My Lords, I do not have time for interruptions. We can correspond, as we do so happily.
Taking our exports in goods and services, our trade with the euro-zone is 13.4 per cent of GDP; our trade with the United States is 4.7 per cent of GDP. That is the balance. Even if we took NAFTA it would be only 5.3 per cent. Our imports in goods and services—I am not talking about only manufacturing but also about goods and services—are 14.2 per cent with the euro-zone and 15 per cent with the whole of the EU, but only 4.2 per cent with the United States and 4.8 per cent with NAFTA. Whichever way you judge the matter, it is clear that our trade with the euro-zone, as a percentage of GDP, and certainly as a percentage of total trade, is enormously more important with the euro-zone than with the United States.
Let me go on to the figures, as a percentage of trade, because that is the most realistic measure. The noble Lord, Lord Taverne, gave some of the figures. Our trade with the EU as a whole—exports of goods and services—constitutes 53 per cent; for the euro-zone it is 50 per cent; for the United States it is 17 per cent; for NAFTA it is 20 per cent. Of imports of goods and services, the EU accounts for 52 per cent; the euro-zone for 49 per cent; the US 14 per cent; and NAFTA 17 per cent. By no stretch of the imagination can it be thought that the United States is more important to us.
The noble Lord, Lord Pearson, then tried to pull the wool over our eyes by talking about the currency in which we invoice. It is where we do the trade, not the currency in which we invoice, that matters. The noble Lord, Lord Taverne, made clear that a large proportion—I do not have his figure to hand—of UK trade is in sterling. That does not mean that we are trading with ourselves; that is international trade. It is just convenient to invoice in sterling. If we entered the euro, all that trade would instantly be invoiced and denominated in the euro.
Imports and exports of oil throughout the world have always been in dollars. Our trade in oil with the Middle East is denominated in dollars. That does not have anything to do with the importance of our trade relations with the United States or the volume and value of our trade with the euro. That is such a vulgar and simple error that it is difficult to believe that it has survived debate in this House until now.
The noble Lord, Lord Pearson, raised another confusion: the issue of the index of exchange rates. He is right about that: the Bank of England's exchange rate index is far from perfect. As he said, it is based on an assessment made many years ago; and it is based on manufacturing rather than manufacturing and services. However, it is the only index we have, and follows the methodology used by the International Monetary Fund, so we must use it. But it is not relevant to our argument, because no policy decisions are taken on that basis. Policy decisions on monetary policy are largely taken on bilateral exchange rates rather than on any such basket.
So on all the aspects on which the noble Lord, Lord Pearson, bases his argument, he is just plain wrong. He is wrong about the balance of trade between the United States and the euro-zone. He is wrong about interest rates. He is wrong about invoicing—as if invoicing were important. I do not want to hear that argument again; I have had enough of it.
Some other interesting things were said to which I should like to refer. I have not much to say to the noble Lord, Lord Cobbold, because I agreed with so much of what he said; I can say only, "Hear, hear". The noble Baroness, Lady Cox, gave us an interesting historical analogy with the gold standard. I recommend that she reads the 2002 Cairncross lecture by Ed Balls, the economic adviser to the Treasury, in which he goes into great detail about that point, pointing out that to a large extent what went wrong then was that a political timetable was set, rather than doing what we do now, which is to decide what is in the national economic interest.
I also enjoyed the history lesson given by the noble Lord, Lord Selsdon. The points that he and the noble Lord, Lord Cobbold, made were relevant. Yes, of course it was true that after the war the dollar was so dominant that it became and stayed a powerful denominator for international trade.
I was interested in what the noble Baroness, Lady Cox, said about demographic change over the past three centuries. I should like to think about the figures she produced. She challenged me to say whether I disagreed with the figures or the interpretation. As they are new to me, I shall have to read them and respond to her in more detail.
The noble Lord, Lord Stoddart, is right about the decline of the manufacturing industry in this country. But, as I pointed out in response to a question from him, that decline in the manufacturing trade is common throughout the more developed world and not peculiar to this country.
A number of noble Lords rightly referred to the importance of inward direct investment, although they drew different conclusions. There was a minor point about the Netherlands effect and I shall write to the noble Lord, Lord Stoddart, about that—not because I cannot give the answer but because it is so long, detailed and incomprehensible that it would bore your Lordships silly. I believe the noble Lord's argument concerned the issue of intermediate holding companies and I should like to answer him in detail about that.
Certainly, it is true that direct investment in this country, as the noble Lord, Lord Taverne, said, does not come particularly from the euro-zone—although it does partly. However, when it comes from countries such as Japan, it does not come because of our trade links with the United States—it goes directly there—but because of our trade links with Europe. It would be enormously serious if we were to put that at risk—and we would be putting it at risk if we were to turn our backs on Europe in any way, whether in the form of the euro or in any other way. Clearly, direct investment is an important part of the argument. That is why it is one of the five tests.
As to the related issue, the noble Lord, Lord Howell, quoted Christopher Taylor of the NIESR. However, despite some of the things quoted by the noble Lord, the conclusion of Taylor in his paper was that,
"the findings in this paper support the view that UK high-frequency exchange rate volatility would be reduced by joining EMU".
That is another important argument and conclusion from a thoughtful and interesting paper.
I am not going to go through—I would not be allowed to—the arguments about the five tests, the preparatory work, the timing and so on. I do not need to. Everyone knows that I cannot say anything new—there is nothing new to be said. If there was anything new to be said, it would not be said by me.
I have enjoyed the debate. The noble Lord, Lord Pearson, as always, has been a wonderful opponent and I have enjoyed the opportunity to set the record straight.