FOREIGN BOYCOTTS BILL [H.L.]

HL Deb 30 January 1978 vol 388 cc605-45

4.10 p.m.

Lord BYERS

My Lords, I beg to move that this Bill be now read a second time. The overall object of the Bill is to protect British individuals, companies and businesses from the direct and indirect consequences and pressures of foreign boycotts and the requests and conditions which are associated with them.

The Bill is supported by an all-Party Committee drawn from both Houses, comprising representatives of all the minority and majority Parties. Many people inside and outside Parliament feel that it is quite wrong that British companies should be told by foreign Governments whom they can employ and with whom they can work and trade. Although the Bill deals with boycotts in general and specifically excludes boycotts approved by Her Majesty's Government, it is, of course, from the Arab boycott of Israel that British firms are suffering most at the present time.

The ability of the Arab League boycott offices in Damascus and other Arab capitals to enforce compliance in Britain would be substantially reduced if this Bill becomes law. These Arab agencies demand that British firms comply with their boycott rules or go on their black-list. According to conservative estimates, over 1,000 British firms have been proscribed in this manner, some merely for failing to fill in boycott questionnaires or failing to provide Arab boycott offices with information about their companies, much of which they rightly regard as being confidential. Even British firms in their thousands which are not black-listed are subject to perpetual harassment. They are called on to complete forms and questionnaires, and an immense amount of time is wasted in studying and filling in documents which are regarded as totally unacceptable by chambers of commerce and industry throughout the civilised world.

The boycott is one of the main weapons in the economic war maintained by the Arab States against Israel. By insisting that British firms comply with the boycott, the Arabs have involved Britain in helping, no matter how reluctantly, in economic warfare against a friendly State and in a dispute in which Britain is not directly involved.

It is little wonder that President Carter condemned this boycott as immoral. This is, indeed, a moral issue—an issue which I believe should commend itself to all right-thinking people, irrespective of Party. The United States has now passed anti-boycott legislation, and in drafting our Bill we followed this fairly closely. The widespread operation of the boycott in the United States can be gauged by the fact that 11,000 boycott demands were made of United States exporters in one six-month period alone from March to September, 1976; and that in 94 per cent. of these cases United States exporters had been coerced into compliance. During the six months ending 31st March 1977 the dollar value of transactions covered by boycott requests jumped from 1.5 billion dollars to 4.6 billion dollars. The Arab trade boycott, long considered to be a paper tiger, developed more power of coercion as a result of a vast increase of Arab petro-dollar wealth—hence the need for anti-boycott legislation.

The Canadian Government have made it clear that Canadian companies that comply with the boycott may lose all aid which is granted to exporting firms. In Germany the Government give strong backing to any German company under threat of boycott, blackmail or blacklisting—the Volkswagen case was the most classic. In France a tough anti-boycott law passed last July was unfortunately weakened by the executive action of the Government in exempting COFACE, the equivalent of our ECGD, but this is now being challenged in the Conseil d'Etat by French business interests.

The irony is that statistics show that countries which have resisted the boycott—Germany, the Netherlands, Denmark and, in particular, the United States—have clearly improved their position in the Arab markets; whereas France, until recently an accomplice of the boycott, made very moderate progress indeed.

I think that it is instructive to note what has happened to Arab-American trade since President Carter signed the anti-boycott law in June last year. Arab reprisals had been predicted by opponents of this law. In fact, there have been no such reprisals. United States trade with the Arab world continues to grow. United States influence in the Middle East continues unaffected by the legislation. That the Arabs even respect a courageous stance was shown in Britain when Barclays Bank refused to surrender to boycott pressure. In consequence Barclays was briefly blacklisted, then removed from the Arab blacklists, and now does useful business with both Israel and the Arab world, although I understand that while it was blacklisted it lost substantial business for a short time. One can only commend the tough action taken by Barclays at that time.

In dealing with Britain the Arab boycott offices thrive on the confusion which they create and the fear that they instil in British firms which, I am sorry to say, receive no real support from the Foreign Office or the Department of Trade, as firms do in the United States and in Germany. To some extent I think that that is due to a misunderstanding by members of our Government about the aims of the boycott. For instance, Mr. Clinton Davis, Parliamentary Under-Secretary at the Department of Trade, said in Tel Aviv on 8th January this year: We oppose and deplore the Arab boycott, but it is one thing to make our views clear and another to legislate to attempt to compel United Kingdom companies to trade in particular markets or with particular customers. Nor can we force them to forego valuable business elsewhere". There is nothing in this Bill which would compel United Kingdom companies to trade in any particular market; nor is there in the United States legislation. Its objective—and the Government must understand this—is to protect British companies from boycott pressures where a boycott has no international or national sanction. That is why we believe that there must be legislation to protect those British companies which are not strong enough to stand up to the boycott.

A recent article published in The Economist said: The only way to protect companies from this Arab blackmail is by legislation. The British Government must come off the fence". The policy of Her Majesty's Government has traditionally been to express abhorrence of boycotts, but to leave the decision on compliance to what they call: the commercial judgment of the British companies concerned"; added to which, the Government Departments validate certificates of origin of goods vouched for by notaries public, and this gives far more offence than it is worth. In Holland the notaries public themselves see this as a moral issue and they will not validate these certificates. I believe that the case for legislation is overwhelming.

This Bill has been welcomed enthusiastically by a number of companies which have recently been blackmailed by the boycott. There are three degrees of boycott—primary, secondary and tertiary. A primary boycott is one where the Arab countries decide not to deal with Israel or with Israeli firms. That is entirely a matter for them. It is one aspect of their own war against Israel, and so be it. The primary boycott is not covered by this Bill.

The secondary boycott is where Arab contracts will not be given to foreign firms which trade with Israel or which have Jews—so-called Zionists—in their management or often on their staff. Certificates to this effect are often demanded by the Arab companies. Boycott pressure like that has caused loss of business and loss of jobs in Britain. For example, Britain lost a £3.5 million shipbuilding order to Norway in 1975 because 18 British shipbuilding yards declined to respond to an invitation from Israel to tender to build tugboats for the Israel Ports Authority. In 1976, the British construction industry declined to participate in a £150 million project to extend Haifa Port, again because of fears of contravening the Arab boycott.

The tertiary boycott is where Arab countries will not trade with foreign firms who do business with other foreign firms who trade with Israel. The secondary and tertiary boycotts are, in my view, totally insidious and are getting worse in their impact, as the Arab states flex their oil revenues. Metal Box is a company which was recently forced to withdraw from Israel under pressure from its United States and British customers, who in turn had come under Arab boycott pressure.

Further—and I find this extremely offensive—anti-Semitism is fostered by the boycott. For instance, a British secretary was offered a promotion by Gulf Oil. This was later withdrawn after she married a Jew. I am glad to say that, having sued under the Race Relations Act, she received quite considerable compensation. But that sort of thing should never happen. A British company, Mindacre Ltd., for example, asked an American firm whose products it hoped to sell, "Kindly confirm that your business is not owned by Jews or controlled by Jewish interests".

This Bill deals primarily with these secondary and tertiary aspects of the boycott. The main provisions of the Bill are, I hope, self-explanatory. Clause 1 states: 'a foreign boycott' means any policy adopted by, or any action taken by, a foreign government or a foreign agency for the purpose of discriminating against any other nation or any other nation's citizens, or any religious, ethnic or political group in the course of trade or business". It then defines: a foreign boycott request or condition", and it defines what is meant by a "person". "Person" means, any individual, company, or the chief executive officer of any business organisation other than a company …". Clause 2 states: It shall be an offence for any person whether by himself or by any person controlled by him to discriminate against or refuse to do business with any other person in furtherance of a foreign boycott or in response to a foreign boycott request or condition". This clause also deals with the provision of information concerning people's religion, racial or national origin, business connections or membership of or connection with any organisation, if the information is required to further a foreign boycott. Quite often, people are asked to state categorically that they have not subscribed any money whatsoever to any organisation that has a Jewish or Israeli connection. The remainder of the clause deals with the processing of any letter of credit or shipping documents containing boycott conditions and, as I mentioned earlier, with the certificates of origin of goods.

Clause 3 makes it mandatory on another person who is requested to contravene the conditions of this Act to report it to the Secretary of State within 28 days. It places an obligation on the Secretary of State to compile a register of the information reported to him and then to publish it at quarterly intervals. There is one proviso, however; that is, that the Secretary of State may omit from publication any information that may be prejudicial to the interest of the State or the interests of persons affected thereby, and the penalty is provided.

Clause 4 makes certain that the Bill is not retrospective. Indeed, some notice would have to be given, as the Americans have done, before it came into operation, in order to allow businesses to make other arrangements. Clause 5 exempts boycotts declared to be in accordance with the policy of Her Majesty's Government. Clause 6, again, is a safeguard. It states that prosecutions cannot be brought under the Act without the consent of Her Majesty's Attorney-General.

Clause 7 provides that, where an individual or chief executive officer is convicted of an offence under this Act, he shall for a first offence be liable to a fine not exceeding £5,000 and for a second or subsequent offence to a fine not exceeding £10,000, or imprisonment for a period not exceeding two years, or both. Finally, in the case of a company convicted for a first offence, that company will be subject to a fine not exceeding £100,000, and in the case of a second or subsequent offence by the company, every officer or agent of the company who knowingly and wittingly permitted the offence will be liable to imprisonment for a period not exceeding two years.

I have no doubt that the critics of this measure—and there will be some—will claim that an anti-boycott law puts companies adhering to its provisions at a disadvantage compared with those who comply with the boycott. Professor Irwin Cotler of McGill University, who has done a lot of work on this, has, I think, completely rebutted this particular proposition. He says that, anti-boycott legislation in fact restores the fair competitive situation that was hitherto considered normal by forbidding all— and I repeat "all"— firms from complying with it. He claims that there is no substitute for anti-boycott legislation. What is needed is to place the Arab boycott squarely outside the law. Business people, he says, need this kind of shield to protect them, and he adds, and I fully agree with him, that such shields should be internationalised.

I think it is interesting to note that American laws were already having an international impact before the Federal law was passed last year. From January of last year, in order to comply with the Californian anti-boycott law, European branches of the Bank of America and other banks based in California scrupulously rejected all letters of credit containing boycott conditions. This, however, was only a beginning. What is needed is the adoption of anti-boycott legislation, particularly in the industrialised countries of the West and particularly in all the countries of the EEC. This Bill is an attempt in Britain to pave the way for more comprehensive international action, particularly in the EEC.

There is little doubt that the boycott violates the non-discrimination Articles Numbers 85 and 86 of the Treaty of Rome and can in fact be met by the imposition of fines and other penalties under that Treaty. The boycott is a clear example of discrimination which breaches the General Agreement on Tariffs and Trade and violates Articles 2 of the United Nations Charter. That Article condemns the threat or use of force against any State, and that includes military, economic and any other form of coercion. I believe that it is high time that all parties in the United Kingdom should recognise the insidious nature of the blackmail and coercion of the boycott.

If your Lordships are good enough to give this Bill a Second Reading, as I hope you will, it is my intention to ask you to refer the Bill to a Select Committee. The reasons for this are twofold. First, it is clear that, even if the Government wished to give time for this Bill in another place—and, quite frankly, I do not think that they do—there is virtually no hope of getting it fitted into an already overcrowded legislative programme. As realists, we recognise that. Secondly, my colleagues and I on the all-Party Committee believe that a measure as important as this, and as new to British politics as this, should have its viability, practicality and effectiveness closely examined in the way that Select Committees of your Lordships' House are well equipped to achieve. Since this Bill may be taken as an example by other nations, particularly in Western Europe, it is important that all its provisions, and indeed its omissions, should be examined with the greatest care. The Companion to Standing Orders of your Lordships' House states that a Bill may be referred to a Select Committee when a more minute investigation or the hearing of evidence is required before coming to a decision. I believe that this is the right way to deal with this particular topic. I hope that the House will support the Motion that I shall move later, and that the House will give this Bill a Second Reading, I beg to move.

Moved, That the Bill be now read 2^a—(Lord Byers.)

4.30 p.m.

Baroness ELLES

My Lords, the noble Lord, Lord Byers, has presented a Bill to the House which, on the face of it, is totally non-political, though he made it quite clear, openly and honestly, in his introductory speech that it is directed primarily against the Arab boycott. From these Benches we will try to keep the heat out of this issue and not discuss the Bill in particular terms as closely as he did.

Embargoes, boycotts and sanctions are not new phenomena among the practices restraining trade either at national or international level and economic coercion as an alternative to military strength has become a powerful weapon for political ends, regardless of their legitimacy. It is as well to remember that since the last war many countries have exerted and introduced boycotts against different target countries. To think of one obvious case, the United States boycott against Cuba, the Dominican Republic, China and the Soviet Union, either alone or in conjunction with other States within a regional organisation—in that particular case the Organisation of American States. The Organisation of African Unity similarly has imposed boycotts on individual target countries, among them Portugal and South Africa, and there are indications of other boycotting activities ahead of us.

Some boycotts imposed by a collection of foreign States will vary according to the efficiency, expediency or flexibility of individual States and the effects are sometimes, though not always, highly exaggerated and in fact counter-productive. I would draw the attention of Lord Byers to his remarks about the Central Boycott Office in Damascus when he said that it was their decision which decided whether countries were blacklisted. I quote from facts about the Arab trade boycott contained in the March 1976 issue of the Anglo-Israel Trade Journal, so nobody will suspect me of being partisan in this matter, where it was reported: Each regional office is, however, autonomous and acts independently, and the Central Office cannot impose its decisions upon the Member States of the Arab League". This is not to make a Party point one way or the other; as I understand it, it is for individual States to decide themselves on the recommendations and the decisions do not in fact come from that Central Boycott Office.

The grounds on which boycotts are enforced also vary. The violation of human rights, now a guideline for State practice and conduct, may indeed be interpreted differently according to the power or pressures on a particular Government. To take one current example: in recent weeks Her Majesty's Government have withdrawn a contract from E1 Salvador on the grounds of violation of human rights, rightly or wrongly, and I do not make any comment on the justification of that action. On the other hand, only last night it was announced on television that we may be accepting a big shipbuilding contract to build ships for Vietnam. Anyone who has read The Times recently will know that human rights are not exactly respected in that country. I give this only as an example of where boycotts are introduced by Governments for certain reasons which are not necessarily agreed as Government policy in Parliament.

The need to introduce wide legislative measures to prohibit economic coercion, from whatever quarter it may come, should be realistically appraised, first as to their political repercussions, secondly as to their application in the courts, and thirdly as to their effects on the pattern of British trade. Considering that the noble Lord, Lord Byers, stated categorically that this Bill is directed against the Arab boycott, we should remember that the delicate situation in the Middle East, the search for a peaceful settlement of the different interests and demands and the consequences of failure to reach a negotiated settlement are far too serious to be ignored. One must ask whether the Bill will, by its effects, accrue to the overall benefit of the United Kingdom or its citizens—and I mean all its citizens, regardless of colour or creed—and I think the answer must be, No. The pressures exerted by some countries will be supplanted by pressures from other groups and the loser will be the British citizen engaged in trade and commerce. Any such measures would more likely lead to counter action by countries with which the United Kingdom has progressively developed good relations and would therefore be harmful rather than beneficial.

To consider the legal effects, let us for a moment turn to the United States where in recent months, as Lord Byers rightly said, legislation has been introduced to "counter discriminatory action coming from foreign boycotts". What has been referred to as a jungle of regulations has, after considerable debate, now been published, designed to govern the implementation of the Act, accompanied by the admission of the Government that their complexity will take several months to clarify. It should be added that since legislation against these boycotts is unenforceable against foreign countries in this country, any action that we take must be unilateral and applicable therefore only to our own companies or these which are carrying on trade in this country.

So far, except in certain cases, British companies and individuals have been free to choose with whom they trade; they have an absolute right already to refuse to co-operate with any aspect of a foreign boycott. Indeed, as Lord Byers said, many companies have already done so and they have earned the respect of other traders and the countries with which they trade. If businesses united and made a firm and robust stand against concerted foreign pressure, from whatever source and from whatever region of the world, there would be no ground whatever for even considering the introduction of this Bill today.

The legal effect of the Bill would be to turn all traders, agents and even those individuals whose task it is to issue certificates of origin into potential criminals. Its scope would be so wide that, as the Bill is at present drafted, nobody would know whether or not they were infringing it. Even a failure to report a request under Clause 2, regardless of whether that request was refused, would eventually incur penal sanctions. To impose a duty to inform of a request would be an intolerable and unreasonable imposition on the British commercial world, turning individuals into spies and informers as well as potential criminals.

In commercial terms, the operation of Clause 2 would in my view be unworkable. The United States Government also consider that it would be almost impossible to prove or disprove the intention of a company, and it is the word "intention" which bears the brunt of the difficulty: … which alters or, per contra, does not alter, its course of business whether in order to, or not, further a foreign boycott". This would be a further fetter on the freedom of commercial firms to make a choice of market without any threat of prosecution. Clause 5 leaves the decision of Her Majesty's Government's policy to the Secretary of State. It is surely for Parliament to decide. As in the case of sanctions—I am thinking of the sanctions on Rhodesia—the necessary Parliamentary processes must be followed before any policy can take effect, it being subsequently for the courts to decide whether some particular restraint in trade is in accordance with existing domestic legislation or contrary to public policy. There are other obvious defects revealed in comparison with United States legislation. I could not in any way agree with the noble Lord, Lord Byers, when he said that his Bill was similar to the United States measure. The Bill refers to "any nation", whereas the United States measure makes it perfectly clear that it refers to a "friendly nation", a vital distinction. Political groups are included here as a ground for non-discrimination; they are not included in the United States measure. One could ask: any political group? Surely not if a fascist or anarchist group.

I raise these details simply to show that a great deal of work will have to be done on this Bill if it is ever to reach the Statute Book. Indeed, is there not enough legislation and collective and industrial action already in this country hampering the prosperous development of commerce and industry? We have sanctions, boycotts—indeed, we heard only the other day about blacklists of companies for exceeding the pay guidelines, not even statutory pay limits—localities boycotted by pressure groups, the deprivation of services and financial and fiscal restrictions, to name but a few of the measures imposed on the financial, industrial and commercial community of our country. The fact is that in any boycott the justice of their cause will be the motivation of those who seek to enforce it, just as it will be for those who seek to oppose a boycott. The one caught in the middle and who will suffer will undoubtedly be the British businessman on the success of whom, in trading relations with other countries, the economic prosperity of this country depends.

It should be recognised that the economic consequences for the United States would be comparatively negligible, and its retaliatory powers, of course, enormous. Can the economic strength of the United Kingdom be comparable? Surely not, regrettably. Any unilateral action taken by the United Kingdom would have little or no effect on the countries imposing the boycotts, but, regrettably, it would have a devastating effect on our own commerce. The additional burden caused by the Bill would inevitably lead to further unemployment through loss of markets, which would be a direct result if this Bill were ever to reach the Statute Book; and, indeed, there would be gain only for those countries which would only too willingly and readily take over our markets. This would seriously hamper the economic prospects of the British people, regardless of their origin, colour or creed. For a trading nation, indeed, I consider it to be a folly.

This is not by any means to say that no action should be taken. On the contrary, I must make it crystal clear from these Benches, first, that we support wholeheartedly the principle that there should be no discrimination on grounds of religion against anybody in this country. Indeed, as noble Lords will remember, my noble and learned friend Lord Hailsham made a dramatic plea for the inclusion of the grounds of religion in the Race Relations Act. I must say, personally, that I believe it regrettable that it was not included in that Bill. Nevertheless, this was the declared policy of our Party, and I do not hesitate to repeat it. Secondly, we strongly support those companies which resist pressures from third countries, and totally reject the right of any foreign Government to interfere in the domestic operation of our commercial and industrial activities. Foreign Governments should be firmly discouraged from applying pressures to British firms and individuals. Indeed, businessmen themselves can achieve considerable changes in the pattern of boycotting if they are willing to do so.

Three ways are open to us to achieve responses to foreign boycotts. The first is by diplomatic action, which, according to the United States Secretary of State, Mr. Vance, has already had beneficial results leading to more flexibility and modification. It has been said—and the noble Lord, Lord Byers, has confirmed this—that the Federal Republic of Germany has successfully countered foreign boycotts by taking a firm governmental line, at the same time protecting the assured markets for its companies—this without any legislation.

Secondly, the noble Lord, Lord Byers, has I believe rightly referred to the European Communities, which have been and are negotiating agreements with States in the Middle East. We have the opportunity, if our Ministers so decide, to benefit from our membership of the European Communities and to take advantage of it by using the available methods of consultation and co-operation. In this way we can continue, with other Member States, to contribute to the scientific and technological development of Middle East States. By no means should it be sought to impede or narrow this contribution. But we should not forget, whatever the view sometimes taken in this country of the European Communities, that respect for the European Communities outside Member States strengthens the view that multilateral action through the European Communities could be effective, and, at the same time, that such action would seek to ensure security and the safeguarding of the access of Member States to external markets for energy and commodity resources. In a world where trading operations have become so evidently interdependent—and how often have we heard that—unilateral measures are no longer effective; multilateral answers must be sought and found. Under the provisions of the GATT, to which, again, the noble Lord rightly referred, an opportunity is available for consultation on trading matters affecting States parties, which indeed include all the relevant States which have been referred to today.

It is also for international organisations to consider the possibility that the opportunity might be taken to lay down a code of conduct for business enterprises engaged in international trade. Till such a code or convention is elaborated, firm action on a multilateral basis is required. Consultation and co-operation are a better answer to boycotts than proposing heavy-handed unilateral legislation, detrimental to our economy and of benefit only to our commercial rivals in other countries. Indeed, a stronger economy in this country would enable us all the better to resist external pressures. A weakened economy, which might well be the result of this Bill, will leave us open to more pressures of every kind.

In conclusion, we on these Benches recognise the difficulties but do not think that the Bill will solve them. Indeed, like many solutions, I think it will create more problems. We are also not certain that the setting up of a Select Committee will be beneficial. We are suspicious that it will encourage divisiveness and produce utterances detrimental to all sides. Nevertheless, we appreciate that this is a subject which is of itself divisive and, recognising that strong feelings exist in this matter, we shall oppose neither the Bill nor the Motion from these Benches.

4.45 p.m.

Lord DENMAN

My Lords, in addressing your Lordships on this matter I must first declare two interests. I have for very many years been concerned with international trading in most parts of the world, including the Middle East. I also have the privilege to be a member of the Committee on Invisible Exports, which, in the City, is charged with overseeing and assisting our invisible earnings, to which I shall refer later. I hardly need remind your Lordships that our capacity to earn foreign exchange depends on the success of our exports, both visible and invisible. It is the duty of Governments to facilitate both. This Bill will do diametrically the opposite, and therefore must be resisted. For the visible exporter, a whole series of new problems will beset him; but, perhaps most importantly, it may prevent his banker from doing his business, and therefore frustrate his exports. Fines, even imprisonment, await individuals who take an action which can be interpreted as a contravention of the proposed Act. This is bound to lead to a loss of confidence, a loss of endeavour and a loss of our vital earnings.

Other noble Lords, I know, will comment on the difficulties for our visible exporters, but I should like to dwell on our invisible earnings and give your Lordships one or two figures in support. It must be remembered that in this current year we are probably going to earn £15,000 million from our invisible exports. In contrast, our visible exports will be of the order of £26 million. This is an enormous proportion of our foreign exchange. I quote to demonstrate this, because the one essential of our invisible earnings is confidence—the confidence that the world has in us. With confidence goes freedom, and one of the priceless assets of our freedom is the elasticity which it provides to enable us to do our work. I think it would probably be fair to say that without any of these things we would never have had the Euro-dollar market in London—an earner which will last us for the rest of our lives.

I regard this Bill as a direct attack on this freedom, and therefore potentially highly damaging. What is needed for every invisible earner is maximum freedom of contract. I suggest that, as the noble Baroness, Lady Elles, has said, any further discussion on boycotts should be at the level of the Community of Europe. I cannot support a Bill which seems, without any dependence on motive, to place in jeopardy an action or a refusal to act by an individual or company which may be furthering a foreign boycott, and that boycott being someone else's discrimination against groups on grounds religious, ethnic or political. I regard it as totally wrong and highly damaging for Governments to attempt this task. I believe that what we have heard today is a very strong case for Governments to act, but not for Governments to land the responsibility on the business community.

My last words to your Lordships would be that all noble Lords in this Chamber know very well the events of the last two months, in which there have been some very dramatic and surprising moves by leading politicians in the Middle East. I believe that this has created a more favourable opportunity than we have seen in the last 30 years towards a settlement, and I believe that this is being so effective that it is our duty to take every step we possibly can to say nothing to interfere or intervene. I believe that further discussion of this very important issue can have just that effect. I ask your Lordships to take this matter no further.

Lord WIGODER

My Lords, before the noble Lord sits down, could he inform us what the effect has been of the American anti-boycott legislation on American invisible exports?

Lord DENMAN

My Lords, I cannot answer that in detail. The Americans' invisible earnings are the largest in the world and we rank second. I do not believe that they have been in any way enhanced. My guess is that they will have been harmed.

4.50 p.m.

Lord SEGAL

My Lords, the House as a whole should feel greatly indebted to the noble Lord, Lord Byers, for introducing this Bill. Perhaps it is appropriate that it should fall to the Leader of the Liberal Party to sponsor such a Bill, for it was in the early years of the present century that the Liberal Party stood for the great principles of free trade and the freeing of restraints upon international trade, and it is fully in line with the great traditions of the Liberal Party. In replying, if I may, to two points raised by the noble Baroness, Lady Elles, she quoted, and rightly, previous other instances of a national boycott; but can she give to the House any instances of a boycott which is directed not against a government, or against a r½gime but against the very existence of a State itself?—because all the Arab countries which are joining in this boycott against Israel have refused to recognise the existence of Israel.

Baroness ELLES

My Lords, if I may be allowed to intervene, I am sure that the noble Lord will agree with me that the new situation in the Middle East does not, in fact, accord with what he has said. The very presence of President Sadat in Jerusalem will counter that statement. I do not wish to be drawn into an Arab-Israeli discussion, for I do not think this is the right forum for it, but I do think that the presence of President Sadat in Jerusalem counters what the noble Lord has said.

Lord SEGAL

My Lords, by a typical instance of femine intuition, the noble Baroness has actually anticipated what I was going to say. May I also ask her whether she is aware, when she refers to the dangers of unilateral action, that both Houses of Congress have already taken action on similar lines? Surely this is not an instance of our taking unilateral action but rather, as the noble Lord, Lord Byers, has said, an instance of our being able to give a lead to Europe—which I always understood was one of the basic reasons for our having joined the European Communities in the first instance.

I have no hesitation whatever in giving my support to this Bill. I hope it will go well beyond the Second Reading and enlist not only the sympathy of our Government but also their active support. Whatever case the Government may have had, until recently, in accepting the existence of the notorious Arab blacklist against Israel, surely this case applies with very much less force today. We have now emerged as one of the major oil-producing countries and our Government ought to give not only a lead but a clear and emphatic directive to British firms that they should be quite free to trade with Israel without any restraint or fear of Arab reprisals.

Up to now, the Government have expressed their opposition to the Arab blacklist but have left it to the firms concerned to decide whether or not they trade with Israel at the risk of losing trade with their Arab customers. It is all very well for the Government to excuse themselves from giving a directive but perhaps they might remember the French proverb: "Qui s'excuse, s'accuse". How much better it would have been for our Government to give a lead now and to follow the example of the United States Government. This Bill does now give the Government such an opportunity; and, with our stronger economic position as an oil-producing country, all fair-minded people will hope that this Bill, after any necessary amendment in its later stages, will receive Government support.

Of course, we all fully realise the case that can be made out against this Bill: the loss of valuable trade which our country sorely needs. But our economy—and I will not at this stage be invidious enough to apportion the praise—is on the rise. The question we ought to ask ourselves is this: how far ought we to sacrifice our moral principles for a short-term, material gain in terms of expediency. As a friend once remarked to me when I was on a visit to an impoverished island in the Caribbean, "We may be poor, but surely we are not all that poor!" I submit that it would be a very valuable line for the Government to take, not only in order to fall in line with our American allies but to give a moral lead to Europe—and, after all, we have done this on many occasions in our past history—to assert their strength in upholding this country's great traditions in freeing trade and denying international blackmail.

There is, finally, another important aspect of this Arab boycott of Israel. I believe that many decent-minded Arabs are not at all proud about this boycott against Israel and that there are many who are anxious to end the state of war and to make peace with Israel who would be glad, indeed, to see the end of the boycott and who would welcome a firm stand by Britain in this matter. President Sadat, who has publicly invited a return of the Jews to Egypt, assured me as long ago as April of last year that on the day that Israel signed a treaty of peace with Egypt the Arab boycott would be lifted.

It is to be hoped that Britain today will set her face emphatically against the rejectionist Arab States and come out firmly in support of the forces of peace. Where firm action has been taken, as the noble Lord, Lord Byers, has already mentioned, by large industrial enterprises such as the Hilton and Sheraton Hotels, the Boeing Aircraft Company, the Ford Motor Company, IBM, Xerox, and the American General Electric Company, it has paid them handsome dividends and they continue to trade with both sides. It is the smaller firms that need today active Government support and today, fortunately, we are, indeed, as a country able to act from a position of strength. May we hope now that our Government will deal firmly and unequivocally with this issue and give support to this Bill whatever amendment may be necessary through its later stages. I have no hesitation whatever in strongly supporting the Second Reading of this Bill.

5 p.m.

Viscount MONCK

My Lords, I must confess that this Bill fills me not only with dismay but with horror. It would appear that firms and individuals could suffer very heavy penalties for conforming to the policy of a foreign country over which neither they nor Her Majesty's Government have any control whatsoever. I am going to venture to give your Lordships a small instance from my own personal experience.

There is a firm which supplies a certain commodity—I am not going to mention any names at all—to a great many countries throughout the world. Among these countries there is a certain group in one part of the world, including one which I will refer to as "X". This firm supplied the lot. Then the other countries in that group, who had no love for "X", lost rather more love and said that anybody supplying "X" would not be admissible as a supplier to them. The firm had to make a decision. I can see what the moral decision could have been; but the fact is that the other countries needed far more in quantity—let alone value—than "X". In order to retain employment—because to have accepted "X" and to have been cut off from all the others would have undoubtedly meant unemployment—the firm, following that, never quoted to supply "X". They used to give a very plausible excuse, such as the terms "X" required for delivery were too quick for the firm to carry out. They gave an excuse, and there the matter ended.

As I said, I know that there is a moral side to it. But, against this, there was the question of loss of employment. I am afraid that I shall end by saying that I hope and pray that this Bill will never reach the Statute Book.

5.2 p.m.

Lord SELSDON

My Lords, I apologise as I may take a little more of your Lordships' time than previous speakers have. I do so because I feel that this is a particularly important issue, one which may have more far-reaching effects than many of your Lordships would believe. Essentially to me, there are two issues: a moral issue and a commercial issue. On moral grounds, I would join anybody who condemned any form of discrimination in the terms of a boycott against free trade. Furthermore, I go further and say that it has always been a principle of this country to support free trade anywhere in the world. Having said that, it would be stupid not to accept that over hundreds of years there have always been attempts by one nation, or minorities or majorities within a nation, to blackmail, arm twist or do things which might be undesirable in the interests of themselves and their trade.

The noble Lord, Lord Byers, disappointed me because he had no sooner started his speech than he turned round and said that this is a matter between the Arab world and Israel, and forgot the many other areas of the world where boycotts are applied from time to time and where human rights are threatened by one nation taking action against another. This can go to the extent of the Argentine with the Falkland Islands, North and South Vietnam and, as my noble friend Lady Elles mentioned, mainland China and Taiwan.

Lord BYERS

My Lords, if I may interrupt the noble Lord, he is in all those cases surely referring to the primary boycott, not the secondary or tertiary boycott. The primary boycott is not covered by this Bill.

Lord SELSDON

I take the noble Lord's point, my Lords. I was about to come on to the fact that, while it may appear on the surface that primary boycotts are not applied in those nations, the number of things that go on through the corridors of industrial and political power in relation to companies selling to these markets are, I understand, considerable. I have had personal experience of them in some of the countries that I have mentioned.

Against that, however much one may moralise and condemn this, one is faced with something which is particularly important and significant. I should like to take a moment of your Lordships' time, speaking purely on commercial rather than moral grounds, to explain the situation as it now stands today. In this I speak as one of the deputy chairmen of the Committee of Middle East trade. I apologise for my noble friend Lord Limerick (who is currently chairman) in that I know he would have liked to speak. The points I make are therefore not totally my own, but we have obviously discussed this matter.

The Committee of Middle East Trade is a body which looks after all the COMET areas, as they are described; the Arab world, Israel, and certain other territories running as far as Afghanistan; although we are not sure whether Afghanistan comes in or out at the moment. Our role is to do what we can to assist the expansion of British trade in our areas. We come under BOTB from that point of view. Our members are made up of private sector interests right the way across the board, consultants, contractors, materials suppliers; a whole range of people who cover the spectrum of British industry. We have as representatives the CBI, the Middle East Association, Chambers of Commerce, ECGD, the Department of Trade and the Foreign Office. While at these meetings that we have had, and overall, we naturally condemn boycotts, and in particular this boycott, our role is that concerned with trade.

If I may give a few figures, so far as the Middle East is concerned, in 1977 our exports to Israel, which is within our area, were £274 million. Our exports to the Arab world were £2.7 billion. This is the magnitude of the problem which we are discussing when we start to dabble in areas which could adversely affect our trade. The noble Lord, Lord Byers, pointed out that the American situation did not adversely affect American trade. My advice is that that was not the case and it has been affected. This is a matter for discussion.

On the invisible exports side, I would point out that the large volume of American banks' invisible earnings do pass through London because there are currently more American banks in London than in New York. On sheer trade grounds, I am advised by COMET—and this obviously excludes the Government aspects of COMET because they could not be associated with this, and the noble Baroness, Lady Stedman, may have some comments on this—that such a Bill would be detrimental to our trade with the Middle East as a whole. More than that, I understand that it could be detrimental to other territories in the world that, for one reason or another, are linked with the Middle East.

In 1974 we had a £2 billion deficit with the Arab world. At the end of 1977 we just about broke even. If my own estimates are correct, I estimate a surplus of £500 million with the Arab world next year. This is a remarkable turn round, bearing in mind the increase in oil prices and everything else. Eight per cent. of all our trade now goes to the Arab world. I have been there myself and have been involved with organisations and the directors of companies that trade with all the countries of the Middle East. Personally, I have had very friendly and understanding talks with all sides in connection with this.

British companies which are on the blacklist seek help from those who are not. That form of informal co-operation is very considerable, and I hesitate to mention it in detail here. What is apparent is that any escalation into the emotional and political field of issues relating to the boycott will lose trade, even if that may not be in the interests of the purchasing country concerned. Further, I am led to believe that if we move towards a lasting settlement in the Middle East—and everyone in your Lordships' House would support this, and we welcome the initiatives that are being taken at the moment—these problems could gradually fade away.

There are many companies which, in the initial stages, when asked to complete questionnaires failed to fill them in and threw them in the wastepaper basket, or they never arrived, and then they found to their surprise that their trade was affected. There were problems of bureaucracy at the other end: people buying photocopying machines often from people who in theory were not allowed to sell them in the Arab world, copying everything and creating a tremendous bureaucratic muddle, until nobody knew what was blacklisted and what was not.

In time there arose a thriving business: the black market for blacklisted goods. British Leyland cars were being sold at inflated prices throughout the Arab world via delivery in Geneva. Perhaps it might be more beneficial to the economy of British Leyland if they were still in that situation. There was the loading of ships in one port at Israel, moving to Italy, the rebagging of the commodity—fertilisers and phosphates—its transportation in another ship with the name changed, and its return. All the initiatives of the Mediterranean entrepreneur were brought in.

Against that background, one realises that a Bill like this would never be able to be enforced. But if it could be enforced, or if attempts were made to enforce it, then ways would be found to get over the problems of trading, because traders will trade. At the end of the day, no matter how many Governments try to step in the way, if people can sell their goods abroad for more than they cost them where they bought them, people will trade. I feel quite strongly on this issue that, if this issue is to escalate into the political area and the moral area, matters will be difficult. I should have preferred it if the noble Lord, Lord Byers, had put down a Motion to discuss, and I am sorry that even the right reverend Prelates are not here to comment on these issues.

The amount of discrimination which goes on among some territories, and within Arab territories themselves, is very considerable. We are aware that it is not necessarily a completely united area. But at the end of the day, if British exports, British balance of payments and British trade are all to suffer as a result of action by Her Majesty's Government, then I do not believe that Her Majesty's Government will wish to take such action. You see, my Lords, the Government's hands are tied. Whatever they do in issues like this must offend somebody, and must have an adverse effect. So that, speaking from as high on the Back Benches as I can get, I should like to guess what the Government's view might be if they were entitled or wished to put it forward.

I believe that in this case, and in everything to do with the boycott, Her Majesty's Government have given the maximum possible assistance to companies which have had to confront it. I personally—and I believe that the noble Lord, Lord Denman, would share this view—have nothing but praise for the Foreign Office, the Department, of Trade (CRE 5 in particular), the ECGD and others, who have recognised the problems of the boycott, for they historically have come across these problems again and again, particularly in the developing world. At the moment, I think that the view of the Government is absolutely right. Effectively, they say that the boycott does not exist, or they do not recognise it and therefore it does not exist. They do not wish to get involved. If they get involved, the Government will be played off, one side against the other. All the lobbies will come in with all the political problems and all the effects of votes. Furthermore, there are certain political commentators who would point out that the American boycott Bill or the French boycott Bill were introduced for political reasons, rather than for reasons of commerce or morality. Even in the French Bill, to which the noble Lord, Lord Byers, referred, COFACE were exempted, which was taken as a signal that all companies in France would be exempted if they got into difficulties. I have heard one interesting point advanced by those who have to visit and trade with the Arab world, that in many cases it would be infinitely preferable to stay in a British goal or pay a fine, rather than pay the hefty hotel bills and live in some of the squalor in those parts of the world.

The prospects for trade with Israel and with the Arab world are good, and they can continue to be good and to expand. As we move towards a settlement out there, one hopes to see increased involvement of Israeli trading expertise with many of the Arab world, and I understand that already people are looking for trading opportunities. One also hopes to see an increase in the level of exports from the United Kingdom to each of those Arab territories, and to Israel as well. Any step which introduces legislation which could affect this will be serious. It will be more serious not because of the legislation, but because of the way in which emotion and heat will be engendered and opinions aired, and this goes even for the appointment of a Select Committee. The one thing that I have never understood about the developing world is that it has an incredible jungle drum effect, and things happen even when there are no telephones or communications. Rumours fly around and action is often taken, based upon false information.

At the end of the day, I would not oppose the Second Reading of this Bill although I would not really support it either. I hope that the matter can be threshed out and discussed in some detail, and that, in the end, people recognise that if we do not push this Bill through our moral standards will in no way have fallen, but our commercial sense will remain as bright as it always has been. To the noble Lord, Lord Segal, I would quote the words of Voltaire: C'est mon opinion et je le partage".

5.14 p.m.

Lord SHINWELL

My Lords, it was not my intention to intervene in this debate, and I ask your Lordships to accept my apology for not putting my name down on the list of speakers. But it was only over the weekend that I discovered, by looking at the Order Paper, that this debate was to take place. I have been in various ways preoccupied lately, and that is my only excuse.

First, I wish not only to offer my congratulations to the noble Lord, Lord Byers, for initiating this debate, but to express my admiration of his courage in doing so, because there was obviously bound to be opposition. As to the nature of the opposition, if I dared to offer an opinion it would be regarded as political in character and that is not my intention. There is another reason why I have intervened. It is because I understand, to my regret, that my noble friend Lord Janner, whose name was on the list of speakers, is incapacitated and therefore unable to be present.

What we are discussing this afternoon is not the details of the proposed legislation, for the noble Lord, Lord Byers, was wise enough to make it clear that, on the assumption that this Bill was acceptable to your Lordships' House, it would not be passed automatically and without any restriction. It was to be referred to a Select Committee and, obviously, that Select Committee would enter into details; in particular, all those details referred to by the noble Baroness, Lady Elles, in her speech this afternoon.

What we are debating is a principle, a moral principle—one to which we must give every consideration. I recall an incident in another place many years ago, when a notable member of the Conservative Party, at a time when doubts existed as to whether we should embark on a military adventure at great risk to ourselves and to vast numbers of our people, declared from the Conservative side of the House that somebody should speak for England. He cared little or nothing about the risks, though they, too, must obviously have been in his mind. It was the late Leopold Amery. He spoke on the basis of a principle which is a tradition of our country and, in particular, a tradition associated with our business and commercial interests; namely, that it is the prerogative of all Governments, of whatever complexion, to protect business interests in the United Kingdom, and to resist every suggestion of blackmail and of intimidation, for whatever reason.

Of course, it would be another matter if there were to be a boycott by any other country against the United Kingdom, but that is not so. This is a boycott against another very small country, surrounded by enemies with, just now as it happens, the possibility of rapprochement and understanding leading to, we hope, permanent peace. That small country is surrounded by enemies, as I have said, and befriended by others—for example, to put it in the singular, by the Conservative Friends of Israel, an organisation established some time ago following the creation of a Labour organisation described as the Friends of Israel. So all Parties are united about this, and here may I include the Cross-Benches.

What do we mean by "the friends of Israel"? It means that we must take every possible step within our competence and capabilities to prevent the destruction of that small country, and that is what we shall be voting about if the noble Lord, Lord Byers, presses the Second Reading of his Bill to a Division. Let us not make any mistake about that, despite the eloquence of the noble Baroness, Lady Elles, and those who have supported her.

The noble Baroness said in the course of her remarkable speech—it was remarkable, with possibly many repercussions; I should not be in the least doubtful about that—that we cannot adopt unilateral measures; it would be another matter if we considered the question from a multilateral standpoint. I can deal with that point very readily. The noble Baroness meant that all of the countries of the Nine, and whoever cares to enter later into that combination, might come to a decision about the question. However, the noble Baroness knows only too well that there are certain members of the Nine, France in particular, who would not agree with the Bill initiated by the noble Lord, Lord Byers. This attitude has been demonstrated by that country's acts and by what has happened in recent years. Let us dismiss the idea of multilateral action; there is not the slightest possibility of it taking place.

Baroness ELLES

My Lords, would the noble Lord allow me to say that what I said was said in perfectly good faith. I do not consider that the noble Lord has the authority to question that. When I propose multilateral action I mean it, because I believe that the only way that this problem can be solved is through multilateral action within the European Community.

Lord SHINWELL

My Lords, I cannot accept what the noble Baroness believes. I am concerned about the facts of the situation. I need say no more about the French attitude; we all know about it. And this attitude applies undoubtedly elsewhere. Multilateral action is out of the question. We are considering whether we are going to take action here, in principle, which will afford unalloyed delight to the enemies of Israel. It is a fair point.

The Earl of ONSLOW

My Lords, if the noble Lord would be good enough to forgive me—

Lord SHINWELL

My Lords, perhaps I may be allowed to continue. I know the noble Earl's views. He has always been pro-Arab, so we can leave it at that. There is no point in the noble Earl interrupting me. In any case, I should not reply to him.

Several noble Lords

Order, order!

Lord SHINWELL

My Lords, I want to make this quite clear, however aggressive I may appear to be. If we understand each other, that is one thing; if we do not understand each other, it is another. But I understand the noble Earl. I have heard him much too often on this issue, and that can be that—I hope for good and for the future. May I come back to the point. We are considering whether we shall accept a concept that is associated with a high moral principle; namely, whether we are going to take action which will afford pleasure and delight to the enemies of Israel, or whether we are going to stand by a principle which is associated with our traditions. I hope that the noble Lord, Lord Byers, will press his Second Reading to a Division and I hope, further, that the friends of Israel on all sides of the House will support him so that not only the country but the whole world will know that we stand by principle.

I recognise the points made by the noble Lord, Lord Selsdon, the noble Viscount, Lord Monck, and the noble Baroness, Lady Elles. There are possible defects in this legislation which will have to be ironed out. I am all for that. Let us iron them out through a Select Committee, but let us stand by this principle.

I do not want to enter into a discussion of the disputations which are now taking place in the Middle East. I have doubts about the possibility of peace arising from President Sadat's advocacy and courage. Here I should like to say that I am satisfied that it is not in the mind of the noble Lord, Lord Byers, nor is it in mine, to do anything that will prevent the cultural, industrial, economic and social development of the Arabs in all parts of the world. The more we develop, the higher the culture, the higher the standard of civilisation, the better we shall like it. Such an idea is not in our minds, but we have to consider whether this country of ours, the United Kingdom Government and the friends of Israel in this Assembly are going to allow action to be taken which will lead to further aggression against the small country of Israel.

I do not believe that it is necessary for me to say much more. Indeed, it was not my intention to say anything at all. I said what I have said because I believe in what I am saying. I hope that the House will take the opportunity to refer this important topic to a Select Committee. Perhaps I may add a word regarding some of the arguments that have been adduced. If the boycott is removed, there are, of course, firms in this country which will lose certain contracts with Saudi Arabia. But it might be better in the long run if we gained something from the principle, even if we lost some of our trade.

There I leave the matter. I ask the House to support the understanding that the legislation, if passed, will go to a Select Committee so that all the details and defects can be ironed out. I ask the Members of your Lordships' House, the friends of Israel, to support the noble Lord, Lord Byers.

5.29 p.m.

The Earl of ONSLOW

My Lords, before the noble Lord sits down, would it be possible to ask him whether or not it is true that there could be two sets of morals? Certain people disagree with the settlement of Poles, Germans, Ukranians et cetera, in Palestine because they belong to a certain religion. The other point is this: does he not remember that the late Ernest Bevin said in another place that there are no honourable Arab Members of this House?

5.30 p.m.

Viscount SLIM

My Lords, I ask your indulgence for addressing you when I have not put my name on the Order Paper. I have been approached to say a few words as a businessman and as chairman of one of the committees of the London Chamber of Commerce and Industry. I have always wanted the honour of following the noble Lord, Lord Shinwell, in a debate. It is a rather frightening business to follow such eloquence and I hope the noble Lord will allow me to remind him of the affection and esteem in which my family has always held him, and particularly my father when my father worked for him, which he did with great pleasure.

I do not argue with the noble Lord, Lord Byers, about the intention of his Bill, but I should like to point out that we are an amazing race. If we can make things difficult for ourselves we do. There is enough bureaucracy, there are enough forms to fill in, there are enough laws at the moment, and trying to do business anywhere in the world is not easy. Some of us are not always successful, and, speaking personally, I feel that any further constraints laid upon the British businessman by such a law as the noble Lord proposes would really be as bad as the boycott itself. We businessmen require freedom. Of course we need help from our Government, from the noble Lord, Lord Selsdon, and the comments of the noble Lord, Lord Denman, and help from our own London Chamber of Commerce, but above all we want flexibility, room to move. If I read the noble Lord's Bill correctly, we see here that it refers not only to the Middle East but to any other boycott by which we are restrained, covered, pushed around. That will bounce off on us and red tape will multiply and our freedom of movement and action as businessmen will be curtailed even further.

With particular respect to the Arab boycott, my limited experience—and I travel a great deal in that area—is that, if there is a problem, there are certain bodies to which you can go, but there is nothing like an eyeball to eyeball with the Government or the company concerned in that distant country. It is a tough battle and it is one we businessmen are getting used to. I think mention has been made of the effect this is having on other countries which have passed legislation such as the noble Lord proposes. I do not pretend to be an expert, but the message that I get from the United States is that the Zionist lobby moved with such force that the legislation is now being questioned and that there is some doubt about employment in various areas. Indeed, the United States Government—and I am perfectly happy to stand corrected—are looking for mitigating circumstances that will alleviate some of the problems arising out of the very harsh measures which they have passed. From France, I am told that the Franco-Arab Chamber of Commerce says that the results of such legislation have been disastrous to Franco-Arab relationships and to general understanding. These are all bridges that can be mended, all things that different Governments can take action on.

So far as we are concerned, the international situation at the moment and the hopes we have in the Middle East make me sorry that the noble Lord should bring in his Bill at the present time. I think this is the time for the businessman to be on the scene and to make his judgment and his commercial decisions, and I do not feel that any Select Committee will help the situation. I do not feel that the Bill will help and I believe that out of a Select Committee will come a compromise, and more red tape for the businessman. I feel I cannot support the noble Lord, for whom I have nothing but respect and admiration, in such a Bill as he proposes.

Baroness WARD of NORTH TYNESIDE

My Lords, before the noble Viscount, having expressed the views that he has, sits down, may I ask him why the President of the CBI did not attend today to express the general view of businessmen and can I ask if he is aware that I entirely support what was said by the noble Lord, Lord Shinwell?

Viscount SLIM

My Lords, if I may answer the noble Baroness, I support what the noble Lord, Lord Shinwell, says about most things, but I have to speak, as we all do in this Chamber, of what I am thinking and of what my experience is. May I say to the noble Baroness that, to be quite honest, I am not a member of the CBI and I do not know what the President of the CBI does for a living?

5.37 p.m.

Baroness STEDMAN

My Lords, may I first of all apologise because the speed of previous business precluded me from hearing the opening sentence of the noble Lord, Lord Byers, when he was introducing the debate. Nevertheless, I have listened with very great interest to his speech introducing the Bill which is before us today. It has of course emerged very clearly that, although this Bill is concerned, as noble Viscount, Lord Slim, reminded us, with foreign boycotts generally, it is principally directed against the Arab boycott of Israel, and it is on this that the debate has concentrated almost exclusively.

The Arab boycott of Israel is a matter which arouses strong emotions. In the first place, it is related to the problem of peace in the Middle East. That is something which all of us want to see, not only for the benefit of all those, whatever their country or nationality, living in that area, but because peace in the Middle East is so important to the peace of the world. Strong emotions are also aroused by the general issue of economic boycotts. Many people see strong objections of principle against such boycotts, irrespective of the countries to which they are applied and the purposes which they are intended to serve.

The Government's attitude to the Arab boycott has been clearly stated on many occasions, and I am glad to have the opportunity to state it again. Her Majesty's Government are opposed to and deplore all trade boycotts other than those that are sanctioned by international support and authority. In accordance with that policy, the Government are always ready to meet and to offer advise in confidence to companies and individuals who meet problems in connection with the boycott. And, while being careful to avoid action which might be construed as recognition of the existence and validity of the Arab boycott, we are also willing to do all that we can to help in finding solutions. Over and above this, the Government does as much as it can to clear up misunderstandings about the boycott.

We pointed out for example, that the boycott does not apply to the export of goods other than war materials from this country to Israel. Indeed, many firms trade successfully with both Arab States and Israel and we give them every encouragement to do so. The Government's stand on the boycott is therefore clear, and we also take action in the ways I have indicated to try to mitigate its effects. The Government have consistently taken the view also that they have no intention of introducing legislation on this matter. It follows therefore that the Government are opposed to the Bill which is the subject of this debate. The reasons for the Government's attitude on this matter are as follows.

First, it is the Government's policy to assist, and not to impede, the efforts of our exporters in world markets. We want to see our exports grow to all countries, both to Israel and to the Arab States. I am glad to tell the House that they have done so. The value of our exports to Israel in 1977, as the noble Lord, Lord Selsdon, said, was £274 million, an increase of 10 per cent. in value over the figure for 1976 and 46 per cent. over the figure for 1973. In the Arab world there has been an exceptional growth in export opportunities over the past four years, for reasons which are well known, and British companies have taken full advantage of this. The value of our exports to Arab countries in 1977 is provisionally estimated at £2.7 billion, an increase in value of 32 per cent. compared with the figure for 1976 and an increase of 452 per cent. over the figure for 1973.

Over this period the importance of exports to the Arab States for our total export effort has been more than doubled. In 1973 the share of United Kingdom exports going to Arab markets was 4 per cent. In 1977 over 8 per cent. of United Kingdom exports went to Arab countries. In order to carry on their business our exporters have to comply with a whole range of import regulations and requirements imposed by various countries. However unwelcome some of these regulations and requirements may be, the Government have not felt it right to forbid our exporters to provide whatever documents or declarations are required to secure lawful access for their goods.

This principle has applied to the import regulations and other requirements of those countries which implement the Arab boycott of Israel. It has always been the Government's view that it is for individual companies to make their own commercial judgment about whether they should comply with these requirements. It is clear from the figures which I quoted earlier that many British companies evidently consider that it is in their commercial interest to comply with these requirements, however much they may dislike them. In making this judgment they no doubt take account of the interests not only of their shareholders but also of their employees. As the noble Viscount, Lord Monck, reminded us, there is no escaping the conclusion that tens of thousands, probably hundreds of thousands, of jobs in this country depend on the maintenance and growth of our exports to the Arab world.

The principle which lies behind this Bill is that companies should no longer be allowed to make this choice. It is proposed that we should make it an offence for companies to comply with these import regulations and other boycott requirements and thus deny them access to some of the most important markets for their goods. There are of course some who would argue that, on moral grounds, such companies, and their workers, should be compelled to make this sacrifice. The noble Lord, Lord Shinwell, has tried to take us to task on that. The question is however not simply whether the cost could be borne, but, equally important, whether such a sacrifice would have any effect in putting an end to the Arab boycott of Israel.

As the debate has shown, it is possible to make different judgments about that. Some noble Lords have placed much weight on the example of the legislation and regulations introduced recently in the United States, and have implied that the Arabs will be bound either to modify the boycott rules or to overlook them in the case of US firms. It would be rash to jump to such conclusions. The final regulations were issued only a few days ago and some will not take effect for some time yet. What we can say, however, is that, although the US legislation was passed in the early summer of 1977, there is no evidence whatever that its existence has caused Arab countries to contemplate getting rid of the boycott or to find some special way of releasing US companies from its provisions.

It is not for Her Majesty's Government to comment on the reasons which may have led the United States Government to introduce this legislation. I would however draw the attention of noble Lords to the fact that the circumstances of our two countries differ in two very major respects. First, the United Kingdom economy is much more dependent on exports than is the US economy; in 1976 US exports were only 10 per cent. of their GNP compared with more than twice as much—23 per cent.—for the United Kingdom. Secondly, as a market for exports, the Arab countries are significantly less important to the United States than they are to the United Kingdom.

My Lords, there are, in the Government's view, very strong general reasons why it would not be desirable to introduce legislation in the United Kingdom on this matter. In addition, there are some particular points about the Bill which is currently before the House which I would wish to draw to the attention of noble Lords. The justification for this legislation is said to be the protection of individuals, companies and businesses from the direct and indirect consequences and pressures of foreign boycotts. There is no way in which the passage of legislation will prevent these pressures and consequences from arising. Inquiries and requests for information will still be sent to companies. If they cannot respond to inquiries, the result may simply be that they are prevented from arguing their case or even from representing the true facts in a case involving mistaken or misleading information. Instead of removing pressures, therefore, the whole effect of the legislation could be to subject companies to two conflicting sets of pressure.

The Bill also seeks to prevent companies from refusing to do business with Israeli firms or United Kingdom firms on the boycott blacklist. It seeks to do this by the threat of criminal prosecution. It will be clear to noble Lords that this is a difficult field for legislation. It is, first of all, not easy to see how one could define the offence in question sufficiently precisely without catching at the same time other perfectly acceptable commercial decisions. The courts would be left with the task of distinguishing between the various motives and intentions which individuals and companies may have in refusing to do business with certain other companies.

There is also the question of the scope of the Bill. It is intended to apply to foreign boycotts generally, and not just to the Arab boycott of Israel. Noble Lords may be surprised to learn that something in the region of 90 countries operate boycotts against other States. Most of these are primary boycotts but some, like the US embargo of Cuba or the US strategic embargo of Eastern Europe and the USSR, have secondary features and can impinge upon the activities of companies and individuals in third countries. The consequences of bringing all existing boycotts within the ambit of the Bill are very difficult to assess. The noble Lord has sought to circumvent this difficulty in Clause 5 of the Bill, which provides that the Act shall not apply to boycotts declared by the Secretary of State to be in accordance with the policy of Her Majesty's Government. As I said earlier, the clear policy of the Government is to oppose and deplore all trade boycotts other than those that are sanctioned by international support and authority. It must therefore follow that, should legislation be passed in the form proposed, it could well have a wide application.

There are many points of detail about the Bill on which it would not be appropriate to comment in a Second Reading debate; for example, the breadth of the definitions, which would leave individuals and firms in a real state of uncertainty, and could mean that some people might find themselves in court for doing things which appeared quite reasonably to have no connection whatsoever with the Arab boycott of Israel. The real difficulties of detail in drawing up legislation on this subject are demonstrated by the United States experience. The Amendment to the United States Export Administration Act covering the boycott contained some five sections, but it has taken the United States Department of Commerce some 20 regulations and 250 examples to attempt to implement and clarify the position, and we have yet to see whether this attempt has been successful.

In the course of the debate, many aspects of the Arab boycott have been touched upon, and several, if not all, of them would fall to be considered by the Select Committee, if that is the wish of the House. But, before I sit down, I should like to refer very briefly to one or two points. The question has arisen of the certification of documents by the Foreign and Commonwealth Office. The practice of the Foreign and Commonwealth Office in certifying signatures on documents which have clauses related to the boycott has been criticised here and in another place. It was recently debated quite extensively in another place. I would make it clear yet again that the certification of signatures which is carried out in accordance with internationally recognised procedures cannot be regarded as endorsing the boycott or adding anything to the validity of the documents in question. The certification relates only to the signature of a notary or chamber official on the document in question and the Foreign and Commonwealth Office have no responsibility for the actual content of the document.

Then, the noble Baroness, Lady Elles, referred to the question of the Central Boycott Board and the fact that their decisions are not binding on all the countries. She is quite right. Some Arab countries, like Algeria, Morocco and Tunisia, do not even have a boycott office, and not all those Arab countries with a national office implement individual Central Boycott office decisions, particularly if it is not in their interests so to do. Neither do all the Arab countries insist on negative certificates of origin. On the other hand, some Arab countries, Iraq in particular, will refuse to deal with a firm even if it is only under investigation by the Central Boycott office. Therefore, it is quite common for firms to be blacklisted in one country and not another, and this adds considerably to the uncertainty of the boycott.

The noble Lord, Lord Byers, referred to the fact that the Netherlands, Denmark and Western Germany were standing up to the boycott. The Government are confident that the degree of assistance which they offer to United Kingdom firms is no less than that given by our European partners. We know of no instance where any of the Community States has given help which we should not be prepared to give to one of our own firms in like circumstances. We have increased our trade with Israel and have regained our place as Israel's second largest supplier, the United States being the first.

Then there were mild suggestions that the Arab boycott is illegal in international trade terms. Although GATT Article XI prohibits the introduction of restrictive or protective measures except under clearly defined circumstances, GATT Article XXI provides an exception for cases where measures are taken for the purposes of national security, and those Arab States which are members of GATT would almost certainly claim that this would cover the boycott. Then we were also questioned about Articles 85 and 86 of the Treaty of Rome and whether it was possible that the secondary effects might lead to a breach of the competition rules. I think this is most unlikely to occur. It must be remembered that the Articles in question concern restrictive agreements between undertakings and decisions by associations of undertakings only where they affect trade between Member States. So far as the EEC is concerned, we would, of course, be willing to take part in any discussion of the Arab boycott within the Community. But I would mention that the view of the Commission given recently in answer to a question in the European Assembly was that Community legislation in this field is not necessary.

If I may sum up, the attitude of Her Majesty's Government to this Bill is: first, we continue to oppose and deplore any trade boycott which lacks international support and authority; secondly, we are prepared to mitigate the effects of the boycott so far as we are able by assisting companies with particular problems and by clearing up general misunderstandings about the scope of the boycott; thirdly, we do not, however, intend to introduce legislation which would make it an offence for companies and individuals to comply with the boycott; fourthly, we consider that there are strong objections both of principle and of detail to the Bill which the noble Lord has brought before the House. The noble Lord has proposed that instead of proceeding directly to the next stage of the consideration of the Bill the House might wish to refer it to a Select Committee. The Government would not oppose this course if the House considered that this was an issue which could usefully be examined in this way.

5.56 p.m.

Lord BYERS

My Lords, I am grateful to the noble Baroness for having summed up the Government's view on this, although I must say I am extremely disappointed, because we do not seem to have made any progress whatsoever over many months on this matter. If I might start by referring to the speech of the noble Baroness, Lady Elles, I was surprised that she should in such strong terms, as the noble Lord, Lord Shinwell, said, appear to be defending the boycott. I think there will be some repercussions from this, although I must say that I was glad that as she developed her speech she seemed to be retreating and getting back to the freedom of trade. I agree with her on the need for a multinational approach to this problem. This is probably the only point on which I disagree with the noble Lord, Lord Shinwell.

Baroness ELLES

My Lords, I wonder whether the noble Lord would allow me to reiterate what I said very firmly towards the end of my speech; that is, we on these Benches reject totally the right of any foreign Government to interfere in the commercial domestic affairs of this country. I am not speaking specifically of the Arab or any other boycott; I am speaking of any foreign intervention by any foreign Government. I think our position is clear on this point.

Lord BYERS

My Lords, it was a great relief to me to hear that, after having listened to the opening remarks, which did worry me very much indeed. I do believe that if we are going to have multinational action we must at least have a draft of a Bill on which we can have the discussion in the EEC or with other nations. I believe we have to do this by sending this measure to a Select Committee. I have no doubt whatsoever that it will be in a changed form when it comes back. I hope it will be much improved. I want to see, as I think the noble Baroness does, a dialogue and a discussion going on in Europe and elsewhere to see how we can deal with the blackmail—there is no question about it—which is being exercised on British businesses from outside this country.

I should like to clear up one point. I think when the two noble Baronesses read Hansard tomorrow they will discover that what I said indicated that there is this Boycott Office in Damascus, but there are independent offices in some of the other States. I have checked my notes and I think I have got it right. I do think that this is a matter where we must emphasise, as the noble Lord, Lord Shinwell, did, the morality of the case being put forward. The noble Lord, Lord Denman, only advanced a case, in my view, for submitting to the boycott. I think this is the classic case which is put forward by all opponents of anti-boycott legislation. All these arguments were put forward in the American hearings, in the committee stages; they all came the same way. You may say America is a different kettle of fish, but the American experience is not bearing out the worries which these opponents of anti-boycott legislation sought to put forward in the evidence which they gave. I believe there is no case for complying with the boycott.

What worries me is this. The noble Baroness, Lady Elles, said there is a diplomatic way of dealing with these things, but our Government is not tough enough, and if you have not got a tough Government, in my view, you have to have legislation. If the noble Baroness, Lady Stedman, had said, "All right, we shall drop the validation of the certificates" that would have been a pretty tough stand. Instead of that, they hide behind saying, "We are not really validating the certificates: we are merely saying that it was the notary public who actually took the statement." Why do we do it? It gives grave offence to people in Israel and to a lot of businessmen who do not want to be bothered with going to the Government offices to get these certificates validated.

I find these certificates quite objectionable. I should have thought that the least the Government could have done tonight would be to say, "No, we agree. Let's drop the whole thing about the validation of certificates." They are weak. It is up to the commercial judgment of companies. It is no use the noble Baroness saying that the British Government give just as tough support to British enterprise as the West German Government give to theirs. The evidence is present. When Volkswagen came under threat, the West German Government moved in like a bulldozer and, in effect, said in Parliamentary language, "Stuff it".

The Government attitude has been stated on many occasions and the noble Baroness, Lady Stedman, has done so again tonight. I want to ensure that this remains as a political issue. One noble Lord said: "Don't let us escalate this into the political arena". It has been in the political arena for years. We must either have tough action by the Government to protect British companies or we must provide legislation which we can enact if we feel that that is the right thing to do. There is no question about it. We all want to see peace in the Middle East. Nobody would welcome it more than my friends on these Benches—we all want it. However, by sending this measure to a Select Committee, we shall now have time to get the matter discussed, looked at and minutely investigated, and to make sure that anything which is impractical or undesirable is eliminated from the Bill. That is what I believe we ought do do. Therefore, I hope that the Bill will be read a second time.

On Question, Bill read 2^a.

Lord BYERS

My Lords, I beg to move that the Bill be referred to a Select Committee.

Moved, That the Bill be referred to a Select Committee.—(Lord Byers.)

On Question, Motion agreed to.