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

I thank the hon. Gentleman for that information. I approved the paper over the weekend, thought it was an excellent idea, and gave instructions for it to be placed in the Vote Office. I am sorry that that has not happened and that I am the only hon. Member present who has seen a copy, but the hon. Gentleman will see that action is being taken at this moment.

We do not believe that the extent of the current cuts that have emerged from this round of the GATT negotiations will damage United Kingdom industry. Certain industrial sectors were unhappy at the extent of the tariff concessions that the Commission made to the United States. In the context of the tariff package as a whole, and with the various safeguards for the textile and paper industries decided upon by the EEC Council of Ministers on 3 April, the Government believe that it is one that the EEC Council of Ministers should in due course formally accept and implement.

It would not be wise to judge this round of renegotiations purely on the basis of the size of the tariff cuts. The Tokyo round of cuts is worth while, but the negotiations were not principally about the cutting of tariffs; they were about the removal, as far as possible, of the proliferation of non-tariff barriers to trade that have evolved in recent years. The main aim of the Tokyo negotiations was nothing less than to clean up the rules of the world trading system.

The agreements on non-tariff barriers in the MTN package are not castles in the air but real attempts to overcome the practical difficulties that face exporters and hence promote trade. If exports are to develop and international trade to thrive, exporters need to be able to predict the total charges to which their goods will be liable before reaching the customers. They want to know not just the rate of duty that will normally be charged but such things as the basis on which the duty is calculated—that is, the basis of customs valuation—whether antidumping or countervailing duties are likely to be imposed, what technical regulations or standards have to be met and what conditions exist for bidding for foreign Government contracts. The agreements tackle these four major problems.

The non-tariff agreements provide a better framework for international trade and greater transparency and openness. We have not been able to get all that we wanted. In negotiations of that kind it would be ideal to impose obligations on others and leave ourselves free of any, but I believe that experience of the working of these agreements will in time show that we have struck a fairly well-balanced bargain.

Disparate methods of customs valuation in different countries have in some instances led to arbitrary and aggressive valuation to raise revenue or protect domestic industry. The danger of the extended use of such valuation practices in order to compensate for the lowering of ad valorem custom duties in the current round added impetus to the search for a system of valuation that would meet with universal acceptance. It was not possible in the negotiations to win everyone round to the system currently used by the Community—the Brussels definition of value. A new system has evolved based in the main on the price paid or payable.

The code has what is described as a hierarchy of secondary methods for use only if in well-defined circumstances it has not proved possible to use the primary method. The 1968 anti-dumping code has been updated without major changes to bring it into line with the subsidies and countervailing duties agreement. In the Community anti-dumping investigations are carried out by the Commission, but my Department maintains a unit to help United Kingdom industry with cases and with its search for amendments to the code. The present arrangements cannot significantly be improved, although my right hon. Friend and I are going to Brussels on 10 July and will be examining the way in which, in practice, the anti-dumping arrangements within the EEC work and seeking improvements. In the main they are working reasonably well.

In the subsidies and countervailing code, the United States has accepted important GATT obligations that were previously excluded by United States legislation which predated the GATT. In return, there has been a tightening up of the GATT rules on subsidies that affect other countries as well as the United States. There is no fundamental change in existing GATT provisions, but the code spells them out and provides new dispute-settlement machinery. Existing export assistance schemes, such as the Export Credits Guarantee Department and the British Overseas Trade Board, should not be affected.

The United States practice on countervailing duties is of such importance to the exports of some individual sectors that I must say more about that. Schemes of assistance to industry similar to our own, including regional assistance, are operated widely in the developed world, including the United States. Our schemes are not intended to have a direct effect on international trade or to give special advantages to our industry through subsidy; they are intended to compensate for geographical and historical disadvantages.

Our industrial support policies are in the process of being reviewed and are likely to be reduced in scope and scale. Whatever decisions the Government may take about industrial support, United States competitors may regard them as contributing to unfair competition. If United States industries think that imports into their market are causing material injury they may well apply for countervailing duties to be imposed. The precise impact of the United States legislation to implement the MTN agreement will not be clear for some time. We attach a great deal of importance to uniform application of the code by all the main parties of the negotiations.

Exporters who are worried about countervailing duties—particularly those hoping to expand their sales in the United States markets—should keep closely in touch with my Department, which will be monitoring the legislation as it goes through Congress and the Senate and as it finally arrives on the United States statute book.

United Kingdom exporters constantly complain, often with every justification, that foreign technical regulations and standards are used as barriers to trade to protect domestic industry. The new agreement concentrates on the principle of transparency—the publication of proposed new measures so that information is more readily available. Exporters should be more able to identify what barriers there are, and the practice of developing standards systems so that they are a barrier to trade will be outlawed.

The Government procurement code brings in a limited measure of liberalisation for Government purchasing. It thus creates new opportunities for exporters, but it will make some formerly "safe" markets for manufacturers more open to competition, although much of the purchasing concerned has already been liberalised within the EEC. There are important exclusions such as local authorities, most nationalised industries and what are described as warlike stores. The important element is again transparency—more open procedures to prevent "fixing" or covert discrimination.

Another important agreement is on trade in the civil aircraft sector. The key provision is for duty-free trade amongst the signatories in aircraft and parts. Since the EEC has not in practice been able to impose tariffs on civil aviation and civil aircraft since its inception, the advantages to our exporters of negotiating away the United States and Japanese tariffs are obvious. The agreement also contains some generally worded agreements on procurement, offset, and so on, to set a framework for international trade in civil aircraft.

Negotiations are continuing in the framework of the MTNs for an agreement on counterfeit merchandise to tackle the circulation in international trade of goods with forged trade marks. It is important to increase the rate of detection of them whilst not creating new barriers to trade, and to create financial disincentives to those engaged in these criminal practices, which are causing genuine concern and damage to many British firms.

No text has yet been published, but the Government welcome the fact that the main negotiating parties have agreed on the principles of an agreement.

The major aspect of the MTNs which remains unsettled is the negotiations on safeguards. These negotiations largely ceased during the meetings of UNCTAD in Manila but are now restarting in the GATT, so far informally.

The Government are strongly committed to a successful outcome of the negotiations for a revised safeguard clause in the GATT. We said so in our manifesto, and we shall continue to seek a successful conclusion to the negotiations. Our objective is to ensure that when safeguard action is necessary it does not have to be taken against all sources of the goods in question but only those causing difficulties. The shorthand phrase for this concept—there is a great deal of shorthand in this slightly jargon-ridden area—is "selectivity". It seems to the Government that this will cause less and not more disruption to trade, and it is certainly not intended, as some developing countries fear, as a preliminary to the wide and indiscriminate use of safeguard action against their exports.

Selectivity is not the only issue in the negotiations. The United States Government wishes to secure agreement on improved procedures and discipline in the use of the safeguard clause. We are prepared to co-operate in the negotiations for that purpose. Although the earlier stages of the negotiations were marked by a serious resistance to the concept of selectivity, the vast majority of developed countries have recognised the validity of the concept, and the developing countries have been willing to talk about the conditions in which it could be used. The main discussions are about the criteria of selectivity.

The Government are not opposed in principle to tighter criteria—criteria which will have to be met before selective safeguard action can be taken—always provided that, at the end of the day there is a usable selective safeguard. We would not wish to see the negotiations produce something which has a theoretical value but which is so hedged around that it simply cannot be used in practice.

The main areas under discussion on the use of selective safeguard action generally are the criteria which have to be evolved before we can decide just when such action can be taken. Issues which have to be settled include such things as whether a safeguard action should have a specific limited life, the base period which should be used in determining any quota, and whether there should be automatic increases in quota levels during the life of the quota. Additionally, it is proposed to establish a GATT safeguards committee which will have the responsibility of monitoring and reviewing safeguard measures. The extent of the role of that body is still under discussion.

Our approach to all these negotiations is, as the House would expect, a pragmatic one. The outcome that we seek is improved discipline in and surveillance of safeguard action but without rendering it impractical, in a way that, in our opinion some suggestions would do. We have to be able to tackle sudden and massive surges of imports effectively.

This does not mean that the Government are contemplating the daily use of safeguard action. On the contrary, we are committed to the open trading system, and our view is that safeguard action, selective or non-selective, should be taken only when fully justified. But within this framework we feel that selectivity will help to maintain the open trading system by directing safeguard action, when it really is necessary, against the specific problem rather than against all imports of the goods in question, including the traditional and the non-disruptive.

This subject came up over and over again during the UNCTAD conference in Manila. During my visit to the ASEAN countries, I was able to talk to a considerable number of representatives of different countries at the conference. I found that the concern which all of them had was that the selective safeguard would be an overused instrument which would simply be a way for countries which were facing imports that they did not like to stop them. I stressed, as I have tried to stress today, that that was not the way in which we saw the selective safeguard. But I did stress that without it it would be very difficult for the Governments of the developed countries to sell a liberalised trade package to their people, and I underline that again.