacceptable. It would be intolerable if an agreement were reached to phase out the MFA while leaving the textile and clothing industries exposed to grossly unfair conditions of competition.
The results would be disastrous, with a huge loss of jobs in the United Kingdom. That would be a double blow to 586 employment in my constituency, which has lost 8,000 mining jobs—a loss from which we are just beginning to recover. Therefore, I and my constituents who work in the AKT industries want from GATT the elimination of abuses such as prohibitive tariff barriers, trade distortions, subsidies and dumping and, more generally, the strengthening of competition. Given that, the clothing and textile industries would accept any challenge.
§ Ms. Joyce Quin (Gateshead, East)
This has been a wide-ranging debate and many important issues have been raised.
To some, the GATT round may seem an obscure subject. Indeed, one newspaper article that I read suggested that if anyone heard the expression "Uruguay round" he might think that it was an obscure form of the rhumba. Despite that, GATT and the Uruguay round is crucial to the future of world trade.
Our debate is timely in one sense. It is intended that the negotiations will conclude in December. I had some sympathy with the view expressed by the hon. Member for Weston-super-Mare (Mr. Wiggin). He lamented the fact that we had not had more detailed debates on the subject at an earlier stage. Given the complexity of many of the issues, I concur with that judgment.
It is worrying that we are close to a conclusion on the GATT round when so many issues have not been properly thought through and worked out. The details are still not available to us. Perhaps the Secretary of State can reassure us on some of those points. Various accounts in the press in recent weeks have alleged that the talks were about to break up without conclusion, when many issues remained to be resolved.
An evaluation has been carried out of the likely effect of the conclusion of the GATT round on certain sectors of the United Kingdom economy. Perhaps the Secretary of State can give us more details of that and the consultations that he has had with industry and the many people from groups within the United Kingdom who are concerned to see a successful conclusion to the round of talks.
For industry the outcome is particularly crucial. Industry faces a difficult future in Britain, as several hon. Members pointed out. High interest rates, high inflation, the need to adjust to membership of the exchange rate mechanism of the European monetary system and, of course, the competition that industry expects to face as a result of the completion of the large European single market in 1992 already put pressures on industry. So the additional effect of GATT must be borne in mind.
I accept the argument that there is a wide and general acceptance of the overall benefits of trade liberalisation. It will bring benefits to us in the United Kingdom and, indeed, to the rest of the world. The president of the World bank, Mr. Barber Connable, said:protection by industrial nations costs developing countries more than twice as much as they receive in aid.Again, there are worries about trade liberalisation. I was glad that my hon. Friend the Member for Islington, North (Mr. Corbyn) laid such stress on the needs of developing countries. This year's World bank development report expresses anxiety that some of the benefits of the round for developing countries will be unequally divided, and that while certain middle-income countries, and even some poorer ones will benefit, unless the rules are framed in a particular way, the losers could be poor countries such as 587 Somalia, which are heavily dependent on basic commodity exports. Such countries might lose the relative advantage that they now enjoy through special trade preferences. Trade liberalisation must not mean that the poorest suffer. That would be a terrible indictment on GATT. Countries that allowed that to happen would bear a grave responsibility.
Trade liberalisation also brings some minor dangers. This week I was reading about the difficulty that Thailand faces in stopping imports of cigarettes from the United States. Its commitment to introduce free trade may mean that it will have to accept imports that it does not want. That shows a health aspect of trade liberalisation. It may be a minor point, but such examples may be repeated in many parts of the world.
Many hon. Members said that we are talking about not only free but lair trade. The expression "level playing field" was used once again. It was used by the Minister of Agriculture, Fisheries and Food in his opening remarks. Even in the European Community a level playing field can be notoriously difficult to achieve, so it will not be easy to achieve level playing fields in the many policy areas dealt with in the GATT negotiations. However, the effort must be made.
One point that I should like to put to the Secretary of State is the problem that trade negotiations which we may conduct bilaterally or between ourselves and groups of countries could cut across the GATT negotiations. That should be avoided if at all possible. For example, the European Community is trying to negotiate a free trade agreement with certain Gulf countries, partly for political reasons. We are worried about the possible effects on our petrochemicals industry and that such negotiations may cut across GATT and some of the principles embodied in it. Perhaps the Secretary of State will comment on that.
Some countries are not members of GATT. Because the former eastern bloc and the Soviet Union now need access to the wider trading community, it is important that we frame the GATT rules in such a way that their interests, too, are taken into account in future. The short-term and long-term needs of eastern Europe and the Soviet Union need to be borne in mind.
A theme mentioned frequently in the debate has been the position of developing countries. As I have said, I am worried that in certain instances the poorest countries could be adversely affected by some of the negotiations. Can the Secretary of State update us on and tell us what discussions there have been about the different categories of developing countries and the need to ensure that the losers are not the poorest developing countries?
My hon. Friend the Member for Cynon Valley (Mrs. Clwyd) wrote to the Minister for Trade expressing concern about the effect of opening up the market in services on certain developing countries. The reply stated:we believe that all countries stand to benefit from the introduction of a set of fair multilateral rules, which will take account of the needs of different parties and provide a stable environment for growth and development.I should like more details about how the Government have sought to promote a stable environment for growth and development as part of the discussions on opening up GATT to areas that have previously not been included in the negotiations.
The Uruguay round needs to be sensitive not only to trade, but to world social and environmental considerations. I was pleased that several hon. Members referred to 588 the environment in their speeches. The Minister mentioned the need for agriculture to be more environmentally sensitive. That is certainly something for which we have called for many years. My hon. Friend the Member for Islington, North referred to the environmental aspect of trading issues, which, too, is important and needs to be borne in mind.
I am a little worried at the reply from the Department of Trade and Industry to my hon. Friend the Member for Linlithgow (Mr. Dalyell) who, in a written question, urged that environmental aspects should be taken into account in the Uruguay round. The Government's reply was:it would not be practical to seek to introduce any major new initiatives at this stage."—[Official Report, 1 November 1990; Vol. 178, c. 772.]Despite the dangers of making the issues even more complex, environmental considerations must not be overlooked because they are vital to the survival of the planet. The reply is disappointing. It also seems to be at variance with earlier promises made by the Prime Minister in the wake of the publication of the Bruntland report, that environmental considerations should be brought into the GATT negotiations. Her statements were subsequently repeated by the Secretary of State for the Environment in May this year. The idea of "environmental conditionality"—countries should not be penalised for taking measures if the main purpose is to protect the environment—is an important principle. I wonder whether the Secretary of State would care to comment on that important aspect, about which we are particularly concerned.
With so many complications, it is perhaps not surprising that the right hon. Member for Southend, West (Mr. Channon) referred to the timetable of the GATT negotiations and expressed concern that it would not be possible to sort out all those issues in December. The momentum towards the conclusion of the agreement should not be lost, but all the issues need to be tackled. If that means postponing the talks while giving a clear timetable for the final agreement and doing so in a positive rather than negative sense, that should be considered. Perhaps the Secretary of State is in a better position to inform us on that aspect.
Not surprisingly, agricultural matters have figured large in the debate. My hon. Friend the Member for South Shields (Dr. Clark) dealt with those matters at length, as did the Minister of Agriculture, Fisheries and Food. We believe that it is important to include agricultural issues within GATT. Many critical comments have rightly been made about the CAP and some of its worst features. I admit that I have done little work on agricultural issues in recent years, but I was a member of the European Parliament's agriculture committee and I remember how strong the agricultural lobby was at that stage. Our agriculture committee included Members of the European Parliament who were beef, pig or dairy farmers, cereal producers, oilseed rape growers, wine producers, sugar beet growers and even, much to my surprise, a buffalo farmer.
At that stage, the agricultural lobby was perhaps stronger in the European Parliament and European institutions than it is now. I strongly believe that agriculture is a vital sector of our economy and that healthy agriculture and environmentally friendly agriculture are extremely important. Some of the provisions of the CAP represent a particularly damaging form of protection and we need to be concerned about those 589 aspects. We all have an interest in reform because of the misdirection of resources in the European budget in terms of agriculture and the effect of export refunds on some of the poorest countries, although hon. Members are perhaps divided on the issue of the pace of reform.
Considerable reference has been made in the debate to textiles. The Minister of Agriculture, Fisheries and Food said that hon. Members should not be constrained about putting forward their special constituency interests. They have certainly not been constrained. Hon. Members have eloquently expressed the interests of their constituents, particularly those employed in the textile and clothing industries. Like agriculture, that is an important sector, involving more than 400,000 jobs. It is the fifth largest manufacturing sector and an important export earner. It should be said, lest people feel that the multi-fibre arrangement has been the cause of total protection, that we have a considerable trade deficit in textiles, with £3.6 billion of our annual deficit being accounted for by the deficit in the textile and allied industries. Given our bad balance of payments, it is not surprising that hon. Members who spoke in support of the textile industry are conscious of the effect of a further deterioration in that industry and a consequent deterioration in our balance of payments.
The textile industry is vital to United Kingdom regions, particularly the north-west, Yorkshire and Humberside and the east midlands. Hon. Members from those areas have put the regional aspects to us. They are not among the most prosperous British regions. For that reason also the representations that have been made on behalf of the textile industry must be taken strongly into account. The Opposition's line on textiles has been supported by many Conservative Members in the two early-day motions on the Order Paper.
§ Mr. Waller
Perhaps I might correct the hon. Lady. Early-day motion I was tabled by me, a Conservative, although I am glad that it has been supported by many Opposition Members.
§ Ms. Quin
I am not sure that I claimed for the Opposition the authorship of both early-day motions. I confirm that both have a large number of signatures from both sides of the House.
Within the textile arrangement that manages the growth of imports—it does not prevent the growth of imports in textiles—we must be sensitive to the position of poorer countries. Many of the poorest are worried about a free-for-all in textiles because they feel that they will be excluded by the middle-income textile producers and that their relative position will become even worse.
I do not have time to mention many other issues with which I should like to deal. My hon. Friend the Member for Nottingham, North (Mr. Allen) raised an interesting aspect when he referred to the social dimension of trade negotiations. While opening up trade, we should not simply increase the possibilities of exploitation of people who earn little or who work in appalling conditions. It is important to remember the need to improve wages and conditions, although I do not expect much joy from the Government on that, given their well-known objection to the conclusion of the European social charter.
590 My hon. Friend the Member for Wallsend (Mr. Garrett) rightly pointed out the importance to the United Kingdom of the service sector and the negotiations in that area. The opening up of GATT to include services could be beneficial, but what help will there be for developing countries in the transition to an open market? Will the Secretary of State comment on the attitude of the United States, which seems to be dragging its feet on services, despite the fact that it was initially in favour of the opening up of the market in services? Indeed, the Financial Times today carries a worrying article saying:Financial services have been left out of the draft text of an agreement to liberalise world trade in services.
§ Mr. Ted Garrett
While my hon. Friend is being critical of America, would she extend her criticism to the unified Germany and its reluctance to move on insurance and other allied services?
§ Ms. Quin
That aspect was mentioned in the debate that we had a few weeks ago on the opening up of the European market in services.
All parties to the GATT negotiations still have some concessions to make to ensure that agreement is reached. Like others, I hope that the negotiations are successful. It would be a tragedy if, after political barriers had come down, the world was faced with trading blocks and new trade barriers. The goal of one world is economically and politically important. The GATT negotiations should keep that goal constantly in mind.
§ The Secretary of State for Trade and Industry (Mr. Peter Lilley)
The hon. Member for Gateshead, East (Ms. Quin) is right to emphasise the importance of the Uruguay round and to regret the lack of understanding of it in many quarters. That was brought home to my by a business man who said that I was spending too much time on the affairs of one Latin American country and should get on with the business of extending free trade world wide. It is important, and it is in recognition of its importance that, as my hon. Friend the Member for Keighley (Mr. Waller) pointed out, Cabinet Ministers are opening and closing today's debate, which is not normal on a Friday.
Why is the GATT round so important? First, because we cannot afford to let it fail. Failure would mean not only a continuation of the status quo, but the erosion of the multilateral trading system that has served us so well for over 40 years. It would also mean an increase in protectionism and beggar-my-neighbour policies, rival trading blocs and trade wars. The great depression of the 1930s is a salutary reminder of what can happen in the absence of multilateral trading rules. The stock market crash of 1929 led to an escalation of trade protection. The result was a reduction in world trade in manufactures of 40 per cent. and in world manufacturing output of 35 per cent. over the next three years.
Secondly, the round is important because of the positive benefits that a successful outcome will bring, as my right hon. Friend the Member for Southend, West (Mr. Channon) brought to the attention of the House in his distinguished speech. Statistics are a dangerous tool and one cannot quantify the benefits of liberalisation with any precision, but the lowest estimate that I have seen is that a 30 per cent. cut in all tariff and non-tariff barriers, which is what the Uruguay round sets out to achieve, would increase Community and British exports to the rest 591 of the world by 2 per cent. in volume terms. That is a large amount of trade. I have seen estimates for the Community of as high as 8 per cent., which would be consistent with an increase in income—in the GDP of the Community—of no less than 3 per cent.
Thirdly, the round matters because the former state-controlled economies of eastern Europe are turning to the market and looking for a place in the world trading system. It would be tragic if we failed them now.
My right hon. Friend the Member for Southend, West asked a number of questions, especially whether I could inform the House of the prospects and the time deadline. The round faces several considerable difficulties, as is well known, especially because of the Community's recent problems in formulating its offer on agriculture by the agreed deadline, which put pressure on the whole timetable. Negotiations are so complex and involve such difficult political decisions that without the discipline of a deadline, we would never reach agreement. The December ministerial meeting has been the agreed deadline for the past two years. It is important that we respect that deadline and make it the key to political decisions in Brussels in December. That does not rule out some tidying up of the technical details following those key decisions during January.
However, we are under an absolute deadline of 1 March when the fast-track procedure of the American Congress expires. We must have everything converted into legislative form by then, or it will be subject to detailed debate and voting in the United States Congress, and the whole thing could become unravelled. As that will take several months, the deadline by which we must make the key political decisions is the end of this year.
There is still a lot of work to do and success is far from guaranteed, but I believe that it will be possible to reach a successful outcome. We had a meeting of Trade Ministers in Brussels on 15 November and all were agreed that we had to be committed to a successful outcome. No country has introduced new road blocks or non-negotiable demands into the process.
If the House will forgive me, I shall not dwell on agriculture because my right hon. Friend the Minister of Agriculture, Fisheries and Food dealt with that subject with immense expertise and ability at the beginning of the debate. There have been several interesting speeches on it, not least from my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin), who brings to bear his expertise as Chairman of the Select Committee on Agriculture, which is matched and balanced by the fact that he is Chamberlain's great-grandson, giving him some understanding of industrial issues also. Several other hon. Members, including my hon. Friend the Member for Sherwood (Mr. Stewart), have spoken on that matter.
Several significant speeches have been made on the textile industry. My hon. Friends the Members for Batley and Spen (Mrs. Peacock), for Keighley, for Pudsey (Sir G. Shaw) and for Nottingham, South (Mr. Brandon-Bravo) recently came to see me about that subject. My hon. Friends the Members for Batley and Spen and for Keighley argued forcefully for their constituents and for that important industry. I recognise that the textile and clothing industry is vital not just to the Community but, more important, to the United Kingdom—in terms of output, exports and the number of people employed. That is why, when we agreed to phase out the MFA, we insisted 592 on strengthening the rules and disciplines and on better market access. That was the commitment made at the start of the Uruguay round and it is one to which we adhere.
My hon. Friends and the industry have three key concerns. The first is the timing of the integration of textiles into the GATT round and the normal GATT procedures. The second concerns the linkage of that phase-out with strengthened rules and disciplines. The third concerns the extent to which it will have an impact on jobs and the industry in this country.
The length of the transitional period has to be negotiated in GATT. However, in deciding how we would argue for the establishment of the European Community's position, we took into account three considerations. First, the length of the transitional period must be realistic and we must obtain overall agreement from the underdeveloped and developing countries to ensure that they join in the whole Uruguay round and that we get a satisfactory settlement out of the round as a whole, not just for the textile industry.
Secondly, we must provide a proper time scale and pace of adjustment for the United Kingdom industry, which must have time to adjust satisfactorily.
Thirdly, as in any negotiations, we must recognise that we will not get everything for which we ask—nor will others. The British industry has tended to say that it would be satisfied with a minimum phase-out period of 10 years. Some countries have demanded 15 years or more, which would probably wreck the chances of agreement on the GATT round as a whole. We have argued for a phase-out period of less than 10 years, but that is a natural part of the bargaining process and it would be absurd to suggest what the final position will be. We have left the Community with a negotiating position and some flexibility in negotiating within the GATT round. I hope that my hon. Friends will agree that that is a sensible approach.
§ Mr. Waller
If one is negotiating, surely one's most likely approach is to ask for at least as much as one wants. It is unusual to ask for less. A number of countries in the Community are asking for more than 10 years. If we want an MFA phase-out period approaching 10 years, it is not very sensible of us to say that we would be satisfied with considerably less.
§ Mr. Lilley
It is a two-stage process. First, we have to reach a settlement within the Community on a range within which it can negotiate. The second stage is GATT. We must ensure that the Community does not establish a target that will make success in the wider GATT round impossible. Some countries in the Community are less attached to the success of the overall GATT round than we are. We have the greatest interest in the successful outcome of the round because 25 per cent. of all our goods and services are exported. It is vital—not least to the textile industry—that we should have access to world markets.
The industry is also concerned about the mechanism for phasing out restrictions. It is important that the process should be reasonably smooth. If we leave too much to the last minute, the adjustment will be abrupt and unpalatable.
Prospects for linkage are brighter in some respects than the industry fears. It is not a matter of the MFA ending before tougher rules and disciplines are brought in, because some of those rules and disciplines will come into effect from the start. For example, changes in the 593 anti-dumping rules and the revised system of safeguards should come in immediately, and important steps should be taken to improve access to overseas markets for our exporters. We want to see export subsidies phased out over the same time span. Naturally, we would like them phased out in a shorter time, but we would accept the time span over which textiles are phased into the MFA.
Some people argue that it is not so much a question of agreeing in principle to stronger rules and disciplines, but of seeing them work in practice. The whole point of rules and disciplines is that they allow infractions to be dealt with through the GATT machinery for dispute settlement. If in the last resort breaches persist and people do not comply with the rules, the Community has the right of retaliation, if necessary on a cross-sectoral basis. Naturally, one hopes to avoid that because we want peace in the trade world, not trade wars. I am confident that the general GATT dispute settlement procedures will be greatly improved.
There are good chances of a satisfactory text in the textiles agreement which will provide for the monitoring of commitments undertaken in other GATT areas.
It is important for industry to know to what extent it will find new textile markets overseas. The industry has a good export record and in some areas where tariffs have come down for one reason or another the textile industry has substantially increased its exports. We want that to happen more widely. However, we must recognise that much of the penetration of the British market has not been by less developed countries but by other countries in the Community. Some 53 per cent. of our imports of clothing and textiles come from other Community countries. They will face the greatest intensification of competition as the MFA is phased out, and we may see some change of source of exports to Britain rather than a continuing increase in imports. I hope that the industry will continue with great energy and determination to upgrade products, quality, design and fashionability so that it can win higher-value markets at home and abroad.
One of the most important sectors is, of course, services. The hon. Member for Gateshead, East asked about the prospects for services and the attitude of the Americans. It is regrettable that America, which initially pressed for services to be included in the round, is now saying that some sectors should be taken out. It is important that the most-favoured nation principle should be accepted in principle for the whole service area, even though to start with there may have to be derogations for specific sectors such as civil aviation which is almost inherently dealt with bilaterally.
Time is so short that we want to get the whole GATT round committed to the principle of including services in the multilateral trading system. We accept that more may 594 have to be negotiated in detail over a longer period. We are still going for success in that area which we think is immensely important for Britain and the Community.
There are some other important new areas, such as intellectual property rights, which are of interest to the textile industry. The protection of patents, trade marks, copyright and designs is an increasingly important aspect of international trade and not only in high-technology goods. The absence of protection for these intellectual property rights in overseas markets can distort trade, and lead to serious loss of revenue for British firms.
Part of the problem is piracy and counterfeiting. Trade in counterfeit goods accounts for between 3 and 6 per cent. of world trade. United Kingdom drug companies lose about £50 million, the record industry $1 billion, and the European motor parts industry $200 million each year through counterfeiting or piracy. We want more countries, especially in the developing world, to establish laws for protecting patents and other intellectual property rights. Without this our companies have no legal remedy if their products are reproduced without their agreement. This is just as much a barrier to trade as a quota or a tariff. It is unfair trade, and unfair trade is unacceptable.
An agreement on adequate protection would open up new markets for many of our companies. There is still a lot of work to be done to agree on standards of protection and means of enforcing these, but agreement is high on our list of priorities.
Time does not permit me to cover all the other important questions raised in the debate, but I shall end by underlining how important this is. The Uruguay round is probably the most complex trade negotiation ever attempted. It covers 15 major areas and involves 105 countries and territories. At stake is the future of the world trading system, which has brought us unprecedented growth and prosperity. The outcome must be a package that satisfies and includes everyone. All Governments need to take difficult decisions if we are to achieve this. We cannot simply take what we want and ignore what we dislike. If we succeed, everyone will gain, and if we fail everyone will be the poorer.
§ It being half-past Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.