HC Deb 17 December 1997 vol 303 cc459-66

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

11.38 pm
Dr. Phyllis Starkey (Milton Keynes, South-West)

The trigger for this debate—[Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. The hon. Lady is addressing the House. Will hon. Members please leave quietly?

Dr. Starkey

Thank you, Mr. Deputy Speaker.

The trigger for this debate is the revelation earlier this year that Israel was effectively fiddling the books and attempting to subvert the interim trade agreement with the European Union by passing off as "made in Israel" goods that have been manufactured elsewhere. Under the terms of the agreement, Israel has a quota for goods—including orange juice, which is allowed into the EU at zero tariff—and 70 per cent. of the normal tariff is charged on additional imports beyond the quota.

It emerged that Brazilian orange juice had been imported into Israel, relabelled as "made in Israel" and exported to the EU at zero tariff. The presumption is that Israel wished to maintain its quota for future use, while choosing to sell its orange juice more profitably elsewhere. Whatever the reason, that is clearly a deliberate defrauding of the EU. It would be helpful if the Minister could estimate the loss to the EU in duties forgone.

The EU had had suspicions that goods from Israel had been mislabelled and it therefore took a serious view of the latest infringement. Detailed investigations uncovered further abuses. Orange juice from illegal settlements in Gaza had been similarly mislabelled. On 8 November, the EU issued a warning. Part of it says: The specific situation is aggravated by the fact that since the inquiry got under way, various elements have come to light which confirm a lack of effective administrative cooperation, as foreseen in the different preferential agreements signed between the Community and Israel, and in particular certain substantial errors in the application of those same agreements, to the extent that the validity of all preferential certificates issued by Israel, for all products, are put in doubt. As a result, Her Majesty's Customs and Excise has been carrying out investigations into the true origin of a wide range of Israeli exports to the United Kingdom-including, for example, textile waste and telecommunications equipment.

Interestingly, today I have received an answer from the Treasury showing that further inquiries by Customs and Excise relating to a range of manufactured goods have been suspended following undertakings given by Israel at a meeting with EC officials on 28 November". I should like the Minister to clarify what those undertakings can possibly be, given Israel's misleading behaviour until now.

In previous discussions in the House on the interim trade agreement with Israel, hon. Members have repeatedly raised concerns about similar false origination certificates relating to Israeli products—in particular, goods from illegal settlements in the occupied territories being passed off as Israeli goods. In 1989, the then Foreign Office Minister reassured my right hon. Friend the Member for Birmingham, Ladywood (Clare Short), now Secretary of State for International Development, that there were no arrangements for produce originating from Israeli settlements in the occupied territories to enjoy preferential access to the British market.

In the Second Standing Committee on Delegated Legislation, which examined the interim agreement in February 1997, the former Member for Morecambe and Lunesdale, Sir Mark Lennox-Boyd, and my hon. Friend the Member for Great Grimsby (Mr. Mitchell) restated their concern about false description and again were reassured by the Minister. It is now clear that those suspicions were justified and that the reassurances have not been borne out.

On 28 November, in response to the latest dispute between the EU and Israel, the Israeli trade and industry minister, Natan Sharansky, admitted in the Israeli press that there had been past transgressions, but attempted in effect to buy off the EU by allowing it additional checks within Israel. That is the clearest possible evidence that the Israelis are playing fast and loose with the EU.

Perhaps I may digress slightly, as we need to understand the EU's purpose in negotiating association agreements. The association agreement with Israel is one of a series of Euro-Med agreements intended to strengthen economic links with the region. There is a similar agreement with the Palestinian National Authority. The interim agreement on trade and trade-related matters deals essentially with the trade provisions of a full association agreement, pending full ratification of that full agreement.

Access to European Union markets is a privilege given in return for Israel and the Palestinian National Authority participating positively in the middle east peace process. Again, the then Minister of State, Foreign and Commonwealth Office made that clear in February 1997 when he said: Support for the middle east peace process is the cornerstone of United Kingdom and European Union policy in the region … Liberalisation of trade will contribute to prosperity and thus to regional stability … The EU's agreement with Israel and the PLO will help to increase prosperity in the region."—[Official Report, Second Standing Committee on Delegated Legislation, 19 February 1997; c. 4.] In recognition of the linkage of trade preferences to progress in the middle east peace process, two specific articles—1 and 38—were included in the interim association. Article 1 obligates Israel and the European Union to respect human rights and democratic principles. Article 38 obliges Israel to refrain from representing products of its illegal settlements in the occupied territories as originating in Israel or, indeed, certifying Palestinian products exported by Israeli firms as products of Israel.

There have been numerous examples of breaches of article 1, which deals with human rights and democratic principles. There have been collective punishments of the Palestinian population in response to individual acts by Palestinians. There have been repeated land confiscations, denial of access to Jerusalem for most Palestinians, and a system of internal controls for Palestinians akin to the pass controls of apartheid in South Africa. Some people's Jerusalem ID has been cancelled so that they can no longer live in Jerusalem.

It is now clear that article 38 has also been regularly breached. In effect, Israel is pretending to participate in the peace process. It is blocking progress and failing to implement agreements already made, but it is preventing the outright collapse of discussions. At the same time, it is continuing to build illegal settlements in the occupied territories, often based on export-oriented agricultural enterprises, and using those settlements to cement its territorial expansion.

The other half of Israeli policy is to choke the growth of the nascent Palestinian economy through internal and external closures. Since the Oslo accords, there have effectively been closures on one day out of three. These closures are paralysing Palestinian trade and have led to the direct loss of at least 100,000 jobs. The United Nations special co-ordinator's office for the occupied territories has estimated that real wage levels in the area controlled by the Palestinian National Authority fell by about 20 per cent. in 1996 and that the real per capita gross national product had fallen by 38.8 per cent. since 1992.

When I was in the middle east in the summer, I saw and heard for myself the effect of that policy. In Gaza, for instance, tomatoes produced there were rotting during the closures because they could not be exported to the rest of the Palestinian National Authority controlled area. Meanwhile, people living in Ramallah were being forced to pay 70 times more than market rates to get hold of tomatoes.

In addition, the Israelis were operating punitive controls on goods from Gaza to Egypt on spurious security grounds. I say "spurious" because the goods were not transiting through Israel but were going direct from Gaza to Egypt. There were reports of boxes of carnations being pierced with check rods, supposedly to check whether there were weapons inside. Of course, that damaged the carnations and made them wholly unsaleable. While such punitive controls are operating, Palestinian goods supplied to Israeli marketing firms are strangely exempted from such treatment.

The economic agreement that the European Union has made with Israel, which should be bolstering peace, is undercutting it. By providing markets for products from illegal settlements, we and the rest of the European Union are positively encouraging the development and sustaining of those settlements—settlements that are sabotaging the peace process not only for the present Israeli Government but for future Israeli Governments. The Israelis are being allowed to enjoy the economic dividend without making any progress on peace. The current Israeli Government have retreated on progress, and the Palestinians are paying—in unemployment, in business bankruptcies and in land confiscations.

The further irony is that the European Union taxpayer is also paying the price, because donor aid from the European Union, which should be supporting economic development in the Palestinian National Authority area, is paying to offset the economic damage of the Israeli blockade on the Palestinian economy.

The Israelis' response to being found out defrauding the European Union has been to bluster and challenge the definition of the geographical area to which the agreement applies. On 10 December 1997, Ha'aretz said: Israel's representative to the European Union in Brussels, Ephraim Halevy, emphasised that … the subject of territoriality with respect to the rules of origin is a political question and that Israel strongly objects to its inclusion in its discussions with the Union, 'because it's not the European Union who is going to determine the borders of Israel as an incidental by-product of economic discussions."' We must say that that is not acceptable. The European Union has made it clear throughout that the agreement applies only to the internationally recognised borders of Israel.

The UK position was reiterated, in March 1997, by Jeremy Hanley, then Minister of State, Foreign and Commonwealth Office, in a letter to the former Member for Morecambe and Lunesdale. He wrote: The British Government's position on Jerusalem is well known, and is shared by all our EU partners … we do not recognise Israeli (de jure) sovereignty over any part of Jerusalem. It follows that goods produced in Jerusalem are not the produce of Israel … A similar logic would apply to goods produced in Israeli settlements in the Occupied Territories". The European Union simply cannot allow Israel unilaterally to reinterpret the terms of an agreement with the European Union. Moreover, that agreement is a privilege, not a right, and gives an advantage to Israel in return for co-operation in the peace process—a process which Israel seems to have no intention of delivering. If the European taxpayer is not to continue to be taken for a ride, the British Government and the European Union will have to take a firm stand.

The agreement has not yet been ratified, and I should be grateful if the Minister will indicate when it is due to be ratified. I very much hope that he will make it clear that the EU-Israel association agreement cannot be finally approved by the Council of Ministers until cast-iron guarantees are given that Israel will comply with the European Union's interpretation of article 38 and with the definition of what constitutes the state of Israel.

The European Union has to spell out the fact that international law—not the force of conquest—decides what is occupied and what is not, and that Israel must comply with international law and provide absolutely watertight guarantees that only goods made within the internationally agreed borders of Israel will be able to enjoy the privileges that the European Union is prepared to give.

11.53 pm
The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett)

I congratulate my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) on raising these issues, and on the way in which she presented her case. Although the House's attendance is somewhat limited at this late hour, I have no doubt that every hon. Member in the Chamber has been impressed with the way in which she has expressed and dealt with some extremely detailed and important issues. I therefore congratulate her doubly on her speech.

I shall make a few opening comments about the nature of the association agreement and the processes that relate to my hon. Friend's final point. I shall then attempt to deal with some of the technical issues relating to countries of origin before moving onto the peace process and Britain's presidency of the European Union. I hope to do all that in the few minutes that I have to speak.

The EU-Israel association agreement was signed in November 1995. It was ratified by Israel and most EU member states early in the process. The United Kingdom completed its ratification on 8 April this year, after the debate in Committee on 19 February to which my hon. Friend referred.

My hon. Friend was absolutely right to draw attention to one extremely important point: the reason why virtually all right hon. and hon. Members considered it sensible for the United Kingdom to ratify the agreement was that there had been progress in relation to Hebron. As a result, all parties were agreed that the House should give the association agreement a fair wind. My hon. Friend was right to say that, at the time, our attitude to ratification was coloured by our attitude to the progress in the middle east peace process.

My hon. Friend may be interested to know that two EU member states—France and Belgium—have not completed their domestic processes of ratification. We expect both countries to have done so in the first half of 1998, although the procedures relate to parliamentary processes in those countries. It is possible that the processes will not have been completed during the United Kingdom presidency, but that depends on the two countries concerned.

My hon. Friend then asked about the attitude of the Council of Ministers to the association agreement and its final ratification. Progress on the middle east peace process would certainly help discussions in the Council of Ministers. It would greatly improve the atmosphere and prove beneficial to Israel.

It may be useful if, before turning to the technical issues, I set out the Government's views on where we are on the peace process, and how we would like it to progress. My hon. Friend is right to say that, post-Oslo, the Palestinians have gained little economic reward from the peace process—indeed, quite the opposite. The figure she quoted in terms of the reduction in living standards for Palestinians may be conservative. Some would suggest that the figure may be as high as 40 per cent.

I realise that political and economic processes do not work together in a simple causal relationship, but if we are to show that peace works, we also have to show that it produces economic rewards. It is abundantly clear that the Palestinians should have more than their fair share of those rewards, simply because of their circumstances and the differential in incomes in the middle east.

My hon. Friend was also right to say that the process is currently stalled. We have taken an active role in trying to encourage the restart of the process. Earlier this year, we were concerned when it appeared that the peace process was no longer engaged, and there was no prospect of progress. We have encouraged the United States to become actively involved and we very much welcome the steps that Secretary of State Albright has taken to try to bring the parties together and get the process going.

It is always worth reminding ourselves that the peace process is the only show in town—the only way in which we shall make progress, and the only way in which Israelis, Palestinians and others in the region will have the opportunity to live together in peace, security and justice. The peace process is important to us all, regardless of the way in which we approach the issues, and from whatever standpoint we come.

We have been pressing the Israeli Government to ensure that the offer on the table will re-create some confidence in the peace process. We have suggested the need for progress and action in the following areas. We believe that there is a need for what Secretary of State Albright has called "time out", and that no action should be taken that determines or predetermines the final status negotiations.

Our view on settlements comes into that process. We are clear that the settlements are illegal, and are an attempt to pre-empt final status negotiations. We have also said that there should be further substantial redeployment. The figures will be subject to negotiation, but the redeployment must be real, qualitative and quantitative. It has to ensure that it rebuilds confidence in the process.

We also believe that there need to be further confidence-building measures, and we have constantly drawn attention to the need to make progress on the proposals for the airport and the port—both of which will feed strongly into the economic issues to which my hon. Friend the Member for Milton Keynes, South-West referred. We also believe that there is a need to ensure free and safe passage so that the situations that my hon. Friend described do not happen and the peace process and the political and economic issues are not undermined. We have made it clear to the Israeli Government that there should not be action that squeezes the Palestinians and their civic society out of Jerusalem, because that would also pre-empt the final status negotiations.

We have made that position clear. My right hon. Friend the Prime Minister delivered that message to Prime Minister Netanyahu, and it has been delivered by other European Union leaders. We hope to see progress in the current round of negotiations.

As I am sure some of my hon. Friends will know, President Arafat is in London tomorrow. We hope that he will be engaging in a successful negotiation through Secretary of State Albright, and that we will be able to make the progress to which I referred. It is important—we recognise this—that, in the context of the peace process, there is a commitment to security on both sides. We need peace; we need security. Both sides have obligations. We are stressing the need for those obligations to be carried out.

The United Kingdom will assume the European Union presidency within two weeks. We are determined to be active in that presidency in our role in the middle east. We feel that we can play an important part by ensuring that the European voice is heard and that our aspirations and concerns are expressed in the peace process.

We are also determined to act as complementary support and help to the United States in the peace process, because—I repeat the point that I made earlier—we all have a reason to ensure that the process is successful. Over the next six months of our presidency, we are determined to play an active and constructive role. Hopefully, we can move on some of the peace-related issues, so that we can move towards the justice with peace and security to which my hon. Friend referred.

I should like to take this opportunity to deal with some of the more detailed issues to which my hon. Friend rightly referred. She talked about the question of orange juice and Israel's breach of country-of-origin rules. I reassure her that the Council of Ministers is very aware of the issue, very concerned about it, and wants appropriate action to be taken. It is clearly unacceptable that Israel—or any country—is in breach of an agreement with the European Union.

It is clear from the available evidence that there has been a breach, and that action needs to be taken. The Commission is following up the matter with Israel, and we hope that they will reach a proper solution in the near future. That solution must be a recognition that "country of origin" means exactly that, and that the rules are clear and cannot be bent. The rules must be honoured, because they are part of an agreement between Israel and the European Union.

My hon. Friend also asked whether it was possible for Israel to redefine its borders under international law, as part of the EU association agreement. I hope that I made the point earlier that our position on that is clear—indeed, it was shared by the previous Government—and we regard the settlements as illegal.

The final boundaries and the final status issues have to be negotiated between the parties, but we do not recognise the settlements under international law, and we have said so on many occasions. The trade association agreement cannot redefine Israel's boundaries, and all the issues must be resolved through the final status negotiations. The position is clear under international law, to us and to other countries, and we will continue to restate our position on the settlements as part of the overall process.

My hon. Friend also mentioned the importance of human rights as part of the broader association agreement. Whenever I visit any country in the middle east, or in any other part of the world, I take the opportunity to raise human rights issues. Human rights are universal: they are not a la carte, and we cannot choose which countries we want to enforce human rights. We must consider each and every country in relation to a universal respect for human rights. That is true for Israel, for the Palestine National Authority and for other countries. I can give my hon. Friend the clear reassurance that we will continue to raise human rights issues on every visit to the region.

My hon. Friend rightly raised specific issues, but the important issue for us all is to make progress in the middle east peace process. I do not believe that any hon. Member, from either side of the House, wishes to see the process stalled, because, if that happens, the risks are obvious and substantial. We all know that we face a difficult and delicate situation. My plea to all those involved is to make progress, through any necessary concessions, and to recognise the needs of all the parties directly involved in the negotiation. No one can seek to stop the world, get off and freeze the process, because that will not work.

We need to negotiate on the basis that the way to bring a lasting peace to the middle east is to recognise the genuine needs of both the Palestinians and the Israelis. If we can do that, the prize is substantial. It is a sad reflection that a region so rich in people and natural resources, and with a culture that is so diverse and yet so important to the history of the world, under-performs both economically and politically.

If we can get the peace right, the middle east can move forward. If we can play a part in that process in the next six months, during our presidency of the European Union, we will make a real. and lasting contribution. We all wish to make progress, and to see peace, justice and security in that region.

Question put and agreed to.

Adjourned accordingly at eight minutes past Twelve midnight.