House of Commons Hansard Debates for 12 Jul 1990

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Economic Summit (Houston)

3.31 pm

The Prime Minister (Mrs. Margaret Thatcher) : With permission, Mr. Speaker, I will make a statement on the economic summit held in Houston from 9-11 July, which I attended with-- [Interruption.] --

Mr. Speaker : Order. This is an important statement. Would hon. Members who are not remaining in the Chamber for it kindly leave quietly?

The Prime Minister : I attended the Houston summit with my right hon. Friends the Foreign Secretary and the Chancellor of the Exchequer.

The communique and the separate political declarations issued at the summit have been placed in the Library of the House.

Our discussions ranged widely, and we achieved important practical results which meet the needs of the times. Great credit for this is due to President Bush for his firm and friendly chairmanship. I shall summarise the main points of our discussion, under seven broad headings : the world economy ; international trade ; assistance to the Soviet Union and eastern Europe ; developing countries ; the environment ; drugs ; and political issues.

First, on the world economy, economic expansion is now in its eighth year in our countries, with notable growth both in incomes and in the number of new jobs. We ascribed this excellent record to sound budgetary and economic policies. These should continue if economic expansion is to be sustained. Much emphasis was placed on the need for more saving, at a time when the investment needs of the world are expected to grow, in central and eastern Europe and in the developing countries.

I reaffirmed Britain's determination to get down inflation as our first priority, and our intention to join the exchange rate mechanism.

Secondly, international trade, in my opening remarks, I stressed that the touchstone of success at the summit would be our attitude to the continued freeing up of world trade. I am glad to report that we reached agreement which should make possible a successful conclusion to the Uruguay round of world trade negotiations later this year. The main difficulty lies in the subsidies and other forms of support and protection which virtually all major countries give to their agriculture. We agreed in Houston that we should each make substantial, progressive reductions in our agricultural support programmes. This will cover internal support, barriers to market access and export subsidies. To subsidise inefficient producers to keep them in business is unfair to those who are competitive. The outcome should therefore be to the advantage of British farmers, who are among the most efficient in Europe.

I believe that the result will also be very welcome in other countries, including the developing countries, and will open the way to resolving the remaining problems in the general agreement on tariffs and trade negotiations. Most importantly, it will give a clear signal that we are determined to go on with the liberalisation of world trade, which has contributed so much to growth and prosperity. That was the most encouraging message from the summit. Thirdly, we discussed assistance to the Soviet Union. We all recognised the Soviet Union's need for technical

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assistance and know-how. Many of us are already providing management training, for instance--but help from the summit seven as a group should be tied to the introduction of genuine market policies and to encouraging the Soviet Union to mobilise its own extensive resources. We also pointed to the need for the Soviet Union to shift resources away from the military sector and to cut its support to nations that promote regional conflict. It is not our purpose to provide an oxygen tent for survival of much of the old system. For that reason, we agreed that there should be a thorough study of the problems and needs of the Soviet economy, and of the criteria for assistance. That study should be led by the International Monetary Fund, which has the greatest expertise in that area. Other organisations will be involved, and the Commission will be closely consulted. The report should be completed by the end of this year. Thus we can ensure that any help we give will be properly targeted and effective.

Fourthly, on developing countries, we noted that the best help that we can give the developing countries is to sustain our own economic growth and to keep our markets open. We welcomed the growing acceptance by many developing countries themselves that the best way to growth is through market-oriented policies, openness to foreign investment, and sound, democratic government. We reaffirmed our support for the case-by-case debt strategy, and agreed to support longer repayment periods for lower middle- income countries, which are implementing strong reform programmes.

Fifthly, on the environment, we acknowledged that there is still some uncertainty about how much global warming is due to natural causes and how much to man-made causes, but the threat of irreversible environmental damage required us to take actions that are justified in their own right.

We all want the world climate conference in November to consider the best ways to stabilise greenhouse gas emissions. That would lead to the negotiation of a framework convention on climate change by 1992, under the auspices of the United Nations environment programme.

We welcomed the decisions at the recent London meeting to phase out chlorofluorocarbons by the year 2000 and to provide financial assistance to developing countries to enable them to meet their obligations. We also attach particular importance to action to save tropical forests.

I believe that as a result of the summit there is now a much better understanding and sense of common purpose among the G7 countries on environmental issues, which is vital if we are to tackle these problems effectively. [Laughter.]

Mr. Speaker : Order. I may say to the right hon. Member for Leeds, East (Mr. Healey) that this is hardly a laughing matter.

The Prime Minister : Sixthly, on drugs, we underlined once more the crucial importance of international co-operation in every aspect of tackling the drugs problem--production, demand, trafficking and money- laundering. We pledged our support to the countries engaged most directly in the fight against drug trafficking, and we agreed to set up a special task force to ensure that precursor and other essential chemicals are not diverted to the manufacture of illicit drugs.

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The summit discussed also some of the principal international political issues, and agreed statements on securing democracy, terrorism, and the growing problem of proliferation in nuclear and other fields. We acknowledged some recent progress in China, and said that we would be ready to relax measures in response to further positive steps towards political and economic reform. We also called on all parties in South Africa to refrain from violence or its advocacy.

Finally, I invited other Heads of Government to meet in London for a further summit next July. They gladly and graciously accepted. The great achievement of these summits has been to make it easier for all of us to reject short-term soft options in favour of longer-term real solutions : in particular, sound economic policies, freer competition, keeping our markets open and identifying new problems such as drugs and the environment at an early stage, and tackling them by international co-operation.

The world looks to these summits for a lead, and I believe that the G7 countries have once again provided just that, particularly on trade. Last week's very successful NATO summit in London was an important step towards a safer and more peaceful world. Our meeting in Houston takes us towards a more prosperous world for everyone.

Mr. Neil Kinnock (Islwyn) : I thank the Prime Minister for that statement but express some surprise and concern that, in the week of what President Bush and Mr. Wo"rner called an "historic" NATO summit, the Prime Minister made scant mention of that meeting in London last week. Why was there virtually no reference to the London summit when it was widely anticipated on good authority that she would be making a statement on the NATO meeting?

On the Houston summit, the G7 commitment to giving "appropriate" economic assistance to "countries that choose freedom" is welcome. Does the Prime Minister accept that, if the end of totalitarianism in eastern European countries and the Soviet Union were to be followed by poverty, it would be a great tragedy and a source of dangerous instability? Does she not agree that, although aid to those countries obviously must be judiciously allocated and geared to specific objectives, if it is too slow or too small it will not have its full and desired effect of fostering change, liberty and peace. Will she therefore stop thinking of economic help from west to east as what she calls "an oxygen tent" for old regimes and start recognising that, properly used, it is the vital means of finishing off the old order once and for all?

In the wake of the Houston summit, does the Prime Minister accept that there is widespread support for the reduction of agricultural subsidies? Does she not agree, however, that the terms of the Houston communique are extremely vague? Will she assure the House that the British Government will press for a more precise timetable over which agricultural subsidies will be reduced in the advanced countries? Will she tell the House what the Government's policy will be for transitional arrrangements and towards hill farmers and others who work marginal areas who will be unavoidably affected by any significant change?

Does the Prime Minister agree that the response of the Houston summit to the pressing environmental issues confronting our planet was far from adequate? Can she

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explain why the summit failed to specify any action whatsoever on the urgent and growing problem of global warming?

Finally, is the Prime Minister aware that the language of co-operation that she uses in her statements on international summits will carry no conviction for as long as she shares a Cabinet table with a Secretary of State who likens the European Commission to Adolf Hitler and Chancellor Kohl to Nazi tyranny? If she considers the Secretary of State for Trade and Industry still to be fit to hold office, then she is not fit to hold office.

The Prime Minister : On the right hon. Gentleman's last point, I have nothing to add to what I have already said. I note that he is not capable of graciously accepting the withdrawal of his remarks which my right hon. Friend has fully made.

I did not make a statement on the NATO summit, but I am quite willing to make one. I did not think that it would be very welcome if I made two statements today, but I am delighted that the right hon. Gentleman wants a statement every time I have a bilateral meeting or attend a NATO summit.

I shall quickly answer the right hon. Gentleman's three questions on the NATO summit. As he will realise, we have set up a team to work out a new strategy for the different circumstances because forward defence may no longer be suitable. We need much defence in depth and much more flexible forces and to rely more on reserves.

We were, however, clear about several things on nuclear weapons. For example, we made it quite clear that to keep the peace the alliance must maintain for the foreseeable future an appropriate mix of nuclear and conventional forces based in Europe and kept up to date where necessary. I hope that that pleases the right hon. Gentleman.

When speaking of short-range nuclear weapons, there was a suggestion--it was put in the communique --that they should be weapons of last resort, but in case that was misread, we also included in the communique an agreement which we have had in NATO for a long time--since the comprehensive concept, which the right hon. Gentleman has never agreed with--that nuclear weapons will continue to fulfil an essential role in the overall strategy of the alliance to prevent war by ensuring that there are no circumstances in which nuclear retaliation in response to military action might be discounted. I hope that that also pleases the right hon. Gentleman.

With regard to aid to the Soviet Union, many countries already have lines of credit to the Soviet Union from their banks, some of which are backed up by Government guarantees, like Germany, and others by Export Credits Guarantee Department cover. In our case, £800 million has not been drawn by the Soviet Union, so it is not short of a loan facility should it wish to purchase things, and most of those things will have ECGD cover.

Many of us are giving various technical assistance, mostly on managerial training, and each in our own way. We were considering further aid, which of course comes from the taxpayer, but any aid that we can give, even as G7 countries, will be comparatively small compared with the economy of that enormous country of 280 million people and 11 time zones, which runs from the sub-tropics to the ice cap. We cannot run that country for it; we can only help it to help itself. In the political declaration, we offered substantial facilities for drafting, because they have no law

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on private property, no company law and precious little contract law. We can help with many of those things. When we are considering how--

Mr. Tony Banks (Newham, North-West) : Let us send them truckloads of lawyers.

The Prime Minister : It would be a very good thing to have a number of lawyers in a country that knows no rule of law. This country believes-- at any rate, Conservatives do--that an independent judiciary must determine the law. It would be good to pass on that lesson to the communist countries.

We shall look at the International Monetary Fund's analysis to see whether there is further help that we can give, but it would be absurd to think that we can change the future of the Soviet Union by the amount of aid that we give, which is why it must be carefully targeted. It is not that it does not grow sufficient food, but that about 40 per cent. of the food that it grows never gets to market. It could do with much technical help on food processing, storage distribution systems and transport. That would be worth doing. May I remind the right hon. Gentleman that these were the conclusions of the seven largest industrialised countries responsible for 60 per cent. of the world's gross national product?

With regard to agriculture and a more precise timetable, as the right hon. Gentleman knows, we negotiate our agriculture through the common agricultural policy, and we shall have to get together in the Community to see how we shall go ahead and honour the commitments that we made at Houston. But it was very important that we made this commitment before the Uruguay round ends this year.

We are also using the De Zeeuw report, which was produced by the negotiating committee of GATT, as a basis for our negotiations. It recommended that we should have a common measurement among all agricultural countries and that we should reduce our export subsidies--[ Hon. Members :-- "Briefly."] The right hon. Gentleman asked me the questions, but he does not like it when I answer them thoroughly. The environment conclusions reached-- [Interruption.]

Mr. Speaker : Order. The Prime Minister has already said that she is answering the questions posed by the Leader of the Opposition. His Back- Bench colleagues should listen.

The Prime Minister : The environmental conclusions reached were significant. They followed the excellent conferences we have had in London on the ozone layer and the commitment of 80 nations to phase out chlorofluorocarbons by the end of the century. The next step is to try to deal with the greenhouse gases.

Mr. Bob Cryer (Bradford, South) : Will the Prime Minister give way?

The Prime Minister : The right hon. Gentleman will find, for example --

Mr. Cryer : Will the Prime Minister give way on this point?

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Mr. Speaker : Order. It is intolerable for the hon. Member for Bradford, South (Mr. Cryer) to behave like that.

The Prime Minister : We wish to be ready for a climate convention on greenhouse gases or their equivalent, which includes methane and many other gases. We also made arrangements to join together to try to protect the Brazilian rain forest. We have already taken a lead by allocating £100 million over three years to protect the Brazilian rain forest. Other people, especially the young people of this country, will be very interested, even if the hon. Member for Bradford, South (Mr. Cryer) is not.

Several Hon. Members rose--

Mr. Speaker : Order. I remind the House that today we have the conclusion to the important debate on community charge capping, which must end at 7 pm, and also a business statement.

Several Hon. Members rose--

Mr. Speaker : Order. I ask hon. Members who will now be called to put single questions and to put them briefly.

Mr. David Howell (Guildford) : While at Houston, did my right hon. Friend receive any representations from the Japanese about their wish to be more closely involved in the reorganisation of European security and in the resurgence of eastern Europe? Was she able to encourage and support those aspirations?

The Prime Minister : The Japanese are closely involved in the resurgence of eastern Europe and, with their enormous balance of trade, they are capable of giving considerable investment help--and are willing to do so. We did not become involved in security at this meeting.

Sir David Steel (Tweeddale, Ettrick and Lauderdale) : Does not the Prime Minister think that it is a pity that she did not take the Secretary of State for Trade and Industry with her in her ministerial team, along with the Chancellor of the Exchequer and the Foreign Secretary?

The only timetable at which the right hon. Lady hinted in her statement was that of the election. Can she be a little more precise about bringing down the rate of inflation, about joining the exchange rate mechanism and about the progressive reduction of agricultural support?

On the question of the Soviet Union, is the Prime Minister aware that-- [Interruption.]

Mr. Speaker : Order. This takes a lot of time.

Sir David Steel : Is the Prime Minister aware that, at her press conference last night, she sounded, perhaps unwittingly, a little grudging about aid to the Soviet Union? Will she now make it clear that she accepts that the price of support to the Soviet Union has to be balanced against the considerable cost of defending ourselves against that country?

The Prime Minister : My right hon. Friends the Foreign Secretary and the Chancellor of the Exchequer and I made a formidable and successful team at the Houston summit. We shall join the exchange rate mechanism when the Madrid conditions are fully satisfied. There will be an election during the next two years. I have forgotten what the last question was.

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Mr. Alistair Burt (Bury, North) : Does not my right hon. Friend find it hypocritical to be given advice about the ending of the old Soviet economic order by men from the other side who have spent the best part of their political lives defending that same economic order and who have tried to bring it over here?

The Prime Minister : My hon. Friend makes his own point well. Many of those people would still retreat to protectionism if they had half a chance.

Mr. Ron Leighton (Newham, North-East) : If the Prime Minister believes her own rhetoric about deregulated markets and free trade, why does she acquiesce in what is perhaps the worst protectionist racket in the modern world--the common agricultural policy? It grossly inflates the price of food to the British consumer and it damages the trade of countries such as Australia, the United States and those in the third world. Why did not the Prime Minister give stronger support to the Americans for knocking the CAP on the head instead of agreeing to a bland form of words which leaves the CAP entirely intact?

The Prime Minister : The hon. Gentleman is aware that before we were members of the CAP we had our own support system for agriculture. That also cost a good deal. I think that every major industrialised country has one. This time we got together to try to reduce the amount of support that each of us gives so that we were each of us aware that we reduce export subsidies, internal support and access to our own markets. There had been a scheme put up under which we reduced only export subsidies. That would have been very advantageous to some countries, but highly disadvantageous to this country. We would have had to reduce our internal support and access while others would have kept their internal support and only reduced export subsidies. That is what we faced. We came away with us all reducing the total support and all reducing each component of it.

Mr. Nigel Forman (Carshalton and Wallington) : At the end of her statement, my right hon. Friend referred to the wish of all the leaders at Houston to go for longer-term real solutions rather than short-term soft options. Did my right hon. Friend look favourably upon the imaginative idea put forward in the United States as well as in this country for a kind of carbon tax or tradable pollution permits as a long-term realistic way of dealing with the problems of global warming?

The Prime Minister : I have seen much about tradable permits, but I am not yet convinced that they would work on a worldwide scale, which is the action that we need. When the question of a carbon tax is put to me, I point out that we already have pretty high taxes on petrol and gasoline, and they were put up in the last Budget. Other countries must have artificially cheap gasoline, and that leads to extravagant use, while our policy leads to economical use.

Mr. Robert Sheldon (Ashton-under-Lyne) : I welcome the progress on GATT to which the Prime Minister referred, but is she aware that it will be difficult to make much progress here when the Minister in charge of foreign trade is the Secretary of State for Trade and Industry? This matter concerns us all because, when he goes to Europe representing us, he will be rather disliked and his negotiations will be less advantageous to this country than

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they would be if someone else represented us. Is the right hon. Lady aware that it is not enough to repudiate the words of the Secretary of State for Trade and Industry ; she must repudiate him as well for the sake of the country?

The Prime Minister : The main negotiations as a result of the Houston summit will be on agricultural matters. That was the great success of the summit. The other thing that is of great importance in the communique is that we have all agreed not to take unilateral action. If there are disputes on trade, we should leave it to GATT and take the multilateral action required. That is also a great step forward. Mr. Terence L. Higgins (Worthing) : Does my right hon. Friend agree that it is the height of hypocrisy for the European Community to lecture eastern Europe on the virtues of the free market economy while at the same time perpetuating the perversion of those principles which is enshrined in the common agricultural policy? Does she agree that it is no good fiddling around the edges with the CAP? She said a moment ago that she did not think that that was the right approach. The CAP is wrong in principle and must be completely scrapped.

The Prime Minister : With regard to the amount of support that is given through the CAP in comparison with other countries, OECD estimates show that the total cost of consumers and taxpayers of all forms of agricultural support or protection is $46 billion-worth in the United States for a population of about 220 million ; in the European Community it is $93 billion-worth for a population of 320 million ; and in Japan it is $68 billion-worth for a population of about 120 million. We are all guilty to some extent of supporting farming. The reason, as my right hon. Friend knows, is that, as the standard of living goes up, we buy many more consumer goods, but each of us will not eat more--we might eat different quality--and therefore the only increasing standard of living in agriculture has to come from increased productivity or variety.

We could not go from those figures straight away to no support at all. It so happens that New Zealand is now down to about 10 per cent. support. I hope that my right hon. Friend will agree that we are going steadily in the right direction on reducing protection, reducing subsidies, and getting away from support to the uncompetitive farmer to letting the competitive, efficient farmer have a much larger proportion of the trade.

Mr. Dave Nellist (Coventry, South-East) : In the wide-ranging discussions that the--

Hon. Members : Come on.

Mr. Speaker : Order. I hope that the House will think that it is fair that I call hon. Members today who were not called on 12 June or 28 June, and I am doing that.

Mr. Nellist : In the wide-ranging discussions that the Prime Minister had, in particular on eastern Europe, did she consider apologising for the remarks of Sir Alan Walters, who, in Prague recently, lectured Czechoslovakia on how to introduce capitalism? He spoke of randomly sacking two thirds of that country's work force, and said :

"Put their names in a hat--it appeals to their sporting instincts." Is he, like the Secretary of State for Trade and Industry, still a close family friend reflecting her views?

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The Prime Minister : The countries whose economies have collapsed are the countries that have been following the centrally planned and controlled system that the hon. Gentleman supports. Their economies have collapsed totally and, until now, have not enjoyed the freedom of speech which is fundamental to every remark that the hon. Gentleman makes and which he enjoys in this House.

Mr. Michael Jopling (Westmorland and Lonsdale) : Although the substantial and progressive reductions in agricultural support are a logical outcome of my right hon. Friend's insistence over the years that agriculture should play a major part in the Uruguay round, does my right hon. Friend understand that those reductions would be unacceptable and wholly unsaleable to European farmers unless those countries that subsidise their agriculture--my right hon. Friend referred to one a few moments ago-- much more than we do take part in those reductions, just as much as everybody else? I am thinking of Japan in particular.

The Prime Minister : I entirely agree with my right hon. Friend. We made that point many times during the discussions. In particular, we said that rice is heavily subsidised in Japan. At one time it was subsidised to the tune of about eight times the world price. Countries cannot expect to export their manufactured goods on the basis of efficiency and refuse to import agricultural produce also on the basis of efficient production.

Mr. Denis Healey (Leeds, East) : Does the Prime Minister recall that last week President Mitterrand referred to her recent statements as representing the penultimate twitch of a dying Government who had brought Britain to the stage of terminal decline? Is she aware that, after the recent interview with the Secretary of State for Trade and Industry published in today's issue of The Spectator, the British people now regard her as not the general but the camp follower of Fred Karno's army? If she herself will not sack people such as the Secretary of State for Trade and Industry and Sir Alan Walters, who are her personal pets or family friends, will she explain to the House and the people how the Foreign Secretary, the Chancellor of the Exchequer and the Leader of the House can continue to sit in the same Cabinet as men who are trying to undermine every objective that they are pursuing on behalf of what they state is her Government?

The Prime Minister : The right hon. Gentleman will be known for ever as the only Chancellor in the post-war period who brought this country to the brink of bankruptcy.

Mr. Ian Gow (Eastbourne) : Is it really the case that not a single Head of Government of the Group of Seven believes in the common ownership of the means of production, distribution and exchange?

The Prime Minister : I most earnestly hope so, and believe so.

Mr. Alex Salmond (Banff and Buchan) : I understand that the recent summit dealt with long-term structural aid to the Soviet Union, but does the Prime Minister accept that there is a case for short-term initiatives also? The negotiations between Scottish and Soviet fishermen on the herring trade are deadlocked, for example, simply because of the Soviet shortage of hard currency. I am sure that the Prime Minister appreciates that, despite the build-up of

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home-based processing capacity on the pelagic side, the herring and klondyker trade is vital to Scottish fishermen. Will she undertake to ask the relevant Minister's to consider that matter to see whether a Government initiative might break the deadlock?

The Prime Minister : I am not sure whether the hon. Gentleman heard what I said earlier. There is a line of credit--of £800 million--for the Soviet Union from the banks of this country, which is supported and covered by the Export Credits Guarantee Department, on which the Soviet Union has not yet drawn, although it can do so if it wishes. Nevertheless, we shall continue to look for technical problems that we could help the Soviet Union to solve. We are looking for larger things so that we can bring the Soviet Union to a complete change of attitude, from a centrally controlled economy to a market economy.

Sir Richard Body (Holland with Boston) : As the European Community has made promises before about export subsidies, will my right hon. Friend bear in mind that we are one of the two paymasters of that system, and will she therefore insist that, on this occasion, a clear timetable is laid down whereby the export subsidies can be brought to an end?

The Prime Minister : I doubt whether we can bring those subsidies totally to an end. That would have enormous and difficult effects on many areas of this country. We must agree to reduce those subsidies, as well as other forms of support, and we are doing that. We shall be keeping a watch on other nations to ensure that they are doing so as well. I agree with my hon. Friend that it is vital that we go for less protection, and for more open trade, but we must do that at a rate at which people can adjust to the new circumstances. I am sure that my hon. Friend will understand that.

Mr. Stuart Bell (Middlesbrough) : In today's Herald Tribune, the Prime Minister is quoted as saying, in relation to agriculture, that the Houston conference was a bipolar conference, built around the dollar, the yen and the deutschmark. How does she reconcile that view with the remarks of the Secretary of State for Trade and Industry in The Spectator that the Germans are trying to take over Europe and that the deutschmark will always be the strongest currency because of their habits? Is it because the right hon. Lady agreed with those views that she did not accept his proffered resignation?

The Prime Minister : The hon. Gentleman used a false premise at the beginning so that he could ask his customary question at the end. Of the economic countries, Japan has the yen, the United States and Canada have the dollar, and those in the European group, except us, are linked to the deutschmark by the exchange rate mechanism, and we shall be when we join the exchange rate mechanism. I should not have thought that the hon. Gentleman needed a lesson on those matters because he is highly skilled in them.

Mr. John Butcher (Coventry, South-West) : If we are to discuss the process of political and economic change in the Soviet Union, does my right hon. Friend agree that the terms used must be both accurate and precise? Has my right hon. Friend noticed that the BBC, especially, now refers to the progressive pro-Gorbachev element in the Soviet Union, which supports policies similar to her own,

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as "the left", and that those hard-line socialists who oppose President Gorbachev are referred to as "Conservatives"? Is that journalistic laziness or something worse?

The Prime Minister : I agree with my hon. Friend that that is difficult and confusing. In every country, it is the classic communists and the hard-line left who are the trouble, and they are death to the prosperity of the people.

Sir Cyril Smith (Rochdale) : Does the Prime Minister agree that it is rather hypocritical of the United States of America to talk about freer trade when the Prime Minister herself in the past three weeks, by Act of Parliament, created a protectionist law under which certain equipment which has been bought in Britain for the past 10 years will now be supplied only by United States manufacturers, thereby threatening hundreds of jobs in my constituency?

The Prime Minister : Each of us is guilty of some form of protectionism. We have voluntary agreements on the number of cars that can be imported from Japan. We have a multi-fibre arrangement. Each of us is guilty of some form of protectionism. We pointed out that the United States, particularly in defence procurement, frequently goes to American manufacturers. That is not an open market. We mentioned those matters.

The important thing is that we are each determined to tackle that protectionism and reduce it. We cannot get rid of it all at once. Indeed, as we know, some other European countries are still protectionist towards some of our services. We want to get rid of that form of protectionism by 1992. I hope that the hon. Gentleman agrees that it is right to go in the direction of less protectionism and more open trade as fast as we can.

Mr. James Hill (Southampton, Test) : My right hon. Friend should be congratulated on at least starting to tackle the common agricultural policy. It is one of the reasons why Europe has not succeeded in the way that so many of us hoped. To turn to the remarks of my right hon. Friend the Secretary of State for Trade and Industry, many Conservative Members rather fear unification of Germany. We fear its economic might. We fear that it is better placed than any other country to scoop the eastern and central European countries' trading arrangements. A word in time--perhaps less emotive language should have been used--was intended to convey to Germany that we cannot stand by after 1992 and aid it to take over central Europe.

The Prime Minister : Thanks to Britain's efforts over the years, we have already tackled many aspects of the common agricultural policy. We have reduced surpluses substantially. There are few surpluses left. We have given the Community an agricultural budget within which it must live, and we have instituted a process whereby, if people produce more than the target amount of goods, whether wheat, rapeseed oil or anything else, the price falls the following year. We have tackled a great deal already. We have not yet tackled the fundamental amount of protectionism, but we shall do so now.

The unification of Germany will happen. East Germany will be in a much better position than the other countries of eastern Europe because it will be able to plug straight into the whole structure of a free market economy. From a system which the country has rejected it can move immediately to another. The other countries do not have

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