HL Deb 26 July 1982 vol 434 cc10-4

3.2 p.m.

The Secretary of State for Trade (Lord Cockfield)

My Lords, with leave of the House, I will now make a Statement about the special session of the Foreign Affairs Council of the European Communities which was held on Saturday, 24th July. The purpose of the meeting was to consider the latest developments in the very serious dispute between the Communities and the United States over action taken in the United States against certain steel imports.

Last January, the United States steel industry initiated both countervailing and anti-dumping complaints against imports of certain classes of steel from a number of sources, including seven Community countries, one of which is the United Kingdom. In the countervailing cases, provisional duties have been in force since 11th June. Provisional duties in the anti-dumping cases may be determined shortly. There is no assurance that further suits will not be initiated.

The highest rate of provisional duty, at about 40 per cent., has been determined in the case of products exported by the British Steel Corporation. This, as I understand the position, is on the basis that the capital introduced into BSC by the Government and the waiver of certain BSC obligations constitute an unfair subsidy to exports into the United States market. This is a formulation which we find quite unacceptable.

The Government's concern is to safeguard the interests of the United Kingdom steel industry, both public and private, in the face of these protectionist measures and to maintain the stability of the internal steel market in the Community. The Community has tried repeatedly but unsuccessfully to achieve a settlement of this dispute on the basis of some limitation of exports to the United States of selected steel products in return for withdrawal by the United States industry of all its countervailing and anti-dumping complaints. The United Kingdom has fully supported these efforts. However, none of the Community's proposals so far have been acceptable to the United States.

At its session on 19–20th July, the council therefore agreed that the member states worst affected, with the participation of the Commission as co-ordinator, should seek bilateral arrangements with the United States. After midnight on Saturday, 24th July, action to suspend the current countervailing complaints could be taken by the United States Administration only with the concurrence of the United States steel industry, under United States law.

Regrettably, last Thursday, 22nd July, the United States rejected the proposals put to them under the council decision by the ambassadors of the countries worst affected, including the United Kingdom. The Administration, in turn, proposed an arrangement for limiting imports of seven products from these countries at an unacceptably low level. In view of the imminence of the deadline, the council met again on Saturday at the request of Her Majesty's Government and the French Government. It accepted eventually that discussions between the countries worst affected and the Unite States should continue to see if bilateral agreements were still possible.

The Government had despatched to Washington after the council of 19–20th July a special team accompanied by representatives of the industry. Following the conclusion of the Saturday council meeting, our team immediately took all possible steps with the United States Administration to negotiate a bilateral agreement for the United Kingdom alone. I have to inform the House that despite every effort by our team, reinforced by a last-minute approach by the Minister for Trade, and despite earlier indications to the contrary from it, the United States Administration was not willing to conclude a bilateral agreement with the United Kingdom.

The decision of Saturday's council also provides for a new initiative for the settlement of this dispute on a comprehensive basis by the Community. Such a settlement should embrace both current and future countervailing and anti-dumping suits. The precise terms of the Commission's mandate for these negotiations will be determined in the course of this week. During these negotiations we shall ensure that the interests of the United Kingdom steel industry, both public and private, are taken fully into account.

3.8 p.m.

Lord Ponsonby of Shulbrede

My Lords, I thank the noble Lord for informing the House about the latest developments in the very serious dispute between the Commission and the United States over steel imports. Although the noble Lord has repeated many Statements in this House, I am told that this is the first time he has made a Government Statement as Secretary of State. As he will appreciate, a Statement made in this House comes on somewhat earlier than if it is a repeat Statement made in another place, and as a consequence I have only just seen the Statement which he has made. I would appreciate it if he could use his influence to get the procedures altered so that Statements are received earlier so that there can be a proper response from the Opposition.

As it turns out, the Statement he has made did not add much to the very full reports on this dispute which were in all the substantial morning newspapers today. However, I should like the noble Lord to clarify the situation about European steel producers. As the Government see it, have these producers failed to honour the agreements on quotas and prices in the way the British steel producers have honoured those agreements on quotas and prices? The noble Lord referred in the Statement—which we support—to our view about the restructuring costs not forming a subsidy to steel production. The British steel industry is fighting for its life, and is it not true that cheap energy costs in the United States effectively subsidise United States' costs and therefore produce an unfair subsidy in the competition with British steel exports?

If countries act unilaterally by imposing quotas and duties, are we not heading for a trade war which could prove devastating all round? If we retaliate, things will only get worse; and indeed one reads in the press this morning that the European Economic Community has just decided to impose a 6.5 per cent. anti-dumping duty on two American fertiliser producers. Perhaps the noble Lord can also say what the Government are doing in general terms to improve the position of British steel exports.

Baroness Seear

My Lords, we from these Benches should also like to thank the noble Lord for the Statement that he has made in your Lordships' House this afternoon. We regard it as a Statement of very great importance and seriousness. We support the Government in attempting to avert the high protection that the United States is imposing against the steel industry, but we very much hope that every possible step will be taken to avoid a trade war breaking out between the United States and this country and the countries of the Community, which could have only the most devastating effect on both sides. Can the noble Lord elaborate somewhat on the defence of the British case in saying that the restructuring costs do not amount to unfair competition? That seems to be a sound argument so far as it stands, but, in the view of the Americans, are other payments being made which cannot be so defended? Will he demonstrate to the House that our case is in fact watertight against the criticisms made by the United States?

I should also like to say that we must welcome the united action of the Community countries. This is surely yet another example of the importance of the Community countries standing together. We understand that bilateral action was attempted with the support of the Community, but can the Minister confirm that every possible effort will be made for the Community to act together and to avoid bilateral settlements unless there is absolutely no other way of dealing with the matter? Surely our strength must rest on a Community stand, rather than on bilateral agreements.

Lord Cockfield

My Lords, I am grateful to both the noble Lord, Lord Ponsonby of Shulbrede, and the noble Baroness, Lady Seear, for what they have said. I am sorry that the Statement was available at only comparatively short notice, but these are important matters, and I thought that we ought to give the House as full a report as possible at the earliest possible time. In view of the fact that the negotiations continued right up until the expiry of the deadline on 24th July—Saturday—and since clearly consideration continued after that date, it was very difficult to have a completed Statement available earlier than it was available.

Both the noble Lord and the noble Baroness raised the extremely important point that we should not allow the situation to escalate into a trade war. I entirely agree with them, and I have myself been very anxious that we should not allow matters to escalate unduly. We are of course hound to protect the interests of our own industry, and we shall continue to do so, but at the same time I very much hope that it will be possible to arrive at a negotiated settlement acceptable to both sides. That has been our objective throughout. As the noble Baroness, Lady Seear, indicated, we have throughout proceeded in close consultation with the Community. The bilateral negotiations have been under the general aegis and watchfulness of the Community. We are inevitably appreciative of the way in which the Community has stood together on this matter, despite the fact that the United Kingdom is by far and away the worst affected, while other countries, such as Holland, Luxembourg, and Germany, are affected to a very much less degree. Nevertheless, the solidarity shown by the Community is of very great importance.

So far as I am aware, the European steel producers have abided by their agreements; and indeed, had they not done so, one would have expected the United States authorities to load the countervailing duties on them very much more heavily than they have done. We entirely reject the basis on which the countervailing duties have been calculated. When I originally called in the American Ambassador I put to him the point that the large amounts of money that we had spent had been directed to reducing the size of the British steel industry, at great social, as well as financial, cost and that this was a contribution towards reducing the over-capacity in the steel industry in the world and was therefore of benefit to the United States Government as much as it was of benefit to the United Kingdom Government. I can assure the House that we will pursue the negotiations as strongly and as effectively as we possibly can.

Lord Harmar-Nicholls

My Lords, as regards the meeting on Saturday to try to arrive at a bilateral agreement, is my noble friend in a position to say how the terms that we would have accepted on such an agreement differed from the terms turned down by the Community as a whole? Can he say whether at the bilateral meeting as regards the strength of their prohibition the United States were just as adamant as they were when they were dealing with the Community as a whole? Was any concession made at all in regard to the possibility of a bilateral agreement, in view of the special considerations of this country?

Lord Cockfield

My Lords, the simple truth of the matter is that the attempt to open bilateral discussion with the United States got nowhere, because when it came to the point they were not prepared to enter into such bilateral discussions.

Lord Diamond

My Lords, is the noble Lord aware that we are particularly grateful to him for having made the Statement because it brings out the fact, which was not generally brought out in the press, that our individual and bilateral attempts were not concerned solely with the fact that we were the worst affected, but arose out of agreement with the Economic Community as a whole? Therefore we were not—as has been suggested—acting as pirates in seeking solely to protect our own interest, irrespective of those of other members of the Community. Will the noble Lord use his good offices to see that the publicity which his Statement will undoubtedly attract includes underlining the aspect that we acted as a full and proper member of the European Community? Will he also accept from a very modest, one-time accountant that the accountancy argument-chopping which the Americans seek to adduce in order to substantiate their case would not get us very far? All kinds of other arguments can be equally adduced with regard to all types of other companies and the way in which they build up their costs. It is far better to leave the argument on the basis that the costs have been properly incurred, that the charges for the goods are the normal ones, and therefore every attempt must be made to try not to undermine the basis of costing, but, somehow or other, to reach agreement to prevent the situation from escalating into a trade war.

Lord Cockfield

My Lords, I entirely agree with the noble Lord that we must do everything possible to prevent this dispute escalating. I agree with him also that the basis used by the Department of Commerce in the United States for calculating the countervailing duties is really a quite insupportable one. So far as the negotiations are concerned, we have acted in close concert with the Community throughout, and I am sure that the press will take due note of this.

Lord Soames

My Lords, would my noble friend say which other countries, which other member states of the Community, sought to open bilateral negotiations with the United States? Was it only us? And to what extent was the position we would have liked to put to the Americans, had they been prepared to talk to us, different from that which the Community would have put on our behalf?

Lord Cockfield

My Lords, these negotiations are still continuing, and I think it would be wrong for me to enter into details as to the negotiating position.

Lord Soames

How many other countries were there, my Lords?

Lord Cockfield

My Lords, that, I fear, I am not in a position to answer at this stage, but I will check the point and let my noble friend know.

Lord Boardman

My Lords, does my noble friend not agree that the problem with the steel industry in the world is over-capacity, that we in this country have made relatively a much larger contribution to closing down that capacity than any other country, and that it is for that that we are now being penalised?

Lord Cockfield

My Lords, I entirely agree with the point made by my noble friend; and, indeed, this is the argument that we have consistently advanced to the American Administration.

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