House of Commons Hansard Debates for 26 Jul 1990

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responsibilities to a dependent territory without compromising our support for measures to conserve the African elephant.

Mr. Harris : Does my hon. Friend agree that an arrangement similar to that made for the 3,000 people in Hong Kong should have been made for the three people in St. Ives who were involved in the trade? At least that would have given them a period in which to adjust. One of the great problems that they have faced has been the lack of information, from, I am sorry to say, the Department of the Environment on where they stood.

Mr. Heathcoat-Amory : I recognise that British ivory traders may feel that they have been treated unfairly in comparison with those in Hong Kong. I am not unsympathetic to the problems that the ban has caused, but I must make it clear that our unilateral ban on ivory imports was introduced under existing European controls, which require us to refuse imports when we consider that they would have a harmful effect on the conservation of the species.

We were concerned that, unless such urgent action was taken, poachers and others involved in the illicit trade would intensify their activities in the months before international action could be agreed at the CITES conference. A dispensation for United Kingdom traders on the lines of the Hong Kong reservation would not have been possible under the European controls.

I fully understand why my hon. Friend's constituents would have welcomed prior notice of our intention to act in that way, but it would not have been fair to alert a single trader without issuing a general warning and that would have been an open invitation to poachers to step up their activities in the intervening weeks or months. I hope that my hon. Friend will understand why it is not our policy to advertise our intention to introduce restrictions of that kind, as that could undermine the effectiveness of stricter controls.

The Government are conscious of the effect that their interim measures have had on the businesses in my hon. Friend's constituency. However, I repeat that controls on the African elephant have been increasing steadily since 1976. Our unilateral ban on ivory imports was introduced under existing controls which had been in force since 1984, and there have been many previous instances in which import restrictions for other species--for example, cockatoos and grey parrots--have been introduced under the EC CITES regulations.

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It has not been our practice to pay compensation when restrictions on trade are introduced for the purpose of conserving endangered species, so although I sympathise with my hon. Friend's constituents, I regret that I can find no grounds for making an exception in this case. As I have already said, his case is illustrative of the costs involved in conservation efforts.

However, I hope that I can offer some consolation to my hon. Friend and his constituents. As he may know, the European Commission has said that the movement and sale within the Community of ivory legally acquired before 18 January 1990, when the international ban on ivory came into force, may be allowed. I am pleased to say that my Department has recently given formal consent to the sale of various pieces of ivory in the possession of my hon. Friend's constituents and they will therefore now be allowed to dispose of those stocks within the EC.

Mr. Harris : I understand that only four licences have been given. I gather that there are technical problems which mean that the whole stock is not covered by those four licences. I do not expect an answer now, but will my hon. Friend consider that so that sufficient licences can be given to enable the firm to dispose legally of its stock, although one has to accept that, as the bottom has fallen out of the market, it probably will not get anything like its value?

Mr. Heathcoat-Amory : I undertake to do that. I was not suggesting that the whole stock--my hon. Friend referred to £30,000 in his introductory remarks--was to be disposed of under existing or new licensing arrangements. If, in the future, some additional licences can be granted, I shall ensure that that is processed as fast as possible.

I appreciate the points that my hon. Friend made. I am sorry to disappoint him in some respects, but I can at least assure him that disposal in the European Community, in so far as it is agreed internationally, may bring some relief to the business concerned. My hon. Friend and his constituents will be pleased to hear that there are indications that the ban on the trade in ivory is proving effective in the war against ivory poachers. It may not bring much comfort to the business concerned, but I hope that, should the situation in Africa continue to improve, it may be possible in the not-too-distant future to allow the ivory ban to be lifted in some respects. If that happens and it can be done while preserving the population of African elephants, it may prove possible for the business in question to be rescued and possibly to grow in future.

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Lome Convention

1.6 pm

Mr. John P. Smith (Vale of Glamorgan) : I am delighted to have a second opportunity this week to draw the attention of the House to problems associated with the Lome protocol after 1992. I shall discuss some of the details of what I think the effect could be on the British fruit trade in general and on the banana trade in particular. I shall then make some suggestions--I hope that the Government still have an open mind on the subject--about what we should be doing now to ensure that we not only protect our trade and industries but protect the interests of countries with which we trade and have traded for a long time.

In the Lome protocol, which regulates the trade between the European Community and Afro-Caribbean and Pacific countries, there are a number of mechanisms under the banana protocol that ensures that preferential trading relationships exist with our historic trading partners. About 50 per cent. of all the bananas that come into European Community countries come from dollar fruit countries primarily in southern and central America. About 30 per cent. is home produced in southern European countries and about 20 per cent. comes from ACP countries.

Nearly all the bananas that come to the United Kingdom come from Jamaica and the Windward Islands through two major companies, Geest, which trades from my constituency at the port of Barry, and Fyffe. We in Britain, being the second largest consumers of bananas in the EC, consume 300,000 tonnes of bananas a year. Everybody will be delighted to hear that. It works out at about one banana per person per week. I hope that that rate of consumption continues and that we will continue to eat Caribbean bananas, because we shall thereby support not only British industry but our former colonies in the area. I am delighted to say that the Prime Minister gave a categorical commitment in Jamaica in 1987 to do everything possible to protect our trading relationship. She said :

"We shall continue to fight hard in the European Community to make sure that Jamaica and other Caribbean countries go on enjoying the preferential arrangements for bananas under the Lome Convention."

Lome IV protects the ACP countries and states that no country should be worse off under any arrangement reached in the EC than they are at present.

I was delighted when, on Monday, the Lord President of the Council gave a commitment and stressed the importance of protecting those markets. He said :

"The Community is fully aware of its commitments to the traditional suppliers under the Lome convention. We consider strongly that these should be taken fully into account, together with other factors, in drawing up future arrangements for banana imports after 1992."--[ Official Report, 23 July 1990 ; Vol. 177, c. 105.]

That was a fairly strong commitment. But the problem is that the Government produced a discussion document this March that was circulated to other member states in the EC, ACP countries and interested parties and which will, if it is deployed, have the opposite effect.

While we welcome the suggestion in the discussion paper of continuing quotas after 1992 for banana imports from our traditional trading partners- -for us, Jamaica and the Windward Islands, and for France and the

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southern European countries, west Africa, Somalia, the Canaries ; by and large, former colonies--the problem is that under the price mechanism proposed in the discussion document, it will have precisely the opposite effect. The British Government are saying that they will give equal access to Caribbean countries to the existing dollar fruit share of the market--the 50 per cent. to which I referred--which goes largely to northern European countries and Germany. We must consider the implications of that and we should bear in mind the fact that the Germans are far and away the single largest consumers of bananas. If those Caribbean countries are forced to compete on an equal basis, there is no question but that dollar bananas from central and southern America will swamp not only other European markets, but Britain. The reasons for that are fairly well established. The banana plantations in central and southern America are vast and situated on plains. They are run by large, multinational corporations and survive on extremely cheap, exploited labour. The House will be horrified to hear that in the last wage negotiations in Colombia between the plantation labourers and owners, no fewer than 200 plantation labourers were murdered during the process of negotiating their wages. That sort of incident, as well as other disturbing events, happens in that part of the world, compared to the Caribbean, where a collection of small producers produce bananas in difficult circumstances- -the plantations tend to be on hillsides.

The banana is an attractive crop. It is the mainstay crop for most of the Windward Islands and represents 70 per cent. of St. Lucia's entire exports. It is a useful crop because, if it is destroyed by the weather, particularly the hurricanes that are experienced in that part of the world, it can be replanted and grown within nine months--a relatively short period.

The process for negotiating prices and payment with the Geest company in the Windward Islands--St. Lucia, St. Vincent, Dominica and Grenada--is democratic. The growers from those islands meet Geest to discuss the rates and reach a settlement on payment in that district. The opposite applies to central and southern America. It is clear that the Caribbean will find it difficult to compete equally with Colombia and other countries. We should take steps either to continue to protect those markets or--and this is possibly the best course--to ensure a lengthy transitional period to allow those countries to adapt to other products, and to allow industries in this country to diversify production ; as I have explained, I have a clear constituency interest. If we do not do that, the consequences may be devastating.

I am delighted by the effort being made by the British retailer Marks and Spencer. It has an experimental station in the Windward Islands to examine the development of tropical fruit, which has become a much more popular food lately. I know of an example dear to your heart, Mr. Deputy Speaker : the kiwi fruit, which a few years ago was hardly available in this country, is now a regular part of our diet and can be bought from most supermarket shelves. If we were swamped with dollar fruit, the consequences would be devastating. In the port of Barry in my constituency, which imports over 70 per cent. of all the bananas that come into this country from the Caribbean, the undermining or even loss of that trade would result in huge job losses. That would be a tragedy for the local work force and the local economy and would affect the

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long-standing relationship between Geest and Barry. I know from the comments made by the Lord President of the Council on Monday that that relationship is also dear to his heart. He spoke of his recollections of seeing the banana boats sailing out of the port of Barry when he was a child. I am sure that the Government do not want such a tragedy to happen, and will be prepared to do something to prevent it from happening.

We should praise the dock workers in the port of Barry, who have had a tremendous relationship with the Geest company for many years, and also have a tremendous industrial relations record. They are some of the most skilled dock workers in the country. Since the abolition of the dock labour scheme earlier this year, they have formed a successful co-operative--Barry Stevedores Ltd.--which is now handling the banana cargoes. The Geest company has a contract with Associated British Ports, which lasts until 1994. Then it must renegotiate the leases and the contracts to bring the bananas in, which of course involves the stevedores.

The danger is that, in the run-up to the renegotiation of that contract, the Government are not able to guarantee the market in the Caribbean. We could lose Geest once again. We lost it for a short time a few years ago, when it was attracted by better port facilities and better deals across the channel in Avon. However, I am delighted to say that did not last long, and it was soon back in Barry, because it knew that it was on to a good thing relying on our dock workers and the Barry community.

There could also be an effect in other constituencies from which the two major companies--Geest and Fyffe--operate, which could substantially diminish their operations and have consequences for jobs and the local economics. However, that is nothing compared with the effect that it would have on the Caribbean. Those countries are almost totally dependent on the one product--bananas. That is partly because of the devastating effect on their sugar industry some years ago, which also arose from our trading relationship with the rest of the European Community. In some cases that forced them to rely on bananas. If they lost that their economies could be devastated. The Geest company provides vital communication and social links with the islands and those links would be lost if the company were forced to look elsewhere in central southern America for its products. My local Vale of Glamorgan borough council elected to sell to St. Lucia at a nominal price two second-hand dust carts. That may not mean much to hon. Members, but to the people of St. Lucia the dust carts were vital in keeping their island clean. The skilled dock workers in Barry packed the trucks into the hold of a ship that normally carried bananas. A range of items are shipped in that way at low cost to support those island communities. That facility could be lost.

It is in our own interests to support the industry, but we also have a moral obligation to our former colonies from whom we have done so well over the years. It would be a tragedy if the people in those former colonies were allowed to suffer. The end of the trade would also have an impact on the British shipbuilding industry, because some companies may be reluctant to order new ships if they are uncertain about the situation in 1993. That could affect other parts of the country. The drastic cut in British shipping over the past 10 years has worried all hon. Members.

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If we remove the sole source of income of these islands, there is a danger of illicit drugs being produced. Such drugs could be grown in that part of the world and their production might attract the relatively poor banana growers. My hon. Friend the Member for Newport, West (Mr. Flynn) is worried about any substantial increase in banana boats coming to Britain from Colombia, a country which is notorious for drugs and drug barons. My hon. Friend tells me that some Colombian banana boats docking at his port have carried substantial quantities of cocaine. In some cases the cocaine was more valuable than the banana cargoes. The drugs can be seized and taken away, but the ships cannot be impounded because the Government could be held liable for the value of the cargo. That is a separate issue, but I am sure that it worries hon. Members.

What are our responsibilities and what should we do? We have produced a discussion paper and, in line with the traditional British character, we have said that we should play by the rules and head towards an open market. As long as it serves the interests of the consumers and meets our international obligations, we all agree in principle with the open market. The Government's proposals are ideal for the Germans. They are the biggest consumers of bananas and their primary source is dollar fruit. They would be happy to see the ACP share of the market collapse. France and other southern European countries are already taking steps to protect their interests. It is incumbent upon the Government to be in the game of protecting our great British companies and our existing trade. I do not suggest that that can be done indefinitely, but transitional arrangements should be made. The countries affected and our industries should have an opportunity to diversify into other products and activities. We must ensure that in the short term we do not suffer again because we are not prepared to take the action that the Germans and French are prepared to pursue in Europe, to ensure that their industries, employers, historic trading links and commitments are protected. I ask for no more, and for no less, for the British.

1.45 pm

The Minister for Overseas Development (Mrs. Lynda Chalker) : I congratulate the hon. Member for the Vale of Glamorgan (Mr. Smith) on managing to debate the banana situation for the second time in a week, which must be a record. That shows how concerned the hon. Gentleman is about the trade in the West Indies and about his own port and workers.

Nineteen ninety-two and the single market process will bring widespread benefits, and perhaps the hon. Gentleman was a little unfair not to point that out. Not only the Community stands to gain from an open market. The door of opportunity will open further for our trading partners. That includes our partners in the African, Caribbean and Pacific countries of the Lome convention. Freer and increased trade will mean more prosperity and more freedom. The removal of internal barriers and greater economic dynamism within the Community will provide greater access for developing country exporters--not less.

Nineteen ninety-two does not mean that Europe has in any way turned its back on the developing countries, but the very opposite. We stand by our commitment to the developing world. It will march side by side with changes

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in the Community and with the events in eastern and central Europe, which will also provide new markets for the specific Caribbean products in question. Nineteen ninety-two represents an opportunity, not a threat.

There is no fortress Europe, and there will not be one. Such a thing would be in no one's interest. We are committed to making 1992 a force for liberalisation. The strength of our commitment to our Lome partners is reflected in the fourth Lome convention, which we expect to come into force early next year, and in whose final negotiations I played a large part. The new European development fund is nearly 50 per cent. larger than its predecessor, and the United Kingdom's contribution to it, at about £1.3 billion, is our largest ever single aid commitment.

The new convention provides further improvements to what were already liberal trade and access provisions in respect of both the industrial and agricultural products of the ACP countries. For example, further concessions have been made on the few agricultural products that are still subject to some form of restriction, by a combination of reducing or dismantling tariffs while increasing or abolishing quotas. Improvements have also been made in the important area of rules of origin.

All that means that the Lome convention is already providing for 1992 in a number of respects, allowing our Lome partners to take advantage of faster economic growth and the increased demand anticipated within the Community as a consequence of the single market. It will be far easier for importers to meet the single standard, with one almost certainly in place in one or more member states, than to address to a whole range of diverse requirements, which was the situation until we really made progress with the single market. So that in turn will mean economies of scale for producers, whether of industrial or of agricultural products.

I shall mention some of the single market initiatives before I come to bananas, about which the hon. Gentleman is so rightly concerned. To ensure that the developing world benefits fully from single market initiatives, Britain will continue to press our Community partners for greater openness in trading. In particular we are encouraging a constructive Community contribution to ensure the success of the GATT Uruguay round, which will be of great benefit to the developing countries.

Obviously, the move towards the single market will bring changes, but, where these are in sensitive areas, they must be carefully managed. We realise--and have always realised--that this is particularly true of bananas.

I am grateful for the opportunity to explain to the House in a little more detail than the Lord President did on Monday this week what we are doing to protect our traditional Caribbean suppliers of bananas. The latest Lome convention again contains a protocol on bananas which enshrines the EC's commitment to traditional African, Caribbean and Pacific suppliers of bananas. We fought hard and successfully to renew the protection which that protocol provided to our traditional suppliers. Annexed to the convention we now have a joint declaration between Community and the ACP states which recognises the fact that the Community will try to

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establish common rules for bananas post-1992 but in full consultation with the ACP--which is the matter about which the hon. Gentleman is so concerned.

The United Kingdom remains committed to fighting to maintain effective preferential access arrangements for Caribbean bananas to the Community market, which are consistent with our Lome obligations. As the hon. Gentleman has rightly pointed out, the Prime Minister has made this undertaking many times. As recently as the end of April this year, my right hon. Friend wrote to the Prime Ministers of our Caribbean banana growers :

"We defended your interests resolutely in the Lome renegotiations and shall continue to fight hard to make sure that you go on enjoying the preferential arrangements for bananas under the Lome Convention."

I acknowledge the hon. Gentleman's particular interest and concern in this issue but it arises from the fact that all our Windward's bananas come into the United Kingdom through the port of Barry in his constituency.

At present, the United Kingdom market is kept separate from the remainder of the European Community. ACP and EC bananas have free access to the United Kingdom. Other bananas, such as those from Latin America, are subject to import licensing.

A single market in bananas, which the ACP has accepted in principle in the Lome convention, is necessary essentially because such internal Community barriers have to be removed from 1993 onwards. The current national arrangements will therefore no longer be enforceable. We have to devise common arrangements for bananas, and we have to strike a balance between a number of priorities in doing so. They are commitments to Community and ACP producers--the preferential suppliers ; consumer interests ; trade and competition policy : objectives in the GATT round ; and, budgetary restraint. The difficulties of reconciling the various objectives cannot be underestimated. After all, the Commission has been trying for about three years to come up with a proposal to bridge that gap, and has not yet done so. That was why we felt it worth while to get the debate going. So we circulated a discussion document, but it was only a contribution to the debate in the Community, because it is for the Commission to table a proposal.

As the hon. Gentleman well understands, it will take us some time to resolve this issue. The United Kingdom idea for a dollar quota would meet conflicting objectives better than any other suggestion so far, and would protect our traditional suppliers, whom we are pledged to protect. I do not think that we shall have the problems about which the hon. Gentleman has been worrying, although I respect his right to refer to those concerns in the House, as he has done twice this week. We shall provide for possible aid over a transitional period. That may be the way to proceed, but it has not yet been decided and all suggestions are therefore welcome.

At this point, perhaps I could reassure the hon. Gentleman about the position on tariffs. The current arrangements for EC trade in bananas include a GATT-bound 20 per cent. tariff on imports from what is known as the dollar area--central and south America-- but not on imports from Lome countries, which come in tariff-free. The way in which other countries will view the mechanisms that might be erected to ensure protection is not yet clear. However, we envisage that a tariff advantage will be maintained. We are not likely to be facing the prospect of a uniform tariff on ACP and dollar bananas.

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The hon. Gentleman was right to say that the United Kingdom is not alone in the Community in having its own traditional suppliers to protect. It is true that other countries will seek to protect their traditional suppliers. Cameroon and the Ivory Coast supply France, while Spain imports from the Canary islands and Madeira supplies Portugal. All those sources of bananas face considerably higher production costs than the producers of dollar fruit.

In contrast, the Commission has to cater also for the needs of Germany and the Netherlands, the first of which the hon. Gentleman mentioned. Their customers are used to paying lower retail prices than those in countries with protected, higher-priced markets. The common arrangements for post- 1992 trade in bananas will have to offer something to everyone if they are to command the support of a majority of member states.

We await the Commission's proposals, which should be tabled in the autumn. We shall then consider the proposals against the need to balance out the different and important objectives.

Our objective is to safeguard continuing preferential access for the Windwards and Jamaican suppliers after 1992. We want to build a framework within which they can assure the long-term futures of their banana industry. We remain in close touch with the Caribbean Governments and representatives of producers and importers about ways of achieving this.

Undoubtedly, the single market will bring with it many challenges, but it also provides tremendous opportunities. I have talked with some of the Caribbean producers and their leaders about the way in which they may benefit from the single market and enjoy the benefits of the wider market with easier access and a lack of barriers. I believe that, if they continue to work at the problems that they currently face in terms of quality and productivity, great gains can be made.

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Although the Government will continue to support the Caribbean producers in the way that I have described, their success post-1992 in trade in bananas depends in no small measure on the producers' own efforts to overcome the severe quality problems at certain times of the year, which can make their bananas difficult to market. We understand that, and are seeking to help.

However, it is right that they should be encouraged--I have been encouraging them in my meetings with them--to diversify and to rely on products other than bananas. The Government have a long-standing programme to assist diversification into other edible crops in the Caribbean. We would hate to see any country start to produce coca or any other drug substance. That is not what we are in business for--we are in business to ensure that such countries have viable produce to sell on the open market as well as to offer access to our markets. The hon. Gentleman might like to know that over the past 15 years or so we have committed over £4 million of our bilateral aid to assist in diversification with around £2 million committed to current projects. That is a measure of how seriously the need we are addressing the issue of diversification from bananas in the region. In conclusion, it is too early to predict in detail the precise benefits that 1992 will bring individual countries. Although two thirds of the single market measures have now been agreed by the Council, many decisions have yet to be taken. Many measures will not come into force before the end of 1992. I assure the hon. Gentleman that we shall continue to encourage progress towards completion of a market and we shall maintain our vigilance to ensure that it remains open and liberal and has the right solutions for the banana producers. It is an opportunity, not a threat. I urge our Lome partners to rise to the challenge because those who grasp the opportunity will reap the rewards.

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Eastern Europe

2 pm

Dr. Mike Woodcock (Ellesmere Port and Neston) : I am grateful to you, Mr. Deputy Speaker, for calling me to speak in one of the last debates in the parliamentary Session. I am equally grateful to my right hon. Friend the Minister for Overseas Development for being here with so few of us to see the sun set on the Session. Perhaps it is fitting that one of the last debates should be about the momentous events that have unfolded in eastern Europe. I wish to speak on the methods by which we can assist enterprises in the emerging democracies in eastern Europe and to suggest how some initiatives, particularly on the know-how funds, can be geared to management training, especially that which is concerned with the values of free enterprise. Those values are not easy to define, but a definition is possible.

My personal interest in eastern Europe was aroused some three years ago when a book that I had co-authored was published in Hungary. It was essentially about management in western economies. It seemed to me that if a book written by a Conservative Member of Parliament--and a fairly dry one at that--was being used to train managers in a communist country, something fairly fundamental was happening. I do not know whether anyone could have predicted the pace of change since then in eastern Europe, but by the late 1980s it was becoming apparent that the Soviet bloc could never really compete with the west. At last, fundamental Marxism was being seen as illogical when viewed against the facts of human behaviour and organisational success. Change was becoming irreversible and was spilling over from one country to another. People were no longer willing to accept the low standards of living that they had had to endure ; they were no longer willing for their economies to be geared to meeting the needs of the Soviet Union. The rosy dream of state socialism had turned into a real-life disaster.

Thankfully, pragmatism is now replacing ideology. The transition to free- market economies will be painful in eastern Europe, but there is no alternative. The sooner that people in eastern Europe accept that pain, the sooner they will be able to reap the benefits. The degree of pain will differ from country to country.

Hungary is now trying to model its economy on western lines. It has a per capita income of only 55 per cent. of the EC average ; it has an immense foreign debt. But it is well on the way to democracy. It is well placed to achieve commercial success.

Czechoslovakia has an average per capita income of 70 per cent. of the EC average. The recent elections there assure moves towards a free market. Czechoslovakia was once one of the world's leading industrial countries, and one of the world's richest countries with a long entrepreneurial tradition. It now has few products that can compete in world markets. It was the first country to manufacture motor cars, but now its industry is a shadow of its former self. In true socialist tradition, industry in that country has been bled to provide short-term production at the expense of long-term investment. But Czechoslovakia is also reasonably well placed to achieve success.

Perhaps the best chance of success is held by East Germany because of its links with the Federal Republic. It

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already has a per capita income of 75 per cent. of the EC average. It has the advantages of a pool of well-trained workers and massive investment from West Germany.

By contrast, Romania has a per capita income of only 35 per cent. of the EC average. It was once one of the richest agricultural countries in the world, but it is now dependent on food aid from the west. However, the problems there were not so much the problems of Communism but the problems of a feudal tyranny where truth simply did not exist and where the economy was based on lies and pretences. It now has a massive foreign debt, and the task that lies ahead is daunting.

Bulgaria has an income of 45 per cent. of the EEC average. Foreign trade there is still dominated by the Soviet Union, but it is taking tentative steps towards a free market economy.

Poland has an income of 40 per cent. of the EEC average. There, as we all know, the Communist party has been disbanded. There are bold moves towards a free market. Unprofitable enterprises are being closed, job security is being abandoned, monopolies are being abolished and privatisation is being vigorously pursued. Shock therapy in Poland is being applied to the results of state socialism. It is perhaps the bravest of all east European countries. By contrast, Yugoslavia has an income of 45 per cent. of the EC average. It has traditionally had a much more liberal political regime. Over the years it has tried to pursue a halfway house. It has had free competition based on joint ownership of the means of production. However, it has been no more successful than its neighbours. Socialism in yet another form has failed and great changes are needed.

It is probably within the Soviet Union that the greatest problem lies. President Gorbachev knows that, in reality, there is no alternative but to introduce a free-market economy. His problem is in persuading the Soviet people of the short-term sacrifices that will be necessary. He was rightly credited with creating many of the opportunities for change in eastern Europe, but they came from a realisation on his part that the Soviet Union had no alternative but to withdraw from eastern Europe. He has a massive job to do. He said that even after many years of tried reforms Soviet workers continue to pretend to work and the state continues to pretend to pay them. We hear a great deal about the level of financial support that will be needed from the west for eastern European countries. It is clear that private sector investment, particularly in newly emerging private companies, will be essential. However, money alone is not the answer, and nor is the straightforward transfer of technology. As Abraham Lincoln said, one cannot help people permanently by doing for them those things which they ought best to do for themselves. We in the west have to help them to facilitate change.

My hon. Friend the Member for Wokingham (Mr. Redwood) is well known for his views on eastern Europe. He has listed some of the things that he believes that east European countries have to do. He said that they must be serious about private property, reform the food supply system, achieve stable banking and monetary control, and institute massive privatisation. I agree with all those things. However, none of them will be possible without the right management skills.

The privatisation process in those countries is a colossal task compared with the privatisation programme carried

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out by this Government over the past decade. It needs a new breed of manager. Managers must understand free-market systems. It needs individuals and organisations which are free to take their own financial decisions ; and, above all, it needs entrepreneurial attitudes and activity. The transition from command economies to demand economies will not be possible without the right attitudes, and that must mean management training on a gigantic scale. I want to suggest seven preconditions for management training to be successful. First, it must be easily understood. Most managers in eastern Europe lack the depth of education and training that most western managers have. Secondly, it has to be non-bureaucratic. Managers in the eastern bloc have had bureaucracy and they want no more of it. Thirdly, it must be practical. It must be in a form that can be readily applied in organisations in eastern Europe. Fourthly, it must be experiential. There is not the time or resources available to train managers in a formal sense. The training has to be largely on the job. In any event, experiential learning is much more cost- effective and achieves a much better transfer between learning and organisational change than formal education and training. Fifthly, it must impact on as many levels of organisations as possible. Seeding will be vital at all levels of organisations. Sixthly, it must be geared to market economics. History shows that free-market systems usually bring freedom and prosperity while planned economies generally fail. Finally, it must be based on entrepreneurial values. Eastern Europe needs managers who are risk taking, pioneering and have the capacity to seize opportunities. The fundamental task is to develop managers who hold values consistent with the free market and who have the competence to steer organisations through the turbulent waters that lie ahead. The values of capitalism are different from the values of communism and socialism. What are the values of capitalism, and what values will managers in the east need if they are to be successful? I believe that four major and fundamental tasks lie ahead of them. First, they must re-establish the proper role of management, and in doing so they must address three issues. They must address the issue of power, because in demand economies only managers can manage. The state must let go of the management process and managers must take charge of the destiny of their organisations They must address the issue of elitism.

In successful economies, management's role must be seen as vital. Organisations in the east need to understand the importance of getting the most able people into management and of continuously developing their competence. As they rid themselves of political elites, it may be hard for them to understand that, in some senses, they must create managerial elites. They must address the issue of awards. Organisations succeed because they identify what constitutes success and rewards it. Successful managers must earn more than unsuccessful managers. There is an old saying that organisations that pay peanuts get monkeys, and there is no room for monkeys in management.

The second major consideration of organisations in the east is taking charge of the task. In any organisation, results count, and in eastern Europe the system has often overshadowed the task. Bureaucracy and false assumptions have generally inhibited accomplishment. They must

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address issues such as effectiveness. Market -led organisations must set their own objectives and focus on the right issues. They must also address the issue of efficiency. It is not enough to focus effort on the right things ; resources must be used efficiently. Eastern European organisations have been characterised by an inefficient use of resources and they must address the issue of accountability. The principle of the profit and loss account gives commercial organisations their ultimate measure of success. Everything costs money and someone somewhere must pay. As Milton Friedman says, there is

"no such thing as a free lunch."

The third major task that organisations in the east must undertake is to establish effective relationships within their organisations. Organisations are essentially about people, and without commitment no task gets done. They must address the issue of concern. Management, by its actions, greatly affects people's lives inside and outside the workplace. Experienced managers in the east need to use power with compassion and to build trust and commitment. They must address the issue of synergy, because well organised and motivated groups can achieve much more than the sum of the individuals who comprise them. Successful organisations must derive the benefits of team work, and they must address the issue of justice. Every community must have a framework of laws that regulate conduct, and successful organisations must develop such a system. That will not be easy in countries that do not yet have justice at national level.

The fourth major task they must address is external relationships, by which I mean relationships with the free market. Organisations in eastern Europe, which have lived in command rather than demand economies, have not yet faced up to the real world. They must address the issue of threat because in every commercial organisation talented people are planning how to expand their business at the expense of the competition. They must address the issue of competitiveness because that is the only sure-fire recipe for survival. In the world of free markets, the fittest survive and the weakest go to the wall. They must address the issue of opportunity, because, despite the most brilliant planning, it is inevitable that the unexpected threat and the unexpected opportunity will occur. As most Ministers and Governments will be able to testify, no one can afford to ignore the unexpected. Successful organisations are committed opportunists. That is the agenda for management in eastern Europe four principal tasks and 12 key issues. Let me suggest 12 golden rules that need to be applied in management in eastern Europe if management is to be successful. Managers must manage. The cream in organisations must be at the top. Rewards must relate to performance. Objectives must be clear. Enterprises must be efficient. Financial reality must be established. Enterprises must care. All must play as a team. Justice must prevail. Enterprises must defend themselves. They must strive to be the best. They must be committed opportunists.

These are essentially the values of the free market. In my view, the emergence of re-emergence of those beliefs will determine the economic success of eastern Europe and the Soviet Union, but we in Britain can and should play a part. Much has already been done, and I commend the Government for what they have done, but if we focus on financial help, there is a danger that those systems that

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need to go will be shored up by it. We need to gear our help much more towards management training that is concerned with the values and beliefs which I outlined.

As we all know, Britain has a long entrepreneurial tradition. In the past decade, we have gone through some of the change processes that eastern Europe will have to go through. We in this country have re-established the dominant role of the free market and have cut bureaucracy and carried forward our privatisation programmes. Our industry is much leaner and fitter. Our managers have regained the right to manage. Our products are now competing again in world markets.

But the task in eastern Europe is massive compared with the task that the Government faced in 1979. The opposition that people in those countries will face will be a good deal stiffer than the opposition that the Government have faced since 1979. I want the Government to give them all the help that they can, but it must be of the right kind. The emergence or re-emergence of free market values is the key to success. It is the process of re-establishing the values of the free market that we in this country should, above all, encourage.

2.17 pm

The Minister for Overseas Development (Mrs. Lynda Chalker) rose --

Mr. Deputy Speaker (Mr. Harold Walker) : Does the right hon. Lady have the leave of the House to speak again? That being so, she may proceed.

Mrs. Chalker : Thank you, Mr. Deputy Speaker.

I am delighted that my hon. Friend the Member for Ellesmere Port and Neston (Dr. Woodcock) has secured this debate, and I congratulate him particularly on the seven preconditions for the establishment of economic success which he posed.

Much of central and eastern Europe is now settling down to parliamentary democracy after the elections, but those newly installed democratic Governments have to tackle the most daunting economic problems in the world, or they will face further drift, decline and, at worst, even explosions of disappointed expectations. Their success will depend principally on their efforts, but it is very much in our interests that they should succeed, thus consolidating democracy, building up prosperity, expanding the potential for trade and ultimately enhancing our security. Conversely, a failure of economic reform in eastern Europe could lead to political and possibly military instability. We and other western Governments are therefore absolutely determined to do what we can to encourage reform and to strengthen democracy.

What, then, is the role of western Governments? Private sector companies from the west can provide much-needed investment, management and know-how and multilateral bodies can provide the necessary capital flows. The role of western Governments is to provide short-term assistance and technical co -operation and to help the new Governments to set up their own systems and institutions. We are concerned with not only economic but constitutional and civil institutions to ensure good government. But all of those need good management. That is why my hon. Friend's stress on management is so important.

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We are concerned to provide a liberal trade regime, which will help eastern European countries to integrate into the world economy. That will help them to reduce their crippling dependence on the old communist barter trade system.

It is an essential part of our approach that there should be the most effective possible international co-ordination of the various national efforts to help central and eastern Europe. We have therefore played a full part in the work of the G24--that is to say, the group of 24 OECD donor countries under the chairmanship of the European Commission which is now responsible for co-ordinating national assistance programmes for Poland, Hungary, the German Democratic Republic, Czechoslovakia, Bulgaria and Yugoslavia. We should not do this in an indiscriminate way, regardless of how committed the Governments of eastern Europe are to real political and economic reform. Differentiation--that is, matching the help that we give to the reality of reform in the country concerned--is a key element of our policy in the region. Following the disgraceful events in Bucharest on 13 and 14 June, we vigorously supported the decisions not to proceed with the EC's proposed trade and co-operation agreement with Romania and not to invite Romania to the meeting of the G24 Foreign Ministers on 4 July. I believe that to be absolutely right. But if we see evidence of moves towards genuine democracy and reform, including full rights for opposition parties and movements, we shall, of course, be prepared to reconsider.

What can we do to help? My hon. Friend recommends much stronger management training. But let us look at what we are doing already. Our multilateral assistance focuses on four institutions. First, the European Community has taken various far-reaching decisions, but, most crucially, it intends to give reforming central and eastern European countries improved access to the Community market. That must be the single most important means of integrating the countries into the liberal western trading system and thereby underpinning their economic and political reforms. The EC will soon begin talks on more advanced association agreements with the most reformed eastern European countries--Poland, Czechoslovakia and Hungary.

Secondly, the European Training Foundation and the TEMPUS scheme will forge closer links between universities in Poland and Hungary on the one hand and those in Community countries on the other. The third institution is the European Bank for Reconstruction and Development, which we discussed on Tuesday. The new bank will play a vital role in developing the private sector in eastern Europe. We are delighted with the decision to site the EBRD in London. We shall ratify the agreement shortly, and I hope that the bank will soon be ready to start effective operation--always insisting that the projects in which it becomes involved are, indeed, well managed.

Finally, we have the IMF and the International Bank for Reconstruction and Development. All the eastern European countries are either members of both bodies or are working towards membership. The IBRD will be the biggest single source of capital assistance for central and eastern Europe.

Our bilateral assistance programme, on which my hon. Friend focused, is aimed at helping the countries to build up their democratic institutions and giving them technical

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assistance and training, especially in areas such as financial services but also in law, in which Britain has something special to offer. All those things are necessary, in addition to the matters of which my hon. Friend spoke.

Our main effort is channelled through the know-how fund. The know-how strategy has been to make sure that the fund provides British advice, skills and training. We concentrate on the sectors in which we have particular expertise and take account of the specific Governments' expressed priorities. The strategy is also aimed to push investment by United Kingdom companies which, with their experience, can work alongside people from central and eastern European countries, for so long denied not only democracy but a market-led economy. Our companies can teach them and help them to find ways of realising how to be successful.

The know-how fund has some priorities which will please my hon. Friend--the banking and financial services ; the generation of new jobs for those who lose their jobs as the industrial restructuring gathers pace ; advice on setting up small businesses and entrepreneurial activity ; help for the energy sector, particularly in Poland and Czechoslovakia ; establishing permanent links between Britain and central and eastern European institutions, particularly in management education and training. That is going on apace, but we cannot stop there. We have to do other things as well.

We shall be giving considerable help to combat the serious environmental problems faced by central and eastern Europe. For example, British electric utilities are co-operating with Poland and Czechoslovakia on ways of conserving energy and reducing the environmental damage caused by burning brown coal. I am sure that there will be many other such instances where the management and technology developed in the west is shared with those countries as they emerge into a new situation.

My hon. Friend mentioned the Soviet Union, and I want to make special mention of that country before I conclude. It is not the Government's intention to shore up any country in eastern Europe by giving it money. My right hon. Friend the Foreign Secretary described it exactly when he said that one does not give money to a man who has a pocket which is not sewn up, but rather a needle and thread and show him how to sew it up first and think about investing the money afterwards.

It is important that we see real economic reform coming first in the Soviet Union and elsewhere, but particularly in the Soviet Union where the need is so desperate, before we become involved in any question of investing money. We shall be extremely careful how we proceed. We are

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