Transatlantic Free Trade Area

– in the House of Commons at 11:30 am on 28th June 1995.

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Photo of Mr Roger Moate Mr Roger Moate , Faversham 11:30 am, 28th June 1995

I should begin by saying how much I appreciate that the debate is to be answered by my hon. Friend the Under-Secretary of State for Trade and Technology. He will not misunderstand if I say that I had rather hoped that we would have my right hon. Friend the Foreign Secretary or my right hon. Friend the President of the Board of Trade. However, as we do not know what position my hon. Friend the Minister may occupy in a week or two's time, we shall listen to, and weigh with even more care, his answers to what I believe is an important debate.

I welcome the opportunity for the House to discuss the idea of a transatlantic free trade area, even though it is a very large concept to explore in a short Adjournment debate on a quiet Wednesday morning. However, it is a chance to put on record and stress the importance of the British Government putting their weight behind an idea which in recent months has gained support from a large number of influential voices in this country and abroad. If we can turn it from an idea into a reality, the prize is very great indeed, not just in terms of trade, goods or services but in terms of foreign policy.

Those powerful voices include the Canadian Trade Minister, who called last year for a North American-Europe free trade area, and the European Commissioner, Sir Leon Brittan, who has strongly supported the idea in a number of speeches, one of which I heard recently. I also recall the United States trade representative Mickey Kantor speaking with approval of the idea some time ago, although I do not have his exact words.

There have been supportive speeches by Henry Kissinger, and by my right hon. Friend the Foreign Secretary in an impressive speech in support of the principle to the Economic Club in Chicago last May. Last October, my right hon. and learned Friend the Secretary of State for Defence put forward similar ideas for a new Atlantic community to promote common interests, including free trade. That is an impressive range of support and I, for one, do not doubt that this is an idea whose time has come.

I will be frank with my hon. Friend the Minister. I fear that the idea is not going to be promoted in all quarters with the zeal that I believe that it deserves. I fear that it may be shunted off into the sidings or, to mix my metaphors, killed with kindness, praised with faint damns and gradually discarded as too difficult, challenging or risky. I believe that the British Government should now make clear their full support and take the initiative with the United States, the other nation states of Europe and, presumably, the European Commission, to put in hand a serious study to see how such an agreement could be negotiated and formalised and how it could or should be structured and monitored.

The name transatlantic free trade area, or TAFTA in the shorthand that is gaining ground, is a title now much used, but it is not one that I especially like. One may ask what is in a name, but there is a great deal in a name if an idea is to command support. The trouble with TAFTA is that it suggests to some people that it could be an exclusive regional trading block concerned mainly with the reduction of tariffs, whereas we know that the modern world is not like that. The main problem is no longer tariff barriers, but non-tariff barriers. The goal is not simply tariff-free zones, but the single market concept with minimal impediments to free, fair and unsubsidised trade.

If we consider who would be members of TAFTA, we realise that it would include the members of NAFTA, the North American Free Trade Area—Canada, the United States and Mexico—and all members of the European Community. It would presumably extend to the applicant nations of eastern Europe, to the Mediterranean countries and to the members of the European Economic Area, notably Norway. The area would extend from the Pacific coast of America across central Europe, from the Arctic circle to the gulf of Mexico. "Transatlantic" is inadequate to describe a common or free market on a scale of that order.

It is important to ensure that this is not seen as a trading bloc because that would be a non-starter and not necessarily in British interests. It should not be a trade bloc, but a building block to construct freer world trade and complementary to the functions of the World Trade Organisation. It could be argued that a new round of world trade talks would achieve greater results, but how many years did the Uruguay round take to negotiate?

Photo of Mr Roger Moate Mr Roger Moate , Faversham

I thought that it was seven, but the hon. Member for Middlesbrough (Mr. Bell) says that it took 15 years. I do not detect any great enthusiasm for launching another Uruguay round before the existing round has been implemented. That is not politically realistic. I believe that there is the political will—and I have given evidence of it—in the United States and Europe to forge ahead with a more limited regional negotiation to secure that single market. We should grasp that opportunity.

The problem that TAFTA would be perceived as an exclusive regional bloc must be dealt with and the idea nailed straight away because it is not true. A report from the World Trade Organisation published in World Trade News states: The rapid growth worldwide of regional economic groupings has not so far impeded the development of freer world trade and has sometimes helped to promote it, according to a report by the World Trade Organisation. There have been no fortress-type regional arrangements among WTO members. It goes on: It is clear that, to a much greater extent than is often acknowledged, regional and multinational integration initiatives are complements rather than alternatives in the pursuit of open trade … some regional agreements have enabled members to accept obligations to liberalise faster than required by the Gatt and helped stimulate progress at the multilateral level. It is very important to understand that, as we are looking for a system which stimulates freer world trade and is in no way seen as an exclusive local bloc.

In his speech in Chicago, my right hon. Friend the Foreign Secretary suggested that we could be pathfinders in the World Trade Organisation in that role. It is clear that despite the success of the Uruguay round, which is now being implemented by the WTO, there remains an immense range of impediments to trade. The world is littered with financial land mines which need to be cleared.

A commitment by Europe and north America to a programme of dismantling non-tariff barriers could be of benefit to the whole world and not just to those who would be members of such an agreement. However, it cannot be seen to be exclusive because the days have passed when tariff walls could be erected, unless we envisage the whole of GATT and the world trade deals being dismantled. That is possible, but it would be a pretty disastrous sort of world. We must understand that tariff barriers, whether real or threatened, should be not be seen as a real threat.

I have a note from the Library which says that tariffs on manufactured goods after the GATT round should come down on average from 5 to 3 per cent. In other words, being excluded from these zones—even if it were a real threat—is not the serious issue, because non-tariff barriers are a much greater impediment. Tariff walls are now low and cannot seriously be used to threaten others with exclusion as though we were somehow going to raise new tariff barriers around a fortress Europe or a fortress TAFTA. There is no sense in that, so we should not use the threat of exclusion to frighten the horses, whether we are talking about world deals or European free trade arrangements.

We in this country have a powerful interest in a world free of barriers, a world of free, fair and open trade. It is worth reminding people of our nation's exporting success. We are still the fifth largest exporter of goods and services in the world, which is a remarkable achievement. We export more per head than Japan and the United States. Incidentally, we are the largest foreign investor in the United States—our investments there now stand at $85 billion. It is also worth noting that United States investment in the United Kingdom is now greater than its investment in the whole of Asia and the Pacific region.

There should be no doubt about our vested interest in extending the concept of a single market, but it has to be a single market enshrined in international treaties. Those treaties should extend as far and as wide as the nations willing to accept those treaties' commitments.

Let us be frank. When we start pointing the finger at nations which have tariff barriers or non-tariff barriers against us, we should remember that many of the worst distortions are in Europe, on our own doorstep. We have to deal with them. I suggest that the existence of a TAFTA, or whatever we decide to call it in the end, could help us to get a better deal for British industry and the British taxpayer in Europe.

Only this morning, I read of a rescue package for Iberia International Airlines. I do not know whether one can talk of a level playing field for airlines, but that rescue package is a classic example of a non-tariff barrier, or major impediment, to free and fair competition. We are told that Iberia is to receive £700 million. Air France has had a similar subsidy, and those two airlines are not the only ones. Yet British Airways has to succeed without subsidy and, to its credit, it does so—indeed, it triumphs. It has to obey the rules, as do other British airlines, and also to compete with unfair competition and subsidised low fares. That is happening on our doorstep.

I suggest that it would help us to get a fairer market in Europe if, simultaneously, we were negotiating international trade rules which made it ever harder to introduce such subsidies. There is also much to be done in the world of shipping, banking, securities, insurance, films and the mutual recognition of chemicals. It would be greatly in our interest if we could secure agreement across a wide single market.

The biggest distortion of all is the common agricultural policy. It is a mighty system of protectionism and intervention, which costs us £34 billion a year, or £20 a week in tax alone for each British family. Moreover, that does not take into account the additional cost of food imposed on the average family.

Photo of Denis MacShane Denis MacShane , Rotherham

Is the hon. Gentleman aware that every cow or beef animal in the United States has $500 worth of subsidy behind it and that there are now more bureaucrats working for the United States Department of Agriculture than there are farmers? When it comes to subsidising agriculture, our friends in America are no slouches compared with the European CAP merchants.

Photo of Mr Roger Moate Mr Roger Moate , Faversham

If I can take that to mean that the hon. Gentleman is as anxious as I am for a disarmament deal, as it were, across the Atlantic and that he is willing to dismantle the bureaucratic structure of the CAP here, he will command widespread support. Until now, I had not detected his enthusiasm for a total dismantling of the CAP which, I had understood, was to him not just subsidy for cows but subsidy for a herd of sacred cows that he was not anxious to see slaughtered.

There is a massive distortion of the market. I should have thought that any new trade negotiations would give impetus to the task that we face in fundamentally reforming the CAP. We know that the CAP will become bankrupt in its present form once the Community is enlarged. If we have concurrent negotiations with other parties while we are trying to reform the CAP, they will act as an additional spur to all of us to get it right at last. We could not enter into such negotiations without a commitment to re-examine protectionist agricultural policies in all the countries involved. We need those negotiations if we are to make sense of an enlarged community and the CAP, so that we can use international trade negotiations to our great advantage. We cannot put up with the present nonsense ad infinitum.

In such a debate, it is fair to cite such examples of distortion which, although we find them irritating, are serious. How can we justify continuing to spend £1 billion a year on subsiding tobacco growing in the European Community when European institutions are spending several millions on discouraging the consumption of tobacco? Such subsidies are falling, but only marginally. The system continues because it is part of the deal. We must somehow find levers to change that kind of institutionalised support.

We spend £800 million to support wine production, much of it undrinkable and not intended to be drunk. We also spend £1.5 billion a year on the fruit and vegetable regime, although not much of it comes back to the British grower. It is an unacceptable waste of money and a distortion of the market. France in particular grows vast quantities of apples, a third of which are destroyed every year. Such systems of support have to be examined. We have made that point so often in the House, but little has been done.

Alongside reform of the CAP, we need parallel negotiations with the United States, the NAFTA countries and others to stimulate us to take action at last. The point is that such support systems distort our home market and our tax system as well as world trade, and they damage us severely.

When I was in Washington recently with a delegation from the British-American parliamentary group, we raised the subject of NAFTA at meeting after meeting with senators and congressmen and with representatives from the state department of national security, among others. Wherever we went, we found that the idea was well received. There was a high level of awareness there of the subject—it was on the agenda. There was an awareness of the speeches that had been made in support of it. I do not think that I am being unfair to anyone when I say that there was no opposition to the idea, but rather a general welcome for it. I emphasise yet again, however, that we are still at the idea stage. We need initiatives from the Government to translate our ideas into reality.

There is much more to the concept than trade, important though that is. I conclude by quoting the Secretary of State for Defence who last October called for a new Atlantic community. He said: The European Union, Nato, the US and Canada are all the product of many centuries of European progress and civilisation. An Atlantic Community"— which is the title that he gave to this important political idea— would be a historic and appropriate initiative as we approach a new century and the third millennium. The question now is, will we go for this great goal or will we play safe and kick it into touch? I fear that we are in danger of doing the latter.

Photo of Denis MacShane Denis MacShane , Rotherham 11:49 am, 28th June 1995

I congratulate the hon. Member for Faversham (Sir R. Moate) on obtaining this debate and on the forceful case that he made. I must add another name to the list of early proponents of the idea—Mr. Lane Kirkland, the president of the American Federation of Labour-Congress of Industrial Organisations, who, in an impressive article in 1992 in the International Herald Tribune, underlined the need for what he called a north Atlantic free trade area. Since there is now a patent on the name NAFTA for the Mexican-Canadian-United States regional trading block, the hon. Member for Faversham has come up with TAFTA. We will see whether that sinks into consciousness. Like him, I am not sure whether it has the ring of long-term sustainability.

I support much of what the hon. Member for Faversham said. I was glad of the emphasis that he placed on the need to keep the United States of America and Canada firmly linked to Europe. I noticed the entry of some recently vulcanised members of the Conservative party to the Benches behind him. Doubtless they were coming to pray in aid the concept of a north Atlantic or transatlantic free trade area against the European Union. I find the two wholly complementary.

As we enter the 21st century, we face the great danger that the glue which kept many countries with different cultures and market economies together in the second half of the 20th century—opposition to communism—has dissolved and we must make every effort, through Government policy and especially through ideas, to avoid a new world of warring capitalist blocks.

That is a significant danger and it is why I strongly favour ensuring that the enhanced development of the European Union, in which our country should play a leading part rather than the opt-out role that it has taken in recent years, is clearly linked with a firm relationship with the United States—both in trade and in a military alliance. I do not want Europe to decouple itself from the United States, which would pose a great danger not merely to world trade but to world harmony and, perhaps, world peace.

The right hon. Member for Guildford (Mr. Howell), who is Chairman of the Select Committee on Foreign Affairs, often stresses our need to "Asianise" ourselves and turn away from Europe. Whereas the slogan of the hon. Member for Faversham is, "Westward ho! The sun is bright", the slogan of the right hon. Member for Guildford is, "Eastward ho! There is money to be made." One must not favour any region at the expense of the region in which, for good or ill, this country is anchored—the European continent.

Contrary to the views of many commentators in the press, I want the special relationship between the two English-speaking countries to be enhanced and strengthened. It has been undermined by Government action, especially the gross interference in the election of the present US President. I visit Washington regularly and have many American friends. That interference is still remembered bitterly. If some words of apology or regret could be found in the language of diplomacy, it would be no bad thing for the relationship between London and Washington, or for London's future ability to act as the pivot for exactly the enhanced free trade area that the hon. Member for Faversham described.

We must consider seriously the problems of United States protectionism. I have here a report from Brussels. Not everything that comes out of Brussels is wise or true, but serious protectionist barriers, both direct tariff barriers and non-tariff barriers, exist in US legislation and mitigate against the sort of free trade community that the hon. Member for Faversham advanced. One barrier is the well known state discrimination in banking, which, although it has been somewhat reduced, in essence still means that Lloyds or Barclays cannot open up a branch wherever they want to in the United States, as they now can in Europe.

Airline ownership is another problem. The hon. Member for Faversham referred to British Airways, but under US law foreign companies are limited to just 25 per cent. of the voting stock in any US airline. Another barrier is the countervailing duties imposed on the steel industry, which is of direct interest to my constituents in Rotherham. It is based on the false argument that British Steel is still subsidised by the Government. We can argue about the nature of the British Steel privatisation, but hon. Members on both sides of the House will agree that it is now a wholly private company which receives no Government subsidies and has not done for some years. None the less, the countervailing duties were slapped on arbitrarily to protect the US steel industry.

The Jones Act ensured that all coastal traffic, which in the United States forms an immense part of the shipping market, is limited to US flag-carrying ships. The Cargo Preference Acts of 1904 and 1954 state that 50 per cent. of all US Government-generated cargoes must be carried by US flag carriers. Smaller barriers include the Cuban Democracy Act, which is the most disgraceful interference in our right to trade with Cuba. I do not particularly like the Cuban Government—nor do I like the Chinese Government and many other Governments—but it is not helpful for one country to penalise British firms and investors who trade with and in that country.

Photo of Ian Taylor Ian Taylor , Esher

As the first British Minister to visit Cuba for 20 years when I visited the country in September, I can reassure the hon. Gentleman that the British Government never accepted the extra-territorial aspects of American legislation, such as the 1992 legislation to which he referred. Neither would the Government accept any extra-territorial aspects if further legislation, such as that proposed by Senator Helms, were enacted.

Photo of Denis MacShane Denis MacShane , Rotherham

I am grateful for that reassurance as, I am sure, are other hon. Members. There is a worry, however, that the United States, particularly with its new Republican majority—there, too, the spirit of Vulcan is reigning in the form of Senator Helms and Speaker Gingrich—is adopting a neo-isolationist, America-first policy. If the US continues down that road and rejects the need to work multilaterally in the World Trade Organisation—or, indeed, if we go down that road and reject the need to work multilaterally in other United Nations agencies, such as the International Labour Organisation—we shall live in a world of sauve qui peut, beggar my neighbour and every country for itself, without the benefits that trade can bring. When discussing the issue, therefore, it is best that we put our cards on the table and say that US protectionism causes substantial problems.

NAFTA has not worked as well as its architects had hoped and has particularly not worked to a similar extent as the integration of much poorer countries in the construction of the European Union. In a globalised and transnationalised economy, one cannot divorce economic relations from civil society, and in particular one cannot divorce economic relations from the obligations and needs that people have as citizens of a country. Therefore, if we are to build a transatlantic free trade area, we must take on board the requirement to build in environmental considerations and social obligations.

I was pleased with a speech that Sir Leon Brittan made only last week in which he urged European and American policy-makers and Government leaders to open world markets for foreign investment. But he stressed that multinational companies, as the principle vectors of foreign investment and of opening trade, must accept that a code of conduct for good corporate citizens could be useful in allaying the concerns expressed, particularly in developing countries, about the impact of foreign investment on society and on government policy. Sir Leon expressed the need to build into an opening of world trade an acceptance of social and environmental responsibilities, and he criticised the opposite stance in the investment debate, in which American multinationals are publicly opposing the inclusion in the multilateral investment agreement of existing OECD guidelines for international companies. I believe this is a short-sighted approach. I very much agree with the European Commissioner. One of the problems of the Clinton Administration is that they have failed to take seriously the need for effective regulation of the activity of the corporations that now control so much of world trade and world investment. Conservative Members may blanch at the thought of a transatlantic social charter being a part of the process, but I put it to them that, if they are looking for a Single Transatlantic Act that some future Prime Minister might sign that is simply based on free trade, they will get nowhere.

The only reason the Single European Act was signed and worked was because it included a wide vision of what trade and economic relations were about. If Tory Members turn away from that—I understand that that may well be the current Tory philosophy—they will end up with countries withdrawing into their shells. Twenty per cent. of the extreme right and fascist vote in the recent French presidential election was delivered on an anti-European ticket. That is a grave warning of what happens when a free trade area does not take on board the need for jobs and social responsibility, and the need for all citizens of a country to have a stake in that enhanced free trade area.

Photo of Michael Spicer Michael Spicer , Worcestershire South

I have heard the argument before that somehow those who believe in free trade are drawing back into themselves. It seems to me that the exact opposite is the case, as those who believe in free trade also believe in the outside world. Is there not a complete inconsistency in the hon. Gentleman's argument?

Photo of Denis MacShane Denis MacShane , Rotherham

I do not accuse the hon. Gentleman of seeking to withdraw into himself, as it were, but if he simply promotes free trade and denies its social and environmental consequences, he will not be able to avoid the pitter-patter of the citizens' feet as they go to vote for Ross Perot, who got 19 per cent. of the vote in the US election, or for Jean-Marie Le Pen and Philippe de Villiers—Sir James Goldsmith's collaborator—who stood in the French presidential election against Europe and to cut France off from that trading bloc.

Photo of Denis MacShane Denis MacShane , Rotherham

I will sit down in a minute. The hon. Gentleman can then make his arguments in full.

The tension between globalised capitalism, transnationals and the increasing organisation of international exchange and the desire of all the people we represent to have a stake in that process has not been fully resolved, and that tension will not go away simply by saying, "Free trade at any price." The massive increase in free trade in the past 15 years has brought with it massive increases in unemployment in many leading countries—I am not saying that it is cause and effect, but it accompanied that increase—and increasing inequality.

I assure the hon. Member for Faversham that I support the underlying premise which moved him to introduce the debate today. Aneurin Bevan made a joke about America and Russia 30 years ago, saying that we had the fierce eagle of the United States and the red bear of the Soviet Union and that Britain's job was to keep those two monkeys apart. I do not see the situation quite like that now. On the contrary, we must keep the United States firmly linked with our European partners. To that extent, I fully support what the hon. Member for Faversham argued in his speech. But we must go beyond free trade to include commitments to democracy, human rights and social construction—the three pillars of English-speaking democracy which have united this country and the United States for so many years.

Photo of Michael Spicer Michael Spicer , Worcestershire South 12:06 pm, 28th June 1995

My support for the idea expressed by my hon. Friend the Member for Faversham (Sir R. Moate) is precisely because it furthers the cause of free trade. I agree with the hon. Member for Rotherham (Mr. MacShane) that the whole concept of free trade is seriously under fire in the world today. I agree also that it is not just the European Union that is becoming more protectionist and trying to fight its corner against free trade—often with potentially disastrous effects, as was the case with the French influence and concept of protectionism during the Uruguay round.

Also, the cause of free trade is growing in the United States. One view of NAFTA is that it is a trade block in the conventional sense, and a protectionist block. I agree with my hon. Friend the Member for Faversham that it is not just a question of tariffs, as there are a multitude of different ways in which free trade can be restricted. In the European Union, the primary method is the use of phoney anti-dumping measures.

In the United States, there is the increasing use of something called managed trade, which is another way of blackmailing countries by saying that, if they will not buy your goods, you will not buy theirs. That is clearly a growing force in the United States vis-a-vis Japan at the moment, and that process comes to fruition this week because of the apparent intent of the US to restrict trade with Japan.

I accept that we have a cross-Atlantic protectionist problem and it has a growing body of theory behind it. The hon. Member for Rotherham used Sir James Goldsmith as an example of somebody who is interested in free trade, but the reverse is true. [Interruption.] Perhaps I misunderstood the hon. Gentleman.

Photo of Denis MacShane Denis MacShane , Rotherham

He is a protectionist.

Photo of Michael Spicer Michael Spicer , Worcestershire South

Precisely. I shall dwell on some of Sir James Goldsmith's views about protectionism later, if I may. There is a great requirement for a restatement of the case for free trade.

Perhaps I ought to declare an interest, as I have just received the manuscript for my book on this exact subject which is to come out in the next few months. It is called "The Challenge of the East". [HON. MEMBERS: "How much is it?"] There is no price on it yet, as it is just hot off the typewriter. I shall not describe the whole book, as it is rather long, but the point is that the case for comparative advantage must be restated. Even if country A is superior to and competitive with country B on every front, it still pays country A to specialise in the areas where it is particularly good, and to buy in for areas where it is not. As a result, not only do the consumers of both countries benefit from cheaper goods, but, crucially, the producers are deprived of the false protection that goes with building barriers around their businesses.

It is somewhat ironic that the new free-trading nations of the Confucian orient have been highly protectionist for the past 400 or 500 years, Consequently, they went down and down from their age-old positions as trading powers. That is especially true of China, which 500 years ago was the greatest economic power on earth. It collapsed solely because of its protectionist and isolationist policies.

Now, the east is mercantile and free trading and, as a result, achieving growth rates ranging from 8 to 10 per cent. over a consistent period, whereas in the west the cause of protectionism has been gaining ground, with disastrous consequences for its economic performance. It is no fluke that in western countries the growth rate norm is now 2 per cent., compared with the 8 to 10 per cent. in the free-trading east.

Photo of Denis MacShane Denis MacShane , Rotherham

I look forward to receiving a review copy of the hon. Gentleman's book. I promise that I will write about it. Does he accept that, although the Asian countries are wonderful exporters, some of them—Korea and Taiwan in particular—have erected an enormous number of barriers against imports, inward investment and participation by foreign investors? It is a one-way mercantilism.

Photo of Michael Spicer Michael Spicer , Worcestershire South

I am sure that the hon. Gentleman is well aware that the greatest growth sector of exports, for instance from the USA, is to the east. It is true also of many European countries, and certainly of Britain, that the real export dynamism is to the east. Therefore, it simply is not true to say that the east is restricting its imports. On the contrary, the east has become the locomotive force of the global economy. Were it not for that, we would have greater unemployment in Britain than we have currently.

I want to make two points about the protectionist argument. Goldsmith says that we have entered a new phase where cheap and readily available capital and cheap labour in other countries is putting them in such a strong trading position that it is impossible for the west to compete without some form of protectionism. There is not enough time to examine that argument, so I simply say that it is not true. Capital is not especially mobile at the moment and it is not moving into eastern countries at a fast rate. Indeed, people are scared of investing capital in the east at the moment. Also, it is not true that cheap labour is still a crucial component of competitiveness.

Photo of Michael Spicer Michael Spicer , Worcestershire South

I am afraid that I have run out of time. My hon. Friend must make her own speech later.

Labour costs, as a percentage of overall costs, are coming down rapidly; transportation, capital and other costs are now more important. Therefore, Goldsmith's argument cannot be right. Even if it were, the answer would be that to have free trade there must be flexible exchange rates. There must be room for some adjustment. If costs become fundamentally out of line, there must be some give in the system, and that must come from flexible exchange rates. It is one reason why I and others argue against fixed exchange rates. Going beyond that, the truth is that no one country would pile up reserves of foreign currency and simply sit on them; it would recycle them—as have the Japanese.

My hon. Friend the Member for Faversham has proposed that the Europeans and the Americans should come together in a free trade area that will lead to greater free trade around the world. Provided that that is a stepping stone towards greater global free trade, that must be the right approach. What I find worrying is the possibility of the European Union, with its highly protectionist outlook, combining with NAFTA, which is becoming increasingly protectionist—although not as protectionist as the EU because it has various different perspectives—and carving up the larger protective market. That is precisely the sort of action that my hon. Friend and I do not want.

Part of the thrust of the ideas coming from people such as Sir Leon Brittan involves further protectionism, on a much wider scale—which, in their view, would help the west to face up to eastern competition in a grand way. That is certainly not what I or my hon. Friend have in mind. Therefore, in the context of wider free trade, my hon. Friend's proposal is to be welcomed.

Photo of Richard Spring Richard Spring , Bury St Edmunds 12:15 pm, 28th June 1995

I am grateful for the opportunity to say a few words. First, I congratulate my hon. Friend the Member for Faversham (Sir R. Moate) on securing this important debate and on presenting his arguments so coherently.

It has become something of a cliché that, given our history as a trading nation, our ability to increase our standard of living is dependent on our ability to produce goods and services that both the home market and the world actually want. Through that, we are able to provide Britain's public services. Historically, trade is vital to Britain. As has been said, we export more per capita than either the Japanese or the Americans. Indeed, Britain's extraordinary economic recovery is essentially export led, in particular by the manufacturing sector. That is resulting in falling unemployment, which we all welcome. There are many examples of that in my constituency.

It is entirely to the credit of the British Government that the single European market was forged. It comprises 369 million people and its exports as a percentage of gross domestic product run at 32.6 per cent. There are two key differences between that single market and NAFTA, which has a similar-sized population of 378 million. The per capita income in our single market area is just over $17,000. In NAFTA, despite the relatively lower living standards in Mexico, the figure is $19,693. In addition, despite the United States' external trade performance with the east—to which my hon. Friend the Member for Worcestershire, South (Mr. Spicer) referred—NAFTA exports as a percentage of GDP run at 11.8 per cent.—just one third of the level of the European Union. In short, NAFTA has a higher GDP per capita but it has a lower propensity to export.

Therefore, even from our narrow perspective sitting here in Britain, or even looking across the single market, it is obvious that there are considerable trading opportunities in a transatlantic free trade area. I must stress immediately that any tie-up would not be political. Although we have strong cultural and historic ties with our friends across the Atlantic—indeed, we all belong to a democratic family of nations—we envisage an economic tie-up only.

I was especially pleased to read about the comments of Warren Christopher, the US Secretary of State, who spoke favourably about a transatlantic free trade area in a speech that he made in Madrid in June. He said: The long-term objective is the integration of the economies of North America and Europe, consistent with the principles of the World Trade Organisation". But he added that any moves must advance our overriding objective of global trade liberalisation, and not disadvantage less developed countries. He went on to say that trade barriers resulting from differences in product standards and testing should be abolished and aviation agreements between the United States and Europe should be reached to make transatlantic travel easier and cheaper.

I also welcome the comments by my right hon. Friend the Foreign Secretary, who, in a speech in May in Chicago, talked favourably about a link-up between the European single market and NAFTA. When barriers come down and markets increase in size, scope and diversity, the prospect of more jobs, lower prices and greater consumer choice often becomes evident. There is no doubt that if we were to move down that route, as I hope we shall, there would be difficulties.

Those who have spoken in this morning's debate have already alluded to the difficulties of agricultural subsidies and the enormous influence of the US agricultural lobby, particularly for cereals. We know that there have been difficulties in aerospace products and European textiles and ceramics. But despite the problems that arose in the Uruguay round, the long-term objective looks worthy.

Sir Leon Brittan spoke favourably about that development and a uniform investment regime. It is gratifying that, for some months now, officials from the European Union, the American Government and Canada have been looking at the feasibility of a transatlantic free trade area and how it could develop. That could evolve into a regional trading block. There are inherent dangers in that but it is a long way down the pipeline. My hon. Friend the Member for Faversham alluded to that matter remarkably well.

Another possibility would be a block-building approach, to concentrate initially on non-tariff barrier areas where it can be difficult to obtain free trade, such as product testing, public procurement, investment and research and development programmes, which often have the effect of mitigating against the free movement of goods and services. We must look seriously at that possibility because free trade, prosperity and jobs are enormously linked to Britain's ability to find those opportunities abroad.

On the advantages of single markets and the breaking down of barriers, it is estimated by the International Institute for Economics that NAFTA would create some 175,000 new jobs in North America. So job creation, which has been markedly more successful than in the European Union, is mooted by the United States to be further helped by the development of NAFTA.

When considering the undoubted advantages of that, we need to take the matter slowly and carefully. After all, NAFTA was signed only in 1992 and came into force in January 1994. After a 15-year period, its final completion will be on 1 January 2009. There was already a basis to build on because of the relationship that had existed for a number of years between the US and Canada, which have a trade agreement called CUSTA—the Canadian-United States Trade Agreement—which goes back to 1985 and was introduced in 1988. NAFTA's objectives, which are to increase investment, trade, employment and living standards, could be transposed successfully into a transatlantic free trade area. Those objectives are desirable in themselves.

This debate has touched on the ambiguous attitudes that we feel towards the Pacific rim countries. Although we admire them for the extraordinary growth and success that they have enjoyed, we must look at our own societies and realise that difficulties are also implicit in this matter. After all, while the US in general has no free health care service—Canada has an insurance-based system—most of the countries in the European single market have a comprehensive welfare system with expensive employment add-on costs. Essentially, the Pacific rim countries do not have that.

The result has been an exponential growth in the economic living standards and the export directions of those countries because they have pursued regimes of low taxation, very little regulation and minimal welfare provision. They have a long history of mercantile and entrepreneurial traditions, which in the past 20 or 30 years have seen a considerable increase in terms of exporting abroad.

To draw conclusions, it is worth while comparing our performance, either in NAFTA or the single market, with that of the Pacific rim countries. Between 1987 and 1996, it is expected that total growth in the United States will have been 2.5 per cent.; in the European Union 2.4 per cent.; in what has been loosely described as the Asian tigers—Hong Kong, Singapore, Korea and Taiwan—7.5 per cent.; and in China 9.5 per cent. In terms of export volumes, we see a similar discrepancy. Between 1987 and 1996, the total expectation for the US is 9.4 per cent.; for the European Union 5.1 per cent.; and for the Asian tigers a full 13 per cent.

I welcome the fact that, following the Uruguay round, access to the Pacific rim countries is easier. But well into the future, it will be impossible for us on many levels to compete with the low labour costs of countries like China, coupled with extraordinary high individual productivity and now rapidly advancing technological expertise. So we shall be faced with the problem of relatively decreasing competitiveness with the Pacific rim countries, with all the consequences of potential higher unemployment in both North America and Europe.

That is why I welcome the possibility of an extension of the concept of a single market from Europe across the Atlantic to North America. By opening up the markets, we can strengthen our economic performance. We would therefore present ourselves with a further growth in export opportunities and increase our job growth, which will be one of our main problems in the next 15 or 20 years in Europe.

NAFTA, however, has not been without difficulties. We must accept that it is not a panacea that can solve all problems. We should learn from the experience of Mexico, where there were huge inflows of cash into the Mexican stock market, based largely on short-term credit. The current account swelled and ultimately the peso collapsed and there was a run on the financial institutions. There was, at least temporarily, substantial chaos in Mexico. That should be a salutary reminder to us that, in situations where a powerful neighbour is juxtaposed against a weaker economy, despite all the sustenance given to that weaker economy, substantial problems can arise.

May I say in passing that the performance of Britain's economy in the past year has been remarkable, in large measure because of our somewhat unexpected but wholly welcome export performance. There are a number of reasons, one of which is undoubtedly the role that the private sector is playing through more than 100 export promoters, who are linked to the Department of Trade and Industry. They are providing a valuable effort.

The business link programme, which will have up to 200 outlets by the end of the year, is also important. The huge increase in trade missions from this country will ultimately have the effect of boosting our living standards because of that massive increase in our exports. Conservative Members, and I hope other hon. Members, greatly welcome the DTI's work to sponsor our export efforts.

A combined NAFTA and European Union single market could provide a gigantic marketplace, which would offer further benefits to our country and our export and employment prospects. Given all the benefits that would result, the time is rapidly approaching when we should move in that direction.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay 12:31 pm, 28th June 1995

I, too, congratulate my hon. Friend the Member for Faversham (Sir R. Moate) on introducing the debate. Trade underlies everything in politics, so this is possibly one of the most important debates that we will have in the House for a number of months.

I should like to address the subject from the point of view not of a politician—the details of the trade arrangements have already been described—but of someone who built up her own business. I dealt in the international marketplace, because 60 per cent. of my turnover was exported to the far east, the United States and north America and I had agents distributing goods and services in Mexico, Indonesia, Malaysia, Singapore, the West Indies and many other countries.

I should like first to deal with some of the boring old bogeys that have been raised by the hon. Member for Rotherham (Mr. MacShane). I understand that he is a politician, but I do not know whether he has ever done very much in international trade. His speech was like a re-run of a Nostradamus prediction about the earth falling to pieces in the year dot, dot, dot.

Photo of Richard Spring Richard Spring , Bury St Edmunds

Did my hon. Friend notice a certain vibration in the Chamber when the hon. Member for Rotherham was speaking?

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

Yes, the earth did move.

The hon. Member for Rotherham raised the old bogey of world capitalism and suggested that there was a gigantic conspiracy against the individual. What total rubbish. People who do business around the world rely on other people as customers. They are there to provide the goods and services that people want, and the more open the market, the more opportunities there are, particularly for poorer people to get their hands on the food, goods and manufactured products that they can afford.

One of the great glories of the old British Commonwealth was our access to cheap food supplies, which fed our population who were then engaged largely in manufacturing industry. That supply helped to improve the population's health, their standard of living and, eventually, the economy of the country. That trade was not one way; in return, we supplied those Commonwealth countries with infrastructure—railways, roads, drains and telecommunications—

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

Yes, absolutely right, even good government services. We are very good at running countries. It would help a lot of countries if we marketed that skill as a service. We kept better order in many parts of the globe, when we were running things, than many countries are able to do now. I even remember a taxi driver in Zimbabwe—

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

No, I will not. That taxi driver wished that the British were back there, helping to run the country, so that he could get on with being a taxi driver instead of worrying all the time that the local mafia would haul him in for some alleged political misconduct.

Another bogey that comes up all the time in such debates is cheap labour. We always hear about the slitty-eyed foreigners who are going to make and sell products, and undermine our market. So deeply is that prejudice imbued in our society that we even hear such comments from members of the royal family.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. The hon. Lady must not refer to the royal family.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

I accept that rebuke, and I withdraw that remark.

There is some idea that foreigners offer cheap labour, which, in turn, undermines our jobs. I must inform hon. Members that the cheapest labour in the world is that of the United States, because it is the most heavily capitalised labour. An individual working for a telecommunications system in the United States or on a machine is backed up by huge investment. That labour is made productive by that level of investment. It is simply not true that a Chinese worker is more productive in terms of the value of the goods and services he produces than a United States worker. American workers are the best paid in the world, and I wish to goodness that we could scupper the oft-repeated argument about cheap labour.

The hon. Member for Rotherham said that people in the far east are manufacturing goods for export to us. If those goods are of high quality and our consumers can buy them more cheaply than other products on the market, our consumers have more money left in their pockets to buy other goods and services. That will include high-quality products produced in the British market, such as videos, pop music and goodness knows what else.

All such services provide jobs for people. McDonald's is as important a business in our economy as someone making pieces of machinery, up to his elbows in grease, in some boring old factory from 9 to 5. We should not discriminate between jobs as though some are good and others are bad. Jobs provide people not only with an income but with their sense of self-respect.

We should emulate the example of NAFTA, which has been operating for just a year, and which represents an effort to reduce barriers between countries, not least because, as our admirable Library tells me, its administrative costs appear to be negligible. Compare that with our own European Union, where the administrative costs of the common agricultural policy account for almost 50 per cent. of its budget. That money does not go to farmers. That is ludicrously expensive. What about other administrative costs?

Furthermore, we have locked ourselves into an international cartel, because the European Community is virtually a closed shop. It wants to stop people from bringing their goods into the Community because it wants to protect its markets, the farmers of France and Germany and continental manufacturers. It is not interested in inviting products from which we, as citizens and consumers within the European Union, could benefit.

We should do all that we can to encourage our Government to establish arrangements to help our country to be linked with the admirable experiment of NAFTA. I recently read a good speech by Henry Kissinger, who pointed out the natural ties between our country and north America and Canada. No one who has lived through the fishing dispute that is going on between us and the Spanish within the European Union will doubt the closeness of the ties between us and the Canadian people.

Our country should exploit and develop that tie. Our best trading advantage, for which the French, the Germans, the Italians, the Spaniards, the Greeks and all the rest of them would give their eye-teeth, is our language. I assure the hon. Member for Rotherham that people all over the far east, who still use English as their second language, have a natural trust and affection for our markets, particularly for banking their money and for taking out their insurance.

Photo of Denis MacShane Denis MacShane , Rotherham

What about Barings?

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

They have a great respect for our high-quality skills in engineering and the other services that we provide. It is not true that our country relies on people making widgets and gadgets to sell. The great strength and advantage of our economy is in invisibles—the capital accounts. Companies rooted in Britain with overseas subsidiaries remit profits back to this country—for example, Mobil, Shell, ICI and other big corporations.

We should not seek to enclose ourselves within a number of rather old-fashioned, diminishing economies—the European Community—but should open our market to other countries. We should welcome all opportunities to establish links with them so that we can take advantage of the sensible provisions that they have made to lowers tariffs and barriers.

As a British exporter, I spent the best part of 20 years trying to crack the German and French markets with the products that I manufactured. They always have ways of setting up obstacles, one way or another. However, taking one's goods and services to the new and developing markets is an absolute doddle. They are anxious for one's goods, as long as they are not competing with domestic ones—that sometimes makes it difficult, but it is part of being a tradesperson. One goes to markets where one can sell for the best price; one goes to markets where one can buy at the cheapest price. That is what trade is about.

We should welcome the initiative, we should welcome my hon. Friend's intention to pursue that line, I hope, and we should do all that we can to make our Government realise that, instead of locking ourselves into little old Europe, with its old-fashioned ways, we should get out of that, open our markets and do business throughout the world.

Photo of Stuart Bell Stuart Bell , Middlesbrough 12:39 pm, 28th June 1995

I am grateful for the opportunity to follow the hon. Member for Billericay (Mrs. Gorman). She knows the esteem in which I hold her.

When I entered the House, the Speaker at the time said that I would go far on short speeches. I have not gone that far, but I have noticed that this morning there have been several short speeches that were well made, well presented and a tribute to the House and to the debate that the hon. Member for Faversham (Sir R. Moate) initiated.

The hon. Member for Billericay mentioned the NAFTA agreement, as did the hon. Member for Bury St. Edmunds (Mr. Spring). They will be pleased to know, as I am sure my hon. Friend the Member for Rotherham (Mr. MacShane) will be, because he mentioned it, that there are side agreements to that agreement. One is concerned with the environment, whereby countries are liable to fines and sanctions if there is a repeated pattern of not enforcing environment laws. There is also a liability to penalties for non-enforcement of child labour laws, minimum wage laws and health and safety laws. That will also please my hon. Friend the Member for Rotherham.

The NAFTA agreement, although it is only a year old, as the hon. Member for Billericay said, has about 15 years to run. The hon. Member for Bury St. Edmunds linked the initiation of the NAFTA agreement with the fact that there was a sudden run on short-term credit: $85,000 million flowed into Mexico on a short-term basis and flowed out again, creating a monetary crisis. It is a matter of conjecture whether that was linked to the agreement, but it is a long-term agreement and, in my opinion, it will bring benefits to Canada, Mexico and the United States.

Photo of Michael Spicer Michael Spicer , Worcestershire South

Surely the key is that NAFTA is picking up some of the bad habits of the European Union. Having got a common market going, it is trying to set itself up with a single market and a single currency. That is the real problem with NAFTA.

Photo of Stuart Bell Stuart Bell , Middlesbrough

I was proposing to refer later to the hon. Member for Worcestershire, South (Mr. Spicer) and to his book "The Challenge of the East". I look forward to reading it, as I am sure will the Minister, like all the voluminous books that we get about trade, including that by Sir Jimmy Goldsmith.

It is not clear whether the Americans, Canadians and Mexicans see any mirror image of the European Union. Later, I shall briefly mention the various trade blocs that exist, of which the trade bloc that the hon. Member for Worcestershire, South mentioned is but an example.

The hon. Member for Faversham began his speech with a reference to the President of the Board of Trade. Naturally, we are all disappointed that the latter is not here today—possibly, as the hon. Gentleman hinted, because he may be preparing for Government. That would not surprise us.

There is a lovely quote from Lewis Carroll—we love these little debates because we can get Voltaire in and Victor Hugo and even Longfellow. I remember the lines from Lewis Carroll: "I met a man who wasn't there. He wasn't there again today. I wish, I wish he'd go away." Perhaps next week at this time the present Prime Minister will mutter those words as he enters the House to take part in what might be his last Question Time. Anyone who writes a book called "Where There's a Will", arguing for Government intervention, will have my vote any time.

The hon. Member for Faversham referred to an idea whose time has come, which was a phrase from Victor Hugo. That idea is quite old. Douglas Jay was a Member of the House and described his experiences in his autobiography entitled "Change and Fortune". He set up a parliamentary group in the late 1960s, continuing into the 1970s, as a study group to provide an alternative to the European Economic Community, to which the hon. Member for Billericay would be well attached. That group was so successful in terms of debate and theory that it continued throughout the 1970s.

Returning to the argument of the hon. Member for Worcestershire, South, the world has been moving towards several trading blocs. There are the European Union, which we all know about, the North American Free Trade Area, which was mentioned, the APEC summit last November—the Asia Pacific Economic Co-operation forum, involving all the nation states of Asia and the Pacific rim—the Association of South-East Asian Nations and the Uruguay round, which the hon. Member for Faversham mentioned.

It was significant that, when Douglas Jay presented to the House his concept of a free trade area, it was a concept relating to industrial goods. The hon. Member for Billericay mentioned that. She said that the world has moved on in the so-called globalised economy—whether or not it is a globalised capitalist economy, as my hon. Friend the Member for Rotherham said—and is now a world of industrial goods and services.

My hon. Friend the Member for Rotherham mentioned Barings from a sedentary position during the speech of the hon. Member for Billericay. We mention Barings simply on the ground that there was a bank which went down to Singapore taking used notes in suitcases, metaphorically, and invested it on the Singapore stock exchange or the Singapore foreign exchange market. It did not come to the north-east of England. It did not say, "Here is £800 million for industrial investment; invest that and give me a return on the investment." It used the money for services—for derivatives—and it was a clear loss to the country. We therefore recognise that services have an important role to play, and we welcome that.

The President of the Board of Trade rightly likes to vaunt the fact that our exports are up—that we are exporting more today than we have done. His latest press release speaks of the exports in the month of March, which achieved a record for total values, reaching new manufacturing export volumes.

We must not forget the other side of the coin. We continue to be in deficit in our trade and we continue to have an imbalanced economy. The deficit on our trade for the month of March—which the President of the Board of Trade did not mention—was £500 million. During the first quarter, the visible deficit has decreased from £3 billion to £2 billion so, although we are right to vaunt our exports, and to say that in the world community of trade, in which we take in one other's washing, we take in more of the other side's washing than we do of our own.

My hon. Friend the Member for Rotherham mentioned an aspect that is worth mentioning—the social dimension of trade. Opposition Members accept the opinion of the hon. Member for Faversham that trade should be sustainable and free.

The hon. Member for Worcestershire, South mentioned managed trade. Opposition Members do believe in a managed, sustainable trade, recognising the value of the general agreement on tariffs and trade and of a rule-based system. However, we believe that developing countries can benefit from better working conditions, providing them with respect, dignity and an appropriate base on which to build a decent standard of living.

We, as a future Labour Government—let us gaze into the crystal ball beyond next week—have no intention of seeking to remove the legitimate trading advantages of developing countries, including their lower labour costs, and we do not intend to impose standards that are out of line with each country's stage of development. Nevertheless, we believe in a broad spectrum of human rights throughout the world and we believe in seeking to establish, through the World Trade Organisation, the basic rights for people in work that every country should be expected to achieve. We believe that those rights include freedom from forced labour and the right of workers to form their own independent trade unions if they choose.

As to a world trade area that encompasses the United States, Canada, Mexico and possibly the European Union, I think that we must be careful not to take too big a step. I know that the hon. Member for Billericay and I do not necessarily agree about all aspects of the European Union. Those of us who have visited the continental countries and who have seen their trade and services and their efforts to combine economic efficiency with social justice—President Chirac of France has just increased the minimum wage and has a policy for the long-term unemployed—appreciate that it is better to develop the Union than to push the metaphorical boat towards the Atlantic seaboard of the United States. I do not want that to distract us from developing all of our trade opportunities.

My hon. Friend the Member for Rotherham used a phrase of Nye Bevan's in referring to the "fierce eagle of the United States". The United States takes an aggressive approach to trade policy and it takes a similar stance in relation to world financial services through the WTO and trade with Japan. In the context of the globalised economy, we must seek to strengthen the trade links that we already have with the European Union and with the rest of the world. Tonight, the President of the Board of Trade and I shall attend a function to discuss Latin American trade. I think that it would be better to view world trade in services and manufacturing as a whole rather than move towards a new free trade area.

Photo of Ian Taylor Ian Taylor , Esher 12:50 pm, 28th June 1995

Before I reply to this excellent debate, I must clarify one point. The last time one of my colleagues stood before the fair bosom of my hon. Friend the Member for Billericay (Mrs. Gorman), he was launching a leadership bid. I assure the House that that is not my intention this afternoon—although in one part of her speech my hon. Friend cried, "We want jobs," which may have been a pre-emptive strike.

She referred also to "little old Europe". I remind my hon. Friend that the European Union of 370 million people may be little by her standards, but it is quite substantial to the rest of us. It has a gross national product of $7,200 billion, and that is also pretty substantial by any standards. Even if we were to denigrate the Union, I must inform my hon. Friend that the United States Under-Secretary for International Trade, Mr. Garten, has commented that the European Union's projected growth rate of 3 per cent. in 1995 will translate into a one-year market size increase of $210 billion. He likened that to finding a new market the size of Taiwan.

That shows how important it is that we get our domestic market right; we must ensure that it is competitive, open and flourishing. Our domestic market is not the United Kingdom: it is the European Union. British manufacturers understand that and they take the European Union very seriously.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

I do not want my hon. Friend to think for one moment that I intend to lend my physical attributes to any bid that he may make for the Conservative party leadership. Europe constitutes 10 per cent. of the world's population—which means that the other 90 per cent. are elsewhere for us to do business with—and it has only 15 per cent. of the world's gross domestic product. That is what I mean when I say that looking only towards Europe is a small way of viewing the world; we should look to the rest of the globe.

Photo of Ian Taylor Ian Taylor , Esher

I agree absolutely with my hon. Friend's latter point. The European Union is the home market for British industry and it provides a strong base from which to attack the much more interesting risk-reward markets of the far east, for example. However, we cannot do that without first accepting that our home market and our strong home base is the European Union.

The debate introduced by my hon. Friend the Member for Faversham (Sir. R. Moate) is an excellent example of how we can pick up issues and discuss them in this place. The contributions of my hon. Friends and Labour Members have been very constructive indeed. In winding up for the Opposition, the hon. Member for Middlesbrough (Mr. Bell) referred to the President of the Board of Trade. I assure him that at this very moment the President of the Board of Trade is delivering a speech about trade barrier strategy to an American audience in London, and is therefore behaving excellently in the conduct of British government.

My hon. Friend the Member for Faversham made a passing reference to the social aspects of trade. I caution him on that point. No one in the British Government supports forced child labour anywhere in the world. We can stop the use of child labour by opening up free trade with countries, thus increasing their standards of living and lessening their dependence on child labour. That is one of the reasons why I share the fervour of my right hon. Friend the Secretary of State for Employment in opposing trade and labour issues in the World Trade Organisation, because they are a cloak for protectionism.

My hon. Friend the Member for Faversham said that he would like to see more zeal in respect of free trade. I have only a few minutes in which to display the full zeal with which I would like to encourage free and open trade around the world. However, I assure him that my fellow Department of Trade and Industry Ministers and Foreign Office Ministers and I are anxiously looking for opportunities to break down barriers to international trade and to take the lead in the international community in so doing.

Only a week or two ago, I attended the Organisation of Economic Co-operation and Development conference in Paris where I had individual bilateral talks with Mr. Kantor of the United States and Mr. Hashimoto of Japan—I castigated both of them, which made me extremely popular. Tonight at midnight, Washington time, we shall find out whether what I believe to be the hugely misguided American action will proceed.

That is not to say that the market in Japan cannot be opened up. Without going into detail, it would be unwise to make bilateral efforts at this pitch, particularly as the World Trade Organisation has a very effective disputes procedure. We have invested a lot of confidence in the World Trade Organisation and we do not wish it to be bypassed by unilateral action by the United States or any other country. I hope that there will be a last-minute settlement of that dispute.

My hon. Friend the Member for Faversham mentioned many important issues, and I shall pick up one essential point. Although it may be possible to have a transatlantic free trade area in the long term, we must be very careful about the phraseology in the short term. According to the present World Trade Organisation terminology, an "area" would encompass all trade, including agriculture and textiles—areas where we would create problems rather than find solutions.

That is why Government spokesmen have made several speeches—my hon. Friend mentioned the Foreign Secretary's speech in Chicago; he might have mentioned my speech the previous day in London, but I accept that—in which we have made it very clear that we are trying to engage the United States and Canada in talks in order to create pathfinding roles and remove some of the non-trade barriers that have obstructed trade across the Atlantic.

As a telecommunications Minister, I am well aware of some of the difficulties that may be created in the telecommunications field and in the talks which continue the Uruguay round and the general agreement on tariffs and trade talks, which will be completed in a year. America is a key player in those talks, and it is also a key player in the talks which are due to conclude this week about financial services in the GATT round. I think that Europe and the United States should try to find solutions which are then applicable to the World Trade Organisation. That seems to be the right way forward.

My hon. Friend the Member for Bury St. Edmunds (Mr. Spring) mentioned roles such as procurement, technical standards, accelerated tariff cuts,, subsidies, intellectual property, rules of origin and regulatory reform. They are substantial agenda items through which we can build bridges across the Atlantic. There is no doubt that the European Union must develop a close trading relationship with the United States and Canada—and Mexico in the context of the North American Free Trade Area. That relationship is crucial and we must work at it.

European Union-United States visible trade in 1994 totalled £140 billion, so our Community partners, with ourselves, have a vital market stake in north America. Germany's share of trade with the USA is larger than ours, so we have further work to do, but we are the largest investor in the United States and one of the largest trading nations in the world. We export per capita more than the USA and Japan combined, so our trading links across the Atlantic are of crucial interest. We must try to give them a framework, which we could call the pathfinding system.

As my hon. Friend the Member for Worcestershire, South (Mr. Spicer) and other hon. Members said, trade is one element in global understanding. Our crucial link with the Americans is the need to engage them continuously in Europe. The Americans have a propensity to look inwards—much more so than the European Union.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. It is time to move on to the next debate.