Electrical Products (Supply to BAOR)

– in the House of Commons at 9:42 pm on 12th February 1987.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Maude.]

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Member, Labour Party National Executive Committee 10:15 pm, 12th February 1987

In a nutshell, the debate is about the experience of British electrical manufacturers and the problems that they meet in trying to sell their products into the West German market. More particularly, it is about manufacturers of electric lighting products produced by such firms as Simplex Lighting of Tipton in my constituency, which tells me that it is unable even to sell its lighting products for installation in British Army of the Rhine establishments in West Germany because of the insistence by German installers of an approval mark which is needed in addition to the European recognised standard of safety.

We have the ludicrous situation of British defence establishments equipped with non-British electrical goods, and men and women in our defence forces reading and writing their letters home under lighting produced in Germany and paid for by British taxpayers.

But the debate is also about the impact that this barrier to trade has on our historically high trade deficit in manufactured goods which is presided over by the Government. It is about the consequent loss of revenue to the electrical manufacturing sector and the resultant loss in terms of jobs.

Lighting equipment produced by Simplex and many other similar manufacturers in this country is made in accordance with a standard known as BS4533. The Minister will know that this equates with the harmonised European standard of IEC 598. It is nonsense that, in spite of complying with all the harmonised European standards, electrical products supplied to West Germany must, in addition, carry what is known as the German VDE mark of approval. This insistence of the VDE mark is bound up with German insurance law. That law allocates responsibility for liability, in cases of damage, between the manufacturer on the one hand and the installer of the equipment on the other.

The installers of the equipment have a professional body which arranges employers' liability insurance. To obtain insurance cover, goods must be VDE approved. So, only German electrical products can be used in the Federal Republic for its insurance law to be valid. However competitive we become in terms of costs, we do not stand a chance because of this national approval system. Allowed to operate as it does, this situation directly contravenes the free movement of goods provisions of the treaty of Rome, so an illegality is being perpetuated.

Naturally, I am concerned about this situation. In the first place, it is illegal. Secondly, it has an adverse effect on the electrical manufacturing sector in the United Kingdom. As the Minister knows only too well, the west midlands is an area of manufacturing, or it once was. The people whom I represent are at the sharp end when job opportunities are lost because of obstacles to trade which the Government seem to fail to do anything about.

I need hardly remind the Minister tonight that, for almost a year, I have been making representations to the Ministry of Defence, the Department of Trade and Industry and the Department of the Environment. In a pathetically inept manner, Ministers have passed the buck from one to another. I have asked more than a dozen parliamentary questions to try to stimulate some action, but I am forced to raise this matter on the Adjournment tonight because of the unsatisfactory responses that I have received.

If the Minister has examined his file he will know that what I am seeking is, first of all, for the Government to confirm the implementation of the low voltage directive of the EEC. That directive is known as directive 73/23. The Government also need to establish the incompatability and indeed, the illegality of adding to that the national VDE mark of approval that is insisted on by installers in the Federal Republic. It has now reached the stage where only the Government can enter into those negotiations with our EEC partner, the Federal Republic.

When I wrote to the Department of Trade and Industry, the Minister agreed that it was incompatible and on 22 July last, and in relation to action being taken in West Germany, he wrote: The way they do this, demanding a VDE mark, would however, seem to us incompatible with the Low Voltage Directive.

The Minister went on to say that he was taking the matter up with the German Ministry of Economics.

Even earlier than that, on 30 April last, a Minister at the Department of the Environment wrote to me acknowledging that Simplex Lighting products met the international standards, but he admitted regarding West Germany: In relation to international agreements, it is questionable whether or not the spirit of the agreement is being observed. He went on to say that, in collaboration with the Department of Trade and Industry, he was pressing for consideration to be given to the wider issues involved. I have heard nothing from either Department since those dates.

There is action that could be taken. The Minister is aware that when goods comply with recognised European standards, as these do, under article 3 of that directive, it is made clear that their free movement should not be impeded. Yet, exports are impeded because of the insistence on this national marking.

I regret the fact that this is a very technical debate, but I assure the Minister that I have looked into this matter very carefully. The Government could bring action against West Germany under article 170 of the EEC treaty because the Federal Republic is failing to fulfil its obligations. I do not expect that the Government will take that action but I am keen to know what alternative action will be taken—and taken speedily—to see that British exports do not meet such obstacles.

I wish to consider another aspect of the matter. In answer to a parliamentary question, the Minister agreed that

Any restrictions must impact on the … lighting industry"—[Official Report, 21 November 1986; c. 373.] However, he said that he could not assess the precise extent of loss of revenue. Surely that cannot be right. Even if the loss to British electrical manufacturers of the West German market cannot be assessed—I appreciate that—some assessment can be made in relation to British defence establishments. It is, after all, the Property Services Agency's policy to encourage the use of British equipment in Crown establishments. Therefore, it must be possible to assess by how much manufacturing contracts could be increased were Crown Suppliers able to supply luminaires to the British Army of the Rhine. On 21 November last, in answer to my question, the Minister, who was then at the Ministry of Defence, said: The average value of electrical installation work tendered for in property occupied by BAOR is about DM80 million per annum. That is about —30 million a year. The Minister then said: The great majority of this work is placed with German contractors".—[Official Report, 21 November 1986; c. 358 .]

In spite of the excellence of British products and in spite of our prices being competitive, on the Government's own admission the majority of this work goes to German contractors, and it does so because German insurance law demands a national mark that is incompatible with EEC standards, and the British Government have so far done nothing about it. There can be no greater example of the Government's lack of support for British industry than this.

I have a great deal of sympathy tonight for the Minister. I had to telephone three Government Departments before I found out who was to respond to this debate. In all logic, I think that it should have been the Department of Trade and Industry, but this job has landed in the lap of an Environment Minister. Even so, I gave his office some notice of the points that I wished to raise, because I want some answers.

Despite the Minister's direct responsibilities in the Department of the Environment, it will not have escaped his notice that our manufacturing trade balance has taken a nose dive since his Government came to office. Six years ago, our trade balance in manufactures was in surplus to the tune of £5 billion. Since then we have moved into a deficit of over £7 billion. That historic situation has been brought about by the incompetence of this Government in responding to the real needs of the manufacturing sector.

Nor, I think, will it have escaped the Minister's notice that millions of jobs have been lost in the manufacturing sector. If he looks tonight at his own Government's figures, he will discover that about 200,000 jobs were lost between 1979 and 1986 in the electronic and electrical engineering industries. Many of those jobs were obviously lost in the west midlands.

What I am seeking tonight will not redress the massive imbalance in industrial and human devastation. I do not pretend for one moment that it will, but I believe that it will help those firms that are trying to compete with their hands tied behind their backs. I ask the Minister tonight to take action in support of British jobs and industry and to seek the lifting of what I consider to be an illegal obstacle to our export trade.

Photo of Christopher Chope Christopher Chope Parliamentary Under-Secretary (Department of Environment) 10:27 pm, 12th February 1987

I know that the hon. Member for West Bromwich, West (Miss Boothroyd) has raised several questions in the past about this subject with both the Property Services Agency and the Department of Trade and Industry. The essential point, I believe, concerns complaints that British companies make about the difficulties that they experience when wishing to sell products to the British Army in Germany. For that reason, it falls to my Department to answer, although wider issues are raised, and I shall start by referring to them.

The low voltage directive, which came into force in the United Kingdom in 1975, covers the kind of light fittings that the hon. Member has referred to in her previous queries, along with most electrical equipment, with some exceptions, operating in the ranges 50 to 1,000 volts AC and 75 to 1,500 volts DC. This provides that electrical equipment, which meets the safety requirements of harmonised standards drawn up by the European electrical standards body, CENELEC, or standards produced by its international equivalent, IEC, must be allowed to be sold in all Community markets unless the member state can prove that the equipment does not meet the safety provisions of the directive itself.

Instead of using standards, manufacturers can make a declaration on the safety of the product, or offer a certificate produced by a recognised certification body as proof of conformity with the directive, and free circulation must be allowed unless the product is proved unsafe. Additionally, a product for use by the general public, but not for industrial or public sector use, tested by a certification body recognised under the directive must be accepted without further test by a certification body in another member state. Thus a product tested to a specific standard by, for instance, the British Standards Institution or others listed in the directive must be accepted by a certification body in another member state if the standards used by both are identical. A product tested, for instance, to a British standard which is not identical to a German DIN standard will not be covered by this arrangement.

As regards British light fittings, those meeting British Standard 4533—and although the hon. Lady said that that was equivalent to the International Standard 1EC598, I am informed that it is only partially equivalent—as my hon. Friend the Minister of State, Department of Trade and Industry told the hon. Member on 24 November, officials in the Department of Trade arid Industry have pursued the question with the federal economics and labour ministries in Bonn and have received an assurance that no legal or de facto regulations exist which require light fittings to meet a German standard or carry a German, for example UDE, certification mark. It is worth pointing out that the standard 1EC598 is not a European harmonised standard but an international one. That means that it has no effect on the right of goods to free circulations.

In respect of luminaires meeting an international standard, low voltage directive 73/23 allows for their free sale without additional testing, but it is open to member states to query an assertion of conformity if unsupported by certification or other proof. However, the British standard covering luminaires, which I believe the hon. Member was querying, is, I understand, only partially equivalent to the international standard, and it would be open to German authorities to demand evidence that the product meets other general safety requirements. The same would apply in the United Kingdom to a foreign product suspected of being unsafe. It would be open to the manufacturer to have his product tested and certified in the United Kingdom by a body recognised under the directive, and this would ease the task of proving safety.

I shall now turn to the construction work which the Property Services Agency carries out for the British forces in Germany. I think that there is a certain misunderstanding about the scope of our operation there. The rules for such work are set out in a supplement to the NATO Status of Forces Agreement Treaty Series No. 73 (1963) between the Federal Republic of Germany and all the NATO foreign forces stationed in Germany. Thus the agreement covers not only the United Kingdom but the United States, Canada, Holland, France and Belgium. The salient features of this agreement in the context of the hon. Member's question are that construction work is subject to German contract law and is carried out on our behalf by the German Construction Administration; the land and property remain in the ownership of the Federal Government and buildings have to be maintained to German standards, because Germany is the host nation; buildings revert to the Federal Government when no longer needed. The United Kingdom may apply its own standards in the field of public safety and order where these are equal to or higher than those prescribed in German law, but responsibility then rests with the United Kingdom for the application of those standards.

In the rare cases where the United Kingdom carries out the work direct that is, not through the German authority, for security or other operational reasons it must respect the Federal Republic regulations regarding competition, preferred tenders, and prices applicable to public contracts".

As a result of the NATO Status of Forces Agreement virtually all the Property Services Agency's work is carried out for it by a German Federal Government authority known as the German Construction Administration which is a network of offices at federal and lande level, spread throughout the British Army of the Rhine area. The federal contract rules for construction tendering procedures are used in the same way as for any other public contracts placed by the German authorities. These make provision for competition and action to combat restricted and unfair practices.

The salient points in the context of the question are as follows. Specific products, or methods, or specific places of origin or sources of supply may only be expressly specified if justified by the value of the work concerned. Designation of specific products or methods — for example, trade names — may be used exceptionally, however, only with the suffixed note "or of equivalent type" if it is not feasible to provide a description by means of accurate, universally understood terms. Standard trade terminology should be used to specify the service; the relevant DIN standards can be used. It is for those reasons that it is not the same situation that arises with PSA contracts in this country. We are talking about a totally different situation, constrained by the rules set out in the NATO Status of Forces Agreement.

I shall now turn to the practical application of the NATO Status of Forces Agreement in the terms that the PSA carries out its work for the British forces. First, I need to say something about the German construction industry. The German Construction Administration, and its subordinate organisations in the Lander at the regional level, normally use German contractors, most of whom are small businesses specialising in particular aspects of the building trade. Large general contractors such as we know them in this country are a rarity. PSA try to encourage British contractors to compete wherever possible, but for the most part such contracts that have been placed with British firms have tended to be for specialist equipment. The German contractors and manufacturers are liable in German law for any faults that arise from the work they carry out. They therefore act with extreme caution in choosing the equipment they wish to install and lean towards using fitments which have a recognised German standard as a defence should a case be brought against them. In Germany, DIN standards and VDE certification are used widely and German contractors are therefore used to supplies having such German clearance.

It is against this background that British manufacturers have to establish a market for their goods, and nobody can overstate the difficulty that they have. While the EEC low voltage directive allows for the access of many goods in the way I have described, there are practical difficulties to overcome. Even when we have educated German contractors to accept goods other than those with VDE marks, there is the practical difficulty of German contractors obtaining the British products and securing the essential back-up service which they would reasonably demand before feeling secure in their purchase of the British product. There are thousands of small electrical companies throughout Germany which have established sources of supply from wholesalers. British suppliers would need to establish outlets for their supplies and spares and servicing. Clearly the normal rules of competition would be applied by German contractors in selecting the equipment they wished to use.

Interdepartmental consultations are now proceeding to consider how best to improve the prospects for British manufacturers to supply their products to the British forces in Germany. There will need to be consultation with the German Construction Administration on whether they can apply the German contract law in a less restrictive way in order to allow products to be supplied to the British forces which do not necessarily comply with German standards but nevertheless meet the general safety requirements. We are looking currently particularly at the clause which states Standard trade terminology should be used to specify the service; relevant (DIN) standards can be used."

Discussion has also started in Brussels on a new works directive covering public building contracts in the Community which will make mandatory the use of European standards where they exist, which, in the near future, should also assist the free circulation of products within the Community. One strong incentive which should encourage German contractors to consider British supplies will be price. While no direct comparison records have been kept, it is considered that, while up to about a year ago German products had a competitive edge over their British counterparts on price, this has probably changed in our favour because of the change in the exchange rate.

The hon. Lady referred to some of the queries which she has raised before and the non-reply to some of those queries. I am informed that full replies were given to the parliamentary questions on 24 November by my hon. Friend the Minister of State, Department of Trade and Industry. Therefore, I do not think that I can accept the hon. Lady's criticism.

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Member, Labour Party National Executive Committee

What I was complaining about was the fact that Ministers tell me that they have written to the German Ministry of Economics and they would let me have their response. This was last year. I have had no response to that.

Photo of Christopher Chope Christopher Chope Parliamentary Under-Secretary (Department of Environment)

I shall ensure that the hon. Lady is kept informed about the consultations. This is an issue which she has been pushing very hard. It is appropriate that we have the opportunity to discuss it so extensively.

Another issue raised was whether it would be possible to take action under the treaty of Rome. I am instructed that action under the treaty can be taken only if there are Government regulations causing barriers to trade. As the hon. Lady has been told previously, there is no evidence of any such regulation or any informal arrangement having such an effect. That is why we cannot take action under the treaty.

I am most anxious that British suppliers have the maximum opportunity to sell their goods in Germany. In 1983 the PSA held a seminar under the auspices of the British Overseas Trade Board to detail the building opportunities in Germany and other overseas countries where the PSA has work and to encourage exports. I thought that that was an important initiative. I do not think the response from contractors and suppliers has been as good as it might have been. Each year since, we have supplied the Export Group for Construction Industries with lists of projects which will be tendered for in the coming year with the same objective of encouraging exports. I want to ensure that those contractors, manufacturers and suppliers with an interest are given the maximum support to compete.

Question put and agreed to.

Adjourned accordingly at nineteen minutes to Eleven o'clock.