Orders of the Day — European Communities (Developments)

Part of the debate – in the House of Commons at 12:00 am on 15th November 1978.

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Photo of Mr Frank Judd Mr Frank Judd , Portsmouth North 12:00 am, 15th November 1978

I beg to move, That this House takes note of the Report on Developments in the European Communities, January-June 1978 (Command Paper No. 7361). This White Paper gives the House a factual account of events and developments during the Danish presidency of the Community. At the outset of our deliberations, I should like once again to thank the right hon. Member for Bournemouth, West (Sir J. Eden) and all his colleagues for the work that they have done for the House in their long hours in the Scrutiny Committee. I would also like to thank those other Members of the House who diligently keep an eye on Community affairs.

Instead of repeating all the detailed material in the White Paper, I want, with the leave of the House, to identify some of the major problems which face us in Britain and to evaluate to what extent our membership of the EEC has or has not helped us to find solutions to them. The Community is not an end in itself. To believe that it is is a mistake some misguided idealists have too often made. It is a piece of political machinery, and its value has to be judged by how far we are able to use it effectively in fulfilling our economic and social objectives.

The greatest single issue which dominated this six-month period was undoubtedly the worldwide effort to achieve growth without inflation in a period of gradual recovery from the oil crisis and other setbacks of recent years. That is why the Prime Minister took the initiative in March this year and presented his five-point plan covering higher growth, improved currency stability, energy, trade and long-term capital flows, including aid for the developing countries.

While the larger members of the Community speak with their own voices on the world economic stage and participate in their own right at economic summits, the Community acting as a whole can sometimes make an even greater impact. The Community is, after all, the world's single largest trading area. Its share of world trade is far bigger than that of the United States of America or of Japan. The figures are 37·2 per cent. for the EEC, 11·7 per cent. for the United States of America and 7·9 per cent. for Japan. It therefore in our view made sense for us to consider what contribution the Community as a whole could make to the success of the Prime Minister's five-point plan, including getting the right results from the Bonn summit.

As the White Paper shows, we were able to bring the Community very successfully into our general strategy for Bonn. It was decided at the April European Council that member States should work out a common strategy including joint commitments on the key point of growth, but also leading to action in a whole range of specialised ministerial Councils such as those on social affairs, energy and aid. The result was agreement at the Bremen European Council later in the summer on a range of commitments and joint positions, with which the Community members involved were able to go to Bonn a week later and work there for a similar agreement with the other leading industrialised nations.

The Bremen European Council saw, of course, not only the completion of this "common strategy" but the launching of a new project—the Franco-German proposals on a European monetary system. This issue of course falls outside the scope both of the White Paper that we are discussing and the current debate, but, as the Prime Minister has made clear, this House will have a chance to debate it before final decisions are taken.

For the moment, I would only say that we believe that a scheme for monetary stability must be judged by its practical contribution to the whole range of our economic objectives, including growth and higher employment as well as monetary stability and the control of inflation. It must also obviously be judged in the context of overall costs and benefits of membership of the Community itself and of how far there is a demonstrable move towards economic convergence between the wealthier and less affluent member States. That is how we in the Government shall judge it when the moment for decision comes. And that is how we recommend that this House should judge it, too.

I mentioned trade. What is at stake in the current Tokyo round of the GATT multilateral trade negotiations is the future of world trading arrangements, quite possibly for the remainder of the century. The Community acts together in these negotiations and its collective weight enables it to bargain on favourable terms with other major trading partners such as the United States and Japan. We stand to benefit a great deal from this. At the same time, for negotiations to succeed, as we very much hope they will, the Community will need to show imagination in responding to the needs of all participants, including the developing countries and the medium-sized agricultural exporting countries such as Australia and New Zealand.

The Tokyo round will be a success only if it is demonstrably fair to all. Frankly, I do not believe that the position of the Community is yet all that it could and should be in some of these respects, and we are determined to play a constructive part in overcoming remaining shortcomings. One particularly disturbing related problem is the failure of the Community as yet to join the International Sugar Agreement and its continued insistence on providing export subsidies greater than the world sugar price, while for some developing countries sugar sales remain literally a matter of life or death. In my view, as long as this indefensible policy goes unchanged, the reputation of the Community will be badly damaged.

It has become increasingly clear at recent summit meetings that the challenge of the Third world is to be seen not in moral terms alone—although the moral demands remain as stark as ever—but in terms of our own well-being, strategically and economically. If we want international stability, we must remove the causes of instability. If we want a prosperous world economy, we must mobilise the economically immobilised millions of Africa, Asia and Latin America. That is why we are concerned not only with the prosperity of this country but with the legitimate needs and aspirations of the people in poorer countries than our own.

On North-South matters, the Community has continued the tradition established at the Conference for International Economic Co-operation last year of making its own distinctive contributions to discussions. We look forward to working within the Community and the wider so-called group B of OECD in the preparation for the forthcoming talks on the proposed common fund for international commodities and for UNCTAD V next year and in the elaboration of a new United Nations international development strategy for the 1980s and beyond.

The Lomé convention, which governs the Community's relations with some 56 African, Caribbean and Pacific States, covers around 600 million people, and its scope is virtually the same as that of the North-South dialogue, as indeed is its aim—namely, the establishment of a new model for relations between developed and developing states, compatible with the aspirations of the international community towards a more just and more balanced economic order. Negotiations, as the House is aware, are now under way for a new EEC-ACP convention, and the Government hope that they will lead to a successful outcome. We want Lomé to be effective. but I must emphasise that we see the convention as only one part of our strategy towards the developing countries. We are determined that it should not become a divisive factor within the Third world.

Meanwhile, the Community's contribution to the development of countries not covered by the Lomé convention, the so-called "non-associates", remains totally inadequate. The Government are working hard with the Governments of a number of other member States to try to increase the amount of money which will be devoted to the Community's programme of aid to them, including as they do some of the largest and poorest countries of the world, not least in Asia.

The Community must do more in the aftermath of the Bremen summit, which agreed that there should be a substantial increase in its aid to the poorest non-associates, to help this part of the developing world. The Government are accordingly pressing for the 1978 allocation of about £45 million for aid to non-associates to be increased to around £70 million in the budget for 1979, and they have been encouraged by the progress which is being made in Brussels to this end.

As the House will be aware, in our overall approach to the new Lomé convention we are concerned to see the issue of human rights taken seriously alongside our concern for economic and social rights of the people of the ACP States. It is simply not acceptable that people in Britain, through their taxation, should be expected to support a repressive regime simply because there is no mechanism under the existing Lomé agreement for suspending its aid or STABEX provisions. But we must avoid a neo-colonial attitude. The fight for human rights is a joint responsibility of ACP and EEC nations alike. We therefore hope to find a way of dealing with this problem which is mutually acceptable.

The development of a new world economic order is not, of course, a problem uniquely for non-industrialised countries. It means changes in the economic systems of the industrialised countries as well, as was clearly brought out in yesterday's' debate. These changes are invariably painful. Three industries where the consequences have been particularly striking are textiles, shipbuilding and steel.

On textiles we are facing up firmly to the challenge of adjustment. This is an occasion when being a member of the EEC has frankly helped: it has been easier to persuade suppliers to reach restraint agreements with the Community as a whole than it would have been for the United Kingdom to act on its own. At the same time, this network of Community agreements with low-cost suppliers, which gives them assured access to our markets, will help industry in the developing countries to plan more securely for the future. The Community has taken particular care to allow special opportunities within these arrangements for exports from the poorer developing countries.

The Mediterranean countries which have preferential arrangements with the EEC were not included in the earlier network of agreements with low-cost suppliers under the multi-fibre arrangement. But separate voluntary restraint arrangements have since been negotiated with most of the main Mediterranean suppliers. These negotiations have been protracted in some cases and, unfortunately, Malta and Turkey have still been unable to reach agreement with the Community. As a result, the safeguard clause in their association agreements has had to be invoked.

In the case of Malta, despite considerable efforts by the Commission to negotiate voluntary restraints comparable to those reached with other suppliers, the Community has found it necessary to limit Malta's exports to the United Kingdom of six sensitive products for the rest of 1978. The Community is, however, very prepared—indeed, anxious—to go on talking to the Maltese about arrangements for subsequent years in the hope that agreement can be reached and safeguards can be lifted.

The shipbuilding industry throughout the world has been badly hit by the recession. Our own industry must be in a position to benefit from the upturn when it comes. We are co-ordinating our action with our EEC partners within OECD in order to ensure as far as possible that the European share of the shrinking world market is not reduced still further. Pressure on the Japanese in particular was for a long time effective in preventing them lowering their prices to attract more orders, although more recently they have declared that the appreciation of the yen makes it impossible for them to do so indefinitely.

Our strategy is also to use the shipbuilding intervention fund to attract enough orders to keep the industry on its feet during the recession. Adjustments of capacity are inevitable, as Ministers have always made clear in this House, but the fund is intended to help make these adjustments as orderly as possible. The adoption of the EEC fourth directive on aids to shipbuilding in April, which admitted the principle of subsidies, enabled us to negotiate with the Commission an extension to the intervention fund.

Those negotiations were not easy, but they succeeded. If they had not, or if no mechanism such as the Community provides existed in this field, there would have been nothing to stop member States rushing into a beggar-my-neighbour subsidy race, with disastrous consequences for the shipbuilding industry in this country. Here again, I suggest, is an area where the Community has made a useful contribution.

Finally, I turn to one of the three industries where the process of adjustment has been particularly painful—namely, the steel industry. At the beginning of the year the world steel industry was in serious difficulties. Many steel producers were making heavy financial losses. The Community industry was particularly badly hit. Its share of world markets had fallen and home markets were suffering serious disruption from low-priced imports. Plants were working at only 60 per cent. capacity. This was an intolerable economic and social problem. It is against this background that the Community has introduced a package of anti-crisis measures designed to restore profitability to the Community steel industry and to provide a breathing space in which necessary long-term restructuring can be carried out.

These temporary measures to deal with the crisis have provided immediate and considerable benefit. Their continuation for a further period is of great importance. We hope this will be agreed before the end of the year. But we and our Community partners recognise that in the longer term the problem can be tackled only by means of detailed plans for restructuring the Community steel industry as a whole. Some progress has been made in this direction, but detailed measures have still to be agreed.