HL Deb 04 March 1999 vol 597 cc1878-83

8.32 p.m.

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

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer to a Private Notice Question on the EU/US trade dispute, which has been given in another place by my right honourable friend the Secretary of State for Trade and Industry. The Answer is as follows: The EU and US have been engaged in a long-running dispute in the World Trade Organisation over the EU's banana regime. Following two adverse WTO rulings in 1997, an amended regime was agreed by the Agriculture Council in June 1998. The US and other complainants maintain that this regime still does not comply with WTO procedures. In November 1998, the US announced its intention to retaliate against the EU by imposing 100 per cent. import duties on selected products. The US sought WTO authorisation for that in January; at the request of the EU, the level of damage the US was seeking in retaliation was referred to arbitration due to be decided on 2nd March. On Tuesday this week, the arbitrator, in an initial ruling, said that he needed more information to make a decision, and asked the parties to answer a series of questions by 15 March. He would then return to the issue and come to a final ruling 'soon' afterwards. However, the US yesterday announced that, with immediate effect, the US Customs Service would begin 'withholding liquidation' on imports of various EU products, including those of cashmere knitwear. This prejudges the panel ruling and we believe is contrary to the WTO dispute settlement rules. The US argues that they will not apply the duties until after the arbitrator has ruled, but the practical effect of their measures is the same as if they applied now as exporters have to put up a bond to cover possible duties in the future. I deplore the action which the United States has taken. It is completely unauthorised by any WTO procedures and wholly ignores the arbitrator's appeal for discussions to continue. Even now, it is not too late for the US to reverse this decision. It should do so not only in the interests of EU-US relationships but to safeguard the whole framework of dispute settlement within the WTO. The US action is irrational and unacceptable. I have summoned the US Ambassador and will make these points to him later this afternoon. We shall also support an urgent convening of the WTO General Council. It is particularly regrettable that the American action is directed against industries which have absolutely no connection with bananas or the issues which are in dispute. There can be no justification for inflicting or seeking to inflict serious damage on businesses and communities, in pursuit of objectives which are utterly unrelated to the activities in which they are engaged. We are very conscious of the effect that even the threat of US action has been having over the past few months, especially in respect of the cashmere industry. This is a seasonal industry and has been particularly affected. Cashmere orders are now being placed for delivery in the autumn. I spoke this morning to George Pedan, Chairman of the Scottish Cashmere Association, who stressed to me the damaging effect the US action would have. In the light of yesterday's action by the US, we have decided that the Government will establish a scheme to guarantee the bonds in respect of the cashmere industry and will discuss with the industry as a matter of urgency the details of this scheme. The US action is unacceptable. We shall do all we can to reverse it. I hope the measures I have announced to support the cashmere industry will be welcomed on all sides of the House". My Lords, that concludes the Statement.

8.37 p.m.

Baroness Rawlings

My Lords, I thank the Minister for repeating the Statement made by the Secretary of State in another place. The revised banana regime, which the US together with a number of Latin American countries are contesting, is against the WTO rules. These were adopted by the EU in July 1998. The UK held the presidency in the first half of 1998, during which they had a golden opportunity to revise EU policy so that it protected our relationship with the Caribbean countries while conforming to WTO, but failed to meet that objective. Can the Minister tell the House what the Government have done at EU level, as they failed to find a solution to defuse the row during the UK presidency?

Currently a series of preparatory meetings is taking place prior to the launch of the next round of talks in Seattle, Washington, on 30th November 1999. We are committed to achieving global free trade by the year 2020. In the light of that, whatever the outcome of the banana dispute, how do the Government view its impact on the next round of the WTO talks? Does the Minister agree that, in the light of recent developments in the EU/US banana dispute, the objective of further trade liberalisation should be balanced by the needs of small island economies, largely dependent on bananas, which cannot diversify easily or quickly into other sectors? Do the Government agree that, by strengthening trade sanctions on totally unrelated goods like cashmere, the US is using the banana dispute as a pretext to protect its own economy and is, therefore, endangering further trade liberalisation?

Finally, will the Minister ask the Prime Minister to intervene in this very serious matter by reminding his friend President Clinton that we are standing shoulder to shoulder with him in places like Iraq and we do not expect him to thank us by declaring a trade war on our cashmere industry and on the Scottish Borders?

8.40 p.m.

Lord Razzall

My Lords, I join the noble Baroness in thanking the Minister for repeating the Statement made in another place. Before I heard what she had to say I assumed that all parties in this House would stand four-square behind the Government at this moment, supporting them in the action they are taking in difficult circumstances. I dissociate my party from criticising the Government at this time, even if criticism is appropriate in the future. In my view we should not criticise the Government at this moment. Everyone in this House should give full support to the line which the Government have taken in the Statement.

During the course of today, events have moved on. I hope the Minister can give an indication of the reaction of the American ambassador to the dressing down he clearly received from the Minister's colleague this afternoon. Perhaps the one advantage of discussing this Statement so late is that we may be given some clarification on that point. From these Benches I wish to indicate, on behalf of the Liberal Democrats, complete support for the stand that the Government are taking. This is clearly a moment when we need as a country to stand solidly behind the action the Government are taking.

I wish to mention a couple of points not mentioned in the Statement. I shall elaborate on what the noble Baroness said. This matter does not just concern the cashmere industry and the other UK industries that have been affected. We all know that the underlying problem here is the position of the banana industry, in particular in the Caribbean. An island such as Dominica is virtually entirely dependent on the banana industry. If we concede the position of the United States we may gain a short-term advantage vis-à-vis the industries we must quite rightly protect. On the other hand we have a responsibility to the islands in the Caribbean to stand firm in this matter. The British attitude has been absolutely paramount and must be maintained. We must not forget that for every cashmere industry there is also a banana industry in the Caribbean. That is not to say that it is not absolutely outrageous that the United States should in effect impose sanctions on an industry that has nothing whatever to do with the dispute. I just did not want the position of the banana industry in the Caribbean to become lost in all this. As I said, we have a responsibility to represent those interests.

I now wish to discuss the position of the United States. It has not been mentioned so far but there is something that needs to be said. There is significant suspicion that the reason for the pressure being exerted on the US Government is that a number of the companies involved—and one in particular—were significant donors to the Democratic Party and to the Clinton campaign. That needs to be said in this House. Why should the American Government take this irrational action? They are in danger not only of behaving in an unjust manner, but also of being clearly seen to behave in an unjust manner. They are seen to be doing that because of political pressure. That is a statement your Lordships need to take on board. We need to criticise the American Government for that action because in this area they need to be seen to be above suspicion.

I now wish to discuss the wider context of the actions of the US Government in this area. We shall shortly embark on debate on the euro and our role vis-à-vis Europe. We have to recognise that large numbers of Eurosceptics advocate, as an alternative to joining the euro and as an alternative to our relationship with Europe, initiating some form of wider trading area with the United States. I ask those people to consider what is happening today. They need to ask themselves whether the United States is the kind of partner we want to have a trading relationship with.

8.44 p.m.

Lord Sainsbury of Turville

My Lords, first of all I should make it clear that during our presidency of the European Union we led on this issue and indeed an alternative on this matter was agreed. A key part of that concerned meeting our responsibilities under the Lome Convention. That is an essential aspect of this matter which we have sought to meet. We have also sought to comply with World Trade Organisation regulations.

I totally agree that this dispute could imperil trade liberalisation and that is why we are working hard to resolve the issue. However, as I am sure will be appreciated, this requires both parties to be aware of the damage done to trade liberalisation by this action. During past months we have at all levels of government made representations to the American Government, including the Prime Minister speaking to the President. As regards the American ambassador whom we called in this evening, a frank exchange of views took place. The Secretary of State stressed to the ambassador that we regarded the retaliatory action announced by the US Government as unacceptable and asked the ambassador to communicate to the US Government our disappointment that certain industries and communities in the UK which have nothing to do with the production of bananas should have been hit by the US action.

I also wish to make clear that the Foreign and Commonwealth Office will make forcefully to the American ambassador tomorrow points about the political issues. My noble friend the Minister at the Foreign Office met the Prime Minister of St. Lucia yesterday and made quite clear that we stand firmly behind the islands in this matter.

Even at this stage it is open to the American Government to pull back from this situation. I do not believe that an enlightened foreign policy would have led them to take this action. That obviously must raise questions about their motives. They still have the opportunity at this late stage to take account both of the damage to world trade liberalisation of this action and of the advantages of adopting an enlightened foreign policy and to pull back from their action.

8.47 p.m.

Lord Acton

My Lords, is my noble friend aware that I have an American wife and a great affection for the United States? Does my noble friend agree that the Government have had to endure a certain amount of criticism for their helpfulness to the American Administration? Is not this news a poor return for that?

Lord Sainsbury of Turville

My Lords, I make it clear that we are not asking for favours in this case. We are asking that the rules of the WTO are abided by. That is our primary consideration. I believe that an enlightened foreign policy would have led in the same direction.

Lord Redesdale

My Lords, usually when the question of bananas is raised in this House it is seen as a development issue and the responsibility of the DflD. It is extremely unfortunate that it has become a DTI issue because of the nature of the trade sanctions that are involved. I live in the Borders. I realise exactly how devastating the loss of so many jobs will be. I hope that every opportunity will be taken to avoid a trade war. However, if a trade war developed, could sanctions be imposed against the Chiquita company because of the large amount of money that it has given to the campaign efforts of American politicians? If a trade war were to develop, would the Minister consider targeting individual companies?

Lord Sainsbury of Turville

My Lords, I am sure noble Lords will appreciate that this is an EU matter. We shall obviously consult immediately with our EU allies in order to resolve this issue as quickly as possible. Therefore I do not think that at this point it is right to start talking about targeting particular companies.

Lord Hacking

My Lords, will my noble friend and his colleagues—I am glad that my noble friend Lady Symons is present too—express forcefully the stern disapproval of this House of the action of the United States? Although the House is not very full at the moment, I am sure that if the Statement had been made earlier during today's proceedings many others would have expressed the same stern disapproval.

Those of us who have observed for some time the trade difficulties that arise from time to time between trading nations—between ourselves and the United States and ourselves, as part of the European Union, and the United States—note with dismay how easily the United States seeks to fall back upon sanctions. One can think of a number of other examples—the difficulties about meat and other commodities—where the United States has threatened sanctions and, as in this case, threatened sanctions wide of the subject of the dispute. Every time the United States of America pursues such conduct, it causes us strongly to disapprove of it. I hope therefore that these views can be expressed as forcefully as possible to the United States Government through the American ambassador in London.

Lord Sainsbury of Turville

My Lords, I am very happy that throughout the whole dispute the House of Lords has been consistent in its disapproval of the action taken by the United States on this issue. I can assure the House that my noble friend the Minister at the Foreign Office will once again make very clear our views and the views of your Lordships' House to the American ambassador when she sees him tomorrow.