HL Deb 24 June 1991 vol 530 cc469-84

6.1 p.m.

Baroness Dunn rose to ask Her Majesty's Government what is the current state of the GATT negotiations, particularly as they affect Hong Kong.

The noble Baroness said: I should at once inform the House that I am chairman of Hong Kong's Trade Development Council and a director of a number of companies involved in trade and services. Your Lordships last debated the important matter of the Uruguay Round negotiations on 23rd January, when the noble Lord, Lord Williams of Elvel, called attention to it. Many issues connected with those complex negotiations were aired, and this House was at one in expressing its hope that the Uruguay Round would be brought to a successful conclusion.

I ask this Question today for three reasons. First, since the last debate negotiations have resumed at the technical level and the American Congress has extended its fast track authority to the President. Secondly, at a time when we all rejoice at the decisive victory in the Iraq war, we may lose sight of the threat of a trade war. The risk of a trade war would be the inevitable result of another failure of the Uruguay Round. The implications—and this is my third point—would be far-reaching for Britain, the world and especially Hong Kong. At any rate, my experience in dealing with Ministers facing difficult issues is that it is no bad thing to prod them from time to time.

The General Agreement on Tariffs and Trade has facilitated the greatest expansion of world trade ever known. Its membership now includes 102 nations or territories which account for 90 per cent. of the world's trade. According to the GATT statistics, annual world trade in 1990 amounted to over 7 trillion US dollars, and Britain's trade amounted to over 409 billion US dollars. Since the GATT was founded in 1948 Hong Kong's trade has increased from a mere 1 billion to 164 billion US dollars. Hong Kong is now in its own right a contracting party to the GATT. Its negotiators actively participate in the wide range of subjects covered by the Uruguay Round. It firmly believes that it is in everyone's interest to see the GATT strengthened and world trade further liberalised by a successful Uruguay Round package.

Hong Kong shares with Britain a common interest in a successful outcome to the current negotiations. Like Britain, Hong Kong has an externally orientated economy. It allows unfettered access to its internal markets, and it depends on access to those of its trading partners. The GATT has been the cornerstone of its commercial relations policy and the guardian of its trading interests. As a result, Hong Kong has managed to climb from being a poor and economically backward entrepot, to a thriving, dynamic and broadly-based economy which now ranks 11th among world trading entities, and which gives Hong Kong a GDP per head as great as a number of European Community countries.

To me it is incomprehensible that such a demonstrably successful system should be threatened. Yet threatened it is, because the negotiating partners have been unable to reach agreement on many of the key issues. Four and a half years after the Uruguay Round was launched, it has become stuck on the mudflats. In the words of the Director General of GATT, Arthur Dunkel, it is: bedevilled by accusations, self-righteousness, mutual misunderstandings and inability to distinguish special interest pleading from the public good". That sounds to me like the diplomatic equivalent of the death from a thousand cuts.

At stake is not just the round itself, but the whole system of world trade. In the absence of a package deal, the GATT system will be pushed to the sidelines; protectionist sentiment will gain ground; trade restraints under the guise of voluntary export restraints, orderly marketing arrangements and anti-dumping measures will increasingly be introduced; and the world will be drawn into a trade war with the United States, the European Community and others retreating behind separate barricades.

Such an outcome would hurt Britain and Hong Kong more than it would hurt the United States and Japan. For example, Britain's exports per capita last year in 1990 were worth 3,200 US dollars and those of Hong Kong were worth over 14,000 US dollars as against 2,300 dollars for Japan and only 1,500 dollars for the USA. Other Members of the House will know better than I how much poorer countries desperately depend on access to world markets.

It is not for me to comment on the merits of the Community's stance on agriculture in these negotiations. But I believe it is right to draw attention to the fact that farming accounts for less than 5 per cent. of output and jobs in the OECD countries. I do so because it was the inability to find an acceptable compromise on agricultural subsidies that caused the collapse of the Uruguay Round last December. Negotiations have since resumed, albeit at a technical level. I hope that Ministers can assure the House that when the matter once again comes up for high level consideration at the G7 meeting next month, Her Majesty's Government will use all their influence to ensure that the issue of agricultural protection is put in proper perspective and is not allowed to put at risk a successful outcome of the negotiations.

Unresolved differences remain in other areas where Britain and Hong Kong have a substantial interest, including services, anti-dumping measures and safeguards. I hope that in pursuing Britain's negotiating aims in these areas Ministers will work hard, hand in hand with Hong Kong's negotiators, to seek solutions that will maintain the integrity of GATT.

After four and a half years of discussion, time for a settlement is running out. We must be thankful that the US Congress has recently extended its fast track authority to the President by two years. That authority enables the President to negotiate a complete package for presentation to Congress rather than to submit each component of the deal for congressional approval. But we must not be lulled into a false sense of optimism by that; the longer an agreement is delayed, the greater the risk that it will become an issue in the forthcoming presidential election and the greater the risk of the package unravelling under pressure from the protectionist lobby. Can Ministers therefore disclose their timetable for completing the negotiations and assure the House that all parties are seized with the urgency? The United States and the European Community must be made fully aware of their pivotal position in the Uruguay round and their responsibility for its success or failure. It is time to demonstrate real leadership.

I have been at pains to stress the common interest between Britain and Hong Kong in a successful outcome to the Uruguay round. But the House will forgive me if I conclude by mentioning an additional reason why its success is so crucially important to Hong Kong. While Britain is in the throes of debating the benefits of sharing its sovereignty with its European trading partners, Hong Kong has only six years to run before one sovereign withdraws and hands over to another. The chance of that unique and awesome prospect working out well for its 6 million people largely depends upon the continuation of the remarkable prosperity that the territory enjoys as a successful trading economy. Loss of access to the world market would cripple our economy. Without a successful trading economy, Hong Kong has little chance of retaining its special value to China as a special administrative region, and that would jeopardise the concept of one country, two systems on which the Sino-British Joint Declaration rests.

Therefore an early breakthrough in the Uruguay round is of the utmost importance to Hong Kong in these years of transition. Whatever Britain's trading interests may be, and equal though Hong Kong's status is with Britain in the GATT, Her Majesty's Government in these negotiations must have clearly in mind their constitutional obligation to help maintain Hong Kong's prosperity, on which all our hopes for its future depend.

6.14 p.m.

Lord Marlesford

My Lords, I rise with particular trepidation to address your Lordships for the first time. One of my noble friends was good enough to seek to reassure me on the prospect. "Don't worry", he said, "the House is always indulgent and generous to maiden speakers. Whatever the maiden speaker says, he or she usually receives compliments". Then he added, "But it's what they think of you that matters".

I am particularly glad to have the chance to speak on Hong Kong, and especially to have the privilege of following the speech of the noble Baroness, Lady Dunn. I have been lucky enough to know her for many years. Your Lordships will not need me to say that she is held in the highest esteem in Hong Kong. The noble Baroness made the point that a successful outcome to the Uruguay round of GATT negotiations is important both to Britain and to Hong Kong not only for trading reasons but also because there is now only six years before Hong Kong leaves the protection of the British Crown and becomes a special administrative region of China. It is on that aspect that I wish briefly to dwell today.

I believe that Hong Kong is by far the most important factor in Britain's relationship with China and is likely to continue to remain so for at least the remainder of the century. As many noble Lords will know, Hong Kong is one of those places which it is particularly hard to imagine. I first got to know it nearly 30 years ago when I was the Far East representative for the British chemical company, Fisons. I have been fortunate enough to visit it regularly ever since and for the past 14 years or so I have been able from time to time to write articles about Hong Kong affairs for the Economist.

It has changed out of all recognition during that period, except in one respect. The thread of self-reliance and entrepreneurial zest has remained throughout. It is not easy to understand what makes Hong Kong tick. Indeed I suspect that it is as hard for a Chinese from the mainland as it is for a European if neither of them has been a regular visitor.

I fear that today the political, and thus the economic, situation in Hong Kong is fragile. In the five years between the signing of the 1984 Sino-British Agreement and June 1989, it may perhaps have been reasonable to have put great reliance on China's economic self-interest as underwriting the success of the transition of Hong Kong from British to Chinese sovereignty. But that has now changed.

The top leaders in China do not themselves know Hong Kong at first hand. It is they, not the more junior officials who may know Hong Kong well, who are in the driving seat. Deng Xiaoping, who, although he no longer holds executive power in China, is most certainly the dominating influence over his government's policy, has, I believe, never visited Hong Kong. Nor, I think, has the Chinese Prime Minister, Li Peng. Both of them, particularly Deng, are deeply concerned at the political and economic instability which they see in the Soviet Union and which they feel to be a potential threat to the stability and integrity of their own country; and probably to their own political survival.

It was the first tremors of such instability which shook Tiananmen Square on 4th June 1989. Hong Kong shared the world's indignation at these events and showed it all too plainly. The result is that for China's leaders Hong Kong now represents a political threat rather than a potential economic asset. They view with apprehension and alarm the prospect of having to digest such an independently minded place and are worried that it could act as a focus for secessionist tendencies in southern China. That has been highlighted in the past few years with the increasing relative prosperity of Guandung Province, which has been described by some as the California of China.

I fear that sometimes the Chinese Government may now wonder whether the risk of one country, two systems is too great a price to pay for the economic benefits of Hong Kong and its capitalist culture. I believe that their fears are unjustified, first, because, as your Lordships know, open protest is usually a substitute for, rather than a stepping stone to, subversion. I am sure that the vast majority of Hong Kongers merely wish to be left alone to do what they are best at; that is, trade and business. Secondly, it is only in agriculture that the modernisation of China's economy has made real strides in the past decade. Progress in Chinese agriculture has been dependent largely on private enterprise.

Therefore, in the long term China must gradually absorb the benefit of Hong Kong's curious and complicated capitalist chemistry. It is not easy. That is why, perhaps, the attempts of China to turn its special economic zones into laboratories of capitalism have so far been rather disappointing. Had they been more successful the result might have been to make China less dependent upon Hong Kong.

The problem has been that China believed that the economic benefits of capitalism could be obtained by an appropriate mixture of capital, technology and management. It has never really understood the role of the entrepreneur. That is why there are now almost 2 million people on the mainland, most of them in Southern China, working for Hong Kong-owned companies. That is significantly more than the 1.4 million employed in manufacturing in Hong Kong itself.

Yet the management of many such enterprises—and I have visited several—still consists almost entirely of Hong Kongers, sometimes right down to production line supervision. If the Hong Kong companies were to withdraw it is unlikely that the enterprises would to be profitable and competitive. Therefore, there is a growing economic dependence of China upon Hong Kong. That has been reinforced since the check to foreign investment in China which followed Tiananmen Square.

There is one other aspect of Hong Kong that I venture to suggest merits your Lordships' attention during the coming years. The good government of Hong Kong, which has enabled the place to flourish economically since the war and to have standards of decency of which Britain can be proud, is not merely the result of the integrity and dedication of the Hong Kong Civil Service; nor is it due only to the participation of Hong Kongers such as the noble Baroness in public affairs there, important though all that is. It is that Whitehall, which has a direct responsibility for the proper conduct of Hong Kong affairs, has always been answerable to Westminster. In 1997 Peking takes over from Whitehall; but who is there to take over from Westminster? I do not pretend to be able to suggest the answer. It will, I am sure, have something to do with the introduction of local democracy and the responsibilities that that imposes.

As your Lordships will know, from September this year Hong Kong's legislative council will have its first directly elected component. Out of a council of 60, 18 members will be directly elected for geographical constituencies. Some might say that it is too little too late. Most of all, it depends on how we in Westminster, in both Houses of Parliament, are able to reassure the Chinese Government that in 1997, within a flourishing world economy to which the success of the Uruguay round must contribute, we shall be able to hand over to China a stable and prosperous Hong Kong with its people confident that their rights and liberties, in addition to their way of life, will be respected. I am grateful for your Lordships' attention.

6.24 p.m.

Lord MacLehose of Beoch

My Lords, I am pleased to have the opportunity of congratulating the noble Lord, Lord Marlesford, on his maiden speech. I am sure that he was as pleased to deliver it as was the whole House to hear it. It was a most notable speech. His knowledge and fair-mindedness which are so apparent in his writings will be of great value to your Lordships' House. I am delighted that he has focused his maiden speech on Hong Kong. However, he is of acknowledged competence in a wide field of economic, political and social issues. I hope that we shall hear from him often.

My noble friend Lady Dunn developed her Question in wide terms. She made a most valuable and thought-provoking speech. She remarked that from time to time Ministers should be prodded. As a former Governor who was often prodded by her, I can say only that Ministers should look out.

My noble friend mentioned two or three specific Hong Kong interests but she did not develop those. I wish to expand briefly on only two. I shall then pick up her valuable reference to the political implications of the Uruguay round on Hong Kong in its present political predicament and its relationship with China. That was so well commented upon by the noble Lord, Lord Marlesford.

The first specific point is that a satisfactory agreement on textiles and clothing is of vital importance to Hong Kong. In January at the time of the previous debate initiated by the noble Lord, Lord Williams, an agreement to liberalise world textile trade seemed within our grasp. However, it has yet to materialise and meanwhile the multi-fibre arrangement on textiles will run out at the end of next month. The uncertainty is highly damaging. Is the United Kingdom endeavouring to move the European Community to agree to an extension? If so, what prospect does the Minister see of success?

The second specific point is that no draft text has yet been agreed for a new anti-dumping code. On 15th June an article in the Economist, which I mention with respect to the noble Lord, Lord Marlesford, described the present code as "already a protectionist's Charter". Our object should be to achieve stricter disciplines and clearer language in the code, in particular on determination of dumping and of injury. I understand that, on the contrary, America and the EC are seeking to broaden the code. I cannot believe that widening the GATT's scope for protectionist lobbies is in the interest either of the European consumer or of those who depend on the freedom of world trade such as the United Kingdom or Hong Kong. Therefore, will the United Kingdom stiffen the EC to resist?

I leave the specific points and return to the relevance of trade to Hong Kong's present predicament. Your Lordships' House has not stinted time for Hong Kong's affairs but in recent years trade has rarely been the immediate issue. Therefore, I am glad that my noble friend has asked her Question with particular reference to Hong Kong. In doing so she has gone to the heart of the matter because trade and all that accompanies it is the basis on which Hong Kong has been built.

The whole concept of "one country two systems", so well spelt out in the Joint Declaration, is excellent. It was an achievement by the Government and an act of statesmanship by China. But I wonder whether it would have been possible if Hong Kong had not prospered so consistently under the GATT regime or if China had not so wisely and rightly concluded that it would continue to prosper if it continued as a free port and a centre of international commerce. That prosperity could be made or marred by the Uruguay round in which Hong Kong is only one voice among many and naturally looks to the United Kingdom for support.

It is most timely that the political implications for Hong Kong should have been so clearly stated in your Lordships' House by my noble friend who, in addition to her other qualifications, is the senior member of the Executive Council of Hong Kong.

6.30 p.m.

Lord Glenarthur

My Lords, I shall be very brief. However, I particularly wish to support the noble Baroness, Lady Dunn, because of the theme underlying her Question. Her persistence as regards this matter with at least one former Minister responsible for Hong Kong has had a belated effect.

Hong Kong is subject to enormous and diverse pressures. As my noble friend Lord Marlesford pointed out in his admirable maiden speech, Hong Kong is unique in that she has a peculiar development in her status in only six or so years' time. Many of the economic matters which underlie Hong Kong's relationship with China and worries about 1997 were addressed by my noble friend in his remarks.

Those anxieties are familiar to many of us who have been lucky enough to have a fairly close association with Hong Kong over the past few years. My noble friend mentioned representative government as one problem. There are others which are of much more local and immediate anxiety; for example, the Vietnamese boat people which worry me particularly. It is striking that only about two years ago I was in Geneva taking part in an inter-governmental conference on that subject. While matters improved after that, we now see a sad and debilitating degradation which affects Hong Kong in a very difficult way.

All those aspects damage and have an effect, to a greater or lesser extent, on confidence for the future. As the noble Baroness, Lady Dunn, said, trade has made Hong Kong what she is today. Up to 1997 and beyond, trading opportunities will allow Hong Kong to remain pre-eminent in the Far East as a gateway for goods to and from China as well as in her position in relation to the wider world. The figures which the noble Baroness gave in her speech say it all.

I always find matters to do with GATT extremely complex, and I cannot pretend to be any sort of expert on it. The noble Baroness explained the detailed arguments in relation to GATT affecting Hong Kong with great clarity. However, serious political consequences could follow from failure to resolve the current round. Those political consequences may be international but they are bound to have a more marked effect upon Hong Kong in her special circumstances.

Time is fast running out. I hope that my noble friend Lord Reay will accept that there are special features about Hong Kong and GATT which deserve particularly close attention; for example, textiles, safeguards, the GATT anti-dumping code to which the noble Lord, Lord MacLehose, referred, and tariff reductions.

As to solutions to the current impasse in more general terms, recent articles and commentaries point to the role of subsidies under the common agricultural policy being the one single issue which if resolved in a favourable way could unlock the problem. However, I realise that in Europe that is no easy matter, especially at present. When the Minister replies, I hope that h will address the theme underlying the Question asked by the noble Baroness; that is, the confidence for and of Hong Kong in her future. With her unique position, if Hong Kong is not adequately helped to retain her pre-eminence of trade, the very roots of her position are likely to be undermined and the damage very difficult to repair.

6.35 p.m.

Lord Holme of Cheltenham

My Lords, the House will recall that as recently as January we had a full and very useful debate on the subject of GATT. Nevertheless, we are greatly indebted to the noble Baroness, Lady Dunn, for tabling her Unstarred Question this evening which gives us the opportunity of a short debate on an extremely important topic. It is important not only because of the central role which British Parliament must play in the years ahead in relation to Hong Kong but also because the question of GATT is one of the most urgent and fundamental issues in the world economy as a whole.

One could wish that the Ministers at the G7 meeting over the past two days had been as concerned with GATT as they were with trying to manipulate the short-term value of the dollar because it is in the liberalisation of world trade that we can hope for a re-animation and picking up of the world economy which is so desperately needed.

I add my congratulations to the noble Lord, Lord Marlesford. It seems particularly appropriate, given his connection with the Economist, that he should have spoken so eloquently on an issue relating to the cause of free trade to which that publication has made such a distinguished commitment over many years. On these Benches we share that historical commitment to free trade. It is a matter of great encouragement that the European Community—not least thanks to the efforts of the Commissioner for Competition Sir Leon Brittan—has resisted those siren voices which call for fortress Europe.

The real test for Europe lies ahead with the problem of the Uruguay round and GATT. Can the problem be surmounted, the Uruguay round fully resumed and the interests of European farmers put into perspective?

If and when the negotiations fully resume, in this country we must have a particular eye open for the interests of Hong Kong albeit that Hong Kong negotiates as a full equal in the round. After all, 80 per cent. of Hong Kong's manufactures are exported. As the noble Baroness reminds us, Hong Kong literally lives to export and exports to live. Therefore, I believe we should look out for the interests of Hong Kong in every way possible.

There is a natural tendency, even for liberalising measures such as the extension of GATT, to reflect the interests of the major trading blocs of Europe and the USA. We need to have regard to the developing countries and the strongly emergent parts of the world economy. Of course, Hong Kong is no longer to be classified as a developing country. The noble Baroness, Lady Dunn, reminded us of the formidable export record of Hong Kong. Hong Kong is a tiger, but even tigers need a leg up occasionally.

The noble Lord, Lord MacLehose, raised the one issue to which I should like to devote a few moments; that is the contentious and difficult issue of textiles. Hong Kong's position in the GATT negotiations is to seek "a meaningful liberalisation" of textiles. We should also want that in the United Kingdom.

We should recognise also that just as the textile industry is important to Hong Kong, so it is important to the United Kingdom. There are 500,000 people in the UK employed in textiles, which is not an obsolete industry seeking some sort of shabby protectionism but is a very go-ahead industry with a fine reputation and good products which is seeking a fair deal. It is not fair that South Korea subsidises its textile and clothing industries to the tune of £2.5 billion or that Australia imposes tariff rates of up to 50 per cent. on some clothing.

Yes, the multi-fibre arrangement should be integrated into GATT as the Punta Del Este declaration of 1986 required. However, let the MFA be phased out over a number of years to allow adjustment. Let there be clear linkage to the question of access to third world country markets allowing for British textile companies greater exports to compensate for what we should accept; namely, higher import penetration. Above all—and this is particularly true between Great Britain and Hong Kong—let us develop a common approach to the question of dumping rather than competitive definitions if possible.

I should like to echo the question raised by the noble Lord, Lord MacLehose, as to whether the Minister can give us some idea of whether there is likely to be an extension of the multi-fibre arrangement during this interregnum. The uncertainty is not good for the industry. I hope that we can help and work with Hong Kong, specifically on the textile question but also on the wider front. We are both trading nations and our prosperity, like that of the world economy, depends on the fastest possible resumption of the GATT.

6.41 p.m.

Lord Williams of Elvel

My Lords, the House is grateful to the noble Baroness, Lady Dunn, for tabling this Question. Perhaps I may say that in my experience in this House—I accept that it is relatively short—few people have come here with the reputation and esteem of the noble Baroness. Today she illustrated why she is held in such esteem. I am sure that I speak for all noble Lords when I say that we are glad to include her among our number.

I echo also what was said by the noble Lord, Lord Marlesford, in his distinguished maiden speech. This is a problem not just for the generality of the world but politically and specifically for Hong Kong. As the noble Lord, Lord Holme, and indeed the noble Baroness, pointed out, we had a debate on the generality of GATT on 23rd January. Unless the Minister can say anything different, not much has happened since then. At that time, speaking from this Dispatch Box on behalf of my party, I advised the Government that we were wholly committed to the Uruguay round and its success; that remains our position today. I agree with the noble Lord, Lord Holme of Cheltenham, that it would be a disaster for the world if this round were to fail. I cannot imagine the 1990s being other than a disaster in terms of world trade and possible United States protectionism if this round were to fail.

As the noble Lord, Lord Glenarthur, said, the issues are extremely complex. We must not blame one side or the other, for instance, for their rough negotiating tactics or inability to develop a proper reform of the common agricultural policy. Much work needs to be done to ensure that it is a success.

Speaking about the generality of GATT, I wish to emphasise two points. First, as the Minister will certainly remind us, it is a negotiation conducted by the Community; the United Kingdom is not negotiating in its own right. We are disappointed that the Community did not accept the Swedish proposal, which in our view was a compromise on the agriculture question. As I understand it, the United States would have accepted that had the Community been able to go that far. Secondly, there seems to be no real understanding in the Community of our responsibility towards the third world. I do not include Hong Kong in the third world. The noble Baroness rightly pointed out that Hong Kong is part of a thrusting new world. However, there are underdeveloped countries in Latin America and Africa which need the support of the European Community in the negotiations on the Uruguay round.

A point quite properly brought out by the noble Baroness and emphasised by the noble Lords, Lord Marlesford, Lord MacLehose and Lord Glenarthur, related to the political implications for Hong Kong should the Uruguay round fail. It is only necessary to realise the timescale under which Hong Kong and the Sino-British agreement is operating to see how important that problem is. Therefore it is vital that we get a move on. I join the noble Baroness and other noble Lords in urging the Government to ensure that the Community does that.

The points where interest in Hong Kong march with interest in the United Kingdom seem to be manifold. We want and they want a proper market in trade, financial services and intellectual property, proper settlement of dispute procedures within GATT and proper respect for copyright patents throughout the world. Those are all points on which we in the United Kingdom and Hong Kong can work together.

The noble Lords, Lord Holme of Cheltenham and Lord MacLehose, mentioned the multi-fibre arrangement. Areas perhaps exist where the interests of the United Kingdom and Hong Kong do not entirely march together; some areas may be different. As the noble Lord, Lord Holme, rightly said, in the United Kingdom there are 500,000 people employed in an efficient textile industry. The Labour Party does not intend to allow those people to be betrayed by any agreement which phases out the multi-fibre arrangement without proper safeguards and a long transition period. By "long" I emphasise what was said by my colleagues in another place: we mean a 10-year period and not the five-year period to which the Government have referred.

Having said all that, I join other noble Lords in stating that the political urgency for Hong Kong is the theme dominating this short debate. We had a debate in regard to the GATT in January. Nothing has happened since then which materially alters the conclusions to which we came. Noble Lords on all sides of the House supported the view that Her Majesty's Government should press the Community as hard as possible to negotiate a proper resolution to the Uruguay round. Since that time the United States Congress agreed to allow the fast track process to continue to the end of the year. Therefore the onus is on Her Majesty's Government and, through them, the Community.

Yet again I reiterate the plea I made in January of this year. It is time the Prime Minister sat down with other heads of government in the Community and got the Community's act together to bring about a breakthrough on the matter. If necessary, he should sit down with President Bush to achieve that breakthrough. Until there is agreement in principle at the highest level of government, however much civil servants talk about the matter they will never have a proper brief upon which to work.

I emphasise the theme of the Question tabled by the noble Baroness, Lady Dunn. Let the British Government press as hard as they can for agreement, not only for our sake but for the sake of Hong Kong. I hope that the Minister will respond in kind.

6.48 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Reay)

My Lords, we have had a short but interesting and distinguished debate, illuminated by a notable and stimulating maiden speech from my noble friend Lord Marlesford. He spoke from long personal experience of Hong Kong. I hope that he will speak in this House often and on many other subjects.

I am grateful to the noble Baroness for raising this matter today. It enables me to explain the Government's intentions in the GATT Uruguay round negotiations, in particular so far as they concern the position of Hong Kong in those negotiations.

As is well known, the so-called Uruguay round in GATT—the eighth round of negotiations since GATT came into operation in 1947—was launched in 1986 and was due to be completed last December. In the event, the more than 100 countries participating in the Brussels ministerial conference in December could not agree on a package to complete the negotiations. A great deal of valuable technical work had been done by then and important agreements were virtually ready in several of the individual negotiating areas. But major differences remained in a number of key areas, notably agricultural trade, services and market access. That meant that no agreement could be clinched.

Work has continued since. There is agreement among all the main parties to the negotiations that the round must now be concluded as soon as possible and preferably by the end of 1991. That aim was clearly stated at the recent conference of Ministers from the OECD countries. A number of Ministers, including the United States trade representative, Mrs. Carla Hills; and my right honourable friend the Secretary of State for Trade and Industry, have stressed the importance of making rapid progress before the end of July. If the round runs on beyond the end of the year the risk is that the current political impetus will be lost and, as the noble Baroness put it, the progress already made will unravel. I can also say to the noble Baroness that at the G7 meeting in London next month, I certainly hope that the heads of government will put their personal authority behind efforts to reach agreement.

It is not surprising that difficulties arose. The Uruguay Round is the most complex international trade negotiation ever, with simultaneous negotiations on 15 separate topics, many of them interlocking. But the Government, with all our main negotiating partners, including the other member states, firmly believe that we must get a successful conclusion. A successful round will contribute greatly to reducing trade barriers worldwide and will accordingly bring a major non-inflationary stimulus to world economic growth. Failure would not only mean loss of these gains but could lead to a loss of confidence in the GATT system itself. That would be extremely damaging for the whole world trading system.

To this end the UK's objectives for the round remain the same as when the round was launched. They are to get more open markets by further reducing tariffs and other barriers to trade; to extend GATT disciplines on an agreed basis to trade in services; to improve intellectual property protection worldwide; to tackle trade-distorting investment measures; to reinforce the structure of GATT, in particular its system for settling disputes; and to persuade developing countries, as they become richer, to observe more of their GATT obligations.

Perhaps most importantly of all, we need to bring agricultural trade for the first time within effective GATT disciplines on agriculture. The need to reform the Community's common agricultural policy is now widely accepted within the Commission and the member states. That process must be carried on in harmony with reforms of world agricultural trade agreed within the GATT round. It is encouraging that the Community has agreed to negotiate specific binding commitments to increase market access and to reduce internal support and export subsidies.

A lot of progress has been made in many of the different negotiating areas, and the Government believe that, given the proper determination, it will be possible to finalise an agreement which is so much in everyone's interest. We shall continue to work hard with our EC partners to bring that about.

As to Hong Kong's future in GATT, since 1986 the territory has had the status of an independent contracting party. Hong Kong speaks for itself and does so very effectively. The Sino-British Joint Declaration provides that there will be no change to the position of Hong Kong in GATT after 1997. Hong Kong will continue to have its own independent and influential voice in GATT.

Hong Kong has as great an interest as any other participant in a successful outcome to the Uruguay round. We shall all benefit from more open markets. The territory is one of the most open economies in the world, and it is in its interests that others reduce barriers to trade to the greatest degree possible. I know that Hong Kong is playing a vigorous and constructive part in the negotiations and the personal contribution of ambassador Broadbridge in Geneva and of his predecessor, ambassador Cartland, has been very important.

I might also add that Hong Kong's position as a major trading nation is due in no small part to the excellent promotional efforts of the Hong Kong Trade Development Council, of which the noble Baroness, as she told us, is the distinguished chairman.

The noble Lord, Lord MacLehose, raised the question of the multi-fibre arrangements. In that he was followed by the noble Lords, Lord Holme and Lord Williams. The integration of the textile trade into the GATT system is a major objective of the Uruguay round. All parties are agreed of the need to phase out the multi-fibre arrangements. At the ministerial meeting in Brussels last December we were close to an agreement on the terms under which that can be done over about 10 years. I hope that that progress can be built on now that the talks have resumed. In the meantime the extension of the round means that the current MFA, which expires in July, will have to be extended.

I know that Hong Kong and other major exporters share that view because of the importance of ensuring certainty for traders, as the noble Lord, Lord MacLehose, mentioned. Our view, which has been agreed within the EC, is that that extension should be for no longer than 17 months which should provide time to complete the round and ratify the resulting agreement.

The noble Lord also raised the matter of anti-dumping. The United Kingdom is encouraging the Community to work for improvement of the GATT anti-dumping code so that it provides for more objective and transparent procedures while ensuring that anti-dumping remedies cannot be used for protectionist purposes.

I conclude by saying that I profoundly hope that we are on our way to success in the Uruguay round. Hong Kong stands as a shining example to economic dynamism and the benefits that open markets can bring. My noble friend Lord Marlesford spoke of its unchanged thread of self-reliance and entrepreneurial zest which, he observed, had lasted for 30 years.

Hong Kong has been created by free trade. But the United Kingdom, more than most countries, depends on an open trading system. As the noble Baroness pointed out, the United Kingdom has a higher value of exports per head even than Japan. So the United Kingdom and Hong Kong both share an interest in seeing the Uruguay round brought to an early and satisfactory conclusion. I therefore welcome the timing, content and style of the noble Baroness's intervention this evening.

House adjourned at three minutes before seven o'clock.