HC Deb 29 October 1996 vol 284 cc441-2
3. Mr. Donald Anderson

To ask the Secretary of State for Defence what estimate he has made of the current trade balance between Britain and the United States in defence products. [350]

Mr. Arbuthnot

The balance of trade remains at around two to one in favour of the United States. That figure is based on the latest five-year average of bilateral defence trade.

Mr. Anderson

Can the Minister confirm that the current unsatisfactory imbalance of two to one will worsen unless the European defence industry can restructure to meet the challenge of the mega-merged US giants? In that context, will he tell the House whether the Ministry will continue to block the merger of the defence interests of British Aerospace and GEC?

Mr. Arbuthnot

Nobody has asked us whether we ould approve a merger of GEC and British Aerospace. The important issue is that we do well in trade with the United States, which is our second largest defence export market. We have had major successes in the United States. Rolls-Royce and British Aerospace sell about £600 million-worth of equipment a year in relation to the T45 and AV-8B programmes. There is a refuelling programme which Cobham pursues, with £150 million-worth of equipment supplied.

We need an effective two-way street with the United States, as my right hon. and hon. Friends and I have argued on many occasions over the years. We have some good prospects for selling into the United States. The ASRAAM—the advanced short-range air-to-air missile—is a good candidate for such a sale. It is low risk and cost-effective, and would be an early solution to one of the requirements of the United States.

Mr. Bill Walker

Will my hon. Friend remind those who are critical of our collaboration with the United States on defence matters that probably the finest piston-engined fighter aircraft that came out of the second world war was British and American? It had a British Rolls-Royce engine and an American airframe: the Mustang. Without question, subsequent collaboration—especially between Rolls-Royce and the United States—has produced some real winners, as with British Aerospace.

Mr. Arbuthnot

My hon. Friend is right. With his experience of flying, I hardly need to add to his comments. We should also bear in mind the importance of the European dimension. The hon. Member for Swansea, East (Mr. Anderson) made a good point, which I would not want to diminish, about the need to restructure European industry in order to compete with American industry. We try to encourage British industry to restructure across borders, not just within Europe but between the United Kingdom and the United States, because in the long run only large companies will be able to compete with the vast companies of the United States.

Mr. Menzies Campbell

Does not the balance of trade in defence products between Great Britain and any other country, including the United States, depend on the enforcement of Government policy towards that country? The Government have a policy prohibiting trade in defence products with Argentina. Has Rolls-Royce sold engine parts for use in Argentine naval warships?

Mr. Arbuthnot

My right hon. and learned Friend the Foreign Secretary made a precise announcement on that last week, and I have nothing to add.