HL Deb 08 July 1997 vol 581 cc584-93

6.19 p.m.

Baroness Symons of Vernham Dean

rose to move, That the draft orders laid before the House on 23rd June be approved [5th Report from the Joint Committee].

The noble Baroness said: My Lords, I shall spend a few moments explaining why these agreements are important. The agreements are designed to extend economic and political co-operation between the European Union and partner countries in Latin America and the Mediterranean region. The European Union signed a Framework Co-operation Agreement with the Southern Cone Common Market—Mercosur—on 15th December 1995 and with Chile on 21st June 1996. The association agreement with Morocco was signed on 26th February 1996. It forms part of the EU's objective of creating a free trade area with the Mediterranean region by the year 2010. All three agreements aim to strengthen relations through increased commercial and economic co-operation. They include steps to liberalise trade and harmonise the partners' economic structures with the EU. That process should create new opportunities for trade and investment, bringing benefits to businesses and consumers in the European Union. They will also help to create the right climate for stable economic and social development in Latin American and Morocco.

The EU Mercosur Framework Agreement establishes a framework to strengthen links between the EU and the countries of Mercosur—that is, Argentina, Brazil, Uruguay and Paraguay. The main elements are trade and economic co-operation. The agreement is a recognition of the growing potential of the region. Mercosur is the most dynamic of the regional groups in Latin America. It is already an important trade partner for the EU and, with a combined population of 200 million and a total GDP of almost 850 billion US dollars, the opportunities it offers are immense.

The agreement provides a framework for discussing ways in which trade can be liberalised in the future. It is a two-stage relationship. The first stage will lead to a second agreement involving progressing liberalisation of trade in accordance with WTO rules. The second stage could have a significant impact on EU/Mercosur commercial relationship and on the operation of the multilateral trading system as a whole. The UK therefore supports the thorough and detailed approach established under the agreement.

There is also provision for Foreign Ministers to meet regularly for political dialogue. That takes place twice a year in the margins of other scheduled meetings and provides an opportunity to discuss a whole range of issues of importance to both regions such as regional development, sustainable development, the environment, drugs and human rights.

The EU/Chile Framework Co-operation Agreement provides us with an additional means to deepen links with the EU and Chile. It provides for enhanced political consultation and economic partnership and foresees progressive and reciprocal liberalisation of trade in line with WTO rules. A joint declaration on political dialogue annexed to the agreement allows for the regular meetings of Heads of State and Foreign Ministers in the margins of other meetings on a range of issues of mutual interest relevant to the international agenda such as human rights, the environment and drugs. The agreement also envisages in the medium term a further round of negotiations on an association agreement with the EU.

The EU/Morocco Association Agreement is the third in the series of new Euro-Mediterranean agreements now being negotiated. So far, association agreements have been signed with Israel and Tunisia; and an interim agreement has been signed with the PLO. Other agreements are planned with Jordan, Lebanon, Egypt, Algeria and Syria. Europe has strong geographical and social ties with the Mediterranean. The new agreements aim to foster a new relationship with the region based on trade and mutual co-operation.

The long-term goal agreed at the Barcelona Conference in November 1995 is the creation of a Euro-Med free trade area by the year 2010. That will encourage economic transition and help to create lasting stability in the region. EU business will also benefit from the agreement. This can only improve under the new agreement which allows for progressive dismantling of Customs tariffs, further boosting trade between both sides. The Morocco agreement also establishes enhanced political dialogue with Morocco in the form of an EU/Morocco association council which will provide a new forum for the EU to raise issues of importance with Morocco.

The agreements represent an important development in the EU's relations with Latin America and with the Mediterranean. Once implemented, they will provide the basis for a new level of communication and co-operation at all levels. I ask the House to support these important objectives by giving its approval to the principles behind the three agreements. I beg to move.

Moved, That the draft orders laid before the House on 23rd June [5th Report from the Joint Committee] be approved.—(Baroness Symons of Vernham Dean.)

Lord Bruce of Donington

My Lords, I very much regret having to enter a note of scepticism into the purpose of these various agreements. Over many years in the past we have witnessed what I believe to be a surfeit of newly-formed institutions and organisations, all of which appear to have a very advantageous purpose when studied at first sight. However, when it comes down to it, what do they all really mean? So far as concerns the European Community, it is composed of nations and the nations themselves have trading relationships with their counterparts in other parts of the world.

The activities of the UK commercially and manufacturing-wise, or, indeed, in the provision of services, are not carried out by governments; they are carried out by individual firms and individuals. Those relationships continue despite whatever grandiose exchange of views there may be between the various organisations that purport to represent groups of state. I certainly would not wish to enter into prolonged argument about the pros and the cons, the advantages and disadvantages, of being a member of one of these important associations. Indeed, that is not my purpose.

I have had the benefit of studying this entire matter as regards the UK for the past 34 years. Therefore, I am no novice in the field. United Kingdom firms, whether or not they are providers of services or manufacturers— or, indeed, a whole series of other tradable activities— act as firms as such. Their relations continue day after day, buying and selling, manufacturing, importing, and so on, irrespective of what their governments do.

We have before us three orders. In each one the European Community and its member states are made party to a collective agreement apparently, but put in order so far as concerns the UK by the European Communities Act 1972. The agreements are made on behalf of the Community and on behalf of its member states with other individual states—as, for example, with Chile. In the case of Morocco it is an association agreement and in the case of the Southern Common Market it is centered mainly around Argentina and South America. They are all made in accordance with a framework agreement.

If one reads the framework agreements one wonders what they amount to in commercial terms. How do they affect the day-to-day commerce which takes place by telephone, fax and possibly now the Internet, despite the flood of words incorporated in proposals, draft treaties or Orders in Council, all of which make much work for everyone? Indeed, I can assure your Lordships that it takes a very prodigious amount of time in order to study and check them. But what is the ultimate effect of them? How do they do any good? What does it matter to the average British trader, manufacturer or provider of services whether these measures are concluded or not? Of one thing we can be quite sure—I can tell your Lordships this from personal experience—they will most certainly result in a flood of proposals, recommendations, reports, the formation of committees travelling to and fro, questions being asked in the European Parliament and the production of vast tonnes of paper in order to explain them to everyone. But what will be the ultimate effect on the ordinary activities of individual people, their companies and even their governments? The answer, I venture to suggest, is very little.

However, I am well used to the activities of the Commission. I have been associated with it closely for four years and from afar for much longer. I can tell your Lordships that once it gets its foot in the door you can bet your life the whole body corporate will follow sooner or later with some regrets that the door was opened, even ajar, in the first instance. Your Lordships may say that coming from me this means little. I most certainly sympathise with anyone who at this stage may hold the view that my views are old hat and therefore not worth troubling much about. I accept that immediately and without any kind of rancour; in many ways I welcome it.

However, I should like an assurance from Her Majesty's Government on one point only. Can Her Majesty's Government tell me and tell the House that nothing in these agreements affects the existing activities of existing companies, individuals, partnerships or firms carrying out their lawful trade in various countries of the world, and that nothing in them would permit the Commission at any stage, directly or indirectly, to effect anything which is inimical to British interests? If they can give me that assurance, I shall at least be happy with these measures because as far as I am concerned, on the face of it, they are much ado about nothing.

Lord Wallace of Saltaire

My Lords, I had not intended to intervene in this short debate. However, I wish to make a couple of remarks. I am tempted to invite the noble Lord, Lord Bruce of Donington, to come across to our Benches because I have heard such a wonderful conversion to the doctrine of pure international free trade and the argument that government should not in any sense be involved in international commerce. However, these agreements are important. It was not the European Community itself which initiated many of these discussions, it was the countries concerned. The Euro-Mediterranean strategy is one of the more important elements of the European Community's foreign policy.

As the noble Baroness mentioned, there is a substantial budget under the Euro-Mediterranean agreements agreed by the Barcelona conference which is intended to provide a substantial amount of aid over the next few years towards the countries of the southern Mediterranean littoral. This is not just a matter of commerce; it is a matter of foreign policy and security policy. Morocco, Algeria, Tunisia and others—the noble Baroness mentioned our agreement with Palestine—are countries with close political relations with western Europe. All of them supply substantial flows of migrants towards western Europe which we struggle to contain. We all therefore have a direct interest in their continuing stability. I therefore welcome in particular the agreement with Morocco in those terms.

I hope the Minister will say a little more, now or later, on how the broader Euro-Mediterranean agreements are being put into effect. Certainly many of us had the impression that this was an initiative of the Spanish and Italian presidencies in connection with the French Government to which other member governments of the European Union did not attach much importance. However, it seems to be rather important in terms of the long-term stability of the Mediterranean periphery of the European Union.

Lord Moynihan

My Lords, I think the noble Lord, Lord Bruce of Donington, was being a little modest. I can match neither his eloquence nor certainly his experience of, I believe, 34 years on this subject. As my Government—as they were then—were party to negotiating these agreements, the noble Lord and the House will not be surprised to hear that we are supportive of the three framework co-operation agreements before the House today. Nor do we believe that there is anything in them that is inimical to British trade interests abroad. On the contrary the thrust of all three of these agreements is to take progressive steps towards freer, more open trade and to permit greater opportunities for companies which need to exercise their business acumen within the countries concerned and in their relationship with the European Union in order to undertake business, make a profit and create employment.

I give one example to show why these agreements are a considerable step forward and are not much ado about nothing, to use the noble Lord's phrase. I refer to the negotiations that took place between the European Union and Morocco. The negotiations were not easy; they were protracted and painful. The reason for that is that it took a long time to move forward to a more liberal and open approach to agricultural exports coming from Morocco into the European Union. I think the Moroccans were rightly aggrieved in the early stages of the negotiations that the agricultural arrangements seemed to fall short of what they wished, which was the much more open market sought after both by the noble Lord, Lord Wallace, and the noble Lord, Lord Bruce of Donington.

Many observers thought that both France and Spain were being unduly protectionist on the question of agricultural exports. What was needed was a detailed negotiation culminating in a reasonable decision and a step forward which would allow far greater opportunities for companies to do business from Morocco into the European Union and vice versa. Morocco would much prefer to have seen a system of free competition as it quite rightly maintained that its consumers were happy with its agricultural products, as were European consumers. It argued that market access was important. Agreement could not be reached to the extent that Morocco wished, but the final agreement was a significant step forward and I hope there will be further openings of the door towards a wider, more open market and towards open free trade in due course. That is one of the long-term objectives of this agreement and the surfeit or plethora of agreements. The noble Lord referred to that surfeit of measures in his speech. The agreement is a step forward in removing the barriers to trade and in enhancing competition.

The motive underlying the agreement is the same as that which underlies the other two orders that are before the House today. Far from being inimical to British or European Union trading interests, I argue that these three agreements represent significant and important steps forward to more open trade and ultimately, I hope, to a global free trade organisation which has appropriate regulation but which enables much wider more open trade with significant trading partners. As was rightly pointed out by the noble Lord, Lord Wallace, this all emerged from the Barcelona process launched in 1995. I believe that process has been significant in developing closer co-operation between the European Union and the Mediterranean region. Tunisia was the first Mediterranean country to sign an association agreement with the European Union.

The agreements before the House today concern Morocco, Mercosur and Chile. However, that is not the end of it. I welcome the commitment given by the Minister today that further agreements are also due to be ratified with Egypt, Jordan, the Lebanon, Algeria and, as I understand it, Syria. Those are all important and welcome steps forward. Just as we have developed and broadened our relationships with the Mediterranean region, it is also important that the European Union begins to develop its already thriving links with Latin America through the two additional agreements, first, with Chile, and, secondly, with the Southern Common Market—or Mercosur, as it is better known to your Lordships' House.

In these agreements, Europe not only advocates freer trade, but also looks to the need for self-determination and territorial integrity. I welcome the Minister's comment that the agreement will also lead to opportunities for policy developments for the environment. I should like to learn more about that from the Minister. The agreements add a secondary dimension to the critical core issue: the realities of global trade and inter-communication. That is what the three development frameworks seek to achieve.

The effects of the frameworks should not be seen to be limited simply to successful trading alliances. I hope and believe that there will be other diplomatic advantages to the Government. I refer to the extension of the European Union's influence in regions of disturbance, and the welcome measures that we have heard—we shall look forward to seeing them in practice—in regard to human rights and human rights abuses in those countries where, as a result of closer trade relations, we shall have an opportunity to exert greater leverage in order to develop sensible and practical solutions to the problems of the day.

When we discuss trading links with Latin America, and in particular the Southern Common Market, we are referring to some of the largest economic engines in the world. Brazil's GDP is of the same order of magnitude as that of China, and 50 per cent. larger than that of India. The Argentine province of Cordoba alone has a GDP equal to that of Bulgaria. The Southern Common Market already accounts for 7 per cent. of the national product of the world. I suspect that it will grow very fast—far faster than the more mature economies of Western Europe. We have already played a key role in this region's success story, in particular through the privatisation initiatives which have dominated domestic policy throughout the region. So the strengthening of the economic ties with Europe forged by this agreement are welcome, important and positive steps forward.

My noble friend Lady Hooper, who has considerable well-known expertise on South American politics, had intended to be present to speak on the draft order regarding Chile. She asks to be associated with my congratulations to the Government of Chile on the work that they have done both in the negotiations on this agreement and as an economic paragon in Latin America. It has become a remarkable example of a country where free trade policies and privatisation can fuel economic growth and create jobs. Chile's economy grew by 7.1 per cent. in 1996. It was the largest growth rate of any of the major economies in the Americas.

I seek to praise Chile for the remarkable success of its pension programme. In practice what that pension programme achieved is a lesson to all development economists. It created a strong enfranchised middle class. Through that pension provision, and through the creation of a strong middle class, one no longer has the traditional problems of a ruling elite and a disenfranchised working class. But with the creation of a middle class, one has a strong springboard to growth—exactly the same springboard as created success, for example, in Taiwan. The strength and courage of the Chilean politicians and economists in creating that is a model. It is a model that is widely acclaimed around the world. The orders present a useful opportunity to praise the Government of Chile for the success of their free trade policy and their openness towards foreign investment. It is noteworthy that Chile's major trading partners include the United Kingdom and Germany. The agreement before your Lordships' House today develops and nurtures that trading link. It is a further step towards free trade with this successful nation and will, I hope, create a framework for continued prosperity between us.

I also believe that the agreement will help fulfil the ambitions expressed by all speakers in this short debate for global free trade in the future, in our case we hope early in the next century. Chile has become an entrepôt between a number of key trading groups. Although not a member, it has close dealings with NAFTA, and as an associate member of Mercosur it will undoubtedly be instrumental in developing a free trade zone across the whole of the Americas.

But Chile is also a member of the APEC grouping which brings together the countries of the Pacific Rim. I envisage a future where freer trade groupings of the world are able to unite to create less inhibited global markets. I stand short of a global free market zone. I think that that aspiration is probably beyond my lifetime, although it is one that I would welcome.

The agreement is important to us politically because as an entrepôt in those trading organisations Chile can be important as a key to unlocking the potential of closer working relations between the trading groups.

Finally, on Morocco, it is incumbent on the European Union to develop bilateral agreements with those closer to home. Of all the regions with which I believe we need to develop a closer understanding, the Mediterranean is perhaps the most important. It is, after all, on our doorstep; and, moreover, it is politically turbulent. I believe that the Barcelona process which is keen to develop closer integration between the European Union and the countries of the Mediterranean can play a very active part in the Middle Eastern peace process. I look forward to agreements being ratified with Egypt, Jordan, Lebanon and Algeria as well as Syria. Morocco is, happily, in a more stable situation than most. Nonetheless, just as we can prosper by developing our markets with Morocco, so we must ensure that Morocco has access to the markets of Europe.

I mention the specific example of the lengthy and protracted negotiations over agriculture. But this agreement is welcomed by the Government in Morocco. It is welcomed by the nation states, the countries, the members of the European Union. It is an important step forward. All those who have worked to achieve this agreement deserve our support and recognition of their success.

The agreements vary considerably. The agreement with Morocco steers us towards a closer political dialogue. It concentrates on the liberalisation of trade in goods and services, and capital, and the expansion of economic social relations. It will also encourage the integration of the Maghreb group of countries. In contrast, the agreement with Chile, although also primarily concerned with trade and political dialogue, will ultimately lead, I believe, to the establishment of a political and economic association between the European Union and Chile.

Finally, the agreement with the Southern Common Market, the Mercosur, is perhaps the most wide-ranging of the three agreements. It will seek to strengthen existing relations, and, I hope, prepare the ground for the creation of an inter-regional association. It will seek co-operation and progress on trade liberalisation and other areas of mutual interest including energy, transport, science and technology, telecommunications and, as the Minister mentioned, the environment, education and training.

I had warned the Minister that I intended to ask her a number of questions today. I have not done so not only because I know that she will be extremely confident in answering any questions that I ask, but because I believe that it has been useful to try to answer the important point made by the noble Lord, Lord Bruce of Donington, as to why these three agreements are important today and why a great deal of time has been put into negotiating them. I hope that my comments will find at least some agreement with the Minister. I believe that these important steps forward are beneficial trading opportunities for European companies and the three areas of the world about which we have been talking. The agreements are important steps forward to free trade. They will be seen by history as door openers to further economic, political and trade policy.

Baroness Symons of Vernham Dean

I thank noble Lords who participated in the brief debate this evening. I shall try to answer some of the points raised.

My noble friend Lord Bruce of Donington added what he described as a note of scepticism to the debate when he asked what the treaties meant and whether in fact they mattered. They do matter because the agreements are aimed at reducing bureaucratic barriers to trade, not increasing them. As the UK is part of the EC Customs Union, third-country agreements are now negotiated on behalf of the European Union as a whole, but that does not prevent us from continuing to promote bilateral UK trade with the region. These agreements are a clear example of what Britain supports most in the EU: progressive removal of barriers to trade, leading to increased long-term prosperity on all sides.

My noble friend asked some specifics in relation to the three treaties. Latin America is a key emerging market. It is a place of huge opportunities. We do not want British companies to lose out. The UK has significant interests in the region. We are the third largest investor, with capital flows per annum of £3 billion. We need to protect those interests.

As regards Chile, the UK has significant interests there, too. We are the third largest foreign investor, again with investments with a book value in the region of £3 billion. UK exports to Chile in 1996 were worth £185 million.

The new Morocco agreement allows for the progressive dismantling of tariffs, opening the Moroccan economy for EU business and making Moroccan products available to EU consumers.

The noble Lord, Lord Wallace of Saltaire, raised a number of questions. As far as the Government are concerned, as I said in my opening remarks, the importance of the agreement is primarily in the liberalisation of trade. But as the noble Lord himself said, we should not put on one side the other advantages open to us. In being able to discuss human rights issues, much has improved in recent years, but there are still problems in these countries which we shall wish to discuss. We shall wish to pursue the environmental issues; and we shall wish to discuss with those countries the consolidation of their newly found democratic systems.

The noble Lord, Lord Moynihan, raised questions about agricultural market access in Morocco. He raised issues—if not specific questions—about delay. It is important to remember that, on the one hand, the EU has a commitment to provide assistance to its Mediterranean neighbours in the form of trade concessions. On the other hand, the southern member states of the EU have problems in accepting trade liberalisation in Morocco's main agricultural products since those who are the main producers of southern member states own the farming industries. The package offered to Morocco reflects the balance between those factors. That is also the case with the other Euro-Mediterranean agreements; I know that the noble Lord had some concerns about Mediterranean agricultural issues.

I listened with interest to the points raised; I hope I have been able to answer them satisfactorily. I give my noble friend Lord Bruce of Donington the assurance that he sought that these agreements will not lead to any detriment in the trade of individual UK companies with the countries concerned.

The European Union agreements with Morocco, Mercosur and Chile represent an important development in the European Union's external trade and economic relations and are consistent with the Government's policies towards those countries. We should therefore give our firm support to these new agreements. I commend the orders to the House.

On Question, Motions agreed to.