§ 5.7 p.m.
§ Lord TREVELYAN rose to move, That this House takes note of the Fortieth Report (HL 226) of the European Communities Committee on the EEC Common Commercial Policy. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. It is, as I understand it, the policy of the Select Committee both to comment on specific proposals made in the Community which affect British interests, and to examine in general major aspects of Community policy. Today the Select Committee, with notable assistance from the Department of Trade and the noble Lord, Lord Reay, the rapporteur for the Loma Convention in the European Parliament, submits to your Lordships a review of the Community's Common Commercial 226 Policy; that is, the commercial policy of the Community towards the world outside the Community. We hope, thus, to draw the attention of the House to a matter, the importance and scope of which we believe are not generally understood. The Committee has also been greatly helped by the visit of its Sub-Committee to Brussels, and the advice which the subcommittee received there.
§ We consider that this is one of the Community's successes, largely due to the efforts of Sir Christopher Soames and his able team of officials. It was adumbrated in a period of European prosperity. It would probably not have developed in precisely the same way if the severe recession could have been more clearly foreseen, but, by and large, I do not think that it would have come out much differently.
§ Let me first single out three aspects of the policy. First, the Community forms the largest trading bloc in the world. To belong to this bloc must surely be of continuing advantage to the interests of this country. Secondly, the Community has achieved a high degree of integration of its Members in its commercial relations with non-Member countries. Thirdly, it is a generous outward-looking policy, and has little of the narrow, inward-looking quality which, in the early days of the Community's existence, we had feared it would have. In this respect, the policy suits the interests of this country which thrives on an expanding basis of international trade, and accords with our recognition of the importance of the advancement of the developing world. It is a policy with which we should be well satisfied. The main basis for the commercial policy is the Common External Tariff, which is now lower than the average level of duties imposed by the other great trading blocs—a tariff to which this country now fully adheres during this year, at the close of the temporary transitional period applying to it.
§ As will be seen from the report, the picture is by no means simple. This is largely due to the need for flexibility in dealing with the many different trading situations. An over-rigid framework would not have met the needs of the Community or its trading partners, which are numerous and diverse, for many countries 227 have eagerly sought trade agreements with the Community. The Member States may continue existing bilateral agreements when they are due to expire, but only after consultation with the Commission, which must check that such agreements do not run counter to Community policy, but any agreement made by the Community with a non-Member State overrides existing bilateral agreements. New agreements are negotiated only by the Community, and the major trade agreements to which the United Kingdom is a party are now Community agreements.
§ I do not want to weary your Lordships with a repetition of the details of the various types of agreement which we have set out in the report, but I should like to comment on four types of agreement: those with the EFTA countries, those with the countries of the Mediterranean littoral, those with the State trading countries and those with the members of the Lomé Convention. The free trade agreements with the EFTA countries followed the enlargement of the Community in 1973, and reflect both the comparable degree of economic development in the Community and the EFTA countries and the long-standing geographical and economic ties existing between them. Secondly, the agreements with the Mediterranean countries also reflect geographical and long-standing historical ties. They comprise three types: preferential agreements with Greece and Turkey which contemplate their possible adhesion to the Community and, in that event, would ease their way to membership; agreements with Spain, Israel, Malta and Cyprus, which contemplate ultimate free trade with the Community; and agreements with other countries of the Southern and Eastern shores of the Mediterranean, which are conceived more in terms of aid than of free trade.
§ The Community is now engaged in bringing balance and cohesion to its Mediterranean policy. There is urgent need of a coherent policy for this area in the agricultural sector. The Government stress the view that the current problems of the Community's Mediterranean producers arise from structural causes, and not from the agreements with non-Member countries. The Committee accept this view, but point out that the probable accession to membership 228 in the next five to ten years of some Mediterranean countries would make it essential to relate the concessions in agricultural products granted to non-Member Mediterranean States to the output of the Mediterranean Member States in the same products. It is an example of the need to co-ordinate the Community's internal and external policies. This touches the difficult problems of the enlargement of the Community, requiring a separate report which the Committee hope to submit to your Lordships later this year.
§ The present report explains the Community's machinery for dealing with the Arab boycott. We note that this machinery has not yet been invoked, and doubt whether it will provide a more practical approach to this difficult question than the present policy of the Government. The Committee believe that the Community's policy for dealing with the State trading countries is sound. COMECON's aim appears to be to negotiate with the Community on behalf of all its members, which show no eagerness to support this procedure. The Community has agreed to have formal links with COMECON in the field of information, but has every intention of negotiating trade agreements separately with the individual countries involved. Agreement has already been reached on the conditions for the import of Romanian textiles.
§ The Lomé Convention, debated in your Lordships' House in November 1976, remains the cornerstone of the Community's relationship with the developing countries, and requires the further discussion of it in the report. We have heard it said that the Convention is based on four principles: that there is a need to link trade promotion with the grant of trading facilities; that, unlike the generalised system of preferences, which is unilateral, the Convention is an international treaty which cannot be varied unilaterally by the Community; that the Convention has established the need to combine trade concessions with co-operation in development which will improve the capacity of the beneficiary to exploit the concessions; and that the Convention's importance lies in the fact that the Community is a group of countries addressing another group of countries.229
§ This is what one might call the ideological basis of the Convention. As I understand it (though my acquaintance with it is only recent), it originated in the concept of establishing a new relationship with the old colonial countries—a relationship which would have a political and psychological, as well as a commercial, aspect. This idea was, I understand, of French inspiration in the Yaoundé Convention, but it has been developed with the accession principally of the former British colonies in East Africa. There is much sense in this line of thought, but the concept of exclusive development of the Community's relations with a section of the developing world carries with it some inherent difficulties. The members expect to have a privileged position, but continually find that their preferences are being eroded by the Community's subsequent policy, either through the general scheme of preferences or through new bilateral agreements. There is a clear division of principle between those who think it would be wrong to treat the Lomé countries as an exclusive club, particularly as some of the poorest developing countries are not members, and those who hold that the privileged position of the Lomé countries should as far as possible be maintained.
§ An important feature of the Convention which is being developed is the scheme for the stabilisation of export earnings, known as Stabex. The Governments of the Lomé countries may apply for financial assistance if a country's export earnings from certain primary products fall by prescribed percentages. This scheme is now operating successfully, and has in a number of cases made a significant contribution to earnings, though the funds available for transfers under the scheme are as yet very limited. The institutions of the Convention give the impression of being rather top-heavy. There is a Council of Ministers, a Committee of Ambassadors and a Consultative Assembly. The practical working of the Convention can best be managed through the smaller working body; that is, the Joint Committee of the Lomé members and the Council of Ministers.
§ One important question will be what position in the Community's commercial structure should be given to the South Asian States which are not members of the Convention. Their membership 230 would swamp the Convention. However, these are the most populous and poorest countries. The Community already has trade and co-operation agreements with India, Pakistan and Sri Lanka, and India benefits from the Community's food aid scheme and the generalised preferences. It seems inevitable that these countries should be treated as a separate category outside the Convention.
§ One weak point in the Community's arrangements is Japan. Negotiations have not got very far. It is the opinion of the Committee that renewed attempts to reach agreement should be made very soon, and the Committee hope that the British Government will pursue this further. On New Zealand and Australia, the Government consider that they can do most for these countries' interests by negotiations within the Community on matters such as the reform of the Common Agricultural Policy, rather than by pressing for Community agreements with these countries. Canada has an agreement with the Community for mutual encouragement of trade and industry which it seems to regard as important, and, I think, is not pressing for anything else.
§ There are some general points which require comment. The Commission speaks for its members in GATT, and the Nine Members seek to co-ordinate their position in the negotiations in UNCTAD. The Community has supported a positive and practical approach to the negotiations for the establishment of a common fund to stabilise commodity prices. It has generally found that it is unrealistic to ask for trade concessions from developing countries comparable to those granted by the Community, but it has emphasised that opportunities to provide security for investments and raw material supplies and for reducing non-tariff barriers should not be overlooked. It hopes to make available reinsurance to complement national schemes of investment insurance.
§ A serious hindrance to orderly negotiation with the developing countries lies in the proliferation of assemblies devoted to the expression of the needs of the developing world both inside and outside the United Nations and the Community. It is beyond the competence of the Community to rationalise the system as a whole, but there appears to be room for 231 rationalising the Community's own agencies in this field and care is always necessary to prevent the establishment of special administrative bodies for tasks which should be performed by the Commission's own staff. Finally, there is the attempt to harmonise export credits in co-operation with non-Member States in OECD. Some progress has been made in establishing guidelines but total harmonisation will take time, particularly while rates of inflation vary so widely among the Member States.
§ An important negotiation now in progress relates to the multi-fibre agreement. This is a matter that I should judge would have been dealt with on a different basis if the recession and its effect on employment in the European textile industry could have been foreseen. The European Council of Ministers have agreed a mandate for this negotiation which has to be translated into binding international agreements. It is essential for British and other European industry that the Community stands firm on its mandate. Here, in particular, there must be co-ordination of the Community's internal and external policies.
§ In general, it is noteworthy that the Community has tried to use its power in such a way as to increase the level of mutually beneficial trade with the developing countries. Considerable progress has been made in working out the policy of this great trading bloc. It is one of the areas in which the Community has recorded significant success. The importance of the Common Commercial Policy is often overlooked by the media because it is difficult to find the way in this complicated field. It should be marked, especially by those who are only concerned to emphasise the Community's failures and to prevent this country from making a positive contribution to a great and imaginative idea, the development of which will surely benefit our country. I beg to move.
§ Moved, That this House takes note of the Fortieth Report (HL 226) of the European Communities Committee on the EEC Common Commercial Policy.—(Lord Trevelyan.)
§ 5.22 p.m.
§ Lord BANKS
My Lords, as a Member of the Sub-Committee which drew up the report on the EEC Common Commercial 232 Policy I am particularly grateful to the noble Lord, Lord Trevelyan—grateful to him not only for the very thorough and comprehensive way in which he has presented this report to your Lordships this afternoon, but also for the efficient and expeditious manner in which he conducted all our meetings. I am quite sure that all the other Members of the Sub-Committee would agree with me on that.
I believe it to be a very important report. As the noble Lord, Lord Trevelyan, has pointed out, it emphasises the scope and significance of the Common Commercial Policy and it describes it in some detail. I think that the report is right to say that this scope and this significance are not always fully appreciated. The EEC has 74 trade and co-operation agreements with 92 countries. There is the establishment of free trade with the EFTA countries; the arrangements with Greece and Turkey and all the countries round the Mediterranean; there is the Lomé Convention to which the noble Lord referred, linking 52 countries to the Community including 22 former Commonwealth countries; there are the arrangements with Asian countries; there is the generalised scheme of preferences and there are the negotiations under GATT. In all these, the nine nations of the Community, as the noble Lord has said, the largest trading entity in the world, are acting as one.
Not all the agreements involve preferential access to the EEC markets but most do so, and the Common Commercial Policy as a whole is a great exercise in the liberalisation of trade. The average level of EEC Customs duties—and the noble Lord referred to this—is only about 6 per cent. compared with 7.1 per cent. for the USA and 9.7 per cent. for Japan. The success of the Common Commercial Policy is an achievement which justifies those who have all along rejected the notion that the EEC must inevitably be a selfish, inward-looking institution. By acting as a unit, the Community exercises great influence in the world, as the report makes clear, and I hope that this will encourage the Governments of the Nine to move towards acting as a unit in other spheres in addition to trade.
Nobody would claim that the relationship between the EEC and the developing world is yet established on anything like 233 a final or satisfactory basis. Far from it, alas! But the Lomé Convention, covering 52 developing countries, is nevertheless a remarkable development. The access which it gives to EEC markets is not made reciprocal. Then there are the provisions for aid, for industrial co-operation and for the operation of the Stabex system. The great attraction of the Stabex system is that it supplements earnings without keeping up prices. In that respect, it has something in common with the deficiency payments system of agricultural support. The funds allocated to Stabex are small; but it has, as the report points out, made a very large contribution to the earnings from certain products of some of the ACP (African, Caribbean and Pacific) countries. I very much hope that the Stabex principle can be used on a wider scale to deal with some commodities on a world basis. In this way, operating beyond the limits of the Lomé Convention for certain commodities, the Stabex principle would be used in the operation of the proposed Common Fund.
That thought leads me to express the further hope that in the field covered by UNCTAD (the United Nations Conference on Trade and Development) the EEC will be able from now on to act as a unit in the same way as the nine countries act as a unit under the Common Commercial Policy. The report rather glosses over, perhaps, the disarray in the ranks of the EEC at Nairobi earlier this year and, in particular the hesitancies of West Germany and Britain over the acceptance of the principle of a Common Fund. Much ill will was created which united action could now do much to disperse.
The generalised scheme of preferences which extends preferential tariff terms to a whole range of developing countries must inevitably, as the report points out, erode the Lomé concessions; and the noble Lord, Lord Trevelyan, referred to this. The aim must always be, however, to move towards the widest possible degree of freedom of trade, but Lomé and the GSP are there to see that, on the way, the developing countries suffer least from tariff barriers, and of course Lomé brings in the other important advantages to which I have already referred.
Some members of the Sub-Committee, as the noble Lord indicated, had the opportunity to enter into discussions 234 with officials in Brussels about the Common Commercial Policy and I was particularly interested in the discussions on the GATT negotiations. We so often hear of the internal divisions within the Nine, yet here was an example of the Nine acting together and negotiating with other large blocs in the world, such as the USA, for example. The US tariffs, it was pointed out to us, consist of peaks and troughs, some very high and some comparatively low, while the EEC tariffs are fairly level. The USA wanted a percentage reduction in tariffs while the EEC wanted to eliminate some of the US peaks. It reminded me of the negotiations for mutual force reductions in Central Europe where the Russians want a percentage reduction but the West say, "No, we must get down to a given figure" because they claim to be outnumbered by the Russians at the present time. The strategy seems to be rather similar in this negotiation within GATT between the EEC and the United States. But the important aspect was that here was the negotiation being carried out by the Commission on behalf of the nine nations, the EEC acting as a unit.
I have spoken of the Common Commercial Policy as a great exercise in the liberalisation of trade. But if I left it there, it would not be giving a complete picture. The noble Lord, Lord Trevelyan, did not leave it there, either. The world recession, and the unemployment which it has brought, have to some extent revived protectionist attitudes in the world and these are to be found in the EEC as elsewhere.
For some time of course the textile industry has presented particular difficulties, and the GATT multi-fibre agreement was designed to deal with this situation. It is now being renegotiated to make it stricter; but, in the meantime, until the renegotiation is complete, the EEC Commission has further limited the imports of textiles and thus forestalled perhaps even more severe unilateral import restrictions by some individual EEC Members. This action drew United States protests; but more worrying than the need for these particular measures has been the emphasis of the EEC Heads of Government at the recent Summit Meeting in London on the danger which unemployment posed to their commitment to free trade.
235 The Prime Minister has recently stated that special measures may be necessary in steel and electronics as well as textiles to minimise the potentially dangerous increase in unemployment. We know of course that EEC trade relations with Japan are crucial in this respect, and I am glad that negotiations—or talks at any rate—have been resumed this week between the EEC and Japan. The French Prime Minister has spoken of the need to make the EEC as protected and self-sufficient a trading unit as possible. There is said to be French pressure to cancel the present round of GATT talks rather than to allow them to drift into failure.
However, Mr. Strauss, President Carter's special trade representative, was full of optimism last week after seven hours' discussion with the Commission. He said:We view the problems of the international economies as a reason not for slowing progress on the GATT talks but for pressing ahead faster.I hope that optimism is justified. I trust that the EEC will not abandon its general commitment to free trade. I hope that the leaders of all the developed countries will be able to agree on an expansionist policy. I am sure that a relapse into protection would lead the whole of the world into a downward spiral of standards. Expansionist policies on a world scale, coupled with the maximum possible freedom of trade, must be the aim. The Common Commercial Policy of the EEC must continue its very considerable contribution to the achievement of that aim.
§ 5.34 p.m.
§ Lord LYELL
My Lords, the whole House will once again be indebted to the noble Lord, Lord Trevelyan, for giving us the opportunity to discuss the report of his Committee. I will be brief because there is a long list of speakers. Certainly, from past experience of debates of this nature, I know there are a number of specialist speakers here who have a great deal of knowledge in some of the fields that are covered by various aspects of the report.
I believe that all of us are now aware of the size and power of the EEC as a major world trading organisation. The report points out—and we have had it spelt out already by the noble Lords, Lord Trevelyan, and Lord Banks—that 236 the Community has more effect on world trade than either the United States or Japan. What is very gratifying to us, both in this House and the Community, is to find that the Common Commercial Policy of the Community has been such a great success, especially in relation to its external aspects and links with the Third World. The report went out of its way to spell out all the aspects of the Lomé Convention and some of the disadvantages of that Convention: how it was unwieldy, and how some of the poorer nations in the Third World were not covered by all the rules and agreements which were drawn up.
The report brings out the importance of the links of the Community with GATT and UNCTAD. It is a tribute to the success of this policy that the Community does not clash greatly with the bilateral relations between Member States and other countries. This proves beyond any doubt that the Community will not be an inward-looking organisation, either with other nations in Europe, former members of EFTA or the Mediterranean littoral who may wish to seek associated, limited or full membership of the Community, or other nations of the Third World or North America.
I believe, also, that the Community takes its responsibilities to the Third World seriously and of course especially to the signatories of the Lomé Convention. The noble Lord, Lord Trevelyan, stressed the point both in his report and in his speech today of the Convention not including the poorest nations which possibly deserve the most help. He mentioned Sri Lanka, but of course we have to consider India, Pakistan and Bangladesh. He mentioned that the various preferences which these countries may enjoy, either bilaterally or as part of a larger agreement with the Community, are gradually being whittled away. This is something which I believe the Community is looking at and it will continue to place great importance on this.
We were happy to find in the report the different types of Community policy. I take special notice of the arrangements under the GATT multi-fibre agreement. The noble Lord, Lord Rhodes, and the noble Baroness, Lady Hornsby-Smith, have spoken many times on textiles, and I am sure that this aspect will be of great 237 interest to them. The noble Lord, Lord Trevelyan, has mentioned this agreement and I support his desire that the Community should stand firm on its mandate and should go as far as it can to support intra-Community trade in this sector.
Also in the report particular attention has been drawn, among other things, to what I call the Mediterranean agricultural policy. This combines two major perils—if I may call them that—of agriculture and the CAP, particularly as it affects Italy and the South of France for some of their agricultural produce. The second peril is preferences and access to the Community of agricultural or horticultural produce, from the nations in the Mediterranean littoral. The report seeks our support in the Community's efforts to co-ordinate this trade, and I believe that we should urge the Community to do all that is possible in this particular region.
Trade is always a matter that can cause disputes between nations and, I believe, round the world. I believe that there is much greater risk of this when bilateral relations are in danger of duplication by any supranational organisation and, in particular, the Common Commercial Policy. We had major examples of this danger yesterday when we were discussing the EEC Budget and how necessary it was to see that nations' Budgets were not duplicated in any major respect—were not paralleled—by the EEC Budget. Yet I believe the report spells out how successful has been the common policy, taken over the wide spectrum which is covered—I believe there are five or six more items involved that I feel I ought to cover. I was interested to see that the Committee believe that an agreement should be reached with Japan. The noble Lord, Lord Banks, drew attention to that aspect and we are glad to know that negotiations with Japan are continuing. That is one aspect where the Common Commercial Policy of the Community can help us.
I think the report has shown us how very successful this common policy has been. The noble Lord, Lord Banks, stressed the multi-fibre agreement. Certainly in my home region in Eastern Scotland I know the anxieties which are still present in relation to that agreement, especially with the risk of the continued world and European recession, together 238 with the consequential low level of employment in this particular industry. My Lords, I think we are all optimistic that the Community can continue to play a major role in world trade and the report has shown that the Community is taking its responsibilities very seriously indeed, both on a bilateral scale and in connection with Third World countries. Above all, it is showing a sense of responsibility as one of the very largest trading organisations in the world. I think that is one point which should be stressed today. I should like to conclude by thanking the noble Lord, Lord Trevelyan, for giving us the opportunity of discussing this matter today, and I look forward to hearing the rest of the debate.
§ 5.42 p.m.
§ Lord SHERFIELD
My Lords, this report on the Common Commercial Policy of the EEC is a meaty one and, on the whole, it speaks for itself. But as a member of the Committee, I am very glad to be able to make a few general comments on it, though they will not diverge very far from those already made by the two other members of the Committee who have spoken.
My first point—and the noble Lord, Lord Trevelyan, stressed it at the outset of his speech—is that the report tells what on the whole has been a success story. The starting point is, of course, the Common Customs Tariff, which lies at the heart of the European Community and is at the basis of the Common Market. Round this has grown up the Common Commercial Policy which, in turn, branches out widely into the fields of aid, development and commodity policy. The report shows how the Community has built up the largest percentage of world trade and has become the most powerful trading bloc in the world, with a formidable negotiating "clout" and a powerful attractive force, so that countries from all over the world are more or less driven to enter into negotiation with it. Moreover, the Community has learned to speak with one voice and to control bilateralism on the part of its members.
So far, the Community has used its economic power with restraint and with a good understanding of the needs of less industrialised and less developed countries. 239 The Commission have been resourceful in devising forms of association with non-member countries, and particularly with ex-Colonial countries, in the shape of the Lomé Convention. They have developed the Stabex scheme for stabilising the export earnings of the Member States who are members of the Convention, and that has recently been strengthened and extended. Incidentally, in the course of our work, some of us had the opportunity to visit Brussels to discuss trade policy, among other matters, with the Commission. We were, I think, all very much impressed by the high quality and ability of the officials who are dealing with these subjects.
I have referred to the outward-looking nature of the Common Commercial Policy, on which the Committee has commented with approval. The question is whether that attitude will be maintained. As the noble Lord, Lord Banks, said, there are some rather ominous signs that protectionism, under various forms and under various other names, may be creeping into Community policy. The negotiations on the important question of non-tariff barriers to trade are making slow progress—although not, as our report concludes, as a result of any lack of will on the Commission's part. The pressures on Governments, in a time of very slow economic growth, to abandon free trade principles are great, but so far the line has been fairly well held through agreements for voluntary restraint and by more structured and elaborate arrangements in particular fields, such as the multi-fibre agreement, which is now up for renewal, and to which other speakers have referred. These have proved acceptable so far, but demands for further measures of trade restriction under the euphemistic name of "organised free trade" are building up, particularly, it seems, in France, and motions with protectionist flavours are appearing in the European Assembly.
I think it would be helpful if the noble Lord who is to reply for the Government could give the House some reassurance that it is their policy to resist these pressures in the further negotiations in GATT and elsewhere later this year. It is, I am sure, an illusion to suppose that a return to protectionism and re- 240 strictive trade practices would in the long run be of any benefit to the Community itself or to its trading partners and associates.
In the development of the Common Commercial Policy the members of the Community have worked together closely and well. They have established common negotiating positions; they have bulit up a network of agreements for free trade and aid. Of course, there is a long way to go, but so far it is a success story and that is no doubt why so little is heard about it. The advantages of belonging to such a powerful economic trading bloc are obvious. The disadvantages, had the United Kingdon remained outside, seem equally obvious. Our membership of the Common Market is under renewed attack and yet the Government seem to do very little to defend and uphold it. Cannot the Government, or at least those members of it who are not trying to revive the controversies settled by the referendum, take more vigorous steps to publicise the successes of the Community, possibly even by making some use of the conclusions of this report and of others which the Select Committee on secondary legislation produces from time to time?
§ 5.48 p.m.
My Lords, I should like to apologise at the outset for not being in my place when this debate started and to apologise also for any discourtesy of which I may have been guilty. I understand that the debate started rather earlier than was expected and my plane was an hour late; so I apologise. My Lords, I hope that the Select Committee's report on the Common Commercial Policy of the Community will be widely read. Certainly, I think it deserves to be. When I was a Member of the European Parliament and Deputy Leader to Sir Peter Kirk, I was a member of the Committee which studied these matters and, in spite of having some knowledge of them, I learned a great deal from the investigations made by Sub-Committee B under the quite outstandingly good chairmanship of the noble Lord. Lord Trevelyan.
I am sure it is true that the Common Commercial Policy is a success story but, in addition, it is something unique in history. I do not think that is an exaggeration because, for example, who would 241 really have thought in 1945 that, after so many bitter and bloody confrontations, two countries—France and Germany, not to mention any others—with totally different brands of narrow chauvinism, were shortly to co-operate for their mutual commercial benefit and, incidentally, for the commercial benefit of many of their trade rivals too? So I feel that we can safely say that the Community has set a very good example through its Common Commercial Policy, although I recognise that it has only made a start. What a pity that we did not join as early as we could have done. The blame for that certainly rests on both of the major Parties, although we can say that we have made a real contribution in this field by using our considerable influence and experience to excellent purpose.
The report shows very clearly that the Community has been less protective and more liberal generally in its trading policies than any other trading bloc or country. I have two related criticisms which can fairly be made, and I shall put them in the form of questions. First, has the Community been firm enough in seeking reciprocity, to which we refer in paragraph 51, in their agreements with non-Member countries? I am not thinking of the developing countries where to a large extent reciprocity is impossible, although not in certain ways. I am suggesting that the Community should be more firm and should say to the developed countries with which it enters into commercial agreements, "If you will, I will".
Secondly, when a country is faced with the kind of recession which we and some of our partners in the Community have faced during the last few years, with unemployment unacceptably high and rising prices that hurt the lower paid and the needy, liberal policies come under severe strain. Obviously it requires courage for Governments to take full account of the hurt which may be done to an exporting country. Also, it requires statesmanship to weigh this factor against the problems and pressures which Governments face at home. Therefore my second question is this: is there a risk at the moment of backsliding from the liberal attitudes which the Community has so rightly adopted and which are so rightly praised in the Select Committee's report?
242 During the last three days I have noticed headlines in The Times and the Financial Times which I should like to quote:India angry over EEC quotas;EEC plans duty on Japanese bearings;EEC draws up plans to curb imports of cheap textile products;EEC may erect new trade barriers, warns Barre; Australia complains of EEC steel barriers".As I have said, these headlines have appeared during the last three or four days, so quite clearly there is something in the wind. Where there is a clear-cut case that a country is exporting something below the domestic price, which is the correct definition of dumping—one might go even further and say where there is a clear-cut case that a country is exporting something below the cost of production—or a clear-cut case that imports from them are genuinely likely to disrupt the domestic market, there is probably justification for some protection through quotas or tariffs. I believe that it was the noble Lord, Lord Brimelow, who I do not see here today, who was reported in the Press as saying that quotas and protective tariffs should not be hung up on Christmas trees; one should be very careful what one hangs on such trees. Therefore it is very much to be hoped that the Community will do everything that it possibly can to stick to its liberal policies and to continue to set a good example in this respect.
Next I should like to say a word about Parliamentary procedure. I have found the question of the Ponsonby procedure and the related question of Community trade agreements, which are the subject of Orders in Council, very confusing. As noble Lords know, these orders are subject to the Affirmative Resolution procedure. It is very strange indeed that the British Parliament—I am speaking of both Houses—which has not used the Ponsonby procedure for more than 50 years should, none the less, be expected to debate and endorse treaties made by the Community with the full approval of Her Majesty's Government: treaties which, because of some legal quirk, are not defined as Community treaties, although they are precisely that. I do not understand this, and I believe that this point must be looked at very carefully indeed.
I noticed—we quote this in the report—that in their Fifteenth Report the Joint 243 Committee on Statutory Instruments expressed dissatisfaction with designation orders, although I believe that their main concern was about the form which these orders take. When, therefore, he makes his contribution to our debate from the Government Front Bench it would be encouraging if the noble Lord could say a word about whether the Government are satisfied with this procedure which seems to me to be very strange. Perhaps I may put it more simply and say that it does not seem to me to make sense—when we have never insisted on our undoubted right to debate trade agreements made by Her Majesty's Government in this century—that when the agreements are made by the Community, with the full approval of Her Majesty's Government, there has to be an Order in Council which is subject to the Affirmative Resolution procedure. I hope that I have explained that clearly; I am so confused about it myself that I may even be confusing noble Lords.
I do not believe that the report makes any mention of New Zealand. It is, of course, quite true that there is no actual Treaty with New Zealand. However, I am very concerned—and I believe that noble Lords will share my concern—about the present position regarding New Zealand dairy exports. I was not very impressed by the so-called renegotiation which was undertaken by a Labour Government. I thought that it was an unnecessary exercise which achieved very little indeed, although when the referendum come to be held the outcome was highly satisfactory. However, what appears to have been achieved by the renegotiation is a much clearer understanding of what New Zealand may expect after 1980 so far as their dairy exports to the United Kingdom are concerned.
I do not believe that it was made absolutely clear—it may have been clear in spirit but it was not clear in the letter—in, I believe, Protocol 18 of the Accession Agreement what preference would be given to New Zealand dairy exports after 1980. It was left to the good will of our Community partners. In Dublin, however, in 1975 the European Council took the view that the Accession Agreement should remain the basis for continuing imports of New Zealand butter after 1980. It was the Leader of the House in another place, who was then the Minister of Agriculture, 244 who described the endorsement of the agreement in Luxembourg in June 1976 as full and satisfactory. Now, however, we understand from the Press, and I believe this to be probably correct, that a legal ruling could upset this agreement upon what seem to me, as a non-legal person, to be quite spurious grounds. We all know that this could result in quite a grim situation for New Zealand whose economy, despite the most strenuous efforts at diversification, still rests very heavily indeed on dairy exports and on sheep meat. Therefore it would be comforting to have some reassurance that things are not quite so bad as they have been painted in the last few weeks and days.
At the same time, I have also read the suggestion that New Zealand should get a price rise of only some 10 per cent. for their butter and cheese exports to the United Kingdom when the price is renegotiated in the near future. I understand that this is considerably less than half the increase in the cost of production. This seems to me to be unfair and inconsistent with the spirit and letter of the promises made by the Community at the time that we acceded.
For the French Farm Minister to comment, as I understand he did, that he was "fed up" with the problems of non-European Community countries is surely just adding insult to injury and I feel that there is an obligation on Her Majesty's Government—and I think that your Lordships will endorse this—to ensure that New Zealand is fairly treated in this very important respect.
Next, I wish to say a quick word about the Euro-Arab dialogue. One thing which does not come out in our report, which deals fairly fully with this question in Paragraphs 24 and 25, is the importance of the Community trade with the Arab countries. I was given some figures last week which emphasised the importance of that trade. The Arab countries' exports to the Community account for more than half their total exports, I was surprised to learn, while their imports from the Community amount to only just less than half their total imports. That emphasises the great importance of the Euro-Arab dialogue, which is largely concerned with commercial matters, though those cannot of 245 course be separated from political questions.
As to the boycott referred to in Paragraphs 22 and 23, while the Commission quite rightly officially deplores discrimination, as do Her Majesty's Government, it is sensibly left—I think sensibly, anyhow—to the individual companies to decide how they should respond to any pressures brought to bear on them to observe the boycott. I feel that some account must be taken of the fact in this context that large parts of Arab territories, particularly large parts of Egypt and Jordan and a smaller, though important, part of Syria continue to be occupied in total defiance of Security Council resolutions. Therefore it is not difficult to sympathise with the Arab point of view even though some of us may not fully agree with it.
Paragraph 26 refers to COMECON and I simply want to say here that I feel that the Community attitude is a correct and proper one, bearing in mind that, apart from the period from 1965 to 1975, when trade between the formerly independent countries of Eastern and Central Europe with the Soviet Union was on a fairly normal basis, the Soviet Union has used COMECON as a means to exploit the satellite countries by selling their raw materials at very high prices and requiring barter arrangements with them, which means that the countries of Eastern and Central Europe have, in exchange, to sell back finished and semi-finished goods at very low prices. Therefore, I feel it absolutely right that the Community should insist that it should enter into bilateral agreements with the COMECON countries and not deal with COMECON itself, which, in any case, refuses to recognise the Community.
The Select Committee's report says nothing directly about the Common Commercial Policy from the British point of view and I think it not a bad idea to ask how we fared and, in particular, to consider whether some of the grave economic problems which we face at the moment—for instance, the weakness of the pound, our balance of trade problems, very high inflation, low productivity, heavy unemployment, high taxation—would be noticeably better had we not joined or were we to pull out.
I myself cannot see that this would be the case. I have made a careful study 246 of the matter and followed all the correspondence in The Times and I think some of these problems might be considerably worse. Who, for instance, supposes that the massive support for the pound that was so readily forthcoming from our Community partners would have been so easily obtained had we turned our backs on Europe So I feel that the suggestion from some people that we should now pull out is sheer folly.
I come to my conclusion and I apologise for speaking for a quarter of an hour. In my view, it is time that the Community, with its immense economic strength, should flex its political muscles a little more and become a world Power in the very best sense of the word. I think it has failed in this. The basis for achieving this is to have a strong and successful commercial policy and strong economies. So in this field there has been disappointingly little progress. Perhaps there are understandable reasons for this. I think that probably there are. They include the effort needed to build war-shattered economies; the caution with which former enemies and rivals moved towards any form of political unity; inevitable fears, mistrust and national jealousies. All are quite understandable, but I think that this country could and should give a better lead than it has so far. I think that we could perhaps take better advantage of our belated entry, bringing a degree of objectivity to these questions that is rather lacking at the present moment. That certainly is the role that our partners in the Community hoped that we would fulfil when we joined in 1973 and when we received such a warm welcome, reflecting the confidence that they had in us. If we were to betray that confidence we should indeed be a nation in decline. My Lords, I am sure that we are not.
§ 6.6 p.m.
§ Lord RHODES
My Lords, we are indebted to the noble Lord, Lord Trevelyan, on two counts: first, for having introduced this subject this afternoon and, secondly, for having chaired so well the Sub-Committee which has produced this report. It is a good report; it highlights successes in the EEC and also some of its shortcomings. The successes are the external relations and the shortcomings are its internal and industrial policy. This is historical. It was easier to whip up 247 enthusiasm for external measures which benefited everybody in the Community than it was for internal Community policies which had to do with the national interest of its members, resulting in trivial arguments like, "How much do we pay and how much are we going to get?".
So success attended the external policies, which in consequence got the lion's share of EEC resources and manpower. That was all right so long as times were good; we can all be generous when times are good. Full employment and reasonable growth give everybody a sense of encouragement to go on. But since 1974 there has had to be a re-think. Massive unemployment and little or no growth have caught the EEC without the necessary strength in its industrial departments to cope with the job. The problem is that nearly three-quarters of the EEC Budget is devoted to agriculture alone and that is why the industrial sectors of the EEC will face a good deal of difficulty in the years ahead.
Nothing illustrates this dichotomy of interests better than what is happening about the multi-fibre agreement. When it was signed in 1974, there was full employment and growth; there was general optimism about an orderly liberalisation in world trade in textiles. Since then, we have had OPEC and a downturn in world trade, together with massive imports from old and new sources and these have resulted in a catastrophic decline in the clothing and textile trade in Europe.
At long last everybody concerned is seized with the necessity for action to be taken. We claim the Community to be a big industrial and commercial entity. It is showing some of its muscle now, and the textile trade of this country can thank its lucky stars that we joined the EEC when we did, because in the years that have followed 1973, being members of the EEC has put a restraint on the internecine competition which would have taken place, without any question whatever, if we had not been in it. If GATT had been the only resource we had we would have had far more closures and for more unemployment. Our thanks are due in very large measure to our Ministers in this Government and to their officials, and also to the EEC officials and Ministers now renegotiating the multifibre agreement in Geneva. May I say 248 that, by and large, the EEC Ministers have accepted the British line.
A year ago I made a speech here on this matter. I will quote from it because it is still topical, and I should like some of these points to be highlighted so that they can be dealt with to the benefit of the textile trade in Europe:We want it—this multi-fibre agreemen—to be renewed, but it must be improved to meet up-to-date requirements, and we want it for a minimum of six years. As it now stands, a bilateral agreement for more than 12 months carries with it a growth rate of 6 per cent. per annum. Think of that on an exponential basis. A 6 per cent. growth rate bears heavily on countries like ours with high import penetration—in some cases up to 60 per cent. This is insufferable because in 10 years the amount allowed is doubled. It certainly cannot be tolerated in a recession, particularly in those areas of the trade which have suffered the most distortion. So the safeguard clauses in the multi-fibre agreement must be strengthened at once and their application speeded up".—[Official Report, 30/11/76; cols. 211–12.]In that same speech last year I made criticisms of the EEC officials for having dragged their feet. I withdraw that criticism, on this count, that they are undermanned. I find on visiting Brussels that there are only half a dozen really first-class men engaged on the industrial side of the negotiations. They are all on agriculture. So I withdraw some of the strictures that I made in that speech last year. These six men have had to negotiate during the last few months 13 bilateral agreements on increase in the volume of imports. It took a long time. It is all right quoting America as being very speedy in their decisions, but they are an entity; they can bring something in overnight. We have to think in terms of nine members, and with a staff of only six. I would ask the Minister to press that the negotiating team be enlarged to cope with the many and complicated agreements which will have to be completed by the end of this year. I would ask him, too, if he has considered recruiting people from industry to help. I have in mind people like Mr. David Price, who was a tower of strength to the wool trade before he retired last year. Such men are available, and they could be of tremendous help to the negotiators in Brussels and Geneva.
Our negotiating team has a mandate. It has been said from all parts of the House 249 this afternoon that the negotiating team must stand firm, and so it must. The whole of the textile trade of Europe has had a really serious setback during these last three years. It may be that the multifibre agreement itself might have to be not only renewed but amended. This is mid-July and in terms of complicated agreements there is little time between now and the time when the multi-fibre agreement lapses.
I should like to ask the Minister another question. What happens at the end of the year if there are still outstanding negotiations to be completed? Are we to understand that the existing import levels will be frozen until those outstanding negotiations are completed? In concluding this part of my remarks—and I will not keep the House long on my other point—I would say that it is in the interests of the developing world, and the EEC as a whole, to get these negotiations completed before the end of the year.
I want to mention only one more topic, and that is on paragraph 45 of this report. It is the matter of Japan. Just as the EEC is now a powerful entity and can speak on behalf of its members in the courts of the world, so the EEC—mark my words!—within the next year or two will have to speak up for the nations of the Free World in terms of growth rates throughout the world. Paragraph 45 mentions Japan. It has been mentioned that a small delegation is in Tokyo at this moment. I do not think they are getting on very fast. On the question of growth rate, I make the plea that in the next round of negotiations this should be brought to the fore. Japan cannot exist without a growth rate of 9 per cent. On that sort of basis she is going to take most of the surplus trade throughout the world. It is to the EEC and its power, its closer-knit policies as enumerated in this Common Commercial Policy which we have been discussing this afternoon, that we can look for help.
§ 6.19 p.m.
§ Lord BARNBY
My Lords, the noble Lord, Lord Trevelyan, to whom we are all indebted for having introduced this Motion, naturally covered a wide range of possible points in connection with trading within the EEC, and, of course, the 250 words of the Motion made possible the covering of a wide field. I shall address myself in the main to the wool textile industry, the textile industry to which the noble Lord, Lord Trevelyan, referred, and the multi-fibre agreement to which Lord Rhodes referred, which is an important consideration in these discussions. The House must forgive me if I am to some extent repetitive, but I think these points are important.
The noble Lord, Lord Rhodes, has been closely associated with the wool textile industry and speaks with great authority. Moreover, he had experience in commercial matters when he was a Minister. I have been associated with the wool textile industry all my life and since my retirement, because of my association with the industry, I have managed to keep in close touch with it.
The industry has been in great distress during recent years largely because of imports from Asiatic and other countries which pay lower wages than those paid in this country. For several years the industry has feared that in high places in Government there has been the belief that the textile industries are expendable, that we should sink our long-established employment relations with a great number of other countries throughout the world in favour of the less developed countries and that we should forego our established position in their favour. That feeling which has caused so much anxiety in the industry for so long has now changed, and the attitude of Government Departments has also changed a good deal.
I should like to say a little about imports. I have referred to low wages which have been an important factor as regards the distressing import levels. Moreover, the State trading countries sell at prices which are decided quite irrespective of the cost of the article. In other words, the technical term "State trading" really means "political prices". I remind your Lordships that the dangerous attitude, to which I have referred as having existed with regard to the textile industry, has now become less prominent. However, I must at the risk of repeating what the noble Lord, Lord Rhodes, has said, emphasise various points about the wool textile industry. I said that I would speak to the wool textile industry, although my comments apply largely 251 to the cotton textile industry. As regards the cotton textile industry, in the first decade of this century you could go from Bradford to Liverpool and see mills springing up like mushrooms. We held the world. We traded everywhere, but what is the picture today? A great many of those mills have passed out of existence as textile mills.
As regards the wool textile industry, its overseas selling capacity has been equalled by no other industry. When I was President of the Confederation of British Industry I often said: "You talk about exports—go to the wool textile industry! You will find that there is not a market in the world that is not penetrated by a salesman for someone in the wool textile industry". Schools for teaching export salesmen and so on were negligible. People could learn from the wool textile industry.
I have been in the industry all my life and have seen what it was in the past. I have recently been supplied with tragic figures which show that in the past 10 years the firms have decreased from 222 to 117. Many firms have gone out of existence. Employment has decreased from 242,000 to 117,000. It is a tragic story. The people in the wool textile industry believe in their efficiency. They have good employer organisations. No industry has had better relations with the working sector of the community than the wool textile industry. I think that there has been only one strike in 50 years. The worker representatives in the wool textile industry have been of a calibre much better than in a good many other industries.
I return to the question of exports. To have efficient exports there must be a strong home market. The home market has been penetrated by imports and I think that the figures show that imports have increased from £400 million to £1,600 million. Those imports have caused great distress and have been most unfortunate. As the noble Lord, Lord Rhodes, has said, the present situation is governed by the multi-fibre agreement which was arranged four years ago and which terminates at the end of this December. The time is short to start a renewal. The agreement depended on a 6 per cent. increase and was negotiated at a time when trade was good and those in the 252 industry felt that they could absorb imports on that scale. In the event we have had a world depression. I do not know to what extent the present Government are the cause of it, but they are certainly not likely on their present financial policies to improve the trading situation very much; but we may hear more encouragement from the noble Lord, Lord Oram, than recent events have indicated. The EEC as a whole accepted these imports which affected their industries on a scale which was harmful to them as well. They were rather costive in taking action to resist this and correct it.
Turning to the employer organisations, one can take pride in the degree to which all these international employer organisations are said by the leading officers from this country to have contributed so much. As I have said, the important multi-fibre agreement must be revised. Imports have come from a variety of Eastern countries—from not only Hong Kong, Singapore, South Korea and Taiwan but also there has been a vast amount of imports from politically priced countries. The leaders in developing countries will be required to make some sacrifices in the general adjustments, because they must see that there are some less fortunate and less developed people in the developing country league who must have a better bite at the cake.
If negotiations fail we must know what fallback the Government have. Perhaps when the noble Lord, Lord Oram, replies, he can give us some idea where the negotiations stand at present. Certainly, we hope that he will have absorbed the degree to which the textile industry has been the victim of what may be called unfair competition.
The EEC has the lowest tariffs of any major trading country. The textile industry in this country employs 800,000 people. How is it that the shipbuilding industry has received major infusions of Government money but that the Government have been so niggardly in the amounts they have advanced to the wool textile industry? Is it not just as important to have the bodies employed in the wool textile industry? Is there a political reason for the shipbuilding industry receiving more help than the textile industry in order to avoid unemployment? I have already emphasised 253 the way in which the textile industry is efficient in its operation and in its exports. It is for that reason that the Government must forthwith give their greatest help to the EEC negotiations on the multi-fibre arrangement and recognise that the past neglect must be corrected. There is not much time until the end of the year so the greatest emphasis must be placed on the matter. The textile industry as a whole and the wool textile industry in particular merit the strongest possible Government support.
§ 6.32 p.m.
§ Baroness HORNSBY-SMITH
My Lords, I also must apologise for my late arrival, for, although we are usually accustomed to precise analyses of how long Members will speak and although our Whips Office informs us when a certain debate will come on, for once the estimate went awry. I was assured that this debate would not start until 6.15 p.m. and I apologise to noble Lords, especially to the noble Lord, Lord Trevelyan, for not being present at the beginning of the debate.
I congratulate the noble Lord, Lord Trevelyan, on bringing this very informative report before the House, and not least on the valuable analysis that it has given us of the many and very complicated commercial activities of the Community. I particularly welcome the evidence of the growth in EEC trade and the extensive Community agreements with countries outside the EEC. This gives the lie to those earlier critics who were sure that the Community would be inward looking and rigid when, in fact, it has by a combination of aid and trade, extended and speeded up support for the less industrialised and newly emerging nations.
If I confine my speech to two points of criticism of policy—not of the report—rather than speaking about the very substantial part of the report with which I am wholly in accord, it is solely in the interests of time. First, I should like to say a few words about paragraph 22, which deals with the Arab boycott of Israel. Here I found myself—perhaps for the first time—in disagreement with my old friend and colleague in both Houses, Lord Chelwood. The Arabs who refuse to trade with Israel can be 254 recognised as using this method as an instrument of economic warfare between nations still seeking a peaceful settlement of their conflict. But that the Arabs should tell other nations whom they are to trade with if they want to keep their Arab business is sheer discriminatory blackmail.
The Committee's report confirms that the Community has taken a stand against such commercial discrimination and provides a forum to investigate such complaints. Our Government accept, and are therefore committed to, this policy. But it really is not good enough to place all the responsibility on the Commission and leave it to individual firms to make representations if the Government can, in complete conformity with the EEC, formally add some muscle to their oft-expressed regret. They could do this not merely for individual firms but, with the weighty evidence that they obviously have in the Departments' for a host of firms whose desperately-needed export trade is being so adversely affected by this wholly unethical discrimination.
When shipbuilding firms are deterred from tendering for a £3½million order for tugboats and when construction firms are frightened to tender for the Haifa port; when both the shipbuilding and construction industries are suffering from heavy unemployment and are listed, with textiles, as the three industries most affected by the current unemployment, it really is time for the Government not merely to bark but to add some bite to their activities in support of the many vital exporting companies in this country which are being deterred from exporting freely wherever they wish.
My Lords, we have passed massive legislation to prevent discrimination against the individual. We protect him from unfair dismissal, and if he is made redundant. we make the employer pay considerable compensation and redundancy money. But, if the Arabs discriminate and that massive discrimination is the reason for lost exports and reduced production leading to redundancies, the Government seem to sit back and say, "Let industry fight its own battles". That is not only discrimination against some high-sounding industrial name on a letter heading; it is discrimination against the British workforce. As such, 255 the Government should fight it as strenuously as they would fight the sacking of an individual from a firm at home.
I now turn to the issue raised by the noble Lord, Lord Rhodes and my noble friend Lord Barnby; that is, the question of textiles. I very much agreed with the noble Lord, Lord Rhodes, when he raised the matter of the limited number of people who are, in fact, detailed to deal with the commercial side of the problems of the Community. To the vast number in agriculture I would add the vast numbers in all the social welfare departments of the EEC, and all those concerned with harmonising the professions, including lawyers and academics galore. Although I have great respect for the many brilliant minds, there are far too few practical industrially-trained people who, in the end, have to furnish the prosperity—the national products—from which we can fulfil the tasks we hope to achieve in social and other fields.
It is, perhaps, unfortunate that this debate precedes by a few days the wealth of factual evidence collated in a report by the British Textile Confederation, representing both employers and employees. I believe that the report will be presented to the public this week. Certainly it will be to Members of Parliament. Over 12 years and in three divided doses, I have earned my living in the textile trade. Therefore, noble Lords will not be surprised that I should like to support all that has been said so far in the debate about the crucial importance of amendments to the multi-fibre arrangement.
First, I should like to say a few words about the proposed agreement with Romania on textiles, mainly in garments. If COMECON achieves its aim to have the right to negotiate on behalf of all its members, then an agreement on behalf of one nation, such as that currently being negotiated with Romania which may have a limited impact on Community trade, could—and I believe would—be used as a thin end of the wedge to make an agreement a pro, forma for the same concessions (the same terms) to be granted to other Eastern European countries such as Poland, Russia and Czechoslovakia which have a much larger and wider textile trade. This could, amalgamated under 256 COMECON, have serious results indeed on the textile industry in this country.
In a previous debate I dealt with cheap suits—having attended two joint meetings of Members of the other House with employers and employees from the industry, I make no excuse for dealing with them again—which every expert in the trade knows well are being exported from Eastern Europe and imported into this country at a totally uneconomic cost. A European analysis of the man-hours worked to earn sufficient money to purchase the various needs of life has time and again established that in the Eastern territories it takes four to six weeks' work to equate to the price of a suit, and if you want a good one it is two months.
The anti-dumping regulations appear only to be invoked against free enterprise countries, and time and again in answer to Questions in this House and in another place the Government fall back on the excuse that the Governments of the Eastern bloc, controlling all the means of supply and demand, refuse the evidence on which a case could be brought. If I and thousands like me have seen with our own eyes such suits selling for the equivalent of £60 or £80 in Eastern European stores while those same suits have been landed here at £8, then in any practical understanding of the word that is "dumping". It requires neither a statesman-politician nor a mathematical genius to recognise how it is achieved. If you make 10,000 dozen garments and you sell them to your own countrymen at a mark-up of 200 per cent, or 300 per cent. you can dump 2,000 dozen on the foreign market below cost, and overall you could still make a better profit than any British manufacturer would be allowed to do under the present restrictions. In the process the countries exporting are able to undermine the bête noire of all Communist countries, private enterprise, by putting firms out of business and employees out of work.
I turn now to the negotiations on the multi-fibre agreement. The impact of the far too generous initial quotas, while most adversely affecting the British textile trade, has also had an adverse impact on France, Germany and Italy. It was understandable that in their post-war boom, and when we were not involved in the negotiations as a member of the Community, they were generous and 257 anxious to help to their utmost capacity when they had high employment themselves and a booming market. However, it is one thing gradually and rationally to help the underdeveloped countries, but if you do it with too great a speed and in times of recession and slit the throat of your own industries and produce mounting unemployment, you are destroying the gross national product through which, in the end, the great industrial countries can import or even grant aid.
In the last three years EEC textile imports have increased by 80 per cent. in tonnage and reached the huge total of 9.3 billion dollars. During that four year period the EEC has moved from a surplus on textile trade of 956 million dollars to a deficit on textile trade of almost 1.3 billion dollars. To shrug off this merely under the cover of aid to the Third World is lunatic to our own people and our own industry. When these agreements were entered into there was little unemployment in the Six, and undoubtedly their generosity and genuine desire to help the Third World outstripped their forecasts of their own future trade and level of employment. Have not we had forecasts over the last four years that have gone awry?—and one must be understanding of the fact that so too can the Community make mistakes, but we must also see that they are rectified.
At a time of massive unemployment it is asking too much that we should be importing two-thirds of the textile demand in this country. Little though your Lordships enjoy figures I hope you will suffer a few to illustrate the quite dramatic change of scene in three short years. Seven out of 10 shirts sold in this country today are imported; seven out of 10 pairs of jeans; five out of 10 blouses; four out of 10 costumes; six out of 10 men's jackets. As a result of these three years, at least 100,000 jobs have been lost to British textile workers. In 10 years, when we have been struggling for economic survival, we have allowed textile imports to rise by 600 per cent. as the noble Lord, Lord Barnby, said, to the terrific figure of £1,659 million.
In the debate which took place in the other place on the 21st February, the Under-Secretary of Trade, Mr. Michael Meacher, gave the strongest and most welcome undertakings we have so far had from any member of the Government, 258 and he confirmed the disastrous effects on the current application of the MF agreement on the British textile industry, and indeed the European textile industry. He showed his awareness that the MFA does not provide adequate protection for our domestic industry during a recession. I hope that, with the unanimous backing of both sides of the industry and the very important document about to be produced, and the backing of this very important report, where this problem is most fairly laid out and underlined, our negotiators in the MFA will fight long and hard for the essential amendments on the basis of the hard and true facts which the Minister enunciated, and so provide a fair deal for this vital and highly efficient British industry.
§ 6.47 p.m.
My Lords, I am very glad to join in the tributes which have come from all sides of your Lordships' House to the noble Lord, Lord Trevelyan, and his Committee for having produced this report. The report itself, as many have said, is an extremely valuable one. I hope that the members of the Committee who have spoken will take satisfaction out of the excellence of the debate to which their report has led. I say these things, if I may, not just on behalf of the Government but personally in that over the years in various unofficial capacities I have tried to wrestle with a number of the problems that are dealt with so ably in this report. One thinks of EFTA; the Lomé Convention; UNCTAD conferences.
As I say, having taken those subjects very much to heart in various capacities I can say that this report we are dealing with is, in my view, the only, certainly the best neat bringing together of all the issues involved, and we must be extremely grateful to the Committee for the excellence of their work. Indeed, if I may take up a point that the noble Lord, Lord Sherfield, made in this connection when he was urging that the successes of the Community should be advertised, I entirely share his view on that matter. I am sure that he will agree that this report can be one of the means of achieving that end. I have in mind particularly the Lomé Convention, which I regard as a real breakthrough in terms of relationships between the developed world and the developing world, and which is one of the 259 great achievements, as I see it, of the enlarged Community.
It will not be possible for me to respond to all the points that have been made in the debate. Indeed, I shall be able to manage only a few because as I have listened to the debate, points have been coming thick and fast. However, before dealing with some of them it may be helpful if I commented in more general terms on the nature of the Common Commercial Policy.
The Community is founded on the idea of a Customs union between its Member States, with complete free circulation of goods across the national boundaries and a common tariff on imports from non-Member countries. So any changes which any Member State wishes to make to its trading arrangements generally are bound to have a direct effect on the rest of the Community. For this reason alone the Community clearly had to have a coordinated commercial policy from the start. But there is another reason as well. The Member States of the Community are small to medium sized Powers in world economic terms and, acting separately, they cannot seriously hope to have a decisive influence internationally. The CCP is a means of co-ordinating and reconciling national views into a single authoritative European voice in international trading matters. As a united whole, the Community is the largest single trading bloc in the world, and its influence is correspondingly great. This can be seen in the Community's role in both multilateral trade negotiations and in its bilateral dealings with specific countries. The CCP is, I suggest, very much a case of the whole being greater than the sum of its parts.
As the report reminds us, the basis of the CCP is enshrined in the Treaty of Rome itself. It sets out in general terms those areas of policy which fall within the CCP. It also defines the balance of powers and responsibilities of the Commission and the Member States. The Treaty sees the Commission as the main initiator of policies and as the Community's sole negotiator with other countries on trade matters. But although the Commission can initiate, it cannot act until it has the approval of the Council of Ministers. This means that each Member State, including the United Kingdom, can 260 ensure that its own vital national interests are safeguarded by amending or vetoing Commission proposals. In practice, the Commission will normally try to put forward proposals that command support from the Member States and the Commission often discusses particular problems with the Member States to ensure that its proposals will satisfy their concerns.
I have said a little about the reasons for having a Common Commercial Policy, and the way it works institutionally. I now turn to some of the more important aspects of the policies the Community actually pursues within this framework. The cornerstone of Community commercial policy is the GATT—the General Agreement on Tariffs and Trade. The GATT is essentially a set of rules governing the conduct of international trade. These rules are designed to foster a general expansion of world trade on a multilateral and mutually beneficial basis. All the major trading nations of the world, including all the Member States of the EEC, are signatories. The Commission now speaks for the Community in GATT matters, subject to Directives from the Council of Ministers.
Perhaps in this context I might take up a point raised by several noble Lords about the danger, as they see it, of protectionism creeping into the world scene. I would remind noble Lords of the Declaration of the Summit Conference in May of this year, a Declaration which had the full support of Her Majesty's Government. That Declaration stated that the multilateral trade negotiations must now be pursued vigorously, partly in order to contain the forces of protectionism. Thus, the points which noble Lords have raised today have indeed been very much in the mind of Her Majesty's Government in taking part in that Summit meeting.
Reverting to GATT, the importance of the GATT lies not only in the series of rights and obligations it sets up. It also provides the background against which trading problems can be examined internationally. For example, the Commission has regular high level consultations with the Community's major trading partners, such as the United States and Japan. On these occasions, current problems are discussed and solutions sought which are compatible with the 261 GATT ground rules. The GATT also lays down the conditions in which antidumping duties may be imposed or protective measures, such as import quotas, may be applied. Actions of this type lie within the scope of the CCP, though it is an area where the Commission must necessarily work in particularly close contact with Member States and, on occasion, with the industries concerned.
Another important aspect of the GATT is that it provides a convenient multilateral negotiating forum. The current round of multilateral trade negotiations are the latest of several rounds of trade negotiations aimed at lowering world-wide tariff levels and other barriers to trade. A second major GATT negotiation currently in progress is the renegotiation of the multi-fibre arrangement—a matter referred to by a number of your Lordships—which regulates the international trade in textiles and clothing.
It was my noble friend Lord Rhodes, the noble Lord, Lord Barnby, and the noble Baroness, Lady Hornsby-Smith, who particularly had the importance of these negotiations in mind. I was asked about the situation at the end of 1977 and it was pointed out that the matter was urgent because of the need for a new arrangement at the end of this year. The points that have been made are fully in the minds of the Government negotiators, but it is too early to give a firm answer as to how we see the situation at the end of the year because, as noble Lords will appreciate, serious negotiations on a new multi-fibre arrangement started only this month in Geneva, so it is a little early to be categorical. But we certainly see a revised MFA, along the lines proposed by the Community, as the best way forward. In consultation with our EEC partners, we are certainly preparing to meet any contingency that arises from those negotiations.
I have referred to the two sets of negotiations under the aegis of GATT. Both these complex sets of negotiations illustrate the Common Commercial Policy in action. Before the Community can participate properly in the negotiations, it has first to agree on common positions internally. Achieving unanimity can be a lengthy and time-consuming process, particularly if the Member States hold differing and strongly-held views. Major 262 national interests must be safeguarded and reconciled. A case in point is the fierce debate which has occurred within the Community over the negotiating position to be adopted regarding the multi-fibre arrangement, to which I have just referred. But once the Community has agreed its position—as is now the case over the MFA—then its views can have a decisive influence over the outcome. In the multilateral trade negotiations, the Community, the United States of America, and Japan are probably the three determining voices. In the multi-fibre arrangement the Community's importance matches its position as the largest single importer of textiles from the developing countries. This is the reason why the Community believes that the difficult task of co-ordinating the Community behind a single voice, speaking a single view, is, in the end, worth while.
I have dwelt at some length on the GATT framework within which the Community's policy operates. I have done so partly because it is easy to forget the all-pervasive, yet half-invisible influence it has had, to so beneficial an effect, in the last 30 years. I have done so also because the series of bilateral links the Community has forged in recent years must be viewed against the GATT background, and perhaps I may say a few words about the bilateral links. The network of bilateral links that the Community has made with other countries in recent years is probably the most distinctive and tangible feature of the Common Commercial Policy. It is, therefore, natural and entirely appropriate that the Committee chaired by the noble Lord, Lord Trevelyan, should have devoted a large part of its report to it. Its report gives a detailed and lucid account of all the various types of agreement that the Community has negotiated, and the wide geographical spread that has been covered. The noble Lord, Lord Trevelyan, in introducing the debate this evening, summarised the four categories of agreements that the Common Commercial Policy has covered.
The Community today is by far the dominant economic influence in Western Europe. It is, therefore, hardly surprising that the other non-Communist countries of western Europe, and around the Mediterranean, have sought close ties 263 with the Community. These take two forms. As a consequence of our accession to the Community in 1973, free trade agreements were negotiated with the remaining EFTA countries so that tariffs would not have to be re-establish between them and the United Kingdom. Following a four-and-a-half year transitional period, there is now effectively a 16 nation EEC/EFTA free trade area.
The second group of agreements comprise those with the Mediterranean countries. These are more disparate in form, reflecting the varying stages of development of the 13 countries concerned, from Tunisia and Turkey, to Israel and Spain. These agreements also arise in large measure from geographical proximity, or long-standing historical ties. They have been extensively revised and extended in scope in recent years in an attempt to bring coherence and some degree of consistency to their provisions. The only major exception is Spain, where the Community hopes to negotiate a revised agreement later this year.
The future development of these agreements is very much bound up with the question of enlargement of the Community to incorporate Greece, Portugal, and possibly Spain. As the report rightly points out, a major issue arising in this connection is the problem of Mediterranean agriculture. No one would dispute that there are serious problems in the Mediterranean areas of the existing Community, as well as in the three potential new Member States. We believe these problems to be essentially of a structural nature, for which suitable and cost-effective solutions must be sought, and this was, I believe, the view of the Committee. What would be wrong would be to attempt to solve structural problems by unduly rigid internal, or external, market mechanisms. These could be damaging both to Community consumers and to trade with countries outside the Community, without making any real impact on the underlying problems.
Looking further afield, the report devotes a good deal of space to the Lomé Convention, to which I have already referred. I think it is now well recognised that this agreement with 52 African, Caribbean and Pacific countries, is something of a landmark in relations 264 between the industralised countries and the developing world. As well as granting duty and quota free entry into the Community for almost all products, it includes a major element of aid and technical assistance. It also includes a major innovation in the form of the Stabex scheme for stabilising the export earnings of the producers of certain primary products. It is too early to give a considered view on the effectiveness of these arrangements, but all the signs so far are that they have had a significant and beneficial effect.
My Lords, in the course of my general remarks I have, I think, taken up a number of the specific points made by various noble Lords who have participated in the debate, but if your Lordships will bear with me, there are one or two other points that I should like to make. One or two noble Lords referred to the importance in the world of trade with, or the trade of, Japan; in this connection I would say that progress towards a formal trade agreement with Japan in the future will depend on what progress is made in the multilateral trade negotiations towards a mutually satisfactory safeguard clause. In the meantime, we should not lose sight of the useful steps being taken by the Commission to establish closer and more regular discussions of trade problems with the Japanese.
The six-monthly high-level consultations are developing as a valuable forum for the discussion of trade matters between the Commission and Japan, and, as the report of the Sub-Committee notes, have made some progress towards removing obstacles to Community exports and towards restraining Japanese exports of steel to the Community. It is to be hoped that these consultations will be continued on a regular basis at a high level, and that both sides will continue to use them as an instrument to help resolve the outstanding problems in Community-Japanese trade.
One other subject that was common to two or three of the speeches to which we have listened was the situation in respect of New Zealand. On this subject, the noble Lord, Lord Chelwood, in particular, made this point. Despite recent changes in our trading patterns, Australia and New Zealand remain very important to us, and I agree with the noble Lord on that. 265 We shall certainly do all we can to maintain and strengthen the trading partnership within the framework of our membership of the Community; and this, of course, includes seeking satisfactory arrangements on access for New Zealand dairy products.
I am establishing a general principle that that should be our objective, yes. I think I have already dealt with the multi-fibre arrangement, which was raised so forcefully by the noble Lord, Lord Barnby, and the noble Baroness, Lady Hornsby-Smith, but in this connection I shall certainly take note of what my noble friend Lord Rhodes said about the undermanning of the team in Brussels which deals with this. I think he made a most important point in this connection, and I shall certainly pass on what he has said in that regard.
If I may now conclude—and I apologise for having taken so long, but it is a complex subject and an important report—I should like now, very briefly, to look ahead to the future of the Common Commercial Policy. I am sure that the Community will wish it to retain its basically open and outward-looking character, and this is certainly the Government's view. We see the present round of GATT multilateral trade negotiations as helping towards this objective. There is the possibility of establishing more satisfactory relations between the Community and the East European countries. This process has already begun with the exchanges of letters between the Community and COMECON, and with the negotiations with some of these countries on textiles and on fisheries matters. We hope that this will lead on to the establishment of formal relations. Then there is the question of the enlargement of the Community, where I look forward to the further report which the noble Lord, Lord Trevelyan, referred to as being forthcoming later in the year. Then, by 1980 we shall have to have renegotiated the Lomé Convention. This, in turn, leads on to the wider issues of how to regulate the Community's trade with the developing countries of the Third World; and this, I am sure, will prove to be one of the dominant political and economic issues of the 1980s.
266 In conclusion, I should like again to say how much I appreciate the work of the Select Committee and the opportunity it has given us for today's debate. The subject, as has been recognised by all who have spoken, is one of great importance to this country, and, as the Committee remind us, one which is given insufficient attention in the media and elsewhere. I hope that this debate will have done at least something to remedy that situation.
My Lords, before the noble Lord sits down, I know that noble Lords more than understand that it is not possible in a debate like this to answer off-the-cuff all the questions which are put to a Minister, but would the Minister be good enough to write to those noble Lords who have raised questions with him which he has not been able to answer?
My Lords, that is a tall order, because there were masses of points raised, but perhaps the noble Lord, Lord Chelwood, would accept my undertaking to look at the main ones. I hope I have answered quite a number, but I shall certainly look at the main ones, though I should not like to give an undertaking that I will write to every noble Lord on every point.
§ 7.15 p.m.
§ Lord TREVELYAN
My Lords, I think we must all be grateful to the noble Lord, Lord Oram, for his wide survey of Government thinking, which has been of great interest. I am very glad that our report has stimulated a debate of real substance, which I have found very interesting throughout I must also thank noble Lords who have shown their appreciation of our report. Every now and again of course, when we produce these reports, we wonder whether we are doing any good. I think a debate like this gives us a lot of encouragement.
It seems to me that there are really four ways in which these reports can do some practical good. First, they create a dialogue between your Lordships and the Departments of Government, and that improves the decision-making process. Secondly, our reports can be useful as a background and a brief for Members of the European Parliament. Thirdly, 267 they can be of use to members of the Commission and of the United Kingdom delegation in Brussels, as giving an outside view of the Community. Lastly, there is, I think, some danger that the Community's business should be regarded in this country as something alien to us, instead of something of which we are an integral part and something, therefore, about which we should know a lot. I very much hope that our labours will be of practical use if only as a reference book to an important part of Community policy.
§ On Question, Motion agreed to.