GATT (Hansard, 23 November 1992)

§ Baroness Denton of Wakefield
My Lords, with the leave of the House, I wish to repeat a Statement made by my right honourable friend the President of the Board of Trade in another place. With permission, Madam Speaker, I should like to make a Statement about the latest developments in the GATT Uruguay Round of trade negotiations. As many honourable Members will have heard, the European Commission and the United, States Government announced on Friday that they had reached agreement on the remaining issues separating them in the negotiations. These included key points in the GATT agriculture agreement, and the separate but related trade dispute over Community support for oilseeds production. This is excellent news. It opens the way to a full GATT agreement between all 108 parties in the Uruguay Round. Most immediately it removes the threat of an imminent trade war with the United States over oilseeds. I should like to congratulate the two Commissioners directly involved, Mr. MacSharry and Mr. Andriessen, as well as the United States negotiators, Mr. Madigan the Agriculture Secretary and Mrs. Hills the United States Trade Representative. I should also pay tribute to my right honourable friends the Prime Minister, the Foreign Secretary and the Minister for Agriculture, Fisheries and Food, who have done so much to work for this agreement. The main features of this agreement were, on agriculture, the cutting of quantities of subsidised exports by 21 per cent.; and on oilseeds, a limit on the area under cultivation. We have still to see all the details, but it would appear that a GATT agriculture agreement on these lines will be broadly consistent with the reforms of the CAP regimes agreed by the Community last summer. The Commission will be preparing a report on compatibility with CAP reform. This is in any case just one of the whole package of Uruguay Round agreements. The results should be judged on the balance between all the elements. 815 The Council of Ministers will take a final decision on whether to accept the deal when all the elements are in place. Talks will be restarting in Geneva this week so that the other 95 participants in the Uruguay Round can consider what has been agreed. I believe it is possible to complete the negotiations this year and we will be urging all parties to reach a conclusion as soon as possible. Apart from agreeing the necessary changes to the agriculture text tabled by the GATT Director-General, Mr. Dunkel, at the end of last year, there remains a great deal of work on other aspects of the Uruguay Round negotiations. Negotiations on liberalisation of trade in services and tariff reductions have to be completed. Much work had already been done on this and was waiting for a final resolution on agriculture. Final agreement is needed on the establishment of a Multilateral Trade Organisation and a single dispute settlement system covering all the GATT agreements. And legal texts must be finalised for all the agreements—not only agricul-ture, services and tariffs, but also intellectual property and investment, textiles, anti-dumping, subsidies and a whole range of other GATT rules and procedures. This is a formidable agenda and much remains to be done. Completion of the negotiations this year would meet the target set by the Munich G7 Economic Summit, and by the Birmingham European Council. It would enable texts to be ready for presentation to the US Congress before the 2nd March deadline under their 'fast-track' approval procedure. Let me remind the House what that will mean. It will mean perhaps 200 billion dollars extra yearly output for the world by the end of this decade. It will mean improved opportunities for our exporters. It will mean that we are able to take advantage of increased trade in services. It will mean our inventors and artists have better protection for their intellectual property—it has been estimated that the UK record industry alone loses £1 billion a year through piracy. For the developing countries it will mean western markets being more open to their agricultural and textiles products. The gains to them from increased trade could exceed the total western aid budget. In short, this is a good deal—for the UK, for the European Community, for the United States, for the developing countries, and for the world. With determination and good will on all sides, I believe that such an agreement can be reached by the end of the year. I hope therefore that the whole House will join me in welcoming the achievement of the Community and the United States". My Lords, that completes the Statement.

§ Lord Williams of Elvel
My Lords, the House will be grateful to the noble Baroness for repeating the Statement made in another place by the President of 816 the Board of Trade. I certainly join with the noble Baroness in congratulating the two Commissioners directly involved, Mr. MacSharry and Mr. Andriessen, as well as the United States negotiators on what has been an extremely difficult negotiation.
As the noble Baroness will know, we have consistently supported every effort that can be made towards a conclusion of the Uruguay Round. I will not deviate from that fundamental position on our side. However, a number of points are raised in the Statement about which I should like to ask the noble Baroness some questions.
The Statement says that the GATT agricultural agreement on the lines that have been negotiated will be broadly consistent with the reforms of the CAP regimes that were agreed by the Community last summer. That has been a matter of considerable controversy. Are those agreements consistent or are they inconsistent? We must know the answer to that question. Our agricultural industry has to know whether our farmers will be disadvantaged or advantaged by the agreements that have been arrived at by Mr. MacSharry and Mr. Murdigan.
The second question relates to the statement that "this is a formidable agenda" and that much remains to be done. It is true that much remains to be done, but how is that sentence consistent with the final paragraph of the Statement which says "In short, this is a good deal"? Much remains to be done; it is not yet a deal. If there were a deal, we could then be in a position to state that it was a good deal. It is odd and a bit previous to announce that there is a formidable agenda and that much remains to be done—which is true—and then at a later stage to state "this is a good deal". If the agenda is completed, it will be a good deal. However, I agree with the noble Baroness when she states that much remains to be done.
The third and most important question relates to the attitude of the French Government. We on these Benches understand that there is a domestic problem in France. The farmers in France have demonstrated, in a very vocal and sometimes violent manner, their opposition to any agreement under the Uruguay Round that compromises their position.
There are clear provisions in the Treaty of Rome for weighted majority voting on such an issue as this. If the National Assembly in Paris requires the government to exercise their rights under the Luxembourg compromise (as it was known in 1966 and is known now) can I ask the noble Baroness this. The Luxembourg compromise was only arrived at in early 1966 after an "empty chair" policy by France in late 1965, and allowed, in a manner which is not yet specified, a national veto on any Community measures that were contrary to the vital national interest of any one major member state. If the Luxembourg compromise is to be invoked by the French Government as a result of a parliamentary vote, will the British Government accept the Luxembourg compromise? Did the British Government, in assenting to the Treaty of Rome, also assent to the Luxembourg compromise? If they did, how did they do it and in what form?
817 I understand that the Luxembourg compromise was a minute of a meeting that took place in Luxembourg in early 1966. If that is the situation, did the Government accept that minute? Did the Government put before Parliament the fact that they had accepted that minute? If so, do we also have the right to invoke the Luxembourg compromise when our vital national interests are at stake? If that is not the position, what are the Government proposing to do? Are they proposing to say that they have not accepted the Luxembourg compromise, that they will not accept it, and, therefore, that the weighted majority voting which is described under the Treaty of Rome for these purposes to approve the GATT Uruguay Round, will go through? I should like the noble Baroness to respond in some detail to the points that I have raised.
Noble Lords on all sides of the House fervently support a positive conclusion to the Uruguay Round. What we cannot have is one country standing out on the basis of possible doubtful legality simply because its farmers, who are experiencing a difficult domestic situation, will be disadvantaged. Either the Community works or it does not work.
I shall reserve my congratulations to the Prime Minister and the Secretary of State for Foreign Affairs until I hear the Government's position.

§ Lord Ezra
My Lords, we on this side of the House heard the Statement with much satisfaction. This is one of the most important issues that unites all parties in Parliament. I also have a number of questions about which I hope the noble Baroness will be able to give some elucidation.
The Statement indicated that the Commission will be preparing a report on compatibility with the CAP reforms which were agreed last summer. If it is shown as a result of the report that there was compatibility beyond any reasonable doubt and that what has been negotiated is entirely in line with what was agreed by all member countries last summer, would that not mean that it would be very difficult for any one country to stand out against the agreement? We shall be relieved to hear the answer to that question.
In spite of the obvious benefits of the agreement, there is very little doubt that it will place a further squeeze on employment in rural areas both in Britain and throughout the Community. Will that issue be taken into account when the final settlement is reached, and will mitigating measures be taken to deal with that aspect of unemployment, which will add to current problems?
I agree that much else remains to be done. There are a number of key issues that are yet to be dealt with which have been deliberately put on ice until the key agricultural issue is decided. What is the future of the Multi-Fibre Arrangement that will affect a large number of countries? There is the question of the trade in services which we were told at one time aroused uncertainty in the minds of third world countries. There is the question of the better protection of intellectual property that is referred to in the Statement. Can those difficult issues be negotiated 818 before 2nd March in order to meet the American deadline? We very much hope that will be the position; but it would be helpful if the noble Baroness can give us some reassurance and also indicate some of the difficulties in the other areas.

§ Baroness Denton of Wakefield
My Lords, I should like to thank the noble Lords, Lord Williams and Lord Ezra, for their support for the work that has been done in bringing the GATT agreement towards a conclusion. I have been grateful for this support in the past and I am grateful again. I was also grateful for the support I received against retaliatory measures when that was on the agenda earlier in these discussions. That was most helpful.
The noble Lord, Lord Ezra, draws attention to the fact that the Commission are preparing a report on the compatibility of this agreement with the CAP reforms. May I say in answer to the noble Lord, Lord Williams of Elvel, that my honourable friend the Minister for Agriculture has welcomed the deal. While we still need to study the details, it would appear to be broadly compatible for those products for which reform was agreed earlier this year. Therefore, it should not impose additional burdens on United Kingdom and Community farmers. In addition, compensation payments to farmers for reduced production are fully protected from cuts. We shall need to wait to see the outcome of the report and the work; and I am sure that my right honourable friend the Minister for Agriculture will be well involved in those discussions.
The noble Lord, Lord Ezra, raised the issues of the rural unemployment that this may involve. I am sure again that this is an area where my right honourable friend the Secretary of State for Employment will be conscious of the need to look at the particular work. The noble Lord, Lord Williams, questioned my reading that it was a good deal because there is so much to be done. It was a good deal to move forward to the point we are now at. We were at a blockage. We were continuing for some time at fingertip distance. We have now managed to join hands together again so that negotiations continue. Progress has been made. I agree wholeheartedly that there is so much to do; but I believe that when it is finished it will not be just a good deal, it will be a brilliant deal.
The French Government was party both to the G7 Agreement and to the Birmingham Summit Agreement and of course the conclusion of the negotiations is important. The European Council of Ministers will have to decide whether to accept a complete, final package at the end of negotiations. We believe that there is a legal base to provide for qualified majority voting for trade policy decisions. We believe that the question of the Luxembourg compromise is something that may arise in due course, but that is not the issue at this stage. The Luxembourg compromise is not a formal part of treaties. It depends on support from member states.

§ Lord Harmar-Nicholls
My Lords, I apologise to my noble friend for interrupting with a sedentary comment. I said that that was sad hearing. The 819 Luxembourg compromise must mean something; or we ought to know if it means nothing. It affects our whole approach to membership of the European Community.

§ Baroness Denton of Wakefield
My Lords, perhaps I may assure my noble friend that it means something; but it depends on the support of the member states. What I am trying to get over is that I do not believe that at the end of the day any one member state will be able to block this deal. I hope that the noble Lord will find that satisfactory.

§ Lord Boyd-Carpenter
My Lords, would my noble friend carry a little further the argument that she has just submitted to the House? Can she say explicitly whether Her Majesty's Government accept that the French Government could veto this agreement? If her answer to that is in the affirmative, then what will Her Majesty's Government do about it?

§ Baroness Denton of Wakefield
My Lords, I repeat that we believe that there is a legal base to provide for qualified majority voting for trade policy decisions.

§ Lord Boyd-Carpenter
My Lords, would my noble friend allow me to intervene? Does that mean, then, that Her Majesty's Government take the view that the French Government does not have an effective veto?

§ Baroness Denton of Wakefield
My Lords, at this stage we do not want to go ahead of the problem actually facing us, which is to get towards bringing the agreement to the whole Council of Ministers. Forcing pressure on our partners when we are aiming for an agreement is not helpful. That has been referred to in the past.

Lord Bruce of Donington
My Lords, the noble Baroness will appreciate that does not get us very much further. This question is one of the most vital importance. Is she aware that on a number of occasions the House has been assured by Ministers sitting opposite that the Luxembourg compromise is still in effect? If that be the case, and if the French Government is entitled to exercise a right of veto, I ask this. First of all, will Her Majesty's Government bear in mind that in May 1982 when the United Kingdom sought to invoke the Luxembourg compromise that the remaining members of the Community, including France, ignored the United Kingdom's veto?
Will the noble Baroness give the House an assurance that if the occasion arises—and I am not saying that it will—that Her Majesty's Government will also see that this particular right is placed in the balance against the overwhelming advantages of GATT? Will the noble Baroness also give the House an assurance that when the council next meets to discuss this question that it will be unnecessary for the President of the Commission, M. Jacques Delors, to attend because the agenda for the council meeting will have already been prepared by the committee of permanent representatives where the president always has the right of access anyway?

§ Baroness Denton of Wakefield
My Lords, the assurance I can give is that the United Kingdom Government are totally committed to ensuring that the GATT-Uruguay Round deal is achieved. It will therefore bear in mind every possible action in doing this; but I cannot give assurances ahead of negotiations. I am sure that the instance that the noble Lord, Lord Bruce, raises is well known to my colleagues. Certainly past history and practice will be borne in mind.
It would perhaps be helpful if I confirm to the House that the Luxembourg compromise is still in effect, but it is not entirely certain that this is necessarily relevant in this case. It applies to internal measures and it is not clear that it applies to external trade agreements. I hope that your Lordships will accept at this stage that the aim of the United Kingdom Government is to ensure that these negotiations are brought to a successful conclusion; and as each step in the way is met, that will he our sole aim.

§ Lord Cockfield
My Lords, I should like to say a word on this. The Luxembourg compromise has no legal base. It is therefore in a sense, a meaningless question.

§ Lord Harmar-Nicholls
My Lords, it is not.

§ Lord Cockfield
My Lords, in a sense it is a meaningless question to ask whether it exists or whether it does not exist. There were two precedents in the 1980s. The one to which the noble Lord, Lord Bruce of Donington, referred, where the Luxembourg compromise was not upheld, and the other one in 1986 involving Germany when the Luxembourg Compromise was upheld. The practical answer to the question is this. If, when it comes to the point, a sufficient number of member states resile from a position of having supported a proposition so that in the event a qualified majority for that proposition cannot be obtained, the proposition falls.

§ Baroness Denton of Wakefield
My Lords, the support from noble Lords is most welcome. I am grateful, as the House so often is, for the experienced views of my noble friend Lord Cockfield who has so much more knowledge on this issue than I do.

§ Lord Stoddart of Swindon
My Lords, the Luxembourg compromise is designed to protect vital national interests. The noble Baroness has just told us that her view of the compromise is that it applies only to internal matters. It now appears that we have a new ruling about the Luxembourg compromise. Hitherto it has been deemed to apply to every matter which may or may not affect a vital national interest. Now we are told that it applies only to internal matters. Is that an official ruling or the personal opinion of the noble Baroness?

§ Baroness Denton of Wakefield
My Lords, we seem to be moving towards a discussion on this subject, not a debate. I hope the noble Lord accepts that I am not standing at this Dispatch Box passing personal opinions. I draw attention again to the comment of my noble friend Lord Cockfield that this matter will be 821 considered when the point arises. I believe that to go ahead of the matters under discussion now is not helpful for the future of the negotiations.

§ Baroness Elles
My Lords, I support the statement just made by my noble friend the Minister. I consider that this is a hypothetical question with regard to the Luxembourg compromise. The French Government have not invoked the compromise. We do not know whether they even intended to invoke the compromise, although clearly from an internal political position they may well attempt to make that kind of noise. We all know the difficulties we have in our own countries where there is a difference of opinion. Would it not be helpful to the Government and, more importantly, the negotiations as a whole, for the Government to carry out their duties as President of the Council and get the agreement through as quickly as possible, if necessary by a qualified majority under Article 113 of the Treaty?

§ Baroness Denton of Wakefield
My Lords, I am most grateful to my noble friend Lady Elles for putting so well what I was trying to say.

Lord Morris
My Lords, I think everyone will agree that my right honourable friend the President of the Board of Trade was absolutely correct in congratulat-ing the negotiating parties. However, perhaps my noble friend can assist me. Bearing in mind the critical importance to world trade that a general agreement on tariffs and trade should be obtained as quickly as possible, are Her Majesty's Government considering the negotiating method for obtaining such an agreement in view of the shock that the public have sustained in the knowledge that the negotiations have been going on for over six years?

§ Baroness Denton of Wakefield
My Lords, I am delighted to reassure my noble friend that all the focus in our Presidency is on reaching a termination of this matter. It must be pointed out that it is the Commission which negotiates, not the United Kingdom Government; but in our Presidency we think that that is the point on which to focus. I agree that in the past it has seemed much more like a general agreement to talk and talk, but I believe we are coming to the end of that.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that everybody recognises the vital importance of the Uruguay agreement being turned into a deal which will stick? That is vital from the point of view of ourselves, Europe and the world. The comment upon the Luxembourg compromise is not intended to interfere with that; it is an attempt to anticipate possible difficulties that may arise to prevent it becoming a deal. It is not that yet. It is silly to think that we can ignore the signs from France that certain steps may be taken. I hope that that point of view will not prevail in France, but we must not overlook the possibility.
I have a positive suggestion for the Government to take into account. This may be the correct time to define, as far as we can, the Luxembourg compromise in this sense. At present it is understood that it can be 822 invoked only when it can be established that vital national interests are affected. We should make clear that that ought not to mean vital government interests. There is all the difference in the world between genuine national interests and France invoking it to protect a party or government and where it could not be established in any kind of court that the national interest is affected. If countries can prove that it affects their national interests they ought to be allowed to use the compromise; if not, they ought not to be allowed to use it. I ask my noble friend and her colleagues to keep that point in mind when they are turning this discussion into a deal.

§ Baroness Denton of Wakefield
My Lords, I assure my noble friends and other noble Lords that I understand that the concern is based on the fact that we want to lead these discussions to completion. I am sure that the Government are taking every possible scenario into consideration. We cannot go ahead of the fact that the Council of Ministers will only have to decide whether or not to accept the complete, final package at the end of negotiations. But I would point out that there are other important interests in France. For instance, as it is the second largest exporter of services there must be many internal conversations going on there.