Lords Sitting of 1 May 1980

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Truro):
The LORD CHANCELLOR on the Woolsack.

UN DEVELOPMENT CONFERENCE
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what has been their response to the proposal of Group 77 (now composed of 117 non-aligned nations) that a United Nations conference on global negotiations for international co-operation for development should meet from 5th January to 11th September next year to break the deadlock in the North-South dialogue.
Lord TREFGARNE: My Lords, Her Majesty's Government participated in the consensus in the United Nations General Assembly which called for global negotiations. We are joining actively in preparatory work for the negotiations, now under way in New York.
Lord BROCKWAY: My Lords, I thank the Minister for that reply. Would he not agree that, in view of the fact that, over 10 years, successive United Nations agency conferences—Paris, North-South dialogue—have led only to limited success, a supreme and sustained effort must now be made to reach an agreement? Would the Government support the proposals made by the Willi Brandt Commission, endorsed this week by the French Government, that there should be a summit meeting of Heads of State in January, followed by a sustained conference next year, on the very big agenda, if a package agreement is to be reached?
Lord TREFGARNE: My Lords, we are not yet in a position to give our
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considered views on the many proposals contained in the Brandt Commission's Report; but the details which the Committee of the Whole (as it is called) are now considering, the details of the conference to which the noble Lord has referred, will have to be confirmed by the General Assembly this autumn.
Lord BROCKWAY: My Lords, may I ask the Minister this question: Is not an agreement just as necessary for the Western nations as it is for the Third World? Would not the lifting of standards of millions of people in the world mean a demand for goods and less unemployment in our countries in the West? Could the noble Lord confirm two points? He informed me last week—and I was very glad to hear it—that the Government have agreed to make a donation to the main fund of around £5 million, and even a contribution to the secondary fund. Is he aware that these proposals have now been supplemented by the United Nations World Food Council, which has increased its food reserves to the Third World? Would he confirm these two points?
Lord TREFGARNE: My Lords, I cannot confirm the last point which the noble Lord has raised because I do not have the information in front of me, but I have no reason to believe that what the noble Lord says is not correct. As for the general assertion which he made at the outset of his supplementary question, that aid is beneficial to the donors as well as to the recipients because of the increased markets which are thereby generated, while that certainly is a consideration there are others as well, including our ability to find the money.
Lord HARMAR-NICHOLLS: My Lords, is my noble friend aware that, while the generalities contained in the Brandt Report may be impeccable in theory, many details will need to be filled in before it is put to a summit, where a disagreement on details would give an impression which would be even more dangerous than beginning to talk about it?
Lord TREFGARNE: My Lords, the Brandt Commission Report, which your Lordships discussed some weeks ago, is certainly a very important and weighty

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document, and we would want to give it very full consideration before reaching final conclusions on it.
Lord GLADWYN: My Lords, even before they have made up their minds on the individual proposals made in the Brandt Report, why cannot the Government say that they favour in principle a meeting of Heads of State or Government in January, as proposed by the French?
Lord TREFGARNE: My Lords, I think we want to be careful before making statements of that nature, which might raise expectations which could not in the event be realised.
Lord HATCH of LUSBY: My Lords, as the Minister has agreed that the implementation of the Brandt Report has an advantage to the industrialised nations as well as to the developing nations, would he answer the point raised by the noble Lord behind him, as to whether the British Government are now working on filling in these details which are so necessary to apply the Brandt Commission Report in practice?
Lord TREFGARNE: My Lords, I must repeat that we are not yet in a position to announce our conclusions on the Brandt Commission Report, but the considerations certainly go wider than the simple one which the noble Lord has often put; that it promotes the interests of our own industries here at home.
Lord GISBOROUGH: My Lords, could my noble friend bear in mind, before any further progress is made, that the Third World already owes 384 billion dollars and in 1981 will owe us 440 billion dollars, and that the only way in which this can be repaid is either by printing money or by bankrupting the banks?
Lord TREFGARNE: My Lords, I think my noble friend over-simplifies the position.
Lord ORAM: My Lords, is the noble Lord aware that his answers this afternoon are in great contrast to the note of urgency that was struck by the Brandt Report; and, while we can accept that deep consideration has to be given to the issues
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in the Brandt Report, is it not equally necessary that they should be given urgent consideration? Will the noble Lord urge upon those responsible for these matters that that urgency should be appreciated? In reference to the last supplementary question from the noble Lord opposite, was not the question of the indebtedness of the Third World to the developed world the very critical issue which was raised by the Brandt Report? Far from being a reason for doing little, it is a reason for doing a lot, and quickly.
Lord TREFGARNE: My Lords, the question of indebtedness to the Third World was only one of the matters raised in the Brandt Commission Report, which, as your Lordships know, is a very comprehensive and lengthy document. But the Government will certainly reach their conclusions on this matter as soon as they reasonably can.
Lord PARGITER: My Lords, would the world be materially worse off if the debts were written off?
Lord TREFGARNE: I have a feeling that is a catch question, my Lords.
Lord TANLAW: My Lords, will Her Majesty's Government take into consideration some of the omissions of the Brandt Commission Report—in particular, rural electrification of the developing world—and will this appear on the agenda which the noble Lord has discussed?
Lord TREFGARNE: My Lords, energy is one of the matters which will be considered by the conference which was the subject of the original Question.
Lord BROCKWAY: My Lords, the Minister spoke of the difficulty of financial aid from this country. Is he aware that the proposed agenda for this conference is much more than aid? Is he aware that the agenda covers raw materials, energy, trade, development and finance, and that it is a matter of mutual trade rather than aid from the Western countries?
Lord TREFGARNE: My Lords, the agenda for this conference has not yet been agreed. I think the noble Lord is ahead of himself.

RHODESIA: ELECTION OBSERVERS' REPORT
3.8 p.m.
Lord HATCH of LUSBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will publish the report of the Commonwealth observers on the Rhodesian elections.
Lord TREFGARNE: No, my Lords. The report is available from the Commonwealth Secretariat.
Lord HATCH of LUSBY: My Lords, would the noble Lord the Minister agree that the work of the Commonwealth observers in Rhodesia during the election was of crucial importance? Would he further agree that their report is an historical document which should be as widely available as possible, and has been sadly neglected by the media of this country? Will he reconsider his Answer and put the force of the British Government behind the publication of this report so that it can be widely read?
Lord TREFGARNE: No, my Lords.
Lord GORONWY-ROBERTS: My Lords, is the noble Lord aware that there would be very considerable support in more than one party and section in this country for what my noble friend Lord Hatch has suggested? Is he aware that we would welcome a somewhat more forthcoming indication of the Government's thoughts for the widest possible dissemination and public study of this very valuable report, particularly in view of the fact that the experience of Rhodesia, of leading a dependency peacefully into effective independence, may serve us well when we tackle the more difficult problem of Namibia?
Lord TREFGARNE: My Lords, that may be so, but the Question I was asked was whether we would publish the report. The answer is, No, we will not, because, as I said originally, it is available from the Commonwealth Secretariat. Why, therefore, the Government should publish it I am not certain.
Baroness GAITSKELL: My Lords, may I ask the noble Lord why he is so unforthcoming about welcoming and trying to spread this report?—because it adds to our prestige throughout the whole world and there is no reason why the Government should hold back on it.
Lord TREFGARNE: My Lords, we are not holding back on it. If the noble Baroness wants a copy she can get it from the Commonwealth Secretariat.
Lord HATCH of LUSBY: My Lords, is the noble Lord aware that, while he is correct in saying that the report can be obtained from the Commonwealth Secretariat, I understand that the Commonwealth Secretariat is having difficulty in publishing it as opposed to simply having it duplicated and available to the public? If the noble Lord is not prepared to commit the Government to publish the report, will he assure us that the British Government will play their part as a member of the Commonwealth in ensuring that this report is published and widely disseminated—including the lodging of a copy in the Printed Paper Office of this House?
Lord TREFGARNE: My Lords, as the noble Lord knows, the report is a lengthy document. I cannot give the undertaking that he asks for. The noble Lord referred to the fact that the report had not been widely referred to in the newspapers. We have no more ability to push things into newspapers than we have to get them out.
Lord CAMPBELL of CROY: My Lords, is my noble friend aware that if as suggested this report were to be printed it might be a very long time before it was published, given what is happening to our Hansards at the moment?
Lord TREFGARNE: My Lords, my noble friend is quite right.
Lord GLADWYN: My Lords, is not this paper available in the Library, anyway?
Lord TREFGARNE: No, my Lords, I understand that it is not available there at present.
Several noble Lords: Why not?
Lord BROCKWAY: My Lords, the Minister did not answer the question whether the report will be placed in the Printed Paper Office in this House.
Lord TREFGARNE: My Lords, I have not given an undertaking that this report will be put in the Printed Paper Office.
Lord PEART: My Lords, surely the noble Lord will be aware that certainly the view that we have always taken over a document of this kind is: why not put it in the Library?
Lord TREFGARNE: My Lords, I will undertake to put a copy in the Library if that is your Lordships' wish.
Lord PAGET of NORTHAMPTON: My Lords, since we must accept that the Government of Zimbabwe is the best Government we have got, is there very much point in drawing additional attention to an election which, admittedly, was rife with fraud and intimidation?
Lord TREFGARNE: My Lords, I must reject that. The elections in Rhodesia were not rife with fraud and intimidation.

LONG-TERM INTEREST RATES AND INFLATION
3.15 p.m.
Lord BESWICK: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what assumption is made about the rate of inflation in the year 2000 when deciding interest rates on Government stock repayable in the next century.
The MINISTER of STATE, TREASURY (Lord Cockfield): My Lords, the Government have made no assumption about the rate of inflation in the year 2000.
Lord BESWICK: My Lords, can the noble Lord recall that on Tuesday, with a degree of emphasis, he said that the rate of interest would not come down unless and until the rate of inflation comes down? Are we to assume, because there
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have been two recent Treasury issues repayable in the next century, that they are assuming that the rate of inflation will not come down until the next century? May I ask the noble Lord whether he would not agree that it is something about which we should all be concerned that on these two recent long-term issues alone, raising between them something less than £2 billion, no less than £7,000 million will be disbursed in interest; and that £7,000 million in purchasing power with no extra production must mean a force towards inflation?
Lord COCKFIELD: My Lords, the noble Lord is not entitled to make any such assumption as is contained in the first part of his supplementary question. The terms of issue of a particular stock depend upon the Government's need to sell sufficient stock to fund the borrowing requirement and the acceptability of the terms to the people who are going to purchase those stocks. There is a substantial demand for long-term stock from the institutions and the Government need to take advantage of this demand.
So far as the noble Lord's second point is concerned, the best way of keeping down the burden of interest on future generations is to reduce the public sector borrowing requirement; and that is at the centre of the Government's policy. I am glad to hear that we have the noble Lord's wholehearted support of our policy in that direction.
Baroness WOOTTON of ABINGER: My Lords, would not the Minister agree that the acceptability of stock to the public very largely depends on the terms, and that the terms carry implications (because of the very high rates of interest that they now carry) about what the value of that interest will be in the next century?
Lord COCKFIELD: No, my Lords, they do not carry any such implications.
Baroness WOOTTON of ABINGER: My Lords, why, then, do the public buy them?
Lord COCKFIELD: My Lords, the public buy them because they think that in relation to the current rates of interest the stock represents a good buy. Perhaps I might remind the noble Baroness that

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the Government issue short-term stocks as well as long-term stocks and that the tap which ran out immediately before the tap to which the noble Lord, Lord Beswick, referred was the 1983 stock—and you cannot get much shorter than that.
Lord KALDOR: My Lords, is the noble Lord aware that in the London Stock Exchange we possess a very efficient secondary market in gilt-edged securities and it is perfectly possible for the Government to fund the public sector borrowing requirement by issuing reasonably short-term or medium-term securities and leave the secondary market to satisfy the need of the insurance companies for long-dated maturities? My second question in this connection is that, since the noble Lord and his colleagues in the Treasury regard the role of inflationary expectations as so important in the process of inflation itself, how can he think there is no link between inflationary expectations and the maturing dates of the wholly artificial coupon stocks which are issued? They are bound to be counter-productive from the point of view of inflationary expectations.
Lord COCKFIELD: No, my Lords, the Government do not accept the noble Lord's analysis of the correct basis of management of new issues. If the Government were to attempt to raise all of their requirements by short-dated issues it would merely have the effect of driving up the rate of interest on the short-term bonds even further than the present level.
Lord AVEBURY: My Lords, if the contemplated yield is much lower than the rate of inflation indicates and the institutional investors' market is expecting the rate of inflation to come down within the period of the stocks, then, if their expectations are not realised, is it not incorrect to say that the burden of interest on future generations will be as substantial as has been maintained, because the Government will have perpetrated a fraud on these investors by paying them back in depreciated pounds?
Lord COCKFIELD: My Lords, the first part of the noble Lord's supplementary question is of course the complete answer to the noble Lord, Lord Kaldor. The coupon on the stock to which the noble Lord, Lord Beswick, refers was 13½ per cent., which is less than the current rate
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of inflation. This indicates that the markets have confidence in the Government's ability to bring the rate of inflation down, and I am glad to see that confidence shared by noble Lords opposite.
Lord SHINWELL: My Lords, could we have an assurance from the noble Lord that he is really interested in what is going to happen in the year 2000, or is he not feeling very well?
Lord COCKFIELD: My Lords, I would never attempt to emulate the noble Lord, Lord Shinwell, who is as fit and active today as when I first saw him cross the political spectrum when he won the election at Seaham Harbour. Nevertheless, I look forward to seeing the year 2000 and to see who is right about the rate of inflation.
Lord BESWICK: My Lords, the noble Lord has been insistent on disagreeing with a good deal that has been asked this afternoon. May we see whether there are some issues upon which we can agree? Do I gather that now, as on Tuesday, the noble Lord agrees that the whole of the borrowing requirement is required to pay interest on money that has already been borrowed? Secondly, does he agree with my arithmetic that £7,000 million will he dispersed in purchasing power on these two recent longterm issues? Thirdly, will he agree that as far as productive industry is concerned in this country, these rates of interest penalise them as far as on-costs are concerned, and make it almost impossible for them to export by creating an artificial exchange rate?
Lord COCKFIELD: My Lords, there is an arithmetical equality between the amount of public sector borrowing requirement and the amount of interest which is being paid. It does not necessarily follow that one is the consequence of the other, because it is equally arguable that the size of the public sector borrowing requirement is a reflection of the high level of Government expenditure generally. The noble Lord is trying to hypothecate particular items against other items. This is not really an acceptable approach. So far as the rate of interest generally is concerned, we recognise the burden that it imposes upon industry. We shall be only too glad to see when the rates of

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interest come down. The Government's policies are directed to this end and we are confident of success.
The MINISTER of STATE, MINISTRY of AGRICULTURE, FISHERIES and FOOD (Earl Ferrers): My Lords, we may not have exhausted this Question; but if we continue for another 10 minutes I doubt whether we will do so. Your Lordships may feel that we have given this Question a good run for its money, and perhaps it would be proper to move on to the next one.

LAND USE AND FUTURE WATER NEEDS
3.22 p.m.
The Earl of ONSLOW: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether it is in line with their policy for land use to allow the Severn-Trent Water Authority to flood 700 acres of farm land at Carsington at the same time as the Anglian Water Authority is lowering the levels at Empingham reservoir 50 miles away thus creating up to 1,600 acres of mud flats.
Lord MOWBRAY and STOURTON: My Lords, this is not a matter of policy. The Severn-Trent Water Authority were authorised to build Carsington reservoir by the Secretary of State for the Environment in the previous Administration. The reservoir is required to meet the estimated future needs for water in the Leicester and Nottingham areas. My right honourable friend the Secretary of State for the Environment confirmed the previous decision. The decision by the Anglian Water Authority to stop pumping water into the Empingham reservoir which, I understand, is nearly full, is for the authority to take. They will be saving a considerable sum of money by doing so. However, the authority will review the situation again over the next few months.
The Earl of ONSLOW: My Lords, is my noble friend aware that the Central
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Water Planning Unit advocated in 1976 at the public inquiry that water from Empingham, where the Anglian Water Authority have overestimated their demand by something like 30 per cent., should be made available to the Leicester area, and that regarding the reservoir at Carsington, the river Dove should take its place? This suggestion fell through because the Anglian Water Authority insisted on a capital charge for their reservoir as opposed to straightforward extraction costs.
Lord MOWBRAY and STOURTON: My Lords, I am not sure whether the noble Lord is making statements to me or asking questions. If he is making statements, I do not agree with them. What I can tell the House is that although there is a surplus of water at the moment at Empingham, there need not be a surplus if the Anglian Water Authority do not pump all the time. They can save £300,000 in one year.
As to the prospect of whether they should pump water to the Nottingham-Leicester area, where there is going to be a grave shortage of water in the future, to do so would take over two years, getting the wayleaves and the pipes put in, and would cost about £10 million. By five or six years on it would still not be giving enough water, because Empingham could not do that even if fully pumped up. The Carsington reservoir is a long-term necessity. When I say "long-term", I mean within this decade.
The Earl of ONSLOW: My Lords, could the noble Lord give us the water forecast needs for the Severn-Trent Water Authority as produced by Carsington and the equivalent pump down at Empingham? Can he also show how much water could or could not be saved by metering?
Lord MOWBRAY and STOURTON: My Lords, the cost of the temporary job will be about £10 million. The cost of the permanent one will be about £30 million. As the £10 million will be wasted in a few years' time because it will not do the job anyhow, surely it is better to do the long-term project.
Lord LEATHERLAND: My Lords, I did not hear the Minister comment on

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that part of the Question which talks about the creation of 1,600 acres of mudflats. Perhaps the noble Lord will enlighten us on this matter. What do the Government intend to do with the flats? Will the Government bear in mind that such mudflats are admirable for the growing of rice?
Lord MOWBRAY and STOURTON: My Lords, the noble Lord, Lord Leatherland, slightly followed my noble friend's original Question. The fact is that Empingham reservoir is very big, about 3,100 acres. If the Anglian Water Authority did not pump for one year, it is estimated that the acreage which would become dry might be some 600 acres round the circumference of that area of 3,100 acres. That could be topped up. There is no reason for it to have mud-flats. Water in reservoirs goes up and down, and reservoirs do not become mudflats.
Baroness STEDMAN: My Lords, is the noble Lord aware that when this reservoir was first contemplated there was considerable local opposition to the size of the reservoir and the fact that round its edges it was so shallow that there was likely to be a considerable loss from evaporation? Is he aware that the same opposition is now being aroused locally at the thought of having the mudflats referred to by his noble friend?
Lord MOWBRAY and STOURTON: My Lords, I am reassuring the noble Baroness that there will not be the mud-flats. The water will not go down at once. It will be a steady going down while the sun is out and the banks dry.
Lord BALFOUR of INCHRYE: My Lords, if the arguments that the Minister puts forward are so powerful and confound Lord Onslow's Question, what is the review which he has said is still to take place going to cover?
Lord MOWBRAY and STOURTON: My Lords, the Anglian Water Authority are an independent water authority. They have not been pumping since the beginning of this financial year. However, they could decide in July, when they have their next meeting to discuss this matter, to start pumping again for one or two
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months. They are their own authority. There is a saving if they do not pump and there is a surplus of water at Empingham at the moment, but, I repeat, not enough to fill the long-term needs of the Severn-Trent.

THE IRANIAN EMBASSY INCIDENT
Lord SANDYS: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m., my noble friend Lord Belstead will repeat a Statement being made in another place on the Iranian Embassy in London.

MAGISTRATES' COURTS BILL [H.L.]
The LORD CHANCELLOR (Lord Hailsham of Saint Marylebone): My Lords, I beg to introduce a Bill to consolidate certain enactments relating to the jurisdiction of, and the practice and procedure before, magistrates' courts and the functions of justices' clerks, and to matters connected therewith, with amendments to give effect to recommendations of the Law Commission. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read la.—(The Lord Chancellor.)
On Question, Bill read la; and to be printed.

OVERSEAS DEVELOPMENT BILL [H.L.]
The LORD CHANCELLOR: My Lords, I beg to introduce a Bill to consolidate certain enactments relating to overseas development and co-operation and to repeal, as unnecessary, Section 60(1) and (2) of the West Indies Act 1967. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read la.—(The Lord Chancellor.)
On Question, Bill read 1a, and to be printed.

STREET OFFENCES BILL [H.L.]
Lord AVEBURY: My Lords, I beg to introduce a Bill to amend Section 1(2) of the Street Offences Act 1959. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read la.—(Lord Arebury.)
On Question, Bill read 1a, and to be printed.

ECC REPORT: TRADE POLICY
3.31 p.m.
Lord DRUMALBYN Lord DRUMALBYN rose to move, That this House takes note of the report of the European Communities Committee on Trade Policy: the Tokyo Round (41st Report, H.L. 204). The noble Lord said: My Lords, I beg leave to move the Motion standing in my name, which draws attention to the European Communities Committee Report on Trade Policy: the Tokyo Round. Noble Lords will find, if they have not already done so, that the report contains a valuable paper from the Department of Trade in which written replies are given to preliminary questions put to them on behalf of Sub-Committee B, as well as the oral evidence from the department complementing the written evidence, and further oral evidence at a later stage from the Department of Trade after the agreements were open for signature. We also received oral evidence from the CBI. The TUC chose not to give oral evidence.
I would draw particular attention to the conclusions of the report. However, in order that your Lordships may judge the validity of these conclusions, it seems to me that my first task in opening this debate should be to give some account of the facts and circumstances on which these conclusions are based.
The first question obviously is: why was the conference called? It was primarily because there appeared to be a serious risk that, as a result of the deterioration of economic prospects in the early 1970s, individual countries might resort more and more to protectionist measures of one sort or another, and that in con-
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sequence the objectives of the General Agreement on Tariffs and Trade would be undermined and its very existence imperilled. The energy crisis, which began almost immediately after the conference, made that risk even greater. The negotiations stemmed from the conference held in Tokyo in September 1973, which was attended by representatives from about 100 nations. They were the seventh negotiations in a series of multinational negotiations since the GATT organisation—I will, with permission, use that term throughout—was brought into existence shortly after the Second World War, with the object of liberalising trade and so avoiding the disturbed conditions of the 1930s following the economic crisis in the United States of America, which had widespread repercussions.
The Tokyo Round also gave the opportunity for some bilateral negotiations to take place between participants. The participants included not only the original members of the General Agreement on Tariffs and Trade and countries which subsequently joined, but others as well. Members included East European countries other than the Soviet Union and East Germany. The list of participants is given in Annex I to the report. For the European Community, the Round was of particular significance as it was the first major occasion on which the Commission negotiated on behalf of all Nine of the Members, in accordance with a mandate approved by the Council of Ministers.
The immediate outcome of the Tokyo Conference was a declaration of the objectives to be aimed at the negotiations. These are summarised in paragraphs 4 and 5 of the White Paper (Cmnd. 7724), which was published in October last, in the following terms:
"The objectives of the negotiations were set out in the declaration agreed at the Ministerial meeting in Tokyo. They were, first, to achieve the expansion and further liberalization of world trade through the progressive dismantling of obstacles to trade on a reciprocal basis, and the improvement of the international framework for its conduct. Secondly, the negotiations aimed to secure additional benefits for the international trade of developing countries. It was envisaged that special and more favourable treatment would be accorded to them in areas of the negotiations where this was feasible and appropriate".
Within this framework the Community wished to achieve a greater harmonisa-

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tion of tariffs. Some developed countries, notably the United States of America, had a number of high tariffs and others had a significant number of tariffs which were not "bound". The Communities regarded it as even more important to get rid of discriminatory practices which were detrimental to international trade—the so-called "non-tariff barriers to trade".
Thirdly, the Communities wanted to extend the protection afforded under GATT against disruption of trade by enabling countries to take selective action against any particular country or countries in relation to a particular product. In the first two objectives the Community largely succeeded. In the third it failed to obtain agreement, at least for the time being.
The White Paper has summarised the results of the negotiations succinctly as follows, in pargraph 8:
"Agreements have been negotiated on tariff reductions; on the reduction of tariff and other barriers to trade in agriculture; on trade in beef and dairy products; on the reduction of barriers to trade in aircraft; on subsidies and countervailing duties; on customs valuation methods; on technical barriers to trade; on government purchasing; on import licensing procedures; on the updating of the existing anti-dumping code and on the framework for international trade. An agreement on discouraging trade in counterfeit goods is in draft".
That is a very considerable scope—no wonder the negotiations took five years! So far, of the 99 participants in the negotiations, some participating more intensively than others, relatively few have signed the various agreements, as paragraph 14 of the committee's report indicates. Here, Annex II shows in tabular form the state of play at the time the report was completed, namely March. However, there is no closing date for signatures and some countries have indicated their intention to sign at least some of the agreements. All the developed countries have ratified the tariff agreement, except Japan, which has signed but not, so far as I know, ratified as yet. Perhaps my noble friend will be able to give us further information.
Turning to the tariff protocol, the negotiations took place on a basis of unilateral offers. Final agreement was reached multilaterally on the concessions to he exchanged, the resulting new tariffs being available to all on a most-favoured-
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nation basis. This contractual agreement forms the Geneva Protocol of 1979 to the General Agreement on Tariffs and Trade. To quote the Commission's report—I am doing this to save time:
"Taken together with the elimination of all tariffs on imports of commercial aircraft, aero-engines and other commercial aircraft equipment, a tariff cut of about one-third has been negotiated, covering over 100 billion US dollars of trade".
To even out the peaks and troughs of individual tariffs of countries, a formula proposed by the Swiss was adopted. This resulted in cuts in the higher tariffs being proportionately greater than those on the remainder. Not all tariffs were cut; nor were all which were reduced cut by the standard formula. Even some higher tariffs were excluded from cuts where countries regarded the items as particularly sensitive. Even so, only 1½ per cent. of dutiable imports in the United States will be subject to duties over 30 per cent., as compared with only one item in the United Kingdom remaining subject to a duty of over 20 per cent. However, nearly two-thirds of all dutiable imports will be subject to duties of less than 5 per cent. in the United States. The United States' concessions, which are of interest to this country, were mainly in the chemicals, non-ferrous metals, machinery, textiles and paper sections.
In brief, both the United States and the Community have cut their tariffs by an average of 30 per cent. on a trade-weighted basis vis-à-vis each other, and Canada by about the same. The reduction in Japanese tariffs on EEC exports is about 25 per cent., but that is on their effective rates, which are rather lower than the formal list rates. All this sounds as if it were a strong shot in the arm for exporters and a depressant for those threatened by imports. But the cuts are, in general, to be implemented over a period of eight years by equal annual instalments, starting from 1st January this year, so they are hardly likely to cause sudden or violent disturbances. A few cuts made by the Community are not to come into operation until 1st January 1982, and those on kraft paper and board begin in 1983. I shall not give many details, but I thought that it might be of interest to mention those.
One important outcome of the negotiations is the USA's abandonment of the

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American selling price system, under which duty is charged in the case of benzenoid chemicals and their derivatives not on the invoiced price but on the price at which like goods are sold in the United States of America. This, of course, greatly enhances the duty. This change is to take place on 1st July 1980. Your Lordships will be glad to hear that they have also given up the wine gallon assessment system, which made bottled whisky subject to discriminatory tax.
The Community refrained from making cuts on certain sensitive items, and on others made cuts much less than the formula reduction. I do not think I need give your Lordships the details, but I have them here. The general effect of all Community cuts is to reduce the Community's tariff from a trade-weighted average of 9·8 per cent. to 7·5 per cent.
Not all industries are happy with the outcome as it affects them. In particular, the CBI felt that while the agreement offered opportunities for some improvement in exports, some industries—notably, the textile industry—were far from satisfied. Written evidence to that effect was received from the British Textile Confederation. Moreover, there are strong complaints that British producers have been grievously harmed as a result of the artificially low prices of United States producers of synthetic fibres and tufted carpets, because of the energy and feedstock which is made available to them at less than world prices.
No doubt my noble friend Lady Hornsby-Smith, who I see here, and other speakers, will have a good deal to say about this. I hope that my noble friend who is to wind up the debate will be able to tell us what further steps, over and above those recently announced by my noble friend Lord Trenchard, the Community is taking to eliminate this damaging piece of discrimination.
So much for the general tariff negotiations, and now a word about agriculture. Sub-Committee B did not take evidence on agricultural products, partly because agriculture is not within its remit, partly because the Common Agricultural Policy precluded the Community from dealing with agricultural products in the same way as industrial products in the negotia-
1404
tions. One can hardly negotiate for tariffs to be reduced, and bound, when an essential element in one's policy consists of variable levies. The Community had, therefore, to resort to bilateral negotiations, though no doubt the bilateral concessions had some effect on the willingness of other participants to make concessions on industrial as well as agricultural products. This was called the sectoral approach, as distinct from the global approach.
However, the Community was anxious to pave the way for greater co-operation in the future, at least by way of consultation. In the event, an International Meat Council and an International Dairy Council were set up, together with a number of rules to be observed on minimum prices. But an attempt to establish an agricultural consultative committee has not so far succeeded, though discussions are to continue. On the other hand, as I have already indicated, there was some success on alcoholic beverages, in persuading the Americans and the Canadians to abandon their present discriminatory practice.
Personally, I am particularly pleased that some useful concessions were made in favour of products from Australia, New Zealand and Canada. A quota of cheese from New Zealand has been arranged, and also some modest exchanges of cheese with Canada and Australia, as well as some access for Community cheese into the United States of America; some on quota and some without restrictions.
There is to be "improved access" for frozen meat into the Community, and a modest annual quota for high quality cuts of beef from the United States of America, Australia, Argentina and Uruguay. The United States of America is to accept from the Community what it describes as a resumption of "traditional exports" of beef and veal. Lastly, Poland, Hungary and Romania are to be allowed to send the Community young beef stock for fattening and veal for processing. But it was not possible to reach any agreement on cereals, nor does it appear that any agreement on sugar was even attempted, though the Commission did manage to avert a confrontation over export subsidies.
So much for the Geneva Protocol and the sectoral approach. The most pro-

1405
mising aspect of the negotiations lay in the non-tariff barriers to trade. Some were designed to clarify existing provisions of the GATT; others broke new ground. What is sad is that, so far, they have not received the widespread support that they deserve. I hope that my noble friend will be able to tell your Lordships that, at any rate, they have the support of Japan.
The agreement on import licensing is designed to ensure that neither automatic licensing nor licensing for the purposes of quantitative restrictions is operated in such a way as, in itself, to restrict trade. The agreement on international trade in civil aircraft not only reduces tariffs to zero on civil aircraft, aero engines and some aircraft equipment, but confers freedom on airlines to buy whatever aircraft, et cetera, they please, with as little Government interference as possible. This came into operation on 1st January this year. I believe—but, again, the noble Lord can tell us—that in Japan it came into operation on 1st April.
The agreement on customs valuations seemed to the committee the most valuable of the agreements to traders in general, and to the Community in particular. It provides that, normally, customs authorities will base their valuations of imports on what is known as "transaction value"—namely, the c.i.f. price—and will depart from that only after consultation with importers. The United States abandonment of the American selling price is a case in point. A special protocol has been drafted in favour of developing countries, which I need not go into.
The agreement on Government procurement virtually extends to all signatories much the same provisions as have operated within the Community since mid-1978. The purpose is to abolish the practice of Governments and Government-controlled bodies, of reserving public contracts to their own nations or giving them price preference. The agreement includes an appendix listing the bodies which the signatories have agreed will be covered. It comes into force on 1st January 1981. Under the agreement invitations to tender have to be published and information has to be provided on request about the subject of the tender and, after the contract is placed, to the unsuccessful tenderers about the reasons for non-acceptance, if they want them.
There is provision for the settlement of disputes to be assisted by a committee of signatories. Obviously the agreement will only work on the basis of manifest reciprocity and, as the report puts it, of goodwill and honesty. The working of the agreement is to be reviewed after three years.
There are four agreements covering matters which can broadly be described as involving fair trade. These are on subsidies, anti-dumping, technical barriers to trade, and counterfeit goods. The agreement on subsidies establishes the principle that countervailing duties may be imposed only if an investigation has first demonstrated that a domestic industry has been materially injured by subsidised imports and that the cause of the material injury lies in an identified subsidy. The United States of America has now passed legislation to this effect. It was the United States that was rather out of step with the rest of the developed countries, although it is fair to add that some ambiguities remain to be tested in the American courts. A committee of signatories is to be set up to help to settle disputes.
A new anti-dumping code has been negotiated and that is more or less in line with the agreement on subsidies. Again there is the requirement that before provisional duties are imposed there must be proof of the dumping and of the injury caused by the dumping. Retroactive dumping duties are not to be permitted. Instead of imposing duties, an importing country may accept price undertakings from the exporter. The agreement on counterfeit goods is still in draft. It is an interesting one and certainly breaks new ground. There again a committee of signatories is envisaged to supervise the working of agreements and to resolve disputes. It is also envisaged that signatory authorities will agree to seize counterfeit goods and detain them on importation when alerted by the owner of a trade mark.
I come now to the Agreement on Technical Barriers to Trade. The object of the agreement is to place signatory Governments under an obligation to ensure that, whether the standards are prescribed by the Governments or issued by standards institutes, there is no discrimination against foreign manufacturers

1407
or traders. The agreement aims at achieving as far as possible conformity with international standards. That agreement is to come into force on 1st January 1981.
Noble Lords will have noticed how often I have mentioned committees of signatories in connection with the agreements. It is hoped that these committees will not only help in resolving disputes but will play a large part in maintaining uniformity of interpretation and implementation of the agreements. So long as the membership of the signatories is small, as it is at the moment, the system should work well. It is not so clear how they will work once the membership has grown. It is hoped that it will grow, but it seems that individual representatives of the Nine will be able to attend meetings of the committees, although in general each of the Nine is represented by the Community. Perhaps my noble friend could say a little more about this when he comes to speak, because so much depends not only on the acceptance of the terms of the agreement but on their implementation.
I turn for a moment to developing countries. There is the question of the exemption of developing countries from the full rigors of the non-discrimination clauses of the General Agreement on Tariffs and Trade. One of the two objectives of the Tokyo Round was to secure additional benefits for the international trade of developing countries over and above those which they would automatically receive from the multilateral negotiations by way of reductions in tariff on a "most favoured nation" basis. The Tokyo Declaration made at the conclusion of the Tokyo Conference stated that developed countries would not expect the developing countries in the course of the trade negotiations to make contributions which were inconsistent with their individual development, finnancial and trade needs. Most developing countries interpreted that to mean that their offers need to be no more than minimal.
Tropical products were to be treated as a special priority section. That objective was fulfilled earlier in the negotiating period when the Community made an offer on tropical products. The offer
1408
covered reductions in the customs duties on 22 products, such as tea, green coffee, cocoa, and so on, as well as the addition of new items to the generalised system of preferences and other improvements in existing arrangements. Developed countries also undertook not to increase domestic taxes on coffee, tea, cocoa and spices. This unilateral offer was implemented on 1st January 1977; other developed countries did likewise, except that the United States sought contributions. Further, most agricultural imports from the least developed countries were granted duty-free admission last year.
Draft framework texts have been prepared formally recognising that, notwithstanding the GATT principle of nondiscrimination, contracting parties may accord differential and more favourable treatment to developing countries and territories, without according such treatment to contracting parties. The texts specifically legalise the generalised system of preference in tariffs for developing countries. They also legalise mutual concessions between less developed countries, and that is going to be of growing importance, forming regional groups such as the Andean and Asean groups and the Central American Common Market. That is always subject to the proviso that any differential or more favourable treatment is designed to facilitate and promote the trade of developing countries, and not to create undue difficulties for the trade of other contracting parties.
The text envisages that the capacity of less developed countries to make contributions or negotiated concessions will improve with the progressive development of their economies and trade situation. That is called the graduation clause. Unfortunately, not all developing countries are willing to commit themselves to this understanding at the present time.
There are really three classes of developing countries: the least developed, listed as such by the United Nations, the newly-industrialising countries, and the remainder which fall between. All claim developing status and expect privileges and exemptions accordingly. Each country selects itself for that status. The committee has felt that some way acceptable to both developing and developed countries has to be found to determine when a developing country has matured to the point when

1409
it is no longer appropriate or fair for it to be treated as such and to make appropriate adjustment.
In some cases the agreements specifically exempt developing countries wholly or partially from the provisions of the non-tariff agreement, for example, that on subsidy on countervailing duties: the Customs Valuation Agreement exempts them for five years from 1st January 1981 and there can be individual extensions. Under the Technical Barriers to Trade Agreement the committee of signatories can grant to any of them specific exemptions for a specified time.
Nevertheless, the developing countries have expressed disappointment, and one cannot disguise this, at the outcome of the Tokyo Round for them. Considering their demands, including duty-free entry and the removal of all quantitative restrictions on their exports, regardless of the effects, that is hardly surprising. In particular, they have opposed the kind of safeguards proposed by the developed countries. The object of safeguards has been to enable importing countries to take emergency action to restrict imports of particular goods when they increase to such an extent as to disrupt an industry or threaten its survival. At present, such action can be taken only on a nondiscriminatory basis.
The Community wanted action to be taken selectively when necessary—that is, against one, or more, particular country. It was also prepared to support the setting up of a safeguards committee to monitor and review such measures. But the developing countries, on the other hand, insisted that if there were to be safeguards they should be applied only after they were authorised by an international committee. The inability to agree on safeguards was the greatest single failure of the Tokyo Round.
Informal discussions are to continue, but without such an agreement the danger of a relapse into protection is greatly enhanced. No country can allow its industries one by one to be crippled or killed by sudden massive surges of imports, far in excess of expectations, from foreign countries. On the other hand, and equally, countries must beware of allowing their own industries to be ruined from within. If excessive wage demands
1410
or inefficiency lead to an industry ceasing to be competitive in world trade, resort to a policy of protection is no answer. All it does is to fuel inflation, to increase inefficiency and even to make it difficult to compete in foreign markets. Safeguard action is all very well for a limited time. That is one thing. Protectionism as such is quite another.
In conclusion, the committee considers that the Tokyo Round achieved a remarkable degree of success, although of course it has not solved all the problems. The report says in paragraph 40 that
"the conclusion of the agreements has at least preserved reasonably intact the essential institutional and legal structure of the world trade system, and has created new, and potentially stronger, mechanisms for international cooperation. It has, therefore, at least for the time being made it possible for governments to save themselves from the excesses of competitive protectionist action into which it is virtually certain that the world would have been plunged if agreement had not been achieved".
The outcome has also vindicated the EEC Commission as a powerful and skilful negotiating body. Most of its objectives were achieved. It remains to be seen whether it will be given sufficient resources and will show the necessary perseverance and determination to make the system work.
Much was accomplished. Much remains to be done. Above all, as the report says, in bringing developing countries more within the General Agreement on Tariffs and Trade framework, a major task of the Community's policy should be to work out a constructive policy towards developing countries which respects the needs of both sides. My Lords, I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on Trade Policy: the Tokyo Round (41st Report, H.L. 204).—(Lord Drumalbyn.)

THE IRANIAN EMBASSY INCIDENT
4.3 p.m.
The PARLIAMENTARY UNDER-SECRETARY of STATE, HOME OFFICE (Lord Belstead): My Lords, with the leave of the House, I will now repeat a Statement being made in another

1411
place by my right honourable friend the Home Secretary. The Statement is as follows:
"Mr. Speaker, I will with permission make a further statement about the events at the Iranian Embassy. I undertook yesterday to keep the House informed of developments and it may be convenient if I summarise what has happened so far.
"As honourable Members will know, yesterday morning at about 11.30 a.m. three armed men forced their way into the Iranian Embassy at Princes Gate, Knightsbridge. A police constable who was on duty at the embassy was forced inside at gunpoint as a hostage. Two people who work for the BBC were in the embassy at the time and they, too, were taken hostage together with a locally engaged member of staff and some of the Iranians who work there. In all about 20 people are being held. One woman hostage, an Iranian, was released yesterday and one British hostage was released this morning. Despite reports of injuries to the hostages, I understand that no one has been seriously hurt. The terrorists said this morning that the British hostages would not be harmed.
"Since the incident first occurred the building has been surrounded by the police, who have cordoned off the area. They have maintained communication with the terrorists and their aim, as in all such cases is, if at all possible, to bring this incident to a peaceful conclusion without loss of life.
"The terrorists have identified themselves as Iranians. They claim to belong to a dissident organisation calling itself 'The Group of the Martyr'. They have addressed certain demands to the Government of Iran, including the freeing of 91 people currently imprisoned there. They have also asked the Iranian Government to recognise the rights of the Iranian peoples.
"I am naturally keeping in continuous contact with the direction of events by the police. I have had a discussion, a short time ago, with the Commissioner of the Metropolitan Police. I will continue to keep the House informed of developments."
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That, my Lords, is the Statement of my right honourable friend the Home Secretary.
Lord BOSTON of FAVERSHAM: My Lords, I should like to thank the noble Lord the Minister for repeating the Statement and for continuing to keep the House informed. We fully understand the Government's position in this matter and that they are in touch with the situation on a minute-to-minute basis. May I take this opportunity to commend the patience and courage shown by the police and the other services in the way they deal with situations of this kind. Clearly, we all join in hoping that this incident will end speedily and without bloodshed and further injury. I do not feel that it would be appropriate either to put any questions to the noble Lord, Lord Belstead, or indeed to say anything more.
Lord WIGODER: My Lords, it is apparent that any comment made either in Parliament or in the media might well find its way into the Iranian Embassy. That could not conceivably promote the prospects of a peaceful outcome and might well prejudice it. In those circumstances, my noble friends on these Benches feel also that it is best at this stage to say nothing.
Lord BELSTEAD: My Lords, I am most grateful for the understanding and support of both noble Lords.

BRITISH AEROSPACE BILL
Returned from the Commons with the amendments agreed to.

ROYAL ASSENT
The LORD CHANCELLOR: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Companies Act,

Consular Fees Act,

Limitation Amendment Act,

Insurance Companies Act,

British Aerospace Act,

West Yorkshire Act.

ECC REPORT: TRADE POLICY
4.8 p.m.
Debate resumed.
Lord BANKS: My Lords, we return now to the subject of the Tokyo Round. This is a subject which we debated in this House on 31st January when we discussed the order ratifying nine of the agreements associated with the Tokyo Round and when we discussed also the White Paper on the negotiations. But the House is indebted to the European Committee for the report which they have produced, and also to the European Communities Committee and the noble Lord, Lord Drumalbyn, for his very comprehensive explanation of the details of the agreement and the conclusions put forward in the report. We now have much additional background information and some very valuable comment.
The conclusions of the report are very interesting but I do not think that they invalidate any of the conclusions we came to on 31st January. The successful conclusion at last of these negotiations is to be welcomed and the report describes it as a formidable achievement. It is encouraging to have an agreement on liberalising trade at a time of trade recession, and we on these Benches welcome the tariff reduction which has been achieved. As the report says, it demonstrates the continuing commitment of the major trading nations to the progressive reduction of tariff protection.
As the noble Lord, Lord Drumalbyn, explained, a new framework—which also is very welcome—has been established to deal with non-tariff barriers. The noble Lord described that as perhaps the most promising part of the agreements. GATT has been overhauled for the 'eighties, so there is much to be welcomed and much that is encouraging in these negotiations which have been successfully concluded, but the report contains warnings. It warns of the possibility of troublesome conflicts among the major trading nations in spite of the Tokyo Round and it instances the recent difficulties between the United States and the European Community on synthetic fibres. The report underlines the reservations of the Third World, and the noble Lord emphasised that point
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himself. As he pointed out, selective safeguards have not been agreed, and the report describes that as a major piece of unfinished business. There is also the problem, which the noble Lord instanced, of the decision as to when a developing country ceases to be a developing country and becomes a developed country; at what time, at what rate and in what way any advantages properly granted to a developing country should be withdrawn. The relations between the Third World and the developed world, between the North and the South, as they are described, have not yet been solved and incidentally, of course, the generalised scheme of tariff preferences and the concessions under the Lomé Convention tend to have less effect when a successful round of tariff negotiations has been completed. There is unhappiness, too, in the Third World about the length of time which it is taking to establish the common fund for commodities.
It seems to me that what the report is saying is that the agreement is welcome; it has helped to stern the protectionist tendencies which are likely to flourish in a time of recession, but it may not be able to contain those tendencies permanently—the pressures may prove too strong. The trouble is that the Third World is not fully integrated into the GATT system. Since those negotiations were completed and since, no doubt, this report was prepared, another report has been published—that is, the Brandt Report. I think the Brandt Report has a great deal of relevance for this discussion. It is of course a programme for survival, a programme for reconciliation between the North and the South. One of the suggestions contained in that report is that the GATT organisation and the UNCTAD organistion—the latter perhaps being looked on with more favour by the Third World—should be merged; that there should be one organisation dealing with questions of world trade.
The Brandt Report also underlines the danger of protectionism. It rejects it as a solution and, as I said when we discussed this matter previously, I am quite sure that a relapse into protection in any general sense by the European Community or by the United Kingdom would lose more jobs than it would save. The Brandt Commission speaks of a transfer of resources—a large-scale trans-

1415
fer of resources—from the North to the South and argues that this could lead to increased exports and to a degree of expansion in the developed world.
In fact the Brandt Commission is making an appeal for a worldwide policy based on expansion and free trade and the great danger is that the world will lapse into contraction and protection. That is what we have to avoid, and of course the adjustment which is so essential in the older developed countries is much easier in times of expansion, and I think that is a point for noble Lords on the Government Front Bench to bear in mind when they are thinking in terms of their domestic economic policy. What we need at the present time, on a world basis, is a worldwide Beveridge plan.
When I use the phrase "Beveridge plan", I am thinking not so much of the social security plan for which Lord Beveridge was famous but of the other plan which he produced, which was designed to secure full employment in a free society. It was based on the idea that private and public spending should be sufficient to call out all the resources of the national economy, but now something more than that is necessary. We know that trying to do that on a national basis on its own presents many problems. It cannot be done adequately on a national basis. Now we need that sort of approach on a world basis. Free trade is only likely to be sustained and the difficulties between GATT and the Third World are only likely to be resolved when the imagination of the Third World—and indeed the imagination of the whole world—is caught by a bold initiative of the kind that the Brandt Commission has advocated.
4.16 p.m.
Lord RHODES: My Lords, I used to say that a man only became mature after he had fought a parliamentary election. I have an addendum to that: a man only becomes mature in this sort of thing after he has served for several months investigating the pros and cons of something like the Tokyo Round.
It came into existence because somebody thought that the world was going to be divided into three: USA, Latin America; Japan, South-East Asia; Europe and Africa.
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It is called the Tokyo Round because it was convened in Tokyo in 1973 and it was triggered off in the way I have just mentioned. But coupled with that was the decline of the United States of America as a world leader. No conclusions were reached until 1979, and then relatively few, at that. But it is as well to remember that the 1973 conference was the first major international agreement which the newly constituted Community of Nine had attempted. That needs to be borne in mind when we are making judgments on it. In my opinion, 1973 will go down in history as the year which began a series of disasters for the West which seemed to be driving us relentlessly towards protection. Personally I believe that we cannot evade import controls. We may talk fancy about how to get by, but in my opinion the pressure is inexorable—and I shall have something to say on that in a moment.
One hundred nations joined in this, most of them having nothing to do with the membership of GATT. All the COME-CON countries were asked to join and they did, with the exception of Russia and East Germany. The terms of reference were optimistic and flowery. If your Lordships' have the book have a look at No. 9, because there it says:
"The progressive dismantling of obstacles to trade and the improvement of the international framework".
These highfaluting ideas were put over so well by the organisers of the conference. These remarks were made in September. They would not have been made if the conference had been convened for October, because OPEC that year increased the price of oil by five times.
There have been six GATT conferences before this one. The Kennedy Round was the last one before this, and it lasted from 1964 to 1967. All the conferences before this one have been to do with tariffs. I suggest to your Lordships' that this is the last conference that will ever be held in the history of the world—that is going some—with tariffs as the sole topic. Those were the days of mild inflation; a little touch on the pedal for a credit squeeze and a bit of additional productivity worked wonders in those days. But this is a different world, a more dangerous world, and no longer will conferences which have tariffs as the sole subject suffice any more. Indeed,

1417
the Tokyo Round itself was a different conference to anything the world had ever seen before. A look at paragraph 11 will give you the answer to it, so it is no use my talking about it, because I want to sit down. Large numbers of subjects were included in the agenda.
Critics said: what did it do? Let us see what it did not do for a start. There was no impact whatever on the agricultural policy of the Common Market, the biggest protectionist racket that we have got. Not a single conclusion came out of that conference. Lord Drumalbyn has drawn attention to the fact that few developing countries either signed or even went to the trouble to have any reservations about it. One reason was the preponderance of the United States-European dialogue. The second reason was that the developing countries could not swallow the idea of selective safeguards which the Community insisted on.
Critics might draw attention to this; little progress was made with COMECON countries due to GATT having a totally different system of economics to the countries in COMECON. GATT depends entirely on an open market; the COME-CON countries have a closed market. They are very difficult to bring together. This should be realised. Other critics have complained that the negotiators for the Community were not tough enough. They were not. They are learning the art of negotiation. We had stronger negotiating teams when we had the old Board of Trade than ever we have had in the Common Market up to now. They have a lot to learn and this wants to be thoroughly understood in Brussels. In any case, they have not got enough staff to do it.
The next thing is, why did not the Japanese confirm it? They signed it. The Japanese are in a class by themselves. The Japanese are paternal. They depend entirely on making an increase of gross national product of a minimum of 7 per cent. per year or else the system would collapse. I have not time to elaborate on that, but I will do sometime if anybody wants to know. There was nothing done about the capital intensive equipment combined with low wages in the newly-developing countries. There are no rules about when a developing country qualifies as a developed country; it is about time there were.
1418
Having said that, make no mistake about it, solid achievements were made. Progress has been made on most of the items that were mentioned by the noble Lord, Lord Drumalbyn—tariff barriers, import licensing, technical standards, safeguards; above all, communications are still intact. We have a chance to go forward from where we are. May I suggest how we should do it. The Government have to start now, if they have not already done so, making arrangements for the best type of import controls that will be selective. If you are not prepared for this situation when public outcry and demand says that import controls are necessary, you will be at disadvantage. There is now a real chance for this Government to do something about it. Why do not we have a London Round? Think, use your studying caps. Why do not we take the initiative? We can, you know. It would be on a scale totally different to what has gone before.
Lord Banks made reference to a type of new role for a conference of this description. That is admirable. It will be in the form of a body regulating international trade, and if such a body can he used to stem the headlong rush to protection so much the better. I am of the opinion that we really have not yet seen the worst in terms of international competition. My last visit to China underlined that point. I was informed that 350,000 establishments were being brought up to date and made efficient. Most of them were going to produce consumer goods. I ask those of your Lordships who are listening to me this afternoon to remember in two years' time what I have said.
If the British Government took the initiative and had a London Round—I would not even mind if it were called the "Thatcher" Round, so long as we had one—we could not possibly leave out the greatest nation, numerically, in the world. Russia and East Germany refused to cooperate in the Tokyo Round. If the initiative were taken now to invite the Chinese to participate in the Thatcher Round or the London Round, let us consider the wide repercussions for good that that would have. Do not condemn the Tokyo Round; do not let us think that we are so superior. It was a really good effort to do something about the archaic conditions in much of our world

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economics. Let us try to have one of our own which will set something going in the years to come.
4.32 p.m.
Lord THORNEYCROFT: My Lords, it is always refreshing to listen to the noble Lord, Lord Rhodes. I have had the privilege of listening to him over quite a number of years in another place as well as this House and it is a delight to hear him speaking with the vigour, imagination and originality of thought that I have always associated with him after every speech he has made.
We are grateful to my noble friend Lord Drumalbyn for introducing this debate on an important subject. Indeed, it is a little nostalgic for me. They say that old men forget. I think that we remember perhaps rather too much and we watch that we limit our remarks to a few matters. However, this debate carries me back to the days when I was President of the Board of Trade and the General Agreement on Tariffs and Trade was a major issue in this country, and at that time particularly a major issue in the Conservative Party. The Conservatives at that time did not believe in wider trade and payments very much: they believed in imperial preference. That was the sort of Clause 4, if your Lordships know what I mean, of the Conservative Party. I remember that in 1954, just before the Blackpool conference, the old guard of the Party, Mr. Amery and Sir Victor Raikes, had put down an amendment attacking me on the General Agreement on Tariffs and Trade, and I told the Cabinet that I wished to contest the amendment. The Cabinet were satisfied that I would lose at the conference—
Viscount AMORY: My Lords, my noble friend said "Mr. Amery". Will he make it clear that it was not me, but a much more distinguished gentleman, Mr. L. S. Amery?
Lord THORNEYCROFT: My Lords, my noble friend was too young to be a member of the Cabinet at that time! At any rate the Cabinet thought that I would lose and I was advised that I should not contest it. I remember the words of Mr. Churchill, the Prime
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Minister. He said, "Let him try". That was a very good answer for a young member of the Cabinet. We went to Blackpool and we contested the view of the old guard of the Tory Party. May I say that I had some notable friends, among them the right honourable Walter Elliot, who made a brilliant and powerful speech from the floor. We carried the day against the old guard of the Tory Party and in a way I think it was at that moment, as the Tories abandoned imperial preference, that they started to jerk slowly forward into the second half of the 20th century, and wider trade and payments and the rules of international trade which are really a necessity for a great nation such as ours.
I mention that story only to remind noble Lords what this matter is all about. It is about having rules in international trade. There have been debates about the details of them and Heaven knows! they have been debating that subject for seven years in the Tokyo Round. There is a much better way of doing it. In my day it was done much more quickly. The way that we did it was to have the discussions not in Tokyo but in Geneva two months before the tourist season started. The hotels threw them out and thus a decision had to be reached in those days. It was tremendous. I remember the Foreign Office sending me a message saying that the Japanese had the rooms in the floor above us and it was believed that they had bugged our discussions. I remember sending back a message saying that if they could understand what we were talking about they were entitled to any benefit that they could get. I assure your Lordships that we had a more direct and, I think, much easier way of carrying forward trade negotiations, but I shall not dwell or expand on that at the moment.
I merely say that it is necessary to have rules. A nation like ours, which exports about a third of everything it makes, cannot live in a protectionist world. Other countries can do so because it really does not matter so much to a country that exports an eighth of what it produces. However, time and again as one has to meet these arguments—and we have all had to meet them—one recognises that the population of this country could not be sustained unless we can maintain an export

1421
rate amounting to about one-third of the gross domestic product. That wonderfully concentrates the mind of economic Ministers when they have to make decisions about international trade and international rules. So, for us, wider trade and payments, and clear rules as to how they should be conducted, are an absolute necessity.
I point out to the noble Lord, Lord Rhodes, that I am not a dyed-in-the-wool free trader. At the time I was President of the Board of Trade I had what might be called my ministerial training in the 1950s in Lancashire and Yorkshire. I was educated by the noble Lord and his friends in, if I may say so, a most primitive manner. I was fairly hammered at the time. I learnt a great deal about what the arguments and the complexities of protection and free trade really meant. I am not an amateur in this matter: I am a hard-bitten professional. I have been subjected to as much attack on this issue as I should think has any noble Lord in this House.
At present I am president of the British Radio and Electronics Manufacturers' Association, and do not tell me that I do not hear about protection. I lead what is called a "brown goods" industry with direct conversation with the Japanese. Indeed, now not only with the Japanese but with Taiwan, Korea and Singapore— an ever widening list of countries, but I shall deal with that matter in a moment because it is relevant to the GATT as well. So, I know that there are powerful arguments for protection at times. I know the importance of trying these industry to industry talks. But I do know that at the back of it all we must have some ground rules. If it were a free-for-all—and I see that the noble Lord, Lord Rhodes, is nodding his head—believe me there would be chaos in the international trading world.
I also agree with the noble Lord in what he said about agriculture. There is little that affects agriculture in all these matters. Happily the Common Agricultural Policy probably carries the seeds of its own decline. I think that on all sides of the House we can hope that we can move forward to some system—which I am sure if we had moved into earlier we might have negotiated—which will make a little more sense in the wider Europe for which we all hope.
1422
I want to talk for just a few more minutes about the GATT in the context of exports. It is obviously a necessity for the United Kingdom to have the General Agreement on Tariffs and Trade, but it is also a necessity for the developing world. In the developing world they have far greater hope from trade than they do from aid. These developing countries are struggling forward; it is true that they are assisted—I would not decry the need for or propriety of giving assistance from the developed world. But they derive their real strength from their trading positions.
The Brandt Report is certainly a fascinating study, but I am not sure that I would not have wished it to go in rather greater depth into the incredible achievements of parts of the developing world in their super-competitive role. Many parts of the developing world, including Korea and Taiwan, have built up a competitive position of enormous strength. They have gone all out for export-led growth on a free-enterprise basis. Others have been left behind. Unless one studies and in some way identifies how it is that some have surged forward where others have been left behind, I do not know that one has a very clear view about what is happening in the Third World. Therefore, whether you look at us or whether you look at them, ground rules are undoubtedly a first necessity for all of us as we move forward.
There are other matters, apart from ground rules, that affect our exports. One is our currency, the pound sterling. I do not know whether we applaud the fact that it is strong or whether we deplore it. I do not ask Her Majesty's Government to reply to all these points this afternoon, but I remember that only a relatively short time age we would not possibly enter the Snake because the currency was so weak. Now we cannot possibly go in because it is much too strong. It is bewildering for the amateur, like myself, who struggles along on the fringes, trying to understand the position. For my part, I believe that, if we could get inflation more closely under control and find ourselves in a more ordered position with other European currencies, it would be of some considerable advantage to this country.
But in part the strength of sterling is a problem. We can buy goods with great

1423
facility from abroad, but it is harder to sell our goods. That is not an easy thing for exporters. Productive efficiency goes to the root of this problem. In an article published in today's Telegraph I saw that the National Executive of the Labour Party has called for urgent action to restrict the import of foreign cars. That is what the GATT is about, because the National Executive of the Labour Party will always go on asking—and it will not be the only body—for an immediate restriction on the import of some commodity or another.
Policy must be decided by parties here. In the main, the Conservative Party has for the last 15 or 20 years stood for a policy of wider trade and payments; has supported the General Agreement on Tariffs and Trade; has entered the great free-trading establishment of Europe, and believes that, with perhaps some trimming at the edges here or there, we can conduct our affairs so as to be at least sufficiently effective in our production to live in that kind of world. I am not absolutely sure where the noble Lords opposite stand, and I shall listen to anything that is said on that.
The Cambridge School of Economists believes in another world. It believes in import restriction. It wants a 30 per cent. flat rate. We should have to leave the General Agreement on Tariffs and Trade to do that. I do not imagine for one moment that noble Lords opposite share that view. Mr. Wedgwood Benn and some of his friends clearly believe in import restrictions, but I think that they are dealing with the symptoms and not the causes of our trouble.
The reason for imports is that we do not produce sufficiently effectively either to sell abroad or to fill the market which is available here. We import because inflation has risen, because we have spent more money than we have and because we have paid ourselves more money than we have earned. Those are the causes which drag imports into a country. I believe that, if we are to tackle these problems, we must tackle those basic causes and not rely on artificial barriers to keep them out.
As an example, let me take the situation of cars at the moment. I do not want to
1424
say harsh things about people who are struggling on, but it is a sort of geriatric industry. We have seen what has been happening in British Leyland and we know the arguments that have been advanced—the strange world of mutuality, as it is called, in which these desperate arguments range between Red Robbo, as he was—and thank goodness he is not there now—and his friends on the one hand, and a management struggling to get production off the floor, on the other hand. And then one asks for import control! The answer is to make some cars. Make good quality cars so that they are available to the people of this country and available in markets overseas. That is the answer. Import control is a very uncertain secondary, deplorable substitute for facing the realities of what it is necessary to do in one's own economy.
I accept that there may be exceptions. I know that the textile industry is in great difficulties, but there are great dangers in protection. Even in the last few months, as we have tried to give some protection to the textile industry against American imports, we have immediately been met with retaliation, or the threats of retaliation, in America. They have said "Look here, you are producing your steel at a loss; we can protect against that". This battle of import restrictions is very dangerous.
Therefore, I believe in international ground rules. I believe that they are necessary for this country and that the policies of the Government are right in supporting those matters. I think that we would want to ensure that others, as well as ourselves, stick to them. We must guard very carefully against non-tariff barriers, which are used in many countries against us; we want to be slow to use non-tariff barriers ourselves. I am not saying that we never protect, that we never have industry-to-industry talks; I am not saying that we should not talk, as we are now, with Europe, because already in this complicated world protection must be on a Continental rather than a national scale. I think that we are right in those things, but basically our policies must be to put our house in order and live within the rules which we support.
4.48 p.m.
Lord GREENHILL of HARROW: My Lords. I am sure you will agree that

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the committee's report gives a full picture of our losses and our gains from that marathon negotiation known as the Tokyo Round. But the very expert speech of the noble Lord, Lord Drumalbyn, and the pungent comments of the noble Lord, Lord Rhodes, have greatly helped us in understanding the report. I agree with the noble Lord, Lord Rhodes, that we might have expected more from the negotiations, given the time and effort put into them. But they dealt with most controversial matters of direct, political and economic importance to the lives of ordinary people in the many countries concerned, and these matters are very hard of compromise and agreement, as they affect people's livelihoods and the continuation of long-established industries.
However, in these days of controversy about membership of the EEC it is perhaps worth reiterating that the Committee says in its report that it believes that we have in this country got a better deal as a member of the Community than we would have done negotiating on our own. In this field membership of the Community is likely to be an appreciating asset in the years to come, and properly used—and the noble Lord, Lord Rhodes, suggested that perhaps we did not get the best out of it—it could become, in this type of negotiation, what someone has described as a civilian super-power.
To participate in this debate one needs a great deal of expert and technical knowledge and in addition, like the noble Lord, Lord Thorneycroft, a long and entertaining experience of these affairs. These qualifications I do not have in anything like the same measure as the majority of speakers this afternoon, but I wanted to intervene briefly to draw attention to one point in the Committee's report dealing with developments in the future.
The report says that it is probably unlikely that another round of multilateral trade negotiations will take place again in the foreseeable future. Indeed, the noble Lord, Lord Rhodes, said that it would never take place again. That is probably true. International circumstances are changing so rapidly that that is likely to be the future. Again the report says:
"The future relationship between GATT and UNCTAD will increasingly demand attention".
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This is indeed true. There is no doubt that the Tokyo Round results are more acceptable to the developed than to the developing countries, and there is a good deal of dissatisfaction among the latter about this. That does not necessarily mean that the demands of the developing countries are always reasonable and ought to be satisfied, but it does mean that there is a continuing, and indeed growing, political and economic split among the trading nations of the world. If this split is to be diminished, there must be some drawing together of GATT and UNCTAD. Both organisations have obvious shortcomings, and the more politicised the split becomes the more difficult will be the solution.
One of the questions we must ask ourselves is whether some new institutional machinery is required. I think that question was implicit in what the noble Lords, Lord Banks and Lord Rhodes, said. It is a matter of history that an international trade organisation was nearly set up at the time of Bretton Woods at the end of the war. If it had been some of our present difficulties might have been averted. Maybe some greater thought should now be given to whether new machinery could assist us at this stage. Of course, if the political will is lacking, no sort of machinery, however ingenious or elaborate, will produce solutions.
Many will say that it is much better—and many of the experts say it is much better—to go on as we are, making modest, largely technical advances in international agreement and building up case law. I myself am not optimistic about new institutions, especially in the present economic climate, but I think that Her Majesty's Government should give thought to this point, and I would ask whether they are doing so.
4.55 p.m.
Lord HALE: My Lords, all of us are anxious to pay tribute to the noble Lord, Lord Drumalbyn, for the compendious way in which he opened this debate, and for endeavouring to review the validity of a vast number of subjects. I personally in particular should like to thank him for the fact that I could hear every word he said, an opportunity which I rarely get nowadays anywhere. The noble Lord spoke almost with parental affection of

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this agreement, which of course has many doubtful and controversial points which can hardly be dealt with in a short debate.
I think that the noble Lord, Lord Thorneycroft, really omitted one vital matter in what he said. I enjoyed his speech. I have often paid tribute to his own personal gallantry, and there is no question about his personal correctitude in his economic propositions involved in his resignation. I told him myself in a personal talk the other day that his recent forthright speeches have to my mind cast rather a new light on some of the problems of that day. But I think he overlooks that what we are discussing today is this agreement, for good or bad. In this agreement we are talking as members of the EEC, and about the effect of GATT on the EEC. The EEC is only a collective representation at Tokyo, and it is in relation to the EEC law that we are now making reference. The EEC has its own constitution and its own views on protective tariffs, their reduction, adjustment and what should be done.
I ventured, very hesitantly and nervously in a previous extremely poor speech on these matters, to express some doubts as to whether trade associations with the USA were, generally speaking, associations which had not proved greatly to our benefit. The noble Lord referred to the difficulties about the "snake in the tunnel". There were difficulties about a European currency. I should have thought that this Government's plans, accepting that the Government have decided to remain in the EEC, depend largely on the attempt to get an effective European currency. It does not seem to be a popular subject in these days.
Of course in a situation in which all the pundits seem to think that the pound is definitely undervalued and the dollar overvalued, the terms of trade become almost impracticable, as is evidenced in this document. Is it Government policy? I listened to the noble Viscount, Lord Trenchard, in a recent debate when the "big guns" of the Labour Front Bench were volleying and thundering, and when he received their economic arguments apparently undismayed and undeterred. So far as I know he said that the Government were relying on market forces. He did not explain what market forces
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were, any more than did the noble Lord, Lord Cockfield, who I believe is to be the great potential pundit, and who speaks in terms of, "I am Sir Oracle, and when I open my mouth let no dog bark." He does not explain anything at all. He tells us he knows it all, and he thoroughly understands it all and has a complete comprehension of the effects of international economics, and that we can leave it to him.
I do not think the noble Lord, Lord Thorneycroft, in a pleasant and entertaining speech with which I did not violently disagree, wants to tell us—nor do the Government want to tell us—one thing. Do they want a textile industry? Do they think we need a textile industry? Do they think we can ever have a balance of trade without a textile industry? Do they know that even now, with all its deficiencies, this industry has a £7,000 million output? There are historical and geographical reasons, which are vital to this country, why we should have a textile industry and why, if it is to be dismantled over the years, we should have something adequate to replace it.
On present plans, which involve vast expenditure on armaments, which keep people employed—some may think usefully employed, but certainly not profitably employed—and which involve huge purchases from America, I cannot see from where the additional output is coming. We are told it is all to be based on the silicon chip, and the BBC has been running television programmes to show how. But as so often happens, and has happened in the past under Labour and Conservative Governments—it makes no difference in this context—we have fallen behind in management. I was going to use the word "conservatism", but that may be political. Is it a conservative attitude of mind that keeps them from using the benefit of this advanced and, we are told, fairly simple technology? We are told that a vast number of organisations could be built up and that a variety of small industries could be created. The creation and help of small industries has often figured in political programmes, but I think there are fewer of them today than ever there were.
The noble Lord, Lord Thorneycroft, as usual, put his argument very well on the question of free trade, but if we are to

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maintain an industry like textiles, then the EEC rules impose something in the nature of protection and bar anything in the nature of subsidies. I was brought up as a Liberal, so much so that when I put my foot out of bed I stubbed my toe on a plaster bust of Mr. Gladstone. My father thought him a great politician with inordinate gifts. Those were the days when the cotton industry of Oldham was still at its zenith; one of the great industries of the world and one of the great contributors to the nation. And the EEC say they very much want a textile industry.
The noble Lord referred to Korea as an example of a country where they are developing textile factories by the score, attempting to flood the world; but they belong to that section, not of undeveloped countries but more or less of developing countries which have special privileges, and they exercise them to the full. I think they have a tariff of something like 85 per cent. on any import into South Korea, yet they are asking for preference here. This is crazy trade. It is no use saying South Korea is a long way away and does not much matter; in all my political life the words "Hong Kong" have been written on my heart.
I wish to say something in particular to the noble Lord, Lord Trefgarne, who has so far not spoken. If he speaks with his customary ability and command I shall listen to him with pleasure, whatever he says. The cotton industry has been peculiarly the victim of the political parties, who come in with rather half-digested idealistic ideas. As I have said, inflation is the enormous menace. It is an economic plutonium bomb. We are told that the multi-fibre agreement, which expires next year, has much more hope of being renewed for a considerable period. We need it, because what does one see if one looks at the modern-minded manufacturer in Oldham? He usually goes there because he knows he has the most industrious, uncomplaining and decent working population to be found on the face of the earth. These people have endured recession, restriction and transfers of population in wartime and at other times with good humour— surely that merits some consideration!——and they have worked in the "dark satanic mills" for a very long time.
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I have here a paper which bears the mark of Carrington-Viyella, who are planning the production of a new modern factory in Lancashire to be designed by Britons and built by British engineers. It is hoped to introduce an increase of production which seems almost terrifyingly enormous, with five, six and, in some cases, seven times as much production from the same area and population as is the case today. The thought that went into the project—planning for the workforce, provision for redundancy, and so on—was the kind of thing that in years gone by one dreamed of.
I have spoken for too long, and I apologise. I shall leave the matter at that, except to make one more comment, regarding Brazil. Brazil, very naturally, is running its own economy, and no doubt running it with considerable knowledge. We are told that the destruction of the Brazilian forests, which is taking, place at an appalling rate, will be a major ecological disaster to the world. There will be deprivation of essential supplies of wood, which is being burnt away to provide profitable crops. If one eliminates vast areas of unplanned territory, Brazil has a very high production unit, and could quite fairly have been regarded today as a rich country; but the vastness of the undeveloped areas of the country means that it is not in that category at the moment, though it seems certain that at some future time it will be. There is evidence in the report about restrictions on the imports of hide: 185 per cent. general tariff, and 100 per cent. tax on imports. That country is going to be self-supporting, perhaps rather like the Marxist model.
In the light of that situation I see very little in the report that gives much manifest help to the textile industry—rather the reverse. Of course the Common Market is to receive new accessions from Portugal and Spain, which are producers of textiles and which have already had the benefit in regard to imports. The textile industry asks that at least we should not make any faulty mathematical computations in assessing the share of Portugal and Spain when they enter, when compared with the very large figure that they have now. The arithmetic should be got right on this occasion, unlike the previous occasion, when it was not.
5.13 p.m.
Baroness HORNSBY-SMITH: My Lords, I, too, should like to join in the congratulations extended to my noble friend Lord Drumalbyn and his colleagues on the Select Committee for the very comprehensive report that they have produced. In my view to have condensed such a complicated and diverse series of negotiations into so brief and factual a whole is a masterly achievement, and my noble friend and his colleagues deserve our gratitude and congratulations.
The Tokyo Round was a very courageous venture in an effort to maintain and extend a more liberal world trade system. The noble Lord, Lord Rhodes, pointed out that the negotiations started six long, weary years ago, when Western economies were more buoyant, and in the years that have ensued the negotiations have been bedevilled by the recession, the oil crisis, and the insistence of Third World countries—way outnumbering the other industrialised nations negotiating—upon the continuation of their very high protective tariffs.
That any results were achieved at all is I believe entirely due to the dogged persistence of the industrialised nations, notably the European Community as a whole, working together, and the United States. We should I believe pay tribute to the way in which they soldiered on through these long years, despite a marked reluctance by a majority of the nations who participated in the negotiations to contribute anything at all towards freer trade. I believe that failure to have reached any agreement would have meant the return to excessive protection and would have set back world trade for very many years.
Although 100 countries participated—and we should remember this fact when we look at the results—as my noble friend Lord Drumalbyn pointed out, paragraph 14 of the report gives the numbers of countries that agreed to each of the various sectional agreements, and it is very sad to think how limited was the co-operation of 80 of the 100 nations. We therefore face the problem of those who have signed and who made concessions, and those who, while benefiting from those concessions, are free to play their own game without any reciprocal responsibility.
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Without question the European Community is making the greatest contribution to liberalising world trade and helping the Third World. As your Lordships know, I have an interest in textiles, and indeed I feel somewhat intimidated this afternoon at speaking in the presence of my former boss, the noble Lord, Lord Kearton, who has forgotten more about textiles than I shall ever know. I hope that at some time we shall hear from him on this subject in your Lordships' House.
To many people in the textile trade the agreement has come as a very bitter disappointment. Outside the EEC, tariff barriers remain a substantial hindrance to world textile trade. From the textile point of view the achievements of the Tokyo Round were very limited indeed. Only the United States and the EEC offered significant reductions in tariffs at all. Despite last-minute United States reductions, I am afraid that United States tariffs will remain on average 28 per cent. higher than our own. So it is that much more difficult for us to export to them, than it is for them to export to us.
This situation is particularly significant against the background of President Carter's very adamant and far-reaching assurances to the United States textile industry, which were made during the progress of the Tokyo Round, that he would take prompt measures to protect the industry as required, with or without international agreement. My noble friend Lord Drumalbyn has already mentioned the disruptive effects on textile exports to the EEC which result from United States dual pricing. Reassurances from President Carter to his own industry also included a "snapback" provision which will allow withdrawal of all tariff concessions if the MFA is not satisfactorily renewed in 1981.
Other countries made no significant reductions at all in tariffs. Japan, for instance, merely consolidated its "temporary" tariff reductions made a few years ago, instead of making further substantive concessions during the Tokyo Round.
It is all too little recognised that developing countries, whether or not they are doing extraordinarily well in the textile field, continue to maintain a very high level of protection for their domestic industries. Kenya, Morocco, and other

1433
African countries effectively totally ban the import of most textiles. Egypt and Taiwan prevent access to their markets with tariffs of 60 to 100 per cent. Brazil charges 205 per cent. on man-made fibre fabrics, while Egypt imposes a duty of 250 per cent. on such fabrics. None of these countries conceded an inch. You need a commando force, not a sales force, to penetrate tariff barriers at that level, and the next person (generally a retailer) who tells me that textile manufacturers should get off their backsides and export will get a double-barrelled blast back.
Undoubtedly, led by the European Community, as the report records, great efforts have been made throughout the years to provide special arrangements for the developing countries under all the agreed codes. But, as Lord Thorneycroft pointed out, there is no doubt that a time must come, and should come soon, when we analyse the criteria of the so-called "developing country". When does a developing country cease to be one? Twenty years ago South Korea was not a significant exporter. Twelve years ago, 61 million dollars-worth was exported. Ten years later, in 1977, she had 1,093 million dollars-worth of exports. Her exports to the United Kingdom over the same 10 years increased fifteenfold, and have increased still further since. At the moment she is the sixth largest exporter, and she has announced her goal of having the world lead in textile exports by 1991. Will she still be regarded as a developing country?
Going to the other extreme, is little Mauritius, exporting annually over 4 million sweaters, most of which she calls "Shetland", still in need of protection for her textile industry? Is she still to be treated, as are other Far Eastern countries who are doing very well indeed out of our markets, as a developing country? My Lords, the Tokyo Round, despite the strenuous efforts of the industrialised nations, failed utterly to get any agreement from Third World countries on fair and reasonable reciprocity. The textile industry does not want high tariffs and protection, but it does ask that there shall be a far greater measure of reciprocity in our dealings with other nations. So far as these negotiations are concerned, the textile industry feels very strongly that in many areas it was "sold down the river".
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The Select Committee recognised this and recorded that not all so-called developing countries warrant the continuing privileges afforded by such status. Extensive barriers to trade by developing countries were in the past justified by their early and immature development needs, but in the future, if they maintain these high tariffs, they are likely to hinder the development of international trade, not only in textiles but in other items, too. By continuing to be excessively protectionist, the better-organised industrial (mainly Asian) countries will strengthen their dominant position at the expense of the weaker economies, and in particular I would say the Lomé countries. While the Far Eastern developing countries have roared ahead—and one can only describe as a mushroom growth that of their textile industries—the Lomé countries have lagged very seriously behind.
I believe we can no longer consider all these nations under one umbrella as developing; and we need very desperately, as Lord Thorneycroft pointed out, a new appraisal analysis of what is and what is not a developing country before we give them the free markets, or the near free markets, into which they are pouring their goods today, to the detriment of those of us who still want to see a real textile industry in this country. The massive advantages, which some of those countries exploit, should be concentrated on the truly underdeveloped territories. Indeed, the Brandt Commission, which Lord Banks referred to, has emphasised the role of the developing countries in this process and their share of the responsibility for creating greater freedom in trading opportunities and opening new fields of trade, which calls for a much greater sense of participation and responsibility than they have so far shown.
I also wonder, in the field of social welfare: Are we not failing in our duty, where Third World industries are mature, flourishing and profitable, when we so readily accept goods from countries which employ 10- and 12-year-olds working 10 hours a day, six days a week, for anything from a sixth to a twentieth of the rates paid in the European Community? For too long the now highly developed Asian and Latin American countries have pursued a policy of, "You give and we take". Their excessive demands in these negotia-

1435
tions for almost free entry, and that any disruption of our markets must be adjudicated by an international committee, are as arrogant as they are farcical. All that this would mean is that the 80 would permanently outvote the industrialised 12.
In so far as the Tokyo Round broke new ground in trying to improve some of the provisions of GATT, which had not proved all that effective, we certainly welcome the arrangements to strengthen control measures and systems to ensure that agreements entered into are honoured and to restore confidence among those who have suffered in the past from the devious methods of State pricing, hidden subsidies and quota avoidance. No one has borne the brunt of those infringements more than has the United Kingdom. We earnestly hope that the new agreements on import licensing, on Customs valuation and on technical standards will be truly effective. In particular, we welcome the ending of the "American selling price" method of valuation, operated in the United States. Lord Drumalbyn described how it works, so I will not enlarge upon that. Equally, we are glad that the rules against discrimination in the purchasing procedures of goods for Government procurement are to be widened. Of course, in theory the EEC already has regulations binding it in relation to public contracts throughout the Community. In practice, if you analyse the advertisements of public contracts you will find that those published by Great Britain outnumber by about 10 to 1 those by anybody else in the Community; and certainly three countries seem to ignore the regulation altogether. Now that it is part of the Tokyo Round agreements, we hope it will be more universally honoured.
As the report reveals, the Tokyo Round, because of the absence of the Soviet and East Germany, failed to find a solution to the problems of State trading country exports. Nor were they able to institute any means of price checks at EEC Customs points to ensure that goods are not dumped abroad at totally uneconomic prices, well below their manufacturing cost. Equally—and I believe Her Majesty's Government are considering this issue—we might eliminate the labelling frauds by insisting that items are labelled with the country of origin, thus preventing,
1436
for example, EEC or minor foreign countries acting as agents for foreign exporters, and using their privilege to channel goods through the freer Community Market, thus avoiding the high tariffs which would be paid by the country making the goods were they exporting them directly to this or other countries.
One thing stands out very clearly; the European Community has shown the greatest solidarity in seeking to form a common commercial policy. I am sure that the case for the individual Member States would have been considerably weaker (as the noble Lord, Lord Greenhill, pointed out) had they negotiated as separate entities and not worked together as one, as near as they were able, and provided a solid front capable of holding its own in the power and strength of their joint market against the United States, Japan and the other regional blocks.
I pay tribute to the patience of the men (and possibly a few women) who slogged through these negotiations over the years and to their genuine efforts, even if they achieved far less than we had hoped. All that one can say is that the Tokyo Round was a brave effort and a vital one. Such advantages as were gained in aircraft and steel are mainly helpful in the limited sphere of trade within the industrialised countries. In assessing this very important report of Lord Drumalbyn's committee, we would do well to remember that the Tokyo Round was negotiated with 100 nations, 80 of them determined to keep their highly-protected trade fortress and a dozen who gallantly strove to free and liberalise world trade. As the Commission pointed out in 1978:
"where reducing barriers to world trade is concerned, true reciprocity is essential".
Sadly, lack of reciprocity was the greatest failure of the Tokyo Round.
5.32 p.m.
Lord ARDWICK: My Lords, like the noble Baroness, not for the first time I rise in this Chamber intimidated by what has gone before. In my case it was not the noble Lord, Lord Kearton, who was responsible for it but my noble friend Lord Rhodes and the noble Lord, Lord Thorneycroft. I thought that they spoke with the voices of prophetic authority; but at times when they thundered across the Chamber at one another, I felt that I

1437
was living a Book of the Old Testament. Although it may have sounded as if they were in disagreement, I think there is fundamental agreement between them and among many of us. These are days when, as the noble Lord, Lord Thorneycroft, said, nobody believes any longer in an absolute "free for all" and complete laissez-faire, when nobody believes in 100 per cent. protection; but there is a concept called managed trade and certain areas of our trade and commerce have to be managed. But I will say more about that in a moment.
I should like to say a general word about the reports of the Select Committee They have a reputation for fairness as well as for clarity. They are not "pro" or "anti" Community. The subcommittee takes each proposal as it comes and examines it scrupulously. If a proposal or an activity is inimical to the United Kingdom's interests, although it may be in the general interest of the Community, then the committee does not hesitate to say so. Thus, when the Select Committee says that something done by the Community is of value to Britain, it should command general respect if it does not command general assent.
I was pleased to see in this final report on the Tokyo Round that was so beautifully presented by the noble Lord, Lord Drumalbyn, today that the committee had no hesitation in saying that it had proved to be:
"a successful exercise by the Community in the formulation of a common commercial policy and in the delicate task of keeping the Member States combined in the pursuit of agreed objectives through long and difficult negotiations".
So let us for once, hail a European success, even if it has not been as great a success as we might have hoped. There is little doubt, the Committee says:
"that the existence of a common Community position brought benefit to Member States".
The report recognises the most eminent position which the Community occupies now in the world of commerce, a position which it did not occupy at the beginning of the Tokyo Round. They say:
"The Nine constituted one of the two major negotiators along with the United States".
That leads to a conclusion which is perhaps the main point of my remarks: the value, that is, of this joint action to the Community and to Britain. As the report says:
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"The outcome would have been different and almost certainly less advantageous to European countries if each Member State had negotiated separately.
"In this sense, the Community's common commercial policy can be seen to have brought a benefit to the United Kingdom as well as to the other Member States, albeit one which it is difficult to quantify".
It is comforting to deal with a report, particularly this week, which speaks of a substantial Community achievement and one which has brought benefit, probably considerable benefit, to this country. I was one of those who were amazed and saddened by the failure of the Luxembourg Summit. I am one of those (and I do not want to introduce a partisan atmosphere but I am in one of the minorities on both sides) who feel that the Prime Minister's rejection of the compromise was—and I am going to repeat the fashionable and prudent phrase—"almost certainly mistaken". I had hoped that this week the European Council would have settled its financial problems and that at this time of developing world crisis would, from a newly-solidified financial base, have gone into confident political action with confident political co-operation joining the wisdom of Europe to the power of the United States.
I hope and pray that Britain's voice in the current political work of the Community will not be weakened by the failure to reach an agreement at the Summit. We have a Foreign Secretary whose actions have won acclaim from all sides of the House. It is a common view that he combines vision with firmness of character and he seems also able to command good luck. May it continue throughout the present crisis! But this is not the day to debate the Summit or wider European affairs. To return to this document, it is realistic in its recognition that this generally depressed economic state of the world generally continues, alas!, to encourage the strengthening of natural protection.
The pressures of sectional interests are very strong and the local problems that nations face are often very real, particularly at a time of growing unemployment and excess capacity, as the noble Baroness has eloquently told us. So, of course, there has to be some provision for industries which are threatened not with mere competition but with most aggressive attempts at disruption. There must be a distinction

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drawn, as I think we have all agreed, between poor, developing countries and the newly-developed countries equipped with the latest machinery for formidable productive capacity and, moreover, unencumbered by social obligations and social conscience. We must also draw a distinction between those people who need support—who are special cases and perhaps need temporary shelter and the use of certain kinds of minimum import restrictions or controls (call them what we may) for specific, limited, temporary purposes—and those who want to build a new Utopia behind the old fortress walls of tariffs and quotas and are careless of the dangers which this kind of nationalism would bring: dangers which those of us who lived through that kind of period in the 'thirties will not forget.
This return to the idea of protection is not confined to one party. The devil of protection has not finally been exorcised from the party opposite. One hears some of the young bloods, the old Etonian "young turks", are themselves thinking in terms of protection. That is what the newspapers say. It may be true; it may be false. I am glad that the noble Lord, Lord Thorneycroft, occupies the position that he does because we can trust him to give them severe discouragement from this kind of philosophy.
5.41 p.m.
Lord SELSDON: My Lords, like my noble friends and noble Lords opposite, I too am grateful to my noble friend Lord Drumalbyn for introducing this debate and also to the Select Committee for their report. I find the comments in the report and the Tokyo Round as a whole quite encouraging. I will try and explain why. We had some 99 countries present there. I do not know how many countries there are in the world—perhaps the noble Lord, Lord Greenhill, will remind us—but it is something of the order of 150, thus two-thirds of the countries attended. Something like 37 actually signed something; and therefore roughly 25 per cent. of the countries in the world signed something.
What they signed may not be as relevant as all that because it is by no means perfect. But I would interpret that as the willingness of many nations to accept the
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need for the ground rules, to use my noble friend Lord Thorneycroft's phrase. The need for those ground rules is more apparent among those nations who rely upon foreign trade for a large part of the economy than among those who do not. I am concerned about some of the emphasis given in the report because it gives a warning.
I begin on the question of protectionism. Perhaps more than other noble Lords, I have a feeling that we are moving far more rapidly towards protectionism in this country at this time than many of us would believe, perhaps for politically expedient reasons. The idea of keeping out the foreigner or helping the British—whether it is called patriotism or nationalism—is growing. There is general welcome when we stand up to someone else, the feeling that the United Kingdom is strong again and thus it must demonstrate its strength by showing strength in terms of tariff barriers, import controls, and so on.
This may not be wrong. Our trade pattern and picture has changed. I would not dispute the figures with my noble friend Lord Thorneycroft, but currently I understand that approximately 25 per cent. of United Kingdom GDP depends upon foreign trade. Thus, by his standards we are already bankrupt and out of it. This is above the world average. The average for the EEC is something like 24 per cent.; and for France it is 18 per cent. But for the United Kingdom to be an economic nation of any significance again in the world we need to depend upon over 30 per cent. If therefore we are to introduce protectionism in one form or another, we are automatically cutting off our own noses.
The argument about protectionism and import controls has another factor: we have a higher rate of inflation than most industrialised countries. Any import control is in itself inflationary. It fuels inflation and creates further employment. If I may refer the noble Lord, Lord Banks, to an eminent Liberal, he drew attention to the fact that if we had had nationalisation of the stage coach industry, it would be alive but not necessarily well. If we had import controls, the stage coach industry could well recover, aided by certain royal

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sponsorship and initiative by the private sector.
There is no doubt that import controls will tend to reduce economic growth and perhaps eliminate it. That is an overall argument and within that one can understand the desire of people to introduce them. One can understand the desire of industrial sectors who object to the textile situation in the Third World. But equally one must understand the industrial problems of many Third World countries who, unlike the developed world, have relatively small industrial sectors. Often their total economy may depend upon one or two. Often it is textiles. If I could go back to the situation with Mauritius, with them it was sugar. Inflation led to an increase in wages and they became slightly uncompetitive. They started looking for other industrial sectors. To some extent the same is true with Egypt whose exports are dependent almost entirely upon textiles and agricultural products, on which there are quotas at certain times of the year.
That is one point I am making. I am concerned about our world trading position. I am concerned too that as this position becomes more apparent to us then we can move in the wrong direction entirely. By this I mean, to take the EEC itself, 40 per cent. of United Kingdom exports and roughly 40 per cent. of trade is with the Common Market countries. Our balance of payments with the EEC this year will, to put it mildly, be disastrous if presented in the true light of exports and imports. We do not depend quite as much upon the EEC for overall trade as countries like Belgium, where 80 per cent. of Belgian exports go to EEC countries. But we have moved that way and that movement is not necessarily anything to do with our joining the Common Market but more for geographical and other reasons over which we have no control.
The real growth area of trade for the United Kingdom and for the developed countries has to be the Third World or the developing nations. It is only by increasing the size of the developed world that it can expand and grow. What is the division between the developing world and the developed world which my noble friends have raised in this debate? It is regularly defined. The World Bank
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usually define it but often it does not come across. It is the developed country with an income of over so much per capita. The LDC with a lower income and then the LLDC—or the least developed country—which when I last remember the figures was an income per capita of something like 200 or 250 dollars per head.
If we look at the income per capita we find to our surprise that there are many countries which claim to be part of the developing world but which are actually at the top of the poll. Many of these countries are the ones that impose tariff barriers or sometimes non-tariff barriers, quotas and things of this sort, whereas their economy, in comparison with the economies of other countries of the world, does not justify or deserve this protection.
If we look at Community trade as a whole, it is moving towards the Third World or towards the developing countries. Something like 40 per cent. of all Community imports come from the developing countries. I concentrate on imports first in order that we should not forget that balance of payments is not the only measure of economic growth, and industrialised nations cannot grow without the raw materials necessary for production. Some 38 per cent. of Community exports go towards the Third World, and this figure is rising. I submit that this is to some extent the justification for the growing expenditure under the Lomé Convention and under EDF5, which takes over from EDF4, for the Third World, which is based upon a self-interest in raw materials—and something well over 50 per cent. of raw materials that the Community imports comes from countries of Africa. In many of these countries we have political considerations where other outside interests could destroy relations between these countries and ourselves. These too would be harmful for trade.
The United Kingdom has this special position of probably relying more upon international trade than most of our Community partners. Ireland is of course one of the exceptions. Our position is distorted yet further by North Sea oil. We should not fail to recognise that if the Government and also the previous Government has the courage to remove the significance of North Sea oil from the trade figures, our industrial manufacturing capacity, our visible trade and exports of

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manufactures, would be in a disastrous state.
This is not due to the inability of management to manage or of British engineers or of labour to work, for indeed if they can go to Korea and, from scratch, in sub-zero temperatures produce a motor car which they can then sell back at a competitive price to Europe, there is nothing wrong with that. It is perhaps more the environment in which they work or the support which they may have, from whom I know not. But if we look at the comparisons of our industrial production with those of other nations, we have archaic and outdated industries, with such old equipment that a team of Italians who were over here last week, including several Ministers, wanted to buy some of the machines they saw in the North of England so that they could put them in the front of their factories to explain to their labour force how things used to be done. They said to me when they were up there: "The British are working very well and very hard but often the machinery and plant which they have is so outdated". Therefore we come back to the historic problem of investment.
Where do we go if protectionism is to come?—and I genuinely fear that there will be considerable attempts to introduce it from all sides of the political spectrum: it is not extremists of one view or another but often rational people who may not understand the effect it can have on the potential of the United Kingdom trade and the United Kingdom economy as a whole. It is all right for countries who are not so dependent on trade to become protectionist. It is, of course, against the whole spirit of the Tokyo Round, but one can understand that. Perhaps it is even all right (though possibly immoral) for certain countries to try to introduce strange sorts of non-tariff barriers which are in their national interests.
I will give a few examples. It may be a question of the safety regulations applying to motor mowers, which means that foreign competition somehow cannot conform to them without restructuring their industry. It may mean sending out your tenders to certain countries or certain friends by express post and sending them to others by second-class post. Often things are announced in the newspapers
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but they may be newspapers which British companies do not read.
When we come to the support that is given for trade with the Third World, and the importance of it, I will refer briefly once more to the Lomé Convention. It is a source of sadness to me that in the last EDF4 British manufacturers only won something like 3·4 per cent. for the country and the French won something like 40 per cent. It is also sad that British companies bid for less than 20 per cent. of the contracts that were announced. That includes, among others, the consulting field, where we are pre-eminent in the world.
I therefore wonder whether, when looking at trade, we are not ourselves thinking too much about the "do not" and not concentrating on the "do". By that I mean that perhaps we are not making as great an effort as we should. I do not necessarily include the textile industry because it cannot sell; but many companies from other countries are now recognising that a large proportion of exports have historically gone to subsidiaries of companies or trade partners which are established abroad.
There is a strong case for re-examining the whole question of overseas investment, which is why I welcome the abolishing of exchange controls and even the encouragement and the enthusiasm of Government for investment in the Third World, because those investments lead to increased exports and there is no doubt about that. It is a myth that some people will advance that if you do invest in a country or set up industrial plants you are killing your own export potential. I would refer again to Korea. All the figures show that, despite the development of South Korea, British exports of plant, machinery and other services which go with them have far more than offset any possible repercussion the other way round in terms of imports of cheap materials. We must recognise, too, that we do not control the price at which a man sells his labour, worldwide. It has always been and, despite industrialisation, I submit it always will be, those countries who can co-ordinate initially a cheap labour force which will effectively be the threat to many of the countries which have preceded them in industrialisation.

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I am encouraged by this report and by the conclusions; but, above all, I fear that the reactions of those who do not understand it may be so serious that it could harm the United Kingdom for all time.
5.55 p.m.
Lord GORONWY-ROBERTS: My Lords, we are all very grateful to the noble Lord, Lord Drumalbyn, for the way he introduced this important report. We are also grateful for the very useful and balanced report which the subcommittee produced under his chairmanship. The Tokyo Declaration of 1973 invited all countries to consider a very wide-ranging series of policies designed to liberalise world trade and to improve the economic prospects of the underdeveloped countries. This report helps us to assess the results of those negotiations to liberalise world trade and to improve the lot of underdeveloped countries—negotiations which lasted for six years.
In making this assessment, I think we should remember that these complex negotiations took place during the period of deepening political crisis and mounting economic recession. A few weeks after the Tokyo Declaration was made a new Arab/Isreali conflict broke out in the Middle East leading to the worst oil crisis in history—one we are still struggling with—involving staggering price increases and also uncertainty about supply. That affected both developed and developing countries. The United States—a major factor in any discussions of this kind, the major trading country in the world, after all—was, until the presidential election in November 1976, preoccupied with a very serious constitutional crisis, which effectively took it out of "decisionary" activity in this field. That had its effect on the progress of the negotiations, I have no doubt. Then again, the world-wide trade recession deepened as exchange rates became ever more volatile, affecting in particular negotiations on the important question of tariff reductions; and unemployment mounted in practically every country.
In these circumstances, I think it was wholly understandable that the Governments of developed and developing countries, of industrial and industrialising countries, should come to the negotiations with a mixture of liberalism and con-
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servatism—I mean both terms, of course, in a non-party sense—with a consciousness of the need to liberalise world trade and yet a compulsion to conserve home industries and employment opportunities at home. Against that background, I think it is remarkable that so much agreement was achieved.
The noble Baroness, Lady Hornsby-Smith, if I may say so, assessed the probable proportion of success as about 20 per cent. Statistically, looking at Annex II and the analysis in the body of the report itself, this may well be a useful assessment of how far these protracted negotiations succeeded. If so, against the background of the mounting difficulties I have mentioned, I think that was quite an achievement. From the perspective of 1973, not knowing what was going to happen, first, in the oil countries and generally throughout the world for other reasons in regard to the flow of trade and the availability of employment, the results are disappointing. But from the vantage point of 1979 and 1980, I would agree they are encouraging and I was much impressed by the speech made by the noble Lord, Lord Selsdon, where, in a very balanced way, he pointed to continuing difficulties and gave one or two warnings with which I agree. At the same time, he made the point that we need not be discouraged by what has been achieved in these circumstances in this direction.
Ninety-nine countries took part. That is a very substantial majority of those who were invited—numbering about 140, I imagine. Although there were one or two notable absentees, such as the Soviet Union and China, not to mention East Germany, nevertheless, a number of East European countries, Communist countries, joined in the discussions. We see from that very useful tabular presentation of the agreements, Annex II, what categories of agreements reached what stage of acceptance.
If I may generalise, I would say that there has been some advance in tariff reductions, though there are one or two qualifications which one needs to make about that area of agreement. But there has been quite substantial agreement and advance on non-tariff harriers, on what the noble Lord, Lord Thorneycroft, called the reinforcement and the redefinition of the essential ground rules. I think that

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we should lay very great emphasis on the need to watch these, to reinforce them and redefine them, as negotiations of this kind proceed.
The non-tariff barriers can be even more effective forms of disguised protectionism than the straight quota or the tariff imposed on imports. There is a wide range of them. I had to consider quite a number of these when I was at the Foreign Office. There is the straight subsidy, countervailing duties, Customs valuation methods, import licensing procedures—or, if you like techniques, and that is a study in itself—and the whole question of Government intervention, especially in procurement and Government purchases. There has been a substantial advance in putting these matters on an improved basis as a result of these negotiations, and I join with the noble Lord, Lord Thorneycroft, in welcoming this, because it is absolutely fundamental to the future of world trade. Anything else would mean anarchy, far beyond the dislocation of the 'thirties that some of us remember.
Having said that, the report is, on balance, encouraging. That is not to say that all countries have, by any means, acceded to all the agreements. The annex makes this absolutely clear. There is a kind of 20 per cent. advance, which I welcome. But we must look squarely in the face the fact that a number of countries—the majority, in fact—range from the negative to the reserved, and very few have gone as far as the final signature. Still, the follow-up may improve that performance. It is, of course, particularly disappointing, though understandable, that so few developing countries have so far acceded to by far the most of these agreements.
I shall not detain the House with the paragraphs which impressed me about the concrete results of the negotiations on tariff reductions, except to say this. The agreement to cut USA tariffs against Common Market exports by 30 per cent., and to cut Japanese tariffs against Community exports by 25 per cent., must surely benefit the Community substantially and, therefore, benefit this country. Of course, the common Customs tariff will be reduced from an average, as we heard, of 9·8 per cent. to 7·5 per cent. It may
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look, on the face of it, as if our friends in America and Japan are reducing their tariffs far more than is the Community. But that, of course, is wholly relative. They started from a much higher threshold of restrictions than the Community did.
There is one criticism which the report makes, and which I want to echo, about the attitude of the Community, which otherwise has been most constructive and most effective as I hope to show. The annual reduction rate which I have quoted will extend over eight years and will be very small indeed, year by year; less than 1 per cent.—I think, perhaps, half of that. In addition, there are partial or total exceptions in the case of particularly sensitive industries.
Here I should like to join my noble friend Lord Ardwick in asking the House to agree—we can all agree on this, without distinction of party, as my noble friend emphasised—that there is a difference between going for a general system of protectionism, which is designed in an illusory way to achieve national solvency, and the use of properly agreed, selective and temporary protective measures in order to safeguard security (some industries are in that category), in order to safeguard ailing industries which, given a little time to recover and a little support in this way, may, without assistance, become effective and contributory in the normal way to the national economy.
I would say, without indulging in any kind of argument of a party character, that while the noble Lord, Lord Thorneycroft, enjoyed himself—and I enjoyed him very much—in referring to certain varieties of emphasis within the Labour Party, other parties have been known, or are known, to indulge in the same kind of variety of emphasis and of opinion. That is all right. I should not be at all surprised if the sea green incorruptibles of free trade in the Liberal Party may individually, from time to time, have a look at the seductive benefits of occasional protectionism. They have in the past, and they may in the future.
But I leave that as a party point. It is not a party point. I think we can all agree that general protectionism is a menace, but that selective temporary expedients, similar to that already approved and agreed in the Treaty of Rome,

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certainly in the GATT, and mentioned in this report as being inevitable and acceptable, are something that we can all live with, and indeed use properly, in order to tide over very difficult situations which affect certain industries in practically every country.
Our own Department of Trade—and the White Paper is very good on this—finds the tariff agreements, and certainly the non-tariff agreements, to this country's advantage, as well as to that of our partners in the Community. All this was negotiated for us by the Community. But we must remind ourselves that, while we derive advantage from concessions which flow in our direction, this works both ways and we shall certainly suffer some increased competition from imports as a result of these mutual reductions. Some British industries will certainly continue to resent import competition which they feel is unfair—the textile industry in particular and a very strong case has been made this afternoon, as it has been made before, for particular attention to our textile industry. Now, with the agreement of the Community, we are negotiating with the United States of America, I think under Article 23 of GATT, to reach a partial solution of this matter. But I agree with one or two noble Lords who say that it is improbable that we shall get from the Americans, who have their own preoccupations in this matter, all that we want. We shall see.
I shall not go through the various items of non-tariff agreements in the Round, except to say that there are one or two which should benefit us markedly in the United Kingdom—the agreement on import licensing procedure, for instance, should benefit British exporters for the reason that virtue in this case is not its own reward. We have always played fair on this. Therefore, if others now begin to play as fair as we always have done, then that will be of benefit to us. It is a kind of reverse tariff that will assist us. There are other examples of advantage to us. What will probably be particularly helpful is the group of agreements on Customs valuation. It will be a help to traders to have greater uniformity and precision in the assessment of ad valorem duty, but it will be necessary to examine the application of United
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States legislation, which is coming up at this time on this point.
The agreement on civil aircraft looks as if it is a sweeping agreement in favour of general free trade in this area. However, a closer look will show us that while there has been a substantial advance here in that industry, nevertheless there are reasonable qualifications about the pace of the liberalisation in this industry.
The agreement seeking to limit discrimination through Government procurement practices depends for its effectiveness on proper supervision and verification. One is inevitably reminded of one's experience in disarmament talks; so often one gets as far as verification, and it is there, on the question of confidence, that the other fellow will do it if you do it, that very often these sensitive negotiations break down. But it cannot be beyond the wit of the participants to put together what the report describes as a supervisory committee composed of representative members to apply the proper supervision and verification to these practices.
I join with the noble Lord who said that it was particularly disappointing that the safeguards code on emergency protective action had not been agreed between the developed and the developing countries. The developing countries, understandably, are nervous. If the developed industrial countries are reasonably cautious about liberalising in such a way that they may imperil weak industries, or indeed the future of potentially strong industries, how much more must there be nervousness among the leaders of young countries which have only lately achieved independence and responsibility, and older countries in the Third World that have had very little industry and now have some industry, and are naturally cautious about placing them in competitive jeopardy?
At this point I agree very much with what was said by the noble Lord, Lord Thorneycroft. The main way to help developing countries is through trade. Trade, properly channelled and deliberately tailored to the potential and the need of the developing countries, is a form of aid. But it is a proper kind of aid and not just an unrequited dole. We need to think very hard about how far we can develop trade arrangements with developing countries which in fact are

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preferential. The whole of aid can be preferential, but not the whole of trade must be preferential. It is like the distinction between paying a man a dole and paying him an assisted wage. There is an element of subsidy or preference in both, but it is far greater in the outright dole.
I think it is fair to say that although these protracted negotiations did not yield the results that we had hoped for when they were initiated, nevertheless substantial gains have been made. There is first of all participation by a very large majority of the countries of the world, developed and undeveloped, industrial and not yet fully industrialised. There have been some specific advances in reducing tariffs, less so in improving the prospects of developing countries, but the will has been shown to be there.
Thirdly, the Round demonstrates the capacity of the Community to achieve a cohesion of method and purpose, and when that is aligned with the growing sense of political co-operation in the Community it is to be welcomed, even though there may not be very substantial results. But there have been substantial results. This is a great gain, politically as well as economically. It has brought the Community together in one sense of purpose. It has also lessened the danger of consolidating the world into some three regional trading groups—Europe and Africa, North and South America, and Japan and Asia—drifting, not into the old style nationalistic competition, but a kind of regional free-for-all. That has been avoided.
However, having said that these are gains, I echo a warning given by the noble Lord, Lord Banks, and add another that I have tried to give in this House before now. The first is that we must resist short-term inducements and sectional pressures to resort to general protectionism, bearing in mind that the ground rules can quite properly include provision for emergency safeguard action in regard to specific interest industries, and even specific national communities. There is a distinction between the two, as my noble friend made clear.
The second warning is that the communist countries, which cover huge parts
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of the world's territory and include a very large percentage of its population and resources, did not participate in this Round, neither did they in the Brandt Commission. That is a deficiency in any international negotiation that we must somehow put right. I think it is essential that we redouble our efforts to identify a community of interests, both politically and certainly economically, not only between North and South but between East and West. Systems may vary, but the needs of peoples of all countries are very much the same. If all Governments, communist, capitalist or mixed economy, as most of us are in the West, were to identify this community of interest and let all systems go, then the great boons of security, which all countries need, certainly in this nuclear age, and prosperity, which all peoples need in a world of rapidly rising population and, possibly, a proportionate diminution of essential resources, may well be the wave of the future, if I may uncharacteristically borrow a Marxist phrase. We should tolerate systems, political and economic, without undue recrimination, but insist upon the larger community of political and economic interests to serve the whole of mankind.
6.21 p.m.
Lord TREFGARNE: My Lords, as so often in the past, your Lordships will be grateful both to the ECC Select Committee for preparing this valuable and thoughtful report and to my noble friend Lord Drumalbyn for bringing it to your Lordships' attention today. The care and moderation shown by the authors of the report are very clear, and the Government can agree with many of its judgments.
The Tokyo Round agreements, the subject of this report, were agreed towards the end of last year and the United Kingdom ratification followed in February of this year. Your Lordships may remember that we discussed the agreements in a debate on the order on 31st January last, so I do not need to go into detail on them now. They provide for further tariff reductions, continuing the process of reciprocal tariff liberalisation which has been under way in a number of negotiating rounds since the war. At the same time, the participants have negotiated a series of agreements about measures other than

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tariffs which restrict or distort international trade. This attack on non-tariff trade barriers is a new departure and has provided the first major elaboration of the principles governing the conduct of international trade since the General Agreement on Tariffs and Trade—or GATT, as it is called—was signed 30 years ago.
This outcome is important to us in a number of ways. I need hardly remind your Lordships that we live at a time of unsettled economic conditions. When industry is working below full capacity, there is inevitably an increase in the pressure on Governments to protect their home markets. In such circumstances, the fear was a real one that, if these negotiations had failed, the door would have been opened to a general increase in protectionist measures. I am here echoing the views of several noble Lords who have spoken this afternoon. If a positive outcome had not been possible, we could easily have found ourselves going backwards.
Beyond this essentially defensive achievement, the agreements provide the framework for a gradual reduction in the obstacles to international trade. Tariffs levied by the developed countries on imports are to be reduced by an average of about one-third over an eight-year period. This phasing deliberately avoids any rapid changes in tariff levels so as to give firms time to adjust to increased competition at home while taking advantage of improved export opportunities. Thus by 1987, at the end of the tariff-cutting process, trade will be quite significantly freer from tariff barriers than it is today.
The attack on non-tariff barriers to trade is a less automatic process. Barriers such as the traditional purchasing practices of Government authorities and the technical standards imposed on domestically produced and imported goods are matters which cannot be changed overnight. The agreements which have been negotiated provide a basis, but the flesh has still to be put on the bones. So the detailed work of implementation and interpretation will be of crucial importance. We shall be taking an active role within the Community to ensure that signatories do not slide away from their obligations and that the potential of the agreements is realised.
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At the same time as implementing the agreements properly ourselves, we shall need to watch closely that our international trading partners do the same. Each of the agreements on non-tariff barriers contains arrangements for settling disputes and this should provide the means with which to ensure that our exporters receive reciprocity for the access which the Community grants to its markets. I will have more to say about that later on. It will take time to build up case law for the interpretation of the agreements. In some cases, we shall have to accept that it is more important to get the solutions to the problems right than to get them quickly.
In assessing the potential of these agreements, it is worth recalling that the success of the GATT in the post-war period was not assured from the outset by the legal form of its principles. Much depended also on the spirit in which they were applied. The success of the newly-negotiated agreements is similarly not guaranteed by their legal form. But the Government hope and expect that as in the case of the GATT itself, the signatories will have the political will to make the Tokyo Round agreements effective instruments for the liberalisation of international trade.
This will be no easy task. International trade touches major economic interests in exporting and importing countries, and clearly cannot be free of problems. Differences will continue to arise for resolution in the future as they have in the past. What we can expect is that the agreements negotiated in the Tokyo Round will help to provide a more up-to-date and secure framework within which the problems can be resolved.
The Select Committee has noted, for example, that important issues are raised by the Government's support for industry, which is now internationally widespread, and its relationship to the GATT principles on subsidies and countervailing duties. The agreement on subsidies and countervailing duties reached in the Tokyo Round has developed the GATT provisions by recognising more fully than previously that Government support can serve important economic and social objectives while at the same time it elaborates on the principles in the GATT aimed at discouraging subsidies which

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have adverse effects on the trade of other countries. As part of the agreement, the United States has at last accepted for the first time the material injury criterion for the imposition of countervailing duties. It is to be hoped that this agreement will help engender a climate in which any problems posed by subsidies can be tackled in a realistic spirit.
As it happens, we in the United Kingdom were faced shortly after the end of the negotiations by a major problem arising from a particularly sharp increase in imports of certain synthetic textile products from the United States. This increase has been encouraged by cheap United States feedstock prices and by the change which has occurred in the parities between the dollar and the pound. The Government have had to secure the imposition of quotas to protect the United Kingdom market under the relevant Community mechanisms.
Paragraph 33 of the report refers rather gloomily to these events, but no set of rules for international trade could have prevented the occurrence of this problem or the need for the Government to take protective measures, faced by a problem of this severity. What can we expect in the post-Tokyo Round atmosphere is that disputes about our action should be handled in a way which contains any disagreements and avoids escalating tit-for-tat measures.
It is a matter of considerable regret that, as the committee notes and as several noble Lords have mentioned, only a few developing countries have so far signed any of the agreements on non-tariff barriers to trade. Representatives of developing countries played an active part in the negotiations on these agreements and developed countries went to considerable lengths in agreeing to less onerous provisions for developing countries, tailored to their needs. Despite the granting of these special arrangements for the developing world, only some South American countries have to date signed agreements on non-tariff barriers, though others we understand are considering doing so.
This hesitancy on the part of the developing world can in part be put down to their conclusion that the outcome of the Tokyo
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Round did not fully live up to the high expectations they had placed upon it. Naturally a developing country may feel a need to consider carefully such a very complex package as the Tokyo Round agreements to assess its compatibility with existing legislation, its effect on different industries, and the overall balance of advantages it offers. Indeed, some administrations simply do not have the resources to deal with such questions speedily and in any case they may wish to see how the agreements are working out in practice before making a permanent commitment.
We and the other developed countries are continuing to try to make this process as easy as possible. Provision has been made that any developing country interested in an agreement can attend the meetings of its supervisory committee as an observer before making a decision about joining. At the same time increased efforts are being made by developed countries within GATT to encourage a constructive dialogue with the developing countries, for example, in the informal group of developed and developing countries known as the Consultative Group of 18.
An increased emphasis is being put on topics of interest to developing countries in the GATT work programme. So we are trying to bring developing countries more fully within the GATT orbit. We shall continue to urge on these countries that it is in their interests to adhere to the Tokyo Round agreements early on and to play a formative part in how they develop.
We are naturally disappointed that it did not prove possible to agree a code on safeguards as part of the MTN settlement. I should like first to rebut the myth that the reason for the failure was entirely due to disagreements between the European Community and the developing countries on the subject of selectivity. There were, of course, serious differences with them on the conditions which should be attached to selective action, but there were other weighty matters still outstanding among all the participants on the various criteria and coverage which the code should apply generally. I am confident that the developing countries have weighed this particular aspect in its proper perspective, though we recognise that the outstanding negotiations add to

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the uncertainties for them, as indeed they do for all of us.
All countries have demonstrated their political will in this area by agreeing to continue the negotiations. These are now continuing on an informal basis and I hope that a solution can be found. I think it would not be appropriate for me to divulge too many details in a negotiating situation, but I can say that we shall be prepared to consider all ideas with an open mind. At the moment we are hoping that attention focused on some of the less contentious areas, such as the more routine conditions, will defuse passions and assist in agreement. At the same time I must say that the Government are not abandoning their search for recognition of selectivity. There is really no basis for the fear held by some developing countries that underlying the Community policies on safeguard action is a plan for an increase in protective measures taken against them. The same stringent criteria would apply to selective as to general safeguard action. But we continue to regard a recognition of selectivity as the only sensible outcome for protecting the legitimate interests of British industry in a way that minimises disruption of the international trading system.
It might now be helpful if I were to deal with some of the points that have been raised this evening. I am not sure that I can manage to cope with all of them because time is getting on, but any points of significance to your Lordships which I fail to deal with I shall be happy to deal with by correspondence afterwards. First I should like to deal with some of the points made by my noble friend Lady Hornsby-Smith, which were echoed indeed to some extent by the noble Lord, Lord Hale, and others. Of course, my noble friend's concern is with the textile industry, the problems of which she has raised several times in your Lordships' House. There are now no less than 27 bilateral arrangements under the multi-fibre arrangement with low cost suppliers. And with those countries with whom the Community has guaranteed under preferential trading agreements free access to the Community for industrial goods, we have in almost all cases where trade is significant negotiated voluntary restraint arrangements. The result is that 93 per cent. of low cost imports are now subject
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to actual or potential restraint. Quotas under the MFA cannot be exceeded but VRAs—that is voluntary restraint arrangements—depend for their success on the willingness of the exporting countries to operate them, and occasionally the Community has had to take up excesses with these countries in negotiation. But VRAs have nevertheless had a major effect in restraining these countries' exports to the United Kingdom. After Community enlargement, a wide-ranging safeguard clause will be available to protect the Community's markets against Greek, Spanish and Portuguese imports during the transitional period and we are now negotiating with our Community colleagues for specific transitional arrangements for Portugal and intend to do the same for Spain.
So far as trade in textiles with the developed countries is concerned, we believe that this should be free but fair. We are prepared to give the industry full advice and assistance, for example, in preparing anti-dumping cases. The Department of Trade and Her Majesty's Customs will certainly investigate any allegations of origin fraud, for example, which are not merely rumours but are backed up by the basic minimum of evidence. I want to say that much of the information brought to our attention is just that—namely, rumours—and so often do we find that the real evidence that we need in these cases is missing. As for subsidies, we will do whatever is possible under the new GATT agreement.
My noble friend Lady Hornsby-Smith also referred to the need to ensure continued reciprocity of access to developing countries. The Government attach particular importance to gaining better access for United Kingdom exports to the markets of the so-called newly industrialised countries who export manufactured products to our markets on an appreciable scale. We shall inevitably suffer substantial problems if these countries are not prepared to open their markets to a wide range of exports from us as we accept a wide range of exports from them. As we make plain in bilateral contacts with the countries concerned, our home industries affected by import competition cannot be expected to accept the situation unless trade is two-way in this sense.
As for the matter of textile tariffs, which my noble friend also raised, both

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the Community and the United States, for example, are to cut their textile tariffs by less than the amount required by the standard tariff-cutting formula, and the cuts will reduce many of the differences between the Community's and the generally higher United States' textile tariffs. The United States has offered worthwhile reductions in its very high tariffs on woollen goods, such as the tariffs on woven woollen cloth and on woollen sweaters. In return, the Community has offered concessions in the tariffs on synthetic textiles, which I recognise have caused some concern. To help allay the fears of United Kingdom and European producers about possible competition in this sector, the Council of Foreign Ministers has declared that it will have recourse without delay to the appropriate safeguarding provisions of the GATT if foreign producers of synthetic textiles try to take advantage of their artificially cheap supplies of energy and feedstock to threaten disruption of the Community market. This commitment is being acted upon in appropriate cases.
My noble friend referred to the "snapback" provisions in the event of the MFA not being renewed. I should perhaps tell her that they, of course, apply not only in respect of the United States but in respect of the Community as well.
If I interpreted him aright the noble Lord, Lord Greenhill of Harrow, asked whether we should aim in the long run to merge the GATT and UNCTAD into a single new and comprehensive international trade organisation covering broadly the same ground as the ITO envisaged in the Havana Charter of 1948. He has raised an interesting and important point. It is certainly true that historically the division of responsibility between GATT and UNCTAD has emerged somewhat by chance. Nonetheless there is much to be said in favour of the present arrangements. The GATT deals largely with an area of trade policy in which precise and binding rights and obligations are both desirable and practicable. UNCTAD, by contrast, deals mainly with commitments which necessarily have to be cast in a more general and nonbinding form. Each has developed different techniques of consultation and negotiation. It would not be in anyone's
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interests to try to force these two rather different types of organisation into a single framework.
It is, of course, important for GATT and UNCTAD to maintain, as they do, close and effective working relations. The issues they deal with are interrelated, and there is a case for periodic discussion of the whole complex of trade and trade-related issues within a single worldwide organisation. UNCTAD already provides the forum for this and should, I think, continue to do so.
My noble friend Lord Thorneycroft and the noble Lord, Lord Rhodes (who has had to leave to catch his train), and others, referred to the general issue of import controls. In the Government's view, general import controls would be contrary to our international trading obligations and to our domestic interests. They would put up prices, reduce freedom of choice for the consumer and act as a disincentive to British industry to adjust. They would also lead to retaliation against our vital exports, and this is not a path we would wish to tread. Exceptionally, we are prepared to consider the case for import restrictions in a particular sector where the industry concerned feels these to be essential. Of course, any such proposals have to be acceptable to our Community partners, and must, of course, be considered against general United Kingdom interests, and, as I said, the dangers of retaliation against vital exports. I must confess that my noble friend Lord Thorneycroft put the case against import controls a good deal more eloquently than I can, and I agree with every word that he said.
My noble friend Lord Drumalbyn in opening this debate asked me particularly about the general position of signature to these agreements. I can say that the Community plus all of the member States signed the civil aircraft agreement, the Agreement on Technical Barriers to Trade, the Standards Code and the Tariff Protocol in respect of European Coal and Steel Community products, but all the other agreements were signed on behalf of the Community alone. The formal position within the Community on who should sign agreements was not clear and the agreement on signature which was finally agreed preserves the right of member States to speak in the committees of

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signatories established under the various agreements. In practice, however, the best results are normally achieved by the Commission speaking on behalf of the Community in the formal GATT committee meetings with the member States active in the margins.
My noble friend also asked me specifically about the position of Japan. The Japanese Diet has now approved the MTNs and the Japanese Government has accordingly just lifted its reservations in Geneva and fully ratified all of the agreements and protocols making up the MTN package including the civil aircraft agreement to which my noble friend referred, and of course this is a most welcome development.
My Lords, we in the United Kingdom are heavily dependent upon international trade. Our exports amount to almost a third of our gross domestic product, compared with 20 per cent. only 15 years ago. Quite apart from the general economic arguments in favour of free trade, which the Select Committee and many of your Lordships rightly endorse, we are in practical terms simply not in a position to forgo the benefit which trading with other countries brings to us. The outcome of the Tokyo Round offers the means by which a further liberalisation of trade can be achieved, not a sweeping one but one appropriate for the times, and it strengthens the GATT principles within which problems affecting international trade are resolved. It is on this basis that we welcome the constructive approach of the Select Committee's report.
6.44 p.m.
Lord DRUMALBYN: My Lords, I should like to start by thanking my noble friend for answering so fully the points that have been raised. He has done it with his usual care and vigour, and he does it at a fairly breakneck speed, which is commendable because we have to get home. It will repay re-reading in Hansard when we get it (I was looking for neutral wording). I should also like to thank the House as a whole for the way in which the report was received. In particular I should like to thank all noble Lords who have spoken and also those few noble Lords who are still here—those who have listened and those who have spoken and
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listened. I am very grateful to them all. Finally, I should like to thank very much our advisers for the unstinted help they have given us. The whole exercise has been a very useful one, certainly for the committee itself, and I hope that as a result of this debate it will prove of wide usefulness to the House, and beyond. I do not know whether I am supposed to withdraw this Motion. I do not see why I should because the House has obviously taken note of what we have been doing. Therefore, I should just like to say thank you very much indeed.
On Question, Motion agreed to.

ECC REPORT: ENERGY OBJECTIVES FOR 1990
6.47 p.m.
Lord SHERFIELD Lord SHERFIELD rose to move, That this House takes note of the report of the European Communities Committee on energy objectives for 1990 and convergence of the policies of Member States (35th Report, H.L. 166). The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. In July last year your Select Committee reported on an earlier version of the EEC communication, Energy Objectives for 1990. At that time we were anxious to get an important document on to the Floor of the House before the Recess and we took relatively little evidence, but we did have a well-attended and interesting debate on 23rd July. By then the Commission had already published a second and more comprehensive communication, with the same title but with the addition of the significant words "and the Convergence of Policies of Member States", plus a draft resolution.
This time your committee decided to make a report in some depth, and, since previous reports on this subject had been rather critical of the Commission, to endeavour to make a constructive contribution to the problem of energy policy in Europe. The result is before your Lordships. Here I want to express my thanks to my colleagues on the subcommittee which drew up the report, to our two specialist advisers and to our clerk. All of them worked very hard and gave me invaluable support.
Your committee took evidence from the Department of Energy, from the nationalised industries concerned with energy, from the European Environmental Bureau, which submitted a very well argued and informative paper, and from the United Kingdom members of the European Parliament. We were assisted informally by an official of the European Commission, and we had a wealth of written evidence from the major oil companies and others. For all these contributions I express my gratitude.
Your committee set out to establish, on the basis of the Commission's communication, what the European Economic Community is, could or should be doing about energy policy. Some time back the Commission tried to promote a common energy policy for Europe. But the present communication recognises in effect that this is not at present politically feasible, since each Government is determined to be master of its own house. The Commission now lays emphasis on aiming at the highest possible degree of convergence of policies, and the resolution sets out five objectives at which to aim. They are listed in paragraph 2 of the report and are subject to two overriding considerations: first, to reduce the energy coefficient—that is the ratio between the growth of energy consumption and economic growth—to below 0.7, since, I believe, revised to 0.8; and secondly, to restrict the level of net oil imports to a named figure. The five objectives are: to promote energy savings; to step up coal production; to restore the nuclear programmes to their original level; to increase indigenous hydrocarbon production to the maximum extent; and to ensure that pricing policies reflect rising supply costs.
In such a fast-moving and vital area of policy a report such as this can do no more than fix the situation at a given point in time, in the knowledge that it will be subject to change before it is published. In one sense that is true of this report. For example, the forecasts for energy production in Europe have been twice revised in a downward direction, and only yesterday the Commission produced a revised resolution, a much shorter draft, which concentrates on two what are now called "priority areas"—that is, energy saving and the rational use of energy, and the reduction of oil consump-
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tion and oil imports. In this resolution the Member States are requested to submit their energy policy programmes up to 1990 annually to the Commission, who will then make a critical examination of them. But, in another sense, the situation has been slow moving, for the communication before the House, which was published in June 1979, has still not been considered by the Energy Council. I shall return to that point later.
Your Lordships' committee concluded that the scope for Community action could broadly be classified under three headings. First, matters requiring negotiation in international institutions in which the Community is represented. Secondly, matters benefiting from convergence of national policies pursued through the negotiation and the adoption of agreed objectives. Thirdly, matters appropriate to a common policy.
The first function is obvious, and has been successfully performed at summit meetings and in the International Energy Agency. As regards the second—convergence—your Lordships' committee considered three ways of promoting it—namely, to set joint targets; to align pricing policies; and to implement and monitor national conservation programmes in order to ensure the highest standard of energy saving and efficient use.
As regards the setting of joint targets, there was some difference of view among our witnesses as to whether that was a helpful practice. The Department of Energy was inclined to throw some doubt on this, but most of our other witnesses thought that they were useful. There was, however, a good deal of criticism of the practice of the Commission in predicting the achievement of targets by simply adding up the figures received from member countries instead of applying a critical faculty and producing their own estimates. Your Lordships' committee agrees with that criticism. The current practice leads to chronic undershooting of the real figures, especially in the nuclear field, and therefore to self-deception.
Finally, our witnesses were almost unanimous in thinking that the Commission was not looking far enough ahead and the European Environmental Bureau was particularly emphatic on this point.

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The Commission should produce estimates at least up to the year 2000. Perhaps the noble Earl who is to reply would like to make some comment both on the question of targets, and on that of the time-scale?
As regards the third point—the scope for common action—a common energy policy is distinguished from convergence of policies by the application of Community resources or the acceptance of Community legislation, with or without budgetary support. One class of project falling under this head includes developments involving a long timescale, high cost and high risk. The classic example is nuclear fusion, where there is already a well-developed Community research programme whose realisation, however, falls outside the timescales under consideration. Other cases are the fast reactor, nuclear waste disposal, and reprocessing, which are appropriate for Community collaboration, if not for a joint programme. Your committee urges in particular that there should be collaboration on fast reactor development. Can the noble Earl say anything more about this tonight?
Another subject is energy distribution and the possible strengthening of the European energy infrastructure, but here the scope for savings seems to be limited. Energy conservation is another matter on which your Lordships' committee thinks the Commission could do more by financing research, development and demonstration projects, and by encouraging national programmes. Your Lordships had a well-attended debate on energy conservation on 19th March, introduced by the noble Earl, Lord Lauderdale. That debate dealt mainly with domestic policy, but nevertheless I need not pursue this subject tonight, except perhaps to say that the Commission, after a shaky start, seems now to be getting a better grip on the subject and that the emphasis laid on the rational use of energy in the new Commission Resolution, to which I have just referred, is, I hope, an encouraging sign.
Perhaps the most urgent need in Europe is to improve the security of supplies, and that means the development of indigenous resources, especially coal, as the British and German coal industries have great potential for increased production. Your
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Lordships' committee considers that there is a strong case for additional Community aid to the coal industry by way of subsidies, control of imports, and, more particularly, of aid for additional investment. In this connection they strongly support the recent proposal of the Secretary of State for Energy for investment grants. I should like to ask the noble Earl what, if any, progress has been made on this matter.
The committee also feel that the Commission might do more to gain public acceptance of the need for increased energy production. They have taken some steps in this direction already in the nuclear field and they might, we think, do more and extend the action to include coal production and use.
Lastly, there are the oil and gas resources of the North Sea, which are of immediate interest to other member States. It is recognised that this is a British responsibility, subject to the schemes of the International Energy Agency and the EEC for the disposal of oil in an emergency. However, the benefits already accruing to the member States under our present management policies are insufficiently recognised. The committee doubt whether Her Majesty's Government would undertake further commitments to their partners in the prevailing uncertainty. Nevertheless, the committee recommend that the Government should take Community needs and policies into account when planning their depletion policy and they comment that aid in the development of the British coal industry would be of assistance in this connection.
There is one further point. We were informed towards the end of our inquiry that consideration was being given in the Commission to a possible Community tax on oil imports. The Commissioner for Energy, Dr. Brunner, made a statement about this and it was favourably received in the European Parliament. I understand that variants of this proposal are still floating about. I ask the Minister whether he thinks that there is anything in this approach and whether he has any comment on it.
What of the immediate future? Your Lordships' committee observes that six years after the 1973–74 oil crisis only 1·5 per cent. of the Community budget

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was being devoted to energy, though I think that this may now have risen to 2 per cent. It further observes that the energy Ministers have still not considered the 1990 objectives communication although it was published in June of last year, which really does not indicate any great sense of urgency.
Therefore, in conclusion, let me quote some sentences from two important paragraphs in our report which look forward. The first is from paragraph 35:
"The Committee recognise that … there has recently been some modest increase in Community expenditure on energy R & D",
which may be reflected in the small increase in the percentage of the Community budget devoted to that purpose. I continue:
"Nevertheless they strongly support the Commission's desire to allocate more of the Community's budget to energy and they hope that the U.K. will in future benefit from Community support for coal production investments. The structure of the Community Budget is ill suited to contemporary European problems and a large increase in the resources allocated to energy is justified. It is essential that funds made available should not simply finance developments that would have occurred in any case; they must be used to create new opportunities".
Then I quote from paragraph 44:
"Since 1973, the Community has made some progress in defining the areas of potential Community effort but has not shown itself capable of action … It is clear to the Committee that the principal responsibility for this lies with the Council of Ministers, the members of which are responsible to national parliaments and are not judged for their positive contributions to Community politics; minor … national interests are often put before major, tangible Community interests. There has therefore been no institution with political authority which can view matters in a European perspective ".
I ask the Minister in his reply to comment on these two statements. Further, I ask him to enlarge, if he can, on the outcome of the discussion on energy at the Council's recent meeting in Luxembourg. It was reassuring to hear that the Ministers had found time to deal with this question, for it is only from the Council that the main and much-needed political impetus can come. Certain matters seem to have been referred to the energy Ministers who are, I think, meeting on 13th May. Can the Minister tell us anything about the agenda and prospects for that meeting, with particular reference to the revised draft resolution to
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which I have referred? Is there a new initiative, and has he hopes that after a year of inaction progress can now be expected? My Lords, I beg to move.
Moved, That this House takes note of the report of the European Communities Committee on energy objectives for 1990 and coverage of the policies of Member States (35th Report, H.L. 166).—(Lord Sherfield.)
7.3 p.m.
Lord STRABOLGI: My Lords, from this side of the House I should like to say how grateful we are to the noble Lord, Lord Sherfield, for moving that the House takes note of this report. I had the privilege of serving on the sub-committee under, if I may say so, the noble Lord's able and distinguished chairmanship, and, as the noble Lord has said, we were well served by our technical advisers and our clerk. I should also like to add my thanks to his to all those who gave evidence either written or oral.
The present Commission document sets out proposals only to 1990, and I must add my regrets to those of the noble Lord, Lord Sherfield, that the period was not extended to at least the year 2000, which would have meant a more realistic time-span. There can be no dispute about the general policy objectives, particularly those to step up energy saving measures, to increase coal output, and to develop the nuclear programme, although—as the committee has pointed out on previous occasions—the Commission should not rely too much on the present achievements of the nuclear construction programme.
It is also to be regretted that the Community has made so little progress in agreeing an energy policy, beyond a few comparatively minor proposals. We must surely add our support to the EEC Economic and Social Committee which last November called for greater convergence on nuclear policies, regretted that the Community measures to promote the production of coal had still not been approved, and emphasised the need for better public education on the instability of the oil market.
The underlying instability of oil supplies from the Middle East has been brought home with a vengeance by the troubles in Iran and the current dispute with Saudi

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Arabia. But even if, happily, we achieve some stability in that area, as the Commission points out, we are still faced with the fact that by 1985—which is just five years away—world demand for OPEC oil could be in excess of OPEC production by 150 million tonnes to 200 million tonnes a year.
From the Community viewpoint the crisis caused by an energy shortage will be further deepened because Greece, Portugal and Spain—three countries that are likely to join the Community before 1990—are all energy importers. I note from the recent Government Statement following the Luxembourg meeting of the European Council of Ministers, which was mentioned by the noble Lord, Lord Sherfield, that at its next meeting in Venice the Energy Council intends to review the current policies of Member States on the replacement of oil by other fuels; on the development of nuclear power, and on conservation. I should also like to support the noble Lord, Lord Sherfield, in asking the Government whether they can elaborate on that.
With regard to nuclear power, within a few decades there is the prospect of a world uranium shortage. I am glad to note that the Commission is encouraging uranium exploration within the Community. We welcome the present Government's decision to go ahead with the Labour Government's plan for two AGRs, but has not the time come when we should be thinking urgently about the fast breeder? Can we afford to wait much longer before a decision is made? Already, as the Secretary of State for Energy admitted recently in another place, Britain is in the position where the amount of electricity generated from the nuclear power available to her by the year 2000 will be less than that available to the French and to the Germans in 1985. I understand that the Government are considering whether there should be international collaboration over the fast breeder; and in its report the committee suggests—as the noble Lord, Lord Sherfield, has pointed out—that this could be beneficial.
I believe that the United Kingdom Atomic Energy Authority, in conjunction with the nuclear and electricity supply industries, is examining possible ways for collaboration with our European partners
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on the fast breeder. Perhaps when the noble Earl, Lord Gowrie, comes to reply he could let the House know the present position.
I should like to support most strongly what the noble Lord, Lord Sherfield, has said with regard to coal. The report points out the importance of our coal industry to the whole Community and suggests that it seems reasonable for the Community to give some aid to the industry. The committee particularly favour aid to investment in coal-burning plant and in electricity generation, as well as aid to new mining capacity. Perhaps the noble Earl, Lord Gowrie, will comment on this aspect of the report.
I hope that the House is not going to be told by the noble Earl that this is not for the Government but is a matter for the NCB, because I believe that this is an area where the Government need to play their part in conjuction with the board and with our European partners. Certainly the considerable recent investment in our collieries of £600 million a year is beginning to bring its reward, and the output in Britain's coal mines continues to rise, with both productivity and output records being achieved in February. Judging by the coal industry's provisional results for 1979–80, this has been a most impressive year altogether of resurgence for coal, and it is an achievement that brings much credit on the 300,000 people—miners and surface workers alike—who work in this great national industry.
I want finally to turn again to the question of producing SNG and oil from coal by the particular extracting processes that are not new—the Germans were able to do this to an extent during the last war, and the South Africans have been doing it for some years—but which have been developed to an advanced level at the National Coal Board's coal research station at Stoke Orchard, near Cheltenham, which I had the pleasure of visiting last year. Perhaps I may say en passant that in the days before coal nationalisation none of the privately owned collieries did any research of this kind. This vital research work, on which our future depends, by the NCB is surely an added justification, if justification were needed, for the nationalisation of our coal industry.

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I hope that we are not going to be told that coal liquefaction is a matter for the board and not for the Government, because the Government should have a part to play in this vital development. The last Government granted a large proportion of the cost for the design and feasibility studies. Can the present Government tell the House when they think that the liquefaction process will be sufficiently advanced to be used on a national scale? Will this be early enough to fill the breach when the oil begins to run out? What are the environmental and planning considerations involved? How many conversion stations will be needed throughout the United Kingdom? And is it envisaged that these will be sufficient for our requirements only, or is it the intention to export oil from coal to our partners in the Community?
I know that the Government are apt to shy away from central planning, but here surely is a case where we need a national plan now for producing petrol, diesel, and aircraft fuel from coal. On the question of cost, it has been estimated that with rising oil prices the project should be economically feasible on a national scale by about 1995, which is just about when we shall need to start replacing North Sea oil with other fuels. Therefore, we have not got very long before the oil runs out and we shall need this alternative form of fuel if this country, and indeed most of the EEC, is not to grind to a halt. I think the Government—and I hope that the noble Earl will be able to do this—should give the House a report on the current position.
7.15 p.m.
Lord TANLAW: My Lords, we, too, from these Benches are most grateful to the noble Lord, Lord Sherfield, for bringing this report before your Lordships' House. I agree with his comments and what he said in view of his disappointment about the apparent lack of urgency that has been shown by the Commission in bringing this report further forward. A time-lag of a year is one which in our view cannot be overlooked, because it is the lack of the sense of urgency which is the main point of the intervention I make today.
The short-fall in Europe which has been expected to occur in the late 1980s could
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happen tomorrow. The political events, as has been said by the noble Lord, Lord Strabolgi, in the past week in Iran, and their repercussions in the neighbouring countries and now London, do not bode well for continuity of supply to the oil-importing nations of Western Europe. Therefore, the title of the report which we are debating should perhaps be altered to allow for these latest developments, and should read the "Commission Communication on Energy Objectives for the 1980s" rather than for the 1990s. I say this because the underlying assumptions that have been made on all the future energy predictions have been that there will be a gradual slowing down of oil supply to the Community, with perhaps only minor interruptions, but with no major stoppages for political or military reasons.
Unfortunately, it would appear that unless the present situation in the Gulf region returns to normal very shortly, which I believe to be most unlikely, then future energy predictions must assume as from today that there could be total stoppages in supply of fuel oil to all Western nations from time to time. Therefore, some of the actions recommended in this report for the late 1980s or early 1990s in anticipation of predicted oil shortages should now be brought forward and implemented as soon as possible if there are not to be very serious effects on both industry and society in the Free World.
The noble Lord, Lord Sherfield, referred to the evidence submitted by the European Environmental Bureau on Conservation. We, too, take up the point that the projection for this report was too short and should have gone on into the next century. Their recommendations in the areas of conservation are ones that should be implemented not in the 1990s but right now, in the 1980s. The other important area which, in my view, was not fully covered in the report is that of substitution. May I say a word about this because there has been a false assumption, which was repeated in his report by one of its witnesses, that electricity cannot make a very large contribution to substituting for imported oil. I disagree with this view, in that it is even now technically possible by using electrical furnaces to produce steel. It is also possible to replace space heating by electrical means.

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I fully accept that electricity is not the most efficient use of energy conversion through the heat and transmission losses involved, and I have said this from these Benches on other occasions. However, in the context of the new circumstances in which I believe we find ourselves today, it is not so much a question of whether the source of energy is efficient but whether it will be available at all. In which case I would ask Her Majesty's Government's view as to what changes in energy policy are being considered to implement wherever possible the substitution of electric power for fuel oil.
Such a policy would of course require in the United Kingdom the CEGB to re-estimate yet again their future consumption loads for the next 20 years, and by implementing such a policy they would have to be greatly revised upwards. I accept the evidence given by the oil companies in the appendices attached to the report that oil should be considered the balancing fuel; but what if the oil is not allowed to leave the ground for the political and military reasons that f have mentioned? Then the whole delicate structure of the Free World economy is thrown off balance unless there is an adequate conservation and substitution policy already in operation throughout the whole Community.
Noble Lords will appreciate that these are general comments and might appear even controversial, which they are not intended to be but merely cautious. The one question that has not been raised or already asked, except in the vaguest terms within the report, is, what kind of society will exist in Western Europe by the year 2000 on the basis of the current energy policies? It is my view that it should be stated quite clearly that there will be be no alternative to an all-electric society for the first part of the next century. There are just no other sources of energy available to maintain existing living standards in the West, or to uplift the very low standards of the Third World.
It may be of interest to noble Lords to know that if the people of the developing world are to have parity in electrical consumption with us—that is, half a kilowatt capacity per head—they will require a total supply of at least twice that which is available in the whole Western world today. Even when alter-
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native energy strategies begin to make their contribution to the energy equation 20 years from now, they will do so mainly by contributing electricity. I am asking the Government today to say quite openly that a world without oil and gas will mainly be one which is powered by electricity in the 21st century. It would be most helpful if they were prepared to say so now, or alternatively explain what other source of power is going to provide the needs of life, public transport and industrial energy during this period.
The particular aspect of the report which is relevant to these remarks is that the time has come for the Community, including the United Kingdom, to cut down the spending of money on academic papers on energy conservation from universities, consultants and the like and to divert these funds instead into the production of workable prototypes which can be properly evaluated. There is no more time for theoretical work, certainly in the public transport field, if a substitution policy of using electrical power is to be of any use. We must have some prototypes, and if I give an example in an area with which I am familiar—that is, the electric traction field, in which I have an interest—perhaps the Government will see what I mean.
The technology of electric traction is well known, as—and this is mentioned in the report—that of windmills, and there is little more to be gained by pure academic research into these areas. What is missing is the hardware for evaluation when the time comes and there is no more fuel oil for transport. The Commission has the power and funds to execute such a policy with known technology. There can be no merit in delaying decisions to go ahead on a whole range of projects concerned with conservation and substitution. They have already been put before them. Postponing these decisions could put the whole future way of life of the Community in jeopardy.
Closer to home—this may sound almost parochial in the wide terms in which I and noble Lords have been speaking tonight—I wish to make a suggestion to the Government which need not involve the expenditure of extra funds in this area. If they divert some of the sums already committed for academic research and use them for the production of prototypes

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rather than paper in this country, they too could be making a contribution to the Community. There is another area in which Her Majesty's Government could be of assistance in preparing for disruptions in public transport due to the possible interruptions, to which I have referred, in oil supply in the future. This would be by advancing special sums or grants to local authorities for the creation of trolleybus, tramcar and other similar means of public transport in both urban and rural areas which could be used for evaluation purposes and at the same time provide a public service.
To give an example of this, I think Blackpool has the only existing tramway system in this country, but it is in urgent need of repair and maintenance if it is to continue to provide any form of public service. The Government cuts in local government expenditure will almost certainly mean that this service will be suspended and the vehicles sold as scrap. However, by the injection of a special grant of about only £50,000 I understand that it would be quite feasible to update this system of transport and at the same time use it as a test track for evaluation purposes. It this tramway is allowed to fall into disrepair, the Government may be forced within a few years to build and establish, at far greater cost, their own test track to evaluate the practicability of the reintroduction of tramcar, trolleybus and other electric vehicle systems throughout the country.
I hope the Minister will answer that when he replies, because he must be aware that in the Community there are modern and extremely efficient tramcar and trolleybus systems already in operation, and therefore if we have to use them in this country it would be a tragedy if we have to use European technology and European vehicles when we could be using our own. Unfortunately, the British Airports Authority is not using electric vehicles built in this country but is having to use expertise from the United States, simply because there are no prototypes for evaluation for their services. There is almost a surfeit of British technology amassed over the years which, without further research, could be used for this purpose, provided there was some incentive for a local authority to construct an economical
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electrical transport system. Already we hear that London Transport wishes to extend the electric trains system from Aldersgate into the new development area of Dockland. Their concern is to how to do it. This would be an excellent area in which perhaps the Government, in conjucntion with London Transport, could use this as an experimental service for the future, for the 1990s and beyond with which the report is concerned.
There is a minor point which I find almost incredible; the difficulties passengers can experience in transferring from British Rail to the public bus services. Why is it that bus stations appear to be situated so far away from railway stations? And why is there such an infrequency of bus routes that travel past a railway station? This aspect was touched on in another report, The Social Consequences of Rail Closures. If we are to work towards a policy of conservation or integration of transport systems for the future, why is it, for instance, that at Preston the only means of getting to the bus station from the railway station is to take a taxi at a minimum fare of £1·50? It seems to me that this is an area where the Government could look to the local authorities for assistance in a policy of energy conservation for the future, simply by establishing public transport stations that are close to one another so that transfers can be made for an integrated transport policy. The motorcar has made the economics of providing such a service today totally unreal; but many people believe, as I do, that the high cost or the intermittent availability of motor fuel in the Community will necessitate people using public transport as a main means of getting from one place to another.
The Select Committee went on to some details of the arguments covered by Gerald Leach and the need for a low energy strategy, which implies that there is little requirement or place for nuclear power stations. Surely there is now an even greater need for a nuclear element as part of the Community's energy policy. Indeed, some countries have no alternative but to go along this route. We in the United Kingdom are committed to building nuclear power stations, subject to the safety provisions which the Government have undertaken to satisfy through a public inquiry. In view of the present urgency of the implementation of a

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substitution policy, may I ask Her Majesty's Government to bring forward the date of these public inquiries so that the nuclear programme can be commenced at an earlier date than is apparent at the moment? Further, will Her Majesty's Government consider at the same time instigating the public inquiry regarding the safety of the fast reactor, so that promising developments in this field may not be held up due to hesitation from the general public about the safety aspects involved in this process of electricity generation?
However one looks at it, I see no advantage in delaying these public inquiries, even if it is only to satisfy the current disquiet that many people feel—that many Liberals have—about the future of the nuclear industry. I am sure it will be satisfied by public inquiry. It is interesting to note that the report touches on this and says that some countries within the Community wish that they had used this method of public inquiry before going ahead with the construction of their nuclear programmes because of the doubts it left with the general public most affected by these programmes. These doubts must be resolved, and the sooner they are, the better it will be for the establishment of a workable energy policy for the United Kingdom and the European Community as a whole.
7.28 p.m.
The Earl of BESSBOROUGH: My Lords, we must be grateful to the noble Lord, Lord Sherfield, for presenting this report so clearly and concisely, and I wish to say as a member of the committee that the noble Lord is a most effective chairman and that we are very fortunate to have him as our leader. I need hardly say that I have no reservations whatever about the report and agree fully with its contents and conclusions, especially, as the noble Lord, Lord Strabolgi, said, that the Community should publish objectives for the year 2000 as soon as possible and, above all—the third main recommendation—that much greater resources should be allocated to energy policy, including conservation, the development of indigenous coal, its liquefaction and, perhaps most important of all, as Lord Sherfield said, the fast breeder reactor.
In regard to increasing the amount of
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funds available for energy research of various kinds on various projects, what I most regret is that, although the Commission and the European Parliament take, I think, a similar view, there seems in recent months to have been no political will in the Energy Council to achieve these ends. I think that the noble Lord, Lord Sherfield, made that point.
I should like to pay tribute to the work of the Energy Director-General in the Commission and to my old colleagues in the European Parliament, who gave evidence to us, for the important work that they have done in striving to achieve an energy policy. But unfortunately—as I think we now all know—the Council does not seem to go along with them in their views. Indeed, my impression is that recent Energy Council meetings, in the last three or four years, have been very ineffective. Some people have said that they are almost going backwards, that each meeting is almost worse than the last. I regret having heard this. At all events little progress has been made in developing an energy policy.
In regard to allocating much greater resources, I have been contemplating how best this could be done, since the publication of the report, and I have read with great interest two recent communications from the Commission to the Council on energy policy and fiscal instruments for raising Community revenues from energy. These communications were published on 20th March, a month after our committee's report was ordered to be published. They are Com80/150/final, and 153/final. They are most interesting and illuminating documents. They are public documents, but I stress that they are of course only communications, and not even definite proposals by the Commission. However, I believe that they are most useful papers for the purposes of discussion, and that is why I raise them.
As the first document says, the case for common Community policies is strong. When the Coal and Steel Community, and later the European Economic Community and Euratom were set up, the need for energy policy as such was not clearly foreseen. At that time coal occupied a more important place than it now does, and nuclear energy seemed to be the main energy source for the future. Thus although powers in respect of coal and

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nuclear energy were attributed to the Community, no specific power was attributed in respect of energy as a whole. Nevertheless, as the Commission says, achievement of the political, economic, and social objectives of the Community as defined in the Treaties are increasingly conditioned by the supply of energy; and I agree with the Commission that there can hardly be a true common market without common policies in that field.
I know that some progress has been made following acceptance of the Commission's proposals on reprocessing of nuclear waste, nuclear waste disposal, and indeed fast breeder technology. But more work is necessary to establish consistent environmental and security standards for nuclear power stations within the Community.
There are, as the Commission adds, two particular areas in which action might now be considered: an energy price and tax policy, and increased energy investment, as the noble Lord, Lord Sherfield, has said. We all know that the Community's paramount need is to become less dependent on external supplies of oil. But at present the different fiscal policies followed by member Governments scarcely promote the greater independence which the Community needs. Indeed, part of recent oil price increases have in effect been carried on national budgets. This may have helped to hold inflation in the short term, but it has had unhappy consequences, including a reduction of the investment to save energy and develop new sources.
The different ways in which prices are fixed in each member State, the different systems of taxation, the different weighting given to energy in such features as the cost of living indices, have created trade distortions between member States and indeed distorted consumption within them. I agree very much with the Commission that progressive harmonisation of energy prices and taxes within the Community is essential. In so far as investment is concerned, this differs greatly among member States in the various forms of energy, according to the circumstances.
We might bear in mind that during the period 1980 to 1990 (the period we are
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thinking about) member States plan—these are the estimates—to spend in total over 400 billion European currency units on energy, or up to two per cent. of the Community's gross domestic product (the GDP). Although about 40 per cent. of all Community financing goes into the energy sector through the European investment bank, Euratom and the European Coal and Steel Community, this amounts to only about 4 per cent.—as opposed to 40 per cent. of all energy finance. This must be markedly insufficient in the long term, and in my view an expanded Community programme of investment support is absolutely essential—as I think the noble Lord, Lord Sherfield, agrees—and above all, it is essential in promoting coal and nuclear power, the exploitation of which is vital to meet our future needs.
As well as the development of synthetic fuels and other renewable resources, there should be increased investment in proven technologies and in more advanced technologies; for example, in deeper sea oil drilling. Many of your Lordships may have seen that interesting and most effective BBC documentary on Tuesday night, about life in the North Sea. I know—and I think the point came through in that programme—that some large oil companies have come to welcome EEC assistance in this respect.
The Commission seems to consider that the additional investment required in the 1980s to hold down oil imports to their present level could be in the order of 50 to 100 billion European currency units, or between a quarter and a half per cent. of the Community GDP.
I recognise that in general terms the energy industry is capable of financing itself, but with the growing importance of research in advanced technology, the long lead times, and long pay-back periods, there is a substantial need for such additional finance; and here the Commission paper—there is more than one paper, I need hardly add—has some interesting suggestions to make regarding the form of such support primarily to supplement national programmes. Maybe a mixture of grants and subsidies for loans would be appropriate. But how would these be financed?
Revenue under the Community's existing system of own resources would

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certainly have to be increased. This might be done by introducing, as the noble Lord, Lord Sherfield, suggested, a specific Community energy tax. It might be a tax on consumption of energy, either in all its forms or on oil, or on specific oil products. Or it might be a tax on production of energy in general, or oil in particular. Or, perhaps—I put this last—it might be a duty or levy on oil imports. If substantial funds—funds which would be part of the Community's own resources—could be raised by taxes of this kind, this would make contributions to the Common Agricultural Policy appear much less inflated, and display, perhaps, a slightly more balanced Community budget. Member States might also, in those circumstances, receive Community-produced oil—that is to say, from the North Sea—at preferential rates. A Community initiative of this kind would also be designed to help further policies already publicly advocated by the OPEC countries to reduce consumption of oil and extend the life of the world's oil resources.
I should be most interested to hear the Government's comments on these ideas, if they are ready to give them, which have been produced by the Commission, as well as on the precise fiscal instruments which might be used. We know that three types of tax do at present apply to energy. First, of course, on consumption—that is to say, VAT—second, special excises on consumption; and, thirdly, Customs duties. I should be particularly interested to know whether the Treasury and the Energy Department have any preliminary views on extending levies or taxes of these kinds, and/or whether, for example, a hybrid formula combining a Community Customs duty on imported crude with identical but nationally-imposed levies on internal crude oil production would be appropriate.
Coming to the end of my remarks, I am sorry that I have perhaps broken somewhat new ground here, but I thought these points were worth discussing. I should like to say how important I consider it to be to revive the dialogue between the European Community and the OPEC countries. The official Euro-Arab dialogue does not seem to have been operating very effectively in recent years, and that is why I have been happy to keep contacts alive as a co-chairman of the
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informal Euro-Arab Dialogue. I hope that Sir Donald Maitland, the newly-appointed Permanent Secretary to the Department of Energy, with his unrivalled experience of the Arab world as well as a permanent head of our delegation in Brussels, will be able to play a part in revivifying that dialogue. I think this is the most remarkable and imaginative appointment of one of Lord Sherfield's former colleagues, and it is an appointment on which I consider the Government, and indeed Sir Donald Maitland himself, should be warmly congratulated.
I also wanted to ask about what happened in Luxembourg. I read the Financial Times today where it was said that the Prime Minister made certain concessions to other Member States on the energy front. I do not know whether or not the noble Earl, Lord Gowrie, can say anything on this; but, in conclusion, my main message has been that we must increase the Community's own resources for these purposes, and I hope that this Select Committee report is approved by your Lordships, because that is one of its main recommendations. I hope the report may have some effect, not only on any future proposals which may be made by the Commission, perhaps in agreement with the European Parliament, but above all on the Ministers representing their Governments on the Energy Council.
7.45 p.m.
Lord FLOWERS: My Lords, I have few points to make, so I shall be brief. First, however, I, too, should like to say how enjoyable it is to serve on Sub-Committee F under the vigorous chairmanship of the noble Lord, Lord Sherfield, and to thank him for initiating this debate on our report. The report itself, and several noble Lords, have stressed that in matters of energy policy the Community has too close a time horizon. Its vision extends no further than 1990, only 10 years away. To be sure, there are very serious short-term problems, as the noble Lord, Lord Tanlaw, has said, but we must not be entirely mesmerised by that. Allowing for all the normal planning procedures, as well as the construction and commissioning phases, it takes about 10 years, with a bit of luck, to build a major power station, whether fossil- or nuclear-fuelled. It takes 10 years to open up a new colliery. It would prob-

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ably take 10 years to provide for a major district heating scheme in present-day London.
On the other side of the coin, it takes about 10 years to rehabilitate a site used for colliery waste. It will take much longer than 10 years to prove, let alone to develop on any significant scale, the so-called renewable sources of energy, such as wind or wave power, which might be applicable in this country. Fusion, which many of us hope may prove to be the ultimate energy source, is several decades away. As for conventional nuclear power, the extent of its contribution and the major technological directions it should take depend, as the noble Lord, Lord Strabolgi, has implied, upon the uranium supply position around the turn of the century—20 years away—and upon whether fast breeder reactors can be shown by then to be acceptable.
My Lords, if the Community fixes its eyes on 1990, only 10 years away, there is really little more it can do than tot up and report upon the decisions that have already been taken by the Member States, and wring its hands about the present instabilities of the oil-producing world. It can hardly contribute to new policy directions, or offer leadership. It seems to me that energy questions should be central to the European Community for political, as much as for economic, reasons, and that the Community should back a vigorous energy policy with funds, as the noble Earl, Lord Bessborough, has argued so eloquently. If so, it is essential that the Community should extend its concern as soon as possible to the end of the century, and beyond. Twenty years is the minimum; 10 years is so short that it can even mislead. I should have thought that this was made abundantly clear by the report of the World Energy Conference, as well as by the evidence submitted to us.
I have mentioned the important contribution to energy supply that may be made by nuclear energy. Indeed, the draft Council Resolution annexed to our report envisages that an increase in the use of solid fuels and of nuclear energy should together cover 70 to 75 per cent. of electricity production. However, this same resolution specifically urges in paragraph 2.d.—and I quote—the
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"restoration of nuclear energy programmes as far as possible in fully satisfactory conditions of safety".
I am somewhat disturbed to find in the revised draft resolution since transmitted to us by the Secretary of State for Energy on 28th April, to which the noble Lord, Lord Sherfield, has already referred, that this important phrase has been omitted. I should have thought it still important to emphasise that nuclear programmes should proceed only under conditions of adequate safety. In this connection I should like to draw to your Lordships' attention the very important article by Sir Alan Cottrell which appeared in the Financial Times on 15th April. In it, Sir Alan, who is a world authority on the strength of materials, makes very clear his view that much remains to be done before we should accept the safety case for that most favoured nuclear system, the pressurised water reactor.
But Sir Alan makes another point, too—and I quote—asking:
"With the commercial fast breeder reactor (FBR) quite properly claiming its place as yet another project ready for launching, would we have the scientific and engineering manpower to handle four different commercial reactor systems—Magnox, AGR, PWR, FBR—with full mastery in all cases?"
I have to declare that I am a part-time member of the Atomic Energy Authority, although not one who has always spoken as my fellow members might have wished. But I do not think I shall cause much additional offence if I now say that I agree with Sir Alan that four systems are a bit too much for us to be handling simultaneously, especially if safety is to be given proper attention, as it must. I also believe that we should do our best to demonstrate the safe operation and economic performance of the FBR system by the year 2000 in case we should need it beyond that.
I have personally been greatly impressed by the progress made at Dounreay and elsewhere in recent years, but even so I doubt whether we can really commercialise this system on our own. It seems to me that it is foolish for us to be in competition with our European partners in something so complex and so expensive, intended for so small a market for many years to come, although, of course, with great potential in the long term. I therefore hope that full co-operation on the development of a common FBR system can soon

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be an accepted part of European energy policy. There is much that British engineers can contribute, and much for us all to gain by sharing the burden. After all, we have successfully developed the Urenco centrifuge plant in that fashion; we are working together on the JET fusion project. We must try to develop FBRs that way, too.
My Lords, nuclear power has seemed so unacceptable in many quarters that the Commission of the European Communities has rightly seen fit to devote considerable attention to trying to improve its image. It has held discussion meetings; hut, more important, it has organised collaborative programmes on reactor safety and on nuclear waste disposal. As we say in paragraph 41 of our report:
"An important aspect of energy policy is to gain public acceptance for its implementation".
It is not enough just to rely upon the great public inquiries like Windscale and the Vale of Belvoir.
I must be careful what I say now, because I am chairman of the Standing Commission on Energy and the Environment and we are deeply engaged in a study of the future of the coal industry in this country. But the draft resolution before us today urges Europe to increase its production and use of coal. Due to inadequate environmental policies the results of doing that in the past are only too evident in many parts of this country and abroad, in the form of derelict land, decaying buildings and the residues of subsidence. Of course, the modern coal industry has no intention of repeating those mistakes, but ordinary people must be forgiven for thinking that more of the past is what they are in for as long as those relics remain so vividly before us. Like the noble Lord, Lord Sherfield, I would hope that the Community, in urging us to use more coal, would recognise just as with nuclear power the need to make it acceptable. They could help to remove past dereliction by recognising the problem, by proposing concerted actions and by financial assistance to the regions most affected.
My last point concerns the third leg of the "coconuke policy", conservation. I fear we are much too complacent about conservation in this country especially if we wish to reduce the energy coefficient. By way of contrast the noble Lord, Lord
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Sherfield, and I were privileged to be guests of the Danish Ambassador earlier this week when we heard about the development of district heating schemes in Denmark from their Minister of Energy and from the chairman of their Board of District Heating. It seems that the Danes now have about 380 district heating schemes supplying 35 per cent. of their dwellings (about 700,000 dwellings) and that 70 per cent. of their electricity is now derived from combined heat and power stations, half of it provided during the last 10 years.
At the risk of contradicting something I said at the beginning of my remarks, it does seem that the Danes are able to get on with the job faster than we seem to think that we can here, and without enormous disruption. Of course, climatic conditions are not the same in our two countries, nor does Denmark have indigenous natural gas as an alternative form of space heating. But if energy conservation is as important as we say it is, and as the Community says it is, we should not be using gas for heating when reject heat can be used instead at a reasonable price; and in Denmark they say that it can. I therefore hope that the Minister may be able to say something encouraging about whether the Government have plans to introduce an experimental district heating scheme dependent upon combined heat and power generation.
7.56 p.m.
The Earl of LAUDERDALE: My Lords, I too, should like to join with other noble Lords in saying how much we are in debt to the noble Lord, Lord Sherfield, for his urbane and discriminating leadership of this committee which is now operating at higher gear and to better purpose than it has ever done. On the subject matter of our debate, I must confess to getting a certain feeling of déjà vu. I am reminded of a lady of 95 in Caithness who once said, "All these long years I have heard the wind blow and never seen it yet". We are going over familiar ground and the context of this debate has inevitably become the meeting at Luxembourg. So much so, that one wonders whether perhaps they may not have had a "peek", as we say in Scotland, at the galley proofs of our report. They have focused on energy saving; so have we. They have focused on coal; so have we. They have

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referred obliquely to North Sea output; and so have we. It looks from the Luxembourg communiqué as if our country has moved (at any rate, a little) on the North Sea oil front towards the wishes of our Continental partners. If that be so, God be praised!
If the Summit did try to inject some energy into the Energy Council in order to accelerate the long majestic march of energy divine, better still! Here it would be churlish not to follow my noble friend Lord Bessborough in saluting the imaginative appointment to the Department of Energy of my kinsman, Sir Donald Maitland, who is quite the most distinguished member of the clan of which I am proud to be Chief. His gift for the Arabic tongue has a very obvious relevance to the political context of his appointment.
If the Energy Ministers do meet and do get down to business and if they pass the current draft resolution which is under discussion, modified (as Lord Sherfield has said) from the text originally presented to us, then it will be the Commission's job to report on members' progress towards convergence. If so, our country can find itself "in the dog-house" on the matter of energy savings. It is far too soon for this Government to boast that last autumn's rise in petrol prices has "caused"—as one ministerial statement tried to suggest—petrol savings on the road. One quarter's figures after a very mild winter—figures which were trotted out in our last debate—tell us nothing. In any case, it is costs in real terms that matter. Therefore, the tendency for the present Administration to hide behind the argument that rising prices will accomplish energy savings as well as, or better than, any administrative or legal measures is, I believe, gravely mistaken. To argue that we have no money is to miss the point. Financial stringency means little in the abstract. The question is not about volumes of investment but about its cost-effectiveness. Nor will intelligent people readily believe if they are told not only that the famous leaked memorandum, Minutes of the Ministers on Energy Conservation Committee of 6th and 14th February, about the cost of conservation policy, is a fake, but that nothing remotely like it is in the record. That will be very difficult for intelligent people to believe. On the face of it, the 11 Ministers involved
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treat conservation as a relatively minor political side show. Someone seems to have suggested that this Ministers on Energy Conservation Group would remain useless until there was a political will fully in evidence from the Prime Minister's office.
Until there are convincing statistical trends to show the reverse, we have only figures up until 1978 or mid-1979 to go on, and they show a very serious rise in energy consumption over recent years, despite an almost stagnant economy. These figures have been quoted before. There is no point in repeating them. But when we debated this matter on 19th March, they were listed and at least 10 different areas for energy saving action were suggested. They were ignored. As somebody once said, it is not the ape nor the tiger in man that I fear, it is the donkey. How we could expect results from a mish-mash of 11 Ministers with the Treasury taking a keen interest passes my comprehension. The set-up is something like a quintet for eight instruments.
Unless the management of energy saving is made over to a high powered task group with direct access to the Prime Minister it is difficult to see serious progress being made. Since the Prime Minister put her name to the communiqué in Luxembourg, and since she had already declared herself forcefully on energy conservation in her speech to the Foreign Policy Association in York before Christmas, we can reasonably hope that this matter will come to her attention.
On the subject of coal, to which there has been some reference in this debate already, evidence before us showed that it would certainly be technically possible to raise United Kingdom output well beyond the target of 135 million tonnes per annum looked for in the mid-1980s—subject to investment. It is relevant to quote our committee's report on Coal, the First Report of the Session 1978–79, paragraphs 25 and 26. The committee said:
Given a stronger lead, the NCB, as the executive organ in the United Kingdom, and the Council, in respect of the Community, may take coal more seriously, and the many undoubted problems are more likely to be solved. Acceptance that only a less ambitious target is practicable may, the Committee feel, be self-fulfilling. Greater drive, enthusiasm and optimism in the attitude

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of the Government, and of the governments of other Member States, might inspire better results."
Then it goes on:
"But our problem in 2010 may not be to cover our total energy needs at the lowest cost, but to cover them at all."
My Lords, there are now new mining technologies available—in particular the development of new oil drilling techniques for use both on land and below the sea. They promise to make the possibility of underground gasification a more attractive subject for study and consideration than as recently as five or even four years ago. If major United States' companies like Atlantic Richfield and Gulf find it worth buying Soviet technology in underground gasification there must be much more in it than has hitherto been admitted by the National Coal Board. Pending this Government's Coal Industry Bill, there is little more that one can do than leave the matter there. We are still waiting to see what the Government's policy is.
We suggested in our report that it would be well if the Commission could look ahead to some such target year as A.D. 2000, and would do so without simply totting up the results of national intentions. Noble Lords may not be aware that on 17th April the London office of the European Communities Commission published a background report based on the new Commission document about coal (COM(80) 117 Final), and looking forward to the year 2000. I can only tell your Lordships that that document, for what it is worth, managed to raise the figure of European coal output as between 1990 and the year 2000 by a factor of two. It did the same with nuclear power, the same with hydro and the same with solid fuel imports. It did so on the basis of a forecast annual growth rate of between 2 per cent. and 3 per cent., which is nothing if not optimistic.
We have said in our report, in the nicest possible way, that it would be well if the Commission could do more than just tot up the national figures, but could give us a serious, independent critique. This latest case, a purported picture of the coal situation at the end of the century, underlines our case.
There are other areas in the energy field on which one could well look forward to some indication of the Govern-
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ment's policy. But since the Luxembourg communiqué, in almost direct alignment with our own report, is focused so sharply on energy saving I believe that tonight we are entitled to something more satisfactory than the information that we were given in reply to the debate of 19th March. If we are not, I suspect others as well as myself will be fortified in a growing belief that even the most serious debates on substantial matters in your Lordships' House resemble nothing so much as a barrage of marshmallow against ramparts of cotton wool.
8.9 p.m.
Lord IRONSIDE: My Lords, I should also like to thank the noble Lord, Lord Sherfield, for introducing this Motion. The new Commission document tries to identify the very important objective issues in energy, but regrettably they are conceived from a rather subjective and fragmented base, over which there is no proper Community control mechanism in the form of some intervention machinery which could be used to steer the Community rapidly in the right direction. The European Coal and Steel Community and the Euratom machinery have not, over the years, achieved any lasting impression on Europe, but they show a form of intervention which could provide a useful function in the energy field. However, I imagine it is too late to remould these two treaties, but they obviously have some further uses.
On the question of treaties, we have similar problems in the NATO alliance where the overall picture has been based on the same diversity of building bricks. If all the building bricks were standard types and the same choice was available to all members, we might probably have more effective defences. As an example, all States have their own air forces but some import their own aircraft, some design and export them and others get together to design and use them on a common basis. The object is defence in Western Europe.
In energy defence, all Member States have their own energy industries; most import primary fuels. Here in the United Kingdom we are nearly self-sufficient and we export them, and a few States trade in energy and energy equipment. But, for example, we have not yet seen the birth

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of a European electricity super grid. Oil and gas gathering grids are appearing in places and actions of these kinds must add to security in energy defence. I think it is regrettable that so little progress has been made in formulating energy policy to present a united front in Europe to the rest of the world. We now see the Commission edging towards convergence as being the next best method of achieving objectives. There is a policy of convergence in NATO and this is now being proposed in the EEC for energy, but basically there is no difference in principle.
Our recent debates have shown the difficulties that the Government encounter with weapons standardisation in Europe, and there will be just as many stumbling blocks in energy. Good intentions, I think, will be found everywhere along the road—not to hell but to the heaven of fusion, where the heat in the chamber is certainly no less fierce. In NATO, if Big Brother is the USA, then in EEC energy Big Brother is the United Kingdom for the time being: and I think we have to exercise our role in a careful and considered way so that we serve our own distinctive interests within the framework of the Treaty of Rome.
The convergence policy which is now proposed by the Commission in the energy field makes some sense in the circumstances, just so long as the Commission bring greater pressure to bear in making it work and the Council of Ministers are also prepared to adopt the resolution on energy objectives. On previous occasions, many of the action programmes have been based on Council resolutions, which I think have been useful launching pads.
However, within this resolution, the philosophy of energy dissociation is carried forward as one of the objectives, and the energy coefficient of 0·7 is proposed. Compared with 0·8 last time, I think there is some danger that, on the one hand, if there is a crusade of energy dissociation it could have a counterproductive effect on making the energy convergence policy work which is aimed at linking energy issues with the increase of industrial prosperity and the GNP. I think there is a real danger of advancing the dissociation arguments too strongly in the face of trying to achieve convergence
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objectives. As we have seen, there are many factors other than straightforward efficiency in energy which have a direct bearing on economic growth and future prosperity. That point was the subject of one of our recent debates on deciding about energy policy, which was introduced by the right reverend Prelate the Bishop of Durham.
If one compares the convergent actions now proposed following the energy policy guidelines which have already been put forward in the last Commission proposal on 1990 objectives, we still find that the emphasis on energy conservation and the better mix of primary energy sources to reduce oil imports is still paramount, but the new convergence proposal also has other useful pointers, including the development of Community trade in energy products and to organise all energy developments in an orderly fashion, working towards a 50 per cent. self-sufficiency and restricting oil imports to the 1978 level of 470 million tonnes.
This raises the question of targets and in the evidence taken by the committee it was shown very clearly that, on the one hand, the Commission was not looking far enough ahead and, on the other hand, the targets proposed were ill defined. The point here is that if you try to generalise when so much control in the energy industry rests with Member States you risk not producing any effective programmes which are likely to be successful. The efforts required from each country are different and, in my opinion, this is a critical factor which the Commission should take account of if they are to make any progress in the energy field.
If we look at the way that motor manufacturers have agreed to improve performance voluntarily by 1985, we can see that this is happening in spite of anything that takes place in the Commission's decision-making machinery. The Commission must use some finesse in developing its role in the energy field. If we look at the large electricity producers who are prime energy users of coal, nuclear and oil. we find that equipment suppliers are in fact planning for improved power station performance and thermal efficiency. For example, fluidised bed combustion techniques are coming forward and hybrid power stations are being produced.

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It is clear that further carefully planned intervention in these areas by the Commission would be very helpful. The supra-national intervention which has come out of the Tokyo Summit is an important factor for justifying any Community initiative, but I think that very large sums of money need to be injected through the Community instruments into selected areas such as combustion, liquefaction and gasification. There are long lead-times, as has already been said; and the Commission is well placed to give major hacking. The European Coal and Steel Community coal members have requested aid for some large new projects and I think that is good, but very much more is needed.
The committee has supported the Commission's proposal to increase research and development and also demonstration—and I think that demonstration is needed in the energy field more than in any other, because you have to prove to potential users that the system you have developed is economically viable. I think the noble Lord, Lord Tanlaw, said that there is a real need now for more prototypes and more hardware around the place. I was fascinated by what he had to say about tramways and that we should look further into their use—but how can we, when we have to comply with the Tramways Act of 1876, which was drawn up for horse-drawn traffic? Perhaps might ask my noble friend Lord Gowrie whether he has any plans for repealing this Act. In any case he may be able to say whether the Government are genuinely going to look at tramways and at public transport in these areas, because they are used on the Continent with great effect. The argument is that they are capital intensive and therefore you need to have considerable investment resources in order to get such projects under way. However, I hope he will be able to say something about that.
It is all very well designing a fluidised bed combustion system for power stations, but you have to be able to demonstrate to potential customers in many other countries that you have a workable and economic system to offer. The only way to show this is to demonstrate the product in a power station, and that means Governments taking a risk too. The Commission has shown that it is ready
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to support demonstration projects in the energy field and it is well placed to support the very large projects.
I now come back to targets. We find that the heavy electrical industries in all the Member States are geared to their home markets. There is virtually no Community internal market operating in the heavy electrical equipment. The heavy electrical industries are fighting to survive, and I am very much encouraged by the statement of the Secretary of State for Energy about the power station ordering programme over the next 10 years, which will allow the United Kingdom heavy electrical industry to plan ahead.
The United Kingdom Government have therefore given targets to industry and, despite the evidence we received that fixed numerical targets are not favoured, here we have an example of the Government setting positive targets for a 10-year period. I can fully understand why some witnesses do not wish to set fixed targets, because experience has shown that one needs to keep one's options open and to exercise some flexibility in planning. In fact, it is obviously very desirable to up-date any targets every year, but the fact is that targets provide a very great incentive for us all to work to.
I think that we welcome the Commission's renewed attempt to define energy policy, but there is a need for action programmes in all Member States, as well as action by the Commission. The lead times are long in all cases and I think we have as much to learn here from the Commission's deliberations as any other Member State. I hope that we can implement our own energy programme in such a way that there is continuity of thought, policy and action, which is not put at risk by successive Governments. Energy is not a party political issue. It concerns all of us in the same way, from the day we are born to the day we die, and our successors afterwards.
8.21 p.m.
Lord SWINFEN: My Lords, I must apologise to the House for not putting my name down for this debate, but originally I had not intended to speak. I was for a time a co-opted member of Sub-Committee F, under the chairmanship of the noble Lord, Lord Sherfield, and grew extremely concerned at the very obvious shortage

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of energy towards the end of this century, and also the very considerable length of time that it takes to bring in new energy sources. I wonder whether it would be possible for a committee to be set up of members of all parties, to advise not only the present Government but successive Governments on energy policy, so that there will be a continuous policy from one Administration to another.
8.22 p.m.
The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie): My Lords, all the Members of your Lordships' House who served on the committee have paid tribute to the chairmanship of the noble Lord, Lord Sherfield. I did not, of course, have the privilege of serving on the committee, but I should like to pay tribute to him for the way in which he introduced the admirable report and today's debate. I should like to say how greatly the Government appreciate the committee's work and how much we expect to learn from it. I am particularly glad that the committee did not confine themselves to a narrow examination of the particular Commission document, but rather used that document to take a more wide-ranging look at the development of energy policy in the Community into the 1990s.
As discussions proceed between Member States, and as events themselves move on, precise judgments, and even the nature of the questions we ask and the way we identify the problems, inevitably change. We have only to think of developments in the world oil market since the Commission first published their report in June last year. We have only to think of the renewed uncertainties, which many noble Lords have mentioned in this evening's debate, in the Middle East today—in Iran or elsewhere. We have only to think of these things to realise that too much precision is not the right approach when talking not only about these uncertainties, but also about a wide range of time and about the future. So it is to the broad spectrum of development and intention that we have to look when we consider these issues; but I acknowledge that they are of great importance not only to our own country but to the whole Community.
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I want, therefore, to speak in terms of the broad issues and not confine my remarks solely to the Community, because, of course, the Community's energy problem is part of the world's energy problem, and to solve it requires solutions within the Community and decisions which also have to be taken in other international fora, and which will, of course, effectively influence anything going on within the Community itself.
For instance, the decisions taken on energy at the Tokyo Summit meeting followed, as your committee's report recognises and welcomes, the ground work which was prepared at the meeting of the European Council in Strasbourg just a week before the Tokyo meeting. Then, again, the Tokyo Summit decisions have much in common with the ground covered in the new proposed Resolution on 1990 Objectives, where progress within the Community continues to be closely aligned with progress on the international front, as the Tokyo decisions are followed up in parallel in both the Community and the IEA. Community energy objectives, therefore, and Community energy policy cannot realistically be determined, except in this context of wider international co-operation.
We must recognise, too, that all Member States already have in being their own substantial energy programmes. In the United Kingdom the Government, together with the nationalised industries and the private sector, are undertaking immense investment in coal, oil and gas, nuclear power and energy conservation, all of which are essential if we are to secure a better energy future. The Government's appointment last week of Mr. Rooney, as director of the National Nuclear Corporation, has given new impetus to the development of our nuclear power policy. Together with our announcement last December of a programme of nuclear power station orders for the years from 1982, and the CEGB's issue last week of a letter of intent concerning the pressurised water reactor, we believe that our nuclear industry is well placed to make a full contribution to future energy supplies.
As noble Lords have already recognised, we have just introduced the Coal Industry Bill and I shall have a word or two to say about coal in a minute. The Bill

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embodies the Government's strategy for the coal industry of reducing dependence on Government support, and turning it into a viable, efficient and competitive industry which will make a vital contribution to our future energy needs. To this end, it is intended to raise the limits on the National Coal Board's borrowing powers from the current level of £2,200 million to £3,400 million, with the option of increasing that already large sum to £4,200 million, enabling the board to continue its investment programme under the Plan for Coal. Noble Lords will be aware that only this afternoon the Government announced our decisions on the seventh round of offshore licensing. This will provide new opportunities for companies to extend the search for oil and gas resources, and contribute to our aim of increasing exploration activity on the United Kingdom Continental Shelf.
So these national efforts play a vital part in the achievement of the Community's energy objectives, as they are inevitably affected by them. I welcome the recognition in the committee's report that other Member States derive substantial benefit from our growing oil production, and from the important part which our coal production plays in reducing the Community's dependence on imported energy. I also welcome the committee's recognition that the main lines of the Community's energy policy must inevitably remain within the control of national Governments and Parliaments.
Although the main thrust of Community energy developments has, as I said, to lie with Member States' national programmes, these can, of course, be complemented usefully by Community-level action where that can make its own distinct contribution. Existing examples are the research and development programme for energy savings and alternative energies, and, of course, the major Joint European Torus project for fusion development. Community-level action may also be appropriate for problems which, because of their nature, require co-ordinated action; for instance, the Community's arrangements to complement the IEA's crisis oil-sharing plans. Community action can also be valuable in areas where energy policy impetus is needed, but where action by individual Member States might create distortions of competition within the Community, or where health
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and safety is concerned. The recent Directives on energy labelling and gas appliances come into this category.
Lastly, and also of great importance, is the Community's role in facilitating in-depth discussion and agreement on areas of mutual interest. This concerns not only the major international issues, but also the exchange of ideas and experience at a practical level. The setting of Community objectives is an integral part and expression of this process.
Such statements of agreed objectives play a useful part, as I have said, in reinforcing common resolve and impetus to save energy and to reduce our dependence on imported energy and on oil. These broad objectives and guidelines are a useful framework for the valuable continuing examination and discussion of Member States' individual energy programmes to which I have referred. But these objectives must be realistic.
The noble Lord, Lord Sherfield, asked what our view was on setting precise targets, and other noble Lords have echoed his question. We believe that the important thing is to concentrate on and to achieve the central policy aims, that is, saving energy and reducing oil consumption and oil imports. We think that is rather more important than trying to fix over-precise quantified sectoral targets. That is particularly true when we are dealing with a date so far ahead and hedged about with so many political and other uncertainties as the year 1990. The forecasts on which the analysis in the Commission paper is based were produced before last year's oil supply difficulties and price rises, and they are now considerably out of date. The unreliability of forecasts does not invalidate the need for a long-term assessment of the choices available to us, but it means that we must not place a great weight on them which they cannot and will not bear. As my right honourable friend the Secretary of State for Energy said when the Commission document was debated in another place last October, rather than trying to arrive at precise, quantified targets for 10 years ahead, we should concentrate on pursuing policies that are fully adequate to the needs of the situation.
That is the approach that the Government have urged in discussion of the

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proposed draft resolution on 1990 Energy Objectives. The Energy Council meeting planned for 13th May will be Ministers' first opportunity to address this question. I am glad to tell the House that the current basis of discussion in Brussels is a much shorter and simpler draft resolution. This draft concentrates on the two broad objectives of saving energy and reducing oil consumption and oil imports. But it still contains some attempt to define in figures where we should be trying to get to in 1990. It will be for the Energy Council to consider whether this is sensible and, if they decide that it is, how firm any such guidelines should be. A copy of this text, which was suggested by the Italian Presidency, has been laid before Parliament, together with an updating explanatory memorandum by my right honourable friend, the Secretary of State for Energy.
May I come now to some of the individual points made in the debate? As I said in my opening remarks, the Government believe that British nuclear industries, particularly with the PWR and the AGR, are well placed at present to make a full contribution to future energy supplies. Both the noble Lord, Lord Sherfield, and the noble Lord, Lord Strabolgi, asked me about the fast reactor and they mentioned very properly the uncertainty of uranium supplies that may obtain by the end of the century. I have made it quite clear in this House in many debates that I am a strong pro fast reactor man. That is why it is a constant sadness to me that I cannot give the House more information at this point than to say that we are still taking advice from the Atomic Energy Authority and others concerned. There is a natural impatience, shared by all of us who are fast breeder men—if that is not a somewhat tactless term, as my noble friend, Lord Mowbray's chortle reminds me—and it is a natural sadness to us that we cannot make an announcement at the moment. But, as I made clear in February, these are complex and highly sensitive issues and we have to reach any decisions most carefully.
Meanwhile I have been asked, on the specific issue of collaboration within the Community, what the prospects are for Community collaboration on the fast reactor. The most important existing
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collaboration on the Continental mainland is based on an organisation called SERENA, which owns the technology of the full-scale fast reactor, known also as the "Super Phénix", now under construction in France. France and Germany have been the leading interests in this body, but other European countries are also involved. Clearly, the possibility of collaboration with SERENA is one of the options for fast reactor policy that the Government are considering at present.
The noble Lord, Lord Sherfield, asked me whether the Government agreed with the committee's view—and I refer to paragraph 35 of its report—that a large increase in the resources of the Community budget allocated to energy would be justified, and I think that point was also taken up in the last intervention by my noble friend on the Back-Bench.
I think that the strength of Community energy policy cannot be measured solely, or even primarily, by the amount of Community finance. The main thrust comes, as I think the committee recognised, and will continue to come, through the national programmes of Member States. Nevertheless we have some encouraging instances of co-operation. JET has been mentioned, and there is the case of the nuclear industries and collaboration in programmes there: for instance, the URENCO, which is the nuclear fuel enrichment project existing between the United Kingdom, Holland and Germany, and also the United Reprocessing Company formed by France, Germany and the United Kingdom for reprocessing nuclear fuel. I take Lord Flowers's point, that this is an indication that we may have examples pointing the way to fast breeder reactor co-operation.
Both the noble Lord, Lord Sherfield, and the noble Lord, Lord Strabolgi, asked me about coal, and investment in the United Kingdom coal industry. The National Coal Board alone in the Western European countries is undertaking a massive 10-year programme of investment. The programme is aimed at creating a new industry out of an old through modernisation and the provision of efficient, highly productive capacity. This has indeed reversed the decline which the British coal industry saw during the 1960s and early 1970s, and I think it provides a sound base for expansion. I believe that, as the

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noble Lord, Lord Strabolgi, recognised, it is a tribute to the National Coal Board that in the financial year just ended deep-mined output at 109 million tons was for the first time since 1963 higher than in the previous year. The noble Lord, Lord Strabolgi, said that it was a most impressive year altogether for resurgence in coal. I am quoting his words.
I have paid tribute to the National Coal Board, but I think I must also pay some tribute to my right honourable friend the Chancellor of the Exchequer; and if anyone hesitates to think that direct tax cuts have not had an effect in this economy, they should go and talk to miners, as I have done. The board has now approved or is committed to, virtually all of the projects which form its programme; its capital expenditure is now running at more than £600 million a year and it is directed towards that objective.
The noble Lord, Lord Strabolgi, asked me whether coal liquefaction was sufficiently advanced to be used on a national scale. Technology being developed by the NCB is approaching the point now where a decision to build pilot plants of 25 tonnes per day capacity will soon have to be taken. If this work goes ahead progressive development should have the technology ready for commercial use at about the turn of the century. Present views of the North Sea oil production profile suggests that this coal development falls within the general time-scale to meet our needs. If the need to apply oil from coal technology arose earlier we would probably turn to one of the United States' processes, which is now in the large pilot development stage, involving coal throughputs of hundreds of tonnes per day.
I was asked what the environmental and planning implications of coal liquefaction plants were. A commercial scale oil-from-coal plant would need to combine the coal and solid residue handling operations of a modern power station with the processing units similar to those in a large oil refinery or a petro-chemical plant and the liquid effluent treatment of a modern coke oven battery. The environmental and planning requirements for these kinds of undertakings are well known, so they would not be very different. Sulphur in the coal will be largely recovered as elemental sulphur, or sulphuric acid, depending on the process used. As
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coal liquefaction processes operate at high-pressure and elevated temperature, there will need to be a high integrity of containment. Leakage of inflammable substances or compounds associated with known health hazards will not, in our view, be significant.
The noble Lord, Lord Sherfield, asked me what progress there was on the proposal by the Secretary of State for Energy for Community support for coal production. It is a matter of regret to the Government that so far there has been no progress in the consideration of these proposals from which, as your committee recognise in paragraph 40 of their report, the whole Community would derive a benefit, because the United Kingdom's coal production, and its use by us, reduces in toto Community demand for oil.
Both the noble Lord, Lord Tanlaw, and my noble friend Lord Ironside were, if I may say so, a little bullish about Community funds. The noble Lord, Lord Tanlaw, said that the Commission has the power and the funds to go ahead with electricity traction prototypes. As we all know, the position on the Community budget, the position on VAT revenues, is difficult at the moment; but I take the point that we need prototypes rather than paper. I hope that the local council in Blackpool, if it is still tomorrow in Tory hands, will listen to what the noble Lord has said about the tramways.
The noble Lord, Lord Tanlaw, raised, as he has done in previous debates, the issue of electric vehicles. I was particularly interested in this because I made a ministerial visit the other day to the firm of Lucas. I was collected, with quite a large and weighty staff, at the station and driven for some miles in Lucas's admirable prototype electrical vehicle, so I am glad to see that a major private company is moving in there. Due to the weight and efficiency of the batteries available, at present electric vehicles are generally inferior, if not in performance in range a least, to cars. But it is becoming generally accepted that in the long term, as world oil reserves decline, a major portion of surface transport will have to be powered by electricity. We are therefore anxious to encourage the development of electrical transport, and several programmes have received Government funding. These include development of sodium sulphur and

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nickels in batteries, development on the one ton van, traction motors, to which the noble Lord referred, and controller and drive system optimisation. And the fund testing of vehicles by the Greater London Council continues.
My noble friend Lord Bessborough kindly gave me notice that he had to leave, but I thought it might interest your Lordships if I answered his question about the Financial Times report, as various noble Lords have made reference to the Luxembourg summit. We have made no firm commitments, but we recognise that it is quite understandable that other Community countries are anxious about their oil supplies. I have explained earlier the important contribution that we are already making, and will continue to make there.
My noble friend Lord Bessborough also asked me about the Commission's energy initiative. The European Council had little discussion of the Commission's paper on Community energy policy at Luxembourg, although I acknowledge that the paper is an interesting contribution to thinking on the development of energy co-operation in the Community. But the matter wes remitted to the Energy Council of Ministers and we are ready constructively to examine in that Council all practical proposals for co-operation in the longer term. I am sure that in. those deliberations not only the committee's report but tonight's debate will prove to be most valuable.
The noble Lord, Lord Flowers, asked me about district heating, a subject upon which I gave an answer to a Starred Question from the noble Viscount, Lord Hanworth, about a week ago. As I said then, we have considered carefully the issues raised in the Marshall report on CHP and we are adopting a programme to establish what specific locations are suitable for the development of CHP. In the industrial field, where CHP is already established, the Government will, as the Marshall Report recommends, encourage the development of schemes, but we believe that the main impetus at the moment will come from industry for the implementation of economically attractive industrial combined heating and power schemes. There are of course some in existence, and I quite agree with
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noble Lords who think that we should move as fast as possible here.
I was castigated, as usual, by my noble friend Lord Lauderdale who shares some of my own impatience with the inevitable caution with which Governments move in a field which changes, if not day by day, sometimes month by month and certainly year by year. I am glad to echo his and others' tribute to Sir Donald Maitland and the pleasure that the House felt in his appointment. I have the pleasure of knowing and having stayed with Sir Donald Maitland. I am afraid that there is going to be a considerable problem for me, with Donald in the department and Patrick on the Back-Benches. I shall be a pig in the middle in the formidable doctrinal clashes in the Clan Maitland, but I certainly look forward to it.
My noble friend raised, as he has done before, questions on energy pricing. We believe in a policy of economic energy pricing under which prices recover their full resource costs. I think that we have put other people's money where our mouth is in respect of the gas and electricity industries at that level. I take the point that the real costs of gasoline may not have risen to the same degree, but we must also recognise the immense debt to Western economies which the OPEC price rises and the new terms of trade for energy have taken. We must adapt them, surely, bit by bit in that regard.
Finally, Lord Ironside's knowledge and experience of the Community's energy research programme underwrote his valuable contribution to the debate. I will draw the points he made on defence issues to my defence colleagues. On the question of the repeal of the Tramways Act, I am not going to look a gift-horse in the mouth, though I rather suspect that it may be of the Trojan variety and I am going to be non-committal about it this evening.
Perhaps I may close by giving an indication of the Government's positive response to a subject which the Committee has dealt with so positively. I think I can do no better than to quote the words of the Secretary of State for Energy last autumn in another place. My right honourable friend said:
"The likelihood—clearly there are no certainties in this area—is that by the year 2000 oil will be confined to its premium uses, which are mainly

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transport and feedstock for the petrochemical industry. A smaller proportion of our overall energy needs at the turn of the century will have to be supplied by oil, and a growing proportion of our economic development will be fuelled by coal and nuclear power.
We face a formidable task: how best to ensure the transition from a largely oil-based economy to a broadly energy-based economy. That is the immediate task. That is why the nine Member States at Strasbourg and the seven summit countries at Tokyo in June established agreement—and they were right to do so on certain priorities. Notable amongst them were the need to restrain demand for oil in the medium term and to press ahead with investment in the production and use of alternatives to oil, principally coal and nuclear power and renewable sources, to develop their longer term potential".
I hope that my right honourable friend's words are an earnest that the Government's thinking is very much in line with the valuable work of the committee.
8.50 p.m.
Lord SHERFIELD: My Lords, in concluding this debate I should like, first, to thank noble Lords for the kind words that they have used about myself, and to reciprocate by thanking them for making the effort to take part in a debate in that most unattractive hour—the dinner hour.
I think there has been a considerable consensus among those of us who have taken part and some interesting specific suggestions have been put forward.
I should like to thank the noble Earl, Lord Gowrie, for the trouble he has taken in giving us such a full and wide-ranging reply to the debate. I feel that there may now be a prospect of some advance in European energy policy at the next meeting of the Energy Council. I am sure that my committee will follow the developments with interest and will, if occasion demands, possibly bring some further matters before the House. But at the moment all I need to do is to beg leave to withdraw my Motion.
On Question, Motion, by leave, withdrawn.