GATT

HL Deb 05 November 1992 vol 539 cc1596-603

6.50 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield)

My Lords, with the leave of the House I should like to repeat a Statement made by my right honourable friend in another place. The Statement is as follows:

"With permission, Madam Speaker, I should like to make a Statement on the position in the GATT Uruguay Round of trade negotiations.

"The House will recall that the Uruguay Round of trade negotiations—the eighth GATT round -was launched in 1986. Its coverage was ambitious —15 different areas and 108 parties—making it the biggest trade negotiation in history. As well as traditional GATT areas such as tariff and non-tariff barriers, it covered the new areas of services, intellectual property and investment, and the development of new GATT rules for agricultural and textiles trade. It also aimed to improve the rules and functioning of the GATT generally.

"These aims were ambitious, but they have now been very largely achieved. The draft text produced by Mr. Dunkel, the GATT director general, at the end of last year proposed a basis for agreement on all these issues. Over 80 per cent. of the proposals were agreed by all the parties. However, there remained a number of unresolved problems, principally over agriculture, which led the European Community to say that the text was not acceptable as it stood. Negotiations also still have to be completed on the commitments by individual parties to cut tariffs and barriers to trade in services.

"I must make clear to the House that the European Commission is responsible for negotiating in the GATT on behalf of the European Community. It negotiates under authority from the Council of Ministers, who will have to approve any final agreement. For their part the Government have consistently supported a Uruguay Round agreement. That has been particularly true during our presidency when we have made concerted efforts to help achieve a satisfactory conclusion.

"Since the Dunkel text appeared, efforts have concentrated on bilateral negotiations between the European Commission and the United States. These were aimed at resolving their remaining bilateral differences, mainly on agriculture, and so open the way to the completion of a full multilateral agreement in Geneva.

"The latest round of these talks took place earlier this week in Chicago between the European Community's Agriculture Commissioner, Mr. MacSharry, and the United States Agriculture Secretary, Mr. Madigan. As well as continuing attempts to settle the remaining difficulties over the GATT agriculture agreement, they were also trying to resolve a separate but related trade dispute over the Community's support regime for oilseeds. The Community and the US have been negotiating changes to this regime following the findings of the GATT panel that it breached the EC's GATT obligations.

"Some progress was made on both issues, but final agreement had not been reached before the talks were suspended on Tuesday evening. The gap between the two sides has nevertheless been narrowed substantially and the remaining differences are very small indeed. The Government are working to bring both sides back to the negotiating table as soon as possible.

"The United States has just announced retaliatory action in the oilseeds dispute against 300 million dollars of Community exports. I understand that that covers various types of wine, rapeseed oil and wheat gluten. This is a highly regrettable development and the Community will need to consider its response very carefully. But I would stress that the list of affected products will only come into effect after 30 days. The question of EC counter-retaliation, which some in the Commission have mentioned, will only arise if there is no settlement in the meantime and would in any case be subject to the approval of the Council of Ministers. It is in the interests of both sides to avoid starting a spiral of retaliation which can only harm exporters and damage the prospects for GATT agreement.

"Little time remains if we are to meet the end-year target set for conclusion of the GATT round by the G7 Summit and the Birmingham European Council. This is also important if the US Administration is to take advantage of their arrangements for so-called "fast track" approval under which any agreement must be notified to Congress by March. We may never have a better chance to conclude such a wide-ranging agreement. If this chance is missed, the prospects for the negotiations and for the world trading system are serious, and those most directly concerned will carry a heavy responsibility.

"While the remaining issues are difficult, the two sides have also never been closer together. A settlement both of the GATT issues and the oilseeds dispute is achievable. The benefits of agreement would be substantial. Apart from the extra 200 billion dollars annual world output which, on an OECD estimate, would result from the round, there is the immediate boost to business confidence which agreement would give. We can and must grasp this prize."

My Lords, that concludes the Statement.

6.57 p.m.

Lord Williams of Elvel

My Lords, first, I thank the noble Baroness for repeating the Statement made in another place. It is sad and disturbing that we always seem to be discussing hiccups in the GATT round when all sides of your Lordships' House and all communities believe that it should go ahead.

Perhaps I may ask the noble Baroness a number of questions. First, is it the case, as I have heard recently, that Commissioner MacSharry has now resigned on the ground that interference from the President of the Commission did not enable him to do the deal that he thought would be acceptable to the United States? Secondly, are the French agricultural subsidies the major problem? If so, what can the United Kingdom, in its presidency of the Community, do about that?

Thirdly, will the noble Baroness give us her views on what the remainder of the world thinks about this curious dispute between two major trading blocs? So far as I understand, the rest of the world is impatient that an agreement which would benefit the third world in particular—I refer to over 100 countries—is held up by a curious dispute over what I believe is 1 million tonnes of oilseed. Is that not a rather odd circumstance? Should we not seek to persuade the Community to break through it?

Fourthly, is the noble Baroness aware that on 30th June the Prime Minister assured another place that he was looking for a successful outcome to the GATT negotiations during his presidency? Can we have an assurance from the Government that if that was what the Prime Minister said on 30th June, that is what the Prime Minister is saying today?

It is a sad and sorry tale. It is extraordinary that a major stimulus to world trade, which we all support at a time of world recession, should be put at risk by a difference in the negotiating position with regard to one million tonnes of oil seed production. If the Uruguay Round can be completed, the gains to industry and commerce will be immense. The Government and the House must not permit that success to be lost in a dispute over soya bean.

Finally, I echo what the noble Baroness said in the Statement which she repeated. If that chance is missed, the prospects for the negotiations as regards the world trade system are serious and those most directly concerned will carry a heavy responsibility.

Baroness Seear

My Lords, we on these Benches wish to thank the noble Baroness for repeating the Statement. Perhaps I may say yet again how much importance we attach, as I believe is the case on all sides of the House, to the success of the Uruguay Round and how disastrous it would be if failure occurred at this late stage. It reads as an unbelievable story that because of oil seed—there always seems to be a great deal too much of that in France—the wholly desirable consequences of a settlement of the Uruguay Round are being held up.

As was said in the Statement, a boost would be given to confidence in world trade which is long overdue. It is estimated that a successful completion would increase output by 200 billion dollars per year. The loss of such wealth creation which that implies, in a world in which there is so much poverty, should not be allowed to happen. Above all else, it would make such a tremendous difference to the people in developing countries whose wellbeing and future prospects are of enormous importance. This is probably the single most important issue before parliaments in all countries today and a successful conclusion dwarfs in importance so many of the other matters which have been discussed in your Lordships' House and in another place this week.

Particularly lamentable is the apparent attempt by the United States to use retaliatory tariffs to try to achieve a result. Of course, in some sense that may be only a negotiating attitude in the hope that it will lead the European Commission to come to its senses. However, if this is the beginning of retaliatory tariff wars, with protection mounting in all countries, then the future for trade for us and for other countries is gloomy indeed, and the consequences are most serious.

For the EC to retaliate would be to compound the error still further. Retaliation cannot take place unless the Council of Ministers agrees. The determination to achieve a successful conclusion of the Uruguay Round must to some extent at least be influenced by the attitude taken by the governments of member states. We demand from the Government that they throw their whole weight behind achieving a satisfactory conclusion to the round. Their strength in the European Commission is surely somewhat enhanced by the events of yesterday. They must throw their weight behind achieving a successful conclusion of the round. They must also oppose retaliatory tariffs: it would be the last straw if the European Community embarked upon them. If we go down that road, the results will he disastrous.

Baroness Denton of Wakefield

My Lords, I thank the noble Lord, Lord Williams of Elvel, and the noble Baroness, Lady Seear, for joining with me in expressing enormous anxiety as to the unacceptable prospect that the talks may not be resolved. It is something which we cannot contemplate. I can assure your Lordships that my right honourable friend the Prime Minister, not only as head of the UK Government but also as President of the Council, will continue to reinforce the extremely strong views which he has expressed already about working towards a settlement of this problem.

As has been rightly said, nothing could happen to support the world economy as effectively as a successful conclusion to these talks. Again, as has rightly been said, the contribution that that would make to the health and welfare of the third world outclasses any other means by which we could offer aid.

The noble Lord, Lord Williams, asked about the position of Commissioner MacSharry. It is reported that he resigned a few moments ago, apparently because of disagreements with Delors over the GATT agricultural negotiations. That is a development which we can only regret.

The negative attitude of some member states is indeed to be regretted wholeheartedly. I stress that all member states signed the commitment to aim for agreement by the end of the year at the Birmingham Council meeting. Therefore, it is difficult to see why we are not moving forward.

The noble Baroness drew attention to the danger of retaliatory action; we are well aware of that. We are convinced that that will bring no answer to the problem. It may perhaps be helpful to your Lordships if I quote US trade representative Carla Hills in issuing the barriers. She said: We are open to further negotiation in the 30 days before the duties become effective … This action will not affect our determined effort to reach a Uruguay Round agreement". We must hope that that will give us a window of opportunity.

7.6 p.m.

Lord Boyd-Carpenter

My Lords, can my noble friend answer the question put to her by the noble Lord, Lord Williams of Elvel, as to whether or not the main factor in the failure to reach agreement has been the attitude of the French to agricultural production? If that is right—and I want to hear her confirmation of that—is it really a fact that the French are capable of holding up this agreement which, as I understand it, is desired by all the other members of the Community?

Baroness Denton of Wakefield

My Lords, indeed, the strength of the agricultural lobby in France appears to be a major contributory factor to the problems which we now face. We should search as hard as we possibly can for solutions. France joined with the other members of the European Council in saying that it would work towards agreement. We must regret that this difficulty has now arisen.

Lord Jay

My Lords, now that this country is at the heart of Europe, can the Minister explain why the British Government have failed to induce the French Government to desist from obstructing the negotiations for the narrowest of protectionist reasons, thereby obstructing the whole future of world trade? Is it true that M. Delors intervened to prevent agreement being reached this week?

Baroness Denton of Wakefield

My Lords, as the noble Lord, Lord Jay, will understand, the negotiations involving the Community were bilateral. I cannot comment on the absolutely confidential details of those discussions. If we could understand why we cannot persuade the French to agree, we should then be able to solve the problem.

Lord Bonham-Carter

My Lords, does the Minister agree that the French are not the only people who pursue a subsidised agricultural policy and that American agriculture is heavily subsidised too? That should not be forgotten. Perhaps I may also suggest to the noble Baroness that these negotiations are conducted by the Commission, but that the Council of Ministers is ultimately in the driving seat. It is no good simply blaming the Commission. However, if you believe that the whole problem is France, the way in which you can deal with that is by having qualified majority voting. That is not something that would appeal to some people elsewhere, but that is the fact of the matter.

The second fact of the matter if you want to deal with the French position is that you have to mobilise the Germans, who have much more influence with France than we do, to persuade the French to change their attitude because it is Germany rather than we who are in a position to exercise real leverage. That emphasises how extremely foolish we were after the abandonment of the ERM to get involved in a ludicrous slanging match with Germany which is after all so important in these matters.

Baroness Denton of Wakefield

My Lords, the noble Lord raises a number of issues. I agree that there are points of prejudice on both sides of the bilaterals that have taken place. There are points of self-interest which countries have been considering. I should like to think that the whole of the Community—the Council of Ministers has the end responsibility; I was not trying to lay that at the door of the Commission—is working together. With our partners in the Council we are certainly doing that. I would not, as perhaps the noble Lord did, underestimate the strength and value of the part played by my right honourable friend the Prime Minister.

Lord Mackay of Ardbrecknish

My Lords, will my noble friend perhaps explain to Commissioner Andriessen and some other commissioners the old adage that two wrongs do not make a right? Earlier today I saw suggestions that the Commission would propose retaliation against the United States. The United States already feels wronged by the Community's attitude to oilseed rape. Just to compound it, retaliating against its proposed retaliation would in my view take us into a spiral of protection which would he extremely dangerous to the world economy, the Community economy and our own economy. Will my noble friend give an undertaking to your Lordships' House that, if this matter comes to the Council of Ministers, the Government will resist any proposals from the Commission to retaliate against the United States?

Baroness Denton of Wakefield

My Lords, I agree with my noble friend that we see this as the most unwise path that we could possibly travel.

Lord Kennet

My Lords, the noble Baroness has told the House that, in the Government's opinion, France is the principal member government of the European Community to be holding out against settlement with the United States. Will she tell the House which other Community governments are inclined to tough it out and which are on our side and inclined to settle quickly?

Baroness Denton of Wakefield

My Lords, I am afraid that I cannot give details. The comment on the French Government and the agricultural position must be drawn from the remarks of Commissioner MacSharry who was involved in the negotiations. I reiterate that every member of the Community agreed to work towards agreement by the end of the year.

Lord Stoddart of Swindon

My Lords, in the Statement the noble Baroness said that British goods would not be involved at present. However, if there is retaliation, would not British goods, including Scotch whisky, electrical goods, furniture and computers, become very much involved? Does not this illustrate the futility of centralism and the absurdity of allowing our trade relationships, even with our greatest and most long-standing partner—America—to be negotiated by a group of other countries with interests diverse from, and often diametrically opposed, to our own? Finally, is it not quite unthinkable that we should allow this country's trade to be governed by the necessity of the French to prevent a riot among their farmers?

Baroness Denton of Wakefield

My Lords, we are part of a global market. It is important that we are part of negotiations which can bring into this market-place an uplift of 200 billion dollars. However, I agree with the noble Lord that, were this agreement not to be signed and were we to end up—this is not the Government's aim—in a retaliatory situation, it is not just the list of goods that he mentioned that would suffer. It would be disastrous for our economy.

The Viscount of Oxfuird

My Lords, does my noble friend agree that, despite the reaction of both parties to the situation, a dumping action could be taken as a way of removing the issue from the debate and isolating it as a matter of local concern?

Baroness Denton of Wakefield

My Lords, we would be delighted if the issues could be split, but we are convinced that there are both political and practical problems that do not make that a feasible solution.

Lord Monkswell

My Lords, given that the Commission negotiates for the European Community on the instructions of the Council of Ministers and that the chair of the Council of Ministers for this six-month period is Great Britain, it seems to me that there is a direct responsibility upon us. Is the failure of the negotiations, and Commissioner MacSharry's subsequent resignation, the fault of the Council of Ministers or is it the result of some fault in the Commission itself? If it is the fault of the Council of Ministers, what action are the Government taking to deal with that? If it is the fault of the Commission, will the Government make representations to the European Parliament, which, I believe, is the only authority that can effectively sack the commissioners, to do that job?

Baroness Denton of Wakefield

My Lords, the noble Lord asks me for specifics on the detail of negotiations to which we were not a direct party. One indication of the seriousness and commitment of the UK Government to the successful conclusion of the negotiations was the fact that my right honourable friend the Minister of Agriculture was prepared to be available for the support of the commissioner in his role as President of the Agricultural Council. As various noble Lords said, it is a matter for the Council of Ministers. There will be discussions as regards the next move. Until the beginning of this week we had reason to believe that progress was being made. Progress has now halted, although we hope only temporarily. We must aim to ensure that those negotiations restart and continue.