HC Deb 12 January 1994 vol 235 cc309-16

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Arbuthnot.]

12.49 am
Mr. Gerald Bermingham (St. Helens, South)

On a point of order, Madam Speaker. Before the House disperses, may I raise a major constitutional point? Am Ito understand that if, in future, the Government do not like the conduct of the Opposition, they will make a business statement seeking to destabilise the normal process and to rearrange business? If so, we might as well not sit at all.

Madam Speaker

That is a question for the Government's business managers; it is not a question for me. It should be raised with the Leader of the House

Mr. James Wallace (Orkney and Shetland)

This is a welcome Adjournment debate as it affords an opportunity, albeit a brief one, to discuss the future of the Scottish salmon industry. I thought that the House was packed to hear about this important industry, but it appears that the ranks are depleting. Nevertheless, I am grateful to hon. Members on both sides of the House who have remained to hear the debate.

The Minister is well aware of the background to the debate. He has received a host of representations and has been good enough on at least two occasions in recent weeks to meet delegations from my constituents, who have been ringing alarm bells about the future of the industry.

Quite simply, the industry believes, with good evidence to back it, that overproduction of salmon in Norway has led to dumping on the European market, which has driven down prices to below the cost of production. Indeed, in the eight weeks before Christmas, Norwegian producers are believed to have exported to the Community as much farmed salmon as the entire Scottish annual production and almost three times as much as was exported in the same period in 1992. The prospect for 1994 is worse, with an expected additional 50,000 tonnes coming on to the market.

It is obvious that, if such market conditions persist, the viability of the industry will be threatened, at a cost of 6,000 jobs in areas where alternative sources of employment are few and far between and at a cost to our national balance of payments.

What have the Government done when confronted with that threat to such an important national industry? It is true that Ministers have voiced concern and have indeed asked the Commission to talk to Norwegian Ministers and the industry in Norway. No doubt this evening the Minister will tell the House that on 16 November the Secretary of State for Scotland wrote to Commissioner Paleokrassas expressing concern about the market and asking the Commission to take appropriate action.

The uncharitable analysis would be to say that the Secretary of State has acknowledged the seriousness of the situation but has failed to discharge his duty to the industry by asking the commissioner to take action only when it was open to the Government to follow the example of the Irish Government and to seek to invoke safeguard action under article 24 of the European Community regulation, as the British Government did in November 1991.

Perhaps, however, one may subscribe to the more charitable view: that the Secretary of State for Scotland recognised the seriousness of the situation, wanted to invoke safeguard action—indeed, Scottish Office statements have been sympathetic to the industry—but was blocked elsewhere in Government. Indeed, in writing to the commissioner on 16 November, the Secretary of State for Scotland took collective responsibility to its very limit.

Whichever is the more accurate version of events, the Minister owes the House an explanation of why the Government did not formally ask the Commission for safeguard action to be taken. Was the blockage in the Foreign and Commonwealth Office, the Department of Trade and Industry or the Treasury? Where was the blockage and what are the reasons behind it, because no one in the industry can understand why action that was appropriate in 1991 and, the industry believes, would be more appropriate in 1993 was not sought by the Government?

I shall not be satisfied this evening, and nor will people who have an interest in the industry, with the response that eventually a minimum import price was imposed. The Scottish Office was well warned of the ineffectiveness of such a measure. That was based on experience of events in 1991–92, when there was a minimum import price, and is borne out by present experience. Indeed, shortly after the minimum import price was imposed the Scottish Salmon Growers Association was quoted as saying: the effect of the European Union Minimum Import Price … has been to lower the price in the substantial French market to that level of the MIP.

Furthermore, the message with which representatives of the Scottish, Shetland and Irish industries came away after a meeting with Commission officials in Brussels in December, at which officials of the Scottish Office were also present, was that all likely survival routes for the industry depended on the support of the United Kingdom Government. That was support which, until now, has been voiced often enough but has been substantially lacking in the arenas where it matters.

I also expect the Minister to tell us that, from 1 January, the European Union has had a reference price in place. In another place yesterday the Lord Fraser of Carmyllie told their Lordships that the Scottish Office representations had resulted in the reference price being fixed at 16 per cent. above the minimum import price. Nevertheless, even at that level, the Parliamentary Under-Secretary of State, the hon. Member for Dumfries (Sir H. Monro), is on record as expressing his disappointment that it was not fixed at a higher level.

Any reference price is virtually meaningless unless it is backed up by a political will to take the appropriate action when the market place undershoots the reference price. Yesterday Lord Fraser indicated that the reference price was a type of benchmark against which future safeguard action can be considered. Will the Minister please give the House a clear statement whether and in what circumstances the United Kingdom Government will seek safeguard action if, as has been the case since the new year, the market price falls below the reference price?

Will the Minister take the opportunity to confirm that, under article 19 of the general agreement on tariffs and trade, a tariff concession can be withdrawn or modified if produce is being imported into the European Union in such quantities and under such conditions as to cause or threaten serious injury to domestic producers"? Does the Minister accept that such conditions currently exist—that we are in a situation in which there is a threatened serious injury to domestic producers? Will he acknowledge that as trout, for example, are subject to a 12 per cent. charge at the point of entry into the European Union, but salmon does not have such a charge, that is a concession? Is that a concession which the Government intend to modify or withdraw in current market conditions?

The Minister will be aware that, under article 11 of the GATT rules, a countervailing charge is available as a remedy, but only if there are measures in place in the European Union to control domestic production. In other words, at the very least there should be a voluntary producer organisation in place in the European Union, with production controls and an extension of those controls to non-producer organisation members through what is called the extension rule.

The Minister knows that the concept of producer organisations commands widespread support throughout the industry and the European Union, but the Government, to say the very least, have been lukewarm in giving that development active encouragement and have not been prepared to take the necessary measures to enforce the extension rule to make them effective. In a letter that was sent just before the new year to the chairman of the SSGA, Mr. Payne, the Secretary of State for Scotland effectively ruled out any moves on the part of the Government to enforce an extension rule.

Quite apart from the critical role which producer organisations can play in rendering the reference price effective, I believe—and indeed the industry believes—that they also offer an effective way of smoothing out the recurring boom and bust cycle of the industry, while ensuring, through market intelligence and research, that producer organisations have the flexibility to respond to market developments. With production control aimed specifically at smolt placements, there is plenty of scope for competition and a premium for the efficient producer.

It is sometimes said by Government that at the present time it would not be effective to have producer organisations because the Norwegians are not interested. In the December issue of the Norwegian Fish Farming magazine, the Norwegian Fisheries Minister, Mr. Jan Henry Olsen, said: The fish farming industry needs to be guided. We need to have growth in the industry which is under control … You quickly find out that a free market does not solve any problems in the industry. That is why the Norwegian Fish Farmers Association should continue to discuss Producer Organisation cooperation rather than abandoning the work which was in progress. If we are to get a solution to the market situation in Europe, we must have cooperation. It would appear from that article that producer organisations are still on the Norwegian Government's agenda.

Has consideration been given to the possibility of the Secretary of State for Scotland meeting the Norwegian Fisheries Minister to discuss how that olive branch of co-operation might be taken further? I should welcome hearing from the Under-Secretary this evening that he is willing to re-examine the producer organisation issue.

I do not believe in sudden conversions, but the industry has been disappointed by the negative nature of the Secretary of State's letter to Mr. Payne. It questioned whether, in some important respects, the Secretary of State proceeded on a factually correct basis.

I hope that the Government are prepared to re-examine the producer organisation issue and allow the industry to present the facts of the case to the Secretary of State. Will the Minister acknowledge the fact that, if the reference price is to be effective, the Government must be willing to give real political backing to the measures that will make it effective, including the role of producer organisations? It will simply not do constantly to pass the buck to Brussels. The Commission has said that the implementation and impetus must come from the member state.

We shall no doubt also hear from the Government exhortations to the industry to come forward with specific allegations of dumping. The industry will no doubt try to do that. Indeed, it has already given a considerable amount of information to the Scottish Office and is in regular contact with the Commission's anti-dumping unit. It has been pumping information into the Scottish Office on the Norwegian costs of production, in support of its dumping allegations. What is being done with that information?

I have also received details from a company in my constituency about a scheme intended to defeat the minimum import price. I shall pass it on to the Minister, but we should not necessarily flag it up in public as it might give people ideas about how to circumvent that. However, it should be recognised that companies have difficulty in finding real evidence. What are our embassies, particularly our embassy in Oslo, doing to try to get some of that back-up information to substantiate the case? Ultimately, it should be the responsibility of the Government and the Community to enforce the rules which the Community has made. We may be stretching the concept of neighbourhood watch too far if we try to make the industry the policeman in this case.

I should welcome an assurance that the Government will encourage the Commission to investigate the extent to which Norwegian state aid to its banking sector has directly or indirectly led to subsidies being channelled to its fish-farming sector.

There is a widely held view within the Scottish and Shetland industry that competition has not been fair. Banking failures have resulted in a substantial part of the banking sector in Norway being taken over by the state. Regional aid schemes in Norway result in 50 per cent. loans being guaranteed. There are cases of fish farms folding one day and, because the fish are still there, the industry proceeds under a different name the following day with a substantial part of its capital debt written off. Those matters merit close attention by both the Scottish Office and the Department of Trade and Industry.

I can do no better than to finish by quoting the Under-Secretary of State, the hon. Member for Dumfries, (Sir H. Monro), in a Scottish Grand Committee debate on fishing and fish-farming in Scotland, initiated by my hon. Friends in the Liberal Democrat party. He said: We must deal with the dumping of salmon from Norway … We cannot have salmon which sells at £.1.50"— today' s industry would say, "If only it would sell at £1.50", given that we have minimum import and reference prices far below that. The Under-Secretary, who was then a humble Back Bencher, said: It will destroy the immensely important fish-farming industry—especially in the west and north of Scotland—which means so much to us. It would be a total waste of the money that the Government and industry have invested in the fishing industry if action is not taken. I have read the correspondence and listened to debates in the House, but it is action that is needed to deal with the Norwegian dumping."—[Official Report, Scottish Grand Committee, 11 July 1991; c. 31] It is action that the industry has long awaited from the Government.

1.4 am

The Parliamentary Under-Secretary of State for Scotland (Sir Hector Monro)

I welcome the debate because the salmon farming industry is of considerable importance to the Scottish economy, in particular to that of the Highlands and Islands.

Fish farming, partioularly salmon farming, is one of the most successful new industries built up in Scotland during the 1980s. We have more than 250 marine salmon farming sites in Scotland. Some 6,000 jobs are dependent on the future of the industry. Perhaps only 2,000 are directly dependent on salmon farms, but the number is significantly above that when one includes those connected with feed suppliers, medicines to control disease, packaging, processing and distribution. Most jobs are located in our remote communities in the north-west of Sutherland, Lewis and Shetland.

I welcome the fact that the hon. Member for Orkney and Shetland (Mr. Wallace) has initiated the debate. Considering what the Government have done in the past year to help fishing in the Shetlands, however, particularly the salmon industry, it was rather sad for us to have to put up with the criticisms of the past fortnight. Those criticisms are disappointing when one considers that the Government rightly and willingly went to tremendous lengths to establish the environmental committee to monitor any ill-effects of the Braer disaster, to help in connection with the exclusion zone for fishing and to offer support for the salmon industry and the bridging loans. We went to every length that we could to ensure that the watchword from Shetland was that only quality fish would be sold. We made it clear that we would do all that we could to help Shetland achieve that aim.

In eight years, Scottish salmon production has expanded more than tenfold, from 3,900 tonnes in 1984 to 40,600 tonnes in 1991. In 1992, output dropped to 38,000 tonnes, reflecting more difficult trading conditions. In 1993, Scottish production increased rapidly again to around 45,000 tonnes, an increase of 18 per cent. That is dwarfed, however, by the Norwegian production, which expanded even more rapidly in 1993 to around 180,000 tonnes, an increase of 28 per cent. Its projected production for this year is yet higher.

The Government are well aware that the industry faced very difficult market conditions in the final quarter of last year, following the large surge in Norwegian production and imports of farmed salmon to the European Community. Overall, the European market is increasing only relatively slowly because of the recession. It is unable to absorb those rates of increase in production without significant falls in prices.

Salmon prices on the European market fell rapidly, particularly during October and November 1993, by up to 50 per cent. for some categories of fish compared with September. Average prices for the largest category of round salmon, at 5 kg and more, fell from £1.74 per lb at the end of September to as low as £1.11 by mid-November, with reports of even lower prices for some consignments.

We expressed serious concern about the fall in salmon prices on the European market to the Commission in Brussels. A number of meetings were held and ultimately the Secretary of State wrote to Commissioner Paleokrassas on behalf of the United Kingdom Government expressing this concern—as the hon. Member for Orkney and Shetland mentioned—and asking for appropriate measures to be taken. Following that letter, the Commission introduced emergency safeguard measures in the form of minimum import prices on 20 November Minimum import prices for round salmon were set at £1.20 per lb, for gutted salmon at £1.33 per lb, and for gutted salmon without heads at £1.46 per lb. We welcome this decision as a step forward, providing as it does a temporary floor for the market while the longer-term problems facing the industry can be dealt with.

The minimum import prices will have effect until 31 January this year. They will be reviewed by the Commission before the end of January in the light of market trends. I spoke to Commissioner Paleokrassas on 20 December and urged him to extend the MIP to 31 March and to press Norway as hard as possible on the issue of dumping.

Mr. Tam Dalyell (Linlithgow)

Mr. Pattinson tells us that, at these prices, the Scottish industry will continue to lose £1 million revenue each week, and more jobs and communities will be put at risk. Is he right?

Sir Hector Monro

I do not know. I could not possibly tell the hon. Gentleman whether the industry will continue to lose £1 million a week or not. I hope not.

There has been some recovery in market prices—for example, the average price of round salmon over 5 kg had increased from £1.11 per pound in mid-November to £1.31 per pound at the end of 1993. Round salmon of between 3 and 4 kg increased in price from £1.18 to £1.44 at the end of the year. That is above the reference price of £1.38.

I do not underestimate the problems that the industry faces, but it is interesting to note that round salmon sales to the continent in November were 677 tonnes and in December 1,130 tonnes, an increase of 73 per cent. There was also an increase in the sale of gutted salmon of up to 53 per cent. That certainly gives the impression that the MIP has helped to stabilise the market, albeit at a price that I think is too low. It is pushing up the market price towards the reference price.

Mr. Elliot Morley (Glanford and Scunthorpe)

Is the Minister hinting that some of the problems that the industry faces are market oriented, or does he accept that the problem is being caused by the dumping on the market of Norwegian salmon?

Sir Hector Monro

Of course it is. I have not yet come to dumping, but it is crucial. Without the enormous importation of salmon from Norway into the Community, the problem would not arise. Of course dumping is the root cause of our problems and I do not disguise the fact.

The reference price is important and I am glad that the Commission introduced it on 1 January 1994 at a level above the MIP, although I should have preferred it to have been higher than £1.38 rising to £2. We made as many representations as we could, and the figure was set at 16 per cent. above the minimum import price.

Mr. Calum Macdonald (Western Isles)

Does the Minister accept that for the reference price to be effective there must be producer organisations? Will he therefore offer his wholehearted support to the setting up of such organisations?

Sir Hector Monro

I do not agree that the reference price is in any way related to the producer organisation issue. The key issue is the attempt to get Norway to adopt a reasonable attitude and to get the Commission to agree that Norway is dumping salmon. We must put an end to that as soon as possible and get the Norwegians to understand that there has to be a fair market. It certainly is not fair now and that is the target of all our efforts.

My officials are going again to Europe next week and I am going the week after to talk to Mr. Paleokrassas. I hope that we will be able to make progress towards action on the anticipated Norwegian dumping.

Mr. Roy Beggs (Antrim, East)

I congratulate the hon. Member for Orkney and Shetland (Mr. Wallace) on securing the debate. Will the Minister bear it in mind that the adverse effects of dumping on the Scottish industry also have an effect on my constituency which has Northern Ireland's only salmon farm?

Sir Hector Monro

When we go to Brussels or Luxembourg we do our level best for the Northern Irish fishing industry, in the same way as we do our level best for that of all the United Kingdom. We have the welcome support and co-operation of the Irish Government who are as concerned about low prices affecting their fish farms as we are about them affecting ours.

It is for the Commission to consider whether, under article 23 of EC regulation 3759/92, a countervailing charge should be introduced for imports of salmon to the European market if prices fall below the reference price. We understand that the Commission considers that to do so may risk a challenge under the GATT arrangements. We are in close touch with the Commission to try to resolve that dilemma.

Market instability is in no one's interest, including that of Norway. Regulations are in place in the Community to ensure fair trading between member states. If and when Norway becomes part of the EC, she will be required to operate within the Community rules.

There is a history of allegations by the Scottish and Irish farmed salmon industry that Norwegian producers are trading unfairly by dumping salmon on the European market at prices below the cost of production. A complaint made in 1989 was investigated by the Commission, which concluded that there was evidence of dumping by Norwegian producers.

A further complaint was made in 1991, but the Commission has yet to carry out an investigation based on that complaint. The Government have consistently argued that the Commission should carry out such an investigation, and this remains our position.

Last year, the Commission invited the salmon farming industry to update the information previously provided to the Commission in 1991. The hon. Member for Orkney and Shetland implied that it was the Government's duty to produce all the facts and figures. We will gladly help the industry, but it must help us. It is not easy to produce the facts and figures and we must work together to provide the information as quickly as possible so that the Commission can decide what to do to stop further massive importation into the Community of Norwegian salmon. As the hon. Gentleman knows from various discussions and meetings that I have had with him, I am keen to resolve this matter in the interests of the Scottish farmed salmon industry, and I shall add a word for Ireland.

Mr. Beggs

Northern Ireland, please.

Sir Hector Monro

I shall add a word for Northern Ireland and for Ireland as well.

It will not be easy to get a quick solution. I have to attend Commission and Council meetings and the rate of progress in getting almost anything achieved in the Council of Ministers is frustrating. We have to work at it as hard and as quickly as we can to help an industry that is in a serious position because of prices that are so much below the cost of production.

I have said that prices have been creeping up since the autumn, and thank goodness they have, but we still have a long way to go before the industry reaches profitability.

The hon. Member for Orkney and Shetland and other hon. Members have mentioned compulsory producer organisation. The Government believe firmly that we could proceed much more quickly by having a voluntary producer organisation and there is no reason why the industry should not get together and get started on that right away. We would be able to give some financial help towards the adminstration of a voluntary producer organisation. However, no producer organisation, despite what the hon. Gentleman said, will be effective unless we can get co-operation from Norway.

The motion having been made after Ten o'clock and the debate having continued for half an hour, MADAM DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at nineteen minutes past One o'clock.