HC Deb 23 November 1992 vol 214 cc609-18 3.30 pm
The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Michael Heseltine)

With permission, I should like to make a statement about the latest developments in the GATT Uruguay round of trade negotiations.

As many hon. Members will have heard, the European Commission and the United States Government announced on Friday that they had reached agreement on the remaining issues separating them in the negotiations. Those included key points in the GATT agriculture agreement, and the separate but related trade dispute over Community support for oilseeds production.

That is excellent news. It opens the way to a full GATT agreement between all 108 parties to the Uruguay round. Most immediately, it removes the threat of an imminent trade war with the United States over oilseeds.

I should like to congratulate the two Commissioners directly involved, Mr. MacSharry and Mr. Andriessen, as well as the United States negotiators—Mr. Madigan, the Agriculture Secretary and Mrs. Hills, the United States Trade Representative. I should also pay tribute to my right hon. Friends the Prime Minister, the Foreign Secretary and the Minister of Agriculture, Fisheries and Food, who have done so much to work for the agreement.

The main features of the agreement were, on agriculture, the cutting of quantities of subsidised exports by 21 per cent. and on oilseeds, a limit on the area under cultivation. We have still to see all the details, but it would appear that a GATT agriculture agreement on those lines will be broadly consistent with the reforms of the common agricultural policy regimes agreed by the Community last summer. The Commission will be preparing a report on compatibility with CAP reform.

That is in any case just one of the whole package of Uruguay round agreements. The results should be judged on the balance between all the elements. The Council of Ministers will take a final decision on whether to accept the deal when all the elements are in place.

Talks will be restarting in Geneva this week so that the other 95 participants in the Uruguay round can consider what has been agreed. I believe that it is possible to complete the negotiations this year and we will be urging all parties to reach a conclusion as soon as possible. Apart from agreeing the necessary changes to the agriculture text tabled by the GATT director-general, Mr. Dunkel, at the end of last year, there remains a great deal of work on other aspects of the Uruguay round negotiations.

Negotiations on liberalisation of trade in services and tariff reductions have to be completed. Much work had already been done on this and was waiting for a final resolution on agriculture. Final agreement is needed on the establishment of a multilateral trade organisation and a single dispute settlement system covering all the GATT agreements. Legal texts must be finalised for all the agreements—not only agriculture, services and tariffs, but intellectual property and investment, textiles, antidumping, subsidies and a whole range of other GATT rules and procedures. This is a formidable agenda much remains to be done.

Completion of the negotiations this year would meet the target set by the Munich G7 economic summit, and by the Birmingham European Council. It would enable texts to be ready for presentation to the United States Congress before the 2 March deadline under their "fast track" approval procedure.

Let me remind the House what that will mean. It will mean perhaps $200 billion extra yearly output for the world by the end of this decade. It will mean improved opportunities for our exporters. It will mean that we are able to take advantage of increased trade in services. It will mean that our inventors and artists have a better protection for their intellectual property—it has been estimated that the United Kingdom record industry alone loses £1 billion a year through piracy. For developing countries it will mean western markets being more open to their agricultural and textiles products. The gains to them from increased trade could exceed the total western aid budget.

In short, this is a good deal—for the United Kingdom, for the European Community, for the United States, for the developing countries, and for the world. With determination and good will on all sides, I believe that such an agreement can be reached by the end of the year. I hope, therefore, that the whole House will join me in welcoming the achievement of the Community and the United States.

Mr. Robin Cook (Livingston)

All parts of the House will join the President of the Board of Trade in congratulating the negotiators to the GATT treaty, particularly Ray MacSharry, who might well have felt that it was not his job to return to those negotiations. However, he has helped to break out of a difficult stalemate to achieve an honourable agreement.

The whole House will also share the right hon. Gentleman's relief that the world is not to be plunged into a trade war in which everyone would have lost. Does he agree that it is important that other countries do not draw the conclusion from the American experience that all that is necessary to secure concessions is to threaten to start a trade war? Will he therefore confirm that the agreement that has now been reached involves concessions on the United States side, concessions which the United States negotiator initially rejected?

I endorse what the President of the Board of Trade said about the boost that the agreement will provide to the poorest countries, which are most in need of greater access to the wealthier markets of the west and which had most to lose if talks had broken down between the two main trading blocks of the west. I am sure that the right hon. Gentleman will appreciate that all 100 member countries that are parties to the GATT talks stand to gain from that agreement.

Some in the House may be surprised that the right hon. Gentleman made a statement without reference to the well-known objections taken by France to the agreement that has been reached. Will he therefore take this opportunity to confirm that it is also true that France will be a net beneficiary of a GATT agreement? Will he also take this opportunity to urge the Government of France to accept the GATT talks and the GATT agreement in the round and not to judge it by the single issue of farm subsidies, because French industry stands to gain more than French farmers will lose?

May I press the President of the Board of Trade on the problems that are still outstanding? Agreements are still to be concluded on financial services, telecommunications and maritime services—the right hon. Gentleman referred to some of those difficulties in his statements. How confident is he that those difficulties will be overcome before the March deadline, when the fast-track mandate runs out for the United States Congress? Has he had any indication that the President-elect would be interested in rolling forward that fast-track mandate for a further year, were that to prove necessary?

The President of the Board of Trade will understand that a statement on trade and tariffs today will be judged by the House against the background of the trade figures on which he has not volunteered a statement today. Those figures show another increase in the visible trade gap, which is now running at an annualised rate of £14,000 million with the other countries that are party to GATT, or £1 million for the time it will take the House to discuss the statement. Is the right hon. Gentleman not concerned that, for the first time in a recession, Britain is seeing imports rise faster than exports? Does he accept that the single most important change in our pattern of trade with the world during the many years of the GATT talks is that, until the early 1980s, Britain never had a deficit in trade in manufactured goods, but, since then, it has never had a surplus in its trade in manufactured goods?

Will the right hon. Gentleman now admit that the stimulus that GATT will provide to world trade, if it is successful, makes it all the more urgent that the Government start to stimulate investment in new plant to provide training and skills and offer the strategy for industry that is now essential to rebuild the manufacturing capacity that they have destroyed and which we need to compete in world trade?

Mr. Heseltine

It is sad that the hon. Member for Livingston (Mr. Cook), who began by so warmly welcoming the important and positive aspects of my statement, characteristically sought to cloud the good news by trying to divert attention away from it. That is characteristic of the Opposition's mean-minded approach.

May I display my characteristic generosity and concentrate on the early parts of the hon. Gentleman's response. The position is not quite as simple as he suggested by implying that one needs only to start a trade war to achieve results. Two issues were involved and were running concurrently. One was the dispute between the Community and the United States over oilseeds, which had been the subject of continuing discussion in which the Americans believed that they had used all the appropriate means open to them to get redress. GATT panels found on their side twice, yet no progress had been made. In the end, GATT persuaded the Americans to take the steps that they took—dangerous steps, without a shadow of a doubt.

But that matter was coincidental with the negotiations proceeding towards a settlement of the areas outstanding in the present Uruguay round. Inevitably, the two matters became interrelated, and it is to the credit of those who negotiated a settlement that they took that extremely difficult issue and resolved both the matters satisfactorily.

The second issue about which the hon. Gentleman asked was the position of France. I have never tried to pretend—nobody could—that the French Government do not have problems with their agricultural interests. However, the hon. Gentleman is right to say that France relies on its agricultural economy perhaps only to the extent of 5 per cent. Therefore, for the overwhelming majority of French commercial and industrial interests, a successful conclusion of the GATT round is as much in the interests of France as the rest of the world.

The hon. Gentleman asked whether I was confident that, under the renewed GATT procedures, we shall be able to make progress. I can only hope that that is so, and I wish those responsible every good fortune. Everybody knows that the rest of the world has had to stand apart while the disputes between America and the Community have been resolved. They are now back in the picture and will have their own views and self-interests. But they will appreciate, as did the hon. Gentleman, that the fast-track opportunity in the United States expires on 2 March and that it is, therefore, to everybody's interest to get within that arrangement—not to consider extending it, as the hon. Gentleman said, but to take advantage of the existing window that is now open in the American procedures.

No one should understate the dramatic opportunity for the whole world, particularly the less-developed world, of a successful outcome of the sixth Uruguay round.

Mr. Michael Lord (Suffolk, Central)

Although I welcome the agreement that has been reached, is it not true that what may be good news for world trade in the long term may prove to be rather bad news for farmers in the short term? Will my right hon. Friend assure the House that our farmers will not be significantly worse off under the terms of this agreement than they would have been under the original CAP reform package? So that the House may decide exactly what is going on, can the financial details be laid before us as soon as possible?

Mr. Heseltine

I am grateful to my hon. Friend, who displays a rightful concern for agricultural interests in this country. My right hon. Friend the Minister of Agriculture, Fisheries and Food believes that the present agreement between the United States and the European Community is compatible with the CAP reform announced earlier this year. That does not mean that there are no difficulties for farmers within the CAP reform, but they are not exacerbated by the GATT negotiations.

Mr. Malcolm Bruce (Gordon)

Does the President of the Board of Trade accept that there is considerable relief among Liberal Democrat Members that a trade war has been averted and that progress is being made towards the eventual settlement of the GATT round? However, may I take up the points made by the hon. Member for Suffolk, Central (Mr. Lord)? The settlement and the CAP reforms will further squeeze farm incomes throughout the Community, and rural communities need measures to help compensate for that. Will the right hon. Gentleman assure us that attention will be given to that? Does he also accept that the final shake-out of the GATT round will have a far-reaching effect on many industries and requires a Community-wide strategy to ensure that we can take full advantage of it, defeat unemployment and have a regional policy? When does he think that our balance of payments deficit will be turned into a surplus?

Mr. Heseltine

The hon. Member asks me to go further than I went in reply to my hon. Friend the Member for Suffolk, Central (Mr. Lord). We all realise the pressures, applied on the agricultural industry as a result of the CAP reform, but it is the view of my right hon. Friend the Minister of Agriculture, Fisheries and Food that the agreements reached last Friday are compatible with the CAP reforms announced earlier. The CAP reforms contain measures, particularly agri-environmental measures, designed to help the sort of people to whom the hon. Member for Gordon (Mr. Bruce) referred.

The wider issue of the balance of trade is a matter of concern. The position in terms of the manufacturing industry has been deteriorating for most of the post-war period. It is a profoundly important issue, but not one to be discussed in this context.

Mr. Paul Channon (Southend, West)

Is my right hon. Friend aware that there will be a wide feeling of relief at the successful conclusion of the talks? They have, after all, taken six years, as they started under the previous British presidency. Does not my right hon. Friend's statement show how important it is to set up a new disputes machinery so that the damaging row between the Americans and the Community will not occur again? How does my right hon. Friend see the way forward for negotiations within the Community? Can matters be settled by qualified majority, or does the Luxembourg compromise still exist? I thought that it had been abolished in 1983.

Mr. Heseltine

My right hon. Friend shows a perceptive understanding of many of the problems involved. Everyone feels a sense of frustration that it has been six years since the talks got under way. People have a clear understanding of the scale of the potential opportunity available. By our failure to reach agreement, we have prevented such success coming at the pace that we would like.

My right hon. Friend was perfectly right to say that one of the issues that had frustrated progress was the inadequacy of the disputes machinery. It is to be welcomed that, within the text proposed by the director-general of GATT, an improved disputes machinery is there to be negotiated. It is important to stress that, within the agreement between the United States and the Community, a peace clause has been injected so that both sides know that when the agreement has been reached there is no recourse to further reopening of the issues in the context of the agreement. Such a reopening of the issues could destabilise the agreement.

As for qualified majority voting, I believe that the position is that the Commission, which is authorised to negotiate on behalf of the Community, is now empowered to move back into the GATT talks in Geneva and negotiate there as the Community's representative. When and if a satisfactory outcome to a GATT round is achieved, it will be for the Community at large—the Council of Ministers—to determine whether that agreement, taken in the round, is acceptable. That decision is taken by the Council of Ministers by qualified majority voting, and it is to be greatly questioned whether the Luxembourg compromise is relevant in such circumstances.

Mr. Alfred Morris (Manchester, Wythenshawe)

It is well appreciated in Canberra and Wellington that Ministers here have kept in close touch with Australia and New Zealand about the negotiations. As for the multinational trade agreement that is still to be concluded, may we be assured that there will be continuing close contact with Australia and New Zealand, and all member countries of the Cairns group, as with Commonwealth countries generally?

Mr. Heseltine

I am extremely grateful to the right hon. Gentleman for raising that issue—what he has said is accurate. During our presidency of the Community—and as a nation which sees wider world trade as economically beneficial to the world community—we have tried to keep in touch with those people not directly immersed in the dispute across the Atlantic. I confirm what the right hon. Gentleman said—we have kept closely in touch with the Cairns group of Ministers. I can go further and say that now that the GATT process has returned to Geneva, we shall continue to keep in touch across the world and use our good offices to bring about a speedy resolution of outstanding matters. Such a policy will embrace a continuing relationship with the Cairns Ministers and a wider Commonwealth connection.

Sir Giles Shaw (Pudsey)

I add my thanks to my right hon. Friend and his team for the success that has been achieved to date. I wish, however, to emphasise what lies ahead. With responsibility for access to, and reduced tariffs in, the world market, there comes a responsibility for true and fair prices. Does my right hon. Friend recognise that the textile industry in particular is looking to the conclusion of anti-dumping arrangements that are more meaningful than those which emerged from the previous GATT round?

Mr. Heseltine

My hon. Friend raises a most important issue. The position of the textile industry is especially important in the GATT round, because the multi-fibre arrangement is designed to be phased out and replaced as GATT arrangements come in place. The position of the United Kingdom is clear: we are determined to ensure as best we can, with all the energies that we possess, the interests of the United Kingdom textile industry. The House will be glad to know that in the draft GATT agreement there are provisions for a transitional period of 10 years. The agreement offers better protection, for example, for intellectual property rights, improved GATT rules against unfair or disruptive trade and the prospects of greater access to other markets. I have in mind especially the high tariffs on textiles that are maintained by the United States and certain developing countries, which would be beneficially affected downwards.

Mr. Bryan Davies (Oldham, Central and Royton)

I share the relief that a damaging trade war with the United States has been averted and that the MFA will continue, to the benefit of my constituents. Will the President of the Board of Trade accept that he should not be so evasive about the other significant trade factor, which is the sign that Britain is not paying its way? Yet again, disastrous balance of payments figures have been recorded. Unless policies that bear on the engineering industry and manufacturing industry generally are changed, the opportunities demonstrated by the GATT round will not be available to the United Kingdom in full measure.

Mr. Heseltine

The hon. Gentleman must not have been present in the Chamber when my right hon. Friend the Chancellor of the Exchequer made his autumn statement, as a result of which we saw interest rates coming down, new tax allowances to encourage investment and a range of announcements to stimulate capital expenditure, plus a determined attack upon inflationary wage claims that would otherwise undermine Britain's competitiveness.

Sir Peter Tapsell (East Lindsey)

I warmly welcome the agreement and extend congratulations to my right hon. Friend the Prime Minister, who, in his capacity of President of the European Council of Ministers, is reputed to have played an important and valuable role. But may I put it to my right hon. Friend—I am sure that he is fully aware of this—that not only French farmers are concerned about the agreement? Farmers in my constituency—and, I am sure, throughout the country—are extremely worried. Does he understand that it would not be acceptable for set-aside to be raised above 15 per cent? Farmers in my constituency will look to the Government for special help to cushion the effect of all this.

Mr. Heseltine

I am sure that my hon. Friend will want to explore the matter with my right hon. Friend the Minister for Agriculture, Fisheries and Food, but I understand that Commissioner Ray MacSharry has said specifically that there is no likelihood of set-aside being increased above 15 per cent.

As for my hon. Friend's tribute to my right hon. Friend the Prime Minister, there is not the slightest shadow of doubt that no one did more in a benign way to influence the outcome of the agreement last Friday. There is not the slightest doubt that his relentless pursuit of sanity and reason helped to achieve the agreement that has been warmly welcomed this afternoon.

Mr. Dennis Skinner (Bolsover)

I regard "benign way" as a studied insult to the Prime Minister. Is the Secretary of State aware that, contrary to all the opinion that has been expressed up till now about GATT being wonderful and beautiful, the view still prevails among socialists—those who believe in intervention in the internal market of the economy and the external market—that GATT will not ensure full employment, a regional policy, a position in which our coal industry does not have to compete with slave labour economies in Colombia and South Africa and a situation in which farmers and farm workers in Britain do not have to compete with the sunshine states of Florida and California?

Some of us believe that there is no such thing as a level playing field in world economics. The truth is that, while people are clamouring for GATT, the net result will he that third-world economies will suffer, as will people in this country because the dole queues will increase.

Mr. Heseltine

We have just heard the voice of the international brotherhood of man. The hon. Gentleman tells us of the views that still prevail among socialists. The question for this House is whether any socialists still prevail.

Mrs. Jacqui Lait (Hastings and Rye)

May I add my welcome for, and relief about, the agreement to the welcome already expressed by other hon. Members? I am glad that my right hon. Friend has told us when he expects a general agreement to be concluded. Can he say whether that final agreement will be discussed in the EC under the British presidency or the future Danish presidency and also whether the French could delay agreement until after their Assembly elections?

Mr. Heseltine

My hon. Friend will not be surprised to hear me say that we are working on that problem. We very much hope that the agreement will be concluded under the British presidency, but it must be clearly understood that it is not now within the gift of the EC to dictate the pace at which the GATT round makes progress.

Having answered the first half of my hon. Friend's question in that way, it follows that the answer to the second half is that, just as we are not in a position to bring forward the ultimate conclusion, neither are we in a position to disrupt progress. All that is now within the GATT negotiating machinery.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

I join hon. Members on both sides of the House in welcoming the fact that a damaging trade war has been averted. The President said that the agreement was broadly consistent with the agreement on reform of the common agricultural policy. Is he aware that, even if it is only minutely inconsistent with that agreement, that could mean the end for tens of thousands of Welsh hill farmers? I urge him to make available all the details as soon as possible, because morale in the industry is very low.

Mr. Heseltine

The hon. Gentleman will have heard me say that the full details of last Friday's agreement have not yet been made available to us, but that the broad declaration has made it clear that the terms are consistent with the CAP reforms. The hon. Gentleman has a particular interest in agriculture, especially hill farming. My right hon. Friend the Minister of Agriculture, Fisheries and Food is as concerned as the hon. Gentleman about that category and, indeed, about all categories of agriculture. He will carefully study how the new agreement will affect hill farmers.

Mr. Bowen Wells (Hertford and Stortford)

Has it not been demonstrated in the House this afternoon that we are all in favour of free trade until it affects our particular interest or industry—whether it is coal, hill farming in Wales, farming, textiles or manufacturing industry that is protected in this country? In view of the prejudice that has been shown in the House, will there be any opportunity for third-world countries truly to take advantage of the GATT agreement?

Mr. Heseltine

My hon. Friend raises a most important point. The answer to his question is yes, there will be every opportunity for third-world countries. Although in the negotiations leading to a successful GATT round every country is bound to argue for its national self-interest, in the end all countries have to consider the agreement in the round to judge whether they gain more than they lose. Some industries or some sectors of industries in individual countries may not think of themselves as natural winners, but the overall national interest and the overall trading interests of the world gain. It will not be possible for those countries that are adversely affected in some small way to use that as an excuse for denying the third world the opportunities that are built into a successful GATT round.

Mr. Campbell-Savours (Workington)

How can a reduction in rapeseed and cereal exports be secured without increasing set-aside above 15 per cent?

Mr. Heseltine

I have already explained that the GATT agreements are compatible, as we are advised, with the common agricultural policy reforms. Obviously, the compatibility of them will be explored when the full details of the settlement are available. Of course, a certain set-aside provision is already anticipated in the CAP reforms.

Mr. Mark Robinson (Somerton and Frome)

I am sure that my right hon. Friend, like me, will welcome the day when the Opposition are prepared to support and welcome a settlement such as the GATT agreement, which has been asked for and demanded by British farmers consistently. The settlement is welcomed in Somerset.

Will my right hon. Friend and the Minister of Agriculture, Fisheries and Food do all in their power to persuade the French Government to place the broader international interest above the interest of a few French farmers?

Mr. Heseltine

I can assure my hon. Friend that there has been a continued dialogue between Ministers in Her Majesty's Government and Ministers in the French Government. That dialogue will continue.

Mr. Stuart Bell (Middlesbrough)

The President of the Board of Trade has said that he believes and hopes that the GATT agreement will be concluded by the end of the year in accordance with the wishes and aspirations of the G7 countries. Although Opposition Members would welcome a conclusion if it were possible, we accept that there are so many ramifications, difficulties and negotiations that we may be looking at the deadline of 2 March. Of course, that brings in the confluence with the elections in France.

In his statement, the President of the Board of Trade said that the agreements reached in America were "broadly" in line with the CAP reforms in May. The matter is of great importance to the French, and it will have to be dealt with, beyond simply reaching a broadly consistent agreement.

The right hon. Gentleman will remember our last debate on the multi-fibre arrangement when the hon. Members for Batley and Spen (Mrs. Peacock) and for Pudsey (Sir G. Shaw) and my hon. Friends the Members for Bradford, South (Mr. Cryer) and for Oldham, Central and Royton (Mr. Davies) raised the issue. As he is aware, the multi-fibre arrangement ends on 31 December. Although we welcome his statement that there may be 10 years protection for our textile industry as a consequence of the new GATT arrangements, can he give an undertaking that, between now and 31 December, the multi-fibre arrangement will be extended?

Mr. Heseltine

We anticipate that the multi-fibre arrangement will, in some way, be the subject of a carry-over arrangement until the new GATT arrangement is in place. At present, the Community is negotiating with suppliers of textiles to the Community to ensure that satisfactory arrangements are in place in any interregnum. For example, agreement has been reached with Hong Kong.

The hon. Member asked about the use of the word "broadly". One must use that word because, for example, the CAP reforms have not yet embraced wine or sugar. There is not a finalised agreement that can be set alongside the Friday arrangement, so we must use words that show that there are still matters of uncertainty but that within the broad view there will still be compatibility.

I fully understand the position of the French Government. They entered into a negotiation which gave authority to the Commission to negotiate on a certain basis. The Commission must satisfy all members of the Community that it has discharged that authority within the remits that it was given. It believes that it has done so. The Commission must continue any further discussions on the matter.

I do not disagree with the hon. Gentleman's suggestion that there are many ramifications ahead. That is certainly the case, but the Commission must now make progress. It is not for individual countries within the Community to frustrate that position. The ability of individual countries in the Community to make a judgment will depend on a successful outcome of the entire GATT round, when it will be put to the Council of Ministers for qualified majority approval.

Dr. Gavin Strang (Edinburgh, East)

On a point of order, Madam Speaker.

Madam Speaker

Order. There is another statement and, as the House knows, I take points of order after all the statements have been completed.