§ 2.45 p.m.
§ THE EARL OF LAUDERDALEMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government by what means they expect the German Federal Republic to keep a check on the re-export to other Members of the Community of those imports from the German Democratic Republic which are not subject to the Common External Tariff.
§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)My Lords, as my noble friend Lord Limerick explained in an Answer to the noble Lord on April 4, we have no evidence to suggest that imports into the German Federal Republic from the German 597 Democratic Republic are being re-exported on a significant scale to this country. If the noble Earl has any such evidence, I shall certainly look into it.
§ THE EARL OF LAUDERDALEMy Lords, in thanking my noble friend for his reply, may I ask him whether he is aware that it is not so much that one is apprehensive about the leakage taking place now, but that one has a reasonable ground for apprehension about the future? Regarding the Monetary Union (to which the Prime Minister referred this week-end, and about which the Commission have spoken a number of times), is he aware that there is a possibility of it being torpedoed owing to the balance of payments of the Common Market being upset through this leakage channel from East Europe via East Germany into Western Europe and on again?
§ LORD DRUMALBYNMy Lords the position at the present time is governed by a current agreement regulating trade between East and West Germany, the 1968 Inter-Zonal Trade Agreement, which provides for the recognition for this trade in both directions as internal. But under the Treaty of Rome Protocol other Member States have the right to take appropriate measures to prevent difficulties arising from it.
§ THE EARL OF LAUDERDALEMy Lords, I appreciate what my noble friend has said, but could he say what indicators in the Common Market we should look at to see whether or not there is any significant change in the situation?
§ LORD DRUMALBYNMy Lords, I imagine that the first indicator would be the imports from the German Democratic Republic into the German Federal Republic. Secondly, it is perfectly open to any customs officer who has reason to believe that the goods originated in East Germany to take account of that and to ensure that these goods form part of the quota, or even to levy a duty on them, and leave it to the importer to prove that they are not of East German origin.
§ LORD SHEPHERDMy Lords, could the noble Lord say where a Member of Parliament is able to find the statistics of East German imports into West Germany? Could the noble Lord say how, as a buyer, I would be able to find 598 out that something manufactured in East Germany had been incorporated in a piece of machinery assembled and exported by a manufacturer in West Germany?
§ LORD DRUMALBYNMy Lords, we are concerned here with the disruption of trade which is subject to quota. As to the question of purchases from the German Democratic Republic, my noble friend Lord Limerick attached a table to his Answer to the Question on March 6. I imagine that possibly these statistics could be found out from the O.E.C.D. If the noble Lord wants to know where to find them I shall be glad to let him know.
§ LORD SHEPHERDMy Lords, could the noble Lord say—to take what he said in his original Answer—where a buyer would be able to find out about an East German manufactured component which was part of a West German assembly?
§ LORD DRUMALBYNNo, my Lords, I cannot say that; obviously not. That is not the kind of question with which we are concerned. This would obviously be in accordance with the Protocol. It would have a certificate from the West German Government and would be treated as internal trade.
§ THE EARL OF LAUDERDALEMy Lords, as on previous occasions we have been told on the Floor of the House by the Minister of State at the Foreign and Commonwealth Office that there are heavy tax disincentives on West German re-exports of imports received from East Germany, could we find out to what extent it has been necessary to bring those disincentives into play?
§ LORD DRUMALBYNMy Lords, the tax disincentive to which my noble friend refers lies in the V.A.T. system. The V.A.T. system is operated in such a way as to give a positive incentive to imports into the Federal Republic from the Democratic Republic. That advantage is lost if the goods are re-exported.
§ LORD DAVIES OF LEEKMy Lords, is the noble Lord aware, following a supplementary of my noble friend, that it is one of the actions of society that unless we buy from some other countries we cannot expect to sell to them? Furthermore, 599 is he aware that the screwball economies of the European Economic Community are such that if Eastern Europe and the Communist world wait long enough they will have Himalayan mountains of butter, eggs, meat and everything else exported to them at about half the price of that for members of the Community?
§ LORD BOOTHBYHear, hear!
§ LORD DRUMALBYNYes, my Lords, but what we are really talking about is goods that are subject to quota; and if you have quota regulations then it is sensible to have some means of checking that they are observed. We consider that if the quota restrictions were being evaded this would be one of the difficulties to which the Protocol refers and we could take appropriate action.
§ LORD SHEPHERDMy Lords, would not the noble Lord agree that there is a quota and a duty on imports from Eastern Germany into Britain, but it is possible, because of the point to which the noble Earl, Lord Lauderdale, has drawn our attention, for East German machinery plants to come into this country as components of West German machinery but not be affected by quota or by duty?
§ LORD DRUMALBYNYes, I suppose that that is true, my Lords. But what we have to look out for are difficulties arising out of this inter-zonal trade between East Germany and West German. I would doubt whether that would give rise to any difficulty.
§ LORD SHEPHERDMy Lords, would not the noble Lord agree that the West Germans are in fact in a very advantageous situation as a result of their agreement with Eastern Germany?
§ LORD DRUMALBYNMy Lords, they are in effect giving something like a regional employment benefit to East Germany, and they are in that way enabling East German goods to compete favourably with their own goods; but that of course does not affect the position when those goods are re-exported to other Community members.
§ LORD BROCKWAYMy Lords, is it not the case that at the Ambassadors' Conference in Helsinki it has been agreed that this subject of East/ West trade should be on the agenda for the Meeting of Foreign Ministers in June and July in connection with the European Conference for Security and Co-operation? And may we hope that Her Majesty's Government will contribute then to the solution of this and of other problems?
§ LORD DRUMALBYNYes, my Lords, but at the moment we are bound by the Protocol of the Treaty of Rome. It is always possible, of course, for that Protocol to be re-negotiated, as in fact it was in 1968.
§ BARONESS GAITSKELLMy Lords, may I ask whether there is a quota of goods from either Poland or Hungary? I have noticed lately with two dresses I have bought that one was made in Hungary and the other was made in Poland—and they are both extremely good and cheap.
§ LORD DRUMALBYNMy Lords, if I may say so, that is an entirely different question.
§ LORD BOOTHBYMy Lords, is there any limit to the amount of subsidy that Her Majesty's Government are prepared to pay for trade with East and West Germany?
§ LORD DRUMALBYNMy Lords, I do not think that that question arises out of the Question that I have been asked. It really is a different question.
§ THE EARL OF LAUDERDALEMy Lords, as a supplementary question may I ask my noble friend whether he would agree with a short point, which is that the quota system is in fact the barometer by which we can measure this trade volume?
§ LORD DRUMALBYNMy Lords, it is, to the extent that it is possible to identify goods coming from East Germany through West Germany. This is the problem and this is the sort of difficulty that was contemplated by the 1968 Protocol. But the point is that this difficulty does not seem to arise at the present time.