The Madrid Conference: East/West Trade

HL Deb 20 May 1981 vol 420 cc979-1005

4.40 p.m.

Baroness Elles rose to call attention to the delayed results of the Madrid Conference and the need for consideration of future guidelines for East/West trade; and to move for Papers.

The noble Baroness said: My Lords, I beg to introduce the Motion standing in my name on the Order Paper. The wording of the Motion may have appeared confusing to some of your Lordships because it does not appear to fall into the neat categories of either trade or foreign affairs. Perhaps we have not looked closely enough or often enough at the relationship between trade and foreign policy, if there be any, and in particular in relation to the Helsinki Final Act, the interdependence of Basket 1, confidence-building measures, Basket 3, humanitarian provisions and Basket 2, economic and scientific co-operation. The failure of the Madrid Conference so far to reach any result or any consensus in a final statement has meant that there has been nothing said, in public at any rate, on the implementation of the proposals under Basket 2.

Perhaps it is as well to recall to your Lordships the first two objectives as stated in the Helsinki Final Act. I quote: The participating States, 'Convinced that their efforts to develop co-operation in the fields of trade, industry, science and technology, the environment and other areas of economic activity contribute to the reinforcement of peace and security in Europe and in the world as a whole, 'Recognising that co-operation in these fields would promote economic and social progress and the improvement of the conditions of life, …". Those are the first two paragraphs which introduce Basket 2; but these intentions so far as the West is concerned were meant to be tied closely to the implementation of Baskets 1 and 3. In neither of these fields have we seen any evidence of any marked progress. There is continued and systematic violation of human rights, whether it be of dissidents or monitors of the Helsinki Agreement in the Soviet Union. There are still, let us remember, 85,000 Soviet troops in Afghanistan with apparently no intention of withdrawing, and there is still massive expenditure on defence and military equipment in the Soviet Union amounting to about 12 per cent. of GNP. As far as we are aware, there is no dramatic increase in the standard of living in East European countries, as was envisaged in the intention of this particular part of the Final Act.

From the facts available on East/West trade, admittedly not always easy to obtain because of the little or no information coming from Comecon countries—and here perhaps I might say that for the rest of my speech "Comecon" refers to the East European countries but excludes the three others, Cuba, Outer Mongolia and Vietnam—it would seem that it is the West which continues to trade regardless of human rights issues, and it is the East which pursues its commercial relations based on foreign policy interests. The reasons for these divergent attitudes are themselves different, of course. While trade for the East is part of its global policy, for the West trade is a matter largely of individual interest and judgment and is of commercial and financial consideration on an individual and not on a national or governmental basis.

So we have to look at it in various ways. First, any political decisions taken by Western Governments concerning trade policies must have the democratic approval of their electorates. The Soviet Union, as a state-controlled economy, has no such fetters on its decisions. There is no need, and indeed no forum, for debate of such issues. Secondly, in the West, while the European Community may attempt to evolve a common external commercial policy, this is frequently side-stepped by bilateral agreements either by individual member states or by private firms. It also includes investment by United States' firms through their European affiliates. I use the word "affiliates" in its broadest sense, and if anybody has read a fascinating book called Vodka Cola (and the title indicates what it is all about) they will see remarkable evidence of cross-investments by Western companies in Eastern European affairs.

Thirdly, it may be thought that the trade involved is minimal, but it has been growing steadily. I am afraid I shall have to bore your Lordships with one or two statistics, though not too many, I hope. Total East/West trade in 1970 was about 6 billion dollars, and by 1979 it was 64 billion dollars—remembering always that the human rights situation in the Soviet Union and in other Eastern European countries was very far from being improved. The United Kingdom's share of the total exports to the USSR was just under 1 per cent. in 1980 and imports were 1.5 per cent. But for the West as a whole it represents 5 per cent. of total exports and 3 per cent. of imports. However, the importance of East/West trade is not so much to the West as to Eastern countries, because 27 per cent. of Comecon exports go to the West and 39 per cent. of their imports come from the West.

Fourthly, much of the Western exports have been backed by low interest rate credits, which of course in themselves are competitive among Western nations. We all compete with our colleagues in the West to give credit backing for exports to Eastern European states in competition one with another. There is the differentiation between United States' interests, which are largely agricultural, in relation to Eastern countries; 80 per cent. of United States' exports are largely agricultural, whereas 80 per cent. of Western Europe's exports are manufacturing goods, plant, technology and equipment. So even if we tried and hoped to co-ordinate a consistent policy with the United States, which would indeed be in the overall interests of the West, we have to recognise at the outset that we do have divergent interests in this matter.

It is in this area of export sales of plant, technology and equipment that I should be most grateful for the consideration of my noble friend the Minister, who will be replying to this debate, because I know that he himself, in accordance with press statements, has been very active on behalf of United Kingdom interests, going to the German Democratic Republic and so on. I believe he is soon to go to Czechoslovakia with a trade delegation.

The form these agreements may take may bring advantages to our economy in the short term. I would ask the Minister: will they really prove to be so in the long term? In the short term, of course, employment is created and sustained and no one would disagree with that objective; but it is the nature of the contracts which give cause for concern, whether they be turnkey contracts, buy-back agreements, counter-purchase arrangements or straight barter arrangements. The effect of these types of contracts is to give away a built-in right to the purchaser to export back to the West, after a short period of delay, the goods originally manufactured here. I think we have seen this happening already in various other sectors of our industries, whether it be in textiles or shoes, in relation to our trading agreements with newly industrialised countries. We are now getting problems from Eastern countries of the dumping of textiles and shoes, and also relating to steel products from Comecon.

We have also a further difficulty in relation to Eastern European countries that we do not have with the NICs. The difficulty of monitoring these dumping allegations is reinforced by the lack of price systems in state-controlled economies, with low wage costs, strike-free labour and no direct way of estimating the cost of production. This is an area where pressure to provide private financial and commercial information within the framework of the Helsinki Agreement would be beneficial. The consequence of these contracts will be for the use of Western-originating plant for production and export to the West, so in the end causing further unemployment, if this danger is not recognised now.

Another aspect of our trade with Comecon concerns shipping contracts. They are also used to benefit Eastern European countries since they purchase goods cif and sell them fob, so guaranteeing contracts for their own ships. We in the West permit state-controlled agencies which make these arrangements, without having any reciprocal rights to establish similar agencies in Eastern Europe to look after our interests. There is not, to my knowledge, any Western equivalent in a Comecon country.

Another factor, but on which I do not wish to dwell and take up the time of your Lordships today, because it has already received much publicity in recent weeks, is the indebtedness of Comecon countries to the West, particularly in the case of Poland. There are, however, some questions which we should be putting to Her Majesty's Government in relation to security, in relation to finance and in relation to our European policies.

It has been pointed out in a recent publication by Mr. Vander Elst, called Capitalist Technology for Soviet Survival that the export of civilian technology undoubtedly helps the Soviet Union in its military and defence equipment, not only because of the concentration of expertise development in those fields, but also because most of the technology emanating from the West—for instance, in the field of electronics and transport, to name only two—contributes to defence technological production. We have only to look at the state of the Soviet chemical industry to see that it is the largest in Europe and the second in the world, which is very largely due to the input from the West. So that, even if the benefit is not immediate and instantaneous, it is so in the long term; and, of course, in the case of military and defence technology, is considerably assisted by industrial espionage.

We have to ask ourselves whether it can really be said that the nineteenth century belief in trade easing relationships and contributing to peace and democracy and a rise in the standard of living can be applied to the political development of the Soviet Union and other Comecon countries in the last few years. Indeed, it can be argued that the supply of Western technology—and, incidentally, agricultural products—on comparatively favourable terms contributes to the maintenance of these totalitarian regimes and to their political stability. I do not think that we should have any illusions that, by exporting to Eastern countries, we are helping to liberate the peoples of Eastern European regimes. There is, so far, no evidence whatsoever of that phenomenon, nice as it would be if it were true.

Following on the theme of Western commercial practice based on profit rather than on political objectives, the value of imposing embargoes by Western nations does not have the same force as an embargo imposed by a Comecon country, particularly the Soviet Union. We need only compare the effect of the grain embargo, when the Soviet Union immediately turned last year to other sources—to the Argentine, to India and other countries—for its shortfall. Indeed, the pressures by the US farmers on the American Government and the depression of the price of grain forced the present régime to lift the embargo; and the Community has also lifted the embargo. We in the Community also suffered from overfull stores of grain in intervention.

So any embargo on the sale of technology is immediately undermined by several other instances. I shall not go into the details of various sales of technological equipment and plant which have been going on during the last year regardless of any embargo. And still there are 85,000 troops in Afghanistan who have no apparent intention of withdrawing.

But if you consider the effect of the Soviet Union's embargo on the export of titanium in 1979, that was a very different matter. It had a very serious effect on electronics and related industries in the West, because, being a state-controlled economy, it is the state which decides and private interests do not intervene. The requirements of the West for certain raw materials for the maintenance of its economy puts a powerful weapon in the hands of the Soviet, and reinforces its determination to impose trade restrictions on South Africa—the only other major source of so many of these vital minerals. We only have to remember the statement made by Mr. Brezhnev some time ago, when he said: We wish to gain control over the treasures which, for the West, are a matter of life and death—the fuel of the Persian Gulf and the mineral resources of central and southern Africa. The most recent development involving further dependence on the East is the sale of pipes, mainly by German firms, to bring natural gas from Siberia to Western Europe. Germany already depends on the Soviet for 15 per cent. of its natural gas and this is to be raised in the future, apparently, to somewhere around 30 per cent. While this, again, has immediate interest for the Federal Republic, particularly as it avoids to some extent the nuclear debate, it creates greater dependence on the East.

From these few thoughts, there may be some consideration of the following issues. First, we should not allow ourselves to become dependent on the Eastern trading bloc, either for energy supplies or for raw materials. Secondly, we should continue the development of energy resources from Western supplies, and ensure our supplies of raw materials from alternative sources; co-ordinate our credit policy within the European Community; recognise the comparative uselessness and ineffectiveness of trade embargoes; but work out some ways of exerting political leverage through our trade relations with Comecon.

Thirdly, we should be reviewing and possibly tightening up the Cocom list of sensitive products. As Churchill said, "I will not subsidise tyranny", and why should we? Fourthly, we should evaluate the policy of selling oil technology and equipment to the Soviet Union. Some will argue that a secure supply of oil to the Soviet Union really distracts its interest from the Persian Gulf, which is of strategic interest and concern to the West. Will an increase in oil supplies for the Soviet Union really stop it from putting on pressure in an area of the world in which the West has an interest? In conclusion we can say that we have the technology, we have the know-how, we have the ability and, apparently, we even have some brains. Must we throw them away at the expense of our own peace and security? My Lords, I beg to move for Papers.

4.57 p.m.

Lord Banks

My Lords, the House will be grateful to the noble Baroness, Lady Elles, for raising this important question this evening. Unfortunately, we have not heard very much from the noble Baroness over the last two years and the European Parliament's gain has been our loss. But I must say that it is very pleasant to be following her in debate again, as I did so often when she was speaking from the Opposition Front Bench. I hope she will forgive me if I do not confine my remarks to trade, but I hope to say a word about that before I finish.

The Motion draws attention to the delayed results of the Madrid conference and there certainly has been very great difficulty in reaching any agreement. That has undoubtedly been frustrating. Certainly, it has been disappointing, but hardly, I think, surprising. The Madrid conference has been dealing with important matters but, in a sense, it has been dealing with them at the fringe, at the periphery, of great power confrontation, and considering them against the background of an unpromising international situation: the heightening of tension following the invasion of Afghanistan; the recriminations about the modernisation of theatre nuclear forces; the delicate situation in Poland and the emergency of the new Reagan régime in America, with its hawkish stance. But there has been a question as to whether that hawkish stance will prove to be the same in practice—whether the rhetoric and the practice will match—and we are only now gradually finding out.

Undoubtedly, great-power relations have been soured and no one is quite sure how things will go. In these circumstances, it was perhaps unlikely that the Madrid conference would make much progress, and likely that it would be used largely as a means of exchanging propaganda. Even so, the holding of it provided another meeting ground for East, West and the non-aligned or neutral countries. It has kept the Helsinki Final Act before the 35 nations and, even though delaying tactics must have been very frustrating for those taking part, I believe it was worthwhile to hold it.

As the noble Baroness indicated, the conference has been concerned, among other things, with disarmament, but it is only one of the fora in which disarmament is being discussed and not the most important. There are the forthcoming talks on theatre nuclear forces which are to be held before the end of the year. We must hope that SALT 2 will eventually be ratified and that negotiations will begin on SALT 3. There are the deadlocked discussions in Vienna on mutual and balanced force reductions. There are the discussions in Geneva. There is to be the Special Session of the United Nations. So there is much talk about arms control. The Economist said recently that the Russians love to talk about arms control but are not so ready to do anything about it. I think that was a correct assessment of the situation.

The Madrid Conference has been dealing with confidence-building measures and it has had before it these two proposals: the rather vague proposal for a conference on the subject put forward by Poland and the more precise proposal, the French plan, put forward by France in association with the other members of the European Economic Community and eventually supported by the United States—a plan which called for a conference to be held to discuss confidence-building measures which would be obligatory and verifiable, which would extend from the Atlantic to the Urals and which would be followed, after a further review conference, by another conference which, as I understand it, would discuss reductions in armaments, although how that might impinge on the other conferences and negotiations I am not at all sure.

The Russians, of course, were unsympathetic to the extension of the amount of Russian territory included, from 155 miles inside the frontier to 1,600 miles, and hostile, as always, to the words "obligatory" and "verifiable", particularly "verifiable". That line of argument, we can say, was not justified but it was scarcely surprising. What was surprising was the Brezhnev speech while the conference was in progress which seemed to indicate that the Soviet Union was prepared for confidence-building measures to extend as far as the Urals, but still there was no commitment that these should be obligatory or verifiable.

The neutrals have made an effort at compromise. They have put forward a proposal for a conference which would cover confidence-building measures from the Atlantic to the Urals, including air and maritime space as well. And that would be obligatory and verifiable. It is coupled with humanitarian concessions: proposals for helping the reunification of families, helping family contacts, and so on. But human rights has been the casualty so far as these neutral proposals are concerned.

The West has made much play, I believe rightly, with the Eastern European failure to uphold the standards of the Helsinki Final Act. They have emphasised the position of the dissidents in Eastern European countries; they have emphasised the treatment of those monitoring the implementation of the Helsinki Declaration; and they have emphasised the plight of Soviet Jewry. So the conference has provided the opportunity to raise these important questions publicly.

The unpleasant fact, however, remains that the Soviet rulers and the West are never likely to agree on human rights. That is simply because they have a different concept of freedom. The only freedom that the Soviet leaders consider important is the freedom of the group, the freedom of the collective. To protect that freedom, the individual must accept a collective view. Dissidence is treachery. Deviation is treachery. That of course is a doctrine which is highly objectionable in our eyes. Nevertheless, we have to accept the fact that this is the doctrine to which the Soviet Union is committed. I believe, though, that they are undoubtedly influenced by world opinion in respect of particular cases and in respect, to some extent, of the overall severity of the repressive policy which they follow. But as to the rectitude of that policy there are no official Soviet doubts.

I believe that the West are right to raise these questions and to raise them strongly. It is right that we should check the Helsinki implementation at regular intervals. But I doubt whether it would be wise to forgo the possibility of progress on confidence-building measures because of violations of freedom, rightly condemned by the West, and because of an inability to agree to a form of words about future activities in the human rights field. Confidence-building measures are not a gain to the Russians alone. I believe that the Russians have implemented the provisions on confidence-building measures so far agreed. They have not implemented the measures agreed on human rights. There remains the great problem of verification, and that may prove an insuperable obstacle, but there is just a possibility that on confidence-building measures and on humanitarian measures some limited progress may even yet be made.

In conclusion, I should like to say a word about East/West trade to which the noble Baroness referred and in connection with which she raised some very interesting and important points. A powerful argument is built up—I do not want to suggest that the noble Baroness wholeheartedly supports this argument—against trade with Eastern Europe on the ground that it helps to prop up the Eastern régimes. Restriction of trade is regarded as a punishment for wrongdoing. Technology should not be given to the Eastern countries—this is a point on which the noble Baroness touched—because it helps them to improve their position, to become perhaps superior in the long run, and allows them to concentrate on defence the 12 per cent. per annum expenditure to which the noble Baroness referred.

I am not pretending that those are not powerful arguments. We should be foolish if we just swept them aside. But against those arguments may I say, first, in reply to a particular reference of the noble Baroness, that I still believe, with Cobden, that trade helps to cement peace and that the more nations cut themselves off in trade from others the more likely they are to find themselves in conflict with those others. Although I agree with the noble Baroness that of course trade with Eastern Europe does not—for the reasons which I have already outlined—solve our anxieties over human rights and is not likely to do so, nevertheless I think that it does help to some extent to open up a closed society.

There is next the question of oil technology to which the noble Baroness referred. It is likely that if we were to deny that technology to Russia we should make Russia more interested in Middle East oilfields and should be putting a pressure on oil supplies which might well have an effect on the world price of oil that might be very much to our disadvantage. It is, I believe, true that only one-third of the £10,000 million which was spent on machinery by Russia in 1979 came from the West. Although they might be much harder pressed without the West, the idea that the Russians could not exist and could not advance without the West is, I believe, untrue. I think it is unlikely, too, that the Russians would cut defence on economic grounds unless there were some very drastic decline in their economic position. In any event, the more parlous the Russian economy were to become, the more likely would dangerous and desperate measures become.

There is the whole question of to what extent we should in fact trade with any countries overseas and provide them with technology, and except in the military context I do not think that is peculiar to our relations with Eastern Europe. The Brandt Report suggests means of providing technology and of helping the development of the third world, but argues, too, that to do so would not in fact be against, but would be in favour of, the economic interest of the West. Of course there must be some restriction on exports to Russia and to Eastern Europe of those things which are of direct military value. That is common sense, and it may well be, as the noble Baroness suggested, that we need to have some revision of the guidelines in that respect. That said, I would welcome as liberal a trade policy as is possible towards Eastern Europe.

May I say in passing that I hope the present difficulties which appear to have arisen between Yugoslavia and the EEC with regard to beef imports will soon be solved in a manner satisfactory to both the EEC and to Yugoslavia. I think it is important that we should maintain and strengthen our ties with that country at this juncture.

To sum up, may I say that Madrid was disappointing and frustrating, but that was not surprising; it was peripheral and overshadowed by the world political situation. It was useful as a forum where the West could publicly condemn the violations of human rights which have breached the Helsinki Agreement, and the West must continue to speak out. But even now something may be agreed with regard to confidence-building measures and humanitarian provisions. The state of relations between the West and the East depends not so much on conferences—although they play their part—but on the assessment that the great powers and the NATO and Warsaw powers make of each other's intentions. In my view the West must maintain its defences, seek and seek again for agreement on the crucial question of arms control, and must pursue as far as possible a trade policy towards the East which is both prudent and liberal.

5.13 p.m.

Lord Brockway

My Lords, I join with the noble Lord, Lord Banks, in expressing appreciation to the noble Baroness, Lady Elles, for having initiated this debate. I particularly welcome her reference to East/West trade although I shall take a different view from hers. I regard the chapter in the Helsinki Agreement dealing with economic co-operation as being the most important as a contribution to bringing about better relations between East and West. It discussed proposals for common action at the frontiers, joint power stations, transport by air, land and water. Integrate economies in that way and the danger of war becomes much less.

Since the Helsinki Agreement there has been considerable development in economic co-operation. There have been 30 agreements on economic arrangements between Western Europe and the Soviet Union, and between 1976 and 1979 Soviet Union trade with Western Europe increased by 62.5 per cent. Those were considerable contributions towards economic integration. My regret is that the Madrid Conference has not discussed economic co-operation to a greater degree.

As the noble Lord, Lord Banks, said, most of the time of the Madrid Conference has been spent on the two issues of human rights and proposals for a disarmament conference. There can be no Member of this House who feels more deeply about human rights than I do. First, the right to live. There are 800 million people in the world on the border of death, according to Robert McNamara of the World Bank. When physical needs have been met, the freedom of personality, the freedom to express one's thoughts in writing, in speech, in every way, this is the very essence of a human society. I take this view so strongly that I have indicated that I am not prepared to go to the Soviet Union on the invitation of its Government while it treats its dissidents in the way that it does. But it is not only the Soviet Union. According to the survey of the United Nations, 82 countries are persecuting their oppositions, often by torture, and I am afraid I shall have to extend my boycott rather further than the Soviet Union.

There was very great danger that the Madrid Conference would break down on the issue of human rights. It was saved at the beginning only by the proposals of the unaligned nations. I never like to use the word "hypocrisy" about my political opponents, but I am compelled to say that there is now an immoral inconsistency in the attitude of the American Government towards human rights. At Madrid, there was denunciation of the Soviet Union for denying human rights; in other parts of the world the Reagan Government has thrown over the Carter Administration's convictions about human rights. Instead, because of its fear of communism and its desire for allies against the Soviet Union, it subordinates human rights and seeks alliance even with dictators who repress liberties as severely as the Soviet Union itself.

This was very well expressed only this week by a Reagan candidate for the State Department before the Senate Foreign Relations Committee. He said: The United States must back its friends and allies even if their human rights records are imperfect". As The Times remarked in its editorial on the Madrid Conference on 10th November, nobody is above criticism. Britain's record on human rights is not perfect". The editorial referred particularly to our actions in relation to migration, and no one can say that the treatment of coloured persons in this country under the immigration Acts reflects human rights.

I want to urge that the best way to influence the Soviet Union towards better treatment of its dissidents is by contact and through economic co-operation. The Final Act adopted at Helsinki emphasised particularly respect for human relations. Even in this respect the Helsinki Act has had some influence in the Soviet Union. I am informed that 15,000 Soviet citizens have married foreigners since the Helsinki Act and that 10,500 have gone to live in other countries. In 1978 31,000 people left the USSR. Only 2 per cent. of those who applied for permanent residence in other countries were refused. Therefore, the action taken at Helsinki, continuing in Madrid and, I hope, to be maintained, is influencing the Soviet Union.

But, my Lords, as the noble Lord, Lord Banks, said, it is not only the issue of human rights which can be helped by co-operation. It is also removal of fear and of war between East and West. The noble Lord, Lord Banks, has described in detail the French proposal for a disarmament conference, and I need not repeat what he said. There were other proposals before Madrid of a more drastic character, which I would have liked to see adopted. There is now real hope that the French proposal will be agreed to by both sides. The Soviet Union has agreed to extend observation and information about manoeuvres across the whole of Europe as far as the Urals. While the French proposals are very limited indeed, one hopes in other directions—next year the renewed United Nations conference on disarmament—that by parallel methods much deeper and more thorough measures may be adopted.

My Lords, I say in conclusion that there is one other reason why we hope the Madrid Conference will succeed. There is a danger still of it breaking down, but one hopes again that the draft document of the unaligned nations may save it. The additional reason for desiring that it shall continue is the Spanish proposal for an international agreement to combat terrorism. This proposal has been received at Madrid with extraordinary sympathy, perhaps deepened by the recent attempt to assassinate the Pope. I cannot mention the Pope without saying that one hopes that this great voice for peace in the world may recover and that he may be able to continue his contributions to ending conflicts between peoples. I believe that the maintenance of the Helsinki Conference, the strengthening of it and all that it stands for, will help the purpose for which he has so often spoken.

5.24 p.m.

Lord Kennet

My Lords, I cannot begin without echoing Lord Brockway's words about the recent atrocious attempt on the life of the Pope. I should like also to join myself in what Lord Banks said in welcoming Lady Elles's presence among us today, and to repeat how much we are indebted to her for raising the subject. I should also like to betray at this stage a shade of disappointment that we learn from what she said that discussion of the matter was not much further forward in the European Parliament recently than it was when I left two years ago. I shall return to that point in a moment.

It is fashionable, though it has not occurred today, to pull a long face about the Madrid Conference because of its apparent slowness, an attitude reflected perhaps in the phraseology of the Motion itself, which speaks of "the delayed results of the Madrid Conference". It is disappointing because we all want instant peace and improvement from every conference that ever meets. But, in fairness, it must be said that the whole Helsinki-Belgrade-Madrid series of East/West contacts in Europe has been no slower to produce results than any other series of contacts between East and West. Such things are by their nature horribly slow, horribly cumbrous and horribly uncertain. I would give the Madrid Conference, relative to others of the same sort, a rather clean bill of health as regards the speed at which the results are coming forward, as outlined by Lord Brockway and Lord Banks. I do not need to repeat what they have said in praise of the positive aspects.

It is a pity—as I think we can see now as the year has gone by—that the Helsinki Conference itself was not allowed to consider arms control in the full meaning of the word, only the peripheral issue of confidence-building measures. This, I think, was one of the few but obvious mistakes made by that outstanding Secretary of State, Henry Kissinger, when he allowed the Russians to succeed in closing off the area of arms control from the Helsinki conference and putting it elsewhere. We have only to look and see what has happened to it elsewhere to realise how much we may have lost through its exclusion from Helsinki, and Belgrade and later Madrid. It is now being considered in the talks on mutual and balanced force reduction in Vienna, which are and always were, I fear we must admit, doomed to failure because they gathered the wrong countries to consider the wrong area and the wrong types of weapons. Hungary is excluded for no apparent reason, and the talks cover only Central Europe, except Russia—they do not cover any part of Russian soil—and only conventional forces and not nuclear forces. Each one of those three things singly would doom the talks to failure and all three together do so very clearly.

Arms control is also talked about in SALT. One could debate for hours about the reasons for the present breakdown of the SALT series of negotiations, but it is clear that they have broken down. I think I shall have to differ from my noble ally Lord Banks in so far as he hoped to see a speedy resumption of SALT. The Russians will not resume in that form until SALT 2 is ratified, and I fear it is now clear that we must accept that the Reagan administration, the present Congress, is not going to ratify SALT 2, and that is that. It is a question now of great ingenuity and forbearance on both sides among the super powers to find a new formula within which they can discuss strategic arms limitation. I hope not to make anything more difficult for them in their world-saving approach to this task by suggesting that they may find it easier, not harder, if other countries are allowed to sit beside them. It is one world; the world belongs to all of us and not only to the super powers.

We then have the recent undertaking from the new Secretary of State, Mr. Haig, to seek to open talks with the Soviet Union before the end of this year on what are called "theatre" weapons. We can only wish that enterprise the very greatest good fortune and the speediest good fortune. But it would again perhaps not be sensible to refrain from noting that it will cover only a very limited field—certain types of nuclear weapons which are liable to fall on Europe—and noting that the use of the word "theatre" in the very title of the proposed negotiations is perhaps not a happy augury. The opposite of "theatre" is supposed to be "strategic". Europe is strategic to us; we live there. Anything that falls on one is strategic to one, whoever one is. Europe is strategic to Europeans. "Theatre nuclear weapons" on the other hand suggests something that will not fall on you, whoever you are, but which you can watch from the transatlantic stalls. The very use of the word is a hostage to fortune because it is likely to provoke an unfortunate political reaction. In Western Europe it has already done so and will increasingly do so.

The safest way to go about this—and here I address myself primarily to the Government—is for the British Government to be able gradually to wean the nations away from the use of the distinction between "theatre" and "strategic" and talk only about weapons systems of given performance characteristics, and every time to name the system so that people can look it up. What matters is what it will do, not where it is or who it is pointed at. You can never tell where it will be or who it is pointed at. You can tell what it will do, so let us call them talks about weapons having a range of more than such-and-such and an explosive capacity of more than such-and-such. That is the way to define weapons categories.

Both noble Lords who spoke just before me have praised the French proposal of confidence-building measures from the Atlantic to the Urals in a familiar French phrase—a phrase which is at last echoed in Moscow. It must be clear that, although the measures themselves are a very small thing compared with the real arms control that we want, the area is right at last and the countries to be concerned are right at last—that is, all the European countries and the addition of the United States and Canada, where relevant. This is a bold proposal. Although shallow in effect it is broad in the proposed area of that effect. For that reason it is a very hopeful one.

There is, of course, an extremely delicate matter to be surmounted; namely, that at about the same time as Mr. Brezhnev began for the first time to refrain from brushing aside proposals to do anything binding or militarily significant as far as the Urals, he raised the possibility of a claim to do the very same things to the same distance into the United States and Canada. On the one hand one may say, "Why not?—this is a most reasonable counter-proposal. If we proposed to look or to have a view of some sort of military activities in the Soviet Union as far as the Urals, it is only right that they should have a corresponding view 1,600 miles into North America". However, against that there is the fact that this would extend the proposal from a European proposal and would make it into a European/North Atlantic proposal. This would in some sense legitimate the historical claim of the Soviet Union to be a world power, but not a European power in the same sense as other European powers have claimed; the legitimisation of which would want watching very carefully. It depends on the context.

I turn to the second part of the Motion, about East/West trade. I said at the beginning of my remarks that I was disappointed. Three and two years ago made an attempt to write a meaningful report for the External Economic Relations Committee of the European Parliament on precisely this matter. My attempt came to nothing because it was so clear that the member nations were all at sixes and sevens in the extent to which they were prepared to control companies based in their own countries. The disarray was such that it seemed more tactful to me and to those of my party group that attention should not be drawn to it. It was as simple as that. I expect that the noble Baroness, Lady Elles, will confirm that that is still the situation. This is not a form of debate where the noble Baroness can say very much at the end, but perhaps she could touch on the question of whether there is a ray of hope coming out of the European Parliament towards the European Council of a uniform system of control of the following factors, because it is not everything that we want to control.

Of course, I do not think that anybody would ever wish to restrict trade as such with a given country because of the nature of its régime, unless one was at war with that country. Having said that, I think that one wants to look at the other side and say that it is not trade which, in itself, will liberalise a tyrannical régime. Why should it? The liberalising effect of trade with a tyranny arises from the number of merchants, exporters, importers and people who render services in one way or another—the number of people who go with it and the freedom with which they are allowed to wander around the territory of tyranny. I suspect that at the moment the number of people who are allowed to go with our trade into Russia and to go into Russia to obtain Russian exports to us, is not as big as one would like it to be, and they do not have as much freedom as we would like them to have if they are really ever to achieve the social effect so rightly outlined by the noble Lord, Lord Banks.

There are two particular points in my view of the many which could be seized, which I should like to mention. First, there is the phenomenon of the turnkey factories built by western multinationals. It does not matter whether it was Fiat who did it 20 years ago or ICI who did it just the other day. If those factories result in a presence—I do not say that they will be flooded—on West European markets of the same product which is made in the West by the same firm, but at a lower price because wages are lower in Eastern Europe, then it is absurd; it is almost silly and tragic that the Governments of those West European countries cannot agree on how to regulate and reduce that phenomenon. It ought to be regulated and reduced. We must find a way of doing it. It obviously can only be done through the machinery of the European Community.

Again it is a fact, whatever one may think ought to be done about it, that in giving favourable credit terms to the Soviet Union we liberate great tranches of their own real wealth for alternative application. The alternative application is within their sole national decision, and if we were not liberating tranches of their own wealth for them they might choose to devote less of it to their military build-up. That would only be good fortune for us; I do not think that it would be ill fortune for them either.

The right course to take to ensure this effect is extremely difficult and will depend of course on Cocom which has a chequered history and which is a cumbrous instrument. It could also depend in future on some European Community machinery. I am not against that. It is hard to define. I do not think that one could make any rule which would obtain even intellectual assent in this Chamber, let alone which would obtain political assent among the nations of the West in the foreseeable future. But we are conferring an unasked-for benefit on the Soviet Union. In many respects I have a subjective feeling that it would be better to stop doing that and to confer corresponding benefits on poorer countries which are our friends and which are making a shot at freedom and democracy.

5.39 p.m.

Lord Auckland

My Lords, my noble friend Lady Elles has opened this important debate with a characteristically cogent and apposite speech. I shall make my own brief remarks in relation to trade because, as my noble friend rightly said, the Madrid Conference itself has hardly been made very public. What will happen as regards the future of the conference is anybody's guess. Divergent opinions which inevitably exist between countries should not always be counter-manded by trade embargoes, always provided that the principles of business etiquette are observed on both sides, notably in the realm of finance and delivery dates.

At this juncture I should like to pay a tribute to our embassies in Eastern Europe which, very often under considerable difficulties, help people who go out on trade missions. There is one question which I should like to ask my noble friend, of which I have given him very short notice. It is certainly relevant to the second part of this Motion. It concerns the mysterious reason why one can dial direct to Prague and to Bratislava and yet not to Bucharest. So if any aspiring British businessman wants to make a direct call to the Romanian capital, the business of getting through is extremely difficult. I do not know whether my noble friend has any means of finding out why this anomaly exists and whether anything will be done about it, particularly in view of the subject that we debated yesterday.

I have visited both Romania and Czechoslovakia. I visited Romania on a trip organised by their state airline, Tarom, on which a number of parliamentarians, one or two people from the CBI and a number of travel writers went, mainly as an exercise in publicising tourism. We were certainly very well hosted. But when I asked why Romanian tourists were not at least encouraged to come to this country, the answer was rather non-commital. I think that the whole basis of this question is as to how the COMECON countries will behave, if I may put it that way, in their attitude towards allowing their nationals to visit this country, bearing in mind that they are all crying out for tourism, and indeed, exports to their own countries.

As my noble friend Lady Elles said, it is very difficult to get precise figures about exports to some of these countries, although I have with me a very elaborate document from the Romanian chemical industry. According to figures which I have here, the 1981 to 1985 prospects of the development of the chemical industry exporting overseas shows an average growth rate of 5.8 per cent. to 9.5 per cent. In that connection when the Premier of Romania recently visited this country and had talks with our Prime Minister and with other Ministers, some of the figures contained in the Romanian journals were pointed out so that our own exporters could get more of a look in the door.

My noble friend has already mentioned the question of dumping, particularly of shirts and shoes. I discussed this quite recently with a Romanian official and he said that measures had been taken to counteract this. Whether or not that is the case, I do not know. But, if we are to encourage this trade, I hope that our construction industry and other industries which could operate particularly in Romania and, to a lesser extent, in Czechoslovakia could be given more encouragement. Of course, much of the encouragement must come from the host Government. A great deal of valuable work has been done by at least one of our large construction companies in the Danube basin. Is this still going on? Is our construction industry, which is on a down-turn at the moment, in a position to work in these countries, always provided that it gets the proper reward for it? It is no use working in these countries if there is no proper currency exchange.

The need to trade in this country is, of course, foremost and it has been said that trade with the COMECON countries will help to solve such grievous problems as human rights and will bring better relations. It is being a little idealistic to think that this will be the case in the short term. If it is so in the long term, fine.

In recent years we have had the visit of President Ceausescu of Romania, whom I have met, and a number of Ministers of both Governments have visited Romania. The other day I tabled a Question to my noble friend asking what was discussed when the Romanian Prime Minister visited this country, and he gave me, as far as possible, a very full Answer. I hope that the Government will consider very carefully the replies which the Prime Minister gave, particularly in the context of British trade and British exports having favourable terms. Are these terms as favourable as they might be? Therefore, I conclude by saying that this has been a valuable debate. Romania has closer links with the West than certainly most of the other COMECON countries, and this is important, but it must be established that the trade is on a two-way basis as regards proper funding and financing.

5.49 p.m.

Lord Taylor of Gryfe

My Lords, I, too, should like to express my indebtedness to the noble Baroness, Lady Elles, for introducing this very interesting subject. It is a pity that it is a short debate because the whole question of the relationship between commercial policy and political strategy is an interesting theme and might be looked at in an even broader context than East/West trade.

I wish to declare my special interest in this matter because for many years I have been engaged in East/West trade. Indeed the bank which is good enough to employ me is probably the major bank when it comes to arranging credits to Soviet Union and Eastern Europe in order to facilitate the purchase of goods from this country. It might therefore be said that I have some special interest in expanding East/West trade, but I can assure your Lordships that my concern for the expansion of East/West trade does not diminish my deep concern for human rights and the establishment of a peaceful relationship between East and West. Indeed, it could be said that I regard the development of trade between East and West as a contributory factor to these ends.

It might be worth while looking at East/West trade to see what kind of goods are involved. A good deal has been said about the possibility of dumping and buy-back arrangements which will flood Western Europe, and Britain in particular, with goods from the Soviet Union. The total value of imports into this country from the Soviet Union last year was £786 million. Of that £786 million a large element took the form of raw materials such as timber, diamonds, and things of that kind. There is no measurable impact by goods exported from the Soviet Union into this country which would normally be supplied from domestic sources.

Even if one applied a trade embargo on exports to the Soviet Union I assume that we would still require to import timber, diamonds and certain other materials into this country. All that would happen is that there would be an even greater imbalance in our trade with the Soviet Union in so far as the imports into this country amount to £786 million whereas exports from this country amount to only £455 million.

Reference has been made to the fact that this trade has been increasing over the past few years. I can tell your Lordships that the reason why there has been an increase in the figures, is simply that we are catching up with the boom years of 1976 and 1977, when we did rather well with Russian contracts which are only now being fulfilled because they were for major projects. The number of contracts which have been concluded with the Soviet Union in the past two years has been diminishing; there has actually been a reduction in our trade with the Soviet Union which will be reflected in the figures two or three years from now. This is due to two factors. The noble Baroness, Lady Elles, said rightly that the Russians frequently inject political considerations into their commercial arrangements, but it has also been due to the fact that the strong pound made British exports rather less attractive.

A great deal has been said about credit arrangements for trade between the United Kingdom and Russia. It is true that the British Government borrow at a fairly high rate in the domestic market and export at a reasonably low rate to countries which enjoy the facilities of the Export Credits Guarantee Department. I am not sure that I agree with the noble Lord, Lord Kennet, who said that this was an unasked benefit. Let me tell the noble Lord, as someone who has sat on the other side of the table in dealing with the Russians and discussing major contracts, that it is not an unasked benefit. It is in fact a benefit that is available from most other countries, and in dealing with Russia and in offering her one's goods one must match the credit terms offered by some of our European partners—particularly France, who are about to review their export credit terms which are at present slightly below ours. In other countries, such as Germany, there is no such subsidy simply because the domestic interest rates there are substantially lower than ours and therefore there is no differential in offering credit terms at the domestic rates.

So far as the Americans are concerned, the EXIM Bank is not permitted to offer credit terms but invariably American companies with subsidiaries abroad manage to provide plant to the Soviet Union within the credit terms of the country in which such subsidiaries exist. While it is true that trade is subsidised by these arrangements, it is also subsidised to all other countries which apply export credit guarantee terms and there is no specific preference for East/West trade.

It has also been said that the main area of Russian purchases in the foreseeable future will be in the field of energy. The large contract to take gas supplies from Siberia to Germany is a massive contract; the development of the Baku oilfield and the development of the Barents Sea all provide opportunities for British exports which I hope we shall not neglect. We have been developing, particularly in the North of Scotland, a capacity to operate oil exploration in the very hostile waters of the North Sea and we have developed the technology which makes that possible. I hope that technology can be offered to the Russians because if the Russians produce more oil and gas from their domestic resources, obviously there will be less pressure on world energy supplies and this should be a contributory factor in reducing tension and perhaps prices.

If there is one thing that one can be assured of in dealing with the Russians it is that they behave correctly and punctiliously in meeting their obligations. If one looks at world trade in general, I believe one can say that, whether or not one approves of the Soviet Union's ideology, the Soviet Government is there and it is stable. The Russians' behaviour in respect of all commercial contracts concluded over the years has shown a record of regular and punctilious observance of their obligations.

The buy-back has caused a great deal of concern to many people in this country, and indeed this has been expressed in this House today. In the case of the ICI contract, to which the noble Lord, Lord Kennet, referred, the terms of the contract are that Davy provide the plant and ICI supply the technology, and ICI buy-back the methanol for which they have a ready market. It is a market that suits the commercial activities of ICI and does not diminish the prospects of employment in this country. All such contracts are judged on that basis. They are all strictly commercial.

By the same token, GKN declined to pursue the biggest contract that was ever offered by the GDR simply because the buy-back provisions would have diminished substantially the employment prospects for their people of this country. In that particular case the French plant suppliers gave the necessary assurances covering buy-back and that is now causing them immense embarrassment in view of the present decline of the motor-car industry in France. Companies which engage in bartering and buy-back provisions try to do so within solid and sound commercial considerations. The possibility of applying on our part any embargo or limitations on Soviet trade would be meaningless. We could make no unilateral gesture which would be of any use.

Yesterday's Financial Times reported a substantial new trading agreement between Brazil and the Soviet Union, by which the Soviet Union provides certain turbines to Brazil to develop their hydro-electric power in return for materials from Brazil. The world market is Russia's market, and we cannot make a gesture, even together with our European friends, that would make any contribution to achieving the ends which we might wish to see: the liberalisation of the Soviet State and the greater observance of personal freedom.

The experience of other countries of trying to observe even trade embargoes with small countries like Rhodesia, for example, proved how difficult it is to do that kind of thing even if it were desirable. Inevitably, because we are democracies in the West, it is extremely difficult to get uniformity of policy, and it is not likely to be achieved. In the case of some of our European partners the Russian trade is even more important, as the noble Baroness, Lady Elles, has said. It is more important to the Germans than it is to us. If you cannot get uniformity in credit terms—and we have tried to do that over the years—it is extremely difficult to achieve uniformity in refusal to supply certain goods.

I agree that it would be a nonsense if we did not apply the Cocom rules with regard to military supplies. But we might consider applying the same kind of limitations on military supplies to other countries as well. So, let us look at this realistically. In terms of employment, and particularly in the heavy engineering industry of this country, Russian trade and the development of East/West trade is very important. I do not believe that you should sacrifice principles at all times for commercial considerations. If I felt that any trade embargo would make any contribution to the achievement of world peace, or to the liberalisation of the Soviet régime, I would consider that seriously. But because I do not see that possibility, I think that we should simply face the fact.

Indeed, as I said at the outset, I believe that the development of trade relationships with Eastern Europe could be a contributory factor to opening up closed societies. I think we are in great danger in the West of regarding the present East/West relationship as a static relationship in which we are always bound to be opposed to the other country and we build up our military and our psychology accordingly. The peace of the world depends on our ability to break down that barrier between East and West, and I would hope that trade relationships might be one device in that direction.

6.3 p.m.

Lord Bruce of Donington

My Lords, the House will be grateful to the noble Baroness, Lady Elles, for having introduced this Motion. I hope she will forgive me if I say that it was couched in such general terms that one had to be prepared for all contingencies. As she herself indicated it is partly a matter of foreign policy and partly a matter of trade. I gathered from the general tenor of her remarks that in so far as East/West trade was concerned she was generally agin it. She seemed to me to want to circumscribe it by such conditions, and had such suspicions of it, that she rather thought it would be better for us, and probably better for future relations in the world, if we did not undertake it at all. I do not wish to exaggerate that, but I think on reflection she will probably agree that that was her general attitude.

At the same time, she expressed the undoubted fact that it had been difficult within the European Community to get an agreed formula of dealing with what at any rate appears to her to be a considerable problem. The reason for that, of course, is not far to see, because it is clear from the material that is provided by the European Council itself that the various countries in the EEC trade with considerably varying results with the Eastern countries generally. Germany, for example, even excluding her trade with the Democratic Republic, has a sum of 2,000 million U.S. dollars trade surplus with the East; France has a surplus of some 663 million dollars with the East generally, and surpluses are also run by Belgium as well. It is Italy, the United Kingdom, the Netherlands, Denmark and Ireland that in fact run trade deficits with the East.

I am bound to say that while she was talking on the question of our exports to the Eastern states as though they were the only factor, and expressing some doubts as to whether they might have a more beneficial effect on those régimes and therefore bolster up régimes of which we did not approve, she must have forgotten that so far as the United Kingdom is concerned the boot is on the other leg altogether, because in 1979 our imports from the USSR alone exceeded our exports by some £460 million. Indeed, in 1980 the figure was £367 million. So there must be a lot of trading organisations and interests in this country, covering the fields so admirably put forward by the noble Lord, Lord Taylor of Gryfe, which find it extremely convenient to import goods from the USSR, let alone from the remainder of the Eastern states.

I start from the standpoint so admirably expressed by the noble Lord, Lord Banks, who said that the expansion of trade helps to open up a closed society. Those are views with which I wholly associate myself, and I suspect that Her Majesty's Government largely agree with that. The more contact, the more commercial and industrial interchange there is between East and West, the better it is. Of course, there are difficulties, and many noble Lords have touched on them. We complain, I think with some justification, that the attitude of the Eastern states is generally hostile to the whole concept of multilateral trading as we see it. But it is important to note that there has been some progress.

In the period from 1947 until, approximately, 1957 the Eastern states rejected both the principle of multilateral trading and also the institutions by means of which it was carried out; the institutional structure. The next stage was that they approved in principle of the idea, but rejected the institutions by which it was to be accomplished. But, more recently, they have given acceptance to both the principles and the institutions. The difficulty as yet is that they have not translated their acceptance of the principles and institutions into practice, but there has been some progress.

The principal difficulty arising from East/West trade stems from the very structures themselves. We in the Western world are accustomed to dealing one firm with another across national boundaries. In the Eastern states the trade, both import and export, is done in the main by special state corporations with which individuals from Western states have to make contact, and it is only at a later stage, if at all, that contact is made right down to the eventual consumer or the consumer organisation.

That is all very strange to us and of course it presents considerable difficulties; whereas under multi-lateral trade there is a certain consumer response within the economy—the consumer ultimately tends to determine the nature of production—in the Eastern states that consideration does not arise. Although the state government itself may have to be sensible in the broad and general sense of what is required by the consumer, it does not have to obey their demands. That gives a certain sterility to all East/West trade, and that is why it is, I think, largely confined, at any rate for the time being, to very large capital projects that do not have any immediate consumer impact.

The whole question of dumping by Eastern states has been mentioned. As the noble Lord, Lord Taylor of Gryfe, indicated, the incidence of this are comparatively minor in relation to the total volume of East/West trade, and I would point out in passing that, from the United Kingdom point of view, one would like to hear more complaints about dumping from Taiwan, Hong Kong, Korea and Brazil, because if any question of dumping is to arise to an extent that causes significant unemployment in the United Kingdom, it most certainly derives from that corner rather than from the Eastern states.

Another factor which is bound to have an effect on East/West trade—this has been emphasised by practically every speaker in the debate—lies in the different political attitudes and philosophies as between East and West. That is bound to have an effect on the whole climate within which multiple transactions take place. When considering the situation in relation to trade with the Eastern states, which of course exclude Cuba and China, I am often puzzled why there should be a polarisation of those particular Eastern states as defined, because if it is on the basis of ideological principle, I assure the noble Baroness, Lady Elles, that the Chinese Republic is more Marxist than the Soviet Union and the Eastern states will ever be.

Baroness Elles

My Lords, I established the debate on the basis of the signatories to the Helsinki Final Act, and it was for that sole reason that I confined it to the 35 states, and not for any other reason, other than the one the noble Lord has already raised.

Lord Bruce of Donington

I am grateful to the noble Baroness and I take the point, my Lords, and I am simply issuing a slight warning; namely, that when East/West relations are under review, it is perhaps wise to bear in mind that there is another significant part of the world which is more Marxist than the Soviet Union and its satellites and which falls in due course to be taken into account.

Most speakers have raised the question of human rights and the subject was raised in the most significant and moving terms by my noble friend Lord Brockway, who for over 75 years, for three-quarters of a century, has been fighting for human rights in all parts of the world, whatever the political philosophies of the states concerned. I share his view that it is a vital subject in the present perilous state in which the world finds itself, with the East/West confrontation which has become so much of our daily fare that we begin to take it for granted. Anything that can help to lessen the tension, which holds such grave and disastrous possibilities for mankind, must be pursued as vigorously as possible.

My noble friends and I are convinced that the development of trade between East and West, however gradually that can be accomplished, is one way of biting step by step, little by little, into the tensions that are so menacing to all mankind. For that reason the development of trade is of the utmost significance. Goods and people cross frontiers. The more that trade develops, the more mutual interdependence develops between all countries of the world; the more they can trade with one another, the more thereby they become progressively dependent upon one another. That provides perhaps only the tiny beginnings of the precarious cement that may, in the passage of time, help to dissipate many of the antagonisms which exist today. Our attitude therefore should surely be to bear in mind that all the countries of the world are at differing stages of development. My late friend Aneurin Bevan used to say, "Never forget", speaking of other countries, "that they stand where once we stood", and it is true that we in the United Kingdom have far greater experience of parliamentary democracy than probably any other country in the world. Therefore, it is up to us not to adopt a policy of continued stridency towards those remaining parts of the world with which we disagree. Stridency in the other place, or in your Lordships' House, when arguing political matters, is quite another question, because it is undertaken within a context that we all understand. But in international relations it is far better to take a stance of patience, of pliancy, to give every kind of understanding to those in other parts of the world who, by virtue of their geography, tradition, and entire history, cannot always think the same as we do. We must be patient.

We must also take into account the question of language. As I have found, and as no doubt the noble Baroness, Lady Elles, has found in Europe, when words are translated from one language to another they do not always retain exactly the same meaning. We must remember that the language of the Russians is essentially an imperative and harsh language. Perhaps it would be best if all international conversations were to take place in French; but that is not a possibility.

Therefore, I hope that when we come to consider the whole question of East/West trade we should continue to exercise the same kind of patience as was exercised by my noble friend Lord Goronwy-Roberts in the conference of Belgrade and by the noble Lord, Lord Carrington, in arriving at the settlement in Rhodesia. We should continue with patience and with pliancy, without in any way diminishing our resolve to stand for, and to continue to put forward, those ideals of human liberty and human freedom to which we all aspire, and which we are all trying to perfect.

6.22 p.m.

Lord Trefgarne

My Lords, in opening this most timely debate my noble friend Lady Elles raised a number of general questions about British trade policy. I do not think that anyone would dispute the fact that as a nation we live by trade. Overseas trade amounts to 30 per cent. of our gross domestic product—more than the comparable figure for any other major country. The exchange of goods is generally of benefit to both the supplier and the buyer and, as your Lordships will know, the British Government attach high priority to the efforts by British firms to win contracts in overseas markets.

Our trade with the Soviet Union, for example, has more than doubled in value terms since 1975. In that year our total trade turnover was just over £600 million. In 1980 the total was over £1.2 billion. Over the same period trade with Eastern European countries similarly showed a steady and significant expansion. In 1975 United Kingdom trade with the Soviet Union's CMEA allies totalled about £660 million. In 1980 that total had risen to over £1.1 billion. Although, as my noble friend has said, the United Kingdom's trade with those countries amounts to about only 2 per cent. of our world trade, it is a valuable source of orders for a number of key sectors of British industry, notably process plant and engineering. These are difficult markets, but the Government hope that British companies will continue to find mutually advantageous business in the Soviet Union and in Eastern Europe in the coming years.

However, I have to agree with the noble Lord, Lord Taylor of Gryfe, that the underlying trend in trade with the Soviet Union over the past two years or so is a little disquieting. Very few major contracts have been signed in that period, but we are now entering a new 5-year planning period and we would expect major Soviet purchases to pick up in the near future.

But trade with the Soviet Union and Eastern Europe involves questions of a rather wider nature. In East/West trade I believe that our definition of mutual advantage requires more careful scrutiny than in the case of our trading relationships with the western and developing worlds. Mutual advantage itself is an imprecise term. In the East/West context the major additional factor in our interpretation of the term is that the development of commercial relations can be of political benefit if it encourages the Soviet Union to adopt a more constructive, and less antagonistic, attitude. In that sense East/West trade is a part of the strategic equation.

There is a further constraining element in successive Governments' interpretation of mutual advantage. It is that in partnership with our allies we have for many years restricted the sale of strategically sensitive technology to the Soviet Union and other communist countries in order to prevent the application of our exports to military ends. The Co-ordinating Committee, known as Cocom, (to which several noble Lords referred) which consists of a number of western countries and which was set up in the 1950s, has strict criteria for exports in this field to the Soviet Union.

With those provisos in mind, it is clear that trade with the Soviet Union and Eastern Europe cannot develop in a vacuum, irrespective of the general state of East/West relations. I believe that our exporters understand this. The Government take the view that it is for British exporters to determine whether, and to what extent, they should become involved in selling into the Soviet Union and Eastern European markets. We provide a full range of Government support for their activities in terms of export promotion. I recently took a mission to East Germany at the time of the Leipzig Fair. We recognise the need to keep the inter-governmental machinery, which has been established for British commercial relationships with the Soviet Union and Eastern Europe, in good repair, so that our exporters do not operate at an unnecessary disadvantage in comparison with their Western competitors. Noble Lords may be aware that to that end the next meeting of the Anglo/Soviet Joint Commission on economic and technological co-operation will be held in London from 27th to 29th May.

My noble friend Lady Elles, and I think certain other noble Lords, made reference to the economic measures that the Government applied in concert with our western partners after the Soviet invasion of Afghanistan. I think that it is important to be quite clear in our own minds about the intention behind these actions. In January 1980 we took specific economic measures in the fields of credit and sensitive technology, which we still maintain. Credit is now available only on a case-by-case basis, at rates in line with the international consensus; and we have tightened up the application of the Cocom controls on sensitive technology, about which I spoke a moment ago. The purpose of these measures was to give concrete expression to our strong disapproval of the Soviet action and to demonstrate that any similar Soviet acts of aggression in the future would meet with a western response which would not be confined to diplomatic moves.

The British Government and other western Governments have made it clear that a Soviet invasion of Poland, for example, would require us to respond with measures in the political and economic fields. Western countries have shared the view that the Polish situation must be left for the Poles themselves to resolve. Any Soviet attempt to intervene will meet with a common and united response. That has, we believe, demonstrated to the Soviet authorities the dangers and disadvantages of intervention.

The noble Lord, Lord Taylor of Gryfe, referred to western involvement in the exploitation of Soviet energy resources. As the noble Lord will be aware, the Soviet Union has large reserves of oil, gas and coal. Many of these are, however, located in remote areas of Siberia or in offshore deposits. The harsh climatic conditions and the great distance from centres of population have presented the Soviet Union with many problems in attempting to exploit these resources. As a consequence, the Soviet Union has shown an interest in importing western technology and expertise, as well as western financial investment to help the exploitation of these reserves. British firms have in the past won valuable contracts in the energy field, and I trust that they will continue to do so.

It is not often appreciated that the Soviet Union is the world's largest oil producer, as well as being a major producer of natural gas. In addition to supplying Eastern Europe, she also exports oil and gas to Western European countries. As your Lordships may know, negotiations are continuing on the Soviet plan to build a major new gas pipeline from North-West Siberia to Western Europe. Gas deliveries from the pipeline would of course increase the proportion of Soviet gas in certain Western European countries' energy imports. On the other hand, there is likely to be a reduction in Soviet oil exports to the West as the more accessible reserves dwindle and as Soviet production slows. Many European countries do not enjoy the benefits of indigenous energy resources and are far more reliant on imported energy supplies than is the United Kingdom. The implications of energy dependence which are raised in this context have, however, certainly not been lost on our Western European partners.

I propose to turn now to the Madrid Review Conference, to which noble Lords referred, but before I do so perhaps I could deal with the point raised by my noble friend Lord Auckland about the telephone service to Bucharest. It is of course the case that there is no direct dialling service between the two capitals at the present time, although, of course, an operator service is available. I am not aware that this causes any difficulties to exporters, but I am certain that the remarks of my noble friend will not be lost upon the Post Office or, indeed, the Romanian authorities, who, of course, must together make the arrangements for the enhanced facilities which my noble friend would like to see.

I turn now to the Madrid Review Conference, which is of course part of the subject of this debate and to which my noble friend referred. Under the terms of the Helsinki Final Act, the Madrid Conference was conceived as being the second of a series of regular meetings of the 35 participating states with the purpose of reviewing progress in the implementation of the political obligations they had undertaken at Helsinki. However, the Madrid meeting has taken place in the aftermath of the Soviet invasion of Afghanistan and against the background of developments in Poland.

In these circumstances, the Government's objectives have been, first, to register the damage done to détente by the invasion of Afghanistan; and, secondly, to conduct a full and thorough review of the implementation of the Helsinki Final Act. Thereafter, we agreed to reach agreement on a limited number of substantial new proposals in the areas of military security, human rights, contacts and information. Such an approach was realistic and was required to maintain the credibility of the CSCE process. It was necessary to reject the Soviet approach of "business as usual" and to avoid creating the illusion of progress by reaching rapid agreement on largely meaningless declarations of intent and goodwill.

Thus, the first six weeks of the Madrid meeting—up until its Christmas recess—was spent in reviewing the implementation to which I have referred. Together with its partners and allies and the neutral and non-aligned delegations, the British representatives in Madrid criticised the Soviet action in Afghanistan and the continuing campaign of repression and violation of human rights in the Soviet Union and in many East European countries. We consider that this review period was a success. The Soviet Union and its allies were left in no doubt of the strength of western governmental and public abhorrence of their recent actions.

Since reconvening in January, the Madrid meeting has been discussing the texts of new proposals (some 85 in all were tabled) and undertaking the drafting of a final document. We, together with our partners, have submitted a number of proposals aimed at improving the implementation of the final act in the areas of greatest interest to us. In particular, we have sought undertakings to promote the exercise of religion and conscience, and to permit individuals to monitor the activities of their own authorities in living up to the obligations signed at Helsinki. We are also seeking improvements in the areas of family reunification, dissemination of printed and broadcast information and better working conditions for journalists.

However, there has as yet been no agreement on any of these issues. The Soviet Union and its allies are primarily concerned to promote at Madrid their proposal for a conference on military détente and disarmament. For our part, we continue to believe that any conference to consider disarmament in Europe must take place within a framework which is likely to produce militarily significant and verifiable results. We do not believe that the Warsaw Pact proposal meets these requirements, and this is why we have supported the French proposal for a conference on disarmament in Europe to negotiate (in the now familiar words) militarily significant, verifiable and binding confidence-building measures applying to the whole of Europe, from the Atlantic to the Urals. The Russians, in order to promote their conference, have blocked progress in the negotiations of all other areas under discussion in Madrid. They have still so far refused to commit themselves to a further Madrid-type meeting until they get satisfaction on their military security proposal. The conference resumed on 5th May, and although we are still hoping and working for a substantial, balanced final document which will include wording on all the areas we consider important, we are not prepared to drag the negotiations out unnecessarily. We shall keep the position under constant review.

I turn now to some of the points which have been made on the questions arising from the CSCE Review Conference. The noble Lord, Lord Brockway, gave some figures for Soviet emigration in recent years, but perhaps I may quote the recent figures for Jewish emigration from the Soviet Union. They were 51,000 in 1979; a mere 21,500 in 1980; and early indications this year suggest that the figure will again drop drastically. I wonder whether this record really indicates that the Soviet Union takes seriously its commitments under the final act on freedom movement and religious expression

Several noble Lords touched on disarmament issues and confidence-building measures. I would agree that an agreement on the first stage of a conference on disarmament in Europe to discuss confidence-building measures would mark a success for the Madrid meeting. It would be in the interests of all, East and West, but I reiterate that the criteria set out in the French proposal are all necessary if we are genuinely to enhance security in Europe. I would also underline the necessity to reach agreement not only on military security issues but also in the spheres of human rights, contacts and information, as well as economic co-operation. The final act is a unitary whole; it must be further developed as such.

Reference has also been made to the contribution made by neutral and non-aligned delegations at Madrid. We have welcomed the action of these delegations in tabling a draft concluding document for the conference. This forms the basis of the present drafting work. The noble Lord, Lord Brockway, also referred to the Spanish initiative on terrorism, particularly in the aftermath of the appalling attack upon the life of the Pope—and, of course, I share his views on that. The Spanish text, which is co-sponsored by Her Majesty's Government, has indeed been agreed at Madrid, and we hope it will find its place in the final document.

Several noble Lords have referred to the economic, scientific and technological provisions of the Final Act; that is, Basket 2. It would be true to say that at Madrid this has been an area where the greatest progress has so far been made precisely because this is, in CSCE terms, an area of little controversy. Language, trade policy and energy issues have already been agreed and discussions continue on provisions relating to better provisions of economic and commercial information and better access to the end user, which was specifically raised by one noble Lord. It would be a mistake to overemphasise the value of these provisions to the real practitioners of trade. Basket 2 and the follow-up were mandated by the CSCE to the European Economic Commission for Europe does no more than attempt to create a climate for businessmen to operate in. By itself, agreement at Madrid will not lead to an increase or a reduction in East/West trade.

My Lords, his has been an interesting and profitable debate. My noble friend and other noble Lords have raised important questions concerning the practice of East/West relations in which trade plays a natural part. There are significant political considerations which affect our, and indeed the Russians', attitude towards the development of East/West commercial relationships. These are in part reflected in the continuing debate at Madrid where the complex of issues under discussion reveals the close interaction between the themes which have been raised by your Lordships this evening.

6.42 p.m.

Baroness Elles

My Lords, I should like first to thank my noble friend Lord Trefgarne for his positive and helpful answer to the issues that many noble Lords have raised in our debate this afternoon, and for giving such a clear exposition of the position of Her Majesty's Government on the outcome of the Madrid Conference. If one were to say anything about the outcome of the Belgrade Conference, it was the fact that there was a Madrid Conference. One of the things we would wish to say from this House—and shared, I believe, on all sides—is the fact that we shall look forward to hearing a place and date for the next review of the Helsinki Final Act. That is probably one of the most important things to come from Madrid.

I should like to thank all noble Lords who have taken part in this debate for doing so and for their kind personal remarks. Those noble Lords who know what the European Parliament is like know what a pleasure it has been for me to take part in a debate from these Benches in this House with your Lordships. To say the least, I have not had to speak through a microphone myself nor to listen through earphones to speeches which would have been, as Lord Bruce of Donington has said, very badly translated.

Many important issues were touched on by noble Lords and I should answer one or two of the points. On the point made by the noble Lord, Lord Kennet, a draft report is in process of emanating from the committee by Mr. de Clare on East/West trade relations. I do not feel that I can comment on the content of that because it has not yet been adopted by the relevant committee, but I am sure that the noble Lord can get a copy himself and, if not, I will be delighted to give him a copy of the explanatory memorandum and the draft motion. It touches on some points that he raised in his speech.

There is also another draft report coming before the Parliament of which I am the rapporteur on European political co-operation which touches on foreign policy aspects of commercial external relations of the Community which will contribute to the debate on East/West trade. I should like to assure the noble Lord, Lord Bruce of Donington, that nobody would be against East/West trade. It is something which exists. But I think that in a democracy we must be aware of the issues and the problems which arise and the considerations we have to take into account when propagating and propping up trade between countries—and one country in particular which has expressed so clearly her global intentions in the long term. That is not to say that we do not continue with East/West trade; on the contrary, many exports should be encouraged. The noble Lord spoke of imports to this country—and we had so many imports from the Soviet Union, they were raw materials largely. We must be aware that we must not become too dependent on a country which wishes to make us dependent on raw materials for our very existence.

These are some points which I think arose in what was a most valuable debate. I learned a lot from comments of noble Lords from all sides of the House and I should like to express my gratitude to all who contributed. With these words, I beg to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.