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Single European Market

10.23 pm

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude) : I beg to move

That this House takes note of European Community Documents Nos. 9756/88 on completing the Single Market and 10413/88 on technical standards and regulations ; recognises that the Single Market will bring important opportunities and challenges for business and benefits for the consumer ; welcomes progress to date on the Single Market and endorses the Government's strong commitment to completing it ; and welcomes the Government's campaign to encourage United Kingdom business to prepare now for the Single Market.

Mr. Speaker : I have not selected the amendment in the name of the hon. Member for Thanet, South (Mr. Aitken).

Mr. Maude : A year ago today, the Department of Trade and Industry launched its single market campaign. Its purpose was to alert business to the opportunities and challenges of the single market. We set ourselves then the target of achieving 90 per cent. awareness of the single market by the end of last year. We met that target well ahead of schedule, and now 50 per cent. of British business is taking action to prepare, recognising that the single market is already becoming a reality.

The need for this campaign is demonstrated by the progress report that we are debating tonight. The Commission was required to produce the report by article 8b of the treaty. It welcomes achievements to date in such areas as standards, financial services, capital movements, public procurement and professional qualifications. It also calls for faster progress in areas such as plant and animal health, taxation and frontier controls, and it stresses the importance of sustaining a rapid rate of progress.

The second report concerns the operation of directive 83/189, which is about preventing the creation of new technical barriers to trade within the Community and encouraging the production of European standards.

The Cecchini report suggested that the single market could create a 4 to 5 per cent. increase in Community GDP and nearly 2 million new jobs. But those benefits will not happen automatically. They depend on removal of all non-tariff barriers. They depend on open markets and a liberal approach.

Mr. Bob Cryer (Bradford, South) : With the removal of the internal barriers, the textile industry fears that all the imports into the Common Market might come into the United Kingdom. That seems likely, in view of our huge balance of trade deficit in manufactured goods. Do the Government have any plans to ensure that there is a fair allocation of textile imports throughout all the member states, rather than allowing them to flood into the United Kingdom?

Mr. Maude : That matter will have to be sorted out in the negotiations on the multi-fibre arrangement which, as the hon. Gentleman knows, falls to be considered in the current GATT round. We have shown here in Britain that deregulation, openness and competition are central to economic success. For Europe to succeed, it needs to follow the same approach, and we are winning the argument. The

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completion of a real single market, which was, after all, what the EC was originally about, is unquestionably in the British interest. On the few occasions on single market measures where we dissent from the majority, it is where we favour the more liberal, more European approach ; while some of our partners, who may make more communautaire noises than we do, stand fast for narrow nationalistic protectionism.

But a recognition of the benefits of the free market approach is growing in Europe. Last year, the Council of Ministers agreed a resolution which reaffirmed our commitment to improving the climate for business. It recognised the importance of small and growing firms and the need to ensure that their enterprise and enthusiasm are not strangled by red tape. It acknowledges

"that the development of the spirit of enterprise and the creation of new firms in the community must be encouraged".

It also acknowledges that existing legislation should be reviewed with a view to simplification. I stress that that resolution was a proposal by the European Commission which was supported unanimously by all 12 member states.

We can claim some credit for creating the climate of opinion in which such a resolution was possible. A few years ago, it would not have been. The same more market-oriented approach is seen in the field of standards. Old- style harmonisation has gone--the days of regulating every aspect of every product. Under the new approach to standards, we simply set the essential requirements--for example, relating to health and safety.

The specialist standards bodies then draw up the detailed standards to help companies meet the requirements. That new flexibility has resulted in agreements covering, for example, machine safety, construction products and toy safety. In that and other areas, we are making such harmonisation as is necessary a liberalising process, rather than a repressive and regulatory one.

In the past 12 months, we have seen key agreements on, for example, the liberalisation of capital movements, the mutual recognition of professional qualifications, the liberalisation of road haulage, and the opening up of public procurement markets. In air services, we are enjoying the benefits of liberalisation already, with new routes and lower fares.

Last Thursday, at the Internal Market Council, we reached agreement on a directive to remove barriers in trans-frontier broadcasting. Attempts by others to introduce rigid and protectionist provisions failed. The outcome is essentially flexible and liberal.

A priority for the future is financial services. We are discussing directives on banking, investment services and life assurance services.

Rev. Ian Paisley (Antrim, North) : Page 1 of the document on completing the single market says, in short, that completion of the internal market is the key not only to the Community's prosperity but to the Community's future. It is the key that will and must unlock the door. What is the Government's attitude to unlocking the door, and where will the unlocked door take us?

Mr. Maude : It is a somewhat cryptic phrase, but we agree entirely with the sentiment that the priority for the Community at the moment is completing the single market, and completing it in the sort of way that the

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United Kingdom finds congenial. That is undoubtedly the key to unlocking a great deal of prosperity that is diverted into needless costs and restrictions.

Mr. Dennis Skinner (Bolsover) : Is the Minister aware that some people have found the key to the door in the Common Market? The Mafia has found a golden key and unlocked the door. When it shouted, "Open sesame!" It found £6,000 million behind the door. It is odd that the Minister should come here with a motion supported by the Prime Minister who only a few months ago was lecturing everybody at Bruges about the dangers of the Common Market. Yet she has signed a motion welcoming the single market, having guillotined the measure in the House. It is high time the Minister told us about the hypocrisy of the Government in trying to give the impression that they are against the Common Market when late at night, as on this occasion, they come along, with the payroll vote, to push a motion through.

Mr. Maude : The hon. Gentleman may find it remarkable, but it is possible to be in favour of some parts of a concept without finding it necessary to embrace warmly every aspect of everyone's view of it. It is possible to be against illegal fraud, as we are--more robustly perhaps than others in the Community--and still be in favour of the completion of the single market. The hon. Gentleman, with his detailed and expert knowledge of the subject, should know that allegations of fraud within the European Community, which we take extremely seriously, have nothing to do with the completion of the single market. The single market is about removing barriers to trade across Europe and nothing to do with providing funds.

Mr. Teddy Taylor (Southend, East) : When he deals with the progress of the directive on machine safety, can the Minister give us any indication of how it will help free trade, particularly bearing in mind that it was considered by a Standing Committee for two minutes on 30 January, after it had already been agreed, and then passed by the House without a vote? As we know, it will add huge extra costs to the activities of small and medium industries. Can he tell me in what way that directive will further the interests of free trade in the Community?

Mr. Maude : It will do so by preventing those countries in Europe that might otherwise be minded to do so--in some instances they do so at the moment--from erecting bogus barriers to trade on the pretext of safety requirements. It will lay down that, if a machine meets the essential safety requirements set out in the directive, another country in Europe cannot prevent it from being marketed.

That is quintessentially what the single market is about. It is about preventing countries from erecting false barriers to trade on bogus pretexts. It will be effective in doing that. We have succeeded in achieving the bulk of our requirements. It is essentially a liberal directive, along the lines that we urged throughout. I hope that my hon. Friend will draw comfort from that. The suggestion that it will impose extra costs on small businesses is mistaken. In respect of the financial services directive, our objective is to secure a sound framework of Community legislation that encourages competition and provides

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equal access to European Community financial markets. We have had strong objections to the Commission's proposals on reciprocity in financial services. We would like to see them dropped altogether, but the Commission's revised proposals, published last Thursday, are a real improvement, although significant points of difficulty remain. We shall continue to resist attempts to use the single market as a pretext for the erection of protectionist barriers against the rest of the world. Again, recent developments are encouraging. Both Heads of Government and the Commission have reaffirmed the need for open markets.

The Community, after all, lives by trade. A policy of "fortress Europe" is simply not credible. Indeed, it would undermine the benefits of more competition and greater consumer choice that the single market is designed to bring. There is also a social dimension to the single market. It is inseparable from the economic benefits of more jobs, more choice and greater prosperity.

Mr. Jeremy Hanley (Richmond and Barnes) : In addition to the excellent initiative and effort being put into developing business advantages for small and medium enterprises in Europe, adding to that the great advantages that will exist for businesses trading in Europe under the single market, many companies that will not choose to trade in Europe will nevertheless be fully affected by the single market and by added competition from Europe. Will my hon. Friend encourage companies, whether or not they choose to trade in Europe, to carry out a full 1992 audit to discover the advantages, and in some cases perhaps the added competition, that they will face following 1992?

Mr. Maude : We have stressed throughout the campaign that we have run that the single market will affect every business in the country and that whether a business is now trading, or might in the future trade, in Europe, it will be affected. To the same extent that the rest of Europe becomes part of our home market, we will become part of the wider European market, so it will become commensurately easier for continental firms to trade here. My hon. Friends point is correct, and I hope that it is widely understood.

Mr. William Cash (Stafford) : My hon. Friend will be aware of the Commission document entitled "The company approach to 1992", which expressly omits any reference to the United Kindom Parliament and its scrutiny process but refers to the scrutiny processes in other parts of the Community, such as the European Parliament and the Commission.

Does my hon. Friend agree that it is essential not only that the scrutiny process in this Parliament is known at large, through documents published by the Commission--of which 50,000 have been distributed in this country-- but that the Department of Trade and Industry should also make sure, as I understand that Department is about to do, that people know that this is the House to which Ministers and others are accountable and to which people are elected to represent their constituents?

Mr. Maude : We treat the process of scrutiny extremely seriously. The attention which my hon. Friend and his colleagues who sit on the European Legislation Select Committee devote to these measures is welcomed by the

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Government. I hope that he appreciates the effort that we are making to bring these matters before the relevant Committees at an earlier stage in the negotiating process because the comments that the House makes are useful to us as we continue the process of negotiation.

I was referring to the social dimension of the single market and said it was inseparable from the economic benefits which would flow from the single market by way of more jobs, more choice and greater prosperity. We welcome measures which help to tackle the problem of unemployment--which is now greater throughout most of the rest of the Community than it is in this country--and measures which improve health and safety.

But there are those in the Community who want to impose new social legislation on us. One example is compulsory worker participation in the running of companies. We are not opposed to the involvement of employees and we have done a great deal to encourage it but the imposition of rigid systems on all companies in all countries is alien to all that the Community should stand for.

I am encouraged to know that I can rely on the support of many Opposition Members for the Government's robust hostility to those proposals. I note from the debate last week on weights and measures how strongly many of them object to the imposition of measures of purely domestic concern by the Community. I look forward to receiving, particularly from the hon. Members for Bolsover (Mr. Skinner) and for Bradford, South (Mr. Cryer) robust support for our standpoint on this issue so that we may go forward on a bipartisan basis in opposing the imposition by others in the Community of alien measures.

Mr. Doug Henderson (Newcastle upon Tyne, North) : What evidence has the Minister that the system of worker participation which has been established in West Germany has damaged the efficiency of the German economy?

Mr. Maude : I did not say that it had. All I said was that it is a system not welcomed by companies here. Many companies, and all successful companies, establish their own systems for employee participation, but they are systems agreed by those companies in circumstances which are appropriate for them ; and systems which are deemed apropriate by the German domestic legislature for German companies are not necessarily those which are appropriate in this country. I hope that the hon. Member will agree with us in strongly resisting this imposition. I can assure the hon. Member for Bolsover that we have not sold the pass but are defending it strongly--and I look forward to his support for our doing so.

10.40 pm

Mr. Doug Henderson (Newcastle upon Tyne, North) : I welcome the opportunity at this late hour to consider the progress towards the completion of the internal market and also to consider the procedure for the provision of information on technical standards, but I must point out, as have some of my colleagues previously, that this procedure is inadequate and that a short debate such as this gives us no proper opportunity to consider the very important matters before us. Parliamentary democracy requires parliamentary scrutiny and we cannot have that if decisions are already made before we come to the House. Parliamentary democracy cannot be guaranteed if

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Ministers increasingly fail to make statements in the House on progress on specific proposals which are absolutely vital to our economy, as is now the case, and if other decisions in Europe are reached in private sessions, in private rooms, initially in the Commission and later in the Council of Ministers. We have an excellent example this week of discussions of this sort, which have been taking place on economic and monetary union.

I was interested to hear the commitment of the Under-Secretary of State to raising awareness in the country of the impact of the single market. I hope that all hon. Members will recognise that change must take place in a new, expanded market, and that our role in that market must change. Having said that, however, I believe that there is increasing anxiety about the Government's relationship with Europe. Is this anxiety not a direct reflection of the Government's own anxiety? And is that not itself caused by the Government's own failure to understand in time the true nature of the Single European Act--as I think some of the Minister's colleagues will point out later in the debate? Is it not also the case that the Government's belated recognition that 1992 means more than the free movement of City capital is something on which they did not originally reckon? Montagu Norman, the legendary pre-war Governor of the Bank of England said that he employed economists to explain to him why he was right. It is obvious to most hon. Members that the Prime Minister must have consulted Montagu Norman's memoirs before she appointed Mr. Walters and her other advisers. It might be wise for the current Governor of the Bank of England to check his economic textbooks this evening to see on whose advice he has drawn in his discussions in Europe in recent weeks.

Does not this confusion and misapprehension about the Single European Act explain the hectoring and the blustering on behalf of our nation in Bruges not many months ago? Has it not made the task of all of us, of industrialists and of business men, all the more difficult in closing what is undoubtedly our Euro-credibility gap? If we do not do that, will we be able convincingly to press for reform in the Community? I hope that all of us would reckon that such reform is vital to our interests.

Mr. Jonathan Aitken (Thanet, South) : I am somewhat perplexed by the Labour party's policy after listening closely to that delphically obscure passage about governors, past and present, of the Bank of England. Is the Labour party policy to support the views of the present governor of the Bank of England on economic monetary union or has it come round to support the views of the Chancellor of the Exchequer? One way or another, the Labour party must now make its position clear.

Mr. Henderson : The views of the present Governor of the Bank of England are interesting. I am not sure that those of the Chancellor of the Exchequer are as interesting. The Labour party's view is quite clear : we will consider greater monetary union in Europe when the time is right and we get an exchange rate with which our industry is able to compete in Europe. People who know about industry will realise that that is crucial.

Why have the Government belatedly understood what the single European market is about? We should hardly have expected the Government to agree with everything said by Mr. Delors, but we would have expected them to have a greater rapport with Chancellor Kohl. One can

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imagine the horror in some of the back rooms of Victoria street last summer when it was heard that, in his Hanover speech, Chancellor Kohl said that he agreed with most of what Mr. Delors said about the importance of the social dimension. I was encouraged by the fact that the Under-Secretary of State said earlier that he had begun to understand the importance of that.

The Government have a number of important obligations in relation to the completion of the single market. They have an obligation to inform our own people, initiate change in Europe on our behalf, represent Britain's interests in Europe and, crucially, make changes in this country, which are necessary in preparation for 1992. It must be clear to the Department that we are the least well prepared for 1992 of the major EC countries.

It is right for the House, in this debate, to examine how the Government have discharged their responsibility.

Mr. Maude : What evidence does the hon. Gentleman have for that assertion?

Mr. Henderson : I am happy to refer the Under-Secretary of the Tyne and Wear chamber of commerce, which referred to an article in the Daily Mail --which I am sure the Under-Secretary has read. Ten major exporters in the United Kingdom were phoned up in French and asked if they could provide an order for the person making the call. Seven out of the 10 giggled at the switch board and the other three cut off the inquirer. When a similar inquiry was made in Germany and in France--in English--seven out of 10 in both cases understood the orders. The noble Lord Young recently told industrialists that they should buy a ticket for Brussels. Surely, one has to know why one is going before travelling. I heard what the Under- Secretary said about the cost of air transport and liberalisation, but that has not done much to reduce the charge between there and London.

Writing in The Journal of Northern Business --which deals with the area that encourages Fujitsu and other companies--Lord Young says : "DTI surveys show that, nationally, only around one firm in three has begun to prepare seriously for action"--

that was in January this year--

"and there is no evidence that companies in the North are any better prepared."

An article in Scottish Management Survey stated in February : "The principal anxiety, however, arises from the lack of preparedness which the survey reveals in the approach of Scottish managers to the challenge of 1992 and the Single European Market. A third of the respondents simply say that the event is not important'."

There is more evidence from the CBI. In its survey of 200 companies, 31 per cent. said that they had made no preparation for 1992 ; 3 per cent. said that they had opened sales offices ; 4 per cent. had managed to open agencies ; and only 7 per cent. had introduced new language training. I do not think that that is good enough.

Mr. Maude : I am sure that the hon. Gentleman will join me in welcoming the fact that since January--a date to which he did not refer until it was drawn from him--the proportion of businesses that are preparing for 1992 has risen from one third to half.

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Mr. Henderson : I hear what the hon. Gentleman says. I shall be interested to hear the statistical basis for it in the morning. Every dog has his day ; does not every salesman have his? Is it not clear by now that the Secretary of State has failed in the preparation for 1992? He cannot even convince the friendly Institute of Directors of his case. Will the Under-Secretary now join his colleagues in expecting the boss to hang up his salesman's patter before it is hung up for him by his own boss? If the boss will not give assurances, as he cannot, will the Under-Secretary acknowledge that urgent action is needed if we are to inform and educate our business community? Does he recognise the danger of a hands-off attitude? Does he agree that an assessment by the Department of the likely impact in each industry is vital? I am sure that Miti in Japan would undertake such an assessment if it were in our position ; indeed, it is undertaking one on behalf of Japanese companies. Will the Under-Secretary make more resources available to co-ordinate the task through the DTI, as a matter of urgency? If he is somewhat weary of making commitments my colleagues and I may understand, although I am not sure that the business community will. I assure him that if he accedes to my requests it will not make him an interventionist ; I am merely asking him to be an informationist. Better information by itself is inadequate, however. The Government have an important obligation to engineer change in Europe. That is not only in Europe's interests ; it is in ours. Europe cannot prosper as long as there is a great divide between the north and the south--or, more accurately, between the Bonn-Paris central axis and the most peripheral areas of southern Italy, Greece, Iberia, Ireland and, increasingly, many parts of the United Kingdom.

Some might argue that markets will resolve that division. Few in the Community seem to believe that, although there are some in Whitehall who do. Few believe that the poorer regions can achieve growth without strong regional policy, that skill levels can be raised without strong social policy or that infrastructure can be improved without intervention expenditure. Few in our textile industry, in regions already referred to, believe that they have any future without intervention in trade through the multifibre arrangement--and also intervention in this country to modernise plant and product and bring marketing to a standard that would allow it to compete principally in Europe. Few would argue that those objectives and others can be achieved without greater European public expenditure.

We should be taking the lead in those matters, in our own interests and in the interests of the Community. We should learn from others. We should learn from the Germans that public expenditure is worth while and can be justified to improve the private sector and that intervention is necessary if education standards are to be raised, training is to be improved and research and development is to reach the necessary standards. Perhaps then we would reach the standards of product development achieved by the Germans and take the lead in introducing some of the most important proposals, such as the three-way catalytic converter for vehicle exhausts, the new standards in ventilating equipment and the new environmentally safe batteries which will be a key issue in the coming months.

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Perhaps it is possible to prosper without intervention domestically or with a social dimension in the EC, although I doubt that. But it is surely impossible for Britain to prepare for 1992 with such an overvalued currency. Industrialists throughout the country, including the CBI, tell us regularly that the one factor which destroys our ability to export is the exchange rate. Will the Government face up to the fact that it makes no sense for one of the weakest manufacturing nations in the EC to have one of the most overvalued currencies? That is a recipe for industrial devastation now, further problems in 1992 and even more severe difficulties if the proposals discussed by the governors of the European banks ever reach the political agenda.

The noble Lord Young may crawl to the recalcitrants in the Institute of Directors, saying that the abolition of exchange controls, the freeing of international road haulage or the freeing of non-life insurance shows that 1992 really means deregulation. I hope that the Under-Secretary of State for Corporate Affairs will be wiser than that and will agree with the manufacturing industry in Britain and in Europe that intervention is necessary to secure common high-technical standards, the best product design, structural changes in industry and the highest standards of environmental protection and safety.

To date, only 108 of the 279 proposals have achieved a common position. We shall face difficult issues in future, such as animal and plant controls, fiscal change, border controls and the movement of people, which are all vital to our future. The challenge to Britain is to produce a European agenda, to take a lead in European standards, technical, material and moral, and to recognise that our macro-economic policies, particularly our exchange rate, is crucial in any European context. Our challenge is to acknowledge that if supply-side improvements do not happen autonomously in Europe, why should they happen autonomously in Britain. Our challenge is to realise that unless all those measures and others are taken, far from being a great opportunity, 1992 will be a great threat.

I hope that the debate will help to clarify the issues in the documents, but the Opposition cannot support the motion. I hope that hon. Members from both sides of the House will express their concern and join us in opposing the motion.

10.58 pm

Mr. Teddy Taylor (Southend, East) : This is a very short debate on an important issue, and I shall say just a few words.

Everyone in the House tonight will probably agree that free trade in Europe would benefit the United Kingdom and Europe. Our massive balance of trade deficit with Europe suggests that free trade and the removal of artificial restraints and bureaucratic controls, particularly in Germany and to a lesser extent in France, would help us all. A real 1992, with free trade in Europe, would benefit us all. But we have to ask ourselves whether we are aiming for free trade, whether free trade will be achieved, and what is actually facing us. What is happening? The Minister said that more and more people were aware of 1992. What worries me is that they are aware of something that is not going to happen at all. I can give many examples. I had the pleasure of attending a recent conference of the print industry and paper manufacturers. They were talking about 1992 and

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the great opportunities of the new changes. I asked all 160 people, including company chairmen, managing directors and accountants, whether they knew of any proposal in the 1992 measures designed for printing or books. I said, "You are the people who know--I don't. You are the company chairmen and managing directors, and you have paid a lot of money to come to a great conference and everyone is delighted with it. Do you know of any proposal that will help your industry?" I did not receive one response, and I know of none, save the possible imposition of VAT on newspapers and books.

The Minister talked about insurance services. I am a director of an insurance company and I have been to lunch with people from many insurance companies. We hear constantly about the glorious new opportunities for insurance freedom in 1992, but I must ask the Minister what those opportunities are. I have read the directives with great care and we have studied them at board meetings, with experts submitting reports, but the only proposal for non-life insurance seems to be for a limited degree of freedom in what are known as large risks. That means that our company might have the opportunity to insure the Eiffel tower, if the French agreed. However, that freedom might not materialise, due to the rule put into the proposals by the Commission at the last minute to the effect that if a company can offer a suitable insurance service it can keep the other lot out. My insurance company--and two other leading insurance companies of which I am aware--thus came to the conclusion that there is no liberalisation in the proposals.

When one considers particular industries, it is nonsense to say, "Please prepare for 1992." Looking at the proposals, it is clear that free trade is not on the way. Sadly, the measures that we have considered to date have largely been matters of little significance. Sadly, too, there are major problems. Does my hon. Friend the Minister seriously think that we can have free trade in 1992 unless we sort out the inner German trade agreement? He will be well aware that the country with which we have the worst balance of payments deficit is Germany. He must be aware from reading Community documents that the position is disastrous.

In the reports about food aid, for example, we find that there were massive complaints last year about food contaminated by radioactivity, which apparently came from eastern Europe. My hon. Friend must be aware that trade is flowing in from East europe to East Germany and to West Germany under the inner German trade agreement. The only people who can control the trading conditions are the West German Government. We are all aware that trade is flowing from eastern Europe to Germany.

The Minister may think that that is a silly point, but let him go and speak to the textile industry or to the people working in the knitted goods industry. They have plenty of documents on the matter. I have one here from the Apparel, Knitting and Textile Alliance, which is clearly terrified that the alleged single European market will simply mean that east European goods will pour in. What can my hon. Friend do about that? We have put particular cases to him, but we are told that it is the German Government who determine that a certain percentage of value must be added before goods can come out of West Germany. What on earth can we do about that, and what is already being done?

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I want to ask my hon. Friend about the interpretation and application of free trade. We have already had one or two minor free trade measures for which we should be delighted, such as one on buses. I appeal to my hon. Friend to come to Southend and ask people at the airport how they get on with the free trade in buses. The Minister should consult the Foreign and Commonwealth Office and his own Department. He will know that, although our right hon. and learned Friend the Foreign Secretary met Mr. Genscher, although our right hon. Friend the Minister of State took proceedings, and although I took a group of Southend councillors to West Germany with the help of our ambassador in Bonn, sadly, nothing happened. Before the Minister goes ahead with more of this massive timetable, I plead with him when talking of the glorious opportunities to ask whether those opportunities really exist or are being planned.

I hope that the Government will also consider what other countries think about "fortress Europe". I was in America last week and met many people in business there. Some firms, such as Ford and Du Pont say, "Don't stir things up--we're in Europe and we want to make sure that we don't stir things up unnecessarily and bring out any anti-American feeling there." If the Minister were to talk to those engaged in trade, however, he would find that when they consider the proposals--there is some element of protectionism in all of them--they are concerned that the proposals seem specifically designed to try to keep out foreign trade. If the Minister has any doubts about that, he should talk to those who export computer chips because there are new proposals about the basis of organisation and about where research and development must come.

The Minister should also talk to the American banks. He will know that in America there is a system of national treatment whereby foreign banks have to have the same facilities and the same rights as United States banks. But that is not what "reciprocity" means, as my hon. Friend the Minister must be well aware. This is something entirely new, which will be protectionism in banking. If he doubts that, he should ask the Bank of America and its vice-president, Mr. Coleman.

Mr. Maude : I am sure that my hon. Friend has seen the Commission's new proposals on reciprocity, which were issued on Thursday last week and which specifically refer to national treatment.

Mr. Taylor : My hon. Friend must be well aware that the document, which I have with me in this pile of documents, states that the question of reciprocity can be referred to the Commission for interpretation. We know that the Minister and the Common Market have, on a number of occasions, given many specific assurances. Does my hon. Friend recall Ministers coming to the House time and time again to say, for example, how delighted they were that in 1987 agricultural spending increased by only 3.7 per cent. but the Court of Auditors' report shows that that was achieved by accountancy fiddles and that the real figure was 24 per cent. If my hon. Friend doubts that, he should come to Southend and talk to our bus company.

Mr. Maude : I am not quite sure where my hon. Friend's last point takes us, as it seems to lead into a wholly different area. On his point about reciprocity, the Commission's new proposals specifically state that the

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Commission would have powers to act against other countries' banks seeking authorisation in the Community only if they did not offer national treatment to EC banks seeking authorisation there. As I said, that point has met many of the existing anxieties, and although it does not meet all our concerns, it goes a considerable way towards doing so.

Mr. Taylor : I should be delighted if that were so, but on the basis of my discussions last week with American banks and on the basis of speeches made by them on the basis of what had been agreed, I can tell the Minister that they are still acutely concerned that when it comes to the assessment of reciprocity and the question of the national agreement, it is the Community as a whole that will be considered by the Commission, not individual member states. Am I right?

Mr. Maude : I stress again that the new proposals were only announced on Thursday, so the banks to which my hon. Friend properly spoke last week will not have been aware of this radically new set of proposals.

Mr. Taylor : I hope that the situation is indeed so dramatically changed, but my understanding was that the assessment of the national situation was on the basis of the group of Community countries as opposed to individual member states. I ask the Minister, what is the need for that in any event, and if it is not a problem, why is everybody so concerned about it? Let the Minister talk to the chairman of Millipore, who has said that trading with Europe is difficult now--but that after 1992 it will become much worse. I ask my hon. Friend the Minister to consider another important point. What on earth will be the position of the rules being imposed on us, which will create massive problems? For example, how will this country benefit from the tax harmonisation to which he referred? I refer especially to the harmonisation of taxation on alcohol and tobacco, on which the Government claim that we still have a measure of unanimity although, as he well knows, the European Court can overturn that by taking action. If my hon. Friend doubts that, let him look back to the speeches by Labour Treasury Ministers at the time of the sixth directive, which stated that all our zero rates were safe--yet six have now been overturned by the European Court. The Minister will be aware that the assessment of the Health Department, according to an answer given in Parliament on 18 May last year, was that if the proposals were implemented, the consumption of alcoholic beverages would be increased by between 10 and 35 per cent. and of tobacco by between 5 and 20 per cent. but, more importantly, that the Government would lose revenue of exactly £3 billion, which would have to be made up in other ways.

The Minister also said that the Mafia issue and fraud were completely apart from the issue of 1992 and free trading. He said that with conviction, as though it was absolutely clear. I appeal to him to contact Giovanni Falgone, Sicily's leading anti-Mafia magistrate, who said specifically in a speech, reported in the Financial Times on 24 February that one of the least desirable benefits of a European single market would be to facilitate the export of Mafia crime from Sicily under the guise of apparently respectable business operations.

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My hon. Friend should not under-estimate the extent of Mafia involvement in the EEC. He will be aware that the House of Lords has said that about £100 million per week is being spent on fraud. He will know that I have repeatedly asked his Department and others what action was taken on the clear example of the 19 million lira paid to the Mafia by the EEC for the non-delivery of non-existent fruit juice to NATO headquarters in Palermo. I have asked that question year after year since it occurred and I have asked about many other examples, but nothing has happened and no information has been forthcoming. If my hon. Friend the Minister thinks that there is no connection between fraud and the Mafia, perhaps he will consult those who seem to specialise in the matter.

My real worry is that in the Council of Ministers we are not able to control matters easily. I should like to ask the Minister about the control of firearms and immigration. The Minister will know that there is a proposal shortly to come before the Council of Ministers about mutual recognition of firearm certificates, which would mean that I could obtain a gun--perhaps a kalashnikov--in Sicily or Greece and then come to London and wander around with it. I understand that the Government oppose that and believe that it will undermine their firearm controls and and basis of the open frontiers.

There is a dispute, because the Commission appears to take the view that that should be decided by a majority vote and the Government take the view that it should be decided by unanimity. I ask the Minister what precise powers we have in that connection. My understanding from previous such occurrences is that, unless the Members of the Council of Ministers unanimously decide to reject the advice of the Commission, there is effectively nothing that we can do about it, apart from seeking to go to the European Court, perhaps three years later, which would not achieve a great deal.

I believe that that point is also relevant to immigration. We shall take a strong view on immigrants from Hong Kong after we hand over the country to the Communist Chinese, but what about the situation of the nearby Portuguese colonies which are classified as the overseas territories of Portugal and places such as French Guiana, which are classified as overseas territory of France? I suggest that the relationship of open frontiers could have an adverse effect on us. Mr. A. J. Beith (Berwick-upon-Tweed) rose--

Mr. Taylor : The main question is whether the Minister is really convinced that we are facing up to the real issue of free trade and not just going through a lot of silly nonsense on the various proposals that have come forward so far. I had the pleasure of having a long discussion with a civil servant, who had spent more than a year going backwards and forwards to and from Brussels engaged in the harmonisation of a proposal on clinical thermometers. His professional opinion was that there never had been any problem with clinical thermometers. I cannot see any problem that could emerge from clinical thermometers, but there was a real intention and a real need to get what was alleged to be a common standard.

When we consider the proposals for the noise levels of tower cranes, the regulations for the protection of hotels against fire, the recent modification of the lawn mower harmonisation of noise emission standards regulations and the hygiene conditions of fish--all of which I am sure

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are important to fish, to lawn mowers and to power cranes--I wonder whether we are really making progress on the real issues of free trade.

If the Minister has any doubts about this, he should think about insurance and banking, which matter a great deal to us. He should consider the implementation of the proposals. Before the Government go ahead and spend a lot more money seeking to persuade businesses of the unique opportunities open to them from a single market, they should try to establish--to some reasonable satisfaction--that the single market is likely to be created.

Sadly, I believe that the single market will not happen, although I wish it would, as it would be good for British business. I believe that we shall simply burden ourselves with a pile of rather foolish bureaucratic measures. We shall not solve the true problems of the EEC, such as the common agricultural policy and inability to control finance. Although it would be grand to say that we are moving towards free trade, sadly I believe that we are simply moving more and more towards protectionism and towards high expenditure, instead of the kind of liberality and freedom that Conservatives would choose. 11.15 pm

Mr. A. J. Beith (Berwick-upon-Tweed) : The hon. Member for Southend, East (Mr. Taylor) brings a great deal of information and the fruits of much inquiry to our debates. His logic, however, sometimes deserts him.

The hon. Gentleman has argued that 1992 will create a problem because holders of passports from Macao will be able to enter this country more easily after the abolition of border controls. The problem that the hon. Gentleman describes exists now. The border controls make no difference. The holder of a Portuguese passport issued in Macao is entitled to enter this country now. The disparity between the inhabitants of Macao and those of Hong Kong is of the Government's making and is not changed in any way by the arrival of 1992.

The hon. Gentleman argued that the progress towards the single market is almost non-existent, and he outlined a number of areas where the conditions are less than ideal. He then argued that 1992 will open up a vast range of new opportunities for the Mafia to clean up. The hon. Gentleman has ignored the fact that the single market does not involve the disbursement of funds, which is where fraud has occurred. The hon. Gentleman cannot have it both ways--either the single market will make a difference or it will make no significant difference and therefore will not open up new opportunities for fraud.

Mr. Teddy Taylor rose --

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