§ Motion made, and Question proposed, That this House do now adjourn—[Mr. Wood.]
§ [Relevant documents: The White Paper on the Uruguay round of multi-lateral trade negotiations 1986–94 [Cm. 2579], Miscellaneous (Nos. 13 and 15 to 30, 1994), Agreements, done at Marrakesh on 15th April 1994, establishing the World Trade Organisation [Cm. 2556 to 2559, 2561, 2562, 2564 to 2569 and 2571 to 2575] and Miscellaneous (No. 14, 1994), Final Act, done at Marrakesh on 15th April 1994, embodying the results of the Uruguay round of multi-lateral trade negotiations with ministerial decisions and declarations and understanding on commitments in financial services [Cm. 2570].]3.50 pm
§ The Minister for Industry (Mr. Tim Sainsbury)
The conclusion of the Uruguay round of multilateral trade negotiations on 15 December 1993 brought to an end seven years, two months and 25 days of complex and often fraught negotiations. I shall concentrate on what the negotiations achieved—a further crucial contribution to higher world growth, more open world markets and a more stable climate for international trade—but I begin by putting this achievement in its historical context.
The Uruguay round was the eighth round in the 47–year history of GATT, the general agreement on tariffs and trade. Like all previous rounds, one of its principal aims was to reduce tariffs—the most obvious and, when GATT was founded, the most serious barrier to trade. Indeed, the earliest rounds, such as the Torquay round in 1951, were concerned with nothing else.
However, as GATT developed, it became clear that reducing tariffs, although vitally important, was not by itself enough to further the process of trade liberalisation. Starting with the Kennedy round in the mid-1960s, and continuing with the Tokyo round in the 1970s, GATT also began to grapple with extending and amplifying the trade rules to take greater account of the use of other barriers to trade such as anti-dumping measures. The Uruguay round greatly extended that process, bringing new spheres such as services and intellectual property within the trade rules for the first time. It was the largest and most complex series of trade negotiations ever held.
Although the Uruguay round has greatly increased the scope and complexity of the trade rules, it is worth remembering that the heart of the rules are the same principles of non-discrimination that have been central to the growth of world trade since 1947—above all, the most-favoured nation, or MFN, principle and the principle of national treatment. I remind the House what the principles involve.
The MFN rule requires that all GATT members treat all other GATT members at least as well as they treat their most-favoured trading partner. The national treatment rule prevents countries from protecting their domestic industries by applying internal taxes or regulations differently from imported goods and goods produced at home. Impressive benefits have flowed from the application of these principles in the rules of GATT and from the steady reductions in tariffs through successive rounds of negotiations.
In 1947, tariffs on goods imported by industrialised countries averaged no less than 40 per cent. By the start of the Uruguay round, the figure had fallen to 5 per cent. In volume terms, world merchandise trade has multiplied 12–fold since GATT was established in 1947. The value of that trade rose from about £14 billion in 1947 to nearly 522 £2,000 billion by 1991. Countries all around the world have recognised the benefits of GATT membership. The United Kingdom was one of only 23 founding contracting parties to GATT in 1947. Now, there are 123 GATT members, and other countries are in the process of applying for membership—notable among those is China. That indicates how widely the benefits of open trade based on multilateral rules are understood.
The GATT deal that we are discussing today will boost world economic growth. The reduction of both tariff and non-tariff barriers to trade will increase opportunities for exporters. Exporters of services will benefit by the inclusion in GATT of intellectual property rights and trading services for the first time. All of us will benefit as consumers from improved choice, lower prices and greater efficiency. The Uruguay round will enable us to look forward to a world with freer trade, more jobs for British workers and higher growth for the UK and, indeed, for the rest of the world.
A 1993 World bank and Organisation for Economic Co-operation and Development study cautiously estimated that the successful conclusion of the round would boost world annual output by more than $270 billion after 10 years. On the other hand, if the forces of protectionism had triumphed and the lengthy negotiations had ended in failure, we would have faced the grim prospect of trade wars, price rises, lower living standards and prolonged recession. That would have been a tragedy, not only for the United Kingdom, but for the OECD countries and for the whole world.
§ Dame Elaine Kellett-Bowman (Lancaster)
Does my right hon. Friend agree that a great deal of the credit for the success should go to Sir Leon Brittan?
§ Mr. Sainsbury
I am happy to agree with my hon. Friend and, later in my speech, I shall refer to some of those to whom we are most indebted for achieving the agreement.
It is worth remembering that trade liberalisation is not a zero-sum game, but a process which leaves everyone better off. By choosing the route of liberalisation, the world's trade negotiators clearly rejected the temptation to resort to protectionism. At a time of stagnation in the world economy, that was a courageous choice for which they deserve congratulations. The benefit will not, of course, all be felt overnight. The results of the round have still to be ratified. At the OECD ministerial council on 7 and 8 June, I and all the other Ministers from the developed world reaffirmed our commitment to implementation of the round by 1 January next year—the target agreed at the Marrakesh conference, which concluded the round in April. While some of the changes that the round will bring will come into force immediately, others, including most of the new tariff reductions, will be phased in over a period of years.
§ Mr. Ieuan Wyn Jones (Ynys Môn)
I understand that the Minister may wish to comment on some of the more specific agreements later. However, as he has talked about the phasing in of some of the agreements, will he touch on some of the changes in the agricultural sector, especially whether the current GATT agreement is compatible with the common agricultural policy reforms already agreed and whether he believes, as do the farming unions, that further reforms may be necessary as the GATT agreement comes on stream, perhaps in five or six years' time?
§ Mr. Sainsbury
The hon. Gentleman is right in thinking that I shall be turning to the specific proposals and, as it is a rather complex and wide-ranging subject, perhaps he will forgive me if I deal with his question when I talk specifically about agriculture.
It is now easy, safe in the knowledge that agreement has been reached, to assume that that agreement was inevitable and to believe that there was never any risk of failure. I suggest that that would be a mistake. From the very beginning, the Government had to fight hard to ensure that negotiations were maintained and that agreement was secured.
§ Mr. Sainsbury
I am glad to have the agreement of my hon. Friend on that.
In 1986, Britain was among those who argued for the launch of the Uruguay round, and the round started during the United Kingdom presidency of the European Community. We also pressed successfully for the negotiations to be wider than in any previous rounds, including, of course, trade in services, intellectual property rights, investment, agriculture and textiles, all issues of particular importance to Britain. We ensured that the European Commission, the EC's trade negotiator, had the support that it needed to conclude a liberalising deal and was not shackled by restrictive or unrealistic negotiating mandates.
In 1992, when there was the prospect of an EC-US trade war, the Government used our presidency to get both sides around the negotiating table and reach agreement on the oilseeds dispute, which was the cause of the threatened trade war, and on agricultural support and trade policies generally. That deal, which came to be known as the Blair House agreement, formed the basis of the eventual agreement on agriculture within the round—one of the major sticking points of the negotiations.
Of the countries participating in the round, around two thirds were developing or least developed countries, including some of the poorest of the world's trading nations. On a number of occasions during the round, developing countries took a lead in urging progress on the developed world. That is not surprising, given that those countries would perhaps have suffered worst had protectionism and trade wars occurred.
As I have said, the road to agreement was long and arduous. We all owe a debt of gratitude to those who worked to ensure that a successful conclusion was reached. We owe a debt to the negotiators, both Ministers and officials, and to the GATT secretariat. The personal contribution of several individuals stands out.
I acknowledge the work of the two most recent directors of GATT. They are Arthur Dunkel, who was responsible for the Dunkel text, and Peter Sutherland, who brought the round to a conclusion. That was greatly assisted by his energy, determination and good humour. Great credit is also due to a number of other people. The European Community's negotiator Sir Leon Brittan, to whom my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) has already referred, worked tirelessly for the Community's interests without ever losing sight of the wider picture. The United States negotiator, Micky Kantor, played a crucial part in the negotiations.
524 Finally, we should not underestimate the contribution made consistently by my right hon. Friend the Prime Minister on a number of occasions of crucial importance to the success of the round.
§ Mr. Max Madden (Bradford, West)
I am sure that the House will echo the Minister's comments about the endeavours to complete the GATT round. However, the Minister will undoubtedly be aware of the genuine misgivings of those concerned with overseas aid and development who believe that the overall impact of the GATT round will intensify difficulties that flow from the policies of the World bank and the International Monetary Fund. What initiatives will the British Prime Minister and the European Union take to try to redress those difficulties? On a domestic note, what success has the Minister had in persuading the Americans to allow much larger access to British wool textiles to the United States?
§ Mr. Sainsbury
As I said earlier, I will refer to specific matters such as textiles. It would clearly be remiss of me not to consider textiles and I will deal with that point.
It is a misunderstanding to assume that the round will somehow be other than beneficial to developing countries. That is revealed by the fact that on a number of occasions, particularly after the Commonwealth meeting in Limassol, those countries have taken the lead in urging on the developing countries the fact that we should reach an agreement.
Copies of the agreements that I signed at Marrakesh have been placed in the Library. Hon. Members who have seen them will know that they are complex and, combined, run to many hundreds of pages. When they were placed on the table at Marrakesh for the contracting parties to sign, we assumed that everyone had their copy on the table, only to discover to our horror that only one complete copy of the agreement lay on the table.
Those reluctant to embark upon such weighty bed time reading may be reminded that on 19 May we published a White Paper entitled "The Uruguay Round of Multilateral Trade Negotiations 1986–94". That is a nice, compact White Paper and I recommend it to the House. It provides an extensive guide to the Uruguay round agreements.
§ Mr. Sainsbury
The hon. Member for Middlesbrough (Mr. Bell) obviously agrees with that.
I should like now to draw the attention of the House to certain key features of the agreements which are likely to be of primary importance to the United Kingdom.
§ Mr. Mark Robinson (Somerton and Frome)
Before my right hon. Friend moves on, may I say that I believe that he has been modest about the British Government's contribution? Here is an example of Britain working at the heart of Europe and at the heart of the international community and working to ensure that a GATT agreement would be delivered. When we work in that way, it shows how this Government can be effective and are effective and it gives the lie to many of the charges that have been tossed around in the recently concluded European elections.
§ Mr. Sainsbury
I am happy to agree with everything that my hon. Friend says. In the negotiations, Britain more than punched its weight. We were always in the lead, on the side of obtaining a successful agreement, and an 525 agreement which generally liberalised world trade and brought in the new areas. Our influence within the European Union to that effect was very substantial.
§ Mr. D. N. Campbell-Savours (Workington)
Recognising that liberalisation under GATT inevitably means greater penetration of our markets, may I ask the right hon. Gentleman a very simple question? Does he think that western advanced economies can compete in terms of wage levels with countries such as China, India and south-east Asia? Does he think that we can compete with those-economies on the basis of wage levels?
§ Mr. Sainsbury
I was going to answer the hon. Gentleman's question by saying yes, until he started adding wage levels. I put to him the simple point that competition is a much more complex issue than something relating just to wage levels. I commend to the hon. Gentleman "Helping Business to Win". If he reads the White Paper on competitiveness, he may see how British business can compete.
I now refer to some of the key features of the agreement. First, there is the proposed World Trade Organisation which will be created as a result of the agreement. Since 1947, the GATT has been applied only provisionally, pending the establishment of an international trade body that never came into being, so after 45 years the GATT must be one of the world's longest lasting provisional agreements, but that is about to change. The agreement that I signed at Marrakesh provides for the foundation of a World Trade Organisation, or WTO. The creation of that organisation will put the GATT on a permanent institutional footing for the first time. The WTO will also provide an institutional structure for the operation of the other trade agreements and understandings concluded as part of the round.
Secondly, I draw the attention of the House to the new dispute settlement system, the operation of which will be one of the WTO's key functions. That system will provide an integrated mechanism for resolving disputes between GATT members about their rights and obligations. It is one of the most significant achievements of the round and one which the United Kingdom played a key role in formulating. With more members than ever before—123—and more complex rules, it is more than ever vital that there should be an effective procedure for settling disputes. Although GATT already has a dispute settlement procedure, that procedure has some important weaknesses. The new dispute settlement process, to be conducted under the aegis of the WTO, will do away with many of those weaknesses and it will offer new and significant benefits to industry.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
The trade dispute procedure is an important part of the package. Will it speed up the resolution of trade disputes? Much dumping can happen so quickly that it is only historically noticed. May we have an assurance that there is within the new procedures a speedy way of tackling some of those very difficult trade matters?
§ Mr. Sainsbury
I am glad to have the hon. Gentleman's recognition that a speedier dispute settlement system is a very important element. I am a little reluctant to go too much into how it will speed up the process or I will slow 526 up my speech, but I can assure the hon. Gentleman that at the heart of the new disputes system is a mechanism to make sure that it works quicker, rather than as slowly as it has done in the past.
§ Dame Elaine Kellett-Bowman
Will the system be likely to cover the very vexed problem of Spanish tomatoes, which are wrecking the horticulture industry in my part of the world and elsewhere?
§ Mr. Sainsbury
I shall ask my hon. Friend the Under-Secretary to deal with the detail of Spanish tomatoes, whether sun dried or others.
I can assure the House that any disputes that fall within the GATT system will be open to be resolved through an improved and faster dispute system. The system will be governed by a set of clearly defined time limits relating to the establishment of panels, the adoption of their reports and any remedial action that may result.
The new system will also see an end to perhaps the worst fault of the old system—the ability of the losing party in a dispute to block the adoption of the report of a dispute settlement panel which found against them. It was as though the accused could always sit on the jury hearing his case. Under the new system, a GATT contracting party will no longer be able to block an adverse GATT panel report. Instead, if it disputes the soundness of the panel's findings, it can have recourse to an appeal body—the appeal body is also governed by strict time limits—whose findings must be accepted. Once a GATT member is found to be in breach of its obligations, action must be taken to redress the situation.
I turn from the improvements in procedures and the institutional framework and look at the changes of substance that the round will bring. For Britain, one of the key innovations is the extension of the multilateral trade rules to cover services for the first time. That is vital to us because services already account for 23 per cent. of Britain's trade. Indeed, in 1992, our exports of commercial services exceeded £32 billion, making the United Kingdom the fourth largest invisible exporter—perhaps I should rephrase that and say exporter of invisibles—accounting for 9.6 per cent. of total world invisible exports.
Britain is well placed to gain from the changes. The new general agreement on trade in services—GATS—will introduce central GATT principles to services trade for the first time: notably MFN, which I referred to earlier, national treatment and transparency of regulation. That will provide a more stable and solid framework for services trade than has previously been available.
In addition to the new rules for services, countries have made significant commitments to guarantee access to their markets for foreign firms in a wide range of service sectors. That is only the start of the process. In most cases, countries are offering no more than a guarantee of existing levels of access in certain sectors at this stage. But even that will offer service exporters important security that they will not face new restrictions in those sectors.
However, there will also be some genuine measures of liberalisation. For example, a number of countries will be 527 liberalising their markets for value-added telecommunications, and negotiations are continuing in basic telecommunications, financial services and maritime transport services to improve the levels of commitment that countries were prepared to make in December.
The crucial achievement is the provision of a multilateral framework within which services trade can grow and flourish. All services sectors are covered by the GATS. The GATS enshrines for services the principle of progressive liberalisation which has paid such dividends for trade in goods. WTO members will be committed to negotiating further liberalisation five years after the agreement comes into force. In the meantime, work will also progress to refine the rules in such areas as the effect of subsidies on services trade.
Another crucial feature of the GATT deal for the United Kingdom is the agreement on trade-related intellectual property rights—TRIPS. The whole of the GATT round was bedevilled by acronyms. The worst of the acronyms that was developed was FOGS—the functioning of the GATT systems. There were moments when those of us who were involved felt that we had gone too much into the fog.
§ Mr. Sainsbury
I am sorry that the hon. Gentleman does not find the clarity of my presentation sufficient for him, but perhaps he will listen attentively.
British industry must innovate if it is to be competitive. It is vital that new technology and ideas are protected. British companies need to be sure that they will reap the proper benefits of their innovation. That is why intellectual property protection is so important. Unfortunately, at present many countries do not offer the same levels of intellectual property protection as we do and as are to be found in Europe. Indeed, it is fair to say that some do not offer any effective intellectual property protection at all.
As a result, British industry loses many millions of pounds of revenue each year because of abuses of intellectual property rights. For example, the International Federation of the Phonographic Industry has estimated that £352 million of potential revenue was lost to piracy in Asian markets alone in 1992. This is why the TRIPS agreement is such an important feature of the new GATT deal.
I know that a number of hon. Members will be particularly interested in the textiles aspects of the agreement. This will extend GATT rules to bring trade in textiles and clothing fully within the multilateral system. The multifibre arrangement—the MFA—which currently imposes restrictions on the textiles and clothing exports of 27 countries is to be phased out in four stages over 10 years. That should lead in due course to significantly lower prices for consumers.
However, the Government recognise that the phasing out of the MFA will present the UK textile and clothing industries with difficult challenges. The 10-year phase-out period should allow time to prepare. Moreover, our textile exporters will benefit from lower tariffs in other countries.
§ Mr. Sainsbury
Before I give way, I shall remind my hon. Friend of how succesful our textile and clothing industries are at exporting. In the past five years, they have doubled their exports to the value of £5 billion.
§ Mrs. Peacock
My right hon. Friend will know of my great interest in textiles and in free and fair trade, and I hope that he will say a word or two about the importance of market access.
While the industry recognises the great work that my right hon. Friend did on its behalf, it is not quite as happy with the access to some of the markets, particularly India and Pakistan which have tariffs of about 100 per cent. The industry is also unhappy about the reduction in our woollen goods to the USA by some 10 per cent. The reduction will take place over 10 years, and is really only 1 per cent. a year. That is not terribly helpful.
§ Mr. Sainsbury
The whole House knows that my hon. Friend is a tireless campaigner for the textile industry and I entirely share her views on the disappointing nature of some of the market access offers.
It was certainly disappointing that the US could not agree greater reductions in some of its peak tariffs—to which my hon. Friend referred—although the cuts for wool cloth are significant gains for our industry. We hope that the continuing negotiations with countries benefiting from the phase-out of the MFA, such as India and Pakistan—to which my hon. Friend referred also—will result in genuine tariff concessions which will recognise their improved access to our markets.
I turn now to the agricultural aspects of the round. Agriculture, too, will, for the first time, be brought fully within multilateral trade rules. The overall aim of the new agreement on agriculture is to promote more market-oriented agricultural policies, with less reliance on the uncontrolled use of subsidies and on protection against imports.
The Government are well aware that the recent reform of the common agricultural policy has already meant a lot of change for the farming industry. The reform was a significant step towards bringing the CAP into a close relationship with world markets and reducing European farmers' dependence on intervention. It has undoubtedly helped pave the way for the GATT agreement.
The European Commission considers that the Community should be able to meet most of its new GATT commitments on the basis of already agreed CAP reforms. The Government's own economic analysis broadly supports this conclusion. However, that does not mean that the process of CAP reform will stop. The need for further reform in certain areas of the CAP—for example, beef—remains, but that would have been so with or without a GATT agreement.
Similarly, further action will clearly be needed in some of those sectors where reform has yet to start. Sugar is one example, and fruit and vegetables are others. I know that my right hon. Friend the Minister of Agriculture, Fisheries and Food will continue to press the case for further reform.
Other trade agreements covered by the WTO agreement will also provide important benefits for British industry. The agreement on subsidies will impose faster procedures, define and categorise subsidies according to their trade-distorting effects and, for the first time, ensure 529 disciplines on developing country subsidies, particularly in sectors where those countries are competitive, such as leather products from India.
The anti-dumping agreement will strengthen and clarify rules governing the imposition of anti-dumping measures and impose time limits on their application. The safeguards agreement will impose important new disciplines and greater transparency on the use of safeguard measures. Action will still be possible against sudden surges of imports that threaten serious injury to domestic producers. The agreement will, however, lead to the phasing out of so-called ġrey area measures, such as voluntary export restraints, which have increasingly been used to restrict imports over recent years.
All those agreements, together with changes to more technical rules in areas such as customs valuation, technical barriers to trade and import licensing, will strengthen the multilateral framework of rules, which is vital to the growth and security of world trade.
Reductions in tariff barriers to trade have already been referred to in several interventions. As I said earlier, the lowering of tariff barriers has been a central element of every round of GATT negotiations since the war. The Uruguay round has been no exception. The complete removal of United States, Japanese and Canadian tariffs in a number of major sectors represents one of the most important achievements of the round. Our exports of pharmaceuticals, medical equipment, agricultural and construction equipment, Scotch whisky, beer, steel, toys, furniture and paper will in future benefit from zero tariffs in those three key markets in exports which totalled more than £2.4 billion in 1992.
Those reductions, and cuts in other markets, will offer a major boost to British exports, including, for example, exports of Scotch whisky, which already total over £2.1 billion a year. Important cuts have also been achieved in a number of peak tariffs. To take one example, the United States rates of 20 per cent. on synthetic dyes will fall to 6.5 per cent.
It is not only exporters who will benefit. Many British businesses depend on imports of materials and components. Reductions averaging 37 per cent. on a trade-weighted basis in the EC's own tariffs will bring real benefits to those businesses.
§ Mr. Gary Waller (Keighley)
I am listening to my right hon. Friend with great interest. Does he accept that many in the textile industry feel that their sector has been traded off against others and that it has been the loser? Reference has already been made to the United States, where the tariffs will come down by only 1 per cent. a year and remain at a relatively unacceptable level.
Following Marrakesh, negotiations with India and Pakistan remain unresolved. Will my right hon. Friend assure the House that everything possible will be done to ensure that the considerable purchasing power of the sub-continent will not be denied to our textile industry and the many people that it still employs?
§ Mr. Sainsbury
The textile industry was certainly not singled out to be treated badly. I believe that the outcome of the Uruguay round was balanced and covered all the aspects of the relevant sectors. I agree with my hon. Friend that rather disappointing market access offers were made 530 relating to textiles. I assure him that it will remain our objective to open the substantial markets to which he referred to better access for our high-quality textile exports.
An important feature of market access commitments given by developing countries has been the "binding" of tariffs—in other words, an undertaking not to increase tariffs in future. Many countries with very limited tariff bindings prior to the round, such as Argentina, Colombia and Romania, have now agreed to bind their tariffs on all industrial imports. That may sound rather technical, but is essential. Binding tariffs means that a country cannot decide to raise tariffs dramatically and suddenly in response to the success of a British export promotion campaign.
The creation of the WTO, which will put the GATT on a permanent institutional basis for the first time, is only a beginning. There is still unfinished business to complete. Perhaps inevitably, given the number of nations involved and issues under discussion, the Uruguay round negotiations failed to achieve all their objectives. Some market access offers, for example India and Pakistan's offers on textiles, were disappointing. Too many tariff peaks remain, but we are working to improve them.
Moreover, it proved impossible to reach agreement on a satisfactory package of liberalisation commitments on telecommunications, shipping and financial services before the conclusion of negotiations. So GATT members agreed that negotiations in those areas should continue after the end of the round. We attach great importance to achieving real liberalisation in those negotiations.
Work to reduce trade barriers further is also continuing in a number of other important sectors such as civil aircraft and steel. The Government are working hard to achieve a level playing field—no speech on GATT would be complete without a reference to a level playing field—for the UK's civil aircraft industry. We are seeking strict but fair disciplines on all Government subsidies in that field. It is important that those should cover both direct support with which we are familiar, such as launch aid, and indirect support such as that which comes to the US aerospace industry from NASA and the Department of Defence. The hon. Member for Alyn and Deeside (Mr. Jones) is familiar with that matter.
Although not strictly part of the GATT, negotiations on a multilateral steel arrangement have also resumed in Geneva. We hope to reach agreement by the end of 1994. More immediately, we must concentrate our attention on the current GATT deal. Although the Uruguay round was officially ended by the signature ceremony, the agreements still require ratification and agreement before they can come into force.
The Uruguay round is a challenge and an opportunity for British industry. Information on new opportunities that will be available is already public. Industry should start preparing to take advantage of those opportunities now. In 1992, our exports of pharmaceuticals to the US, Canada and Japan totalled £518 million and paid some £34 million in duty. Those exports will be free of duty once the WTO comes into force.
Our exports of chemicals to those markets were worth £1.7 billion in 1992. Harmonisation of tariffs will bring about an annual saving in that sector of more than £50 million. Our exports of medical equipment to the US, Japan and Canada were £386 million in 1992 and have been subject to duties of up to 9.9 per cent. Those tariffs 531 will be phased out completely over the next five years. In 15 major markets, tariffs will be reduced to an average 3.7 per cent. It is clear from those examples alone why the director general of the CBI referred to the conclusion of the round asa momentous and welcome event".Reductions in trade barriers will increase opportunities for exporters of both services and goods. Innovators and service exporters will benefit from inclusion in the GATT of intellectual property rights and trade in services for the first time. Consumers will benefit from increased choice and lower prices. It is no wonder that, within the UK, both consumer groups and industry have welcomed the outcome of the round.
However, British companies must remember that the increased competition from overseas, which will benefit consumers, will increase competition for British industry. It is a challenge as well as an opportunity. My Department will do all that it can to assist, and our export promotion and sponsor divisions will pull out the stops to help ensure that all exporters are made fully aware of the new opportunities open to them. However, my Department cannot do it all. Its role is "Helping Business to Win", which is the title of the recently published White Paper on competitiveness. I recommend it to hon. Members.
The increased competition that the round will bring is an opportunity and a challenge. Trade liberalisation is a continuous process. No trade agreement can settle every trade dispute or open every market. But the completion of the Uruguay round represents an enormous achievement in which the world has chosen trade liberalisation rather than protectionism. The conclusions of the round provide a secure basis for future expansion of world trade and the growth and prosperity that go with it.
§ Mr. Stuart Bell (Middlesbrough)
The House will be grateful to the Minister of State for making an important but nevertheless dull subject more interesting for the House. He has certainly had a response from hon. Members in the House by way of many interventions.
The Minister of State was right to draw our attention to the extensive scope of the GATT agreement and its variety of annexes and schedules. I am sure that the Chancellor of the Exchequer, who is not with us today, could safely put his hand on his heart and say, "I have not read this document," and we would all forgive him for doing so. The Minister also referred to the White Paper that the Government have prepared, which is a succinct and well put together report which I think that we can all follow.
The House will have to excuse me if I am not able to mention all the subjects that were included in the debate. My former hon. Friend, the previous Member for Bradford, South, Bob Cryer, took a big interest in textiles issues and I was glad to see his successor sworn in today. I know that the hon. Member for Batley and Spen (Mrs. Peacock) will make a contribution about textiles. My hon. Friend the Member for Bradford, West (Mr. Madden), too, is in the Chamber and takes an interest in that subject. The hon. Member for Keighley (Mr. Waller) may also catch your eye on that subject, Mr. Deputy Speaker.
Audio-visual; agriculture and property rights, all of which the Minister mentioned, are important subjects, but it is not possible to cover them all in a single debate. I shall 532 therefore modestly restrict my comments to a whole scheme of ideas that the Opposition have, which would constitute a trade policy.
Many Members who have followed these debates with care are in the House today. I remember preparing for a speech by my former leader John Smith on the subject and going into great detail about GATT. The Minister went through a series of rounds, including the Kennedy round. John Smith was able to remind me gently that he had been Secretary of State for Trade in 1978 during the Tokyo round. We all have a part to play in the process but, as the Minister said, it has been going on for many years and we are now witnessing the culmination of a lengthy procedure.
I was pleased that the Minister of State was in Marrakesh and signed the agreement on behalf of Her Majesty's Government. I hope that he managed to see the Atlas mountains from the Mamounia hotel and I am sure that he enjoyed the short experience of being out of the country at that time. The Uruguay round, as the Minister said, goes back more than seven years. It has taken a hike around the conference tables of the world from Punta del Este to Morocco—not a voyage as exciting as that from the halls of Montezuma to the shores of Tripoli, but a fruitful voyage for all that.
The Minister ended his speech where I would like to begin: the Uruguay round has achieved what it set out to achieve—a further liberalisation of world trade. There will be tariff reductions on a wide range of industrial goods, services and intellectual property within the frame and we have a new World Trade Organisation—according to the Minister, 40 years in coming—which will come into effect once the United States Congress has agreed the entire Uruguay package.
Here I make a little warning sound about the ratification of the treaty in the United States. Opposition to the treaty is not so great as opposition to the North American Free Trade Area agreement. We witnessed a great deal of pork barrel politics in the United States Congress to obtain many concessions from the administration in order for the latter document to be signed, but we do not feel that a similar thing will happen on the Uruguay round. Nevertheless, proceedings in Congress can be lengthy and if Congress does not ratify the treaty by the end of its parliamentary session the World Trade Organisation will come into effect, not on 1 January 1995, but on 1 July 1995. That is important and significant, and it is helpful that the President of the United States has committed himself and, one hopes, Congress, to completing all its passages this year.
One of the advantages of the new agreement is the speed with which trade disputes should now be settled between nation states which are signatories to the Uruguay accords. My hon. Friend the Member for Workington (Mr. Campbell-Savours) mentioned that briefly, as did the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who also mentioned it in relation to the rapidity with which disputes can be settled. One of the defects of the old GATT was that trade disputes simply went on and on and on. The procedures were cumbersome and it took as many as five years to achieve any result. That should no longer be the case. A dispute should be quickly and effectively dealt with and should take no longer than 18 months to resolve. I hope that those nations that wish to take unilateral action against one trading nation, for reasons that are nothing to 533 do with trade, will note that in signing up to the World Trade Organisation they are signing up to a set of rules that should make such unilateral action no longer possible.
The Government are right, in that sense, not to vaunt the economic benefits of the Uruguay accord as they are nebulous and frankly unquantifiable. The Minister rightly referred cautiously to the Organisation for Economic Co-operation and Development, which spoke of a boost to annual world income of $270 billion. As the right hon. Gentleman said, that can happen only when the Uruguay accord is brought fully into effect, which will take some 10 years. While we welcome the breakthrough in the Uruguay round of the GATT talks, it will be 10 years before the full fruits of the accord are seen. The gains are likely to be incremental and beneficial.
The Opposition have taken the view that it is better to have a successful conclusion to the Uruguay accord than no conclusion at all. It is better to have an international framework than no framework. However, whether the 125 participating countries really give the World Trade Organisation their full support, and whether there will be the consequential positive economic gain to which the OECD alluded, only time will tell. I throw to the Minister the biblical quotation:By their fruits ye shall know them.We shall measure the World Trade Organisation and the new agreements by the actual fruits that come as the years pass.
§ Mr. Bell
Yes, and the tomatoes. Although always reluctant to answer sedentary interventions, at least on this occasion we can say that they are not square tomatoes. We were happy to note that in Austria the square tomato party did not swing the votes in the referendum on accession to the European Union.
In their White Paper, the Government rightly draw attention to their role in keeping the Uruguay negotiations on the rails when they were threatened with severe disruption and trade wars between the United States and the EU. The hon. Member for Somerton and Frome (Mr. Robinson) referred to the modesty with which the Minister put forward his proposals and the hon. Member for Lancaster (Dame E. Kellett-Bowman) actually went out of her way to praise Sir Leon Brittan. It was left to the Minister to praise the Prime Minister. It is interesting to see where the praise lies. We all know that victory has a thousand fathers, but defeat is an orphan; there are certainly no orphans today.
If the Government did indeed play a part in ensuring that the accords were signed, their role was less than noble when it came to the actual content of the accords. While the Minister was able to tell the House that 23 per cent. of our exports come from services and to refer to a figure of £23,000 million per year, and while he was able to say that we are the fourth exporter of invisible exports—it was difficult for him to get around that phrase, but we understood what he meant—nevertheless there is a feeling, which is reflected in the Government's document on competitiveness, that we have not done so well in financial services exports as we might have done. We were not able to impose a fully-fledged agreement on financial services on the European Commission and in the negotiations with 534 the USA and the other participating countries. While the Minister was right to vaunt the great benefits that came from the so-called GATTS, the feeling is that we did not do well enough in financial services.
We must hope that the Government will follow up on their own commitment, as expressed in their competitiveness document "Helping Business to Win", and will vigorously pursue the issues of financial services—banking, insurance and securities—telecommunications, maritime services, aerospace and steel. I am glad to see in the Chamber my hon. Friend the Member for Alyn and Deeside (Mr. Jones), who I am sure will make his own points about aerospace. The conclusion was not so successful as it might have been, had there been more important input in terms of world share of financial services.
§ Mr. Ian Taylor (Esher)
I share the hon. Gentleman's frustration at the failure to liberalise financial services, but does he agree that the biggest problem was not failure by the British Government but the intransigence of the US Government and the need to put that aside to achieve overall agreement, with the intention of continuing to consider financial services?
§ Mr. Bell
Yes. The Minister indicated that there were many occasions during the negotiations when we were close to a trade war, so there was much to-ing and fro-ing. There was a feeling that US interests in financial services did not extend beyond American Express and improving its position in respect of financial services. Nevertheless, the new agreements offer the possibility of pursuing that aspect. The Government's competitiveness document indicated that they will do so. We shall keep them to that and monitor progress.
The Minister pointed out that there were about 24 signatories at the beginning and that the number is now up to 125. There is the prospect of China joining GATT through most favoured nation status. Saudi Arabia is joining the agreement, and it is possible that Russia and Taiwan will do so. We take the view that trade is a tool of co-operation and not of coercion. The more countries in membership of GATT are prepared to live by the rules, the more we shall be happy and trade will improve.
The third world aspects of GATT preoccupied many. My hon. Friends the Members for Bradford, West and for Nottingham, South (Mr. Simpson) are in their places and if they catch your eye, Mr. Deputy Speaker, they may refer to that topic. The basic premise was always that a successful conclusion to the Uruguay round would increase world trade, be better for consumers by offering wider global choice, perk up economies currently suffering from recession, and bring improvement over and above the so-called Trinidad terms to assist third world countries to alleviate their massive debts to western banks and Governments. We hope to see a lift for the third world with higher agricultural prices and better access to world markets.
The conclusion of the Uruguay round brought a host of measures designed to protect less developed countries. We welcome the protection granted in terms of longer transition periods, due process rights provided under the new understanding on rules and procedures governing the settlement of disputes, special needs clauses to promote transfers of technical aid, and acceptance of the necessity for flexibility in imposing obligations under the Uruguay 535 round which less developed countries might have trouble observing. We remain concerned about the ability of the poorest countries to protect their food producers against cheap imports and dumping. We are anxious that developing countries should be given the freedom to protect infant service industries and other key sectors of their economies, which will require surveillance and supervision.
Another disappointing failure which goes to the heart of the Uruguay round is one to which the Minister, not surprisingly, made no reference. I refer to the absence from GATT of any platform of social rights. There is no reference to that in the Government's recent competitiveness document either. Trade should be fair and balanced, and should address the aspirations of workers and consumers alike. There is a theoretical case for free trade, in that it is meant to provide the most efficient producers with access to world markets. It allows lower prices and forces domestic producers to be more efficient. Consumers and the most efficient companies benefit. Therefore, there is public interest in choice through free trade.
We are the world's fifth largest trading nation, but I must disappoint those hon. Members who are not Francophiles, although I do not include the hon. Member for Esher (Mr. Taylor). The French, as the world's fourth largest exporters, are ahead of us. It must be in our national interest to pursue a policy of fair and balanced trade, where that trade is fair and balanced in other countries. The Uruguay round makes no provision for workers' rights: the only reference is that they should be part of a working programme for the new World Trade Organisation.
We look for allies in our cause. We are not alone in seeking to improve environmental and labour standards in relation to trade. My hon. Friend the Member for Knowsley, North (Mr. Howarth) will wind up on the environmental aspects of the Uruguay round, but the European Commission recommended an overall evaluation of trade benefits for 60 developing countries, with new incentives for improving environmental and labour standards, when the generalised system of preferences is reviewed. We are entitled to draw the attention of the House to GATT's failure to address workers' rights, which has meant an imbalance in world trade. There was a missed opportunity to incorporate such rights in the Uruguay round.
We welcome the extension to the principle that industrial products should not be the only subject of GATT but that it should embrace also intellectual property rights and agriculture. We are disappointed that workers' rights are not covered. We shall continue our efforts to ensure that they are not forgotten, with canvassing and campaigning in the European Union, World Trade Organisation, European Commission and European Parliament.
It is worth remembering that the European Parliament will ratify the GATT' agreement, which is something that this House will not be doing. I understand that this is our last debate on the subject, but there is room for us to make headway elsewhere, with improvements to basic human rights on employment in relation to fair and balanced trade. That could be achieved at no detriment to the developing world and without enhancing protectionism. If there is to be fair and balanced trade, there should be a proper platform for workers' rights and for the environment.
We envisage world trade based on GATT, and a World Trade Organisation based on a strong environmental and 536 workers' rights platform which leans strongly towards the third world. The long section on trade in the competitiveness document to which the Minister referred deals with the mechanics of investment and world trade, but contains no overarching strategy: there is movement, but no action.
We always welcome the peripatetics of the Minister for Trade, who is not with us today. We understand that he has just returned from another trade mission to Saudi Arabia. We admire his zeal, zest and commitment to his task. If there is a Government reshuffle, we hope that the hon. Gentleman will keep his job. As we are not malign in any sense, we hope that all the members of the Government's trade and industry team will keep their jobs. When we are on the Government Benches, we shall expect the same consideration and generosity.
§ Mr. Bell
It may not exist to that extent, but as Napoleon said—he was not necessarily a free trader—it is but a single step from the sublime to the ridiculous. Many Government Ministers may shortly discover that to be the case.
The competitiveness document indicated that the Government will monitor GATT's progress in relation to a host of issues to which the Minister referred and its progress within the European Union on financial services, telecommunications, maritime services, aerospace and steel. We do not believe that the Government have a strategy to reverse our decline in world trade. The competitiveness document revealed that our country's share of world trade has declined over the years and now only holds steady. The French—our European partners —have seen their share of world trade increase.
We are pleased that the British Export Credits Guarantee Department has resumed its export credit insurance cover for Brazil and that in the past two years it has resumed cover for 14 additional countries where business has been renewed. Nevertheless, the Labour party is not satisfied, and never will be, that the dead hand of the Treasury does not lie across the Department of Trade and Industry. The Labour party is not satisfied, and never will be, that our exporters enjoy the same support and advantages as, for example, the French or the Germans. The Labour party is not satisfied, and never will be, that our exporters can match foreign competition on the level playing field to which the Minister referred in terms of price, technology, product and package. "What is the package?" is so often the cry in the City of London.
§ Mr. Malcolm Bruce (Gordon)
The hon. Gentleman makes an important point. Is he aware of the fact that a project worth more than £100 million, which might have come to this country, went instead to Italy because the export credit guarantee premium was 13 per cent. in the UK compared with 8 per cent. in Italy—a difference of more than £6 million on the contract, which was mostly profit? That is why we are losing out.
§ Mr. Bell
Obviously all Governments, including ours, put the best face on every aspect of their trading relations. We have heard many a time how the Government have increased export credit guarantees in terms of number, and how the average premium has been reduced. We are also aware that the Treasury goes behind the back of the 537 Department of Trade and Industry and sets premiums which are far too high and thus do not make the firm that is seeking to export competitive. We are trying to weed out the problem which exists between the Department of Trade and Industry and the Treasury. That is why I say that the package offered to exporters is not so good as that offered to exporters in Italy, or certainly those in France and Germany.
When we look at the package available for exporters in relation to the GATT agreement, again we are found wanting and it is inadequate. We know that the Department of Trade and Industry is aware of that. The Ministers know it, but they know that they cannot lift the dead hand of the Treasury from across our export trade. What we shall have to ensure, what we shall have to prepare for, and what we shall see happen is that the day will come when a Government are in office who will ensure that it does.
§ Mr. Mark Robinson (Somerton and Frome)
Any negotiation involving 123 nations will always be complex and difficult to bring to a successful conclusion, and the Uruguay round is no better an example of that. That is why, at various times, none of the participants could be certain that the negotiations would reach a satisfactory conclusion, because the length of the negotiations meant that political circumstances and events—dare I say elections?—would intervene, which caused the positions of the participants to shift with the electoral evening tide or the morning glow of the arrival of a new Government. That is why, at certain stages, the negotiations became extremely polemical. That, perhaps, was to be expected, but it made it extremely difficult for the parties concerned.
I mentioned earlier the role that the British Government were able to play in trying to heal and soothe some of the gulfs that opened up in regard to those polemics. For example, one must pay tribute to my former right hon. and learned Friend, the commissioner in Brussels, Sir Leon Brittan, for the work that was done to bring about the Blair House agreement. It seems like a long time ago as we move on from the final conclusion of the Uruguay round, but had not that work been effectively concluded, we would never have got on to the second stage, which was to try to ensure that the French came into line with the rest of the Community so that the European bloc was able finally to reach an agreed negotiating position.
It is a fact of life that any negotiation of that size, involving as it did 123 nation states, will be a series of mini-negotiations before the final one. I have had the privilege and experience of working in international secretariats, so I know a little bit not just about the 11th hour of negotiation, which always seems to be an inevitability, but about the umpteenth hour of the umpteenth night, when, finally, one is able to reach the desired objective. Would that it was possible to do that in some other way, because one often has a sickening feeling when coming to the negotiations. We know before we start that it will not be before the umpteenth hour of the umpteenth night that we will be in a position to reach the desired objective. When the history of the negotiations comes to be written, Britain's part will increasingly be seen as having been of the highest significance.
538 I take the point made by the hon. Member for Middlesbrough (Mr. Bell), the Opposition spokesman, that we could not achieve everything that we wished in terms of financial services. I do not think that we ever expected that it would be possible through the Uruguay round to achieve success in every single field. At the end of the day, one has to decide the areas where one will give ground to allow the negotiations to be completed, and those where one will fight to get the most satisfactory conclusion that one can. But, of course, the great advantage of the Uruguay round and its predecessors is that the final signing of the agreement is not the end, by any means, of the process. That is where the World Trade Organisation will play a major part.
For those of us who believe in free trade, and I believe that most of us do, the world stands to gain not from tariff barriers or protectionism, but from the ability to increase markets. That is as relevant to the developed world as it is to the developing world. It is through the success of the international mechanisms which have grown up since the second world war that considerable achievements have been made. If it had not been for the honing of those negotiating mechanisms, the prize, which the Uruguay round and the GATT agreement delivered, would not even have been closely within our grasp. It was not just a desirable prize; it was an essential one.
We all talk about growth in trade, and growth in world trade. Those of us who discuss those issues believe that continued growth is essential. We believe in developing new markets. We believe in developing new trade opportunities. I pay tribute to my colleagues on the Front' Bench who go around the world fighting for markets and opportunities, and new ones are developing all the time. With the return of South Africa into the international community, I know how hard they have worked in terms of trying to open up the opportunity that the arrival of a new Government in South Africa is bringing to the world trade process.
It is a pity that it is sometimes necessary to resort to threats in the negotiations, but I do not believe that any of what was ultimately achieved in the Uruguay round was achieved as a result of such threats. Far from helping the process, threats merely slow it down and breed uncertainty —uncertainty that feeds into the market place in our constituencies, the businesses that we are trying to encourage and the employment opportunities that we all spend so much time discussing here.
In my rural constituency, where issues relating to agriculture and agricultural machinery are considered extremely important, there was great relief when the Uruguay round was completed—although in some respects that relief has now turned to uncertainty. No sooner were the negotiations over than the so-called beneficiaries were asking, "What does this mean for me?" With such a protracted timetable, farmers and business men cannot always find ready answers to their questions—not because Government Departments are sitting on those answers, but because further negotiation will inevitably be necessary to produce them.
I observed that uncertainty the week before last, when I visited the very successful Royal Bath and West show in my constituency. The conclusion and implications of the GATT were at the forefront of farmers' minds. Britain, after all, will benefit from a freer market in agriculture, but that freer market is still slow in arriving.
539 There is no doubt that the agricultural community welcomes the more market-oriented approach to agriculture and the impact that it will have on many agriculture-related businesses; but they, like any other business, must plan for future opportunities, growth and marketing. They cannot make their plans until they know what the consequential decisions will be. At a time when the value of the pound has fallen and opportunities have increased—especially in the dairy sector—farmers are frustrated by the fact that, although they can see the opportunities that exist, many of those opportunities still lie beyond their immediate grasp.
The same is true of small and medium-sized businesses. They are all aware of the trading opportunities that exist in the outside world and feel frustrated when they come up against the barriers that are still preventing them from expanding their trade further. Let me add, however, that it is easy for businesses to think that they cannot make progress when often they can.
A printing company in my constituency—Butler and Tanner—recently decided to take on the German market head on. Others in the industry had said that it was not worth trying and that the company would have little success in winning orders; but it nevertheless took its marketing abilities across to Germany and won the order involved. When I asked what had been the most difficult obstacle to overcome, the managing director said that it had been the shock felt by a German company seeing a British company actually coming over to win an order. When I asked how the company had coped with the language barrier, he said, "We were lucky; one of our important marketers is a fluent German speaker. Without that linguistic ability, we could not have made the breakthrough."
I believe that such opportunities are available to British business—not just in Europe but in the United States and, indeed, throughout the third world. I am thinking particularly of the far east. Sadly, many business men are frightened by the prospect of going there and trying to win orders for their companies; but the chance of success is undoubtedly there if they are prepared to make the leap and visit Japan or south-east Asia.
Some of the barriers are breaking down. Those who have turned to the Department of Trade and Industry for help in that regard have been extremely surprised and pleased at the amount of service available to them, but it is not simply a question of saying to the DTI, "I should like to do business in a particular part of the world: please tell me how to do it." Businesses must know the markets for which they are heading, make their plans and then say to the DTI, "This is what we propose to do. What support and help can you give our marketing exercise?" As I am sure my hon. Friend the Parliamentary Under-Secretary of State will agree, businesses that have taken such action have been highly successful in breaking down barriers—artificial barriers, rather than the kind that were discussed in the GATT negotiations.
The future is just as important as the successful conclusion of the Uruguay round. We cannot be complacent simply because of the considerable achievements in the removal of tariff barriers to which my right hon. Friend the Minister for Industry referred. Five per cent. is 5 per cent. too much. We must keep up the pressure, encourage our partners and work together at the heart of Europe, while also using our influence. The 540 negotiations were a classic example of Britain's ability to work at the heart of Europe, bringing Europe together but then acting as a bridge between it and the United States.
Other parties to the negotiations may have regretted the fact that, to the outside world, the heart of the negotiations seemed to lie on one side of the conundrum. Everyone took it for granted that, once the argument that had raged between the Americans and the Europeans was successfully concluded, the other countries would fall into line. It was assumed that the remaining issues were not complex or difficult; in fact, they were extremely complex and extremely difficult. The negotiations lasted for many hours, and different negotiations took place in parallel. Perhaps because the issues involved were not so close to home as other matters covered in our financial newspapers, they did not receive as much coverage as the other side of the equation.
We have to work on and encourage the World Trade Organisation not to fall into a plethora of bureaucracy, but to develop an action programme to take forward those important issues. It is easy to sit back and say, "We have created the World Trade Organisation; let us relax now." Those at the front line of marketing, business and agriculture want the process to continue so that the opportunities that clearly exist can be secured and their competitiveness and businesses will grow. That will have an impact on employment, which we discuss a great deal in this place.
Unemployment falls because jobs are created; it has been said time and again and it is a fact of life. Successfully building up and managing our trade opportunities leads to an increase in employment prospects, as we have already seen over the past few months.
Reorganisation is still taking place in British industry. Jobs are still being lost, but at the same time jobs are being won which are bringing down the overall level of unemployment. That is happening only because of the market opportunities that are being created at home and overseas. The opportunities that are created overseas bring further job opportunities to other industries that do not naturally or necessarily export overseas, but will benefit from those companies which do.
Over the next decade, we can look forward to a period of great opportunity for Britain in terms of its trading potential. We can do that with even greater confidence because of the work that went into securing the success of this very complex and complicated negotiation.
In the short time available, my right hon. Friend the Minister was able only to touch on the heart of the subject matter which is contained in the voluminous documentation with which some of us are familiar. Without the many hours of hard work that not just British officials but officials from all over the world put in to secure the success of that complex negotiation, we would not perhaps be looking forward to the next 10 years with the same optimism.
After a prolonged period of recession, there is a temptation among commentators to think that it will never end, yet I visit businesses and hear stories of improved order books, fresh opportunities and successful balance sheets. I could easily name a variety of companies that I have visited in my constituency in the past few weeks. I have already talked of a major printing company and Cuprinol is another company in my constituency. I could go on and on. I have noticed changes from a year ago.
541 When I walk into a business—whether it is a large or a small one—the first question I always ask is, "How is the order book looking?" The prognosis 12 months ago was extremely pessimistic. That pessimism has gone. The position is not uniform; there is more pessimism in construction than in other sectors, but confidence is growing and gradually making its way across the economic front.
I know that at times it is difficult for the Opposition to recognise that because it goes to the heart of much of what they say in terms of their criticism of the Government and the Government's attitude to the economy and trade. That is quite understandable, but as the climate improves and the volume of trade grows, as we see Britain as having one of the most successful records of growth in trade in the European Community, and as we get the figures month after month, the general public begins to recognise them and the aura of confidence starts to return.
As we move on from the GATT negotiation into the next decade, in the next two or three years we shall be taking a different view of the British economy from the rather jaundiced attitude that some people take at the present time. If one is prepared to go out and ask the questions, the seeds are there. They are growing day by day. It is no accident that unemployment is starting to fall, the volume of trade is growing and export opportunities are improving. The signs are there and the recovery is under way.
It always takes the public longer to recognise recovery. It is often six months to a year behind, just as the end of the boom was not noticed, except by connoisseurs, for a year if not two years after it had actually run out of steam.
I say to businesses in my constituency which tell me about the growth in their order books that now is the time to plan for the future growth of their trade. Now is the time to be thinking about making investment decisions; now is the time to be contacting the bank manager to try to persuade him of the strength and relevance of the business. If companies are involved in exports, now is the time to be going out and looking for market opportunities, which certainly exist and which the successful GATT negotiation has created.
§ Mr. Deputy Speaker (Mr. Michael Morris)
Before I call the next hon. Member, may I remind hon. Members that this is a debating Chamber and not a Chamber in which the general post is delivered and dealt with.
§ Mr. Denis MacShane (Rotherham)
I am sad that the House is so empty for this important debate. The Uruguay round and the creation of the World Trade Organisation will touch and affect everybody in the world, from my constituents in Rotherham to the poorest peasants of the Amazon and India.
Although Napoleon said that England was a nation of shopkeepers, there was really no excuse for sending a grocer to sign the Uruguay round in Marrakesh; every other leading country in the world sent its top Trade Minister. I regret that the President of the Board of Trade, who would be Prime Minister, has not graced us with his presence this afternoon.
I read the GATT treaty in full. I put a diskette into my computer and started to print it out. It was 100, 200, 300, 542 400 pages—more than 500 pages of densely printed text, a treaty that bears some close study. Socrates said— [Interruption.]
§ Mr. Jacques Arnold (Gravesham)
When the hon. Gentleman refers to those hundreds of pages of detailed text, in the light of what he said about my right hon. Friend the Prime Minister, will he bear in mind the fact that not only did my right hon. Friend master all that detail, but he pushed very much of it through?
§ Mr. MacShane
I referred not to the Prime Minister but to the President of the Board of Trade, who would be Prime Minister. If the hon. Gentleman would listen, he might know what I was talking about and might understand what he will be talking about later on. Socrates said that any politician who did not know the price of wheat was not worthy to hold any kind of office. That 2,000-year-old adage is true today. We need to know exactly how world trade works in all its intimacy.
The Uruguay round and the new World Trade Organisation will go far beyond trade in finished goods and will cover trade in services and, most important of all, trade in ideas. I believe that "intellectual property rights" is the rather pompous term for what we would call an idea. We are now talking about the buying and selling of ideas, the putting of a price on an idea or a patent that can be injected through biogenetics into agricultural produce and medicines, which will mean that an extra royalty can be demanded from the poorest in the world. That will significantly alter the way that we regard world trade. Patents are power and biogenetics will substantially alter the way in which we trade ideas with each other.
I am not sure whether I speak for all Opposition Members, but I strongly favour free trade. It is, however, ironic that in the previous half century free trade expanded most quickly when full employment lay at the heart of policy on both sides of the Atlantic. The Minister for Industry said that trade was not a zero sum gain. I wish that he were right, but, alas, in the past decade, many people have become substantially worse off because of deregulation and the application of full neo-liberal free trade ideas.
In Mexico, the purchasing power of a worker is about 50 per cent. of what it was 12 years ago before the Mexican Government implemented free trade ideas which culminated in the North American Free Trade Agreement. I did not especially want to cite the case of Rotherham, but the majority of my constituents are worse off now in terms of their purchasing power than they were 15 years ago because of the application of neo-liberal free trade ideas.
§ Mr. Jeremy Corbyn (Islington, North)
Is my hon. Friend aware that one of the consequences of the application of free trade ideas in Mexico has been a massive uprising by the very poorest people in the south? Indeed, the rallying point for most of those who took part in the rebellion earlier this year was opposition to GATT because of the implications for their standard of life, their jobs and their ability to pursue sustainable agriculture.
§ Mr. MacShane
I am grateful to my hon. Friend who is quite right. The many strikes taking place in southern China, which are very little reported in the press, are being organised by victims of the application of uncontrolled free trade policies. They have risen up and demanded their share.
543 The worst protectionism exists when worker; do not earn enough to buy what they make or to protect their families, homes and communities from hunger, poverty and misery. That was very much the message of the European elections. In France, the extreme far right Philippe de Villiers' list powered to third place on a solely protectionist programme. In Italy, Mr. Berlusconi and the fascist MSI party also ran on a protectionist, corporatist programme. A worried Europe is voting against free trade and for protectionists such as Jimmy Goldsmith and Mr. Berlusconi.
One cannot divorce trade from the social context in which it takes place. That was recognised in the 19th century by-the Tory party. A poem from the 1850s reads:
That was an American slave song from the mid-19th century. Of course, at that time, slavery was considered to be an acceptable part of the trading relationships between modern nations.
- "We raise the wheat—they give us the corn
- We sift the meal—they give us the husk
- We peel the meat—they give us the skin
- And that's the way they take us in".
Today's slaves are the 10 million in the prison camps of China. Above all, they are the children who, under free trade, are increasingly being forced to work. I am sure that many hon. Members have sons and daughters, perhaps even grandchildren. How would they feel if one of their children were among the 50,000 aged between three and a half and 15 who work in the match and firework industries of Tamil Nadu in India? How would they feel if their child were among the 25 per cent. of workers in the glass industry in Uttar Pradesh who are children and who have to carry molten glass on which adults then work? That is the world of free trade that the Uruguay round, GATT treaty and WTO need to consider if we are not to experience a disintegration into the type of protectionism exemplified by the votes that took place across Europe on Sunday.
The Minister for Industry referred to the Havana charter which was to set up an international trade organisation —an ITO—in 1947. I apologise, Mr. Deputy Speaker, but I must quote directly from the key clause which stated thatall countries have a common interest in the achievement and maintenance of fair labour standards related to productivity, and thus in the improvement of wages and working conditions as productivity may permit. The Members recognise that unfair labour conditions, particularly in production for export, create difficulties in international trade and accordingly each Member shall take whatever action may be appropriate and feasible to eliminate such conditions".That clause in the Havana draft treaty was sufficient for the United States Congress to refuse to ratify it so that in 1947 we had only a provisional treaty, not a proper one. I fear that Congress may not ratify the Uruguay round, despite President Clinton's efforts to sell it, because the treaty now setting up the WTO does not take sufficiently into account social and environmental considerations.
Even as we debate, the general conference of the International Labour Organisation is taking place in Geneva. I was there at the end of last week and nearly all the speakers—Heads of State and Employment and Labour Ministers—referred to the need for a social clause in the GATT treaty. Some were for it and some were against, but I welcome the call of the President of the Swiss confederation—that great free trading nation—who wanted a link between the ILO and the WTO. I believe that the House should also welcome such a call.
544 I also welcome the call of the Secretary of Labour of the United States, Mr. Robert Reich, who insisted at a meeting that I attended last Friday morning that the full respect of trade union rights was a basic condition for access to the world trade system. The same call was heard from the new Labour Ministers of South Africa and Russia, but, alas, our Secretary of State for Employment was notorious by his absence. When great world issues are debated, Britain is not present. It is not punching above its weight or below the belt—it is not punching at all.
As I represent a steel constituency, I am especially concerned about subsidies. I agree that the subsidies paid to many steel producers around the world create an unfair market in which the technically advanced and highly proficient and co-operative workplaces of our steel industry are finding it difficult to compete.
More important than the question of subsidies are the questions of demand and of manufacturing industry, but, perhaps, that is for another debate. If we are to fight our corner on subsidies—a point raised by Conservative Members—we need to be at the heart of Europe, arguing in every corridor and at every table for our position. We have to be in tune with our partners in Europe instead of opting out from nearly every policy that they put forward.
We also need to be in tune with our trading partners across the Atlantic, instead of, as at Marrakesh, when Micky Kantor the United States Trade Representative spoke out powerfully for social clauses in the World Trade Organisation, our representative, with all the third-world dictatorships, argued against those ideas.
Much mention has been made of Sir Leon Brittan and Peter Sutherland. Mr. Sutherland, as many hon. Members will know, is leaving GATT and, from the Opposition side of the House, I should be happy to nominate Sir Leon to succeed him. Certainly, if the Government keep on running Sir Leon as President of the European Commission, he stands no chance. In his most recent book and speeches, he has started to acknowledge the importance of a social Europe and of linking trade to social accountability and responsibility. It may be simply an election address, but I take him as a serious man. He puts pen to paper and publishes pieces and we take him at his word. We also need to pay tribute to President Mitterrand, to Prime Minister Balladur and to US Trade Representative Kantor for their insistence throughout the winter and into the spring that the linkage of trade and workers' rights is important in the new world trade system which we are creating.
I believe that the House would like to see a link between the World Trade Organisation and the International Labour Organisation. I hope that it happens soon, as my hon. Friends sit on the Government Benches arguing for that link and instructing our diplomats and civil servants to argue for it. We need a social clause based on ILO conventions Nos. 87 and 98 and the elimination of child labour as a fundamental pre-condition for access to the world's trading system.
The hon. Member for Somerton and Frome (Mr. Robinson) referred to the need for business to plan. I agree completely with him, but, as business has to plan, so we need an active Government who plan. The hon. Gentleman did distinguished work for the Commonwealth Secretariat and we need such international organisations to link up and to plan. He called for an action programme and I agree with him. We need an action programme for social and environmental rights, which are built into the new world trading system that is being set up. Yes, I am for a world 545 of free trade and trade that is fair. The way in which to make it fair is to ensure that trade adds not only to the wealth of nations, of multinationals and of banks, but to the wealth of all individuals and the communities in which they live, wherever they be in the world.
§ Mr. Ian Taylor (Esher)
I am delighted to be able to follow the hon. Member for Rotherham (Mr. MacShane), who entered the House not long ago and who has a certain deprecating tone in his speeches, which, in time, I am sure that he will justify.
The debate is timely because the results of the GATT negotiations are lying in front of the House and it gives us an opportunity to consider carefully their implications and the prospects for the future of world trade. Several hon. Members have rightly paid tribute to the people who were most notably involved in ensuring that a deal was struck at Marrakesh—Arthur Dunkel initially, followed by Peter Sutherland. My hon. Friend the Member for Somerset and Frome—
§ Mr. Taylor
Somerton and Frome; I almost got it right. My hon. Friend pointed out that we tended to focus on the European-American negotiations, but when all the rest of the countries—about 111, or perhaps more—tried to come together to agree, it was a complicated procedure. So, credit is undoubtedly due in that respect, as the GATT organisation performed miracles. I add my own tribute to Sir Leon Brittan for his mastery of detail. One of the attributes of a Commissioner who is handling trade disputes is a brain that can get round some rather complicated and somewhat arid details. He undoubtedly did that, with great gusto, and was more than a match for his opposite numbers, such as Carla Hills and others from the United States. Sir Leon's work galvanised the arrangements and was warmly supported by the British Government.
Nevertheless, the point that I stress is that the European Community was negotiating as one. It is a classic example of the Community as a single unit being in the British interest. Certainly, in trade negotiations, the Community has the right and the responsibility to negotiate on behalf of the contracting parties to the GATT series of talks. I do not believe that we would have got anywhere near a deal if all 12 individual member countries of the EU had negotiated separately. Indeed, it is almost certain that we would never have reached a starting point for negotiations. Also, we would never have got as good a deal in the face-to-face negotiations with the Americans if we had not been negotiating as a trading bloc of 340 million people with one spokesman. Let us put the European elections behind us and concentrate on what benefits a positive approach by Britain to our role in the European Union can give to the people of Britain, because there is no doubt that that unified, single negotiating position on behalf of all the individual contracting nations was a good example of the reason why I believe that Britain's membership of the European Union is absolutely critical to furthering the interests of the British people.
Free trade is an essential part of the progress of the economic well-being of the people of this country. We are 546 a trading nation, and there is no getting round that. Since 1947, the world has seen a reduction in tariffs from about 50 per cent. across the board to about 5 per cent. on average and almost an 800 per cent. increase in the volume of trade. In the period between 1947 and the end of the Tokyo round, volumes of world trade in manufactures had increased by more than 800 per cent. and world output by 300 per cent. There is no doubt that the post–1940s boost to the western economies has been based on the principle of removing trade barriers and of promoting the growth of the interchange of goods and services. In those circumstances, we are now in a situation where, although there were considerable impediments, which was the reason for the Uruguay round, we have long since put behind us any doubts about the benefits of opening up borders to trade and the removal of non-tariff barriers.
Some of the current figures are remarkable. Merchandise trade represents 33 per cent. of world gross domestic product and, if trading services are included, the corresponding figure is about 40 per cent., compared with 26 per cent. in 1963. Even more significant are the changes in the composition of trade. Trading in manufactured products today accounts for more than 70 per cent. of merchandise trade, compared with 50 per cent. 30 years ago. The growing percentage of that trade is in intermediate manufactured products. For the major industrial economies, intermediate manufactured products make up as much as 50 to 70 per cent. of their imports and, for some major economies, anything up to 50 per cent. of exports and 30 per cent. of imports take place within multinational companies.
The opening up of financial markets is even more remarkable. In the past decade foreign investment has grown three times faster than trade and four times faster than world gross domestic product. Those figures can be found in a speech made by Sir Leon Brittan at a conference in Portugal at the end of last November, when I had the honour of sharing a platform with him, just before the final agreements. Sir Leon said:The world financial market has taken the place of national markets, easing world liquidity but reducing each individual country's macro-economic independence.That is an important point to underline.
Although I do not make any pointed references, it is ironic that those who are most in favour of opening borders to free trade sometimes also regret the passing of national sovereignty which accompanies the opening of those borders. If one believes in free trade, one has a consequential problem in also believing in the importance of preserving national sovereignty at all costs. The world economy now has a big influence on trade and financial markets in respect of what a national Government can do.
The foreign exchange markets have tripled in terms of turnover since 1986 to reach $900 billion a day. The yearly turnover of cross-border equity transactions corresponds to 7 per cent. of world gross domestic product. Those figures provide an idea of the magnitude of what is being achieved and show the importance, for a country like ours which believes in opening borders and welcoming the prospect of free trade, of the limitations that the Government face in respect of domestic arrangements taken in isolation. We will not be able to attempt to introduce domestic policies that do not pay attention to international competition. I hope to return to that point later.
There is also now no doubt that the results of the GATT round will have a significant benefit in terms of the growth 547 of world trade. The Organisation for Economic Co-operation and Development and the World bank have estimated global annual economic welfare gains of $200 billion to $275 billion as a result of the successful outcome of the Uruguay round. However, the gains are likely to be even greater over a longer period. One estimate suggests that the total annual gain could be $2,000 billion in 10 years' time, the equivalent of more than 0.5 per cent. added to world annual growth rates in the next decade. That is a very significant benefit and a target that we can set ourselves which would benefit enormously people in Britain and elsewhere.
I am aware of the arguments that the agreements may be less beneficial to developing countries in certain specific respects. My hon. Friend the Member for Broxtowe (Mr. Lester), who hopes to speak later, is more knowledgeable than I am about the developing world and I will leave him to concentrate on those issues. However, I do not accept that the developing world will not benefit from the expansion of world trade and the removal of barriers to its goods and services. If we analyse what has happened over the past 30 or 40 years, I do not believe that one can sustain the argument that developing countries are penalised if they follow sensible economic policies.
Reference has been made to problems that are on the horizon. Once a treaty has been proudly proclaimed and tabled, we assume that its ratification is almost inevitable. We had an example last year where that was perhaps a rather mistaken view. However, in this case, having fought very hard to get the treaty through, we assume that its ratification is taken for granted.
I was in America not long ago and I believe that that view is exaggerated. The American Senate and Congress appear to have exhausted their free-trade instincts by passing the North American Free Trade Area agreement. In the event, that was slightly easier than had been forecast. Ross Perot made a bit of a fool of himself in opposition to NAFTA. However, the anti-free trade instincts on Capitol hill were clear.
There is another problem with GATT on which it would be wise for the House to focus for a moment. America is obviously the most critical of all the countries that are required to ratify the agreement. Because of American rules, it is necessary to replace dollar for dollar the loss in revenues from tariff reductions. It is estimated that, in the first year, between $10 billion and $14 billion will have to be found from other tax-raising measures in order to equalise the budget. Although I am no expert, I believe that it is possible that reductions in expenditure could compensate for that. However, I am not entirely certain about that. The debate on Capitol hill is about what revenue can be raised in compensation.
Over five years, the cost to the US in revenue lost through tariff reductions could be as much as $40 billion. When we make the bland assumption that it is going to be all right on the night, we should remember what American politicians are now wrestling with. They are trying to decide how to make up for the tariff reductions. When I listened to Carla Hills and others, I wondered whether American politicians forgot to tell their people that there were implications in the battle against Europe and the threats of trade wars. I do not believe that those politicians told the mid-west farmers that there might be changes in the way in which their subsidies were treated or with regard to price supports.
548 To use an agricultural analogy, the chickens are coming home to roost. American politicians are now having to admit that the free trade push to break down barriers to their goods in Europe and elsewhere has a domestic cost which may not be evenly spread.
My next point about ratification has already been referred to, but I do not apologise for raising it again. The only Parliament to have a clear responsibility in terms of ratification is the European Parliament. At the moment, it is difficult to tell what the character of the European Parliament will be. We now know the members because the elections have been completed, but the Parliament's character is still uncertain.
I hope that the free-trading instinct, which has characterised discussion in this House, will exist in the new European Parliament. As this is the first debate since the European elections, may I say that I hope that the loss of so many excellent Conservative Members to that Parliament will not be a blow to free-trading instincts in the European Parliament when it reconvenes in a few weeks' time.
The rules set out in GATT are very important. The documents are so voluminous that it is impossible to go into them in detail. However, I shall summarise them under four headings.
First, the anti-dumping rules are extremely welcome. The second heading relates to subsidies provisions. In the speech to which I have already referred, Sir Leon Brittan drew to my attention—this point may be useful for the House—the difference in subsidies, or the definition or use of subsidies, in Europe and the United States. He said:The EC systems of government tend to favour more direct forms of subsidy, such as price support, programme support, regional or social aids. In the United States, however, subsidies are more indirect, perhaps in the form of income support, research and development assistance through the NASA budgets, or pensions cover for Chapter 11 bankruptcy cases. Resolving this issue lies at the core of many of the most difficult EC/US trade disputes.That point is worth noting. Trying to determine what is actually a subsidy when one person's subsidy is not the same as another's is a very intricate problem. Again, I pay credit to Leon Brittan for cutting through those difficulties.
The third heading is trade-related investment measures and non-tariff barriers. There is no doubt that there are various ways of skewing investment so that it affects trade, and they have been itemised and exposed in the GATT negotiations.
The final heading is connected with safeguards and transparency of dealings. Those rules which have characterised the GATT talks are extremely important and I am sure that we will follow progress under each of the headings.
There are matters outstanding, and I share the frustration that financial services were not fully part of the original deal. I certainly do not blame the British Government. Of course, we would be anxious, given the excellence of our financial services industry, to make sure that that was part of the deal. I know that we are now pushing for conclusions, but the Americans did not like opening up their market to other pressures and certainly in the financial sector they are still fairly restrictionist.
There is also a hidden problem of which I am sure my right hon. Friend is well aware—it applies particularly in respect of the Americans, although they are not the only people, of course, who use it—and that is tit-for-tat agreements, which are almost bilateral arrangements, with 549 the Americans attempting to use their own power to obtain corresponding benefits from other countries. Of course, there is their trade Act and their Super 301 provisions. I am not an expert on either, but I certainly know that the Americans can use them very much for their own national benefit, regardless of their talk about free trade. We must be very careful to watch what they are doing.
The cultural aspect is another subject that will be of continued interest. I do not think that it is just a matter for the French. I have certain sneaking sympathies with the French position. Having lived in France for three years, I know how fond the French are of their language. We should be careful not to allow the swamping of a culture. Therefore, French worries about the impact on the French language and culture by a complete opening up are ones that I do not discount entirely, but the problem is that the French are somewhat erratic in the way in which they push their arguments. Certainly, when they were saying that we must protect the French film industry, French people were flocking to see "Jurassic Park".
§ Mr. Corbyn
I have some sympathy with the hon. Gentleman's arguments about the French film industry and the dangers to it. Does the hon. Gentleman accept that there are also dangers to other people's film and publishing industries, particularly the film industries in Burkina Faso, in Africa generally and in India? In the Indian case, they are well developed and under threat from the power of Hollywood unless protection is offered to them.
§ Mr. Taylor
Remarkably, I agree with the hon. Gentleman. What we then mean by protection is something that I would like notice about before I answer, because it is very easy to hide behind a threat to culture and then put up all sorts of barriers. The desire in the modern technological visual age not to swamp local cultures is one that I share, because in the long term it will do great harm to nations, whether they be France, India or anywhere else. But we must not use that as a simple excuse then to put up all sorts of barriers. It is a very complicated aspect of detailed negotiation.
There is a certain point on which the House would be wise to concentrate when discussing GATT, because I sense widespread enthusiasm in the Chamber for free trade. Sir Jimmy Goldsmith, a man whom I used to know and used to admire—I think that making too much money goes to one's head—possibly alone has put forward rather pertinent points which should cause us to think carefully about our enthusiasm for free trade—not to change our views but to attempt to refine our arguments. In an article in The Times of 5 March, which I recommend people to read, he talked about the threats from opening up trade and the dangers to competition in places such as western Europe from the new markets that are opening up in the rest of the world, with the 4 billion people who have entered the world economy with liberalisation or progressive liberalisation. He cites
China, Indochina, India, Bangladesh and the nations which used to be part of the Soviet Union, those of Latin America, and so on.The 4 billion people who are increasingly becoming interested in being customers and whose literacy is rising—in some cases, far too slowly—nevertheless receive wages that are as much as 90 per cent. or 95 per cent. less than those in Europe. Sir Jimmy Goldsmith's argument is 550 that free trade between regions is not desirable. I can understand what he means. If we in this country say yes, we believe in free trade and that we will therefore have to adjust our domestic conditions to be able to compete with the newly emerging capitalist economies of the far east, clearly we will have some problems if wage discrepancies are so great.
That argument also features in discussions within Europe on the social protocol. I have some slightly unpredictable views on that matter, but the reality is that western Europe as a whole simply will not be capable of competing on wages alone. There is no prospect of doing that. All studies of comparative advantage indicate that what we have to develop in Europe—America will find the same—is value-added and the ability to have high technical skills in the work force.
Attempting to pay cheap labour or low wages in Europe as a point of principle in order to compete in international markets is no solution. There is simply no prospect of doing that. We do not even have to look as far as the far east. I believe that I am right in saying that if we compare current wages in the Czech Republic with those even in east Germany—the eastern Lander—we will find that wages in the Czech Republic are about a sixth of those in the neighbouring Lander. In Poland the figure is one tenth. Even in the broader family of European nations we see almost an inability to compete on equal terms. The answer is clearly not restrictionism. There can be no sense in restricting trade, certainly not from the countries in central Europe which we wish to be stabilised and brought into the wider Europe. In the longer term, there is no point in trying to cut ourselves off from the threat from the far east. Before Opposition Members happily leap to their feet and say, "Aha, a Tory who supports minimum wages," and all the rest of that panoply—
§ Mr. Taylor
I do not support a minimum wage, for the very simple reason that in France, a country which I much admire, there is, sadly, a disproportionately high level of youth unemployment because of difficulty of access to the market. There are arguments, which we sometimes do not treat seriously enough, about a minimum wage, which effectively means companies subsidising the work force at a level which, in terms of their productivity, is not sensible, and then looking to the Government to subsidise them because they are doing so as a social gesture. In other countries that do not have a minimum wage, people are more readily drawn into new jobs and job creation is a bigger part of economic development.
Those are perfectly reasonable arguments. I know what my instincts are, having already said that I am not attempting to force wages down to levels which rival the ability to produce from the far east or even from central Europe.
§ Mr. MacShane
Is the hon. Gentleman aware that the country that has created the most jobs in proportion to its population in the past 25 years—the United States of America—has very strong minimum wage legislation?
§ Mr. Taylor
I am aware of that, although I am sure that the hon. Gentleman would accept that it varies from state to state in the United States. As he is obviously knowledgeable about these things, I am sure that he would also accept that there is a parallel problem in the United 551 States: there is a much larger pool of people who do not get any access to the jobs market, and that tends to be a much more permanent pool. There are social consequences of minimum wage legislation. We can argue the case—it is an argument that we need to have—but it is not a panacea and there are consequential difficulties.
Nor am I saying that Europe should not pay attention to its competitive position. Many European countries are out of line with other developed countries such as the United States. Non-wage costs are extraordinarily high and Germany is now beginning to feel the pressure of that. In Germany in 1992, the hourly cost per employee in manufacturing was DM42, compared with DM30 to DM35 in Japan and the Benelux countries, DM28 in France, DM25 in the United States and DM23 in the United Kingdom. Non-wage costs, which add 84 per cent. to every deutschmark paid in wages, are the main source of the differential between West Germany and other countries. When we talk about West Germany, we are specifically referring to the West German lander in the united Germany.
§ Mr. MacShane
I am grateful that the hon. Gentleman mentioned Germany. Is he aware that the OECD has revised upwards its forecast for growth in Germany in 1994 from 0.6 per cent. to 1.8 per cent? That means that Germany will create an extra $24 billion of wealth this year in the very country that the hon. Gentleman says has high wages, high social costs, strong unions, strong works councils and so on. Germany is on the way back—it is leading the way for a social Europe with wage costs that are taken into account when manufacturers export goods.
§ Mr. Taylor
I am delighted to recognise exactly the statistics that the hon. Gentleman has quoted from the OECD report. Of course, that is one of the reasons why Chancellor Kohl got the benefit of the doubt in the recent elections. The German people recognised that the German economy was growing. We should be glad about that because there is little doubt that full economic progress in this country depends on economic growth in the rest of the European Union.
I point out to the hon. Member for Rotherham that that is not an unmixed blessing from the German point of view. The German record is extraordinary in terms of producing growth. I shall make two points: first, because it works in Germany, its system does not have to be exported elsewhere in the European Union. Indeed, there is a danger in so doing because other economies may not be capable of adapting to it.
Secondly, one only has to look at recent moves by German industry to realise that all is not entirely well with regard to the social costs in Germany. Both BMW and Mercedes have built enormous plants in the United Slates, employing about 1,500 workers each, because the cost of employing American workers is lower than the cost of employing German workers. That is why companies have moved their workers to where the market is.
Another aspect is that we are seeing considerable continuing investment in other European Union countries by German companies. That is natural but it is related to costs. There is no question about that. More than 150,000 workers are directly employed by German manufacturing companies in this country alone. German costs are not an unmixed blessing and the German equivalent of the CBI has recognised that.
552 We need to be careful about costs because of the globalisation of world trade in terms of sales, sourcing, marketing products and technology. In each of those circumstances, it is possible to have a head office in one country and most production units elsewhere in the world without necessarily knowing where the product has been developed, unless one looks at the small print on it. There is nothing wrong with that. There is no point in railing against it or accusing multinational companies, because that is the way in which business is now done, and many developing countries are benefiting from it.
Certain large European countries no longer employ as many people in Europe as they previously employed. Unilever has reduced its European work force by one third over the past few years, despite having grown internationally. That is a real problem that we must watch. We must safeguard our competitive position and our understanding of comparative advantage. We must take on board the slogan, "Get smarter or get poorer".
As part of the discussion on free trade arising out of the GATT talks, we need to look closely at our philosophy of how to keep our economies growing. Unemployment will not fall simply as a result of normal economic growth. The last time that we had clear growth throughout the European Community was in 1986–90. About 9 million new jobs were created, but unemployment fell by only 3 million. As technology changes and as more people enter the labour force, we will constantly have a problem with unemployment in our western economies.
§ Mr. Jacques Arnold
Is not it particularly noticeable that that was the case at the time because there was growth in the number of people entering the employment markets in those countries? Today, the situation is somewhat different, and the importance—certainly in this country —of not having the social chapter is relevant.
§ Mr. Taylor
I accept what my hon. Friend says. We need to encourage as many people to enter labour opportunities as possible, not price them out of jobs. That is important. Certainly, I believe in the benefits of having a job, rather than being on social welfare.
For western economies, the problem remains that, even if we increase our rates of growth, unemployment will not fall sufficiently. That worries me because there is a risk that our desire for free trade could affect people in different ways. Protectionism comes through fear and politicians can play on that fear if they are unscrupulous. There is no doubt therefore that if we do not get our domestic economies or the European economy right, we could open up reactions to the good work that was done in the Uruguay round.
I should like to touch on other issues, but I know that other hon. Members wish to participate in the debate. I shall therefore conclude by saying that my hon. Friend the Parliamentary Under-Secretary of State for Corporate Affairs must take on board the fact that within the GATT round there is scope for encouraging British exports. One is not urging on him, and he would not wish to have urged on him, anything that is unfair or outside the rules, but it is important to do the very best for British manufacturers.
Recently, I had a constituency case with British Aerospace Sema. Against fierce competition from Germany, that group won an order from the Korean navy for a command and control fire system for its frigates. The important point is that the Korean navy did not have to buy 553 British—there is no doubt that it was a keen buyer in the current circumstances. BAe recognised that it received tremendous help from the Ministry of Defence for the credibility of the system—no financial assistance was offered. The Ministry of Defence was trying to explain to the Korean navy the advantages of working with BAe Sema. That is the sort of assistance which can come from right across the board, and the DTI should be in the forefront of that.
Increasingly, the Foreign Office has trade experts in embassies around the world, and that is an area in which we can try to do our best for British industry and for financial services within the rules of GATT. I am sure that a popular application of that effort will work wonders for British industry, which still has a lot to offer based on high value-added, high-skilled and, ultimately, highly paid British workers.
§ 6.9 pm
§ Mr. Malcolm Bruce (Gordon)
I welcome this debate, as I asked the Government a few weeks ago to make time available for such a debate. I am glad that they have done so. I am also glad that, in a small way, I was able to assist in ensuring that the Minister was able to get to Marrakesh, given that there were certain local difficulties in the House at the time. It was my view that it was important that the British Government were there to append their signature to the treaty.
I am not surprised, but I am a little disappointed, that the debate is being held at a time when we have just come back from a two-week recess, and there is not an enormous amount of interest. One must consider that this country is a trading nation which will die if it fails to trade successfully in the new environment.
I honestly believe that we as a nation do not address collectively how we can perform better. It is not a matter of trying to make party-political points about the relative merits and demerits of the Government's policy, although we can discuss them by all means. But we must recognise, especially in the environment which will be upon us once the GATT process gets under way, that we must be much more vigorous in our approach to securing an increasing share of world trade for Britain. If we do not take that vigorous approach, there is a real danger that others who are more vigorous will produce a situation where our share declines.
I understand that many of the speeches that we have heard so far have been somewhat congratulatory about the fact that we have got here. There has been a recognition that it has been very difficult, and that the British Government, the Governments of many other countries, the European Union and the American Government played a part. All those have had to come together, and there have been many delays and obstacles on the way. All that must be acknowledged, but all we have achieved is a new environment. Simply congratulating ourselves on achieving that and not facing up to what it means is not enough. We clearly must move forward, and it worries me.
I feel like saying that if British industry is not excited and scared at the prospect, it damn well ought to be. It should be scared in a negative sense, but perhaps fear will fuel the recognition that there needs to be a real application of thought in a very competitive environment. The Prime 554 Minister has said at the Dispatch Box on numerous occasions when the issue has been discussed—a little glibly, I think—that it is estimated that the GATT agreement could, once it is in full flow, lead to additional world trade of over $250 billion a year. It is said almost as if that trade will fall out of the sky. It will not, and it is there potentially for 125 nations to fight for. We must ensure that the United Kingdom is equipped to fight effectively to ensure that we get that share.
There are number of weaknesses that we must address. I make no apology for introducing one or two anecdotal contributions because they are often particularly relevant and practical. I shall give one example. Two weeks ago, I visited a company in the south of England which was extremely successful. It was what we would call a medium-sized enterprise, employing more than 500 people and with a turnover of £18 million. It was exporting 72 per cent. of its turnover to 68 countries. That is impressive, and the company was involved in technology associated with telecommunications.
I asked what was the secret of the company's success and I went through a catalogue of issues. The first thing I asked about was finance. The managing director said that it was not a problem, and that his only complaint about the rate of interest was that it was too low, as the company had cash in the bank. It was financed internally, and was owned by private shareholders. I make that point and immediately one is struck by the fact that it is not a typical company. It is an unusual, but successful, company.
I then asked about training. The managing director said that he had served his apprenticeship, and that he believed in apprenticeships. The company still recruited and trained apprentices. It believed in the value of skills. He said, "I am an engineer. I am proud of it, and I could go down on the shop floor and work alongside my workers and sort out problems with them. I do not think that I am typical of British management." I do not think that he is typical either.
That brought home to me the fact that there are cultural and structural problems within the British economy which somehow do not always enable us to compete as effectively. I only give that as an example. I am not saying that all companies should be like that. We could not create that, and we must build on what we have.
The managing director said that his firm could take a long-term view, and the next question I asked was how the firm approached export marketing. He said that export marketing, which made up two thirds of the firm's business, required long-term planning and investment in the market. He said, "We have a guy in Vietnam right now. We have no business there, and it will cost us tens, if not hundreds, of thousands of pounds over the next three or four years before we get any return on that investment. But we recognise that that is what we must do if we are to build up markets." Too often—I am sure hon. Members on both sides of the House have experienced this—when one talks particularly to small and medium-sized companies, they say that they cannot afford that kind of investment.
Worse than that, as far as I am concerned, are companies that get into the export market only because it is tough going at home. They decide that they had better find a market somewhere, and they go abroad. They may start to pick up a little business—particularly if they have had the benefit of a 15 to 20 per cent. devaluation—but when the market picks up at home, the tendency is to drop 555 their new overseas customers and come straight back to the home market. When that happens, a company damages its long-term performance.
I am not suggesting that that is typical of all British companies, but I fear that it happens too often. If one compares small and medium-sized enterprises in the United Kingdom with those in Germany and Japan—and, to a lesser extent, France and the United States—one sees that there is a recognition in those countries that one must develop markets and must take medium-term views. They believe that companies must make investments in developing the market, in developing the product and in innovation to ensure added value. One needs access to finance to support those developments on a competitive basis. That is where the private shareholding in the company to which I referred was interesting.
We have had this discussion quite often, and I think that two things must be addressed. I do not wish to propose a mechanism for giving small and medium-sized companies access to funding on a subsidised basis. Most small and medium-sized companies are looking for access to funding comparable with what is available to larger companies, and where they are not required to put up so much personal security. If they do not have to put up personal security —which substantially lowers the risk to the financier—they are charged premiums on their interest rates, or whatever their financial package is, because they are small or medium-sized companies. They are a greater risk, even though the risk has been reduced by the very guarantees that have been sought. Time and again, I meet companies that complain about that.
Within that context, we must also address an issue that the Chancellor referred to in his Budget speech concerning the relationship in cash terms between large companies and small companies. That is very relevant to the matter of trade overseas. A constituent who came to see me last Saturday is a small business man. He said that, as a direct result of his inability to get prompt payment from his main customers, he had had to lay off two of his five workers. Late payment destroys jobs—simple as that. That man had to lay people off, not because he did not have the business, but because he could not get the cash to pay their wages. His cash flow problems also meant that he had to forgo potential business because he was unable to service contracts. He cited household names that typically kept him waiting between 90 and 120 days for payment. That is unacceptable. We cannot expect our small and mechumsized businesses to develop medium and long-term strategies when their major customers treat them that way. They should also be given help regarding market and product development.
When I intervened during the speech of the hon. Member for Middlesbrough (Mr. Bell), I referred to export credit guarantees and the apparent discrepancy between what is available to foreign companies and our own. I raised that problem with the President of the Board of Trade when he appeared before the Select Committee on Trade and Industry, but he dismissed it in a cavalier fashion by saying that the problem is only cited by business men who are moaning about markets that they are not fit enough to win. I do not think that such an attitude goes down terribly well with business men, nor is it particularly helpful.
In the past few months, I have visited a number of companies and I have asked their representatives whether they think that there is anything that the Government could 556 or should do for them. It is an open invitation for those business men to offer the Minister's reply, "I don't want to know about Government. I don't need them. I am a free marketeer." Many of them say that they do not want much intervention from the Government, but they also say that the current export credit guarantees provision does not compare with that offered to their competitors.
I do not want to be churlish about the extension of those guarantees, which was welcome, but business men still tell me that our Government, unlike the Governments of their competitors, are not prepared to offer cover in more risky markets. It is a matter of judgment, but such hesitancy could be a major error. I appreciate the possible dangers of trading with the republics of the former Soviet Union. They may be high-risk markets, but investing in them should not be governed by sentiment. Should those countries achieve an economic upturn in the long term, those that take the risk in the early stages of their development will reap great benefits. Those republics will remember those countries that were not prepared to take that risk.
I was told of a major construction project where the Italian Government were prepared to make export credit guarantees available on the basis of an 8 per cent. premium. The British Government said that their premium was 13 per cent., non-negotiable, even though it was made clear that if they were able to provide comparable cover to that offered by the Italians, 80 per cent. of the contracts would be placed with United Kingdom companies. That project was worth £100 million, but the net result was that the contracts were awarded to Italy. It is difficult to give all the relevant details, but it is a matter of great concern that such a large project was lost to this country, apparently on the basis of ECG cover. I hope that the Government will recognise that such cover should be governed by a proper strategy so that there is a clear understanding of what we are trying to achieve.
I pay tribute to the President of the Board of Trade to the extent that he specifically employed experts from industry to develop market profiles and to offer informed business advice. That helpful and valuable policy has been generally successful; I have had good reports about it and I am more than happy to give credit where it is due.
I am also happy to note that, increasingly, I hear good reports about the efforts made by our consular officers and embassies. We no longer have an empire or the political influence and clout that we once had, so, in many parts of the world, such offices no longer have any primary purpose apart from sustaining our trade performance. Businesses now need advice and local knowledge about foreign markets to prevent them from making fatal mistakes that may prejudice market development.
Brand-name world leaders from Britain can take on and beat anyone in the world, but many small and medium-sized companies need guidance, because the cost of competing on their own is proportionally much higher than the costs incurred by those world leaders. I accept that those companies must have the will to compete and should put up their own money, but the quality of the help that they receive from the Government is critical.
The hon. Member for Esher (Mr. Taylor) referred to competitiveness in relation to wage costs. Last year, I visited southern Germany. I noted the business men's sharp appreciation of the problems facing their economy and the importance of social costs and its relationship with the economy. What concentrates the minds of those 557 business men sitting in Munich is the fact that they are just 100 miles from the Czech Republic. The wages in the Czech Republic are just 10 per cent. of the wages in Bavaria. The social costs issue is marginal to the fundamental disparity between the basic wages.
The attitude of those German business men was simple. They had decided that they would locate their expansion plants in the Czech Republic because they knew the country, spoke the language and it was just over the border from Germany. They felt that that was the way to protect their companies.
That strategy was understandable, but those business men also appreciated that it was just part of the policy designed to secure the long-term future of the Germany economy. They appreciated that by relocating they would help to raise the standard of living in the Czech Republic to the point where the gap would be narrowed and the ability of Czechs to buy German goods would increase. That is what free trade is all about—it has a positive benefit if it raises purchasing power. The necessary adjustments can, however, be painful.
The Germans also recognise, however, that they must continue to innovate and stay ahead of the market technically. They appreciate that they must always produce enough with which to compete because they know that they must be the world leaders, not countries such as the Czech Republic. That is why German business men value engineers and maintain their spending on research and development.
The recent report of the Select Committee on Trade and Industry on the competitiveness of our manufacturing industry drew attention to the fact that throughout the recession British companies continued to maintain dividend levels even though profits were down. The report noted that, on average, dividends rose from about 20 per cent. of profits to about 65 per cent. That obviously undermines our ability to make the necessary investment to create a strong platform for recovery once the recession ends for certain and world trade starts to move again, partly because of the end of the recession and also because of the benefits from GATT. The contradiction inherent in those dividend payments weakens our ability to take full advantage of the markets available to us.
The arguments about the social chapter and social costs may be a legitimate part of the debate, but they are in danger of being used as a political canard to obscure the fact that we must be competitive right across the board. Those who advance those arguments know that in most cases social costs are not the definitive problem. Within the European Union, Portugal has the lowest wages. Portugal also has the highest unit labour costs. Germany, which has the highest wages, has the lowest unit wages costs. That matter is not difficult to follow.
Britain is in the middle. A tennis analogy was put to me today. Someone who had just gained a qualification as a tennis coach told me that the basic instruction was, "Step to the net or stay back on the baseline. Don't get caught in the T." That is where Britain is in danger of being caught.
§ Mr. Jacques Arnold
I am concerned about the hon. Gentleman's comment on unit costs relating to Portugal. The Portuguese pride themselves on their relatively low level of unemployment because their employment and unit costs are low. Where does the hon. Gentleman gets his figures?
§ Mr. Bruce
As I recall, they are European Commission figures for the manufacturing industry. Germany, with its high social and wages costs, has the lowest unit costs. That is the most important part of the equation. If taken across the whole of its economy, the fact that Portugal has low wages may benefit its economy. But that is not the case in manufacturing, partly because it has neither the investment nor the modern plant in its indigenous industry to enable it to perform competitively. That is the nub of the point that I am trying to make.
What really matters to the United Kingdom is our ability to maintain investment and innovation so that we are competitive, and to make things on a lower unit cost basis but of a comparable quality to our major competitors. France and Germany are the countries which we should try to match. We are simply not succeeding in doing that at present.
I was astonished at the Prime Minister's intervention in the European debate about a multi-speed Europe. Although I understand the argument for it, particularly with regard to enlargement, his comment gave many people the idea that the United Kingdom might choose to opt out of the division that includes France, Germany and the Benelux countries. If that is the Government's ambition, I neither share nor accept it. If we cannot compete on equal terms with France, Germany and the Benelux countries, we must get our act together and ensure that we can do so alongside them. We are not at that point and it is foolish of the Government to pretend that we are.
There is a genuine need, which cuts across party politics and also exists outside the House, to recognise that we are not performing well enough as a trading nation to meet the aspirations of the British people. Our chronic balance of payments deficit is unacceptably high and all the indications are that it will worsen as the economy improves. If we do not invest and innovate, and plough money into research and development, we risk being unable to compete not only with high-investment economies such as France, Germany and America but with low-wage economies such as the Pacific tigers and emerging countries elsewhere. We shall then really be in the middle, which will lead to serious problems.
If we start to lose ground, we may be unable to fulfil the hopes and expectations of our people. We shall be unable to reduce unemployment or give people quality jobs with wages that enable them to aspire to the quality of life that they want. The Government may be tempted into political polarisation to ensure that—I shall put it bluntly—the cake is redistributed to sweeten their supporters, thus increasing the social divide. Many Conservative Members would feel uncomfortable about that, although some of us think that it has already happened. If it goes much further in that direction, serious social tensions may be opened up.
In his opening remarks, the Minister said—predictably and, perhaps, slightly rhetorically—that the result of the 559 GATT round is an opportunity. Of course, it is an opportunity and we must succeed. Those who got us to this point, despite the difficulties of doing so, are to be congratulated. But we must not say, "This is a wonderful opportunity; we are a trading nation, so everything will fall out of the sky and we shall be prosperous." An awful lot of countries, from the richest to the poorest, will be fighting for the business, and unless we have a clear and incisive idea of how to maximise our potential and make a commitment to achieving our share of that growing trade, we risk falling further and further behind. We do not have that strategy at present.
This is not an attempt to make a party-political point. It is a genuine plea to the Government to aim, along with all sectors of industry, for an objective of a balance of payments surplus, an improvement in our technical competence, a reduction in unit labour costs because we back investment, and a recognition that training, technology, investment, research and development are the keys to success.
§ Lady Olga Maitland (Sutton and Cheam)
I warmly welcome this debate. I was sorry, however, to hear the hon. Member for Gordon (Mr. Bruce) talking down Britain, which we have heard over and again from the Opposition. Bashing Britain does us no good and will certainly not relieve the problems that he tried to describe. He described a situation which we know is untrue and suggested that all the indications were that things would get worse. That is not correct. Unemployment has come down, fewer companies are going to the wall and productivity is up. What kind of world does the hon. Gentleman live in? He certainly does not live in this world. Thank goodness that I now have a chance to put the record straight.
As a great trading nation with experience built up over hundreds of years, it is appropriate that Britain should have played such an instrumental role in securing the signing of the Uruguay round in Marrakesh. We all recall the hearty sigh of relief that came over the airwaves when, after eight war-weary years of interminable stop-start negotiations, an agreement was made involving 125 countries. I pay tribute to Sir Leon Brittan who, in his role as British Commissioner on behalf of the EC, negotiated long and hard through many nights with the United States to break a deadlock which threatened the successful outcome of the trade talks. In effect, he averted a trade war.
From my knowledge of Sir Leon, I cannot think of a better person to have fought that battle. He is well known for being tenacious with a strong intellectual ability and we owe him a great debt. His work came on the back of the Government's earlier efforts. As my hon. Friend the Member for Somerton and Frome (Mr. Robinson) said, our Prime Minister has always said that he is committed to working at the heart of Europe. In doing so, he used the opportunity of Britain's presidency of the Community to get both the EC and the US back to the negotiating table to reach an agreement on agriculture. That hardly sounds like someone who is fading away and almost ready for a tombstone that says RIP.
§ Lady Olga Maitland
Far from it. The Prime Minister gets on with it. He rolls up his sleeves. Time and again, whether the negotiation is on trade, Europe or the Irish 560 difficulties, he is a master when it comes to getting people round a table and making an agreement. He has a sense of detail and an ability to control that brief, from which we have enormously benefited.
After that effort in 1992, Britain last year was instrumental in encouraging the Clinton Administration to extend congressional authority to permit the GATT round to be concluded. The Prime Minister then pressed for agreement on tariffs at last year's Tokyo summit. He received a deserved tribute from the Japanese ambassador to this country, who said recently:Great Britain is a trail-blazer for free trade in Europe".That is a classic example of where Britain really stands in the world, and to knock Britain in the shabby way that the Opposition do is cheap. I think that we should applaud that: one cannot buy such a tribute. The ambassador was not trying to score political points—he was simply speaking the truth.
I shall speak for a moment about the undoubted benefits that will come out of the new round. As an island nation, comfortable with trading, we can only build on GATT. We are already the world's fifth largest exporter, exporting one quarter of all that we produce. Indeed, the Board of Trade's paper, "Competitiveness: Helping Britain to Win" said that the removal of barriers and opening of doors can only help us:UK business cannot keep pace with international competitors without easy access to overseas markets. It also needs … competitively priced inputs to its production processes. As business becomes more complex and globalised, the remaining barriers to trade and investmentcan bedisruptive and damaging. Eliminating barriers benefits UK business and consumers in terms of choice and price for goods and services competitively supplied in open markets.In the fullness of time, as has already been said several times today, an extra 400,000 jobs could be generated in Britain alone as the successful conclusion to the Uruguay round and as trade opens ever wider.
I can think of several businesses in my Sutton constituency which will immediately benefit, including a company called Pobjoy Mint, which produces coins and sells them worldwide. Far from withering away, as the hon. Member for Gordon tried to suggest, that company increased its exports by £3 million last year and hopes that as a result of the round a fairer arrangement will develop. At present, in the UK it has to pay 17 per cent. VAT on its gold coins, but in Germany there is not such a heavy burden—indeed, nothing is payable.
Another company in my constituency, a small and enterprising company called DesignPlan, which makes public lighting fixtures, is breaking new ground overseas and will undoubtedly benefit. It is showing all the dynamism and energy that the hon. Member for Gordon seems to deny.
§ Mr. Bruce
First, the hon. Lady is putting words into my mouth that I did not use. Secondly, Britain at the moment has an annual balance of payments deficit running at £12 billion, which is the greatest of any in the European Union. Our biggest trading partner in the union is Spain, which has the second worst deficit. Does she not feel that we should address that issue at the very least?
§ Lady Olga Maitland
May I carry on? Another company in my constituency, Tomy Toys, whose European headquarters is in Sutton, tells me:Ratification of GATT brings significant beneficial effects in the short, medium and long term. Failure to ratify restricts supply and choice to the consumer and increases prices.In future, if all goes smoothly, Christmas and birthday children's toys will decrease in price. That can only be good news for parents, aunts, uncles and godparents. I agree with my hon. Friend the Member for Somerton and Frome that confidence has certainly started returning in my constituency and any Conservative Member is able to give endless examples. It is a pity that the Opposition seem to find it so difficult to recognise that.
With my interest in Northern Ireland, I know that there are companies there who will benefit. Britain is especially strong in the pharmaceutical sector and I mention Norbrook Laboratories in County Down, which this year won the Queen's award for industry for exports. By successfully selling animal vaccines world wide, that company is able to provide more employment in Ulster and in turn, with its profits, can afford to take an active role in cross-community activities. GATT will provide ever more opportunities, so in the end everyone in the Province will benefit.
In global terms, world income will be boosted by £180 billion once the round has come into effect and I trust that future generations, and Parliaments here, will remember that it was our Prime Minister who pitted his energy and commitment to that end.
A word of caution, however. For the opening of trade and competitiveness to be effective, everyone must understand the need for, and value of, free trade. It is no good any country, political party or individual saying, "Yes, I support it" and then undermining its spirit. The Opposition seem to want to have it both ways. They support GATT but when the chips are down the Labour party backed the Euro-Socialist manifesto, which argued that the principle of free trade must not be used to undermine social standards in Europe. Indeed, the hon. Member for Middlesbrough (Mr. Bell) complained that there was no mention of workers' rights in GATT. The hon. Member for Gordon also, by implication, backs the social chapter.That is contradictory, especially if those people persist in arguing for the implementation of the social chapter to a point where it will be a gross burden on businesses and undermine competitiveness. It will mean that businesses will not be able to produce goods at a price at which they can be sold world wide.
Socialists throughout Europe are beginning to wake up to free trade, but it takes time. Especially for the eastern bloc countries who, for 70 years, operated on burdensome centralised economies, learning new free trade habits takes time. However, there is no excuse for the Opposition here giving anything less than whole-hearted support to the agreement, bearing in mind the natural instincts and successful record of business in Britain.
Another word of caution. Although I welcome the establishment of the World Trade Organisation on 1 January 1995, I can only hope that all the 125 players will make the ratification process go through smoothly before implementation takes place. An agony of indecision and delay will be harmful. As Peter Sutherland, the Director General of GATT, said in his statement in May:It is essential that those who are the major trading partners of virtually every country in the world must lead the ratification.562 I understand that, according to press reports, only about 30 of about 120 countries which agreed the settlement have ratified the pact. In a recent interview in the Financial Times, Mr. Sutherland went on to express the view that
the birth of the WTO should not be held hostage to domestic political in-fighting—nor to transient trade squabbles, which tend to be of mind-withering inconsequence when measured against the crucial importance of the new multi-lateral trading system".In relation to that, we might spare a thought for events taking place in Washington, as my hon. Friend the Member for Esher (Mr. Taylor) discussed, but I take comfort from the knowledge that President Clinton has given his support, as do the vast majority of Congress. I hope that, in the end, they will outweigh the doubters who might try to destroy the process.
In short, everyone must understand and obey the rules. We do not want countries across the world to revert to what I can only call "business as usual", perpetuating their preoccupation—justified or not—with bilateral trade balances. The ideals and the targets are in place, covering a range of areas such as dismantling remaining barriers, opening new markets, trade promotion, dumping and so on. However, I spot a weakness—what sanctions will the WTO have should things go wrong? It was appropriate that the hon. Member for Middlesbrough should ask how long we should wait and how we would enforce any sanctions. What sort of penalties could be imposed on a country which had been repeatedly obstructive and continually in breach of the agreements?
To what degree have we given that problem serious thought, or are we trying to shelve it by saying, "We won't fall into old habits, such as allowing five years to pass before a dispute is sorted out; we will try to speed up the process to 18 months." That is not enough. We need to know what sanctions and pressures can be put on countries failing to comply with the agreements. I hope that the trade dispute procedures will be thoroughly analysed and I trust that detailed attention will be paid to this soon. I foresee some serious problems if that does not happen.
I want to make a brief plea about the situation in China, which is a country with enormous potential. It has one fifth of the world's population, but it is locked away from the rest of the world. I hope that we shall be able to pave the way for it eventually to join the GATT process. I accept that China's economy, which has been so centralised, has a long way to go to catch up with what I call the developing nations. However, there is progress to be made and there should be some close analysis of what can be done. I am aware that China is not the easiest country with which to negotiate as it has different laws on a single issue, depending on the part of the country: the free enterprise zones have one set of rules, but there is another set elsewhere, making life difficult for the business man trying to find his way through it all.
One question that has caused tremendous debate throughout the world is the extent to which we should allow our concern about human rights to play a part in the degree to which we trade with China. We were all horrified by the events of Tiananmen square and it was natural to want to step back and say, "Close the door, shut out China and impose sanctions; we must lock China away from the rest of the world." However, that is not the way to go about things. We should use every possible method to make clear our feelings about human rights, but the danger in locking a country out of the mainstream of the world is that that 563 country will never learn the standards that we want it to accept. More than that, it is by developing trade links that cultures can achieve the parity that we would all accept.
§ Mr. Corbyn
Does the hon. Lady accept that some of the worst abuses of human rights occur in the slave labour factories in the economic development zones, where children and young people are paid disgracefully and disgustingly low wages so that the products that they make can be exported to western Europe and the USA? Does she further accept that her argument of non-interference is exactly the argument that the Conservative party and Government used in South Africa during the era of apartheid? Are there not many other examples of that?
§ Lady Olga Maitland
It is a matter not of non-interference or turning one's back on tragedy, but of applying appropriate pressure at the appropriate time and in the appropriate way. Is the hon. Gentleman saying that only by supporting the African National Congress in exile could we have helped to solve the problems in South Africa? The answer must be no. What really changed events in South Africa was the fact that our Government worked with the South African Government and reassured them that by abandoning apartheid they would not be abandoning their hearts, souls and cultural heritage. We helped them through the process and I have no doubt that our role was crucial.
GATT will have a beneficial effect on the less developed countries. During the past year I briefly visited Sri Lanka and Malawi and I have no doubt that those developing countries, which are food exporters, will benefit from the agricultural agreements which provide greater market access and reduce subsidies. It is another example of the genuine, world-wide benefit that will be gained.
I want briefly to touch on the importance of export promotion. I pay tribute to my right hon. Friend the President of the Board of Trade and his team—he cannot operate alone—for their enormous energy, vision and commitment. I can give a personal example of that. I accompanied a firm from my constituency at a meeting with one of the ministerial team—the Minister for Trade, my hon. Friend the Member for Wiltshire, North (Mr. Needham)—and we had a fine show of support. We discussed the export credits guarantee issue and there was a satisfactory outcome. My hon. Friend the Minister for Trade has shown tremendous energy in motivating and supporting companies, big and small.
I take issue with the hon. Member for Gordon, who tried to suggest that small or medium-sized companies are ignored. That has not been my experience. Indeed, I know of very satisfied customers in my part of the world. Nevertheless, I want to encourage the Department of Trade and Industry to continue its assistance to companies trading overseas. It has increased the budget and I hope that it will be increased again. I have no doubt that the Department will reap a reward far greater than the money that it has invested. When overseas, I have noted the enormous energy that our rivals—whether the French, the Germans or the Americans—have put into competition. I am proud that we can hold up our heads, but I would like Britain to have a sharper cutting edge.
This has been an enormously important debate and I feel privileged to have taken part in it. The small businesses in my constituency can look out into a world of 564 enormous opportunity. I can truly say that they thank this Government and our Prime Minister, who is enormously dedicated to tough negotiations to get the best possible result for our companies.
§ Mr. Barry Jones (Alyn and Deeside)
The hon. Member for Sutton and Cheam (Lady Olga Maitland) will forgive me if I do not follow her distinctive train of thought. I disagreed with much that she said, but I listened with care to the remarks of the Minister for Industry. He paid tribute, as he had to do, to those who negotiated the agreement and he emphasised that, besides rights, nations also have obligations in that important matter.
I pricked up my ears when the Minister mentioned a level playing field, because I want that for the traders and manufacturers of Britain who sell and make our nation's goods. I agreed with the Minister's remarks about free trade, but recalled the remarks of workers in Deeside, who believe that free trade should not provide an easy route for foreign competitors into markets in our country. Our constituents' jobs are at stake, and we shall always look to Ministers to make sure, when bringing home a good GATT, that our work forces do not suffer in any way.
Britain's balance of trade is of relative value in any discussion of GATT. That colossal deficit is a sobering feature of our economic national life. I do not believe that Governments have adequately addressed the massive deficit that still occurs month after month.
I will try to put this debate in context, as the Minister did in his usual courteous style, by referring to Britain's loss of manufacturing. I hope that the details announced today will not mean a further loss of that capacity in the years immediately ahead. We have seen the virtual wiping out of our machine tool industry, loss of our capacity to make titanium granules, cuts in our steel-making capability, massive loss of jobs and capability in the aerospace and textile industries, virtual quartering of our cement manufacturing, virtual elimination of our coal and shipbuilding industries, and less and less computer manufacturing capability.
All that happened in recent times. Britain's loss of manufacturing capacity since 1980 has been stupendous, and our nation has yet to realise the awesome nature of losses in that sphere of our national life. I remain critical of the then Chancellor of the Exchequer, Sir Geoffrey Howe, and of the then Secretary of State for Industry, Sir Keith Joseph. Both are now members of another place and are in many ways honoured in British public life. When they were Cabinet Ministers and dominant in their party's councils, they let Britain down. For several years after their appointment by Margaret Thatcher, they allowed too much of Britain's manufacturing capability to go to the wall. I remain deeply concerned about Britain's manufacturing capacity into the next century.
Our future will rest on two basic industries that survive, albeit in a greatly slimmed-down form. I refer to the steel and aerospace industries. The steel-making workers have been co-operative almost to a fault. They are brilliant at being productive and delivering high-quality goods. The British steel industry is now lean, competitive, successful and fit. It is an industry of which every right hon. and hon. Member can be proud—but at a massive cost in closures and redundancies.
565 The past three years have seen plant closures also in Britain's aerospace industry, with tens of thousands of job losses. There are still major question marks over the future of that industry. The Government are guilty of undervaluing those seed corn industries. Without them, Britain will have a poor future as an industrial nation in the next century. If the Government will fight for and encourage, promote and invest in those industries, they can enjoy great success. The quality of their work forces, management and products is second to none.
I was perplexed to read in the business news section of The Times today that the bellwether of British industry, ICI, proposes to invest £250 million not in Britain but in Pakistan, and is considering several major investments in various regions of China. Recently, we saw the sale of Rover to BMW and the sale by British Aerospace of its corporate jets division to Raytheon Inc. Accordingly, there remain questions about the policies extant in the boardrooms of British industry and the nature of the Government's leadership and encouragement.
I want to raise several questions about the Airbus project in particular, which I hope the Under-Secretary of State for Corporate Affairs will answer when he winds up the debate. There may not have been a GATT agreement had not the civil aerospace industry been removed from negotiations at the last moment to facilitate a declaration. I understand that there are question marks over specific aspects of European Airbus sales to north America. Where does GATT stand in that respect?
President Clinton, without any shadow of doubt, stands up and battles for and encourages the Boeing work force. He regularly visits Seattle where the jumbo jet is made and the new 777 is being constructed, and tells the Boeing work force that he is on their side and will not let them down. I would like the same bold statements to be made by Ministers to the British Airbus work force and to the Airbus company in Europe.
§ Mr. Jacques Arnold
As to the Boeing 777, large Airbus project and the new generation of supersonic passenger aircraft, would not it be far better for President Clinton to encourage more airlines to order such aircraft? Only British Airways has shown a definite interest in such projects, and it is worth bearing in mind the fact that British Airways was privatised—against which the hon. Gentleman voted.
§ Mr. Jones
I regret having given way to the hon. Gentleman. With his garbled intervention, he does not realise that British Airways refused to buy, in any worth while number, the Airbus. Workers in my constituency tell me that they wish British Airways to put in the same orders and show the same commitment as Air France and Lufthansa. I ask the Minister to consider how he might persuade British Airways to fly the flag, as it were, and purchase the Airbus, which many of the world's airlines are prepared to do, and they testify to its success.
§ Mr. Jones
I will not give way further to the hon. Gentleman.
566 I believe that the British Government and, indeed, the Governments of Europe, must be very firm with the United States and the future sales of Airbus. Many thousands of jobs in Britain depend on such backing.
In the context of the debate on GATT, and bearing in mind the difficulties that we have under GATT in terms of Airbus and the United States market, I refer to the future large aircraft project. I am told that some 7,000 British Aerospace jobs will depend directly on Her Majesty's Government, principally the Ministry of Defence, ordering the FLA. I have raised the matter with the Department of Trade and Industry and the Ministry of Defence. I have always found Ministers at the Department of Trade and Industry courteous and responsive to my queries about the FLA. I believe that they have informed advice from their section within the civil service and within the Department. Whenever I have visited the Department, I, and the work force leaders whom I take to see civil servants and Ministers, have been well received, not least by the right hon. Member for Hove (Mr. Sainsbury), the Minister for Industry, who opened the debate.
I emphasise that the FLA project is of massive importance to British manufacturing industry. It will have massive implications for trade, exports, skills and training, and I very much hope that the Government will look to the interests of Britain and not of a company based overseas. I must tell the Parliamentary Under-Secretary that I have received some 107 letters from my constituents at the BAe Airbus factory at Broughton. Every one expresses deep concern at what would happen to our great aerospace industry if there were no substantial orders for the FLA by the Ministry of Defence. My constituents tell me that they want a level playing field. It is a coincidence that, as I make my speech on behalf of the FLA and my constituents, the current issue of The House Magazine contains a two-page briefing about the FLA. In case the Parliamentary Under-Secretary has not seen it, it says:Today, the Government is faced with a decision that could affect all our tomorrows.It continues:The UK has the chance to be part of building Europe's own purpose-built transport aircraft, the FLA (short for Future Large Aircraft).Designed to replace America's venerable Hercules, only FLA can carry the key equipment today's military so desperately need … Unfortunately, there is a very real danger that the wrong choice may again be made. It's time to quit stalling. We urge the Government to give FLA the green light and so ensure future generations actually have a future. After all, a decision that carries this much weight shouldn't be taken lightly.I draw that to the attention of Ministers and hope that they will respond later.
I have received many letters on the matter from the 2,000–plus workers at BAe Airbus at Broughton. I now quote from a letter from one of my constituents from Connah's Quay, Deeside, who says:
it now seems certain that the Government's short sightedness will allow the opportunity of being a founder member of the F.L.A. project to pass us by, once again putting the whole of the U.K. Aerospace Industry in doubt with regards its future.That may or may not be the case, but my correspondent continues:If our major partners in the Airbus project are allowed to dominate the F.L.A. project without input from the U.K., then there must surely come a time when they"—in Europe—
will feel that the Airbus project can also be continued without U.K. involvement.What then? Thousands more jobless with the resultant loss of revenue from Tax and N.I. contributions.567 That may or may not be the case, but it shows that, in the context of a serious debate on GATT, and bearing in mind the difficulties over Airbus, Ministers have a real case to answer about the project. I hope that the Department of Trade and Industry will leave the Ministry of Defence in no doubt as to what should happen in the placing of orders for the FLA programme.
I must tell the Minister that, on the Order Paper of 18 May 1994, there is an early-day motion entitled, "European Future Large Aircraft Programme." It says:
'That this House notes that a commitment from Her Majesty's Government to the European Future Large Aircraft programme would secure and create employment throughout the United Kingdom and would provide high technology work for British Aerospace, Rolls-Royce and Shorts as well as significant prospects for over 60 equipment supply companies".I rest my case as of now.
In conclusion, I emphasise that trade is Britain's lifeblood. It is as simple and as important as that. But I think that Britain has lost too much of its industrial base in the past 15 years. It appears to me that Her Majesty's Government have no strategy for the next century for our remaining industries. I believe that, compared with France, Japan, the United States or. Germany, we in Britain give the impression of being amateur in our defence and promotion of our industries and trade. Either we export, or, as a nation, we die. As a trading nation, we must export. We must, therefore, invest in and encourage our industries. I know that, now, the British market is heavily penetrated by our industrial rivals. I have already mentioned some of them. I pose the question to Ministers, just how good is the GATT for Britain's future? Will it reverse the obvious decline in our industrial capacity in the immediate years ahead? Those are the vital questions. The sad fact is that the Government's White I'aper on competitiveness, which was brought to the House last month, appeared, to many of us on the Opposition Benches, to be lacking, to be toothless. It seemed to lack true financial commitment to British industry. It appeared to many of us that the Prime Minister and his Treasury allies had decided to outmanoeuvre the President of the Board of Trade and prevent him from coming to the House with his White Paper for a truly powerful strategy for our manufacturing industries to the end of the century and beyond.
I think that hon. Members are entitled to express at least some scepticism—if not cynicism—about the claims that have been made for GATT today, notwithstanding the elegant speech made by the Minister for Industry. I want the Minister to be successful; Britain needs him to be successful; but he is serving a Cabinet that fails to devise a strategy and leaves the fate of our great manufacturing industries to the vagaries of market forces. On that basis, I find Government policy wholly lacking.
§ Mr. Jacques Arnold (Gravesham)
The hon. Member for Alyn and Deeside (Mr. Jones) seems to have a vested interest in droning the last rites for British manufacturing industry. Let me remind him that the United Kingdom exports more manufactured goods per head than either the United States or Japan—although no one would believe that from what he said.
I welcome the Marrakesh Final Act agreement on GATT. It has been a long time coming. The Uruguay round was launched eight years ago in 1986, after the Punta del Este ministerial conference; it has taken from then until now to achieve the final agreement. Nevertheless, it is a 568 great achievement in view of the large number of countries that had to be brought into line, each with its considerable vested interests.
We should bear in mind that free and fair trade is especially important to the United Kingdom, which is the world's fifth largest exporter, exporting a quarter of all that we produce. It is estimated that, over time, an extra 400,000 jobs could be generated in the UK as a result of the successful conclusion of the round. That is particularly valuable in constituencies such as mine, which certainly need more jobs.
The Uruguay round will help British industry by bringing down barriers to exports of manufactured goods and services. It will give manufacturers greater protection against piracy of their copyrights, patents and designs, and strengthen the world trading system against unfair practices by individual countries. It is worth remembering that the UK is the world's fifth largest exporter of goods and commercial services and that our markets are already among the most open. This country therefore stands to be one of the biggest gainers from cuts in worldwide tariffs, quotas and other restrictions.
The achievement, ratification and putting into effect of the GAIT agreement have been essential not only to Britain but to the developing world. It is all very well to ask the countries of the developing world to scrap their "import substitution" policies and open their markets; for that they need foreign currency, which they cannot earn unless they can sell into our markets. If we have trade barriers and tariffs set against them, they do not have a chance, but if they can earn foreign exchange by exporting they will earn not only money but self-respect. That is much better than the begging-bowl mentality so beloved of Opposition Members and that is why the measures on agriculture are so important.
Agriculture is being brought within the rules of multilateral trade for the first time through the GATT agreement. Over a period, that will create the conditions for a fairer and more market-orientated agricultural trading system. The agreement provides a strong basis for further liberalisation in the future. I welcome the conversion of all restrictions on imports of agricultural products to tariffs, which will make the whole matter very much more transparent and easier to deal with. Let us hope that the significance of the Poitiers customs house is a thing of the past.
We should also welcome the other provisions, such as the 36 per cent. reduction in tariffs over six years with a minimum cut of 15 per cent. in every tariff; the guarantee that at least 3 per cent. of domestic markets for agricultural products will be open to imports, rising to 5 per cent. by 1999; and controls on subsidies, with domestic support reduced by 20 per cent. from the 1986 to the 1988 level, expenditure on export subsidies reduced by 36 per cent. and the volume of subsidised exports cut by 21 per cent. from their average levels between 1986 and 1990. The agreement will provide a basis for freer trade, and in time will extend choice and lower prices for consumers while reducing the burden of agricultural subsidies paid by taxpayers around the world—not least in this country.
The biggest danger to international world trade has been —and, to a considerable extent, remains—the growth of trading blocs, which are themselves subject to pressures for introversion and the creation of a fortress mentality hiding behind tariff and other barriers. That has been a real danger in the European Community, especially under the 569 inspiration of the French; it has also been a problem in the United States, which is now extending its bloc through the North American Free Trade Agreement, to which a number of Latin American countries wish to adhere. I would much rather see a free trading world with co-operating trade areas —a reformed European Community, a NAFTA and a Mercosur in Latin America.
I want to focus on Latin America, a region that has been transformed politically and economically over the past few years. Every Latin American country except Cuba is a democracy, and all those countries have enthusiastically embraced free trade. They have cut tariffs unilaterally. The House should concentrate on facts such as these. In 1985, when the process of liberalisation began, the average tariff level in Latin America was 56 per cent.; in 1992—the most recent date for which figures are available—it was 16 per cent. That change was carried out unilaterally, and showed Latin America's dedication to free trade. The response of the rest of the world is long overdue.
The Latin Americans were dismayed by French policy in the European Community, not least because exports from France, with its vast metropolitan agricultural areas and its Caribbean overseas departments, compete directly with many of Latin America's agricultural exports. France's approach has been supported by Spain with its Canary Islands dependencies and Portugal with Madeira.
The Latin American countries have increasingly come to realise that the interests of Britain and the new Latin America have much in common. We are, after all, the fifth largest exporting nation and we export more per head than the United States or Japan. The Latin American countries depend on free trade for the success of their new economic policies. As I have said, we have much in common and I believe that Britain is very much the champion within the European Community of the Latin American countries.
The House should give credit to those who have worked so hard for the successful conclusion of the GATT round. My right hon. Friend the Minister for Industry mentioned the successive endeavours of Arthur Dunkel and Peter Sutherland, who have worked hard; I would add the name of our right hon. Friend the Prime Minister, who has fought consistently to keep the negotiations going. Following the negotiations over the Maastricht treaty, he has again shown himself to be a master of negotiation, pushing the British interest. Let me also add the name of the right hon. Sir Leon Brittan, who did so much to secure agreement between the European Community and the United States.
The United Kingdom played an important role in securing agreement in the Uruguay round. It was summed up best by the Japanese ambassador in London, who said last year:
Great Britain is a trail blazer for free trade in Europe.Lastly, I would agree with my hon. Friend the Member for Esher (Mr. Taylor) that we should not take it for granted that GATT will be ratified by the European Community and the United States. We do not know what view the new European Parliament elected last week will take. We have lost many free trade United Kingdom members like my own erstwhile Member of the European Parliament, Ben Patterson. I hope that his successors and those of others will make sure that the hard pressure for free trade, in the European Community and in the world generally, will be kept up.
570 I hope that today's debate will signify the assent of the House to the ratification by Britain of GATT. The GATT deal also has to be ratified by the United States Congress. The loss of tariff revenue to the United States Government may produce odd pressures on Capitol hill. We must wish President Clinton godspeed in his current negotiations. The transformation in the world with the collapse of the socialist bloc and the development in countries in Latin America and Africa of free trade and free market economies gives us very much to hope for.
The recent GATT deal will provide a wide base for the development of that freedom, both politically and in the economy. It is incumbent on the House to campaign steadily in the debate and onwards for free trade throughout the world and to press on to achieve the ratification of GATT and the successful establishment of the World Trade Organisation so that there can be free trade and prosperity throughout the world.
§ Mr. Alan Simpson (Nottingham, South)
I thank you for calling me, Mr. Deputy Speaker, and apologise for the fact that I have almost lost my voice. I am particularly grateful to have this opportunity to speak because I suspect that I may be one of the few hon. Members who will rise to speak against the GATT treaty. I wish to do so by setting out a different view of the world in which we live.
I start from the perspective set out by John Maynard Keynes in the 1930s, when he looked at the world and said that the things that ought to be encouraged to move freely around the globe were ideas, hospitality, knowledge, travel and learning. In relation to trade, he considered that there were overwhelming arguments for a world perspective based on planned trade, where a premium was placed on producing locally and regionally in sustainable and acceptable forms. Yet, in contrast to that, we are now presented with a GATT treaty which sets out a different world view based on a different set of values. I shall sketch some of those differences.
GATT is based on some fairly important assumptions which are closer to ideology than to evidence. The assumptions are, first, that if we free trade, there will be a general increase in global prosperity and, secondly, that we will all somehow benefit from that growth in prosperity.
When I went back to the Organisation for Economic Co-operation and Development study in which the original figures in relation to the growth in prosperity were produced, I was struck by two things—the modesty of the figures and the vagueness of their sources. The study suggested that, over a 10–year period, there would be a growth in world output of approximately $19.5 billion per year. In the context of global gross domestic product that is not an awe-inspiring sum, but when I tried to look into the matter further, I realised that the evidence on which the claims were based was extremely sketchy.
Perhaps the most forthright of the people who owned up to that was Professor Jagdish Bhagwati, economic adviser to the Director General of GATT, who said in relation to those estimates or guesstimates of the growth in world trade:Nobody really knows. I mean that's basically ballooning up estimates … I think the $200 million figure you keep hearing all the time, that relates to the extent of incremental trade, which, according to some models, we expect to get. But I have been in this game long enough to know that, you know, if—it's almost astrological to try and forecast specific numbers.".571 If that is what the economic adviser to the Director General of GATT had to say, it seems to me that the evidence about which we are getting so excited is terribly thin.
The hon. Member for Gravesham (Mr. Arnold) pointed out that there would be 400,000 job gains for the United Kingdom. I would simply caution him to look at the claims made by President Bush in the early stages of the GATT negotiations—to the effect that the American economy would gain by $125 billion in the first year of the treaty alone.
§ Mr. Jacques Arnold
I would settle for 100,000 jobs, because they would be incremental to the growth that we are already seeking in the British economy.
§ Mr. Simpson
I suspect that the hon. Gentleman would have to settle for far fewer than that. As I was pointing out, last year the Economic Strategy Institute in the United States did a different calculation and suggested that the American economy could lose between $36 billion and $63 billion a year as a result of the signing of the GATT treaty. I would caution hon. Members to look carefully at the basis of any serious calculations that have gone into the underpinning of the consequences of the GATT treaty.
GATT has been sold to us on the basis of a mislieading and weak study and of inadequate economic analysis. There are serious collisions built into the principles around which world trade is to be constructed. GATT models itself on three pillars of a free trade model; it is based on the principles of non-discrimination, reciprocity and transparency of trade.
By contrast, I think that the House ought to be starting from the following set of questions. Does the agreement create jobs in Britain? Will it improve equity both at home and internationally? Will it create stability in our domestic and in the global environment and will it protect that global environment? Is it, in effect, an agenda for sustainable economics? In answer to those questions, my sad conclusion is that there is very little basis for saying that there would be job growth in the United Kingdom as a result of the signing of the GATT treaty.
I am clear, however, that there are other quite specific consequences of the signing of the treaty. It would clearly fit in with the Government's interest in what they glibly refer to as jobless growth. It can almost certainly be guaranteed to deliver a huge increase in the profits that are accruing to transnational companies.
GATT is a treaty for the powerful and the anti-democratic. An examination of the nature of world trade today clearly reveals where the huge interests that have supported the signing of the GATT treaty are. Last year, Oxfam carried out a study which concluded:
In reality, trade flows are dominated by powerful corporations located overwhelmingly in Western Europe, North America and Japan. In 1985, the combined sales of the world's largest transnational companies exceeded $3 trillion, equivalent to one third of the world's Gross Domestic Product".However, it is not only a third of the world's GDP that the transnationals control. The studies by Oxfam and other organisations have shown that the major transnational companies control 70 per cent. of world trade. Almost all the primary commodities that are marketed are controlled by only six multi-commodity traders. In the agri-chemical industry, the 20 largest transnational companies control 94 per cent. of the market. In the telecommunications industry, the nine largest transnational companies control 89 per cent. The freedoms that the transnational companies 572 will receive under the treaty will be enormous. The treaty will extend and entrench their power to control prices, pursue the lowest wages, seek the fewest responsibilities and disregard the environmental damage that often goes with the power that they have accrued.
Where in Britain will the job impact be felt? I cite an example from my constituency. I am privileged to have the Raleigh cycle company based in Nottingham. It is a very efficient company which I have visited many times with the management and the trade unions. The company has pointed out that it cannot compete with the Chinese bicycles being dumped in the United Kingdom. Its representatives have been invited to go to trade fairs in south-east Asia, and the Chinese say blatantly that it does not matter at what price Raleigh seeks to sell its product in China because they are concerned only about who controls the markets. Even where nations are not saying that, the same message is being sent to countries and continents by transnational corporations.
We are already witnessing a serious transfer of production as a result of the liberalisation of world trade. In America, there is ample evidence of a transfer of manufacturing industries from the industrial belt of mid-America to the free trade zones of Mexico. People are amazed that the goods produced in Mexico, which an attempt is being made to sell in the industrial belt of America, are not being bought by workers who lack the wages to pay for goods that they are no longer employed to produce. To highlight that point, I refer to a report issued last year by Professor Thurow of the Massachussetts Institute of Technology. He explained his attraction to free market but went on to say:Free markets … tend to produce levels of inequality that are politically incompatible with democratic government. Witness the rising inequality and homelessness in the United States, and note the need for large social welfare income-transfer payments systems in every major industrial country.They are the consequences of the liberalisation of trade. They certainly go hand in hand with the accrual of increased profits to the multinational companies, but they do not generate jobs in one's domestic economy or create conditions of stability or equity in an international sense.
In the developing world, there are also enormous pressures that dislocate domestic economies. For example, there is pressure to opt for primary production. Over the past 20 years, the net effect has been that developing countries have increased their production of primary products. World commodity prices have since collapsed and the income from the sale of the goods has failed to cover the cost of the debts that they have acquired through borrowing to increase this production. Instead of becoming richer and freer, those developing nations have merely increased the debt burden around their necks, and a phenomenally high rate of profit has been delivered to transnational companies.
For the industrial world, there is a serious drain not only of manufacturing capacity, as my hon. Friend the Member for Alyn and Deeside (Mr. Jones) said, but of a new era of emerging technologies, jobs and services which—a fact that we have not yet understood—are going to the third world as part of the liberalised free trade regime.
It is now the custom of some accountancy firms in this country and in the United States to take on firms' .accounts and ship them to Barbados to be processed by faceless women for less than $1 an hour. Does anyone know an accountant in this country who will work for less than $1 573 an hour? If so, many hon. Members and others would bite his hand to find out the name of that accountant. No matter how efficient we become, we cannot compete at that rate of pay.
The same is happening in the data-processing industry. In the Philippines, qualified data processors are working for United Kingdom and American companies for £100 a month, with medical care and a ration of rice thrown in. Nor can we compete with the computer programming being done in the third world, either directly or indirectly, for United Kingdom companies such as National Westminster Bank, British Telecom, Procter and Gamble, and Abbey National plc. Such work is being done in Calcutta, Madras and New Delhi by highly qualified computer programmers for £1 an hour. Could any hon. Member find me a computer programmer in Britain, or anywhere else in the industrialised world, who could live on £1 an hour? That movement of services will continue and will always mean greater profits for transnational companies. The trend is not to spread equity but to concentrate profitability.
At this point, I wish also to mention democracy and stability. Paragraph 4 of article XVI of the "Understanding on Rules and Procedures" states:Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.In other words, nations' constitutions will have to be rewritten to conform to the GATT treaty. Whatever a nation's electoral mandate, if its laws and constitutions are at odds with the treaty, they will have to be changed.
I refer the House to a riot that took place in the Karnataka area of India, which was in opposition to the threats to the Indian Patents Act 1970. Under Indian law, it is illegal to patent any life form, but the new agreements relating to the trade in biotechnology patents enshrine the rights acquired by large multinational pharmaceutical companies to patent genetic products, allowing the inherited genetic diversity of the planet to be turned into a form of private property.
A number of other national and international practices will become similarly "GATT illegal". In Canada, the export of unprocessed salmon and herring has been ruled illegal. It was seen as an unreasonable restriction on trade. Equally likely to be defined as GATT illegal is any attempt by a nation to control the export of its own natural resources. In relation to the Muntingh proposal, the European Parliament set out terms in which it was attempting to control the import of unsustainably logged timber. Its proposals are to introduce by 1995 positive incentives which will reward the production of sustainably logged timber and by 2000 disincentives to obstruct the importation of unsustainably logged timber. All those processes will be GATT illegal.
The Montreal protocol, which is designed to reduce chlorofluorocarbons emissions, has set out ways in which we are incrementally moving towards the banning of trade in products and by-products which generate CFCs, so that there is now a ban on the import of controlled substances from non-signatory countries to the Montreal protocol and a ban on the export of controlled substances to non-signatory countries. Both those bans will be GATT illegal.
574 Any challenge will be ruled on by the GATT disputes panel—the disputes settlement board. Is that to be a source of protection for national economies, conservation economics and international environment initiatives? The answer is sadly no. To see why, we need only consider what has happened in the dispute that took place over tuna-dolphin catching—first between the United States and Mexico, Venezuela and Vanunu and, subsequently, between the United States and Europe and those three countries. The United States attempted to ban what was referred to as the encirclement method of catching tuna, a reckless method which needlessly, cruelly and irresponsibly took the lives of huge numbers of dolphins. There was an attempt to say that it was not acceptable for tuna to be caught in that way. The matter went to the disputes panel and, in 1991, the panel ruled that such a ban constituted an unreasonable restriction on trade. It is likely that such methods will be supported when the matter goes before the new panel. GATT is likely to blow an almighty hole in any global attempts to set down a serious commitment to challenge environmental exploitation and environmental degradation.
By failing to build an environmental dimension into this round of GATT, we run the risk of destroying most of the major initiatives that have been taken up in the process of dragging the world into facing up to the environmental damage that we have been causing. The World Trade Organisation will have powers to compel countries to adhere to free trade rules whether they destroy the environment or not, whether they exploit child labour or not. A body has been created which, in effect, comprises the new ayatollahs of free trade fundamentalism. It will have the power to dictate national policies and to deny people the choice of putting a planned future before a free-for-all present. GATT prevents countries from taking trade measures to protect the environment and natural resources beyond their national boundaries. GATT disallows import restrictions based on production processes, including the use of such things as milk-enhancing hormones, which can have a devastatingly destructive effect not only on the cattle to which they are fed but on the human beings who consequently consume them indirectly. GATT will accelerate the collision between free trade and a global environment.
In fact, what we need is a treaty for sustainable growth and sustainable development. Four principles should underpin that treaty. We need policies under which the developing world can feed itself, house itself and build up its own infrastructures. We need a new form of environmental protectionism, which would pay for the development and gifting of environmental technologies. We need a treaty that would raise the standards of production to those of the best, rather than reduce them to the price of those who would exploit the most. We need a treaty which recognises that the next century will place a premium on reducing global transportation, which accounts for one eighth of the ozone-depleting gases currently being emitted. The treaty needs to eradicate toxic dumping, the majority of which now takes place as a transit process from the industrial north to the developing south and east. We need a treaty which delivers stable jobs and sensible wages. Sadly, none of those needs is met in the GATT treaty.
§ Mr. Jeremy Corbyn (Islington, North)
It is a pleasure to follow my hon. Friend the Member for Nottingham, South (Mr. Simpson), who made an excellent speech. I especially agreed with the latter part of it and the conclusions that he drew. There seems to be an understanding that GATT is something that we should all welcome and that anyone who opposes it is somehow a heretic or an anti-Christ and therefore should not be allowed to enter the debate.
May I point out that it is yet another treaty that has been signed by the British Government of which there has been no parliamentary scrutiny whatever? No vote was taken on that treaty, there are no means of amending it and a huge proportion of power has been handed over to the World Trade Organisation in the name of promoting the idea of a free market economy all round the world, with all the devastation that that will cause, for jobs in this country and for living standards in the poorest parts of the world. The weakness of the British parliamentary system is that there are no means whatever of stopping that being done. The treaty was signed, as every treaty is signed, within the powers of the royal prerogative and we are left with it. We call ourselves the mother of Parliaments and a model of democracy to everybody else around the world. We should stop lecturing the rest of the world and start trying to learn some lessons from them.
I do not join in any general welcome of the treaty. I have the deepest misgivings about the treaty and, indeed., about the GATT process. It has been presented—the Prime Minister did so in this Chamber—as though, somehow, everyone is a winner in GATT. It is rather like a game of bingo in which everybody comes out a winner. The only problem is that, in most gambling that I have ever understood, the bookmaker makes the money, not those putting money on the competition. If everyone is a winner, how come some are bigger winners than others? It appears from what the Prime Minister said that the biggest winners will be western Europe and the United States of America. Proportionately, the people who will come out worst are those living in the poorest countries of the world.
The hand of the United States looms large in the GATT treaty and in the GATT negotiations. President Clinton said:We are on the verge of a historic victory in our efforts to open foreign markets to American products.With typical United States arrogance, they assume that the American continent belongs to them. I do not know why they cannot say "United States products" and why the term "American products" is always used which, to my mind, includes those of Canada, Mexico, the whole of Latin America and the Caribbean.
However, around the world, considerable opposition to the GATT treaty is being mounted. My hon. Friend the Member for Nottingham, South mentioned the problems of a number of people in India. There have been huge demonstrations in many parts of India by Indian farmers who are opposed to the treaty because they can see the consequences for themselves—the consequences of poor countries having to import foods that they already grow, the consequences of their not being able to get their industrial products into western markets to the degree that they would want and the problems that they will have of 576 high levels of import penetration from multinational corporations. Those demonstrations were enormous, but were barely reported in this country.
The demonstration in southern Mexico, known as the Zapatista rising, was a direct consequence not only of GAIT, but of the structure adjustment programme forced on Mexico by the World bank and the International Monetary Fund as their means of coping—that is the only way in which to describe it—with the problem of the Mexican debt. Those poor people understood what was on the agenda and what the consequences would be.
The hon. Member for Sutton and Cheam (Lady Olga Maitland) and other hon. Members mentioned what is currently happening in China. China has the fastest growing economy in the world. However, many people in China work in the worst possible conditions in the world and on the lowest possible wages. A plethora of industrial strikes are taking place in the economic zones and all over southern China at the present time. They are barely reported in the west.
The muted criticism of China's human rights record by the British and United States Governments and everyone else is axiomatic in that they are saying that trade comes first and their concern for human rights comes second. The Conservative Government could tell us plenty about that as they sold arms to South Africa during the worst years of apartheid oppression and they happily sold arms to Chile during General Pinochet's time. There are dozens more examples of such actions.
If we are serious about human rights abuses, we are serious about human rights abuses full stop, irrespective of the country concerned, or the economic or political system within which they operate. The failure to criticise China shows that we are interested more in the possibility of British companies making money out of investments in China than in doing something serious about the problem.
The treaty includes a major section on trade barriers and the lowering of import rates. Here we are seeing growing interference in the ability of the poorest countries in the poorest parts of the world to produce the goods they need for a system of self-sustaining agriculture.
After the long years to gain independence from this country, Zimbabwe embarked on a process of self-sufficiency in agriculture. The powers that be in Washington visited Zimbabwe and demanded to know why it had so much maize in stock. With great prudence, the Zimbabwean Government said that they wanted maize in stock as a hedge against the likelihood of drought, which occurs frequently in many parts of southern Africa. The Zimbabweans were told to get rid of that maize. When drought came along, Zimbabwe had to buy maize on the open market, some of which came from the United States. It is a policy of utter folly and madness to destroy the indigenous agricultural systems of so many poor countries.
Given the pressure of structural adjustment programmes on poor countries, instead of giving them support and assistance to develop self-sufficiency in agriculture, one expert after another steps off a plane from London, Washington or Frankfurt and says that the solution is to grow coffee. So many countries began to grow coffee that the world price of coffee fell. Many countries now face economic disaster and many people in the west are suffering from hypertension because of all the cheap coffee that they are drinking. That policy is not sensible.
The latest suggestion is to grow cut flowers. The number of countries that are now investing in growing cut 577 flowers is unbelievable. I did not know that there was such a market for cut flowers. The number of planes flying around the world, depleting the ozone layer, using up oil and causing noise and other problems, in order to bring cut flowers from Colombia, Zambia, Zimbabwe, Ethiopia, India and God knows where is extraordinary.
§ Mr. Corbyn
And of course from Kenya. I would not wish to leave Kenya out. Those planes are carrying cut flowers to the markets in Paris, London, Washington, New York and Tokyo. That policy is simply not sensible and there are plenty of similar examples.
I recall some years ago visiting a very poor area of Honduras in central America. Most of the people lived in what can only be described as shacks. They lived outside the cash economy and practised subsistence living. They grew a bit of maize, kept a few chickens and more or less got by somehow. If they had a good crop, they sold some of it to buy cooking utensils and the like. If they had a bad crop, they starved.
Beside those shacks where those very poor people lived there were huge fences and security guards protecting the fattest beef cattle in the world. Those cattle were being fattened up to be beef exports to pay for that country's debt and to bring in foreign exchange. What came first: the starvation of those children or the export of the beef? The export of the beef came first, never mind the starving children.
Country after country is being asked to produce export products to meet a debt which is not of their own making. Those export products are not benefiting the people who are suffering worst in the poorest countries of the world. I fear that the GATT process does nothing to improve the lot of the poorest people. In fact, it is likely to make it worse.
The real beneficiaries of the GATT process are the very small number—possibly no more than 500—multinational corporations which, between them, control 30 per cent. of global products and 70 per cent. of global trade. A very small number of people in a very small number of faceless offices around the world are the real winners in the GATT treaty. They are not accountable to national Parliaments or national Governments. They are not accountable to shareholders. They operate in their own way and wield enormous influence over the GATT negotiations and over the United Nations.
Far from controlling the activities of those companies, far from being an organisation which will control the power of multinational corporations—indeed, the UN has closed its multinational corporations office—the World Trade Organisation will be telling poor countries, "How dare you impose import tariffs on these goods? How dare you try to develop a protectionist economy which can provide self-sufficiency for your own people?" Those countries will be punished by the WTO. The hon. Member for Sutton and Cheam apparently wanted to know what that punishment will be. The power to punish was handed over to the WTO without so much as a vote in the British Parliament.
I want now to consider the cuts in domestic subsidies arising from the GATT deal. As a result of those cuts, a third-world country—as we choose to call them—cannot subsidise its own agriculture. Instead, it must open its 578 doors to imports from the west. However, it is apparently perfectly okay for north American and British farmers to receive enormous subsidies for farming, often in an environmentally unsustainable way. We seem to be preventing subsidies from being meted out to help poor farmers in poor countries while we are allowing subsidies to go to very rich producers in the northern countries. Something seems to be fundamentally wrong there.
The International Herald Tribune summed up GATT in all its glory. It stated:Analysts said the multinational companies, which account for about two-thirds of the world's cross-frontier trade, would be the obvious winners from the deal … As part of the accord, foreign companies are to be granted the same national treatment as domestic concerns, making it easier for multinationals to relocate jobs in low-wage countries".My hon. Friend the Member for Nottingham, South mentioned several examples of multinational corporations increasingly relocating jobs in the cheapest labour areas. Daimler-Benz moved jobs from Germany to Alabama in the United States. The Ford Motor Company regularly plays ducks and drakes with its workers around the world. All the big pharmaceutical and electronics companies do exactly the same. Japanese electronics companies used to have their goods made up in Japan. They now have them made up in Taiwan or South Korea. They are now moving into Bangladesh and India and wherever they can obtain the cheapest wage rates.
It is a policy of utter folly and great danger to set competition on a pedestal all on its own without regard to social and environmental consequences or the real costs to the environment of the huge increase in transport to which my hon. Friend the Member for Nottingham, South referred.
I want now to consider not the very poorest countries, but what we choose to call middle-income countries which must allow for an increase in the importation of agricultural products into their economies. Indonesia, whose Government I admire not a jot, has been told that it must allow up to 1.5 million tonnes of rice to be imported to Indonesia every year. Indonesia does not have a problem producing rice for its internal consumption. However, it has been told that it must allow those imports irrespective of the fact that 34 per cent. of its export earnings already go towards trying to pay a debt incurred from previous inequalities.
The GATT deal will cause serious damage in the form of environmental problems and problems for sustainable agriculture around the world. GATT seeks to say that the only thing that matters in the world is the principle of competition. When Conservative Members talk grandly about the need to introduce a competitive economy in Britain, as their counterparts do in France, Germany and every country in the world, that is a recipe for lower wages and living standards and higher levels of unemployment and for cuts in health services and the welfare state—all in the name of the free market economy.
I believe that that is the wrong direction in which to go. My hon. Friend the Member for Nottingham, South set out a series of ideas which would be a step forward and he was absolutely right. First, why is there nothing in GATT about workers' protection and rights? Why is there nothing about the minimalist right to join a trade union and to organise together to negotiate for decent wages and working conditions? The treaty says absolutely nothing about that. It would apparently be a gross interference with trade.
579 Nothing is said about human rights—for example, the way in which the Government of Indonesia have bombed the people of East Timor. Nothing is said about human rights abuses in China, or about the occupation of Tibet, and nothing is said about many other abuses that happen in many parts of the world. All those matters could be and indeed must be addressed. That must be what the inspiration and formation of the United Nations was all about—to try to address those very basic problems.
We now come to environmental sustainability. We live in a world of galloping consumption, mounting waste and mounting damage to the planet. I receive a fortnightly paper which is sent to me from Penang in Malaysia called the Utusan Konsumer, published by the Consumers Association of Penang. It is a very interesting paper for all that, because it often says the unpalatable truths from a relatively poor country to the rich of the north. It points out, for example, thatWestern industry produces vast amounts of toxic waste … which is dumped in the Third World.Since 1986, over 3 million tons of toxic waste have been shipped from Western Europe and North America to other countries.About 125,000 tons of toxic waste are sent to the Third World from Europe each year.That is the way of getting around environmental restrictions in the west and dumping them on the third world.
On brutal farming techniques, the publication points out:Every decade, 7 per cent. of the world's soil is lost through large-scale farming techniques",such as those used in the United States, wherean area twice the size of California has been rendered unproductive.Those are the very same farming methods as are being imposed on poor countries. The newspaper goes on to show the figures, which are well known, about the enormous waste of oil and other energy sources by the over-consumption of western economies.
Those crucial issues have to be faced up to. Rio gave us an opportunity and at least pointed in that direction. Much of the work of Rio, which is limited in itself, has been undone by the GATT treaty. We need to look forward to a future in a world in which we redress the problem of imbalances between the rich and poor and between the north and south, and stop worshipping the god of competition and the god of exploitation of other people and start looking to a sustainable future for the planet. GATT goes in exactly the wrong direction; it does not help us at all. I wish that we had an opportunity to vote on it, because I for one would emphatically vote against it.
§ Mr. Derek Enright (Hemsworth)
I apologise for being unable to be here since the beginning of the debate. I have been attending the Standing Committee on the Education Bill, undertaking Opposition Members' constant drudgery of attempting to make the Government see sense. I regret to have to inform you, Mr. Deputy Speaker, that we did not quite do that this afternoon, but hope springs eternal in the breast, and I constantly pray for the sins and the sinners of the Government.
I should like to make a very brief intervention on some specific points. The principle of GATT is, of course, entirely right and correct. We are trying to get fair and decent trade around the world. But it is equally right and 580 correct that, as my hon. Friends have said, we should look at the social effects of much of what we are doing. In particular, one thinks of the way in which China, which has already been mentioned, is able to flood not only developing countries but this country with very cheap products without regard for normal decent human relationships.
Her Majesty's Government have prided themselves on saying, "We will assist the developing world only in so far as it puts democratic measures into their Governments and ensures proper reform." That should apply absolutely everywhere, not just to the small countries of Africa but to large countries. It is no use simply condemning China. We have to show that our condemnation of China, for example, means something.
Another point that I should like to be considered much more closely is world commodity agreements. It simply is not fair to ask very poor countries, which are producing goods for export at subsistence level, to put up with current fluctuations in world markets—something which can have nothing whatsoever to do with the efficiency of what is being done in a country but which can have much to do with current speculation on the world commodity markets. That can destroy a country, and that means destroying not only the country but individuals, families and small rural settlements. That has happened in Africa in particular.
The continent of Africa is the greatest suffering continent at the moment. Some of the problem is man made. The people who are resisting legitimate government in Angola and Mozambique, for example, are responsible for great misery. Angola and Mozambique will certainly have enormous commercial potential once they get over that problem. However, for much of Africa, the difficulty is not man made, it is natural. People have to eke out life at subsistence level by relying on exports and, in particular, on the favours that are given to them by the European Community.
The Lomé treaty—I hope that the Minister will say something about it—is particularly geared to doing favourite things to favourite people—in other words, to looking after the continent of Africa, the Caribbean and the Pacific. In so far as GATT takes away from that, and it most certainly does, GATT is performing a wickedness which Her Majesty's Government must consider.
I have spoken before about the problem of bananas. As the Minister knows, bananas are covered by the protocol in the Lome treaty, but the deal that has been done under the GATT treaty has thrown away all the advantages that banana-producing countries in the Caribbean had. That is no joke to populations who depend for their livelihood on the production of bananas and on getting their bananas to their traditional markets.
We made a commitment under Lomé that we would give special preference for African, Caribbean and Pacific bananas and, as the European Union, we must honour that preference, in spite of what is being said by certain parts of the GATT machinery at the moment. Indeed, a GATT panel recently challenged—not in an official way, admittedly—the preferences that are given under the generalised system of preferences to developing countries by the European Union.
Her Majesty's Government must give an absolute commitment that they will stand up to that threat and make sure that those developing countries continue to receive favoured nation status. The Prime Minister regularly says that he has great influence on Chancellor Kohl. He must 581 use all that influence on Chancellor Kohl in respect of bananas because Chancellor Kohl is taking the European Union to the court so that the Germans will be able to flood the country with even cheaper bananas which are produced by very cheap labour indeed. The virtue of the protocol in the Lome agreement is that it ensures that a decent wage can be paid to people who grow bananas.
§ Mr. Corbyn
Is my hon. Friend aware that dollar bananas, which are the ones that the Germans are keen to flood the European market with, are produced by environmentally damaging methods in large plantations in central America and parts of South America, whereas the smaller Caribbean bananas that we are used to in this country are much more environmentally sustainable and are usually produced by small farmers? The economies of a large number of Caribbean islands will be totally devastated if the European Court decision goes in favour of what Chancellor Kohl wants.
§ Mr. Enright
I am grateful to my hon. Friend for underlining the point that I was making. I would add that it is odd that Germany should take such action on bananas and, at the same time, pursue a path of demanding special recognition and protection for its agricultural products. That is two faced in moral terms and must be resisted. I am not normally in the habit of doling out praise to the Government, but they have been reasonable in arguing with the German Government on the matter so far. Tonight, we should ensure that that tenacity of purpose continues.
Totally untrammelled trade agreements such as GATT can be an absolute disaster for poverty-stricken areas. It is, therefore, not simply a question of looking at the United Kingdom with regard to other rich countries but of looking at the United Kingdom with regard to other rich countries and poor countries. The whole picture must be examined but not in a one-sided way.
I shall conclude by talking about what I consider would have been a good example if it had been followed—the much-maligned multi-fibre arrangement. The idea of the multi-fibre agreements and arrangement was that there would be an orderly transfer of technology. That was perfectly all right. Certainly, the people who get poor wages in the clothing industry in my constituency would be happy for it to move somewhere else where goods could be produced effectively and cheaply and they could start to improve their standard of living.
At the same time, it was agreed that jobs in the clothing industry would be replaced by high technology. It is most unfortunate that the Government took over in 1979; not a penny was put into developing high technology as all the textile jobs in West Yorkshire disappeared. That is not what happened in West Germany because the Germans saw that an orderly transfer was needed. They wiped out their clothing industry, but replaced it with high technology. That is why West Germany, even now with all the problems of East Germany, is infinitely more successful than the United Kingdom in terms of wealth creation, manufacturing and full employment. The Government should take a leaf out of that book, look at what is happening in West Germany and frame their policy on GATT accordingly. It is no use praising free trade when all it does is enslave a large number of people.
§ Mr. Elliot Morley (Glanford and Scunthorpe)
The area that I represent is the centre for heavy industry in this country. It is one of the few such areas left, thanks to the Government's policies. Apart from having heavy industry and some high-tech industries, it is also an area of rich agricultural land. It is one of the United Kingdom's centres—and, indeed, one of Europe's centres—for intensive livestock.
Like the rest of this country, the area that I represent has a lot to gain from an orderly organisation of world trade and the encouragement of exports. Even though in principle we need the GATT agreement because of what it can offer, it has some severe disadvantages as it stands in terms of its impact on a whole range of issues, as has been outlined by my hon. Friends the Members for Hemsworth (Mr. Enright) and for Islington, North (Mr. Corbyn). Indeed, there are some issues that have not been satisfactorily resolved which the European Union should carefully consider before the agreement is endorsed. Like my hon. Friend the Member for Islington, North, I regret that the House has not had the opportunity to debate the detail of the GATT agreement or, indeed, to vote on it. Some of these issues could have been raised and discussed.
In terms of some of my concerns, I shall deal with agriculture and one aspect of it. I apologise for not being here at the beginning of the debate; I was at a meeting of the all-party animal welfare committee. That committee, together with animal welfare groups in the United Kingdom and, indeed, in Europe, is concerned about the implications of GATT in terms of stopping the constant improvement of standards that we have seen in agriculture, animal husbandry, food quality and veterinary products, and stopping new developments such as genetic engineering and novel foods. The agreement has implications in terms of the right of individual countries to control what they import and how it is used.
I am amazed that Tory Members start huffing and puffing and getting all excited about the European Union and the alleged loss of sovereignty and powers; yet, by praising the GATT agreement, they are taking away even more powers from the United Kingdom than the European Union because at least the European Union has some measure of accountability through directly elected Members of the European Parliament—whom we have just elected.
I shall give some examples of my concerns. In food agriculture and food production generally, agriculture faces some major changes as a result of the GATT. There must be some changes, because we cannot sustain the common agricultural policy with its subsidies and its impact on developing the third world in terms of dumping surpluses at subsidised prices and distorting the markets.
One issue is the use of artificial hormones in boosting food production. At present, the hormone known as BST —bovine somatotropin—is banned in the United Kingdom; the European Union has decided to extend that ban for a further year. There is some doubt about whether such bans can be applied under the GATT. Indeed, GATT will be used as an excuse by companies and individuals to try to get products on to the market. What sense is there in taking away restrictions on the use of artificial hormones such as BST, which increase milk production, in this country when we have a huge surplus of milk in the European Union? That surplus must be controlled by the 583 use of quotas, which have disadvantages. BST has implications for animal welfare and is not welcomed by consumer groups or, indeed, farmers in this country who know that artificial productions distort the market.
Another issue is the use of hormones in, for example, beef. At present, the use of hormones in beef is legal in the United States, but is banned—rightly—in the European Union. The Americans could claim that keeping out their beef exports which have been subject to the use of hormones is illegal under the GATT arrangements and that, therefore, undermines the United Kingdom in taking the correct stand.
Another issue is animal welfare standards. The Labour party takes these issues seriously. Indeed, we have seen an improvement in animal welfare standards and production and rearing methods over the years. We want: those improvements to continue and we campaign for that through the European Union. Things such as veal crates are banned in this country, but they are still legal in the European Union.
Various methods of rearing livestock and intensive systems are still legal; the use of battery cages is the best example of that. It will be difficult to bring about changes in intensive systems such as battery cages. If we impose restrictions on our farmers, they can be undermined by the importation of food products—in this case, eggs—from other countries which are not subject to the same restrictions and which can claim to be exempt under GATT. That makes it difficult to bring about improvements in animal welfare standards.
§ Mr. Corbyn
Is my hon. Friend aware that in most countries—certainly in South America—there is no restriction whatever on the way in which intensive farming can be conducted, on the sizes of cages for battery farmed chickens or on any other sort of intensive animal rearing? Clearly, the evils of the way in which animals are treated would tend to become the norm rather than the exception that they are at present.
§ Mr. Morley
I am aware of that, and my hon. Friend makes a good point. I want standards to be raised in this country and in the European Union in terms of world trade. The danger of GATT is that it will lower standards to the lowest common denominator driven by market pressures. I do not believe that that issue has been properly addressed within GATT.
While there is a place for the free market and for trade, we cannot have unfettered trade which does not take into account the exploitation of the weak by the strong, proper environmental standards, and the exploitation of the world's resources—whether animals or people. Those issues are not dealt with.
I have mentioned genetics, which is a huge growth area in terms of genetically modified animals and foods. This country has procedures in place to look at the ethics and standards of that. Will they be undermined through GATT? Those areas of science and technology are moving so fast that proper and effective regulation must be put into place.
Another issue is that of countries that produce food in damaging and unsustainable ways. The question of the yellow fin tuna was touched on by my hon. Friend the Member for Nottingham, South (Mr. Simpson). The method of fishing to which he referred not only destroyed large numbers of marine mammals but did so in a cynical 584 way. The fishermen were looking for schools of dolphins to indicate where the tuna were. They then shot their nets around the dolphins, destroying them along with the tuna.
Methods of drift netting in the Pacific have caused havoc to endangered turtles, various fish species and marine mammals. Quite rightly, the Americans put a boycott on yellow fin tuna. Those issues are of international importance, and each country ought to have the right to take action by boycotting products if they are being produced in damaging ways.
Another method—which, I am glad to say, is currently banned in some areas—is re-fishing where dynamite has been used, thereby destroying fragile ecosystems on Pacific reefs. Those issues need to be brought under control and action must be taken on that.
Recently, there was a meeting of the International Whaling Convention, and there is still tension, as hon. Members will know, about certain countries that insist on killing whales, sometimes in defiance of IWC international regulations. There must be action taken—if appropriate —against those countries, and I hope that GATT will not restrict that.
There is also the issue of tropical hardwoods which, in certain parts of the world, are being felled in totally unsustainable ways, causing enormous ecological damage. We ought to have systems within the European Union of identifying companies whose tropical hardwoods come from sustainable areas and involve local ethnic people, so that those companies can be encouraged and rewarded. Countries and companies that defy international law and destroy tropical forests should be boycotted and controlled. GATT undermines that particular situation.
I hope that the Minister will consider four points. First, GATT ought to allow individual countries to prohibit the use of animal husbandry systems or veterinary drugs if that country thinks that they are damaging, inappropriate or against the interests of consumers.
Secondly, each country ought to have the right to prohibit the imports of products that are derived from animals reared in systems that are regarded as unacceptable in terms of welfare, standards and cruelty, or products that have been treated with drugs that have been banned in the European Union.
Thirdly, products that have been produced in damaging or non-sustainable ways should also be subject to boycotts or restrictions within GATT.
Fourthly, I endorse—although time does not allow me to touch on this—all the points made about the exploitation of people around the world. GATT does not take into account the use of child labour and slave labour in certain parts of the world and products derived from that.
GATT should also take into account social issues, the right of people to join trade unions to protect their interests and basic human rights. GATT should not be used as an excuse to level down, to condone and encourage exploitation, and to undermine those countries that are striving for high standards—whether animal production, agriculture, food quality or health and safety of people at work. If we are to get the benefit of GATT—there are potential benefits—those issues must be addressed by the Government, who are responsible for negotiating on behalf of our people.
§ Mr. Jim Lester (Broxtowe)
I apologise to the House for not being here for the whole debate, although I indicated that I had previous commitments. I did come in for the opening speeches, and I am delighted to have the opportunity to participate.
It is fair to make criticisms of GATT, but it is also fair to assume that, if we had not had it, we should have had an infinitely worse situation. As one of those who pressed continuously for GATT and who supported the Government in all that they did in terms of reaching agreement, I feel that it is a worthwhile state of affairs for organising world trade well into the next millennium.
It is the first agreement of which I am conscious which sets down rules which will take us into the next millennium. I do not say that for the selfish reason that it should be helpful to Britain and our manufacturing industry. I genuinely believe that GATT will be of overall benefit to the world community. I should like to support all that has been said about the activities of the Prime Minister and other Ministers, but especially those of Sir Leon Brittan in terms of his mammoth negotiations with the United States. I hope that the talent and expertise that he brought to bear in the trade negotiations will be recognised within the European Union. When the curricula vitae of the various people likely to become President of the Commission come to be considered, I hope that the unswerving and devoted work that Sir Leon Brittan has done—particularly in taking the European Union through those difficult negotiations—will be recognised.
I have always felt that we needed a world trade agreement which took us forward, because I have never felt that Britain's interests, or those of the developing word, were compartmentalised. We could not see our future in terms of employment and development simply by trading ever more sophisticated products to one another. There had to be a system whereby the transfer of resources and the ability of the developing world to improve its position was of direct benefit to the western world, and particularly to Britain.
One has only to look at the way in which Asia has developed in recent times, and at the problems that we have had with Malaysia. When we draw up a balance sheet of what is happening in Malaysia in terms of our exports there, we see that that country's development and the way in which it has become one of the major economies in south-east Asia is very much based on the sort of transfer of technology and assistance that this country has been able to carry out with Commonwealth countries. We see the same in Vietnam and China; during the past three years our trade with China has increased dramatically as that country's own economy has developed. It was important to get an international agreement which fostered and encouraged that development rather than stifled it.
I was particularly pleased about the agreements on intellectual property. That is a new concept, and the ideas that people have are not made of steel any more. They are not obvious, but they can have dramatic effects; one computer programme can be of immense importance and tremendous value in terms of organisation. I was horrified to hear the figure that my right hon. Friend the Minister for Industry gave in his opening speech about losses by the phonographic industry world wide as a result of piracy. We are all familiar with music—perhaps not the sort of music that one plays every day—which is available throughout 586 the developing world at a nominal cost where new tapes have been pirated in a short time. A famous author told me that his book had scarcely hit the stands in Britain before it was copied and on sale in Singapore. Such copying would not give the author any royalties. We must therefore be vigilant about the concept of intellectual property, which also has a particular role in terms of pharmaceuticals—in which Boots, a constituency company of mine, has a particular interest.
I am delighted to pay tribute to the President of the Board of Trade and his Ministers for gearing themselves up, well ahead of the White Paper, to promote British interests and exports. I suspect that, nowadays, no Minister from any Department ever goes abroad on a mission without a group of business men and other people who can be introduced so that the long-term interests of Britain are promoted. The significance of such visits has been apparent in many countries. I was recently on a visit to Taiwan with the Select Committee on Foreign Affairs which happened to coincide with a visit from the Minister of State. It was a joyful occasion, because we were able to capitalise on the good will that had been generated. The Minister's role was important because he brought key players with him from Britain to that growing, powerful economy. That visit was important for future trade.
I have a long-held interest in the developing world and I am chairman of the all-party group on overseas development. It is worth noting the significant effect of the Uruguay round on developing countries, because they participated in force in multilateral trade negotiations for the first time. In the Uruguay round they had clear objectives for their agricultural, textile and clothing exports, and for products which had always anomalously remained excluded from previous GATT settlements. It is clear that some wanted to protect their positions in terms of services, intellectual property and laws affecting foreign investment. The impetus to liberalise their own trade, however, whether undertaken under duress or not, had also increased their interest in strengthening a rules-based international trading system. That represents a sea change. For instance, a decade ago Mexico was not even a member of GATT, but now it is a member of the Organisation for Economic Co-operation and Development. India is no longer introverted and aims to trade competitively. The trust that such nations have put in free trade must not be disappointed or controverted.
In the traditional GATT subjects, especially tariffs on manufactures and in traditional primary commodity exports, there is little left for any country to gain because barriers have come down so far already. The Uruguay round does not, unfortunately, reduce tariff escalation very much. Changes will come mainly from adjustments in relative preferences, but average effects will be small.
The Overseas Development Institute calculates that a once-and-for-all gain to developing countries resulting from full implementation of the Uruguay round settlement would be worth about $100 billion in extra exports, and more if account is taken of the dynamic effects of trade and specialisation on income growth. Not all developing countries will necessarily be net beneficiaries. It is extremely important that one should not generalise. Some African countries, particularly those which import food, will be marginally badly affected. I am glad to note that the Minister has already announced measures to take that into account.
§ Mr. Enright
I am rather disturbed at use of the word "marginally" as it is clear that the sub-Saharan African countries will suffer greatly under the GATT agreement. The ODI has already said that. Will the hon. Gentleman comment specifically on the worries about the Lomé agreement and the actions currently being taken against that agreement as a result of parts of the GATT agreement? Those actions are a source of great concern to the majority of Africa.
§ Mr. Lester
I shall comment on that as I develop my speech. I used the word "marginally" advisedly because the ODI's assessment is that the agreement is nothing like so significant as Christian Aid and others have suggested. For instance, Bangladesh is one of the poorest countries, but it is one of the main beneficiaries of the GATT round as its trade will increase overall by 14 per cent. China, which is not even a member of GATT yet, stands to benefit immensely from trade liberalisation. I cite those examples because they directly affect Britain, especially in terms of our trade with China as it becomes more sophisticated and therefore needs more of our products.
More generally, studies conducted by the World bank and the OECD expect world income to expand by 1 per cent. annually—between $200 billion and $300 billion—as a result of full implementation of the Uruguay round. They calculate that developing countries' share of that income, as well as exports, will be about a third. That is a significant share.
In answer to the hon. Member for Hemsworth (Mr. Enright), strong enforcement and dispute settlement powers are needed. The World Trade Organisation should be established as a viable successor to tie the always temporary GATT. The concern expressed by the hon. Member is borne out in a different way, because developing countries are queuing up to be founder members of WTO. That hardly suggests that they have anything to fear. They know where advantages are to be seized under the new trade regime and most of them realise that in the future there will be relatively little mileage left in the culture of preference selling, however honourable its post-colonial origins once were.
In connection with the mid-term review of the Lomé convention which is just starting, the ODI has separately calculated for the African, Caribbean and Pacific secretariat what the losers in trade liberalisation will miss and what they should do about it. The ODI recognises that the Uruguay round settlement will lead to a loss overall to the preference-dependent ACP states of just 144 million ecu—a mere 0.7 per cent. of their exports to the European Union market and a much smaller fraction of their total exports. Many of those countries, such as Zimbabwe, will register gains. Food import-dependent states such as Ethiopia and Senegal will lose out more heavily and will have to change their policy. Within GATT we are already taking those losses into account and making provision to help deal with the temporary circumstances.
§ Mr. Enright
Senegal has already changed its economic policies three times at the behest of international organisations ranging from the World bank and the International Monetary Fund to the European Union. Now it is being asked to change its policy yet again. That is insupportable.
§ Mr. Lester
We cannot have a country such as Senegal wagging the tail, for whatever reason, of the 150 nations 588 which are now signatories to GATT. We must make special provision and the Minister of State has already spelt it out. Many of us will be conscious of the difficulties, but overall the Uruguay round represents a major benefit to developing countries. The settlement brings new export opportunities even for Senegal and Ethiopia, not least in the booming Asian market.
I welcome the debate and I support the GATT round. I recognise that, overall, the settlement will benefit rather than disadvantage developing countries. Where we need to make special provision for a handful of ACP countries, we should do just that, but we should also encourage the quickest possible implementation and operation of the GATT agreement.
§ Mr. George Howarth (Knowsley, North)
This has been a useful, timely debate, because it is right that the House should consider the implications of the Uruguay round. It is important that we spend some time considering not only the advantages of that agreement but hon. Members' fears and predictions about some difficulties that may arise.
Most speeches came from Opposition Members and it is important to acknowledge some of the arguments which have been properly and ably made. I had to miss part of the speech by the hon. Member for Gordon (Mr. Bruce), but I agreed with much of what I heard. We would not disagree with much of what he said about the implementation of trade. It is important to acknowledge that some common ground exists.
The speech by the hon. Member for Broxtowe (Mr. Lester) showed the understanding that he has gained from holding positions on all-party groups. It was important for that voice to be added to the debate, from whichever side of the Chamber it came.
My hon. Friend the Member for Hemsworth (Mr. Enright) was customarily eloquent and also knowledgeable on the subject. I do not wish to undermine what he said, but I could not compete with his knowledge of the banana industry in the Caribbean. Suffice it to say that I hope that the House will take his point because the issue is clearly important.
Similarly, my hon. Friend the Member for Alyn and Deeside (Mr. Jones) stoutly defended the aerospace and steel industries. Although I am not exactly a neighbour, my constituency is not far from his so I am fully aware of his constituents' concern about those industries. Some of my constituents work in his constituency, so they keep me informed about the position. My hon. Friend made some legitimate points.
My hon. Friend the Member for Rotherham (Mr. MacShane), in only his second speech in the House, demonstrated his command and knowledge of the detail of the steel industry, which is important in his constituency, and of the social dimensions arising out of world trade and particularly GATT. His speech leads me to believe that we shall hear much more of him on that and related subjects.
The thoughtful speech by my hon. Friend the Member for Nottingham, South (Mr. Simpson) ranged over several global economic, social and environmental issues. Much research had clearly gone into it.
My hon. Friend the Member for Islington, North (Mr. Corbyn) took us on a Cook's tour of the world's problems with GATT. Without endorsing every word that he said, 589 may I say that it was clear that he had travelled to some of those spots and that his feelings on the subject were heartfelt. We all share some of his concerns on behalf of the poorer regions.
My hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) showed his knowledge and understanding of, and his sympathy for, agricultural communities, wildlife and animal husbandry. It was timely to bring such expertise to the debate and he did so with passion.
I shall not comment in detail on the speech of the hon. Member for Sutton and Cheam (Lady Olga Maitland) because I was not sure that I entirely followed it. Indeed, I was not sure whether the hon. Lady followed her own speech. It was sometimes better informed when she was assisted by the hon. Member for Esher (Mr. Taylor), who helped her at least once. It is usually best to draw a veil over the specific content of her speeches.
We are genuinely concerned that environmental considerations should be built into, indeed entrenched in, GATT. GATT's potential economic advantage—I stress the word "potential"—for freer world trade cannot be bought at the cost of further destruction of our global environment. Some weeks ago, I thought that that point was uncontroversial and that most sensible people would agree that the economic thrust of GATT and its effect on the world environment were connected. However, on re-reading the Prime Minister's statement to the House on 16 December, I began to wonder whether that matter was controversial. Following that statement, my late right hon. and learned Friend, John Smith, asked the Prime Minister:On the environment, will the new Multilateral Trade Organisation be given a remit to recognise the importance in the modern world of linking economic development with environmental protection?
§ Mr. Howarth
I shall give way once I have finished the quotes.
In responding, the Prime Minister said:
There is no question that development will be at the expense of the environment and I do not believe that anyone seriously imagines that that will be a problem."—[Official Report, 16 December 1993; Vol. 234, c. 1271–72.]Some months later, on 4 June, the Prime Minister was quoted in The Guardian. If Conservative Members are not keen on The Guardian, they can refer to any of the other newspapers that reported it at the time. An article by Paul Brown, the environment correspondent, said:
John Major, opening the World Environment Day award ceremony yesterday, praised free trade as the answer to the world's environment problems and was immediately accused of 'dangerous wishful thinking' by one of the winners.Mr. Major said the opening of markets around the world in the Gatt Uruguay round was the environmental landmark of 1993. Increasing global prosperity was an essential precondition to sustainable development. 'Trade will be the most powerful means of raising living standards in developing countries and thus open the way for further progress on environmental protection.'Many of the award winners at the ceremony to honour the United Nations Global 500 Laureates were dismayed by Mr. Major's remarks.Paul Ekins, the only economist among the 39 Laureates honoured yesterday, said the Prime Minister's views had no foundation in fact.590 So there is some controversy and the Prime Minister seems to change his views on the subject, depending on the audience that he happens to be addressing.
§ Mr. Jacques Arnold
Will the hon. Gentleman tell us about the relevance of the provisions of the Earth summit agreements signed in Rio de Janiero, which were also negotiated by the Prime Minister?
§ Mr. Howarth
It is usually a good idea to answer the question that one has just been asked before taking on another. I shall give way in a few moments.
I intend to come to the subject of the Earth summit agreements in a moment. [Interruption.] The hon. Member for Gravesham had the opportunity to make his speech; he made it in his own way and I shall make my speech in my own way. I intend to refer to Rio later and then I shall make some observations on the very argument that he makes. I give way to the hon. Member for Broxtowe.
§ Mr. Lester
Surely the hon. Gentleman recognises that poverty in many of the poorest countries in Africa is the main reason why their environment is destroyed. One cannot go to a poor country without seeing the total destruction of its environment. The Prime Minister was right to say that raising standards in those countries, so that the people can begin to earn enough to have a stove, to use electricity, instead of cutting down all the trees for miles around their encampment, is of direct benefit to the environment.
§ Mr. Howarth
I agree with the hon. Gentleman. The key thing, which I intend to discuss in a few moments, is not that we do not want economic development. It is vital and the hon. Gentleman is right to emphasise that—as indeed, in one of his statements which contradicted an earlier one, was the Prime Minister. The key argument that we wish to make is that economic development cannot take place—I am sure that the hon. Gentleman would agree —at the expense of the environment. [Interruption.] If the hon. Member for Gravesham shows a little patience, which is not customary for him, perhaps he will learn something. As my speech develops, I shall answer some of the arguments that he is trying to make from a sedentary position.
It is important that we consider the environment in terms of GATT because there are three vital possible ways in which we need to look afresh at the way in which we consider the issues. The first is the process of harmonising standards under the auspices of the International Standards Organisation. If the process is allowed—several of my hon. Friends referred to that—it could lead to downward pressures rather than increased environmental protection. It could also lead to technology transfer being restricted rather than developed further as we had hoped, and the consequences would be catastrophic to the environment in the developing world. I am sure that the hon. Member for Somerton and Frome (Mr. Robinson) would agree with that.
§ Mr. Howarth
It is important to provide reassurance—so far absent on the part of the Government—that the GATT treaty cannot and will not be used to challenge international agreements such as the Montreal protocol and 591 the Rio conventions. Whatever their failings, none of those agreements—[Interruption.] The hon. Member for Gravesham is saying, "What rubbish", I think.
§ Mr. Howarth
It is not a red herring and I shall explain why in a moment.
Although they are not comprehensive, perfect agreements, they have been welcomed by Opposition Members, for important reasons. However—this is why it is not a red herring—under the GATT arrangements there have already been challenges to the Austrian timber ban on the import of tropical timber and challenges in the tuna —dolphin case, to which several of my hon. Friends referred, as the hon. Member for Gravesham would know if he had bothered to stay in the Chamber for more of the debate. There is already evidence that important environmental considerations are being challenged, and that they are being challenged on the basis of GATT. It is important that those conventions are upheld. I should have been far happier if there had been an article in the agreement listing those important treaties that should be exempt from challenges under the GATT rules. That is a minimum condition that we would need in order to be satisfied that it is environmentally friendly and will not be damaging to the environment.
Similarly, the treaty sets out the inviolable rights of states to independent action—for example, to protect health. Why could not there have been a similar statement, making it clear that nation states still had the right to protect their environment from processes as well as products? Products are to some extent covered, but often the processes that lead up to the production of those products are not. It would have been more reassuring had there been a statement to that effect.
Although we equally welcome the establishment of the proposed World Trade Organisation, we feel strongly that it needs to be a proper and democratic organisation. The obvious way of ensuring that would be to construct proper lines of accountability that lead to the United Nations. If one is to have an agreement on a global scale, the United Nations is the most appropriate organisation to deal with it.
We also believe that the organisation needs to be transparent in its decision making by meeting in public so that people know what it is talking about; by voting in public so that people know who has voted in what way; and by receiving and taking evidence in public so that the arguments as well as the decisions made and the votes cast can be assessed.
We feel that, for the process that is envisaged to be valid and useful, there needs to be some commitment that it will have an element of permanence, that it will not run out of steam in 12 months' time without any momentum. There is so much to do that it is important to have some permanence and stability about the way in which decisions are taken. There needs to be a proper appeals procedure, constituted in a fair and accessible way, so that those who fall foul of the system know that there is an opportunity to appeal.
It is also important that the GATT working party on trade and the environment is prevailed upon to report within a year and that the contracting parties agree to follow with an action plan, we hope within two years, so that the momentum built up on the environment can be followed through.
592 The most important principal issue, to which several of my hon. Friends referred, is that we seek globally sustainable trade within a fair trading system, rather than the uncontrolled system that several Conservative Members seem to believe is the only way forward. As my hon. Friends have strongly argued, it is now generally understood that economic and social development are indivisible and that acute poverty in the developing world creates a climate that forces individuals and some Governments to collude in environmentally damaging processes and practices.
Similarly, there is an overwhelming case for taking measures and delivering strategies globally to help to close the north-south gap. Several of my hon. Friends referred to that at length. We need to lift the burden of debt and spread the fruits of global economic activity. To put it bluntly, environmental protection cannot be postponed until the third world has grown rich, but nor can it be achieved by keeping it poor.
The key issues on sustainable economic development and the environment remain unresolved. Tonight we are, in effect, asked to trust a Government who, by their words and record, believe in untrammelled free trade but not in fair trade—a Government continually forced to fall back on short-term measures when the world is palpably ready for a global strategy for sustainability. We are asked to trust the Government but, like the rest of Britain last Thursday, our answer must be that we cannot. Although the jury may still be out on GATT, it has already delivered its verdict on the Government's stewardship of trade, industrial development and environmental protection, and they have been found guilty. The sooner the sentence is passed, the better.
§ 9.6 pm
§ The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Neil Hamilton)
I am pleased by the broad welcome from both sides of the House for the GAIT agreement, however much some of it was hedged around by caveats. Many hon. Members, especially on the Conservative Benches, spoke eloquently about the advantages of free trade and welcomed the achievements that the whole world can claim for the GATT agreements.
However, there were exceptions. I was intrigued by the speeches of the hon. Members for Nottingham, South (Mr. Simpson) and for Islington, North (Mr. Corbyn). From the nature of their speeches, I gather that they will not be part of the campaign team of the hon. Member for Sedgefield (Mr. Blair). In fact, there was a certain period aroma about them—circa 1848. The sentiments that they expressed are not often heard today in other parts of the world. The hon. Member for Nottingham, South declared himself in favour of planned trade. Not many countries today claim to plan their trade. Indeed, apart from Cuba, which is moving away from planned trade, I can think only of North Korea.
I am not sure how both hon. Members find a place in a modernised Labour party. Perhaps we will learn more about that in due course. The essence of their case is that trade impoverishes, whereas the lesson of the last couple of thousand years is that trade enriches. Development is everything at which we should aim in third-world countries, rather than seek to reverse it. What sort of position would Germany be in today if the Tollverein had not been created in the middle of the last century and that country was still a motley collection of city states and tiny 593 principalities? Would it be the economic power house that it is today? The answer is self-evidently no, yet that is exactly the kind of trading system advocated by the two hon. Gentlemen.
That view has gained support in some parts of the European Union, as demonstrated by the results of last week's elections. I never thought that those hon. Gentlemen would be soul mates of my good friend Sir James Goldsmith, but it appears that there is a bond of contact between them that would perhaps surprise Sir James. I understand from my reading of newspaper reports of Sir James's campaign that his view is that the west must be protected against cheap labour economies because of the social upheaval that might be caused in the west as a result of the changed trading patterns that would occur in a relatively short period. I understand that there is an argument on a transitional basis, but the GATT agreements will be phased in over a period, and we seek to take account of that.
Overall, enabling trade will increase opportunities for wealth creation all around the world, including in the European Union. That is something that the Government unambiguously welcome.
Now that agreement has been reached, we should not be complacent. There is much work still to do. As my right hon. Friend the Minister for Industry said earlier, if the United Kingdom does not seize the opportunities offered by the new agreement, others certainly will. British industry must act fast. If it does not, it will lose out—which is why the Department is particularly concerned to assist British industry to win in world markets. That is the essence of everything that we do. It was the essence of our competitiveness White Paper published just before the Whitsun recess.
The impact that government has on business and on the opportunities to create wealth and jobs should be at the forefront of all our minds. That is not to say that we must make a god of money, but in taking decisions in almost every policy area we should be fully aware of the economic impact, in so far as it is compatible with other policy objectives. We should ensure that it assists our trade rather than restricts or diminishes it.
In that respect, export promotion—which featured in a number of speeches from hon. Members on both sides of the House and particularly in the speech of the hon. Member for Gordon (Mr. Bruce)—is of great importance. The Department has transformed export promotion. This country's 80 top markets are analysed by private sector individuals brought into the Department, who have written market plans and involved industries in the leading economic and trading sectors. As a consequence, the Department is much better informed than before. I hope that, over time, industry will become better informed about the services that the Government can offer and the means by which they can be delivered. That is also important.
The Export Credits Guarantee Department is an important element. The hon. Member for Gordon acknowledged that its functions have been extended and the terms on which guarantees are granted have been liberalised. The hon. Gentleman mentioned that a lower premium rate is offered by the Italians for a specific project, and he criticised the higher rates charged by ECGD. In fact, it seeks to match its premium rates to the 594 risks attached to a given market. That means that, although rates may be higher in certain markets, they may be lower in many others.
The premium is not the only consideration in determining the quality of cover provided. Benefits to exporters include the value of cover. One important difference between the ECGD system and others, particularly in the European Union, is that the department's cover is provided at 100 per cent. of the loan value and is unconditional. In other countries, such as Germany and France, cover is only at 90 per cent. of value and is conditional. There are significant differences between schemes and no doubt one could argue about them, but it is not a sustainable proposition that the ECGD's scheme is any worse than others—although companies that have been unable to obtain cover for a particular project may complain that it is. But let nobody be in any doubt that we support the expansion of world trade and that we want a bigger share of it for Britain. I hope that that is something that will unite the House. There should be unanimity on that point.
The debate ranged widely today and I shall try to take up some of the points that were made. They are, however, so numerous that I doubt whether I shall be able to consider all of them in my speech. I shall try to consider some of the main issues.
The hon. Member for Middlesbrough (Mr. Bell) raised the question of trade in services and the expansion of the GATT into GATS. The extension of multilateral rules to trade in services is one of the main achievements, in my view, of the Uruguay round. The agreement lays down a series of general disciplines to which more than 100 signatories will be obliged to adhere. The creation of the GATS framework of principles and rules, including provisions requiring measures affecting trade in services to be fully transparent, will be of benefit in providing predictability and consistency, which UK services suppliers regard as vital. That, of course, is just a first step towards a progressive liberalisation of services sectors, and there are some instances of discriminatory measures being removed or relaxed.
Many countries, in many sectors, have taken on stand-still obligations so that they do not introduce more onerous conditions in the future. That is to be welcomed. I am particularly keen that we should reach an acceptable agreement on financial services, which is a particularly important sector for the United Kingdom. There will be clear benefits from having it covered by multilateral rules. The great majority of countries that participated in the round were prepared to make liberalisation commitments in financial services, but, alas, further work is needed to complete the package. I hope that it will be completed swiftly. In some cases—Canada is a particularly good example—countries undertook to remove or relax existing measures that discriminate against foreign firms, but in most cases countries' liberalisation commitments are based on the stand-still provisions, which I mentioned a moment ago. But, even so, such limited commitments are valuable as they guarantee that current levels of market access for foreign firms will be maintained.
When the negotiations concluded, there was a real danger that financial services would effectively be excluded from the GATS package. In particular, the United States was not satisfied with the level of commitments that were being given by some trading partners, particularly far eastern countries, and was not prepared to extend US 595 concessions to those countries. It was decided, therefore, to continue negotiations in financial services to provide the opportunity for improved commitments to be made.
Six months after the World Trade Organisation comes into being, all participants will decide finally on the level of their commitments and whether they wish to derogate from the most-favoured-nation principle in any respect, for example, by keeping the ability to make access to their financial services markets conditional on reciprocal access for their companies in other markets. Our Government will work for a satisfactory outcome based on full most-favoured-nation principles, and an outcome in that highly important sector based on bilateral market opening through the use of reciprocity measures could, in my opinion, be very damaging. The prosperity of the City of London depends on its openness and the Government will fight hard to ensure that it is maintained.
Another feature of the debate has been the emphasis that Opposition Members have placed on the so-called "social clause"—trade, labour and social standards. That is an important question and I am happy to deal with it. The Government are committed to international action in support of human rights, and to stop the exploitation of children, but trade sanctions or restrictions are unlikely to work, and may in fact do much harm to the trading system. So we oppose moves by some, including France arid the United States, to introduce trade rules and labour standards, or a social clause to the World Trade Organisation. Instead, we are promoting proper analytical work in the Organisation for Economic Co-operation and Development to sort out the issues and to see where there are problems that need to be addressed. The UK approach enjoys a good deal of support in the European Community and, indeed, the rest of the world.
§ Mr. Corbyn
What does the Minister propose to do when the analysis is complete and it has been demonstrated that child slave labour is being used and disgracefully low hourly rates are being paid in the economic zones of such countries as China?
§ Mr. Hamilton
I am surprised that the hon. Gentleman should make such an obviously fatuous point. The idea that China's internal domestic policies will be influenced in any way by the trading obligations that others seek to impose on it is utterly preposterous: all the evidence of recent years shows that that is not so.
What we know from the history of the world is that dictatorial, totalitarian regimes tend to occur in poor countries. The best way in which to avoid dictatorships and repressive regimes is to enrich the peoples of those countries, rather than impoverishing them. We seek to expand the opportunities for world trade, to bring the countries into world markets rather than excluding them and hence—not only by example and precept, but by the change that results from economic enrichment—to alter 596 the political systems that the hon. Member for Islington, North has spent so much of his life supporting and promoting.
Trade restrictions aimed at enforcing labour standards would almost certainly be unacceptable to the majority of developing countries, most of which behave perfectly respectably in terms of labour rules. The problem is simply that they are poor: any such trade restrictions would be a real excuse for protectionist abuses, which would make people in developing countries poorer, increasing misery and removing hope. I cannot imagine a more selfish option. Moreover, whatever sacrifice British industry might make, I think that we can be certain that some other countries would not be quite so scrupulous: the hon. Gentleman would not achieve his objective even then.
Real humanitarian issues such as slavery are best tackled through the United Nations system, as at present. UK law provides for prison-made goods to be banned from the UK, but that law has never been used because of the difficulty of proving the origin of any particular goods. That is a good example of the practical problems that could be expected to arise during attempts to deal with labour issues within the trading system.
§ Mr. Corbyn
The Minister now appears to be keen to remove sanctions. In that case, why on earth are sanctions being pursued against Libya, Cuba, North Korea and Iraq?
§ Mr. Hamilton
I do not think that we want to go down highways and byways of that kind. Let me deal with the other issues with which serious participants in the debate wish me to deal—in particular, trade and the environment.
Hon. Members have claimed that the WTO agreement will harm the environment or undermine important environmental policies and agreements. Again, I do not see how that can happen. The WTO agreement will not prevent countries from taking steps to protect the environment; it will help to stop the use of environmental excuses for protectionist purposes.
The UK is committed to proper protection of the environment, and to the maintenance and development of an open, rule-based trading system. That is why the UK has strongly supported the establishment of a WTO trade and environment committee to look further at new rules to reconcile the needs of the environment with the trading system. The UK is particularly sensitive to the need to involve developing countries in the process, because those countries often fear that the environment is used as an excuse to restrict their trade and market access. We must ensure that that does not happen. I can tell the hon. Member for Islington, North that nothing in the GATT round will prevent countries from meeting their obligations under the Montreal protocols.
A number of Opposition Members raised the tuna and dolphin case—in particular, the hon. Members for Glanford and Scunthorpe (Mr. Morley) and for Nottingham, South. I am happy to deal with that point, too. There have been two dispute settlement cases in GATT involving tuna and dolphins. In 1991, a dispute settlement panel upheld a Mexican complaint that the US had banned the import of Mexican tuna in violation of US GATT obligations. In that instance, the US action was aimed at protecting dolphins which swim with tuna in the eastern tropical Pacific—a point mentioned specifically by the hon. Member for Nottingham, South.
597 The United States rules were discriminatory because United States boats faced easier targets than foreign boats. They were also retrospective in their application. The GATT dispute settlement panel also confirmed that GATT rules do not allow unilateral trade action to be taken in pursuit of environmental goals wholly outside the country taking the action. It confirmed the United Kingdom view that multilateral agreement is the best way to tackle global environmental issues.
This year, the EC won a case in GATT against the so-called United States secondary embargo. It was a silly idea because the United States banned imports of tuna from countries that did not ban Mexican tuna at the time of the first case, ostensibly to prevent so-called tuna laundering, but really to put extra pressure on Mexico, so the case does not add much to our understanding of the wider environmental issues.
That shows, however, that efforts to enforce environmental rules by using trade bans are unlikely to work and that engaging the co-operation of others is much better than coercion.
§ Mr. Malcolm Bruce
Does the Minister agree that as we move on to the next round of GATT, it would be appropriate for an environmental responsibility to be built into the World Trade Organisation and that it should be the instrument for enforcing what has been previously agreed? That is not incompatible with what he has just said.
§ Mr. Hamilton
It is one possibility that will be considered in the near future. I cannot forecast the outcome of those negotiations. These have been difficult enough and went on for long enough, but I hope that other countries are as concerned as the hon. Gentleman is—and of course we are concerned about the environment, as my hon. Friend the Member for Gravesham (Mr. Arnold) demonstrated in a number of telling inventions in Opposition speeches and in his own speech.
The interface between the trading system and the environment is one of the issues which cross countries' borders. It is appropriate that such issues should not be wholly excluded from the debate, so they will be looked at.
The hon. Member for Glanford and Scunthorpe also asked about animal welfare and how that is affected by the Uruguay round. Animal welfare issues are not dealt with explicitly as part of the round, but any trade restrictions on animal welfare grounds will continue to be subject to the broad provisions of GATT. As such, they must not operate with discrimination between GATT members or amount to an arbitrary or unnecessary barrier to trade. In Britain, our standards for animal welfare are a matter of domestic choice. There is no automatic provision within GATT to permit restriction on third-country trade because production takes place under less demanding welfare conditions than nationally, but, if applied, such restrictions should not be any more onerous than the requirements placed on domestic producers.
As regards third-country imports produced under less stringent welfare conditions and the hon. Gentleman's proposition that they should be restricted, the Community will continue to be able to make bilateral arrangements with exporting countries regarding the source of particular export products. It is not appropriate for one member of GATT to impose arbitrary restrictions on trade with third 598 countries. The United Kingdom will continue to work closely with its European partners to ensure due consideration of animal welfare issues.
Once again, this is an issue with an interface with the trading system. I can understand the hon. Gentleman's concerns, but we must be ever-vigilant to ensure that such matters are not used as excuses to undermine the freedom of trade because that would be to throw the baby out with the bath water.
The United Kingdom has very obvious interest in maintaining the maximum freedom of trade around the world because such a high proportion of our national product is derived from international trade. As my hon. Friend the Member for Gravesham pointed out, we export more per head in this country than any country in the world, so we have a more vital interest than most countries in maintaining the integrity of the international trading system.
§ Mr. Morley
Does what the Minister is saying mean that if the European Union wants to continue to ban the importation of beef which has been fed hormones, as is the American practice, that can still be done under the GATT rules and arrangements?
§ Mr. Hamilton
I am not an expert on this matter, as might be obvious. My right hon. Friend the Minister for Industry assures me that some disciplines do apply, although, in the time available, he is unable to prompt me to repeat them at the Dispatch Box. I shall be happy to respond to the hon. Gentleman in a more permanent form and, I hope, satisfy him as a result.
Many hon. Members concentrated on the impact of GATT on developing countries. Developing countries know that they stand to gain from freer trade and the stronger trade disciplines that the round will bring. They made up a majority of the countries participating in the negotiations and, on a number of occasions, they took a lead in urging progress on the developed world. That was one of the outcomes of the Limassol conference in November 1993.
Last November's OECD-World bank study estimated that incomes in non-OECD countries would increase by some £78 billion a year as a result of the round. I accept that these are forecasts and, like the hon. Member for Nottingham, South, we are right to be suspicious of them. Whatever doubts we may have about the authenticity of any specific figure, it can hardly be doubted that there will be an increase in world trade as a result of the treaty and that that increase will be substantial, which will help to raise income levels and create jobs. Developing countries would have suffered more than most from any increased protectionism had the round failed.
The Government recognise, however, that the gains for developing countries will not be evenly spread. Most studies suggest that agricultural reforms will lead to price increases for most staple food products compared with the level of world prices in the absence of an agreement. That will raise the cost of imports for the developing countries that import foods, a point made by the hon. Member for Hemsworth (Mr. Enright), but which was well rebutted by my hon. Friend the Member for Broxtowe (Mr. Lester). In so far as the cost of imports for developing countries that are net importers of food creates problems, it should also 599 create incentives for local farmers to increase production, so enabling developing countries to reduce their dependence over time on imported food.
The final act of the round also includes provisions to assist net food importing countries through food aid and the resources of international financial institutions. That enables us at least to meet some of the difficulties faced by some countries. However, I agree that, overall, developing countries will be significant net beneficiaries of the changes to be made.
§ Mr. Enright
I said that I was talking not about Africa as a whole but about specific developing countries, especially those of sub-Saharan Africa. I went to some trouble to say that some African countries would benefit were it not for political difficulties that have nothing to do with GATT. We must recognise that a core of the African countries, especially the sub-Saharan countries, will suffer severely from GATT because the slightest quiver on their economic scale has significant reverberations and we must do something about it. I am sorry that the Minister has not yet said anything about bananas, but I hope that he will guarantee that the Government will continue their good behaviour in that respect.
§ Mr. Hamilton
I shall deal with bananas in a second so that hon. Members will not be disappointed.
As I was saying a moment ago, a number of round agreements recognise the special needs of developing countries. Some provide technical assistance to help them to comply and others give developing countries the additional time that they will need in order to implement the agreements. A ministerial decision on measures in favour of the least-developed countries will assist in a number of other areas. They include the regular review of such measures, the flexible and supportive application of trade rules and substantially increased technical assistance. Taken together, it is a substantial package of measures which will help to alleviate and, in many cases, eliminate the transitional difficulties that will be caused. Set in balance against the opportunities that are provided for developing countries by this set of agreements, I believe that the benefit overall is substantial.
The hon. Member for Islington, North made some wholly erroneous allegations about the impact of GATT on agricultural support in developing countries. GATT commitments to reduce domestic support for agriculture in developing countries will be less than that in the developed world and will be implemented over 10 years rather than six. However, support which forms an integral part of development programmes will be, in any case, exempt from reduction commitments, as will all support for agriculture in the least-developed countries. If such support systems were wholly excluded by GATT, of course, the common agricultural policy, unambiguously on the same principle, would also be excluded. That may find favour as a proposition with some of my colleagues, but it is certainly not one of the outcomes of the GATT negotiations.
I shall now turn to the issue of bananas, to pacify and mollify the hon. Member for Hemsworth. A Community deal on bananas with four Latin American GATT complainants was agreed as part of the Uruguay round and we welcomed that as offering the potential for a period of stability in the EC banana regime. We will be strongly supporting the Commission to ensure that the deal is 600 implemented to maintain the integrity of the regime itself. We have long-standing commitments to our traditional banana suppliers, which we fully intend to honour. With regard to the German case, which the hon. Member for Hemsworth raised, of course, we must wait and see how the European Court of Justice rules, but the preliminary view of the Advocate General last week was to recommend that the court overturns the case. The United Kingdom unambiguously supports the current agreement, which allows a mixed supply of bananas, and that is the policy of Her Majesty's Government.
§ Mr. MacShane
I am grateful to the Minister for news on bananas, on dolphins and on food, but may I turn his attention for a second to human beings? He did not answer the specific question that I put to him and his hon. Friends on whether the Government welcome the forthright statement by the president of the Swiss Confederation inviting the International Labour Organisation and the World Trade Organisation to co-operate strongly to set up joint bodies to link trade and protection for human beings, as defined by ILO conventions. Does the Minister welcome the statement or not? I would like an answer to that specific question.
§ Mr. Hamilton
I do not know if the hon. Gentleman missed the section of my speech in which I dealt with those issues. I have to admit that I had not come across the statement of the president of the Swiss Confederation, but I do not spend as much time in Geneva as he does.
A number of important constituency points were also raised, not least by the hon. Member for Alyn and Deeside (Mr. Jones). I wholly understand his concerns on issues such as steel and, indeed, aerospace. The hon. Member for Rotherham (Mr. MacShane) also inveighed heavily against subsidies to the steel industry, but, of course, only in other countries. That seems to be one of the problems with Labour Members. They find it rather difficult to take a universal view of such questions because they have been so inured over the years to supporting those disastrous policies in the United Kingdom. When we try to sweep them away around the world, there is a certain ambivalence about their welcome for the changes. I fully agree with the hon. Member for Alyn and Deeside about the huge productivity gains that have been made by British Steel in recent years. It is now one of the best steel-making companies in the world. It certainly causes us some concern when subsidies and other unfair practices in other countries, sometimes in the European Community, undermine the market position of a company which, in the free market, would undoubtedly be a market leader. We strongly oppose some of the unfair regimes, which the hon. Gentleman complained about in his speech, and we shall continue to do so.
With regard to the Airbus project, the hon. Member for Alyn and Deeside invited me to put pressure on British Airways to purchase one particular model as opposed to another. I have to tell the hon. Gentleman that we have moved away from that kind of role for the Government in the past 10 or 15 years. I do not know whether Opposition Front Bench Members are committed to reversing those policies, but I cannot believe that a reversion to a regime whereby politicians rather than business men decided on investment projects and the products to be purchased would constitute an advance.
601 I hope that British aerospace companies will prosper. We will do all that we can to improve the business environment and the export potential of those products. The full resources of the Department of Trade and Industry's export promotion departments will be made available.
Future large orders from the Ministry of Defence are not a matter for me. I will draw the attention of my right hon. and hon. Friends in the MOD to the remarks made by the hon. Member for Alyn and Deeside. As a north-west Member, I fully understand, as British Aerospace plants are very close to my constituency, how important such projects are to the future of that company.
I do not share the pessimism of the hon. Member for Alyn and Deeside that the agreement will fail to achieve its objective of reversing what he called industrial decline. In the increasingly competitive modern world, the only way to succeed is by becoming more competitive, which happens not by being insulated from competition, but by being exposed to it.
The most successful economies are without exception in countries that have very competitive home markets, particularly in Japan, where domestic competition is fierce. Those are very difficult markets to break into. The success of those industries, which they have been able to export to other countries, is based on fierce internal domestic competition. We must recognise that there is no means of insulating ourselves against that.
Overall, I believe that the agreement is a contribution towards raising the wealth-creating potential of this country and of the entire world. It has taken 40 years for GATT to reduce tariffs to their present level. It has taken 20 years to deal with non-tariff barriers, 10 years to agree to extend GATT rules to trade in services and seven years two months and 25 days to conclude the Uruguay round negotiations.
Nevertheless, the wait has been worth while. The conclusion of the Uruguay round represents a substantial further step down the road of trade liberalisation. Peter Sutherland described it asa defining moment in modern history".The new agreement has paved the way for the creation of a new world trading system under the auspices of the World Trade Organisation and we give thanks for it.
My right hon. Friend the Minister for Industry spoke earlier of the courage shown by the nations of the world in choosing the route of liberalisation. At a time of stagnation in the world economy, it would have been easy to yield to temptation and to resort to protectionism. That was the great mistake that was made in the 1930s which deepened and lengthened the great depression.
However, the world has now taken a clear step in the opposite direction, concluding that prosperity is best achieved by means of strong multilateral trade rules and their vigorous enforcement. Courage will also be needed to put the agreements into effect and to build on them. However, in concluding the Uruguay round, the path of growth has been chosen. I commend the agreements to the House.
§ Motion, by leave, withdrawn.