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Mr. Ron Davies : For the sake of the accuracy of the record, will the Minister confirm that his Department has accurate records of those applicants who participated in the two outgoers schemes in 1978 and who, after the introduction of quotas, subsequently made quota applications?

Mr. Thompson : I cannot give the hon. Gentleman a categorical answer to his question this evening. I shall take it up with my officials and see exactly what the situation is. It is no use doing the work twice. We must first see how the scheme as amended turns out.

Mr. Allen McKay (Barnsley, West and Penistone) : I refer to a constituency case that I thought was dead--that concerning Eric Lodge. The Minister may recall that Mr. Lodge's land was only good for milk production because of previous opencasting. Subsidence wrecked his cow house and all his feeding sheds, and by the time the board put that right, the quota was introduced--so he had a marvellous farm and cow house but no cows. That was because of the quota system. He made a quota application but was turned down. Is it possible that the new provision will allow him to enter the scheme again?

Mr. Thompson : Distressing though the case is, I do not think that that gentleman will fall within the ambit of the scheme. My hon. Friend the Member for Pembroke mentioned the 64 per cent. of hardship cases--cases like that of the hon. Gentleman's friend--that were initially turned down. I do not think that I can give the hon. Gentleman any hope, but I shall look into the matter if he will write to me about it. I shall also write to the hon. Member for Caerphilly if I can get together a reasonable and concrete letter without undue expenditure of time and money. Once the document has been amended and has passed through the Council, we shall have a clearer idea of the answers that he has asked for.

Question put and agreed to.


That this House takes note of European Community Document No. 8108/88 on milk and milk products and of the Government's intention to pursue agreement which meets the requirements of the European Court's judgement while containing costs and ensuring that the effectiveness of milk quotas is maintained.

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New Zealand Butter

11.25 pm

The Minister of Agriculture, Fisheries and Food (Mr. John MacGregor) : I beg to move

That this House takes note of European Community Document No. 8961/88 on New Zealand butter and of the Government's intention to pursue agreement to these proposals which meet the aim of establishing arrangements for the continued access of New Zealand butter on special terms for the period 1989 -92 in a way which represents a reasonable balance between the interests of those involved.

The document contains the Commission's proposals for dealing with future arrangements for the import of New Zealand butter into this country. The treaty of accession to the Community, in recognition of our traditional trading links with New Zealand, provided that decreasing quantities of New Zealand butter could be imported over a five-year period at a reduced rate of import levy. The treaty also provided that the arrangements could be extended by unanimous decision of the Council of Ministers, acting on the basis of a Commission proposal.

The importance to New Zealand of its butter exports to this country was acknowledged by Community Heads of Government meeting in Dublin in 1975, and the special arrangements have been extended by the Council on a number of occasions since then. The quantities of New Zealand butter permitted to enter the United Kingdom at the preferential rate of levy have been reduced from just over 165,800 tonnes in 1973 to 74,500 tonnes in 1988, reflecting the continuing decline in United Kingdom butter consumption.

Mr. Simon Coombs (Swindon) : What has been the percentage reduction in the consumption of butter in this country since the last time the New Zealand quota was decided?

Mr. MacGregor : I have not the precise figures for the last three years. I think that the reduction is between 5 and 7.5 per cent., but I shall check the figure, and my hon. Friend the Parliamentary Secretary will respond at the end of the debate.

That substantial and continuing decline in consumption--it is probably rather larger than my figures suggest--is one of the problems facing the dairy sector as a whole.

Mr. Nicholas Bennett (Pembroke) : In 1976 the Commission recommended that the figure for New Zealand imports should be 25 per cent. but, because consumption has fallen, New Zealand butter now accounts for 37 per cent. of the market.

Mr. MacGregor : Those figures are not quite right, but I shall deal with my hon. Friend's point later.

The present arrangements for New Zealand butter imports expire at the end of the year. The document explains the Commission's proposals for the continuation of imports between 1989 and 1992. The proposals have two main elements. First, a cut of 10,000 tonnes in the quantity of imports, to 64,500 tonnes, is proposed for 1989, followed by equal annual reductions to 55,000 tonnes in 1992. Secondly, it is proposed to reduce the rate of levy from 25 to 15 per cent. of the butter intervention price from 1 January 1989.

The proposed reduction in the quantity of New Zealand butter imports over the next four years reflects the trend

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since accession and the continuing fall in overall United Kingdom butter consumption. The proposed reduction in the rate of import levy would partly offset the loss in revenue to New Zealand from the cut in quantity. The Commission's proposals would therefore be consistent with the Community's international obligations. They imply a reduction of 26 per cent. in New Zealand imports by 1992, which is twice the reduction in Community milk production since the introduction of milk quotas, and more than double the annual percentage rate of reduction in butter imports under the previous arrangements. However, in terms of the total United Kingdom butter market, our estimates suggest that if the Commission's proposals were adopted, New Zealand supplies would represent about the same share of the market as they do under the present arrangements.

The Commission's proposals would ensure continuity of supply of New Zealand butter to the British consumer. We believe that it would be unlikely to have any significant effect on retail prices, or any significant adverse effect on the United Kingdom and Community taxpayer. Now that the support arrangements in the milk sector have been tightened and intervention stocks substantially reduced, it is unlikely that significant quantities of butter will enter public storage in the foreseeable future. Therefore, the budgetary costs of the concession to New Zealand will be considerably lower than might previously have been the case.

I should like to emphasise one point about which there is still considerable misunderstanding among United Kingdom farmers. As New Zealand and all other butter imports were excluded from the original calculation of United Kingdom dairy quotas--the original basis was past production by our own producers--whatever decisions are taken about the future arrangements, they will have no effect on United Kingdom quotas. It is important to stress that point, because there is a great deal of misunderstanding about it. Some people believe that if New Zealand butter imports were reduced even further than is provided for in the Commission's proposals that would lead to an increase in United Kingdom dairy quotas. It would not.

I have a few words to say about the amendment. The concerns that are expressed there are fully met by the Commission's proposals.

Mr. Alfred Morris (Manchester, Wythenshawe) : Some members of the Council of Agriculture Ministers have criticised the package and may have been trying to unravel it. How does the Minister view his role in regard to those critics? Is he actively promoting the package, and will he continue to do so?

Mr. MacGregor : I shall make my position on that clear at the end of my speech. It would be more natural to do so in that context. There are many varying points of view on both this and many other proposals that are before the Council of Ministers. Criticism has been voiced by many Ministers, often from conflicting standpoints. Some of them are inevitably linking the butter proposals with the sheepmeat proposals, because New Zealand is involved in both. My view is that there is no legal link between the two, but some Ministers are making that link. The sheepmeat proposals are being criticised widely by nearly all Ministers--again from many different points of view. There is nothing unusual about that.

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As for some of the concerns that have been expressed--not least in the amendment, which has not been called, but which highlights some of the concerns--I believe that the Commission's proposals meet them. It is important to remember, as I have stressed throughout, that butter consumption in the United Kingdom has been falling for a number of years, and I expect it to continue to fall. If the proposal is adopted, I expect the New Zealand share of the total United Kingdom butter market to fall only very slightly--so slightly that its share will be about the same as it is now over the four years of the agreement. I expect the New Zealand share of the packet butter market to continue to increase somewhat, as it has done in recent years. Consumer choice would therefore be broadly the same.

As for the consistency of the proposal with the Community's commitments at the start of the Uruguay round, which we shall discuss in the mid-term review in Montreal next week, it could be argued that as the New Zealand arrangement is a unilateral concession by the Community there is no legal obligation on the Community to maintain it after it runs out at the end of this year. The New Zealanders are, however, perfectly at liberty to appeal to the spirit of these undertakings to justify continued access. It is in any event reasonable that the proposal should provide for a continuing reduction in the New Zealand quota in line with what has happened in the past and with the continuing decline in our butter market. The proposal is consistent with the Community's commitments on the Uruguay round and, as my hon. Friends will have noticed, it is endorsed by the New Zealand Government.

Mr. Nicholas Winterton (Macclesfield) : My right hon. Friend is trying to justify the proposal, but in view of the dramatically changed circumstances since we joined the Community, the advent of quotas and the reduction in butter consumption, can we continue to justify the substantial import of New Zealand butter, bearing in mind the loss of jobs in creameries throughout the country and the grave problems faced by many people in creameries and other areas of milk and butter manufacture?

Mr. MacGregor : New Zealand has accepted reductions in British imports of its butter recently in line with reductions in butter consumption. Under these proposals there will be a rather sharper decline in butter imports than there will be in milk quotas in the Community. Any reductions in imports from New Zealand, however, would not have any effect on quotas and, therefore, on creameries. We have still to take a decision on these matters in Council. In theory it will be done before the end of the calendar year, but the recent progress in the Council of Ministers leads me to suggest that we might be being optimistic in thinking that we will reach agreement before the end of the calendar year. This is therefore an opportune moment for the House to express its views. I suspect that, in contrast to the previous debate, we shall hear some contrary views on this subject, just as very different points of view are being expressed in the Council.

Many interests are involved--Community producers, consumers and taxpayers-- and there are the Community's obligations to New Zealand. The Government believe that

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the Commission's proposals represent a reasonable balance between them, and that is the point of view that I have been expressing in the Council.

Several Hon. Members rose --

Mr. Deputy Speaker (Mr. Harold Walker) : Order. I have to tell the House that Mr. Speaker has selected the amendment in the names of the hon. Member for Thanet, South (Mr. Aitken) and his hon. Friends. 11.37 pm

Dr. David Clark (South Shields) : The Minister rightly said that this is probably an issue which will prove quite divisive and lively. We have had some good debates on it. It stirs many emotions. I do not apologise for that. The House knows that politics is not always determined by logic. Sometimes it is determined by emotion. Many of us feel that we owe a debt of gratitude to the New Zealand people. Some of us remember that, in the early 1970s, when we were arguing the case against our entry into the EEC, one of our greatest worries was what the status of New Zealand would be. Many of us were very pleased that we were able to achieve protocol 18 of the 1972 accession legislation, which gave some continuity and hope to New Zealand dairying.

The New Zealanders have adapted remarkably. They now send considerably less butter to Britain than they did in 1972. According to a parliamentary answer given to the hon. Member for Pembroke (Mr. Bennett) on 2 February, in 1986, 27 per cent. of the United Kingdom butter market was provided by New Zealand. I use the Government's figures.

As we consider the argument and the problems that the Minister faces in negotiations in the Council of Ministers, we hope that he will fight the New Zealand corner--and we wish him well.

I regret that there is a considerable amount of misinformation--I use that word and not "disinformation"--about this matter and regret the hostility from the National Farmers Union of England and Wales, the Milk Marketing Board and the Farmers Union of Wales, which feel that the New Zealand Government and people are being treated too generously. I do not share that view.

I remind the House and the NFU that farmers in New Zealand produce that butter without a single penny of subsidy and that they can send that butter halfway round the world and jump a tariff barrier of about £500 per tonne, and still compete with European butter. We are talking about a very efficient argriculture, which is not protected. In enunciating such views, I take comfort from the fact that I have the support not only of many of my hon. Friends but of hon. Members of all parties. I was pleased to see early -day motion 543 in the last Parliament. It was sponsored by my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) and others, and attracted over 200 signatures. I note that there is an amendment to this motion that broadly goes along the same lines and urges the Government to stand up and fight for the New Zealand point of view.

There is considerable misunderstanding about this matter. As I go around the country and talk to farmers and at NFU group meetings, I find the misconception that if we could get rid of the New Zealanders, our milk quota would be increased. Therefore, it was rewarding to hear

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the Minister state the position categorically. We cannot repeat it too often. The right hon. Member for Suffolk, Coastal (Mr. Gummer) repeated it clearly in a written answer on 8 May 1986 :

"The United Kingdom milk quota, like those of other member states, is based on past national production levels with no account being taken of imports from New Zealand or any other source."--[ Official Report, 8 May 1986 ; Vol. 97, c. 238. ]

I have repeated that because it needs repeating as the message has still not got across, and it is because the message has not got across that there are so many misconceptions.

Another misconception is that we guarantee a market for New Zealand butter. Of course we do not. What we do guarantee is the opportunity of entry for New Zealand butter. Once the butter is in this country, it must compete with every other brand or make of butter, whatever its origin, on a strictly commercial basis. People buy New Zealand butter because by and large they want to buy New Zealand butter. They do not buy it because there is no alternative. The brand name "Anchor" is one of the premier brand names in this country. I hesitate to mention this, but I think that I should remind hon. Members of what the Prime Minister said on 19 May :

"People here still wish to purchase that country's butter.--[ Official Report, 19 May 1988 ; Vol. 133, c. 1088.]

It would be wrong for us to take steps that are too rigorous and to stop people having the choice of New Zealand butter. We in the Labour party believe that people should have the freedom to choose that brand of butter.

As we have heard, the consumption of butter has been falling in recent years. I suggest that, if we took draconian steps and banned New Zealand butter, as some responsible people advocate, consumption of butter would fall even further.

As with many other products, demand for butter is sustained and stimulated by advertising. I think that about £8 million a year is spent on advertising it in Britain, and of that amount, £6 million is contributed by the New Zealand Dairy Board. If New Zealand butter was not coming into Britain, that shortfall in advertising would not be made up and the result would be an even steeper fall in the consumption of butter in Britain. Overall, British butter producers would not benefit.

Another reason for being careful about restricting the access of New Zealand butter--the Ministers touched upon this--is the whole issue of the current GATT negotiations. I am mindful, as I know the Minister is, that the next round of the Uruguay talks will take place on 5 December in Montreal. The spirit of most countries is that world agricultural trade should be liberalised and subsidies reduced, with resulting benefit to Third-world and other countries. That spirit is correct.

The EEC has given a commitment to liberalise trade and it would seem strange if at the same time we were leaning towards more protectionism by restricting the entry of New Zealand butter. As I have said, just over one quarter, 27 per cent., of the United Kingdom butter market is in the hands of the New Zealanders. They have obtained it through competition and brand loyalty. The Opposition are committed to the entry of New Zealand butter to Britain.

I realise that the Minister is engaged in a complicated set of negotiations involving not only butter. As he says,

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there is also lamb, which is covered by a firm GATT agreement. The issue of top fruit was discussed earlier this year. I hope that the message he takes from the House is that the overwhelming majority of hon. Members--including all Opposition Members and probably a majority of Conservative Members--feel that it is his duty to go to Europe and fight the other Ministers on behalf of the New Zealand producers. That is the will and the desire of the British people.

11.47 pm

Sir Richard Body (Holland with Boston) : I beg to move, at the end of the Question to add,

but much regrets the restriction on consumer choice for British housewives caused by the proposed further reduction of 25 per cent. in the New Zealand quota, and urges Her Majesty's Government to consider whether the proposal is consistent with the pledge given by all the participating nations at the start of the Uruguay round of the General Agreement on Tariffs and Trade that no new barriers to trade would be introduced while the negotiations continued.'. I hope that my hon. Friends who have come into the Chamber clutching their briefs from the National Farmers Union will go back to their constituencies echoing what has been said about the effect that any cut in quota will have on our dairy farmers. It is not only our dairy farmers who will be affected, but our arable farmers too. I am glad to say that I have many arable farmers in my constituency. We should never talk about milk or milk products without having regard to the interests of the arable farmers who produce the feed grains that go to the dairy herds.

For the life of me I can see no prospect of any arable or dairy farmer benefiting in the slightest by the proposed cut in butter imports. Surely it is common sense that not a tonne, not an ounce, not a pat of New Zealand butter can come to Britain unless the British people say that they wish to buy it. No one can dispute that. Therefore, we are talking about an attack on the preferences of the British people.

The New Zealand Dairy Board has for decades been advertising butter and promoting it in a way that the Milk Marketing Board has failed to do. It is a disgrace that the Milk Marketing Board insists that we must agree to cuts in the imports of New Zealand butter when it has done so little for decades to promote butter and has left it to the New Zealanders to do the task.

The New Zealand Dairy Board has not only advertised butter and promoted it for years, but has gone out of its way to blend a type of butter to suit the British palate. It has taken endless pains to achieve that end. According to all the market research, the majority of people prefer to eat that kind of butter, which is blended to suit their palate. Therefore, if there is a further cut in the amount of butter that we shall be allowed to eat of our own choice, that is an attack on freedom of choice. That is something that we treasure and wish to promote.

I know that my right hon. Friend will go to the Council of Ministers and fight hard for our consumers. I hope that he will draw the attention of his colleagues to protocol 18 of the treaty of accession, to which he referred earlier on. It is because of that protocol that we are required to import a declining quantity of New Zealand butter.

That article had two parts to it. One was that we would accept a decline in the amount of New Zealand butter that we were allowed to eat, and the other was a pledge by the Common Market not to do anything to frustrate New Zealand from seeking markets elsewhere. We debated that

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for a long time. Those of us who can remember those awful dreary debates that we had about our accession to the Community will remember that New Zealand butter was one of the main sticking points, and we were given an assurance that the EEC would do nothing to make it difficult for New Zealand to find export markets elsewhere. What happened? Our butter production went up, and when New Zealand sought to sell butter to Hong Kong, an island without a single dairy cow, as far as I know, and almost on the doorstep of New Zealand-- [ Hon. Members-- : "Oh!"] Well, we live in a small world. If I have my geography right, New Zealand is nearer to Hong Kong than to the Common Market. However, when New Zealand tried to promote the sale of butter at a competitive price to Hong Kong, in went butter from the Common Market, dumped at a ridiculous price, so New Zealand lost that market. New Zealand went to Moscow and sought a market there, and again butter from the EEC was dumped and it lost that market. Wherever the New Zealand Dairy Board has sought an outlet for its products, the EEC has gone in and denied it that market.

The Common Market has broken the pledge that it gave under protocol 18 of the treaty of accession. I hope that my right hon. Friend will emphasise that when he mets his colleagues. New Zealand has cut its dairy production again and again, although it is the lowest cost producer in the world. It has fought hard to find markets elsewhere, but every time that it has done so it has been thwarted by the funds--raised from our money--of the Community.

I hope that my right hon. Friend will emphasise a point that was mentioned by the hon. Member for South Shields (Dr. Clark) and is included in the amendment--the fact that the Common Market gave a further pledge at the beginning of the Uruguay round not to impose any fresh barrier upon trade with third countries until the completion of the GATT negotiations. If the Community goes ahead with that further barrier against New Zealand's trade with us, it will be in breach of that undertaking. I hope that the Community will not contemplate that step until the GATT negotiations are complete. I am sure that the House and the consumers of this country will wish my right hon. Friend well in his negotiations. I hope that our farmers also will wish him well, in the knowledge that they cannot lose by New Zealand continuing to send butter to this country. The promotion of butter needs to be financed by the New Zealand Dairy Board to sustain our dairy farmers. It is a paradox that our dairy farmers have in the past gained as a result of the board's skills in promoting butter in the past few decades.

I hope that my right hon. Friend will give the firmest assurances that he will argue as strenuously as he can for the interests of the British people.

11.56 pm

Mr. Austin Mitchell (Great Grimsby) : I do not have an interest to declare, but I am married to a New Zealander and breed New Zealanders in captivity under licence in this country part-time.

I was in New Zealand throughout the 1960s as the New Zealand equivalent of Robin Day, although not as well paid. I remember a series of British Ministers, both Conservative and Labour, coming out throughout the

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1960s. I interviewed most of them and on television and to the public generally they gave solemn and sincere assurances that New Zealand interests would be safeguarded and defended by the British Government, that New Zealand would have continued access to the British market and that the traditional and close trading relationship would be maintained. Those assurances were given by Minister after Minister into the 1970s, when we finally went into the EEC. Perhaps New Zealand was a little trusting in heeding those assurances without demanding more definite quid pro quos, but they were certainly intended at the time. I regard it, therefore, as a matter of honour, and the curtailment of New Zealand access, which is implicit in these proposals, is wrong and immoral.

The Minister, whose work has been impressive in many other spheres, has not fought has strenuously as I and many of his hon. Friends should have liked to defend New Zealand's access to this market. The reduction in quota from 165,000 tonnes in 1973 to 55,000 tonnes in 1992 is a 26 per cent. reduction on 1988 imports and is a faster rate of reduction than before.

The butter negotiations have been tied in with the sheepmeat treaty, which was a treaty obligation. They should not have been tied together. The Minister's position has been more ambiguous than it should have been. His defence of New Zealand interests has not been as strong as I should have liked. I can understand that, because it is not a happy position for a Conservative Minister of Agriculture to be unpopular with those involved in agriculture. By reducing milk output, he has not been in the happy position of his right hon. Friend the Member for Worcester (Mr. Walker) when he was Minister of Agriculture.

It is wrong that the National Farmers Union, individual farmers and Conservative Back-Bench Members should attack New Zealand access. Their argument is misguided, as the Minister has said. It is wrong even to insinuate that there should be a reduction of the New Zealand quota. A reduction of New Zealand butter imports would not lead to a better milk quota for the United Kingdom. If there were to be an increased quota, it would be followed pari passu by the other members of the EEC. The effect in the United Kingdom would be minuscule. There would be an increase in the price of milk and, therefore, an increase in the price of butter. The consumption of butter would decrease and the only beneficiaries would be the margarine manufacturers, not the farmers who are attacking New Zealand access. It seems that we would be going to a great deal of trouble to benefit the margarine manufacturers.

The Minister should have fought more strenuously in Britain and in the rest of Europe. It is clear that we do not have a good deal. I warn the Minister that there will be anger in the House. That is shown clearly by early-day motion No. 543 of the previous Session, which was signed by over 200 Members, and by the amendment which has been moved tonight. There will be anger in the country as well if the Minister does not respond. He must fight to the utmost to prevent any undermining that could follow from what has already happened. We have a moral obligation to New Zealand. Furthermore, there is a consumer issue. Consumers want New Zealand butter. They like New Zealand butter and they buy it. They are accustomed to the taste of New Zealand butter. Consumer organisations want sustained

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access for New Zealand so that consumers can buy the butter that they want and should be able to secure. It is unreasonable for the Minister to say that, because consumers want New Zealand butter and because the product can hold its share of the market, it is legitimate to reduce access in order to increase market share because of consumer preference. That is a tortuous argument.

As has been said, New Zealand is the only substantial advertiser of butter. Of the £8 million that was spent on advertising butter last year, £6 million was spent by New Zealand. Against that, £16 million is spent on advertising margarine. It is clear that the consumer wants New Zealand butter, and as a result of advertising New Zealand is sustaining the demand for butter generally.

Mr. Nicholas Bennett : What is the hon. Gentleman's attitude to Icelandic cod in Grimsby?

Mr. Mitchell : That is a silly question at this moment. It is irrelevant as well. I am sure that the hon. Gentleman regards it as a humorous question. In fact, we want Icelandic cod in Grimsby because we want to maintain the processing side of the industry. Similarly, the consumer wants New Zealand butter. I do not see the relevance of the hon. Gentleman's question, but he has his answer.

This is a trade issue as New Zealand is one of the few countries in the world with which Britain trades successfully. Our annual trade with New Zealand amounts to £1 billion--visibles and invisibles--and we are actually in surplus. That is a unique phenomenon for Britain. At a time when we have such a horrendous trade deficit, why should we allow a substantial market for British goods and services to be undermined by the reductions in quota that are implicit in the document? We should support our markets and our friends.

As the hon Member for Holland with Boston (Sir R. Body) said, protocol 18 of the treaty of accession gave solemn undertakings that the EEC would not frustrate New Zealand's efforts to develop alternative markets and to diversify its sales. That undertaking has not been kept in any respect. Wherever New Zealand has tried to develop alternative markets for butter, wherever it has got its butter exports going, it has been counteracted by large-scale dumping of EEC butter. That was done not only to compete with New Zealand's exports, but to depress the price of butter on the world market. The solemn obligation has in no way been sustained by the EEC. Having failed in that crucial respect, although New Zealand took the plunge and agreed to diversify its markets, to start now to reduce New Zealand's access to this market is unreasonable.

New Zealand's share of the British butter market went down from one third in 1970 to about 27 per cent. in 1986. Despite all my efforts to the contrary--and I have been magnificent--the butter market has shrunk. It is half what it was when we entered the EEC. New Zealand's trade has diversified enormously. Nine tenths of its trade came here before the war. Now nine tenths of it goes elsewhere, but 45 per cent. of New Zealand's butter export earnings are still made in this market. It is crucial to the New Zealand economy because 14 per cent. of New Zealand's total exports come from the dairy industry. Curtailment of the quota will be a bitter blow for an economy that is facing real difficulties. For a highly

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efficient primary producer, which developed as this country's farm in the antipodes, it will be a bitter blow to farmers whose standards of living have been cut drastically and who have been hit hard by what has happened to world agricultural trade. This will be a further blow which we in this country should not countenance.

Why should we cut New Zealand's access to this market in any respect? I regard the Minister's stand on this as equivocal. What economic sense does it make to penalise New Zealand--the most efficient producer in the world, with which we trade successfully and in surplus--and to be forced to buy over-priced, inefficiently produced butter from the EEC, from nations with which we are in a horrendous trade deficit, which is getting worse every year? The proposal to cut quotas will be a serious blow to our trade with New Zealand. The proposal is a moral and political folly of national self- interest. We should not reduce the quota, as the Minister evisages ; we should sustain New Zealand's access as much as we possibly can.

12.7 am

Mr. David Curry (Skipton and Ripon) : There is no point in discussing this issue unless we put it in the context of decision making within the European Community. That lays down the framework of the debate.

It is not an option to preserve the status quo, because the present entitlement lapses at the end of the year and legally the Community could simply say that no butter should be imported if the rules are not renewed. As the original agreement talks about transitional arrangements, that clearly envisaged progressive reductions. However, it is not an option to seek to wipe New Zealand off the face of the map. There are reasons for that. First, there is a common interest between the Community and New Zealand in trying to maintain prices on the world market. There has been some success. The minimum price was $1,000 per tonne at the start of the year, $1,100 in March and $1,250 in September ; it is now being traded at $1,400 and some sales have been concluded at $1,600 per tonne, including sales by the New Zealand Dairy Board. Secondly, in the light of the GATT negotiations, the Community would not be in good order going into those negotiations if it were to introduce the proposed cuts for the New Zealand quota which were out of line with the reductions that had been progressive over previous years.

That is the framework within which the decisions must be taken. A political compromise will be struck and the interest lies in the requirements for the compromise. I believe that the first interest is a continuing choice for the consumer in the United Kingdom and availability of New Zealand butter broadly with the same proportion that we had before, in a declining market place, as all hon. Members have noticed. The second is a fair deal for New Zealand, because, as hon. Members have said, New Zealand has invested in the marketing network in the United Kingdom and put a major proportion of its advertising expenditure into the United Kingdom and is entitled to look for a fair revenue for its producers.

The final requirement is justice for British and European farmers, who have taken significant cuts in their quotas and who feel that all participants in the market place should share that burden, although they have realised a major capital asset in the dairy quotas. The cost of disposing of the surpluses and making the mountains

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disappear has been borne by the taxpayer as well as by the producer, and sometimes each side in that equation forgets the other. On that assessment, is the deal fair? The cuts are not draconian ; they are not as high as expected. Most people would have punted the Commission's opening bet at around 50,000 tonnes. It is significantly higher than that. The reduction in the levy seeks to compensate in revenue for the cut in quantities sent by New Zealand farmers. In my experience, what matters to farmers is the bottom line of the account. Consumer choice is preserved because the cuts are broadly in line with those that have taken place historically, and the European farmer cannot say that a 14 per cent. cut in the New Zealand quota is not a severe measure.

It has to be emphasised that any other proposal could be worse. What the Commission has put on the table is the best that New Zealand will get. Any amendment will be worse for New Zealand : that is the political reality. It is an illusion to think that a cut in the New Zealand quota will produce one extra gramme for British dairy farmers. The quota will not be redistributed. We could argue that, if New Zealand butter did not come in, perhaps there would be a little extra for everyone across the Community, but even that is very doubtful. I believe that the reaction of the New Zealanders, with all the marketing effort that they have put in, would be to buy continental butter and put it into Anchor packs. There is nothing to prevent them from marketing continental butter in the United Kingdom under the Anchor label.

The market in Europe is not yet in such perfect balance as people suggest. There may be only 100,000 tonnes of unsold butter in public storage. However, liquid skimmed milk is still being subsidised into calves' feed at 53 ecu a tonne, and skimmed milk powder is being subsidised into calves' feed at 650 ecu per tonne. Therefore, it is ridiculous to talk about the market having undergone some miraculous transition to balance. There is still a long way to go. Butter is being subsidised into pastry-making, ice cream and other manufacturing projects.

The proposals represent a balanced view, and, as my right hon. Friend the Minister said, we have to consider them with the lamb and sheepmeat proposals. Most people consider it a package, although the legal status of the two agreements is wholly different--one is a bilateral deal and one is a voluntary restraint within the overall framework of the GATT. With the proposal to cut the New Zealand lamb entitlement to a level still above the historic level of New Zealand shipments--with some limitation on chilled lamb, which in some senses is more sensitive to the United Kingdom market-- the Commission has produced a cleverly worked package, which may be one of Commissioner Andriessen's last measures as Agricultural Commissioner before he takes on his new role as Commissioner for External Relations. This is a well-wrought deal. It is fair to all the parties concerned, given that the Commission had to square a circle containing very conflicting interests. I believe that the housewife has the same proportion of choice that she had before. The European farmer cannot complain that his pain is not shared by others. The combination of the cuts and the levy change for New Zealand maintains the revenue expectations of that country and justifies its input into the promotion of the butter market.

I commend to my right hon. Friend the view that, within the confines of his negotiations, he should seek to

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promote the deal, as it comes as near as we are likely to get into the practical political circumstances of producing something supportable, even if all parties are not ecstatic about it. It is a well-wrought package and he would do well to defend it as it now exists.

12.14 am

Mr. Geraint Howells (Ceredigion and Pembroke, North) : The National Farmers Union and the Government appear to be at loggerheads over the issue of New Zealand butter. Perhaps the Minister will explain why. The NFU represents a large number of producers in this country. The NFU's view is also taken by the Milk Marketing Board, which has served the dairy industry well for the past 50 years. It is also the view of the Dairy Trade Federation. They are all agreed that the New Zealand butter quota should be reduced to 40,000 tonnes next year and be abolished by 1992. There is a great deal of disagreement among the unions, the trade, the Milk Marketing Board and the Government. It would be helpful to know why.

There has been a 15-year transitional period and the dairy trade is wondering how long it will continue. Hon. Members on both sides have said that we would not have an additional milk quota if the New Zealand butter quota were abolished.

I should be grateful for clarification on the question of profitability, which is important to British farmers. The Government are duty bound to look after the interests of their dairy farmers. I still believe that we should treat New Zealand gently and allow it to continue to send butter to this country, and, so long as the Minister does his utmost to safeguard the interests of British dairy producers and consumers, he will have the blessing of my party.

Mr. Michael Jopling (Westmorland and Lonsdale) : I agree with the remarks of the hon. Member for Ceredigion and Pembroke, North (Mr. Howells). I especially agree with what my hon. Friend the Member for Skipton and Ripon (Mr. Curry) said in his outstandingly clear speech.

The House is beginning to realise what a contentious issue this is and always has been. Various arguments are deployed. There are those who say that there should be more, even unlimited, access to New Zealand butter. My hon. Friend the Member for Southend, East (Mr. Taylor) has almost made it his life's work to find every conceivable argument from the bottom of the barrel to criticise the European Community. We are all familiar with that, and it is the gist of the amendment. There are others who say that New Zealand butter imports should be abolished as soon as possible.

Like many hon. Members, I have spent a large part of the past four or five years travelling around the country to speak at farmers' meetings. I often met strong objections to New Zealand butter imports. I discovered that almost all the criticism was based on the false assumption that if those imports were abolished there would somehow be increased quotas for Britain and, possibly, the Community. That is erroneous, and my right hon. Friend has nailed that argument. Many of the cries from farmers and the Milk Marketing Board are based on that erroneous assumption. I hope that we can kill that. We must put the position of New Zealand imports into its historic context. I well remember that in the early 1970s, when we were negotiating to join the Community--the team was led, I think, by Lord Rippon as he now is--some

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issues came up time and time again. There was the issue of sugar imports from the developing countries, and there was the issue of New Zealand butter imports. I notice that some of the people who, 15 years ago, insisted on the need to maintain New Zealand's share in the United Kingdom butter market are now saying that it should be eliminated altogether so that perhaps our farmers would get some extra quota. That is a silly argument and one to which we should not listen.

I hope that we shall hear no more from the Opposition about it being wrong to reduce the amount of New Zealand butter that has been imported over the years. I remind Members on the Opposition Front Bench that the amount of New Zealand butter imports decreased during the years of their Government, as it was their Minister who negotiated that decrease.

I feel that the proposal to go down to about 55,000 tonnes in 1992 is about right. I understand that the New Zealanders have said that this is the lowest level that they can accept and, like my hon. Friend the Member for Skipton and Ripon, I was pleasantly surprised that the Commissioner did not put a somewhat lower figure on it. I believe that it is about right, but I warn the Minister that there will be those in the Council of Ministers who will take this proposed figure as the starting point. I can anticipate the arguments of, perhaps, the French and Irish Ministers, who will use this as a starting point from which to negotiate a significantly lower figure. I hope that my right hon. Friend will support the Commission and resist any suggestions that this figure should be further reduced. I believe that we have a continuing debt to New Zealand because of what it did to support Britain in two world wars, and we should never forget that. It would be a tragic mistake if we were to sell New Zealand down the river, and we are not doing so with these proposals. As my right hon. Friend said, they will mean that New Zealand's share of our butter market will be more or less maintained. That is the key, and I hope that my right hon. Friend will support the Commission in sticking to these proposals.

12.22 am

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