Orders of the Day — Multilateral Trade Negotiations

Part of the debate – in the House of Commons at 12:00 am on 29th June 1979.

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Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertfordshire South 12:00 am, 29th June 1979

Yesterday, the OPEC Ministers took the decision to put up the price of oil. Today, in Tokyo, my right hon. Friend the Prime Minister and the other leaders of the West will be discussing ways of dealing with the energy crisis and other pressures on the world economy.

One of the dangers facing the West is that the OPEC decision will give a new impetus to those who see protectionism as an answer to our problems. It is against this background that we are today discussing the outcome of the Tokyo round of the multilateral trade negotiations, one of the main barriers to protectionism.

As the House will know, this latest round of multilateral trade negotiations, as they affect the United Kingdom, was launched by my right hon. Friend the Member for Worcester (Mr. Walker), now Minister of Agriculture, Fisheries and Food, in 1973 when he was Secretary of State for Trade and Industry. The negotiations took a very long time to get started seriously, and even after the necessary United States legislation had been passed at the beginning of 1975, serious negotiations had to await the outcome of the United States presidential elections and the appointment by the new President—President Carter—of Ambassador Robert Strauss as his special trade negotiator. Unlike some international negotiations which have been in the doldrums and have subsequently foundered, however, these have been brought to a successful and worthwhile conclusion.

The Commission, negotiating on behalf of the countries of the EEC and the other negotiators—largely from developed countries—initialled agreements on most of the subjects that had been under discussion in the multilateral trade negotiations in Geneva on 12 April of this year.

Many developing countries are currently considering whether to accede to some or all of the agreements. The Government earnestly hope that they will feel able to do so. That was the course I urged on them at UNCTAD and during my subsequent trip to the ASEAN area. I understand their feelings that they were to some extent "bounced" in the later stages of the negotiations. It is true that the need to get the agreements ready for the United States Congress to consider them this summer did not permit the more thorough negotiation that would have been desirable.

I explained to the Ministers of a number of countries whom I met in Manila that the multilateral trade negotiations were not a charter for protectionism, as some of them saw them, but were, rather, a vital weapon in the armoury of the Governments of the Western countries that should enable them to resist protectionism. I found that many Ministers representing rather less democratic countries than ours find it hard to understand that the impetus for protectionism in a country such as ours does not come from the Government. It is a pressure which comes from the people and which Government are resisting.

The agreements are important, but how they are put into practice and how they will work is just as important. In evolving the necessary codes of practice and the new techniques that will be necessary if we are to implement the multilateral trade negotiations, the developing countries can play, in our view, a most important part.

I shall not attempt now to expound the detailed provisions of the agreements. Anyone who has examined those texts, which have been made available to the House, will see that they are very complicated. The texts are being finalised. Once they are in their final form, the Government will have them printed and laid before Parliament in the usual way. My Department has prepared for this debate a background paper which tries to set out the points which we consider are of real economic and political importance. I hope that those interested will have been able to have had a look at them.

Looking round at the rather less than crowded House, I was tempted to come to the conclusion that many Members, having looked at the paper, had decided that it was not a subject for them and had been frightened away. That was not the Government's intention in putting that paper in the Vote Office.

Before I turn to the general intent of the agreements, I shall say something about their importance in rather more general terms. The Tokyo round negotiations were launched before the oil crisis—and by that I mean not the 1979 oil crisis but the 1973–74 oil crisis—so many of the objectives that Ministers set themselves in Tokyo proved incapable of complete fulfilment in the light of the recession that followed the oil price increase in the middle of the 1970s.

That recession and the rise in unemployment in the developed world naturally led to considerable protectionist pressures in many developed countries—mainly from industries that found themselves in difficulties. It has been the general consensus amongst the leaders of the Western world, at their successive economic summits since 1975, that it would be disastrous to give way to such pressures, and that the route of protectionism is not one that it would be wise for the Western world to follow. That does not alter the fact that there can scarcely ever have been a time when it seemed less appropriate to be discussing the liberalisation of trade than during what has proved to be a prolonged and very stubborn recession.

It is against that background that I pay tribute—I hope that it will not embarrass him too much—to the right hon. Member for Lanarkshire, North (Mr. Smith) and to his predecessor, Mr. Edmund Dell. This was their attitude, in direct contrast to the policy advocated by some of their hon. Friends, who argued strongly in favour of a protective wall of import controls behind which British industry was supposed to revive itself through increased demand.

Apart from the fact that adopting generalised controls is a policy closed to us by our international obligations and our membership of the EEC, and would almost certainly provoke retaliation, I do not believe that the removal of the stimulus of overseas competition would assist in improving domestic industrial efficiency. The fact that the consumer has a choice and is prepared to use it if British companies do not provide what he wants when he wants it at a price that he is prepared to pay, is the best spur that British industry has to increase its competitiveness and productivity.

The fact that multilateral trade negotiations were going on and creating a real prospect of a further step towards the liberalisation of world trade and better and more up-to-date rules for it, and for the settlement of disputes about it, has been an important element in enabling Governments to resist the pressure for piecemeal protection.

If the negotiations had failed—and at times an outcome as successful as the one that has been achieved seemed very far from a foregone conclusion—there were real grounds for fears that the alternative would have been steadily increasing protectionist actions by Governments. That the negotiations succeeded was due very largely to the contribution from the United States side and, in particular, from Ambassador Strauss. Many people regard his appointment by President Carter as the special trade negotiator as probably the main turning point of the negotiations.

I also pay a compliment to those who have negotiated on behalf of the EEC and those unsung heroes, the officials of the Department of Trade, who played a very substantial part in keeping the negotiations moving.

I now touch on the most important elements of the package agreed. Industrial tariffs are to be cut by somewhat under a third over a period of eight years. That average naturally conceals considerably different tariff bargains between the main negotiating partners. The most far-reaching is probably the bargain between the EEC and the United States, with clearly balanced cuts of about 30 per cent. on each side, where the cutting process was pursued as far as the negotiators judged practically possible. The outcome of the negotiation with Japan, with cuts on applied tariffs of 25 per cent. on their part and 20 per cent. on the Community's part, was a little disappointing.

The industrial tariff cuts offered by Australia and New Zealand to the Community are relatively modest, but they reflect the fact that the reciprocal concessions by the Community had to be found, and that they were found with some difficulty in the agriculture sector. I shall return to that aspect of the negotiations later.