HL Deb 18 July 1978 vol 395 cc169-82

The Heads of State and Government of Canada, the Federal Republic of Germany, France, Italy, Japan, the United Kingdom of Great Britain and Northern Ireland and the United States of America met in Bonn on 16 and 17 July 1978. The European Community was represented by the President of the European Council and by the President of the European Commission for discussion of matters within the Community's competence.

1. We agreed on a comprehensive strategy covering growth, employment and inflation, international monetary policy, energy, trade and other issues of particular interest to developing countries. We must create more jobs and fight inflation, strengthen international trading, reduce payments imbalances, and achieve greater stability in exchange markets. We are dealing with long-term problems, which will only yield to sustained efforts. This strategy is a coherent whole, whose parts are interdependent. To this strategy, each of our countries can contribute; from it, each can benefit.


2. We are concerned, above all, about world-wide unemployment because it has been at too high a level for many years, because it hits hardest at the most vulnerable sections of the population, because its economic cost is high and its human cost higher still. We will act, through measures to assure growth and develop needed skills, to increase employment. In doing this, we will build on the progress that has already been made in the fight against inflation and will seek new successes in that fight. But we need an improvement in growth where that can he achieved without rekindling inflation in order to reduce extremes of balance of payments surpluses and deficits. This will reduce destabilising exchange rate movements. Improved growth will help to reduce protectionist pressures. We need it also to encourage the flow of private investment, on which economic progress depends; we will seek to reduce impediments to private investment, both domestically and internationally. Better growth is needed to ensure that the free world is able to develop to meet the expectations of its citizens and the aspirations of the developing countries.

3. A programme of different actions by countries that face different conditions is needed to assure steady non-inflationary growth. In countries whose balance of payments situation and inflation rate does not impose special restrictions, this requires a faster rise in domestic demand. In countries where rising prices and costs are creating strong pressures, this means taking new measures against inflation.

Canada reaffirmed its intention, within the limits permitted by the need to contain and reduce inflation, to achieve higher growth of employment and an increase in output of up to 5%.

As a contribution to avert the world-wide disturbances of economic equilibrium the German Delegation has indicated that by the end of August it will propose to the legislative bodies additional and quantitatively substantial measures up to 1% of GNP, designed to achieve a significant strengthening of demand and a higher rate of growth. The order of magnitude will take account of the absorptive capacity of the capital market and the need to avoid inflationary pressures.

The President of the French Republic has indicated that, while pursuing its policy of reduction of the rate of inflation, the French Government agrees, as a contribution to the common effort, to increase by an amount of about 0.5% of GNP the deficit of the budget of the State for the year 1978.

The Italian Prime Minister has indicated that the Government undertakes to raise the rate of economic growth in 1979 by 1.5 percentage points with respect to 1978. It plans to achieve this goal by cutting public current expenditure while stimulating investments with the aim of increasing employment in a non-inflationary context.

The Prime Minister of Japan has referred to the fact that his Government is striving for the attainment of the real growth target for fiscal year 1978, which is about 1.5 percentage points higher than the performance of the previous year, mainly through the expansion of domestic demand. He has further expressed his determination to achieve the said target by taking appropriate measures as necessary. In August or September he will determine whether additional measures are needed.

The United Kingdom, having achieved a major reduction in the rate of inflation and improvement in the balance of payments has recently given a fiscal stimulus equivalent to rather over 1 per cent. of GNP. The Government intends to continue the fight against inflation so as to improve still further the prospects for growth and employment.

The President of the United States stated that reducing inflation is essential to maintaining a healthy U.S. economy and has therefore become the top priority of U.S. economic policy. He identified the major actions that have been taken and are being taken to counter inflation in the United States: Tax cuts originally proposed for fiscal year 1979 have now been reduced by $10 billion; government expenditure projections for 1978 and 1979 have been reduced; a very tight budget is being prepared for 1980; steps are being taken to reduce the direct contribution by government regulations or restrictions to rising costs and prices, and a voluntary programme has been undertaken to achieve deceleration of wages and prices.

The meeting took note with satisfaction that the common approach of the European Community already agreed at Bremen would reinforce the effectiveness of this programme.


4. In spite of some improvement, the present energy situation remains unsatisfactory. Much more needs to be done.

5. We are committed to reduce our dependence on imported oil.

6. We note that the European Community has already agreed at Bremen the following objectives for 1985: to reduce the Community's dependence on imported energy to 50 per cent., to limit net oil imports, and to reduce to 0.8 the ratio between the rate of increase in energy consumption and the rate of increase in gross domestic product.

7. Recognising its particular responsibility in the energy field, the United States will reduce its dependence on imported oil. The U.S. will have in place by the end of the year a comprehensive policy framework within which this effort can be urgently carried forward. By year end, measures will be in effect that will result in oil import savings of approximately 2.5 million barrels per day by 1985. In order to achieve these goals, the U.S. will establish a strategic oil reserve of 1 billion barrels; it will increase coal production by two-thirds; it will maintain the ratio between growth in gross national product and growth in energy demand at or below 0.8; and its oil consumption will grow more slowly than energy consumption. The volume of oil imported in 1978 and 1979 should be less than that imported in 1977. In order to discourage excessive consumption of oil and to encourage the movement towards coal, the U.S. remains determined that the prices paid for oil in the U.S. shall be raised to the world level by the end of 1980.

8. We hope that the oil exporting countries will continue to contribute to a stable world energy situation.

9. Looking to the longer term, our countries will review their national energy programme with a view to speeding them up. General energy targets can serve as useful measures of the progress achieved.

10. Private and public investment to produce energy and to use it more efficiently within the industrial world should be increased. This can contribute significantly to economic growth.

11. The further development of nuclear energy is indispensable, and the slippage in the execution of nuclear power programmes must be reversed. To promote the peaceful use of nuclear energy and reduce the risk of nuclear proliferation, the nuclear fuel cycle studies initiated at the London Summit should be pursued. The President of the United States and the Prime Minister of Canada have expressed their firm intention to continue as reliable suppliers of nuclear fuel within the framework of effective safeguards. The President intends to use the full powers of his office to prevent any interruption of enriched uranium supply and to ensure that existing agreements will be respected. The Prime Minister intends that there shall he no interruption of Canadian uranium supply on the basis of effective safeguards.

12. Coal should play an increasingly important rôle in the long term.

13. Joint or co-ordinated energy research and development should be carried out to hasten the development of new, including renewable, energy sources and the more efficient use of existing sources.

14. In energy development, the environment and human safety of the population must be safeguarded with greatest care.

15. To help developing countries, we will intensify our national development assistance programmes in the energy field and we will develop a co-ordinated effort to bring into use renewable energy technologies and to elaborate the details within one year. We suggest that the OECD will provide the medium for cooperation with other countries.

16. We stress the need for improvement and co-ordination of assistance for developing countries in the energy field. We suggest that the World Bank explore ways in which its activities in this field can be made increasingly responsive to the needs of the developing countries, and to examine whether new approaches, particularly to financing hydrocarbon exploration, would be useful.


17. We reaffirm our determination to expand international trade, one of the driving forces for more sustained and balanced economic growth. Through our joint efforts we will maintain and strengthen the open international trading system. We appreciate and support the progress as set forth in the Framework of Understanding on the Tokyo Round of Multilateral Trade Negotiations made public in Geneva, 13 July, 1978, even though within this Framework of Understanding some difficult and important issues remain unresolved.

The successful conclusion of these negotiations, the biggest yet held, would mean not just a major trade liberalisation programme extending over the 1980s but the most important progress yet made in the GATT in relation to non-tariff measures. Thus the GATT rules would be brought more closely into line with the requirements of the next decade—particularly in relation to safeguards—in ways which would avoid any weakening of the world trading system and be of benefit to all trading countries developed and developing alike. A substantially higher degree of equity and discipline in the international trading system would be achieved by the creation of new mechanisms in many fields for consultation and dispute settlement. Uniform application of the GATT rules is vital and we shall move in that direction as soon as possible.

In all areas of the negotiations the Summit countries look forward to working even more closely with the developing countries. We seek to ensure for all participants a sound and balanced result, which adequately takes into account the needs of developing countries, for example, through special and differential treatment, and which brings about their greater participation in the benefits and obligations of the world trading system.

At last year's Downing Street Summit we rejected a protectionist course for world trade. We agreed to give a new impetus to the Tokyo Round. Our negotiators have fulfilled that commitment. Today we charge them, in co-operation with the other participants, to resolve the outstanding issues and to conclude successfully the detailed negotiations by December 15, 1978.

18. We note with satisfaction the renewal of the pledge to maintain an open market oriented economic system made by the OECD Council of Ministers last month. Today's world economic problems cannot be solved by relapsing into open or concealed protectionism.

19. We welcome the statement on positive adjustment policy made by the OECD Ministers. There must be a readiness over time, to accept and facilitate structural change. Measures to prevent such change perpetuate economic inefficiency, place the burden of structural change on trading partners and inhibit the integration of developing countries into the world economy. We are determined in our industrial, social, structural and regional policy initiatives to help sectors in difficulties, without interfering with international competition and trade flows.

20. We note the need for countries with large current account deficits to increase exports and for countries with large current accounts surpluses to facilitate increases in imports. In this context, the United States is firmly committed to improve its export performance and is examining measures to this end. The Prime Minister of Japan has stated that he wishes to work for the increase of imports through the expansion of domestic demand and various efforts to facilitate imports. Furthermore, he has stated that in order to cope with the immediate situation of unusual surplus, the Government of Japan is taking a temporary and extraordinary step of calling for moderation in exports with the aim of keeping the total volume of Japan's exports for the fiscal year of 1978 at or below the level of fiscal year 1977.

21. We underline our willingness to increase our co-operation in the field of foreign private investment flows among industrialised countries and between them and developing countries. We will intensify work for further agreements in the OECD and elsewhere.

22. In the context of expanding world economic activity, we recognise the requirement for better access to our countries' markets for the products of the developing countries. At the same time we look to increasing readiness on the part of some of the more advanced developing countries to open their markets to imports.


23. Success in our efforts to strengthen our countries' economies will benefit the developing countries, and their economic progress will benefit us. This calls for joint action on the basis of shared responsibility.

24. In the years ahead the developing countries, particularly those most in need, can count on us for an increased flow of financial assistance and other resources for their development. The Prime Minister of Japan has stated that he will strive to double Japan's official development assistance in three years.

We deeply regret the failure of the COMECON countries to take their due share in the financial assistance to developing countries and invite them once more to do so.

25. The poorer developing countries require increased concessional aid. We support the soft loan funds of the World Bank and the three regional development banks. We pledge our governments to support replenishment of the International Development Association on a scale that would permit its lending to rise annually in real terms.

26. As regards the more advanced developing countries, we renew our pledge to support replenishment of the multilateral development banks' resources, on the scale needed to meet the growing needs for loans on commercial terms. We will encourage governmental and private co-financing of development projects with these banks.

The co-operation of the developing countries in creating a good investment climate and adequate protection for foreign investment is required if foreign private investment is to play its effective role in generating economic growth and in stimulating the transfer of technology.

We also refer to our efforts with respect to developing countries in the field of energy as outlined in paragraphs 15 and 16.

27. We agreed to pursue actively the negotiations on a Common Fund to a successful conclusion and to continue our efforts to conclude individual commodity agreements and to complete studies of various ways of stabilising export earnings.


28. The erratic fluctuations of the exchange markets in recent months have had a damaging effect on confidence, investment and growth throughout the world. Essentially, exchange rate stability can only be achieved by attacking the fundamental problems which have contributed to the present large balance of payments deficits and surpluses. Implementation of the policies described above in the framework of a concerted programme will help to bring about a better pattern of world payments balances and lead to greater stability in international exchange markets. This stability will in turn improve confidence and the environment for sustained economic growth.

29. Although exchange rates need to respond to changes in underlying economic and financial conditions among nations, our monetary authorities will continue to intervene to the extent necessary to counter disorderly conditions in the exchange markets. They will maintain extensive consultation to enhance these efforts' effectiveness. We will support surveillance by the International Monetary Fund, to promote effective functioning of the international monetary system.

30. The representatives of the European Community informed the meeting of the decision of the European Council at Bremen on 6/7 July to consider a scheme for a closer monetary co- operation. The meeting welcomed the report and noted that the Community would keep the other participants informed.


31. It has been our combined purpose to attack the fundamental economic problems that our countries confront.

The measures on which we have agreed are mutually reinforcing. Their total effect should thus be more than the sum of their parts. We will now seek parliamentary and public support for these measures.

We cannot hope to achieve our purposes alone. We shall work closely together with other countries and within the appropriate international institutions; those among us whose countries are members of the European Community intend to make their efforts within this framework.

We have instructed our representatives to convene by the end of 1978 in order to review this Declaration.

We also intend to have a similar meeting among ourselves at an appropriate time next year. Bonn, den 17 Judi 1978 Veroffentlicht durch das Presse-und Informationsamt der Bundesregierung

3.46 p.m.


My Lords, I should like to thank the noble Lord the Lord Privy Seal for repeating the Statement of his right honourable friend the Prime Minister in another place. We are all grateful to him for that. First of all, before coming to the economic content of the Statement, may I welcome most warmly the unexpected inclusion in the Summit Conference of this agreement about action to combat international terrorism. We want to welcome this most warmly. All I want to do in that respect is to ask the Government for an assurance—which I imagine will be forthcoming—that we in this country will vigorously implement this proposal if we are affected, and not only that, but that we will play a full, active diplomatic part in trying to persuade other countries to accede to the agreement of the Seven announced in this Communiqué.

Coming now to the outcome of the Summit as it affects the world economy, I suppose it is very much as was expected and forecast in advance. I do not think it marks any radical new departures in policy by any of the participating countries. But, for what it is, we welcome it as a modest contribution. It is important to emphasise the word "modest", not in order to belittle, but some of these Summits in the past, particularly if I may say so the one last year here in London, claimed too much for themselves and I do not think they did themselves any good thereby. In using this word "modest" therefore, I repeat, I am not trying to belittle. It is very important, if we want to get such effects as we can from this, that no politicians in any country seek to claim too much for it for whatever reasons.

May I ask the Government two questions? The first concerns Britain's contribution to encouraging growth in the world economy. I have understood from Press reports, and so forth, that our line at the Conference was that we had made our contribution towards growth by the tax reductions contained in the recent annual Budget. I cannot help noticing the article by Mr. Carroll in today's Sun newspaper, and I should like to ask the noble Lord the Leader of the House whether he has any statement to make about it? That article suggests that the Government may be contemplating a further stimulus to the economy in the next few months, of, say, another 2p off the standard rate of income tax. Perhaps in view of Mr. Carroll's forthcoming close association with the Prime Minister we are inclined to take what he says more seriously than we might have done a few months ago. It is important for the Government to say something about that.

My second question concerns the competitive power of British industry if the outcome of the Summit Conference leads to stimulating the level of world trade above the level which it would otherwise have reached. I imagine the Government would agree that it is of vital importance that we should ensure that British industry is sufficiently competitive to take full advantage of it, to get its full share of the increased world trade which we hope will accrue. In order to do that, will the Government take the measures that are necessary? Will they, for example, make changes in our personal taxation system and take all the other measures which have been put forward in our debates in your Lordships' House on the subjects of productivity, growth, collective bargaining, and so forth? We on this side believe that unless such measures are taken, this country will not succeed in getting its full share of any increase in world trade which may, as we hope, be brought about by the Summit Conference.


My Lords, we, too, should like to thank the Leader of the House for repeating this important Statement. As the noble Lord, Lord Carr of Hadley, said, we can all unreservedly welcome the decision of the four Governments to take measures to combat international terrorism through the hijacking of passenger aircraft. This seems to be a real step forward, and we can only hope that those other Governments whose consent and co-operation is necessary will in fact co-operate.

With regard to the proposals for combating the present recession, subject no doubt to the reservations voiced by the noble Lord, Lord Carr, with which I think I should be able to associate myself, we express our satisfaction that so great a measure of agreement in principle was reached by the four Governments. But, as has been pointed out many times, in practice everything depends on the ability of Governments to induce their own Parliaments and their own public opinion to agree. Although the analogy is not perfect, the situation brings to mind the famous lines of Shakespeare in. which a Welsh wizard says: I can call spirits from the vasty deep", and the reply was: Why, so can I, and so can any man; But will they come when you do call to them? I am sure that I am expressing the wish of the entire House when I say that we can only hope that the spirits will respond in the right way eventually.


My Lords, I am glad that the noble Lord, Lord Carr of Hadley, in speaking for the Opposition welcomed the action taken on international terrorism. He asked me for an assurance that Britain will vigorously implement what was proposed. The answer is: certainly; and we will certainly play a full and active diplomatic part. I believe that that has always been the view of Her Majesty's Government, and we are glad that a conference of major Powers in the world has taken a realistic view of this matter.

I am sorry that the noble Lord was a little pessimistic about the Summit. I read the Financial Times, which I regard as a very reasonable, impartial and fair paper, dealing with financial matters. This morning its main headline dealing about the Summit was: Summit ends with pledges on growth ", and there was another heading "A realistic Summit" in relation to the editorial. I believe that this should be the tone. I detected that here and there the noble Lord would have liked to criticise, but he did not go far enough to make any real criticism of what has been agreed because he cannot deny that what we are doing is right.

With regard to growth, I should say that we have contributed to growth in the Budget. We have also contributed to the fight against inflation by playing our part in maintaining the open trading system, and we have made an important contribution to world energy resources. Britain has a very good record on aid to less developed countries, and that is important when we think of world trade. One could go on giving examples.

I note that the noble Lord, Lord Gladwyn, indicated that he agreed with much of what the noble Lord had said; and I think I have answered that point. The noble Lord talked about the spirits emerging; he wants to see reality, and of course we all do. The Summit has been successful. There has been a desire by all Governments to get together and to do something. This is a good step forward, and the Summit will be followed up at a later date.


My Lords, on the subject of terrorism, can we be assured that the measures to discourage hijacking will be applied to all hijackers, without exception being made on political or humanitarian grounds? Secondly, is there not a danger that if prosecution is allowed as an alternative to extradition—which would be far more effective—the countries which sympathise with the objectives of the hijackers may often fail to convict them after a prosecution, or may give them a purely nominal sentence? Should we not do better to insist on extradition?


My Lords, that is a detailed point. All countries which were represented at the Summit have agreed to outlaw terrorism and hijacking. I cannot go beyond that into specific terms. I have noted carefully what has been said. I will follow this matter up and give the noble Lord any detail that I can. The declaration which was given to another place repeats a broad statement of policy.


My Lords, does the noble Lord agree that in order to get the maximum result over a period from the agreement in the widest sense, and particularly in relation to terrorism, it is not enough to have a Summit of a limited number of countries? The approach must be made on a world basis. In the Statement it was deplored that COMECON has not played its rôle. The noble Lord and I share in common memories of the 'thirties'. Does he agree that the efforts in the thirties—which ended in a cataclysmic slump which hit every country in the world and which may have been a major contributory cause of the Second World War—failed because the approach was on too limited a basis?

I welcome without reservation the efforts that have been made in Bonn; I applaud the candour with which the Prime Minister has informed both Houses and the country of what has been achieved; and I note here the modest nature. However, would the noble Lord not agree that this is but the first step and that we must bring every country in the world into consultation if the world is to escape economic disaster on the one hand, and at the same time bring about an end to terrorism, which we all want?


My Lords, I agree with the noble Lord that we do not want the kind of situation that we saw in the 1930s. I recall a world conference at that time on economic matters, which was held in a geological museum. One would have thought that fossils were being resurrected at that conference—but that is another matter. We want to avoid that kind of situation; we also want to avoid a slump. This is why the Summit has taken place. It may be that this is a modest approach, but it is also a realistic approach. Whether our discussions can be extended will be for another Summit to decide, and then agree upon an agenda. As I have stressed, we believe also in helping the developing countries. Britain has done this previously through the Lomé Convention, to give one example; I could give other examples. It is good that Japan, the United States, Germany, France, Britain and other countries concerned have met together, and I believe that this will be advantageous both to the developing world and in terms of the growth which we desire in order to get our economies right.


My Lords, if these efforts result successfully in a net expansion of trade, is the noble Lord satisfied that we would be in a position with regard to skilled labour to cope with it? Should this not be the setting off point for an enormous effort to increase our skilled labour?


I agree, my Lords. We had a very good economic debate in the House the other week. We discussed the training of technicians, engineers and other people who have to deal with the present highly complex systems, as well as the development of microelectronics and other matters. I would agree with the noble Lord that this is a key point. We must also have a British challenge in the markets of the world, and I believe that we can achieve that.


My Lords, I should like to join with my noble friend in saying how important it is that we should see that the developing world has the opportunity to benefit from the Summit. Is my noble friend aware that at present there is grave anxiety in many countries, especially in Africa, over the terms of trade which now exist? These countries are quite unable to capitalise their copper mines and other metal mines. Unless we can assist them by taking far more of their products, they will not be able to produce the raw materials which we all need.

Furthermore, is my noble friend aware that all seven of the countries which were represented are suffering from heavy unemployment? They will now be faced, as is this country, with a demand for a shorter working week. Is my noble friend aware that none of those countries can concede it alone without putting themselves out of competition? But is he further aware that if the manufacturing world as a whole agreed to look at this demand we could probably, all together, manage to get down the number of hours worked while not encouraging a shorter working week merely in order to increase the number of overtime hours worked?


My Lords, my noble friend has put to me some very important points, of which I take note. I stress again what he mentioned as to the developing countries. We have taken decisions here; and this may be important in another field of activity, energy, where we could make a major contribution—we with the other Western European countries, the United States and Japan. I think this was recognised at the Summit.


My Lords, could my noble friend say something on the working week?


I have nothing specific to say on that, my Lords.