The Argentine: Trade and Contracts (Hansard, 5 April 1982)

§ The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Lord Trefgarne)
My Lords, with your Lordships' permission, I will now answer the Private Notice Question tabled by my noble friend Lord Balfour of Inchrye by repeating a Statement that is being made in another place by my right honourable friend the Secretary of State for Trade. The Statement is as follows:
20 "It was announced on 3rd April that the Government had frozen all Argentinian financial assets held in this country, that ECGD would not provide new export credit cover for Argentina and that exports of military equipment and arms to Argentina had been prohibited. Other economic measures are being urgently examined, and we are consulting our European Community and other allies. British citizens are advised not to travel to Argentina, and British companies to withdraw their non-essential British staff. British firms must decide what action they should take in relation to existing commitments in the light of the present circumstances, the measures which have so far been announced, and of the terms of their own individual arrangements with Argentinian firms. They are advised not to enter into new commitments.
"The Prime Minister told the House on 3rd April of the Government's intention to despatch a substantial naval task force to the Falkland Islands. I should like to take this opportunity to announce to the House that Her Majesty assented to an Order in Council enabling the Government to requisition any vessels that may be needed under the long-standing contingency plans available to meet national emergencies of this kind. The P&O liner "Canberra", whose captain is an officer in the Royal Naval Reserves, is being transferred to naval control this afternoon. Other ships will be requisitioned and chartered as necessary."

Lord Bruce of Donington
My Lords, we on this side of the House would like to thank the noble Lord for having repeated the Statement, the contents of which are quite inevitable following the extremely grave events that were reported to this House and to another place on Saturday. We on this side of the House entirely support the Government in their intention to freeze all Argentinian financial assets in this country. At the same time we should like some clarification of Statutory Instrument No. 512, which we believe was laid before Parliament on 3rd April and which is supposed to come into effect, concerning gold, securities, payments and credits. Perhaps the position regarding those could be clarified.
We note from the Statement that the Export Credits Guarantee Department will not provide any new export credits for Argentina. This raises the question of what is going to happen to existing outstanding liabilities of the Argentine which the ECGD have already insured. May we take it that the obligations of the ECGD up to and including 3rd April will be honoured? And can we have the further assurance that in the event of substantial losses being incurred by the ECGD as a result of these measures, no increase in premium will be passed on to other exporters in order to pay for any deficit that arises? In other words, will the noble Lord give the House an assurance that any deficit on the ECGD fund that arises from this situation will be borne directly out of the Consolidated Fund rather than passed on to the exporters who continue to do business with other parts of the world?
It is quite clear from the Statement that other measures will have to be taken, and the noble Lord has already 21 mentioned some of them. May we take it that there will be urgent consultations not only with our EEC partners, whose joint action will urgently have to be sought in concurring with whatever measures we decide upon in supporting those measures, but also far outside the EEC itself, in conjunction with our allies?
We note that British companies are advised to withdraw their non-essential British staff. The term "nonessential" is of course a little vague and I cannot expect the noble Lord to enlarge upon it, but I should be surprised if British companies employ non-essential people in the enterprises which they are conducting. Will the noble Lord undertake to keep the House fully informed of what further steps are likely to become necessary as the situation develops?
Finally, the noble Lord can be assured that we on this side of the House will support whatever measures are necessary in the economic sphere to bring pressure upon the Argentinian Government, even though some of these may, at any rate temporarily, be to the disadvantage economically of this country. Will he give an assurance that the military objectives so forcefully put forward in the other place on Saturday will in fact be pursued with the utmost rigour, should it become necessary to do so?

§ Lord Mais
My Lords, may I from these Benches say that Her Majesty's Government have our complete support in any action which they may have to take. But in the light of industry generally, can we be assured, in so far as any assurance can be given, that companies which at the moment are heavily committed in the Argentine both in the supply of goods and in construction and other works, will receive some instructions as to how they are to proceed? In other words, are they to carry on, or are they to withdraw? And will they have some assurance as to compensation, or otherwise, for what could in many cases amount to very heavy losses?

§ Lord Trefgarne
My Lords, may I thank both noble Lords, in particular the noble Lord, Lord Bruce of Donington, for his helpful and constructive reception of this Statement. My thanks are no less due to the noble Lord, Lord Mais, although he did not go into the same detail. May I deal first with the points put to me by the noble Lord, Lord Bruce of Donington.
Regarding the noble Lord's question about the statutory instrument, that instrument was made, laid and came into force on Saturday last. It was made under Section 2 of the Emergency Laws (Re-enactments and Repeals) Act 1964. Section 7 of that Act provides that the order may be annulled by a resolution of either House. The order clearly therefore does not require formal approval by your Lordships' House or the other place.
So far as the position of the ECGD is concerned, I understand that the ECGD has firm commitments amounting to £290 million in respect of Argentina, that there are further offers outstanding of £60 million and that applications are being considered for a further very substantial sum. In fact, United Kingdom investments in Argentina amount to about 8 per cent. of total foreign investment in that country. They have a book value of about £200 million but the real value may well be higher. We are unaware of any significant Argentinian investment in the United Kingdom.
22 The noble Lord also asked me to give an assurance about increases in premiums which may or may not prove to be necessary following these events. I am not in a position to give the noble Lord the blanket assurance that he sought. The noble Lord will recall that it has been the policy of consecutive governments to ensure that the ECGD traded in respect of its credit insurance arrangements more or less in balance on a year-to-year basis. As the noble Lord knows, that has not always proved to be possible, but that has been the target and we would wish to maintain the general principle so far as ECGD is concerned. I certainly take note of the point which the noble Lord has made. Further measures, which were referred to in the Statement, will indeed need to be discussed and agreed with our European Community partners, by and large.
As for the noble Lord's question relating to the staff of British firms, the Statement made it fairly clear that it would be wise for British firms operating in Argentina to reduce their personnel there to the very minimum. Turning to the final point made by the noble Lord about the military action which we fear may prove to be necessary, I can assure the noble Lord that it is the Government's clear intention to restore control of the Falkland Islands to this Government, as was said by my right honourable friend the Prime Minister and Lord Carrington on Saturday. I believe that I have covered the point made by the noble Lord, Lord Mais, in his supplementary question and I hope that I have been able to clarify the Statement to the benefit of your Lordships.

§ Lord Balfour of Inchrye
My Lords, may I repeat the question I asked before? Are the Government satisfied that these measures will have an immediate and significant effect on the economy of Argentina in general? In particular, the noble Lord the Minister did not mention aviation. Can we be assured that the Argentinian aircraft in this country are impounded and will not be allowed the continued service of our aerodromes?

§ Lord Trefgarne
My Lords, as to the effect of these measures upon Argentina, it may be helpful if I say that some 20 to 25 per cent. of Argentinian reserves are believed to be held in United Kingdom banks or by way of stocks and securities held in this country. It is therefore certain, I would say, that this will have a very significant effect on Argentina's economy.
As to my noble friend's second point, about air services, I understand that Airlineas Argentinas, which is the Argentinian airline, normally operates two services to the United Kingdom. The two most recent services were in fact cancelled for reasons best known to the Argentinians. Certainly it is not our intention that any further services should be operated. The operating permit will he suspended if necessary, and British Caledonian Airways have also suspended services to Buenos Aires.

§ Lord Kennet
My Lords, will the Government look again at their own wording in this Statement, perhaps later today? Will they put themselves in the position of a British firm and see whether the sentence "British firms must decide what action they should take", and 23 so on, could not be made a little more helpful? Are the Government satisfied that they have continuing arrangements which will make it possible for firms which are truly puzzled about what they should do and in fear of their futures, to get advice quickly in terms which are quite understandable and in terms which the Government will stand by?
Also, on the last part of the Statement, about the taking of the "Canberra" under naval control, are the Government satisfied that there are enough merchant ships left flying the British flag for them to be able to meet their needs in this emergency, given the enormous number which have passed under flags of convenience in recent years? Will the Government in due course draw a lesson from this? Will the Government go further than speaking of "restoring" the Falkland Islands to their proper allegiance and of maintaining them in the Falkland Islands as long as the inhabitants wish?

§ Lord Trefgarne
My Lords, as for advice to British firms, it is not possible to go further than the Statement does in terms of specific advice, because circumstances will vary from company to company. A total trade embargo with Argentina is certainly something that we could consider, but we would need to do that in close concert with our allies in the European Community and elsewhere. In any event, an embargo by the United Kingdom acting in isolation would probably not have any major effect and it is therefore crucial, I believe, to secure the support of our friends and allies in this matter.
With regard to the "Canberra" and the possibility of needing other ships, I can say that one other ship has, I believe, been requisitioned and that a number of others have been chartered for this operation. We have no doubt whatever that an adequate number of vessels will be available as required.

§ Lord Shinwell
My Lords, my question is directed not at the noble Lord, Lord Trefgarne, but at the Government's Chief Whip. I want to ask this question, because there is a danger that we might be entering into a kind of debate, and this is not the appropriate occasion for that; so many questions have yet to be answered. I should like to ask the Government Chief Whip, is there likely to be another debate on this subject before the Easter Recess? Is the vacation to take place as arranged, beginning on Wednesday next? These are very important questions and we want to know where we are. The House should be in almost constant attendance while we are awaiting events in the Argentine. Will the noble Lord inform us whether there is likely to be an occasion for another debate? Otherwise some of us want to ask some very direct questions.

§ Lord Denham
My Lords, I do not know whether it is proper for me to answer the noble Lord, Lord Shinwell, at this point. This is the kind of matter which is always arranged after discussions through the usual channels. I can assure the noble Lord that such discussions will take place.

Lord Morris
My Lords, I should like to ask my noble friend Lord Trefgarne, will Her Majesty's Government constantly bear in mind their strategic principle and eschew all short-term economic expediency?

§ Lord Trefgarne
My Lords, the Government's position with regard to this matter generally was very eloquently and adequately described by my right honourable friend the Prime Minister when she spoke in the other place on Saturday, and indeed by my noble friend Lord Carrington when he spoke to your Lordships on the same day. 1 suggest that my noble friend reads the Hansard reports of those two debates.

§ Lord Beswick
My Lords, will the noble Lord, Lord Trefgarne, be good enough to clarify what he said about the European Economic Community? I understood him to say that further measures will have to be discussed with our partners in the Community. What about those measures already taken? Are they to be followed? Will similar action be taken by our fellow partners?

§ Lord Trefgarne
My Lords, I believe that will be a matter for the national Governments concerned. External trade, as the noble Lord will know, is a matter in which the European Community has competence, as the expression goes, and therefore it is right and proper that we should discuss matters of that nature with them. The matters to which the Statutory Instrument refers, and about which the noble Lord, Lord Bruce of Donington, was asking me, fall within our own national competence.

§ Lord Davies of Leek
My Lords, there is a technical point about insurance. Would an underwriter's agreement made 24 or 30 hours ago still be legally correct? Would he still be called upon to undertake his underwriting if it was with Argentinian business or with other concerns of Argentina? May we have some information on that point?

§ Lord Trefgarne
My Lords, I speak without a specific brief on that particular point, but I imagine the position is that if a premium has been received, then the contract is in force but that a claim could not be paid until these restrictions were lifted.

§ Baroness Masham of Ilton
My Lords, are the Government keeping in close contact with the International Committee of the Red Cross in Geneva? I believe that the committee has offered its services on behalf of the Falkland Islands population. Is it not vital that there should be an impartial humanitarian body to protect the interests of civilians in the hands of an occupying state? Would the Minister not agree that safeguarding innocent civilians is paramount whatever else happens?

§ Lord Trefgarne
My Lords, I can confirm that the International Committee of the Red Cross has made an approach to Her Majesty's Government along the lines which the noble Baroness has described. We naturally welcome that approach.

Lord Bruce of Donington
My Lords, may I press the noble Lord, Lord Trefgarne, on the whole ECGD question? Would he not agree that it would be very unfortunate indeed if these events were required to be paid for by ECGD policyholders and by exporters generally, who have already suffered enough? Will he give this matter his most urgent attention? Will he reply to the request made by the noble Lord, Lord Mais, with regard to the position of compensation for firms which have suffered damage or loss as a result of these events?

§ Lord Trefgarne
My Lords, I understand that it is not the practice to pay compensation in these circumstances. It is the case that in a situation such as this one costs will be incurred and will have to fall on someone, but defending our national honour is not something that we can do for free.

§ The Earl of Onslow
My Lords, could my noble friend answer the following questions? Will he please make representations to the French and Italian Governments that they should supply no spare parts to the Argentinian armed forces for French and Italian equipment which they supplied? Secondly, how many Argentinian merchants ships are there in British or British controlled ports? How many British merchant ships are there in Argentinian controlled ports? Please can we put an embargo on the Argentinian ones if the odds are on our side and not on theirs?

§ Lord Trefgarne
My Lords, I can assure my noble friend that the Italian and French Governments have given us the utmost support in this matter, and I have no doubt will be considering acting along on the lines my noble friend suggests. I understand that at present there is only one Argentinian vessel in a United Kingdom port, but one or two are due either today or soon. I will certainly see that the point made by my noble friend is taken into account.