§ 3.59 p.m.
§ Lord COBBOLD rose to move, That this House takes note of the Forty-seventh Report of the European Communities Committee of last Session on the Setting up of a European Export Bank (S/349/76). The noble Lord said: My Lords, your Committee was greatly assisted by the evidence taken in writing and orally from representatives of HM Treasury, the Bank of England, the Export Credits Guarantee Department, the British Bankers' Association, the CBI and chambers of commerce.
§ Though in some respects witnesses expressed differing views, the principal conclusions of your Committee reflect, I think, the bulk of the evidence which they received. In a very broad way, I would sum up the main feelings of your Committee as follows. The objective of this proposal is to provide a solution to two separate but interacting problems. The first problem is the need to harmonise the practice of the various national export credit institutions in the various countries of the Community. Harmonisation is clearly desirable, and we were informed that some progress is being made, though for a number of reasons it is proving a regrettably slow process. The majority of witnesses found it difficult to see that the addition of another layer by creation of an EEB would make an effective contribution on this point of harmonisation. Your Committee agreed that if harmonisation were the only objective, it would not seem worth while to set up a whole new machinery to expedite a process which could, and should, be achieved more simply in the normal ways of discussion and co-operation. In any event it was felt that if an EEB were set up, it could not in practice for long be limited solely to providing export credit insurance, and it would inevitably be extended to deal with the provision and/or finding of finance.
§ The second problem, where the real objective of the proposal lies, is the gap which appears to exist in machinery for financing very large multi-national contracts involving contractors and their bankers in several Community countries. The real extent of this gap is in dispute, 439 but it seems likely that there have been, and may increasingly be, instances where very large contracts outside the Community are lost by the Community (in some cases with this country as the main sufferer) because the Community as a whole cannot match the speed and concentration in provision of credit insurance and finance which can be offered by the United States and Japan. Your Committee reached a clear conclusion that this is the hub of the matter. Unless it can be shown both that there is a real gap which cannot adequately be filled by existing agencies, and that an EEB could be organised on a sufficient scale to fill that gap and to provide effective competition with EXIM and MITI (the American and Japanese institions respectively), it would be difficult to justify setting up a new, expensive and perhaps cumbersome administration.
§ It became clear during our hearings that, while the proposal certainly deserves study, a decision could not sensibly be reached either as to the size of the gap or as to whether the proposed EEB would be the best means of filling it until a great deal more work has been done both on the principles and on the details of the proposal. We therefore recommended that as a matter of urgency working groups with real experience from the governmental, export credit insurance, and banking and industrial sides should be set up. We should see advantage in setting up working parties both in the Community and in London, where there is perhaps longer and more concentrated experience. Your Lordships will have noted that the Select Committee in another place have reached somewhat similar general conclusions. In the House of Commons Report published on 28th July the Committee mentioned that the evidence given to your Lordships' Committee was valuable to them in reaching their conclusions.
§ To digress a little from the report, I should like to say that this seems to me an example of one way in which subcommittees in the two Houses looking at the same subject can usefully co-operate with a saving of time to committee Members, to Parliamentary staff, and to witnesses. As a fairly recent recruit to the Committee, I have felt this co-operation to be most desirable whenever 440 it is convenient to both Houses. I hope that the concurrent work on the European Regional Development Fund, which we are starting next week and to which the noble Lord the Leader of the House referred in the debate last Thursday, will prove a further satisfactory instance of this type of co-operation.
§ I turn to a few points of more detail. We found it generally agreed that the insurance and financial activities of an EEB should in any case be limited to dealing with multi-national contracts and then only when really large figures were involved. The practical complications would be many, and they are spelt out in some detail in your Committee's Report. I may perhaps call your Lordships' attention to a few of the outstanding ones. First, there are the relations between a new EEB and the existing machinery, both the national export credit institutions and the banking and financial markets in the various countries. There are obvious difficulties in arranging finance part provided by EEB, which would be a nonprofit making institution, and part by the private sector in various countries where profit evidently has to be considered and where questions of cost and risk would often be dissimilar as between different countries. It was suggested by some witnesses that the banks in the various EEC countries, who are in close regular touch, might even find it more difficult rather than easier to reach agreement between themselves and their customers if there were a new institution intervening.
§ Again it is by no means clear that it would be desirable or practical for an EEB to rely largely on reinsurance arrangements with the various national export credit agencies which have differing methods and are naturally competitive with each other. Finally, there are all the problems of where and how the EEB would raise its finance—to be effective the figures might be very high indeed—complicated by questions of exchange risk, whether and to whom concessionary finance should be envisaged, and where the cost should fall. Among many other matters to be studied would be the possibilities of co-operation, or the line of demarcation, between an EEB and the existing European Investment Bank, and the extent to to which an EEB should be independent of, or under the direct control of, the Commission.441
§ I have sought to suggest that the proposal is one which deserves serious study and which might, after full investigation, prove to be a way of helping to meet United States and Japanese competition on major multi-national contracts. But I have wished also to emphasise your Committee's view that the urgent need is for a very detailed study by competent working groups before a decision is reached. It is of interest to note that an allocation of funds for promoting an EEB, which was made in the Commission's preliminary draft budget for 1977, has been deleted in the more recent draft budget as no Council decision on this item has yet been taken.
§ Finally, my Lords, if an EEB is eventually set up I suggest, not only for selfish nationalist reasons, that it would have the best chance of getting off the ground if it were located in London, where there is more experience than in other European centres both of the working of export credit insurance and of co-operation with the private sector, both domestic and international. My Lords, I beg to move.
§ Moved, That this House takes note of the Forty-seventh Report of the European Communities Committee of last Session on the Setting up of a European Export Bank (S/349/76).—(Lord Cobbold.)
§ 4.9 p.m.
§ Baroness ELLES
My Lords, we are grateful to the noble Lord, Lord Cobbold, for having introduced so helpfully the 47th Report of the Select Committee on European Community matters. I should also like to express, as I always do with real gratitude, our thanks to my noble friend Lady Tweedsmuir of Belhelvie and her Committee for having once again produced an admirable and lucid report. The report very clearly explains the Commission's proposal for the setting up of an EEB and some of the difficulties which would be consequential on the setting up of such a bank. Indeed, we have a typical example of a solution to a problem causing, in its turn, new problems without necessarily finding solutions.
It is evident from all the documentation from the major interested bodies that in order to facilitate and improve exports from multinational consortia to third countries there are two main elements 442 which are lacking at present: a co-ordinating body to provide the necessary credit insurance and export finance, and/or a common currency and a common insurance and reinsurance system. What is not clear at present is how many opportunities have been missed because of the lack of these two elements. In fact, so far as I can see it is impossible to estimate how large is the gap and how much, if the gap was filled, would be provided. This is something which must, I would imagine, remain an imponderable, because not only does one know of instances where perhaps something has failed to materialise in the long run, but one can also imagine many suppliers not even embarking on exporting in combination with other EEC companies in view of the difficulties due to lack of credit, insurance and so on. Certainly these difficulties will have prevented suppliers from embarking on certain export activities.
So the proposal to set up an EEB to meet the first need would appear logical and sensible—subject, of course, to the powers, terms and conditions under which it would operate—but the problems created by different currencies, fluctuating exchange rates, different national insurance legislation and procedures would not, of course, vanish. Indeed, there will be a great variety of problems in co-ordinating contracts, which may or may not take account of inflation, the rates of which of course vary from Member State to Member State. But what I believe the EEB would be able to do is to concentrate attention on those areas where there are problems and difficulties, and work out solutions in the light of practical experience; and no doubt proposals from an EEB could contribute to further Directives from the Commission, leading to more efficient working, and ensure comparable conditions throughout the Member States. One obvious example is the proposed measure to abolish progressively the regulations in the United Kingdom, France and Italy on escalation guarantees. I would imagine that is the kind of matter which could come out of the working of an EEB.
In this connection, it is clear, of course, that the relationship between the EEB and the Commission will be of considerable importance. The 47th Report quite rightly draws attention to this relationship, 443 and to the extent and form of the Commission's intervention. It would certainly be hoped, if an EEB is set up, that it would have a reasonable degree of independence, certainly so far as day-to-day affairs are concerned, rather than have to operate under rigid controls. The funding of the operation would be provided by a comparatively small sum, as I understand it, from the EEC budget. I understand that the original amount envisaged was something like 100 MUAs but that it has now been written down to a token amount as the decision has not yet been taken by the Council. The rest of the finance needed, I understand, would be raised in national or international markets. In this connection I wondered—and perhaps the noble Lord, Lord Cobbold, will be able to say something about this when he winds up—whether any ceiling would be envisaged for the size of borrowing that the EEB might undertake. I understand that it would be used for major efforts and projects outside the Community, but would there be an upper ceiling beyond which it would not be allowed to borrow?
The other point I should like to raise is in relation to the role of the member of the Board who represents the Commission. The European Parliament Development Committee, in its report of the 5th May, has correctly pointed out that there may be a conflict between the Community commercial policy and the policy of the European Community towards developing countries. Now here the EEB might again act as a catalyst to produce a more coherent and balanced overall policy whereby development policies and common commercial policies are brought closer together, and in this connection undoubtedly use would be made of the Inter-Service Group for Financial Institutions, which I understand has recently been set up.
Since one of the main purposes of the setting up of the EEB would be to encourage competition for the benefit of European Community producers, we should certainly take a closer look at the US EXIM and MITI, as recommended in the Committee's Report, and consider whether the powers as set out in the draft regulation of the Council are adequate or sufficient for an EEB, if it is to be set up, to carry out its proper task. The Economic and Social Committee raised 444 the issue concerning the use of a projected EEB by one or more suppliers from a single European Community country; and I think the noble Lord, Lord Cobbold, has answered that one in his introduction. I understand that the conclusion of the noble Lord's Committee was that only multinational consortia should use the EEB, and it should not be available to single suppliers or to multinational corporations. I wonder whether the noble Lord would kindly confirm that when he winds up, because this has obviously been a matter of concern to some bodies.
There is another important question to be asked if an EEB is to be set up, and that is in relation to the timing. If we are really losing out on exports to third countries, as it would appear—and the EEB is the only proposal which seems to provide any answer to filling this gap—how soon is it envisaged that such an institution could be set up? Would it be a matter of a year or two years, or could it be set up comparatively simply? I would certainly support the noble Lord in his proposal that London should be a centre of such a bank if it were to be set up. There is obviously no better place than the City for the EEB; it would be, at last, a main institution of the Community which would be in the United Kingdom, and we would certainly welcome that.
Rightly, of course, there is a reluctance to create yet another body, with all the consequent expense and tendency to bureaucracy, but it must be said that although not all the bodies giving evidence were in favour of the EEB, nobody, so far as I have been able to see, has provided any satisfactory or convincing alternative. It is also clear that if export opportunities are not to be lost—and this, of course, has great bearing, not only on the employment position in this country but also that in the other Member States—the EEB is so far the only constructive proposal. We cannot afford to miss out on opportunities or on any initiative which may stimulate commercial activities which are at present being lost. I think there is one other advantage in the setting up of an EEB. Whereas it could be a consortium of existing merchant banks in all the nine Member States—and it is clear that bankers feel that they could perfectly well do this themselves, and probably very much better than civil servants in an 445 EEB—such a consortium would not be a supranational legal body, as the EEB would in fact become. Certainly the EEB would therefore be protected under Community Law; and suppliers within the EEC and purchasers from outside the EEC would have their rights better protected under Community Law in being able to deal with one supranational institution.
It is obviously clear that the EEB may not be the sole answer, but it could act as an encouragement to concerted action on export credit insurance and the necessity, eventually, for some form of common currency, particularly for international financial operations. The very fact that the EEB would have to cope with the problems arising out of existing difficulties would, hopefully, eventually lead to the harmonisation of credit insurance, and would ensure the export financing arrangements so much needed for our exporting companies. I therefore welcome the report and particularly welcome the proposals and recommendation that Working Groups should be set up. We certainly shall look forward to hearing the results of the recommendation of such Working Groups and hope that they move forward as soon as possible to the necessary solution to this problem.
§ 4.20 p.m.
§ Lord TANLAW
My Lords, from these Benches, we, too, welcome the general concept and the conclusions outlined in the 47th Report from the Select Committee on the European Communities and go along so far with the conclusions and recommendations of the noble Lord, Lord Cobbold. I think that we also accept in general the British Banking Association evidence given to the Committee and note their reservations. These were remarked upon by the noble Lord, Lord Cobbold, and by other members of the Committee. To begin, I should like to question the noble Lord who has immense experience, far greater than mine, in this. Is it right at this stage to describe the European Export Bank as a bank? I wonder whether it is not a little premature. Is it not really an agency similar to the ECGD? Their terms of reference appear on page 25 of the Select Committee Report:shall 'facilitate the export of goods and services by undertakings located in two or more Member 446 States to third countries, where such exports constitute operations of common European interest '.No mention is made of financing under these terms of reference, although this was touched upon in the Select Committee. But at this stage, this theoretical stage perhaps, the EEB surely will begin just by issuing paper that is guaranteed by Member countries in order to provide insurance for multi-Member exports on large scale foreign contracts. All of this has to be achieved, as the noble Baroness, Lady Elles, has pointed out, on a relatively small base of borrowed capital. I do not think that this comes under the heading of a bank either under the Trade Descriptions Act or within the dictionary definition. I should like to think that the concept is exactly and precisely the same as that which promoted the formation of ECGD which is not a bank. Therefore, it may be misleading now to fix in our minds that the EEB is a bank. This is a personal view and I have no doubt that the noble Lord, Lord Cobbold, will put me right on this or confirm it.
The most effective role that an agency such as EEB can play is, as has been said and is said again in the Select Committee report, to harmonise the rules and terms of export credit insurance among the Member countries of the EEC so that the Members can compete with similar terms offered to exporters working with the backing of EXIM and MITI agencies of the USA and Japan. This, I think, is the reason why we all welcome it in all parts of the House and even in the banking industry itself. British industry mainly concerned with export of large contract size will welcome this too.
But if the EEB could manage to harmonise interest rates on short-term, medium-term and long-term contracts entered into by Member countries this, I think, would be a major advance. I think at this time, as was said in another debate, British exporting companies are being severely hampered by excessive interest rates in this country. High interest rates have virtually cancelled out any export advantage gained by the fall in sterling. I put this out as a thought as to whether something could be done on a Community basis, to harmonise interest rates on a Community basis 447 without the bother of going into a bank, with all the problems that have been listed in the Select Committee. I think this is of primary importance, much more so than the terms of export credit insurance. I do not want to deviate from the terms of reference of this debate, but it strikes to me that there is some urgent need for the harmonisation of interest rates on large-scale European contracts. I think that this could be done without necessarily going through all the paraphernalia of setting up the EEB or similar organisations.
Single-currency financing was mentioned as an objective. This is admirable, but it is still miles away. I think that we can virtually ignore this aspect for the time being until we have got nearer to harmonisation or, at least, nearer than we are at the moment. If it is accepted (and I believe it is) that the EEB is intended to be a Common Market version of ECGD it may be worth while looking more closely at some of the procedures presently adopted by ECGD to see whether they can be applied or have relevance to what we are discussing this afternoon. Before doing so, it may be worth asking the noble Lord, Lord Cobbold, how the EEB intends to define "foreign goods". I believe—and I stand to be corrected—that the ECGD would define Common Market manufactures of Common Market products as foreign goods under their terms of reference. Would the EEB, therefore, define foreign goods as products from any other Member country not involved in the major contract under discussion for insurance finance?
For example, if Germany and the United Kingdom were exporting nations, would any French goods quoted in the contract be defined by the EEB as foreign goods, or not? I would imagine that in these circumstances, unlike the ECGD, these products would not be considered as foreign because they are Community-manufactured products and, for the purposes of export credit insurance, they would not be penalised for incorporating other Member countries' products other than those asking for the finance. There may be another general problem which needs early definition, and that is: what is the definition of a "national company"? For instance, under ECGD, a United Kingdom company is defined—and I 448 stand again to be corrected—as any company which conducts business in this country. There are a number of non-EEC companies which are subsidiaries of, let us say, Japanese or American holding companies operating in this country. They are considered by ECGD as national companies. The question I am asking is this. Will subsidiaries of, let us say, Japanese and American companies operating in the Community (large subsidiaries, some of them) be classified as British, German or French companies when it comes to credit insurance when their mother companies, their holding companies, may be the very competitors for the contract for which the credit insurance has been asked?
I hope I have made myself clear. These are definitions of terms; but I raise this matter as I can see stumbling blocks here. I can see endless committees on the definition of "national"; many regulations defining subsidiaries of non-EEC companies operating who, like any other commercial organisation, also want credit insurance on good terms. Personally, I think we should "scrub" the details here. These companies, whether subsidiaries of Japanese, American or other foreign companies operating in this country. employ large numbers of citizens of the Community. I think that they should be judged on this basis alone: that the ECGD definition or terms of reference of a national company, if it is good enough for this country, should be good enough for the EEB if and when it operates in Europe. I also believe that it comes under the terms of reference that I quoted earlier which, I would remind your Lordships, spoke of:such exports constitute operations of common European interest".I consider employment to be on immense and relevant common European interest at this stage.
Having another look at the ECGD Act. I foresee major problems arising under Section 2 which covers the political aspects of exports. We certainly concentrate in this House on the commercial aspects—and what a triumph it has been to support them! Section 2 covers the political aspects which no doubt noble Lords in banking business know. ECGD cover may be denied or penalised if a British company wishes cover to export goods to, say, Chile or South Africa. In certain other 449 Common Market countries these political restrictions—what I call Section 2 restrictions—may not apply.
Therefore what are we going to do when we have a multinational contract of the size that the noble Lord, Lord Cobbold, talked about, but the consumer of this contract is accepted politically in one of the Member countries but not in another? If we are not careful when we set up an EEB, or when we discuss it in detail, it will not be on terms of credit insurance, interest or balancing the different currencies, it will be for tiresome political reasons that the project falls apart. Some countries will say, "We want to exclude so and so", and another member may want to exclude some other country. I like to think that the concept of the EEB must be bigger than this. I implore those who are involved in the Working Parties not to get involved in, or bogged down on, the political problems of exporting to whom and why and when, because if the Working Parties get diverted on political matters in this way, I the germ of a marvellous idea which can bring benefit to the entire Community will fall away. I do not think that EXIM or MITI, the United States and Japanese export agencies, are nearly so fussy. If we are going to compete with them, we should start looking at the same terms as they use.
I should like to emphasise the warnings put forward by the British Bankers' Association and by other speakers this afternoon. There is the further danger of whether this will just be another level of bureaucracy. Will the EEB restrict, delay or further complicate existing arrangements that have to be made for a multinational export contract? Instead of improving the Common Market Members' position in the export world, if this goes wrong the EEB might make them less competitive than they are today. What I am saying is that it will merely slow down the bits of paper which have to be signed or countersigned. If we are not careful, the Member countries could end up with their EEB giving less competition than today. These remarks apply also to the relationship that the Commission establishes with the EEB and the areas in which it has the powers to issue binding Directives on the functions of the EEB. This is another point which should be clarified in detail before further 450 work is pursued on the general concept as outlined in the original proposals for the setting up of the European Export Bank.
As the EEB seems to be modelled on our own Export Credits Guarantee Department, I should like to make the plea with other speakers that the location of such an agency must be in the City of London. But wherever the EEB is located, a bank is, as the saying goes, only as good as its bankers. The same must apply to the EEB, whatever its functions or objectives may be in the world of export finance.
§ 4.35 p.m.
§ Lord MAIS
My Lords, as the chairman of the Sub-Committee which studied the problem before us today, may I first thank the noble Lord, Lord Cobbold, for introducing this report and for all the work he and other Members of the Sub-Committee and staff have done in connection with the taking of evidence and the preparation of the report. There is so much ground one could cover—and possibly should cover—but time will not permit and I must therefore limit what I have to say to a few points which I felt were of particular importance.
I gained the impression during the taking of evidence from various bodies that there appears to be some doubt as to the role which a European Export Bank might be expected to play or should play. Whether its principal role would be to provide funds to finance multinational trade generally, or to provide additional guarantees such as are now covered in this country by the ECGD.
The principal need for an EEB is brought about by the present lack of harmonisation of existing systems provided by the individual national export credit authorities. If a European Export Bank could improve upon the facilities which are now available or bridge the gap until harmonisation can be achieved, clearly there would be considerable merit in the formation of such a bank.
But if the proposals to set up a European Export Bank do go ahead, I would say that the general consensus of opinion was that it should be an independent body and not wholly dependent on back to back arrangements with the individual national export credit authorities.
451 However, if it be the intention that it should act as a co-ordinator, it would—as was said by the noble Lord, Lord Tanlaw—simply provide an additional level of bureaucracy without in any way making a significant additional contribution to what is currently already available. Therefore, my Lords, we ought to consider or attempt to identify what need exists for a new insurance and financing mechanism within the Community which is not already available from the established arrangements in the individual Member States. I think all of us—or certainly most of us—would accept that there is room for improvement in the existing facilities when it comes to meeting the special requirements of multinational supply contracts.
Perhaps we might consider the principal reasons why this is so. First, because of the difficulties which are met by main contractors or consortium members in accepting responsibility for contract performance by sub-contractors or fellow consortia members. Secondly, the possibility of differences in credit terms and extent of cover acceptable to credit insurance bodies in the Member States participating in a particular contract or major order. Thirdly, the present unavoidable necessity of establishing separate financial arrangements from each country of major supply to the third country who is in the position of borrower. Fourthly, arising from the three points to which I have just referred, the protracted negotiating period prior to signing of the supply contract and the final settlement of financial arrangements or agreements.
I have had some experience of consortia operating overseas. It is the time factor involved in finalising financial facilities and guarantees which sometimes results in losing the contract. As the noble Lord, Lord Cobbold, mentioned in his address, we are definitely at a disadvantage when competing, against the United States or Japan. I name them because I think they are the particular ones who give trouble, but that does not alter the fact that we are frequently at a disadvantage with other countries. On the other hand, one must not, in my view, overlook—it would be quite unfair to do so—the very helpful and efficient service we have received and still receive from our own Export Credits Guarantee Department.
452 But one must question, when operating on a multinational basis, whether the needs of industry are adequately covered at the moment. In support of that, the British Bankers' Association said in giving evidence that they considered the only need not adequately covered by national agreements, so far as the United Kingdom was concerned, was in the area of multinational contracts. They went on to say that, apart from this single area which, by its nature, could not be resolved by individual national arrangements, they considered that the existing forms of support by the ECGD and the United Kingdom financial institutions were adequate. They did not envisage any requirement for the future development and participation of a European Export Bank in other forms of export financing and export business. I think most of us would probably agree with that contention.
The impression I have gained from the various witnesses who appeared before the Sub-Committee, and from my own observations, is that, generally speaking, it is felt, certainly as far as the United Kingdom is concerned, that our financial institutions can provide the necessary back-up finance for jumbo projects or major national or multinational undertakings. It could be that the build-up towards a European Export Bank followed a failure of credit insurers to harmonise their policy and to allow the normal mechanism in each country to work in a relatively simple form when more than one country was involved, and that the move towards a European Export Bank was primarily aimed at trying to move ahead in order to force the credit insurers and the credit institutions to follow a common line. That may or may not be so; it is a matter for conjecture.
I do not want for one moment to give the impression that I am in any way opposed to the establishment of a European Export Bank. I believe we should lend our support to a more detailed investigation of the problem and to try to isolate exactly what points are not taken care of by these agreements at a national level. The noble Lord, Lord Cobbold, referred to a good location for a European Export Bank and I do not believe any of your Lordships would imagine that I, for one, would disagree with his suggestion that the obvious place for it is the City of London. 453 As I see it, the problem arises not so much over the establishing of such an institution but over what its terms of reference are to be. As far as the United Kingdom is concerned, I personally believe that the financing facilities are adequate in nine cases out of ten. It is insurance and guarantees which sometimes appear to present problems.
I should like to end by adding my appreciation to that already expressed to the organisations and institutions who gave evidence before your Lordships' Sub-Committee. Without exception, they sent the most senior of their directors and representatives. They had obviously taken enormous trouble in preparing their evidence, and I hope they gained as much satisfaction from presenting it to us as we obtained from listening to what they had to say.
Lastly, my Lords, if I have to depart before this interesting debate has ended, I would crave your Lordships' pardon. I hope it will not be necessary, but I have a very long-standing engagement at which I have to take the chair. Therefore, I hope your Lordships will understand if I am not able to stay until the end of the debate.
§ 4.46 p.m.
§ Lord O'BRIEN of LOTHBURY
My Lords, I am grateful for the opportunity of speaking in this debate, which was so effectively opened by my noble friend Lord Cobbold. I was, like him, a central banker for many years, but for the past three years—in what doubtless the noble Lord, Lord Shinwell, would call my "middle age"—I have been President of the British Bankers' Association. That is an Association, as your Lordships may well know, of all the banks of consequence operating in the United Kingdom. There are over 300 of them—British and foreign—and it is indeed a formidable Association. In my capacity as President, it may be said that I am an example of a gamekeeper turned poacher. Certainly, like Mr. Jack Jones, if I may associate myself with that potent figure, I am now a spokesman on sectional interests. However, in what I have to say to your Lordships today, I shall try to draw on my past experience as well.
The proposal for a European Export Bank, as we all know, emanates from the 454 Commission in Brussels. I have already been concerned with these proposals as a member of the Council of the European Banking Federation, which unifies for Community purposes the nine separate national banking associations within the Community. The Federation maintains close relations with the Commission in Brussels on all subjects of concern to banks in the EEC, and by their advice and comment seeks to promote the harmonisation, rationalisation and control of banking within the Community in the most sensible and productive manner possible.
As I said, the proposal we are now discussing has already been considered by the banks. Not unnaturally, they started by viewing with some scepticism, not to say suspicion, what appeared to be grandiose proposals which, if implemented, would remove all, or at least part, of the financing of exports from the existing channels—that is to say, the banking system—or might simply add another corps of bureaucrats in a field where they are not necessary.
In the United Kingdom, and in many other countries today, the foundation of finance for exports is State-provided insurance of credit and transfer risks. Most exports, as we all know, are paid for in a matter of months and the financing of them, largely in bills of exchange, causes little problem. Longer-term credit covering larger contracts concerning, for example, the export of heavy engineering goods, has caused difficulties. The competition to secure such exports has led to ever longer-term credit being offered. The Berne Union has tried to keep this competition within bounds, but it remains an important, and not infrequently decisive, factor in securing large-scale contracts for export.
Over the years there have been many demands for an export bank in the United Kingdom, but less is heard of such demands now. As I see it, the reasons for that are fourfold. First, the Export Credits Guarantee Department, to which the noble Lord, Lord Mais, has referred, has continuously improved its services, so that now I believe it leaves little cause for complaint as to its cost, comprehensiveness or flexibility. Secondly, the banks, which means principally the clearing banks, have not shrunk from providing increasing amounts of longer-term credit, 455 which many big contracts now require. They have been helped in this by the refinancing facilities made available to them first by the Bank of England and, subsequently, by Her Majesty's Government. Her Majesty's Government have also helped the exporter by bearing some part of the burden of present high interest rates, which otherwise would frustrate many potential British exports.
I have described briefly what has happened in the United Kingdom, to show how the adaptation of existing machinery was sufficient to cope with our export credit problems. The question is: would this suffice in the EEC? Could the nine individual systems of export insurance and finance be effectively welded into one instrument able to serve the Community as well as the Ex-Im Bank serves the USA, and the comparable Japanese arrangements (MITI) serve them?
At the present stage in its development, the EEC is not, of course, fully comparable with the USA or Japan. Each of the nine countries competes with the others for exports, and this is likely to continue for many years yet. Even so, a harmonisation and improvement in export credit and guarantee arrangements, from which all could benefit, would strengthen the Community as a whole, and therefore be desirable. No doubt efforts to bring this about will continue, but progress so far has been disappointing. On the whole, however, the banks in Europe would favour persevering in these efforts, rather than setting up an entirely new institution, which they fear would want to operate quite independently of the banking system and without using bank finance. Not unnaturally, industrialists like the noble Lord, Lord Mais, hold somewhat different views. They tend to favour any scheme which would enable them to deal with one agency able to provide all the answers, so far as export finance and insurance were concerned.
I myself doubt whether it would be wise to be so ambitious, at least at the outset. I am sure we should continue to make the fullest possible use of the financial resources, expertise and close relations with exporters possessed by the banking system in this and other countries of the Community. The danger of a new institution being a fifth wheel to the coach is very real. All are agreed that 456 multinational contracts pose special problems. It would seem best to concentrate on them to begin with. If after further intensive study by the Commission, in company with acknowledged experts in this field, it is decided that the formation of a European Export Bank is likely to be a helpful innovation in dealing with this limited problem, I hope it will be established. Experience will show whether the idea was a good one, and help us to judge whether the activities of the Export Bank might usefully be extended. In the further preliminary studies which are undoubtedly necessary, I entirely agree that special attention must be given to the seven points listed in paragraph 16 of the Select Committee's thoughtful and most useful Report.
Consultation between the Commission and the banks is already going on. Officials of the Commission came to London in September, when they met some 50 representatives of British banks for talks on the subject. Two days ago, a group of experts of the European Banking Federation met in Brussels the External Economic Relations Committee of the European Parliament, which is responsible for preparing the Parliament's opinion on the Commission's proposals. I have had only a brief report of that meeting, but I gather that the representatives of the Parliament were inclined to feel that the establishment of a bank of this character at the present time would be premature. As your Lordships know, bankers have no dialectical skill so this must have been a spontaneous conclusion. Let me say that the banking fraternity, at any rate, is not idle, partly because it feels in some sense that its interests are being threatened. But I think that it will contribute to honest discussion of this proposal.
If, as I expect, something will eventually come of the Commission's proposals, we shall certainly press, as every other speaker so far has proposed, that this new bank should be set up in London. It can hardly be disputed that we have the most versatile and sophisticated financial centre in the Community, and that an Export Bank is therefore more likely to prosper in such a setting than elsewhere. Such considerations would seem to justify making an exception from the normal practice of establishing the Community's financial institutions in Luxembourg.
457 Perhaps I may end by making a more general comment about the EEC and its future, which I think has some relevance to the present possibly minor issue; and I speak as one wholly committed to the achievement of a united Europe. The barriers now standing in the way may sometimes seem insurmountable. Every subject bristles with difficulties. Effective political action is endlessly delayed. Most of the EEC countries have their hands full with their own economic problems. The over-ambitious hopes of only a few years ago now seem nonsense, as to some they were when first expressed. Even the committed may sometimes doubt whether the Community can have much of a future. We must not give way to such defeatist thoughts, but press on with patient and diligent work on all fronts—and it will have to be patient and diligent. We should not be dismayed even by repeated disappointments, but resolutely continue, realising that we are in for a long haul of which future generations will be the beneficiaries.
§ 4.57 p.m.
§ Lord SELSDON
My Lords, I must first apologise to your Lordships because I may appear breathless and, secondly, because I could not attend the early part of this debate. But I have only just arrived from Paris, and I am not so good at running as I used to be in my earlier days. I speak today with some feeling on this subject and, while I have not been privileged to hear everything that noble Lords have said, I know that I shall share some of their views, although I may be slightly more practical. The needs are the first question. There is no doubt, in the current climate of our country, that exports and sales abroad are more critical than they have ever been. Therefore, any mechanism, however vague, however difficult to establish, which in some way contributes today towards increasing the United Kingdom's exports to third countries must be desirable. That to me is the prime function; not the arguments as to whether or not the vehicle created is perfect, but the arguments that something needs to be done, and it needs to be done much more desperately than noble Lords may believe.
I speak here as a banker, although the demands are not of the banking system but of the exporter. In a way, the financial system of the world is no longer 458 tailored to meet the needs of the exporter. This is perhaps because the shift in world trade, due to the increases in oil prices, and the development of Third World countries, happened relatively suddenly and coincided with a recession in industrialised nations. The banking system was not quite geared to having demands placed upon it to finance trade with impoverished countries or countries with a low credit rating. Perhaps it is significant to point out that approximately 40 per cent. Of EEC exports now go to Third World countries, as opposed to industrialised nations, and the rate of increase of these exports and of the export opportunities is very substantial.
Further, more and more of these exports are tending to be related to large projects or large groupings. It is not so much the individual export order but the large project which requires finance. The size of these projects is such that often no one country is willing to take the overall risk, although the financial systems of any industrialised nation or developed country are quite capable of handling the administration and the organisation of it. It is this move towards risk sharing, the co-ordination of finance or, a phrase now being used in Whitehall, crédit mixte, which is particularly important. Currently I believe that about 4 per cent. of British exports are now linked to major projects of one kind or another. The export opportunities are far greater than that, but are held up because people are unwilling or unable to provide the finance required or, more important, to take the sovereign risk or the country risk.
It was all this that was at the back of the mind of the people who proposed that there should be some form of European Export Bank. It may well be that it was when the entrepreneurs, companies or consultants found that the appropriate guarantees or financial sources were not available to a country that they started to approach the Commission on the basis that things could be done from there. Much of this led out of the development of the Lomé Convention and the willingness of the Community, under Lomé, to provide finance, not so much in the form of money but in the form of aid or technical co-operation, for the 46 ACP territories.
I do not like the idea of the creation of any new institution because new institutions take a long time to get off the ground. 459 As we have seen in the case of many of the proposed funds that there are around the world, they create suspicion and, above all, they do not have those initial informal links which often are so critical. It may not be appreciated by those who are not so closely involved that, when it comes to export credits, or know-how or expertise upon it, of all the countries in the world the United Kingdom is supreme. The ECGD was formed just after the First World War and without doubt commands a better reputation around the world than any other single agency for its fairness, integrity, speed of operation and willingness to see the point of view of the exporter rather than necessarily the point of view of Her Majesty's Treasury.
Anything that substitutes or replaces an established institution would, in my view, be wrong, but when the established institutions and the private banking sector find that there are certain areas in which they are unable to stray or unwilling to stray because of the size of the risks involved, some other animal or organisation which is prepared to take a risk-sharing role rather than a substituting role would be good. This is why I supported the principles behind it when the European Investment Bank was first proposed, but I do not necessarily support the establishment of a completely new institution.
Originally it was suggested that there should be 100 million units of account allocated to it, but what we were really after was some body which would share the sovereign risk and the guarantees—in other words, a guaranteeing organisation. Equally we knew that if there was a guaranteeing organisation, ultimately it would stray into the field of finance and that it might start to compete with other national organisations, or become a political vehicle, or be out on its own, creating more and more problems.
We discussed at length in Committee the need for this organisation to be linked in some way or another with the European Investment Bank rather than that it should stand completely independently on its own. However, when we look at the development of exports and at what has happened in the last six months rather than in the last 12 months, what I am 460 aware of is that as these jumbo projects, these larger-sized operations, have come into being, other sectors of the world, whom we never thought of as competitors before, have appeared—for instance, South Korea; Canada offering 50 year money at 1 per cent., in some cases; the Arab countries themselves; the developing countries themselves. Competition is very hot and competition on price is critical.
Our weakness has often been that the nations in Western Europe are themselves unwilling to provide the complete guarantee for a single project. The central banks and Governments of developing countries are willing to provide those guarantees. These countries may not have the credit rating necessary to compete with the West but they can go some way towards it. It would be wrong for any national Government within the EEC to agree in principle to take on board on its own the size of sovereign risks that many of the developing countries are willing to take on in their rush for growth or exports. It is not so much a question of the sources of money that are available. Our banking systems are such that at very short notice they can bring on stream vast amounts of money from all corners of the world, day or night, provided that the appropriate credit risk or guarantee is there.
Thus it seems to me that if the Community can put forward proposals for an export bank or an export guaranteeing organisation, or something of that kind, on the lines that have already been discussed, an organisation which does not attempt to replace national systems or to introduce a form of nationalisation of the banking systems indirectly by being the sole vehicle that has the power and strength on its own but which has clearly defined regulations that allow it to supplement the facilities of local national export organisations, I would support it wholeheartedly. Indeed, I would do more than that.
If we look at where the export demand currently lies and at the current commitment of the United Kingdom—the way in which it is over-extended in many cases in developing countries in terms of the level of credit that we have offered, or the level of exposure of ECGD as such—it is practically impossible to sell any more goods unless other sources of finance or guarantees are found. In a free world, 461 which we still have, there is always somebody, the entrepreneur, who will come along and find another source of finance. There is always somebody who will take a risk somewhere. The danger at the moment is that where it is impossible for the United Kingdom to accept that risk and where the private banking sector cannot take it on to its own balance sheet, the entrepreneur, of whatever nationality, goes off to another country, for financial reasons, and takes with him his export order. Once that export order is given and the equipment is on stream, then the replacement orders, the servicing and the things which accompany it also go and the market is lost.
These problems are very serious when we consider the trends. I do not believe that our export led boom will be a boom in the industrialised nations. If we are to have export led growth, which is so critical, I believe that the greatest part of those exports and the greatest growth will be in the Third World or in the developing countries which have a poor or a bad credit risk. Yet we have to look at the competition from the rest of the world. If other people are willing to take that risk and we cannot take it on board ourselves, if somehow we can use the power of the Community—after all, this is what the Community is all about when it comes to trade—I believe that we should do so. I do not believe that we should reject a proposal such as this out of hand.
Further, there are in the Community at the moment relatively few financial institutions. As the noble Lord, Lord O'Brien of Lothbury, pointed out, there is a need. If financial institutions of this kind are to be created to work with the private sector, they should be located in that area of the world where the private sector is most dominant. I think that everybody would agree that that area is London. Further, I believe that the high standing of Her Majesty's Government in these fields, the Ministry of Overseas Development and the ECGD itself can all be complementary. Many of the Third World exports tend to be to Anglophone countries or to those countries which have historic links with the United Kingdom. If we can attract such an institution to this country, or perhaps insist upon it, it could be beneficial. I would not feel happy if it were controlled and 462 operated outside this country, because in many ways our friends and competitors in Europe are often more capable of making government machinery work to their advantage than is our own private sector in the United Kingdom. Therefore, I support the concept, but I should like to be sure that it was this country which decided how it was to be utilised, because of all the countries in Western Europe we need exports more than any other.
§ 5.10 p.m.
The Earl of BESSBOROUGH
My Lords, I hope that your Lordships will forgive me if I intervene most unexpectedly in this debate. Like the noble Lord, Lord Selsdon, I have just returned from Brussels. For most of last night I attended the Budget Committee of the European Parliament, and I want to confirm what my noble friend Lady Elles said about the provision for the European export bank having been deleted from the 1977 Budget. I have prepared no notes for what I am going to say now, but having listened to this debate I wanted to pay my tribute to the noble Lord, Lord Cobbold, and his Sub-Committee for having produced a very useful report and also to say how very wholeheartedly I agree with every word of what the noble Lord, Lord Selsdon, has said. I would hesitate to disagree with so noble a person as a former Governor of the Bank of England in the shape of the noble Lord, Lord O'Brien of Lothbury, but I believe that some body of this kind, perhaps not precisely in line with the Commission's proposals, would indeed be desirable.
In my view this guarantee organisation, as my noble friend described it, might perhaps apply not only to projects overseas, to third countries. I have recently been engaged in preliminary discussions with the European Investment Bank on the formation of a multi-national financial and industrial consortium for the reconstruction of the earthquake area in Northern Italy in the autonomous region of Friuli. Of course I went first to the European Investment Bank, who told me that they would not initiate any proposal of this kind but that if a series of banks from different Member States came forward and together proposed the formation of such a consortium with, for example, the steel industry—because as your Lordships know there is a steel industry to 463 be rebuilt, there are cement works and a considerable number of other factories—then the European Investment Bank would do everything possible to facilitate the formation of such a consortium.
However at the moment there are problems. I mentioned this to a personal friend who is now in a very well known merchant bank in the City of London. He is a very energetic and enterprising person—indeed, a former Ambassador—and he came forward and said, "I think we should try to do something. We must look at this". So on Wednesday of next week we are having a meeting with Sir Raymond Bell of the European Investment Bank and his other advisers, and representatives of industry who would be interested in becoming involved in such a project which has, of course, many complications and may not in fact in this case get off the ground. I think this will be an interesting effort which might lead to something more important later.
I have spoken to the Director-General of—I do not think he will mind my mentioning the precise name of the consortium—the Société Financielle Européenne. He said "It is very curious. The City of London is a great centre in world banking and yet the merchant banks in London are not as closely involved in the Community as are similar banking organisations in other Member States. So it seems to me that any new body which would encourage the association of banks in this country with their partners on the Continent, going somewhat beyond the admirable Federation which the noble Lord, Lord O'Brien, has mentioned, would be a good thing.
I merely put this idea forward because it is very much in my mind at the moment. It seems to me that there is no organisation to which one can go in the kind of circumstances which I have mentioned—circumstances which involve the long-term reconstruction of an area and not the immediate relief for which the Community have indeed made quite an important contribution. I could not agree more if such a body were centred in London, like everybody else, but I think that the noble Lord, Lord Cobbold, has certainly raised the key points in the last part of his report. I have looked at that carefully and I agree with what he says, but I should 464 like there to be an on-going discussion of this whole question and, as I have said, not confining it solely to third countries.
A Community guarantee will obviously be necessary if this consortium for the reconstruction of that part of Northern Italy is to go through. There must be a Community guarantee. Who precisely will provide that guarantee I do not know. We may get a little further on the subject next week, but I just wanted to put these new ideas into your Lordships' minds in the hope that you will also give it thought and perhaps in winding up the debate the noble Lord, Lord Cobbold, may also express an opinion on them.
§ 5.16 p.m.
§ The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk)
My Lords, on behalf of the Government, I should like to say how very much we welcome this opportunity to debate the Commission's proposal for the establishment of a European export bank. It is the first time since the two Committees have reported in the other place and here that there has been such an opportunity as this; I am grateful to the noble Lord, Lord Cobbold, for giving us the opportunity. I should like to say to the noble Lord that one point on which I found myself in agreement with him was when, towards the end of his speech, he mentioned the unfortunate duplication of committees in both Houses. As talk of the reform of your Lordships' House has been very much in the air recently—but not, let me hasten to say, for any reason devolving from the European export bank—this is something which I hope will be a positive contribution to any debate on reform in the future.
As has been pointed out, the objective of the bank is to improve the chances of success of companies in Member countries who wish to collaborate in bidding for contracts for the large-scale—or in the jargon which is now used, "jumbo"—projects in countries outside the Community. It is true that the actual proposals are detailed and highly technical and I do not pretend to know all the intricacies of them, but the problems of collaborating on finance and insurance are really not surprising when one looks at the 465 different ways in which the financial systems of the Member countries have developed.
Talks have been going on for many years about harmonisation but there is little prospect of early success. We have not only seen these problems in regard to finance; we have seen them in a variety of areas within the EEC; for example in pollution and food additives and indeed right over the whole area. I found myself very much in agreement with the noble Lord, Lord O'Brien, when he said that the barriers may seem insurmountable. He mentioned that when he was talking about ranging over the whole field of the EEC and he said we must not give way to such defeatist thoughts. Having been a pro-European all the way through from the beginning, I agree that this is absolutely so and it requires an enormous amount of patient and long-suffering consideration.
It is also true that in the meantime American and Japanese companies do not have to face the same problems of co-operation on large projects as the European consortia do. A European export bank would be one way of trying to deal with these problems within the Community and to improve the Community's overall ability to compete for large-scale business. I do not pretend for one moment that there is such a thing as a European panacea, but I should have thought it was an attempt to go along the right road. However, there are clearly technical difficulties to be overcome before a bank can be set up and fully functioning. Therefore, as I think everybody has agreed, the Commission's initiative deserves a warm reception and also thorough examination. That the Commission's proposal is excellent in its objective is one thing, but it does not mean that it specifies in sufficient detail the manner in which the bank would handle these technical problems. Indeed, the noble Lord, Lord Tanlaw, raised the question of whether "bank" was the right term. I think this really is a matter of semantics. As it would undertake the banking function of borrowing, which ECGD does not do, I would define it as a bank lending to exporters and to buyers. Also, it is true that it would undertake insurance operations, which ECGD does, but I am sure noble Lords would agree that that is not one of the major obstacles.
466 The proposals of the Commission have many obvious attractions. First of all, there is the provision of a single point of contact for financing and insurance, which the noble Baroness, Lady Elles, pointed out, which could simplify the administrative problems which firms face over the negotiation of large multi-national operations involving two or more member countries. So there does not seem to me to be any reason why subsidiaries in the other sense of multi-national should not also be part of the process. The amount of business coming to undertakings in Member States could therefore increase as a consequence of the expanded and centralised facilities thus made available. The noble Lord, Lord Selsdon, made a very strong plea on the necessity for exports and anything that will increase our viability on the export side, a sentiment with which I find it difficult to disagree.
Secondly, the access of the European export bank to independent sources of borrowings could relieve Member States from a part of the financial burden of financing particular pieces of large export business, which is very important to us in our financial and economic context. The bank could also facilitate the financing of a multi-national credit deal in a single currency. Therefore, the Government believe that the Commission have usefully identified ways in which the Community's export capability could and should be improved. However, we are not confident that the many other technical aspects of the operations of the bank can be left to the management of the bank once it has been set up, as the Commission suggest. That is putting the cart before the horse. The most important problems which would arise were described by the noble Lord, Lord Cobbold, and I do not intend to reiterate them. The problems of principle and the political dimension were pointed out by the noble Lord, Lord Tanlaw. These must be settled before the bank is set up.
In addition to these major problems, there are also technical difficulties which will require thorough discussion before the bank can be set up, and before we can reach a final judgment as to whether it would provide the best and most cost-effective answer to the problems identified by the Commission. It is true that the bank would be no use if it were just 467 another tier of bureaucracy. It would have to be able to respond flexibly and quickly, and the technical feasibility of its operations would have to be hammered out in advance, if it were to have any starting point at all. This is absolutely essential.
Having said this, there is one other important point that cannot be overlooked. Competition between exporting nations over export credit terms, which can considerably reduce the value of the exports to the countries concerned, is always likely to be mutually damaging. The United Kingdom firmly supports continuing efforts to avoid such self-defeating competition and any escalation towards a credit war. Therefore, we have to ensure that while we take the necessary action to enable Community exporters to compete effectively, any action should not add further impetus to destructive competition over credit terms. I think this would be to our mutual disadvantage.
We are extremely grateful for the evidence so assiduously and carefully assembled by the Scrutiny Committee, which has been extremely useful in helping us to formulate our view. We particularly agree with the conclusion of the Scrutiny Committee that a more detailed examination of the proposal is needed. This is absolutely essential if a full assessment is to be made, expecially of the costs of the proposed bank, and also its potential benefits to the Community in terms of additional exports. Therefore, as the Committee recommend, we should like to see the proposal referred to an appropriate specialist group or groups, whichever turns out to be preferable. I am the last person to want to see an endless proliferation of studies, but, as has been agreed by noble Lords who have spoken, detailed preparation is absolutely necessary.
The noble Lord, Lord Selsdon, raised the question of whether this would duplicate other institutions. I would say that the bank would not, or certainly should not, encroach on or duplicate or be a substitute for national agencies such as ECGD. This would make the bank redundant before it got off the ground. The bank would have to deal with large-scale, jumbo projects which do not make up the bulk of ECGD business. In other 468 words, the bank would have to carve out its own place. It will not be just an extra institution added to the large number of institutions already existing within the EEC.
The noble Lord, Lord Mais, was right when he said we should attempt to identify what is needed in the existing facilities. The noble Baroness, Lady Elles, raised the question of the time the study would take. The study will take some time, especially as some of our partners, particularly France and Germany, are not convinced that there is a need for such a bank, although most other members are in favour. If it is to be a Community bank, then one must have Community agreement on it. As members of the Scrutiny Committee will know, there has been a generally favourable response to the proposal by the professionally interested bodies in the United Kingdom, including the CBI and the banking associations, although the noble Earl, Lord Bessborough, felt that perhaps there ought to be more enthusiasm from that quarter. We would continue to consult these organisations if, as we hope, a detailed study is launched in the Community. It is only fair to say that the whole proposition began in August 1975, so there has not really been a very long time for it to have got off the ground. If now we move forward to a more detailed study, then the interest and enthusiasm of other institutions should follow. A strong case has been made by several noble Lords for siting the bank in London, which is still the major financial centre of Europe. On the other hand, it is true that the other financial centres in the Community and other facilities are in Luxembourg. This will come out in the detailed study of the proposition.
My Lords, to summarise the view of the Government, the Commission have identified a real problem and probably a real need. We think that the capacity of the Community to compete for the large export projects can and should be improved. Therefore, the European export bank may well be the answer to the problems to a great extent, and may well be of great benefit to the United Kingdom. However, at this stage it would be foolish to commit ourselves to the proposal of the Commission until it has been expertly scrutinised. Therefore, the Government give their blessing to the recommendation 469 to follow the proposal that has been set out in the report of the Scrutiny Committee.
§ 5.29 p.m.
§ Lord COBBOLD
My Lords, I am most grateful to the various Members of the House who have spoken in this debate, which I found very interesting. May I first thank the noble Lord, Lord Mais, who acted as chairman of the Sub-Committee through most of the hearings, and who has been instrumental in getting out this report. May I also express my thanks to my successor-but-one along the road, Lord O'Brien of Lothbury, and to the noble Lord, Lord Selsdon, for coming back from Paris. Both noble Lords made extremely well-informed and constructive speeches, to which I am sure your Lordships were glad to listen. The noble Baroness, Lady Elles, asked one or two questions—I would say, a lower ceiling I think, but not an upper.
The majority of our witnesses, and the Committee itself, felt that the European Export Bank should deal only in big projects, and various rather large figures were thought of. I did not hear an upper ceiling mentioned. I personally think that if the EEB really took over and got going, a figure of £100 million would prove to be something of a token figure; we are talking, I believe, in very large amounts indeed if this happens. I think the difficulties of the raising of finance for an EEB should not at all be underestimated when the working group comes to look at the matter.
Lady Elles also asked me to confirm what I think I had said about multinational contracts. Certainly the Committee's view and my own view is that the EEB should only deal with contracts where two or three or more Community countries' contractors are involved, and should not deal in respect of a single exporting country, because they would inevitably be in competition with the local national. She also mentioned multinational companies. This is not designed in any sense for multinational companies, but I can think of instances where multi-companies might be concerned in multinational contracts.
I rather agree with the noble Lord, Lord Tanlaw, about nomenclature. I think "bank" is slightly misleading, but 470 I cannot think of a better name. He suggested that one might start with insurance and think only about EEB finding or providing finance. All our witnesses, I think, were quite clear that in fact and in practice, even if they did only start with the insurance side, they would eventually have to find or provide finance themselves. Unless my memory plays me false—it goes back several years—the ECGD started as credit insurance only and went on later to provide Government finance. I think that is the general experience.
As to harmonisation of interest rates, if I thought the EEB could harmonise interest rates throughout the Community I would be very greatly in favour of it at once, but that is, surely, much too hopeful a prospect. The harmonisation of interest rates must depend on individual countries' general economic and financial policies. It is not going to be achieved, I am afraid, by setting up the EEB. On the definitions, I agree that they are complicated; that would be for the administration of an EEB. I should have thought that within the EEC you would not talk about foreign goods when a member country of the EEC was concerned. Also, I should have thought that subsidiaries operating in one of the countries would be classified as operating there. I certainly would not follow the noble Lord on the question of political exclusions. Finally, I would agree that it is absolutely essential to make sure that an EEB would make things easier and not more difficult.
I was extremely interested to hear the intervention of the noble Earl, Lord Bessborough. If I may say so, I would think that long-term finance projects are rather outside this field at the moment, and to start talking about anything more than exports for an EEB would confuse and delay the issue. Possibly it is more in the European Investment Bank field. Certainly I would not think it was in the EEB field at the moment. But I appreciate, as always, the noble Earl's enthusiasm for European adventures in general.
Turning to the noble Baroness, Lady Birk, of course I am extremely glad, as all members of our Sub-Committee will be, to know that the report has the general support of Her Majesty's Government. I am delighted to hear that she gives her support to the few words I said 471 about the Committees of the two Houses working together, which seems to me to be a very important development. I would particularly hope—the noble Baroness has said this is the case—that, before we get further, Her Majesty's Government will press very strongly for early examination in detail by people who really know what this is all about; it does seem to me extremely important that that should take place as early as possible. I am most grateful to your Lordships for a very interesting debate.
§ On Question, Motion agreed to.