§ 3.2 p.m.
§ Baroness Young rose to call attention to the Uruguay Round of GATT; and to move for Papers.
§ The noble Baroness said: My Lords, I am introducing the debate this afternoon because I believe that the outcome of the Uruguay Round of the GATT is the most important issue facing the world today. I am delighted that a number of my noble friends taking part in the debate were themselves at one time engaged in previous GATT negotiations. I look forward greatly to hearing from them. I am also delighted that the noble Lord, Lord Williams of Elvel, is speaking for the Opposition. I know of his interest because he introduced a short debate on the same subject a year ago, and I believe for the same reason.
§ The GATT Round is a very technical subject but the broad issues raised are those affecting both the industrialised countries and the developing world. They will have an impact on the lives of everyone. It has been said that success in the negotiations could add another 4,000 billion dollars to the value of world trade by the end of the century. In so doing it would create millions of jobs in industrialised countries, help consumers by lowering prices and enable millions in the developing world to escape from grinding poverty.
§ For Britain the outcome is particularly important. We export about 25 per cent. of all that we produce. Therefore, we depend more than most countries on the openness of the world trading system. Conversely, failure would mean not merely recession but slump. I say that because it is now recognised that the great depression of the 1930s was caused not so much by the Wall Street crash but by the steps which the industrialised countries took to protect their industries. As a result world trade in manufactures fell by 40 per cent.—an incredible amount —with the consequence that millions became unemployed.
§ A lesson was learnt. Towards the end of the war the United Kingdom, the United States and other countries met to find a better way of managing world trade. They envisaged a rule-based rather than a power-based international economic system. There was to be a framework of trade rules which would ensure non-discrimination and limit tariff barriers.
§ From that meeting emerged the General Agreement on Tariffs and Trade. It was finally agreed in 1948. The trade policies of member countries were to have four features: liberalism, transparency, stability and non-discrimination. The success of the system soon became evident. Trade barriers were reduced. There was an enormous expansion of international trade and living standards rose. Indeed, the 1950s and 1960s have been described as the golden years of GATT.
§ One immediate spin off from GATT was the beginning of the liberalisation of trade in Western Europe. Marshall aid provided the leverage needed to push forward that process, thus paving the way for the European Community. In a sense the completion of the internal market by 1st January 1993 is the logical conclusion of it.232
§ By the end of the 1960s problems were appearing. Little or nothing had been done to counter the rising tide of agricultural protection. Developing-country exports in textiles and clothing were restricted by the Multi-Fibre Arrangement of 1974. Developed countries experienced acute political problems relating to particular industries.
§ So we come to the present. The Uruguay Round began in 1986. More than 100 countries are involved and the round is ambitious and wide ranging. As regards agriculture and textiles, GATT is to be extended to new areas of intellectual property, patents, designs and trade marks as well as to investments and services. As we all know, what was scheduled as the concluding meeting of GATT broke up almost exactly a year ago because the United States and the Cairns Group of countries were unable to reach agreement on agriculture with the European Community. That failure meant that other aspects of the negotiations could not be concluded because many participants linked the liberalisation of trade in agriculture to their willingness to make concessions in other areas.
§ Despite that major set-back the round resumed this year. A breakthrough came on 9th November when under the aegis of President Bush at the EC/US summit both sides narrowed their differences on agriculture. The United States made considerable concessions. However, I understand that the follow-up talks in Geneva appear to have reached a stalemate. Perhaps in reply the Minister will give us the latest information on that.
§ Of course there are immense problems. I shall touch on only three. Obviously there are many more, but time does not allow me to go into them. Clearly agriculture is the most important problem. I shall not talk in detail about that because other noble Lords far more knowledgable than I will do so later in the debate. Two sets of figures illustrate the problem. It has been estimated that the Common Agricultural Policy adds £11 per week to the cost of food for the average family of four in the European Community. It is only too obvious that the least advantaged suffer the most. The OECD has estimated that the cost of agricultural subsidies in developed countries is some 300 billion dollars per year; a sum larger than the total amount given in development aid. It is the dumping of surplus food in developing countries at subsidised prices that has been so very damaging. All noble Lords might agree that it is an absurd system. I recognise that farmers are going through a difficult time at present. However, it is generally agreed that British agriculture, which is among the most efficient in the world, will benefit by liberalisation. Some progress has been made but we need to move a great deal faster and further along that path in order to reach a solution.
§ The second issue is the Multi-Fibre Arrangement. It is a major derogation from the rules of GATT. Its principle aim is to secure an orderly and equitable development of trade in clothes and textiles. It is justified as a temporary measure to allow industries in developing countries—our own included—to restructure in response to low-cost competition as it permits 233 industrialised countries to negotiate bilateral arrangements setting import quotas from the developing countries. At the same time the arrangement provides for guaranteed access and growth rates for textiles from the developing world. We in the United Kingdom, together with the European Community, have agreed that the Multi-Fibre Arrangement should be phased out. However, that depends on strengthened GATT rules and disciplines as well as a transitional period for adjustment.
§ The third big issue is that of services. As an industry it has expanded enormously during the past 30 years of so. The industry is now estimated to be worth some 1,000 billion dollars of world trade. It is an issue that is important to us because in 1987 we were the world's third largest gross earner from services. I believe that it is difficult to reach full agreement on full liberalisation before the conclusion of the GATT round. However, a basic framework needs to be established. Again, I hope that the Minister will tell us more about that.
§ What is at stake? The prizes are extremely high. The successful conclusion of the round would provide much needed non-inflationary growth to the world economy. For the United Kingdom it would give a boost to jobs and exports; for example, a 30 per cent. cut in tax would boost European Community exports by 1.5 per cent. and create 340,000 jobs.
§ It is estimated that liberalisation in services, which now account for 20 per cent. of all world trade, would increase trade by 10 per cent. For the developing countries, it would reinforce the process of liberalisation which is taking place in so many of them. The countries in the Pacific Ring—Hong Kong, Taiwan, Malaysia, Singapore and Thailand—are frequently referred to as examples of a kind of economic miracle and yet the successful developing countries are those with a good export growth; they have depended on an open trading system. There are other developing countries which are liberalising their economies with considerable success—Mexico is a good example. They need the open world trading system to export and to prosper.
§ When I was a Foreign Office Minister I travelled to a number of third world countries. I shall never forget some of the distressing sights which I saw. For those countries to prosper, they need trade as much as, if not more than, aid. In turn that means that the industrialised world must buy what they can sell. Failure of that system encourages a dependency culture of the worst kind.
§ Nor are the problems of failure only economic; they are also political. We can already see some signs of that ii we look briefly at the vexed question of immigration into the European Community. Many people from the Soviet Union—and I am not quite sure that I should still call it that—and Eastern Europe in particular will inevitably want to come to work in the European Community, to say nothing of the millions in the third world who wish to do likewise. They want a better life and they will not be prepared to accept the hardships which changing their economies will bring.234
§ One important way in which we can help them is by trade. If those countries cannot improve their economies and raise the living standards of their people, it is inevitable that more will wish to emigrate. That could have extremely unpleasant political consequences. We have all seen pictures on our television screens of the rise of the neo-Nazis in Eastern Germany and we all know of the growth of extreme Right-wing movements in France and more recently in Belgium. The excuse for those excesses is the influx of immigrants. Obviously it is in our self-interest as well as that of the developing countries that that should be prevented from happening.
§ Finally, the worst danger, as I see it, is the threat of a trade war between the great trading blocs of the United States, the European Community and Japan. That would mean a return to protection. Already voices in the United States are calling for more protection for their industries as are some in the EC. History shows us that competing trading blocs engage in a self-defeating battle in which all are losers.
§ Political will is now required. Those complex negotiations cannot be resolved by officials. I am glad that my right honourable friend the Prime Minister gave his personal leadership to the GATT round when he was in the chair at the G7 meeting this summer. I am very glad that after that meeting a commitment was made by all those present to the conclusion of the GATT round. It is important that with all the discussions and debates at the Maastricht meeting next week, the principle of the open trading system is high on the agenda.
§ Time is not on our side. Once we reach 1992 the Americans will turn their attention to their presidential and other elections. The conclusion of the round by the end of the year is still possible and we must not allow narrow sectoral interests to stop it. We have all benefited greatly from the end of the cold war. We must not allow a failure of GATT to take its place. My Lords, I beg to move for Papers.
§ 3.15 p.m.
§ Lord Williams of Elvel
My Lords, the House will be grateful to the noble Baroness, Lady Young, for bringing this Motion before us. The last time that we debated this matter was on a Motion standing in my name, but obviously with the agreement of my noble friends on these Benches, on 23rd January this year. In my view it is fitting that both major parties have tabled Motions with the same end in view. It is good to be able to use this occasion—unusual as it is—to express what I believe will be a general support for the Government in their efforts to persuade all parties to complete successfully the current GATT round.
In the time available to me, I propose to comment on some of the major issues. Indeed, they are the major issues which the noble Baroness has raised in her opening speech. I propose also to reflect upon the possible consequences of failure.
At the outset—and at the risk of repeating myself—I wish to make it wholly and unambiguously clear, although this is not in any sense a party matter, that on this side of the House we shall work in whatever 235 way we can for the success of the round. I only echo the words of the General Secretary of the Trades Union Congress, Mr. Norman Willis who said:Jobs in British industry depend increasingly on the expansion of trade and the growth of the world economy as a whole".That must be our objective.
I know of no serious analysis of the post-war world economy which does not recognise the importance of the liberalisation of trade as a motor for growth. There is no analysis of which I know of third world economies which does not recognise how vital it is that the present round is successfully negotiated. As the noble Baroness said, I am afraid that we are some way from achieving that at present. The round was due to be completed by the end of 1990 to allow for the appropriate procedures to be followed in the United States Congress—known as fast track approval. The last bout of negotiations before the end of last year failed; we must admit that. We are now nearing the absolute and final deadline for the fast track process to operate. That is why the next few weeks are so important.
Quite apart from the politics, the issues are extremely complex. In today's debate we shall certainly not be able to do justice to all of them. After all, over 100 countries are participating in the negotiations and there are 15 major on which agreement is needed. I am sure that noble Lords who are to speak will roam across many of those areas. For my part, I should like to follow the noble Baroness, Lady Young, in identifying the three issues which seem at present to be top of the agenda for negotiation and to offer some thoughts on those.
As the noble Baroness said—and this will not surprise your Lordships—the first is agriculture. By way of background, it is now becoming quite clear that the United States is determined to reduce not only its own agricultural subsidies, which are playing havoc with federal finances, but also subsidies paid to European farmers and perhaps more importantly, when it comes to exports of agricultural products, to traders since the two problems are linked.
The Cairns Group, as it is called, led by Australia, has the same objective as those countries in the third world which wish to sell the products of their land. Let us not forget that in some cases it is their only product for export to the rich markets of developed countries. On the other hand —in these matters there is always another hand—in this country we must take note of the present dramatic decline in domestic agricultural incomes. It would be folly to destroy a major industry, which by international standards is extremely efficient, by reckless or ill-considered action.
There is no doubt—I say that with all deliberation—that the level of agricultural subsidy in Europe is too high. Moreover, we in Britain have a specific grievance; we are net contributors to the Community in agriculture and the CAP costs us dear. Of course we are paying through the CAP a social subsidy—there is no other word—to the small Continental farmer. But—again it is a large "but" —if we are to reduce subsidies to agriculture, it cannot be done indiscriminately and suddenly. The Community must be 236 prepared to phase out subsidies over an extended period of time. If, by doing that, we can enhance the cleanliness of our environment and the beauty of our landscapes, then that can only be a plus. But it must be properly planned. Simply relying on market forces will give us all the wrong solutions—a bankrupt agricultural community and a much poorer environment.
As the noble Baroness said, a deal on agriculture is only one of the elements of a successful negotiation. The second major obstacle I shall address is how to achieve freer trade in services. Ideally that means freedom of establishment for service companies in all countries as an ultimate objective. We must recognise that that will not be achieved over night. Many third world countries, let alone the United States and Japan, are instinctively hostile to that idea. The non-tariff barriers—if I can use that expression in this context—are severe. We must therefore work harder. But if we are to give on agriculture, there must be a corresponding give from others on services.
The third issue of importance—again I follow the noble Baroness, Lady Young—is the integration of the textile and clothing trade into the GATT. To date that trade has been regulated by the Multi-Fibre Arrangement, which worked well in providing a framework for the restructuring of the textile industry worldwide. If that arrangement is to be discarded—and it is reasonable to argue that it should be —there must be adequate safeguards in the form of a longish phasing-out period. By "longish" I mean a period of 10 years or so. That is particularly important for Britain which employs almost half a million people in the textile and clothing business. Much of that employment is concentrated geographically.
I chose those three issues not because they are necessarily the most important in objective terms, but because they give the most trouble in negotiations. There are many other points on which agreement is near—protection of intellectual property, prohibition of local content requirements in inward investments, settlement of disputes and strengthening of rules on what safeguards are available to signatories to the agreement. Progress on those issues forms the basis for a sensible package if the major problems can be solved. However, that "if" still represents an open question.
The noble Baroness spoke of the consequences of failure. In our view it does not overdramatise the situation to say plainly that the consequences of failure will be disastrous. They will be disastrous for future growth in the world economy since there is little doubt that failure will spark off a trade war as well as the formation of protectionist blocs such as the North America and Mexico bloc or, for that matter—let us face it frankly, as did the noble Baroness —the European Community. It is not simply that world trade would suffer. The consequential effects on employment in the advanced countries, and on life itself in many of the poorer areas of the world, hardly bear thinking about. Furthermore, we in Britain would be major sufferers since such a high proportion of our national product goes to export and always has done.
237 It is therefore in everybody's interest to bring the negotiations to a successful and happy conclusion. However, in this matter there is something more than just self-interest, strong though that may be. What is at issue is the kind of world in which we wish to live. Is it a world that relaxes into protectionism; that lives by beggar-my-neighbour policies where richer countries show no responsibilities for their poorer brothers? As the noble Baroness pointed out, we had that kind of world in the 1930s and we all know where that led us. Or is to be a political world in which we have the political will to reach over frontiers and across seas? Is it to be a world in which we recognise that the world economy, with the advance of technology, is and must be single and indivisible and in which the world economic product must be shared out equitably among all its inhabitants?
That is the underlying and almost philosophical question posed by the present GATT round. However it is wrapped up in the technical jargon of trims and trips and rebalancing and import access, unless that underlying question is recognised, I fear that the technical jargon will triumph. Short-term self-interest will reassert itself and we will fall at the last hurdle. It is to encourage the Government to redouble their efforts to ensure that that does not happen that this debate is taking place this afternoon.
§ 3.27 p.m.
§ Baroness Seear
My Lords, I must first apologise to the House. Months ago I agreed to take part in a police seminar in Bedford this evening and shall therefore need to leave long before the end of the debate. I am deeply sorry that that should be so.
This will not be a normal party political debate. The difficulty from the debater's point of view is that there is such a wide area of agreement between us. Since it is not a party political debate I shall limit party points to saying what joy it is to hear both Conservative and Labour Members recognising the importance of a free trade policy. It is joy to the ears of those of us on these Benches whose party has preached it for 100 years. That is my only party point this afternoon.
The noble Baroness began the debate—absolutely correctly —by speaking of the industrial aspects of the Uruguay Round. When we are discussing the matter we tend to emphasise, almost exclusively in recent months, the CAP issue and the farming and agricultural problems connected with it. That has led to a failure to understand the enormous importance, in terms of our self-interest and our economic development, of the Uruguay Round for the industrial and services areas.
The noble Baroness gave us figures which illustrated how important it could be to possible expansion of trade in manufactures and services if we could win freedom through the Uruguay Round. Let us consider, for example, the insurance industry. It is waiting to obtain establishment rights in a number of countries in order to expand the work which is recognised as being of the highest order in this country 238 and therefore offering opportunities for development and for consequent wealth and wellbeing to this country.
We have a considerable interest in making the Uruguay Round work for our own industry, our own jobs and the development of those areas, such as services, in which we are recognised as being pre-eminent. That needs to be stressed a great deal more than it has been in the past because of our tendency to speak only as though the issue centred around agriculture.
I wonder whether something more can be done, arising from this debate, to get the point over to the country as a whole. It is difficult to see that there is any widespread understanding in the country as to why this subject is important in terms of jobs, increasing the wealth of the country and its ability to carry out all the programmes it wishes to put into effect. It is difficult to see a connection between those factors and success in the Uruguay Round. I hope that this afternoon we shall not be just talking within these four walls, but that the Government will find ways of giving much greater publicity to the issues involved in the Uruguay Round which do not make the pulse of the public as a whole beat very much faster than it otherwise would when it hears that such issues are being discussed.
That said, the issue of agriculture and the CAP is very important and difficult. It has had publicity because it has been a sticking point in the negotiations until now. It seems that because we cannot get everything otherwise real progress would be made if we could overcome the agriculture and CAP difficulties. It is an absolute nonsense that we should be hung up on this particular issue. A dwindling proportion of the people of this country and in the EC earn their living in agriculture. I do not know why we have had to bow before them to the extent that we have for political reasons, which in reality must be becoming less and less important. We should come to grips with the issue. It is very difficult to understand why we have to bow before them to the extent that we do.
As we all now know, in France and particularly in Germany, a high proportion of farmers are part-time farmers. They are only a small proportion of the whole. Many of those farmers would do very well even without the support of the CAP. There are rich farms in Picardy and in the northern and central parts of France which do not need subsidies in order to do very well indeed. It is true that there are problems with the smaller farms both in Germany and France, but the numbers are not very great. It should not be a problem which it is beyond our wit to solve.
The noble Baroness also referred to the developing countries and the effect of failure in the negotiations on them. It is on that point that I want to dwell in particular, both from the point of view of the developing countries and of our own country and European civilisation to which the noble Lord, Lord Williams, made reference. The differences in the standards of living in a world in which people can see what the differences are, are not going to be accepted indefinitely in the poorer countries. If we do not give 239 those countries the opportunity to sell not just their primary products, but the opportunity to turn those primary products into semi-manufactured or manufactured goods to sell in those countries, the results will be disastrous. The developing countries will be in gravest poverty.
Last year I was in Kenya, where half the population is under 15 years of age. As your Lordships will recall, the world population as a whole is due to double by the year 2030. Ninety-four per cent. of the increase will be in developing countries. That is the scale of the problem that we are facing. The Kenyan officials said that in 10 years' time they can neither employ nor feed them. If one has a population which can be neither employed nor fed one has one of the most explosive mixtures that the world can ever see. What will those populations do? The people will not just sit there, but will attempt, as the noble Baroness said, to emigrate to other countries.
We are facing a very serious immigration problem with the countries of Eastern Europe. Those countries want to share in the standard of living of the West. However, the Eastern European countries are not in hardship in comparison with the current and future position of the developing countries unless they can trade. There is a need to open up our markets to the goods coming from the developing countries. That is of the greatest importance to them and to us. We have seen already the rise of racialism in Europe. As the North African immigrants cross the Mediterranean into the southern European countries the position will become nastier and nastier. People will not come because they want to, but because they have to in order to eat. It is in their interests as well as ours to see that they can stay at home and eat there too.
The Uruguay Round is important for our own industry, our own unemployed and our own future prospects. It is also important for the mutual well-being of the varying groups in what is a world economy today. Unless trade opens up the result will lead to disaster. As I said a few moments ago, the most important matter is that this message should go far and wide outside this Chamber. It is not understood. We need real publicity to explain to people why this issue matters so much and why failure would be so disastrous. As the noble Baroness said, there is no other issue facing this country which is as important as the success of the Uruguay Round and the real development of world trade.
I hope that we shall get an answer from the Government and I hope that noble Lords will forgive me for not being here to hear it. What can the Government do to get the public and the voters to understand? We are now coming up to an election, with all that that implies. They must be made to understand just how important this issue is. The stakes are enormously high and we cannot afford to lose.
§ 3.37 p.m.
§ The Lord Bishop of Worcester
My Lords, I am grateful to the noble Baroness, Lady Young, who has a busy life, for giving me the opportunity to speak in this debate. To come to this House and hear three 240 speeches of the quality that we have heard from the two noble Baronesses and the noble Lord, Lord Williams of Elvel, is very encouraging indeed. I look forward to the debate in order to learn of some of the technicalities of this immense problem which I confess are not at my command.
The debate is extremely timely. Perhaps I may corroborate what has been said by the noble Baroness, Lady Seear, about the need to get across the issues of the GATT round to young people. Development education has often been regarded as something that should not be taking up time in schools and colleges. I believe that that is misconceived because I believe that we cannot live in this world without understanding the fragile interlocking system which is the world economy to which we belong. I should like to see much more time and resource given to helping towards a better understanding of the issues at stake.
The debate is timely because with the preoccupation with Europe which has possessed us in the past two years or more, the global economy and the related issues have tended to be removed from our agendas. The imbalance between the northern and southern hemispheres remains a contemporary injustice which we must not tolerate.
We have the poor in our own society; but the poor in the societies in the northern hemisphere tend to be the "left behinds" of an otherwise affluent community. There is no comparison with the poverty that exists in the third world. As has been so rightly said, if this GATT round is not completed, the small kerosene lamps will go out; the herds will become thin and emaciated; and they will over-graze. There will be over-cultivation which will leave in its train famine and disease. Not only that, but I am told it will even have an effect on the climate.
The plight of the poor and the poorest countries is growing. I am told that 20 years ago we could talk about one-third of the world's population having access to two-thirds of the world's resources. Ten years ago that became one-quarter having access to three-quarters of the world's resources. I am told on good authority that today one-fifth of the population has four-fifths of the world's resources at its disposal. We know that that must include the oil-rich nations.
However, we in Europe, where in our history people have gone to the stake in order that justice might be done to individuals within the nation, must surely realise that a similar anxiety for justice must possess us as we look at the international scene. We must all welcome the lead given by our own Prime Minister in Harare in promoting the cancellation of debt of the world's poorest countries. That is a lead which is required. It is not enough to negotiate in such a way that the powerful can always call the tune.
Furthermore, as has been implied already, so often self-interest dictates that which justice demands. Disraeli in the "two nations" saw that an economically divided nation is rendered weak and ineffective. As has been said, a world where the gap between the rich and the poor is widening must surely be a destabilised world, a world where people are vulnerable to the 241 extremists and those who defy civilised standards because they feel they have no other way of being heard.
I apologise for quoting a report which came out 12 years ago. But noble Lords will remember that it was a principle of the Brandt Report—a report which, like all reports, had its shortcomings—that we cannot cure our own recession if we do nothing to activate the markets of the poorer nations.
I am told that 6 million jobs in the northern hemisphere—the countries of the West, if you like— have been lost because the so-called third world countries have sunk deeper and deeper into poverty. I recall, when I was working in Kent, the laying off of skilled rolling stock workers in Ashford at a time when in Tanzania it was a common occurrence for trains not to reach their destination because the rolling stock was so antique.
In the last stages of the Uruguay GATT round there must surely be a case for establishing to a point special and differential treatment for developing countries. Not to a point beyond which trade is distorted. I could take Members of this House to the village where I live in Hartlebury in Worcestershire to see enormous mountains of grain which cost every taxpayer a considerable sum every year to maintain. We all know that in order to avoid the cost of that, the temptation is to dump them on the world market, thereby depressing or undercutting the price. Rightly the United States is seeking the liberalisation of the world market in order to stop the subsidies which create the growing mountains.
There is a difference in the poorer countries where, for example, in Zimbabwe there has been up to 50 per cent. subsidisation of food growers which has been not to create surpluses but actually to enable the agricultural industry to survive. That has been very successful. Other pieces of good news of this kind can be found. Can we therefore urge that a distinction be made between the kind of common agricultural policy subsidies which have so often reinforced the big farmers, and the subsidies for survival which some of the poorer nations ought to be encouraged to apply in order that they can move towards a certain self-sufficiency; but I agree it should not be to the point where trade is distorted.
There is also the need for survival for the least developed nations—the very poor nations—to have import assistance with their food. That is not to make them a dependent culture, but so that they may survive. There is little chance of making them over-dependent when the small percentage of the gross national product in official aid in the northern hemisphere is only 0.35 per cent. I am sorry to say that in the United Kingdom it is only 0.27 per cent. We are 14th in a list of 18 countries.
A further reassurance from the GATT negotiators is that the countries which have weaker economies should have a longer timetable for the abolition or the reforming out of subsidies so that it may be carried out not in five years, as has been suggested, but in 10 years or even more. Can we be reassured that the Multi-Fibre Arrangement—and not only that, but also other unilateral so-called voluntary arrangements 242 —will be no longer allowed? They are arrangements whereby poorer countries may not export their commodities by which alone they could get rid of some of their unemployment. They must not do this because the richer nations do not like processed commodities brought into their midst. It is a situation where the powerful are able to call the tune. I feel that should be abolished in the name of justice.
As I have already said, I greatly look forward to hearing this debate and learning some of the technicalities required for a free and just market-place which other noble Lords will no doubt understand but which as yet I do not. I am grateful to have been able to contribute a small comment on this vital issue. I believe that the future well-being of the whole of humankind depends on the success of the GATT round. I hope and pray that it will not end there. If it succeeds in coming to a conclusion, I hope that the situation will continue to be monitored as the years go on.
§ 3.48 p.m.
§ Lord Thorneycroft
My Lords, I am delighted to rise and speak for a few moments on this subject. I am all the more delighted to speak in a House which is so united on a great subject, a subject which is going to have immense effect upon the future of everybody in this country.
Thirty years ago I was in Geneva at the Hotel Beau Rivage leading for the British nation on the subject of GATT. I regarded it then as complicated. It still is, but it is not so complicated as the right reverend Prelate suggested. It is not the complication of detail but the principle that matters. It is the determination of people; it is common sense. Then, as in this round, we went on longer than we thought we should. The hotel keepers in Geneva were on the verge of trying to kick us out. If the same principle were adopted in Uruguay we might be urged on towards the end of these discussions.
The negotiation I had was I think successful but it was not universally popular. It is only fair to point out, in a House that is united about these matters, that 30 years ago the Conservative Party was not in favour of GATT. It followed with passion a very different line of country. It favoured imperial preference. When I returned I remember going to the Cabinet in November to find, as a young President of the Board of Trade, that the distinguished gentlemen there assembled did not think that I had been up to much good while passing my time in the Beau Rivage. They argued passionately against me and suggested that when a motion was put down at the party conference against the GATT we should accept it. I argued strongly that we should fight our corner and said that I believed that we could win. Of all the many delightful things that I remember in my life, I remember Winston Churchill saying at the end of it, "Let him try". He was a remarkable man to serve under. At any rate we went to Blackpool, we argued the case and we won. That was the last time imperial preference was argued as a main principle for the Conservative party. From there we moved on to the system of wider trade and 243 payments, which we follow in the main today and which, through this debate, we seek to follow in the future.
The battle at that time was not due to any eloquence of mine. It was due to what was happening in the world of those days. The world in which we live today is not a world in which Australia sends grain to us and we swop it for manufactured goods. Australia wanted to sell goods to Japan and to get Japanese manufactures in return. When world opinion and tastes change one cannot hold on to artificial and outdated ideas. Thank God we threw them over, to the immense benefit of trade in this country and throughout the world. I shall not repeat the point except to say to the noble Baroness, Lady Young, how grateful we are to her for raising this subject for debate today and arguing it with such clarity.
Clarity is what is wanted. Half this country does not understand a word about the GATT. Half the world does not know what is going on. We discuss the most fascinating questions about the grouping of nations for trade, about a new Europe, about the Pacific Basin and about new areas of trade to be set up around America and Mexico. Every day I read new ideas for trade, but I hardly ever hear an interesting discussion about what is the main strategy of trade. The GATT is the main strategy. The GATT lays down the rules. It ensures that there is not differentiation in preferences between one country and another and that we treat each other the same.
The amount of free trade on that basis has grown out of all knowledge. Instead, we talk about larger and larger narrow groups. If the world turned into one in which one group was in Japan, another was in Europe and a third was somewhere in the Americas and there was no overruling law such as we have today about the way trade goes on, it would be a disaster. We should lose all the considerable benefits, or most of them, that we have today and we should turn the opportunities which we have enjoyed and are enjoying today into something narrow and protectionist.
I am delighted to hear not from one side of the House but from all sides that it is seen with absolute clarity that to turn back now to that narrower world would be the worst course that we could adopt. I hope that we in this country, speaking together and having the same ideas and the same objectives, can talk broadly, boldly and successfully in favour of what is said today.
§ Lord Fraser of Kilmorack
My Lords, before the noble Lord sits down, I was one of those who listened to his great conversion of the Conservative Party conference to GATT at Blackpool in October 1954. That is nearer to 40 years ago. It was a remarkable performance. We were converted rather earlier than some people may realise.
§ 3.59 p.m.
§ Lord Hollick
My Lords, I must first apologise for the fact that I may not be present at the end of the debate as I have duties elsewhere. That explains why I have been pushed up to an unexpectedly high number in the batting order for today's debate.
I have been impressed by the enthusiasm your Lordships have shown for a successful outcome to the Uruguay Round and the widespread recognition that such an outcome is crucial to the well-being of more than 100 nations that are expected to be signatories. The noble Lord, Lord Thorneycroft, suggested that half the population was unaware of the significance and meaning of GATT. While he may have exaggerated a little, that state of affairs is partly our fault. It is very often the practice of politicians and bureaucrats, whether intentionally or otherwise, to obscure the crucial importance of an international negotiation from the public view by adopting impenetrable jargon. Such indeed is the case for the Uruguay Round, which I must admit sounds like a football knockout competition where the odds would be expected to be heavily stacked against the visiting team, a sort of non-tariff barrier.
The merits of free trade and their crucial importance to the United Kingdom should be widely proclaimed so that the process is enthusiastically supported in the country. One of the greatest benefits of free trade is that, like the quality of mercy:it blesseth him that gives and him that takes".There can indeed be an equality of benefit. Free international trade can open markets for the produce and goods from both the developing and the developed countries. It can spread wealth to developing countries and can provide them with the manufactured goods and technology that they need to build their economies.
For the developed world, free trade brings a wider choice of goods and access to food and consumer durables at world prices rather than prices inflated by subsidy and protectionism. Further, the advantages and disadvantages which each country possesses by virtue of its climate, its location, its resources and its skills can be offset and balanced through world trade.
In its 44-year existence, GATT has been a singular success and a triumph of international accord. It has provided a systematic and effective framework for growth in world trade. During this period world trade has grown by 6 per cent. annually. That has led to increased prosperity, higher employment worldwide and has provided the third world with some of the foreign currency that it so desperately needs for investment.
A successful outcome to the Uruguay Round can provide the much needed stimulus to the world economy at a time when recession is inflicting considerable damage both in the developed and in the developing world. An increase in world trade offers the prospect of growth and increased employment without inflation. In the developing world, where agriculture employs more than half of the population and accounts for a quarter of GDP, the opportunity to increase exports of agricultural produce to the developed world can provide a desperately needed 245 lifeline to economies and societies, many of which are on the brink of collapse. In other words, free trade can be a powerful force to help remove poverty from the third world and can stimulate growth in the recession-hit developed world.
What has been the British Government's contribution to the Uruguay Round of discussions? Frankly, it has been rather disappointing. In the past year, our Government have been far too preoccupied by other matters to play an effective and forceful role in the negotiations. I believe that their priority has been to square away their own internal problems rather than invest their efforts to pursue the most advantageous outcome to the Uruguay Round for Britain. The Government have used up their store of political capital with our European partners in a desperate effort to secure an opt-out clause at Maastricht to ensure that they can ignore the social charter and to avoid the use of the dreaded word "federal". This political capital could and should have been used in the national interest to secure a thoroughgoing reform of the common agricultural policy. The CAP has proved to be a major stumbling block in the GATT negotiations and it continues to impose a heavy burden on Britain's food bill.
In 1990, agriculture accounted for 63 per cent. of the Community budget. That whopping £20.3 billion sets off the absurd chain reaction of over-production, massive surpluses, expensive storage followed by heavily subsidised sales on to the world market which sadly, in turn, inhibit and undermine the development of agriculture in the third world. In order to pay for the high guaranteed prices for agricultural goods and for the export subsidies, food prices throughout Europe are believed to be 15 per cent. higher than competitive world prices. The National Consumer Council has estimated that this is equivalent to £14 per week on the average food bill for a family of four. That is a burden which falls disproportionately on the poorest in our community. In turn, that surcharge reduces the standard of living of non-agricultural workers throughout Europe and, to the extent that high food prices are reflected in higher wages, European industry is placed at a disadvantage in world markets. The abolition of the CAP would reduce food prices and provide an enormous competitive boost for European industry. By failing to press for radical reform of the CAP, our Government have failed to act in the best interests of either the consumer or the business community. Indeed, we appear to have ended up with the worst of all worlds. The way agricultural subsidies are now expected to be distributed will discriminate against Britain's large efficient farmers in favour of the smaller, less efficient, farmers in Ireland and continental Europe.
I should now like to turn to the proposals to include the service industries in the GATT. The inclusion of services and intellectual property rights in the Uruguay Round is of vital importance to the United Kingdom. More than 60 per cent. of our GDP is now contributed by the services sector and it is an area where we have an international proven competitive advantage. I should declare an interest. I work for a company which is busy developing its financial and 246 information services businesses around the world. The UK, with its successful services sector, can be a big gainer if the GATT accord includes comprehensive agreement to liberalise and to open the market for services around the world. Our Government should be pushing hard to eliminate barriers and to set in motion a process of further negotiations that will eventually lead to a free trade in services. They should also be alert to American attempts to withdraw such important areas as telecommunications and shipping from the negotiating table.
It is, I suspect, inevitable that once the ink is dry on the agreement at the end of the Uruguay Round—and, based on recent reports, there is now some optimism that an agreement may be achieved by the end of this month—the signatories will be tempted to find ways of improving their relative commercial positions. Your Lordships will know that it is often the small print which is the most important part of a contract. It is, I fear, in the small print where some of the benefits of a successful agreement on free trade may be eroded.
My experience when seeking to establish new businesses in overseas markets has been instructive. Many countries pay only lip service to opening their markets. In reality the rules of the game, as they are interpreted in that country, can present a series of insurmountable, or at best very costly, hurdles which the unwary inward investor must clear before the new venture can be established. Bureaucratic delay, tortuous regulatory requirements, the imposition of unnecessary and often quite unsuitable joint venture partners are only a few of the methods used to fob off and deter the investor.
We in this country hold the view that we not only play by the rules but that we also play by the spirit of the rules. Although this view has, possibly, taken a knock with the recent developments on Sunday trading, I still believe it to be broadly correct. However, I have to tell your Lordships that not every country takes that view. I urge the Government to be alert to the real dangers of these non-tariff barriers and to scrutinise the fine print of any agreements to ensure that as many as possible of the well-known and well-tried loopholes are firmly blocked.
§ 4.9 p.m.
§ Lord Boyd-Carpenter
My Lords, in politics as in war, good timing is almost everything. For that reason, I think that one must particularly congratulate my noble friend Lady Young on the really admirable timing of this debate. It comes at what is very nearly the decisive moment on this issue. It comes when we are nearly at the end of what had been hoped would be the final year of the Uruguay Round and at a time when it is still possible to achieve agreement, but when it is only just possible. It gives the Government the advice of your Lordships' House on an all but unanimous basis as to what should be done. I am sure that not only your Lordships' House but also the Government and the country should be immensely grateful to my noble friend for taking this initiative.
I shall only comment for a moment on the speech made by the noble Lord, Lord Hollick. I thought that 247 he was extremely unfair to the Government on his allegation of the lack of criticism of the CAP. As far as I know the Government have been extremely active in trying to secure an improvement in the provisions of that monstrous policy. I have heard them doing their best again and again. I also thought that the noble Lord, Lord Hollick, was less than fair in his general response to the Government's attitude in the matter.
I do not want to waste further time on that topic, because what is important is that we should hear from my noble friend the Minister that the Government fully realise the great urgency of the matter. Once we get into next year, we are in the year of the American elections. Once those elections start, various pressure groups, interest groups and the rest will be pressing the American Government for concessions in the direction of protection. Equally, as we get into next year, the enthusiasm which has been felt, not just in the United States but in a great many other countries, will begin to diminish. Public opinion tires of any issue, however important, if nothing appears to be happening. If nothing appears to be achieved, public opinion is apt to write off the matter. So it is of the utmost importance that the issue should be settled, and settled quickly.
I agree with much of what has been said by almost every noble Lord: this is the most important issue facing the world. It is far more important than the adjustments to the European Community which are apparently the basis of the forthcoming Maastricht talks. I express the hope that our excellent Prime Minister, and his team at Maastricht, will take advantage of the presence of the Europeans at that meeting to urge them to move quickly, and quickly to achieve agreement. It is still possible, but it is only just possible. It requires the impact of the strong personality of our Prime Minister, backed by his Government, to secure that we move quickly, even at the cost of certain compromises, to complete the round. It will not be completed, of course, in the sense that every detail can possibly be settled. That would be unrealistic. It is vital to have the issue settled in principle. That is why I rejoice enormously at the way your Lordships' House has discussed the matter, because I believe that it will interest the Government.
I listened to the noble Baroness, Lady Seear, holding forth, justifiably, that her party had always been in favour of free trade. I must confess that I was not. When I was a young candidate, I was a protectionist, but as the years passed and the situation changed, I was convinced that high protection lowers the standard of life of most people involved, and that the more free trade one can have, the better. Confession is said to be good for the soul, and as the noble Baroness prided herself on her life of rectitude, it is perhaps appropriate that I should confess that at one time I did not attain that standard.
§ Lord Boyd-Carpenter
My Lords, the noble Baroness tempts me with that remark, because there are one or two examples which, if I had the time, I 248 might bring forward which suggest that rectitude has not been the most conspicuous mark of the Liberal Party over the years.
The crucial issue that must be faced is that of the common agricultural policy. I thought that several noble Lords rather underrated the difficulty of resolving that issue. If one thinks about it, the strength of the French devotion to the CAP is the result of factors that have operated for a long time. It goes back, in fact, to the Code Napoléon. Under the Code Napoléon, as your Lordships will recall, when someone dies, instead of having a system of primogeniture for inheritance as we have in this country, one's property is divided by the number of children one has. As a result, France is full of a large number of small fanners. That has two consequences. One is that they cannot earn a living unless prices are maintained artificially high and protection of one sort or another is given. Equally, it has the consequence that there are an enormous number of voters in France who have an interest in agriculture. The number is out of proportion to the number in this country and many other countries.
One must therefore realise that the French Government, with the best will in the world—I am sure that one has the highest regard for their ideas—are in a difficult position and require to be pushed hard to persuade them not to give way to that significant number of voters. We sometimes ignore the fact that after 150 years the Code Napoléon is indirectly causing us considerable damage.
The situation is such that we depend for the future prosperity of this country and the world on getting the Uruguay Round moving. I am especially enthusiastic for its extension to the service field. To extend it, for example, to insurance will be of the greatest benefit to this country, and it is right, because it would not just enable our insurance companies to operate freely in countries where their activities are now forbidden, but it would give to the world the advantage of the high professional calibre and quality of the British insurance industry. Its extension to services is an important aspect of the Uruguay Round. This country will undoubtedly benefit, but so will the world, from that change when it takes effect.
The right reverend Prelate dealt properly, as one would expect from a holder of his important office, with the poverty which exists in many parts of the world. But to reduce obstructions to trade, to reduce the dumping of goods, and to reduce restrictions of one sort or another will benefit, above all, the ever-increasing numbers of poor in the southern hemisphere in particular. Therefore the intelligent thing for the northern countries to do is to press ahead with that change. I am not denigrating the giving of relief. I am sure that we should continue to give relief and help, but the soundest way of helping the poorer sections of the world is to get world trade going, and to get it going effectively.
We have, for a few weeks perhaps now, but only a few weeks, a golden opportunity to achieve a big move in that direction. I hope that Her Majesty's Government will tell us that they are determined to seize it.
§ 4.19 p.m.
§ Lord Jay
My Lords, in congratulating the noble Baroness, Lady Young, I must also apologise to the noble Lord, Lord Boardman, in that he is being required to listen to me again, as we always seem to be paired on occasions such as this. I hope that this time he will agree with me.
As I see it, there are three overwhelming reasons why the Government should exert themselves to the maximum to achieve a Uruguay Round agreement before it is too late. First, the Uruguay Round affects, as has been said, the trade and welfare of over 100 countries and about 20 times as many human beings as are directly affected by the war of words now going on over Maastricht which involves, when all is said and done, the affairs of one bit of one continent only.
Secondly, a GATT agreement would most of all benefit the poorest countries of the world by lowering barriers against their exports to the advanced countries.
Thirdly, it would very substantially benefit the United Kingdom by lowering the costs of our imports of food which have been a major burden on labour costs in this country since we had the common agricultural policy forced on us in the 1970s. It is probably the major cause of the huge deficit in our visible trade with the EC which was as high as £10 billion in 1990.
These GATT negotiations have now been going on for five years. They ought to have ended a year ago. In an Answer on 20th November in this House, the Minister told us that the Government hoped for agreement by the end of the year. What has gone wrong and has apparently been holding matters up since then? Of course it is true that many other issues are involved in this argument than the extreme protectionism of the CAP. But everyone knows that by far the greatest obstacle to agreement has been the refusal of the Continental countries, led by the French, seriously to moderate that protectionism.
Nor is it just the United States, as it is sometimes made to appear, which demands further liberalisation, but also the 14 nations of the Cairns Group, including Australia, Canada and Argentina, and a wider group of South American, African and Indian countries.
Therefore, for all those reasons, the United Kingdom Government ought to be taking the lead in the European Community in calling for the concessions necessary for success. The Prime Minister tells us that one advantage of being a member of the EC is that we can influence its policies. I hope that we can do so in this case. However, if we are influencing it, there is singularly little evidence of it.
The public utterances of our Minister of Agriculture, Mr. Gummer, sometimes give the impression that it is all a matter of British agricultural policy. Of course any agreement must be fair to our own agriculture, which incidentally received a much fairer deal under the deficiency payments system before 1972 than it has received since. Even so, it is also true that about 2 per cent. of our population are producers of food and 100 per cent. are consumers.
The latest snag now reported in the press is that the French have discovered a new obstructionist tactic: to 250 alter the base year for calculation of proposed cuts in subsidies. Manipulation of the base year is one of the oldest tricks in the statistician's surgery. I am reminded of the occasion in the programme "Yes, Minister" which we all enjoy, when Sir Humphrey advises one of his juniors: "If all else fails, alter the base year".
Surely we shall not allow that kind of thing to wreck this vast undertaking. One cannot help feeling that if one-third of the effort and time that has been lavished on the Maastricht machinations were devoted to saving the agreement, success would soon be achieved.
Surely rather than accept failure, if this week's efforts by officials fail—and I gather that they are now discussing matters in Brussels—the heads of government and others concerned should meet together and not go home until a final practical compromise has been reached. They should do that at an early stage.
I urge the Government, even though their voice in this affair is unhappily muffled within the Commission, to make up their mind that agreement must be reached soon, and ensure that it is. If they do that, I am sure that it will have the unanimous support of the House.
§ 4.25 p.m.
§ Lord Boardman
My Lords, it is always a pleasure to follow the noble Lord, Lord Jay, as I frequently do, and particularly when I find that I am in closer agreement with him today than has often been the case in the past. I am sure that the whole House will wish to thank my noble friend Lady Young for introducing the Motion today so well and also for securing support from almost all quarters of the House.
As has been said by others, the problem with GATT is that it is not recognised by many of the public. People are not sure what it is or what it does. If we mention the name, they think it probably barks or bites. If we say that it is in some way coupled with Uruguay, that does nothing to add to its credentials. If on top of that people read that it has been going for five years, all sense of its importance vanishes straightaway. It is a problem, as has been rightly said, and I am sure that there should be far more public recognition of what is at stake in the matter.
What is at stake is enormous. My noble friend Lady Young referred to what happened in 1929–30 following the Stock Exchange slump in the United States and the wave of protectionism that followed it, with the introduction of the tariff laws. There was the Smoot Hawley Tariff Bill which came in in 1930 in the United States and which led to the terrible wave of depression which went on for so long.
I do not predict that if the present GATT round fails we shall have anything quite so disastrous, but the damage would be very severe. There would be the setting up of a number of bilateral blocs. I can see the extension of the USA-Canada Fair Trade Agreement spreading to Mexico. I can see Japan trying to secure a ring fence around itself and part of the Asian territories. The Community will become more protectionist, building fences around itself. The damage would be extremely severe.
251 Protectionism is a most insidious infection from which most of us have suffered now and again when it affects us and the goods which we like to possess and the things that we like to do. At one end, the local milkman will object strenuously when someone else goes on to his round. At the other end, a large British airline will protest violently if some foreign airline is allotted a slot at Heathrow. That is the range of protectionism that is in-built in many of us. The result is that the customer suffers and at the end of the day so does the supplier.
It is remarkable that, I believe, 108 nations have almost but not quite reached an agreement. It is tremendously important that an agreement is reached quickly. My noble friend Lord Boyd-Carpenter referred to what would happen if the agreement were not reached by the end of this year or certainly by March when the fast-track procedure, which Congress has allowed in the United States, will cease to operate. Presidential elections will be taking place and the term used is that all the work that has been done so far would probably unravel. So it is tremendously important that something should be done quickly.
As has been pointed out, there are a number of sticking points. The main one appears to be agriculture. Much of the blame is attached to the CAP which is an economic disaster. It is a nonsense. It directly opposes everything that was in GATT; it is in direct opposition to GATT in its protectionist approach. It is extremely expensive and unfair. However, we must also, in all fairness to the CAP and those connected with it, remind ourselves that other countries—including the United States of America—have a degree of agricultural protection which is nearly as bad as, and as regards some countries even worse than, CAP.
The problem with the common agricultural policy is that it makes negotiations on GATT almost impossible because the European agricultural scene is cluttered up with a great range of conflicting objectives. The noble Baroness, Lady Seear, referred to that matter in her speech. The CAP attempts to cover a whole range of non-agricultural issues. It tries to deal with economic, social, employment and environmental problems. It attempts to deal with the problem of security of supply. At the end of the day it touches on agriculture. The CAP attempts to solve all those problems in relation to 12 countries as disparate in agricultural terms as Greece and Denmark for example. Such a situation is absolute nonsense.
Taxpayers within the Community are then charged to support the subsidies and payments which are given to attempt to achieve the objectives that I have mentioned. Such a situation makes it almost impossible for any sensible agricultural proposal to be put forward to make negotiations on GATT possible. We must strip down the CAP to its basic objectives. As regards the environment, clearly anyone who occupies or uses land should be prohibited from destroying the environment. On the other hand, someone who attempts to improve his land and builds ponds and installs copses should be paid for doing so. He should not, however, be paid out of the 252 agricultural budget. Such payments should come from the environmental budget. I believe that the latter is called a green box. Such environmental matters have nothing to do with GATT and nothing to do with agricultural production. If we can reduce agriculture and the CAP to the bare essentials, we could then get a sensible deal.
If the German Government want to keep part-time farmers and small farms in Germany—as the noble Baroness, Lady Seear, mentioned—we should allow that government to do so. However, that government should pay for that measure. A charge should not be imposed on the CAP, or on the agricultural budget. If we strip out these nonsenses from the CAP, I see no reason why agriculture should present any more of a problem in terms of GATT than is the case with most other traded items.
I also believe that if everyone competed fairly in agriculture and if everyone avoided the practices of dumping and subsidies—those are fairly big "ifs"—the UK's agriculture would hold its own. Instead of that, today our farmers are not allowed to produce and sell all the milk that we in this country consume. They are allocated quotas. Farmers are paid to set aside part of their fertile land although we are only 73 per cent. self-sufficient in produce—produce that we are quite capable of producing in this country. Those are the kind of nonsenses that have crept in and which have made agricultural negotiations in GATT so difficult.
Due to the time factor in obtaining the GATT settlement, there is little hope of achieving a major reform of the CAP on the lines that I should like. To achieve a settlement of GATT without that reform will not be easy, but it must be achieved. I hope that can be achieved without sacrificing the British farmer who has already suffered greatly from certain proposals issued in Brussels.
A sensible conclusion of the GATT round is essential—that has been mentioned by every speaker today. It would be highly desirable if GATT could be extended—as is being sought—to cover services, trade related intellectual property rights and trade related investment, to which my noble friend referred in opening the debate. Such a situation would constitute a real bonus. However, there are problems in settling those matters within the short time that is left. It may not be possible to reach solutions in every case. I hope that we do not risk losing all that has been nearly achieved by trying to go a bridge too far.
§ 4.34 p.m.
§ Lord Alexander of Weedon
My Lords, every speaker today has stressed how vital the GATT negotiations are. Therefore I hope your Lordships will acquit me of discourtesy in wanting to make a brief contribution to the debate in spite of being unable to stay until the end of it. I apologise that a longstanding commitment prevents me from doing so.
This is easily the most important round of the GATT negotiations since their inception. Its breadth is far greater than before, embracing agriculture, financial services, intellectual property and other issues. This makes it possible to seek a wide-ranging 253 liberalisation of trade which should afford opportunities to developed and developing countries alike. The negotiations, which have at times appeared perpetual and at other times to be teetering on the brink of failure, are approaching a climax when the world economy looks fragile. It is therefore more important than ever that the negotiations are successful. Therefore it is heartening that, after the apparently muted efforts to avoid failure last year, there is a much stronger and determined political impetus to ensure success. A breakdown of the talks, which would foster protectionism and regionalism, would carry great risks to the world economy. By contrast, the liberalisation of the trade system will contribute to global economic growth at a time when we are most in need of it.
Agriculture, as has already been said—this will no doubt be highlighted again—has been one of the more intransigent stumbling blocks. It is unnecessary to dwell for long on the absurdities of the common agricultural policy. Its history is a classic illustration of why we should avoid protectionism. Powerful farming nations first agree to subsidise their own farming interests. They are then forced to impose barriers to cheaper imports. Then, when their subsidised farmers increase production, they have to create forms of export subsidy. This not only harms other agricultural countries but also means that according to the OECD the agricultural sector in developed countries has become subsidised by taxpayers and consumers by no less than the monstrous sum of 300 billion dollars a year.
I have perhaps said enough on the inequity of the common agricultural policy for the most necessary and welcome recent impetus given by President Bush and M. Delors has pointed the way to a compromise in the GATT talks as regards the key sticking point of agricultural subsidies. I do not seek to debate whether this compromise goes far enough. It possibly goes as far as can be practically achieved. However, its important effect is to unlock the door to a consideration of the other areas on which an effective agreement to liberalise markets is also so important. I echo the words of the noble Lord, Lord Williams of Elvel, when he said that if the European Community is to give as it ought on agriculture, there should be give from others on services.
Crucial as the common agricultural policy is, there are also other areas which are of great significance. The avowed intention of the agreement for financial services will be to secure liberalisation. In the area of financial services the European Community can speak with some conviction and authority since, in the second banking directive, it has committed itself to a notably liberal policy. As your Lordships know, this directive provides that within the European Community any subsidiary of a bank from anywhere in the world which has been accepted as eligible to bank by the regulatory body in any country of the Community, can trade anywhere else within Europe. This regime will apply from 1st January 1993.
For the purposes of the directive, banking includes dealing in securities; so the directive recognises an 254 ability to secure complete geographical coverage of the Community and, where one regulator has granted consent, an ability to engage in universal banking.
However, one understandable and reasonable concern arises where lack of reciprocity exists. To that end, the directive provides that the Commission may propose limitations on the future rights of banks from a particular country which may apply in the future to operate in Europe. As it exists, that limitation would enable some persuasion to be brought to bear on countries which are notably less liberal in their approach to foreign banks than is the Community.
By contrast, there is doubt as to the extent to which the likely GATT agreement contains enough of an impetus to countries with relatively closed financial systems to persuade them to widen access to banks or, as my noble friend Lord Boyd-Carpenter mentioned, insurance companies from other countries. The basic agreement is likely to contain a provision, described perhaps somewhat quaintly as a most favoured nation clause, which requires each party to accord immediately and unconditionally:to services and service providers of other parties, a treatment no less favourable than the treatment it accords to like services and providers of like services of any other country".As I understand it, that means that any concessions made to any one country will have to be made multilaterally right across the board regardless of whether some of the countries which thereby benefit have themselves liberalised their own laws at all. That provision, well-intentioned as it is, could prove a charter for tardiness and minimalism.
At the same time as the overall agreement, countries are tabling the initial offers as to the terms on which they will grant access to the markets. It could well be that, against the background that I have described, many countries will table little more than an offer of what is in fact just a standstill against the introduction of more restrictive regimes. That would be far from positive.
Banks in this country, and I believe in the whole European Community, would hope that greater energies will be devoted in the final negotiations to liberalising commitments in the financial services area from other countries in exchange for the concessions that are made in agriculture and elsewhere. A combination solely of national standstill agreements, plus the "most favoured nation clause," will make many countries see no need to open up their markets soon. There will be just an incentive to sit back and seek to ride pillion on the backs of those who, through liberalising their own markets, open the doors to everyone.
That point has perhaps greater force for us because the GATT agreements will circumscribe European Community action in that area. In particular, it will become more difficult in future for the Community to use its right to require better terms from other countries as a condition of allowing their banks to enter our markets.
There is time to address those points in negotiations. I should be grateful if the Government would indicate the extent to which they currently believe that the financial services regime will be effectively liberalised under this round of negotiations.
255 Are they anxious about the likely course of negotiations over offers and requests? Are they positive enough? What negotiating stance are they encouraging the Community and the United States to operate in that area? Do they share the view that, as matters at present stand, the Community's ability to act legitimately in its own interests may be circumscribed in future? It would be a pity—perhaps your Lordships would say an irony as well—if, in an area where our Community is conspicuously liberal and which is of such importance economically, we should not be able to seek the same approach from other countries.
I hope that my noble friend the Minister will not think me churlish to have concluded by asking him a number of questions when I am extremely sorry that I shall not be here to hear his reply, but I look forward keenly to reading it with the greatest possible care.
§ 4.44 p.m.
Lord Bruce of Donington
My Lords, the House will be grateful to the noble Baroness, Lady Young, for having introduced this subject this afternoon. For almost the first time since I came to your Lordships' House some 15 or 16 years ago, I found myself in almost entire agreement with the argument of the noble Baroness. She put forward the case with a clarity to which I have not been privileged to listen for some considerable time.
The noble Lord, Lord Alexander of Weedon, referred to the fragility of the world economy at present. There has been the virtual collapse of the economies of the centrally planned states in the Soviet Union and the eastern states, but equally in the doldrums at present are the principal free enterprise and free market economies of the world. That includes the United States and Japan, which has not achieved quite the performance that it has shown over the past four or five years. As for the European Community countries, as Mr. Banham of the CBI pointed out only last week, their performance has been distinctly disappointing: output is down, the balance of trade has deteriorated and unemployment has risen.
Those matters are of the utmost importance for us to consider, particularly within the context of the remarks that fell from the lips of the right reverend Prelate. On the one hand, there are millions of people in the world, including the Western world and the EC, with unsatisfied, urgent needs, not for luxuries, but for the bare necessities of life. Yet, on the other hand, there is what even in pre-war, 1930s terms may be called mass unemployment, with all the consequences that may flow from that condition. Not all your Lordships were with us in the Thirties, although quite a number were. However, I am bound to tell your Lordships that there are considerable similarities between the state of the world economy now and its state in the Thirties. We would do well to ponder the consequences in terms of the preservation of peace and, as ultimately in the Thirties the outbreak of war, of mass unemployment in the highly industrialised countries, to which must now be added large-scale unemployment and widespread poverty in the 256 developing and undeveloped countries of the world. Therefore, anything that contributes to freeing trade and increases the demand for and production of goods and services must be good.
That is why GATT is of great importance. If a general agreement is achieved—I accept what my noble friend who is no longer with us said about reading the small print—it will undoubtedly provide a great stimulus to the enlargement of world trade. By so doing it will at the same time free the fiscal resources of the richer states so as to be able to develop aid programmes for the developing countries. That must be taken as an additional bonus to increases in trade which may take place.
I rarely find myself in such agreement with the noble Lord, Lord Boardman. He described very accurately the massive effects and the utter folly of the present common agricultural policy. I shall read what he said so that I may borrow his invective for the next occasion on which I participate in a debate on the EC. However, there can be no question but that the continued existence of the common agricultural policy in its present form will be a bar to the achievement of an agreement at GATT. Therefore most urgent attention must be paid to this matter.
I also find myself in agreement with the noble Lord, Lord Boyd-Carpenter. The achievement of a GATT agreement is indeed far more important than an agreement at Maastricht and is of much more urgency. At Maastricht we shall be dealing in part with the machinations of bureaucrats and the ambitions of not a few. We are dealing with a matter of reorganising what threatens to become Fortress Europe—one of the more protectionist parts of the world which works in essence and particularly but not exclusively through the CAP against the operation of GATT.
More than that, I am afraid that, unless some changes are made, the United Kingdom may find itself locked within Fortress Europe and locked within a Continental system which may inhibit its independent operation for the essential achievement of GATT aims. I regard that as just as much of a menace as the existence of the CAP itself.
The Prime Minister, supported by the Leader of the Opposition and, I am sure, by the liberal parties—a very impressive degree of unanimity—said that he wants this country to be at heart of Europe. I believe that we have a more important role. We are one of the principal countries and the leader of a Commonwealth of 50 nations spread over the whole world. Many of them are developing countries. If they were assisted by growing trade and aid perhaps on the scale of our net contribution to the EC itself, they would bring enormous benefits to both themselves and the United Kingdom.
One cannot have one's heart in two places at once. We should endeavour to regain our place at the heart of the world economy, not merely of Fortress Europe. I am quite convinced that we should co-operate fully with our European colleagues, preferably under conditions of unanimity. But I am also convinced that our historic role in the future is to promote the ideals 257 of GATT, and to promote aid to the developing countries to the lasting benefit of those countries and ourselves.
§ 4.55 p.m.
§ Baroness Elles
My Lords, I join other noble Lords in thanking most warmly my noble friend Lady Young not only for magically choosing this day for the debate, which is so vital this week in the development of the GATT, but also for laying down the ground rules for the debate this afternoon and explaining so ably, clearly and succinctly the many issues which arise within the negotiations at present taking place in Brussels.
On a personal note, I should like to say how privileged and pleased I was—as indeed I am sure were many noble Lords —to hear my noble friend Lord Thorneycroft remind us of the role he played (he claimed a very modest role but indeed it was very important for the country) at Geneva in 1954 during the early negotiations of the GATT. From these Benches I must say how delighted I was to learn that by his own conversion he was able to convert our party to the right way of thinking with regard to trade.
I should also like to say a few words to the noble Lord, Lord Hollick, who is not in his place at the moment. He complained that the Government were not doing enough in the GATT round. I strongly disagree. If he knew anything about the Treaty of Rome, he would know that the Commission has the task of negotiating on behalf of member states. In this particular negotiation member states are closely following each stage of the negotiation and the Commission cannot take any further steps or take any different views than those agreed by member states. The Commission is in the forefront of the negotiation. Consequently it attracts the media, to which I suppose some noble Lords direct their whole attention and so are not aware of what is going on. I should certainly say, as many noble Lords on this side of the House have said, that there is nobody more aware, keen and anxious for the GATT round to succeed than my right honourable friend the Prime Minister. As chairman of the group he has taken the opportunity to remind all members of the G7 that they must work for the successful conclusion of this round. It would not be right in my way to criticise the Prime Minister or the Government for failing in their full duty of trying to reach a successful conclusion to this negotiation.
I want to recall the preamble to the GATT. It refers to raising standards of living, ensuring full employment, the growth of real income and effective demand, developing the full resources of the world and expanding the production and the exchange of goods. There is universal agreement in this House that those are excellent objectives and that everything should be done to achieve them. Nobody would deny that. But more is at stake. By this trade system we should achieve economic stability. That economic stability, which is achievable through GATT objectives, underpins political stability. They are interrelated. Rarely, if ever, is there economic growth where there is political instability. Economic growth is achieved only where there are democratic processes at work.
258 That emphasises and underscores the importance of the GATT system not only from the point of view per se of the economy but of the general political stability which we hope will spread. That is basically what the GATT aims to achieve.
Many noble Lords mentioned that the agreement covers new issues at this time: agriculture, services, trade-related intellectual property and trade-related investment measures. They are evidence of the faith that 108 countries have in the effectiveness of the system. If they did not believe that the system had worked well so far, they would not be introducing the new issues in the new GATT round. Again that is a source of encouragement. No one doubts the immense benefits in terms of increased world trade—with especial benefit, I would add, to the developing countries as well as the industrialised countries—of a successful conclusion to the negotiations.
At a recent meeting which I attended there were many representatives of SADCC, the 10 front line states. Members pressed urgently the need for a successful conclusion of GATT. They are optimistic that they will benefit from the process. They recognise that aid is no longer the answer to their problems. About 3 billion dollars were given in aid to the SADCC countries in 1989; yet only two of those countries had positive economic growth, one of those being only 1.5 per cent. They want the negotiations to succeed. That should encourage those who recognise the role and need of supporting developing countries to ensure that this negotiation succeeds.
The UK is a trading nation. Many noble Lords have touched on the 25 per cent. GDP that we obtain from exports. The success of the GATT negotiations, with every increase of exports by 1 per cent. in this country leading to 300,000 new jobs, must be a prize worth fighting for.
As we know, there are certain sticking points, in particular the agricultural problems between the US and the European Community. Both are the biggest export markets for each other's products, with the EC being the world's biggest importer of food—a fact that is sometimes hard to believe when one considers the surpluses that we produce; but those are the statistics—and the world's second biggest exporter. Therefore it is crucial for us to have a settlement. It is not sometimes realised that the proportion of agriculture to world trade is only 11 per cent. Nevertheless everyone is affected by agriculture's success or failure.
The US was the first country to demand big reductions in agricultural subsidies, such subsidies to be eliminated over 10 years. It should not be overlooked that the US also heavily subsidises its farmers by up to 20,000 dollars per head compared with the Community's 8,000 dollars per head. The House recently debated the excellent report on the development and future of the CAP. Many of the matters touched upon are the subject of current negotiations. Reform of the CAP, recognised as essential, cannot overlook the changing background not only of Eastern Europe but of events in the Soviet republics (if I may still call them that), and changes in Southern Africa, so that the concept of regionalisation and remedies to the imbalance in agricultural products 259 are taken into account as well as the understanding that those areas all want access to EC markets. In that connection it is worth considering the triangular mechanism, which is sometimes introduced, of EC financial support rather than direct aid to buy produce from areas of surplus for transmission to areas of food shortage.
All parties have agreed within the EC context that a substantial and progressive reduction of agricultural support is necessary. I am sure that that will be cheerful news to many noble Lords who have spoken on that issue. However, at the present time in the middle of negotiations it is not possible to do other than to indicate the direction in which it is hoped they will go; that is, improvement of import access, substantial and progressive reduction of export subsidies and substantial and progressive reduction of internal support. Those have all been areas for negotiation. The reduction of support prices for agricultural products would have the effect of reducing food prices, reducing the cost of export refunds, and facilitating access for imports. Reduction of intervention prices would or should lead to curbing excessive food surplus as well as reducing overall costs of transport, storage and waste, to say nothing of the costs to the EC of fraud arising from the current methods of implementation of the CAP, with special emphasis on export refunds.
There will be new mechanisms, for instance, with the removal of import controls such as quotas and levies. Some measure of control would be possible under the system of "tariffication". That is another new jargon word—something that always seems to occur within the Community. Tariffication is an import tax which would replace the control restrictions.
Overall, new arrangements in the agricultural industry can bring benefit, provided, first, that there is adequate and appropriate compensation to be degressive. That would give time to those farmers who would be hit by changes in support prices to adapt to new products or new land use on the principle that market prices and social needs are clearly separate considerations. Many noble Lords have attacked the CAP but one cannot do so without giving alternative support to enable those farmers who would suffer from the change to adapt to the new situation.
Most noble Lords will accept that the CAP has now become a disaster. I must confess that I was a great supporter of the CAP when I had to feed young children with very short rations. After the Treaty of Rome was signed the CAP supported farmers. It gave them a chance to attain a viable living off the land. To produce food at reasonable prices was an achievement that anyone who had been through the war would have greeted with great acclaim. We all understand that the scheme has now become out of control. Most governments, in particular those with large farming communities, were not able, through a perfectly respectable democratic process, to answer the farmers in a satisfactory way and to reduce the costs of the CAP. We have to recognise the historical role of the CAP and the point that we have now reached.
260 The GATT negotiations have achieved what member states' governments and the Commission have been unable to achieve over the past six years. At last the CAP will have to be reformed to implement the provisions which will be contained in the new trade agreement. It is that way round: the GATT will be signed and the CAP reforms will follow, probably early next year, in accordance with the agreement made by all member governments at the conclusion of the GATT round. That outcome, for which we all devoutly hope, will benefit not only the European Community but also the United States which will have access to a large single market, with all the benefits that that allows, including EFTA countries now within that area.
I believe that it would therefore be appropriate to conclude with the words of Arthur Dunkel, Director General of GATT, to whom I am sure your Lordships will pay the greatest respect and admiration for the way in which he has conducted the negotiations over the past six years. He said:The successful conclusion of the GATT will mean a guarantee that world trade will continue to grow. Trade creates new business, [and] new jobs".
§ 5.6 p.m.
§ Lord Elton
My Lords, about a fortnight ago that small proportion of the press which devoted a small part of its space to the subject which we are discussing as the most important issue before the human race began to prepare us for an important statement about a great breakthrough, or progress of a substantial nature, to be made on Friday of last week. Since then the only reference that I could find is a headline in the Financial Times today, which states, "Last chance for Uruguay Round". I believe that that is the sinister background against which we hold the debate. It is ominous for two reasons: first, the hoped-for and—as noble Lords from all sides of the House said—last minute progress is not yet available; and, secondly, that lack of advance is a matter of such extraordinary indifference to almost the whole of the media of this country and, for all I know, those of other countries.
There are two analogies for the GATT process. One is a battle of Titans; the other is a supremely complicated game of chess. The Titans are the European Community and the United States of America—and Titans they are. In 1986, between them comprising about 10 per cent. of the world's population, they had cereal reserves of 316 million tonnes. That figure is two and half times the total international volume of trade in the year, and—in a bizarre statistic —it represents a quarter of all cereals eaten in a year by the whole population of the world and its livestock. That gives an indication of the extent to which those Titans travel the world and dominate local markets.
For some time they have been locked in a rather unedifying, old-fashioned trade war. It began when the Soviet Union had recourse to heavy buying when the world production levels of cereals were at a slightly reduced level in the 1970s. In 1974 the World Food Conference was convened. It was announced that there was a world food crisis. Both Europe and the 261 United States responded with alacrity to meet that challenge and to increase production, at a hideous cost to taxpayers, as has already been said.
Between 1980 and 1986, the United States farm budget was increased 10-fold to almost 30 billion dollars. The EC budget doubled during a shorter period to 22 billion dollars. It is important to remember that CAP is not the only obstacle to progress in this field, although it is that on which we can have the most influence. Farm price protection increased at a rate double that of domestic demand during that period. In consequence surpluses were pumped into or dumped onto the world markets. The principal tool for jacking up the United States' production was the 1985 United States Farm Act designed, according to the United States Agricultural Secretary of the day, to:squeeze [the] CAP until the pips squeak".It was indeed an old-fashioned, unedifying trade war. It cut United States domestic cereal prices by 20 to 30 per cent. and was accompanied by a 5 billion dollar export enhancement programme. By the end of 1986 18 billion dollars was being spent to export grain and cotton. Again I mention the figure because it is a bizarre illustration; it was double the value of those goods in the market place. We could have accepted that as largesse but we responded in kind. By 1987 export subsidies equalled half of European Community cereal spending and 38 per cent. of the common agricultural policy budget. In the words of one commentator, world trade had become reduced to a subsidy battle between the treasuries of Europe and America. Who paid those treasuries? We and the other taxpayers of those countries paid at a rate which my noble friend Lady Young has set at £11 per family per week.
I said that the struggle was unedifying. I suppose that the argument about whether the United States' system of intervention should be excluded as being entirely virtuous while the EC system of intervention is entirely wicked seems to bring the whole argument into disrepute. Surely there must be one worldwide standard of what constitutes a trade-distorting practice. That should be the same on both sides of the Atlantic.
The other analogy is a game of chess. It is hugely complicated. At least three boards are in play, although we are looking at only one. That is the most active one of GATT. Games are in progress on the World Bank and IMF tables and also on the United Nations table. However, GATT is the most important board. There are more than 100 players, although not all in tidy groups such as the United States, the European Community, the Cairns Group or the Nordic countries. There are incessant exchanges and even sacrifices of pieces. Some vital moves are simply ignored in the main negotiation. Major liberalisation programmes have taken place in Mexico, the Philippines, Costa Rica, Tanzania and Kenya since the outset of the Uruguay Round but they have counted for nothing within the round itself. Those countries are not Titans and they are the losers by it.
The complexities of existing GATT articles and the agreements under them are huge and well known.
262 Perhaps they are greater to me than to my noble friend Lord Thorneycroft because I have not spent an illuminating time in the Hotel Beau Rivage and fulfilled distinguished engagements from there as he did. My briefing is four inches thick and I do not propose to go into it. Your Lordships are seized of the complexities and might agree that in the debate we should be looking for the simplicities.
The complexities are such that for many of our writers and broadcasters they have obscured much that is important; they cannot see the wood for the trees. One ought to say that they cannot see the woods for the trees because it all started in Bretton Woods. It was the product of that previous most terrifying world recession in the 1920s and 1930s. I leap with alacrity to the unfamiliar pleasure of agreeing with the noble Lord, Lord Bruce of Donington—he has had the pleasure of agreeing with everyone else on this matter—that it is to that issue that we must look in order that subsequent generations will understand what is at risk. Our present situation will soon be "in the previous century". Soon I shall no longer be a young man by your Lordships' standards, which means that I am an old man by the standards of the rest of the world. We have a duty to keep the reality of that experience before the consciousness of succeeding generations lest they slide into the awful experiment of doing the same thing again. That means education. We do not need to educate the poor of the world; they can see on television whenever they want the rich enjoying their riches. One of the first things that governments of poor countries appear to do by way of improvement is to provide televisions for their people. They do so for two reasons. The first is for entertainment, as the Romans provided bread and circuses. The second is as a means of propaganda to the people by the government. What the people see are soap operas produced by American companies which are often connected with the companies which set up the television network. I sound as though I am becoming anti-American but I wish to correct that impression. The Americans provide us with a good impression of what we ourselves do wrong and perhaps I take the easiest examples to hand. What is shown to people in poor countries is sumptuous consumption with no political comment—the political comment can be added locally.
The best way to illustrate the very delicate and explosive situation in which we now find ourselves is to ask your Lordships what has been the most dramatic event of the current year. It will not have been the failure of the attempt to dislodge Mr. Gorbachev; it will be the spectacle of 6,000 young Albanians trying to enter the lush pastures of the common market. That is a stark illustration of the extreme differences between comfort and discomfort, between wealth and poverty, very close to home. The right reverend Prelate was absolutely right to say that there is a close analogy and coincidence between the moral imperatives which that and so much else in the world lays upon us and the path that intelligent self-interest would counsel us to take.
If we do not accept the modest discomforts which a change in the present regime of world trade will 263 bring to us now we, and more particularly our children, will be faced with a far greater price to pay in the years to come. That price will not be merely in money or standards of living. We are talking about a sector of the world which may be poor in resources but which is in many cases well developed to act. Perhaps I may remind your Lordships of what the United Nations inspection teams discovered when they went into Saddam Hussein's factories. Your Lordships will realise that the existence of an impoverished, embittered and desperate population in two-thirds of the world represents an extreme danger to the remaining one-third. That and the moral imperative between them make an advance in the negotiations essential. It is a matter of education.
I conclude by commending to your Lordships the One World Week organisation started by the Churches in co-operation some 13 years ago. It was designed to allow local communities to become aware of their identity with communities throughout the world, their shared interests and what should be done about that. It sends out 7,000 packs from the Shetlands to the Channel Islands, each pack going to a group which learns from it. The groups can talk to their Member of Parliament and thus engage in the proper process of democracy which my noble friend Lady Elles suggested to your Lordships should be the governing matter in this as in all things.
My noble friend Lady Young has done the House so much good by introducing this debate. I have no more than five seconds in which to say that your Lordships should be deeply grateful to her for her contribution, as my party should be to my noble friend Lord Thorneycroft for that critical steer which he gave to his policies all those years ago at Blackpool.
§ 5.20 p.m.
§ Lord Judd
My Lords, I join with those who have congratulated the noble Baroness, Lady Young, on making this debate possible. She was right, in her very challenging speech, to underline the immense importance of the subject.
It is clear that on all sides of the House we are united in our desire to see a successful conclusion to the Uruguay Round, it is hoped, by the end of the year. As the noble Lord, Lord Thorneycroft, powerfully reminded us, another breakdown in talks at this late stage would have disastrous consequences for world trade with incalculable political and social consequences. Conversely, as my noble friend Lord Williams argued, success could mark the beginning of sane management of human society in which outmoded concepts of national interest are as dangerous as they are irrelevant.
What do we mean by "successful"? The round will only be concluded once the complex and difficult issues facing negotiators have been satisfactorily resolved. To be judged a success, the final package must genuinely enhance the economic prospects not only of the developed world but also—and crucially—of the developing world where the overwhelming majority of humanity struggles to survive.
264 Never has the need for that been greater. We are faced with the greatest humanitarian crisis in history. It is the crisis of famine and grinding poverty faced by millions of people throughout Africa, Latin America, Asia and even now in parts of Eastern Europe and the Soviet Republics, A successful Uruguay Round will be crucial in achieving the sustained relief of that suffering. An "unsuccessful" conclusion to the round could, in the words of Thomas Ogada, the Kenyan representative to the United Nations:sound the death knell for Africa".In terms of its potential success I suggest that there are two main worries about the Uruguay Round: one is the impact that it will have on the ability of people in third world countries to feed themselves; the other is the impact that the round will have on the global environment.
In relation to the first worry, it is now widely accepted that greater food self-reliance is a key factor in achieving food security. Relatively weak trading nations, especially those dependent on a narrow range of primary commodities for which prices have been extremely low for more than a decade, cannot rely on world markets to furnish food supplies to their populations. That is why the Economic Commission for Africa has stated:Africa's viability resides, above all, in its ability to feed its own people from its internal resources".Therefore, a deal on agriculture must allow food deficit developing countries to do what we in Europe have been doing for decades; namely, to subsidise food production and protect farmers from cheap food imports. It is vital that the GATT unambiguously recognises the fundamental distinction between subsidies used in the North, which perpetuate overproduction and export dumping, and subsidies used in the South to raise self-sufficiency, protect rural employment and promote environmental sustainability.
A successful Uruguay Round will also ban comprehensively the agricultural export dumping to which the noble Baroness, Lady Young, referred. That has been at the root of the anarchy in world markets over past decades. It has caused developing countries chronic trade and food security problems. Efficient producers of commodities such as cereals, sugar and beef, have been forced out of markets and have seen their prices collapse. Staple food producers have seen their household incomes slashed with US and EC surpluses flooding into local markets at prices well below production costs for locally produced cereals.
With regard to the treatment of environmental issues in the GATT round, there is reason to believe that in its present form the GATT is not only ill-equipped to address pressing issues of ecological resource management but, through the use of unrestrained liberalisation measures, it could undermine national efforts to encourage sustainability.
As the Bruntland Report emphasised, trade is an environmental issue. A successful GATT agreement will recognise that. It will allow governments to use trade restriction or subsidies for environmental purposes; for example, rain forest conservation. It will 265 not infringe either existing or future international agreements or national efforts to raise environmental standards.
Once the round is concluded, we must look to the future and renew our commitment to multilateralism in world trade. That will involve giving serious consideration to urgent reform of the GATT itself. The Uruguay Round has shown that the GATT is ill-equipped to deal with the formidable problems facing developing countries. Not only that, successive rounds have, by and large, failed to control the growth in protectionism.
In short, I believe that we now need to consider whether there is not an urgent need for a more open and democratically run organisation that does not lay itself open to accusations of being a rich nations' club. Such an organisation would not treat trade in isolation from other financial considerations which are of critical importance to the developing world, such as the debt crisis and high interest rates. It would have much wider objectives, including protection of the global environment which I suggest within our lifetime is rapidly becoming the most urgent and strategically significant issue facing political leadership across the world.
§ 5.27 p.m.
§ Lord Stodart of Leaston
My Lords, as one who on Monday was sitting on a tractor ploughing some ground in preparation for next year's harvest—and I shall be doing the same again on Friday—I listened with enormous pleasure to the opening remarks of my noble friend Lady Young to whom we are so indebted. She referred to the enormous importance of agriculture. I then listened to my noble friend Lord Boyd-Carpenter saying how crucial agriculture is. If they had stopped at that point, I should have been a happy man. However, they went on to say, in a slightly different way, how very important and crucial it is that a GATT settlement should be achieved.
It has been said many times this afternoon that agriculture is the key issue. I can see no likelihood of a favourable result without an agricultural accommodation. It is probably the most complex and most contentious issue of all. For many years now fair trading has been made virtually impossible as nearly every country in the world uses various means of supporting its agriculture—you name it: quotas, tariffs, export subsidies and so on.
The impression is often put about and widely believed that this country and the Community is more guilty than most. The Ministry of Agriculture, Fisheries and Food has published an interesting document entitled Our Fanning Future in which it gives a table prepared by the OECD. That shows the total value of forms of support and protection given by various countries as a percentage of the value of their total agricultural production. It was staggering to see that Japan goes to the extent of 71 per cent.; New Zealand, at the bottom, was no surprise at 6 per cent.; the OECD averages 43 per cent.; and the United States 30 per cent.
Farmers have been longing for a level playing field—an expression I fully expected to hear used in the 266 debate this evening. We were supposed to get one when we joined the Common Market. But for most of the time farmers in this country have been disadvantaged by a totally incomprehensible thing called the "green pound". I used to know a little about it; I have long forgotten the intricacies. Certainly the new proposals by the commissioner, Mr. MacSharry, are the last things that will give us a level playing field.
One of my recreations—being a perpetual optimist as all farmers are—is a game of golf. Without doubt the MacSharry proposals are exactly like a golf course on which one is almost certain, whatever one does, to drive into a bunker. Although most noble Lords watching the great golfers on television will have noticed that they appear to get nearer the hole when playing out of a bunker than when playing off the fairway, in my experience and that of most of my friends once one drives into a bunker it takes a tremendous amount of time to get out. That is why farmers in this country are extremely and understandably anxious, and indeed considerably jaundiced, at the thought of the new slant being put on the common agricultural policy.
Like many other industries, farmers are retrenching. The machinery people at the Smithfield Show were in deep despair. Farmers are normally good customers for the shopkeepers of the market towns and factories which turn out a host of different goods. But the ripples are beginning to spread fairly widely. If the GATT round can eliminate the inequities of the support that I described, then at least some measure of fair competition will result. We would know what we had to do. No farmer in any sector is afraid of competition in this country provided that it is fair. After all, who can grow cereals more cheaply than the best of the cereal growers on our arable farms?
A moment ago I mentioned New Zealand with her minimal agricultural support. I want to conclude by remembering an episode in 1971 when the negotiations for the Common Market entry were in full swing. New Zealand sent over Mr. Jack Marshall to negotiate on its behalf. He gave a press conference at Heathrow. Somebody asked him, "What will it be like for New Zealand, Mr. Marshall?" He said, "It is going to be unbelievably tough but if it is going to help the old country we shall muscle in". "It" was the Common Market and the Community's use of export subsidies. Those factors are now virtually strangling the economy of New Zealand. Around 61 per cent. of its export earnings come from the land. New Zealand farmers in company with other farmers deserve a better deal, and I profoundly hope that as a result of the GATT round we shall all obtain it.
§ 5.35 p.m.
§ Lord Desai
My Lords, let me first join with other noble Lords in thanking the noble Baroness, Lady Young, for the opportunity to discuss GATT. It also gave me great pleasure to listen to the noble Lord, Lord Thorneycroft, as he recalled his and his party's conversion to the idea of free trade. I confess that I, too, am a late arrival in my belief for, at least, "freer" trade rather than "free" trade.
267 As my noble friend Lord Judd said, for a long time it was believed that GATT was a rich man's club; it was a club for rich countries because it concentrated on the manufacturing trade for the richer countries. In that respect it was a great help. Let us not forget that the Kennedy Round and the Tokyo Round were a great help to the trade and manufacturing of developed countries. The main feature of the current round of GATT is that by now the middle income members of the developing countries have been converted to the benefit of freer trade. It is they who took the initiative in this round of GATT, which is why it is called the Uruguay Round.
In my speech this afternoon I wish to concentrate on the angle of the developing countries rather than of the developed countries, which has been well covered by other noble Lords. In one sense the quantifiable benefits of the Uruguay Round are not large. It must be remembered that the best calculations of the World Bank show that the success of the Uruguay Round will, at most, add three-quarters of 1 per cent. to the growth rate of industrial countries and something smaller to the growth rate of developing countries. We must consider not only the benefits, but also the dangers from its failure. The losses are much greater and more serious to contemplate than the quantifiable or non-quantifiable benefits. It is from that point of view that we must recognise that the success of the Uruguay Round is important for the developing countries, no matter how large or small the benefits.
A dangerous trend through the 1980s was that the developed countries adopted a number of quantitative restrictions—called among other things "voluntary export restrictions"—which were used to block the manufacturing exports of the developing countries to developed countries. That trend was widespread in the US and to some extent in the EC. Indeed, in economic literature it goes under the title of, "strategic trade policy". Strategic trade policy is old-fashioned protectionism under another guise. It is in order to reverse that dangerous trend that we should wish for the success of the Uruguay Round.
We hope that finally the Uruguay Round will get rid of the Multi-Fibre Agreement—a major example of the specific restriction used by developed countries for many years to block developing countries. Major benefits to the developing countries from the Uruguay Round arise from the relaxation of the textile restrictions that take place. In return for that, in the current GATT round the third world countries have taken on board intellectual property for the first time. Up until now they have been pirating, copying or stealing intellectual patents and not paying any price for them, and so they have benefited. It will cost them something to accept that the trade-related intellectual property (TRIPS as they are called) will have to be paid for. In return for that they will receive concessions on textiles and some on agricultural products.
The swap is a good one but we have to remember two things. Through the 1980s, partly because of a debt crisis and partly because of the goading of the IMF, many developing countries unilaterally adopted 268 liberal trade policies. The GATT negotiating structure is such that if you have behaved well in the past there is no concession made in return for that. If you have been a free trade nation you cannot offer anything in return for a reciprocal cut. As the noble Lord, Lord Elton, pointed out, many of those countries which have liberalised their trade have nothing more to offer in bargaining for a reciprocal cut from the developed countries.
In any future reform of the GATT procedures we should give countries credit points for past good behaviour outside the GATT process. People should not have to wait until the GATT negotiations start to begin behaving well. The procedures actually subsidise bad behaviour because if a country behaves badly until the GATT round starts then concessions are offered. That is also partly the reason why the negotiations themselves seem so complicated and dull. Many commodities are being negotiated simultaneously and some of the negotiations are absolutely bizarre.
One major problem with the benefits of liberal trade is that by and large they benefit the better-off countries. Even among the poorer countries, those which are to benefit from GATT negotiations are the middle income countries of Latin America and East Asia and some of the major textile producers of South Asia. Africa stands to gain very little from the GATT negotiations. Therefore, we have to remember that while freer trade is good, and I welcome it, we shall have to find other factors in the international economy to reach the very poor nations because they are countries which do not trade very much. What they do trade are commodities for which, if I may use the jargon, the elasticity is too low for them to benefit by cutting tariffs or prices.
When we consider the GATT process, while it is clearly a very important one, we notice that both this and the Tokyo Round have each taken six years to negotiate. That is clearly a very long time. We also notice that this time there are very many more countries involved in the GATT process and many more subjects being taken on board. Uncertainties caused by the GATT process while it is taking place may have their own costs. I believe that once the Uruguay Round is out of the way we should seriously consider whether there is not a better and more flexible process for conducting international trade negotiations. It should be a process which will give a place as much to the developing countries as to the developed countries. It should also be remembered that in the next round we may have the Eastern European countries and the Soviet Union joining GATT. We shall have to find procedures which will be speedier and more beneficial all round.
We recall that GATT has arisen only because of the reluctance of the US Senate to sign the Havana Charter. We need to revise the process by which the international trade organisation is to be set up along with the IMF and the World Bank. We need new institutions, but in the meantime I welcome the opportunity to say that the GATT process should succeed, but if it fails it will cause great damage to us.
§ 5.45 p.m.
§ Lord Wade of Chorlton
My Lords, I too wish to thank my noble friend Baroness Young for bringing this debate before the House. I wish passionately to support all those who believe so implicitly that a successful negotiation of GATT and further international trade is essential to the wealth of all of us. However, although we need to see a successful outcome to GATT which makes everyone wealthier, that would not be so attractive if we end with an outcome in which some become poorer so that others grow richer. We need to be able to utilise the trade of all the world to make us all better off.
I wish to draw the attention of noble Lords to some information which is in the latest edition ofAgra Europe which deals with the agricultural situation in Europe. Already it has been agreed within the Commission that translating GATT into reality will mean that the exports of grain and wheat from the EC will drop from 17 million tonnes to 9 million tonnes. However, the export of grain from the United States which reached 47 per cent, of the world markets in 1981–82, will increase from that level by 16 per cent, to 20 percent. Recently there has been a confidential Commission report which says that as a result of the CAP reforms brought about by GATT negotiations, land set-aside plans will take 4.4 million hectares of arable land out of production in the EC. It is estimated that out of 4.6 million landholders, 250,000 will take the early retirement pay-off very soon. It is also calculated that about 7 million hectares of land for agriculture will be abandoned altogether.
I draw the attention of noble Lords to those factors because there is a downside to having a much more competitive world where we all should be doing better if in fact the competition, as other noble Lords have said, means that some are disadvantaged. It seems that if we are now moving into a much more competitive world the last thing we should be doing with our agriculture is to make it less efficient than it has ever been and at the very time when we are going to be competing with many more countries, which it is quite right that we should do in a free market. We do not want to be making life more difficult for those of us who are trying to operate in this more and more competitive world.
Many noble Lords have suggested that the CAP has been a disaster. I remind them that many people in Europe have benefited enormously from it. There is a choice and range of food throughout Europe which nobody else in the world has except the United States of America, which has a similar system of support. I also remind the House that many noble Lords show great concern about the environment and how we can utilise land to make this country a better place in which to live. That is a luxury that we can afford only if we have supportive agriculture. Nobody worries very much about the environment in some of the countries to which noble Lords have referred and which want to move into our market place.
If we are to be put into a world market place and compete, as I strongly believe that we should, then we have to be very conscious of the fact that we cannot expect our agriculture reductions to be carried out 270 with a great deal of restriction which does not apply to our competitors. Over the past 10 years the United States of America has increased its milk production by 4 per cent. The result of quotas has meant that milk production in Europe has fallen by 12 per cent. That is not brought about by the market place, but because society in general and the EC in particular have felt it right to put that restriction on European agriculture.
Many noble Lords have complained during the debate about the export of commodities and export refunds. In fact, 65 per cent, of the export of foodstuffs from this country is in added value branded products, it is not in commodity products at all. In order to achieve those added value branded products, some 600,000 people are employed in the food industry in this country, which makes a very important contribution. Therefore, when we talk about agriculture we are not just talking about the 2 per cent. to which the noble Lord, Lord Jay, referred—which does not seem to be very important. We are talking about many more people than that, and vast industries which make an enormous contribution to the well-being of everyone.
Therefore, although on the one hand I firmly support the GATT negotiations, I also firmly believe that we have to move to free world trade in products that give the underdeveloped countries in particular the opportunity to move into our market places. Give them the opportunity and they will. Eastern Europe is already sitting on the borderlines waiting to push forward products as soon as they can negotiate their way into the European market place. They are going to be a lot cheaper than we have seen here up to now. Just two weeks ago, Hungary negotiated an agreement to send several thousand tonnes of duck products into Europe. If those people who complain about the way we farm in this country saw how they farm ducks in Hungary, we would not be allowed to get anywhere near. Yet suddenly we are having to compete with products that are produced very much more cheaply but under conditions which we and maybe the rest of Europe would not accept.
Therefore, as we tackle the world problem, I feel that it is most important that we go into the freer world market which is so essential in a strong position to compete in that world market and should not find that we are marginalised in everything we want to do. One of the noticeable changes that we see in food production enterprises in more competitive parts of the world where they do not have support is that the added value to food production is made in the rural community and not in the urban areas, as happens so commonly in this country. That is a very good thing for the rural community because it adds value.
As we go to a more competitive world, as we undoubtedly shall, then the same pressures will arise in our market place. Already we see changes in the milk industry in this country because of potential changes in the Milk Marketing Board which are essential. We see pressures on individual milk manufacturers, or people adding value to milk, to move nearer to their milk supply. If they are to compete with eastern Europe they will have to get nearer to their milk supply. What stops them? Suddenly there is an 271 enormous outcry from everybody that we must not have a milk value added factory in the countryside because that spoils our view. If our view becomes more important than our competition with eastern Europe, then we shall fail.
So there are many important factors of which we must be aware, not just as a Government but as a nation, in what will happen as we—and I hope that we will—negotiate a much freer market for products throughout the world. We shall also open ourselves up to the competition from which the CAP and other walls around Europe have protected us for so long. It will affect our industry at all levels. It will enormously affect anything to do with the manufacture of food. We have the United States of America ready to pump much cheaper food into the European market place. We must see that as an opportunity and not a threat. However, we can only see it as an opportunity if we realise the pressures it will exert on our industry and do what we have to do to compete. If we wish, we can become an importer of grain from Europe to which we can then add value in this country to put value added products into the rest of the EC. However, it is no good when that is coming into say, north-west England if suddenly a stop is imposed because we say that we must not build any more factories in the North West as that is not what we want to see.
There is a balance in everything we have talked about and, although I strongly support everything that noble Lords have said, I hope that we shall also be aware that we shall have to make fundamental changes in our own attitude towards many of the things which are going to have to change as the world grows more and more competitive.
§ 5.55 p.m.
§ Lord Mackay of Ardbrecknish
My Lords, I am sure we are all grateful to my noble friend Lady Young for introducing what has developed into a most interesting debate. I should love to be tempted to follow my noble friend Lord Wade down the highways and byways of the agricultural policy. However, I shall resist that in the main, but I want to say that he makes a valid point which I can best sum up by saying that there are more to barriers between nations in trading terms than just tariffs. There are other non-tariff barriers and I shall come to some of them later in my speech. However, he has mentioned some of them in the simple way of how we in this country—and indeed in the European Community—expect our fanners to produce their products and how we seem to be pretty lax about expecting the same standards when we import products from other parts of the world. My noble friend makes a valid point.
I want to move a little from agriculture to the processed industries that derive from agriculture. I do not think that calling the processing industry that processes cereals into Scotch whisky quite does it credit and properly savours the product. Noble Lords who were here on a Friday will perhaps recall that in the Second Reading of the Finance Bill I discussed how the United Kingdom Government was not entirely fair in the way it taxed spirits, namely Scotch 272 whisky, and for this purpose I am quite happy to allow all the other lesser spirits to come along in its wake. We unfairly tax spirits as against beer and wine. I suggested that the Chancellor might improve on our record in that regard. That is important when it comes to the European Community, where there are equal imbalances between the way our European partners tax beer, wines and spirits. Indeed, some of our principal European partners do not tax wine at all and they tax spirits very heavily indeed.
Our interest in Europe, as it is in the rest of the world, is that we are the major spirit producers so far as concerns our food processing industry. Therefore it falls more heavily on us if tariffs around the world are unfairly placed on spirits, and on Scotch whisky in particular. I certainly hope that my right honourable friend the Chancellor of the Exchequer will be fighting hard, as he promised he would, to make sure that the minimum rates laid down by the Community for spirits will not be punitive on Scotch whisky and will not be at such a level that the price of Scotch whisky in the southern European Community countries will actually have to be raised in order to meet the levels imposed by the Community, especially when the Commission has said that wine-producing countries can have a zero rate on wine.
Where that spills out on the rest of the world is that if we do not treat these matters fairly and equitably in the Community we are on slightly shaky ground when we go outside the Community into GATT negotiations, or even into one to one negotiations, and attempt to ask other countries to treat whisky and European spirits more fairly than they do. That aspect of the GATT Round is what I want to spend a minute or two looking at.
As these negotiations come to what I hope will be a fruitful conclusion I hope that the processed goods from agricultural production, whether they be biscuits, confectionery or whisky, are not forgotten in the negotiations and in the desire to get a solution.
I make no apology for concentrating for a few minutes on Scotch whisky because, as I pointed out to your Lordships some months ago, it is a very important industry. If my recollection serves me rightly, it is the fifth most important export earner for the United Kingdom; it is the top one for Scotland; it employs not huge numbers of people but 16,000 people in Scotland—largely in rural areas, but not exclusively. And of course in the Scotsman's view—and probably in your Lordships' view, I trust—it brings a lot of goodwill to Scotland and to Britain from all over the world.
§ Lord Mackay of Ardbrecknish
I thought I might get agreement on that, my Lords.
One of the problems in the Scotch whisky industry, as in so many other industries around the world, is that when we try to export we find ourselves up against severe tariff barriers and non-tariff barriers. Perhaps I may give examples of one or two of the non-tariff barriers. Brazil and Mexico require onerous documentation. Canada and South Africa have chemical analytical requirements which are pretty 273 tiresome to meet. Thailand and the Philippines carry out pre-shipment inspections. Noble Lords will notice that I have chosen my examples to range from some of the most developed and richest countries in the world to some of the less developed and perhaps poorer countries. I have done so to illustrate that the problem is not confined to certain nations.
There are 40 instances of discrimination in favour of locally based spirits. Japan is quite bad in that regard, although I am happy to say that, thanks to the efforts of my right honourable friend Mrs. Thatcher when she was Prime Minister, major progress was made in Japan in 1988–89. Indeed exports of Scotch whisky to Japan rose by around 27 per cent, after those efforts. Korea, which ought to be a trading nation, is another example of what I have in mind. My goodness, I keep on seeing when I do my shopping, as no doubt other noble Lords do, products made in Korea. What is the Korean view of fair trading? A 35 per cent. tax is put on the local product but 150 per cent, tax is put on Scotch whisky. If we were to impose such a tax on some of the products that we see in our shops from Korea—I am not suggesting that we should—they would suddenly be by no means some of the cheapest items in the shops.
Then of course there are the tariff barriers which involve import duties or Customs duties. The list of countries with such barriers is quite considerable. It includes Korea, Japan, Brazil, the United States of America—which sometimes in this GATT Round has tried to appear as the whitest of white countries—Hong Kong, India, Australia and New Zealand. Those countries all have some form of import tariff on Scotch whisky. I very much hope that the Commission—as the noble Baroness, Lady Elles, reminded us, the Commission negotiates on our behalf—will not forget that it has a responsibility to the Scotch whisky industry as it negotiates for fair and equitable arrangements around the world.
I doubt very much whether we shall ever remove all these impediments to trade. However, what the Scotch whisky industry would like—preferably, in one-to-one negotiations inside GATT—is to negotiate a zero-for-zero tariff arrangement. We in the European Community are fair and equitable to the import of spirits from abroad. We then expect foreign countries to be equally fair with our exports to them. I very much hope that my noble friend the Minister will be able to assure us that the Government will be doing all they can to encourage the Commission to take a reasonable lead on this matter and to look in particular at the common Customs tariff of the Community itself.
The Community must look at some of its trading arrangements if it expects other people to do likewise. The Community must see to it that there is a reasonable rate on all bottled and bulk spirits imported into the Community, that they are treated alike, that the duty is levied on the basis of alcoholic strength—I have been over that ground before—and that no other import duties are allowed on any imports into the Community. In that way, with whisky 274 as with many other products, we should be able to persuade other countries to have much fairer arrangements for the import of our products.
My noble friend Lord Wade mentioned export refunds. I very much hope that the Government will not allow the Commission to think that any trade-off can be made between a reduction in tariffs around the world and the export refunds given to the Scotch whisky industry. The industry has to use the very much higher priced European and British cereals. Its competitors in the United States who make bourbon buy cereals at a much lower price. The export refund is for that purpose and is not to compensate for the tariffs.
In conclusion, I wish to refer to another industry of equal importance to our country which is often looked at from the point of view of needing protection but which in fact is very important in the international trading scene. I refer to the textile industry. In the United Kingdom the product is worth around £16 billion. About a quarter of that total is exported. In Scotland we do slightly better. Of the £1.5 billion output almost half is exported. It is important for the textile industry that there are level playing fields around the world. I do not just mean in some of the poorer countries—I mean in some of the richest markets or in some of the improving markets around the world.
We should like to see the prohibition of trade distorting subsidies. South Korea has just given a £2.5 billion subsidy to its textile and clothing industries. We should like to see protection of brand names. In Taiwan and Japan that is not done very well at all. The United States of America has a 36 per cent, import duty on our exports to it of wool cloth. What I have illustrated there and in the whisky examples is that some of the richest countries, including the United States, which wish to see themselves portrayed in regard to agricultural products as whiter than white, are in fact fairly protectionist. What we need is a freeing of world trade.
My noble friend Lord Thorneycroft in his powerful speech made it perfectly clear that over 30 or 40 years the freeing up of world trade benefits every single person. I hope that the European Community does not turn itself into a fortress behind whose walls we all shelter, and will in fact take a leading role in liberalising and opening up world trade for everyone's benefit.
§ 6.7 p.m.
§ Lord Plumb
My Lords, I wish, first, to apologise to my noble friend Lady Young for not being present when she opened the debate on the Uruguay Round of GATT. Nevertheless I thank her for enabling the debate as a whole to take place. I was not sitting on a tractor reflecting on the world scene, as my noble friend Lord Stodart was the other day, but I was very much involved in the Smithfield Show. I say that particularly, and I say it in the context of this debate, because there one sees the finest examples of the products produced in this country and throughout Europe. One sees the products of British agriculture and British industry. One sees the high quality stock, 275 machinery and technology. One sees the many overseas visitors who have been pouring into London over the past few days to look for business, to look for opportunities and to look for the expertise that can be offered by agriculture in this country. It is in that context that we should consider the development of trade in the more competitive world into which we are moving.
As I am sure many noble Lords have said, agriculture lies at the very centre of the GATT negotiations. British agriculture, together with European agriculture, must be free to compete on fair terms, and any solution that may be reached in the GATT or any settlement made must apply equally to competitors worldwide. A settlement in GATT is imminent and therefore this debate is timely.
I do not believe that we can ever move towards that level playing field to which many noble Lords have referred. I am not sure that we have ever had a fully level playing field in the United Kingdom. We certainly do not have one in Europe. Nevertheless, on fair terms, we can compete. We should therefore welcome the initiative already taken by the Director General of GATT who has come forward with a detailed framework which I hope will allow the negotiation of a final agreement.
His proposal puts forward a number of elements which would bring about an agreement to reduce trade distorting support measures and protection over the period of the rest of this decade. He claims that that would cover the border measures, to which reference has been made, the export assistance and the internal support which, together, go towards distorting trade. If we accept that policy, it is crucial that each country in turn accepts the discipline of such an agreement and that within the European Community, as part of the overall deal, no discriminatory measures are taken between producers.
A GATT settlement will set the guidelines for a CAP settlement and CAP reform. I do not believe that it is overdramatic to say that the positions which now need to be reached on both the reform of the CAP and on food and agriculture in GATT will indeed cast a shadow forward to well beyond the end of this century. If we produce the wrong answers, then we could see lasting damage done to our ability to compete on fair terms both in Europe and in world trade.
As I see it, the risks are real and the problems deep. No one can argue against the need for those major reforms. The United States and the European Community, together with Japan and many other developed countries, have been subsidising each other out of the market over many years. That has forced world market prices down and, as has already been said so clearly, the sufferers have often been not those countries which are exporting but the developing countries whose market has been undermined.
Therefore to avoid that lasting damage, agreements must be made progressively to reduce the level of trade distorting support measures that we have seen operating over the years. Forms of internal support exempt from such reductions, assuming that they do 276 not distort trade, could include: programmes which provide general services to agriculture research; disease control; general marketing and promotion; retirement and retraining programmes; the transfer of technology; infrastructure building; bona fide food aid and disaster relief, together perhaps with crop insurance and public stockholding for food security reasons. As I see it, there has to be flexibility to allow programmes for regional development, environmental protection and conservation and restructuring of agricultural sectors.
Food safety and animal welfare, as my noble friend Lord Wade said earlier, is a major concern in a world of more liberalised trade. There is always the danger that regulations can be applied and used as non-tariff barriers to protect the individual market. Therefore, we should make sure that there is agreement to enact rules to ensure that sanitary and phytosanitary regulations are based on scientific criteria, and not just on political expediency which often happens or indeed on emotion.
Therefore, in any agreement progressively to reduce direct export restitution and indirect export assistance, there has to be a tightening of rules and disciplines so that the assistance does not exceed the difference between internal and external markets. For example, export subsidies from the European Community have often been higher than the value of the product. That is of no direct benefit to the producer/farmer who is concerned to produce for the marketplace, not for the intervention store. High quality beef, for instance, soon becomes low quality beef after freezing for long periods of time.
Perhaps another area of concern which we cannot ignore as we consider world trade agreements relates, as so many noble Lords have said, to the problem in many developing countries. It is an irony is it not?—that we continually highlight the areas where we have surpluses, yet half of the world's population is either starving or suffering from malnutrition. Special provisions for developing countries and countries undergoing transition to market systems to allow appropriate development programmes and a slower timetable for reductions in border measures and trade distorting internal support have to be made. Many of those countries, including those we see developing in Eastern and Central Europe, are experiencing short-term and long-term problems in financing the normal levels of commercial imports. I believe that they should be eligible to draw more easily on the resources of international financial institutions.
I believe that it is imperative that governments should take all the initiative necessary to ensure that a satisfactory agreement on agriculture in particular is reached during this round and that the round itself is completed as soon as possible. Indeed, it would be an appropriate goodwill message to the world as we enter 1992. It would help to restore some of the confidence that is currently sadly lacking.
§ 6.16 p.m.
§ Lord Clinton-Davis
My Lords, perhaps I may at the outset express an apology on behalf of my noble friend Lord Williams of Elvel for the fact that he had 277 to leave the House shortly after completing his speech. He was unavoidably required to be elsewhere. Certainly no discourtesy was intended, and I am sure that the House will understand.
As has already been said, the House must be indebted to the noble Baroness, Lady Young, for her notable contribution and for her initiative in bringing forward what on any terms has been a very remarkable debate. Several former Ministers, leaders in industry, banking and other significant fields of activity have participated. We even heard about Lord Stodart of Leaston's problems with bunkers. We also had a notable contribution from the noble Lord, Lord Plumb, who was a very distinguished President of the European Parliament. I was very glad to have participated in debates there under his guidance.
If I single out one speaker, I am sure that the House will understand. I say that because for me it was a pure joy to hear the humorous, yet purposive, reminiscences of the noble Lord, Lord Thorneycroft, about the part that he played in advancing the cause of GATT in those early days and also about the part that he played in demolishing some of the ideological prejudices of his party. I happen to feel that he is needed again in that regard, but there it is. I believe that significant lessons may be learned from the powerful and passionate speech that he made.
In my view the common denominator of this debate—and much agreement has pervaded the House today—is the recognition on all sides of the significance of this Uruguay Round and of the fact that time is of the essence. Yet, in the very limited time available, so much more needs to be done if we are to achieve success Of course it is right that, historically in this regard, deadlines have been set before and extended. However, it seems to me that this time most people feel that the deadline which has been set is for real. The stakes are indeed high. I believe it was Carla Hills who said that if the negotiations prove to be successful the world stands to gain about £2,325 billion in terms of world output.
If there is failure, then, as my noble friend Lord Williams of Elvel said at the beginning of the debate, there will be a loss of trade, unemployment, trade wars and disaster for the poorest of all. All that will ineluctably follow. In that context, it is as well to remember the prudent words of Mr. Barber Conable, the President of the World Bank, who said:Protection of the industrial nations costs developing countries more than twice as much as they receive in aid".The present negotiations, and indeed the debate, have focused inevitably on agricultural issues and the common agricultural policy. I wish to put on the record, on behalf of the noble Lord, Lord Cockfield, and myself, that we struggled manfully in the Commission to try to get some sense into the policy. However, we did not always succeed. Other major issues too are critically important. Banking is important, alongside beef. Copyright, textiles, telecommunications, transport, tourism and shipping are critically important in the negotiations. It is as well to observe that the United States itself, while complaining bitterly as it does about the CAP, engages in appalling discriminatory and restrictive 278 practices in terms of shipping; notably as a result of the long-established Jones Act which is still iniquitous, however long it has been part of United States law.
The difficulty with the development of the negotiations is that they have tended to obscure the penalties of failure and the significance for other players on the GATT stage. There is a lack of balance about the negotiations. I refer to the way in which the issues are portrayed, especially in the context of relations between the United States and the European Community—in parenthesis I have to say that on the whole the United States has come off rather better, at least in the PR battle; the way in which the interests of the developing world have been addressed, or, perhaps, more correctly, have not been addressed, as my noble friends Lord Judd and Lord Desai said (of course everyone pays lip service to the interests of the developing world); and then there is the failure to take account of environmental issues, so eloquently depicted by my noble friend Lord Judd.
It is noteworthy that the GATT does not take account of environmental issues, although there is competence there, because a committee was set up in 1971 to examine the relationship between trade and environmental issues. That committee has never met. It is also noteworthy that the Nordic countries, Austria and Switzerland have called for that committee to be revived and to sit. I should like to know from the Minister whether the United Kingdom Government support those endeavours. More than that, the GATT rules forbid environmental protection measures being accompanied or supported by restrictions on trade. I should like to know from the Minister what is the Government's attitude to those issues. For example, how can the Montreal Protocol on CFC emissions be reconciled with that situation? The Montreal Protocol insists that there should be trade restrictions to protect the environment. It was right for all the European member states to support that protocol and to inspire the reaching of that accord.
The noble Baroness, Lady Elles, referred to the Commission being the negotiator there, and rightly so. Nonetheless, it is important to take account of the fact that the Commission has to negotiate according to a mandate which is set by the member states; and so it is relevant to ascertain from the Government what is their position on some of those matters. What about the CITES regulations which impose restrictions on trade in endangered species? What of those many developing countries which are not self-sufficient in agriculture and look for food security? Are they to be placed in the same position as rich countries in being required to phase out subsidies to farmers and farm import controls? How would that impact on third world powers if they were to lose their only source of income? What then of the concept of sustainable development?
Those are serious issues which, in the light of massive hunger, poverty and indebtedness (all so indivisibly connected) must be faced, or are we to shelter under the insubstantial argument that it is not the business of the GATT to address those problems?
279 A number of your Lordships have expressed, in reasonably polite terms, the belief that the CAP is iniquitous. If we had all been farseeing when the Community was established, we might have had some influence in shaping a more rational agricultural policy for the whole Community. There may be a lesson in that too as we approach the IGCs at Maastricht. I noted that the noble Lord, Lord Boyd-Carpenter, who, if I may say so, made a characteristically good and robust speech—we expect that from him—seemed to suggest however that success at the GATT and success at Maastricht were somehow mutually exclusive. I cannot accept that doctrine.
§ Lord Boyd-Carpenter
My Lords, if the noble Lord so misunderstood me, I must have expressed myself badly. All I indicated was that success over the GATT round was more important and more urgent than success over the other matters which will be dealt with at Maastricht.
§ Lord Clinton-Davis
My Lords, I was not that far wrong. In my judgment, at least—perhaps I differ from the noble Lord—they are equally important. Success at Maastricht is important, but so, of course, is success in the world wide negotiations. Perhaps there is not so much between us after all.
It is right also to observe that not much less iniquitous than the CAP has been the deficiency payment system used in the United States—the main source of United States exports subsidies. In the negotiations, certainly in the PR battle at least, we have tended to lose sight of that fact.
I shall say a few words about the consequences of failure. Stronger protection for individual property will go; the liberalisation of trade will suffer; investment in services will be jeopardised; the developing countries will be denied protection against the dumping of vast food surpluses at prices which make it impossible for them to engage in efficient food and agricultural production. So the test for the Community in relation to agriculture is not merely whether we recognise the need for reform—even the most unlikely people seem to understand that today—but whether we can formulate, agree, and then enforce detailed proposals. There is a sorry story to be told about enforcement so far.
As the noble Lord, Lord Boyd-Carpenter, said, we should not underestimate internal political problems posed for so many in the negotiations: the United States presidential elections; our general election next year; the change in the presidency of the Commission; the new post-Maastricht situation; in Germany, where battle has been joined by the German Economics Minister and Herr Kiechle, that champion of small, inefficient, moonlighting farmers whose appetite for unrealistic farm support is insatiable—I can only hope 280 that Herr MÖllemann will succeed; and in France, where there have been violent demonstrations by farmers. There are worldwide internal contradictions.
I wish to say in conclusion that the European Commission has a major task in seeking to formulate a united position. But it must do so if we are to succeed. Concessions here are self-evidently conditional on the United States in particular making much greater concessions in the services sector, on anti-dumping and subsidies. We are so close now to the end of the Uruguay Round that we have to ask, will it be failure or success? Will it be beggar-thy-neighbour policies or better-thy-neighbour policies? Will it be international humiliation or international hope for the future of peoples right across the globe?
§ 6.30 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Reay)
My Lords, I am grateful to my noble friend Lady Young for introducing this debate. I do not think that I have ever taken part in a debate in which there was a greater degree of unanimity. There was hardly a dissentient voice, hardly a discordant note, only faint traces of partisan speech in a general recognition of the importance of this issue and the need for us to reach an agreement before the end of the year. That was very welcome to me.
The General Agreement on Tariffs and Trade—GATT—has served us well for over 40 years. It has provided a framework of rules for the conduct of trade relations and the settlement of disputes without the need for recourse to damaging retaliation and counter-retaliation. It has also provided the forum for negotiating trade liberalisation. It is a framework within which world trade has grown and prospered.
Its success is demonstrable. Since GATT was formed in 1947, tariffs in the industrialised countries have dropped from an average of 40 per cent, to an average of 5 per cent. World trade in goods has grown nearly twice as fast as world GDP. When recession came, as it did in the mid-1970s and again in the early 1980s, the world trading system held up, unlike the disastrous falls in trade and output which occurred in the 1930s, resulting from protectionist legislation in response to the Wall Street crash.
At the same time an increasing number of countries have come to realise the benefits of liberalising trade. When the GATT began it had 23 members. Membership has now grown to over 100 countries, with still more applying to join. GATT members now account for nearly 90 per cent, of world trade.
However, in recent years the GATT system has been coming under increasing strain. There has been a growth in protectionist pressures and in grey area measures which circumvent the GATT system and thus undermine it, even if they are not directly contrary to it. In addition, GATT does not cover important new areas of increasing importance to trade, such as services, investment, and intellectual property. Moreover, new rules are needed for textiles trade and for agriculture. It is for these reasons that GATT members embarked on the Uruguay Round of negotiations to modernise and strengthen GATT. We 281 believe that a successful conclusion to the Uruguay Round would bring great benefits both for developed countries and for the developing world.
British industry stands to gain considerably from trade liberalisation which will open up more opportunities for exports. Participants in the Uruguay Round have set themselves the objective of reducing tariffs by an average of 30 per cent. It has been estimated that if this objective is met, it could boost British exports by more than £700 million.
As far as service industries are concerned, liberalisation in this important area would provide major new opportunities for the British service sector. The European Commission has suggested that European Community exports of services could increase four-fold. At the moment services account for 60 per cent. of advanced countries' domestic economic activity, but for only 20 per cent. of world trade.
The introduction of GATT disciplines into the field of intellectual property protection would also yield important benefits to industry. At present, the lack of such protection loses our drug companies £50 million a year; and it costs our record industry perhaps as much as £1 billion a year. These figures give some idea of the importance to our industries of an agreement which protects them against piracy, counterfeiting, and illicit copying.
More and better opportunities to invest overseas will be opened up if we can achieve an agreement on removing trade-distorting conditions on investment such as minimum export requirements. This is of major significance to a country such as the United Kingdom, which is the second largest outward investor in the world after Japan.
Proof of the value to our industries of a stronger, more open international trading system lies in the fact that British industry has consistently lobbied hard on the need for a successful round. I am greatly encouraged by the support which it has given the Government in our efforts to promote a successful outcome. Representatives of British industry and commerce have also joined their colleagues in other European countries and elsewhere to ensure that the Commission and other governments are left in no doubt of the importance they attach to a substantial agreement.
However, we must not think that it is only producers who stand to gain. The consumer too will see major benefits. Liberalising markets will promote competition and offer the consumer greater choice. It should also bring lower prices, by reducing protection. Protection of the textiles industry costs United Kingdom consumers alone £1 billion a year. This is equivalent to an extra 5 per cent. on retail prices. Let us not forget that it is the poorest members of society who are hit hardest by higher prices.
As my noble friends Lady Young and Lord Alexander of Weedon reminded the House, the OECD estimates that agricultural subsidies in OECD countries cost consumers and taxpayers some 300 billion dollars last year. The common agricultural policy is estimated to cost EC consumers and taxpayers 130 billion dollars a year. Of course, these costs will not disappear overnight. But reform would 282 put in place a mechanism which will enable market-distorting subsidies and barriers to agricultural imports to be progressively reduced.
As the noble Lord, Lord Judd, brought out in a forceful speech, the benefits of a successful Uruguay Round will not be limited to producers and consumers in the developed world. Developing countries also will benefit from a general reduction in tariffs. At the moment, developing countries suffer more from the exclusion of their products from markets of developed countries than they gain from overseas aid. A Uruguay Round agreement will give them better access to developed markets. To give an example, improving access for tropical products provides one means by which the developed world can help developing countries. In this context I am glad to be able to say that as part of the Uruguay Round negotiations the European Community has found itself able to reduce the tariffs it levies on such products and has offered further reductions. Reduced tariffs will encourage increased trade flows, not only between north and south, but between south and south, that is between developing countries themselves.
Developing countries will also benefit from agreements on services, intellectual property rights and investment. The presence of GATT disciplines will make western firms more willing to supply services, technology and investment in developing countries, and this in turn will provide new skills and promote domestic research and development in those countries.
I mentioned the costs of textiles protection to our own consumers. Many developing countries are major producers of textiles and clothing. As the noble Lord, Lord Desai, reminded us, we must not forget the obstacles which protectionism puts in their way in this sector above all others, as they seek to increase export earnings and create employment opportunities. I am happy to say that negotiators are close to an agreement which would entail phasing out the Multi-Fibre Arrangement over a period of about 10 years. At the end of this transitional phase textiles trade would be brought fully within the normal rules and disciplines of the GATT, as strengthened in the current negotiations.
I should like to turn to this subject of strengthening existing rules and procedures. Improved rules covering trade in all sectors are necessary to ensure that producers are not subject to unfair competition. But we are also pressing to ensure that these rules are not abused for protectionist motives. In the case of anti-dumping, for example, we believe that there is a need for anti-dumping provisions to deal with unfair trade, which GATT members should not be able to circumvent. However, we also believe that there is scope for tightening up the rules to ensure that when action is taken this is done on the basis of criteria which are as objectively assessed as possible.
We are also seeking a strengthened mechanism for the settlement of disputes over breaches of GATT obligations. Under the present consensus principle, the consent of all GATT members is required before the findings of panels hearing cases brought before the 283 GATT can be adopted. This means that parties to a dispute can block decisions which go against them. We need to reform procedures so that this is no longer possible. If such a reform is implemented there would no longer be any justification for unilateral trade measures.
The most difficult issue in the Uruguay Round has, of course, been agriculture. Disagreement over cuts in agricultural support and protection was a major cause of the breakdown in negotiations at what was to have been the final meeting in Brussels last year. Since then participants have gone a long way to resolving their differences. The European Community and the United States are much closer to bridging the gap which exists between them. This time last year the US was demanding cuts of up to 90 per cent. in agricultural support. The two sides now seem close to a more realistic figure of 30 to 35 per cent. reductions in support over five or six years in each of the separate areas of domestic support, export subsidies and import access.
Four outstanding issues have yet to be resolved in the agricultural negotiations. First, negotiators are still discussing how reductions in export subsidies should be measured. A commitment based on a reduction in the total value of export subsidies would be simple to measure and is favoured by the European Community. However, if the gap between world prices and domestic prices narrows and the subsidy per tonne therefore decreases, a budgetary limit might actually allow the quantity of subsidised exports to increase. The United States is therefore looking for a commitment to reduce the volume of subsidised exports.
My noble friend Lord Wade has seen press references to substantial reductions in EC exports occurring as a result of GATT. I believe the figures he has seen are rather high, but I emphasise that nothing has yet been decided. A compromise solution incorporating both budgetary and quantitative commitments would seem a sensible solution and may well be possible. The second key issue is how to convert import barriers—
§ Lord Reay
My Lords, we are not responsible for that matter in the GATT negotiations as they are conducted by the Commission. I shall discuss agriculture further in a moment.
As I was saying, the second key issue concerns how to convert import barriers, such as quotas and variable levies, into fixed tariffs which might then be subject to a reduction commitment. Tariffication as this is known, is now accepted in principle by most contracting parties, but the precise methodology for calculating tariff equivalents is still under discussion.
The third issue involves what is known as rebalancing. When the European Community put forward its original offer of 30 per cent. cuts in total subsidies, it also proposed to introduce new protection 284 for certain cereal substitutes, such as oil seeds. The Community accepted that such an increase in protection would need to be matched by correspondingly larger reductions elsewhere to meet the overall 30 per cent. cut. In our view, however, the Uruguay Round is not the time to introduce new protective subsidies, and we argued against including rebalancing in the European Community proposals. Predictably, rebalancing has not proved acceptable to other contracting parties, and I believe the European Community must now be prepared to moderate its position if we are to get movement in other areas.
Fourthly, negotiators still have to determine the precise nature and scope of the green box; that is to say, those subsidies which will be exempt from cuts. There is general agreement that some measures which are not directly linked to production, such as set-aside or environmental payments, should be placed in the green box and be exempt from reductions. Although these policies transfer government funds to agricultural producers, they do not encourage excess production. Other policies which offer price support or production subsidies clearly should not be in the green box. Between these extremes the precise boundaries of the green box have yet to be decided. In particular a decision has yet to be taken on the situation regarding direct payments to producers, such as the compensation payments proposed by the Commission as part of the reform of the common agricultural policy. We would like to see exemptions from cuts kept to a minimum to ensure that the agreement results in effective overall reductions in support, not only in the Community but in other countries too.
Of course, it is not enough for the European Community and the US alone to reach agreement. Any deal on agriculture must be acceptable to other GATT members, including Japan and the Cairns Group of agricultural exporting countries. The agreement which seems to be emerging from these negotiations may seem disappointing to some contracting parties. However, the crucial point is to get an agreement which locks agricultural subsidies into the GATT system once and for all. The remorseless application of the GATT ratchet has brought tariffs on manufactured goods down by seven-eighths since GATT began and I am sure that future rounds of negotiations will produce further reductions in agricultural tariffs.
As my noble friend Lord Plumb pointed out, inflated agricultural subsidies cost us dear in higher taxes and higher prices, and yet the full benefit of this sacrifice is not passed on to the farmer. All too much of the subsidy goes on storage, refrigeration and disposal costs. Also, returns on farming are higher than they would otherwise be and this perversely drives up the price of rents, land and other inputs.
§ Lord Wade of Chorlton
My Lords, my noble friend the Minister said that in Europe production will be limited. Is he aware of any other participants in the GATT negotiations who, in addition to reducing their tariffs, will also put a limit on their level of production?
§ Lord Reay
My Lords, that matter is part of the general negotiations. A general reduction in subsidies will not necessarily adversely affect farmers as much as they may fear. This is particularly true of British farmers whose greater efficiency will be rewarded by increases in their competitive advantage as market distorting subsidies are reduced.
I was pleased to hear the confident assertion of faith of my noble friend Lord Stodart of Leaston in the ability of British farmers to meet the demands of a more open and fairer market. I share that faith. An agreement on agriculture is in all our interests. It will pave the way for agreements in other sectors, for agriculture is not the only unresolved issue.
Negotiations are continuing on reductions in tariffs. The UK has strongly supported the Community position on the importance of cutting high or peak tariffs. This is because high tariffs are more of a barrier to trade than low tariffs. The European Community has largely given up relying on high tariffs. Our highest industrial tariff is 22 per cent. Once the Community tariff offer is implemented, the highest rate will be 19 per cent. Initially the United States focused on its zero for zero proposals under which each participant would completely eliminate tariffs on certain items. However, these proposals would only result in the elimination of tariffs in cases where rates are already very low. However, cutting peak tariffs and eliminating low tariffs are not mutually exclusive options. It is looking increasingly likely that it will be possible to reach a compromise covering elements of both approaches.
In the field of services good progress has been made. All the major parties accept that the most favoured nation principle should be the long-term objective for all forms of services. This principle, which means that no nation receives more favourable treatment than that available to other nations, is a principle which has been a powerful mechanism for promoting free trade. It is vital that it should apply in the agreement on trade in services.
I entirely agree with my noble friend Lady Young on the importance of achieving a framework agreement for services. Good progress is being made although the detailed work on specific commitments for each service sector will continue into next year after the main package of Uruguay agreements has been settled.
Having gone through the principal areas in which work remains to be done, let me now turn to the overall state of the negotiations. Attention is focusing on the talks between the European Community and the United States. The European Community/US summit early last month underlined the determination of these two parties to reach agreement. It also did much to bring that agreement closer. Since then high level negotiations have continued. Meetings have been taking place in the Hague today following preparatory meetings which took place in Brussels yesterday. The talks have widened to include all aspects of the round, rather than focusing exclusively on agriculture. While differences remain, these are gradually being resolved.
Further progress in these bilateral negotiations would act as an additional stimulus to the multilateral 286 negotiations in Geneva where progress has fallen behind the timetable set by the GATT Director-General, Mr. Dunkel. He had originally hoped to table a draft agreement in mid-November. However, the negotiating committees failed to produce the sectoral agreements which would have made that possible.
The noble Lord, Lord Jay, queried whether an agreement would be possible this year. We believe that we can still achieve the necessary breakthrough before the end of the year. Once that is achieved, there will still be some detailed work to do. It should be possible to complete that work in time for the final agreement to be formally approved by March next year, but agreement on the principles of a comprehensive package covering all areas of the negotiations must be reached this year. If a breakthrough on agriculture is achieved in the next few days, Mr. Dunkel hopes to achieve an overall agreement by 20th December.
Perhaps I may now respond to some points raised by other noble Lords which I have not touched on or have touched on only briefly. The noble Lord, Lord Williams of Elvel, raised the matter of textiles. I am grateful for his support on that matter and for the support that he promised generally from his side on the matter. It was well illustrated by his extremely constructive speech. Perhaps I may add to what I said on the subject of textiles by making it plain that the Government have always been committed to liberalising trade in textiles, but it is equally our aim that the rules and disciplines should be strengthened by improvements, all or most of which would come in before completion of the MFA phase-out.
United Kingdom industry rightly attaches great importance to progress in the areas of safeguards, subsidies, intellectual property, dumping and better access to all markets. The right reverend Prelate expressed his anxiety about the dumping of agricultural products on the third world. We all share that worry. The reductions in agricultural support and export subsidies to which I referred should make such practices unnecessary as well as undesirable.
On the issue of the reform of the common agricultural policy, several noble Lords, including my noble friends Lord Boyd-Carpenter and Lord Boardman, the noble Lords, Lord Williams and Lord Jay, and the noble Baroness, Lady Seear, referred to the urgent need for reform of the CAP. I can assure the House that the Government continue to be committed to secure a genuine, fair and sustainable reform of the CAP. I am grateful to my noble friend Lord Boyd-Carpenter for recognising the Government's strong line on the CAP reform and for protesting at the failure of the noble Lord, Lord Hollick, to do so. I should have thought that our efforts to secure reform of the CAP were fairly widely appreciated. We believe that changes which make European agriculture more market-oriented, cut the costs of the CAP and lead to a closer integration between agriculture and the environment are vital, regardless of what happens in the GATT Uruguay Round.
I am grateful to several noble Lords, including my noble friends Lady Young and Lady Elles, for 287 recognising the role played by my right honourable friend the Prime Minister. Throughout those important final stages, he has played an active role in the round through the contacts with his counterparts in other key GATT countries. As chairman of the G7, he recently wrote to all his colleagues reminding them of their commitments and emphasising the need for everyone to face up to the difficult decisions involved. That gives the lie to the accusations of the noble Lord, Lord Hollick, that Her Majesty's Government have not done enough to advance the negotiations. Moreover, it must always be remembered, as my noble friend Lady Elles reminded us, that it is the Commission which negotiates on behalf of all member states.
A number of noble Lords, including the noble Baroness, Lady Seear, said that the whole subject of GATT should be given a wider airing and a higher degree of public awareness. I agree with that, but I do not see that if that matter does not achieve success it can be blamed on the Government. I understand that my right honourable friend the Secretary of State for Trade and Industry and his predecessors have constantly sought to bring this subject to public attention. I understand that my right honourable friend the Secretary of State made a major speech on the subject only two days ago to the Institute of Directors. This I strongly commend to your Lordships, although those who pay close attention to my speech will have less need to read his.
My noble friend Lord Alexander of Weedon asked about the liberalisation of financial services as a result of the Uruguay Round. The United Kingdom and the European Community want to see the maximum possible liberalisation by other GATT members in that sector. As my noble friend said, the Community is already fairly open. The offers by other GATT members and currently on the table certainly fall short of what we would ideally want, although we must remember that this is the first time that services have been covered in GATT. If we get a sound framework agreement in place, it can be built on later. My noble friend is not in his place, but, as he said, he will read the debate in Hansard and I can assure him through that medium that I shall reply to his other questions in writing.
Perhaps I may reply to my noble friend and clansman Lord Mackay of Ardbrecknish on the subject of Scotch whisky and, as he put it, the lesser spirits. We are well aware of the importance of gaining improved access to third country markets for Scotch whisky producers and for other spirit producers. We have consistently supported the Scotch Whisky Association's position on that issue. We are also aware of the association's support for the United States proposal for multilateral elimination of tariffs and non-tariff measures on distilled beverages. We have made its views known to the European Commission negotiators who will respond to the United States. However, that is only a small element of a much wider United States proposal whose implications will need to be considered carefully in the context of our overall aims for the negotiations.
288 The noble Lord, Lord Clinton-Davis, sprang several questions on me to which I shall reply in writing. However, I can tell him that the GATT working party to which he referred has recently been re-established.
It was a privilege to listen to one of the players in the GATT story. I refer of course to my noble friend Lord Thorneycroft telling us of an important moment in the development of free trade thinking in British politics, a moment in which he himself played a most significant role. I agreed with my noble friend in what he said about the urgency of reaching a conclusion.
All the major parties agree that the round must be substantially concluded this year. If we do not reach an agreement this year, there is a risk that we shall never reach one. We must be absolutely clear that we cannot afford another failure like that of last December. As my noble friend Lord Boyd-Carpenter said, we have now a golden opportunity. We are nearer a deal than we were this time last year. In key areas of the negotiations, the agreements will be more robust and comprehensive than they would have been had they been signed last December. The extra time has enabled negotiators to improve on draft texts and to agree more tightly drawn-up provisions.
The GATT Director-General has put the onus for resolving the final difficulties firmly on the participants, where it belongs. If we shirk that responsibility and avoid taking decisions, however difficult they may be, we risk seeing an increase in protectionism, restrictive bilateral agreements, and the creation of inward-looking trade blocs, as my noble friend Lord Thorneycroft warned us. We would not simply return to where we were before negotiations began and we would lose much more than the chance to open up new areas of trade. People would lose faith in GATT. At a time when developing countries and the countries of Eastern Europe are adopting market economies and seeking to participate more fully in international trade we cannot fail them by allowing the framework which safeguards that trade to be destroyed.
Finally, a successful Uruguay Round will cement world peace. Whereas in the 1930s protectionism led to the Great Depression which was the prelude to war, free trade can provide the framework for peace. We can, and must, ensure that the international trading system, which has served us so well in the past can provide the basis for fair and open trade into the 21st century, to the greater prosperity of all mankind.
§ 6.59 p.m.
§ Baroness Young
My Lords, it remains for me to thank everyone who has taken part in this important debate today. Unfortunately, neither time nor the conventions of the House allow me to respond to all the points raised or to say all the many things that I should like to do, but I too shall read Hansard very carefully.
In thanking all noble Lords who have taken part, I should like particularly to echo what my noble friend Lady Elles, the noble Lord, Lord Clinton-Davis, and, a few moments ago, my noble friend the Minister said about my noble friend Lord Thorneycroft. He made an extraordinarily moving speech. He gave us an 289 insight into an important piece of history and the role that he himself played. We should all be very grateful for what he did on that occasion as well as for his speech today.
This debate has been unique in my experience too by the very wide measure of agreement in all parts of the House. Every noble Lord who spoke agreed on the vital importance of completing the GATT round. I am grateful to the noble Lords, Lord Clinton-Davis and Lord Williams of Elvel, for their support as well as to the noble Baroness, Lady Seear. The GATT round is of importance not only for the industrialised countries but also for its effect on the third world. We all listened with great interest to the noble Lord, Lord Judd, who spoke from his great experience of the matter.
Several important messages came forward to the Government. First, the agreement needs to be made quickly. I was most interested to hear what my noble friend the Minister said on that point. Secondly, the importance of what is at stake in the GATT round needs to be much more widely known. That is always difficult to achieve. I recognise that my right honourable friend the Secretary of State for Trade and Industry has made a number of speeches on this matter. But people find it very technical and difficult. As my noble friend Lord Boardman said, they are bewildered by it. However, it is something which affects us all. That point was made also by the right reverend Prelate the Bishop of Worcester.
Much of the latter part of the debate turned on the issue of agriculture. I listened with great care to what was said by my noble friends Lord Wade and Lord Stodart about the importance of a level playing field. I am quite certain that no one will be able to drink a glass of whisky again without understanding exactly what is meant by a non-tariff barrier. It was helpful also for my noble friend Lady Elles to explain so clearly the reasons for the development of the common agricultural policy and to draw our attention to the importance of the role of Mr. Dunkel. We certainly wish him well. I should like to add my recognition of the value of the high standards of British agriculture. Like all those who have taken part in the debate, I hope that my noble friend Lord Plumb is right and that a settlement is imminent.
I conclude by thanking my noble friend the Minister. He gave a very full and extraordinarily interesting reply. I was pleased to hear where we stand in the detail of the negotiation and I felt greatly encouraged by what he said. I hope that in his turn he will take back a message from this debate about the strength of unanimity of view in all parts of the House. Everyone spoke from both knowledge and experience. Quite properly we want to support the Government at this time in all that they do to press the Commission for a settlement of the GATT round. My Lords, I beg leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.