EUROPEAN COMMUNITIES COMMITTEE REPORTS

HL Deb 27 November 1975 vol 366 cc408-53

3.59 p.m.

The Earl of SELKIRK rose to move, That this House takes note of the Thirty-Seventh Report of the European Communities Committee (Session 1974–75) on the Lomé Convention. The noble Earl said: My Lords, I beg to move the Motion which stands in my name, and I do so as a member of the Select Committee on European Affairs and the Sub-Committee which deals particularly with this matter. We have in fact made two Reports; one of them is, as to almost half of it, statistical, and the other we have tried to make more easily readable and explanatory. We had no doubt whatever that this was an important matter which should be discussed in this House. Before dealing with it, may I say that we are grateful to the printers for doing a very quick job. We were a little late in getting out the Report because we waited until we had been to the Commission. The printers have done a very good job, and I am most grateful to them.

My Lords, perhaps I may make one other general remark. I believe that increasingly people are beginning to realise that what is happening in Brussels will be of considerable importance to many people, and I think that people would like to understand better what is happening. I believe it would be of assistance if they could have something in the nature of a Queen's Speech, indicating what Brussels would be doing in the current year. This idea was put forward by the noble Lord, Lord Rhodes, and it would greatly help people. It would not be a Queen's Speech, but it would be some outline of the work which they proposed to tackle in the corning year.

If I may turn to the Treaty, while I am confident that the Government will ratify this, may I ask when they will do so? May I also ask that they should do so with rather more warmth and welcome than they have done up to the present time? This Treaty has already been welcomed by the Kingston Commonwealth Council and has been unanimously passed by the European Parliament. It is already in part, in the interim stage, in operation. Nine months have gone by and it has not been ratified. In the Government's White Paper on aid it is not even referred to, although they refer to one of the benefits that arises from the Lomé Treaty, though there is no mention of it in the Queen's Speech.

All these are small matters which, to the outside world, give the impression that the Government are not enthusiastic about the matter. As the noble Baroness well knows, two-thirds of the African, Caribbean and Pacific countries have already ratified; that is 31. Only one European country so far has ratified. It falls to Her Majesty's Government to give every possible encouragement to other countries to get on with it just as quickly as they can. This is a very important Treaty. I was proud to hear M. Cheysson say that, if it had not been for the United Kingdom, this Treaty would never have taken place at all. This is one of our great contributions, and it is of importance to us because it deals with two matters which concern the Commonwealth which I and many other noble Lords felt was vital to get settled. Indeed, we can be pleased that it is better than we could reasonably have hoped for.

I will not deal in detail with the Treaty—it would weary your Lordships if I did so. I will present a general picture. As the noble Baroness said, it is an extension of the Yaoundé Treaty, but with a considerable number of additions to it. To the 19 original States, in fact 21 Commonwealth States have been added, and six other African States, making altogether a population of 500 million people. It is not very likely there will be any additions to this because additions can be made only by election by institutions of the Lomé Treaty itself. The Treaty is governed by institutions; it is a contract between the ACP States on the one hand, and, on the other hand, the European States. It avoids any question of patronage. Here are people meeting in parity and discussing what it is they want to do. It includes the Council and Assembly. I do not know how many will be in the Assembly; it may be 92 or 184. The European representation will be from members of the European Parliament; this may be 46 or 92 in number.

The Treaty covers a very wide field. I call it a trade treaty with aid added. Some people may put it the other way. This is a matter of opinion. What is important is that it creates a relationship. What that relationship will be is the kernel of the value of this Treaty. It covers grants, soft loans, hard loans, risk money, regional schemes, technical and marketing assistance, assistance for stabilising export earnings and free access to the European market without reciprocation. That is very important because it means the ACP countries do not have to reciprocate with free access to their markets; but they cannot discriminate between one country and another in Europe.

Perhaps the most interesting novelty is the STABEX system which will enable countries with more or less a monoculture of sonic kind of exports to get compensation if the export earnings were to fall considerably. One must regard this as a valuable experiment, something which will be tried out. It may be developed or it may not be of great importance. So far as the United Kingdom is concerned, I should like to make three points which are of particular significance. The first point is sugar. This replaces the Commonwealth Sugar Agreement. I tried to invite the noble Lord, Lord Campbell of Eskan, to speak today, but unfortunately he has to be in Paris. He has written an extremely interesting article, and I should like to make two short quotations from it. He says: This creates a healthy relationship between cane and beet producers. And further: The Community may be proud of the sugar protocol. There is also provision on similar lines regarding rum and bananas.

The second point is that it creates a firm relationship between the Francophone and Anglophone countries of Africa. Anyone who knows Africa knows a separation existed. We shall now have a good and firm association. The ACP countries have been able, throughout the negotiations, to act with unity. This is remarkable considering the diversity of areas and places with which they have been concerned. They are now working as an African, Caribbean or Pacific group with a European group, while not entirely destroying the traditional link which may from time to time be of value.

The third point which struck me—and this goes slightly outside the subject we are discussing—was the outward-looking policies which appeared to me to be dominating the Commission. They fully recognise certain things. First, the growth of international trade from developing countries. This is wider than the Lomé countries. The figure I received showed that international trade arising from developing countries was greater than that from the European Community. It is about twice that of the United States of America and, of course, a good deal more than that of Russia. That indicated to the Commission the extreme importance of getting into this line of business.

Europe itself is not rich in natural resources, and it is extremely important to extend European trade so that the fullest possible use could be made of natural resources throughout the world. Our contribution in this is technology, finance and marketing experience. The Commission attached tremendous importance to the unrestricted movement of trade. They did not view with favour the suggestion of any restrictions in this country. No doubt the Council will in due course have some comments to make when these matters are discussed there.

So far as the Lomé, Treaty is concerned, when one has free access to the market in this country, one has to look to see whether there is any protection against serious disturbance of our trade here. That, my Lords, you will find in Article 10. Here we have clear evidence that that is adequate to meet quickly any emergency. The evidence we have says that the safeguard provisions of Lomé are so generally and widely defined as to be all-embracing in the situations which they cover, though in these cases the Lomé Council would have to be informed of any action taken.

This Treaty derogates in some degree from the GATT. We believe GATT will not object, particularly because of the absence of any reciprocal requirements on the ACP countries. It is proper to emphasise that the Commission gave me the impression that they attached tremendous importance to the multinational principles on which GATT was founded. There is no intention of disregarding the GATT provisions. The Lomé unit of account, I am glad to say, will be dealt with by the noble Lord, Lord Roberthall. The information I have is that it is calculated every day, and I believe it works satisfactorily. I will leave it at that.

The main criticism advanced of the Lomé Treaty is there are too few countries and not enough money. We have had a short discussion on this already with my noble friend Lord Cowley. This is an agreement between 55 countries. The countries joining are laid down in Article 109, Annex 4, Protocol 22, and are there to be seen. It has been said, in regard to the very large food aid which is given to India, that the General Preference Scheme is something of which it can take advantage, but it is also something of which it does not seem to be taking a great deal of advantage. Of course, this is not the only scheme in the world and there arc other ways in which the Indian sub-continent can be helped; but it may not be unfair to say that in some circumstances the best is the enemy of the good. Here we have a very considerable undertaking and our major task is to see that it works well.

If I may, I should just like to look back a little, because it is very important to get it started in the right way. Some 300 years ago, when Europe first began to come into contact with Africa, Asia and where you will, the first contacts were concerned with trade and they developed into some colonial relationship or other. Now, even with many good intentions and much achieved that has been of great value, there is no doubt that those earlier relationships have turned sour, and one might even use a stronger term than that. We now have the opportunity to set up a new type of relationship, and I should like to emphasise how important it is that this should be carried out with great diplomacy and skill. I make these suggestions because it is particularly important for the new organisation to start properly.

Let me take, for instance, the institutions. The Council will consist of 55 members and the quorum will be 37, so that the Council will not be valid unless 37 people are present. They hope to have one meeting a year and hope that decisions will be unanimous. I think this is a trifle optimistic, and a very great deal of skill will be needed if it is to work properly. We have provision for good offices and, of course, for arbitration. Nevertheless, I think people with experience and ability will be needed to achieve the best results.

This is, of course, another multilateral aid organisation. I do not know exactly how many such organisations we belong to—it may be a little more or a little less than two dozen—but are they adequately co-ordinated? I am not saying that one should have a central register, because many of these organisations deal with confidential matters and most of the work is done, more or less, on a person-to-person basis. But I should like to ask: should not something more be done to ensure that all concerned know what is being done and how it might be co-ordinated? Here there is a very real conflict between skill and experience, and the need to spread appointments through nine nations. The fact is that experience of this type of work lies primarily with Great Britain and France, They are, by far, the two countries most experienced in the handling of matters such as these, and I say quite positively that we simply must get the best people. The Government should impress on the Commission that we must get absolutely the best people to work it.

I should also like to ask whether the organisation of the Commission is really orientated at present to operate a highly complicated and detailed Convention such as this. There are very great problems of administration involved. There are six languages and nine nations, and there are roughly 2,000 executive officers, plus supporting officers, and approximately 1,500 people engaged in the task of translation. This is an administrative task of the first order of magnitude and to obtain the confidence of the ACP countries in an organisation like this and to ensure they are satisfied that they are being fairly dealt with, will not be easy. They will not be inspired by the mechanism of the machine, but they will want to know a person to whom they can go and in whom they can trust. I shall never forget the acid remark made by the late Sir Walter Elliot in talking about bureaucracy, Not a soul to save, nor a bottom to kick. I do not say this critically, but I feel that unless the ACP countries know somebody to whom they can speak with confidence they may not feel that they are being satisfactorily dealt with.

We in this country have always emphasised personal responsibility. Noble Lords and Ladies sitting on the Benches opposite have a notional responsibility for everything that happens in their Departments; and, of course, this happens also in the other place. Therefore, we should emphasise that there should be someone to carry personal responsibility. I should like to suggest that there should be a Director-General of Lomé, someone who is personally responsible for seeing that the whole thing works properly. I do not wish this to be taken as a criticism of Mr. Cheysson, for whom I have a great admiration; but he has many things to do and cannot take care of every detail. It is so important to get this started off on the right foot, and something like this would be a great achievement.

I believe that this is a considerable step forward—perhaps the greatest thing that has been done by the Community since we joined it. There may well have been tense moments during the negotiation period, but none of them would have taken place had we not been there. Therefore, I would ask the Government to ratify quickly, and to do so with the utmost encouragement to other nations and with a sense of pride in what we have been able to achieve.

4.17 p.m.

Lord ROBERTHALL

My Lords, I have been asked to call to your Lordships' attention the Twenty-eighth Report of your Select Committee, dealing with the Lomé unit of account. I ought perhaps to make it absolutely clear to your Lordships that because the two Reports deal with different aspects of the Lomé Convention it was felt that it would be convenient to discuss them together, although I imagine I shall have to move my Motion formally without further debate at the end of our discussions.

I am afraid that the Report with which I am dealing is very technical and I hope I shall not weary your Lordships with a second-rate lecture on economics. No doubt I shall make some mistakes and, if so, I hope that the noble Baroness who is to wind up for the Government will put me right. I feel the best way to introduce this Report is to say something in general about the new international units of account, and then try to put the Lomé unit in its place there. A unit of account is a unit in which one keeps books, and we are most familiar with that in the form of keeping our accounts in money. The international unit of account was, for a very long time, either gold or some currency which was fixed in terms of gold, so that in effect all the international books were kept in terms of gold.

That was a nice, convenient system. But after the last war the Bretton Woods Agreement was constituted and all the leading Western countries agreed to fix their parities in terms of gold. That was done, and so we had this nice simple system which, combined with the General Agreement on Tariffs and Trade, gave us a very large expansion in European trade. Unfortunately, at least in this context, at the same time we all embarked on full employment policies and they led, by one source or another, to inflation; and because we all had different successes or failures in dealing with inflation our prices, and therefore our rates of exchange, got out of step. There was too much strain on the system. We struggled along and had an occasional devaluation; but finally the United States gave it up, and since then there has been no common unit of account. All the currencies fluctuate against one another.

It was that which led to the need to have book-keeping units for certain contingencies that might arise. Broadly speaking, the contingencies arise when a number of countries are engaged in a common operation and therefore have to keep books in some common form. That is what a unit of account is. The most famous one, of course, is the Special Drawing Rights of the International Monetary Fund. That began as a kind of money rather than with the particular purpose of a unit of account. But after the departure from gold people began to ask: "What is a Special Drawing Right worth?". It was that which led to the concept of a basket of currencies. It was said: "All right! If the IMF goes bust the member countries must all subscribe in accordance with their shareholding, so to speak. They will all have to put in bits of their own currency." That is what a Special Drawing Right is worth, and that is the famous basket of currencies, but it is also used as a unit of account mainly between central banks. If one wants to know the value of one's own currency in Special Drawing Rights, it is calculated from day to day and, as some of your Lordships will know, it is quoted in the Financial Times every day.

The unit that most concerns us is, I suppose, the EEC unit because the Community of which we are a Member has to carry out a very large number of financial transactions in which all the Members are engaged. They had to face this before we went off gold, and so they reached an agreement as to the proportions in which different countries were paid. But those were all put in at the old gold parities. That is still being used and, as no doubt many of your Lordships know, it is very favourable to us at the moment because we are in at the old rate although we have depreciated a good deal. So it is not really a basket of currencies, except in the sense that it is a basket all of the same things. One reason why we thought we ought to call your Lordships' attention to this document is that it is a different kind of basket from one which is likely, in my opinion and I think in the opinion of your Committee, to take the place of the very nice for us but now rather out-of-date unit in which the whole of the Community's books are kept.

When the Lomé Convention was signed, it included, I think I am right in saying, a provision for aid from the Community countries to the ACP countries, and that aid is going to be spent by the recipients in the form of project aid in the Community countries. So the transactions will be transactions within the Community area, but a number of countries are engaged and therefore some unit is required in which to keep the books. So it was thought, I think quite properly, that it would be very desirable, as you were starting off, to do so with a more up-to-date unit. That is how the Lomé basket came to be constituted. The details of it are set out on page 2 of our Report. As I did not draft the Report, perhaps I may be permitted to say that in my opinion, for a very complex subject, it is drafted very well and clearly. So if your Lordships are in trouble it can be consulted. At any rate, one has there all the details of how the basket is constituted. Your Committee thought it was a very sensible way of proceeding. They welcome it and hope your Lordships will take the same view. My noble friend (if I may call him so, although he is not sitting on the Cross-Benches) or my old boss, Lord Amory, is going to speak and I think he will say a little more about the Paper.

I should like to conclude by just mentioning the two caveats at the end of our Paper. The first is to call attention to the need when one has a basket of this kind to revise it from time to time. That is rather self-evident. The second is of some importance. The Community, as I have endeavoured to explain, is using as its main unit of account this rather out-of-date unit. It is now launched on the new unit which is going to be used for transactions between the European Investment Fund and the Lomé countries, and I think it is going to be used to some extent by the European Investment Bank. There is at least some danger that other units will be tried. The purpose of the unit is to make the transactions which would otherwise be extremely complicated at least one degree more simple. But we feel that within the Community area it would be a great mistake to multiply units of account. If you are going to have one you ought to have only one. Your Committee think that the Lomé unit would in fact be a very good basis for a general unit of account. Whether that is agreed with or not, I think we ought all to recommend to Her Majesty's Government, who have to negotiate these things, to take account of our feeling against any sort of multiplicity of units. If one unit is of great convenience, then with any more than that one tends to be back in a system without any unit at all, which I can assure your Lordships would be terribly complicated when so many countries are involved.

4.27 p.m.

Baroness ELLES

My Lords, the noble Lord, Lord Roberthall, will understand if I do not follow him completely. In any case, I think that noble Lords in all parts of the House will be grateful to him for his clear explanation of the Lomé unit of account, coupled with a crystal clear definition in the Twenty-eighth Report. We on these Benches congratulate the drafter of that Report, because at the end of it even I felt I understood it. I was not quite sure I could claim to have done so, but it was so clear that I thought I had understood it. It was a remarkable piece of work for what could be a very complex concept. Perhaps I might say at this stage that I hope that the noble Baroness, Lady Llewelyn-Davies, and other noble Lords will forgive me if I leave before the end of the debate as I have to catch a plane and will probably not be able to hear all the speeches tonight. But I have put a Question to the noble Baroness and I will, of course, read her answer with great care tomorrow in Hansard.

I would congratulate my noble friend Lord Selkirk, Chairman of the Select Committee responsible for the Thirty-seventh Report, particularly for the decision taken by his Sub-Committee to enable this House to discuss this very important Lomé Convention, and also for his introduction of this matter this afternoon. The Report itself contains some valuable comments on the Convention as well as clear explanatory evidence on the objectives, preparation and possible developments arising out of the Convention. May I say at this stage—and I hope that noble Lords opposite will not feel that it is a Party point that I am making—that high praise is due to my noble friend Lord Reay, who showed by his evidence the important role he has played personally as Vice-Chairman of the Committee of Development and Cooperation of the European Parliament, in co-operation with colleagues, the Commission and representatives from the ACP countries, in completing the task of finding acceptable policies resulting in the Convention. It is regrettable that he is not here today to give us the benefit of his wide and deep knowledge on this subject, but he is no doubt in Luxembourg this week taking part in the meeting between the EEC and ACP representatives who are discussing the setting up of institutions, and in particular the setting up of a Consultative Assembly to ensure the effective operation of the Convention. I know that all noble Lords in this House wish that meeting well and every success.

The Lomé Convention—a remarkable document—indicates a new direction in relations between one part of the world and another: North-South developed and developing, between rich and poor nations, whichever euphemism one cares to use. Whatever the criticisms may be of Lomé it is worth pointing out some of its remarkable achievements. First, it is a break away from the near colonialist approach of which we are so often accused in international fora. A multilateral agreement with concrete results uniting 55 countries and about 525 million people is in itself a remarkable event. Further, the nine Member-States of the European Community and the 46 ACP countries are joined in equal partnership. My noble friend Lord Selkirk has already referred to this. It is a quite remarkable achievement in the world of today when there is so much dissension between the different parts of the world.

It should be emphasised that the two effects of United Kingdom entry into the European Community have contributed to the success of the drafting of this Convention. First, it builds a bridge between the Anglophone and Francophone States in Africa, contained hitherto in two distinct blocs either under the Yaoundé Convention or the Arusha Convention for the East African countries. It brings in as well, outside the previous arrangements, countries such as the Sudan with whom we have had long-standing arrangements and trading agreements. These were not included among the countries listed in Protocol 22 of the Treaty of Accession.

Secondly, in relation to this Convention the entry of the United Kingdom has confirmed what was repeatedly said by those who were in favour of joining the European Community, that by our membership we would be able to assist our former dependent territories to have entry into the markets of the biggest trading bloc in the world. Even those who spoke in these terms at the time of entry into the Community did not envisage such remarkably advantageous terms for those countries and such a generous understanding of their position and difficulties by all the Member-States of the European Community.

Then, there is the refutation of the constant criticism one used to hear, that the members of the European Commission in Brussels were faceless bureaucrats. It is clear, even from the evidence contained in the Thirty-Seventh Report which is before your Lordships' House, that M. Claude Cheysson, the Commissioner responsible, has personally contributed enormously to the imaginative proposals that are contained in the Convention. I think a tribute should be paid to him by this House. There is also proof that the European Community is determined to consider and take active steps to play a full part in the more favourable distribution of assets throughout the world. Finally, in relation to the innovations and benefits of this Convention there is the introduction of a scheme to create a bloc that is not based on a custom, union, or a free trade area, or association agreements with reciprocal rights. This is a completely new departure in any North-South development and is to be highly praised.

Of course, there are criticisms, some of which have been raised already and no doubt will be raised by other speakers: why is not more aid given to Asian countries—India, Ceylon and so on—particularly in view of the provisions made jointly with the Treaty of Succession in the Joint Declaration of Intent? It must be said that apart from the fact that those countries may not want to be bound by this type of convention, food aid is given to them. Bilateral aid is already given by individual Member-States to some of these other countries. I am not saying that further aid should not be given or that further trading benefits should not eventually be accorded to these countries, but one of the great qualities of the Lomé Convention is that it is modest, that it is small and that it does not try to do too much to begin with. It gives a structure and the possibility of future development. Although I accept that this criticism can be made, we should accept that to start small and to develop is probably safer than to try to bring in too many countries at one and the same time. The present Convention is open to applications for accession by any State with a similar economic structure to those of the ACP countries who arc already members.

The Lomé Convention is not only a modest beginning but is of short duration —until March 1980. This is sensible because if there are teething troubles they can be considered and rectifying measures taken within a fairly short space of time. However, it should be pointed out that within the next 18 months or so the Government will already have to be thinking in terms of Lomé No. 2. Therefore, it is surely time that we should be getting on with Lomé No. 1.Secondly, this is a modest attempt to contribute to the thinking of a new international economic order which may serve as a guide to much wider discussions at UNCTAD IV next year. Thirdly, opening up without discrimination the markets of the European Community Member-States to all industrial goods and sonic agricultural products in times of severe recession in Europe without reverse preference, must show the intention of the European Community to accept its responsibilities towards a wider world.

At this point may I put a question to the noble Baroness with regard to Article 7(2)(B) of the Convention where reference is made to "developing countries"? This affects the "most favoured nation treatment" as between Member-States and ACP countries, but does not take into account developing countries. I should like to ask the noble Baroness what definition the Government apply to the term "developing countries". Is it the one designated by the OECD or by the United Nations? Perhaps the noble Baroness will enlarge upon this when she winds up the debate.

With regard to Stabex, another very ingenious innovation to stabilise the export earnings of the 46 ACP countries, it does not have a very large fund to begin with, but in context it can be seen how it will work in the future. Already, in the Seventh Special Session of the United Nations, Dr. Kissinger has used it as a means whereby stabilisation can be achieved between developed and developing nations. Certainly one of the worst setbacks for developing countries has been the effect of inflation on their import programmes. I recall only too well that when the price of oil went up certain Iranian friends said, "Surely it is right that we should have increased the price of oil twice since you have increased the price of sugar and prac- tically every other commodity five times. We have to find the money to pay for the imports that we need in order to develop our countries ". There is a certain amount of logic in that. In this connection the Twenty-eighth Report of the Select Committee contributes to the clarification of the calculation of the Lomé unit of account. This is another innovation which will be a first positive step in contributing towards much-needed stabilisation in the international monetary field.

The noble Lord, Lord Roberthall, has already enlarged considerably upon this matter but I should like very much to endorse what lie said, that perhaps it is the beginning of monetary union within the Community. It will be an example which will serve as a basis of calculation for the unit of account as a whole in the European Community instead of having several types, or more than one type, of unit of account calculated on a different basis.

As has been said so clearly and categorically by my noble friend, to regularise the position the Convention must be ratified by all the Member-States and by two-thirds of the ACP States. If 31 ACP States have been able to do so, surely it is time for the Governments of the Member-States of the European Cornmunities to show their good faith, after so many expressions of co-operation and conciliation, by ratifying this Convention. In particular, considering it is for the benefit of United Kingdom former dependent territories that so much of the Convention will play its part, it is for them to give the lead and to follow Denmark, the only other country which has ratified, and to bring this Convention into force as soon as possible.

Perhaps it should be said, finally, that the most remarkable fact of all in the setting up of the Convention has been the achievement by the nine Member States of a common and united effort outside narrow national interests to ensure a fairer distribution of our European wealth, to the benefit of those who are not so well off as ourselves. If ever there was a beginning of a foreign policy in Europe, perhaps the Lomé Convention is the best example for which we could ask.

4.40 p.m.

Lord BANKS

My Lords, I should like to join in thanking the noble Earl, Lord Selkirk, and the noble Lord, Lord Roberthall, for the helpful way in which they have introduced this subject to us this afternoon. I found the Twenty-eighth Report, as the noble Baroness, Lady Elles said, a very concise explanation of the Lomé, Unit of Account and the Thirty-seventh Report contained a valuable assessment of the Lomé Convention itself. The evidence to the Committee contained in the Report was of particular interest. I will not claim to have digested it all, since I was able to obtain a copy of it only the day before yesterday, but I think it repays reading and studying.

I am one of those who regarded the signing of the Lomé, Convention last February as a great and historic event, and this was certainly the view of my noble friends. Yet the LoméConvention has not been free from criticism, and I suppose the biggest criticism against it—and in a sense this was touched on by the noble Baroness, Lady Elles—is the question of its very existence. Should there be (it is asked) such a Convention between the EEC and only a part of the developing world—a part which covers only 14 per cent. of the population of the developing world, even though that 14 per cent. represents some 510 million people? Should not any arrangement of this kind be all-embracing? Perhaps in a perfect world this would be so. Perhaps in a world where there were no historical associations this would be so. But we do not live in such a world, and I welcome what has been achieved between the Community of Nine European nations, most of which have been at the centre of great empires, and 46 developing countries. I welcome particularly the co-operation which has been brought about between English-speaking Africans and French-speaking Africans and I welcome the fact that 22 Commonwealth countries are involved.

We must bear in mind, as the Report makes clear, and as previous speakers have made clear, that assistance under the Lomé Convention is not the total sum of EEC assistance to the Third World. India, Pakistan, Bangladesh and Sri Lanka are covered by other, though less generous treaties, and as has already been pointed out the Indian sub-continent benefits from food aid. As I understand it, the British Government are anxious to secure more favourable terms for Asian countries, and we would certainly support them in that. Then, of course, there are the generalised preferences, of which some 90 countries can take advantage.

In the course of the evidence to the Select Committee, it was stated that 40 per cent. of EEC aid goes to non-associated countries, and for that purpose I am counting the Lomé countries as associated countries, although I believe that that is not technically correct. So we have this special and remarkable arrangement with 46 countries covering 14 per cent. of the total population of the Third World, but we are not neglecting the remainder of the Third World.

The Lomé Convention is remarkable, first because it provides free access for all industrial and more agricultural products to the EEC and yet no reverse preferences are required. That is a development which we greatly welcome and one which, prior to the signing of the Convention we, on these Benches, had been advocating. Incidentally, it is a development which makes it more acceptable to GATT, as I believe the noble Earl, Lord Selkirk, pointed out.

Then there is the provision for aid and industrial co-operation. I am never quite sure, when it comes to aid and some new provision is put forward, whether this is really new aid or whether it is merely aid channelled in a different way. I think to some extent that is in fact the case here, that it is aid channelled in a different way. However, as has been pointed out, part of it is linked to the STABEX scheme for guaranteeing national export earnings against fluctuation. I think this is a desirable aim to pursue, to provide protection against fluctuation. It has been questioned, but I think it is necessary and I am glad that it has been incorporated in the framework of the Convention.

This system of guaranteeing earnings rather than guaranteeing a price or by means of restricting production, or by means of buffer stops, is, I think, an ingenious development. It is rather like comparing the deficiency payments system that we used to have for agriculture, with the system of levies which we now have; and perhaps since the Common Agricultural Policy is being reviewed this particular STABEX idea might well be considered for wider application in connection with that. As the noble Baroness, Lady Elles, said, the amount of money available for STABEX is small. Nevertheless, it is an important experiment and one which may be extended on a wider front.

I should like to make a brief comment on the Lomé unit of account, and I would quote from the Twenty-eighth Report that it is a, device for expressing monetary values other than in national currencies ". As has been explained, this unit of account is a basket of the currencies of EEC countries and the share which each country has in that basket was determined at the outset by the size of its gross national product; by its relative share in world trade, and by its relative share in intra-Community trade. As the noble Lord, Lord Roberthall, has pointed out to us, the Committee envisage this principle being adopted on a wider scale for other units of account. The Committee entered two caveats, the first of which rather puzzled me. It says that the weighting of the currencies, to which I have just referred, should be reviewed from time to time, and points out that the United Kingdom's share in this basket has fallen from 17.5 per cent. to 15.5 per cent. since the unit was adopted. The reason for that, of course, is the depreciation of the pound. It says that it will be in the interests of Britain to try to restore the position by encouraging periodic reviews, but it seems that it has already criticised other units of account because they are not sensitive to currency changes. It seems to me that it is a little difficult to have it both ways. In any event, surely the value of the changes and the value of the country are an indication of what has been happening to the relevant criteria.

For example, if our GNP had been increasing more than that of our partners, if our relative share of world trade had been increasing faster than that of our partners, if our share of inter-Community trade had been increasing, it is unlikely that the pound would have depreciated. The second caveat which it entered and to which the noble Lord, Lord Roberthall, referred—namely, that there should not be a whole series of different baskets on the same principle, but all calculated at different times according to slightly different criteria—is one which seems to me extremely sensible.

Like the noble Baroness, Lady Elles, I would raise a note of concern about the delay in the ratification of the Convention. As has been pointed out, only one of the Community States has so far ratified although more than two-thirds of the ACP States have done so. As I understand it, the position is that the trade part of the Convention has been in force this year, but the institutions are not. If the institutions are not working, this is bound to lead to a feeling on the part of the participating ACP countries that they are not participating fully. However competent officials in Brussels may be, it is not the same as having complete participation. I hope it will not be very long before these institutions are operating fully; perhaps the noble Baroness who is to reply will be able to tell us when they will be. May I say that the Lomé Agreement in its entirety is, in many ways, an experiment, but it is a very valuable experiment of great significance.

4.52 p.m.

Viscount AMORY

My Lords, I am a little unnerved by seeing the respected Chairman of our Committee sitting on the Bench opposite, looking at me with a very thoughtful look on his face. On the other hand, I am immensely relieved that the noble Lord, Lord Robbins, has left the Chamber, because I was terrified he would raise the subject of the unit of currency called the Europa, to which he referred in his speech to your Lordships the other day, which the noble Lord said he thought was at present in the higher realms of fantasy. If he had raised it, I should have said to him that, as this is in the higher realms of fantasy, I would postpone discussion of it until my next lecture !

My Lords, may I say to the noble Lord, Lord Roberthall, who was kind enough to refer to his old boss, that in following him I am following my old master; because, as your Lordships may know, the noble Lord was my economic mentor aid adviser there. I should like to make only this point to your Lordships; that is, that now, 15 years later, it would he a complete waste of your Lordships' time to try to drive a wedge between us. The evolution of some units of account within the European Economic Community is a national development, and one which I think we are all agreed is essential in the long run, and should be welcomed in principle. The present position is as the noble Lord, Lord Roberthall, said; that is, that there are a number of different units of account, which leads to complication in itself, and, as those other units of account are based on gold, they really do not fit the current situation very well. Therefore, it seems desirable that, as soon as possible, one type of unit should be selected, and its use gradually made general. It is not a case of too many eggs in one basket, but I think there is a risk of too many baskets for a limited number of eggs.

My Lords, it looks as if the Lomé unit of account may suit our present and likely future situation in which currencies float better. It may be the one which may be more widely adopted and used perhaps in the case of the Budget. Aswill be appreciated from the Report of the Committee, its precise composition is at first sight not very easy to explain. If I were to attempt to expand the explanations given in the Report of the Committee, I think the only impression your Lordships would get would be of the many-sidedness of truth. But I would like to join with the noble Lord, Lord Roberthall, in that I think the Report, even although it comes out under our names, is skilfully drafted.

My Lords, there are really three main components in the units, as I understand it. The first is the initial value of the unit which, as the noble Lord, Lord Roberthall, said, really has been borrowed from the Special Deposit Receipts of the International Monetary Fund. The second component or variable is the initial share, or proportion in which the currencies of individual member countries should be represented in the unit. These are based, as the noble Lords Lord Roberthall, and Lord Banks, said, on the GNPs, on the relative shares of world trade, the relative shares of inter-Community trade, and on the weightings of the European countries in the SDRs themselves.

The noble Lord, Lord Banks, questioned the first proviso or condition mentioned in the Committee's Report, and wondered whether it was reasonable, as our initial share goes up or down in the light of the depreciation or appreciation of sterling. The point we make there is that the initial share is affected in that way, but we said that we doubted whether the initial shares were based on criteria which were the correct ones, no doubt, four or five years ago, and whether those criteria would require revision technically in the light of experience. I do not think this is a question of trying to get the thing twice over, or the best of both worlds. The initial shares were settled as a result of bargaining in the Council, and will need adjustment from time to time in the light of changes in the relevant criteria.

In the case of sterling, because it has depreciated relatively, the United Kingdom share has gone down from 17.5 per cent. to 15.5 per cent. In the case of potentially weak currencies there is advantage in the share being as high as possible, and in the case of potentially strong currencies, probably the reverse. For as long as the United Kingdom is in net debit to the EEC and is a net contributor rather than a net receiver—I understand the time is coming in the near future when we may be in net credit in the EEC—there is a temporary advantage to the United Kingdom in the use of the existing units of account based, as has been said, on a sterling exchange rate more favourable than at present. But that advantage could hardly be expected to last indefinitely.

My Lords, the third variable is the amount of the currency unit, which is the second column in the table on page 2 of the Report. The value of this unit changes from day to day with the alteration in the relative exchange rates of the member countries concerned. This means, I think, that the Lomé unit should be far more up to date as a measurement than the earlier models. Perhaps it is relevant that the system of special deposit receipts, used by the International Monetary Fund and others, in current use in the international system seems to have proved strikingly successful and the Lomé system is substantially based on the SDR experience. So I would have thought we could wish a fair wind to the Lomé unit of account, and hope it may lead to the progressive proliferation of different units of account, subject to the proviso that the initial ratings will from time to time require revision by the Council in the light of changes in the national criteria which have been used.

It seems to me, therefore, that there are no grounds for your Lordships to have any anxiety about the likely trend of development here, but it is something that I think your Lordships would expect and hope that your Committee will keep in touch with and report to you again from time to time, whenever they think something is happening or is about to happen which might be of importance and interest to your Lordships.

5.1 p.m.

Lord WALSTON

My Lords, yesterday and on Tuesday I was in Luxembourg taking part in the inauguration ceremonies and committees of the Parliamentary Assembly of the Lomé Convention, and two of my colleagues on the Development Co-operation Committee, the noble Lords, Lord Saint Oswald and Lord Reay, were also there and are still there. On their behalf, I give their apologies for not being here; I know they wished to be and they would certainly have taken part in this debate today. I am sorry that they are not here, but I am sure they were right to remain in Luxembourg. I can assure your Lordships, from the conversations I had in Luxembourg with very many representatives from the ACP countries, that the welcome that this Convention is being given is not confined to your Lordships' House and is not confined to this country, but is shared by all the ACP countries. It is a very great tribute to many people, to their imagination and their hard work, that this has come about.

Mention has been made, quite rightly, of M. Claud Cheysson, the architect of this Convention, and I certainly associate myself with everything that has been said about him. I should also like to give my thanks to my right honourable friend Mrs. Judith Hart for the very great part she played, a part which has been acknowledged by very many people in Brussels and elsewhere. It is very good to know that a Minister from this Government and from this country, and in par- ticular, if I may say so, a Minister who has not been particularly well-known for her support of the European cause, should have made her impression; so very greatly among her European colleagues.

I wholeheartedly support the Convention itself, and I support the order which will be moved by my noble friend. I do not want to trespass on her preserves, but mention has been made of ratification. My understanding, since this order has been approved in another place, is that if it is approved by your Lordships this afternoon there are only some relatively unimportant formalities to he gone through before we in this country ratify the Convention. I am told by my colleagues from other countries in the European Parliament that no unreasonable delay is expected in any of the other countries; in fact, it is expected that virtually all of them will have ratified it by the end of this year, and the one or two who, for technical reasons, may not have been able to do so will certainly have done so by the middle of January.

I should like, if I may, on a very small point of detail, to correct something which I think the noble Earl, Lord Selkirk, said concerning the size of this organisation. At the moment it is true that there are 46 member countries from the ACP, but that is a number which will grow; it is not the final number. Already, five countries are about to apply. The highest on the list is Surinam, which I believe obtained its independence two days ago and has now, therefore, become eligible, and within a matter of days, perhaps, will become a member of the Convention. In a few months, there may well be four more.

This is not entirely without significance, because quite apart from the Ministerial Council to which the noble Earl has referred there is also the Parliamentary Assembly which consists of equal numbers from the ACP countries and from the EEC countries. Each of the ACP countries sends two members. That means that at the present time, as there are 46 of them, they will send 92 members; therefore, 92 members have to come from the European Parliament. If there are five more countries there will, therefore, be another 10 members from them and another 10 from the Parliament, making, if my arithmetic is correct, 102 members. It is a somewhat unwieldy body meeting to give advice and to direct, to a certain extent by remote control, the actions of the Council.

A lot of thought thas gone into the best way of achieving a really worth while and effective organisation. Here I should like to pay tribute to Mr. Yace, the President of the Ivory Coast National Assembly, and Mr. Spenale, President of the European Parliament, who have worked very closely and effectively on this. The present suggestions are that while the full consultative Assembly, of roughly 200 members, should meet once a year in Luxembourg, there should also be a Committee unfortunately only half the size, and therefore still a very unwieldy body, that would also meet once a year. But coming down from that committee, there would also be a series of ad hoc committees dealing with special subjects or special areas, which I believe will be a workable proposition. It will ensure that there is a certain amount of Parliamentary interest taken in this, and, what is so very important, as the noble Earl and other speakers quite rightly pointed out, make this co-operation between the ACP countries and the EEC countries a reality. I do not think it can be stressed often enough that this is an entirely revolutionary form of aid; in fact, it is scarcely aid at all. It is a genuine co-operation between two parts of the world. It is essential that we pursue this concept and ensure that all the bodies, the officials who are doing the work, the Council of Ministers, the Parliamentary Assemblies, work together in complete equality and co-operation.

I believe that this whole concept is a very significant advance in our attack on the discrepancies of wealth throughout the world, and about which we here have so often spoken. There are many aspects of it which one could discuss; some of them have been discussed by noble Lords, and others, I have no doubt, will be. I should like to concentrate solely on the export stabilisation arrangements, because to my mind this is the most important aspect; it can be built upon and developed into something which will have a profound impact upon the pattern of world trade, and, above all, on the pattern of production in the developing countries. At the present time, we all know the terrifying discrepancies that there are in wealth and in poverty between the rich and the poor countries.

I should like to give a few details taken from the last available figures in 1972. Whereas at that time in the United Kingdom our average income per head was 2,600 dollars, in Upper Volta—and I am referring only to countries affected by the Lomé Convention—the income per head of the population was 70 dollars, and in Somalia and Ethiopia 80 dollars each. We are told that that gap has been increasing over the last few years, and is still increasing. So if one had more modern figures, while the 70 dollars and 80 dollars might have risen slightly, the gap—in spite of our poverty in this country, in spite of the problems with which we are confronted, in spite of the self-pity in which we indulge because of our own inability to increase our standard of living—would have widened still further.

In order to rectify that, we certainly do not want to decrease our own standard of living, our own income per head; what we want to do, and what we must do, is enable the developing countries to increase their wealth. How can that be done? It can be done if they make use of their own natural resources, whatever they may be; mainly, but not entirely, agricultural. In order to do that one must have investment, one must make use of modern technologies and, to a certain extent, machinery; not as much as some people say, but there must be investment in machinery and in the whole paraphernalia that is necessary to extract the greatest amount of wealth from the earth of these countries. Therefore, there must be investment.

In order for there to be investment there must not only be money to pay for it, but there must also be stability. There must be confidence on the part of the people who are putting up the money, on the part of the people buying the machinery, on the part of the people investing in the new techniques. Not unnaturally, that has been notably lacking in the past because of the enormous fluctuations in the earning power of these primary producing countries.

A country which depends for 70 per cent. or 80 per cent. of its foreign earnings upon one single crop, upon cotton or cocoa, cannot tell how much it will get two years hence; how much it will earn in foreign currency from that crop. It cannot tell, because it does not know what the climate will be; whether there will be locusts, droughts or floods, and it does not know what the world market will do. It does not know whether the price will be £250 per ton or drop to £125 per ton, and these are things which happen.

There has been virtually no stability in the past for the primary producers, and in the earnings of foreign exchange of their countries. Efforts have been made —cocoa agreements, coffee agreements, the wheat agreement to which my noble friend referred, and some of them have done some good, but none of them has been sufficiently effective even to stabilise the prices, and none of them has attempted to deal with the vagaries of nature. This stabilisation of export earnings in the Lomé Convention sets out to do precisely that.

It is modest, and it is right that it should be modest, but if it succeeds it will mean that those countries which depend for their wealth upon crops of one kind or another will in future be able to count on an assured income made up from Community sources if, for any reason, their earnings drop below the average level of the last five years. In that knowledge, they will therefore be able to borrow money to invest, to improve their techniques, to improve their total production and marketing methods, to increase their wealth, and thereby to start to narrow the gap between the rich and the poor countries.

Some of your Lordships will have listened yesterday to an admirable and fascinating speech from my noble friend Lord Chalfont on defence. Of course we have to spend money on defence; I am not for a moment denying that. But we must know, if we look at history at all, that one of the greatest causes of conflict in the world is the disparity, where-ever it exists, between the rich and the poor—rich countries, poor countries; rich communities, poor communities; rich individuals, poor individuals. Where you have those vast differences, the tensions get greater and greater and eventually there must inevitably be an explosion.

Whatever we may spend on defence, we must not skimp on our expenditure on reducing these inequalities of wealth. I am talking not about the moral aspects at all—they are for each individual to think about—but, purely in practical terms, about the proper expenditure of government funds. Whatever money we spend on reducing these tensions, on increasing the wealth, decreasing the poverty of the poorer people of the world, will indeed be money well spent. For that reason, if for no other, I give my wholehearted support to this Convention, and wish it well.

5.17 p.m.

Lord GARNER

My Lords, I rise to underline briefly some of the reasons why I derive such encouragement from the Lomé Convention. In my view, its successful negotiation reflects great credit on all the parties concerned; on the Community, on this country, and on the Commonwealth countries in Africa, the Caribbean, and the Pacific. When we were having our debates about the question of the British application to join the Community, I said that I should not have felt able to vote in favour if it had not been possible to meet the essential requirements of Commonwealth countries. When that negotiation was completed I wasdelighted—if perhaps a little surprised—that those requirements were so fully met.

It seems to me that the Lomé Convention provides yet another proof that the Community is prepared to be outward-looking and to meet some of our needs. It has shown itself in Lomé prepared to adapt itself to the historic requirements of Britain's position. It has not forced us into a straitjacket of logic or of doctrine, but has made the changes that suited our position. Perhaps the most significant break with the past was the abrogation of the requirement for reverse preferences, something which caused a little trouble with GATT under the previous Convention and was certainly found irritating by our American friends and some other friends. The fact that that has changed is almost entirely due to British influence.

Certainly I would support what the noble Earl, Lord Selkirk, said about the important role that Britain has played, and that the Convention would never have come about in the form that it has without full British participation. I believe that it will be increasingly necessary for Britain to use her experience and skills if we are to make a success of this venture. It is certainly clear to me from discussions which I have had recently with a number of officials and others in the ACP countries in the Commonwealth that they warmly welcome the participation by Britain and are very grateful for what has been achieved by British efforts.

Tribute is due to the way in which the ACP countries in the Commonwealth have behaved throughout. It is the fashion nowadays to decry the Commonwealth and perhaps to wonder where it is going. It seems to me perhaps rather extraordinary that Lomé—this international agreement with a number of other foreign countries—has shown in some ways the Commonwealth spirit at its best, because it has brought up to date the relationship which Britain has had with, in some cases, continuing Colonial territories but, in most cases, territories which have ceased to be Colonial. It was brought about by applying the time-honoured practice of Commonwealth partnership, consultation and co-operation. I wonder sometimes whether sufficient credit has been given to the Commonwealth Secretariat, which initiated a series of consultations two or three years ago to try to co-ordinate the positions of the various Commonwealth countries to which these arrangements could apply. Events have shown that they have been extremely successful in bringing about a sense of unity and getting them all to work together.

It seems that the Lomé Convention has done three very important things. First, as has been said more than once, it has brought together the English-speaking and the Francophone territories in Africa and has made it possible to restore that sense of unity which was to some extent destroyed by the boundaries set in the scramble for Africa in the last century. Second, and more important, it does away with the atmosphere of Colonial or neo-Colonial handling of our arrangements, particularly because the basis has ceased to be that of one individual country looking to its own metropolitan country and has been replaced by a group of countries looking towards another group of countries; namely, in the Community. The third reason why I believe it to have started such an important new pattern is that it sets the right contemporary idiom for a relationship between developing and industrialised nations; it is an understanding based on frank and fair dealing, on a sense of complete equality, with no rancour on one side and no patronage on the other.

The Third World, as we have heard, is increasing in importance in many ways; its own development is taking off and its share of world trade is becoming extremely important. It is growing, too, I believe, in self-confidence and self-respect. It is vital that the Western World should have sensible relations with this Third World, and I believe that Britain, with its contacts in the Commonwealth and its rapport with its allies in the European Community, has a major part to play in bringing about this new sort of world. Of course Lomé is not the complete answer; it is only a beginning, an experiment. There are vast areas of the world which are left out of the Convention, but I believe profoundly that it has set us on the right road. I am strongly of the view that we should demonstrate our faith in it. and I hope that we shall ratify in the very near future.

5.24 p.m.

Lord REIGATE

My Lords, it is with some diffidence that I take part in this debate as I am a comparative newcomer to the Sub-committee over the rather arcane discussions of which my noble friend Lord Selkirk so ably presides. But one of my reasons for speaking is that I went with him and other members of the Sub-committee to Brussels to interview certain officials of the Community. I hope it does not sound patronising if I say how immensely impressed we all were with the calibre of the officials whom we met there. When I thought about saying that, I hesitated because I was anxious not to sound patronising, but I do not think I have ever met a group of people in a new or newish project who were so skilled at deploying their arguments. Their idealism and enthusiasm for what they were trying to do with the Lomé Convention was absolutely infectious; there was not one who was not perhaps even starry-eyed about what this might bring, and there is nothing wrong with being starry-eyed sometimes.

I do not ask the noble Baroness who will reply to the debate to comment on any of my criticisms; there are criticisms which I was going to make but some of which I have eliminated having listened with great interest to the remarks of the noble Lord, Lord Walston. I was going to say, after my visit there, that I found the membership of the ACP Group as needing some explanation to the outside world; that its membership was slightly anomalous and even capricious. After all, it is the amalgamation of the former Francophone and Anglophone countries in Africa to which one then adds six independent countries, two of which have never been colonies or dependent territories anyway, and then, because one adds the British Commonwealth territories, one takes a leap across the oceans to the Caribbean and, last but not least, to three very small territories in the South Pacific. At the same time, one leaves out the Indian sub-continent and it is a little hard to explain to outside interested persons why these anomalies should exist. However, the noble Lord, Lord Walston —and they were glad tidings for me—said that there are five candidates for membership coming along, and that means that what I feared and what I had intended to say will not be true; that is, that the ACP is in danger of becoming a rather restricted club. And even inside the membership there are some strange anomalies. If one takes the Caribbean as one small instance, the Bahamas—which is hardly, by most people's standard, a poverty-stricken member of the Third World—is included, but Haiti, which I think is the poorest country I have had the opportunity of visiting, is excluded. I know there are reasons, but it is a pity that such an anomaly should exist.

Having listened to the noble Lord, Lord Walston, there is one subject which I must mention with concern, and that is Stabex. I entirely agreed with all the noble Lord's arguments about improving the standard of living of the poorer countries. He said that Stabex was a modest scheme and, frankly, that is my fear; that it is, perhaps, too modest—that the funds are small and that any sort of a disaster or demand in the early years could wreck the scheme. Of course, if the scheme were wrecked in this way it would be a blow to the countries of the Lomé Convention and might make them sceptical about the future of the whole of the Convention.

Another point to which I wish to refer and which was also dealt with by my noble friend Lord Selkirk is the question of the overlapping agencies and the growth of a new international bureaucracy. I did not know the quotation which he made from Walter Elliot before, but I believe it is true to say that the officials whom we met in Brussels all have souls to save. However, it is the work in the field that concerns me. There are so many different agencies that I believe that a watchful eye ought to be kept from the institutions to see that there are not too many cooks working in the same kitchen.

Working for the agencies should not become a sort of profession in itself unless one can bring technical qualifications to bear. For example, we were told that it is the intention to have 41 commissioners in the 46 countries. One or two countries like the South Pacific countries will be covered by one Commissioner. When I look at the map and see some of the countries each of which will have a commissioner, I feel that some of them will be very overworked but that others will be rather underemployed. Despite these very mild criticisms, I wish this project very well indeed. There is one reason which I should like to mention it proves what those of us who have supported the European idea have always believed —that the European Economic Community will not be inward looking and introspective but will be bold and outward-looking.

5.32 p.m.

Lord HAWKE

My Lords, I apologise for not having put down my name and, in consequence, I shall be brief. These are not the first developing countries in the world. A considerable number of years ago I was connected with South American utilities and, in the course of my operations there, I made something of a study of the financial history of the continent. I noticed that countries there were developed with vast sums of European money which were poured into them. Normal banking practice was followed and the higher the risk, the greater the interest rate. I observed that the higher the interest rate the more certainty there was of default. Here, I welcome the fact that it has been recognised that it is no good trying to lend money at interest to developing countries, and that the vast bulk of the money will be in grants. I have been advocating this for a number of years. I went even further, and suggested that the best method of all was lease-lend, in which case the loans only become repayable in the event of the developing country being in a position of prosperity and the original giver of the loan being in a position of penury, as was the case when we were in the War.

I must say that the Stabex figure does not fill me with great confidence. I do not see the millennium which the noble Lord, Lord Walston, pictured coming out of 375 million units of account out of a total of 3,000. Anybody who has been engaged in the commodity market will know that that is a very small margin indeed to cover fluctuations. It could vanish overnight, particularly if there were a real slump such as there was in 1930. It would not last a fortnight. I have been into a room the size of the Royal Gallery piled to the very roof with bags of coffee waiting to be destroyed, and, if we had a slump of that nature, I do not believe that Stabex would stand up for a minute.

The other point is that we all know that the cotrast between rich and poor excites envy, but the cure should to some extent lie at home because my experience of poorer countries is that, the moment they become a little more prosperous, the ruling classes all buy Cadillacs while the people who do the work become no richer and indeed very often become poorer. These countries cannot really accuse us on the score of this great gulf between rich and poor if they do not do something about the matter themselves. Nevertheless, I feel that the Convention is a great step in the right direction and I particularly welcome the fact that the money is to be given in grants rather than in loans. I wish the operation every success.

5.36 p.m.

Earl COWLEY

My Lords, I should like to add my own congratulations to my noble friend Lord Selkirk, the noble Lord, Lord Roberthall, the Committee and the draftsmen for the excellent work that has been carried out in preparing these two Reports. The Lomé Convention is a much-welcomed development in the relationship between the Community and the Third World. It is necessary evidence that, with the assistance of this country, as the noble Lord, Lord Gamer, and my noble friend Lord Selkirk have said, the Community will not become inward-looking. The Lomé Convention is a major step forward in the relations between industrial and developing countries, providing a comprehensive approach to the solution to many of the complex problems that face that relationship. The debate this afternoon has highlighted many aspects of this example of international co-operation. Thus I should like to add my own plea to those of all other noble Lords, including my noble friend Lady Elles, that the Convention should be ratified as soon as possible.

It is remarkable that so many developing countries, with all their diverse interests and needs, should be able to come together and create a common front in their negotiations with the Community of the Nine. The Convention's institutions will further encourage this process, a point which has been made clear in the Thirty-seventh Report. I agree with my noble friends Lady Elles and Lord Selkirk that the equal partnership between the developing countries of the ACP and the nine countries of the EEC is a great advantage. I rather liked the words used by my noble friend, who said that it avoids any question of patronage. The spirit of co-operation rather than confrontation between developing and developed countries, which is one of the hallmarks of the Lomé Convention can be seen in other international negotiations—for example, the Seventh Special Session of the United Nations. This growing understanding between, at least, certain developed and undeveloped countries bodes well for future international meetings; for example, next month's meeting of the Group of Twenty-seven and the discussions on the New International Economic Order which were mentioned by my noble friend Lady Elles. Perhaps even UNCTAD IV next year will achieve more than its predecessor in Santiago. I hope so.

However, one must not be too starry-eyed about the relationship between the 46 ACP countries and the Nine. There are reports of growing tensions over the implementation of the transitional provisions and the level of consultation prior to the coming into force of the Convention itself. The ACP countries did not achieve all they wanted under the European Development Fund. They did not obtain the request for 8,000 million units of account put forward by them during the meeting in Kingston last year, but the finally agreed level of the EDF is not so low when one takes into account the economic climate in Europe, and the fact that the Lomé Convention runs from the date of signature and not from the date of entry into force. This means that the European Development Fund will probably be spread over only four, rather than five, years.

Moreover, as the Twenty-eighth Report makes clear, the unit of account of the EDF is to be based on a principle that is linked to the Special Drawing Rights of the IMF, so that the ACP countries will be protected from the adverse fluctuations in the real value of community aid. I agree with the view expressed by the noble Lord, Lord Roberthall, and my noble friend Lord Amory about extending the Lomé unit of account as a basis for other units of account used by the international community.

An important development in the new Convention is the increasng responsibility to be borne by the ACP countries in the administration and management of the Community's programme aid. In future, it is planned that Community aid will be drawn up jointly by agreement between the Community and each of the ACP countries, and the programme will reflect the list of priorities of the particular needs of the recipient State. On paper this appears to be a useful and worth while innovation, but there is a danger that the EDF might lack a clear set of criteria when it comes to be put into effect. This is an important worry, and it should be watched very carefully as the EDF develops.

I agree with my noble friends Lady Elles and Lord Selkirk, and with the noble Lord, Lord Banks, in their feeling that the level of benefits under the STABEX scheme were too low, but it is the principles of STABEX that are really important, although at the same time I share the fears expressed by my noble friend Lord Reigate. It is interesting to note that many of the ideas being considered for the new international economic order reflect the provisions of STABEX. It is a step forward that can be improved upon and extended to cover all developing countries as the situation arises.

A great deal of importance has been attached to the idea of industrial co-operation as proposed under Title III of the Convention. The noble Lord, Lord Banks, raised this subject. While it is obviously welcome to see the recognition of the role of private investment as an indirect means of assisting the development of under-developed countries, there seems to be an apparent conflict with the declared aims of the British Government. It seems to be a tendency for private investment and the industrialisation process to be attracted to the more developed, and thus more economically attractive, of the Third World countries. While this is important, it is vital as well to transfer more resources in the form of overseas development assistance to the rural sectors of the poorest developing countries. Perhaps the noble Baroness, Lady Llewelyn-Davies, when she answers this debate, could comment on the apparent conflict between the Convention's seeming emphasis on industrialisation and the British Government's concern for rural development.

While the Lomé Convention certainly represents a step forward for the ACP countries, it covers only some 12 per cent. of the Third World's population. It does not cover many of the poorest of the developing countries—as has been mentioned—such as India and Bangladesh, and there is a danger that the Convention will actively discriminate against them. The point raised by the noble Lord, Lord Walston, that the gap between the rich and the poor is getting greater, is a very serious one, and it should be considered as such. Although some developing countries which are not covered by the Lomé Convention will receive special treatment as OCT countries, or be somehow associated with the Community in other ways, some of the most populous and poorest countries in the developing world are excluded from such benefits. I agree with my noble friends Lady Elles and Lord Selkirk that there is some advantage in having a scheme that is small, so that it can be properly operated. But its real need is that it should develop and be extended in the long term to cover all developing countries, if possible.

Many countries not covered by the Lomé Convention are eligible for certain trade benefits and other bilateral benefits from individual Member-States, but when compared to the contents of the Lomé Convention they are rather small. Furthermore, certain developing countries —for example, Argentina, Uruguay, Brazil and Mexico—have signed non-preferential trade agreements with the Community, but even here the Community has, in certain cases, unilaterally suspended parts of the agreements with those countries.

In preparation for the Seventh Special Session of the United Nations General Assembly, the Commission recommended that the Community, Should maintain and improve its generalised system of preferences and confirm its willingness to consider the interests of the developing countries. This recommendation fits in with the Joint Declaration of Intent which was annexed to the Treaty of Accession to give special consideration to the trade policies of the independent Commonwealth Asian countries. It seems that the Community feels that it has gone far enough at the present time, but it should not be necessary to remind the Community that, as far back as October 1972, it agreed that, without detracting from the advantages enjoyed by countries with which it has special relations, it must respond even more than in the past to the expectations of all the developing countries. While the Community is perfectly willing to grant generous food aid to developing countries as a whole, on the basis of need, financial aid is, from the point of view of the Community as an institution, distributed on a different basis. As a consequence of this, it was recommended that 100 million units of account should be set aside as aid for the non-associated developing countries in the first year of the five-year period, 1976 to 1980, by when it should have risen, it was hoped, to 200 million units of account. Despite the British Government's support for the scheme, it was rejected following objections from West Germany, France and Belgium. Thus, while much has been done in relation to the 45 ACP countries under the Lomé Convention—which development must be heartily welcomed—it would be really wrong of us to sit back on our laurels and merely congratulate ourselves. The Lomé Convention is an important step forward, but it is only a step forward, and is a clear indication of the way the relationship between the Third World and the industrialised countries could, and possibly should, develop.

I have only two detailed questions for the noble Baroness. There seems to be some doubt about the question of reverse trade preferences in the case of the OCT countries when they take up the offers of association with the Community—which offer bears great similarities to the Lomé Convention. I should be grateful if the noble Baroness could tell the House whether the question has been finally resolved, and what the decision has been. Secondly, it is reported that the Government of Bermuda have stated that they do not wish to become associated with the Community under Part IV of the Treaty of Rome. I should be grateful if the noble Baroness could find out what were the reasons for that Government's decision and what will be the effect upon Bermuda's relations with this country. We have had this afternoon an extremely useful debate. I should like to reiterate my hope that the Lomé Convention is ratified as soon as possible, and that it lives up to the expectations so eloquently expressed in this House today.

5.49 p.m.

Baroness LLEWELYN-DAVIES of HASTOE

My Lords, as the noble Earl, Lord Cowley, has just said, this has been a fascinating and most useful debate, and I should like to add my gratitude to that already expressed to the noble Earl, Lord Selkirk, for the way in which he has presented the Report. I also wish to express my gratitude to all the Members of the Committee for the way in which they have examined these by no means easy matters. The European Committees of your Lordships' House work extremely thoroughly on the very complex matters which come up. And, of course, we should never speak about these topics without congratulating the Principal Deputy Chairman of Committees for the indefatigable and successful labours in which all the time she is engaged on our behalf. I should also like to add to what many noble Lords have said about the drafting of the Report itself. It really is a model of what drafting should be—clear, concise, comprehensive and, for me, a delight to work with.

Her Majesty's Government, of course, most warmly welcome the Report. If he will forgive me for saying so, I think that perhaps the noble Earl, Lord Selkirk, was less than generous in his remarks about the welcome which Her Majesty's Government have given to the Lomé Convention. Indeed, in many ways we regard ourselves as one of its parents. We warmly welcomed the signature of the Convention. My right honourable friend the Minister of Overseas Development described it in the other place as "historic". I really do not think we can be accused of luke-warmness about it. In my view, it is one of the finest prizes in the crown of future co-operation and development among the nations.

My Lords, I think it would be very difficult—indeed, I do not think it would be possible—to answer all the points which have come up in the debate, because it has been a detailed and technical debate; indeed, in some parts extremely technical. But I think the whole House has clearly agreed that the Convention is an achievement of great psychological as well as political value. I think what the House has also particularly welcomed is that it demonstrates, and demonstrates in concrete form, the EEC's widening concern with the difficult problems of the developing world, and this is very important. As we have already agreed, the Lomé Convention builds upon the foundations laid by earlier Conventions, and in a number of ways it greatly extends and improves on them.

I think I should like to mention here what has not yet been mentioned; that is, that perhaps the most important difference is that the trade provisions abandon the concept of obligatory reciprocity. This means that the ACP States are not required to grant reverse trade preferences, and when the House considers, as was said by my noble friend Lord Walston, the relative economic strength of the Member-States of the Community and of the ACP countries, this is obviously not only urgently realistic but equitable. I think it is also important—something else, perhaps which we did not go into—that the aid provisions are more flexible, both in the instruments and in the terms of aid. They range from loans at commercial rates to soft loans and, as was especially said by the noble Lord, Lord Hawke, to outright grants, and I very much agreed with his view about that. This means that specially suitable forms of aid can be provided and, in a rather subtle way, can take into account, both the nature of the projects themselves and the level of development of the individual countries. This is perhaps not entirely new, but it is a fairly new conception of the way aid should be administered. Another important departure is the specific provision for the programming of assistance according to agreed and objective criteria in consultation with the ACP.

Many noble Lords have welcomed the other, rather novel thing in the Lomé Convention: that is, the Stabex Scheme. Here, perhaps my noble friend Lord Walston was the most hopeful, but some of us may share some of the worries of the noble Lord, Lord Reigate, and the noble Lord, Lord Hawke. There is no doubt, however, that we hope it will make some contribution towards the stabilisation of the export earnings of a number of key products of the developing countries, complicated though this may be. The industrial co-operation provisions are imaginative, and I believe that both Stabex and the industrial provisions are potentially significant innovations. This is always hopeful even if, as noble Lords have said, we are beginning in a small way. Of course, we do not know exactly how these things will work in practice, and there are some doubts, as has been said, about certain aspects of Stabex. But it is broadly hopeful, and it should provide very useful experience; as the noble Earl, Lord Cowley, said, we must hope to build upon it.

My Lords, I think it is true that the House agrees that Lomé has set a new pattern in the comprehensive nature of its provisions, again as the noble Earl, Lord Cowley, said. It is a balanced approach to development problems because it combines a wide spectrum of aid, trade and industrial measures. I think perhaps the noble Earl was making too much of the conflict between industrial development and rural development. We see them as two sides, really, of the same coin, and this, in an imperfect world, is the only way in which we can deal with it. Many noble Lords have referred to what I think is very important; that is, the relationship between the developing world and the Member-States of the EEC. Mr. Babacar Ba, who is the Senegal's Minister for Finance and Economic Affairs, and who was chairman, for most of the time, of the ACP countries during the negotiations and played a most lively and useful part in them, said that Lomé establishes: …a new type of relationship between under-developed and developed countries". All noble Lords have emphasised the concept of co-operation between partners which runs throughout Lomé.

This, in itself, has an important effect, not only on the relations between us and the developing countries but, as—I was going to say "my noble friend"—the noble Lord, Lord Garner, said, on the ACP countries themselves. I think of the noble Lord as my noble friend because we were old colleagues in the Commonwealth Relations Office, attended many conferences together and many nights, "tired the sun with talking and sent him down the sky". I agreed very much with what the noble Lord said. The good thing about it all was that the ACP countries maintained a remarkable cohesion throughout all the negotiations despite the differences of which we know and despite the historical and cultural traditions with which noble Lords are very familiar. They maintained this cohesion, and they think that this is one of the most important products of Lomé. We think that is important for the future because, as the Report says, the success or failure of an agreement as complex as this depends entirely on the good will with which it is applied by everybody concerned.

Many noble Lords—I think almost every noble Lord who spoke—were worried about the ratification, and I can reassure the House completely on this point. It is true that the ACP are just about to reach their necessary 31 ratifications. Of the EEC States, so far only Denmark has ratified. We hope to be the second of the EEC countries to ratify, and in the very early future. The noble Earl, Lord Selkirk, need not worry; we shall certainly give a lead in this to the other countries. We anticipate very early ratification and we shall keep in close touch about it.

I think that at this point I ought to turn to the speech of the noble Lord, Lord Roberthall, when he presented the Twenty-eighth Report, and indeed refer to the speech of the noble Viscount, Lord Amory. I must confess at the very outset that for a long time the concept of units of account had me rather baffled, and when it was allied to this rather curious description of a "basket", which is always put in inverted commas in my brief, my bafflement was compounded. But the explanation which the noble Lord, Lord Roberthall, gave could not be bettered, and I think with that, put together with the remarks of the noble Viscount, Lord Amory, the House can rest content; and with the Report's explanation, we can leave it at that.

I ought perhaps to say to the noble Viscount. Lord Amory, who suggested that the Lomé unit of account could be applied to the Budget, that, of course, he will be aware of the complexities surrounding that problem and the additional cost to the United Kingdom if we made a change overnight; in other words, it is not a matter on which I can comment in any detail. There are many difficult and technical problems which would arise out of it.

Viscount AMORY

My Lords, I agree with the noble Baroness that it could not possibly be done overnight. I quoted it only as an illustration of what a single unit of account might eventually comprise in the years ahead if developments move in the way I hope they will.

Baroness LLEWELYN-DAVIES of HASTOE

My Lords, I take the noble Viscount's point. I ought to refer to the two caveats in the Report mentioned by many noble Lords. In the first one, as the House will realise, the Committee recommended that the weightings of currency should be reviewed from time to time. If circumstances showed that the standing of a member currency in relation to the unit did not reflect the underlying economic reality, there might be a case for such a review. But I do not think the House should underestimate the difficulty not only of getting agreement between the nine countries but that such a review was really needed. Also, again the technical and administrative difficulties that the change would cause.

The second caveat, to which the noble Baroness, Lady Elles, referred, was about the excessive proliferation of different units. As the noble Lord, Lord Roberthall, said, the Committee considered the new unit of account superior to the existing unit of account in the prevailing conditions and believed that it would eventually replace existing units in certain other areas. Her Majesty's Government favour the extension of the basket unit in appropriate circumstances. Indeed, we supported the proposal (as noble Lords will know) to which the Finance Council have now agreed; that is, that the European Coal and Steel Committee should use the unit of account in all its transactions as from January 1976. But the emphasis must be on "appropriate ". The new basket unit is most appropriate where there are frequent intra-Community and extra-Community transactions and, of course, particularly appropriate to Lomé. But there may be circumstances in which it would not be appropriate to choose a basket unit of account or, if a basket, not this one.

My Lords, these things are incredibly complex—economically and politically—and they must be examined and resolved. That is why, although we agree in principle with the second caveat—that there should not be excessive proliferation—we cannot put uniformity as the only objective; there are many other factors to consider. I understand the worries of the noble Earl, Lord Cowley, about EDF. We understand and will keep a close watch on that also. Many noble Lords have expressed worries and hopes about the implementation of the Convention. I can promise that this Government will do their best to do everything they can to make it effective; and I was rather pleased that so many noble Lords thought that the more British administrators there should be in it, the better. That was rather encouraging. I can assure the House that there will be many British people involved in it.

As to the actual institutions, I was very interested in the suggestion of the noble Earl, Lord Selkirk, about the Direc- tor-General. I think perhaps I ought to remind the House that much praise has been given to M. Claude Cheysson. He is supported by a Director-General, Herr Krohn, and two Deputy-Director-Generals, one of whom, Mr. Maurice Foley, formerly of another place, will be well known to all Members of your Lordships' House as an expert on developing countries. They control the division of the Commission. that is the Directorate-General VIII, which deals with the implementation of Lomé. I think it is in good hands. I do not think that the House will want me to run through—which I had planned to do—exactly how the control rests with the Council of Ministers and the Committee of Ambassadors. One can read about this. I agree that these bodies are sizeable but we think there will be a fair degree of unity among ACP States and Community Members, because this is exactly what happened during the Lomé negotiations. That is hopeful and we hope is going to continue. There is the possibility of difficulties arising—there always is—but that has been thought of, and there is provision for the Council of Ministers to look at this should those difficulties arise.

One of the other things about which many noble Lords were worried was about the co-ordination of the various multilateral aid organisations. We take every opportunity of urging co-operation between them and to support the machinery which exists to fulfil the function. Noble Lords will not want me to list all the organisations. In fact that is done, rather amusingly, on pages 35 to 37 of the Thirty-Seventh Report. I must say that there is rather a formidable number of them. The House will know that the United Nations have an Administrative Committee on Co-ordination and there is the UNDP which is responsible for administering and co-ordinating most of the technical assistance. With all these bodies we are in the closest touch. We try to ensure co-ordination between our bilateral aid programmes and those of other donors of both multilateral and bilateral aid. Nobody pretends that this is easy; nobody pretends it is perfect. We take seriously what the noble Lord, Lord Reigate, said. We are very much aware of the difficulties but are not at all unhopeful.

My Lords, at this hour and after a long debate I do not want to take up too much time in talking about Lomé itself. But there are one or two points about which I was asked and with which I should deal. The noble Earl, Lord Selkirk, said that there were too few countries and not enough money. There is never enough money, that is certain. But I think that the noble Lord, Lord Reay, to whom the noble Baroness, Lady Elles, referred summed it up beautifully when giving evidence to the Committee when he said—and this is at page 24 of the Report: …it is not really right to criticise the Lomé Convention on the grounds that it excludes large populations elsewhere in the world, just as I think it would be wrong to criticise the Community for being a Community of Nine when it could be a Community of 15 or 20 European countries. The LoméConvention does, after all, cover 55 countries and that is some 40 per cent. of all the countries represented in the United Nations and it covers altogether…500 million people. So, my Lords, I think it is a very good beginning. The noble Baroness, Lady Elles, was concerned about how we defined a developing country. As she probably suspected, we operate (along with all the other member-donors) on an agreed list which is compiled by OECD. I will send her a copy of the list later.

The other great worry that people have about the Convention, however imaginative and considerable its achievements have been so far, concerns its limitation to certain nations. The Government see it as a first step towards the development of a world-wide policy extending the Community's assistance to the developing nations. I very much share the disappointment of the noble Earl, Lord Cowley, with the results of the meeting of the Development Ministers. As everybody knows, the Community committed itself to the policy to which he referred by the terms of the Council Resolution in July 1974. All of us are disappointed that so far this has not been implemented. But this country will continue to make every effort to reach agreement on the means of making this commitment effective.

We fully recognise that the Convention does nothing to improve the lot of a large section of the developing world; especially we all think of the Asian Commonwealth. They were excluded from the Community's offer of association in 1963 and 1972. We accepted the terms of Protocol 22 of the Treaty of Accession because the inclusion of the Asian Commonwealth in the Community's offer simply was not a negotiable objective. Our policy was therefore to ensure the best possible terms for the associable Commonwealth, while trying to move the Community towards a more broadly-based development policy. And of course Lomé is not perfect; nobody could pretend it was. I should think it would be a miracle if any document emerging from negotiations involving 55 nations could reach anything like perfection; but, as noble Lords said, it is a beginning, and an inspiring beginning.

In the meantime, we must surely judge Lomé on its merits which are, as the whole House believes, considerable. Her Majesty's Government take great pride in it. The whole House will doubtless hope for even greater achievements in the future, but for the moment we may be satisfied with a remarkable beginning.

6.11 p.m.

The Earl of SELKIRK

My Lords, I should like to thank the noble Baroness most warmly for the extremely thorough way in which she has taken up the points over a wide field. Some of the points were much more complicated than those I tried to discuss. I am glad she could say that ratification will take place shortly. I noticed that the Minister used the word "historic" and, until the noble Baroness spoke this afternoon, that was the only word of warmth which had been said. The noble Baroness has spoken with great warmth. The noble Lord, Lord Banks, whose speech I enjoyed very much, was perfectly right to say that the word "associate" has ceased to have any meaning. It used to have a precise meaning, but I believe this meaning has shifted altogether. The noble Lord, Lord Walston, and I will watch with interest what States are accepted into the Lomé Treaty in the next two years. I endorse what the noble Lord, Lord Reigate, said. I had the highest possible opinion of the officials, and any comments I made had nothing to do with them; they have souls to save no doubt, but a bureaucracy does not. There is that distinction. I beg leave to withdraw.

Motion, by leave, withdrawn.

Lord ROBERTHALL

My Lords, I shall not move the Motion standing in my name, which was:

That this House takes note of the Twenty-Eighth Report of the European Communities Committee (Session 1974–75) on the Lomé Unit of Account.