ECC REPORT: TRADE POLICY

HL Deb 01 May 1980 vol 408 cc1413-62

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 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- 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. 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, 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.

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 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 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 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.

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 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 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 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". 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 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 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 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.

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.

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 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".

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- 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, 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 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: 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 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 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 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 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 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 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.

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- 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 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 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, 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 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 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 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 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.

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 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 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 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 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 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 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 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 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.