UK-US Relations (Hansard, 15 February 2001)

§ Mr. Michael Fabricant (Lichfield)

The debate is about the United Kingdom, the United States and Europe. In a recent MORI poll, people were asked: In a crisis, which of these—Europe, the Commonwealth or the United States—do you think would be Britain's most reliable political ally? The result was 16 per cent. for Europe, 15 per cent.—surprisingly—for the Commonwealth, and 59 per cent. for the United States.

I believe that there is a special relationship, but that view is not held by everyone. The director of historical studies at Cambridge, Professor David Reynolds, exemplifies the view that the special relationship is artificial. He claims: Recognising that the special relationship has been in part a deliberate British creation—a tradition invented as a tool of diplomacy—helps us appreciate the artifice that lays behind fulsome official British rhetoric about America. I disagree. That is unrealistic. The special relationship is solid—rooted, as it is, in trading, defensive and societal interactions on a massive scale. One need only consider the trade flows between our two nations or the 3 million Britons who visit the US each year.

The US and the UK rank first and second, respectively, as Our two countries are also the largest recipients of foreign investment, as well as one another's largest foreign investor. United States investment alone accounts for approximately 40 per cent. of the UK's entire of foreign investment, and in 1998, the total value of Anglo-American trade reached $165 billion—larger in value than the economies of most nation states.

Neither is this massive mutual investment in decline. Between 1991 and 1997, the value of UK exports to the US increased by 50 per cent., as did UK imports from the US. In a world where 51 of the 100 most valuable entities are not nation states but corporations, it is Anglo-American corporations that lead the way, accounting as they do for almost half of worldwide merger and acquisition activity during the last 20 years of the 20th century.

Despite that massive mutual investment, barriers and threats to the special relationship remain, especially in the spheres of trade and defence. I shall begin by examining barriers and threats to trade, before discussing the dangers to the Atlantic alliance.

Although successive general agreement on tariffs and trade and World Trade Organisation accords have reduced trading tariffs to an average of just 2.6 per cent., much Anglo-American commerce remains subject to tariffs as high as 15 per cent. In a report last August, the US International Trade Commission estimated that the elimination of those tariffs would boost bilateral trade by around 10 per cent., and would have the effect of lowering prices in the United Kingdom. I know that the Minister has seen the ITC's report, in which it said: Despite the healthy trade relationship between America and the UK, trade barriers persist. They are evident in agricultural products; pharmaceuticals; textiles; apparel and footwear; machinery and equipment; and services. 558 That is bad news, because the report was about the impact on the United States economy of including the United Kingdom in the North American Free Trade Area.

Ever since entering the single market, the UK has entrusted the terms of her foreign trade to the European Union, and thus our scope for unilateral action to reduce tariffs against the US is unfortunately limited. We can and must do more to bolster the feeble efforts of the European Union to conclude a free trade agreement with the United States.

Under French pressure, the attempts of Sir Leon Brittan to conclude an agreement collapsed repeatedly. On everything from bananas, to beef, to offshore tax rules, considerable differences remain. The broader problem is that, rather than focusing on the extension of free trade, the EU Trade Commission has focused on the extension of its own authority. In the use of its regulatory powers over trade, the EU could learn a lot from the United States, and I shall explain how.

The instrument allowing the regulation of trade between the component states of the US is the interstate commerce clause of the constitution. Specifically, the ICC gives the federal Government power to regulate trade between, but not within, the 50 states. Like the economic harmonisation provisions of the Maastricht treaty, liberal interpretations of the ICC by Congress, and at times by the Supreme Court, have allowed the regulation of intrastate activities when they have had but tenuous effects on interstate commerce. An instrument designed to facilitate trade between states thereby became a vehicle for torrents of federal regulation. In much the same way, Brussels has used the aim of economic harmonisation to justify its regulation of everything from Europeans' working hours to the shape of their fruit.

Yet in the US, at least, there has been a sea change in the federal Government's use of their power to regulate interstate commerce—a change that Brussels could do well to learn from. That change came in 1995 with the Supreme Court case, United States v. Lopez. Chief Justice Rhenquist's ruling in Lopez turned on his reasoning that if all that is required to justify the regulation of an intrastate activity is that it is shown to possess some small nexus with interstate commerce, there would exist in America the potential for not merely federal, but completely centralised government. Rhenquist' s jurisprudence contains a powerful lesson for the EU: power over interstate commerce should be used to facilitate trade, not as a Trojan horse for extraneous federal regulation.

The EU lacks the check on centralisation provided in the US by the Supreme Court, whose recent rulings on the limits of interstate trade regulation should be a lesson to Brussels. The court's ruling in Maryland v. Wirtz, for example, attempted to delineate how the federal Government could use their power over interstate commerce to impose wider regulation. The decision on Maryland stated: The Supreme Court has never declared that the Federal Government may use a relatively trivial impact upon commerce as an excuse for broader regulation of state or private activities. Were something of the court's wisdom applied to the European Union, we could be spared meddlesome interventions concerning the milk content of chocolate, hairdressers' tea breaks—with which I am very familiar—and other such trivia.

Unfortunately, Brussels is an unlikely student of Chief Justice Rhenquist, not least because its governing ambition has been to achieve, and not—unlike John Locke 559 and the American constitution—avoid, the total hegemony of government. In a perverse ordering of priorities, Brussels has failed to stop its constant distortion of interstate trade with public subsidies and price fixing. Let us consider the heavily subsidised farming in continental Europe, and the state airlines.

In any event, countries such as France do not seem to share the respect for law shown by Britain and the United States. We enforce European Union directives and law, while other countries seem to ignore them. This debate follows an earlier debate on BSE. The disrespect for law is exemplified by France's continued refusal—against EU law—to import British beef, though it be free of BSE.

I want to say something about defence, and in doing so to endorse the popular and correct opinion that the Atlantic alliance is in danger. A convenient myth has evolved in Europe that the Russian threat has—for want of a better word—evaporated. In fact, Russia's perestroika may prove vestigial, with the future election of an autocrat. Even some of Vladimir Putin's recent actions on control of the media should give some cause for alarm. Russia's present governing arrangement is more plutocratic than democratic, and remains highly volatile.

The notion that Europe can relax in the company of such a neighbour, and that the EU can pursue policies undermining NATO and establish a defence union characterised by underfunding, undermanning and tension between its competent nations, is misguided. We have already seen Russia loosen her criteria for the use of nuclear missiles, while Vladimir Putin made increasing military expenditure by 50 per cent. central to his presidential campaign.

A record 30 per cent. of Russia's defence spending was devoted to military procurement in 1999. Putin also backs the development of a new generation of multiple re-entry missiles, capable of penetrating the most sophisticated missile defence systems yet envisaged. Conversely, European nations have been making drastic cuts in their defence expenditure. In devoting, on average, less than 2.2 per cent. of gross domestic product to defence, they have in effect been freeriding on United States defence expenditure, fuelling calls by Condaleezza Rice—among many Americans—for US forces to withdraw from Europe completely. Following a decision rightly criticised by the US's outgoing Defence Secretary, William Cohen, Germany reduced her military expenditure in December 1999 to a pitiful 1.9 per cent. of GDP. The UK now spends just 2.5 per cent. of her GDP on defence.

Especially worrying is the establishment of the 65,000-strong European army at the 1999 Helsinki summit. It has neither adequate funding nor the necessary co-ordination to realise its aims. In fact, that may be just as well. President Chirac has said: The object of the European defence identity is to contain the United States". How ridiculous!

Meanwhile, the Franco-German summit, which also took place in December 1999, contained declarations not only on a shared military intelligence satellite, Syracuse 3, and a rapid reaction force, but on a heavy-lift capacity. Dr. Jonathan Eyal of the Royal United Services Institute has estimated—excepting the unlikely prospect of the United States lending Europe a fleet of Galaxy 560 aircraft—that acquiring heavy-lift capacity would cost the already overburdened European taxpayer $100 billion a year for the next 10 years.

The Western European Union, moreover, has now been folded into the EU. From France's perspective, subsuming the WEU is designed exactly to allow Europe one day to jettison NATO altogether. Why else, indeed, would the ambitious Javier Solana opt to leave NATO in order to head the—formerly unimportant—WEU? France's desire to undermine NATO resurfaced in January 2000, when Paris sided with China and Russia to argue that the Pentagon's proposed national missile defence system contravened the 1972 anti-ballistic missile treaty.

The question in Washington is, of course, why should we lend Europe the equipment that its defence ambitions require? While in joint command through NATO the US has shown herself prepared, when asked, to contribute to the solving of essentially European conflicts. The US air force dispatched some 90 per cent. of the bombs dropped on Kosovo. However, denied a commanding role, the US would be foolhardy to sign over its NATO equipment, especially when only a few days ago the President of the European Commission, Romano Prodi, said: The EU should aspire to be a world power—not just a trading bloc, but a political entity. We now hear that the European army—for that is what it is—is looking to use discarded Ukrainian military equipment as a means of operating without US support. If it were not so serious, it would be laughable. The British Government may be too blind to see it, but it is just such anti-Americanism that continues to motivate French support for European defence. The decision to allow American members of NATO's operations centre, SHAPE, to sit on the new EU military committees, for example, was greeted in France with unbridled fury.

The conclusion to be drawn from all that I have said today is that there exists a yawning gap between our formal, treaty ties to the Europe Union on the one hand, and our cultural and trading ties with the United States on the other. The Government must be resolute and take action to narrow and close this gap. As a first move, they must press for the abolition of tariffs on Anglo-American trade—whether in co-operation with the EU or, if necessary, unilaterally. The Government must also resist the drive toward a fully fledged European army.

Smaller but no less significant measures could also be taken to bolster Anglo-American relations, such as allowing citizens of the US the same speedy passage through UK immigration as is enjoyed by EU citizens. Certainly, it is an indignity to thousands of former American and Commonwealth servicemen—who fought for Britain, whence many of them hailed—that they must queue as "aliens" to enter our country.

There can be no doubt that a special relationship exists between the US and the UK, but that relationship must find formal expression if it is to survive and prosper. As the loose relationship of Spain and Portugal with South America reminds us, cultural ties alone are not enough to foster close co-operation. The use of trade policy to bolster Anglo-American relations is now almost entirely denied to us, thanks to our membership of the European Union. The expression of the special relationship in defence co-operation must not be allowed to go the same way.

Britain is reaching a critical point in its history. It is being driven along, l fear, by the EU's desire to "contain the United States"—another phrase used by President 561 Chirac. How quickly France forgets its debt of honour to the American war dead who fell on the beaches of Normandy 57 years ago.

The Kaiser used to say, "Those who are not with us are against us." I hope that Britain will not be forced into a choice between the United States and the European Union. However, if such a choice were ever forced upon us, I have no hesitation in saying that our destiny should lie with English-speaking nations such as the United States. They share with us a common legal system, a respect for the rule of law, a common history, and a common sense of democracy and decency.

§ The Minister of State, Foreign and Commonwealth Office (Mr. Keith Vaz)

It is always a pleasure to respond to the speeches of the hon. Member for Lichfield (Mr. Fabricant). I well remember my visit to Lichfield at his invitation in my previous incarnation when he was mobbed by his constituents in the high street, all asking for the name of his hairdresser.

It is a great pleasure also to see in the House my hon. Friend the Member for Hastings and Rye (Mr. Foster)—in my view, the best Member of Parliament that Hastings and Rye has ever produced. I look forward to visiting his constituency in March of this year.

This is an important and timely debate, as it is being held near to the visit of the Prime Minister to President Bush. We wish the new Administration well in their endeavours. As the hon. Gentleman knows, my right hon. Friend has just returned from a highly successful visit to the United States where he met the new and dynamic Secretary of State, Colin Powell.

Britain and the United States have a uniquely close relationship, based on common values, common interests and a common language. I want to mention a couple of those aspects. Our political systems are founded on a shared liberal outlook and values: freedom, free speech and free trade. Britain's strategic partnership with the US in NATO remains fundamental to the national security of both our countries. The US, as the hon. Gentleman said, is our biggest single export market. We are the biggest investors in each other's country.

There are close personal ties between our peoples at every level. More happens in the US that is relevant to Britain than in any other country. In the limited amount of time left to me by the hon. Gentleman, I hope to explore the fact that our position as a leading player in the European Union enhances this relationship.

The transatlantic relationship will remain strong because our vital national interests coincide now as much as they ever did. The Government are committed to working with the new Administration as we have done with previous ones in pursuit of our common interests. President Bush has confirmed to the Prime Minister that he shares this determination. The warmth shown to my right hon. Friend the Foreign Secretary by the Secretary of State bodes very well for the future. The visit of my right hon. Friend the Prime Minister to Washington from 22 to 24 February will re-cement this important relationship.

Last year, Britain sold £28 billion, $40 billion, worth of goods to the American market, and bought about the same amount of American goods. We sell more to Boeing 562 than we do to many countries. British interests in many of the 50 states individually outweigh our interests in most other countries. Year after year, Britain and the US are the biggest investors in each other's country. We are now the most important overseas investor in California, having just overtaken Japan. Some 5,600 American companies see Britain as their base in the European single market.

It is important to explore some aspects of what the hon. Gentleman said. First, he made a number of proposals which I shall dub "the Fabricant proposals", if I may. I will study them. If we can do anything that will enhance the relationship between the US and Britain, we are certainly willing to do it. If he would like to come to see me to discuss the proposals, I will be more than happy to do that. No doubt that will feature prominently on his website. I know that other meetings I have had with the hon. Gentleman have reverberated around the world.

The US seeks to ensure that Britain is a leading player in the EU. Since 1 May 1997, the Government have been committed to playing that leading role. We have been supported by the American Government and that has not in any way affected the special relationship we have with the US. It is because we are playing a role in Brussels and shaping the agenda in Europe that the US benefits, as do our business people and our own people.

The second point that the hon. Gentleman raised concerned defence and foreign policy. That gives me an excellent opportunity to clear up some of the misunderstanding sown by the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), the shadow Defence Secretary, as he travels like a weasel to Washington on various occasions trying to spread disharmony among those on the Hill.

We are absolutely committed to NATO, which forms the cornerstone of our defence policy and we will do nothing to undermine it. However, we believe that our relationship with our European partners through the new European defence policy will lead to NATO's enhancement. [Interruption.] The hon. Member for Lichfield makes a funny face, but I assure him that we will act only when NATO does not wish to act. We will act only in co-operation and in consultation with NATO and on those key tasks—the Petersberg tasks—that have been agreed by successive Governments. I remind the hon. Gentleman that they were agreed by Sir Malcolm Rifkind when he was Secretary of State for Defence. The initiative is therefore not new, but has been on-going under several different Administrations.

Our discussions with our European partners and colleagues in the past year—certainly since the St. Malo conference when the matter was first raised between France and Britain—show an absolute desire to ensure a co-ordinated approach. Colin Powell and the American Government understand that, and have supported what we have said. That does not prevent an individual, usually from a former Administration, from appearing on "Newsnight" and being presented by Mr. Jeremy Paxman as a great authority on the subject. Of course, people have raised anxieties, but they do not need to worry. We will not act without our NATO partners. That has been agreed and approved by all the European leaders. My meetings in the European Council suggest that the matter will be developed in the next weeks, months and years.

563 We do not need to choose between the United States and the European Union. We are in the European Union, as are eight of our top 10 trading partners and 700,000 British businesses. A huge amount of trade takes place with other European Union countries, yet some Conservative Members, when they attend our proceedings, say that Britain should withdraw from the European Union. We believe in a stronger Britain in a wider Europe. That is why we support the admission of applicant countries to the European Union. The hon. Gentleman tries to be tough and macho on the issues that we are considering, but he does not need to be. I know he accepts that Britain is a European country and that our future is in Europe.

We can maintain strong relationships with Europe and the United States. Indeed, the stronger the ties with the United States, the stronger the ties with other European countries. We are determined that developments in Europe should strengthen, not undermine, our strategic partnership with the United States. Britain's pivotal role in the transatlantic alliance is valued by our friends in Europe and in the United States.

564 Any loss of influence in Europe would damage our economic and strategic relations with the United States. One of the best ways to maintain Britain's influence and interest in the United States is for us to continue the work of the Prime Minister and the Foreign Secretary in the past four years and ensure that we are key players. The Prime Minister's role at the Nice summit last month further strengthened our influence in Europe and therefore our relationship with the United States.

As the Foreign Secretary has said, however, it is not a choice between the United States and Europe. There is no tension. The tension is created by those who want to sow mischief. I urge the hon. Gentleman, who I know thinks deeply about these matters, to reconsider some of the views that he has expressed today. Perhaps by the time that we meet to discuss the Fabricant proposals, he will be able to tell me that he strongly supports our relationship with the United States and strongly supports our relationship with our European partners.