HL Deb 01 February 1979 vol 398 cc336-50

3.30 p.m.

Lord BYERS rose to call attention to the Report of the Select Committee on the Foreign Boycotts Bill [H.L.] (H.L. 265, 1977–78); and to move for Papers. The noble Lord said: My Lords, in opening this debate I wish, first, to suggest to the House that whatever may be thought of the recommendations in the report—and I believe them to be very important—the Select Committee has performed a remarkable task in assembling a considerable amount of information about the Arab boycott in a period of three months. The fact that this was achieved was in no small measure due to the patient, skilful and firm chairmanship of the noble Lord, Lord Redcliffe-Maud. We were also greatly assisted by the way our work was organised by our Clerk, Mr. Paul Hayter.

For noble Lords who may not have had the opportunity or time to read the report and the minutes of evidence in full, it might be useful to mention some of the major matters contained in it in addition to the specific recommendations of the committee; I shall refer to those specific recommendations later. For instance, the report describes the Arab boycott of Israel and how it works. It contains four important statements on this from the Boycott Office in Damascus, together with a copy of the form of questionnaire submitted by the Boycott Office to those wishing to trade in the Middle East with Arab countries.

The Questionnaire is interesting in that it asks these questions. The first is: Have you or any of your subsidiaries, now or ever, had main or branch factories or assembly plants in Israel? Secondly: Have you or any of your subsidiaries, now or ever, had in Israel general offices for regional or international operations? Next: Do you or any of your subsidiaries grant, or have you ever granted, the right of using its name, trademarks, manufacturing licences or patent rights et cetera to Israeli persons or firms? Then: Do you or any of your subsidiaries participate or own shares, now or in the past, in Israeli firms or businesses inside or outside Israel? That one caught Metal Box Limited and got it on the black list. Next: Do you or any of your subsidiaries render, or have you ever rendered, any technological assistance to any Israeli firm or business? Then: Do you or any of your subsidiaries represent, or have you ever represented, any Israeli firm or business in Israel or abroad?

It goes on to ask, and I do not know how many people are able to comply with this: Please give the names and nationalities of all companies in which you own shares and the proportion of shareholding as to the total share capital of the company concerned, together with the names and nationalities of the companies which hold shares in the share capital of your Group and/or any of your subsidiaries, and the percentage of the shareholding of the participating party as to the share capital of the party participated in". One can see how this adds up to a great deal of time-wasting frustration. There is then a question as to whether companies have a prominent Zionist on the board and, despite denials from Damascus, there is a distinct overtone of anti-semitism in the questionnaire and in the boycott itself.

Refusal to answer the questionnaire or giving a reply which is unsatisfactory usually leads to blacklisting. This questionnaire shows the all-pervading nature of the Arab economic warfare against Israel, and the Foreign Office witnesses made no secret of the fact that this is economic warfare; and that is included in the minutes of evidence. There is a statement in the report regarding the Canadian position. It is in the form of a statement by the Secretary of State for External Affairs, made on 21st October 1976. But since then an anti-boycott Bill has been introduced into the Canadian House of Commons and is now before it.

There is also a memorandum in the report from the Commission of the EEC clarifying the position of the EEC and the Treaty of Rome so far as the boycott is concerned. The report also contains a very useful letter from the Chief Executive of the Commission for Racial Equality on the question of the boycott and the Race Relations Act, something which we may want to follow up in this House. There is also a copy of the relevant United States legislation on the boycott. Finally, there is a guide to anti-boycott regulations issued by the Foreign and Commonwealth Office here on certificates of origin and other matters.

I mention these aspects of the report to emphasise that it provides a wealth of information on the working of the Arab boycott on Israel and the attitude of other countries to it. As to the findings of the committee, I hope your Lordships will feel that these were by no means negligible, and if they were to be accepted by the Government and Parliament they would represent a major step forward in reducing the harsh impact of this boycott. There was, of course, no hope that the Bill which I sponsored would be passed into legislation. There was no Parliamentary time for it last Session and the Government are unlikely to give time for it in this; apart from anything else, we do not know for how long this Session will be going on. But the hostility of the Government and the hostility of the main Ministries involved would almost certainly have ensured its defeat in the last Session. However, I hope the nature and quality of the Select Committee's report may to some extent have modified these views.

In addition, witnesses representing trade and commerce on the whole took the view that United Kingdom legislation would result in a considerable loss of trade with Arab Middle-East countries. I do not think that has been proved and I do not think it is by any means certain. However, that was the view held by some of the witnesses. That view was advanced in the United States by similar business interests when the American legislation was being put forward. Indeed, the view was put forward to our committee, with some vigour, that the American experience had been too short for a considered judgment to be made. That was the view expressed last June and July. But since then the gloomy predictions that the Arab boycott legislation would result in a decline of United States exports to Arab countries and a consequent loss of jobs have proved groundless. According to statistics released by a United States Government agency, exports to the 14 boycotting countries from January to the end of September 1978 showed a 12.4 increase over the same period in 1977.

The case of Iraq is interesting. Iraq is a real hard-line Arab country which never resumed diplomatic relations with the United States after the 1973 war, and Iraq increased its imports from the United States by 43 per cent. Even more significant were the remarks made by Mr. Stanley Marcuss. He is in charge of anti-boycott enforcement for the Department of Commerce in Washington, and he said recently, well after the United States legislation had begun to bite: Negative certificates of origin are fast becoming a thing of the past. Prohibited boycott conditions are ' falling out of letters of credit'. Saudi Arabia no longer asks vessel and insurance carriers to certify that they are not blacklisted". Nevertheless, according to Mr. Marcuss: …answering boycott questionnaires in order to qualify to do business remains a troublesome area"— but he added: there is a marked decline in the number of boycott-related requests filed with the Commerce Department". In the six months ended March 1977 there were 60,000 such transactions. In the next quarter, ended June 1977, there were only 17,000 transactions, a move in the right direction.

I believe the boycott is harmful to British trade and I do not think we are all that different from the United States. I believe that if the Arabs want our goods because of quality, price and delivery, they will ignore the boycott as they do with the United States; but in the meantime it remains an unwarranted source of irritation and, in my view, an immoral restrictive practice in international trade. This same attitude was well expressed by the American Secretary of Commerce, Juanita Kreps, last November, when she said—and I quote: Over and over again we are told that United States companies, backed by the authority of United States law, are able to resist boycott demands and yet receive business". She went on: I am convinced that if we insist on protecting our people from anti competitive behaviour and discrimination, if we insist that business without principle is business not worth having, then we will be successful". My Lords, those were the sentiments on which my Foreign Boycotts Bill was constructed.

What I think is probably equally significant is the fact that Congressman Lehman, who is Chairman of the House Sub-Committee of the Committee on International Trade, has let it be known that he will be pressing the American Government in the course of this year to toughen up the United States anti-boycott legislation, and that, in particular, he will try to get the Government of the United States, in turn, to persuade countries of the EEC to come into line by accepting anti-boycott principles as a fundamental basis of their international trading policies. Therefore, we shall expect to see a good deal more interest on the part of the American Government in the way our own Government and others in the EEC conduct their international trade. Indeed, I understand that congressional hearings on this are just about to begin.

However, even if we assume that we are in a weaker position than the United States and that we have less "muscle" in this matter, the committee came to the conclusion that certain actions could be taken administratively. They also said that if these fairly modest administrative actions were adopted by the Government, and if they did not succeed in reducing the impact of the boycott, then legislation might well have to be considered. Mean-while, boycott activity in the United Kingdom continues. It affects a considerable number of companies, and even affects some of our own nationalised corporations. I am not going to deal with all these cases. They are well known to the Anti-Boycott Committee of the Anglo-Israel Chamber of Trade and to the All-Party Committee which exists in both Houses of this Parliament. But I shall refer to one case because it is a curious one and exemplifies what can happen.

This concerns a company whose identity I do not propose to mention publicly, although I am quite prepared to give it to the Government. This is a British company which is a subsidiary of an American company, and therefore has to comply with United States legislation. But the British company, in turn, has an Indian subsidiary, and this Indian subsidiary buys a certain ingredient from Israel in order to complete its final product. Now the Indian company has been asked by the Boycott Office if it has any of this ingredient left from the batch—a fairly small batch—which it bought four years ago, and whether it will agree never again to buy this product from Israel. This pressure has been brought to bear on the Indian subsidiary of the United Kingdom company over a period of two years. The United Kingdom company has explained that it cannot agree to this because it is an American subsidiary; nor does it intend to agree to these demands and diktats from Damascus. The result is that the Indian company is now on the black list and the United Kingdom company is being similarly threatened. As the managing director of the English company said to me, "I do not think it is realised what a very unpleasant experience this type of harassment and pressure constitutes", and there are many other instances of this frustration and harassment, which I believe ought to be stopped.

My Lords, I now turn to the specific proposals made by the Select Committee, to which I would hope that the Government will give a positive and sympathetic response today, because the boycott is still causing a great deal of irritation, time-consuming frustration and is a restriction on trade with a friendly nation. After saying that the Bill should not proceed, the Select Committee stated their general conclusion in these terms—and I quote: Nevertheless, the Committee do not find the present situation satisfactory. The boycott thrives because it is not resisted and is even given the unsolicited help of British companies operating what amounts to a voluntary boycott. It is objectionable for those who are not a party to the Middle East conflict to be drawn into it and for the exercise of legitimate economic activity to be made subject to extraneous political conditions". That statement in the report was very like the statement I have just read from Juanita Kreps, the Secretary of State for Commerce in the United States. I would hope that Her Majesty's Government would take note of that considered view of the committee as a background against which the specific recommendations were made.

The recommendations are these. First, the committee recommend that the Government should take a more positive line in relation to the boycott. They should increase their present activities in trade promotion and provide energetic consular help to all exporters attempting to expand Middle East trade. I should not have thought that was difficult to accept. Secondly, the Government should urge companies receiving boycott requests to report them voluntarily to the Department of Trade, so that other companies can benefit from their experience. I personally should like to see reporting of boycott requests made mandatory, as it is under the United States and Ontario legislation, and as it will be if the legislation before the Canadian House of Commons is passed into law. But that was not the view of the committee; that is my personal view. Thirdly, suitable diplomatic opportunities should also be taken to persuade individual Arab States to narrow the application of the boycott, with the goal of eliminating its secondary and tertiary levels. Again, I should have thought that that was a modest and moderate proposal.

The remoteness of the Foreign and Commonwealth Office and the Department of Trade from the working of the boycott struck me as being quite appalling. There was a distinct overtone of "not wanting to know". When one considers that it is estimated that there are something like 50,000 boycott requests a year to British companies, and that over 1,000 United Kingdom companies are on the black list, it is surely incredible that no British Government Department has a copy of the black list. And yet an American witness, Mr. Will Maslow, told us that he obtained a copy of the black list by sending a cheque for $25 to the Boycott Office in Damascus. I am convinced that there is much scope for more effective diplomatic activity to reduce the impact of the boycott. I am sure that is not too much to ask of any Government.

The committee also concluded—and I quote—that: the Government should show that their opposition to the secondary and tertiary boycotts is more than a form of words. Their general policy of deploring the boycott and yet leaving all decisions to the commercial judgment of the companies without any reference to the Government's view is not wholly consistent". The outcome of present practice, in the committee's view, is to make the Government appear not to be completely neutral. What the committee recommend (in paragraphs 111 and 112) is a policy more like that adopted by the Canadian Government, although not exactly the same. The Canadian Government not only deplore the boycott and allow companies to decide for themselves whether or not their commercial interests require them to comply; they also actively encourage companies to observe the Government's statement of hostility to the boycott. Canadians who comply with the boycott in spite of public policy forgo Government support for the project concerned, and this policy itself is being tightened up under the new law which has just been introduced into the Canadian House of Commons.

My Lords, your Select Committee consider that companies should be made more aware of the political implications of the boycott. Company managements, including those in the public sector, should still be free, in the view of the committee, to choose for themselves whether or not to comply with the boycott. But the committee recommend that whenever possible they should avoid signing contracts which include conditions specifically discriminating against a friendly State. The committee say that Her Majesty's Government should seek to guide companies to this effect. If companies always decide to comply with the boycott for the short-term purpose of winning trade, they will, say the committee, allow the boycott to grow stronger and may in the long run produce effects contrary to Britain's commercial interest. I have to ask the noble Lord, Lord Goronwy-Roberts, whether or not the Government accept this view.

Another conclusion was that Her Majesty's Government should give careful consideration to the use of public funds in support of particular boycott-related transactions such as those involving direct compliance with the boycott in the form of a boycott declaration or a negative certificate of origin. That brings me to the question of the certificates of origin themselves. The Select Committee say this: The Committee find that the Government is vulnerable in their practice of authenticating negative certificates of origin"— these are the certificates which say that none of the goods or components originated in Israel. The report continues: Although the authentication ('legalisation') of these certificates is performed by the Foreign and Commonwealth Office as a routine aid for exporters, and the Apostille bearing the seal of the FCO is expressed as authenticating the signature on the document (not the document itself), there is no escape from the impression which this creates that the FCO condones such documents. They become a party to the process by which the documents are issued. Assuming that the Government's opposition to the secondary and tertiary boycott means what it says, they"— the Government— ought to dissociate themselves from this process. Otherwise they are trying to have it both ways. The Committee therefore recommend that Her Majesty's Government change their policy of authentication and that officials of the Foreign and Commonwealth Office should be directed not to authenticate the signatures on the negative certificates of origin. Such documents are among the most discriminatory forms of the boycott mechanism and it is undesirable that the Government should process a document which discriminates against a friendly state".

My Lords, in my view, one of the most unsatisfactory pieces of evidence presented to the Committee was that given by the Foreign and Commonwealth Office witnesses on the question of whether or not the Foreign Office employees read the negative certificates of origin or whether they merely certify the signatures at the bottom of the document and do not examine the contents at all. In an exchange with the Chairman, with myself and with the noble Lord, Lord Caccia—and all this is recorded in the report—the witness said that on principle the contents are not read, and the contents are not authenticated. I suggested that this meant that the Foreign and Commonwealth Office may well be certifying unwittingly a whole lot of improper documents every day. The noble Lord, Lord Caccia, asked pointedly whether they did not even look at the documents to see if somebody was applying, for instance, to export arms to South Africa or something of that sort. To that question the reply was: I very much doubt if anybody would be so foolish as to put a wholly illegal paper into our hands". But, as Lord Caccia then said, you cannot know if you do not read it—it is as automatic as that. That is the system under which we operate today. The position is that if the documents are not read, any sort of certificate can be authenticated. If they are read, then the Foreign and Commonwealth Office is a party to issuing a discriminatory document and legalising it.

As a result of legislation in the United States, the negative certificate of origin is a thing of the past and has been replaced, in many cases, by a positive certificate. In this country, I believe I am right in saying, only Iraq now insists on the nega- tive certificate. When you consider the very unsatisfactory diplomatic relations between the United Kingdom and Iraq at the present time, then I suggest that the Government accept the recommendation of the Select Committee, particularly since negative certificates have been roundly condemned by the International Chamber of Trade and Commerce.

The final recommendation of the Committee is one of the most important ones. I think I can say that we were unanimous in suggesting that there should be an initiative to develop a common European policy which would be more effective than the efforts of any single State to combat secondary and tertiary boycotts. This is something that I wholeheartedly subscribe to. The Committee proposed that Her Majesty's Government should undertake to put the subject of the boycott on the agenda of the European Council. The Dutch have expressed their willingness to discuss whether a common policy can be formulated—and I think that this approach would find favour with M. Gaston Thorn, the Prime Minister of Luxembourg, and in some other countries.

Non-discrimination is a fundamental principle of the Community and it is time, in my view and in that of the Committee, that this nettle should be grasped. Despite the very considerable amount of business which British companies do with Arab countries, compared with the relatively small amount they do with Israel, there is no doubt that substantial trading opportunities are being lost as a result of the boycott but, even more important, United Kingdom companies are being forced to participate in a form of international blackmail which has no place in a civilised system of international trading. I do not believe that we are any more vulnerable than the United States. I believe it is a myth that the Arab countries would remove their sterling currencies, for instance, if we implement these proposals. If they did, where else would they take them? They are not going to invest in a weak dollar. I believe that some definite practical action must now be taken by Her Majestys Government and that this should be done preferably with our EEC partners but, if necessary, without them.

My Lords, in conclusion I hope we shall not be told that the Government cannot accept our proposals because they might aversely affect the Middle East settlement and might result in a loss of trade. This really is not an argument that stands up. The Select Committee proposals are not for legislation but for sensible moderate changes in administrative practice. The United States, having introduced really tough legislation, have not been accused of jeopardising a Middle East settlement—just the reverse, as Camp David showed—and their trade with Arab countries is increasing. The argument about affecting a Middle East settlement will not run. I hope that the Government will recognise the fair-minded way in which the Committee set about its task, and I hope that they will give a sympathetic response to proposals which should commend themselves to those who search for justice in international trade. I beg to move for Papers.

3.48 p.m.

Baroness HORNSBY-SMITH

My Lords, after a year's medically enforced virtual silence in this Chamber I find myself returning to the fray on a similar issue to that on which I spoke in February last year. Then it was on human rights and the persecution of members of the Jewish faith in Russia. Today it is on the boycott. I would congratulate and I agree with the noble Lord, Lord Byers, and his persistence in this matter. There is nothing in his speech with which I personally do not agree. While not giving much joy to the noble Lord, Lord Byers, in pursuit of his Bill, I agree that the Committee has produced a most valuable report, particularly in the fact that by its summation of evidence it has highlighted and exposed to all those who are prepared to read it the extent, the unfairness and the hit-and-miss aspect of this pernicious boycott. We can be grateful for that. They made valuable recommendations which have already been outlined by the noble Lord and which I hope very much that the Government will implement. But in some ways I do not feel that they go far enough. It gnashes its teeth in anguish but it will not bite. Rather, I think, it has nibbled at some aspects of the problem. I regret the total rejection of the noble Lord's Bill because we could have amended it. It is a procedure at which your Lordships' House are highly accomplished.

The report refers briefly to the wartime economic blockade. I spent over five years of the last war as principal private secretary to the Minister of Economic Warfare, the third Earl of Selborne. In World War II economic warfare was fully recognised and a much more developed weapon in total war than ever before. We used every endeavour to prevent vital and useful supplies reaching Nazi Germany and her allies. But despite the fact that we ourselves were involved in total war and that we tried by persuasion and pre-emption to limit supplies from neutral countries reaching Germany, we never descended to the blackmail and boycott of neutral powers and neutral persons such as is imposed by the Arab countries now. Instead, we did our best to maintain normal, if far more limited, trading relations with the neutrals. No one, if I may say so, contributed more to those negotiations than a former colleague of the noble Lord, Lord Byers, the late Sir Dingle Foot, who at that time was Parliamentary Secretary at the Ministry and a Liberal Member of the Government.

Economic sanctions involving boycotts and embargoes are a recognised weapon against your enemy. The Arab boycott of trade with Israel as such is a recognised weapon so long as a state of war exists between those two countries, though I hold the view that dropping the boycott, if only by Egypt, would make a truly tangible contribution to the current peace negotiations. We have heard from all the valuable information in the report that the Arabs make it as difficult as possible for a firm to establish what it can do and where, since a British company wishing to trade with an Arab country is required to agree to the terms of the boycott form issued by the particular country with which it is at that moment trading. A common instruction covering all the Arab States and issued from the Boycott Office in Damascus just does not exist; but, as the report documents, the Arab boycott seeks to dictate to officially neutral and friendly countries terms which discriminate against non-Israeli firms and individuals and, through its tertiary boycott, against non-Jewish clients and partners of companies, it seeks to direct their policy and impose an embargo on their trade.

To me, this blatant interference in the conduct of companies is blackmail. This discriminatory procedure challenges, I believe, the whole basis of the GATT agreements and, certainly, the principles of the Common Market, in that it would seek to coerce EEC nations against the principles of the Community into boycotting an Associate Member State, Israel. It is a denial of the human rights endorsed at Helsinki which this Government so repeatedly assure us they vehemently uphold. It has on occasions even sought to dictate who shall serve on the boards of directors of English companies. Even the Race Relations Board agree that this latter provision is discriminatory and contrary to the Race Relations Act.

It is particularly repugnant and shaming to me to find that it is now common practice for business and professional men to acquire two passports in order that they may not be denied entry into an Arab State because they have previously entered Israel and their passport carries an Israeli entry visa. They may only have gone to Isreal as a Gentile visiting Jerusalem and devoutly following the Stations of the Cross, but they will have an Israeli visa on their passport and their whole trip to an Arab State to trade can be ruined by the fact that they have been to Israel appearing on their passport.

The Government have time and again verbally deplored the boycott. But, in the interests of the nation, will they not implement active support of the many recommendations valuably made by this distinguished committee which have been detailed by the noble Lord, Lord Byers? We are told that, in theory, the boycott applies only to companies supplying arms, military aircraft, ammunition, ships or tankers, or if they have subsidiaries in Israel or go into partnership there. However, the variation in regulations between one Arab State and another, the difference in the terms, the phone-calls and the peculiar machinations which seem to go on when they want to blacklist a country, are so cunningly concealed that they are like a minefield: "Heads, I blow you up; tails, you commit suicide". A United Kingdom agency in Israel selling ping-pong balls or even Arab dictionaries could get itself banned under some of the provisions of the documents which the noble Lord read out.

I believe from the evidence of this report that the Arabs are using the boycott as a major propaganda exercise but are not prepared to deny themselves the goods they need. They can turn a blind eye to the companies that they wish to supply to them and, at the same time, use their muscle particularly on many middle-sized firms or individual professional men. We appear to be the prime victim. The United States and Canada, as your Lord-ships have already heard, have reacted vigorously and do not appear to have suffered. France contends that the boycott is illegitimate and, with true Gallic cunning, trades perfectly happily with both Israel and the Arab world. It is in Great Britain that it appears to have bitten hardest and, so far as the report establishes, there are 1,100 British companies on the black list. In the entire United States we are told there are 1,500—hardly a proportionate distribution.

In their report and in rejecting the noble Lord's Bill or recommending that it should not receive a Second Reading, the committee quite understandably laid great stress on the economic issues. But are we so desperately weak that we have to bow to the bully-boys? Because a nation of only barely 3 million imports less than a nation of 70 million, must the little nations lose out all the time and must we accept the injustices? Time was when Great Britain was proud to be the champion of the small nation. In section 121, paragraph 3, the committee emphasises, as the noble Lord has done, that we really should give active assitance to companies which refuse to yield to blackmail and who wish to trade freely in the Middle East with both Israel and the Arab countries. Can we not have that real mandatory assistance which the noble Lord, Lord Byers, outlined, and not just most charmingly expressed verbal lamentations which to the Arab countries have been like water off a ducks back?

The present Government endorsed Helsinki; they introduced a Race Relations Bill which is probably the toughest measure anywhere in the free world. All we are asking is that the Government practice what they preach and legislate by defending their own citizens from totally unfair and unwarranted discrimination solely because they are trading with Israel or are members of the Jewish faith. In furtherance of international agreements, the United Kingdom should join with other Western powers and jointly protect these firms and neutral countries wishing to trade free from these boycotts.

Finally, many of the Jews in this country came here as the result of relentless persecution in Germany, in the war-time occupied countries or in the USSR. They came because they believed this to be a country of freedom and justice. In the arts, in science, in the law and in commerce they have made their contribution. Many families have been here for generations, and by doing nothing to protect those who are now our citizens and those gentiles who are our citizens and seek to trade freely, I think we are denying those people the very citizenship which led them to come to our shores.