HC Deb 04 March 1999 vol 326 cc1223-9

1.9 pm

Mr. Archy Kirkwood (Roxburgh and Berwickshire) (by private notice)

To ask the Secretary of State for Trade and Industry if he will make a statement on the unilateral trade sanctions imposed by the United States Administration against cashmere knitted garments and other products.

The Secretary of State for Trade and Industry (Mr. Stephen Byers)

The European Union and the United States have been engaged in a long-running dispute in the World Trade Organisation over the EU's banana regime. Following two adverse WTO rulings in 1997, an amended regime was agreed by the EU's Agriculture Council in June 1998.

The United States and other complainants maintain that this regime still does not comply with WTO procedures. In November 1998, the United States announced its intention to retaliate against the EU by imposing 100 per cent. import duties on selected products. The United States sought WTO authorisation for that in January. At the request of the EU, the level of damage that the United States was seeking in retaliation was referred to arbitration, to be decided on 2 March.

On Tuesday this week, the arbitrator, in an initial ruling, said that he needed more information to make a decision, and asked the parties to respond to a series of questions by 15 March. He would then return to the issue and come to a final ruling soon afterwards.

However, the United States yesterday announced that, with immediate effect, the United States customs service would begin "withholding liquidation" on imports of various EU products, including cashmere knitwear. We are firmly of the view that that prejudges the panel ruling and is contrary to the WTO dispute settlement rules.

The United States argues that it will not apply the duties until after the arbitrator has ruled, but the practical effect of the measures is the same as if they applied now, because exporters have to put up a bond to cover possible duties in the future.

I deplore the action which the United States has taken. It is completely unauthorised by any WTO procedures and wholly ignores the arbitrator's appeal for discussions to continue. Even now, it is not too late for the United States to reverse its decision. It should do so, in the interests not only of the EU-US relationship but to safeguard the whole framework of dispute resolution and settlement within the WTO. The United States action is irrational and unacceptable. I have summoned the United States ambassador and will make those points to him later this afternoon. We shall also support an urgent convening of the WTO General Council.

It is particularly regrettable that American action is directed against industries that have absolutely no connection with bananas or the issues in dispute. There can be no justification for inflicting, or seeking to inflict, serious damage on businesses and communities in pursuit of objectives that are utterly unrelated to the activities in which they are engaged. We are very conscious of the effect that even the threat of US action has been having over the past few months, especially in respect of the cashmere industry. This is a seasonal industry and it has been particularly affected. Cashmere orders are now being placed and dispatched to the United States for the autumn season.

I spoke this morning to George Pedan, chairman of the Scottish Cashmere Association, who stressed to me the damaging effect that the proposed US action would have. In the light of yesterday's action by the United States, the Government have decided to establish a scheme to guarantee the bonds in respect of the cashmere industry, and we will discuss with the industry, as a matter of urgency, the details of that scheme.

The United States action is unacceptable. We shall do all that we can to reverse it. I hope that the measures that I have announced today to support the cashmere industry will be welcomed on both sides of the House.

Mr. Kirkwood

I am deeply grateful to the Secretary of State for taking the opportunity to come to the House at such short notice, and so quickly, to deal with the damaging situation that the cashmere knitted industry faced last night. The anger and incomprehension felt in the Scottish borders at this completely gratuitous hostile and unilateral act at the hands of a so-called ally were palpable. The concern was that knitwear businesses would be driven to the wall and into financial insolvency if they had to carry financial bonds in addition to the other difficulties that the knitwear industry is suffering.

I am deeply grateful to the Secretary of State for making it clear that he has engaged, immediately, in talks with the Scottish Cashmere Association and associated bodies to achieve a scheme that will give confidence to the industry. He is absolutely right to say that this is a crucial time of year for securing contracts for cashmere delivery to the United States. It is the worst time of year for the problem to have arisen. If he can secure agreement with the trade representatives and get a scheme in place at the earliest possible opportunity, that will at least give us some short-term respite during which we can sort out this long-term dispute.

I congratulate the Government on what they have done, but I hope that the Secretary of State will redouble his efforts to resolve the fundamental underlying dispute between the EU and the US about bananas quickly, so that we can all put this deeply damaging and unfortunate incident behind us.

Mr. Byers

What can I say? I welcome the positive response from the hon. Gentleman, who modestly did not refer to the fact that, the other evening, he led a delegation to meet me and my hon. Friend the Minister for Trade to discuss precisely those matters. There are two issues at stake, the first of which is the steps that we need to take to ensure that certain industries—in this case, the cashmere industry—are not the innocent victims of the action taken by the United States. The measures that we are introducing and the scheme that we propose will achieve that.

There is a more fundamental issue—the dispute resolution mechanism within the World Trade Organisation. We will certainly do all we can to ensure that the United States recognises that it has a responsibility to comply with the procedures, even when it may appear to the United States that those procedures are not going in its direction. The acid test of any resolution procedure is all parties agreeing to abide by it, in good times as well as bad.

Mr. John Redwood (Wokingham)

I, too, am grateful to the Secretary of State for his answer and I am glad that he can, at last and after so long, see the damage that US action can do to innocent industries in Britain. Will he promise to get the EU to settle this diplomatic trading dispute? He accepted in his statement that the EU has twice broken the rules and twice lost the case in the WTO. Will he promise us that he and Brussels now have a compliant regime? When does he intend to establish that regime to the satisfaction of the WTO?

Why did the Secretary of State or his predecessor not intervene a long time ago to achieve a proper, compliant agreement from Brussels so that we could have avoided this whole sorry mess? How much money will be made available to help the cashmere industry during its time of trouble? Does he now agree that the Government's appalling diplomacy, in Brussels and beyond, has made the banana row so much worse? Does that not show that the Secretary of State has no influence in Brussels, that he has failed to stand up for British industry and that he does not care about British manufacturing? First, he makes it too dear to make things in Britain; then, he fails to keep our markets open for those who are still struggling to succeed.

Will the Secretary of State now stand up for the UK cashmere manufacturers, stand up for the others and do whatever is necessary, through Brussels, to solve this dispute and to impose a compliant regime on Brussels?

Mr. Byers

First, I congratulate the right hon. Gentleman—it was fully 45 seconds before we got to the Brussels-bashing element of his speech, which is something of a record. Usually, he reaches it far more quickly.

This is a serious issue and it is unfortunate that the right hon. Gentleman has sought to use it in the way that he has. Whether the regime is compliant is a matter for the dispute resolution procedure to determine, which is exactly what it is in place to do. The regime is being challenged and it is for the dispute resolution procedure to determine that challenge. The matter is for the arbitrator and the panel to determine and they are in place to do precisely that.

We have taken action to ensure that we offer protection to the cashmere industry in these particularly difficult times and we have intervened in Brussels to promote, and to try to achieve, a settlement on this issue. I regret that that has not been possible, but we will ensure, in the days and weeks ahead, that we continue to do all we can to resolve the issue to the satisfaction of the cashmere industry and the other sectors that are also affected by the retaliation.

Mr. George Stevenson (Stoke-on-Trent, South)

Does my right hon. Friend agree that this US action is in pursuit of the singular interests of the multinational banana companies controlled by the United States which dominate production in central, north and south America? Does he also agree that, if its agenda of removing the European Union regime on quotas for Caribbean bananas is successful, it will result in the total destruction of the Caribbean banana industry? Given the siren calls that we have just heard from the right hon. Member for Wokingham (Mr. Redwood), does my right hon. Friend further accept that the European Union—particularly the United Kingdom—has a traditional and current responsibility to ensure that the interests of the Caribbean banana producers are protected under whatever regime is eventually negotiated?

Mr. Byers

My hon. Friend makes an important point. I am sure that many people will be asking why the United States, where no jobs are at stake because of the banana regime, is putting WTO procedures at risk over this issue. Its motives should be questioned and scrutinised in some detail. This is a crucial issue, and we shall do all that we can. There is a responsibility to countries in the Caribbean that depend on the regime that the EU has put in place. We do not intend to stand to one side and watch people in those countries becoming innocent victims; nor do we intend to stand to one side and watch what is happening to the cashmere industry.

Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale)

The Secretary of State will be aware that there have been thousands of job losses in the borders in the past couple of years. This deplorable unilateral action by the American Government threatens hundreds more jobs. As the Secretary of State has acknowledged, this action could not come at a worse time, because companies in the United States are at this very moment encouraging people to buy Scottish cashmere to put on their shelves for next season.

I welcome what the right hon. Gentleman said about the bond scheme, but will he tell us how quickly that scheme will be worked out? This morning, I spoke to a local manufacturer, who said that he is suddenly faced with a bill of £50,000. He must find that money this week to get his goods in America delivered on time for his customer. This is a serious matter, and I hope that the Government will ensure that their welcome initiative is speedily implemented.

Mr. Byers

I agree that time is of the essence and that we have to get the scheme in place as a matter of urgency. That is why I have already had a brief discussion with the chairman of the Scottish Cashmere Association about how the scheme should be formulated. I note the hon. Gentleman's points about the particular effect that this action will have on Scotland. I regret that no members of the Scottish National party are present in the House to address this matter of great concern to Scotland. This is a key issue for Scotland, and we shall do all we can to protect the cashmere industry in Scotland and in the rest of the United Kingdom.

Ms Diane Abbott (Hackney, North and Stoke Newington)

My right hon. Friend will be aware of the great concern in the Caribbean region, in the Caribbean community in this country and among friends of the Caribbean about the issue underlying this dispute, which is access to European markets for Caribbean bananas. As hon. Members have acknowledged, it is important that this dispute is resolved speedily, but I hope that my right hon. Friend will assure the House that there will not be a speedy resolution at the expense of hundreds of thousands of people in the eastern Caribbean, whose countries face economic collapse. A speedy resolution at their expense would mean that the bully-boy tactics of the US had won.

Mr. Byers

This is a novel occasion, because I am pleased to agree with my hon. Friend on the points that she made. We believe that the revised regime that the European Union has put in place meets the WTO's requirements and protects the countries and communities to which my hon. Friend referred.

Mr. Tony Baldry (Banbury)

The Secretary of State will be aware that this coming Tuesday is Commonwealth day. At least a quarter of the Commonwealth countries are in the Caribbean, and the economies of many of them largely depend on the banana industry. When the Secretary of State sees the American ambassador this afternoon, will he explain to him that many people in this country think that it is crazy that the United States should seek to undermine the economies of the Caribbean? It will pay the penalty through drug trafficking and money laundering, because not one job in the United States will be affected. This action is short-sighted, stupid and crazy.

Mr. Byers

I shall be pleased to pass on the hon. Gentleman's views to the American ambassador—and I am grateful for the fact that, when I speak to the ambassador this afternoon, I shall be able to speak on behalf of hon. Members on both sides of the House in adopting the robust approach that I intend to adopt.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

I welcome what my right hon. Friend has said, the style with which he has said it and the action that he has taken. Does he accept, however, that there is a certain ironic contrast between the subject matter of his statement and that of the earlier statement? This is a very poor moment for the United States to declare war on British biscuits and pullovers. Does he further accept that this constitutes a dangerous lurch towards the crudest kind of protectionism, at a time when world markets are extremely fragile? Will he ensure that representations are made at the highest levels with the aim of reversing this crazy action, and will he assure the House that he will not lend his name or his hand to any equally crude reprisals that may occur in the European Union?

Mr. Byers

The European Union will obviously need to consider its response to the measures announced by the United States yesterday. However, I agree with my hon. Friend that it would be retrograde for us to impose sanctions as a response. The fact is that—particularly as the world economy is slowing—we need free trade and commerce. Protectionism anywhere is a threat to prosperity everywhere. We have a great tradition as a trading nation, and we need to ensure, through our efforts in the World Trade Organisation, that we can maintain that position.

Miss Anne McIntosh (Vale of York)

I associate myself entirely with what has been said by hon. Members whose constituencies will be deeply affected by the cuts. I think that all who, like me, were born in Scotland are immensely proud of the cashmere industry, and proud to wear cashmere. I commend the negotiations conducted by Sir Leon Brittan, who has been zigzagging across the world in his attempts to prevent a trade war. It is in that connection that I want to question the Secretary of State, for a broader issue is at stake—an issue that goes beyond bananas and cashmere. The United States appears, by stealth, to be leaving behind its policy of free trade, and turning increasingly to protectionism. We have seen that especially in the context of bananas: it is dollar bananas versus Commonwealth bananas, Chiquita versus Geest. The economies of the Windward islands and other Commonwealth areas—and, indeed, those of European areas, such as the Canary islands—are being forgotten.

I wonder whether the Secretary of State can help us in another respect. Can he prevent a trade war from arising over Hushkit aircraft? That will be the next development. We are talking about noisy reconditioned aircraft that should be prevented from flying into the United Kingdom from 2002—

Madam Speaker

Order. The hon. Lady is a long way from bananas.

Miss McIntosh

May I leave the Secretary of State with a final thought? If we do not beat the United States on bananas, we shall have to take hormone-produced beef, which consumers in this country simply do not want.

Mr. Byers

A range of issues are relevant to the difficulties that we will face if this issue escalates into a wider trade dispute. As was suggested by my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins), it is important for us not to allow that to happen. Sanity must return to the situation. The steps taken by the United States yesterday were really for internal political consumption, rather than implying that the US was a player in a world organisation such as the WTO. That makes these developments particularly regrettable.

Mr. Dale Campbell-Savours (Workington)

Will my right hon. Friend remind the American ambassador that there is a specific interest that the United States should take fully into account in deciding what to do? I refer to the whole question of regional political instability, which the US will provoke in an area that is very near its frontiers. He might well also remind the Americans of their policy on and concerns about Cuba, and the fact that they had to invade Grenada for reasons—in their interpretation—of instability. If they carry on with their policy, they might provoke such ferocity and instability that they find themselves having to intervene again. They are on a very silly course.

Mr. Byers

My hon. Friend makes some important points. I will ensure that the strength of feeling that he has expressed is relayed to the American ambassador this afternoon.

Mr. Owen Paterson (North Shropshire)

Any breach of free trade with the world's largest economy must be deplored. Has the Secretary of State considered the fact that, if this country had joined the North American Free Trade Agreement, there would have been mechanisms through which to resolve the dispute some time ago?

Mr. Byers

I have to admit that I have been concentrating more on trying to resolve the current issue and on the pressing problems that are affecting the cashmere industry, but I note the hon. Gentleman's point and I might give it some consideration, although perhaps not for too long.

Mr. Jeremy Corbyn (Islington, North)

I welcome my right hon. Friend's response to the point that was made by my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) about the plight of Caribbean banana producers. Can he be a bit more specific about what can be done to help banana producers in the eastern Caribbean, who face an immediate loss of orders, serious unemployment problems and the resulting collapse and implosion of their economies? I understand the point about arbitration, but any delay will be disastrous for the many small, hard-working farmers in those islands.

Mr. Byers

My hon. Friend raises significant points. The Government are already taking steps. The banana recovery plan is in place and offering help. There are opportunities to diversify from the banana industry, so that alternative forms of employment are provided for those communities. Therefore, we do not intend to walk away from our responsibilities to those countries. We will do all that we can to discharge our responsibilities to them.

Mr. Nigel Evans (Ribble Valley)

I am a great supporter of the United States, but even I think that it has gone off beam with its decision. I welcome the support that the Government are giving to the cashmere industry. I hope that the right hon. Gentleman will give an equal commitment and support to Caribbean banana producers because, if they lose out, their economies will be totally devastated and we will have to give them an enormous amount of aid. Trade is far better than aid.

I am a bit perplexed because I thought that the Prime Minister was a great pal of the President of the United States. I cannot understand why he has not picked up the telephone, called Bill and asked him what support he can give to the cashmere industry in Scotland. After all, the Prime Minister was the human defence shield for the President when he had difficulties. Now that the cashmere industry in our country has difficulties, is it not about time that the Prime Minister started calling in a few favours? When will he pick up the telephone and say, "Dear Bill, give us your support"?

Mr. Byers

I am not party to the conversations that my right hon. Friend the Prime Minister may or may not have had with President Clinton, but I do know that right is on our side. It should be a question not of calling in political favours, but of the United States abiding by agreed international procedures. That is the issue at stake. As a result of the action that it announced yesterday, it is failing to do that. That is unacceptable. It needs to comply with those procedures. That is what we need to ensure happens. We need the weight of international opinion to be brought to bear on the United States so that it recognises that, yesterday, it made a bad mistake. There is time to get it right and to change its approach.

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