British Trade International

HC Deb 21 December 2000 vol 360 cc137-54WH

[Relevant documents: Fifth Report from the Foreign Affairs Committee, Session 1999–2000, on the Annual Reports of the Foreign and Commonwealth Office and British Trade International 2000, HC 507 (including Minutes of Evidence taken before the Foreign Affairs and Trade and Industry Committees, meeting concurrently on 6th June), and the Government response thereto, Cm 4894.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Pope.]

12.33 pm

The Minister for Trade (Mr. Richard Caborn)

This is an opportune time to give the House an appraisal of British Trade International, an important organisation in terms of exports and wealth creation for our nation. As co-chairman of the board of BTI with the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Leeds, West (Mr. Battle), I am extremely proud to have had a close association with that body. BTI, through its operating arms, Trade Partners UK and Invest UK, has been a success in helping British business in international markets and attracting inward investment to this country. It now represents a model of how the Government wish to see public services develop.

I should like to say a few words about the global context in which BTI operates. I am constantly surprised by how much we take our business success for granted. Britain is the world's fourth-largest exporter. British firms trade in every market in the world, and we sell more abroad, relative to our gross domestic product, than most of our competitors. We are talking about a staggering £230 billion a year—more than the combined GDP of Denmark, Ireland, Portugal and Luxembourg in 1999. Per head of population, we export more than the Americans or the Japanese. In 1999—the most recent year for which we have figures—our companies earned more from investments overseas than any other country outside the USA and Japan. The value of exports continues to grow rapidly. In the USA, for example, exports of goods have been growing at more than 15 per cent. this year. In recent years, the United Kingdom has been the fastest growing major exporter to far eastern markets.

Those are staggering achievements. We had hoped that they would receive more publicity than they have, but unfortunately the press seems to want only bad stories, not good ones. Those achievements are testimony to the quality of goods and services produced in the UK and to the success of our business in promoting them. We should not forget that British business leaders are world leaders in several fields: pharmaceuticals; aerospace; the creative and entertainment world and its industries, which are becoming major exporters; and finance and business services.

Our creative ability is still widely and rightly admired. I understand that a Japanese Ministry for Trade and Industry study once estimated that the UK had been responsible for more than half all significant inventions since 1945. Many of us still appreciate—I do, as an engineer—seeing the Rolls-Royce sign on the engine of an aircraft when we walk up its steps. We feel a certain confidence and pride. As an engineer, I used to work on Rolls-Royce equipment, so I can assure people that it is safe. The reputation of our engineers, scientists and technologists serves us well in all markets and is a source of pride. I see that as I travel throughout the world.

As the world increasingly focuses on new knowledge as the basis for competitive advantage, the talents and accessibility of the UK science base becomes an even more powerful asset. Our historic trading role, with links to all the world's regions, and the use of English as the global business language, have also been invaluable national assets. However, we cannot rely on them and the quality of our products alone. Firms will continue to need access to high-quality information and advice if they are fully to exploit changing overseas markets. The revamped BTI can continue to make a real difference in that area.

The export benefits to this country do not come only from the direct value of our export sales. International trade helps to make our nation's business stronger. Firms that export bring international know-how into our economy and tend to be among our most innovative businesses, with higher growth rates and a greater ability to withstand short-term market fluctuations. BTI is taking on board the important cultural change that takes place in a company that starts to export. It becomes much more innovative, looking for new ideas and developments, and that is true throughout business.

In short, firms that export grow faster and survive better. We should remember that, for each large business that wins business overseas, a supply chain—often comprising small and medium-sized enterprises in the geographical locality of the major supplier—will be affected. There is real benefit to UK plc—in jobs and economic prosperity—in helping firms that already export and those that want to do so. Again, that is a challenge for BTI.

However, exports are only one side of the coin. The Government are determined to create a successful and dynamic Britain, and winning inward investment is a key part of that mission, both economically and socially. After the USA, we lead the world in attracting foreign direct investment stock. Britain is already Europe's top location for overseas inward investment. We attract nearly a quarter of all investment into the European Union, including more than 41 per cent. of United States investment and 45 per cent. of Japanese investment. That investment accounts for 17 per cent. of British manufacturing employment and more than a third of manufacturing investment.

Last year's figures for inward investment were the highest ever recorded by Invest UK—757 projects are expected to create more than 50,000 new jobs. A major feature in many of those investment decisions is our reputation for having a strong science and technology base, high-quality telecommunications and a skilled and adaptable work force. Knowledge is a tradeable commodity throughout the world, and many United Kingdom universities and scientific institutions are now engaged in joint ventures that are designed to apply their academic findings to commercial projects. For example, the United Kingdom has more centres carrying out clinical research than any other European country, with more than 170 contract research organisations.

To complete such a virtuous circle, I draw attention to the fact that among the 18,000 foreign investors in the United Kingdom are some of our biggest exporters. Overseas companies now account for about 40 per cent. of Britain's top 100 exporting companies. We have long passed the time when we thought of investment as just investment and exports as just exports. We must move away from such old-fashioned and rigid distinctions. In the global economy, overseas companies are potential buyers, potential investors and potential partners in collaborative projects.

I make no apology for emphasising British success in such areas. As a nation, we are prone to be self-critical even when we should be celebrating our achievements—something that is unfortunately carried forward by the press. What has happened to Vauxhall in the past few weeks is disappointing, but the UK inward investment figures for last year alone show that we are more than compensating for changes that are taking place in our industrial base.

BTI was created a little over 18 months ago as the Government's lead organisation for exports and overseas investment. It brought together into a single structure a patchwork of services that used to be highly fragmented, such as export promotions from the Department of Trade and Industry, the commercial work of diplomatic posts overseas and support in the regions through the Business Link network. The decision earlier this year to bring Invest UK—formerly the Invest in Britain Bureau—under the BTI umbrella will enable the changing shape of trade and investment activity to be exploited more effectively. It will create new opportunities to project a single focus for promoting the United Kingdom's commercial interests worldwide and will establish a truly one-stop shop for investors and business alike.

BTI is a good example of the way forward for public services in this country. It is very much about joined-up government, operating in a seamless way to benefit the consumer. BTI now provides a unique network of support for British firms and inward investors—local, national and international—with the support of staff in more than 200 countries. Staff from the Department of Trade and Industry, the Foreign and Commonwealth Office and the private sector work alongside each other in a single management structure with the goal of developing business competitiveness in the United Kingdom.

The creation of BTI illustrates the Government's willingness to listen to business, to develop a real partnership and to take a genuine approach to the difficulties that we face. It was created in direct response to the views of business. Sir Richard Wilson's review of international trade promotion is probably the largest review of trade and investment work to be carried out in living memory. Hundreds of business people were able to make their views known to the Government. However, business involvement extends beyond that. BTI is all about partnerships with business and those partnerships are embedded throughout the organisation and are central to its existence. Its board has a majority of private sector members. Business people work on secondment within the organisation. More than 200 business men and women advise and support BTI's business advisory groups, and some of the United Kingdom's most senior business people serve as ambassadors for British business, speaking for UK plc abroad.

I value immensely the contribution that has been made by Sir David Wright, as chief executive, and the staff that work for BTI and its subsidiary organisations. Sir David Wright respects the views of business representatives, and works with them to make BTI one of the most effective organisations in the world, in terms of both trade development and trade promotion. We believe that the firm will be a unique animal in exports and inward investment.

Moreover, the partnerships extend beyond the private sector. The BTI board includes representatives not only from the Department of Trade and Industry and the Foreign and Commonwealth Office, but from the Export Credits Guarantee Department, the devolved Administrations, which are extremely important in this area, regional development agencies and business links. So there is real and tangible partnership. I am sure that my hon. Friend the Minister of State, Foreign and Commonwealth Office will agree that there is a sense of direction and dynamics when we chair board meetings.

I spoke to the business men after the meeting this week when we laid out the programme for the next 12 months, and learned that they felt that there was added value to their work. Their comments were pleasing. I was particularly pleased to see a closer, positive partnership between BTI and our Export Credits Guarantee Department. Businesses need access to competitive export credit support to do business in some sectors and more difficult markets, and that is a facility that the ECGD offers to British firms by insuring £3 to £4 billion a year of capital goods and services, and investments in more difficult overseas markets.

Export credit, lines of project finance and overseas investment insurance offered by the ECGD are all essential tools in our armoury, and I look to the ECGD to provide, with BTI, a seamless service to exporters. The ECGD is taking steps to widen its customer base. I was pleased to announce on 1 November a package of measures aimed at small and medium-sized enterprises to help them obtain more easily, the insurance finance that they may need particularly in emerging markets. Widening the customer base does not just stop at small and medium-sized enterprises. For multinationals, the ECGD has already identified target companies including large UK-based companies, project sponsors and foreign-based borrowers as potential customers.

The ECGD is establishing closer ties with a range of organisations, including the Department of Trade and Industry's small business service, chambers of commerce and trade associations in direct contact with smaller exporters. That underlines the importance of close links with Trade Partners UK, and I am encouraging both organisations to seek further ways to support each other. As for the regional launch with the ECGD, we were pleasantly surprised by the number of contacts made, and I hope that, with the supply chains that are now in place—the chains in the global marketplace as a result of the e-revolution—we can now make the ECGD a much more potent tool.

Another pillar of our strategy for modern public services is to ensure that we exploit the opportunities offered by developments in information and communication technology. In the modern knowledge economy, information shoots around the world at the press of a button. I am pleased to say that more than four-fifths of UK business is now on-line, and with customers all around the world, it is essential that BTI is poised to keep pace with such developments. That is why we have provided major new funding—£20 million over the next three years—to build on the existing electronic services offered by Trade Partners UK and Invest UK. Our aim must be to ensure that British Trade International is a world-class exemplar of online government and help for business.

Business is responding. The Trade Partners UK internet-based sales lead service already delivers details of 2,000 sales leads and market intelligence every month to nearly 16,000 customers. More than 100,000 searches are made for British suppliers on its exporters' database every month. New and potential exporters use the internet as their first point of contact with Trade Partners UK. That will increase month on month as people get to know not just the service, but its quality. The electronic gateway also provides a direct link to local international trade teams. One aim of Trade Partners UK is to provide a strong regional operation, close to the service's customers, making it easier to access.

International trade directors, most with a private sector background, have now been appointed in each of the nine English regions. Located, in most cases, in the regional development agencies, they are tasked with delivering customer-driven services and ensuring that regional activities are properly integrated. They also have an important role in developing closer links with RDA work on inward investment.

I am delighted that Trade Partners UK is committed to continuing to strengthen its regional operation. In particular, a major new national programme of support will help newcomers make a success of their first contact overseas. We see that as an important element of the development part of Trade Partners UK. Together with chambers of commerce, export clubs and others, it will set national accreditation standards for the support available to new exporters. Delivered regionally and locally, it will use innovative training methods such as e-tutorials.

One of the international trade directors' key aims is to be proactive in seeking out firms that are ready to reach new overseas markets and are ready for new challenges. Those are to be found particularly in the small and medium enterprise sector. The Trade Partners UK regional network also provides access to a range of services. This year, for example, Trade Partners UK expects to help 4,500 businesses to go on a trade mission to an overseas market; 9,000 businesses to exhibit at overseas trade fairs; more than 20,000 businesses to get a sales lead from abroad; more than 50,000 businesses to find answers to market inquiries; and 56,000 businesses to promote themselves on our UK exporters database. That is good by any standards, but we can do a lot better. We hope that the targets that we have set for BTI can be met and in some cases surpassed.

I should like just to touch on a few areas where BTI has added real value. When I came into this job 18 months ago, one of my first tasks was to go to Kosovo. We had been heavily criticised after the Gulf war for not being proactive and taking part in the reconstruction of the countries. A team was put together through BTI under the chairmanship of Nigel Thompson, the deputy chairman of Ove Arup. We were able to move into Kosovo very quickly and we secured a £20 million civil engineering contract for a British-led consortium.

When the situation changed in Serbia and Yugoslavia, we moved in with an advance team. It is good that AMEC has been asked to give an overall assessment of the energy needs in Yugoslavia. It was important that we moved in there quickly. We have done so for two reasons: first, to help in the restructuring of Serbia and Yugoslavia, and, secondly, to show that we support the regime. There are some important elections on 23 December. We were able to make a material difference to the new presidency in areas such as health and water and energy supplies.

There has been no praise in the press for that. On television and radio, I have mentioned the media criticisms after the Gulf war and pointed out that we are now in Kosovo, Serbia and possibly in wider Yugoslavia, yet I hear no praise at all. However, the BTI team have expertly shown, with public and private sectors working together, that the United Kingdom can lead the field in many of the disciplines and industries that are needed there.

It is 18 months since BTI began operating. We have been able to involve the Foreign and Commonwealth Office. That was not easy, but work is going on under the leadership of Sir David Wright with a business-led board. Invest UK and Trade Partners UK are working closely together internationally, nationally and locally, and there is now a far better working relationship with the financial instrument that is represented by the Export Credits Guarantee Department—the £3 billion to £4 billion insurance and reinsurance facility that we give to British business wanting to export to the difficult markets in question.

After the further consolidation that is going on has been completed, and once the organisation is established, together with the information and communication technology systems, the United Kingdom will be able to be proud of our achievement. We shall probably have the world's best provision with respect to export promotion and development and inward investment. We shall be able to move information and knowledge around at the press of a button. Our business men will be able to obtain relevant information at any place and time. That is a great achievement by the public and private sectors working together. I think that the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) will agree that that is good, joined-up government.

12.56 pm

Mr. Nick Gibb (Bognor Regis and Littlehampton)

I welcome this debate, but I do not agree with the Minister, despite his optimistic tone, that the Department of Trade and Industry has a good record of promoting exports and free trade. Trade is crucial to this country's economic success. We have always been a great trading nation and the Opposition hope that that will long continue.

As the Minister said, with just 60 million people, Britain is the fourth-largest economy in the world. For many years, we have received more investment from overseas companies and we have invested more abroad than any country except the United States. Britain is the world's fifth-largest exporter of goods and second-largest exporter of services. About 5 per cent. of all goods exported in the world originate in Britain. Given the Government's onslaught against manufacturing, exemplified by the climate change levy and £5 billion a year in higher regulatory burdens, whether that record can be sustained is a moot question, but if it proves to be sustainable, it will not be thanks to Ministers at the DTI.

The launch of BTI was accompanied by glossy documents full of fine words, but like so much emanating from the Government it was all spin and little achievement. It was announced at the time that BTI brings together teams in more than 200 British embassies and posts overseas, more than 45 Business Links in the UK and at least nine government departments, as well as representatives in Chambers of Commerce across the country&For more information visit the website. I am sure that that is all marvellous. The Minister said that BTI would strengthen and better co-ordinate the relationships between investment and trade activities in central Government. So it goes on. There is more of such bureaucrat-speak in the DTI expenditure plans, in which it is stated that BTI will encourage more businesses&to take an active and professional approach to business opportunities overseas. A target was set for 50 per cent. of firms to adjust their approach to exporting as a result of assistance provided. Then, lo and behold, the document announces that in the period January to June 1999 a target of 50.1 per cent. was achieved: BTI just made it. It seems rather convenient, as well as being couched in bureaucrat-speak. This view is not only mine but that of the Foreign Affairs Committee, which commented on BTI's annual report: This document has more of the nature of a promotional brochure than an annual report in the normal Whitehall model. The Committee recommended that a more factually-based Annual Report be produced by BTI in 2001 and subsequent years. Amen to that. The same recommendation should, I believe, apply to many Government reports in which facts and figures are being manipulated to suit propagandist purposes—particularly in the Budget Red Book.

The bureaucratic nature of the beast is apparently revealed by the Select Committee's comment on the rebranding of BTI as Trade Partners UK—an exercise which cost £250,000—one which we are surprised was necessary so soon after the initial launch. Annual reports and Select Committee reports are all well and good, but the success of BTI and the DTI's export initiatives should really be measured by export figures. In 1997, Britain had a net trade surplus in exports and imports of goods and services of £504 million. In 1998, that had become a trade deficit of £7.9 billion, and in 1999, a trade deficit of £15.2 billion.

Perhaps that is simply a reflection of the Government's record rather than that of BTI. As the Minister said, it was only in May 1999 that the Overseas Trade Services was transmogrified into British Trade International. There was a net trade deficit in goods and services of £4.3 billion in the first quarter of 2000, one of £4.6 billion in the second, and a staggering £5 billion trade deficit in the third. Those are not good figures. The Library brief in which the statistics are collated states: The last 6 quarterly figures include some of the largest quarterly deficits in trade in goods ever recorded. Surpluses in the trade in services have also been wakening over recent years. All that said, no doubt the DTI has a role in helping companies and small businesses in export promotion. Many people in BTI undoubtedly work hard and effectively in doing so, and a Conservative Government would be equally committed to such work. What is frustrating about the Government, especially the DTI, is the chasm between their rhetoric and their actions. Another example is on page 77 of the comprehensive spending review of July 1998, which states: By the end of this Parliament&a comprehensive programme of liberalisation of world trade and investment will be agreed internationally. Perhaps the Minister will tell us how that is getting on.

What initiatives have been undertaken to reduce the 15,000 different tariffs on goods entering the European Union? Why is there a 16 per cent. duty on importing clementines, a 9.5 per cent. duty on chocolate and a 10.4 per cent. duty on white chocolate? Why is there a 5.4 per cent. duty on imported fruit salads, but a 10.4 per cent. duty on imported fruit salads that contain prunes? Why is there a 10 per cent. duty on coffee, but a 12 per cent. duty on decaffeinated coffee? For fresh figs the duty is 6.1 per cent., but for dried figs it is 8.7 per cent. Why is there a duty of 5.3 per cent. on imported communion wafers and a 19.9 per cent. duty on imported grapefruit segments? Those who believe in free trade—Britain has always benefited from it—believe that it is time to bring down the trade barriers. The Conservative party is committed to working with the European Union to eliminate all the barriers by 2020.

When I listen to the Minister's speeches on free trade and remember the shambles at Seattle last year, I am not convinced that the Government, or at least the DTI, are really committed to free trade. The Secretary of State for International Development, a remarkable and commendable politician, consistently challenges the left's opposition to global free trade, despite her left-wing pedigree. The Minister does not. The Secretary of State for International Development does so through conviction and through her realisation that the only effective way to eliminate poverty in the developing world is by free trade. In a debate on the World Trade Organisation, she said: The fastest reduction of poverty for the largest number of people in the whole of human history has resulted from rapid economic growth in east Asia over the past 30 years. That happened because inward investment was attracted from multinational capital, which brings with it knowledge and technology. That is how we must harness those things: by attracting investment to create opportunities to export and trade that will grow economies rapidly. That lifts up poor people as well as providing for investment in the education of the people.—[Official Report, 9 December 1999; Vol. 340,c 1089.] Many on the left strongly believe that nations should be allowed to ban the import of goods that are manufactured using people who are paid rates of pay that are well below those that would be acceptable in countries such as Britain and the United States. That view is often espoused by British and American trade unions. Earlier this year, my noble Friend Lord Parkinson made a speech in which he said that he found that argument obnoxious. He said: The suggestion that poverty represents a competitive advantage to less developed nations and that the developed world should exclude products from its markets or impose huge tariffs because they are produced more cheaply is particularly unattractive. He is right. In many developing nations, the choice is not between a child working or attending school, but between working and starving. As the Secretary of State for International Development has said, banning such products would punish countries for their poverty and trap their children in endless poverty.

There are also those who argue that we should allow the import of products from developing countries free of tariffs and restrictions in order to boost their emerging industries—I agree with that—but that we should not encourage developing countries to lower their own trade barriers, lest that brings in competition and damages their emerging industries. That is the EU approach, which the Minister supports when he goes to Europe. However, during the same debate in the House on 9 December, the Secretary of State for International Development demolished that argument. She said: Many African countries try to develop behind protectionist barriers. They had very inefficient, expensive and highly subsidised local industries and they paid lousy prices for local crops to the very poor people in their rural areas. Their economies did not grow, but their population grew and poverty grew invincibly.—[Official Report, 9 December 1999; Vol. 340, c. 1089.] Those who point to that sort of failure and say that it is the result of free trade misread economics and history. Again, the right hon. Lady is correct.

Mr. Caborn

This is wonderful stuff.

Mr. Gibb

I am glad that the Minister agrees.

The Secretary of State said in an article in The Independent about her White Paper on globalisation: The protesters want to stop globalisation because they argue it means multinational capital trampling all over us. The poorest countries in the world are desperate to interest multinational companies in investing and thus bringing access to the clean water, sanitation, electrification, telecommunications, information technology and transport systems that we take for granted. I fully support everything that she says on these issues. She is doing a marvellous job helping the third world by being true to her convictions that this is the right way to go.

However, the Secretary of State's words and activities contrast sharply with the activity—or, rather, lack of activity—at the DTI. It is widely acknowledged that the DTI's current incumbents have little clout with other Departments. I am sorry to say that, having been supportive of one of the Minister's colleagues. The DTI seems to be the departmental whipping boy of the new Labour Government. The Treasury piles on business taxes such as IR35 and the climate change levy with barely a squeak from the Secretary of State, despite the huge damage that they are causing to the IT and manufacturing sectors. There are turf battles with the Department of the Environment, Transport and the Regions over utility regulation, which the DETR generally wins. Now a battle is emerging with the Foreign and Commonwealth Office, which the FCO is winning.

The Machine Tool Technologies Association is highly concerned about the delays—often of several months—that its members face in obtaining export licences, which are leading to business being lost to this country. I could quote many examples, but I shall refer to just a couple. In 1999, an equipment manufacturer in Coventry made an application to export to India and received a licence eight months later. In January 2000, the company made a new application with virtually the same details other than a slightly different part number. In May this year, after continued delays, it still had not been contacted and its letter of credit expired. By October, when it got in touch with the MTTA, it had still received no response. It is now being forced to pack up trading with India altogether. The chief executive of the company said: The biggest frustration is that we cannot speak to anyone in authority at the DTI—we feel we are just being fobbed off by a junior bureaucrat. Another manufacturer in Merseyside applied for a licence in October 1999 and had to wait until September 2000 to be told that no licence was required. The manufacturer stated: Our records show that since February 2000 we made contact in excess of 20 times by telephone, e-mail and fax to the DTI and the Foreign Office. Many promises were broken and, on at least one occasion, we were given conflicting information from the 2 departments.

Mr. Caborn

The hon. Gentleman makes a serious point. If he writes to me, I will look into the matter because I would not be prepared to allow the Department to behave in the way that he describes. However, although it is the DTI's responsibility to issue licences, the Ministry of Defence and the Foreign and Commonwealth Office must deal, for example, with defence contracts. The hon. Gentleman will know that a cross-reference must be made, moreover, to the Department for International Development. Nevertheless, I shall look into the matter personally and write to him. Given that the manufacturer tried to contact the DTI 20 times, the problem needs to be taken seriously and I shall look into it, if the hon. Gentleman will give me the necessary information.

Mr. Gibb

I shall see what I can do. Unfortunately, this is a systemic problem. The examples that I have given are just two among many. They are not isolated instances.

The Minister mentioned the need to refer to other Departments and in his opening remarks he spoke of the need for, and effectiveness of, joined-up government. However, those examples illustrate a lack of joined-up government. I acknowledge that many delays are caused by the involvement of other Departments, such as the Foreign Office and the Department of Trade and Industry, but damage is being done to our business and we must sort out the problem.

The reality is that the difficulties faced by exporters originate not from dealing with foreign cultures or coping with long distances, but from our own Government. Of course we need to ensure that huge care is taken when granting export licences, so that products cannot be used for unacceptable purposes, such as making nuclear bombs. However, the study of such applications should not be allowed to take eight or 11 months. In that time, continuous study of those applications would amount to about 1,200 hours. In reality, applications spend most of that time sitting in in-trays, waiting to be examined.

If the Government are serious about exports, they will devote more time to speeding up the licence application process. I thank the Minister for his intervention and I shall ask the MTTA to write to him giving the relevant details.

The rhetoric and fine words in the DTI documents need to be followed up by a little more concrete action in the offices and corridors of Victoria street. We also need more active campaigning for reduced tariffs in the European Union. A more pro-active commitment to international free trade by the DTI, combined with a less regulating and taxing Treasury, might improve Britain's trade figures. Clearly, the figures that I read out in today's debate are an enormous cause for concern.

1.12 pm

Dr. Vincent Cable (Twickenham)

I agree with many of the Minister's comments, and I should particularly like to add my compliments to those paid to Sir David Wright, whom I have encountered at various stages of his professional career, and who is undoubtedly an excellent public servant.

I agree with much of what was said by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), particularly on the importance of free trade and the defence of globalisation. They are important principles for which he put the case trenchantly and well, but I have some queries about his presentation. He rightly said that an enormous number of trade barriers remain: there are about 50,000 tariff line items in the trade categories. However, he failed to mention that many are accounted for by specialised areas. If my memory serves me right, standard international trade classification items 65 and 8—textiles and clothing—account for a disproportionate number. Although I would argue in favour of total liberalisation of textiles and clothing, the Conservatives have in the past been rather coy about the subject, and it is unclear where they stand.

Similarly, a swathe of items is accounted for by the generalised system of preferences. The system is designed to help developing countries, but it has become so bureaucratic that it is probably no longer worth persisting with it. I doubt its value, and I should be interested to know whether the hon. Member for Bognor Regis and Littlehampton shares that judgment.

The other categories, which account for all the examples to which the hon. Gentleman referred, relate to agriculture. It is true that protectionism in agriculture is grotesque, costly and damaging for all concerned. However, in the debate on sugar in this Chamber a few weeks ago, hordes of Members, many of whom were Conservatives, clamoured for protection of the sugar beet industry. The principle of free trade is important, but often it is not consistently applied.

I agree with much of what was said about free trade by the Minister and the Conservatives. However, the more I read the report—particularly the transcript of the interrogation by the two Select Committees—the more I felt that we should move away from platitudes about the wonders of Great Britain Ltd. and ask instead critical questions about what British Trade International is actually doing. The transcript of the interrogation reads like a script from "Yes, Minister". Reference is made to endless turf disputes between the Foreign Office and the DTI that go back over decades. It reads more like an account of the war between the Serbs and the Croats than a story of an integrated Government team practising joined-up government. Some of the best Rolls-Royce minds in the civil service are employed dreaming up new names for their departments, which is bizarre.

Two points hardened my concern. First, BTI accounts for a substantial budget of almost £200 million. That is not a vast sum compared with total British public expenditure, but it is substantial compared with British services overseas. That money has an opportunity cost: it could have been spent on vaccines in Africa, British external broadcasting services or deployed in some other way. Sir David Wright's contribution showed that he regards £200 million—the precise figure is £188 million—as hopelessly inadequate. Is such an application of Government funding useful?

The second matter that aroused my suspicions about BTI was the enormous effort to re-brand it, including hiring consultants to find it a new name. Why was that necessary? That is similar to the Metropolitan police trying to improve its image by re-launching itself with a new name, such as Londonsecurity.com, and putting adverts in newspapers saying, "If you have problems with burglars, robbers and muggers, don't phone a friend, phone your friendly copper on 999." Why should a civil service department that is supposedly helping British business have to promote itself to its own customers? The whole concept is preposterous, which leads me to question whether its substantial intellectual and managerial resources are underemployed. Is BTI really necessary? What does it do that is indispensable? Those questions had to be asked, and I shall try to answer them.

First, the promotion of British exports is good for British jobs. The Minister made that point explicitly and by implication. We all have firms in our constituencies that export and create local employment, and we treat that as a benefit. However, we must consider exports more critically. Probably half of Britain is in a state of economic expansion, and that area is desperately short of labour. Whenever a British export mission successfully promotes the sale of a construction contract in Saudi Arabia, the implication for the British economy is not the creation of employment, but an increased scarcity of quantity surveyors, architects and civil engineers, which pushes up the price of contracts for schools and hospitals in the UK. Of course, exports may create employment in Newcastle, south Wales or Clydeside, and I recognise the importance of how we help with export promotion and regeneration in depressed regions, but I am unsure whether BTI's operation is focused on that specific problem.

The Minister dealt with my second point at some length, and he presented his case in a sophisticated way. He argued that exports are more desirable than other forms of output and production. However, I am rather sceptical about that for the same reasons as the hon. Member for Bognor Regis and Littlehampton.

We now live in a globalised world. Exports are good; so are imports. Inward investment is desirable, but so is outward investment; it is one of the strengths of British-based companies. Why should we persist with that rather old-fashioned view—the French view of the world known as mercantilism—that exports are good and imports are bad, and that inward investment is good and outward investment is bad? It is an inappropriate way of looking at the world. I suspect that such thinking is deeply embedded in the BTI; it is not modern. I totally agree with the hon. Gentleman that the Secretary of State for International Development seems to have a much better grasp of the realities of the modern world and what globalisation means than some of the other Departments that deal with international trade.

My third point is about one of the arguments in favour of BTI's work. The report, which I have read carefully, states that doing business in some parts of the world—for instance, in rural China or Siberia—can be dangerous and difficult, that one might be dealing with corrupt and weird systems and with obscure languages, and that it would obviously be a great help to have British officials on hand to offer expert advice. I accept that up to a point, but when one reads the script, it is clear that that is not what BTI is about.

In his testimony, Sir David Wright tried to justify the fact that we were building up our commercial promotional activities in Paris. I know that French is a difficult language, but it is not clear why the British taxpayer should be involved. Why s could the taxpayer provide a translation service free of charge to British companies? Is it necessary? After all, businesses can use telephones, fax machines and the internet. I appreciate that the consulate in Ekaterinberg is probably performing a useful commercial function, but questions should be raised even about that.

I draw on my experience in the mid-1970s, when many arguments were bandied back and forth in much the same terms as they are today. A brutal turf war was taking place between the Department of Trade and Industry and the Foreign Office about which Department should accompany a high-level trade mission to Venezuela and Ecuador. The Foreign Office won the argument, and I accompanied that mission on behalf of the Foreign Office. It was a great time; the taxpayer paid for three exciting weeks in South America, and we did lots of interesting things. In subsequent years, however, I wondered whether that was a terribly good way for the British Government to function.

Is the idea of Great Britain Ltd. useful? On the trip, we did a great deal: we persuaded the Venezuelans to buy some missiles to guard their new hydro dam, and we persuaded the Ecuadorians to buy some motor torpedo boats that they clearly did not need. A few years later, when those two countries ran out of oil money, they defaulted on their export credit debt and, as far as I am aware, the British taxpayer had to pay part of the bill. It was all good stuff, but it eventually came to a sticky end.

I remember also sitting in a rather sweaty room in a hotel in Guayaquil, the main commercial centre in Ecuador, with two recalcitrant British exporters of sugar manufacturing equipment who refused to stop competing against each other. They were undercutting each other and making it difficult to get the deal for the British. I organised an export cartel and they agreed to collaborate and to fix their prices. We got one British contract as a result, but on reflection I wonder whether that should be a job for the British Government.

The concept of Great Britain Ltd.—the idea that the British Government are there to back exporters and to promote exports—raises all sorts of questions. I appreciate that some of what I am saying may be unpalatable, but our job is sometimes rather like that of the little boy at the emperor's coronation who asked whether he was wearing any clothes. Does the BTI have any clothes? What does it do? I leave that question with the Minister.

The hon. Member for Bognor Regis and Littlehampton may think that the budget should be slashed, although he did not say so today. I am not arguing for that, for the simple reason that British exports are under a lot of pressure because of the exchange rate. An additional imposition on the export sector would be untimely. In the long term, however, why are the British Government so heavily involved in export promotion? Is it really a good use of public resources? Will the Minister make a careful, reasoned case for it, rather than just assuming that it is a good idea? There is too much of an assumption that it is a desirable activity, and that the civil servants are productively employed, and I would question that. Some of them might be productively employed, for some of the time, but the rationale for BTI needs to be much more carefully reasoned.

1.25 pm

Mr. Caborn

The debate has ranged slightly wide of BTI and I shall try to put it in context. I am sure that the Secretary of State for International Development would be proud of the debate and I shall send her the relevant copy of Hansard, which will no doubt make very good reading and be recycled.

In terms of trade policy, we play a proactive role working with the DFID, trying to enhance what the World Trade Organisation is all about—managing the continued liberalisation of trade. We tried to do that collectively in Seattle, which the Minister for the Environment and I attended. For the first time, we tried to engage Civil Society in decision-making to make our decisions more meaningful and better informed. That is why, for the first time ever on any British Government delegation, we took three NGOs—one from the Confederation of British Industry, one from the Trades Union Congress and one from Civil Society. At 7 o'clock every night, we had a meeting with all of the NGOs and, by the end of the week, it was probably the best show in town. I think that there were 150 NGOs, and they all presented us with T-shirts at the end because, they said, we had done such a good job and had been as transparent as any delegation. We had also played a significant role in trying to get an agenda agreed, on which we could then make progress—because Seattle was only about setting the agenda—for the next stage of the WTO process.

We were disappointed by Seattle, which we said was an opportunity lost. When we came back, the Secretary of State for Trade and Industry submitted a paper to the WTO, with the support of the rest of the Government, which argued that the WTO must be modernised to address some of the serious weaknesses that were evident in Seattle. We suggested setting up an eminent persons group to consider internal and external transparency, the rules-based organisation and how it was carried through. Probably most importantly, we wanted to engage the least developed countries in capacity building and make them feel that they were part of WTO decision making. The vast majority of the 140 countries in the WTO are developing countries, which constitutes a change in the nature of the WTO since 1993 in Uruguay. We have played a significant role and continue to do so. Two weeks ago, I was in Chile, where I discussed with its acting Foreign Secretary the possibility of staging the next ministerial meeting there in the autumn of next year.

I have written to every Trade Minister in the European Union to say that Europe should take a political lead in making sure that moves are made towards a ministerial meeting in 2001. That has been done in concert with every other Government Department. We have played a significant role in, first, trying to rescue whatever possible from Seattle and, secondly, making sure that that is acted on as quickly as it can be. In terms of the development of the WTO and the wider picture—the Conservative and Liberal Democrat parties have painted quite a muddled picture, and I am not clear what they are asking from the Government—world trade has continued to expand. Since the meeting in Uruguay in 1993, it has expanded by 26 per cent. We are therefore moving into that chain. As we try to follow the agenda outlined by the Secretary of State for International Development, the DTI supports what the Chancellor of the Exchequer has done. We are considering how to reschedule third-world debt, and $100 billion of IMF funding is available under certain conditions. Those countries must have the capacity to develop their economies and training, and we must ensure that they have access to the developed world's markets.

It is interesting to hear what the official Opposition have been saying. Only yesterday, I gave evidence to a Select Committee about imports of sugar, bananas and rice from the least developed countries. Many colleagues of the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) would not agree with what he has said here. There is great scepticism about importing sugar, albeit only 250,000 tonnes from the least developed countries, such as Mozambique, which exports about 60,000 tonnes, against consumption of about 12 million tonnes in the European Union and the export of a further 6 million tonnes. That shows the magnitude of the figures under discussion. I had to defend the British position, which my right hon. Friend the Prime Minister made absolutely clear in his Mansion House speech. We did not say that nearly all goods should be imported we said that all goods should be imported, including agricultural goods. The EU is now making a decision, which will affect our sugar industry and its problems. We believe that the three-year period to manage the change is sufficient and that safeguards, such as the surge mechanisms, should protect our industry.

The hon. Member for Twickenham (Dr. Cable) mentioned textiles. I was in Casablanca a few weeks ago and saw a plant established by the Dewhirst company, which has moved about 20,000 jobs out of the UK in the past five or six years. It employs about 5,000 people in a new air-conditioned plant. The working week has been reduced from five and a half to four and a half days. Almost all the workers are women, and it was decided to work longer days, but the same number of hours. The labour turnover is less than 1 per cent. The answer to the question "How much do you pay an hour, with all the add-on costs?" is £1, but it is one of the highest-paying companies in Casablanca. That is what globalisation is all about.

People ask how globalisation can be managed and about the DTI's role. We are developing policies that will take our industries up the value added chain. They will be able to sell goods through organisations such as BTI and wealth will be created. BTI and I as Minister for Trade argue in favour of our aerospace exports. I am sure that the hon. Gentleman knows that it is sometimes not an easy market as a result of lobbying by other Governments and, particularly, the Americans. However, we must continue to move up the value added chain, which is why our industrial strategy involves developing clusters and using intellectual property to create wealth. Lord Sainsbury, the Minister for Science, announced that strategy. With industry and the regional development agencies, we are considering how we can capitalise on some of the best brainpower and intellectual property in the world by converting it into goods and services that will sell in the world's markets.

One key factor is inward investment. The President of China visited the UK a year ago, and the only place outside London that he visited was Cambridge, where he saw the biotech structure that is in place. It is a question of knowledge. I understand that 150 Chinese companies are now in vesting in the UK. The DTI is managing the changes that have been forced on us by globalisation, because we know that we must move up the value added chain by exploiting one of our greatest assets: our universities and centres of academic excellence, which have never been exploited in any meaningful way.

The cluster policy attracts inward investment. Ministers in the DTI are working with BTI and Invest UK to ensure that the after-sales care for the inward investor will now be second to none. I want to hear from corporate headquarters where the next merger and acquisition will be and where the next investment will be in terms of new developments. It is BTI's job to pick up such intelligence. We can pick it up effectively through our 200 embassies and high commissions around the world.

We are talking not about a single organisation, but about one that is fully integrated into the actions of the Department of Trade and Industry, the Foreign and Commonwealth Office and all other Departments. The organisation will collate a mass of information, whether on export promotion, development or inward investment. It will pass that information back in as realistic a time as possible to the decision makers, whether to those who have to make decisions on inward investment, those exporting widgets or whatever.

It would do a disservice to British industry for anyone to think that an advanced industrial nation moving into the 21st century should not consider how it deals with export promotion and development, and inward investment. Do not argue about that with anyone in government, but go and talk to Peter Mason, the chief executive of AMEC, Sir David John, the chief executive of the British Oxygen Company and Richard Turner, the main board director of Rolls-Royce. Ask them what they believe that BTI brings to UK Ltd. I do not think that one would find the same response as that of the Select Committee report.

I am proud of what the Government have done to draw up the new organisation in concert with what business has asked for. We have made sure that the division between the public and private sectors has narrowed—indeed, they have merged—and that a real and effective service is given to exporters, the real wealth creators of the nation. I accept in part the idea of the division of responsibilities between importers and exporters, but they are merging as we go into a more globalised world. That is why we have to modernise how we do business.

I shall put a challenge to business. When I took this job, I asked with whom I was to communicate in the wide world of business. There are 168 trade organisations affiliated to the Confederation of British Industry, and more than 600 trade associations in this country. Compare that with Germany, which has one chamber of commerce. I do not say that compulsory membership of a chamber of commerce is the right way, but I believe that the challenge to industry, business and commerce in this country is for it to get its act in order. I cannot believe that, in the 21st century, 600 trade organisations are needed to represent British industry in the world.

I shall answer some questions in terms of the current account, simply by giving the statistics. The total current account deficit in 1999 was 1.2 per cent. of gross domestic product. Comparing that with the 4 per cent. of the late 1980s, gives a historical perspective. I am not especially interested in bandying figures around.

I take on board the point about the annual report. We have already given certain commitments to look again at changing its format, I hope, into a more readable form. In response to the members of the Select Committee and hon. Members who have contributed today, I say that the operation has been running for 18 months, so we should see how things pan out. We should see how BTI fits into the bigger picture of government and how we can help business most effectively. We will do that in the practical way that I have outlined for BTI, and in our world trade policies, as the hon. Member for Bognor Regis and Littlehampton mentioned.

There is no difference between the activities of the DTI and those of the Department for International Development. We work closely together and we have taken a lead internationally to ensure that the continuing liberalisation of global trade is carried through. We believe that to be a win-win situation for everyone, including the least developed countries.

Question put and agreed to.

Adjourned accordingly at twenty-one minutes to Two o'clock.