EU-US Trade Relations

HL Deb 21 April 1999 vol 599 cc1163-211

3.9 p.m.

Lord Clinton-Davis rose to call attention to trading relations between the European Union and the United States; and to move for Papers.

The noble Lord said: My Lords, I am pleased to be able to initiate a debate on an issue which is of paramount importance to the relationship between the European Union and the United States in terms of trade. Although we have focused on the question of the banana regime and the decision made by the World Trade Organisation in recent days, the issue goes far wider. Paradoxically, it arises at a time when the European Union and the United States are engaged together in seeking to bring relief to the beleaguered people of Kosovo. One might say that that is odd—and, indeed, it is. Some might say that the points in dispute are mere irritants, but I do not believe that to be the case. They are serious matters, although we need to consider them in context.

The European Union and the United States enjoy great advantages from access to the other's markets. Trade and investment account for more than a trillion dollars and six million jobs on both sides of the Atlantic. Discussions to promote a rolling agenda for co-operation and negotiation on trade; competition; trade and the environment; and trade and labour issues are to take place through the transatlantic economic partnership in anticipation of the millennium round. A commissioner from the United Kingdom was responsible for initiating that process in the Commission, which has now been adopted by the Council.

So there are many positive aspects to our trading relationship. None the less, apart from the arguments relating to bananas, there are, as I said, other issues which could well become even more menacing, such as hormone-treated meat, genetically modified organisms, noisy aircraft and steel—all highly complex and very technical. Assuredly, we need to do all we can to avoid the damaging prospect of an all-out trade war.

What are the essential issues involved? Underlying everything, in my submission, must be respect for a rule of law in international trade, embodied in the dispute resolution process of the World Trade Organisation, patiently and fairly recently constructed, and certainly a marked improvement on what had been devised through GATT, the decisions of which had become largely unenforceable because the verdict could be vetoed by any member state, including the party whose conduct was complained of. Today, as a result of negotiation through the WTO, the verdict can be overturned only by unanimity.

Part of the background is also that the United States Congress remains suspicious of the WTO and its disputes panel. That is echoed by the assertion, "Three strikes"—using a baseball analogy—"and we're out"—that is, three decisions adverse to the interests of the United States and that is the end for us. That concept must be decisively rejected, challenging as it does the essential tenets of a rule of law in trade.

So, supportive as I was as Minister for Trade—I remain supportive—of the WTO processes, we should recognise that the system is new and evolving, especially with regard to the connection between the WTO and protection of the global environment through the complementary multilateral environment agreements. We should be prepared to consider change where it can be established that that is required. Meanwhile, however, WTO panel decisions must be respected if the system is to be nourished, as it must be.

My second caveat about the procedures is that those initiating this form of international litigation—that is not exactly the right word, but I use it for shorthand—should first examine with greater care than in the past what are the probable consequences of their legal acts: economic, social, environmental and political.

The third caveat is that legal success cannot necessarily vouchsafe public acceptance and, indeed, could well promote hostility and antagonism towards the WTO if a decision is seen to be imposed against an unwilling and suspicious people.

All too often, Europeans do not understand the US system sufficiently—and vice versa. Insufficient account is taken of the beliefs, knowledge—and even prejudices—of people from the other camp. People must feel that undue pressures are not being applied to procure a particular result which they consider to be contrary to their interests.

A highly relevant example is biotechnology. It may well produce huge benefits for millions of people in due course, but millions in the continent of Europe remain to be convinced. They have experienced unhappy precedents, based on alleged scientific criteria which have gone wrong, confounding the experts who had proclaimed the verities involved. Mad-cow disease and environmental damage were long denied by experts, but they were proved to be wrong. People do not want to be patronised by experts. They want to be considered and to have an informed debate. They do not want to be told, "This is good for you and you therefore have to take it". Least of all do they want to be told by organisations with a vested interest that something will be good for them. There is distrust. We must face up to that fact of life.

While the United States expects Europeans to conform to decisions of US regulatory processes—I was told that not so long ago by the US Trade Secretary—regardless of European Union sensitivities, is it not ironic that, because of the sensitivities of people in the United States following Three Mile Island, it abandoned nuclear power?

Transparency is also a very important criterion in relation to the examination of this matter. There has been a strong feeling, not least on the part of countries producing bananas, that the three US majors in this field have not behaved with total propriety. Mr. Carl Lindner is the boss of Chiquita. He has provided substantial donations to the coffers of both the Republican and Democratic parties—for insurance purposes, I suppose. Indeed, I understand that he was rewarded by being given President Lincoln's room in the White House to sleep in. However, I do not think that that was the only advantage that he was seeking to elicit.

There is, of course, another salient concern—

The Earl of Dartmouth

My Lords, does that mean that the noble Lord considers that the mere fact of party donation should disqualify someone from any dealings with government? Should that not also encompass such a process as appointment to director-general of the BBC?

Lord Clinton-Davis

My Lords, that is a highly relevant intervention which I propose to ignore.

There is another salient concern; namely, that the countries that are weak, impoverished, vulnerable and too dependent on a specific staple product—in this case bananas—in the Caribbean, African and Pacific areas helped by the Lomé; arrangements are essentially incapable of being able to diversify their economy without enormous help from Europe and the United States. That is a fact of life.

Parenthetically, perhaps I may mention other problems in relation to the current procedures if justice is to be done and be seen to be done in relation to these developing countries. I refer to the question of unequal legal combat because of totally unequal representation before the WTO panel. Representation of developing countries on the panel itself does not exist, although there has been, as chairman, a former United States congressman.

Those are matters which give rise to an unfortunate perception on the part of countries which are adversely affected. The banana dispute which has featured prominently recently, as with all disputes, is a complicated and difficult matter. Many disputes arise between the super powers which are far less adversely affected although, of course, the unilateral imposition of sanctions by the United States could still have serious effects on us and a number of trades. On the United States' side, supporting as it does some Latin American countries, the argument has been that its enterprises suffer from discrimination in the banana trade.

The United States does not grow bananas. On the other hand, the European Union has claimed that the preferential commitments for traditional ACP suppliers go back to the original Lomé Convention and apply to the present one. But what is clear beyond doubt is that, first, social unrest and unemployment, and possibly resort to major drug dealing in conflict with the interests of the United States, could arise on a substantial scale in consequence of the decision that has been made. The noble Baroness, Lady Young, has made that point over and over again to great effect.

Secondly, three United States companies—Chiquita, Del Monte and Dole—dominate the world market. It is alleged by trade unions internationally that those companies exploit labour on short-term contracts. Thirdly, they have engaged in excessive use of pesticides—banned in the United States, incidentally, for health reasons—as well as engaging in other adverse environmental behaviour.

Although those issues may not assume major proportions vis à vis the WTO, they are not irrelevant in the wider perspective. But having said all that, the fact remains that we are now legally obliged to bring the European Union banana regime into line with WTO requirements. I do not seek for one moment to resile from that. But we must also face up to the consequences, although the scale of compensation is far removed from that which the United States was originally hoping for, having been scaled down substantially in the decision of a few days ago.

I turn now to other actual or potential disputes. We know that dangerous and damaging precedents have been deployed by successive United States administrations: the assertion of notorious claims for extra-territorial jurisdiction; the Helms-Burton legislation relating to trade and investment with Cuba; the Iran-Libyan Sanctions Act; and even the Jones Act dating back to 1920 which debarred non-United States flag shipping from engaging in its coastal trades. Yet in relation to multilateral negotiations with the United States, it appears to be a no-go area.

There are further issues on the horizon such as the threat to ban Concorde flights if the European Union proceeds with a law banning older aircraft fitted with hush-kits from landing at European Union airports. Negotiations are in train to try to introduce amendments to that provision and to make the proposed law more palatable to the United States. I welcome that. But the wholly disproportionate threat was made by the United States which, incidentally, refused to negotiate the issue through the appropriate body, the International Civil Aviation Organisation. In relation to development of airports people must be assured that action against unduly noisy aircraft will be undertaken.

We should not omit to recall that even larger issues predominate. The next stage in seeking to achieve a more ambitious international trade settlement will be through the millennium round—not far away. Endeavours to open up still further trade in goods and services, textiles, steel, audio visuals, foodstuffs and agricultural, will be part and parcel of that. Many of those areas are currently subject to trade barriers of the most complicated kind. All that must be viewed against a factor of major substance; that is, the United States' trade deficit of 300 billion dollars which could all too easily, especially in a pre-election period and with an isolationist Congress, lead to further protectionist measures.

In fairness, we must realise that although there is potential for danger, for many years the United States has carried, albeit not always successfully, huge responsibilities for developing international trade and economic growth and a more than fair share of international defence and political responsibilities. To defuse some of the trade challenges is an imperative. We must ensure that the contagion of bitterness arising from the present disputes is not spread. But how? The United States must understand that with so many sub-federal problems, especially in terms of liberalising services, the EU and indeed others are confronted by huge difficulties. The most open market in the world is claimed by the US federal authorities but is simply not compatible with some sub-federal administrative laws covering among other things banking, professional qualifications and public procurement, all of which have a major impact in impairing multilateral trading arrangements.

We have to face up to the fact that on the EU side as well—especially, for example, in the field of audio visuals but in other areas too—there are what I referred to in another context as "no-go" areas. It is therefore essential that we enhance the process of reform as rapidly as possible.

There are faults on both sides. We must address them without, I hope, the rancour, of the past few weeks and months. That must entail putting aside a temporary triumphalism in winning, wholly or in part, a battle in the WTO. The WTO must not be seen or be perceived to be the plaything of the United States or the European Union while others are lectured on the benefits of multilateral trade liberalisation. Developing countries must be enabled to play a full part in the WTO and in its decision-making in a spirit of partnership. That is the only way to build confidence in the organisation. It is essential too if the millennium round is to succeed and make a major contribution to the elimination of poverty.

We have been stressing for a long time in the United Kingdom and within the EU that these are essential components of the trade policy that we need to follow. Co-operation between multilateral agencies, especially with the World Bank, involving capacity building, is also crucial, as indeed is the need to work together to ease the burden of heavily indebted third world countries.

I have spoken for nearly the full time I am allotted. I hope that some of those thoughts will be taken up by your Lordships in what I believe, as I said at the beginning, to be a matter of the gravest importance, not only to the European Union and to our country, but also to the West and all developing countries. Having a sucessful multilateral, international trading organisation is of crucial importance. I beg to move for Papers.

Lord Bridges

My Lords, before the noble Lord sits down, perhaps he can enlighten the House on one further point. From his knowledge and experience, I am sure he can. The noble Lord referred to the agreement assumed by the European Union on the Lomé Convention. My understanding is that the GATT fully agreed the principle of multilateral preferences which that embodied. However, it now appears that the World Trade Organisation does not. Can the noble Lord say whether or not that is the case? If so, can he tell us how it arises?

Lord Clinton-Davis

My Lords, with respect, I do not think that I should engage in such a discussion. I have already spoken for nearly 20 minutes. Therefore, it would be improper to take up the time of others in the debate. I shall try to return to the point when I conclude the debate. Perhaps the noble Lord will be kind enough to remind me of it.

3.30 p.m.

Baroness Miller of Hendon

My Lords, I would first like to thank the noble Lord, Lord Clinton-Davis, for having introduced this important and timely debate. We are fortunate to have the benefit today of his knowledge and experience as a former European commissioner. We are also fortunate that the noble Lord is not an hereditary Peer, so that his specialised expertise will not be lost to us—as will that of so many of your Lordships—when, sadly, the hereditary Peers are expelled from Parliament.

Perhaps I may preface my remarks by saying that they are not made more in sorrow than in anger. They are made in sorrow, but without anger. The United States of America is a country that I admire greatly, as well as its people. I have a large number of cousins of differing degrees of remoteness who are citizens, as well as very many American friends.

It pains me to have to criticise the USA, but it is right to say that an honest reprimand from a well-wisher is worth more than an undeserved compliment from a stranger.

In my view, the conduct of the United States of America over the banana problem and the draconian sanctions that it has imposed are a very sad way for a great and powerful nation to behave. There is no doubt that if one went out into the streets of, say, New York, one would find that hardly anyone would know what his or her government are doing in their name.

Let us begin by looking at what, or whom, the United States is trying to protect. Is it some major home industry? Is it to prevent rising unemployment in any of the 50 states? The answer to both those questions is, no. Will the sanctions produce any more jobs in the United States? Not one. Will they produce any more income for the low-paid workers on the South American plantations? As the noble Lord, Lord Clinton, said, quoting a trade union, the answer to that is, no. What it will do is increase the profits of three major US corporations—three major greedy US corporations—which, between them, already supply 78 per cent. of the EU hanana market compared with the Caribbean producers' mere 9 per cent. The Caribbean, African and Pacific growers between them supply only 20 per cent. of the EU market.

We are talking about three major US corporations, one of which has as its head Carl Lindner, who is one of the biggest bankrollers of the American political process, as the noble Lord, Lord Clinton-Davis, has already told us. Three major US corporations which are not content with controlling two-thirds of the world banana market nevertheless want to snatch even more from the poor people in the Windward Islands, where bananas provide 60 per cent. of their export earnings and 40 per cent. of their adult employment.

So at the behest of this powerful cartel, the US Government seek to impose what I have already called "draconian" sanctions. The amount sought in extra tariffs is no less than 520 million dollars—a number seemingly plucked out of the air, because the World Trade Organisation (WTO) reduced it in short order by almost two-thirds to 191.4 million dollars. So where were the sanctions directed? They were carefully targeted to inflict very serious economic damage. I will refer only to the sanctions applied to the United Kingdom. I stress United Kingdom because it is something to which I shall shortly revert.

We all know about the threat to the cashmere industry, now happily removed. The USA does not seem to have given a single thought to the collateral damage to goat herders in Mongolia, who actually produce the wool and depend upon it for their meagre subsistence. I doubt very much whether many people living in Ulan Bator have ever seen a banana, let alone know why demands for their product suddenly fell off. Candles are another item on the American hit list. They are not very important in the grand design of the universe, but vital in North Cornwall where candles provide work and income in an area of specially high unemployment.

What did Her Majesty's Government do about this situation? Did the Prime Minister get on the telephone to his friend Bill and call in some of the many IOUs that the USA owes to this and previous governments?

Of course, we shall never know, because what happened was that instead of sending the Secretary of State for Trade and Industry to argue with the Americans, he sent over none other than the Secretary of State for Scotland, to whom the Prime Minister has generously given all the credit for the concessions that have been secured, concessions for which we must all be gratified.

However, what are those concessions?—Scottish cashmere garments, Scottish shortbread (with English sweet biscuits benefiting from the broad definition). Of course, it is only a coincidence that there is an election going on in Scotland and that The Scottish Secretary has ambitions to be the First Minister. But what concessions have been achieved by the Government for the rest of the United Kingdom? The items remaining sanctioned are valued at £27 million in annual exports, with, for example, lead acid storage batteries alone producing some £14 million, to say nothing of the smaller trades on which many people depend for their livelihood no less than in any other industry.

I do not believe that I am being unduly suspicious about the way the Government have handled these sanctions. Soon after the list was published, the Government announced that they would finance the deposits that would be required from the exporters of cashmere, as the Minister for Home Affairs and Devolution, Scottish Office, proudly reminded the other place in the debate there on 22nd March. Did the Government offer to help any of the English or Welsh companies innocently caught up in this wrangle? No, not with a single penny. This is despite the fact that the Scottish Office Minister admitted in the same debate: This is an issue not only for Scotland, hut for the UK and the European Union".

Moreover, bananas are not the only problem. Looming up on the horizon is the question of hormone-treated beef. The treatment is to fatten up the beasts. I do not know whether it is good for one or bad for one, but judging by the fact that America has one of the generally most over-weight populations in the world, I suspect it stays in the food chain. However, that is not the point. Rightly or wrongly, Europeans mostly do riot want it. But the next food war will be when the beef farmers of the USA try to force it down our throats—literally.

Then we have genetically modified soya. Here is a product that I happen to believe has nothing wrong with it, and has been subjected to a lot of scaremongering. However, my opinion is irrelevant. There are many people who do not want it in their food. Until they change their minds, that is their right and should be their choice. Monsanto will soon be increasing the quantity of its GM soya, and is already surreptitiously slipping it into general supplies. This is a company which is also pushing the marketing of bovine somatropin milk—whatever that may be. I do not know what it is, but I have to say that it sounds horrible. It is something that greatly concerned the honourable Member for Nottingham South in the debate in the other place.

If the EU decides that, conforming to the wishes of its population, it wants to prohibit or inhibit the marketing of these products, what will happen? Well, if sanctions worked once, the USA could undoubtedly try them again. I gather that the Government already have the list and that it includes raspberry jam, sugar confectionery, cough drops and mustard.

There are two final but very short and important points that I have to make. First, one of the reasons advanced for the existence of the EU—whose trading relations with the USA are the subject of this debate—is that it was going to form a powerful bloc which would be able to compete because of its size with other large trading blocs. That brings me to my second point; namely, that the United States of America is unquestionably legally within its right to retaliate with sanctions against the EU over the banana issue. Indeed, it ought to be noted that this is only the second occasion in the 50 years of the GATT and the World Trade Organisation that sanctions of this kind have been officially endorsed. This does I suppose show how far the Americans think that the European Union is out of line. Therefore, however much we may dislike the situation, we have to understand that there has to be an even-handed look at this particular problem.

Shortly there is to be another round of negotiations about the trading rules in Seattle. I very much welcome the statement by the Minister for Trade that the Government are preparing themselves for these by consulting with trade unions, non-governmental organisations and representatives of trade and industry. We have heard often recently that the United Kingdom has much influence in Europe. I know that we all wish the negotiations well.

I very much hope that the new rules will take into account world social considerations, including the effect of the revised trading rules on the economies of poor nations so that they will never again be sacrificed on the altar of the bottom line of multinational corporations. I hope also that they will take into account ecological and environmental considerations.

3.41 p.m.

Baroness Williams of Crosby

My Lords, it is a well known piece of etiquette in this House to thank those who introduce debates. On this occasion, however, our thanks to the noble Lord, Lord Clinton-Davis, go much further. This matter, in the view of our party—and I am sure in the view of Peers in many other parts of the House—is a matter of overwhelming significance and importance. It is far more than a technical issue of trade. It is perhaps one of the most difficult areas we have had to confront since the end of the Cold War and one that could certainly affect our relations with the United States which are central and crucial to the conduct of the war in Kosovo and, extending far beyond that, to the whole global strategy of Europe and of North America in sustaining democracy and sustaining countries in transition.

Therefore we on these Benches make no apology for the fact that the three Front Bench members of our team involved in this debate cover foreign policy, defence and trade. We believe that this is much more than a trade issue; we believe that it is an issue of absolutely crucial foreign relations and has to be considered in that light. Having thanked the noble Lord, Lord Clinton-Davis, for introducing the debate, I must say that I believe that the serious tensions which now exist in trade—not only individual areas of abrasion and difficulty but going much wider than that—frame the potential for a possible clash between our two major continents.

I shall say a few words about the often neglected political background which makes it not easy to resolve some of these difficulties. It is widely thought in many European countries, not least in our own, that one deals primarily with the administration of the United States. We tend consistently to underestimate the separate power of the American legislature. Any American president trying to hammer out policies for that country is continually striking bargains with Congress in order to get his decisions through Congress and normally arrives at a final position which is somewhat different from the one he started with. As many noble Lords know, the present Congress has a greater orientation towards the south and the west than was characteristically and traditionally the case. This means that the influence of the eastern seaboard—which was predominant between the wars and for a long period afterwards—is today considerably diminished. It was the eastern seaboard above all that understood and gave priority to Atlantic relationships. Today Pacific relationships are at least as important to the United States as Atlantic ones.

Further, the mood of the Congress is currently one of growing protectionism, as the noble Lord, Lord Clinton-Davis, pointed out. It is not only a mood of growing protectionism but to some extent one of growing isolation too. The President has had no fast-track authority to deal with trading matters since 1994. Two Congresses have flatly refused to give it to him. His own influence is unquestionably weakened by the events of the past two years. Congress is increasingly treating his trade initiatives with growing suspicion. That is also the case as regards his monetary initiatives, as shown by the extreme difficulty he experienced in getting Congress finally to agree to increase the American contribution to the International Monetary Fund.

However, the blame does not all lie on the American side. It is worth recalling that the United States feels that it is virtually on its own in carrying the burden of sustaining world economic growth. The Americans are critical of the European Union which they believe has not taken its fair share of imports from Asia and from the rest of the developing world and which, in their view, had until recently pursued too high an interest rate and too cautious a policy towards sustaining world growth. I make no judgment on that. I merely observe as someone who still works part of the time at Harvard University that this is an attitude one encounters over and over again in American political and business circles.

The EU is undoubtedly now becoming a force of equal weight in world trade matters with the United States, as the noble Lord, Lord Clinton-Davis, pointed out. Let us say clearly why that is; namely, because this is one of the few areas in which the European Union speaks with a single voice. That single voice has given it an influence and a power in world trade matters that—I say this bluntly—it does not have in security matters or in foreign affairs matters. Some of us draw lessons from that. However, the development of the euro and the obsession with trying to build the euro that characterised many of our neighbouring states within the European Union has meant that from the American point of view the European Union now presents a challenge that simply did not exist a couple of years ago. Quite bluntly, that challenge concerns where the world decides to hold its reserve currencies. As the noble Lord pointed out, the United States has a heavy trade deficit running at some 300 billion dollars a year. Therefore the United States will be in some difficulties if it can no longer rely on being the world's sole safe reserve currency. That throws up new and difficult issues.

The other factor about the EU is that the price paid for getting a single position is often to strike bargains among the 15 which are then not easily opened up to further negotiation with the United States. The United States has some reason to complain that the EU is secretive and for that matter unwilling to discuss difficult issues in order to try to sustain unity within its own ranks. As regards steel and, to some extent, bananas, the European Union has been reluctant to try to withdraw some of the poison from these conflicts until the ultimate stage of the trade disputes procedure of the World Trade Organisation.

The noble Baroness, Lady Miller of Hendon, outlined eloquently and precisely some of the strains within the relationship between the two sides. She mentioned in detail the banana dispute and therefore my comments on it will be brief. We may as well be blunt and honest. I believe that one of the problems with the banana dispute is that the greatest advantage of the rent charged on the additional price of bananas which was agreed by the EU has not gone to the poor countries of the Caribbean. It is estimated that they have gained about 150 million dollars worth of additional help through that procedure. The money has gone, to the extent of 1 billion dollars, to the traders in bananas.

I agree with the noble Baroness, Lady Young, that we have a great responsibility to the Caribbean countries. However, I must be quite blunt with the House; it is not clear to me why substantial additional development aid to enable them to make their economies somewhat less dependent on one crop might not be more useful than an extremely complex arrangement which leads to the banana traders being the great beneficiaries of the outcome. Perhaps we on the European side should he honest enough to admit that on this issue not all the guilt lies in one quarter.

I wish to address two other issues. Again, as the noble Lord, Lord Clinton-Davis said, the World Trade Organisation has been a major force in establishing the rule of law in the area of trade. It has also been very important in setting up a disputes procedure which has in most cases—although not all—been relatively successful. It has not been able to cope with some of the most difficult issues of all, such as the American extra territorial sanctions, and it will find it very hard to deal with what can only be described as the very disappointing outcome of the agricultural reform negotiations in the European Union, which will be the source of a great deal of strain between the United States and ourselves. Having said that, as the noble Baroness, Lady Miller of Hendon said, genetically modified foods may prove to be a very great difficulty.

One of the problems of the WTO as it presently exists is that it does not take sufficiently into account some of the rising needs, not only of the developed countries but also of the developing countries. The developed countries are more and more concerned—rightly so—about the protection of the environment. WTO decisions all too often run directly in conflict with that protection. One example is the over-riding of the Mexican Government's objection to toxic waste sites in two of its major local authorities. A second example is the overriding of decisions with regard to, funnily enough, the United States' attempt to prevent the turtle becoming extinct by refusing to import tuna caught in nets which also catch the declining proportion of turtles in the world. That may seem minor, but it will not seem minor to us when, in a few years' time, we begin to register the extraordinary speed at which the multiplicity of species in our world is declining.

The WTO does not take sufficiently into account the needs of the developing countries. In the row about bananas, we have neglected to notice, for example, that India lost a major case on the issue of whether it could restrict imports because of its balance of payments problem. India was overridden—perhaps rightly so—but it indicates the problems that even very large and developing countries have in running economic policies that they believe to be in the interests of poverty alleviation in their own countries.

I conclude by saying that if the millennium round, as Sir Leon Brittan recently pointed out, opens up the whole question of the issues of the exceptions, the rules and the special procedures of the WTO, I hope that our Government and the governments of the EU will bring to the table not only their particular concerns—about sanctions, about bananas, about genetically modified food and about agricultural protection—but will recognise the wider issues that now so very much impinge upon the world beyond our borders; the issues of the environment, the issues of the real need for developing countries to be able to help and alleviate poverty in their own midst, the issues of the heavily indebted countries, of which only seven have so far been relieved of the vast burden of paying interest on past debt and not least and finally, the issue of how, to use the words of Renato Ruggiero, the soon-to-retire director general of the World Trade Organisation, it can be recognised that trade has not only an economic but also a human dimension.

3.53 p.m.

Lord Grenfell

My Lords, I am grateful to my noble friend Lord Clinton-Davis for introducing this timely debate. The United States Commerce Secretary, William Daley, recently warned that last year's financial crisis could well become this year's trade crisis. To a certain extent it has. The heat generated by the so-called "banana war" is, of course, out of all proportion to its economic significance, but it shows just how tetchy both the US and the EU have become on trade issues and we need to see now how the temperature can be lowered.

As Europeans, we must begin by acknowledging that neither side can claim to be on the side of the angels. The problem will not be solved if we claim that Europe is always in the right and that the United States is always in the wrong. I read with great interest, and some sympathy, in this morning's Financial Times that the Australian Trade Minister has deplored what he sees as an opportunity missed by the EU for real reform of the CAP at last month's Berlin summit. I very much agree with him. He said: There is now likely to be further intervention and a renewed build-up of unwanted surpluses which will continue to be off-loaded on world markets". I am not sure that that is a foregone conclusion, but he has made an important point.

Equally, the Cairns Group has reinforced this criticism with a statement saying that EU agricultural reforms were insufficient as a contribution to the WTO talks and would continue to shield EU producers from international market signals.

The EU's acting Commissioner for Agriculture, Franz Fischler, has predictably rejected this criticism, saying that it ignored the contribution the reforms had made toward stability of world prices and pointing out that the EU was the world's largest importer of food. Both of those statements are true, but they are not a full answer to the question posed by the Australians. Meanwhile, the United States has also come under Australian fire following the administration's International Trade Commission's proposal last month to impose a 20 per cent. tariff on all lamb imports above 1998 levels. As the US is Australia's largest lamb export market one can understand its frustration and annoyance.

I refer to these irritated and irritating exchanges simply to emphasise the point that American and EU trade policies and regimes have an impact far beyond the transatlantic area. That is one major reason why a new trade round is so vitally needed. We should be grateful to President Clinton for having called so strongly for a new trade round in his State of the Union message last January. One is aware, of course, that it is not just the need to make progress in the liberalisation of global trade that prompted him to make that call. He has at the same time to try to head off growing protectionist tendencies in the US Congress, and we should fully appreciate that.

But the EU should be equally wary of its own protectionist tendencies, particularly in agricultural products. As a recent report of the American body, the Council on Foreign Relations, states: Both sides of the Atlantic should guard vigorously against protectionist pressures, especially in the new, more difficult global environment: the United States and Europe should want more competition based on fair rules of the road and a level playing field, not less".

What prescriptions should one offer to help cure the current malaise? The first and most obvious, I suggest, is to strengthen support on both sides of the Atlantic for the World Trade Organisation, as my noble friend Lord Clinton-Davis emphasised. Precious little of that has been evident on either side in the banana dispute. No matter how genuine the EU's humanitarian concern for poor banana growers in the Caribbean—as the noble Baroness, Lady Williams, pointed out, they are not necessarily the beneficiaries of the regime—its non-compliance and its efforts to subordinate the WTO's rulings to its relations with that area was scarcely supportive of the world body that it claims to respect. The WTO's eventual authorisation of 191 million dollars in US trade sanctions was the inevitable result of that. For its part, the US administration, while loudly trumpeting that the WTO is good for America, itself flouted the WTO rules by taking premature and unilateral action, which is a strange way to go about boosting the organisation's reputation.

The European Union now claims that it needs eight months to put a new banana regime in place because of the difficulties foreseen in finding a solution acceptable to all parties and because of possible procedural delays due to this summer's elections to the European Parliament and to the formation of a new Commission. Since the United States has said that it will leave the sanctions in place until a solution has been found, I am rather surprised that a greater sense of urgency does not reign in the corridors of the Commission in Brussels.

The European Union clearly has to take a hard look at its development aid under the Lomé Convention. Does an aid regime largely based on tariff preferences still comply with WTO rules? It is not clear to me. I hope that my noble friend the Minister will be able to clarify the point.

I accept that the well known slogan, "Trade, not aid" is not an invalid appeal. I know that direct financial aid has a patchy record as a deliverer of value for money, granted or borrowed. I accept that the EU recognises the importance of diversification as a cornerstone of the solution in the Caribbean, and a difficult one to implement. But I remain convinced, as I believe is the noble Baroness, Lady Williams, that that is nonetheless the route that will have to be taken, however difficult it may be, if the dilemma of preference-based aid is to be resolved and if those economies are to become sustainable economies and not just on bananas.

The second prescription, I suggest, is that the European Union take very seriously indeed the US warning that it cannot for long remain the importer of only resort. While the US current account deficit rose by 146 billion dollars between 1996 and 1999, now reaching somewhere in the region of 300 billion dollars, the combined surplus of the Eurozone, Japan and emerging Asia has climbed to 342 billion dollars, and the Eurozone has run a large and stable surplus throughout this period.

It is true that while US domestic demand has been very high, that level of growth in demand would have overheated the economy were it not for the substantial inflow of relatively cheap imports. But let us not forget that that in flow has largely enabled the global economy to avoid the very worst scenarios that the Japanese recession and the Asian financial crisis could have brought about.

I therefore fully subscribe to the view, indeed I urge, that Europe stimulate demand so that it grows much faster than its trend rate of around 2½ per cent. Asia will certainly play its part in helping reduce the American trade deficit as its recovery gains speed. But that does not let Europe and Japan off the hook. They must stimulate stronger domestic demand and they can afford to do so.

I find it frankly shocking that in some quarters there is a preference for sitting back and letting a weakening euro sustain output as demand slows. Such an attitude will only exacerbate unnecessarily relations between Europe and the United States. Nor can we excuse ourselves by claiming, true as it may be, that the expected continued climb in the US trade deficit will be due more to a fall in exports than to a rise in imports.

No, we have to do much better than that. At the same time we must remain vigilant. At the last Davos World Economic Forum, the US trade negotiator, Charlene Barshefsky, was pledging firm resistance to protection at home and the submission of the unilateral use of trade sanctions to the restraint of WTO rules. And yet, since then, the infamous "Super-301" has been re-instated. If that is simply to calm US industries calling for more protection Europe might be able to live with a threat that is not likely to be carried out. But we must remain vigilant. As my noble friend Lord Clinton-Davis remarked in regard to Helms-Burton and other aberrations, these too must be vigorously and continuously contested.

My third and final prescription is this. Europe must somehow avoid doing anything that will make it harder for President Clinton to win back from Congress the "fast track" negotiating authority. His own weakened position, as the noble Baroness, Lady Williams, reminded us, in the wake of impeachment by Congress has not helped him in that respect. It is by no means certain that he can win it back. The noble Baroness eloquently evoked the problems of executive and congressional relations. The administration's protestations that it is fully committed to further multilateral trade liberalisation may be the signal that it feels it must send loudly and clearly to compensate for the possibility that Congress will not give him that authority.

That authority is essential if a millennium trade round is fully to engage the United States and produce the best results. We in Europe must therefore take fully into account in the trading behaviour of the European Union 15 that failure to follow the rules ourselves—for example, on hormone treated beef imports—puts ammunition in the hands of a protectionist-leaning US Congress and lessens even further the President's chances of gaining fast track authority. That would clearly he to shoot ourselves in the foot.

The Uruguay Round in the 1980s was largely launched in response to the strong protectionist pressures weighing at that time on the United States as it saw its current account deficit growing rapidly. A millennium round is therefore needed, not only so that we can fulfil the commitment to negotiations on agriculture and services but also because we must work for the further opening of markets to government procurement, curbs on anti-dumping measures, which are rising rapidly, and better conditions for foreign direct investment.

A serious commitment to a new round can also send a strong message that the further liberalisation of global trade within a framework of mutually agreed global rules is an irreversible process. It will strengthen the WTO as it strengthens the global economy. Both Europe and the United States have a huge stake in seeing that both those objectives are achieved.

4.5 p.m.

Baroness Young

My Lords, I, too, wish to add my thanks to the noble Lord. Lord Clinton-Davis. They are in no sense perfunctory. The noble Lord has raised an extremely important issue. I share the views expressed by the noble Baroness, Lady Williams, in her analysis of feeling in the United States and also in the European Union. We have already seen the dangers that can arise from a trade war over bananas. But a trade war continued over some time would be infinitely the most dangerous thing that could happen in the world, short of the difficulties in Kosovo. This is a matter to which people in all areas need to address their minds to see whether a solution can be found to the very real problems that are raised.

I and my colleagues have always supported the talks through the Uruguay Round to find a successor to the GATT arrangement in the World Trade Organisation. I have always been led to believe that the terrible depression of the 1930s was set off not so much by the fall in the US stock market as by the protectionist measures taken by countries afterwards in an attempt to protect their own interests. That is recent history which we should all study and remember, and it should be borne in mind in this important and timely debate.

All noble Lords who have spoken have referred to the problems of the Caribbean. I was interested in the remarks of my noble friend Lady Miller about the effects of the trade situation in our own country. I hope the House will forgive me if I also pursue that matter, speaking in my capacity as president of the West India Committee. As I have said frequently in this House, small islands have an infinite capacity to cause difficulties out of all proportion to their size, as we are seeing in yet a further case.

I wish to address myself to the matter of the Caribbean. The noble Lord, Lord Grenfell, touched on Helms-Burton. That in itself is the subject for a complete speech. I shall not go into it now, save to say that it is a completely deplorable instance of trade protectionism of the worst kind.

One of my anxieties is that the interests of the Caribbean will be marginalised in all these discussions. It is easy for the United States to go to the World Trade Organisation. But what of small, vulnerable states? I was interested in the point made by the noble Lord, Lord Clinton-Davis, and echoed by the noble Baroness, Lady Williams, that trade matters concern more than merely trade. They raise environmental and other issues. There is also the whole problem of small, vulnerable states. The Government clearly attach much importance to having an ethical foreign policy. Do they believe that the principle also applies to trade policy, and particularly to small, vulnerable states?

I believe that this afternoon I speak both as a friend of the United States and a friend of the Caribbean; and also as someone who hopes that those in Washington who have an interest in the stability of the Caribbean will speak out at this difficult time.

Perhaps I may touch on some general issues. I wish to ask the noble Lord, Lord Simon, when he comes to reply, whether the Government agree that there is now a real need for a negotiated solution to the trade war in bananas between the EU and the United States. At the same time, will they ensure that the Caribbean is fully consulted in all the negotiations? Most important, can the Minister answer the extremely important question put by the noble Lord, Lord Bridges, about whether the Lomé agreement still applies? It is of great importance to ACP countries. I am advised that the WTO ruling does not in any way diminish the obligation of the EU to fulfil its commitments under Lomé, but it would be helpful to have the point confirmed if that is possible.

I was encouraged to read the remarks, as reported, of Mr. Scher, the United States trade negotiator who said on 6th April: The United States remains open to a negotiated resolution. Our conditions remain simple—a WTO consistent regime and one that enables vulnerable Caribbean countries to continue to export their bananas". That seems to me a positive and helpful statement. I hope that it will be built on and followed up. It appears that the US seems prepared to find a solution to the matter, through direct dialogue with the EU. But of course, as we all know in these negotiations, the devil is in the detail.

The Caribbean banana producers require a regime that gives them certainty and at least 10 years of stability in an arrangement which must continue to honour the Lomé treaty commitments. That is to say, they require a system that provides assured access to the EU market and a viable return for traditional volumes of fruit. This, they argue, is only possible if a new WTO compatible system is established that continues to limit the volume of bananas on the EU market. A tariff-only system, as has been suggested by some, would not achieve this, as it would lead to the small volumes of Caribbean fruit being displaced by high volume low-cost Latin and other fruit. If the way around this were to be through additional measures then I understand that there are possible models not too far from ideas previously promoted by the United States special trade representatives' office.

What is Britain's role in this? Surely we have a particular interest, quite apart from our membership of the European Union, important though that is. We are a friend of the Caribbean. The islands of the Caribbean are part of the Commonwealth. It would be helpful to know what kind of solution we have in mind to the problem. The Government have recently produced an important paper on the overseas territories, but they will be greatly involved in the Caribbean if the whole banana regime breaks down. They would be the recipients of economic refugees, for example, just as we ourselves would be under pressure to receive economic refugees.

That brings me to my next point which is a real concern. The Caribbean is already worried about the future of bananas. But we are in danger of seeing the progressive collapse of products upon which the Caribbean depends; bananas today, rum tomorrow and, I am told, a real possibility of sugar in the not-too-distant future. That raises a serious prospect for the Caribbean altogether.

We have touched on aid but in these circumstances it is not the solution. It is difficult to get the aid money to the farmers who require it. I greatly enjoyed the speech of the noble Baroness, Lady Williams, but I felt she somewhat underestimated the difficulties which the banana producers have. Of course I recognise the problems with the companies which transit and trans-ship the bananas, but at the end of the day it is the Caribbean banana growers in the Caribbean who are mostly affected by all this.

If those islands are to make that transition which we all want, which is relatively easy to state but extremely difficult to achieve, to enable them to make the transition to other industries such as tourism, off-shore banking and information technology or the better integration of agriculture and tourism, they will need a long transitional period. They will need help and understanding.

I wish to conclude as I began. I believe that this is an extremely important issue. Once again I reiterate the point about the Caribbean and the role of the islands in it; the danger that they will be marginalised, the danger not just for the islands and the indigenous populations for whom I believe we have a moral obligation, even if they are independent countries in the Commonwealth. There is also the danger of our self-interest in the matter. The noble Lord, Lord Clinton-Davis, touched on the dangers that they could turn to drugs if they are denied their opportunities to grow the crops they are able to grow and if they do not get the transitional period for change to other industries.

This is one piece in a big jigsaw. It illustrates how important the whole of the world trading relationship is. Perhaps I may say how important the debate is in drawing attention to the difficult issues which we all need to solve if we are all to benefit from better trading. One thing is absolutely certain: in a trade war, everyone is a loser.

4.16 p.m.

Lord Shore of Stepney

My Lords, like others I begin by congratulating my noble friend Lord Clinton-Davis not only on giving us this opportunity to discuss matters of great importance but also on the range and quality of his speech. He knows what he is talking about when he turns to matters of trade. I speak with some knowledge of that because he and I had the pleasure and privilege of sharing command of the Department of Trade some 20 to 25 years ago. Since then, he has had a second and more recent innings as a trade minister, not taking account of his period of banishment in Brussels where he served in the European Commission. I shall carefully study the written form of what my noble friend said.

Although I know that the trigger for the debate and for our concern is bananas and the banana war, I welcome the reference to the development into the wider, more damaging and potentially dangerous areas of protectionism, non-tariff barriers of a new kind, but above all those that are linked to health and environmental matters. We have not yet sufficiently confronted them and if we—the European Union and the United States— allow ourselves to be driven into unthinking animosity, we can only do great damage to ourselves, to each other and to the whole international community of which we are an important part.

So one says straightaway that this is a diplomatic failure of a serious kind. Frankly, it does not speak well for the trade representatives of either the United States or the European Union that matters should have come to such a pass.

The noble Baroness, Lady Young, referred to our concern with the Caribbean. I well remember, during the earlier days when we were negotiating or trying to negotiate entry into the then Common Market, that the interests of the Caribbean and New Zealand were among the matters which we tried to safeguard. I believe that to a very great extent we did so. Added to that was the Lomé Convention which was already in force among the six.

I should like to make one point straight away that arises from the speech of the noble Baroness, Lady Young. As I understand it, the ruling of the World Trade Organisation is that it is the European Union's licensing scheme which is unlawful and should be banned, not the quota tariff preference, which is at the very heart of the banana regime, the protocols and the other matters that we negotiated.

If I am right about that, that is a very important point at which to begin to look for a solution. It is not being wiped out. We should also remember that, although financial interests are clearly operating strongly in the US Congress in an unhelpful way, it is not just United States interests that are set against those of the Caribbean countries, for which we have a genuine concern. The far from prosperous countries of the northern part of Latin America, some of which have recently been ravaged by nature in the form of hurricanes and damage of all kinds, are themselves exporters of bananas and have very great problems of poverty and under-development.

Having said that, perhaps I may say a little more about the banana issue before dealing with some general points about world trade, how I see the future and how the matter can best be remedied. There is only one point on which I question my noble friend Lord Clinton-Davis. He referred—I believe a little unfairly—to the American concept of "Three strikes and you are out" in approaching these matters. I have a piece of paper that gives a potted history of the banana dispute and perhaps I may give the salient dates.

On 19th May 1993 the GATT panel found against the restrictions in EU states. On 18th January 1994 the panel found against the EU's new Regulation 404. On 22nd May 1997 the WTO panel found against the EU regime. On 9th September 1997 the WTO appeals body upheld the panel's finding of EU violations. On 25th September 1997 the WTO disputes settlement body adopted the reports of the panel and appeals body. Finally, one had the judgment in April this year. According to my arithmetic, that is not three strikes but at least six. I believe that on this particular issue the clumsiness and insensitivity of the European Union negotiators has been very reprehensible. If one tries to give a balanced view of the handling of this matter by the European Union, the scales come down against the European Union.

On the wider issues very properly addressed by my noble friend, we must get it right and adopt procedures. The problem of hormones in beef has yet to be resolved. We had a four-year ban on our own meat exports but there is a ban of 10 years on American meat exports on the ground that it is a potential threat to health. In addition, there is the issue of genetically modified foodstuffs. On top of that, my noble friend Lord Grenfell referred to the possibility of a huge collision between Europe and America on the question of aircraft noise and the threat of retaliation against our own rather noisy Concorde. It is a splendid aircraft but nevertheless it is one that breaks most of the normally accepted limits. There is so much at stake that we must get it right.

The noble Baroness rightly reminded us of the tragedy of the pre-war years. The cause was not just the stock exchange disaster; that was part of it. Above all, it led to protectionism which in turn led to the contraction of the world's economies in a way that so fostered hatred between nations that totalitarian parties and governments emerged in Europe. One of the great successes and triumphs of the post-war period has been our capacity to generate and share prosperity and expansion. I confess that I have not always believed in it. From time to time I have been in favour of protecting particular interests and limiting trade, generally during the transition period between the end of the war and a more affluent and relaxed period in terms of our own trade. Clearly, taking one thing with another the world has benefited from the removal of trade restrictions. There have been temporary disadvantages but overall the pluses greatly exceed the minuses. That regime must not be put at risk. We have a great vested interest, not just because we are British or are part of the European Union or the Atlantic community, but because we are part of a world community whose hopes and prosperity for the future rest upon our ability successfully to grapple with these problems.

I turn finally to what I should like to see done immediately. Here I disagree with the noble Baroness. First, the maintenance of the tariff quota seems to be all right, but beyond that there should be compensation. If we are not getting that aid through, for heaven's sake let us recall from the European Union our own aid programme. We handed over one third of our development aid budget to the European Union. It has not exactly been successful in the use of either our money or anyone else's in helping to foster and help the economies of the countries which that money is intended to assist. Whether we do it directly ourselves—we are one of the major traders with the Caribbean—or through the European Union, we should ensure that the money goes where it is needed: into the pockets of the growers.

Secondly, let us use the period before the millennium round to take a good look at the World Trade Organisation. If, as I suspect, reforms are necessary—my noble friend hinted at them—let us try to make adjustments before the new round gets under way. Thirdly, we should accept that the disputes committee procedure under the World Trade Organisation is a good one but perhaps one or two modifications should be made to it. It must not be insensitive to the impact of its rulings on the social and economic conditions of the countries that are adversely affected. But it makes sense to have an arbitrator in this matter. Different interests are bound to come into collision. We must do our best to mobilise the very best scientific advice that is available. The matter will always be open to challenge. We must find ways to reassure publics that the right decisions are being made.

This is an opportunity for us to open up a prospect for the future. I am very grateful to my noble friend for giving us this chance to debate a matter of the utmost importance, which I am sure will fill the pages of the press when the awful tragedy of Kosovo has departed.

Lord Hacking

My Lords, before my noble friend sits down, perhaps I may be of some assistance to him. In his remarks to the House he referred to the dangers of new tariffs in the form of health barriers and he also referred to the 10-year beef ban. I offer this assistance to my noble friend: the directive for the ban on meat—that is any meat from cattle which have had hormones administered to them—was not made even on health grounds. It was made on perceived public concern about health.

Lord Shore of Stepney

My Lords, I will not take more than a moment. That is part of the problem: the difference between assessing the objective reality and mobilising the best evidence, and the public perception of the problem. That somehow has to be solved and, frankly, in the end only politicians can help to do it.

4.30 p.m.

Lord Fraser of Carmyllie

My Lords, I should like to join others in thanking the noble Lord, Lord Clinton-Davis, for introducing this important debate. It has undoubtedly been of great value to the House that someone of his expertise should have set the context for that which followed. At the outset it would seem to me worth reflecting that some three years ago, rather than having in contemplation the threat of a continuing trade war, the then Foreign Secretary, Malcolm Rifkind, and the then President of the Board of Trade, Ian Lang, were articulating ideas of a greater North Atlantic Free Trade Area. Forceful intellectual content was given to the concept by that most outstanding of Canadians, Mr. Roy Mclaren, who was then Trade Minister and who is now the Canadian High Commissioner here in London.

It was also a time, just three years ago, when the dangerous notions of the Helms-Burton legislation were close to ruinous and futile implementation, and the United Kingdom and the European Union firmly resisted the pressure to join in that anti-Cuban initiative, and rightly so. I record my gratitude for the unanimity of support that there was in this House in opposition to the nonsense of that suggestion.

It is therefore exceptionally unfortunate that, having held the high ground on that issue and having been prepared to contemplate the extraordinary and exciting expansion of greater free trading across the North Atlantic, we now find ourselves in such a relatively short space of time on the back foot and dangerously close to trying to defend an indefensible position. Without the immense negotiating skills of Sir Leon Brittan, it must be doubtful whether the great liberalising of world trade that the WTO ought to bring about would ever have been achieved. Few have a greater clarity of vision of what is required.

Accordingly, I share, I think with the noble Lord, Lord Grenfell, some discomfort as we have watched him on the back foot, playing the game out as long as he could over the latest WTO ruling on bananas. The noble Lord, Lord Grenfell, indicated that perhaps the Americans would take some blame because they ultimately acted precipitately or prematurely. I am bound to say, without trying to justify the Washington position, that one is bound to have some sympathy for them when one has regard to the chronology that the noble Lord, Lord Shore, spelt out and to the response that the European Union then offered—that it would take months, if not years, before we could bring into place anything that approximated to a scheme that would meet with WTO compliance.

If that is the position, we have to be careful about pretending that there is any high ground left for us to hold. I appreciate that the Government have had some success in restricting the range of goods put at risk by the American counter to the European Union banana regime, and pre-eminently among those successes was that of Scottish cashmere. I am sure that my noble friend Lady Miller is absolutely right in her suspicions, wondering why it should be at this particular point in time Mr. Donald Dewar who, however eminent he may be in other spheres of politics, has not been prominent in negotiating trade matters across the North Atlantic in the past. However, we will set that aside. Our success must not be simply in relation to that; nor should our objective be to ensure that any United States response is no more than proportionate.

I believe that our objective is a simple one. It is this: we must go back to the root of the disagreement and settle that. The noble Lord, Lord Clinton-Davis, said that he feared we were in the middle of, or were about to begin, an even greater trade war. He identified some areas where such conflicts might emerge with the United States. There may be some force in what he said and there may indeed loom some issues of greater significance than the banana regime itself. The reason why we have got into disagreement with the United States has been over the European Union banana regime and the way that the European Union has responded to the rulings of the WTO.

It simply will not do to squeak with some moral indignation that Chiquita has bought its influence in Washington. It did not buy the WTO. And however much we might like to blind ourselves to that reality and to that fact, the point has not been lost on policy-makers in the United States. If there is a concern in your Lordships' House and, more broadly, in the United Kingdom and the European Union that there lurks in Washington and in the United States a spirit of protectionism, is it surprising that that spirit of protectionism is engendered further if, on the first occasion that we have a major ruling of the WTO, we react in an illogical fashion'? If they wish to believe that we are going to operate in a genuinely global way in a spirit of enhancing world trade, they simply will not believe us if on that very first occasion we procrastinated and pretended that in some way what we were doing complied with what was required of us. It will get us nowhere if we persist with that notion.

Nor do I believe it will do any good to mislead our friends in the Caribbean with false promises that the EU's intransigence alone will safeguard their fragile economies. When I was a Minister in the DTI no one was more vigorous in support of those countries and islands than my noble friend Lady Young. I shared her sentiment that their economies should survive and prosper, and I continue to do so. Where I would rather not part company with her, but do, is that I do not see that it does those fragile economies any good whatsoever to pretend that we can protect them, when we do so with little more than bluster and a prayer. If we are going to achieve something that is satisfactory and lasting for them—and I would wish to see that achieved—we must undoubtedly do so by reaching agreement with the United States on a basis that is compatible with the WTO responsibilities that we have.

Accordingly, it seems to me to be fundamental that our primary policy should be to persuade the United States that it is not just in the Caribbean's best interests, or Europe's best interests, but it is in the best interests of the United States also that the small economies in the Caribbean, possibly over-dependent on the single commodity as they may be, should flourish. I am not always sure that I share the gloomiest of prognostications that if they cannot prosper with that single commodity of bananas their only alternatives are to become staging posts on the trade route of other internationally illegal commodities such as drugs destined primarily for the United States itself. Undoubtedly that is a very real risk. No one in America who looks at the position in the battle over drugs in his own country at this point in time would say that any sort of victory was about to be secured. It would seem logical for the policy makers in Washington to understand that the fewer battlegrounds on which they had to wage that war against drugs the better their chances of success at the end of the day.

We must attempt to persuade Washington that it is not in its best interests to be preoccupied with the weakening of one larger island in the Caribbean but rather of strengthening the smaller economies that surround it.

As my noble friend Lady Young pointed out, some expressions of opinion from the United States indicate a possibility of reaching a negotiated settlement on the matter of the regime. I am sure the House will be grateful to the noble Lord, Lord Shore, for spelling out exactly what has been cut down by the WTO decision and what remains open for the European Union to keep in place. If the Prime Minister has the influence in Washington that we are repeatedly told he has, I hope that that influence will be exercised in such a fashion that there will be genuine and positive negotiations over that issue.

I conclude, as did the noble Lord, Lord Shore, that the last thing the European Union needs to do at this time is to pick another fight with the United States, in particular over such issues as beef, if 10 years is to be the period that we seek to defend. There may be other bases on which we should be able to challenge what they wish to do—I do not know—but let us be sure that if we are to enter a fight on this occasion we know our international legal position and understand how to take it forward.

I would prefer to avoid such a battle. I would rather that the United Kingdom and the European Union took up this position: that we go into the next round—the millennium round—with a reputation not only vis-à-vis the United States but also the rest of the world that we are genuine and forceful in the liberalising tendencies that we wish to adopt as regards international trade. We want to be in a position to achieve a number of important reforms. If we are seen as the group in the world keenest to have squabbles that do not have a proper legal base in international law I fear our negotiating position will be very much weakened.

4.44 p.m.

Lord Montague of Oxford

My Lords, I join previous speakers in congratulating my noble friend Lord Clinton-Davis on the strong efforts he took on this side of the House to ensure that this subject is considered by us today. It is timely and appropriate. Unfortunately, I cannot differ from other speakers and begin with a subject other than bananas. It is a high profile issue.

We must be careful that we do not appear to be bad losers. From some of the points made we may seem to give that impression. One suspects that the judgment of the WTO was not influenced by heavy payments to political parties in America. It was assessed rationally. By responding that it would take us at least eight months to sort it all out hardly shows that we have understood the lesson we have been taught..

Americans should also remember something at this time as they savour their victory. We have heard that this is only the second time in 50 years that a WTO decision of this kind has been decided. It is worth remembering that 50 years ago was the first time; and the Americans lost. Whether this is the first or second of the two strikes, I am not sure. It is a salutary reminder that 50 years ago it was decided by the WTO that the Netherlands was right to restrict wheat imports from America because of America's import policy on dairy products from the Netherlands. So they are not always the winners. But it is a harsh warning for us to be careful.

Another issue has been referred to; the matter is imminent. I have in mind the situation with the hush kits and the banning of Concorde. I am not sure how many Members of this House are aware that the banning of Concorde is due to come into effect within seven days. The latest information is that the next discussion on the matter will take place with the Council of Ministers at the weekend. If it does not come up with an acceptable proposal which either buys time or solves the matter, then Concorde may not be flying next week.

Lord Clinton-Davis

My Lords, if my noble friend will give way—I do not wish to take his time—I have one point to make. The appropriate venue for argument of this kind is unquestionably the International Civil Aviation Organisation. The Americans have refused steadfastly to allow that to happen. Therefore, that is an important element to the background and why I think that the sanction proposed is totally disproportionate.

Lord Montague of Oxford

My Lords, as I said before, we are lucky to have in the House a noble Lord with the knowledge and experience of my noble friend Lord Clinton-Davis. He is right. However, it does not invalidate the point I make: that however unfair it may be that America should have this approach, it is a fact, however unreasonable, that the matter has to be decided one way or another this coming weekend. I know from experience of confrontations in which I have been involved from time to time that once one starts to lose—however unjustifiably—it is hard to recover. I put it another way. If for some reason Concorde does not fly next week, it will not necessarily be an easy or quick process to have Concorde flying again.

The British public do not have a detailed knowledge of the disputes surrounding the issue of bananas. They cannot have a detailed knowledge of the nuances of the dispute about hush kits. They will be told by the Americans that their hush kits satisfy the sound regulations which are about to come into being. The British public will find the position difficult to understand. They may not know what a hush kit is.

There are two sides to every story. It is important that we do not have a huge blaze of publicity next week about Concorde no longer flying because that will be misrepresented to and misunderstood by the British public at a time when I suggest that these issues require us to stay cool, as we are in this House today.

I comment on a further aspect of the hush kits which supports an important point made by the noble Baroness, Lady Williams. She referred to the importance of our understanding that, unlike in the Union where one can direct these matters almost exclusively to the heads of government and governments themselves, that is not the case in America. It is interesting that as recently as 15th April the threatening letter on this subject did not come from the Administration but from the chairman of the trade committee in the Senate. It covered not only the issue of the Concorde, but raised the spectre of other restrictions relating to aircraft movement. Therefore, I fully support an awareness in this House of the pressures coming from America. Perhaps the Foreign and Commonwealth Office should consider how we could have a closer dialogue with the Congress and Senate in order to achieve a more intimate understanding of the problems that we must face.

On that basis, I turn to beef. We face a problem which is partly of our own making. I am somewhat critical that we are unable to do a sufficient amount about it. I refer to the public mistrust in what is said by government and authority in relation to our food products, including meat and genetically modified foods in particular. It is agreed that it is necessary to have a food standards authority in which the public can have confidence. Indeed, there has been consultation about the appropriate Bill to come before Parliament, but where is it? It is ready, so why is it not here? We are told that there is insufficient parliamentary time. That may be the case, but I was interested to hear the noble Baroness, Lady Miller, say that we would have the good fortune of retaining the noble Lord, Lord Clinton-Davis, as a Member because he is not a hereditary Peer. There has been a complete acceptance of the fact that our good friends, the hereditary Peers, are to depart. I raise that issue because the provision of three days to discuss hereditary Peers, with the suggestion of an increase to six, is one of the reasons why we have insufficient parliamentary time.

We shall spend much time hearing the same old speeches as we heard yesterday over and over again. If someone has something new to say, for heaven's sake, let them say it, but we do not want repetition. The BBC broadcasts a programme called "Repetition" and I have never heard so many Members who are eligible to participate in it. Please, let us get on with our business and get the food standards Bill before Parliament so that we can have people leading it in whom the public have confidence. They can begin to learn the real issues relating to genetically modified food and beef.

Finally, I wish to comment on the understanding of our American friends, about whom we are somewhat critical. They are negotiating not only with the European Union but in particular with Japan. I am not so sure that their tactics towards Japan can be applied to the Union. I know Japan very well; I cannot say how many times I have been there. The Japanese do not understand nuances because of language and cultural problems. Unless you make it absolutely clear to the Japanese what you are going to do, almost under threat, they take no notice of you at all. That is a lesson that the EU should learn when it negotiates with the Japanese. It is no good issuing small, subtle threats—they cannot hear. However, that is not the way to treat us in the European Union and perhaps that is one of the mistakes that America is making at this time.

I heard reference to the problems in America as regards sugar. It is true that the Americans do not grow bananas, but they do grow sugar. They passed the Laurel/Langley Act in attempt to protect their sugar industry. I have a business in Hawaii and I know that the Hawaiian sugar growers have been devastated by the issues relating to the import of their sugar under the same circumstances as relate to bananas. They have had to deal with them while facing the criticisms made in relation to bananas. Therefore, we must take a slightly broader view of some of the issues that face America.

I conclude with the European Union and Sir Leon Brittan, for whom we all have immense regard. He has done a wonderful job and deserves great credit. But we have lost. Sometimes, it is advantageous to have a change of leadership when the rhetoric can be softened. I do not know whether Sir Leon will be reappointed. Perhaps there will be a reshuffle, but I believe that it is time for a different person to face with skill and alacrity the issues involved in our trade relationships with America.

4.56 p.m.

Lord Wallace of Saltaire

My Lords, I declare an interest as an adviser to the Trans-Atlantic Policy Network for some years. The group is concerned with the linkage between trade and security relations with our American friends and with bringing together parliamentarians, officials and businessmen, who often talk past each other, not with each other.

I want to talk about issues which go wider than those relating to bananas. agree with my noble friend Lady Williams that there are other ways of helping the small island states in the Caribbean than the deeply inefficient means of subsidising them through banana quotas, and we should now be turning to them. What is most worrying about the current state of trade relations between Europe and the United States is that the world economy is so fragile. With the downturn in east Asia, the US/European relationship is the key to maintaining an open international economy. In the United States, conventional wisdom on the world economy and the ways in which the US and European economies are developing differs widely from conventional wisdom among economists, politicians and businessmen in Europe. The banana dispute is a symptom of our underlying differences; it is not a cause.

The current American mood is worrying; particularly, but not only, in Congress. We are back to American economic triumphalism, but with an underlying mood of aggression about the Europeans. We have an American boom which has gone on for some time, driven by a rise in asset values, and which now includes a negative savings rate. It is a fragile basis for continuing prosperity. Partly as a result of that, from a European perspective there is a widening US trade deficit. However, as the noble Lord, Lord Grenfell, said, thankfully, under difficult conditions for the world economy, that US deficit has helped to maintain a degree of economic growth in east Asia. The United States has been the world's importer of last resort, and Americans complain bitterly that western Europeans should have done more to reflate European economies in order to take up more of the slack in the world economy which followed from problems in Indonesia, Japan, Malaysia and elsewhere.

This is the seventh year in which the European economies as a whole have run a substantial trade surplus with the United States. There is a rising rumble of complaint within the US Congress over that, indeed, an argument that that in itself is evidence that we must be protectionist. There is a perception of a European "output gap" which follows from our low growth, from our socially protectionist practices. They argue that we should have reflated, reformed, opened up rather more.

The American perception is also that Europeans are dragging their feet on eastern enlargement, which is not only an economic objective but also a political and security objective which we and our transatlantic allies share, and doing so for domestically parochial, protectionist reasons. Above all, in the American view, we continue to be protectionist in agriculture. We should in no way underestimate the extent to which American aggression against the Europeans in trade matters is driven by the perception that the European Community continues to be protectionist in agriculture. In this respect the failure to agree on Agenda 2000 in Berlin was a serious setback. One can only be deeply critical of the French Government and the French President in particular for that failure. I am told that there are several hundred thousand beef producers in 48 of the 50 states of the United States. The beef dispute will make the banana dispute look rather small.

In addition, one finds in the United States a confidence that it has built up a clear technological lead (above all in information technology) over the last 10 years, combined again with an aggressive determination to maintain that lead by ensuring that international standards, for example, for e-commerce, encryption and third-wave wireless telegraphy. fit in with American rather than European interests. There is a concern to maintain its lead in biotechnology, and particular concern that European pressures on biotechnology and in genetic engineering would disadvantage American companies. All this is accompanied by a sense that the United States is carrying the global security burden as well, very clearly evidenced by what is now happening in south-eastern Europe.

From our side we see the United States also in a rather jaundiced fashion. We despair of the style of Washington politics, of a weak presidency and deeply parochial Congress in which a substantial proportion of congressmen do not even have passports, and of a desperate search for campaign finance which gives enormous power to American lobbies. One talks about some of the difficulties we have here, not only in agriculture but also in energy. Energy companies in the United States have been fighting up a very active campaign against the United States accepting the implications of the Kyoto Protocol on global warming. We have ethnic lobbies fighting on sanctions. We have American airlines fighting for open skies in Europe but trying to prevent European airlines having equal access in the United States. There is, altogether, a preoccupation with their own domestic imperatives accompanied by an inability to recognise that European governments also suffer from domestic constraints.

European economists point to our higher savings rate and to our different stage in the economic cycle to justify our difference of approach. Our governments also point to the scale of European economic assistance to central and eastern Europe, Russia, the Ukraine and also to Turkey and the Middle East to demonstrate that we are sharing a considerable amount of the burden. Yet overall the European response is muffled and confused, which makes it even more difficult to get our case across in the noisy and crowded agenda of Washington politics.

What should we be doing, both in the United Kingdom and in the European Union as a whole, at what is a very sensitive period in maintaining an open world economy when a downturn in the American stock market, a hesitation in the continued period of American growth, could easily lead to some very severe trade disputes, a surge of protectionism within the US Congress, and thus threaten world growth as a whole? I do not think we need any new grand transatlantic initiatives, certainly not the New Atlantic Initiative beloved of the noble Baroness, Lady Thatcher, and others, nor the Transatlantic Free Trade Area, TAFTA, of which a US congressman remarked to me the other week that, since it sounds like NAFTA and they do not like NAFTA anyway, it loses support before it has left the ground. I am not even sure that the New Transatlantic Agenda has taken us too far.

But we clearly need very active engagement in conflict prevention on difficult new issues, on all of the questions of standards now coming up, on e-commerce and genetic engineering; we need a scientific dialogue on a whole host of new issues. The Transatlantic Business Dialogue has been particularly valuable in this respect.

There are other awkward issues coming up. As the Minister will be well aware, the divergence of European and American perceptions on energy use and the importance of the environment and global warming is extremely worrying. I am fascinated and rather depressed by the very odd combination of ethnic lobbies for security and oil company interests in central Asia that we now see driving Washington policy and, as I saw in an article last week, providing vast new sums for Washington lobbyists paid for by the governments of Azerbaijan, Kazakhstan and others.

There are plenty of areas in which it is easy for us to misunderstand each other and to talk across each other. We need therefore to make much greater efforts to explain our justifiable differences of perspective to US audiences. I welcome the European Commission's efforts to set up new centres of European studies in the United States. I welcome the German Government's efforts to fund centres of German and European studies around the United States, on the west coast and in the south as well as on the east coast. I wonder whether the British Government should not be thinking of providing more scholarships for potential American scholars and policy analysts to come over here, just to make sure that we do cultivate a new generation of American scholars who know rather more about Europe. We clearly need much more active and combined European efforts to engage with Congress as a whole and to try to persuade more US congressmen to understand European perspectives. We need also to accept that there is in American policy-makers' minds a linkage between security and economics, so that the European defence initiative (which I welcome the British Government pushing forward) is an important part of the European response.

Above all there is a need for the European Union and the European Central Bank to develop a more positive approach to international, economic and monetary policy. The European Union is now a key player in keeping the world economy open and prosperous, and we should not take it for granted that the world economy will remain open and prosperous without active engagement by European governments. We have the world's second reserve currency; we are now the largest grouping in world trade. The European Union and its member governments are in many ways still rather parochial, the European Central Bank a good deal more so, as Willem Buiter said yesterday.

From the American perspective, the confusion of West European representation in the various fora in which we meet the Americans is pretty disappointing. One turns up to G8 to find four European governments, the European Commission and often the Presidency from another state, all attempting to distinguish themselves from each other and insist that they are rather important. We could get our act together rather better. I regret that the United Kingdom sadly remains a rather marginal player, as it will until it joins the single currency. I hope that at some point—although naturally the Minister will not be able to say anything at all on this—that marginalisation will resolve itself with British membership of the single currency. I merely wish to urge with all the force I can that what we need is a more active and more coherent European approach to our partner and ally, the United States, in sharing the burdens of world economic management, before the US stock market turns down.

5.10 p.m.

Baroness Byford

My Lords, seen from the point of view of agriculture, trading relations cover the transfer of goods—that is, the rules of entry—the labelling of goods, the content of goods and the final sale of goods. There are also the complications caused, for example, by the Lomé convention, to which other noble Lords referred earlier, but I feel sure that that latter aspect will be covered by minds more legally tuned than mine. Therefore, I make no apology for sticking to food glorious food.

Wider implications have been debated very well by noble Lords this afternoon. They have made extremely valuable contributions. The World Trade Organisation wants to create a level playing field in which the exchange of goods is made easy. The EU and some opinions in Britain want to ensure that our native populations retain that element of control over what they eat.

The CAP reform, about which other noble Lords have spoken earlier and to which I add my concern, was too little and with the coming enlargement of the EU we shall have greater difficulty when we come to negotiate in the next round of the WTO.

At present, the main threat appears to be meat which is produced using growth-promoting hormones. Those hormones, produced synthetically, were banned from UK farming in the early 1980s to comply with an EC directive. The ban related to the risk of cancer because it was said that hormones had been found in food at toxic levels. There are those who insist that because all meat contains natural hormones the risk from synthetic ones is very slight and it will be difficult to monitor in any event. However, I understand that the Meat and Livestock Commission has produced a DNA test which can tell the difference. What arrangements are the Government likely to make to carry out the necessary tests in the event of large-scale imports of US meat?

The second major threat appears to be the synthetic BST hormone used legally by a large number of American farmers to boost their milk production, as my noble friend Lady Miller mentioned earlier. The scientific committee on veterinary measures relating to public health has stated that artificial BST seems to increase the presence in milk of another hormone which has been linked to breast and prostate cancer. I need hardly remind your Lordships that those two diseases hold particular terrors for most of the population. Synthetic hormone BST has been banned in Europe since 1989 but that prohibition runs out later this year.

The third major area is genetically modified organisms such as soya, to which other noble Lords referred earlier. No one can surely have missed some of the arguments surrounding that subject; nor can anyone be unaware that there are strong differences of view particularly between the manufacturers, the major users and the consumers. As other noble Lords have said, there is great concern on the part of the buying public. I am not aware of specific disease implications but I know that great concern has arisen over the realisation that animal feed is not controlled in any way. I need hardly remind your Lordships of the consequences of our last cattle feed disaster.

One way, and many would say the most logical way, is to label all foods, whether imported or home grown, so that it is made crystal clear that there has been tampering with nature. Unfortunately, our American friends wish to restrict information to a fairly bland assurance that all ingredients have been approved by the US Food and Drug Administration. It will be interesting to know on what grounds that organisation is so sure of its approval of GM and hormone additives. Perhaps the Minister will let noble Lords have details of that. If he cannot do so today, perhaps he will write to me on the matter.

On 15th April, the Financial Times highlighted the problem when its leader article read: Top buyers in US spurn modified corn". The article began: Archer Daniels Midland, one of the largest US agri-businesses and a leading corn processor, yesterday said it would not buy or trade any genetically modified … corn which had not been approved by the European Union". Later, the article went on to say that that, means that two leading corn buyers in the US have decided to cold shoulder non-EU approved corn—at least for the time being—in an attempt to avoid trade problems". Until that point has been resolved to the satisfaction of both parties, I fear that we shall be subjected to a concentrated campaign on both sides of the Atlantic. That campaign is clearly in place and is designed, I fear, to force us, through the WTO, to accept what the Americans themselves are beginning to doubt. Unfortunately, we in the UK and our partners in Europe seem unable to get our own act together to produce a clear and a unchallengeable code for labelling all agricultural products.

Were we to agree such a code, we should also have to devise and put into place methods of monitoring the actual content of food items on the shelves. There are agricultural colleges, institutes, bodies like the Meat and Livestock Commission, university departments and even health charities which are doing valuable work in analysing the constituents of food. Do the Government have any plans for unifying those various approaches in anticipation of a European labelling code?

I believe that a unified labelling code and a cogent monitoring system would restore the faith of British shoppers, and those outside Britain in the goods that they buy. It should improve also the image of British farming and, it is hoped, improve the margins in that beleaguered industry. Other countries would be required to sing from the same hymn sheet if they wished to see their goods on our shelves. Consumers would thus be in a position to indicate quite clearly whether their concerns over the scientific advances in nutrition were deep and lasting or merely media-driven and transitory.

Such an approach should obviate the need for mutual bans of bananas, beef, pig meat, poultry and, today. added to that list, batteries and bath products. It should encourage consumers to exercise their taste buds in the certain and sure knowledge that anything that they take from the shelves is what it says it is. That atmosphere of trust could only improve trading relations all round.

I thank the noble Lord, Lord Clinton-Davis, for giving us the opportunity this afternoon to discuss those very real problems and thereby indirectly to assure our American partners that it is not a personal issue. As English-speaking countries with a long history of co-operation and mutual understanding, we need to solve our differences in a way which reinforces those freedoms, particularly freedom of choice, for which we have fought side by side in the past.

This debate has underlined how important the coming WTO discussions will be to both the EU, America and to the world at large. Farmers, like any other business, need to look to the long term. In a world where many are short of food, it is essential that future agreements are clear, understood, and to the benefit of us all.

5.18 p.m.

Lord Puttnam

My Lords, I too thank my noble friend Lord Clinton-Davis for introducing this timely and very important debate.

At the outset, I should declare an interest. For more than 20 years my company has received financial backing from the American entertainment conglomerate, Time-Warner. Over the course of my career, perhaps as much as 75 per cent of my income has been derived from revenues earned in the United States.

The United States has also had an enormous impact on me in other, less immediately tangible ways. As a boy, I would sit in the darkness and soaks up the influence of American films like Fred Zinneman's "The Search", Elia Kazan's "On the Waterfront", or Stanley Kramer's "Inherit the Wind".

As a result of the quite intoxicating impact of those movies, the day I first went to America, in 1963, was, in many ways, the most significant day of my life. Part of me was coming home. Far more than any other influence, more even than home or school, my attitudes, my dreams, and my preconceptions have been shaped irreversibly by the optimism and the sheer zest of the United States. So I am in no way hostile to that remarkable country; nor do I believe in any kind of organised conspiracy theory, leading to cultural or commercial imperialism.

It is 30 years since the French media entrepreneur, Jean-Jacques Servan Schreiber, published his seminal text The American Challenge, brilliantly anticipating Europe's economic decline in the face of the overwhelming penetration of American goods, ideas and services. As he put it,

The confrontation of civilisations will now take place in the battlefield of technology, science and management". He concluded that, The war we face, will be an industrial one". Perhaps I can illustrate just how prescient Servan Schreiber turned out to be. Rather than joining other noble Lords in going bananas, I shall focus on the industry that I know best, the movie business. I hope that the House will find what I have to say relevant and informative.

Almost since cinema began it has been dominated by the United States. From the start, the Americans developed a trust in and a respect for the cinema audience. They imaginatively exploited each and every advance in the technology of cinema. They have shown an unerring ability for finding and telling good stories and, for the most part, they have attempted to challenge as well as please their audiences.

In contrast to the European industry, the American industry has also consistently lobbied a thoroughly receptive government for policies that would be likely to guarantee the survival and good health of their businesses throughout the world.

One hundred years later the effects of such single-mindedness are all too tangible. The audio-visual business has for some years been the United States' second largest export earner. For reasons that I shall attempt to explain, it is almost certainly its most enduring and most important. The imbalance of payments between Europe and the United States in this sector now runs at over 7 billion dollars a year. At present rates of growth that, in very short order, will undoubtedly cross the 10 billion dollar mark. From a European point of view, at some point those numbers become simply unsustainable. We cannot grow a European economy, create European jobs or any form of sustainable European future without addressing those issues in a farsighted and thoroughly comprehensive manner.

This is probably a naïve observation in the context of this debate, but surely the whole point of world trade is to create some form of visible equilibrium, or at least to have that as your long-term objective. When the implications of such dominance are considered in broader terms, they become quite alarming.

Today's movies are really "brand names". Every single film put out by the Hollywood studios is, in its way, its own brand which, when successful, becomes a locomotive dragging behind it many other sectors of the economy from fashion to fast food, books and video games. An entire panoply of other products and services latch onto the back of a successful movie. The film "Titanic", for instance, generated over a billion dollars around the globe from box offices outside North America and has sold a staggering 24 million units on video, 40 per cent. more than the previous record holder, "Jurassic Park". As a consequence, "Titanic" will probably generate several billion dollars more on the back of other commercial activities drawn along in its wake.

As many in this House will realise, it is an industry which brings incalculable benefit to the US by promoting American products, styles, values and fashions all around the world, 24 hours a day, seven days a week, every single week of the year. Now, new hybrid sectors of the audio-visual industry are emerging, containing a potential for growth which already makes them more commercially important than the traditional feature film industry.

By contrast, the film industry in Europe has tended to be defensive and inward-looking, rather than outward-looking and confident. There is absolutely no doubt that the health of the so-called "creative industries"—those industries built around intellectual property, of which film is just one part—will, increasingly, become one of the keys to success as we enter the information age of the 21st century. That will be an era in which the global economy will increasingly be driven by two things: information and images.

In these circumstances, it should be a matter of the greatest concern that America's extraordinary dominance in the field of films, television and the moving image generally continues to intensify. That concern is heightened by the fact that the Americans are already light years ahead of us in terms of internet-based entertainment and information. The development of the information society, and its potential to increase further the commercial and cultural domination of the United States, raises the real prospect of a fundamental dislocation between the world of the imagination, created and stimulated by the moving image, and the everyday lives of ordinary people around the globe.

Frankly, we have no idea what the consequences of such a dislocation might be, for it is genuinely without any form of social precedent. However, it is surely no exaggeration to say that it has the potential to be one of the cultural time bombs of the 21st century. The liberating and democratising possibilities of these new technologies must be realised in order that we all gain greater access to accurate information and perhaps an increasingly direct say in the way in which our communities and countries are run.

In January 1998, at the World Economic Forum in Davos, Hillary Clinton proclaimed that, American culture is America's biggest export". She cited the examples of fashion, music and movies. Surely, that represents a challenge to which the rest of the world, and particularly the nations of western Europe, should rise, rather than truculently acknowledging that as some form of permanent force of nature.

For some extraordinary reason, we in this country have grown up in a culture which is faintly embarrassed by success, and where taking part has been held to be somehow more important than achieving. When one asks an American how he is getting on, the traditional response is, "Great", "Terrific", or "Never better"! The British equivalent is likely to be, "Not so bad", or "Can't grumble" or "Surviving"! The latter is, of course, perfectly understandable in the case of one or two of our colleagues in your Lordships' House!

What other country could have devised national sports such as rugby and cricket? Cricket must be utterly unique in taking five days to play for a draw and rugby is surely the only sport in which, in order to move forward, the ball has to be passed backwards. Compare that to, say, American football. The objective is the same—to get the ball over the goal line as quickly and as often as possible—but the rules could hardly be more different.

In an era of rapid globalisation, we must recognise that, while we may prefer the attractive patterns and opportunity for individual flare offered by passing the ball backwards, the rest of the world is primarily focused on getting the ball across the line! We may be more stylish, but in playing to our traditional prejudices—good and bad—frequently we prevent ourselves being wholly successful.

The movie business in the US, for example, has taught me that government and industry work in partnership. That has been the case since 1917. As a result, the Americans have long been prepared for the next round of GATT negotiations, due to start early next year. More than that, they have a clear idea of where they want to be in 2005, and possibly even in 2020. I am sad to say that we, in Europe, have considerable uncertainty of where we were five years ago!

Please believe me that everything that I have said about my own industry is equally true of many other sectors of the economy. In his recent book, Business at the Speed of Thought, Bill Gates argues that, if the 1980s were about quality and the 1990s were about re-engineering, then the next decade will be about velocity. Business is going to change more in the next ten years than it has in the last fifty". I suspect that he is right. That begs the question, can Europe adequately devise and implement the type of structures, delivery and decision-making mechanisms to compete in this rapidly changing commercial environment? One way or another, that is the challenge to which we must rise. In my judgment, that is what the future of Europe is all about.

5.28 p.m.

Lord Monkswell

My Lords, I am tail-end Charlie and although everything has already been said, not everybody has said it. I join those who have thanked my noble friend Lord Clinton-Davis for introducing the debate.

I wondered whether, as tail-end Charlie, I could add anything new to the debate. There may be one new angle. I refer to asking the question: What do we hope to get out of the debate and to achieve by it? We have heard some erudite speeches, explaining the situation and suggesting ways forward. It seems to me that we have problems both as regards the Administration and Capitol Hill in the United States of America and—dare I say this?—with those involved at the negotiating level of the European Union. The point that I should like to get across is that all those involved in the decision-making processes seem to have taken their eyes completely off the ball in terms of asking: What is it all about?

As has been said, if we go down the road favoured by the USA with regard to the banana regime, we must ask ourselves who will benefit. It will not be the banana-growers in the Caribbean islands or those in Central America. It will not be any American workers or any of the consumers in either Europe or the US. It will be the shareholders of an already well-off company. I should like to introduce the realism of what perhaps I may describe as "the ordinary guy". It is crazy to allow a situation to develop which will end up benefiting nobody. We need to recognise that. In a democracy, one of the ways in which we can try to tackle that is to get across the facts of the matter to the ordinary man in the street, the ordinary voter, whether in the USA or the EU.

Perhaps I may give my perception of what has been going on. For the past century the USA has intervened in one way or another in the small countries of Latin America, usually with disastrous consequences for their citizens. Why? It was usually at the behest of a large fruit company wanting to increase its profits or not to see its land taken for land redistribution among the landless peasants. Now those same fruit companies are demanding that their anti-social policies and activities, which have laid waste to the small countries of Latin and Central America, should be exported to the islands of the Caribbean which, by and large over the past few years, have developed a modus vivendi that enables their citizens to lead reasonable lives and to make a positive contribution to their own communities and the world. It is only when such facts are conveyed to the electorates of our democracies that the politicians will sit up and take notice.

One could cite a range of areas with equally difficult problems, but I went through that explanation of my perception of what is happening in the hope that our debate will appear on the Internet and that some people in the USA will thereby pick up on what has been said here and agree with it.

My experience of the USA is rather different from that of my noble friend Lord Puttnam. Yes, we all share a perception of the USA that has been gained from films and television programmes, but when I first went there a few years ago I was amazed to discover that it was not like that. Again, my political background may have coloured my perception differently from that of my noble friend. I had thought that the Americans were the bad guys, but when there I found that it was not like that. It was all rather different from the movie and TV image. I have met some really terrific people in the US. It is those decent citizens, those decent democrats, to whom I am speaking when I say, "You need to do something about your political system. We have problems on this side of the pond and we are doing what we can to sort things out". Indeed, some of those matters arose in our debates yesterday. That is the message that we need to get across. We need to build a communication link and to highlight the good things.

I have been concerned in this debate by the misconceived polar extremes of free trade or protectionism. We need to recognise that protectionism or isolationism is not socially useful; but neither is free trade. Free trade without regulation will lead to a social, economic and environmental disaster.

I was pleased to hear the Conservative spokesperson saying that we should inject into the World Trade Organisation the concepts of society, the environment and social policy. That is important. I wonder whether the current rules of the WTO make any sense at all. I am not familiar with all the details—I am not an expert—but it appears that the WTO is saying that a small number of people in the Caribbean can have their livelihoods taken away from them and that that is perfectly legitimate. Any organisation that says that that is legitimate needs to be questioned. We need to say, "It is not legitimate to take away people's livelihoods". I am also concerned by the argument, "We can give them some compensation". That is rather like saying, when making people in this country redundant, "It is all right because they can have unemployment benefit". It is not all right to render people unemployed and to give them no opportunity to work, to fulfil themselves or to contribute to society. If we do nothing else, we must recognise that.

Earlier, noble Lords asked what the result of all this will be. We can forecast the result. There will be the cultivation and peddling of drugs and an upsurge in piracy in the Caribbean area. We know that that will happen because wherever there has been economic dislocation, criminal activity has been generated. It is not just a question of providing financial compensation. We must ensure that there is work for people to do. If, in the next few months and years, we do not inject into the WTO the legitimate demand of ordinary people that it should service their needs and ensure that people have jobs and a decent standard of living and that the environment is not degraded, the world will be a worse place and all of us will suffer as a consequence—not just in the UK or the EU, but also in the USA, Canada and all other parts of the world.

We have been discussing a serious topic and I hope that our debate can inform the Government and those who will be negotiating on our behalf so that, however they come to their conclusions, those conclusions actually mean something to ordinary people throughout the world.

5.40 p.m.

Lord Razzall

My Lords, in winding up from these Benches, I join other noble Lords in thanking the noble Lord, Lord Clinton-Davis, for introducing this extremely important subject tonight.

Having listened to a number of noble Lords, I should first like to express concern at the anti-US feeling that crept into many of the speeches. There can be no doubt that since the Second World War US economic policy and the US economy have been the motor of world economic growth. This House must recognise that. In that context, the US-European economic relationship has clearly been one of the great successes of the post-World War Two era. The American-European economies together probably make up more than half of the world GDP. As the noble Lord, Lord Clinton-Davis, indicated, trade between the European Union nations and the United States exceeds 1 billion dollars a year; and it is probably true to say that 95 per cent of Atlantic trade investment takes place without any of the difficulties on which many noble Lords concentrated this afternoon and this evening.

As an aside, it was interesting in this week of changing Conservative Party policies to listen to the speeches of the noble Baronesses, Lady Miller and Lady Young, both of whom indicated in the tone and content of what they said the end of any suggestion of a North Atlantic trading organisation as an alternative to the European Union so beloved by the noble Baroness, Lady Thatcher.

Baroness Miller of Hendon

My Lords, I certainly did not say anything like that. Perhaps the noble Lord should read what I said tomorrow in Hansard.

Lord Razzall

My Lords, I say to the noble Baroness that I could not resist the dig!

As a committed free trader, I commend the behaviour of the European Union and the United States since the Second World War. After all, the countries of the European Union and the United States have been the most consistent and close participants in every iteration of multi-lateral trade talks, beginning with the first round of the General Agreement on Tariffs and Trade in 1947. The European countries and the United States have been highly instrumental in the establishment of the World Trade Organisation and are indispensable to its further strengthening. Therefore, having listened to the speeches of noble Lords, it is important to put on the record that the European Union-US trading relationship over the past 50 years has been a massive success.

That extraordinary record does not mean, as many noble Lords indicated, an end to our economic disagreements. A number of noble Lords concentrated on individual disagreements that have disfigured our discussions with the United States in recent months. People touched on the aircraft issue. People wonder why there appears to be no liberalisation of US routes for UK and European aircraft, despite the pressure from the US aircraft industry and government for liberalisation for European routes to them. Some people mentioned that it is odd that a European Union ship cannot pick up cargo in one US port and take it to another US port under the existing restrictions that apply in the United States.

We are well aware of the disputes regarding tariffs and subsidies to which many noble Lords referred this evening. They affect particularly textiles, the motor car industry, non-ferrous metals, and obviously the agricultural industry of which bananas are the flavour of the month. Many noble Lords concentrated significantly on the problems of bananas and I shall return to that later.

Some disputes have significantly disfigured relationships between the European Union and the United States; for instance, intellectual property rights. The noble Lord, Lord Puttnam, gave an excellent exposition of the power of the United States' movie industry, but we are all aware of the never-ending dispute between French perception of Hollywood domination as against a French desire for the French language to maintain its predominance in France in television and the movie industry. That issue influences and affects all sorts of attempts to liberalise world trade and has done so for many years.

Many noble Lords expressed concern about the United States' attempt to impose extra-territorial sanctions legislation. It used to be trade with Libya and Cuba that was affected. The jury is out as to what will happen vis-Ȥ-vis Libya now that sanctions appear to be suspended. But in relation to trade with Cuba, many European countries are disadvantaged as a result of what we regard as discrimination in the Helms-Burton legislation in the United States.

Having said all that, as I indicated at the beginning, I feel that the record of European Union-US trade is impressive, notwithstanding the problems that have been indicated. I should like to suggest a number of proposals. It is all very well for us to debate these issues and express our concerns, but I hope that on behalf of these Benches I can bring forward some practical proposals in the context of noble Lords' speeches as to what we would like the Government to do.

First, there is a legitimate concern expressed in the United States as to the insular nature of the European Union vis-à-vis trading matters. The United States has a legitimate concern that the United Kingdom and the European Union cannot get their collective act together to join them in attempting to deal with a number of issues that affect the world economy and are outside Europe. The obvious one, on which my noble friend Lady Williams touched, is the regional and global implications of the Asian economic crisis. There is a feeling in the United States that we left it to them and ignored the issue. There is a feeling in the United States also, which I share, that the European Union has not done enough to join the United States to put pressure on Japan to introduce the litany of Keynesian recommendations that clearly any rational economist would attempt to persuade them to put into place.

There is a strong feeling that the Government need to pressurise our European partners to join with the United States in reforming the G8 financial architecture to enable Asian and Japanese crises of the future to be better predicted. That would also involve pressure on the United States to work with the United Kingdom and the European governments to ensure reform of the International Monetary Fund.

Secondly, within this global area there is the question of Turkey. That has not been mentioned during this debate, but there is clearly a significant difference of opinion between the United States and the European Union as to what to do about Turkey. Turkey is a major potential trading partner of the European Union. In the United States' eyes, it was a major strategic partner during the Cold War, and the United States, the United Kingdom and the European Union, again need to get their act together in relation to what global policy ought to be adopted to bring Turkey more into the comity of nations.

In relation to strict trade issues, I urge the United Kingdom Government to continue the pressure for further trade liberalisation within the World Trade Organisation. Agricultural talks are due to he completed in 1999; talks on services are due to be completed in 2000. From these Benches we urge the United Kingdom Government to continue to pressurise the United States to co-operate in the liberalisation of world trade within that organisation.

Thirdly—a statement of the obvious—we want to put pressure on the Government (having listened to recent debates I am sure that the Government require no further pressure) to come to a satisfactory resolution of the banana dispute, in particular in relation to the points made by a number of noble Lords concerning the Caribbean.

One point that concerns me about the Caribbean is the fact that we are in danger of creeping into the feeling that the only solution to the banana problem there is a trade one. In other words, the only solution is to allow bananas from the Caribbean to be sold into Europe, albeit in breach of WTO guidelines.

There are no solutions to the Caribbean islands' problems which do not necessarily mean breach of WTO guidelines. I think we talk, at our peril, about aid not being a solution because there are many different forms of aid. Clearly aid in the form of a cheque given to those countries is not a solution. There is the whole structure that the world community has learnt to put in place for developing countries to encourage alternative forms of agriculture—for example, soft loans., guarantees and grants. Indeed, certain forms of industry. like tourism, need to be looked at as a matter of urgency by the British Government. I hope that the Minister will be able to confirm that that is happening.

Fourthly, we need to press the United States for the removal of the Cuban liberation and solidarity Act—the Helms-Burton legislation. As the noble Baroness, Lady Young, indicated, that discriminatory piece of legislation ought to be removed as far as concerns trade with Cuba. I am sure that I am pushing at an open door with the Minister, but I believe that the British Government need to do everything that they can to encourage the United States Administration to resist the siren voices of protectionism that we so often hear and which, I suspect, now result from the ending of the Cold War and the sense that the US can, once again, retreat into its inner roots.

Finally, perhaps I may return to the fundamental point with which I started. Please can the British Government not allow the small problems—they represent only 5 per cent of all the problems—as regards US/European trade and investment to deflect us front the achievements of the past 50 years?

5.52 p.m.

Baroness Denton of Wakefield

My Lords, I should also like to thank the noble Lord, Lord Clinton-Davis, for bringing forward today's debate. It was a great achievement because it moved the issue way beyond bananas and what has happened in the past. Indeed, it has rather been known as "the banana issue". That does not make it a matter of lesser concern, but I believe that we have today identified what an enormous area the issue covers. I should like to thank the noble Lord, Lord Puttnam, who probably brought back happy memories for everyone. However, my own favourite was "The Wizard of Oz", although "Follow The Yellow Brick Road" seems to remind me of the current Government's transport policy!

I was lucky. Two years ago I went to a renaissance weekend run by the current American Ambassador to the United Kingdom, Mrs. Lader. It was at that event that I spoke to the first American that I had ever met who did not agree with sanctions. That was quite an achievement. However, there was also a general resentment there of the fact that Ministers of the United Kingdom travelled with people from British companies to find trade and investment. It was only when a former Secretary of State joined their team that they began to realise that this was a joint effort from industry and government to bring business into the economy. The dismay that they expressed took me by surprise, but I believe we changed their view.

However, what was most important was discovering that the US has always been described as "the most powerful nation on earth"—not the most educated, the most caring or the fastest growing, but the most powerful. What can you do with the most powerful? Do you attack or referee? Anyone who has been in Northern Ireland will tell you that refereeing is no great fun. Alternatively, do you stand still and put up the barriers?

My noble friend Lady Miller was suspicious as to why the Secretary of State for Scotland was in Washington on St. Patrick's Day. My own observation would be that cashmere is more New Labour than bananas. But, more seriously, what will the policy be after devolution? Will the Scots, the Welsh and the Northern Irish all race for a noisy but lovely concord? Can the Minister tell me how we will deal with the issue when we have four areas all looking to make their case heard? Was it not the UK—I do not say this with absolute certainty—which first blocked retro-fitted noisy planes, which resulted in the Concorde issue being raised in retaliation?

I must agree with the noble Lord, Lord Wallace, on the role of education. We should all remember the size of the states and their issues in the USA and put them into that overall jigsaw. However, perhaps I may be allowed a slight non sequitur— and this has happened in your Lordships' House before. I believe that anyone looking at this matter should talk, first, to the City as regards the issues for finance. If we put up barriers against the US, how can we have mergers and acquisitions which give our companies the size to play globally? You cannot play globally with some of the capital bases of our companies at present. I hope that that point will be taken on board.

The EU runs a consistent trade surplus with North America. When it comes from their boom, the Americans have no problem; but when it comes from EU policies that distort trade, America has no alternative but to retaliate. The situation is not helped by the fact that the euro has declined by around 9 per cent since it arrived on the scene. The recent ECB rate cut for Germany's unemployment benefit—or, possibly, employment benefit—does not help. Although it was a different issue, we cannot be surprised if the US saw it as a protectionist issue. However, the real issue is whether the EU will obey rules that it hammered out or defy them when it suits its purpose. I hope that it is the first option.

5.58 p.m.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury)

My Lords, I must say that I have been greatly encouraged by today's debate, especially by its tone. Therefore, I should specifically like to add my thanks to those expressed to my noble friend Lord Clinton-Davis both for sponsoring the debate and, if I may say so, for setting the tone. Indeed, my noble friend made an extremely thoughtful and wide-ranging speech. It set the right tone, which I believe was taken up by other speakers. That applies particularly to both Opposition speakers who have just spoken; namely, the noble Baroness, Lady Denton, who I am happy to see in her place today, and the noble Lord, Lord Razzall.

We have much common ground in this House about the vital nature of our relationship with the US. I believe that the noble Lord, Lord Razzall, underlined the fact that the scale and importance of that relationship over the past 50 years should never be underestimated or forgotten. The relationship is fundamental to free trade in the world. If there are currently a number of outstanding disagreements within that relationship, we should firmly bear in mind—I believe this is the mood of the House—that these are exceptions to the rule. The vast majority of trade and investment between the EU and the US takes place without difficulty. The Government do not want to see these relatively few, although admittedly important, disagreements colour the nature of the relationship as a whole. I believe that that represents the feeling of the House.

I wish to separate the two main themes that the House has developed. These are the strategic, geo-political issues, which have been sensibly highlighted, and the disputes. I hope the House will bear with me if I spend rather less time on the disputes, as they are complex matters of negotiation, than on the strategic issues. The noble Baroness, Lady Williams of Crosby, and my noble friend Lord Grenfell set out the geo-political relationships that are at risk if we do not look positively at the nature of the relationship between the European Union and the US, and see through the hiccups which are certainly causing us some indigestion—not least in my case—in trying to master the issues. We need to see through those hiccups and discern the real strategic balance that we need to achieve. The point made by the noble Lord, Lord Wallace of Saltaire, in this context is important. Given the tragedy of Kosovo, it is clear to us that the fundamental balance of the relationship between security and trade is very much uppermost in the minds of our American friends. That has always been the case. They closely associate the two matters in their geo-political thinking, perhaps in a rather different way than Europeans, because the Americans have a more unified capacity.

We were reminded by the noble Lords, Lord Wallace of Saltaire and Lord Razzall, and most effectively by my noble friend Lord Puttnam, that we require a more unified, cohesive and confident approach from Europe to develop exactly the same balance in security and trade as our friends in America have. Our style may be different—as both the Opposition Front Bench speakers have said—but as a government and as a political body we must seek in the UK and through our good offices, in Europe, to achieve a more unified, more consistent, more effective and reactive decision-making structure vis-Ȥ-vis our partners in the United States. Those noble Lords who spoke in the debate on Monday night on our changeover plan for the single currency will understand the extent to which this strategic intent is in the back of the mind of this Government.

I turn to a key issue in the EU/US relationship. It is worth mentioning some figures here. This relationship accounts for 54 per cent. of world income and some 38 per cent. of world exports and 39 per cent of imports. In 1997 the goods trade accounted for 160 billion dollars on either side. The trillion dollar figure accounts for all the services. The relationship accounts for a remarkable 20 per cent. of our exports and some 24 billion dollars of our investment flows. It constitutes an enormous bedrock of confidence and balance between the two continents. There is a depth and a significance in this relationship which is absolutely crucial. I wish to emphasise not only the bilateral relationship—that is not the only reason we must understand each other's attitude to the trading system—but also the impact that has elsewhere in the world. In this context I refer particularly to the small island nations that we have discussed in regard to the banana dispute. Therefore it is vital that these twin pillars of the trading system come together and understand their impact in third party markets.

I turn to the development of the Transatlantic Economic Partnership. My noble friend Lord Clinton-Davis said that the concept of process is important. He talked of improving the WTO process. I want to consider the relationship between Europe and the US and ways of improving that process. I believe that the transatlantic partnership that was negotiated under the UK presidency of the EU last year, and agreed at the EU/US summit in London in May 1998, is vital. It builds on an already strong transatlantic trading relationship. The Transatlantic Economic Partnership provides a wide range of opportunities to improve the bilateral trade relationship. Currently we are considering a more positive disputes resolution capacity within our relationship. I am sure this will be discussed at the next summit. As many speakers have said, it would be wiser for us to solve our problems before they reach the WTO. I believe all of us agree that we should like to avoid lighting in that world theatre, given the impact of our relationship on everyone else. We shall take forward the capacity to improve the bilateral disputes mechanism. That is best done through the Transatlantic Economic Partnership.

We are considering various elements of the relationship: services, agriculture, the environment, food safety—that was emphasised by the noble Baroness, Lady Byford—and biotechnology. All of these issues can be taken forward. Electronic commerce and further technical barriers to trade will be important elements in that discussion. It is important to mention that process, but I could rightly be asked why we are having so many "barnies"—if that is the right word—when this marvellous new process is being established. One must look at the context of this matter. We need to consider the dispute as seen through American eyes and to underline some of the interesting points that people have made.

Last week I spent three days in Washington and New York talking to the administration and to the banking community. I heard clearly that their deficit was 250 billion dollars—some speakers have said it is 300 billion dollars; I hope it is not at that point yet—in the last quarter of last year. That is an important figure to the Americans. We must understand that two years ago world growth rates in trade stood at a level of nine to 10 per cent. They are now at a level of 3 per cent. That means we are missing between half a trillion and a trillion dollars of world trade that people thought would appear on their books. That is causing an enormous regional adjustment to be made worldwide, as has beer. clearly said. The Americans regard themselves as the clearing house in this situation. They state that absolutely clearly when one talks to them informally. They rightly ask, "What are you Europeans going to do to improve this situation?" Therefore the debate on bananas must be seen in that light. Noble Lords have rightly said that the huffing and puffing of negotiating rhetoric will not disguise the fact that we have lost this dispute after much prevarication on the European side. It ill behoves us to pretend that the problem is still that of the Americans.

The large problem is ours to share, but the particular issue I am discussing is ours to solve. I say "ours" in a collective sense because I believe it is the European Union's problem. I say en passant to the noble Baroness, Lady Denton, that even if this were specifically a Scottish or a regional problem, everyone would still have to seek a solution in Europe. That is the strength of Europe. Unless we negotiate through Europe, we will certainly be taken apart in salami fashion because, as the noble Lord, Lord Kingsdown, said in Monday's debate—I paraphrase—we should not expect sentiment from the Americans in matters of trade negotiation. I am sure that he will not mind my paraphrasing.

I now turn to the dispute about bananas. The issues are very clear and it behoves us to think very hard about how we want to negotiate. Perhaps I may say to my noble friend Lord Shore that it does not help to imply that it is the EU negotiators who have got this wrong. EU negotiators play the hand largely given to them by the nation states. If we give them poor cards they will do a poor negotiation. We need to understand why this has happened.

It is regrettable that the United States chose to retaliate—even though it had perhaps the right in the dispute—because that does not make the position any easier for the other side to negotiate. While I am very happy to see that the threat to sectors such as cashmere, knitwear, sweet biscuits, candles and plastics has been lifted recently and those items have been taken off the retaliation list, it is for the Opposition to wonder why. They expressed their wonder about how this happened and who negotiated it. I would merely say that they probably do not understand how joined-up our government are. It was of course my right honourable friend Donald Dewar who was involved in the negotiation, but then we have many facets to our negotiating capacity and that is something the Opposition should understand.

Having got that off my chest—and having put the accolade where it is due—I wish to be quite clear that the WTO panels have now ruled that the EU's banana regime is not fully compliant with WTO rules. Perhaps I may respond to the question of the noble Baroness, Lady Young. The WTO ruling on bananas recognises the EU's right to a waiver to provide a degree of preferential access to the ACP banana suppliers. In other words, the WTO ruling does not prevent our still meeting commitments under the Lomé Convention. The noble Baroness, Lady Williams, said that the real problem was the licensing and the vast amounts of money going to the wrong places. We all have to sort out that negotiation. We would now like to see rapid movement to resolve the dispute. That is very clear. I heard the request from the other Benches for the Government to take forward that matter. We certainly need urgent consultations with all the parties involved in the dispute, including the Caribbean, on the option for reforming the banana regime, and including the timetable, the process and the possibilities for an interim solution. I place the interim solution there because there are still retaliations which will affect British industry if we do not come to an interim solution during what some people have said may be an eight-month negotiation to reshape the regulatory basis.

Perhaps I may turn to the question of hormones. As my noble friend Lord Shore made clear, the European ban on hormone-treated beef has been in place for more than 10 years. The WTO found in 1998 that the ban was inconsistent with WTO rules because it did not follow a properly conducted risk assessment. The EU was given until 13th May this year to comply with the ruling and it looks as though the EU will not meet that deadline. On 22nd March the United States published a draft retaliation list covering 900 million dollars' worth of EU goods compared with the 500 million dollars for bananas. World Trade Organisation rules require that trade measures put in place to protect human, animal and plant health must have a sound scientific basis. Governments can and do apply restrictions to protect their consumers but those must be in line with international standards or justified by a risk assessment where they are more stringent than international standards. If these rules were not in place countries could impose restrictions which were simply designed to protect their domestic industries but disguised as consumer protection measures.

In the hormone cases, as in all other cases, we must therefore recognise the importance of sticking to scientific principles. In this case the WTO found that the risk assessments carried out by the EU were deficient. The Government believe that the new assessments being carried out by the EU should have been done well before now, as the WTO has said. However, in the meantime we must continue to engage in serious dialogue with both the US and Canada, the other complainants in this dispute, in order to find a satisfactory way through. The Government are encouraging the US to discuss compensation as an alternative to retaliation and labelling options, which were mentioned by the noble Baroness, Lady Byford—we think they are very important in this dispute—and hope it will take into account the ongoing scientific assessments. In that way we hope to avoid further escalation of the hormone dispute into another damaging trade war.

Perhaps I may now turn to the issue of the hush kits, which was raised by my noble friend Lord Montague of Oxford. When I tested the phrase "hush kits"—my noble friend asked whether people would understand what it means—my children thought it was my new language for my old carpet slippers in the sense that I was trying to be modern. I agree with my noble friend that no one knows what the dispute is about—but it will not go away. That is absolutely clear.

The proposed EU regulation on noise pollution from older-generation aircraft fitted with hush kits seems to address a genuine environmental problem. However, it is clear that it poses problems for US airlines and hush kit manufacturers. There were intensive negotiations between the EU and the US over this issue in the run-up to the Transport Council meeting on 29th March this year. The adoption of the regulation which flowed from those negotiations was delayed for a month to allow more time in which to address the concerns of the United States on the technical and trade policy fronts. Solving the dispute would be very welcome and would be proof—that is important given the nature of the sequence of disputes—that it is possible to resolve differences through a serious bilateral negotiation designed to recognise the concerns of each side. How the hush kits play out will be a serious issue given that we have a month's moratorium. I think the noble Lord, Lord Montague of Oxford, mentioned that once you have lost a negotiation it is easy to go on losing. The noble Lord, Lord Clinton-Davis, reminded me of my title at that point and said, "That didn't happen to the Arsenal". I want noble Lords to think about the impact of Manchester United in the sequence and then Wimbledon. I suspect—without wishing to bring this to a lower level—that we can all take confidence from the fact that we do not always lose twice running, which was the impact of the encouraging remarks of the noble Lord, Lord Clinton-Davis. One can see how trade negotiation happens in our office upstairs.

Lord Montague of Oxford

My Lords, is it correct that this game is due to be played out at the weekend and what does my noble friend forecast will be the outcome?

Lord Simon of Highbury

My Lords, it is incorrect to say that it will be played out at the weekend. I have no knowledge other than that there was a month's interregnum from the date and therefore, theoretically, the matter could run until the end of the month. The Americans are currently on their negotiating rounds. The noble Lord may be right, but that is not my understanding of the negotiating period.

I was told, generously, that I should have slightly longer than 15 minutes to reply because the noble Earl, Lord Dartmouth, had decided not to speak. Perhaps I may turn to the issue of comprehensive multilateral trade negotiations. As many speakers, including the noble Baroness, Lady Young, and the noble Lord, Lord Shore, said, these are crucial. Trade liberalisation remains vital. It is as important today as it was 50 years ago when the GATT was first founded. Growing protectionist pressures, about which we are all presently worried, trade reshuffling and the large swings in trade balances with which all countries are currently coping, increase the urgency and need for a further boost to economic growth. Some have wanted us to stimulate extra growth in Europe; others believe that a bilateral negotiation between the US and Europe on growth will be important. I believe that both will be important.

This is a welcome and timely opportunity to comment on the Government's support for the next comprehensive round of trade negotiations, the so-called millennium round, which we hope will be launched at the WTO ministerial conference in Seattle at the end of this year. It will be the third ministerial conference: the first was held in Singapore in December 1996; the second took place in Geneva in May last year. We believe that a comprehensive round from the Seattle process would allow countries, including the developing countries, to obtain an overall package which could reflect a broad range of interests, largely because of the political impetus that has just been described, the current state of world trade balance and imbalance; and for that reason it will allow trade-offs across a very large area of trade at this time.

Some question the wisdom of pressing ahead with trade liberalisation proposals at a time of difficulty. But trade policy was not the cause of the Asia crisis; nor does it provide a complete solution. It can, however, help the world on the road to recovery. We believe that freer trade, as has been explained, has brought substantial gains to the global economy in the post-war era. We know that the Uruguay Round brought significant boosts to world trade and incomes. We have all learnt the key lessons of the 1930s, of which we were reminded during the debate. That is why the UK and the EU have pledged to resist protectionism and are at the forefront of efforts to secure a new round of multilateral negotiations. We have a very long "wish list which I shall not go through now.

Sustainable development was mentioned by a number of noble Lords. The Government are committed to sustainable development. Protecting the environment and maintaining an open, nondiscriminatory and equitable multilateral trading system are both essential to achieving that objective. There are many effective, internationally recognised measures that aim to protect the global environment. There is more to be done, although significant progress has been made in the past:20 years. The multilateral environmental agreements now in place are solid steps. Liberalising trade will help to ensure that resources are used efficiently. It helps to generate the wealth that is necessary for development and environmental improvement. The two run together in our minds. From a business point of view, the spread of clean technology is a real business option which we must underpin with rhetoric and use in taking forward new developments in technologies and companies. It is a positive option.

I conclude by re-emphasising a general point about the place of disputes in the EU-US trade relationship. The vast majority of substantial EU-US trade and investment flows are not affected by transatlantic disputes, despite what the headlines might encourage us to believe. Disputes are rare. Without wishing to minimise the individual importance of the particular issues on which I have touched, there is a danger that we could colour the overall relationship unfairly. It is important that when disputes arise all parties should try to keep the temperature down and look for workable solutions rather than responding with knee-jerks and heavy rhetoric. I hope that the TEP will be good in that process.

As I said, US action in the banana dispute has been regrettable. But to be blunt—and as many noble Lords have observed—the EU negotiating position prior to losing this case did not enamour the US to our approach. Let us hope that, for major trading partners, we can now cut through that, solve the problem and look for practical solutions. It is all the more important because the two partners, the EU and the US, enjoy a massive, dynamic bilateral relationship which is crucial to every other trading partner in the world.

6.25 p.m.

Lord Clinton-Davis

My Lords, the House will be disappointed to know that I have only 42 minutes for my concluding remarks! I was pleased to have the opportunity to initiate this debate. I have in no way been disappointed by the outstanding contributions that it has elicited.

I know it is invidious to mention individuals, but perhaps I may echo the words of my noble friend Lord Simon in expressing delight at seeing the noble Baroness, Lady Denton, in good form on the Front Bench. She is a very good friend. Perhaps I may also mention my noble friend Lord Shore. It is about 25 years since he used to open, and I used to wind up a debate. It is almost a lifetime.

I have greatly admired the breadth and profundity of speeches in this debate. So much individual expertise was brought to it, making it of collective value to the Government in seeing the position taken up by noble Lords on all sides of the House. That will win me no enmity at all, but my response is genuine.

The other central feature was an understanding that no one could claim complete triumph one way or the other in the negotiating postures that have been undertaken in relation to a wide variety of problems. It is not triumphs that we want; it is comprehension of each other's points of view, ensuring that the dispute resolution process, whatever its faults, is honoured. It has taken a long time to build it up. It is effective compared with the GATT process.

It is also important to ensure that the developing world plays a part in this process. We must never forget the role that citizens across Europe and the United States, and wider, are entitled to play. If there is no understanding on their part of the issues, yet there is the knowledge that they will be vitally affected, it is easy for hostility to occur towards the process that I so greatly value and the noble Lord, Lord Simon, values on behalf of the Government. It could be placed in jeopardy, and that would be a great tragedy.

My noble friend Lord Simon brought characteristic experience and breadth of vision to his concluding remarks. He emphasised how important it is to embark upon a successful millennium round. The stakes are high. The process of engaging in proper preparation for the millennium round was emphasised vividly to me when I had the honour of being a Minister at the Department of Trade and Industry. We tried to ensure that the mandate that we gave to the Commission was one which, using our best endeavours, could produce the right kind of result. I think that Leon Brittan, as commissioner in charge of this negotiation, has handled the matter with great skill. I hope that he will continue to do so in the short period before he gives up his mandate.

I profoundly thank everyone who has participated in the debate and hope that the Government will find that it will have been of considerable value to them in understanding the tenor of the debate which was free of rancour and which did this House proud. My Lords, I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.