§ 3.28 p.m.
rose to call attention to the problems of the shipping industry and to the Twelfth Report of last Session of the European Communities Committee on EEC shipping policy (H.L. 70, 1978–79); and to move for Papers. The noble Viscount said: My Lords, in calling attention to the problems 1115 of the shipping industry and in particular to the Twelfth Report of your Lordships' Select Committee on European Affairs, I do not have to remind your Lordships how vital our shipping industry is to the United Kingdom. We all know that that goes without saying, but, regrettably, I suggest that it is all too often interpreted as being taken for granted and, while that may be regarded as a compliment, it is, I suggest, a rather dangerous compliment.
In my Motion, I refer to the Twelfth Report for 1978–79, which deals with shipping policy generally and with competition from cargo liner fleets of State trading countries in particular. Your Lordships will have noticed that the Committee recommended that this important matter should be debated in your Lordships' House but should be debated against a background of much wider shipping policy. That is the purpose of my Motion today.
The noble Lord, Lord Trevelyan, who is Chairman of Sub-Committee B, which really produced the Twelfth Report, did me the honour some time back to invite me to move the Resolution which his Sub-committee and the Select Committee itself recommended, and I am most grateful to him for that invitation. Originally, the Motion was down to be debated on 12th April but of course, like other debates, it fell with the general election. It is not without significance that there have been important developments in this field in the interim period, and of course, in saying that, I am not referring to the election but to other relevant developments. I mentioned the noble Lord, Lord Trevelyan. I feel I must say this. The noble Lord is regrettably not with us today because, as many of your Lordships will know, he has recently undergone some serious operations. I spoke to Lady Trevelyan this morning to find out how he was getting on, and your Lordships will, I am sure, be glad to hear that, while his progress is slow, progress is being maintained. I would like to send him, personally, a hope that he will very soon be in his place in this Chamber again.
My Lords, I want to start with a brief look at the United Kingdom shipping industry as a whole and its position in the world today, in order that, coming to more particular points, one can have 1116 the right perspective. The United Kingdom shipping industry has, I suggest—and I can say this as I have no personal axe to grind—much to be proud of. It stands fourth in tonnage in the world after Japan, Liberia and Greece. Its ships are today, on an average, no more than seven years old, and they are highly sophisticated. The ships owned and registered in this country represent something like 7 per cent. of world tonnage. The industry employs 80,000 people directly, and it contributes the remarkable —as I think I can say—figure of £l½ billion sterling a year to the United Kingdom balance of payments. Its record for investment as an industry can be said to be second to none in this country. That investment of course includes a lot of new technology, and it has been estimated that, between 1966 and 1976, the investment was the equivalent of £1 million a day. That is a pretty remarkable figure.
The industry has led the world in the development of container ships, and let us remember that, broadly, one modern container ship can be said to be the equivalent of something like ten traditional cargo liners. It has the largest refrigerated cargo fleet in the world, the second largest gas fleet, the third largest chemical fleet, and, along with those material assets, it has made great strides to match the selection and training of seafarers at all levels to the high standard of its fleet. Admittedly, it is no longer right at the top of the tree dominating the world's fleets as it used to be. But I do feel that what I have quoted are impressive facts, and although the return on capital has been rather varied at times, the United Kingdom shipping fleet really has nothing to be ashamed of in its efforts to keep right ahead and to meet the major problems that confront world shipping as a whole today.
I would suggest to your Lordships that shipping is probably the most vulnerable of all industries to outside economic influences. If we look at the world shipping picture since the OPEC crisis in 1973, what do we see? We see that it has experienced the worst recession since the 1930s. A massive slowing down in the demand for shipping, together with a huge world order book inflating the world's fleets, resulted in a collapse in freight rates and severe over-tonnaging. 1117 Although, of course, the situation varies with different sections of the industry, if we take one example—that of tankers —current thinking for tankers is that the proper balance between supply and demand is unlikely to be achieved until at any rate the early 1980s. This world surplus of tonnage, which has been with us already for some years now, is not correcting itself anything like as quickly as one would like, perhaps due to some extent to the understandable desire of many Governments to see what they can do to maintain employment in their shipyards.
In mid-1978, just a year ago, the deadweight tonnage of ships laid up worldwide was 57 million tonnes, and it has been estimated that slow speed steaming disguised at least a further similar amount. In short, one-sixth of the world's fleet, largely tankers, was surplus. During the second half of 1978, there was an improvement, laid-up tonnage falling to some 30 million tonnes and freight rates increasing to levels which provide, as I understand it, a degree of viability. But since then events in Iran and uncertainty of world trade, from whatever cause it may arise, have left a very inscrutable future.
The United Kingdom, of course, has not been immune to all these events but has probably fared rather better than average, at any rate up to 1977. However, in 1978 our situation deteriorated and in the middle of last year 6 million tonnes or 13 per cent. of our fleet were inactive. There have, of course, been some bright spots—ferry operations, cruise ships. The position for container ships, to which I have already referred, has also been good, but even here there are now signs of over-tonnaging. At any rate, our laid-up tonnage has dropped to some 3½ million tonnes, and this includes some disposals, but the outlook is still very obscure. So the situation is a very difficult and murky one, and it is in that situation that we have today three major problems, among others, which I want to look at.
There is, first of all, the United Nations Code for Liner Conferences. There is the friction caused in Western circles by certain aspects of United States shipping policy. And then there is the matter 1118 referred to specifically in my Motion—the impact of unfair competition from the cargo liners of State trading countries. I shall largely confine my comments to those three issues in the order in which I have mentioned them, because I think they build up logically in that way. But there are, of course, other problems. There are the efforts in UNCTAD to deal with and regulate bulk trades; there is the question of flags of convenience; there are the discrimination practices of certain countries, including the State trading countries. No doubt other noble Lords who will be speaking from great experience will deal with those points as well. I may make just a very brief comment later on the bulk trades.
As regards the United Nations Code for Liner Conferences, I should remind your Lordships that there are in the world something like 300 conferences. They play an extraordinarily important part in the United Kingdom shipping industry. They have, of course, from time to time—let us admit it—caused critical comment from various directions. They have been regarded as cartels, and in fact they are. I certainly shall not go into any details as regards that now: suffice it to say that when the Committee of Inquiry, of which I had the privilege to be chairman, reported to the Government of the day in 1970, we came to the conclusion, after very careful study and taking a great deal of evidence, that if shippers who were not able to charter complete ships for their own trade were to have the regular and efficient service required for their trade at quoted prices, and if shipowners, with their capital intensive industry were able to provide that on a viable basis, then the so-called "closed conference" was the answer. We pointed out that the system must be properly monitored and that it was really essential although one recognised then, as one does today, that the closed conference is anathema in the United States. In passing I should like to stick my neck out and urge some of our more leading industrial shippers to take a more active personal interest in shippers' councils, the work of which is so important when it comes to the consideration and operation of conferences. However, I must, of course, remind your Lordships that shippers' councils are also, I think, illegal in the United States. 1119 The problem to which we now particularly come as regards liner conferences concerns the question of developing countries, which naturally want to have access to membership of these conferences that serve their own trade, and they want to have some allocation of their own trade. The United Nations Liner Code of 1974 tried to bring that about—indeed, that was its purpose. The United Kingdom shipping industry and, I think, successive Governments, have always recognised that some access to these conferences was reasonable. But the United Nations code, which as I say was intended to bring that about, caused considerable doubts and difficulties. The United Kingdom did not accept or ratify it. I shall not go into the details. They are involved and admirably laid out in another report of your Lordships' Select Committee—the 25th Report for 1977–78 —although that report, at the time, was not discussed in your Lordships' House.
Very briefly, the code provided for access to conferences by developing countries and the sharing of their cargoes to and from them on the basis of the so-called 40–40–20 formula which I have no doubt your Lordships know all about. The difficulty arose not only from the provisions of the code itself, which many felt were far too rigid, probably unworkable and even likely to result in the mandatory transfer of traffic from efficient lines to inefficient lines. That was one of the problems. However, the other problem was that it created considerable differences of opinion in the EEC as to how member-States should react to it, and there was uncertainty as to what should be the correct Community attitude under the Treaty of Rome to its members ratifying the code.
After considerable and lengthy discussions in Brussels, a compromise was arrived at only early this year—this has been going on since 1974. Briefly that compromise accepted the provisions as regards trade with developing countries, but agreed that trade between member-States of the EEC and OECD countries should continue to be allocated on a commercial basis. A Statement to that effect was made in another place by the Secretary of State for Trade on 17th May last.
Whether this compromise would prove 1120 adequate to maintain the viability of the shipping lines of the great maritime nations, including ourselves, with all their immense in-built investment, or whether indeed it would satisfy the aspirations of the developing countries was a matter for conjecture. At any rate, this compromise had to be ratified last month at the UNCTAD Conference in Manila. As I understand it, the outcome was that there were varying degrees of acceptability expressed by a great number of countries, some abstensions and a few outright objections. In the end, a resolution was agreed without dissent which, so far as I understand it, seems to have the effect of encouraging all concerned, including the developing countries, to get on with arrangements, and instructing the Secretary General of the United Nations to lend advice and help developing countries where called for, and to carry out certain monitoring to see how progress was being made. At any rate, it seems as though the resolution effectively closes the debate for the time being.
So much for that matter. However, before I leave the Manila conference may I say that another resolution on the bulk trades was also passed. That resolution dealt with bulk trades and flags of convenience, but it is quite clear that there was no meeting of minds between the West on the one hand and the rest of the world on the other. I imagine that these subjects will come up again for discussion at the Ninth Session of the UNCTAD Committee on Shipping, which I believe is due to take place in 1980. I hope that other noble Lords will pick up these points. What is significant—and this is the only reason why I say anything about it at all—is that the OECD countries, taking theirlead from the United Kingdom, urged that the present commercial basis for the bulk trades was infinitely better than any form of regulations, but they were outvoted by the rest in an omnibus resolution dealing with this and other matters. What is significant, and really encouraging, is that on this occasion all the West voted as one. I hope that my noble friend the Minister will have something to say on that.
The instance of the West voting together is important and leads me to my next point—namely, that the Western maritime countries must make a concerted approach on a number of matters. 1121 However, the point that I want to make is one that makes this concerted approach more difficult and it stems from across the Atlantic, from the United States. In the United States shipping policy is, in many respects, quite different from that of other Western maritime nations. These Western nations, and indeed most others, recognise the importance in trading terms of the rationalisation which is provided by the closed conference system. For that reason, for the most part liner conference activities are exempted from the scope of national anti-monopoly legislation. But, on the other hand, when it comes to the United States, the spectre of United States' anti-trust monopoly legislation overhangs all the shipping operations, and American attempts to impose their anti-trust laws on international liner shipping have given rise to jurisdictional disputes between the United States and Governments at the other end of the trade. This has happened on a number of occasions. Considerable efforts were made—and I am very glad that the noble Lord, Lord Goronwy-Roberts, is following me because I am sure that he took part in this and helped it along—by the United States and Western European Governments to achieve some long-term understanding in their mutual trades. Progress was certainly made, but the events which I shall now mention have certainly threatened to set back that progress.
Following Grand Jury investigations in Washington, criminal indictments alleging breach of Section 1 of the Sherman Act were handed down to various shipping lines, including certain United Kingdom lines and United Kingdom nationals. Naturally, this prompted—and I think rightly—our Secretary of State for Trade and the President of the General Council of British Shipping to make very strong statements deploring this action, referring to it as quite prejudicial to any progress in understanding between us. It was unilateral action taken by the United States and does not help Western countries getting together on shipping matters.
In the event, some quite substantial fines were demanded and have been paid. One hopes that this will be the end of the affair, but that remains to be seen. Naturally, one cannot condone the breaking of the laws of another country by one's own nationals, but this surely is a 1122 different situation. It leaves a sour taste in the mouth and must be a serious setback to objective discussions in the future. However, some modus vivendi between the United States and its European shipping partners must be reached; that is absolutely essential. At a time when we are faced with very difficult world trading conditions, a recession of no mean magnitude, and with the non-commercial activities of Soviet shipping lines, we, in the West, cannot afford to argue among ourselves. It is farcical and tragic; we must work in concert.
That brings me to the point raised in the Twelfth Report about Russian shipping. I use the word "Russian" for short; I should perhaps say the Comecon countries. For the most part Russian shipping lines are not members of liner conferences. As the Twelfth Report admirably points out, they have a rapidly expanding fleet; they seem to have a bottomless purse; they undercut the conference rates substantially and take the cream of the trade. They are doing this to an alarming extent.
Judged on the basis of United Kingdom accounting principles that could be done only at a loss, but I understand that with their accounting approach they can conveniently claim that they are making a profit. Therefore that would exonerate them from the accusation of unfair competition. I have heard it suggested in this country that nations are free to run their own commercial operations and accounting procedures according to their own lights. That sounds logical enough. However, in a complex industrial world where international trade is so important to all of us, some degree of reciprocity is surely needed. In the past various attempts have been made to come to grips with this problem, both on a bilateral basis in the Anglo-Soviet talks in the Black Sea in 1977, and in such international organisations as the Consultative Shipping Group, which comprises Western European countries, Japan, and the OECD.
There has been no reciprocity from Russia and little has been achieved. With the impact growing worse, an attempt was made to discuss this whole question in Brussels in the hope that the collective muscle of the Community might prove to be effective. As the Twelfth Report 1123 shows, after considerable discussion a very promising suggestion was made. It involved concerted action, first, in the form of fairly widespread monitoring of the routes as to what was happening, which could then be followed, as necessary, by appropriate counter-measures. However, in the event, regrettably that was entirely dropped and all that was left was a very diluted form of monitoring on a minor number of routes. All one can say is that the will to do anything really effective was not there in Europe.
Of course, shipping is more important to some countries than it is to others. Some countries, even maritime countries, may have other reasons for not wanting to antagonise Russia in this instance. They know that Russia is already irritated by the reactions from the West. However, from the United Kingdom's point of view this situation is really serious. I understand that as far back as 1977 the spokesman of the late Government, Mr. Clinton Davis, made it abundantly clear that there could be no further bilateral talks unless the Russians could show some degree of flexibility in their attitude to individual cases. I am told that they have at last agreed to something that may be taken as a feather in the wind. A small degree of flexibility may now be possible in that they have agreed to join the India, Pakistan and Bangladesh Conference on conference terms. Whether or not this is to be seen as a degree of softening up, I do not know.
Last week there was a meeting in London of the Anglo-Soviet Joint Maritime Commission. I do not know what happened at that meeting. Perhaps my noble friend on the Front Bench will be able to tell us. I rather doubt whether anything relevant occurred. Failing that, I shall look with great interest to see what suggestions other noble Lords and noble Lords from both Front Benches have as to how this problem should be tackled. I am afraid that I have spoken for a long time, but this is a very difficult and technical matter. I have tried to build up, in correct logical order, to the point raised in the Twelfth Report. My Lords, I beg to move for Papers.