ECC 36th REPORT ON MUTTON AND LAMB (SHEEPMEAT)

HL Deb 17 July 1978 vol 395 cc47-96

4.36 p.m.

Lord WALSTON rose to move, That this House takes note of the Thirty-sixth Report of the European Communities Committee on Mutton and Lamb (Sheep-meat) (R/769/78). The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. At the outset, I should like to give my thanks to those members of the Sub-Committee who have spent so many long but, I hope they will agree, fascinating and useful hours probing evidence, listening to many wise and knowledgeable people and deliberating thereafter as a result of the evidence that has been heard. In those thanks, I should like to include both our clerk and specialist adviser who have done so much to make it possible for us to produce this report with a very fair degree of speed.

In considering this matter of the proposals from the Commission in the unattractive but useful "shorthand" of the Commission for a sheepmeat régime, the first question that any of us should ask ourselves is this: is there any need for any further Directive or legislation in this matter? Frequently in this House and elsewhere we criticise the Commission for bringing out Directives which are unnecessary. We have to satisfy ourselves as to the reasons why it is necessary to have any proposals to regulate the trade in sheepmeat. We did not have very much difficulty in doing this.

I am speaking completely personally but most, if not all, of my fellow members go along with me when I say that with all its shortcomings we believe that the Common Agricultural Policy is a very important part of the Community. It must be made to work as efficiently and broadly as possible. Until some sheepmeat régime comes into force, the trade in mutton and lamb—and also goatmeat which does not affect this country significantly—does not come under any of the provisions of the Common Agricultural Policy. As a result of that, there is a very distinct impediment to the free movement of goods between different Member countries of the Community.

There is probably little need to remind your Lordships that at the present time it is impossible for British farmers to export sheepmeat to France unless there is a special permission given by the French Government which is only given when the price of sheepmeat on the Paris market rises above a certain level and is withdrawn immediately it falls below that level. That is in complete contradiction to the beliefs and concepts of the Common Agricultural Policy. Therefore it is essential that this should be removed.

There is a further reason why these proposals are of value to the whole concept of the Common Agricultural Policy. This is one to which I shall return later in more detail, but it may surprise some of your Lordships; that is, that, while it is part of the Common Agricultural Policy that the home producer as regards the partners in the Community should have priority in the markets of the Community itself for their own products, there should be freedom, so far as is consistent with that first proviso for imports to come in from third countries. At the present time that is extremely difficult for most of our partners in the Community and, in fact, in France, which is the biggest potential for sheepmeat, imports are limited to 3,000 tonnes per annum. For those reasons, I believe that some form of sheepmeat régime is a necessary addition to the armoury of the Commission, of the Community and, particularly, of the Common Agricultural Policy.

Having, I hope, established the fact that in general and in principle it is important that there should be a sheepmeat régime, we now have to look at the effect of these particular proposals upon the various component Members of the Community as a whole and, in particular, how beneficial or how adverse the effect may be. Broadly speaking, one may say that there is concerned in this matter, first of all, the taxpayer, who is interested in how much extra charge, if any, these proposals will put on the Community Budget and, indirectly, upon the contribution this country has to make. Secondly, and most importantly, there is the consumer—above all, the consumer in the United Kingdom. Thirdly, there are the farmers of the United Kingdom and, fourthly, our friends in New Zealand—the farmers and the sheep producers there and the people of the country as a whole. New Zealand is a very loyal member of the Commonwealth and an old ally in every sense of the word, an economic partner and one to whom we owe a very great deal. How will these proposals affect these different interests? So far as the taxpayer is concerned, the effect is minimal. There are provisions for a premium to be paid to certain farmers. It is not specified which farmers they will be, but undoubtedly the French farmers will be adversely affected by the opening up of competition, above all, from this country. Perhaps I should have said in my earlier remarks that already France has a special arrangement with Eire over the importation of sheepmeat there which, again, runs completely counter to the ideals of the Community. But the French sheepmeat producer will undoubtedly be affected by the opening of the doors to cheaper sheepmeat coming in from elsewhere, and particularly from the United Kingdom.

It is therefore, in my view, perfectly reasonable that at least for a transitional period—to which I shall refer later—the French producer of mutton and lamb should have some cushioning against the effect. According to the Commission's proposals, that should be dealt with by way of a premium which, in other words, is hardly distinguishable from our own deficiency payments in this country, to which we attach very great importance. It is worth mentioning that we already have agreement in the Community for the payment of special premiums to sheep producers in this country and for hill-farming subsidies to help those who are specially disadvantaged. Therefore it is not right for us to oppose the concept of the premium, but I believe it should extend—and this is where we need more clarification of the Commission's proposals—not only to the French farmers, who will be most affected, but to all sheep producers throughout the Community, wherever there may be a need.

In passing, I should say that this is a very valuable precedent for us in this country, who for long have been pressing for some form of deficiency payments to our producers because, without going into detail, we believe it is the best way to safeguard both producer and consumer and to prevent prices rising too high. So we have here a precedent which is of value but which will cost a certain amount of money, though not a large amount. No figures have been suggested and I think it is wise they should not be; but, undoubtedly, in terms of the total Community Budget, this figure will be a very small one. That, my Lords, is the limit of the cost to the Community and hence to the contribution that the British taxpayer has to make.

Let me make a point here which is frequently overlooked in discussions on this matter; that is, that in those proposals there is no question whatsoever of any intervention price. There is no floor to the market and no question of the creation of a "mutton mountain" because there is no intervention price or intervention buying; and therefore the biggest potential source of expenditure by the Community does not exist in the case of sheepmeat.

That is the situation so far as the taxpayer is concerned: what about the consumer? To my mind, there is no question at all but that the price of sheepmeat to the British consumer will rise. That is not a very happy situation in itself, but we must look at this in rather more detail and the Committee looked at it in a great deal of detail. We tried very hard to find out how much the price of sheepmeat would rise to the British consumer and we were given a whole range of possible increases in price, from 5 per cent. at the lowest end to 40 per cent. at the highest. There was a lot of talk about elasticity of demand, and many figures were produced to suggest that a certain fall-off in consumption would take place if the price rose by a certain amount. There was a lot of talk about the rate of change at which these increases in price would take place. There was also a lot of talk about the competition from other types of meat and about the relative prices of beef, pork and poultry.

All these factors have to be taken into account, but, having done that, I confess quite frankly that we could do no more than make a guess. I hope it was an intelligent guess: it was certainly an unbiased guess, and perhaps I should point out that the membership of the Committee did cover a very wide range of interests and experience over the whole spectrum of the meat problem. There were sheep producers and general farmers; there were those with experience of the wholesale meat business and of the retail meat business, and there were those with experience of consumer protection. At the end of the day, we came to the conclusion that the increase in price would probably be of the order of 15 per cent. As I say, that in itself is not a very happy conclusion to come to at a time when we are doing our best to hold down inflation. I do not want to anticipate the final conclusions and recommendations, but if there were a transitional period of five years for introducing this régime and if that price rise of 15 per cent. was to be spread over five years, it would in fact mean an increase—

Lord ARDWICK

My Lords, would the noble Lord forgive me? Is it a 15 per cent. rise to the consumer—to the person buying—or is that a wholesale price?

Lord WALSTON

My Lords, I am very glad that my noble friend mentioned that, because I was coming to that point and it is of significance. But if you spread this increase of 15 per cent. over five years, it will be an increase of 3 per cent. per annum. That increase is, in fact, to the producer. One never knows in these cases whether the various other people concerned, such as the wholesalers and the retailers, will charge exactly the same percentage on top of the producer's price that they pay, in which case the whole of the 15 per cent., or the 3 per cent. per annum, will be passed on to the consumer. But if, as one hopes, they said, "Our costs will not go up in any way. It is only the producer's price that will go up, not the costs of handling, of distribution, profit margins and so on. They will not go up as a result of this", then that 15 per cent. to the producer should not mean more than 10 per cent., or even 7½ per cent., to the consumer.

I do not think one should count on that, because experience in the past makes it unlikely that at least some of this will not in some way be passed on to the consumer. I would say therefore that, spread over five years, one should expect a price rise of between 2 and 3 per cent. per annum. After all, with inflation running at the happily low figure of something under 8 per cent., a rise of 2 to 3 per cent. in sheepmeat alone is not a matter of complete disaster. But we have to face this fact and it is one which cannot be dodged.

However, let me make this point clear to your Lordships. This increase in price is not due to a high intervention price, or any of the other devices which we so often associate with the Community and with the Common Agricultural Policy. It is due solely to the fact that the British producer will have opened up to him markets in the rest of the Community, particularly in France, which, as I have already explained, are at present closed to him for most of the time. Therefore, there will be a greater demand with, at any rate for the moment, until production increases, no greater production. There will simply be the effect of supply and demand pushing up prices and, from our point of view in this country, the increased demand comes as a result of increased exports.

It surprises me that there are prominent members of all Parties who are vociferous about the need to keep down the price of sheepmeat to the consumer here, and who say that nothing should be done to allow prices to rise. But, at the same time, it is the policy of the Government and of the Opposition to encourage exports wherever possible. We must realise that the only reason why any rise in price may occur is that exports from this country will be increasing, which surely must be a cause for rejoicing, even though it may result in an increased price to the consumer here.

Lord HAWKE

My Lords, may I ask the noble Lord a question? I do not think he has made clear to us what is the present price of sheepmeat on the Continent. It seems to me that meat, in general, on the Continent is nearly double the price of what it is in England.

Lord WALSTON

My Lords, I deliberately did not want to go into a lot of figures and details: they are all printed in the report. But the noble Lord is perfectly correct and prices on the Continent are very much higher. I believe that in France and Belgium the prices are approximately double what they are here, but in certain other countries of the Community they are about 50 per cent. more. However, in every case they are very considerably higher; but so, indeed, are the prices of beef, pork and poultry, too. So that the relationship between them is not necessarily very different; and, as we all know, the level of wages and the spending power are greater there, too.

But to return briefly to the question of exports and the increased price to the consumer here, I do not think anybody would suggest that we ought to curtail our exports of, for example, barley of which we have very valuable exports to the Continent, which help to keep up the price to the British producer of barley in this country, simply in order to bring down the price of barley here, as indeed would happen, and thereby reduce the cost of feedingstuffs and possibly reduce the cost, if not the price, of beer and whisky. So that we must be very clear about the reasons for the price increase that is likely to take place.

The third group which are concerned are the farmers of this country, and there is no doubt that it will be beneficial to them. They will have this increased market opened to them, particularly the French market, and there will be a steady increase of market. It will not be a stop-go situation, depending upon what happens in the Paris meat markets, and on how the supplies and demands in France, or in other Member States of the Community, fluctuate. It will always be open there. But it will not be an easy market. At the moment, the French take a small amount of our sheepmeat, but they take only the best quality. They are very choosy in what they buy and it will not be possible for us to sell to France, once the gates are open, everything that is produced here.

The demand is limited. At the moment it is a luxury product, but I hope that as time goes on it may become a more common article of diet on the Continent. Again, if the noble Lord would like to refer to the table in our report, he will see that the consumption in all the Community countries is very well below what it is in this country and in Eire. We shall be able to make use of this new opportunity only if we give yet greater care to the provision of real quality meat, and to the methods of our marketing of it. So that while farmers will benefit from it, it is not just a wonderful new open market ahead of them. It is a selective quality market, which will need a great deal of work to get the biggest possible benefit from it.

Finally, there is New Zealand. I have already spoken of the debt that we owe to them, and it is only right to say that all the evidence that we received from New Zealand, and which one has read in the newspapers, shows that they have very strong fears about the effect of this decision upon them. I believe that those fears, while reasonable, are considerably exaggerated. I do not not believe that the danger to New Zealand is anything like so great as they believe it to be.

The most important point to remember here is that, at the present time, New Zealand has to pay a 20 per cent. tariff on all sheepmeat coming into this country. Under the new proposals there will no longer be a tariff. There will he a levy which will vary up and down, depending on the price within the Community as a whole, but on an undertaking, given as a result of the GATT commitment, it will never exceed the 20 per cent. tariff which is payable at the present time.

So that New Zealand is in the position of knowing that there will never be a greater imposition upon their imports than there is at the present time; there may well be a diminished one. As the major supplier of sheepmeat from third countries into the Community as a whole, it is always open to them to increase their offer price, thereby receiving more money for themselves but not increasing the money over here, because the levy that they have to pay to bring it up to the ruling price within the Community will thereby be diminished. So to that extent they stand to gain somewhat.

New Zealand also stands to gain by the fact that, at present, France imposes a 3,000 tonnes per annum limit on the amount of sheepmeat imported from third countries. Our understanding of these proposals—and here clarification is needed most importantly—is that the 3,000 tonnes limit will disappear, and the market will be open to New Zealand, subject always to the levy, so that they can develop their market without fear of impediments arising in the future, both in France and in other Community countries, with no limit at all placed on the amount that they can send into those countries. They have, therefore, a greater opportunity than exists at present.

Their fear is that because of the rise in price in this country, consumption in this country will drop and therefore the amount which will need to be imported from New Zealand will also drop. That is a genuine fear, and it is one that we accept. I am not saying that that fear does not exist; it is a real fear. On balance, however, I believe that the advantages which they are getting will go—I put it no higher than this—a very long way towards counteracting any disadvantages which they may suffer. Knowing the ability of the New Zealanders as exporters of sheepmeat and the quality and the consistency of their product, I believe that during the transition period they will be able to come out of this with little, if any, disadvantage and possibly with some advantage.

To sum up, our report says that these proposals form a good basis for a just, workable and reasonable settlement. There are one or two particular points to which we wish to draw noble Lords' attention and which I hope that our negotiators will be able to achieve before the final proposals materialise. They are these. First, the safeguard clause which is written into these proposals—and, indeed, into all proposals of this nature—should be used and should be seen to be used only if there is real disruption of the entire sheepmeat market. It should not be used here and there, sporadically, if it looks as though something is going to be difficult; it should be used only in the event of a real disruption of the stability of the market. When one considers that only one-third of our sheepmeat is produced within the Community, this is highly unlikely ever to take place. If, however, disruption of the stability of the market were to take place, due notice should be given, bearing in mind the fact, so far as New Zealand in particular is concerned, that since the length of time between meat being shipped from New Zealand and arriving in Europe is very considerable, it would clearly be unfair to them if these emergency provisions, should they have to be invoked, were invoked for sheepmeat which was already on the high seas.

Secondly, it must be made absolutely clear that the French should abandon their 3,000 tonne limit on imports from third countries, and that New Zealand and any other country outside the Community that wishes to do so should have free right of access to the whole of the Community market for its sheepmeat, subject always to the levy, the maximum being 20 per cent. Thirdly, the premia which are suggested should be available to all sheep producers within the Community and should not be confined solely to the French who will be hit the hardest.

Subject to those three points being clarified, we believe that this is a sound proposal, that it will help the Community as a whole, that it will improve the Common Agricultural Policy and that it will do so at virtually no cost and with a certain amount of benefit. My Lords, I beg to move.

Moved, That this House takes note of the Thirty-sixth Report of the European Communities Committee on Mutton and Lamb (Sheepmeat) (R/769/78).—(Lord Walston.)

5.4 p.m.

Lord O'HAGAN

My Lords, the report that we are debating this afternoon is what one would expect of a Sub-Committee of the Select Committee on the European Communities Committee, when one considers the members who comprise it. If Her Majesty's Government needed a private or semi-public Think-Tank on the topic of sheepmeat in general, or goatmeat in particular, it would be hard to find a wider range of experts than the Sub-Committee of the Select Committee on the European Communities Committee which has produced the report that we are debating this afternoon. In particular, the noble Lord, Lord Walston, has experience both of the political scene in the European Community and of farming in this country. Therefore, it does not fall to me, as a mere stand-in on this long-term operation, to come with a wide-ranging series of criticisms of what the sub-committee have done, although, as we saw earlier in today's proceedings, it is essential that we should retain on the Floor of the House the right to differ from any committee, or any sub-committee which a Select Committee may set up, because we cannot be mandated by committees which are set up to do work elsewhere.

I do not have the same range of qualifications as those possessed by the noble Lords who have taken part in the work of this sub-committee, but I do, I hope, have a serious interest in the future of the European Economic Community, in particular in the sensible and steady evolution of the Common Agricultural Policy, which is one of the pillars of the existing Community. Unless the Common Agricultural Policy continues to hold up the fabric that the Community has worked out for itself, the rest will fall apart. However, we must remember—I hope noble Lords will accept this comment as a preliminary to the rest of what I have to say—that the Common Agricultural Policy is not working perfectly, that it needs to change—and change quickly—in order to survive and that it was based upon a system which itself was built upon stable currencies, or currencies which did not fluctuate wildly. At this very moment, after Bonn, I hope that moves are being made towards a firmer currency relationship between the Member States of the Community. On the basis of such an arrangement, if such an arrangement comes into being, we could start to work out a new edition of the Common Agricultural Policy.

Why do I bother to make these general remarks which appear to have nothing to do with sheepmeat? Because the proposal that the sub-committee examined and the proposal which we are considering this afternoon is but a further, modernised version of a whole series of proposals on sheepmeat which are themselves part and parcel of the existing Common Agricultural Policy. When we are examining this proposal, therefore, we have to remember that it may be but one more in a series of recommendations, that it will be discussed in the Council of Ministers—who may alter it out of all recognition—that it will be considered by the agricultural Ministers, together with a great number of wholly unrelated subjects, that it will be bargained about, probably in the middle of the night and probably when tempers are very short, and that a decision will be taken upon it, not on its own merits alone but as part and parcel of other agricultural decisions which may have to be reached at that particular moment.

The first question that I should like to ask the noble Lord, Lord Strabolgi—I hope he will accept that the questions which I am about to ask are not petty, partisan, point-scoring questions but the kind of questions which are necessary for a serious debate on the report that we are discussing—is this: When do the Government anticipate that this proposal will reach the Council of Ministers?

I have given what I hope may be accepted as general warnings about the nature of this proposal. I am not asking noble Lords to stand back from the report because the quality of the report does not deserve close attention. I am asking your Lordships to look at the report in, as the horrible jargon has it, the context of what is happening to the Common Agricultural Policy in general and to the proposals for the various agricultural commodities and produce in particular. It is no use looking at this report just on its own; we have to see where it is going to take us. Looking ahead to a Community of Twelve, looking ahead to a Community which is going to become increasingly anxious about expenditure on agriculture, we have to examine whether it is taking us in the right kind of direction generally. I hope other noble Lords with better qualifications than mine can address their comments to this point as well as to the particular points raised by the report itself.

The noble Lord, Lord Walston, began his remarks by trying to assess the need for the proposals and I think we must accept that the sheepmeat régime would have come into being had there been a crying need for it to exist in order for the Community to survive. The Community has worked without a sheepmeat régime since 1958. What is the need for having one now? I ask that question not in the spirit of those who wish to prevent the Community working but with an earnest desire that the Community and the Commission in particular should only tackle a common need where a common need really exists, because unless there is a common need there is no purpose in a common policy.

What is the common need? We have been told in the report and by the noble Lord, Lord Walston, that the Community has many Member States who are not particularly strong in either consumption or production of sheepmeat, and Table 1 makes that vivid. So it is a problem that really revolves around three Member States. That may be an oversimplification but the triangle of France, Eire and ourselves is the most important triangle when this subject is being considered. If we are wondering, what is the need for a régime on sheepmeat I think we must at least consider the possibility that it is to some extent the refusal of the French which is responsible for the demand for a sheepmeat régime because it is the resistance of the French market to imports and in particular the arrangements between the French and the Irish Republic which prevent a genuine common market in sheepmeat from existing. As I understand it—though I may easily be wrong on this and if I am perhaps the noble Lord, Lord Strabolgi can correct me—since the ending of the transition period at the beginning of this year a common market in sheepmeat should automatically have come into being between the new Members and the old Members.

So, at least on the surface, it is not in the interests of all Member States to have a sheepmeat régime, and it is not necessarily in the interests of the other three Member States that I have mentioned, except that there are some legal difficulties which might be overcome by a sheepmeat régime. But, if that is the case, we should not set up sheepmeat régimes simply because existing legal sanctions are not enough. I am sounding a note of caution because I think we have to examine very carefully what it is that this proposal is committing us to. As I said in my earlier remarks, endorsement of the principles of the proposal does not commit this country to the proposal. It can be changed in the Council of Ministers; it can be changed as part of a package deal, and the reason I am asking these questions is because I want the Government to answer them.

In their present frame of mind, whom do the Government think a sheepmeat régime will benefit? Although it is quite clear that our own sheep farmers would benefit a great deal and could stand to gain an enormous amount if their exports were increased, the price to the consumer is something about which the Select Committee itself had the greatest difficulty in coming to a firm conclusion and it is something to which we in this House need to pay a great deal of attention. The Community is already blamed for everything from Britain's performance at football and cricket to every sort of high price. It would do no good to the Com- munity if there were a price rise in sheepmeat that was undoubtedly the result of a sheepmeat régime unless every precaution had been taken beforehand to evaluate exactly what those costs would be.

I saw in The Times the other day a favourable comment about the Select Committee's report on the 1979 Budget which was headed, "Lords join criticism of EEC Budget over agriculture" and of course the nature of that criticism was all to do with cost. So the need for the régime in the context of a changing CAP is something on which we need to hear the views of Her Majesty's Government. We have heard from the noble Lord, Lord Walston, that existing obstacles prevent the free movement of goods: is it really the Government's view that the sheepmeat régime would bring these obstacles down?

The noble Lord, Lord Walston, caused me anxiety from time to time because he was making so many of the points that I wanted to make and doing so rather better than I am able to do. In particular, he went through the various groups of people who might be affected by the introduction of this proposal. I was not fully happy with what he said about the cost to the taxpayer because, while accepting that the principle of deficiency payments, particularly during a transitional period, is very much worth having in Community legislation, I was not happy that he did not mention paragraphs 33 and 34 of his report, the conclusions of which talk about private storage. He was of course quite right to say that there are no proposals for intervention and no proposals for putting the sheepmeat, if it should ever run into surplus, into storage through the mechanism of the intervention price. I fully accept the argument that, as the Community is not self-sufficient in the production of sheepmeat, it is fairly unlikely that there will be a surplus—certainly not a large one. It is not the same as with beef or with these other commodities which give everyone in this country and in Brussels as well so much concern.

Paragraphs 33 and 34 mention private storage, which, as I understand it, is a system for paying for the private storage of surplus sheepmeat. Somebody will have to pay for that. I know it is not very clear in the proposal how it is going to work and I may have misunderstood what the proposal itself suggests or what the report suggests, but I think we must bear in mind that there is a possibility of a cost here because, if it means anything, private storage means a subsidised form of the sort of buying which leads to so much anxiety when there is a proper intervention price. I should like to know from the noble Lord, Lord Strabolgi, what he thinks of the proposals on private storage. Do Her Majesty's Government feel that these are sufficiently well defined and well controlled in this proposal not to lead to something which might one day turn into a form of intervention buying and storing by another name? I am asking for reassurance about the extent of private buying.

So far as the cost to the taxpayer is concerned—I was mentioning private stockpiling under that heading—I was also concerned that the possible premia, which could be extended to areas which might be in difficulties as a result of the introduction of the sheepmeat régime, would also bring a cost for the taxpayer. Presumably the premia, which again are ill-defined, as the noble Lord, Lord Walston, mentioned, could be differentiated by region, as the report says in paragraph 35; and it goes on to comment that the text is very vague as to detail. These again are things to be borne in mind when the cost is being calculated, and perhaps the noble Lord, Lord Strabolgi, could tell us what he thinks these regional premia would amount to, how they would affect us in this country and what costs they would lead to.

My Lords, I do not want to delay your Lordships from hearing those speakers in this debate who have spent longer on this subject than I have. I have an anxiety about price. I do not think any step flowing from the Community which results in an increase in the price of food to the consumer in this country can be undertaken at this moment without a great deal of thought, and I should like some reassurance, as I am sure would my noble friends, on this aspect of the proposals that we are considering today.

I should like to say a word from this side of the House about my understanding and our feeling on the special position of the New Zealand producers, who developed their own production with our needs in mind, who do fill in the awkward times of the year when British production is not fulfilling all the demand that we have, and who do give us a very large proportion of their total exports of lamb. I believe they have a serious problem which we must see that Brussels, those in authority in the Community, tackle with sympathy. Nevertheless, I think that this proposal deserved all the work that noble Lords in the Select Committee have put into examining a very controversial and difficult proposal; speaking as a former member of this particular sub-committee I say so with special enthusiasm.

I have not sought, from this position, to use words of Party political warfare, nor have I sought to attack the proposal or the report on it in a destructive manner I have tried to do what I believe this House, sitting in full session on committee reports, is intended to do; that is, to look at the proposals with thoroughness and to examine what it is that they contain. I have tried to look at the report in a rather wider framework than it was the function of the Select Committee to do. This proposal can only be seen as part of the machinery of the CAP as a whole. I believe that the CAP is standing at the threshold of change. We need to examine this proposal in the light of what we wish that change to be. I hope that the Government will express their thanks to our Select Committee by giving full answers to the questions that I and the noble Lord, Lord Walston, have raised, and others will raise in this most important debate.

5.24 p.m.

Baroness ROBSON of KIDDINGTON

My Lords, I rise as a second substitute to address myself to the subject raised by the noble Lord, Lord Walston, in presenting this report to the House. First, I have been asked to apologise to the House on behalf of my noble friend Lord Mackie of Benshie for being unable to be present here today; equally, the noble Lord, Lord Lloyd of Kilgerran, was prevented at the last minute from attending. Luckily, I, being interested in farming, had read the report, so that I have some observation to make. First, may I say how much I enjoyed listening to the noble Lord, Lord Walston, and his analysis of the problems presented to us by this draft Directive. He gave a marvellous breakdown of the things we have to look at in conjunction with this report.

We are faced, as Members of the Common Market, with looking at the problem not only from our own point of view but also from the point of view of our fellow Members within the Community. We have to look at this, as the Committee and Lord Walston did, from the point of view of France's position. With her present quota system for the import of sheepmeat, she will inevitably face a difficult situation, and her producers will, when and if this Directive comes into force. At the same time, as Lord Walston said, we have to look at our own consumers and our own farmers. It seems to me that the recommendation on the time limit of implementation, a period of five years, is about right from all three points of view. I think the noble Lord, Lord O'Hagan, asked why do we need an Instrument at all why did we not immediately on 1st January this year move into a free market in sheepmeat without an Instrument. I believe that would have been fatal for the consumers of this country and the price would have jumped suddenly to an unacceptable level.

Lord O'HAGAN

My Lords, if the noble Baroness would allow me to intervene, she has misinterpreted the point I was making, no doubt because I put it badly. I was asking a question about the legal position. I was asking whether the sheepmeat régime was being introduced because what should have happened on 1st January this year, when transition ended, did not happen. I was not advocating it. I was merely asking whether that was not the position.

Baroness ROBSON of KIDDINGTON

My Lords, I apologise for having misunderstood the noble Lord. But I still think that my argument would hold water, because had it taken place it would have meant an enormous sudden increase in the price to our consumers. It is in our interest that a Directive of this kind on the right time-scale should come into operation. I would have said that five years is just about the right time, both from the consumer price point of view and for the adjustment of the farming industry that will be necessary. Having read the evidence given in the report, I know that there were demands for making the time-scale much longer, something like 10 years, which I believe would have been a calamity. I welcome the Committee's recommendation that five years is about the right time.

The noble Lord, Lord Walston, mentioned that of course we have a very special concern with the interests of New Zealand. I listened with great care to his assurances about the safeguard of the 20 per cent. maximum tariff under GATT, which puts my mind at rest somewhat. But I am concerned about the safeguard clause in the Directive. Although it is stated that this will only be used in extreme circumstances, I think it is something about which Her Majesty's Government will have to be very vigilant, because it could be used, I believe, under pressure, too frequently and perhaps unnecessarily.

When considering the problems of New Zealand and the difficulties that that country believes it will or might face, we must remember that for some time New Zealand has been facing even greater difficulties in many ways because it has not been able to have the free market in France that it would like to have and at the same time it has been functioning under the 20 per cent. tariff. As a result, New Zealand has increased its markets in other parts of the world, and quite rightly so. Therefore, its dependence on the Common Market is not so great as it used to be. Nevertheless, I believe that this instrument, in itself, could enable New Zealand to increase its exports to Europe rather than the other way round. I take that view because New Zealand lamb does not have the same seasonal fluctuations that affect production within the Common Market itself. Therefore, from that point of view, it has in many ways an advantage.

The noble Lord, Lord O'Hagan, is concerned about the provision of private storage. I am equally concerned about that matter not only because of the cost, but because of the danger that he mentioned—namely, that it can be used as a form of undercover intervention buying. If it is used in that way, I believe that it could be extremely dangerous. On the other hand, if it is used with great care, I believe that it can prevent a demand for intervention buying being introduced. Therefore, that again is one of the provisions of the Directive which must be watched very carefully and very carefully balanced.

When reading the evidence in the report and the hope that the introduction of this Directive will be of real benefit to the British farmer, I was very disturbed to read something of which I have been aware for some time and that is that the quality—this was mentioned by the noble Lord, Lord Walston—of production in this country is not necessarily up to the quality demanded in France; that some of our abattoirs are not up to standard and that our quality grading of sheepmeat is not as high as that demanded in the Common Market. If we are to benefit in any way as a farming community from this Directive we must of course increase our quality grading so that we are competitive in the whole of the European Economic Community. Incidentally, when I spoke to the noble Lord, Lord Mackie of Benshie, about this matter on the telephone the other day, he told me that there was no problem in Scotland because Scottish lambs are always accepted, even in France! I do not know whether that is true.

The other matter which has possibilities for us that I should like to raise is that the demand in France and on the Continent as a whole is for a very high quality carcass which is very strictly graded. On the whole the demand is for lamb. I am a housewife and I read French cookery books. There are superb French recipes for mutton which is unobtainable for purchase in Europe. I believe that properly graded English mutton could have an enormous market as a result of the introduction of these proposals.

However, as I said at the beginning of my remarks, my main concern is that the special safeguard clause should not be used against third countries except in very extreme circumstances, but that if it is used—because of the distance between New Zealand and Europe—it should only be used after adequate warning has been given. Apart from those comments, I welcome the Committee's report and thank its members for all the hard work that they have done.

5.35 p.m.

Viscount TRENCHARD

My Lords, I too was a member of Sub-Committee D and I was surprised about the inclusion of goatmeat. I remember being asked by a certain African country vet when I asked the price of beef, if I meant the price of beef from the goat or from the cow! However, sheepmeat is what we are really concerned with. My noble friend Lord O'Hagan queried whether the EEC needs to have a régime in relation to sheep-meat at all. I assure him that the committee spent a long time deliberating on that matter. We asked for some advice on the degree of certainty about the opening of the market in any event and in the absence of a régime.

There are several problems involved. One such problem has already been mentioned by the noble Baroness, Lady Robson of Kiddington, and that is that an immediate opening, even if possible, would cause considerable chaos and a very large price rise. We were not sufficiently sure that the market would be open and would stay open and that sheep would receive treatment in line with that for other livestock with which they will compete over the years to come. We were not sufficiently sure that New Zealand would gain entry into France in adequate quantity with the present limit of 3,000 tonnes on third countries.

For those reasons somewhat reluctantly—it would have been very much easier to say that no régime was necessary—we felt that we had to have a régime. After all, whatever Common Agricultural Policy one may devise the object of it must be to open markets on a fair competitive basis—particularly from the British point of view—wherever our natural ability to produce a commodity cheaply exists; and it does exist in relation to sheep and lamb.

We were also satisfied that production could be increased. Therefore, for all those reasons and also in view of the need for an orderly progress, we felt that we must stop playing Box and Cox, as was being played with us at the time, and must have a régime. The main problem is, of course, the huge price difference shown in Table 2 on page VIII of our report. With price differences approaching double, the problems for us and for France—the other main country concerned—are clearly enormous and the need for a five year transition period and perhaps for open minds during that period become very clear on that one fact alone.

I cannot believe that the premia which were suggested and about which at present we have no details—I hope that Her Majesty's Government will press for details as to how the premia will work—can more than partially solve (unless the cost is to be much higher than anticipated) the problem of this huge price difference, especially in view of the probable fall of price in France, to which I shall refer in a moment.

Why is the difference so large? To put it another way, it has already been mentioned that the difference in prices of other livestock and meat are very considerable, but why is lamb and sheepmeat substantially larger? Once again one comes straight to the green pound, which at present, has a very substantial price reducing effect on the prices of other meats in this country which does not apply to lamb.

We must also bear in mind the periodic stop-go system of controls and impediments to exports from this country. That, too, has made for this huge difference in price between France and our-selves. The markets, although much smaller in Europe, are, of course, considerable. The latest figures of French consumption on a per capita basis show that it is rising to about half of our own and with the price at double that of our own country the potentiality of the market is clearly considerable. I believe that, if exports, at reasonable prices, could be increased to other countries, other markets will also develop.

I should like to turn for a moment to New Zealand. As I see it, their fears are, first, that under the safeguard clause, or any other method, there might come a situation when more than 20 per cent. duty is chargeable on imports from Third countries. Provided that our advice in paragraph 43 of our report is taken, and provided that the agreement of the EEC Commission service to use the safeguard clause only in accord with Article XIX of GATT is written into the régime, then I believe that the New Zealanders have a guarantee that the duty will be no higher than it is at present, and conceivably lower.

Their main worry, of course, is the effect on consumption of a price rise in the United Kingdom market. This, indeed, is the main threat to which, if I may, I shall return in a moment. In passing I should like to say to the noble Baroness, Lady Robson of Kiddington, that the New Zealanders are still very dependent on this market. Their lamb is tailor-made for this market. We questioned them quite closely on the opening up of other markets. Clearly, they have tried for a considerable period of time to open up other markets; they started trying when it first looked likely that this country would join the EEC. However, they have not made any appreciable headway. Therefore, they are still dependent upon us.

In my opinion—and it can only be opinion, which is why we need a five-year transition period and open minds—if this régime goes progressively into operation something like the following will happen. First, there will be a progressive diversion of supplies from this country and, to an extent, from New Zealand, into Europe, and particularly France. The diversion would be greater from New Zealand if it were not for the fact that New Zealand's product is frozen and the French retail trade at the moment is simply not geared to or sympathetic with the concept of handling frozen lamb. However, I believe that that will break down over time. Therefore, there will be a progressive diversion of supplies, including all qualities of British sheepmeat at the prices concerned. I know something of the ingenuity of the French paté manufacturers and I can assure noble Lords that they will soon be developing at those prices useful uses for the fatter lamb.

This progressive diversion of supplies into Europe will, of course, cause a price rise in Britain and a price fall in France. It is difficult to be sure of the true difference when one is not comparing exact quality for quality and one has to consider the cost of transport and also the size of the relative markets, our market being a little more than double the size of that of the French. But our guess of coming out nearer the top end of the Ministry guess is only a guess. If I were to put a private estimate forward, I think that a 20 per cent. rise is more likely over this period. But that, of course, leaves a much greater fall to be accommodated by the French. In my opinion that is, indeed, the real problem. It is the real reason for the need to have the régime written very clearly so that safeguard clauses cannot be applied simply because prices in France start to come down, as they are bound to do.

The consequence of this will, of course, be a consumption increase in France. In time there could well be a 50 per cent. increase in their present market, and a decrease in this country. The decrease in this country is, of course, worrying both to us and to the New Zealanders. At the moment the size of the decrease is very hard to guess. The reason, of course, is that the green pound applies to other livestock and other meat, and, under this régime does not apply to lamb and sheepmeat. Perhaps by the time the live-year transition period is over, hopefully, the green pound may be very much less of a problem. But if it were at anything like the present level of 30 per cent. of sales price, then the damage to consumption of lamb and sheepmeat in this country would be very great indeed. Therefore, this is a most important point to watch during the transition period and I hope that Her Majesty's Government will put down their markers or pegs, thus being able to raise it as the transition period progresses.

In my view the fourth consequence will be that production in the United Kingdom will, of course, increase, and there is room for it to increase. There is considerable enthusiasm for this among lamb producers, particularly those North of the Border. However, if it does increase, the marketing arrangements to sell it—not in this country where consumption is likely to decrease but abroad—are vital. It will have to be sold abroad in very large quantities and that is another reason for a five-year transition period, because that cannot be done at a stroke. If it is not sold abroad, the price will, of course, very soon fall again regardless of the new régime.

The people who are really frightened about this régime—and it is beginning to be mentioned in the French Press—are, of course, the French because without any doubt over this period they will face very substantial decreases in price. This, again, means that these safeguard clauses must be very carefully written and we must be absolutely sure that the 3,000 tonnes embargo on Third country imports into France is, as it should be, removed.

I think that the New Zealanders are unnecessarily alarmed if we take five years over this and if the points that I have mentioned are taken care of; but their fear could be right that much more damage to consumption in Britain could be caused if a green pound is not applied to lamb, or if we have had little or no phasing out of the green pound in relation to other meats, because other meats are directly competitive and over a period of time the price relationships, which we have thrown a little doubt on in the report, are percentage for percentage, percentage quantity for percentage relative price. To put it in simple terms, people do not buy a leg of lamb and a leg of pork on the same day. Therefore, in my view the most important points are the safeguards and the five-year adjustment period.

I should like to say a few words as regards the remarks made by the noble Lord, Lord Walston, about the 15 per cent. price increase perhaps being only 10 per cent. at the point of retailer or consumption. First, as our report makes clear, this 15 per cent. is an absolute guess. So conjecture and refinement on details of at what point the price will go up by 15 per cent.—or 20 per cent., which I tend to think more likely—is really a waste of time. But I must also point out that, unless my statistics are badly out of date, about 80 per cent. of the cost of fresh lamb as it arrives at the door of the retailer is accounted for by raw material, and that therefore the differences between the price increases wholesale and retail, though they may vary considerably on the short-term, will not vary all that much on the long-term.

5.51 p.m.

Lord SAINSBURY

My Lords, after the speech of my noble friend Lord Walston, who so ably chairs our Committee, there remains little for me to add, but I should like to emphasise certain points in our report although many of them have been covered inevitably by previous speakers. The economic basis of the Community is, as I understand it, the free movement of goods across Community frontiers, and it seems to me that there are no reasoned grounds for excluding sheepmeat from this general principle. The Ministry of Agriculture, Fisheries and Food stated in their evidence that it is generally accepted legally that the Rome Treaty now certainly requires a Common Market machinery for sheep-meat and that barriers to intra-Community trade must go now that the transition period has ended. I cannot accept as realistic the National Federation of Meat Traders' opposition to the implementation of a sheepmeat régime as indicated in their written submission to the Committee.

The second point I should like to emphasise is the unsatisfactory nature of the present marketing situation owing to the fact, as has already been said, that French imports from the United Kingdom are permitted only when the French market price is above a certain figure; but even then are subject to a variable levy and a weekly licensing system. May I quote Mr. John Cameron, Vice-President of the National Farmers' Union of Scotland, who stated in his evidence to the Committee: As far as sheep producers are concerned, we have been suffering … from a completely disruptive effect which the French importing regulations have imposed on us over the last few years, and this licensing system, which may be withdrawn at 24 hours' notice, has done a lot of damage to our sheep industry". So as well as there being imperative legal reasons for a sheepmeat régime there are practical advantages from a market stability point of view.

Thirdly, I should like to refer to the possible effect of the proposed régime on United Kingdom consumer prices. As a former retailer with long experience of the food trade, I am very sceptical of forecasts of future price changes. All I think it is safe to say, as I think the noble Viscount, Lord Trenchard, has already said, is that with free movement within the Community French prices are likely to come down and result in greater consumption, and United Kingdom prices are likely to go up and consumption to decline. But much depends on what happens to the price of competing meats such as beef, pork and, above all, poultry meat. To cushion the effect of rising prices on the British consumer and the effect of lower prices in France on the producer, the Committee recommends a five-year transitional period.

May I now turn to the position of New Zealand and at once express my sympathy with their fears about the future. Some years ago I paid a very happy visit to their country, and came back with greater admiration for the efficiency of their agriculture and their wonderful grasslands. One must appreciate the importance of the sheep industry to the New Zealand economy, and the long-term nature of the investment in sheepmeat production not only by producers but also in abattoirs, shipping and handling facilities at the ports. The New Zealand sheepmeat industry is also of very great importance to the United Kingdom. New Zealand supplies over 50 per cent. of the lamb consumed in this country, and has shipped lamb to the United Kingdom for nearly 100 years.

I should also like to draw attention to the seasonality element in the lamb trade, with the availability of supplies from New Zealand when the home product is in short supply; also to a further difference referred to by the Smithfield Market Fresh Meat Traders Association in their evidence: The complementary feature of New Zealand lamb to our own production extends beyond that seasonality, to the field of weight and size of carcases. New Zealand lamb also fulfils a requirement on an all-the-year round basis of furnishing the trade with a lightweight lamb which UK production is unable sufficiently to supply". As has already been stated, the main fears of the New Zealanders are, I think, twofold. The first concerns the operation of the proposed safeguard clause. But it is only right to underline that the Commission has emphasised that the safeguard clause will operate only when other ways of stabilising the market have been fully explored and have failed, and our Committee recommended that this assurance of the Commission should be an integral part of the régime. If it ever proved necessary—which I consider unlikely—to apply the clause, it would only be done in strict accordance with GATT regulations. It is also fair to point out that this clause is the same as that in use for other GATT products.

Secondly, the New Zealanders fear that there will be a drop in demand in the United Kingdom due to higher prices, resulting in the costly build-up of stocks. But against this there will be a great opportunity for them to increase their sales to other Community countries, particularly to France which is the highest consumer of lamb after the United Kingdom. At the present time France operates an import quota of 3,000 tonnes of sheepmeat per annum from non-Member countries. As we point out in our report, this quota should disappear if the Commission's proposals are adopted. May I stress that no reduction is proposed in the current level of imports into the United Kingdom and that, unlike other régimes, the sheepmeat régime can be described as market-related. My conclusion, after a great deal of thought, is that a sheepmeat régime is needed and that the present proposals are a reasonable basis for further negotiations and clarifications on certain details. I therefore commend our report to your Lordships.

6.2 p.m.

Lord VESTEY

My Lords, I must declare an interest before I start to speak to your Lordships this afternoon. My family company, of which I am joint managing director, has substantial interests in New Zealand, in the meat trade, and also we have substantial interests in the abattoir, wholesale and retail meat trade in this country. We have sales branches on the continent of Europe. We have cold storage interests in the United Kingdom, on the Continent and also in New Zealand and Australia. We also have a very substantial interest in shipping, part of which runs from New Zealand to this country and the Continent.

I wish to be brief this afternoon. I shall attempt to explain to your Lordships why I am against this proposal, if I may call this Regulation a proposal. I shall not go into technical details about the probability of price rises. There has been some excellent evidence cited in this report. I shall not talk—as the noble Lord, Lord Sainsbury, talked—about New Zealand. We all know what New Zealand's position is. I am sure that there are many Members of your Lordships' House who would want to do the best we possibly could for New Zealand. I shall not try to be technical, as I have said. I should like purely to see what we can do to get over this problem.

I have had a fair amount to do behind the scenes, with the various submissions to this Select Committee. I should like to see what I could do to suggest a way of solving this problem. I must also declare that I am a farmer in this country in a small way. I am also President of the Institute of Meat. This afternoon I should like to start by asking one question and then trying to answer it. Why is this proposal before the House? By proposal I mean the draft EEC Regulation establishing a common organisation of the market in sheepmeat. France continues to place restrictions on the movement of sheepmeat across her borders from other Member States, contrary to the Treaty of Rome, contrary to the principles of the Charmassson judgment—which, although it was about bananas, in principle can be applied to any commodity—and currently in contravention of a reasoned opinion of the EEC Commission. There would be no need—and indeed no desire—for this proposal if the French restrictions were to be removed.

Of course we must be realistic. The question that follows is: Why is it France that imposes the present restriction, or indeed seeks other protection if the present restrictions are removed? We all know that it is to protect her own sheep farmers, who sell a high-cost product into what we would call a luxury home market. We cannot expect France to abandon her procedures for the immediate effect of free trade, which is bound to result in the lowering of prices in France and obviously the raising of prices in this country, as has already been mentioned.

What is the best way to help France out of her problem? The French production is less than a fifth of the total lamb consumed in the EEC: 52 per cent. of the flocks contain fewer than 20 breeding ewes, and 90 per cent. contain fewer than 100 breeding ewes. I do not believe that the right answer is the full paraphernalia of an EEC régime under the Common Agricultural Policy, or even a light or liberal régime, as these proposals have been described.

The Member States with any real interest in sheepmeat are France, Ireland and the United Kingdom. Ireland has already made its own bilateral arrangements with France. Surely it is not beyond the wit of some of our experts to arrive at some similar, though perhaps slightly more complicated, solution with our French partners. I know that this was tried some while ago, but it failed owing to Irish objections. This seems to me to be much less likely to occur again now that the previous objector, Ireland, has made its own settlement.

Why am I so strongly opposed to a régime? I have already declared my interests to your Lordships, who all know that I am deeply involved in the meat industry and not just in imported meat, or even New Zealand lamb, but right across the board: United Kingdom fresh meat from United Kingdom farmers, and also EEC trading between all Member States. My industry—the meat industry—has experienced at first hand the Common Agricultural Policy, and more particularly the régimes that have been devised in the past. In 1973 third-country beef imports amounting to 150,000 tonnes were cut off at a stroke, but in 1971 few had envisaged that such a possibility would occur. There is no reason in my mind to doubt that something like this could happen, although on a smaller scale, to lamb and mutton. I ask your Lordships to think again and to spare my industry—indeed the European meat industry—from another dose of the medicine as before. Your Lordships will say that I am exaggerating. Indeed, the Select Committee at paragraph 44 of its report says that I am exaggerating, if I have my New Zealand hat on. However, I assure your Lordships that that is not so.

The proposal under debate here today is for a comparatively light or liberal régime, as is proposed to you now. But I suggest that this proposal has all the menace of a time bomb. It is not now or even the immediate future that concerns me so much—but it is the more distant future. What will this turn into, once it has been let loose on us? How will it be changed? What will it grow into as a result of future annual agricultural negotiations in Brussels? I believe that it will become another bargaining counter in the swap-shop, subject to decisions of political expediency, often quite unrelated to practical and commercial reality. Economic situations change; political situations change; and, even more so, people change. I have no doubt of the good intentions of those who have drafted this proposal. However, they will move on, and their intentions and assurances will be swept aside by new people and new events.

I am sustained in my thinking by a statement which the Minister of Agriculture made at the weekend, a copy of which I found on my desk when I came to my office this morning. Perhaps I might have your Lordships' permission to quote briefly from it. The Minister, speaking about the EEC proposals for sheepmeat at the opening of a new cold store, said: The British Government is committed to fundamental reform of the CAP, including improved access for products from outside the EEC. It has no interest in extending the scope of the CAP and is not seeking an EEC organisation for sheepmeat". That is a quotation from an official Press notice from the Ministry. For those reasons alone, I return to my original theme; namely, that in present circumstances, which relate purely to ourselves and France, a full régime and all its unwieldy mechanism is unnecessary to solve this problem.

6.10 p.m.

Lord STANLEY of ALDERLEY

My Lords, I must declare an interest in that I fatten lambs in England and breed them in Wales; I am taking part in this debate for that reason, but before I, as a farmer, put my main worries to the Government I must ask the Minister to set my mind at rest over three specific points mentioned in proposal R769. First, would he agree that two-thirds of our sheep production takes place in our less favoured areas and that therefore a sensible sheepmeat policy giving adequate returns to farmers in those areas would help to solve many of the economic, social and—dare I say it?—environmental problems that I understand the Government have difficulties with in those areas?

On page 2 of the proposal we are told that sheep numbers are rising in Continental countries and are more or less static in the United Kingdom. As the United Kingdom is the cheapest producer of sheepmeat in the EEC, this state of affairs is crazy. Would the Government agree that this is in part being caused by the present non-régime and doubtfully legal Customs harriers that have been operating? Do the Government agree that a continuance of such chaos is detrimental to both producer and consumer? On lowland farms we have come to realise once again that the sheep really is the golden hoof and, as such, can save fertiliser, which is energy and which I believe is likely to be in short supply, particularly bearing in mind the comments of Sir Kenneth Blackster, director of the Wright Institute at this year's Oxford farm conference. I ask my noble friend Lord Vestey to consider these points with the points he raised, speaking as a butcher. I ask him to have more faith in human nature, even though I have little, and I ask him to have a little more faith in the Common Agricultural Policy being made more viable, which we all want to see.

I would appreciate the views of the Government on those points and I would refer the Government to three specific points made by your Lordships' Select Committee, whose work and effort I know are appreciated not only here but outside the House. The Select Committee recommends—the noble Lord, Lord Walston, reinforced this in his remarks—three things: the need for a régime, the need to look after New Zealand's special place in our market, and the need for a deficiency payment. I ask the Government to explain their position on those three points. I need hardly add that all three are strongly supported by sheep farmers, including access for lamb from our fellow sheep farmers in New Zealand.

I am, or perhaps I should say almost was, a potato producer and I have no wish to see lamb shoot up in price, and so lose my market, as has happened with potatoes. I believe, if no régime is undertaken, that that may well happen, and I must admit that the Government's words in a written reply to my noble friend Lord Hylton on 30th June—"if it proves necessary" to introduce a Community organisation for mutton and lamb—worried me extremely. Did that mean what I fear, namely, that the Government want no part in any régime, and that the noble Lord's right honourable friend Mr. Silkin is acting as a short-term Minister of Food rather than a long-term Minister of Agriculture and Food?

Despite, or maybe because of, what my noble friend Lord O'Hagan said, I believe this proposal is a step in the right direction, for both producer and consumer. I have been hauled over the coals in your Lordships' House in the past, particularly by the noble Lord, Lord Strabolgi, for fiercely criticising Ministers of Agriculture, including the present Leader of this House when he was in trouble over beef prices. Indeed, I fear that when my noble friend Lord Amory was Minister of Agriculture I may have wished him in after life to go to a place I now trust he will never go to. I will certainly not promise not to do so again, particularly if the next Minister of Agriculture comes from this side of the House. It is a farmer's right to criticise Ministers of Agriculture.

On this occasion perhaps Mr. Silkin is in a quandary; perhaps he would like a sheepmeat régime but realizes—I hope the noble Lord will say "Yes" to this—that he must not have one without the third of the Select Committee's points, namely, the need for a deficiency payment. If that is his problem and the Treaty of Rome says "No" to deficiency payments, then all I can say is that the Treaty of Rome said "No" to milk boards. The noble Lord, Lord O'Hagan, is, I think, trying to correct me; should I have said "marketing boards"?

Lord O'HAGAN

"Nonsense" is what I said, my Lords.

Lord STANLEY of ALDERLEY

I think it did, my Lords, or at any rate it said "No" as much to marketing boards as it does to deficiency payments, and I will come to my noble friend's point. In any event, the right honourable gentleman managed to get round that one. Perhaps—I commend Lord O'Hagan to this—he will look at the Select Committee's report, particularly paragraph 34, and I hope the words in that paragraph will inspire him, as I hope Lord Walston's remarks will do also. As I say, I am prepared to understand the Minister of Agriculture's problems. I can only ask of him that, if he supports the Select Committee's recommendations, will he go to Brussels to try even harder for these deficiency payments and this report than he did when he defended the milk boards?

6.18 p.m.

Lord WISE

My Lords, I, too, must declare an interest in so far as I am an ordinary farmer producing a certain amount of what is now called sheepmeat, although my noble friend Lord Kings Norton said, "Please continue to call it lamb and mutton". I welcome this report and, as a sheep farmer, I certainly endorse the Committee's view that the movement of sheepmeat within the Community is essential in the interests at least of the British producer and, I consider, in the long term, of the British consumer.

It was with some apprehension that I read the remarks of the Minister of Agriculture to which the noble Lord, Lord Vestey, referred, when he said that the Government were not seeking an EEC organisation for the lamb trade but were seeking a reform of the CAP which would allow for a free trade in food products from outside the Community. That I found rather disturbing. I suppose one can appreciate the reasons why the British, and for that matter the French, authorities do not at this time want to enter into a sheepmeat régime, but I should like the noble Lord, Lord Strabolgi, to say exactly what the Government are intending to do.

It seems to make a nonsense of the whole concept of a Common Agricultural Policy if the vitally important sheepmeat industry is excluded from it. One would have thought that as Britain is by far the largest producer and consumer of sheep-meat within the Community, Her Majesty's Government could take the initiative and give some lead in this matter.

Many of the points that I wished to raise have already been dealt with very adequately so I will try to skip over them as quickly as I can. The Committee recommended a transition period of five years and with that I would agree, but I am a little concerned as I do not quite understand how that transition period works; I wonder whether the French will still be able to put an embargo on imports; and whether the present system of deficiency payments within our country will continue? I should be grateful for some advice.

It seems to me that providing New Zealand products are allowed to continue to come into the country, consumer resistance alone will prevent our prices from rising astronomically. Incidentally, I do not think the New Zealanders have anything to fear. As the noble Lord, Lord Walston, said, the new proposals to change the present system of set tariffs to the variable levy could indeed help them. Conversely, provided the British producer continues to produce good quality lamb at the right weight, as the noble Baroness, Lady Robson of Kiddington, has said, I do not think the British producer has anything to fear from New Zealand competition. The two complement each other to ensure continuity of supply.

One senses that there is an air of confidence within the sheep industry at the present time. Given stability—and stability is so essential to efficient production—I believe that will continue and the proposed 20 per cent. increase in production will come about in due course. If that happens it will increase the viability of our hill farms and could in time decrease the amounts payable to them under direct grant from the EEC Commission. But in order to absorb this increased production we have to export to Europe. We must make the French people appreciate that mutton and lamb are not purely luxury commodities and that there must be free access to the French market. I am sure that a Community sheepmeat régime is essential in all our interests. I believe that the proposals form a good basis for discussion but I hope that Britain will give a lead in improving the rather vague and somewhat nebulous proposals for producer premia and fall-back support prices.

6.23 p.m.

Lord MOTTISTONE

My Lords, I will not detain you long. I rise mainly to support the noble Lord, Lord Walston, under whose chairmanship of Sub-Committee D I had the great privilege of sitting. The principal points to make have all been made. I should have thought that the main point about these proposals on behalf of the Commission is that they are "freeing" down the barriers to trade which is a fundamental of the Treaty of Rome. It would seem to me that the point at issue is not whether they are introducing a régime for mutton and lamb but what they are doing. I should have thought also that that would be the answer to my noble friend Lord O'Hagan whose question was put somewhat oddly for somebody who is such a good "Communitaire" man himself.

It would seem to me that the French are employing a particular sort of protectionism in this area and I find it very difficult to understand how we shall be able to surmount that. The French are very skilful at hiding their "non-Communitaire" action as though they were the right ones and the British the "wrong 'uns". I find it very odd not to have heard rumours that the French have got some trick to get round these rather sensible and very moderate proposals of the Commission.

It would seem to me that the protection of the New Zealanders is the one thing that in this country we can feel is a special duty, and so far as we were able to determine it as a Sub-Committee that has been taken care of effectively. I shall not detain your Lordships by going into the reasons why, because so many noble Lords have already done that.

The only other points to make are that it seems to me—this point probably has not been made as thoroughly as I might have expected—that there is a great deal of room for persuading our fellow Europeans (perhaps not in the short term because, as we all know, habits and particularly eating habits, take years, if not decades, to change) that if one looks at the figures in Table 1 you see it is quite remarkable how little "sheepmeat", to use the new phrase, the Germans, the biggest single country in the European Community, or at any rate not far off it, eat compared with ourselves and the French—the other two "big 'uns". I should have thought a good bit of marketing over the years there should have been a first priority both for ourselves and for the New Zealanders as being the most efficient farmers in this general area.

Finally, I think that a transition period is absolutely essential and it is rather odd that the Commission should not even have taken a stab at it themselves before they launched the document upon us and left it to other people to make suggestions. Being associated with bargaining of various kinds, I am not sure whether we were quite right to go for a figure of five. We might have gone for a bigger figure to settle at five, because that seems to be about the right one to end up at. With those few remarks I should very much like to follow those of my noble colleagues who sit on this Sub-Committee and commend the report to your Lordships.

6.27 p.m.

Baroness ELLIOT of HARWOOD

My Lords, as the tenth speaker in this debate and also as someone who is on the Sub-Committee I will be short but I should just like to say a few things because I am the first, in fact the only, speaker from Scotland in this debate, and I am also—and declare my interest with great enthusiasm—a fairly large producer of mutton and lamb.

Before I start my speech I should like to say how grateful we all are to the noble Lord, Lord Walston, the Chairman of the Sub-Committee, who conducted this inquiry with great skill and tenacity and has enabled us to consult with so many different interests—and many different interests have spoken in this debate today. We are much indebted to the noble Lord, Lord Walston, for the fact that he has enabled us to talk to, examine and get papers from so many different interests. Anybody who criticises the report cannot criticise it because it has not gone into the subject thoroughly. They may criticise it, as the noble Lord, Lord Vestey, did because it does not say what he wants it to say, well, that is all right.

We are very much indebted to the Chairman and to the other members of the Sub-Committee. It is a committee of the greatest interest. We sit there, all of us coming from different parts of the country and of different political backgrounds, and we never disagree. That is very remarkable. I come, as I say, from Scotland and I come from an area in the Borders which is an upland hill area. It stretches all across the South of Scotland and it is one of the biggest areas of production of hill sheep and lamb in the United Kingdom. Therefore, I speak with experience, and with a great desire to see the success of the régime of mutton and lamb.

In my opinion it would be a disaster if the EEC policy were to impede the production and the sale of mutton and lamb, and I support the proposals in the report for many reasons. I should like to see much more mutton and lamb consumed on the Continent. Except for the French and ourselves, the consumption in the EEC is very low, as your Lordships will have seen from the tables published in the report. I should also like to see a really active policy pursued by the CAP—by M. Gundelach and the others—to encourage the sale of mutton and lamb, and to encourage people in Europe to eat more mutton and lamb. I have always felt that one of the weaknesses of the EEC Commission is that it has no machinery to encourage the selling of commodities. When we read of what is happening in the EEC we learn continually of enormous butter mountains, beef into intervention, wine lakes, and all the rest of it. I was very glad when we managed to persuade the Commission to recognise the Milk Marketing Board because it is a good example of an organisation which sells and which encourages people to buy, as well as provides the daily milk delivery. I appreciate that we are not discussing milk, but this is an example of a type of organisation which is sadly lacking in Europe.

Each time I have gone with the Committee to talk to the Commission I have asked the same questions: "What do you do about selling? What do you do about getting rid of all this wine, and so on?" The Commission has no answer. I believe that there is a weakness here, and I very much hope that in the new reorganisation of the CAP, which is gradually to come about, someone will think about selling and about how to encourage people to buy and eat more of the commodities we produce.

I must say a few words about the French policy. I agree with every word that has been said by others on the subject of the French policy. I have learnt from a very reliable source one or two interesting facts about the present French situation. The French are in danger of putting up a kind of camouflage, in that they say they allow sheepmeat into France, but they charge such enormous levies to the exporters that this amounts to a ban. The latest figures I have about the French levy on imported mutton show that the French charge 93.6p per kilo for lamb going into France. This amounts to 42.5p per pound. It means to the exporter that when he exports a 40lb lamb he is paying £17 sterling on the price of that lamb in the levy to France. The levy is so high that it is virtually impossible for our exporters to export to France, and in many cases they have to export to other European countries, and eventually the exports get into France. The French have received £10.7 million in a full year out of the levy. The levy should have gone to the EEC from the 1st January, but it has not, and I do not think it has gone even now. However, had it gone to the EEC we, as Members of the Community, would have recouped ourselves a little from the levy.

Today I heard from a reliable source that our exporters are endeavouring to increase exports not so much to France—they can do that only if the French policy is altered—but to other countries. One day a week there are exports from Scotland to Belguim. One day a week there are exports to Holland. Two days a week there are exports to Germany. This is only a beginning, but it will increase as demand in Europe grows. We have heard from Members of your Lordships' House about the Irish situation, and we know that the Irish are in a very advantageous position in exporting to France because they get their mutton and lamb in free. But why is there this preferential treatment? It is surely contrary to the rules of the Community, and it should be looked at.

Of course with all food production there is a powerful consumer lobby. We are all consumers—I am a consumer, too—and we do not want the prices to rise unduly. But speaking also as a producer, I do not want the prices to rise to such a degree that people do not buy the mutton and lamb we produce. Equally, in view of the huge increases in costs which have taken place over the past three or four years—wages and other costs are rising all the time—we cannot sell at a loss. Here arises the question of the guaranteed minimum price. This has worked very successfully for us in beef, and I should favour it. I should favour not a high basic price, but a basic price that covers the costs, and so if the price of mutton and lamb goes below that figure, a premium would need to be paid. This seems to be only fair, and it has worked well with beef in the past. For many months—indeed years—no premium was ever paid on the sale of beef because the price never went below a certain point.

If your Lordships study Table 2 on page 8 of the report you will see that the market prices in the United Kingdom and Ireland are well below those of any other European countries. I should like to see the European prices come down and for there to be a narrowing of the margin between the United Kingdom and Europe. I do not want our prices to rise to the level of the European prices, and I do not want overproduction, which is such a problem with certain other commodities. So much overproduction is caused by farmers in Europe growing food in uneconomic conditions that very small units can pay only if they can charge very high prices. Surely this should be avoided if possible—and this certainly applies in regard to mutton and lamb—before it goes too far. I should not like to see a repetition of what happened regarding milk, when people are paid not to produce it. I want to see people paid for producing excellent mutton and Iamb, and for encouraging the consumption in the European countries.

Sheep can be run economically on upland areas—what are called "disadvantaged areas" in today's phrase—and unless those areas are used for mutton and lamb, as well as for store cattle, they will go down in value. The population will leave the uplands and will seek employment in the overcrowded urban areas, and the community would be deprived of work, particularly in Scotand and the hill country of Wales. This would be disastrous because nothing other than grazing and the producing of sheep and cattle can be done with the hills and upland areas.

I heard the other day that in some European countries sheep farming is done with fewer than a score of ewes on a farm. The noble Lord, Lord Vestey, this evening gave us some figures which were extremely interesting. This type of situation is most uneconomic as the feeding and the bringing up of lambs becomes extremely expensive, as it is in France. It is in the raising of scores of sheep on hill land and in the selling of lambs to be fattened on the lowland farms, where grass and crops are grown, that it is possible to attain an economic method of producing mutton and lamb. That is the secret of the success of sheep, mutton, and store cattle farming in Scotland, North Wales, and the North of England.

Surely in view of the experience with agricultural produce of successive Com missioners of Agriculture in the EEC, the expensive overproduction in the wrong areas could be forestalled by adopting the right methods from the start of the new régime. I should like our Government and the Minister of Agriculture to stress this point very strongly indeed. I am sure that misuse—that is perhaps too strong a word, but the wrong use of types of agricultural land leads to complications which should not arise if' the prices remained economic.

Our Committee heard very good evidence from New Zealand, and this evening other Members of your Lordships' House have spoken of this. I was very impressed. They are great experts at producing excellent lamb and mutton in the ideal conditions of New Zealand. Again, Lord Vestey spoke about that, and I am sure he is right. I am sure we should help the New Zealanders as much as possible to continue their excellent production. We have always been importers of New Zealand mutton. It is cheap and good, and it also comes into the United Kingdom at a time when home production is not on the market, our summer and their winter being at the same time. I should not like to see New Zealand producers paying any more than they do now to enter the Common Market, and I believe they are finding new markets in North America, in Japan and elsewhere, which I hope will help them.

To come back to where I began, I am a supporter of the policy for mutton and lamb outlined in our report. I think we should encourage the production of sheep on the hills and uplands of the United Kingdom. If the export market were more certain and the French were prevented from opening and shutting their imports or, alternatively, from charging exhorbitant tariffs on mutton and lamb from the United Kingdom, we in this country could produce more from our uplands, and if we did that, prices would not go up; they might even come down provided that the costs were covered by the prices which we could get. I do not want the housewife to have to pay any more; on the other hand, I do not want the mutton and sheep industry, and the cattle industry, to get into the state it was in about three or four years ago, when hill farms were going on the market every day because the farmers could not make two ends meet. That is no economy and, in my opinion, a very wrong use of land.

Also, those responsible for the CAP should think hard about encouraging the increase of the consumption of mutton and lamb in Europe, should adopt an active selling policy and should try to do for Europe what would help all of us, which is to encourage more consumption in the EEC countries. We have done it in this country, and I think it has paid off. The amount of land which we farm today is not so great as it was, say, 20 or 30 years ago, and yet our production has gone up, and the amount of mutton and lamb which is consumed by the public is also in a fairly satisfactory state. It could be done in Europe, too, and I hope very much that, at the beginning of this new régime which we have been talking about, the snags which have impeded the other régimes which we have seen in the Common Market can be avoided. If this report helps to do that, I shall be only too delighted.

6.43 p.m.

Lord STRABOLGI

My Lords, I should like, first of all, to join with other noble Lords in thanking my noble friend Lord Walston for initiating this debate; and also, if I may, to pay a tribute to him for his work as chairman of Sub-Committee D, which has produced the excellent report under debate in your Lordships' House today. I should like to endorse what the noble Lord, Lord O'Hagan, said about the thorough job that the Committee has made of this report, and to welcome all contributions from your Lordships. I do not think I can ever remember a debate which has been so well-informed as this one—and this, of course, is saying something in your Lordships' House.

While I think there was a certain similarity of view from most speakers, we had a different viewpoint, of course, from the noble Lord, Lord Vestey, who also has great experience in this field; but, if I may say so, I think the debate was none the worse for that, and later on I shall try to answer some of the points that the noble Lord, Lord Vestey, made. I am also grateful for the opportunity which this debate affords me as the Government spokesman of explaining to the House the Government's view of the EEC Commission's draft proposal for a Common Market organisation for mutton and lamb. I should like to stress that discussion of the draft proposal in the Community is at an early stage, and more detailed exploration is required on some aspects. The questions raised by noble Lords have demonstrated the complexity of the issues involved. I should like to thank all noble Lords who have contributed, and to say that the points that they have made will of course be carefully noted.

As I think noble Lords will agree, the Committee have highlighted the main features of the proposals, and I should like first to comment in a general way on their key points. I note that the Committee believe that free movement of sheepmeat within the Community is essential, and that is a point of view which was shared by many speakers today. Following the Government's protest against the discriminatory charges against United Kingdom exports of sheep and sheepmeat into France, the Commission have found these charges illegal, and if France does not end them they may well put the matter before the European Court. The Committee also share with the Commission the view—

Lord O'HAGAN

My Lords, I am not playing games with the noble Lord, but this is a crucial point. What stage has been reached in these discussions about taking France to the European Court? Can the noble Lord, perhaps later in his speech, bring us up to date on what stage these court proceedings have reached? Can he tell us when the case will be heard, or give us further information about this particular point?

Lord STRABOLGI

My Lords, this is, of course, such an important and crucial matter that I was going to deal with it in detail rather later, if the noble Lord would have a little patience. As I think I said, I was at this stage in my speech sketching the general principles. I was going to deal with the detail later, and I shall have something more to say on this then. The Committee also share with the Commission the view that a sheepmeat régime is necessary to achieve free trade; and I noted very much, and agreed with, what my noble friend Lord Sainsbury said: that there is no need to exclude sheepmeat from the Rome Treaty principle of free trade between EEC countries. Court action might also shed some light on this issue, but the Government have avoided seeking a régime because they are not convinced that comprehensive arrangements are needed to deal with this problem. The noble Lord, Lord O'Hagan, said that these proposals stem from the French attitude, and we should not set them up because of the French levies.

Lord O'HAGAN

I did not say that, my Lords.

Lord STRABOLGI

My Lords, I understood the noble Lord to say that we should not set up these proposals because of the French levies, and I was going on to say that I agreed with him. The noble Lord, Lord O'Hagan, also said that there is a need for a régime, and asked whether the sheepmeat régime would bring down the obstacles to free trade. The Commission consider that, to achieve free inter-Community trade, an organisation or common measure is required to prevent the market disruption that would follow if the French import control system was removed immediately. If, therefore, there has to be a Common Market measure, the Government agree fully with the Committee that any régime must take account of the needs of EEC producers and consumers, and also New Zealand.

I agree fully with what was said today about New Zealand by almost every noble Lord. I shall also deal with that later. Like the Committee, we welcome the Commission's declaration on the safeguard clause. The noble Baroness, Lady Robson, referred to this as did the noble Viscount, Lord Trenchard. The Government will need to be vigilant to ensure that it is only operated with due regard to the EEC responsibilities under GATT. We are heartened by the Commissions' approach for a market-related measure because any artificially-forced increases in prices would clearly damage our substantial consumer interests.

On aids to producers, we take note of the Committee's views, but consider that the Commission's proposals on premia are as yet too ill-defined for us to take a definite view. But we agree that whatever measures prove appropriate for a Com- munity of Nine—and I shall have also a little more to say about the three other applicants—they must provide fair returns to producers. Finally, we are pleased to endorse the Committee's view that a transitional period is necessary to allow gradual adjustments to the new market conditions.

The noble Lord, Lord Stanley of Alderley, seemed to think that I resented criticisms that he has made from time to time of spokesmen from this Bench and in another place. I do not resent them at all. The noble Lord is perfectly entitled to make the points that he does in his own inimitable way. He asked today: Why does the Minister not fight more strongly for these proposals? As the noble Lord has said, the problem is the legality of the French import restrictions; and while my right honourable friend has said that he is not convinced that the solution of this problem requires a full-blown régime, the Government and my right honourable friend have made it clear that they will consider a régime if one proves necessary providing it meets the interests of United Kingdom producers and consumers and introduces no new restrictions on our New Zealand supplies.

The noble Lord, Lord O'Hagan, asked why it is necessary to have a sheepmeat régime and the question has also been asked as to what exactly is the legal necessity for a régime. Sheepmeat is a product subject to the Common Agricultural Policy under the EEC Treaty, as the noble Lord, Lord O'Hagan, I thought, recognised in his very thoughtful speech. Recent judgments of the European Court have declared barriers to intra-Community trade invalid. The Commission have a general obligation to make proposals for common market organisations and they have taken the view that a common measure is, in particular, needed for sheep-meat to deal with the situation which will arise on the ending of national measures, in this case, particularly, the French levies. Nevertheless, I should point out that the Treaty does allow flexibility on the form a common organisation may take, as, provided it meets the objectives of Article 39 of the EEC Treaty, it could vary from a measure providing no more than the observance of the common rules on competition to a full-blown régime, such as we have for beef.

The noble Lord, Lord O'Hagan, also asked about the costs to the Community of the premia. This needs to be watched but the proposals are as yet unformed. A suitable transition measure to smooth the adaptation by producers to a free trade situation would help limit such costs, as would the full use of the aids for less-favoured areas. He also asked for an assurance on the effect on consumers following price increases. There has been a great deal of concern about the possible effect of the régime on prices to the United Kingdom. The Commission's proposals, in fact, provided no mechanism for forcing up prices. I must emphasise here, because I think this has not yet been brought out in the debate, that the basic price is not a target price but is merely a point of reference which will be based initially on the weighted average of Community prices. Prices may rise as exports to France may increase, as has been recognised today, but, as the Committee recognised as well, this depends on many factors including the production response in the United Kingdom and in France and the consumption response in France where prices will fall, as the noble Viscount, Lord Trenchard, pointed out. I can assure noble Lords that this is not a matter that the Government feel complacent about and they will obviously negotiate to ensure that no unnecessary price increases are enforced.

There is also the question of the likely effect on consumers. The noble Lord, Lord Stanley of Alderley, referred to that and also to my right honourable friend in connection with a possible Minister of Food. The Government are very conscious that the United Kingdom domestic market buys four-fifths of our own production. It would not be in the interests of our producers to agree to a régime which put up prices sharply and significantly and so damaged their own home market. The Government wish to see that mutton and lamb remain one of our staple meats. We are one of the largest consumers in the Community—far ahead of any other country, including France. We have to recognise that consumption has been falling for a number of years and we must expect any price increase to lead to some further fall on demand. But, obviously, the Government will do all they can to minimise this.

I must now come to the question of what producer support is envisaged and the matter of the premium payments which has been supported by my noble friend Lord Walston and other noble Lords. The Government note the Committee's view in favour of deficiency payments for producer support. These have served the United Kingdom well over the years but, at this stage, the Government need to keep an open mind to the Commission's proposals which themselves provide for premium payment to producers. These are intended to help producers adjust to new market conditions as free trade is introduced; but exactly how and in what way they may be made is still not yet clear. I can only comment at this stage that Member States do not have the necessary administrative machinery at present to operate a price-related guarantee and there is great concern about the likely cost of any Community-wide premium payments. United Kingdom producers are obviously well placed to take advantage of improved export prospects and their returns are likely to increase. Here, I agree fully with what was said by the noble Baroness, Lady Elliot of Harwood, in this connection. Nevertheless, the Government will seek to ensure that our producers receive a fair return. I should like to stress this in answer to the noble Lord, Lord Stanley of Alderley. The Government fully recognise the importance of safeguarding producer interests, and my right honourable friend the Minister has said so frequently.

There is another area of the proposals on which clarification is being sought, but it would appear that it is intended that such aids would be exercised on a discretionary basis. This is the area of private storage, to which reference was made by the noble Lord, Lord Vestey. The Government considered that the Commission are right to suggest aids to private storage rather than public intervention. But clearly we shall need to examine the implications carefully in the course of negotiations.

In reply to the noble Lord, Lord O'Hagan, we take note of what he said and we need to be absolutely clear how the aids to private storage would operate before committing ourselves. The noble Lord, Lord Stanley of Alderley, also referred to the less favoured areas. The Commission have said that Member States should examine the possibility of increasing payments under the Less Favoured Areas Directive to compensate producers whose returns would fall after the introduction of regulations, as not all Member States currently make full use of these payments. This alone, however, could not compensate producers as not all sheep are produced in areas covered by LFAD. Also, any aid given under this Directive is given for social reasons to provide adequate income in areas where physical handicaps prevent normal economic production. Member States consider that it should not be used to compensate for a market régime giving inadequate returns.

Nearly all noble Lords today have spoken about the export potential and the importance of opening up new markets. The noble Baroness, Lady Elliot of Harwood, referred to the challenging marketing opportunity. United Kingdom producers will undoubtedly benefit if the proposals are adopted from improved access to the French market which currently takes just under half our exports. Being among the most efficient in the Community—and here I should like to pay a tribute to them—our producers are well placed to take advantage of these new opportunities. I shall refer later to the question of the Irish arrangements made with the French Government.

I am glad to say that United Kingdom exports have nearly doubled since we joined the Community, although most of this growth has been to Member States other than France. We would expect that better access to the French market, coupled with the removal of the destabilising effects of changeable levies and the removal of the threat of closure to United Kingdom imports, should lead to a steadier trade. This will be beneficial not only to the trade but to the whole United Kingdom sheep market.

Noble Lords are aware of the fears that the Common Market organisation would force us to reduce our imports mainly from New Zealand. In fact, as they stand, the Commission's proposals provide for no greater restrictions on imports than exist at present. The Government's main aims in negotiations are to ensure that we maintain proper access for the supplies that we need and, as the Committee also mentioned, to ensure that there is a clear understanding that the safeguard clause is operated strictly in accordance with the GATT rules. Here I should like to endorse all that my noble friend Lord Walston and the noble Lords, Lord Mottistone and Lord O'Hagan, have said about New Zealand. I agree on the long term with my noble friend Lord Walston when he said that New Zealand might benefit from an expanding market. As the noble Viscount, Lord Trenchard, said, we must ensure that New Zealand has a guarantee. The Government are very conscious of the significant role products from sheep play in the New Zealand economy. We keep in close touch with the New Zealand Government.

It is early days but, as the proposals take shape, we will continue to consult with New Zealand and, in negotiating, always keep to the fore the aim that any arrangements must allow New Zealand to retain their present access to the United Kingdom markets. Sixty-five per cent. of New Zealand Iamb exports come to the United Kingdom and all sheep products are almost 40 per cent. of New Zealand's earnings. We should not forget, as my noble friend Lord Sainsbury said, the importance from the marketing point of view of the seasonal aspects of New Zealand lamb production.

I can also assure noble Lords that the Government are very aware of the heavy investment in services involved in the trade between New Zealand and the United Kingdom, such as shipping, cold store and insurance, which have developed with the trade which started almost a hundred years ago, as I think my noble friend Lord Sainsbury said. Mention has been made by the noble Viscount, Lord Trenchard, of the green pound. The Commission's proposals provide for the use of a stabilised commercial rate, not green rates. The Commission consider that sheepmeat is an unusual market calling for an unusual arrangement. They consider market related monetary arrangements are the corollary of their market related measures.

The Government initially favour considering this proposal because there are no intervention arrangements, but we shall want to examine the implications further. Other Member States have suggested that various options should be considered as well as the Commission's proposals. Possibilities are being explored by technical experts in Brussels. At this stage, the Government can only be prepared to consider any legally viable alternatives, but we must bear in mind that any continuing charges or restrictions on inter-Community trade similar to the present French levies on our exports are not likely to be compatible with the EEC Treaty. The noble Lord, Lord Vestey, pointed out that Ireland has made her own arrangements with France. He asked why the United Kingdom could not do the same. Any such restrictions would be legally questionable under the Treaty requirements for free trade. They would therefore be open to challenge.

Now I should like to deal with the discrimination against the United Kingdom exports to France, following the Franco-Irish arrangements. The United Kingdom Government have protested to the EEC Commission about the heightened discrimination against our exports on 10th January after the announcement of the Franco-Irish arrangements. A further protest was sent on 28th February when the rates of levy were increased by 26 per cent. to 51 per cent., and noble Lords can be assured that we are watching market developments closely. The EEC Commission have declared the French controls to be contrary to the EEC Treaty, and they have ordered the French Government to end this discrimination by the 22nd June, although they have now granted them a further month—that is, until 22nd July—to do so. If the French Government persist in applying its import measures, the Commission could well take them to the European Court of Justice.

The noble Lord, Lord O'Hagan, referred to the accession applications from the three Mediterranean countries. As noble Lords may realise, Greece, Spain and Portugal all have significant sheep industries with prices higher than ours in the United Kingdom. The accession of any of these States would certainly have significant consequences for the EEC market in mutton and lamb, but this will need to be dealt with at the appropriate time.

The noble Lord, Lord Wise, asked how the transition period will work. The Minister of Agriculture has told the Council of Agricultural Ministers that the Commission's proposals are deficient in that they lack measures to aid transition to free trade. In seeking these measures, obviously we cannot allow those which disrupt trade, as the present French closure system does. We will seek measures which allow a gradual price and market adjustment.

The noble Lord, Lord O'Hagan, asked when the proposal would reach the Council of Ministers. He has been very patient with me in not asking me when I was going to answer the question and I have kept it till the end. Following the Council meeting on 19th and 20th June, the proposal is being examined at technical level and will come before the Council again in the autumn. The differences between the Community markets in the sheep sector are such that the negotiations may take a considerable time. If a Community régime proves to be necessary, then the Government agree with the Committee that the Commission's market-related proposals represent a reasonable starting point for negotiations. But in considering these and any ideas which may come forward, the Government will maintain that any arrangement must allow New Zealand to retain its present access to the United Kingdom market; it must protect our consumers from unnecessary or rapid price rises; and it must provide an adequate return to our producers.

Lord WALSTON

My Lords, I do not think there is anything I need add, except my thanks to those who have taken part in this debate, and in particular I should like to thank those who have been members of the Sub-Committee. I extend very special thanks to the noble Baroness, Lady Robson, who said that she had come in a the last moment. But if one had listened to her (as we all did with pleasure) one would never have realised that her speech was not a carefully prepared one. I am most grateful, my Lords, for the thought that your Lordships have given to this Motion, for the encouragement which most of you have given to it, and for your having taken such valuable note of these proposals.

On Question, Motion agreed to.