HL Deb 08 March 1960 vol 221 cc877-93

3.15 p.m.

Order of the Day for the Second Reading read.

THE EARL OF DUNDEE

My Lords, at the end of last July, on a Motion by the noble Earl, Lord Swinton, your Lordships had a full discussion about both the European Common Market and the proposed European Free Trade Association; and although some misgivings were expressed with which we can well understand and sympathise (while we hope they may be unfounded), from one or two industries, particularly the paper-making trade in Scotland and elsewhere. I think your Lordships were generally agreed on the objects of our policy. I think your Lordships agreed that the most important purpose of the European Free Trade Association was to lead eventually to an association which would also include the Common Market, and which we had tried unsuccessfully to get a year before. Obviously, that is a thing which will take time. Of course, it might do more harm than good if we were to press for a reopening of negotiations before the time seemed to be opportune, and there is nothing more that I am able to tell your Lordships about that at the present time.

I think your Lordships were also agreed that, even if we should fail in that purpose, this association of seven countries, in the European Free Trade Association as it is called, would not by any means be useless; on the contrary, it is a perfectly viable economic association, consisting of 88 million people who have a very high standard of living; and there is every reason to hope that, even if it were not to lead to anything wider, it will accelerate to a great extent the growth of material prosperity in all these countries.

The Convention between the seven countries forming the Association was initialled at Stockholm on November 20; it was signed by my right honourable friends the Chancellor of the Exchequer and the President of the Board of Trade on December 29, and we hope to be able to ratify it by March 31. We already have nearly all the powers we need to fulfil our obligations under this Convention by reason of existing legislation, and this little Bill is only just necessary. We have powers under the Import Duties Act to vary or abolish import duties by Treasury order; we have, of course, power under the Finance Act at any rate to vary Revenue duties. We have also power under the Import Duties Act to make origin regulations relating to goods subject to protective duties. But that power does not extend to origin regulations on goods which are subject only to Revenue duties, and since some Revenue duties have a small protective element which we agreed to remove at the Stockholm Convention, it is therefore necessary to increase our existing powers to that small extent, which is done by Clause 1 of the Bill.

Clause 1 repeats all the powers we have already enabling the Board of Trade to make regulations for determining the circumstances in which goods are to be treated as grown, produced or manufactured in, and consigned from, the European Free Trade Association area. The origin rules which were agreed on at Stockholm are fairly liberal. The figure of 50 per cent. value has been taken as a common-sense maximum but this rule is considerably liberalised by the fact that materials on the agreed Basic Materials List, whatever their actual origin, count toward the Area content of the product. That is to say, if they are on the Basic Materials List, even though they have been imported from abroad, they count as if they had been produced in the country which is exporting the goods. If your Lordships want to know what the Basic Materials are, I am afraid that I shall have to refer you to the text of the Schedules to Annex B to the Convention Approved at Stockholm. It is a rather long list of materials. It begins with human hair, whether or not washed, and then, after five or six pages, ends with such familiar objects as unalloyed bismuth, chromium, gallium, germanium, hafnium, indium, manganese, niobium, rhenium, thorium, titanium, uranium, vanadium and finally zirconium. There are, of course, a great many others in between with which I shall not trouble your Lordships.

In addition, as your Lordships may find at an earlier part of this Text of Schedules, it has been agreed that if manufactured goods satisfy certain process criteria they will be all right, whether or not the materials used to make them have been made in the exporting country. That, of course, may be an alternative which the exporter would much prefer to be judged by, rather than the 50 per cent. of value: the process test is easier, of course, for people who are not expert in accounting practice to understand. I believe that the rules are a reasonable compromise between liberality and restrictiveness. They ensure that Area goods must contain a reasonable amount of Area workmanship but also avoid undesirable disturbance of the existing patterns of trade with the rest of the world. Textiles are rather a special case. In face of the exceptional differences in price levels inside and outside the Area of raw materials for textiles, it was agreed that the 50 per cent. rule should be dropped and that textiles should qualify for Area treatment only if they met the conditions laid down in the process rules which are contained in page 93 and the following pages of this Text, and which are a little less liberal than those for other products.

Clause 2 provides that the Board of Trade may make regulations withholding the benefit of lower rate of duty if certain conditions as to non-payment of drawback are not fulfilled as provided for in Article 7 of the Convention. Drawback, as your Lordships know, means that if an importer of goods pays duty on goods which come in and then uses them to export, he can claim a rebate of the duty which he paid on their entry. Obviously, it would be unfair if he got the rebate of duty here and duty did not have to be paid at the other end when he exported the goods to another country in the European Free Trade Area, and this clause provides for arranging that he cannot have it both ways. Either he can give up the benefit of the drawback or not expect to get the benefit of duty-free entry for his export into another E.F.T.A. country.

Clause 3 contains an entirely new provision providing that Customs and Excise, on the request of another European Free Trade Area country, may verify the evidence of origin or other evidence given in the United Kingdom in support of a claim to a Convention rate of duty in that country. In signing the Convention the members accepted the obligation to do this work on each other's behalf and the obligations are reciprocal. We expect that other E.F.T.A. countries will carry out similar investigations in relation to our imports from them. Clause 4 provides that penalties shall be imposed for making a false statement. The penalties are contained in the Customs and Excise Act, 1952, relating to untrue declarations on customs matters.

Clause 5 repeals the Dyestuffs Acts. After the first War, on grounds of national security, the import of dyestuffs was prohibited except by special licence. Owing to the general system of licensing which was established during the war these old Acts have not been necessary and we have continued to keep out dyestuffs under the general licensing system; but we provided at G.A.T.T., in 1947, that we should be allowed, if licensing was brought to an end, to put on an import duty of 33⅓ per cent. instead. Now, owing to the formation of this Association, it is necessary to allow dyestuffs to have preferential treatment if they come from Switzerland or any other E.F.T.A. country; and therefore it is necessary to repeal the Dyestuffs Acts. They will be replaced by a 33⅓ per cent. duty which, in the case of other members of the Association, will be progressively reduced over a period of ten years.

These are all the things which this Bill does. It is a very small piece of machinery which is necessary for the continuance of our commercial policy towards the rest of Europe. That policy suffered a severe setback in December, 1958, but we hope we shall be able to continue our policy, in spite of that, with patience—which will certainly be necessary—and also with the approval of the other members of the Commonwealth and, I hope, with the approval of all political Parties in this country. I beg to move that the Bill be now read a second time.

Moved, That the Bill be now read 2a.—(The Earl of Dundee.)

3.28 p.m.

LORD PETHICK-LAWRENCE

My Lords, after the somewhat controversial arguments that the noble Earl and I had earlier this afternoon it is a pleasure to come to a subject on which we are in substantial, if not complete, agreement; and I have great pleasure in stating, so far as noble Lords who sit behind me are concerned, that we have no intention whatever of opposing or delaying the passage of this Bill. In fact, in another place, where considerable time was devoted to discussion of the various stages of this Bill, my Party never divided against Her Majesty's Government at all and their principal interest was in certain corollaries to the action taken by the Government, to which I shall refer a little later on.

I remember very well, however, a discussion that we had in July, which was a very full one, in which our points of view were carefully put forward. I will not repeat in any detail what I then said, but I will, once and for all, say this. My political lifetime has seen a whole cycle of attitudes towards free trade and tariffs. Starting from perfervid belief in free trade, this country gradually abandoned it and went to fairly high tariffs, and has now conic back to almost exactly the point in the circle where my political experience started. And that, I think, is all to the good, because I believe it is better for nations that they should trade and negotiate with one another, even though that sometimes leads to controversy, than that we should try to keep out one another's products, which oftens leads to very great ill-feeling. So we on these Benches thoroughly support the whole principle that lies behind this Bill and we wish it well.

With regard to the points which the noble Earl made on the different clauses of the Bill, there was the question of the proportion of home-grown product and substitution and re-shipments. We understand that it was necessary, and in fact I imagine that it was those matters which have occupied a very great part of the attention of the negotiating parties; and naturally the conclusion was taken as something in the nature of a compromise, which we understand and, in the main, support. In particular there are the detailed questions of drawback, a matter which was very largely debated in another place, and I think the Government have made out a case for what they have done. But there are certain subsidiary and ancillary matters of which this House should take special cognisance.

In the first place, this Agreement has been largely made possible for us by the co-operative attitude of other members of the Commonwealth. Had the other members of the Commonwealth stood pat on their rights under the preferential treatment accorded to them in the past, as I think the noble Earl will probably agree, it would have been exceedingly difficult for us to make successful overtures to the other members of the Seven and bring about a successful conclusion. The members of the Commonwealth have realised that in the prosperity of the whole their individual prosperity largely was improved. Therefore, while naturally preserving some of their rights and some of their privileges, they have felt disposed to take a wide view, a large-minded view, and to further the attitude of Her Majesty's Government instead of continually trying to put spokes in it, which they might easily have done if they had been more short-sighted and less public-spirited in the matter. We welcome the fact that the Commonwealth is standing with us in this Treaty, but we hope that, in view of their broad-mindedness, Her Majesty's Government (and when I speak of "Her Majesty's Government" I refer to any Government, of any Party) will try to accommodate the Commonwealth countries so far as may be possible in the shift-over from the old position to the new.

Equally, we realise that this Treaty will hit certain of our British industries pretty badly, particularly as times goes on and the tariffs are steadily and slowly reduced during the ten years to which the noble Earl has referred. We should like to feel that the Government will sympathetically consider the requirements of different industrial enterprises in this country, while not resiling from their desire to see the E.F.T.A. fully realised in all its bearings. But we believe that any Government—and we hope Her Majesty's present Government—will naturally, within that limit, do what they can to ease any hardship which may fall upon particular industries. So much for the working of the Bill itself and the convention which it is implementing.

There are still one or two other matters which must be discussed, if at all, on the Second Reading because they are not parts of the Bill; they are corollaries of the Bill. Those in another place who take the same view as I do naturally felt inclined to discuss these matters with the Government and to ask for information, and I am bound to say that, so far as I can see, the Government were not able to provide a great deal of the information which was asked for. However, perhaps the noble Earl—and I should like to know whether it is so—when he comes to reply, will be able a little at any rate, if not in full, to extend our information on the subject.

The first matter is the relationship between the Six and the Seven, between the E.F.T.A. and the Common Market. We should be very sorry if the formation of this Free Trade Association were in any way to be regarded as a hostile act towards the members of the Common Market. We do not believe that it is intended as a hostile act, and we hope that it will not be taken as such; and we hope everything will be done to prevent that impression from gaining ground. We believe that the E.F.T.A. is formed for our benefit and not as a means of attacking the Six who formed the Common Market. If the Seven and the Six were to be brought into conflict with one another, we should regard that as a very disastrous and backward step, particularly as our interests as exporters and importers are not confined by any means to the Seven as against the Six. If anything, our trade must necessarily be quite as large with both—perhaps greater with the Six than with the Seven, because they are larger trading countries and naturally we must keep up our connection with them.

So, my Lords, I hope that we may have an assurance from the Government that they will do everything in their power to carry on negotiations with the Six, and if they can give us any information on any progress in that matter we shall be particularly glad. So far as the information that has come through up to the present is concerned, I cannot say that I feel very optimistic. The members of the Six have rather resented the fact that we wanted, as they put it—as they thought it, at any rate—to get something of the best of both worlds. They thought we wanted to get all we could out of them while failing to cooperate with them in the way they would have liked us to do. Whether that be true or not, I hope there will be no such spirit in the future; and anything the Government can do to draw nearer to the Six, and any information they can give us to-day to show that they are taking those steps, will be welcomed on this side, and I am sure on all sides, of the House.

In that connection, there is a further point which also, I think, needs stressing; and it was one of the reasons why I think successive Governments felt unable to throw in their lot entirely with the Common Market from the start. While in this country these European associations, whether of the Six or of the Seven, are thought of mainly as economic, there is no doubt whatever that in parts of the Common Market there has also been a larger idea of a political union—carried to its fullest, a federation—of some countries of Western Europe, ultimately reaching even such an idea, as a United States of Europe. I am afraid that we, as a member of the British Commonwealth, have found that that idea, in the form in which it appeared to be expedient to some of the countries of the Six, was a stumbling block to us; and, within limits. I do not think anyone in this country would be prepared to go quite so far as to say we wanted 'a Federation of Western Europe, and still less a United States of Europe. We have many political ideas as to which we do not see entirely eye to eye with some of the Western countries in Europe; but, subject to that limitation, if we go as far as we can to meet the wishes of the Six I am sure that most Members of this House will be glad.

That brings me to the last point—it is one that I feel very deeply about—and that is the question of the United States of America. As I understand the position (I speak subject to correction), the United States has shown itself friendly to the Common Market because it favoured, and still favours, something like a Federation in Europe. I have often heard Americans over here boasting of their own United States of America and saying that, with all these little States that there are in Europe, there ought to be a United States of Europe similar to their United States of America on the other other side of the Atlantic. If my information is correct, the United States has therefore shown a good deal of sympathy and support for the Common Market arrangement of the Six, believing it to be largely a political as well as an economic system. But I am given to understand that they are less favourable to the E.F.T.A., which they regard as an economic system almost exclusively. They feel that they, the United States, will not only not benefit from concessions being made by this country to other parts of Europe but will actually stand to lose by them. That being, as I understand it, the basic position, I shall be glad if the noble Earl will tell us a little of what he knows (and of what he hopes, at any rate) is being done to meet that resistance by the United States.

I feel myself—and I think it would be the opinion of noble Lords on all sides of the House—that while we should resent anything in the nature of interference, and still more being dictated to, by the United States in matters of our own economic policy in the interests of our industries, and of our own budgetary, financial and social conditions, we should wish as far as possible, subject to that, and by no means allowing ourselves to be over-influenced, that the policy with regard to the Seven should be presented to the United States in a form which would not arouse their resentment but rather would arouse their support and co-operation. If the noble Earl will be so kind, in the course of his reply, to touch on the two or three points that I have made, and particularly on the question of the relationship to the Six and of our relationship to the United States, I feel that it would be conferring a benefit on us, because those questions would be out of order on the Committee stage or on later stages of the Bill. I conclude by saying what I said at the beginning: that, so far as those who sit behind me on these Benches are concerned, we give our support to the principle of the Bill, and our action will be 'to facilitate its passage into law.

3.44 p.m.

LORD REA

My Lords, the spectacle of the Conservative Party and the Labour Party welcoming back, after a period of sixty years, their old love of free trade, is perhaps a little embarrassing to those of us sitting on these Benches. Nevertheless, we welcome it, and we hope that in this case age has not withered nor custom staled this new love—and we think that "custom" is perhaps a very appropriate word. I have very few words to say to your Lordships this afternoon. I could not let this Bill go through without a word of thanks and blessing and gratefulness from these Benches, but the noble Lord, Lord Pethick-Lawrence, as usual, has stolen from me all my points and has put them much better than I could myself. I therefore will not weary your Lordships for more than one moment, but I want to say that I support very much what he said about the difference and the relationship between the Six and the Seven. The Six seems to us a little more political in character. The Seven has a very big task in front of it; and I hope the Government will work on the Seven so that things will go smoothly and harmoniously, and perhaps use it as a bridge over to the Six, so that something like a Thirteen may come about. I have nothing further to say, except to wish this Bill well and to thank the noble Earl for introducing it.

3.46 p.m.

LORD BALFOUR OF INCHRYE

My Lords, the Minister without Portfolio, who moved the Second Reading of the Bill, labelled it "a little Bill". I think that the noble Lord, Lord Pethick-Lawrence, has made it into quite a big Bill, and I am glad that he has, because he has raised certain fundamental issues on which noble Lords on all sides of the House would wish to hear the views of Her Majesty's Government. My mind, like his, goes back to the July debate, which was a full debate upon this subject. On that occasion I think many noble Lords on this side of the House, and maybe noble Lords on the other side, gave full support to the proposals then put forward by Her Majesty's Government, having in mind the project, the hope, the ultimate purpose, which the noble Lord, Lord Pethick-Lawrence, and the noble Lord, Lord Rea, spoke about a moment ago—that is, that the Seven is desirable in itself, but that it should be regarded as only a first step towards the association of the Seven and the Six. But I would go further than that, my Lords. I would then say that the association of the Seven and the Six should be considered only in relation to an association of the British Commonwealth, and that there should be a British Commonwealth approach to the economic problems of relationship with the Seven and the Six. That, my Lords, I think, is the ultimate hope of many noble Lords who believe in the political and economic destiny of the British Commonwealth.

Now I have four very simple questions to ask of the Minister without Portfolio: so simple that I am quite convinced he will have no difficulty in answering them fairly and directly and to the complete understanding of your Lordships on all sides of the House. My first question is this. As the noble Lord, Lord Pethick-Lawrence has said, and as noble Lords will see if they look at Hansard of February 15 dealing with the proceedings in another place, Her Majesty's Government have admitted, quite rightly, freely and frankly, that this Bill makes difficulties for a number of British industries. The policy of all political Parties in this country is to retain full employment, and I would therefore ask the Minister this question: can he say which of the main industries, in the opinion of Her Majesty's Government, are the ones which are going to be faced with difficulties? We all have opinions, which we expressed in the debate last July, as to which industries might be adversely affected; but, of course, our views may not coincide with those of the Government. Therefore I think we should like to know what industries the Government think will be in difficulties, and what measures the Government have in mind to assist those industries if they are particularly badly hit: what emergency protectionary steps can be taken in case of hardship.

My second question is: could the Minister explain something of the effect of this Bill on Imperial Preference, divided as to primary products and manufacturing goods? As I understand it, the present Imperial Preference on manufactured goods will gradually disappear over a number of years, so that in ten years' time Commonwealth manufactured goods will have no preferential entry into this country, but the preference for primary products will continue. I think that this is a matter on which your Lordships' House would like some clarification and I would ask the Minister to make it clear.

My third question is: Are the Government satisfied that the Commonwealth countries are with the Government in all this? The words used—carefully no doubt, as indeed is right—by the Ministers responsible is that the Commonwealth "were continuously informed." You can be continuously informed of something and be strongly opposed to it; you can be continuously informed of something and support it very fully, and you can be continuously informed of something and be rather lukewarm about it. I have shortly—next month—the privilege of going to Australia, where I shall meet, in association with the Chambers of Commerce of the Commonwealth, many Commonwealth industrialists, and I should be happy to know that Her Majesty's Government are quite satisfied that the Commonwealth countries, while being continuously informed, are also continuously satisfied.

My fourth question is this: Do Her Majesty's Government agree with the authoritative view which was expressed in the Economist last August, to the effect that in the light of these new developments the time is now ripe for a general review of the General Agreement on Tariffs and Trade, which allows for customs unions and for free trade areas with tariff barriers wholly removed from within, but makes no provision at present for preferential zones with barriers only partly dismantled? Not for the first time, the exigencies of European grouping seem to call for a revision of G.A.T.T. I will repeat my last question. Could the Government say whether they consider that this new set-up does or does not call for a revision of the now out-of-date provisions of the General Agreement on Tariffs and Trade?

3.54 p.m.

THE EARL OF DUNDEE

My Lords, I am grateful to the noble Lords, Lord Pethick-Lawrence and Lord Rea, for the support of this Bill which they have expressed. I hope very much that this may be a matter on which the Liberal Party may find itself unanimous. I will reply as briefly as I can to questions which noble Lords have asked. My noble friend Lord Balfour of Inchrye said that he was going to ask four questions which were so simple that I could not possibly have any difficulty in answering them. Whenever I hear that, it always arouses my deepest suspicions and makes me think of Election meetings. But I do not think that my noble friend's questions were either unreasonable or particularly difficult.

Which industries do the Government think are adversely affected? I said a good deal about that on July 28. We do not want to appear in any way unsympathetic towards the natural apprehensions of industries like that which I mentioned, both then and in my opening remarks to-day—that is, the paper industry—but we honestly think and hope that its apprehensions are unfounded. I do not think that your Lordships will wish me to go very fully into all the arguments. For one thing, the fears of the paper industry were only on the basis that this European Free Trade Association of seven would not succeed in merging into something bigger. If we could have got the European Free Trade Association all over Europe which we wanted, then they would not have minded. They were quite happy about that. What they are afraid of is that the Common Market may keep Swedish paper exports out of Germany and France, and that may have the effect of directing the whole volume of Swedish exports here, instead of to Germany and France. That is what really gave rise to their misgiving. We have had many discussions with them on this subject. I think that it would be fair to say that we do not think that any industry is likely to be adversely affected to a serious extent as a result of what we are doing. But there is a provision in the Convention that if there is exceptional hardship or unemployment, then special action by agreement may be taken to relieve it. The noble Lord, Lord Pethick-Lawrence, also asked the same question about cases of hardship.

Then my noble friend asked what was the effect of this Bill on Imperial Preference. I do not think that it will have any effect on Imperial Preference, except, of course, that the preference will not be effective upon goods coming into Great Britain from the other members of E.F.T.A. at the end of the ten years' period. There is no distinction arising out of the E.F.T.A. Treaty between the preference we give on industrial raw materials and on manufactured goods. The preference will still be effective in regard to goods coming here from the rest of the world. All that will happen is that goods coming from Sweden, Norway, Denmark, Switzerland, Portugal and Austria will not pay any duty at the end of ten years. Therefore to that extent, the Imperial Preference which we give against all other countries may be less valuable to the Commonwealth.

Are the Commonwealth with us? Yes; we have consulted the Commonwealth all along. They did take the view about the proposed European Free Trade Area (which we failed to get), that in the long run it would be to the benefit of all of them as well as of us and of Europe; and they are equally with us, now that we have failed to get the greater objective, in what we are doing to secure the lesser one and at the same time to continue to work for the greater one. It is only my noble friend's fourth question which I am afraid I cannot answer now. I sometimes agree and sometimes disagree with the Economist, but the question of whether this European Free Trade Association Treaty calls for a general review of the General Agreement on Tariffs and Trade, is a major question of policy which I should certainly not be prepared to answer upon a Bill of this kind. The noble Lord, Lord Pethick-Lawrence, to a certain extent covered the same ground. He mentioned Commonwealth agreement, but I think he took the right view of it, and what he said was correct. He also asked about the cases of possible hardship which I have already mentioned.

Then the noble Lord particularly wanted to know about the relationships between the Seven and the Six. He was very anxious to know that we were not trying to act with any feeling of hostility towards the Common Market; not trying to divide Europe into two opposing camps. Perhaps I might be allowed, with your Lordships' indulgence, to reply by quoting what I said about this in a debate last July: [OFFICIAL REPORT, Vol. 218, col. 731] The last thing we are thinking of doing is to use this as a kind of threat against the Common Market to force them into negotiations, by threatening to injure them if they do not do it. What we want to do is not to start a trade war of any kind, but to help Europe to unite and to show the Common Market Powers by our example, by the way this Stockholm Free Trade Area works in practice, that they have nothing to fear and everything to gain by agreeing to the larger association which we all want". It was, as your Lordships know, largely the apprehensions of French industry which frustrated a desire for a larger European Free Trade Area. We entirely understand their feelings, and we do not want to quarrel with them about it. But we think that they perhaps also had the feeling that superimposing the Free Trade Area on the Common Market was altogether too complicated and tiresome a procedure. We think, however, that, by the example of this Free Trade Association we are now forming, we may be better able than by argument to overcome the objections among the Common Market countries to forming a larger association with us.

I agree with the noble Lord, Lord Pethick-Lawrence, that some members of the Common Market may have thought that we ought not to be allowed to join them commercially if we did not also come into the political union which he mentioned. I think there is probably something in that. One reason why we cannot come into the Common Market is because it would be incompatible with our membership of the Commonwealth to do so. What we tried to do before December, 1958, and what we are still trying to do, is to move in this matter with the Commonwealth and to form a European Free Trade Area which will be consistent with, but not identical with, the Common Market.

LORD PETHICK-LAWRENCE

The noble Earl has not quite satisfied me by quoting from what he said in July. What I wanted to know was what progress they had made since July, and that is a question which he has really put aside. I want to know whether they are making any headway with an approach to the countries of the Common Market; and if not, what steps they are planning to take in the early future not to allow the matter to go by the board.

THE EARL OF DUNDEE

I thought that I had already answered that point in advance in my remarks when moving the Second Reading. I think I made it plain to your Lordships that we must act with great patience and that I could not now tell your Lordships anything more than I was able to tell you last July about progress towards a larger European Free Trade Area. Surely, in view of the sensitive feelings and perhaps misunderstandings with which we have got to deal, it is a matter in which we must act with great patience and circumspection. If we keep on rattling their windows and banging on their doors and saying: "Are you not ready to negotiate yet?" it might do more harm than good. I think it is a matter on which we must go slowly; and as I have tried to say, I believe that when this association of the Seven gets working—and it has not done so yet—that in itself will be a stronger practical argument for getting other people to agree with our aims than abstract discussion at the present stage.

LORD PETHICK-LAWRENCE

I do not want to keep interrupting the noble Earl, but what I am asking is something not quite so foolish as he would seem to suggest. I am not suggesting that we should keep on telling them that we must have a definite agreement between the Seven and the Six. But in the process of working out the arrangements for the Seven, there must be a large number of points which directly concern our other neighbours in Europe. What I want to know is how far in the negotiations that are taking place—and negotiations must be taking place—we are making headway: not, as the noble Earl suggests, banging on their doors and saying that they must agree to our coming in, but whether the contacts which necessarily arise are bearing fruit.

THE EARL OF DUNDEE

None of the arrangements that we are making under the Conventions we have signed, and under which we are undertaking to reduce duties until they are finally abolished at the end of ten years, is in any way incompatible with a larger European Free Trade area; they are all entirely consistent with it. We hope that our friends in the Common Market will before long come to see that that is so.

The noble Lord asked a particular question about the United States. We have, of course, discussed with the United States our aims in forming this European Free Trade Association, and we are sure that they understand that we have a liberal object in mind which will not harm them economically. They are participating in discussions about the future of European trade with members of the O.E.E.C.—that is, the larger European organisation—which we hope will in due course lead to fruitful results, including the improvement of economic relations with the Six. Of course the larger Free Trade Area which we had hoped to form, and which we still hope to form, was co-terminous with the O.E.E.C. countries. That is still our object, and I do not think there is any reason to expect hostility towards it from the United States.

My Lords, although none of the interesting questions which your Lordships have asked has arisen out of the Bill, I entirely agree that it is proper that on any occasion of this kind we should discuss broad questions of policy which your Lordships may wish to raise, and I have been glad to do my best in replying to those few questions which have been put. It is still our purpose, and will continue to be—and I assure the noble Lord, Lord Pethick-Lawrence, that we are not slackening in it—to see that this Association will eventually lead (as we all hope it will) to the larger union which we unfortunately failed to get a year and a half ago.

On Question, Bill read 2a, and committed to a Committee of the Whole House.