THE SHIPPING INDUSTRY AND ECC REPORT

HL Deb 21 June 1979 vol 400 cc1128-77

4.9 p.m.

Debate resumed.

Lord GORONWY-ROBERTS

My Lords, the House will be grateful to the noble Viscount for introducing this useful debate and for the manner in which he did so. We are also extremely appreciative of the work of the sub-committee—one of the most important sub-committees of the Select Committee on European Policy, the Sub-Committee on Trade and Treaties —for the work they have put in on this extremely important matter. Incidentally, we were glad to have from him a report on the improving health of the chairman of the sub-committee, my noble friend Lord Trevelyan, and I am sure the House will wish the noble Viscount to convey to Lord Trevelyan our general wish that his recovery will be a speedy and full one.

The work of the Select Committee under the able chairmanship of my noble friend Lord Greenwood is already a matter of frequent commendation in this House; it is one of the substantial reasons for the retention of your Lordships' House as a full part of the parliamentary process in our democratic system of due scrutiny. The report is admirable, in that it is brief, concise and comprehensive. Practically everything the noble Viscount said will bear further reading and study when it appears in the Official Report; it was a most able statement of the implications for the future of the matters raised in a report that is commendably brief but very much to the point.

As the noble Viscount reminded us, we in the United Kingdom have the largest shipping fleet in Western Europe. We are fifth—I think he said fourth; we are either fourth or fifth—in the world and we are second in containerised tonnage. Moreover, our fleet is modern, well-equipped and well-managed, and there is a growing consensus of purpose and effort between management and men and between both sides of this considerable industry and the Government of the day. We have a major interest in tackling the undoubted difficulties which have arisen in the field of conference liner operation and various other related shipping matters. We employ 30,000 of our people in this industry and we hope to employ more. We carry a great deal of the world's tonnage already and our fleet, in addition to being well managed, is also competitive, and that against a background of increasing competition from outside, particularly from Eastern Europe—from the Comecon countries.

The Soviet merchant fleet is today the sixth largest in the world and this reflects a remarkable expansion over the past 20 years or so. The Soviet fleet has quadrupled since 1960, and this increase reflects the increase in Soviet foreign trade which in turn increased Soviet dependence on foreign shipping which spurred them on to add to their own supply of shipping. The 1970s saw a rapid expansion of Soviet merchant shipping, in fact an addition of some 1 million tons annually, against a background of a general cutback during that period in world ship construction.

The greater part of Soviet cross-trading takes place outside scheduled liner services and their ships have succeeded in capturing considerable trade from certain world shipping conferences. We would not automatically object to that if they succeeded in capturing an increasing amount of trade by fair practices, but there is, to say the least, and there has been for some years, considerable doubt as to whether all Soviet practices in this field constitute fair competition. It is the methods by which the Soviet Union competes which have been causing concern in Western Europe, and particularly in this country. It is principally a question of undercutting rates. Undercutting is supported, for example, by subsidy (these are State trading agencies); by incomplete relevance to commercial costs (here again, the State is omnipotent); by longer amortising periods than are usual in the West (this is an indirect subsidy to say the least); and by the State itself meeting insurance costs and the costs of training crews.

The noble Viscount referred to Eastern European methods of accountancy; some of us are familiar with these in various fields. It is particularly interesting and ominous to meet it in this field because the net result is that they are able, by methods which do not square with Western standards, to increase their share of trade and, in using the undercutting of rates to do this, force the West, which is already operating to a very economic margin, to reduce its own rates. So we lose both ways: we lose an amount of trade and, on the trade we manage to retain, we manage to retain it only by losing on the lower rates we are forced to charge.

There is another method whereby the Comecon countries, particularly Soviet Russia, achieve an advantage. Their foreign trade organisations—again, they are State trading organisations—buy f.o.b. and sell c.i.f., and that is a great advantage to them. It is said that this concern, which has been mounting in the West and in this country, about rate cutting has been somewhat exaggerated. Perhaps the Minister will tell us when he replies how he sees the present position. I do not believe it is in the least exaggerated. It may have abated in one or two instances in the last year or so—I cannot definitely say—but we should be grateful if, as no doubt he will, the, Minister will give the House his view of the present position.

There have been discussions between Soviet shipping Ministers and ours over the past year or so at least and in the Anglo-Soviet Maritime Commission, which I believe met last week. Perhaps the Minister would tell us if anything has resulted from such bilateral discussions at ministerial, official and commission level.

My next question to the Minister is about the attitude of the Community towards this whole question, and the noble Viscount put it fairly and forthrightly. Indeed, the report puts it very frankly. The committee whose report we are now debating consider that the situation is "most unsatisfactory" as a result of the developing attitude of the Community to these problems. Paragraphs 4 to 8 inclusive of the report give details of the attempts within the Community, principally by the Commission, to set up a system of monitoring of the activities of the Comecon cargo liners.

One cannot escape an impression of disunity, if not of disarray, in the Community on this important matter—indeed, an impression of a certain amount of obstruction in some quarters. It would be invidious to specify countries by name in a suggestion that they have in mind purposes other than the correction of the situation relating to cargo rates. But one gets the impression from this and other documents that a number of our friends and partners—more than one—in Europe are perhaps more concerned about diplomatic recrimination and commercial repercussion promised in Europe than they are about dealing with a situation which cries out for a united approach by Europe to secure reform.

First, the date of implementing a monitoring system, after being somewhat reluctantly agreed, was postponed. Secondly, there was less than united enthusiasm for preparing counter-measures which could be applied if the results of the monitoring operation showed such measures to be necessary. I should like to know whether in fact the Community is studying what kind of countervailing measures could be applied if the monitoring operation showed that they were necessary. Thirdly, the number of routes to be monitored has been reduced from four to two. In fact, as the report puts it in paragraph 8, This most recent Council Decision"— that refers to, I think, the 23rd November decision— represents a further dilution of the Commission's original proposals. The provision for concerted counter-measures has been dropped,"— I asked whether studies were proceeding. They may be, but the reports says that they have been dropped— and the geographical scope of monitoring is much reduced"— it is reduced from four to two— As such, the Decision is a disappointment to the United Kingdom". I would draw the attention of the House to what the report further says; namely that our Department of Trade submitted a note on the Council's Decision of 23rd November, stating that the United Kingdom requested an entry in the Council Minutes to the effect that the study of possible counter-measures, commissioned by the Council in June 1978, should proceed forthwith so that measures could be adopted if need were established". Perhaps the Minister can tell us how far we have got with this very reasonable request: that while monitoring is established, albeit for a reduced number of routes, nevertheless the necessary and useful study of the kind of countervailing measures that might prove to be necessary should proceed regardless.

Finally, may I invite the Minister to tell the House what steps Her Majesty's Government intend to take to raise these matters and press them forward in the Council of Ministers. I recall that last year in the other place there was a short debate on this matter in which the then Government was represented by my honourable friend Mr. Clinton Davis. to whom the noble Viscount paid a well merited tribute for his work in this field. He, and the Government with him, were accused of dragging their feet in this matter and not showing a robust enough belief in the rights of this country. Well, now those accusers have their chance. The then Opposition is the now Government, and no one would be more delighted than I and my noble friends if the Minister is able to tell me that on commercial grounds, and possibly on strategic grounds too, the British voice on this matter will be raised loud and clear in the Community. Although there are certain reservations among our friends in Europe on various aspects of the matter, I believe that if our voice is maintained, and is raised clearly enough, we shall have very substantial support in Europe for the proposals that we have already made.

4.26 p.m.

Viscount SIMON

My Lords, when I first came to your Lordships' House we used to have quite frequent debates on the shipping industry, many of them initiated by the noble Lord, Lord Winster, whom older Members of your Lordships' House may remember as being very keen on anything concerned with our Merchant Navy. Recently we have not had the opportunity to discuss these matters, even though the position of our shipping industry is very much graver today than it was 20 years ago; and so we are all most grateful to the noble Viscount for having both tabled the Motion and introduced it to us with so full-ranging a speech. I am also very grateful to the noble Lord, Lord Goronwy-Roberts, for what he has said, particularly regarding the international situation. It makes it almost unnecessary for me to say anything about the report which is referred to in the Motion before us.

I agree entirely with what both the noble Viscount and the noble Lord said. The report shows that for some reason the Council of Ministers is very half-hearted about a matter which has been strongly urged upon the Community through the Commission. I venture to think—and I suspect that the noble Viscount also hinted this—that this is perhaps because although most of our partners in the Community, with the exception of Luxembourg, have substantial shipping interests, in none of them is their shipping interest so vital to the economy of the country as is our shipping interest to us. This has made the Council of Ministers, or clearly some members of it, unwilling to pursue the line which the shipping industry has asked for and which the Commission has suggested.

There is only one point about the report that I should like to add to what the noble Lord, Lord Goronwy-Roberts, said. As he rightly pointed out, the scope of the monitoring has been greatly reduced, but I regard as even more unfortunate the attitude in regard to countervailing measures. Is it really sensible to postpone as the Council of Ministers seem to wish to do, the preparation of countervailing measures—which will clearly take time to prepare—until we have had the result of the monitoring? If the result shows that serious damage is being done to British and other Community interests, which is what current experience shows practical people, are we then to have to wait another year or two while measures are being prepared and put into effect? Fortunately, as a result of the Merchant Shipping Act of earlier this year, our Government have the power to take countervailing measures when the occasion arises.

If this is to be done on a Community basis, clearly everybody must agree first on what has to be done. Countervailing measures are only a type of warfare and I think that it is open to question how far they are going to get us. They could lead possibly to repercussions in other directions. I must say that I was very satisfied to read in the speech of the new President of the General Council of British Shipping that in his inaugural address, when dealing with this matter, he used these words: We have the hope that one of these days it may prove possible, against a background of strength, for some understanding to be reached with the Soviet Union on shipping questions". If that can be done, it is a far more satisfactory arrangement than having a guerrilla war with counter-measures and Heaven knows what other action taken by the other parties.

If I may turn to some of the wider issues, the economic problems facing the industry, apart from those arising from these Comecon activities, are very serious. We have over-tonnaging throughout the world; there is too much tonnage, I would suggest, even if trade were buoyant. We have the extension of the developing countries' fleets, some of which are more for prestige reasons than economic reasons. But on that point, we must understand their position. Those of your Lordships who were connected, as I was, with shipping during the last war will know that many of these small areas, then largely colonies of the different great powers, depended for their livelihood on being serviced by ships of other nations and particularly by the British fleet. When the whole fleet had to be requisitioned for the purposes of the war, they suffered seriously. I can understand, to take the example of our own colonies, their saying, on achieving independence, "Should another war arise in which the great powers are involved, we must not be entirely reliant upon them for the supplies that we need to maintain life in our own territories". I think that we should take an understandable and understanding attitude towards these moves by the developing countries.

Then we have the oil crises, and particularly the latest oil crisis arising from events in Iran and the expectation that this may lead to a further trade crisis. Shipping has always been a cyclical business, but a cyclical business does not, unfortunately, follow the geometrical circle. I am afraid it looks as though in this case, having reached the bottom of the circle, it is going to be a long time before it starts the up turn. That, at any rate, is how it seems to me. But I am glad to see that the noble Earl, Lord lnchcape, and the noble Lord, Lord Inverforth, arc going to speak later. They have in these matters much greater knowledge than I. To me, the prospect seems extremely gloomy. My Lords, I should like to say something now about the men, and a few women, too, who man our ships. I hope that I shall be forgiven by noble Baronesses if I use the verb, "man"; for I do not feel that one can say, "who 'person' our ships". Having spent nearly 35 years in the shipping industry, though it was a long time ago, I have been privileged to know personally and to appreciate the sterling qualities of our seafarers. We often remind ourselves that we are by geographical necessity a seafaring nation. I do not know whether these qualities which make our seamen the finest in the world are inherited or whether they are acquired afresh in each generation; but certainly these qualities survive. Of course, the increasing complexity of modern ships demands of seafarers qualifications which were not necessary in the old days. The job is quite different; the work is less hard physically than it used to be. This, curiously enough, introduces a new problem: for if men are not now as exhausted physically at the end of their watch, their period of duty, it is easier for boredom to creep in during the off-duty hours, living as they must be, and are, in rather cramped conditions and in small, closely-knit communities. Moreover, as life ashore has become increasingly easy and pleasant —and let us be frank, whatever criticism we have of successive Governments. life has grown easier and more pleasant than it used to be; and even the curse of unemployment which we discussed yesterday is made easier to bear than it used to be—so the particular disadvantages of life at sea, the absence from home, sometimes for long periods, sometimes for indeterminate periods, becomes harder to bear. And it is harder to bear not only for the seafarers but for their families as well.

What has the industry done about this? I should like to take your Lordships hack about 60 years, to just after the First World War, when the industry in consultation with the trade unions concerned set up the National Maritime Board. And before any noble Lord on the Benches opposite starts to get hot under the collar, this is not a Quango. It is called the National Maritime Board because it was a board which dealt on a national basis with the relations between employers and employed in the shipping industry, but there was no Government repre- sentative on it. Within the ambit of this board, wage negotiations were carried on, but also there were full and frank discussions across the table, or, rather, round the table, because at the only meeting that I attended we all sat round the table and not facing each other across the table. All the problems of the industry were tackled in a co-operative spirit between the employers and the unions.

It is so long ago that I cannot remember and give credit to the man on the side of the employers who started this idea, but I remember that great leader of the National Union of Seamen, Havelock Wilson, who had a great deal to do with the establishment of this body. It worked marvellously. There was real understanding and really frank discussion. The only one sad result was that, in a sense, the owners and the unions got so close together, because they understood each other's point of view so well, that it was possible for Mr. Harold Wilson, as he then was, during the seamen's strike in 1966, to accuse the owners of having put the unions in their pockets. This was a very unfair criticism. What had happened was what we all would wish to happen in more industries: that the two sides (if you have to call them two sides) were recognising that they were really part of the same organisation and that they could discuss frankly what the problems were and how best to solve them in the interests of the industry.

This general concept has been developed since then. Recently, I have been interested to learn about a body under the chairmanship of a very old friend, Sir Frederick Bolton, a body representing the owners and the unions—on this occasion with the help of a representative of the Department of Trade—who have been continuously examining and exploring all the kinds of problems which arise in the rapidly changing conditions of a developing industry. The terms of reference of this body interested me very much. I am glad to say they are quite short. They are as follows: To examine ways in which life at sea in the United Kingdom shipping industry can be made more attractive to the United Kingdom seafarer from which the effective use of manpower can be developed". I thought that was a splendid term of reference. This body has been working for about five years and now it is about to wind up its work. To follow that, there are proposals for a similar body working in the same direction. I believe these matters are being considered this week, and it may be that the noble Earl, Lord Inchcape, will be able to tell us something about that.

This is an indication of a state of relationship in this industry which is much to be admired, one which justifies the industry in the hope that it will get through whatever difficulties there are. I believe that, if the present Government take up the problem—as they must in the next five years; and the sooner they do it the better—of the question that was left by the Bullock Report, which I am afraid most of us on all sides of the House did not like very much, and deal with how we are going to spread what I still like to call "worker participation" (because I dislike the phrase "industrial democracy"), and spread that spirit through all the industries in this country, that will do far more to improve the efficiency of industry in this country than tax relief.

Finally, I want to say just a few words about what the Merchant Navy has done for us. Some of us—perhaps most of us here—have lived through two World Wars, in each of which we were saved by the skin of our teeth by the Merchant Navy. The courage of the men who brought what was needed to our beleaguered island and to the theatres of war is something which should be more frequently remembered. If any noble Lord wants to remember it, he can go down to Tower Hill and look at that splendid war memorial with the names of thousands of sailors upon it.

We must all hope and pray—those of us who can pray—that our country will be spared another war. If by any unfortunate chance that does happen, the men will be as courageous as they were in the last war. I remember being told that in those terrible Russian convoys going around the North Cape—one of the most dangerous routes in the world during the war, with the German aeroplanes in Norway—no ship ever missed a convoy because the crew were not there. That spirit will be repeated again. The question I ask the Government—and I hope that the Minister may be able to give us some reassurance—is this: does he and do the Government realise the immense importance of ensuring that, if such an occasion does arise, we shall not only have the men but we shall have the ships?

My Lords, before I sit down, may I say 1 am sorry that I have to apologise to the House and also to the noble Viscount and the noble Lord, Lord Trefgarne, that I may not be able to stay to the end of this debate on account of a previous commitment. I have never had to do this before and I am extremely sorry to do it on this occasion.

4.44 p.m.

The MINISTER of STATE DEPARTMENT of INDUSTRY, (Viscount Trenchard)

My Lords, the House indeed owes a debt of gratitude to my noble friend Lord Rochdale for moving the Motion and the way in which he moved it. The House also owes a debt of gratitude for Lord Rochdale's part in the Twelfth Report and of course for all his very distinguished background services in this area, and particularly that "Bible", his 1970 Committee of Inquiry Report. Let me add my thanks to those which he expressed to the noble Lord, Lord Trevelyan, and other members of the committee and say, as others have said, that we wish Lord Trevelyan a very speedy recovery.

I have to add an apology that I shall not be able to stay to the end of the debate. My reason is that I find ministerial "pull" to get night sleepers is not adequate to enable me to get to the South West on a regional visit—the third of my regional visits—which has to be fitted in a very tight timetable. I shall stay for as long as I am able, but my noble friend Lord Trefgarne will wind up the debate. I believe he is decidedly more knowledgeable than I am. I know that there must be a limit to the number of times that I am able to get away with apologising for this, being the first time that I have stood here doing something for another department. On this occasion I have to answer on a subject which is the responsibility of another department. I see the noble Lord, Lord Goronwy-Roberts, smiling as he recognises the signs that experience is growing of the problems that that produces.

My knowledge is very small in the shipping world, and perhaps the House will not take it amiss if I were to say that really the only serious tuition I had was in my very early training days in Unilever in their shipping department, when a manager of a department—who was not the most enlivening of lecturers—was going on and on about a bill of lading. I found myself with a pencil writing a poem. I cannot remember it all, but I can remember the last stanza: No matter where your trading; It has to go by boat; While on the bill of lading; The steamships stay afloat". My Lords, I have listened with very great interest to the speeches made by the noble Lords who have preceded me, and particularly to that of my noble friend Lord Rochdale, with his immense knowledge. I am also aware, in addition to commenting that the Twelfth Report is, as he says, an excellent document—and we have taken note of it very carefully—that the Merchant Shipping Bill went through this House at a very fast speed just before the dissolution of Parliament, and that there may well be points that noble Lords had been meaning to raise in the debates on that Bill which may come out in this debate. Those points, along with all the points in this debate, will be most carefully drawn to the attention of my honourable friend, the Minister of State at the Department of Trade.

I shall concentrate on the problems of our industry in the international context. I shall touch a little on the domestic situation, but only briefly. It goes without saying that I agree that shipping is a uniquely international industry and the current problems of the industry stem from many of our international problems. As a newcomer, I put the problem slightly differently, and maybe it is just my lack of education. The word, "recession" is used a great deal in this context. The whole of world industry is having a difficult time. But of course it is not strictly true that trade by ships has gone back, which could be implied from the word "recession". It is still growing at 4 per cent. per annum.

While all the world's shipping lines are undoubtedly feeling the pinch in regard to profitability, it is regrettably true that our own industry has, to a greater degree than most, lost a share of the market. Of course this situation, whatever name we use for it, comes from the continued building of ships, albeit at a slower rate than some years ago, at a faster rate than the building up of world trade and the need to carry cargoes.

The level of world trade itself is, of course, terribly important to us and, as is well known, we are more dependent on it than most. Until now, as noble Lords have said, the Free World has been generally served well by its shipping industries; and with the tradition of free and vigorous competition, albeit with a degree of voluntary self-regulation via these conferences, of which my noble friend Lord Rochdale spoke, this vigorous, competitive industry with its self-regulatory element has provided efficient services.

The changed conditions which I have just outlined have produced, as my noble friend said, severe price competition. They were bound to do so. If supply is increasing faster than demand this is the inevitable result, and it has produced to a degree the calls for protectionism and for Governments interfering in shipping. It is well known, of course, that virtually all our exports go by sea and that United Kingdom lines are still the largest single factor in that area. It has been mentioned that the United Kingdom's fleet is still the fourth largest in the world. It has also been mentioned that we continue to do relatively well in the liner sector and in fact are leaders still in two sectors, and very close behind in two others. I accept entirely what my noble friend Lord Rochdale has said: that this is due to heavy investment, wise investment, and efficient investment by the industry. The figure that I have is £4,500 million over 10 years, which incidentally is 15 per cent. of the investment in Great British industry as a whole. I also accept all that has been said about the record of the industry on all sides, and there seems no point in my repeating that.

It is, therefore, in that context, rather sad that we have lost our share, and sad also to record, as I am informed—and here I am informed slightly differently, I think, from my noble friend—that the balance of payments contribution from shipping has now moved from being a small positive one to a negative one. This is in terms of the amount of shipping that United Kingdom residents provide, compared with the amount of shipping we have to buy from operators in other countries. I understand that in 1978 it moved to a minus contribution to our overall balance of payments of £300 million. This is indeed very sad, and I can assure your Lordships that the Government are very aware of this sitution and are studying it very carefully.

My noble friend has given a much more effective and comprehensive review of the problems that I can hope to do, although I will tell him as I go along what I believe my right honourable friend feels on these subjects; but before coming to the detailed problems I want really to say first that it is still early days in the period of office of this Administration. Paying attention to a very knotty problem is one thing: getting to the stage of being able to give specific answers, as all your Lordships will know, is another.

I think the first thing we want to say is that while we would like to see world trade speed up, and indeed we hope that it will do so, we are not counting on the fact that it will. In cautiousness and commonsense, I think we have to assume that the growth of trade by sea will not accelerate very much. Within that context, we shall do everything we possibly can to ensure that our shipping industry is given a fair trading opportunity. The noble Lords who have spoken already have covered a great number of points which show only too clearly how difficult of accomplishment that is, but it is certainly our determination so to do. We are very aware—and I shall return to this later—of the problems of lower-priced competition, but we separate them mentally from the problems of aided competition. We believe, in relation to the latter, that we must work in concert with other nations. We accept that flags of preference generally are not the most effective way of ensuring a competitive and efficient shipping industry, but we do recognise the developing countries' point of view, which the noble Viscount, Lord Simon, mentioned—although we sometimes wonder whether they are wise in some of the attitudes they have taken.

I want to introduce at this point the industry's attitude, as I understand it, on this very difficult situation, and to say on behalf of my right honourable friend that he found their attitude and their recent statements, bearing in mind all that they are facing, which has been outlined, a thoroughly healthy one. This is not an industry which is rushing, cap in hand, asking for help: it is a sturdy, independent industry. The first paragraph of a statement recently released by Mr. David Ropner, the new President of the General Council of British Shipping, says: The most crucial challenge for British shipping in the coming year would be to maintain its competitive edge and at least equal its competitors in cost-effective manning operations". My noble friend Lord Trefgarne will touch on the domestic points later but this industry, faced with these problems, is doing all it can to improve its own efficiency. The importance of it and the size of it have been already sketched, and I will not go over these statistics again. The tonnage of ships that have been laid up, taken out of service or sold has also been mentioned. These figures are serious, and we know that some of the latest sales have been of good modern ships. The profit position and the cash-flow position of the industry are known and the steps taken by the last Government to alleviate them are acknowledged in the short term. However, what we and, I believe the industry, want is a free and healthy industry and one that has a fair trading opportunity.

That takes me to the international problems. If I may, I should like to leave the very important points that the noble Lord, Lord Goronwy-Roberts, raised on the EEC until I have dealt with two of the subject headings here, but I shall come to some of them later. May I first comment on the UN liner code convention. I understand that the convention was adopted as long ago as 1974. It largely reflected the aspirations of developing countries in liner shipping and, in particular, contained the rigid provisions to which my noble friend referred on cargo shipping—the 40/40/20 per cent. suggestions. We recognise that successive United Kingdom Governments have been aware of the problems of developing countries, and we, too, are also aware of them. I think that all Governments have believed it totally inappropriate that the provisions designed to meet developing countries' needs should be applied to all shipping, including shipping serving trades between industrialised countries.

There is no reason to depart within the OECD area from the present free com- mercial régime, which serves both shippers and shipowners well. However, it is clear that in current conditions some OECD countries have become attracted by the protectionist elements in the code. The United Kingdom industry, as we know, has vigorously opposed this trend, and has done its utmost to maintain the free commercial regime which suits its worldwide shipping activities. In 1974, we expressed this attitude by voting against the convention.

However, as is well known, the European Community had come to a common position on the code. That position was finally agreed last month. The regulation in which this agreement is included represents, in our view, an important step both in the development of a European shipping policy, and in laying the basis of shipping relations between developed and developing worlds.

The United Kingdom stressed throughout these difficult negotiations the importance we attach to maintaining a free commercial regime within the OECD and between OECD shipping lines, and the dangers of a protectionist solution based on the code without any amendment. The final position adopted by the Community has been outlined, but the principles of it are, I think, clear; developing countries will enjoy the benefits of the code in their own trades; the code's most rigid features, notably cargo sharing will not be applied—my brief says "will be disapplied", but I prefer a different phrase—in intra-OECD trades, provided that other OECD countries adhering to the code offer reciprocity; competition will be encouraged between OECD lines in their share of trades with developing countries.

The maintenance of the present commercial régime within the OECD now depends largely on the response of the other OECD countries. We agree that the question of Western unity is critical. In this case, we believe that the Community has given an important lead and one that is based firmly on the fundamental free trading principles of the Western world. Some other OECD countries have already made it clear that they will follow the Community's approach. We welcome this and we hope very much that others will follow. United Kingdom accession to the convention will require legislation. Of course, the code must inevitably mean some changes in the operation of liner conferences, but we are confident that, in essence, the system will go on as before.

Let me now come—still before commenting on Europe—to the problem of Soviet Union shipping and Comecon shipping. Of course, the problem that is probably worrying the industry more than anything else is non-commercial competition from the Soviet Union in the liner trades. We accept that there has been what I think my noble friend called "cream skimming". It may be that later in the debate, and possibly after I have gone, the Department of Trade's internal report may be mentioned, because I understand that noble Lords taking part in the debate know of it. But I want to assure the House that my noble friend does not in the smallest degree underestimate the seriousness of this threat.

The Soviet fleet has grown enormously. Various statistics have already been given. It has doubled since 1970. Its predatory rate-cutting outside conferences has enabled it to win business from established conference operators, or to force conferences to cut rates and dilute their revenues as the price of retaining shipping. Because of the importance of the Soviet Union, this is clearly a problem that is best handled by nations in concert. The crucial need is to achieve sufficient Western unity and, as has been mentioned, the United Kingdom has made valuable initiatives in the European Community. We still have to establish the basis for a co-ordinated Western response to damaging Soviet practices. We would clearly prefer a policy of accommodation rather than confrontation and there are signs, as has been mentioned by my noble friend, that the USSR's attitude may be changing. We hope that those signs are indeed real.

I come to the points that the noble Lord, Lord Goronwy-Roberts, raised, and to his plea that the British voice should be heard loud and clear calling for effective action on an EEC basis. There is no question about the strength of British views on this point. I think that we have a great deal to do in the EEC generally, but we are not perhaps so convinced as the previous Administration that "loud" is the right word to use in this context. Effective action must be taken and we believe that the EEC can become a great help in this area. I have noted carefully what the noble Lord and others have said about diluting and delay—even about the monitoring exercise and not working on the possibility of countermeasures. I think that all I can do at this stage is to assure the noble Lord that this Administration is working on all those subjects, that it has opened discussions behind the scenes—and that is why I said I believed that in these areas negotiations are often more effective when they are not loud—and we shall press them as fast as possible within the context of overall EEC problems.

Nothing very spectacular came out of the tenth meeting of the Joint British/ Soviet Maritime Commission last week, but we welcomed the fact that they had joined this one conference and that they seemed more ready to talk about these things. I believe that the EEC can be a positive help. I accept what has been said about the fact that we have a much bigger shipping interest than the other members of the Community. In this context, I want to remind noble Lords that Greece will shortly enter the Community. As I understand it, when Greece enters she will hold a larger share than we shall of the shipping trade, and thus there will be two nations who are really interested in world-wide shipping. This should be a great help in ensuring that a positive view is taken by the EEC. However, we believe that the negative views of the past were perhaps influenced by other things. We hope that the positive attitudes of this Administration towards the EEC will produce the correct response.

It is much to be regretted that shipping relations with the USA are such a problem. The position has been well spelled out by my noble friends. Therefore, the only thing I shall do will be to repeat the statement on 1st June of my right honourable friend the Secretary of State for Trade, when he expressed grave concern about the situation. He said: Shipping is an international activity. It affects the interests of both countries. Any questions that arise should be dealt with jointly, and we consider it wrong in principle for the United States to exercise unilateral control over shipping between the two countries in disregard both of our economic interests and of our shipping policies. In the light of this latest development, the United Kingdom will be reviewing its attitude towards co-operation with the United States in anti-trust questions and on the enforcement in the United Kingdom of United States anti-trust judgments. Meanwhile, I hope it will be possible for the case to be settled as soon as possible. For the future, the United Kingdom looks to the United States to adopt a flexible and responsive approach to further discussions, with a view to reaching a long term agreement between us on shipping matters". I shall overstay my welcome if I spend any length of time on UNCTAD. I endorse the remarks which were made by my noble friend Lord Rochdale in that respect. We believe that we shall keep trade in the OECD countries on a competitive and open basis, and we shall resist the demand for a cargo sharing régime in the bulk trades. We are aware of the industry's views on all the unfair competition questions which have been mentioned, and I should only be repeating what other noble Lords have said. We shall work as hard as we can to try to ensure a fair trading opportunity.

We are very heartened by the attitude and resilience of the industry. We are also very heartened by the fact that industry discussions are taking place, as the noble Viscount, Lord Simon, mentioned, among all those who are working in the industry to try to ensure a yet more efficient performance. Also, we are aware of the defence needs in relation to the security of this country. I am still a novice who has taken too long, and I apologise to the House.

5.13 p.m.

Lord HAYTER

My Lords, I, like other noble Lords, am very grateful to the noble Viscount, Lord Rochdale, for introducing this debate. So far, it has reminded me of Mark Twain's observation that everyone talks about the weather but nobody does anything about it. In this context, one asks the question: who does the talking? I noticed in a newspaper this morning that in one year the General Council of British Shipping held 1,200 meetings in their building. But what happened? Who listened? I do not think anybody did. And who acts in the context of what we are talking about today? To be truthful, it must be those nations who are not too mixed up with other nations—and that means Russia, China and the USA—and who do not get themselves too involved with allies who may not always agree with everything that they say. So I have been very depressed by the debate so far, but I hope that I shall cheer up.

There has been an air of euphoria about the debate which I do not think is realistic. However, noble Lords may well ask why I should have any cause for criticism. The answer is very simple. For some time now I have been the chairman of a little Neddy, that of the International Freight Movement. We have been hammering away at this issue for the last two years or so, with a minor result, as has been mentioned. The General Council of British Shipping and the unions have been intimately involved, and I hope that good will come from it. A variety of opinion is to be found on this little Neddy. The Government are represented upon it; so are the unions, and also the employers. More important, however—and he has not been mentioned a great deal so far—the customer is represented. On this little Neddy we have the British Shippers' Council, the CBI and the British Importers' Federation.

Unless we can solve this problem, my position in the little Neddy group will be very difficult. For is there not, in the National Economic Development Council, the theory of an industrial strategy? Are we not trying to put forward the idea that all of these working sectors should be increasing their exports? And how can they do that if they do not have the shipping which is right for them and which brings its share of payments into this country?

Although United Kingdom shipping, as has already been mentioned, ranks as the most efficient in the world, this is of limited avail if we meet subsidised foreign competition—or, should I say, foreign competition which is more subsidised than ours. It is good business practice to sell cif rather than fob, but if this means that the shipper does not have the facilities that he needs it leads us nowhere.

Now we come to the balance of payments question which has been mentioned. The same is true there. If, for any reason, our shippers can transport exports from this country only on terms less advantageous than those available from overseas, this is self-defeating in balance of payments terms.

On the question of the future prospects for the industry and looking at them from an abstract point of view, these to me remain very gloomy. I do not wish to rehearse once again all the problems; they are self-evident. It is the solutions which are so hard to find. The international aspect of shipping and the oil crisis brought their problems, with freight rates being pushed down and United Kingdom shipowners having to pare down their operations and sell their ships cheaply to their competitors. Most people will agree that since the great days of United Kingdom shipping supremacy Britannia no longer rules the waves. Several countries are determined to bring about a reverse and to build up their merchant fleets.

I take the point which was made by the Minister, the noble Viscount, Lord Trenchard, about the entry of Greece into the Common Market. If I may add a word of caution, this might not necessarily be to our advantage. We shall have to be a little more thoughtful as Greece, Spain and Portugal join these other people, whose permission we have to seek before we can carry on our own strategy.

Then other countries subsidise their freight rates, as we now know to our cost. They reserve cargoes for their own fleets. They create shipping fleets out of all proportion to their operations. This is an element of competition. It is one thing to recognise the competition and another thing to fight it with all the strength at one's command. One more factor which has to be taken into account is the mad scramble to build new ships in the 1960s and 1970s and the surplus capacity which then became available at knock-down prices to nations expanding their fleets.

The last point I have made a note of to which reference has already been made, relates to flags of convenience, a situation which, to a businessman, is quite extraordinary. It cannot be paralleled in any other industry in the world. If you have a flag of convenience, it entitles you to make up your own rules as to how you are going to conduct competition. If we are talking about long-term strategy—and I take it that we are—we ought to be much more precise about the nature of the competition, and that brings us back to the reference to monitoring, a point which has already been discussed in this debate. But unless we really can establish the potential growth of this industry we have some other serious problems.

It follows from the fact that we do not know where we shall be standing in 10 years' time in relation to shipping, that we also do not know how many training courses should be settled for our union representatives; the schools, the hospitals, the hotels, the recreation centres and the other union services again cannot be forecast. The time has come for an international system of educational support for marine qualifications. This was referred to by the noble Viscount, Lord Simon, and I entirely agree with him. The work in shipping has changed, and although some efforts have been made in this connection in the past, I personally feel ashamed when I hear what is happening in Rotterdam and elsewhere on the Continent in relation to the educational needs of their seafarers. The public are quite right in asking for an increase in standards, and if those standards cannot be supported by the sale of the shipping and of their services I think the industry is entitled to get some financial support. The same is true of safety standards and environment control techniques. One could argue that the Government should promote international safety standards and implement them in the United Kingdom and that if they affect the cost of shipping then the industry can turn round to the Government and ask for help.

With our EEC partners of course, as has been said today, we can press these countries to permit the same shore and commercial facilities for EEC shipping as we permit to them. It is a tragedy that a solution to that particular problem cannot be arrived at, but in a very short time will come the opportunity in connection with the Rhine/Danube problems when I hope that a stand can be made.

So the four aims that my little Neddy has in relation to shipping are very simple. We want our exporters and our importers —because they must not be forgotten—to have the most economical shipping services possible, but it must be on a continuing basis. We must avoid putting ourselves into a situation where, by our traders taking short-term advantage of cut price subsidised shipping they therefore kill off the non-subsidised shipping in this country, and we should later be faced with a shipping monopoly which we know we shall have to pay for through the nose. Secondly, I endorse entirely what the noble Viscount, Lord Simon, said: we must ensure that we have protection for our essential seaboard trade against a time of war or of a trade war, when international shipping is seriously disrupted. That is a major strategic point. Thirdly, so long as international shipping provides scope for worthwhile employment to our seafarers and ship managers naturally we want to have as large a share as possible of the international shipping business. Fourthly, there is the obvious point that we must play as strong a role as possible in ensuring safety at sea.

I would proffer two solutions—a major one and a comparatively minor one. The major one is that I would suggest that it is the role of Government to get established the basic level of UK shipping and seafaring. There must be a minimum number of ships that we should have against trade war or against any other kind of more serious warfare. That is a matter of judgment for the Government, and when we have made up our mind as to the basic level—and of course it carries implications that if it is the basic level of shipping, it is the basic number of seafarers, the basic number of seafarers' facilities—if we are forced down to that position, then the Government must maintain it by whatever form of protection is practicable. In just the same way as facing up to competition in business, when you are really up against it you have to be ruthless, so the Government will have to be ruthless, having established that minimum basic level.

The other small contribution that I should like to make is to say that if there is any opportunity which the Government or the other interests involved feel that my little Neddy can do, of course we shall be only too delighted. One of the curiosities of my little Neddy is that it gets things done. At Heathrow it was our little Neddy which put forward the great bonded facility which made so much difference to the freight forwarders, and if in the context of the Rhine/Danube connection we can help in any way at all to solve some of the problems, I should like that to be suggested to us. Whatever is said by the various interests represented in this debate, there are not many ways in which one can go. We could have a commission of inquiry, but we know what the time factor for that would be. We could leave it to the individual organisations, and that is exactly what has been happening all this time. The only other solution is to get together a body where all the interests can be brought together with a firm recommendation represented by the interests concerned, as to what the basic level is that must be maintained in a very difficult area from a national and also from an industrial point of view.

5.27 p.m.

Lord CAMPBELL of CROY

My Lords, I am glad to be following the noble Lord, Lord Hayter, in this debate. As we have heard, he is the chairman of the international freight sector unit of the National Economic Development Council organisation and therefore has been running one of the "little Neddys", as they are known. From all that I have heard of it, that body certainly has the reputation for getting things done, and I am sure he is largely responsible for that success. But I think I detected a complaint from him that there has been an air of euphoria in the debate so far. I shall certainly not contribute to that. He referred to a saying of Mark Twain, that everybody talks about the weather but no one does anything about it. That prompted me to think of another saying attributed to the same author, that a certain piece of music was "better than it sounded". I hope that the departments and all others concerned will examine carefully the contributions that are being made to this debate today when they read them in the Official Report, because I think they will find nuggets of good sense and good advice in the speeches.

Like others, I congratulate my noble friend Lord Rochdale on having initiated this debate and on having done so in such a helpful way. He dealt with a complicated subject in what he described as a logical sequence and it is a very well chosen sequence. Subsequent speakers have been able to avail themselves of his sensible division of this subject, as I intend to do myself. Of course the Motion was down for debate in April and it was postponed as a result of the dissolution of Parliament. I am very glad that it was only a postponement and not a cancellation. One result of the general election that intervened is that most of us are speaking today from places in the House different from these which we would have occupied had the debate taken place in April. I hope I shall escape any risk of accusations of introducing polemics into the debate by saying that I regard the new positions in the House as an agreeable change.

Parliament is greatly indebted to my noble friend Lord Rochdale, I think more than has yet been stated in this debate for his contribution in past years to this and to related subjects. He was too modest about this. After having done that exhausting inquiry into docks and harbours he was, between 1967 and 1970, chairman of the Committee of Inquiry into shipping. It examined the whole question of liner conferences, both open and closed, their usefulness and whether they cause restraint upon trade and upon competition. As a result, the committee approved in general such conferences, but did make some reservations. Those conclusions were accepted, and modifications were introduced at the initiative of the British; the British took the lead. As a result the modifications have been adopted by a very large number of the liner conferences throughout the world, notably in the CENSA code, as it is called. I will spell the name of that out, because it arises from the Council of European and Japanese National Shipowners' Associations. The point is that there is no "J" which can be sounded in the acronym, but it is important to recognise that the Japanese are involved. It was as a direct result, therefore, of my noble friend's committee's report that the liner conferences have been operating throughout the world very smoothly until 1974, when the United Nations code of conduct was adopted. The liner conferences situation would not otherwise have been disturbed.

But, as has been already stated, it was the developing countries who found that CENSA code not to their liking. Britain voted against the United Nations code, but Japan, for example, appears to be in favour of it. Indeed, the unity of the maritime developed countries has been upset by this new code, and therefore I very much welcome the agreement which my noble friend Lord Trenchard confirmed just now had been agreed last month among members of the European Economic Community. I understand that ratification of the United Nations code can be carried out by members of the Community with agreed reservations. That United Nations code was very hurriedly thrown together, and, as the Twenty-Fifth Report of the Select Committee in the Session 1977–78 pointed out, it had great disadvantages for the United Kingdom. Now the agreement reached within the EEC goes forward for discussion in the OECD. Very much is owed to my noble friend for these developments and the way that this is now going.

I would also like to join others in mentioning Sub-Committee B of the Select Committee and express regret that its chairman, the noble Lord, Lord Trevelyan, cannot be with us because of illness. I join others in hoping that he will have a very quick recovery after being in hospital and having his operations. I cannot refrain from mentioning that we worked together for the first time 32 years ago, when he was in the Economic Relations Department of the Foreign Office and I was working in one of the European departments; so I particularly look forward to further working with him in the future.

Turning to the state of the British shipping industry, I am to be followed in the debate by two noble Lords who are themselves in the industry and will give us the benefit of their knowledge, my noble friends Lord Inchcape and Lord Inverforth. So I will not go into those particulars myself. We all agree that the industry has been passing through a very difficult period and we are glad to see some signs of improvement in recent months. But there has been a substantial reduction in British-owned ships during the past year. The statistics for 1978 are available, and for that year certainly the United Kingdom is shown as fourth in the world table in deadweight tonnage. The noble Lord, Lord Goronwy-Roberts, said that he thought we might be fourth or fifth, but certainly in 1978 we were fourth.

Two of the countries who are ahead of us are Liberia and Greece. If we look closely at the registration of ownership, where Britain is concerned we find that the tonnage registered with the United Kingdom is 49.7 million tonnes. That owned in, and registered with, the United Kingdom is 46.7 million tonnes. So there is not a great difference between the tonnage registered and the tonnage owned by United Kingdom owners. That means that we are virtually with Japan at the top of the first division in the first league in the shipping of the world, because certainly where Liberia is concerned I think we can assume that considerably less of the tonnage which is registered with that country is genuinely Liberian in ownership.

My Lords, not only in size is the British industry in such a leading position in the world; we lead also in specialised cargo fleets, such as container shipping and other carriers. I think the importance of the United Kingdom shipping industry is not adequately known in this country, so I make no apology for emphasising these facts. I noticed a discrepancy arising, which my noble friend Lord Trenchard indicated, between the figures that he had for the contribution to the balance of payments and the figure which my noble friend Lord Rochdale had mentioned in his opening speech. I think we ought, if possible, to get this settled, and I think it might be possible before the end of the debate when my noble friend Lord Trefgarne winds up. The latest information I have on this is a statement made only a week ago by the president of the General Council of British Shipping in which he said—and this was published: In 1977 the net direct contribution of UK ships to our balance of payments was over £1,000 million and in 1978 the net contribution is expected to be of the same order". So my understanding is that the net contribution is of the order of something over £1,000 million. It may be that my noble friend was considering the sea transport account rather than the net contribution to the balance of payments. I do hope that this can be sorted out later because it is an important fact, if it is a fact, as I believe it is, that the British shipping industry still does make this net contribution to our economy.

I would like to comment before I sit down on two matters bearing on the future health of the industry to which I believe the Government should be addressing their serious attention: first, the close links with our ship-building industry, and secondly, the threat posed by the blatant undercutting of freight rates by the Soveit Union and the East European countries described in the Select Committee's Twelfth Report. That can only be carried out by massive subsidies within the State trading and State ownership systems practised by those countries. On the first matter, with regard to shipbuilding, the United Kingdom industry is in a very difficult situation. This arises because there is in the world about three times the capacity that the world needs. The United Kingdom shipping industry is making its contribution to solving the problems. It is calculated that at the end of last year 66 per cent. of all merchant ship tonnage due for United Kingdom registration was on order for building in United Kingdom yards, and that was an increase upon the percentage at the end of the previous year, 1977.

In the coming months the Government will have important decisions to take on shipbuilding. There are serious economic and social problems in the shipbuilding areas. I point out that jobs in the smaller firms supplying components and in ancillary industries are also affected and they are usually in the same areas. I ask the Government to answer the following questions if they can today: In assisting with remedial measures, will the Government keep in mind the wellbeing of the British Merchant Fleet?

Not only the British economy, but also the shipbuilding industry itself, will suffer if the British Fleet is badly damaged by schemes which help foreign competitors. Orders from abroad are, of course, welcome, but if they are attracted only by massive subsidies enjoyed by foreign shipowners, the subsequent competition is likely to be most unfair placing the British shipping industry at a great disadvantage. The Polish deal is past history, but it was disquieting at the time. For example, the subsidy element could mean that a ship was acquired by a foreigner for £1 million less than a similar ship being built for a British owner. That means that during its lifetime that ship would enjoy a start of £1 million against British competitors in the world shipping lanes. The Government should find a balance between the interests of both industries, because both industries are interdependent.

I turn to unfair competition from the Soviet bloc countries. A great deal has been heard about the expansion of the Soviet Navy, and rightly so. However, not enough has been heard about the expansion of the Soviet Merchant Fleet in this unfair way. Action has been taken within the EEC, but the report of our committee points out that it has not been enough. We do not know what happens in the Council of Ministers because the proceedings are confidential. The fact is, however, that the proposals of the Commission, limited as they were, were very much watered down and all that we have as a result is the monitoring over a period of two years—which started at the beginning of this year—of only two routes: one between the EEC and East Africa and the other between the EEC and Central America.

I accept the need to avoid unnecessary provocation of the Soviet Union. The matter can be handled in a friendly way. I understand that there is to be a meeting between Western interests and Soviet interests in August. I do not know whether it is simply again another meeting of the British/Soviet Maritime Commission. It may be wider, and perhaps my noble friend can inform us about that. I am sure that it is welcome that the Soviet Union has apparently agreed to join one conference—the India/Pakistan Conference mentioned by my noble friend. It has been suggested in the past that it might join conferences, but there were technical difficulties. However, from outside the liner conferences, the Soviet Union has launched deliberate offensives to take over as much cargo as possible on certain selected routes, charging freight rates which on commercial terms are simply not possible. Those rates can only arise from very heavy subsidisation.

From the United Kingdom point of view more action is needed—and much more effective action than is now being taken. I was very glad to hear the assurances given by my noble friend Lord Trenchard in his speech earlier this afternoon. I hope that the Government will accept the recommendations of the Select Committee and will succeed in persuading our partners in the EEC to act accordingly; namely, to strengthen the very limited measures which are now in train.

5.45 p.m.

The Earl of INCHCAPE

My Lords, as chairman of a major British shipping company, I am doubly grateful to the noble Viscount, Lord Rochdale, first, for his past services over many years to the shipping industry; and secondly, for his service today in initiating this debate and for his full and forthright speech in which he covered all the salient points of the industry's situation. His Motion is linked to the Twelfth Report of our EEC Committee and having taken part in the deliberations of the sub-committee I welcome the opportunity to contribute to the debate today.

Indeed, my EEC involvement goes back some years, because as president of the General Council of British Shipping, I went in 1976 to call on the noble Lord, the Lord President of the Council and Leader of the House, Lord Soames, who was then Commissioner for External Relations in Brussels. He made it clear how important it was for the United Kingdom to consider our shipping problems in Community terms—to add as it were a "Brussels dimension". We accepted that inspiring message in the spirit in which it was given, but to do this sort of thing is never easy. There are bound to be conflicts between various national interests of which shipping is only one. Other conflicts will arise too, between national interests and those of the Community. So, it is difficult to start from the basis of a grand design for a European shipping policy and hope that everything will fall into place.

Those of your Lordships who, like myself, favour a more pragmatic approach will in recent weeks have drawn comfort from the attitude of the EEC to the United Nations Liner Code which has been mentioned by several noble Lords this afternoon. That international convention has been referred to and debated before in your Lordships' House. There has been no doubt, ever since the text was finalised in 1974, about its divisive character. It has divided many developed countries from the developing countries of the Third World. Equally, it has created divisions between member countries within the EEC. And yet, it was possible for the EEC Commission at the UNCTAD Conference in Manila, which has just concluded, to present an agreed front on this issue.

The so-called "Brussels package" has the support not only of the EEC countries and of the Commission, but I believe of other Western countries, such as Sweden, Norway, Finland and Greece. Ship-owners no less than Governments have accepted this compromise; for compromise it is, as the noble Viscount, Lord Rochdale, has said. I would not wish to burden your Lordships with technicalities, but it is important to see where the compromise lies. The basic provisions of the Code on cargo-sharing — the famous 40-40-20 formula—will apply as to trade between developed and developing countries. Cargo-sharing in the trade between developed countries will continue to be determined by commercial criteria. These arrangements seem to me to accommodate commercial and political realities. alike.

However, important though the Code is, I see it against a wider backcloth. It represents a major topic on which the member-States of the Community and of the Commission, and of the various national shipowner associations, have managed to reach agreement. So, the question then arises: cannot we build on what has now been achieved? I think that we can, for the code is not the only example that I can cite of agreement, although it is by far the most important one.

Following the anxiety by the Eastern bloc fleet, the Community (as has been mentioned by several noble Lords) has agreed to monitor non-commercial competition. There is widespread agreement too on the measures that should be taken on safety grounds against substandard ships. But I would like to insert a word of warning here. There is a role for the EEC in co-ordinating action under internationally agreed safety and pollution conventions. But for it to duplicate the work done at IMCO would be a serious waste of time and money for all involved.

What all this suggests to me is that if we are to follow the advice of the noble Lord, Lord Soames, and try to import a European dimension into our shipping policy, we should do so on a pragmatic and step-by-step basis. Let us first seek agreement on both shipowner and Government networks, on individual issues and gradually build up a European shipping policy. That is, I am sure, a better line of approach than to draw up an elaborate and ambitious blueprint which would have little chance of being implemented and might well lead to disappointment and disillusion.

The noble Viscount, Lord Rochdale, did not limit his Motion to the EEC. It goes on to call attention to the problems of the shipping industry generally. I should like to take advantage of that wide invitation. As has been mentioned by many noble Lords this afternoon, we do have problems, but I want to set those problems in perspective. As the noble Viscount, Lord Rochdale, has said, the British fleet is now 40 million deadweight tons. It includes all the major types of merchant ships: oil and chemical tankers, gas carriers, bulk carriers, container ships, ro-ro ships and off-shore vessels, as well as passenger cruise ships and cross-Channel ferries.

In recent years the fleet has made an annual contribution to the balance of payments—and I should like to confirm the figure given by my noble friend Lord Campbell of Croy—of £1,000 million a year. That is the net figure. In addition, a further £300 million is saved by imports being carried in British ships. If it was not for its shipping, this country's modest surplus on current account for 1977 would have been a not-so-modest deficit, and the same would have been true in 1978.

As we are frequently reminded, North Sea oil will not last for ever, and for balance of payment reasons alone we still need a major British shipping industry. As my noble friend Lord Simon has said, we are also an important employer of seafarers and shore staff, and we are an important customer of United Kingdom shipyards, indeed traditionally their most important customer. We are of major importance to the insurance, shipbroking and forwarding businesses. We carry some 80 million tons of this country's imports and exports each year. So we are not being boastful when we say that a strong British shipping industry is of vital importance to this country. However, we in the shipping industry do not believe that this should be taken for granted because we have problems about the future

During the last five years the major problem has been one of worldwide over-tonnaging, particularly in the tanker sector. Even now we are not clear of it. The surplus of the largest tankers is likely to continue for several years yet. In the shipping industry we have taken the necessary steps—the sometimes painful necessary steps—to adjust capacity, and slowly shipyards are doing the same. We hope that Governments everywhere will now recognise that the only sure remedy for the world's shipbuilding sickness is a genuine revival in demand, and the essentials for national shipyards are competitive prices and prompt deliveries.

In shipping, too, competitiveness is one of our problems. It is one which the industry collectively and companies individually are tackling. But we are competing in a free market against ships with far lower crew costs than ours, and if we are to prosper, not only in the short term but in the long term, we must match and better the total costs of our competitors.

Then there is the field of co-operation with the Government. Here I am happy to say that there is no problem. We have always been lucky in having excellent relations with the Government of the day. For example, the last Administration provided the Dell Moratorium Scheme which has been of considerable help to one sector of the shipping industry. Recently, as the noble Viscount, Lord Trenchard, mentioned, your Lordships passed a Merchant Shipping Act—albeit at great speed—which had general support from both sides of the House and from the Cross-Benches.

This close working relationship with the Government is one of the invisible advantages of the British fleet. Developments in UNCTAD, competition from the Eastern bloc fleets, and the regulatory activities of the United States all demand that Government and industry work as one. The same is true in the fiscal sphere. The Chancellor is aware of our need for consortium group relief, and there is a need to stop foreign Governments taxing British ships when we do not tax theirs. I hope that my noble friend Lord Inverforth will have something to say on that subject. Finally, there is the problem of ensuring that our fleet is able to take advantage of the revival of the market when it comes, as it surely will.

For over a period of 10 years the British shipping industry invested an average of £1 million a day, as has been mentioned this afternoon. That period is now over; indeed, it has been over for some time. Reserves have been used in keeping afloat during a long hard recession. Inflation has made a nonsense of depreciation based on historic costs, and many ships have been sold by companies to pay off debt and so improve their balance sheets.

Therefore, replacement of the fleet is a formidable task. We have the skilled seafarers; we have the management; and we have many fine ships. But if we are to make full use of those advantages, the time will come when we shall need to make further investments; not growth for growth's sake, but growth to meet the likely expanding world demand for shipping services in the 1980s. I am not asking for investment grants. Valuable though they were, we do not think that they are the right solution. Rather, we believe that there is a case for investment allowances. I hope that this case can be developed to the Government and that the Government will look favourably upon it. After all, we in the shipping industry do not get certain advantages which are available to manufacturing industry, such as stock relief. Although it is accepted that this industry has served the country well over many decades, we must ensure that it will continue to do so, as that is in all our interests.

5.56 p.m.

Lord INVERFORTH

My Lords, as chairman of shipping companies I, too, particularly welcome the initiative of the noble Viscount, Lord Rochdale, in enabling us to spend some time this afternoon discussing British shipping. I should like to begin by mentioning the termendous problem which has been facing my own family company regarding the Vietnamese refugees, as both the "Sibonga" and the "Roachbank" belong to us. Noble Lords may recall that "Sibonga" rescued from the South China Sea 1,003 and "Roachbank" 295 of these unfortunate people. We have been glad to save their lives, feed them and aid them with medical supplies.

When the "Sibonga" arrived at Hong Kong we took on board doctors and nurses to further their care. In all we had them on board the vessel for two weeks and, although much has been reported of this incident in the Press and on television, little has been said of the remarkable seamanship of the master in handling the vessel during the actual rescue operation. This was carried out under very difficult circumstances in heavy swell conditions, with severely dehydrated and weak refugees, the majority of whom were women, children and babies in arms totally ill-suited to boarding on the open sea a vessel such as the "Sibonga". Despite having to lift them with improvised cradles on to the decks of the vessel—which was rising and falling over 30 feet—the only incident was a young women sustaining a slightly crushed toe.

For a cargo vessel designed under normal circumstances to accommodate only 60 persons, suddenly having to cope with such an enormous number of people, needed considerable organisation. The problems presented by sanitation, hygiene, potential disease and fire hazards I need only leave to your Lordships' imagination. The fact that the whole operation was managed so well illustrates the many skills, professionalism and humanitarian outlook needed by the master, officers and crew of a British ship.

The problem of the "Sibonga" refugees, thankfully, has been resolved. However, the "Roachbank", I regret to say, still lies idle at anchor off Taiwan with her refugees on board. She picked them up on 23rd May and four weeks later they are still with us. In the present state of our shipping industry we can ill afford the resultant loss of earnings. I am sure your Lordships will appreciate that in these circumstances the charterer immediately puts the ship off hire, and so we bear a considerable loss, in addition to the cost of feeding and caring for the refugees. These costs together have run us into many thousands of pounds and so far have all fallen on the shipowner. It is ironic that my company should be penalised financially, when each master was committed to fulfilling his legal obligations under the Maritime Conventions Act 1911.

I know that Her Majesty's Government are deeply engaged on this difficult question with the United Nations High Commission for Refugees, and have proposed an international conference on the subject, but all this takes a terribly long time. "Roachbank" is under a year old, a modern and expensive ship, and the long delay we are experiencing whilst Governments and diplomats struggle with the problem is extremely worrying and costly —to say nothing of the ineffective impression we give by being unable to carry on the ship's commercial activity. We shipowners do need assurance that if we save life we shall be relieved as quickly as possible of any victims we have picked up. The solution to the problem of the refugees is surely one for governments and not for individual shipowners.

May I now turn to shipbuilding, the plight of which industry is now even more bleak throughout the world than when I last addressed your Lordships a year ago. As you are aware, my company has been a good customer and 100 per cent. loyal to building in this country. Indeed, since the Second World War we have built 82 vessels, with the 82nd being delivered today more than a month ahead of contract date. It is surely fair to claim the successes of British Shipbuilders as much as their failures so far as deliveries are concerned. The shipbuilding industry can only survive if it gives the customer what he requires, when he wants it. It is no good trying to persuade owners to build surplus to their own requirements at a time when there is already a surplus of tonnage worldwide.

I have always felt that this country should have an efficient shipbuilding industry—not only for defence purposes but also to produce ships of good quality for our merchant fleet. Shipbuilders, however, must concentrate on improving their efficiency, so that when an owner does want to build he can be quoted the keenest price and offered the best delivery terms with the assurance of both management and their workforce.

My Lords, there is another aspect affecting competition which I should like to mention. British ships operate with crew sizes which are legislated or recommended by the Department of Trade. These numbers are frequently in exess of those required by our EEC partners, or for that matter by other main foreign-flag carriers. The British shipowner is therefore at a considerable disadvantage. Is it not possible for IMCO to extend its legislation in this particular field? Meantime our own Department of Trade must seriously reconsider manning levels on British-flag vessels. Every single pound per day counts, and we look to the United Kingdom Government to see that we are not placed at a disadvantage.

Another example of this concerns safety and, while British shipowners approve the lead that the United Kingdom Government give at IMCO in producing new internationally agreed legislation, what we cannot afford is for the United Kingdom alone to go beyond such legislation, in a way which puts us at a competitive disadvantage. We cannot afford to pay more than our responsible competitors for survey fees, and we cannot afford to have safety requirements greater than those competitors, or the expensive testing of equipment which has already been approved in other reputable countries. These are not issues of safety but of cost. The British fleet's safety record is already three times as good as the world's, but please do not penalise us with extra financial burdens. An internationally agreed safety code, through the offices of IMCO, is the best solution—with such legislation adopted and monitored by all member-States.

My noble friend Lord Inchcape has mentioned briefly the problem of foreign Governments taxing British ships when we do not tax theirs. At this time of major depression our industry can ill afford the payment of unnecessary, unfair and at times discriminating taxes. Although developed countries on the whole incorporate the OECD principle of exemption for shipping, there is an increasing tendency for developing countries to tax our ships—usually by reference to turnover, which they quite wrongly equate to profits. United Kingdom shipowners therefore effectively bear a further overhead expense to which the foreign shipowner from the country concerned is not liable. Not only therefore are we less competitive but we are being obliged to pay out increasingly substantial sums of money at a time of losses and real financial stringency. What is more, we are paying these taxes to countries many of which in fact are in receipt of grants in aid from this country—let alone, on occasion, the gift of cheap ships. Just touching on capital taxation, we were very interested to see what the Chancellor had to say in his Budget statement and hope very much that we may look forward to some relief in this difficult area.

One final word about the EEC. Shipping is an international industry. The interests of the Community's merchant fleets are essentially directed outwards towards the rest of the world rather than to intra-EEC trade, although this has grown significantly. The problems that face the EEC in shipping therefore cannot be treated like transport problems, which are purely internal. Thus, in whatever way EEC competition policy may relate to intra-EEC trade, I believe it does not apply to international liner shipping. Shipowners are hungry creatures these days and competition is fiercely intense. On many of my own company's international trading routes our most formidable and persistent rivals are in fact fellow-members of the EEC. Consequently I hope that Her Majesty's Government will oppose any attempts by the European Commission to apply the EEC Competition Rules to international liner shipping. This is not just because liner conferences have a much wider basis than the European Community, but because we believe that relationships between shippers and conferences should continue to be established at a commercial level. The last thing we want is a European equivalent of the US Federal Maritime Commission to regulate the application of the EEC Competition Rules to shipping. We have only to look at the recent developments in the US trades to see what a disastrous effect this could have on the commercial operations of our merchant fleets.

Notwithstanding the competitive pressures of everyday commercial life which I have just mentioned, there are many wider policy issues where the shipowners of the EEC can co-operate closely to their mutual advantage. I was very happy that a compromise was reached among the EEC partners on their approach to the UN Liner Code, so that we were all able to go to the recent UNCTAD meeting in Manila with one voice on this complicated but important issue. It is on the wider range of shipping policies such as this that the EEC could well be very useful to us in the future. My Lords, I have spoken on a variety of shipping matters, but I hope that what I have said may be regarded as useful and that the Government will take note of my points.

6.8 p.m.

Lord RUNCIMAN of DOXFORD

My Lords, like other noble Lords I should like, at the risk of a desirable repetition, to thank my noble friend Lord Rochdale again both for starting this debate and for the manner in which he did so. I do so all the more because of the interest which I must now declare, which is that I have been a practising shipowner for something over 50 years, and still more or less am. That gives one a slight feeling of having seen an awful lot of this before.

It was no great pleasure being a ship-owner in the depression of the 1930s, but I think it is true to say that the current —I am told by someone in the House this afternoon that I must not use the word "depression"—situation with regard to sea transport is more difficult for the British owner than that situation was because of one or two technical things. It is much more difficult to deal with a small fleet of large ships than with a larger fleet of smaller ships. You have more flexibility with the latter. You have inflation as compared with, if anything, falling costs in the 1930s, and, above all, the political bedevilment of so much of international shipping, which has rightly been the subject the greater part of your Lordships' debate this afternoon.

I will not try to add to what people better informed than myself have had to say about the liner trade, except to echo something which fell from my noble friend Lord Rochdale when he urged that the commercial interests of this country should make more use of shippers' councils. I have seen something of it from both sides of the fence and it is disappointing that, in their own interest, let alone that of British shipping, shippers' councils are not stronger, more effective and more numerous.

Otherwise, I wish to speak briefly on the bulk cargo section of the British fleet. It is closely allied, of course, with the independent tanker section and the problems which face it; namely, that they are both subject to the charter market, which is itself probably the most extreme case of simple economics of supply and demand governing price, certainly that I know of, anywhere in the world. The liner conferences can to some extent cushion, or at any rate postpone or make less violent, the effects of supply and demand, but the tramp market, to use the old-fashioned term for it, cannot, and the fluctuations are quite startling. One remembers freights falling by 75 per cent. on a particular commodity in a large trade over a period of six months, which is not the kind of thing which has to be put up with by most industries.

Bulk cargo ships form a little under one-quarter of the total tonnage of the United Kingdom; or it would probably be more correct to say that it did so at the beginning of 1978 because, as has been suggested already this afternoon, it is pretty clear that the sales of United Kingdom ships to foreign owners have been mainly in the independent tanker and bulk cargo markets. The reason for that is simple—in fact I have just given it; namely, that they are immediately subject to falls in price which, if your standards are the sort of standards which United Kingdom shipowners have learned to observe and if your financial arrangements over the last years have been such that you have built ships on borrowed money and therefore have no fat, or not much, to live on, you are obliged to sell to keep a cash flow going, and I cannot see any immediate prospect of that process being reversed.

The only long-term remedy, so far as the bulk market is concerned, is a sustained increase in the demand for bulk commodities to be carried about the world by sea. There has happily been a welcome increase recently and, if this is sustained, I dare say those of us who are in that trade will feel encouraged to remain in it rather longer than we otherwise might. But it will take a very much larger recovery in world trade than anyone can foresee to enable the British bulk owner to compete successfully with those to whom he has sold, very often at a loss, ships which they can operate much more cheaply than he can, in matters of crew and the like, and also they are people who have had advantages in not paying taxes over the years which has left them with rather more cash available to see them through bad times. That is no new phenomenon either; one saw it not so early as the '30s but in the depression which followed the Korean war, and one has seen it at intervals since. I am afraid, therefore, that the chances of a suitable sufficient increase in demand are not really very great. The only hope for the moment, and it seems a slim one, is a diminution in the supply; in other words, a real cutting back in the building of unwanted ships by yards subsidised for that purpose in a good many countries. That is always difficult. You can buy or sell a ship or you can order a ship, and it does not take very long one way of the other. You set up a shipyard and you then have a very large establishment. Of course in shipbuilding, which is largely an assembling industry—mention has already been made of the number of sub-contractors involved in any shipbuilding operation—it is very much more difficult to unwind it without a great loss in the employment of the people you have taken on to run it in the first place. If you are talking about jobs in shipbuilding and jobs in shipowning, you will always find there are more jobs to be considered in shipbuilding than there are in shipowning, which is a most capital intensive trade.

There is always a tendency for people who are looking for the employment of their nationals to favour the shipbuilder at the expense of the shipowner. If that goes on, I take an extremely gloomy view of the future of the bulk cargo part of the United Kingdom fleet. And if we should find ourselves with a very small number of bulk carriers at a time of war or threatened war, we might find ourselves in the situation, which was described with just sympathy by the noble Viscount, Lord Simon, of being dependent on other people for our own vital necessities. I can pose the problem, but I cannot really attempt to answer it. I can only say from that point of view that I think the beginning of widsom is the reduction in unwanted tonnage.

6.18 p.m.

Lord TREFGARNE

My Lords, I rise armed with a sheaf of papers informed to answer almost every point that has been made in this debate, but we will see how we go and if I get a bit long-winded perhaps noble Lords will forgive me if I cut my remarks short and answer the rest of the points in correspondence. As my noble friend Lord Trenchard has already covered most of the foreign shipping relations matters that have been raised, I will concentrate my attention more narrowly on the United Kingdom industry and some of its specific and more domestic problems. First, I will make some initial general remarks. I am heartened by the emphasis that successive speakers have laid on preserving the essentials of our traditional approach to foreign shipping relations. The interests of the United Kingdom industry lie with maintaining a free commercial environment, particularly in the developed world, but we must bear that in mind when framing our domestic policies too and not let the recession become an excuse for adopting narrow or protectionist attitudes at home.

Secondly, and this also echoes much of what has already been said, despite its problems, we must recognise the success of our United Kingdom shipping industry. Nobody denies that times have been very difficult, but we pay tribute to the resourcefulness and ingenuity with which the industry has met its difficulties. Shipping remains a major United Kingdom industry and United Kingdom shipping remains a major force in the world. What is especially encouraging is that we are among the leaders in the most modern, efficient and dynamic sector; namely, the containerisation of liner cargo.

I am of course aware that United Kingdom shipping, like its foreign competitors, is suffering from the effects of a recession, perhaps the worst since the 1930s. It originated in the great expansion, largely outside the United Kingdom, of new shipbuilding in the 1960s, and was followed by the oil crisis of 1973, and then the slow growth of world trade since that time. Too many ships are chasing too little cargo. Freight rates and earnings are depressed. The oil tanker sector was earliest and hardest hit, and has not yet recovered. Meanwhile, over-capacity has spread, first, to dry bulk carriers—by which I mean those carrying dry cargo on regular services. So far the industry has weathered the storm well without Government assistance on any large scale, thanks to the enterprise, efficiency, and generally good management and labour relations. But there could still be difficult times ahead. Forecasts vary as to when the market for shipping services will return to balance, but it is likely to be years rather than months. The effects of such a prolonged recession are bound to put a strain on any industry's resources. I know that the industry is taking steps to cut costs and increase revenue and efficiency, and it is also discussing what further action needs to be taken in co-operation with the Government.

May I now turn to the various speeches that have been made and try to deal with at least some of the important points. The noble Viscount, Lord Rochdale, to whom we must record our gratitude for initiating the debate, made a number of points which I shall cover in a few moments. First, I want to make our position clear on the Grand Jury investigation to which the noble Viscount referred, and which has caused considerable concern in the Government. It is perhaps worth recording that the maximum fine in this case of 50,000 dollars was imposed on 13 individuals, two of whom were United Kingdom citizens. Furthermore, the maximum fine was imposed on two British members of certain consortia operating on these trades, totalling 1.8 million dollars. These latter fines were in fact agreed settlements made out of court. As my noble friend Lord Trenchard said, my right honourable friend the Secretary of State for Trade made a statement expressing Her Majesty's Government's grave concern at the recent prosecution by United States authorities of British shipping interests, and we are awaiting their response.

The noble Viscount, Lord Rochdale, also asked me about the joint British-Soviet Maritime Commission which held a meeting in London recently. The commission reviewed various trades where there is a significant Soviet presence. The United Kingdom side welcomed the agreement opening the way for a Soviet line to become a member of the India, Pakistan and Bangladesh conference, but we expressed regret at the continuing disagreement between the Soviet line and the East African conference. The commission reviewed the bilateral UK-USSR trade and, I am told, noted an encouraging increase in the proportion of trade carried by the United Kingdom flag.

The Soviet threat has been mentioned by almost every noble Lord who has spoken today, and several noble Lords have been critical of the progress being made in the EEC on this matter. But I would remind your Lordships that it is our policy, and indeed the policy of our predecessors, to proceed in these matters —not only in the EEC and elsewhere— wherever possible by negotiation behind the scenes and by persuasion and accommodation. While it may not be inappropriate to consider what retaliatory actions could be taken if the need arose, the time has certainly not yet come when we should consider taking those actions. But we certainly believe that the EEC ought to consider what measures could be taken, and we are continuing to use our influence to get them to agree to that. May I, in parenthesis, try to keep the matter in perspective. The United Kingdom Fleet in 1978 was 49.7 million deadweight tonnes, although there has been some small decline since then, and the Russian Fleet was still only 19.8 million dead weight tonnes. So, for the moment at least, we are still almost two and a half times the size of the Russian Fleet—

Lord GORONWY-ROBERTS

My Lords, before the noble Lord leaves the question of the possibility of countervailing action, may I put a point to him? I understand that the monitoring exercise which has been agreed—although it has been restricted to two routes, and there are a number of other reservations about it in some quarters—will take two years. The present EEC attitude (if I may call it that) is that countervailing measures should not be considered or thought out until the monitoring exercise—if and when it takes place—has been completed. That puts the point of countervailing action, if it proves necessary, at at least two years, and very probably at least three years, beyond today. In the meantime the pressures on our own shipping and that of others among our partners are real and may intensify. May I ask the Minister to give urgent consideration to pressing our friends and partners to engage in a notional exercise on countermeasures pending the end of the monitoring period? What is to be lost by doing that while the monitoring is going on, rather than postponing even the consideration of the measures until after the monitoring is over, which would be two years ahead?

Lord TREFGARNE

My Lords, I cannot hide from your Lordships the fact that we are disappointed by the present EEC position on this matter. We are certainly pressing them now as opportunity arises to reconsider the position in this regard and indeed to consider now what actions might be taken should they become necessary in future. As the noble Lord knows, we have to take our EEC partners with us; we cannot on our own steamroller the EEC into doing this. But the noble Lord may be assured that we are doing everything we can through the proper channels and by the proper means to get the EEC to change their ideas in this direction and to achieve what the noble Lord is seeking. Certainly the noble Lord and I are at one as to what ought to be done in this situation.

I now wish to turn to the remarks which the noble Lord, Lord Goronwy-Roberts, made in his speech. I believe that I have already covered his principal point about the need for more concerted and more effective action in the EEC. The noble Lord raised some other points, almost all of which I think I have now covered. Further, he raised the question of Soviet practices, which is really part of the same concern leading up to what we hope will be a better solution in the EEC, and he asked whether the matter is being raised in the Council of Ministers. As the noble Lords knows, it has been recently raised with regrettably unsatisfactory results, but we shall continue to press for it to be reconsidered, and I have no doubt it will be raised again in the near future.

The noble Viscount, Lord Simon, also referred, at some length, to the Soviet threat. I am glad that the noble Viscount (who is not in his place at the moment) also preferred accommodation to confrontation. That is certainly our preferred policy, and we hope that in this matter we shall be able to achieve that. The noble Viscount, Lord Simon, along with the other noble Lords, also asked me about worker participation and about what we were doing for what I think he called "crew comforts", for our seamen. This is of course a most germane point, and I shall write to him on it specifically.

The noble Lord, Lord Hayter, asked me about the Economic Development Committee for international freight movement. He referred to the activities of the little Neddy and its discussions on the state of the shipping industry. Shipping is a uniquely international industry and many of the factors which influence world shipping are inevitably outside our control. That alone makes it doubly difficult to forecast the future with any confidence. Because of its international nature, many of the central questions affecting shipping safety, pollution, the liner code, and so on are best considered in the appropriate international fora. Regular meetings now are well established between the General Council of British Shipping and the seafarers' organisations to discuss economic aspects. So far as I know, the little Neddy for international freight movement is the only body which brings together formally representatives of Government, management, the unions and the customers. Although its remit is wider than shipping, it has a role to play in the exchange of views and ideas, particularly during this difficult time for the shipping industry.

The noble Lord, Lord Hayter, also asked about overseas aid and special deals involving shipbuilding. Several noble Lords raised the potential damage to United Kingdom shipping through the grant of special terms to our competitors to order ships in this country or to assist in the purchase of ships under the aid programme. Perhaps I can say more about that in a moment. When I come to refer to the remarks of my noble friend Lord Campbell of Croy, I can refer specifically to the Vietnam ships deal where I think there are some lessons to be learnt.

If I may now turn to the remarks of my noble friend Lord Campbell of Croy, he asked me to try to clarify the apparent discrepancy between the remarks of my noble friend Lord Trenchard and the noble Viscount, Lord Rochdale, on the balance-of-payments situation. I think that there may be some misunderstanding about the different terms involved. Certainly United Kingdom-owned ships earned in 1977 about £1,000 million net; but the shipping account included payments by United Kingdom nationals for shipping services to non-United Kingdom shipping companies. If those figures are taken into consideration, then in 1978 the total shipping account moved into a deficit position, of (so I am advised) £300 million, and it may be worse in this year. The figure of £1 billion total deficit has been suggested for 1980, but we believe that that is unduly pessimistic.

My noble friend Lord Campbell of Croy also asked about the August meeting on Soviet shipping matters. This is a meeting between the United Kingdom and the USSR shipowners which, by the nature of the Russian situation, is principally the Russian Government; but it really only relates to bilateral trade and is not part of the process of seeking a more general accommodation. The next formal meeting with the Soviet Government is the Joint Maritime Commission meeting next year, but contact between individual liner conferences and Soviet lines will be continued in an attempt to find an acceptable basis for entry into these new conferences.

I now refer to the sale of ships, with aid, as was done in the case of Vietnam. There is perhaps a general lesson to be learned from that case which may apply to other similar deals when considered in the future. The offer of £4½ million from the aid to trade contingency provision, as it is called, to assist with the purchase of four SD 14 general cargo vessels from Austin and Pickersgill was made by the previous Administration and embodied in a formal exchange of notes with the Government of Vietnam. The previous Administration explained in the other place on the 13th February the reasons for this step. Since then one ship has been delivered, various instalments paid on others, and almost £2.3 million remains to be paid. Under the terms of the agreement these instalments are paid directly to British Shipbuilders and we see no possibility of their being diverted by the Vietnamese authorities. The aid forms an essential part of the contractual arrangements for the sale of ships which Vietnam could otherwise have bought elsewhere in the world market at prices broadly competitive with our price after allowing for aid and put them into service in competition with our own shipping lines. The general lesson to be learned from these deals is that the developing countries will buy their ships from where they can and doubtless they will get them at least as cheaply from elsewhere; so that we face competition for our shipping industry whether we supply ships or not. It is therefore sometimes worth proceeding with these deals simply as a good means of providing additional business which is sorely needed in our shipyards. The noble Earl, Lord Inchcape, in an interesting speech asked me a number of points. I am not sure that I shall be able to answer them all this evening. I shall try to do so, but if I miss any I shall write to the noble Lord. He asked particularly about investment allowances. He asked whether there will be sufficient incentive for the shipping industry to reinvest when the recession comes to an end. Mention was made of investment allowances. The industry already enjoys the advantage of a 100 per cent. free depreciation on the purchase of new ships, which means that it is not badly off in relation to its European competitors. The Government will examine with care any proposals from the industry but obviously we can make no commitment at this time.

The noble Earl, Lord Inchcape, referred to the swift passing of the Merchant Shipping Act at the end of the last Session. The noble Earl will appreciate, I think, that they were unusual times and, although we shall be monitoring the effect of the Act as passed, we have no immediate plans for introducing any amending legislation.

The noble Lord, Lord Inverforth, referred to the serious problem of the Vietnam refugees with which his company has been particularly involved. We recognise the pressures and frustrations faced by ships' masters and shipping companies not only when rescuing Vietnam refugees in the South China seas but in the period afterwards when arrangements are made to provide at least temporary asylum. There is no question but that we support the action which ships' masters have taken in recent incidents. It reflects great credit on them and on the shipping companies. The difficulties which arise after the refugees have been rescued bring forward many conflicting considerations for the Government to take into account. We have decided upon humanitarian grounds to accept all refugees from the "Sibonga" and all those from the "Roachbank" which the Taiwanese will not accept. The scale of the problem is such that the Government cannot make an open-ended commitment. A solution has to be sought on an international basis rather than by the United Kingdom alone.

Both the noble Earl, Lord Inchcape, and the noble Lord, Lord Inverforth, complained of the double taxation which sometimes falls on British shipping companies. The Government are certainly concerned about the increasing number of countries which impose taxes on shipping revenue earned on turnover rather than on profitability. While we have some sympathy with the view that reserved countervailing powers should be available to the Government to be used in situations where our shipping interests are treated unfairly, there is a danger that the existence of such powers will be counter-productive when conducting negotiations on double taxation agreements. We will keep the matter under careful review.

Finally, I refer to the point made by the noble Lord, Lord Inverforth, about the application of stringent safety and manning requirements on British ship operators. I have taken careful note of what the noble Lord has said. The Government have no desire to place British fleets at any commercial disadvantage; but, as I understand it, the recommended manning levels are directed at securing the safe operation of these ships, which is surely the common object of both Government and industry. However, if the noble Lord has particular points that he wants to raise, I shall be happy to draw them to the attention of my right honourable friend. My Lords, I have spoken too long already, I fear. May I end by reminding your Lordships that British greatness was perhaps built upon the shipping industry as much as any other, and as it is a central tenet of this present Government's policy to restore this nation to its rightful place at the top table of the world, we feel sure that the shipping industry will help us do that again as it has done in the past.

6.41 p.m.

Viscount ROCHDALE

My Lords, I am sure that anyone moving a Motion in your Lordships' House, and having from every speaker the feeling that the debate has been worthwhile and has raised important matters, cannot but be satisfied. For my part, I am very pleased with the way that this debate has gone. I should like to thank all noble Lords who have taken part in the debate from their several points of view and experience, and from many points of view there has been great experience shown. I should like in parti- cular to thank the spokesman from the Front Benches, the noble Lord, Lord Goronwy-Roberts, who made a very important contribution, and also my two noble friends on the Government Front Bench, the noble Viscount, Lord Trenchard, and the noble Lord, Lord Trefgarne.

The word "euphoria" crept in during the course of the debate. Obviously, it would be wrong if the message were to go out from this House that it was merely one of general euphoria in what was going on in the shipping world in the United Kingdom. But it would be equally wrong if we did not interpret the word "euphoria" as recognising and expressing appreciation of what the industry and all those who work in it are doing in the extremely difficult circumstances in which they have to operate today. Obviously, there are enormous problems; they have all been referred to and analysed. I hope that the result will not be merely words but will encourage the Government to continue with the department the excellent work of action to get some of these problems resolved as quickly as possible.

I am very grateful to my noble friend Lord Trefgarne for resolving the little problem of the contributions to the balance of payments. When we all read that in Hansard we shall find that we were both, broadly speaking, right; it was merely a matter of how the references were phrased.

Perhaps I may make one other point. Shipping is not a subject that lends itself to emotion; but I must say, listening to the noble Lord, Lord Inverforth, that there was a degree of emotion—and rightly so—when he reported and gave us a very interesting account of what went on in the case of the "Sibonga". It showed that those who serve at sea in these ships today continue to live up to the highest traditions of the Service. I am very glad he made that point. My Lords, having said that, and having again thanked all noble Lords for their contributions, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.