§ Mr. Michael Fabricant (Lichfield)I shall concentrate on the global scene. Before I present my arguments in favour of strengthening political and economic ties with the United States and the North American Free Trade Area in particular, I should make it clear for the benefit of any mischievous journalists who might read this speech, let alone listen to it—let alone any mischievous Minister who might be sitting opposite me—that this debate is most certainly not about our leaving the European Union. I shall argue today for a positive and additional step to be taken that I believe will benefit the British economy. If taken, it will secure jobs and generate increased jobs for the benefit of all in this nation.
This debate is timely. Two significant events have taken place in the past couple of weeks. First the Institute of Directors, which is not known for its Euroscepticism, published a detailed report entitled, "EU Membership, What's the Bottom Line?" Graham Leach from the IOD's economics department conducted a detailed cost-benefit analysis of our EU membership. Incidentally, I am asking the Government to do just that in my Analysis of Costs and Benefits (European Union Membership) Bill, which is on the Order Paper.
The IOD analysis is deeply disturbing. Despite all the advantages, including the single European market, the inward investment that we have enjoyed from Japan, Korea and elsewhere, the influence that we have exercised in Brussels—or not—and most recently in Lisbon, our EU membership is still, it would seem, a net drain on British resources. According to the study, the net cost of EU membership to each family in Britain is at least £1,000 a year, perhaps double that. That money could be spent on pensions, schools and the health service in Staffordshire as well as in the rest of the UK. Sadly, the Government are in no position to disagree because they have not conducted their own analysis. Perhaps they fear the answer.
First, may I challenge the Government and the Minister in particular to enact the provisions of my Bill? There should be no no-go areas for knowledge and free debate. The second event in the past two weeks has been the visit of the International Trade Commission from Washington DC at the behest of the United States Senate Finance Committee. It is conducting its own cost-benefit analysis into the advantages of the UK joining NAFTA. The visit is significant, although not because it will lead anywhere in the short term; it will not. Sadly, a Senate committee can no more dictate to the White House than a Commons Select Committee can dictate policy to Downing street.
However, this inquiry demonstrates that there has been a sea change in attitude in the United States regarding economic relations with Britain. For years, the United States showed no interest in such ties with Britain. Harold Wilson's sensible overtures in that direction, from 20 or 30 years ago, were rebuffed. However, as the song goes, "The times they are a'changin"'. Technology and changed practices have seen to that. It is now cheaper to phone anywhere in the United States than France. It is cheaper to send a container of coal, or anything, to New Jersey than to 102WH Nuremberg. We share the same commercial and civil law. We share the same language, the same heritage and the same way of doing business. As I am sure the Minister will confirm, that already leads to huge mutual investment in each other's countries. I shall say more about that later.
There could be more mutual trade for our mutual benefit. Growing voices in Washington DC and beyond see the potential benefits of Britain joining NAFTA. That would create a bigger market with an even bigger gross domestic product than the European Union.
In the darkest days of the war, before Pearl harbour, Winston Churchill said that the United Kingdom and
the United States will have to be somewhat mixed up together in some of their affairs for mutual and general advantage. For my own part, looking out across the future. I do not view the process with any misgivings. I could not stop it if I wished; no one can stop it. Like the Mississippi, it just keeps rolling.How appropriate that Churchill, the product of an Anglo-American alliance should have foreseen another so fruitful. So firm was his belief in "the special relationship" as he christened it, that he vowed that with Europe and the Commonwealth it should remain one of the three interlocking circles with which future British foreign policy should be concerned.As Churchill foresaw, the broad strategic interests of the United States and the United Kingdom continue to run together. Those interests lie in the preservation and promotion of peace, democracy and free trade. Our two nations are inextricably bound in the effort to secure those interests. Over the years, there has been cooperation in the North Atlantic Treaty Organisation, the World Trade Organisation and other forums to secure those ends. It has not been easy, however. The growing pressure in continental Europe towards greater harmony of purpose, or federalism, is straining those ties at political, military and economic levels. The United States and the United Kingdom share enormous mutual interests for the benefit of us all, but they are being jeopardised.
In trade terms, the United States and the United Kingdom share, and are continually replenishing, a colossal mutual investment. In 1997, as in most other years, the United States received the largest share of total foreign direct investment—more than 30 per cent.—not from Japan but from the United Kingdom. The total UK investment in that year amounted to some $18.3 billion; in north America as a whole, our net direct investment in the past decade has been double our investment in the European Union, and that huge investment is reciprocal. Indeed, more United States outward investment goes to the United Kingdom than to any other country. In the past decade, net direct investment in the United Kingdom by United States and Canadian firms was one and a half times that of net direct investment from the European Union. In 1998, United States capital outflow to the United Kingdom was $35 billion compared with $75 billion to the rest of Europe combined. What is left of our overseas territories received an additional $5 billion in that year, more than Portugal and Spain combined.
103WH The importance of our trade with the United States should not detract from the importance of our European markets; by the same token, we must not exaggerate or over-privilege our trade with Europe at the expense of that with the United States.
§ Mr. Owen Paterson (North Shropshire)Will my hon. Friend reflect on that fact that the European Union's total share of world trade, excluding the United Kingdom, has fallen by 11 per cent. since 1992, while the UK's has increased by 9 per cent., mostly to NAFTA? In that time, the United States has created 13 million jobs and the euro zone has lost 700,000.
§ Mr. FabricantI thank my hon. Friend for his intervention. It shows that Europe has much to learn from the United States. As I shall say later, it seems that at present Europe is trying to exclude the United States, at Europe's cost.
Some vested political interests claim that European markets account for 60 per cent. of our foreign trade, but the Office for National Statistics pink book reveals that the true figure is a shade over 48 per cent., and even that, valuable as it is, can hide almost as much as it reveals. For example, a substantial portion of our trade with Europe takes the form of goods, such as motor cars, which are exported immediately, often to the United States. Those substantial re-exports constitute trade through, rather than with, Europe. That should not be used to exaggerate our economic reliance on a continent with which the United Kingdom has a massive trading deficit, probably as a result of the matter mentioned by my hon. Friend.
The telecommunications revolution and computing—especially the rise of the internet—have closed the gap between the UK and US economies to the point that it is vanishing altogether. Dominated by a common language, the internet represents the death of distance once predicted by the makers of jet airplanes and express trains. The cheapest international call that one may make from the United Kingdom is now not to Ireland, Germany or France but to the United States. A tunnel may traverse the short distance to Calais, but a new cyber tunnel across the Atlantic affords far speedier access to the United States.
Anglo-American relations are as fused in the defence of democracy as they are in trade and technology. Thrown together in two world wars, the United Kingdom and the United States went on to form an alliance against communist expansion, which came into practical effect during the Malayan and Korean campaigns. Between 1975 and 1989, our two nations stood alone among major western countries in devoting more than 4 per cent. of gross domestic product to defence and exerting financial pressure on the Kremlin that eventually brought Gorbachev to the negotiating table and the cold war to an end.
A firm mutual belief in confronting one's enemies characterised Anglo-American defence relations throughout the 1980s and 1990s. I shall give a brief history lesson to illustrate the reciprocity that marked Anglo-American defence relations between 1980 and 1985. In January 1980, the Conservative Government rightly announced support for 160 US nuclear missiles to be stationed in the UK to counter the threat from SS20 missiles deployed by the Soviet Union. In 1981, 104WH Britain declared its wholehearted support for President Reagan's plan to set up a rapid deployment force to be dispatched to trouble spots throughout the world. That force was the forerunner of today's rapid reaction forces.
In 1981, the United States sold the United Kingdom second-generation Trident missiles at a considerable discount, I am happy to say. The US also provided crucial assistance to our Falklands campaign in 1982. In 1983, we contributed military support to a US peacekeeping force that prevented Syria engaging in the Lebanon conflict. Such an engagement would have been disastrous. The well-revived Anglo-American relationship then went on to manifest itself in a host of different areas in the second half of the 1980s.
So much for the past, the cold war is no more and defence expenditure—although higher in the UK and US than in continental Europe—has been slashed. What of the present? When a poll for The Economist in November 1999 asked who was the UK's most reliable ally in a crisis, 59 per cent. of respondents cited the United States, despite the ending of the cold war. Only 16 per cent. of respondents paid Europe that compliment. Similarly, when respondents in the American social attitudes survey are asked who is their most reliable ally, they reply, year after year, that the honour of that status goes to the UK, above even Canada.
Regrettably and unnecessarily, the special relationship between the United Kingdom and United States—so long the linchpin of world security—is coming under strain from growing European integration. In trade and defence, the mutual interests underpinning the Atlantic alliance have been ill served by EU policies targeted, sometimes unashamedly, at challenging or frustrating the United States.
The repeated attempts of former EU Commissioner Sir Leon Brittan to secure a free trade agreement between EU and NAFTA countries collapsed as a result of French fears about US dumping. Sadly, many politicians in Paris are hostile to such a deal ever being concluded. Rather than link with a genuine free trade area, such as NAFTA, or press for free trade agreements through worldwide bodies such as the WTO, the European Union has chosen to secure bilateral trade deals between itself and smaller economies. By creating a patchwork of varying trade deals throughout the world, the EU seeks not so much free trade as favourable terms with parties too weak on their own to resist its protectionist demands.
Even the United Kingdom has suffered from the protectionist instincts of some EU countries. As recently as 16 March, manufacturers of milk chocolate in the UK, including the well-known brand of Cadbury's in the west midlands, learned the good news that its product is to be allowed into certain European markets for the first time in 30 years. Hurrah for British chocolate!
What about defence? European nations have been making drastic cuts in expenditure at exactly the same time as they seek to create, as the President of the European Commission Romano Prodi has made clear, a fully fledged European army. According to President Chirac:
The object of the European defence identity is to contain the United States.105WH That is some quote—quite extraordinary. Speaking in Paris in December, Chancellor Schroder echoed President Chirac's comment, stating:whining about US dominance is not good enough. We have to act.Such anti-American rhetoric may go down well with continental audiences but it certainly does not reflect British interests. The UK might not have cause for concern if the anti-American streak within European integration remained rhetorical. Yet, as Dr. John Hulseman, senior European affairs analyst at the Washington-based Heritage Foundation, pointed out:We need to stop thinking that European rhetoric isn't serious, that it is just a cultural eccentricity. Rather it reflects the honest beliefs of a people that have very different political and economic agendas from our own.The difference between the Anglo-American and the Continental perspectives to which Dr. Hulseman referred surfaces time and again whenever crucial interests are at stake. In December 1999, France abstained from a crucial vote in the UN Security Council on sanctions against Iraq. On 18 January, France allied herself with Russia and China in opposing Anglo-American moves to appoint Rolf Ekeus, a Swede with great experience of arms control, to oversee the destruction of Iraqi weapons.Each of these cases—and there are so many more—exposes a fundamental mismatch between the Anglo-American emphasis on free trade and active defence and the continental tradition of military equivocation and economic protectionism.
However, there is an historic opportunity now to narrow the gap between our treaty commitments to the EU and our cultural and historic commitments to the United States. The opportunity to narrow this gap is being created not in London, and certainly—of course—not in Brussels, but in Washington DC and elsewhere in north America. I repeat that I am not convinced that the US Senate Finance Committee will lead to our joining NAFTA; indeed, this is not possible without a change being made to the treaty of Rome. However, there is a nexus of events and circumstances that we would be foolish and irresponsible to ignore.
If the IOD and other economists are right, and there is no net benefit—indeed, a cost—to our membership of the EU, we must renegotiate our terms of membership. We owe that to our farmers, fishermen and pensioners and to the wealth creators in our society. Expansion in the EU to absorb the eastern European states, which I welcome, will worsen the cost-benefit outcome for Britain unless we renegotiate our treaty obligations to the EU. Such renegotiation is therefore urgent, and should include the repatriation of Britain's right to enter into its own individual bilateral treaties with other nations.
Let me make it clear that renegotiation is not a code for withdrawal; it is a code for commonsense economics. I remind the wishy-washy folk in the Foreign Office—I hope that the Minister is not one of them—who say that renegotiation is impossible that Mrs. Thatcher knew that in Europe, as elsewhere in life, he who pays the piper calls the tune. Britain is a major contributor to the EU budget.
106WH The current position is unsustainable. The future without renegotiation will be impossible. I am not driven by anti-European feelings—I speak French and German and have friends in those countries. I understand the reasons why Europe, which has endured two European wars in the past century, causing border changes and huge migration, wants to move towards political integration. That is natural, but what is right for continental Europe is not right for Britain. Even my French friends refer to "les Anglo-Saxons", automatically linking Britain with the United States, Canada, Australia and New Zealand. They instinctively understand what is logical and right.
Britain's membership of NAFTA, while staying in a looser, freer EU, is both logical and right. My purpose is not to argue for any specific option under investigation by the United States Senate. I call upon the Government and the Opposition to prepare and reflect upon specific proposals to move the special relationship forward for the benefit of all our people and to shield it from anti-American pressure.
Although Anglo-American relations may, as Churchill put it, roll on like the Mississippi, even that great river has several forks in its path. If the United Kingdom's membership of the EU is not to constitute such a fork, we must act now for all our sakes. We must actively investigate how to strengthen that relationship, the success of which is vital to this country and, as history records, the world.
§ The Minister of State, Foreign and Commonwealth Office (Mr. John Battle)It is usual to give a customary word of congratulation to the hon. Member for Lichfield (Mr. Fabricant) on securing the debate. His tenacity in pursuing causes is well known and appreciated with serious affection.
I shall comment on the points that he makes in the few moments that he has left me to reply. First, he suggests joining the North American Free Trade Area, but that is not a good idea. Secondly, he suggests renegotiating the treaties of Rome and Maastricht, but that is a disingenuous cover for withdrawal. Thirdly, he suggests that the benefits of joining NAFTA would greatly outweigh those of our EU membership, but the benefits of being in the EU greatly outweigh those of joining NAFTA. Fourthly, the Americans prefer us to be in the EU, not to withdraw from it.
§ Mr. FabricantI did not say that we should join NAFTA instead of the EU. I am surprised that the Minister fell into that trap.
§ Mr. BattleIf the hon. Gentleman will give me a chance to reply, I shall tell him precisely why it is not possible to join NAFTA without withdrawing from the EU, which the International Trade Commission acknowledges in its terms of reference. Crucially, those terms of reference refer to the EU, but that point is missed because the Opposition say that they will construct a purely hypothetical model.
It is disingenuous of the hon. Gentleman to argue that we could remain in the EU if we were to join NAFTA. He acknowledged that changes to the treaty of Rome would be needed. He sat through the Maastricht 107WH debates. He is simply pretending that we can be members of both. He argues that that would bring us closer to the EU, but he does not say that joining NAFTA would inevitably mean leaving the EU, with disastrous consequences for jobs, trade and foreign investment in Britain. I would prefer it if the hon. Gentleman openly said, "Let us leave the EU and form other relationships", because that is the implication of his arguing that we should join NAFTA. Let him say openly that we should leave the EU.
The hon. Gentleman referred to the report published by the Institute of Directors. The press release of 14 March, which launched the IOD report on the costs of EU memberships, states:
There are no simple solutions. Withdrawal from the EU to the EEA—the European Economic Area—would expose the UK to regulation without representation. This is why the IoD argues that the UK should remain within the EU and fight for radical reform from the inside.That is what our Government are doing. It is what the Prime Minister did at the Lisbon summit last week.Joining NAFTA would mean leaving the EU, as it would be incompatible with the Single European Act that set up the single market in 1987 under Baroness Thatcher. We do not intend to join NAFTA and leave the EU. It would not be in our interests because more than half our overseas trade is with the EU—59 per cent. of our exports and 54 per cent. of our imports. NAFTA now accounts for only 16 per cent. of our exports. That does not include our total trade with the EU, which is £240 billion, as opposed to £79 billion with NAFTA. Not only big exporters are involved: 30 to 40 per cent. of Britain's small and medium enterprises now do business with the EU.
The European single market comprises 372 million customers, or 38 per cent. of world trade. Three and a half million British jobs depend on that trade to some extent. The EU will be enlarged to more than 500 million customers and will be the largest market for trade and investment in the world. Leaving it would jeopardise foreign direct investment. More than 44,000 jobs were generated by that investment in the past year. I cannot imagine companies choosing to invest in the UK to gain access to NAFTA the other side of the Atlantic. The UK would not be an investment springboard for entry to 108WH NAFTA, so leaving the EU and moving to NAFTA, for which the hon. Member for Lichfield argued, would jeopardise our economy.
§ Mr. FabricantOn a point of order, Madam Deputy Speaker. The Minister keeps saying that I said and implied that, but I made it clear that I did not do so.
§ Mr. BattleThe hon. Gentleman—
§ Madam Deputy SpeakerOrder. Please could we pretend to be civilised? That is not a point of order.
§ Mr. BattleThe hon. Gentleman cannot have it both ways. The argument will not stack up. He cannot argue for our joining NAFTA without our leaving the EU. He does not seem to recognise that, but everyone else does. Our relationship with the United States is of fundamental importance. Our political relationships are strong. The Government of the US have warmly welcomed the European defence initiative, which strengthens rather than undermines the North Atlantic Treaty Organisation. Our economic ties with the US are stronger than ever and 40 per cent. of all US investment in Europe is in the UK already.
It is because we are in the European Union that our influence in the US is so strong and significant. Our Government play a full role in Europe and are deeply engaged in shaping it, and that is why we are strong partners with the US. Raymond Seitz, former US ambassador to Britain, said:
if Britain's voice is less influential in Paris or Bonn, it is likely to be less influential in Washington.In his book, "Over Here", he said:the option of leaving the Union altogether … is a flimsy proposition, unlikely to gain much traction except with the graspers of straws … Standing between America and Europe … was never either-or. It always had to be both … If Britain is not part of important European decision-making, it is less likely to be important in American decision-making, and vice-versa. If Britain is aloof from developments on the continent, it is bound to be more marginal in America.That is why we are engaged at the heart of Europe, shaping the agenda of the future, as the Prime Minister demonstrated at the Lisbon summit. We are building a truly single market, driving forward a modern agenda and using technology as a means to generate employment through innovation, enterprise and imagination.The hon. Member for Lichfield may now gain a reputation as a straw grasper, but I suspect that he is an outrider for the Leader of the Opposition, who is covertly campaigning to join NAFTA. That is merely a covert strategy to withdraw from the EU, which is why the Foreign Secretary spelled out that the Tories are prepared to jeopardise British jobs to justify their extreme anti-European prejudices.