Trade with Developing Countries

HL Deb 23 May 1984 vol 452 cc262-93

5.27 p.m.

Lord Hatch of Lusby rose to call attention to the need to increase British trade with developing countries in order to stimulate British production and the purchasing power of the third world and to reduce world poverty; and to move for Papers.

The noble Lord said: My Lords, this debate is about an apparently simple issue which I think can most graphically be described by two sets of figures. On the one hand, in this country of the United Kingdom there are roughly 4 million men and women unemployed. At the same time in the developing world 17 million children a year die from malnutrition. Indeed, many scores of millions more children are born permanently crippled with brain damage because of the lack of nutrition of their mothers during pregnancy. It is to put those two sets of figures together that I am moving my Motion tonight.

Any comfortable citizen of this country who reacts to that tragic picture with apathy, unconcern or lack of imagination is guilty of responsibility for those children's deaths and for the misery of millions of families. I make no apology for repeating the oft quoted words of John Donne: No man is an Island, entire of itself … any man's death diminishes me, because I am involved in mankind; And therefore never send to know for whom the bell tolls; It tolls for thee".

That is more relevant today than it has ever been before in human history.

This is the moral, ethical and humanitarian dimension of my Motion. I believe—and I think that most noble Lords would agree—that many (indeed, most) British people have humane instincts and these are shown by the great contribution made to charitable organisations and to the non-governmental organisations concerned with development. But having said that, I must point out that this debate is designed to be about the application of those instincts through the concept of mutual self-interest of interdependence.

I could not have had a better context in which to initiate this debate than the Government's statement yesterday on British Leyland. The tragedy of Bathgate, which some of us have seen coming and which was recently forecast by the Glasgow Herald, is a tragedy which illustrates every aspect of the Motion that I have placed before this House.

In 1982, British Leyland reduced the number of jobs in Bathgate by over 4,000: 27 per cent. of its workforce. Now 1,800, plus all those lost through the contractors and the suppliers, are going to be added to that total. So that in that area of West Lothian there is now over 40 per cent. of the workforce unemployed.

Why is this? It is because of the collapsing African export market. British Leyland have been accustomed to supplying 2,500 lorry kits to Nigeria alone. Last year they could supply only 300. It was not because they could not construct them or because the Nigerians did not want them, but because the Nigerians could not afford to buy them.

Surely this is a time in which the third world market should be opening up. Half the markets of the world have been closed from time immemorial. They should now be opening up. British production should be adjusting, specialising, reconstructing and expanding to meet this rising demand. This is not what is happening. The third world market is contracting, for example through the vicious circle of protectionism.

The common agricultural policy is surely the worst example of this protectionism. It is denying both cheap food to the people of this country and the opportunity for the development of agricultural resources in the developing world. It is reducing the export opportunities of the third world and increasing the consumer prices here. It is doing this by creating low commodity prices and maintaining the price of manufactured goods which are imported in their place. It is creating a scarcity of foreign exchange. This scarcity is inevitable once you have the low price paid for the commodities that are exported to the developing world and the compulsion upon such countries to continue to pay the high prices for the manufactured goods that are essential to them and for their energy, in particular the oil which they have to import.

Therefore, through the scarcity of foreign exchange there is a reduced purchase of the exports that we want to send to them and so an increase in unemployment in this country. What is the consequence? The consequence is that most of the developing world has to borrow at the high interest rates that we have seen growing over the last five or six years. When they get into difficulties through their borrowing, when they have to concentrate their production on the payment and the servicing of their debt, they have to turn to the IMF, who say to them, "Yes, we will help you, but only on condition that you contract still further your whole productive process and divert from producing food and consumer goods for yourselves, to exports". This results in leaving many more people in hunger and poverty and the workers of Bathgate unemployed.

That is the vicious circle which no Government has been able to break or has really set out to break—at least not since the war. This Government do not seem even to recognise either the problem or the opportunities which the new situation creates. So what have we seen in Britain? We have seen record bankruptcies. We have seen record unemployment. We have seen an absence of that relevant research and development work which is essential to the restructuring of our industrial base. We have seen a lack of leadership and direction throughout our industrial world. We have seen the constant overlooking of the potentials of our new global society.

We have seen this before, and we are seeing it today. In 1982, the total exports of this country were worth some £55.56 billion. Of that sum, £13.05 billion, or about 28 per cent., went to the lesser developed countries. In the following year, 1983, our exports had increased by about £5 billion, to £60.53 billion. But the exports to the lesser developing countries had declined. They had gone down to £12.78 billion, or just over 20 per cent., which is a very substantial fall, particularly in percentage. Continuing that to this year. in the first quarter of this year our total exports were £16.84 billion, of which only £3.25 billion went to the lesser developed countries, substantially under 20 per cent. So the whole trend of our export trade has been to diminish that proportion which goes to the developing world.

Of course, there is an argument that we have to safeguard ourselves against competition. This is an argument which is often put up by trade unionists. I want to repeat something which I have said several times before in this House. I hope it will be noted by both trade unionists and by the Government. It is that if you take the most vulnerable section of our industry, which is always textiles, the major competition to the textile industry in this country comes not from the developing world but from the developed world; it comes from the industrialised world. To see this, you have only to look at the figures: 12 per cent. of our imports of textile goods comes from the developing countries, over 85 per cent. comes from the industrialised countries. Of course in sectors of our industry there are problems in the drive to increase the imports of the developing world, to increase that section of the trade that comes to us. But these problems have been distorted out of all reality. They are problems which need to be tackled if we are going to take the opportunities offered by the developing new world.

When we are talking about the favourable terms of trade and about the decline in the products that we tend to import—particularly in commodities—and the maintenance of the price of the goods that we export, there is here a hidden false argument. The terms may appear to be favourable to us, but do we not realise that what they are doing is to depress the purchasing power of the developing world and thus to depress their ability to buy our exports?

You have only to look, for example, at the country of Zambia, again referred to many times before here. Zambia is producing copper at a price that is below the cost of production. It has to do so in order to get foreign currency. But it has to live on a hand to mouth basis. What Zambia buys tomorrow in this country depends upon how much copper Zambia can sell today here in London, and the price is going to mean a net loss to the Zambians.

There are some countries that have recognised this issue. Many noble Lords, I think, would agree with me that you cannot talk about American policy as such without recognising that there are many strands of American policy. I would refer noble Lords to what was stated in the Wall Street Journal of 28th March 1983: In recent years the United States and other major industrial nations have been able to count on developing countries as their fastest growing export market. By last year the United States sales to third world countries had swelled to 39 per cent. of its exports". Thirty-nine per cent., whereas our top figure was 28 per cent.! Because of the developing countries' cash problems and because the strong US dollar makes United States goods more expensive abroad, this country's total exports have fallen". That is recognised by the Wall Street Journal. Later in the article, the writer says: Others in Congress"— this was a reference to a debate that was taking place in Congress— want to put pressure on the International Monetary Fund whose demands that poor countries cut their spending to reduce their balance of payments deficits are dampening markets for US exports". Yes, some other countries do recognise this issue. The Japanese are another instance. As your Lordships know, the Japanese run a very high deficit with the developing world and, although perhaps hesitantly, they are still looking to the future to increase the purchasing power of developing countries, particularly in Asia, in order to sustain Japanese industrial and particularly manufacturing output.

My main plea is for the Government to recognise that here is an issue that requires serious attention. It has dangers but it also has opportunities. What can the Government do about it? I can make a number of suggestions. I can suggest that the Government should encourage and expand trade missions and that they should pay particular attention to the negotiations now taking place on the Stabex and Sysmin agreements under the Lomé Convention. They can provide offices and a conference centre for commodity associations, for trade commissions and for the management of the common fund.

The Government can engage in national stockpiling which would do a great deal for the commodity producers of the developing countries. They should take a lead in insulating the lesser developed countries from both the United States and United Kingdom financial policies, by freezing the floating rate of borrowing instead of capitalising the interest, which is now becoming common and which only postpones, compounds and escalates the final reckoning. Above all, the Government—I would say this to any Government—have failed so far to co-ordinate and to develop co-operation between their own departments in overseas trade. This involves the Foreign and Commonwealth Office, the Department of Trade and Industry, the Treasury and other departments. But, above all, it involves education. It involves education because any Government seizing upon this as a policy can only succeed by educating our own people. That is why I regret so deeply the winding-up of the committee set up by the previous Government, the Committee on Development Education.

It is essential that the people of this country recognise the direct connection between expanding trade with the third world and employment in this country, and, at the same time, the attack on world poverty. All are part and parcel of the same policy.

I know that there are many issues to which I have not had time to give consideration—the operation of multinationals, the policies of third world governments themselves, the operation of international institutions, the desperately dangerous element of arms sales, the question of energy provision, and the whole issue of the world environment. I have had little to say on the financial crisis. I hope that other noble Lords will address themselves to it. I have had little to say on the problems of competition and the necessity for restructuring.

I know that the noble Lord who is to reply for the Government is both a humane and a rational man. I submit to him that there is, in this Motion and in the issues that I have brought before him, a set of real opportunities that, at one and the same time, can help to dig our country out of depression, to assist in the development of third world countries and to undercut the misery, the deaths and the degradation that are common there. I submit the Motion to the House in the hope that the noble Lord will seriously take it back to the Government and give it consideration as practical policy for the future. My Lord, I beg to move for Papers.

5.46 p.m.

Lord Bauer

My Lords, we must thank the noble Lord. Lord Hatch of Lusby, for his Motion on two counts. First, it is an example of his determination to raise third world issues from which domestic concerns too often divert attention. Second, it stresses trade as an instrument for economic welfare. In what follows I must try to avoid the Scylla of generalities and the Charybdis of detail. Since the nineteenth century unrestricted trade has transformed many poor countries into flourishing developing countries where progress is linked with commercial contacts with the West and poverty with their absence. One can contrast Singapore and Malaysia with aborigines and desert people.

In 1890 there was no cocoa in British West Africa. By the mid-1930s, cocoa exports from the then Gold Coast alone were 300,000 tonnes a year, all from African owned farms. Since then, this progress has been retarded by official disruption of the market. Again, the rubber industry in South-East Asia began around 1900. Exports were above 1 million tonnes in the 1930s. They are now around 2.5 million tonnes in the face of many political obstacles. Ninety-five per cent. of the acreage is Asian owned.

Such developments greatly increased local purchasing power and import capacity. For example, the then Gold Coast and Nigeria have increased the volume of imports this century by the order of 50 to 100-fold in the face of much disorganisation and adverse policies. These imports are practically wholly for African use.

Expansion of trade for commercial motives has brought about profound changes, unrecorded in statistics. Thus, in northern Nigeria, slave markets gave way to groundnut trade. In 1890 there was no wheeled transport in eastern Nigeria. By the 1940s, one Ibo contractor operated over 30 lorries. In a few decades Malaya was transformed from a sparsely populated country of hamlets to one of populous cities, thriving commerce and excellent roads. As a result of trade, millions of people there now live longer and better than their forebears.

Who benefited most from these new opportunities? It was the poor and the humble. The opportunities have enabled millions to escape from the extreme poverty, insecurity and cultural prisons of subsistence production and many down-trodden people to escape by emigration from the oppressive conditions of South India and South China. This refutes the rhetoric about the benefit of the market being like the Ritz—open only to the rich and well connected. Even more than in the West, in LDCs it is the poor who most need the widening of economic opportunities.

External trade transcends goods and services. It is a channel for new ideas, methods, skills and crops. Trade often first suggests the possibility of economic improvement. It helps the voluntary discarding of beliefs and habits which impede economic, social and cultural advance. Trading activity introduces people to such important features of an exchange economy as the distinction between stock in trade and personal possessions. It paves the way for unsubsidised manufacturing. Every single viable manufacturing and transport enterprise in early post-war West Africa, both African and expatriate, began as a trading business. This role is ubiquitous, from entrepreneurs in West Africa to the large-scale development of manufacturing in the Far East. It can also foster trust across ethnic and cultural divisions. Amidst acute political tension in Nigeria in 1950 I witnessed, as between European and African traders, commercial transactions requiring the utmost confidence, to a degree not exceeded in the West.

The trade-induced prosperity of the third world has greatly benefited jobs, living standards and consumer choice here. In 1982—I am not so up to date as the noble Lord, Lord Hatch—our exports to the third world were about £14 billion, and imports were around £11 billion. Such figures cannot easily be translated into jobs; but the benefits are undoubtedly very great, and unlike so-called job creation schemes the incomes from unsubsidised trade do not absorb taxes, but yield them.

Both in the West and in the third world severe barriers obstruct the trade which the noble Lord, Lord Hatch, rightly wishes to see increased. This debate can only touch the tip of the iceberg. Some United Kingdom barriers antedate entry into the EEC, as, for instance, textile quotas, support to beet sugar and tariffs on processed products. Others are EEC policy, like the CAP and common external tariff. There are strict quotas on the import of many third world products. To describe some as "voluntary" misuses language and adds insult to injury.

Besides restricting trading opportunities, they also set up conflict between and within third world countries as exporters struggle for shares in the quotas. The tariffs can be far more restrictive than appears, because a duty of 10 per cent. on a finished product can give effective protection many times that amount on value added. Quotas are sometimes raised at short notice, which inhibits investment for fear of still stiffer barriers. Again, EEC governments, including our own, have for many years subsidised products competing with third world exports; for example, sugar, dairy products and textiles. Some of these policies yield large surpluses dumped abroad, damaging third world exporters. Procurement policies which discriminate against imports also often harm LDCs.

Instead of being a liberalising influence in the EEC, since the mid-1970s we have tended in the opposite direction—towards more restriction of imports and more domestic subsidies, often very harmful to the third world. Thus we go partly counter to the declared objectives of our Government and the widespread desire to relieve third world poverty. Simultaneously, these policies restrict consumer choice here and raise the cost of living, notably food prices, bearing disproportionately on the poor and impairing the control of inflation. It is by reducing trade barriers that we can best contribute to third world development and relief of poverty. This would also benefit this country.

How can we combat the formidable pressure groups, both here and in the third world, which will not be moved by recital of the benefits from freer trade? Yet it is only when we recognise the hardship inflicted by trade barriers, especially on third world victims, that we can decide whether, or how best, to tackle the vested interests. There may be various possibilities. First, foreign aid could be used to nudge recipient governments towards more open economies for the benefit of their own peoples. Secondly, in the West, because the reduction of trade barriers is painful, we might consider offering compensation to the worst-hit casualties of freer trade. This is open to various objections, the most obvious from victims of politically-induced change who are not compensated. But it might still be a lesser evil than ever-increasing barriers to third world exports combined with ever-increasing aid. Since buying out vested interests would directly benefit the third world, the cost could be financed legitimately from the aid budget.

Official aid and official trade barriers are an anomalous combination which, besides other perverse results, invites charges of hypocrisy and suggestions that aid is only conscience money for restrictive policies. I hope the noble Lord the Minister will show awareness of the extensive social and economic hardship inflicted by official trade barriers on people in the third world even more than in Britain.

5.57 p.m.

Viscount Falkland

My Lords, I feel very diffident on two points—first, that I should presume to address your Lordships' House so soon after I have taken my seat; and, secondly, that I should be addressing myself to a problem which at this moment is insoluble. The countries of the third world of which I have some knowledge are those of central and eastern Africa. Today things have come to a pretty pass. With the combination of many years of the changing prices of commodities, of difficulties, of internal strife, of the problems in the industrialised world, we have now reached the stage where it is almost impossible for us to deal with these countries, in that, quite frankly, they are unable to pay for what they need—not for what they want, but for what they need.

In referring to the countries of East Africa which most often are in the newspapers, I will take first the one which receives the most favourable press—Kenya. In this country, Kenya was considered the jewel of the ill-fated East African community—an idealistic concept which unhappily broke down. Since the death of President Kenyatta, Kenya has seen a very fragile regime, a political upheaval bubbling under the surface. We have become very fearful of a continuation of that process because it is so close to the borders of Uganda, which, as we know, is a country which has shown enormous resilience in actually surviving to the extent where recovery now looks possible. Over a number of years that country suffered a turmoil with changing régimes which I think most of your Lordships would feel would sink any country.

Tanzania, the other country in that group after the break-up of the East African community, decided to go a different way from Kenya, and here perhaps we are coming to an important point, which is worth considering, in the attitude of the Western industrialised countries to the third world and, in particular, to the countries of this region.

Tanzania took it upon itself to follow a different road. It has an idealistic president. He is a great leader, as I think most of your Lordships will agree. In fact, in that part of the world we have had a number of great leaders and some not so great. But President Nyerere must certainly go down as one of the most sincere leaders of our time. He chose to follow a path of what is described in the press as "African socialism". Indeed, "African socialism" is a term which, like "third world", I do not like. I see only one world. African socialism is a contradiction in terms.

President Nyerere chose to follow a line which was idealistic and in some ways mistaken. As a result, that country—which was a very poor country—alienated itself from other countries within the group, particularly Kenya. And what is more important, it alienated itself from countries with whom it could have shared an enormous amount of goodwill had it followed another road. Happily, at present the signs are that we are seeing a return to a more moderate view in Tanzania. President Nyerere has not made any statement to show us that that is a certainty, but certainly it seems that he is moving more towards the middle of the road and abandoning some of the more dramatic policies which have alarmed this country and other industrialised countries.

I agree that his policies have not enhanced his country's economy. Nevertheless, the achievements that have been attained in Tanzania cannot be minimised. In Tanzania there is a general standard of health and education and—thanks to generous donor countries—there is a general standard of essential facilities such as water, and so on, greater than those that exist in Kenya where there has been a sharp difference between the marginal areas and the areas which attract more attention; namely, the urban areas around Nairobi, and so on.

The point that I am making is that we have had a relationship with these countries which can be likened to the relationship of a parent with a precocious child. When those countries became independent—and we made every effort to see to it that independence was granted peacefully—for various reasons we stood off in the way that a parent stands off from his child. We failed to take advantage of our long association with these countries and we allowed their thinking to develop along lines with which we find it hard to associate.

I hazard a guess that, had we taken a different view about the development of the three countries in the East African community, had we exerted our influence and had we taken advantage of the goodwill which existed there, then the East African community might have existed today. If it did exist today there would probably be no General Amin and there would probably not be a situation in Tanzania where they are not only unable to buy goods which are essential from the developed world, but where they are, as of today's date, unable to repay the debts to many countries which they owe on past transactions.

This situation is very dangerous. I share absolutely the sentiments of my noble friend Lord Hatch of Lusby on the obscenity of world poverty, particularly African poverty. Indeed, African poverty differs from the poverty that we know, as I am sure many of your Lordships have probably experienced. We are not talking of poor people who have experienced a fall in their standard of living and who have had their motor cars reclaimed. We are talking of people who find every day a struggle for survival and who face hunger of a crippling kind.

Many of your Lordships will have seen on television in the areas where there has been either natural disaster or a refugee problem, the faces of people who are living in daily agony. I do not wish to sound pessimistic, but unless the conventional wisdoms of the Western world in terms of banking, finance and so on are seriously reviewed, and unless we find some way of developing the third world, and Africa in particular—and I restrict myself to those countries because they are the ones that I know—with their increasing populations and the heavy international pressures which they have from other countries in the world, if we do not help them, then others will do so. To hark back, this has been shown in the case of President Nyerere of Tanzania. He was assisted; he is still in a neutral position and he would take help from us if he could do so.

I fear that unless we break away from the old standards of financing and returns on capital invested in the short term, and unless we take a longer term view, the likelihood is that in certain countries disaster will ensue and that will lead to further upheavals and add to the terrifying situation which we see in terms of famine, suffering and hunger today.

6.7 p.m.

Lord Bottomley

My Lords, I follow a noble Viscount whose association with this honourable House spans 400 years. I have been here just four months. Nevertheless, my membership of another place entitles me to say that I think that I can judge a good speech when I hear one. The sentiments expressed by the noble Viscount appeal to me very much; but I am confident that I speak for all of your Lordships when I say that we congratulate him on his maiden speech and look forward to hearing from him again.

I should also like to congratulate my noble friend Lord Hatch. I know that the subject that he has raised today is very dear to his heart. We worked together for a very long time. Indeed, when I was a shadow Minister he was my adviser, and he was very courageous in many of the recommendations that he made. They were unpopular at that time, but they have now been generally accepted by the British public at large.

It has been said that trade follows the flag. I think it can be said that today trade follows aid. When I was Secretary for Overseas Trade, I had some responsibility for overseas aid as the Minister in charge of the Export Credit Guarantees Department. The responsibility for development aid was shared by the Treasury, the Foreign Office, the Commonwealth Relations Office, the Colonial Office, the Board of Trade and the Ministry of Agriculture, Fisheries and Food. This was an absurd situation, and the Government in 1961 decided to form a special department—the Department of Technical Cooperation. That department was responsible for coordinating, promoting and carrying out aid to overseas countries in the fields of economic development, administration and social services. The financial part of the aid administration was still controlled by all the other Government departments.

However, when the Labour Government came to power in 1964 they decided to put the whole of the economic aid programme under one Ministry—the Ministry of Overseas Development. Later I had the privilege of being the Minister. I very much regretted the break-up of that department and the transfer of power to the Foreign and Commonwealth Office. However, the fact that there is a Minister responsible for running the department gives some encouragement that the work will be carried on efficiently and enable resources to be provided to the developing countries.

The weakness of the department is the failure of the Government to provide the facilities for it to carry out the aid programme efficiently and effectively. The provision of aid is the most effective way of developing trade and assisting the third world. There are those who feel that overseas aid is wasting the taxpayer's money. That is not so. Countries to which aid is given have to find 80 per cent. of their investment from internal resources, so they have a vital interest in avoiding waste. It is in the interest of the donor and receiver not to discuss or promote schemes which are useless or grandiose in character.

The overseas aid programme provides Britain with an intimate knowledge of and influence in markets for the future, and gives us an opportunity to carry out research on a world-wide basis. Ultimately this means that people who have used British goods and find them to be of good quality and value, or who have been trained by British skilled craftsmen and technicians will seek to place orders with British firms in the future.

There are many ways of safeguarding the abuse of overseas aid. From my own experience I know that Ministers meet in order to agree the level of aid, what particular part of the country's development is to be financed, and to agree terms and schedules. They also make arrangements for the placing and supervising of contracts. Our own experts make an evaluation of the scheme to be undertaken. British aid is mainly concerned with agriculture, irrigation, electricity, communications, roads, ports and railways. Scientific experts, technical experts and teachers play their part in helping the developing countries to build up their economies. I like to feel that I played a part in extending this kind of practice. Too many people in the developing counties concentrate upon becoming white-collar workers. Wealth does not come from the efforts of academics and white-collar workers alone. The substantial production of wealth is created by skilled craftsmen and labourers.

When I was the Minister for Overseas Development, with the help of the Trades Union Congress. skilled craftsmen, foundry workers and shepherds concerned with hillside sheep farming were sent to Colombia to train and work alongside the local people. I was present to see the scheme started and a plaque was put up in the government department in Bogotá. I should like to think that this kind of work is still being done.

Overseas aid is not only morally right, but it is also very much in our self-interest. It lays the basis upon which trade develops, and I think we would all agree that is most important to Britain as a great trading nation. Aid helps to promote exports of plant and equipment, and ensures that Britain will continue to supply replacements and spares. This would be the equivalent of a large home market. Of this I am sure: if we do not increase British trade with the developing world in order to stimulate British production and purchasing power, we shall be the sufferers. In addition, no country which prides itself on its humanity and goodwill can leave the deprived people of this world to struggle upwards by themselves.

6.15 p.m.

Viscount Montgomery of Alamein

My Lords, I should also like to congratulate the noble Viscount, Lord Falkland, on his maiden speech. The noble Viscount is clearly an expert on African affairs, as was evidenced by the extremely sensitive nature of his remarks. I hope he will forgive me if I say that I perceive him as a relatively young member of a new party in this House—and indeed in the country—and as such I think that he will be in great demand as a speaker. We on this side certainly look forward to hearing him frequently in the future.

The noble Lord, Lord Hatch, has had his Motion down on the order paper for a long time. I congratulate him on his persistence. As he said, this is a very large subject and it is impossible for us to touch on more than certain aspects. I should like to take up one aspect which was mentioned by the noble Lord, Lord Bottomley; namely, the question of aid, but a rather particular part of aid—the aid and trade provisions, which is normally known as ATP. I must declare an interest in this as a director of an engineering group which has been the recipient of ATP in trading overseas.

ATP is sometimes seen to be a subsidy to United Kingdom exporters; but I put it to your Lordships that it is no such thing. It is a means of obtaining business for United Kingdom industry at a time when so many major contracts in the world are considered by developing countries on a government-to-government basis. As has already been mentioned, major contracts represent a transfer of resources, and ATP forms an important ingredient in the obtaining of this transfer and the successful conclusion thereof.

As was outlined by my noble friend Lord Bauer, in an ideal world it would be better if this system did not exist. It would indeed be better for the United Kingdom if greater discipline could be imposed internationally to phase out this system of support. But what is clearly essential is that the United Kingdom does not take any unilateral action which would result in leaving hard-pressed capital goods industries in a disadvantageous position against their competitors in Europe, Japan and elsewhere. In terms of employment, capital goods contracts give rise to follow-up orders, and these may continue for years and years.

The noble Lord, Lord Bottomley, raised the subject of ECGD. I was very glad that he mentioned the work of this department because it is also a concern of British industry that in times when so many countries in the developing world with which we are doing business are in difficulties, the ECGD would inevitably feel itself required and constrained to curtail its activities. This of course would be disastrous both for the countries concerned and for British industry. As has been mentioned, the third world needs not only trade and aid but investment, because investment ultimately leads to trade.

Perhaps I may refer briefly to a part of the world with which I have a great deal of experience. One of the main reasons why our trade with Latin America has diminished so catastrophically during the course of this century is because our investment has declined. I hope that Her Majesty's Government will consider favourably requests from the ECGD, because what is needed is some continuity of approach and the ECGD needs to be encouraged and strengthened if the objectives which have been outlined so cogently in this debate are to be achieved.

There is another aspect which has not been mentioned, and that is the training of people. One of the provisions under the aid programme is that in the transfer of resources, and in major capital goods contracts, people—operators, executives and others—may be trained to execute those works and also to operate the facilities which are thereby created. But the provisions under the current programme are rather rigid in that most of the training is required to take place in the United Kingdom if companies are to be eligible for support.

I put it to your Lordships that this is an impractical way to proceed, and may indeed not be in the best interests of the developing countries or, indeed, of the industries concerned. I should like to suggest that there ought to be much greater flexibility in this whole programme, so that the training can take place wherever it will be most effective and wherever it will be most appropriate in each individual case. I hope that the noble Lord the Minister will be prepared to give consideration to that matter.

In closing, may I pass from the specific to the general and mention some of the things we do in the multilateral field, because this debate has been largely about bilateral activities. In the international field we belong to a number of institutions, such as the World Bank, and I have in mind more particularly the Inter-American Development Bank, of which we are a non-regional member. The Inter-American Development Bank has recently formed a new subsidiary called the Inter-American Investment Corporation—the IIC. The object of this Inter-American Investment Corporation is to promote investments, as I referred to earlier, in private sector activities in Latin America, in exactly the same way as the International Finance Corporation does in other parts of the world. In other words, the Inter-American Investment Corporation will have exactly the same relationship to the Inter-American Development Bank as the IFC does to the World Bank.

This seems to me an activity in which Her Majesty's Government should take a specific interest, because it is directly in line with the thinking of the present Government. But what do we find? We find that when we were invited to join the IIC we declined to take up this suggestion. We are therefore, so to speak, members of a club which we are not actually using properly. As with any other club, if you want to get the best advantage from it you have to be active.

It is deplorable that we have declined this opportunity, because there have been times—and in your Lordships' House I have been pleading the case of Latin America for many years, sometimes not to much effect—when we have neglected the opportunity (and this is yet another instance) to show that we really care about what is going on in Latin America. Only in a small way do we have to participate, but it would at least be a manifestation of real interest in an area of the world which is going to be with us for a long time.

I hope that Her Majesty's Government will reconsider this matter. All the other non-regional members appear to have decided to join. Therefore, if we do not follow this initiative and take up the offer that has been made to us to join the Inter-American Investment Corporation we shall be once again the odd man out; it will be perceived by our friends in Latin America that we are not taking the interest which I believe we should be taking. I hope that this attitude, which of course is part and parcel of our whole relationship with the developing world—which is what has been spoken about by the noble Lord, Lord Hatch, and others—will change, and that we shall play an integral and positive part in this initiative.

6.25 p.m.

Lord Brockway

My Lords, there are two preliminary remarks which I feel I must make. The first is to thank my noble friend Lord Hatch of Lusby for introducing this debate, and to express appreciation of his formidable speech, which showed that this is not only an issue of the human welfare of people in the third world but one of interest to this country. Secondly, I feel I must congratulate the noble Viscount, Lord Falkland, on his maiden speech. I have had to make two maiden speeches, and I know how nervous I was on those occasions. The noble Viscount did not show any nerves at all. The House must have been impressed by, first, his easy delivery, and, secondly, his knowledge of this subject and the suggestions that he made. I hope that we shall hear him often, and that he will have a larger House to address, which he so strongly deserves.

Some Members of this House may remember the speech which the late Lord Ritchie-Calder made on this subject. He suddenly departed from his text and exclaimed, "Suppose a child collapsed in this House. All of us would become involved. Doctors from both sides would seek to save the child, and we would all be lost in anxiety when the child died". My Lords, in the third world 17 million children die every year from hunger and from medical neglect. Their deaths are just as real as would be the death of a child in our midst.

We have not reached a stage in the development of mankind when we can feel tragedies at a distance as we can when they occur nearby. Perhaps television will help us to realise that. But if we did, we could not live one day in ease knowing that 17 million children are dying unnecessarily in the world. We could hardly bear to eat a meal ourselves, and we should demand immediate action to end this tragedy in the world.

There are two ways in which the problem of hunger in the world can he met. The first is aid. Nations of the world are committed to contributing 0.7 per cent. of their output in aid. We do not all reach even that meagre demand. As Willy Brandt pointed out in his second report, aid is immediately necessary, particularly for the poorer nations of the world. In his first report Willy Brandt pointed out that a mere fraction of 1 per cent. of military expenditure in the world could end hunger in the poorest countries within a decade.

I agree entirely with the noble Viscount, Lord Montgomery of Alamein, that much more supervision is necessary of the way in which aid is contributed. This nation and the industrialised nations of Western Europe and America exploited for nearly 300 years the peoples of the third world to obtain cheap food and cheap raw materials. It is no compensation if we demand that aid shall be given to them far more generously than it is to end the hunger that is in their midst.

But aid is no solution. The real necessity is for a change in the economic relationships between the industrial powers and the third world. Those economic arrangements were made at Bretton Woods in 1944, before the nations of Africa and Asia had even their independence. They had no representatives there. The decisions, despite some benevolence due to the influence of Keynes, were all weighted on the side of the industrialised nations; and they have been made worse since.

This problem of the economic relationships between the industrialised nations and the third world has now been discussed at conferences, and particu larly at meetings of UNCTAD, for over 10 years. No solution has been reached, and little has been done. It is now many years since the Committee of Seventy, representing 70 third world countries, now supported by 130, proposed a new international economic order: an order in which there would be partnership between representatives of countries of the third world and of the industrialised powers; partnership in the great financial orders, the World Bank and the International Monetary Fund; partnership in the great international companies, the multilateral companies which are now so powerful in the third world; partnership in determining retail and wholesale charges—we pay 10 times more for the products of Africa than the Africans receive for producing them—and partnership even in the costly transport of goods from those countries to this country. That is a great, constructive proposal. It has been rejected by the representatives of this and other countries at UNCTAD year after year; but it is only by a new world economic order that we shall destroy the economic imperialism which still exists in the world—political imperialism in the sense of the independence of nations recognised, economic imperialism even stronger today than it was when those territories were under colonial rule. We must have a new world economic order if we are to meet the problem of hunger in the third world.

As I grow older it seems to me that we need a new approach in all our political parties. We need an approach which has the object of fulfilment of the possibilities for every child that is born, not only in our country but in the world; the opportunity of fulfilment physically, mentally and spiritually. If that was the objective of our political parties there would be two major problems in the world to which we would be giving our minds. First would be the ending of nuclear weapons and weapons of mass destruction which threaten the whole life of mankind. The second would be to end the hunger, with 30 million people dying every year of hunger and medical neglect, 17 million of them children, as has been said. We need a political approach which has that great human object as its first objective. I hope to live to see a Government which will realise those aims.

6.37 p.m.

Lord Auckland

My Lords, the House will never cease to be amazed at the fluency of the noble Lord, Lord Brockway, at his not inconsiderable age, on a subject which is so dear to his heart. I am quite sure that we all listened to his speech with the very greatest interest.

The House is indebted to the noble Lord, Lord Hatch of Lusby, for enabling us to debate a very widely drawn subject; a subject to which it is really quite impossible to do justice in a short debate of this kind. The noble Viscount, Lord Falkland, has given this House a maiden speech of outstanding calibre. He is clearly somebody who has much experience of this very important subject and who, we hope, will address your Lordships frequently.

Last night on BBC television in "Newsnight" there was a feature about the Upper Volta Delta and the intense poverty which exists there. One saw mothers and children dying of starvation. The tragedy of that programme was that there seemed to be very little in the way of a solution. It was admitted by a representative of the United Nations on the programme that one of the problems was that there, and possibly elsewhere, there are a number of organisations, charitable and otherwise, who are helping. But often there is such an escalation of help that communications become blocked and admirable organisations such as the Save the Children Fund, which has done sterling work out there, cannot on its own solve the problems. Those who watched the programme will have been impressed by the dreadful situation out there and, if they are realistic, will equally understand that it is not a problem which can be solved by any one government or any one country.

I should like to say a few words about the Caribbean which is the only part of the third world, to use that title, of which I have any knowledge at all, never myself having been to Africa. I visited Jamaica in 1978 for the Commonwealth Parliamentary Association Conference. It is a country of great interest, a country which has been very loyal. During the last war, many Jamaicans served with the Royal Air Force and elsewhere in the services. Under the premiership of Dr. Seaga, Jamaica has made considerable strides. The trade figures—because the Motion of the noble Lord, Lord Hatch, turns on trade—are interesting. Imports from the United Kingdom in 1982 were £56 million; exports to the United Kingdom were £92 million. Can my noble friend the Minister say whether the Government have had any plans to try to redress these figures? Bauxite is one of the main industries in Jamaica and much of it, as I understand, is Canadian-owned. I wonder whether my noble friend—and I have not given him notice of this question, so I do not expect an answer now—would agree that we could do much in the agricultural field, possibly by exporting more agricultural machinery (which we manufacture most efficiently) to Jamaica, because I believe it is a country which needs aid, not necessarily financial aid, but aid in kind, so that Cuba does not play too great a hand there.

We have a responsibility in this country to give aid to countries such as Jamaica and to some of the other Caribbean countries. St. Lucia is a country which is now a big tourist attraction. Industry there is very limited. I wonder whether our construction companies, for example, could be persuaded to do more in islands such as St. Lucia, which is developing all the time, and in the smaller islands such as Dominica, where British expertise on the technical side and on construction could be very useful. My Lords, how world poverty is going to be reduced is a question which few human beings could answer, certainly so far as this country acting unilaterally is concerned. I believe that the United Kingdom under successive Governments has an impressive record in overseas aid. This is not to say that we could not, or should not, do more; but it is important to remember that there are a number of people from the third world living and working in this country and, on the whole, living and working honourably and contributing much to this country. We have many domestic problems of our own in the housing field and the health services; so that when one talks about the British contribution unilaterally to overseas aid, I believe that this is something which has to be borne in mind.

Finally, when the noble Lord, Lord Seebohm, raised a very interesting debate in your Lordships' House not many months ago on world hunger, I made the point about whether the Commonwealth as a whole—and particularly the old Commonwealth with New Zealand, a country with which I have many associations, Australia and Canada—in collaboration with ourselves and with the EEC (which is going to be enlarged) could not do more together, at least to contribute towards a solution of a problem which certainly touches the conscience of us all, even though, if we are realistic, we have to recognise that it is not a problem which can be solved in the short term.

6.46 p.m.

Lord Molloy

My Lords, may I join the noble Lord, Lord Auckland, and others in congratulating my noble friend Lord Hatch of Lusby on introducing this matter this afternoon. Being fully seized and well aware of his enormous knowledge of this subject, I am bound to say that in doing so he compressed it into a most succinct and telling speech. Before I go any further, may I say to the Government Front Bench that there has been a remarkable number of contributions this afternoon and some very telling questions have been asked. I do hope that we get some sort of reply, even if not at the end of this debate, to those many telling points which such noble Lords as, for example, the noble Viscount, Lord Montgomery of Alamein, have raised, so that we may reflect on whether or not it is worth while having a debate of this kind or whether we should merely spend a couple of hours having a gentle chat where the words at the end produce no action. If the latter is the case, we have got to have a look at the constitution of this House. I should also like to congratulate the noble Viscount, Lord Falkland, on his speech.

I, too, know most African countries very well indeed, particularly Tanzania. I know Julius Nyerere. He is a man for whom I have the highest regard and the most massive sympathy. It would appear that there is no point at all in the developing world eschewing either Chinese communism or Russian communism and struggling to do your best on your own. It seems they get no help whatsoever from the Western world. This is a terrible, sad and absolutely myopic attitude for governments to adopt. What has happened is that Tanzania has not even been provided with the juice to stew in, despite its hopes that there would be support from the West.

I should like to underline again what the noble Viscount, Lord Montgomery of Alamein, has said with regard to our lack of interest in Latin America—except when, for some reason or other, we have to go to war; and that is particularly stupid and dangerous as well. Great Britain has one enviable reputation when it comes to aid. We are probably the only nation that does not try to attach any strings in the form of military alliances and so forth when we supply aid bilaterally. That, I believe, is something on which to congratulate the present Government and previous Governments in maintaining this particular attitude.

For the few minutes that I have at my disposal, I wish to dwell on the effect of aid on the United Kingdom economy. I find it desperate to have to realise that about 20 years ago—and I speak now in the currency parlance of the time—for every ten shillings' worth of aid that we gave we made a pound in return. I do not believe that that would be described as a grand Christian principle. It might have happened by accident, but it was bad and it was wrong. Slowly, that is changing. The present effect of our aid programmes can still help the United Kingdom economy, and it is important to regions within the United Kingdom; it is important to various industries; it is important to a number of firms; indeed, it is important to a number of individual companies.

I believe that there must be more examination to keep under review the recipient welfare effect, both in the United Kingdom and in the country to which it is going, and to keep firms, regions and the great industries informed of what is happening. I believe that the men and women, the company directors, who are involved in great organisations providing practical aid would really like to have some knowledge of what their contribution has meant. I should like some comment to be made on that later when the Minister winds up this debate.

When we inform developing countries that we intend to try and help them, we should make quite certain that there is some sort of liaison between the British firm and the nation we are going to help. This is vital, and it can improve relationships. If we were to increase aid to help ourselves alone, that would be bad; but, my Lords, it is not impossible for us to increase our aid to the developing world and at the same time help ourselves, with justifiable profits and increased employment. All these things together sow the seeds of goodwill.

I also believe that we should ensure that the fulfilling and financing of orders should be no less profitable for individual firms than is their normal business. To do otherwise would be unjust and unfair to individual firms. I believe that aid must go to the right place, that it would help firms to know where their work is going to, and that we should make sure that normal commercial arrangements for liaison are established when aid is being worked out.

The benefits of British aid are bilateral, except in this particular instance—and it is beginning to happen and I should like some comment from the Front Bench on this—where British aid to the developing world is not confined to British companies employing Britons. The Crown Agents claim that their role also makes it possible to employ foreign firms to apply aid. A purist will say that it does not matter from whom the aid comes as long as it goes where it is needed. I share that view, but I do not believe it is an insuperable problem. If the British, via their Government, want to give aid somewhere in this world, I am quite sure that we can do it, with British endeavour and British managerial expertise. The argument is this: if we cannot, then British managerial efficiency is at fault. That question must be faced fairly and squarely.

Most British bilateral aid still goes to our Commonwealth. This long association has been a distinct advantage both to the recipients and to the British-owned companies, as well as to the British economy. We need to widen that now to include other nations as well. Our goods, when compared with other manufactures, have to be examined to ensure that they are in good order before they leave.

Perhaps it is not generally understood, when we see on television the appalling famines in some parts of Africa, that in point of fact foodstuffs and textiles are not exported as part of the aid programme. I would ask the Government if we could change this, simply to provide immediate help to starving people and those who are suffering a great and terrible plight. It would appear that we have no problem in providing mechanical and electrical engineering, metal manufactures or steel vehicles. I think the British are to be congratulated on the fact that we have developed a programme of refurbishing second-hand machinery: when firms who need a very high standard of particular machinery in Great Britain have to renew it, they do not discard the old machinery as scrap; they refurbish it so that it can be put to use for some years in some poverty-stricken part of the third world. That is a typical instance of British initiative. On all these aspects I would ask if the word can get through to the Crown Agents, who play a vital part in this aid programme, to keep our firms and industries in touch at all times in assessing where priorities lie.

I should like to make one particular point here with regard to the voluntary sector. I have for a great part of my life been involved to a degree in the voluntary sector of aid for the starving third world, and there is one remarkable instance which I should like to mention in this House this afternoon. That is the work that has been done by a countryman of mine, Mr. Frank Harcourt-Munning, CBE, who was the founder of War on Want. This man has a genius for raising money, not for himself but to relieve suffering all over the world. When people knew that they had been helped because of this Briton, that not only made the life of Frank Harcourt-Munning very worthwhile—and I hope he will go on for many years; it also brought honour to our nation. He did one other thing which I should like the Government to consider. Within a matter of weeks, he could raise money and aid in the form of goods, food, all sorts of things, for any disaster that occurred in this world. I know Frank Harcourt-Munning would have been the first to acknowledge that, although he might have given the lead, the response came from the British people. That is to our everlasting credit.

In conclusion, as my time is running out, I should like to say I hope that our country under our Government can release itself from the hypnosis of the nuclear holocaust. We are spending multimillions; we are joining the lemming nations on the way to self-destruction; we are taxing our people to the hilt to buy and house these absurd weapons. I understand that we need defence, but I would have thought that we could bend our endeavours so that we could at least give a lead to mankind to accept that this is a terrible situation. We have brilliant minds which can produce nuclear weapons which are so wonderful that they will not destroy the buildings; they will destroy only the human beings inside! That is the sort of thing we have to try and wrench ourselves away from. I hope that it will be my nation, with its full responsibility for the defence of our island, which will nevertheless show mankind the need to help the third world and release ourselves from the hypnosis of the nuclear holocaust. I think that can be overcome by world acceptance—led by Great Britain—of pity, compassion and understanding.

My Lords, the history of Great Britain and the record of our country is supreme. It has a massive qualification for having evolved an Empire into a Commonwealth. We all face a common crisis which needs common world co-operation. I hope that my country will not only play its part in bilateral aid but give a lead to the world in returning to sanity, to ease suffering throughout the whole of mankind so that we can lift up our heads with pride and say that we in this nation of ours have, as usual, played our full part.

7 p.m.

Lord Pitt of Hampstead

My Lords, I, too, must begin by thanking my noble friend Lord Hatch of Lusby for giving us the opportunity for this debate. I must apologise to him for not being in my place when he started to speak. He told me he expected that—he knows I am always late! I can assure him that I shall be reading his speech with my usual interest, because what I heard was extremely good.

I should also like to congratulate the noble Viscount, Lord Falkland, on his very able maiden speech. He not only demonstrated his knowledge of Africa but also his sympathy with the needs of the people and their ways of trying to deal with their problems. He showed that he had a head and a heart, and that combination is always welcome. I am also grateful to him for drawing to your Lordships' attention the plight of the people and also our failures in dealing with the East African nations after independence. As many or your Lordships know, I have been trying for quite some time to get the Government to understand that in relation to the Caribbean, and perhaps the noble Viscount and I can get together and see whether we can pressurise the Government into understanding that this country has a part to play, in view of its past history, in relation to all these territories.

I am grateful to the noble Lord, Lord Bauer, for his very impressive historical description of the value of free trade and for his vigorous condemnation of protectionism. There is a great deal of substance in what he said. The fact remains, however, that this country has 3½ million people unemployed and a great deal of spare capacity, at the same time as millions of people in the developing world are living at the poverty level or even below it, as has been described by the noble Viscount, Lord Falkland. They need the goods that this country can produce; yet our exports to the non-oil-exporting developing countries have declined in the last decade from 15 per cent. to 11 per cent. Bridging that gap is of the utmost importance both to us and to the developing countries. To buy British goods, these countries need foreign exchange. They can get it by selling goods to us, by borrowing or by being provided with the foreign exchange.

Most of these countries rely for their foreign exchange on the sale of primary products. Unfortunately, the prices of these commodities fluctuate considerably, and recently they have been at a very low level—an even lower level than they were in the 1930s. This means that these countries are not in a position to pay for British goods through the export of their commodities. My noble friend Lord Hatch instanced Zambia; and the illustration he gave of Zambia applies to lots of other third world developing countries.

Processing these commodities would help—but what happens? The position is that manufacturers have to overcome great tariff and non-tariff barriers: hence my welcome to the speech of the noble Lord, Lord Bauer. It is, of course, more often non-tariff barriers than tariff barriers that they face. The first essential, therefore, is action to stabilise commodity prices at remunerative levels, and this is something to which Her Majesty's Government should give vigorous support. The Common Fund, for example, is essential to enable this to take place, and the resources of the fund need to be adequate for this purpose. It should encourage and finance effective international commodity agreements. I am not sure whether the noble Lord, Lord Bauer, would agree with me about that, but I think that in the circumstances of the world in which we live they are necessary. They should also facilitate storage, processing, marketing, productive improvement and diversification, which is absolutely essential. At present, the few international commodity agreements which exist are in the doldrums. Efforts should be made to revive them and to facilitate the coming into being of many more.

There should also be action to remove the tariff and non-tariff barriers which at present exist against the processed goods of developing countries. A new Lomé Convention is at present being negotiated. Every effort should be made during these negotiations to lessen the burden of the rules of origin and to facilitate and increase the amount and value of processed goods coming from the EEC, the Community. At the same time, as my noble friend Lord Hatch has already mentioned, the funds available for Stabex should be increased and the products it covers should be extended. The British Government are taking part in the negotiations: therefore they can play a part in ensuring that these two things are dealt with: first, that the rules of origin are made less burdensome, and, secondly, that Stabex is increased not only in regard to the amount of funds available for it but also in regard to the range of products it covers. The British Government can do something about that.

Action is also needed to increase compensatory financial facilities available through the international fund. Here again, Her Majesty's Government can do something about that, or at least they can use their weight to try and get something done about it. I think that is perhaps putting too strong a burden on them, but I am not reducing the burden that I place on them in the EEC negotiations. In the case of the IMF, I agree that is probably a little more difficult.

In the past decade, the developing countries have been making active use of the commercial banks and, as a result, they are having loan problems. They have burdens that are not only burdensome to themselves but which also are endangering the world banking system. I am sure we are all grateful to my noble friend Lord Lever of Manchester for undertaking the chairmanship of a Commonwealth study group on this matter, and we wish him every success. It was a Commonwealth study group which gave the "push" to the establishment of a Common Fund for commodities, and we hope that my noble friend's study group will enable the Commonwealth to give a lead in handling this vexed question. But whatever happens about that, there is need to increase the funds available through the World Bank, and in particular through the International Development Agency. As we know, the USA is not prepared to play its proper role. I am glad that Her Majesty's Government are prepared to play their proper role. I give the Government full marks for that.

The International Monetary Fund is also a body to which countries go when they have a balance of payments crisis. A good deal of complaint has been voiced about the conditionality which is always imposed by the IMF. The Government have some influence over the IMF. I hope that they will try to bring about an improvement in the attitude of the IMF towards some of these developing countries, even if all that they can do is to get the IMF to slow down the rate at which they expect developing countries to conform—in other words, by extending the term to five years instead of one year, or two, which is the position at the moment.

British aid, not only aid through the international agencies but bilateral aid, is still important. Before I came to the House I read the ODA pamphlet which has been sent out to exporters. It is called Britain's Aid Programme: Opportunities for Exporters. This pamphlet says that British aid helps to foster the growth of world trade, which is vital to the developing countries and critically important for Britain. Such grants and loans offer considerable opportunities to British companies to export both goods and services. I hope that this will be fully endorsed on all sides. It is for British manufacturers to win and to hold these markets. Aid, whether it be bilateral or multilateral, provides that opportunity.

Finally, may I refer to the point which was raised by the noble Lord, Lord Hatch of Lusby; namely, development education. We cannot pursue the right policy unless we carry the people with us, and we cannot carry the people with us unless they understand the reason behind that policy. Therefore, development education is of the utmost importance. It is important, for example, for people to understand that aid is not mere charity but investment.

7.13 p.m.

Lord Walston

My Lords, first I have the very pleasant though very difficult duty of congratulating my noble friend Lord Falkland on his maiden speech. The reasons why it is pleasant are obvious. It was a magnificent speech, delivered with delightful informality and with a very great depth not only of knowledge but of feeling. It is difficult because other noble Lords who have already spoken have taken any words which I might have used out of my mouth. This is an indication of the value which this House places upon the speech to which we have just listened. In fact, the congratulations ought to be directed rather more towards my own party for having acquired such a fine new colleague than towards the noble Viscount, Lord Falkland. My thanks also are due to the noble Lord, Lord Hatch of Lusby, both for having given us an opportunity to speak about this very important subject and for the masterly way in which he introduced it. It is very difficult to confine one's remarks to the relatively short time which is allowed to us and to do justice to the subject. I shall attempt to do so but it will entail a certain amount of shorthand and will make it impossible to develop, as I should like to, some of the arguments.

The noble Lord, Lord Bauer, will not be surprised to hear that although I agree with him that impediments to trade of all kinds should be removed, I am in complete disagreement with him over his suggestion that that is all that needs to be done. At the present stage in world affairs I believe that the greatest impediment to the third world's development is the burden of debt. First, the debt itself is far too high; too much money has been borrowed. Secondly, interest rates are too high and are liable to rise still higher. Thirdly, as other noble Lords have pointed out, the price of commodities is too low.

We are very much in danger—this warning was given by the noble Lord, Lord Lever of Manchester, to whom reference has already been made—of creating in the third world, which will then spread to the rest of the world, the situation which caused such havoc after the first world war, starting in Germany. If the crisis of credit is allowed to continue in the way that it is showing signs of doing, the implications will be far more far-reaching than simply affecting the development of the third world. For instance, there was the statement in a Sunday newspaper, which your Lordships may have noticed, that the rise in interest rates during the past year has added between 7 billion and 8 billion dollars to the cost simply of servicing the debts of the third world. That is a substantial amount for any borrower, even a rich borrower, to have to pay. That the borrowers themselves are on the verge of poverty is a clear indication that any development in the present circumstances is out of the question.

Turning to commodity prices, may I give just a few figures. I do not wish to weary your Lordships with too many figures but they illustrate what has happened as a result of the decline in commodity prices, even though some of them are beginning to recover slightly. In 1975, a tonne of copper was able to buy 115 barrels of oil. In December 1983 it could buy only 49 barrels. In 1975, a tonne of coffee bought 289 barrels of oil. In December 1983 it bought 104. In 1975, cotton bought 119 barrels of oil. In December 1983 it bought 60. And in 1975, sugar bought 42 barrels of oil, whereas in December 1983 it bought only six. That is an indication of the decline in the purchasing power of those countries which depend to an enormous extent on one or other of those commodities. The same figures could be repeated for the great majority of primary commodities produced by third world countries.

When one looks, which in some ways is even more revealing, at the servicing of their debts, may I take different commodities. Whereas in 1975 a tonne of lead was able to service a debt amounting to 6,000 dollars, it could do so only on 4,000 dollars-worth in 1983. Coffee could service 45,000 dollars-worth of debt in 1975, but only 30,000 dollars-worth in 1983. Maize could service about 1,800 dollars-worth of debt in 1975 but only 1,200 dollars-worth in 1983. In other words, simply in order to service their debts, the countries relying upon these commodities would have to produce, or sell, 50 per cent. more of those commodities in 1983 than they produced or sold in 1975. Those are, one can say, the macro-economic effects. It is no wonder that countries which are affected in this way are unable to buy the commodities that they want, many of which would come from our factories.

If I may, I should like to be very personal and come down to the level of micro-economics. As some of your Lordships may know, I have an interest—I am glad to say not a very direct one any longer—in a plantation in the West Indies. For a variety of reasons—some of them man-made and some of them the work of God—that plantation has been going through some very difficult periods over the past four or five years. During that time, it has contracted a substantial overdraft with the bank. I am of course grateful to the bank for allowing that facility; but that debt has to be serviced at a rate of about 14 per cent.

Now the situation is rather better. Prices are higher and production is higher; but all the surplus income that comes into the plantation is spent on servicing the debt that is due to the bank. Another tractor is needed, more fertilizer is needed, repairs to buildings are needed, development of the unused land should be undertaken, trucks are needed to ship the bananas—but there is no money for them because of the burden of the debt which has been contracted. That, as I said, is a somewhat minute and personal example; but in some ways it is more telling than the examples involving global figures.

What are the answers? I believe that the first action which should be taken—and which should have been taken a long time ago—is that the debt itself should be reduced. The only way it can be reduced is for a great number of the items on which that money has been spent to be paid for out of straight aid as opposed to loans. I am speaking of those items which do not bring any immediate cash returns, such as roads, infrastructures, schools and hospitals. If countries were relieved of the burden of debt on such items, they would be in a much stronger position to cope with the present situation and continue their development.

Secondly, having reduced the debt, fixed interest loans should be converted into a form of equity shareholding so that if there are bad times, the lender suffers; but when there are good times, the lender will profit from them. It will also force the lender—whether that lender be a private bank, a private individual, a world bank or whatever—to take far more interest in the actual management of the operation than is normally the case at present. As an example, I suggest that your Lordships examine the record of the Commonwealth Development Corporation, which has pioneered that type of equity involvement.

The third and rather more difficult object to achieve—but it is one of very great significance mentioned by the noble Lord, Lord Hatch, and others—is the stabilisation of commodity prices. It is impossible for any business concern, industrial concern, private individual or country to plan a future economy on whatever scale it may be with no idea whatsoever of what will be obtained from the major sources of income—and when we know from experience that prices may vary by as much as 100 per cent. within the period of just a few months. Stabilisation in some form or another is the right answer. There is no time now to go into the different methods of achieving it; but those of your Lordships who have paid any attention to this matter will know that there is a series of ways in which it can be done. I certainly support the noble Lord, Lord Pitt of Hampstead, in his plea to Her Majesty's Government to take a lead in the EEC negotiations on the Lomé Convention in order to bring this about.

7.24 p.m.

Lord Bruce of Donington

My Lords, the House will be very grateful to the noble Lord, Lord Hatch of Lusby, for having taken this opportunity to raise such an important matter. It is good to feel, bearing in mind my noble friend's long and distinguished work in dealing with the whole question of aid to developing countries and the ways of affording help to them, that they are now beginning to receive full recognition in the United Kingdom. My noble friend speaks on these matters with very great knowledge and experience, and also (as noble Lords who have listened to him would probably agree) with deep feeling.

On my own behalf and on behalf of my noble friends, I should like to extend my felicitations to the noble Viscount, Lord Falkland, on his maiden speech. I cannot add very much to the extremely justifiable tribute paid to the noble Viscount in the speeches of those noble Lords who have preceded me, but I can add one appreciation of my own. It is that the noble Viscount spoke to the House with sincerity. He meant what he said. No matter what the controversial content of a speech may be, your Lordships always appreciate it when a man speaks to your Lordships from his heart and from his convictions. I sincerely hope that we shall have many more opportunities of listening to the noble Viscount.

This debate is very timely. It occurs about a fortnight before the economic summit which is due to take place in this country. As I listened to the speeches of your Lordships, I wondered what kind of message we would be able to send to those who will be participating in that conference. There is a degree of urgency which was brought home to us very poignantly by my noble friend Lord Brockway when he gave the figures of the children who are due to die short of their normal expectation of life within the year. On the basis of the figures he gave us, no fewer than 4,800 children will have died during the course of this debate. Not all these deaths can possibly be due to matters within our control or within the control of the governments of the world. Many of them will be due to natural disasters. A great tribute has been paid, and justifiably so, to those voluntary organisations and governments which have extended assistance as much as they have been able.

The fact remains that there is unnecessary suffering in the world, and unnecessary poverty. The noble Lord, Lord Pitt, put it very well when he reminded the House of the incongruity of the position in which there are more than 3.5 million unemployed people in the country who are quite willing to work and produce, and in other parts of the world millions of people who would be only too glad to have the products of their labours.

This brings us face to face with a matter we do not often like to think about. It brings us face to face with the idea that the problems of the developing countries, and those of our own country and of other richer countries, are due to some phenomenon which has come down supernaturally in the form of a recession, as though it were something quite extraordinary and outside the control of man. The people who think that are very wide of the mark indeed. The recession from which the world is suffering and which is having such an impact, not only on ourselves but also on the developing and less-developed countries of the world, is man-made. It is precisely because we are not capable as yet—and, if we were, do not have the will—of so organising ourselves in society that these man-made catastrophes, or man-tolerated catastrophes, in the name of the free play of market forces occur from time to time.

The House has listened to many important contributions as to the steps that governments ought to take and made suggestions to our own Government. My noble friend Lord Molloy made many, and so indeed did my noble friend Lord Bottomley, who has had much experience in the overseas aid programme. But there is a time bomb ticking under the civilisation of the West as we know it now. It was the noble Lord, Lord Walston, if I may say so, who raised this very important point in emphasis of what my noble friend Lord Hatch of Lusby said in opening the debate. Although the noble Lord opposite in the course of winding up may give us many figures showing what aid has been given over the past few years under the present Administration, and what aid is projected in the future, and may enlarge upon it and praise it with some justification, the fact is that the aid that is being given with one hand is rapidly being taken away by the international banking and financial community.

As the noble Lord would have gone on to say, had he had the time, a 1 per cent. increase in interest rates costs the South American countries two and a half billion dollars. If one takes all the other developing countries into account, the total cost to them to off-set against whatever direct aid they receive is in the region of £3 billion or £4 billion—and that in a situation where many countries are faced with such an interest burden that it exceeds their net exports. In other words, as the interest rate goes up and as the debt continues, so exactly does their propensity to buy from the developed countries, in particular the United Kingdom, go down.

It is no good, if I may say in the most moderate terms of which I am capable, the Government saying, "Yes, we realise that there is trouble and we are trying the best we can within our financial constraints and within our cash limits to do what we can", and claiming credit for that when they are themselves, at the highest governmental level in the person of the Prime Minister, who is the chairman of the Cabinet Committee on all economic matters, giving international support to policies largely determined by the United States, and ruled by the United States as the leading financial power, which vitiate most of the financial and other aid which is given to the developing countries.

I said that there is a time bomb ticking. I shall elaborate on that. Your Lordships know perfectly well that the American banking system is under some severe strain at the moment, and seven and a half billion dollars has had to be put into the Continental Illinois bank. They will also know that moves are already afoot among certain of the debtor countries to act in concert and to present the international banking system with a threat of default. If that default actually takes place on any scale the threat to the international banking system would be such as to produce a situation very much akin—I address myself particularly to the noble Lord, Lord Bauer—to that arising from the collapse of the Credit-Anstalt before the war, with all the consequences that occurred in Germany afterwards.

That is the time bomb and that is the situation which has to be dealt with. It is really no good people saying, "Well, we have to ride out this recession". We have to take action now in order to ensure that the basic difficulties of the developing countries, and indeed our own basic difficulties, are taken in hand. It is no good, however nostalgic people might be about the old days—when the advantages of free play in the market operated under vastly different technical conditions from those of today—to say that there is nothing we can do except ride it out. It is no good saying, "Well, we in Britain are already recovering and the world is recovering from the recession".

What does that really mean? It means recovery in the sense that the rewards accruing to capital throughout the world are recovering. It does not mean that that recovery spreads to the ordinary common people of our country and the ordinary common people of the world. Recovery in this country, for some paradoxical reason which one could elaborate on at greater length, has meant an increase in unemployment. There is no recovery among the under-privileged in the United Kingdom. There is no recovery for the underprivileged in the other countries of the world.

The noble Lord, Lord Bauer, gave some hint of the possible solution to the problem. I must say I found myself in unaccustomed agreement with him when he referred to the role that the European Community had played in this, the degree of protectionism and the adverse effect that it had upon the developing countries, because it gave me a clue for my proposal as to the best way we should proceed. It is no good the Ministers' meeting, when it takes place in a fortnight's time, coming out with a lot of pious platitudes which are quite meaningless to everyone. They must address themselves to the main problem, which is the reconstruction of the banking system—the system of credit throughout the world—very much on the lines put forward by the noble Lord, Lord Walston.

The other action it should take, since our own Prime Minister will be there, is to abandon the basic concept of being tied by the navel to the European Community. What we have to do is once again cooperate with our Commonwealth; once again have a co-ordinated and planned effort with our Commonwealth for planned trade, planned aid, planned educational facilities, and so on. If we proceed on those lines, which are positive and which give a constructive prospect to mankind, we may be able to avoid the catastrophe which I fear otherwise awaits us.

7.39 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)

My Lords, I very much welcome the debate which the noble Lord, Lord Hatch, has enabled us to have today because it provides an opportunity to outline the major contribution which the United Kingdom is making to stimulate trade with developing countries, and because I should like to start by saying that the Government most certainly believe in the mutual importance of that trade. Indeed, I agree with the noble Lord, Lord Bruce, who said in his speech that the Government's attitude on the subjects raised in this important debate will be important to the heads of state at the London summit in the near future.

Before I go any further, may I also welcome the maiden speech of the noble Viscount, Lord Falkland. He spoke without needing to refer to notes and with personal knowledge of the subject. Those are both attributes which appeal particularly to your Lordships' House. If I may say so, the noble Viscount's speech gives plenty of food for thought, as indeed do all the other speeches which have been made by your Lordships today. I join with other speakers this afternoon in hoping that the noble Viscount will be taking part in our debates frequently in the near future.

A great deal has been said by the noble Lord, Lord Bruce—and I shall not follow him, if he will forgive me, at all closely—and others about the problems of the recession and the problems that we have of external indebtedness. All that I would say is that the United Kingdom has played a positive role in international efforts to deal with these debt problems. We certainly sympathise with the effects of higher interest rates upon the position of certain countries. We shall continue to give the help that we have been giving to the international efforts. We shall continue also through debt rescheduling, whenever that is possible, and through the international financial institutions, to do all that we can.

If I may resort to only one political point this evening, I would just say to the general criticisms of Her Majesty's Government's policies which the noble Lord, Lord Hatch, delivered during his speech, that if we had not established over the past five years a soundly based economy in this country, following the appalling period of recession from which all countries are only just beginning to emerge, we should not have been able to give the effective and energetic support to the international financial institutions, and particularly to the IMF, which Her Majesty's Government have been able to do in recent years.

I venture to start by mentioning those matters because economic recovery is, I suggest, the most important influence on developing country trade. Of course, it is a relationship which works both ways. After all, trade generates economic development. Many of your Lordships who have much more experience of that than I shall ever have will be the first to tell me that. Indeed, it was my noble friend Lord Bauer who made the point that increased exports earn the currency needed to buy more imports, which are required for development. There are other gains from increased trade—intangible but none the less real. Again, my noble friend, I think, said that trade brings with it not only new products but also such things as new ideas, new methods of training and of course new technology. Trade is a two-way relationship from which we all stand to gain.

The Government believe that, despite the difficulties, the open trading system has been a major achievement of the post-war period. We are certainly committed to doing everything that we can to preserve and improve it. Since 1945 world trade has increased eight-fold against an increase of only half that size in world output. If I may say so, the United Kingdom is a country which has one of the most export-oriented economies in the world, with exports of our goods and services accounting for about 30 per cent. of our gross domestic product; and of course we are dependent on open markets for those exports. But, in return, about 80 per cent. of our visible imports come in duty free. Only 7 percent. are subject to non-tariff restraints.

Having said that, of course on trade policy generally we work within the European Community. It is the Community which negotiates as one body with third countries. Although sometimes we in this country feel that that is a constraint on what we would wish to do, it is also a big opportunity, because access to the Community market is vital to many developing countries.

Although the open trading system has brought advantages, we have to recognise that recession has increased protectionist pressure and created some serious problems of adjustment. Perhaps the classic example of that is textiles. The Multi-Fibre Arrangement covering textile products is the only general derogation—I think that that needs to be said: it is the only general derogation—from the free-trade principles of the GATT, and the MFA is a recognition of the really vast structural difficulties faced by the textile industries. Despite the protection of the MFA, 250,000 United Kingdom jobs have been lost in textiles since 1980. Even so, the Community, with ourselves in support, has tried to take account of the textile interests of the poorest developing countries in renegotiating the MFA.

I venture to say a word or two about the general picture. No amount of specific help to developing countries will be really effective unless the overall economic and trade environment is right. Nevertheless, as members of the Community, we have taken a number of very significant measures specifically to help the trade of developing countries. I come here more closely to what your Lordships have been saying.

The first of these is the general scheme of preferences. As your Lordships will know, the Community scheme covers all industrial products which are allowed in duty free and a large range of agricultural products at preferential margins. It is true that there are some restrictions on duty free imports of the most competitive industrial products from the advanced developing countries. But I come clean about this. This has been done quite deliberately by the Community in order to spread benefits to the poorer countries. Indeed, under the GSP now product coverage is almost total for products from the very poorest countries, with scarcely any restrictions.

The second major element (about which the noble Lord, Lord Pitt, and indeed the noble Lord, Lord Walston, both spoke) is the Lomé Convention, under which of course 99 per cent. of exports from 64 African, Caribbean and Pacific states enter the Community free of quantitative restrictions and customs duty. It is a system which I am so happy to follow the noble Lord, Lord Molloy, in saying links us the more closely with the Commonwealth countries overseas. Of course, a unique feature of Lomé is the stabilisation of export earnings, about which both Lord Pitt and Lord Walston spoke. This of course is under negotiation now, for the Lomé Convention is currently being renegotiated. During these negotiations we have noted with very great interest the views expressed in the most interesting report entitled, A Successor to the Second Lomé, Convention, from the Select Committee on the European Communities of your Lordships' House.

My noble friend Lord Bauer had some harsh words for the United Kingdom's influence on European Community policies. But if I may just say this to my noble friend, it was Her Majesty's Government who advocated the abolition of the few remaining tariffs on agricultual imports from the ACP countries. It is Her Majesty's Government who have also presented detailed proposals to the other Community member states on how the origin rules of the present convention could be relaxed and simplified. I hope that that picks up the point which the noble Lord, Lord Pitt, also made on that important subject.

May I, in only a sentence or two, mention with some pride the work of the United Kingdom Trade Agency (UKTA) which is almost entirely financed through our aid programme and which helps developing countries to market their products here by providing information, organising trade missions and indeed training commercial attachés. It is a splendid organisation of which we are very proud. We also support community trade promotion and United Nations efforts aimed at the markets of the whole developed world through the International Trade Centre in Geneva. About one-sixth of the experts used by the ITC are British, by far the biggest national group.

There is the point which was made by my noble friend Lord Montgomery, which is that what is needed overseas in third world countries is investment. Well, this is a Government which has concentrated increasingly on stimulating private direct investment overseas. It is we who sponsored a draft resolution at UNCTAD VI aimed at encouraging both developed and developing countries to improve the climate for investment. We are also pressing for investment protection to be covered in the new Lomé Convention. In the United Kingdom of course we have a number of schemes to help would-be investors overseas. As the noble Lord, Lord Walston, mentioned, of course we support the Commonwealth Development Corporation who do such splendid work assisting developing countries in the development of their economies.

I hesitate to say that I make only one political point. Perhaps I had better make another one. It is this Government who have abolished exchange controls about which I have not exactly heard cries of joy from the other side of the House. Perhaps we can come together again in the House by saying that it is the Government, with I am sure all-party support, which are active in the negotiation of bilateral investment protection agreements. But I must just add the point that always much depends in these matters—does it not?—on the economic and political conditions in the host country. It is a message which we try to get over at every opportunity.

The noble Lord, Lord Molloy, made the point in his speech that exporting firms need advice and guidance, and of course many developing countries are important markets for United Kingdom exports. Indeed, about 20 per cent. of our exports go to those countries. I think the answer there is the British Overseas Trade Board which, as the noble Lord will know, offers a wide range of services to United Kingdom exporters, including support for trade missions, overseas trade shows and for market research and also market entry.

May I come quickly to the subject of aid and trade. The noble Lord, Lord Bottomley, spoke from his great experience of this matter and the enormous amount that he has done in his career for it. The noble Lord will know but may not wholly support the fact that in 1980 the Government did a review and concluded that commercial, industrial and political aspects should be given greater weight alongside developmental considerations. But when I say that, let us remember that British exports benefit from the aid programme in a number of ways. Just to give a figure or two, in 1983 some 75 per cent. of our bilateral aid of £604 million was tied to the procurement of British goods and services. In addition, we reckon that we are winning export business in multilateral aid programmes broadly equivalent to our contribution of some £417 million.

My noble friend Lord Montgomery spoke of the small proportion of the bilateral aid programme allocated to the aid and trade provision in order to support United Kingdom bids for developmentally sound projects in competition with overseas competitors. Because of lack of time I shall write to my noble friend on that point and simply say now that since 1977, when ATP was started, grants of some £264 million have resulted in additional British exports in excess of £1,298 million.

A very important point was raised by the noble Lord, Lord Pitt, and the noble Lord, Lord Walston, and it was in the general context, too, of what the noble Lord, Lord Hatch, was saying about commodities, specificially on the subject of stock piles. It is doubtful whether national stock piles would help commodity prices in the long run. It is really better to look at each case on its merits multilaterally, of course on occasion there may be a need for commodity agreements with buffer stock provisions. Here let us just bear in mind that it is the United Kingdom which has signed and ratified the Common Fund and pledged 10 million United States dollars to the second account of that fund, but as yet not enough countries have ratified in order to bring the fund into force.

My Lords, I am sorry but I think I am beaten by the clock and I must allow the noble Lord a moment to wind-up the debate. May I content myself with saying that I know there are questions to which I have not had the time to reply but I promise I will reply in writing. Although perhaps not agreeing with everything that has been said, the Government are nonetheless extremely grateful for this very important debate, and I now hope the noble Lord who moved it will bring it to a close.

Lord Hatch of Lusby

My Lords, I am grateful to the noble Lord for giving me a minute or so at the end of our debate. I should like to thank each of the speakers individually and mention his contribution, but obviously there is not time for that. But I thank everybody who has taken part in this debate. I am sure everyone will understand if I particularly single out the noble Viscount, Lord Falkland, who I am honoured to have make his maiden speech in a debate of this kind. We not only hope to hear him again but we shall expect to hear him again on this subject.

Before I withdraw the Motion, I would just say that I must answer the central point on exchange control that was made by the noble Lord the Minister. Of course we do not congratulate the Government on removing exchange control because the removal of exchange control has allowed many funds to leave this country where they should have been invested. Very few of them have gone to the developing world. Most of them have been attracted either to places like Florida and the Bahamas or to the industrialised world, to our competitiors. So as far as the removal of exchange control is concerned it has not—

The Deputy Speaker (Earl Cathcart)

My Lords, the time allotted for this debate has now elapsed. Does the noble Lord wish to withdraw his Motion?

Lord Hatch of Lusby

With the leave of the House I beg leave to withdraw this Motion.

Motion for Papers, by leave, withdrawn.