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Sir David Steel (Tweeddale, Ettrick and Lauderdale): We do not often have the chance in the House to debate foreign affairs, so I hope that the right hon. Member for Oxford, West and Abingdon (Mr. Patten) will forgive me if I do not follow him down the interesting highways and byways of a simple Back Bencher.

I want to return to the main theme of the debate, which is the broad sweep of world affairs and, faced with the same problems that everyone else faces of a miscellaneous ragbag of points, I want to try to set what I have to say about one or two particular instances of our relations in the general context of the plea that the Government have made from time to time, but not strongly enough, for the spread of good governance.

I define good governance as having four component parts. First, we should encourage the promotion of free and fair elections, for the simple and obvious reason that one can search the human history book in vain to find any example of where two democracies have gone to war. There is no greater assurance of the promotion of peace than the promotion of genuine democratic traditions in countries around the world.

Secondly, another cornerstone of good governance is accountable and transparent government. At a time when we are talking about corruption, whether it be in the European Community, where we call it fraud, or whether it be the misuse of some of our aid programmes, the only way to root out corruption is to establish accountable and transparent government.

I came across one example on my travels during the summer recess when I was astonished to be shown the new palace in Lilongwe which was built by Dr. Banda before he was removed from office and which cost $70 million. The scale and extravagance of that would have been horrendous in any country, but in one as poor as

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Malawi it was a scandal. It was robbery of Dr. Banda's own people and it makes doubtful some of the United Kingdom aid programmes to Malawi when such gross misuse of funds was going on. It is a great tribute to the new democratically elected president of Malawi, President Muluzi, that he has declined to take up residence in such an absurd place.

Thirdly, in the quadrangle that creates good governance there is freedom of expression and association, including freedom of the press and, fourthly, independence of the judiciary and access to a genuine legal system. Those are the values that we should be attempting to promote as part of our foreign policy.

In particular, I welcome the speech on that theme made by Baroness Chalker at Chatham house in July when she talked about putting policy into practice. My only criticism of Government foreign policy is that that high priority has not been reflected right across the board--not just in the Foreign Office but in the Department of Trade and Industry, the Ministry of Defence and aid programmes. I add to the pleas made during the Foreign Secretary's speech. Regardless of his consideration of the legal judgment in the Pergau dam case--I am concerned not so much about the legalities as about the political mistakes that were made in that instance--I hope that the £216 million earmarked for that project will be reinstated in the aid programme. It has sometimes been said in the House and elsewhere that the standards that I outlined are western standards and that we cannot expect people in Asia or Africa to aspire to them. That is a racist approach to international politics--and when it is said by people who are themselves Asian or African politicians, it is positively insulting. If, as the Gracious Speech repeats, we are committed to upholding human rights, we must accept that torture hurts just as badly whether one's skin is white, black, brown or yellow. We should not accept in any part of the world any departure from aiming at high standards.

I pay tribute to the work done in that sphere by the Westminster Foundation --a new and small organisation which is inadequately funded compared with the munificence of German political foundations or the American Endowment for Democracy. Nevertheless, the foundation has made a good start. One sees from its annual report that, even with a small budget, it is playing a part in promoting good governance. I only make a plea in the direction of the Treasury that its work should continue to be enhanced.

I am a little concerned that the Gracious Speech refers to celebrating the 50th anniversary of the United Nations. I hope that we shall do more than simply wave flags or hold meetings or church services. The UN's 50th anniversary is a time to pursue some of the ideas proposed by the Foreign Secretary in the past, and to adopt the proposals made by the UN Secretary- General in his document "Agenda for Peace". We should recognise that a UN charter drafted in the circumstances of 1945 is not really appropriate in the circumstances of 1995. We want the charter revised, more relevant structures and a more streamlined organisation.

I join hon. Members who referred to the UN's peacekeeping role and to the way in which, sadly, we are often too late on the scene. I saw that for myself graphically in Rwanda in July, when I found myself

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sitting in the limited office then available in Kigali to Ambassador Khan and to General Dallaire. It was sad to note the length of time taken to provide the 5,000 troops promised by the Security Council. A chart on the wall showed each of the countries from which the contingents were to come. When I was there, the number arriving was 900 out of 5,000 promised. I asked the general when he needed the troops, to which he gave the political response, "Yesterday." As we know, the tragedy unfolded and the troops were late in arriving.

I add to the tributes already paid to the British forces in Rwanda, who in July had just arrived and were settling in. It is a magnificent operation, but it is sad that it was so late. Will the Government support the initiative taken by the Dutch Government in the Security Council, to press for a standing rapid deployment force? It is not suggested that armed troops should be on standby in Geneva or New York, but there is a realistic proposal to have forces assigned by member nations ready to be moved as a fire-fighting expedition as and when required.

I am concerned that, with the end of the bi-polar world to which reference has been made, there has been a tendency recently in Washington to regard the interests of the UN and of the United States as one and the same. In Somalia and in the recent decision concerning arms for Bosnia, we have seen the continued erratic nature of United States foreign policy, which may get worse with the recent reverses in the American elections. It will be even more difficult to achieve a coherent United States foreign policy when the Government no longer carry a majority in Congress.

British foreign policy should be directed more through the European Union, as foreshadowed in a recent speech by the Foreign Secretary and in the Maastricht treaty. We look forward to much greater cohesion in defence and foreign policy in the European Union. One area of further development in the UN is the recently created UN register of the arms trade. At present, it is only a register and not fully effective, but it has been established only two or three years. I hope that in future it will become an instrument of international arms control.

Although people complain with some justification about the degree of bureaucracy in various UN agencies, it is as well to remind ourselves that the UN's annual running budget is only one quarter that of the debt that Mr. Robert Maxwell left behind when he died, which gives a sense of perspective. It is money well spent if we can make the United Nations a much more effective instrument of international policy than at present.

Dr. Robert Spink (Castle Point): Does the right hon. Gentleman believe that now that UNESCO has cleaned up its act administratively, we should rejoin it? If so, should we do so before America rejoins or after?

Sir David Steel: Yes, I hope that we rejoin UNESCO.

The Government recently received formal proposals from the Swedish Government for the creation of an international institute for democracy and electoral assistance, which has the UN's blessing but will not be another UN international agency. It will be established by international treaty next year. Although officials from the Overseas Development Administration have been engaged in preparatory discussions, the Government have yet to make a commitment. I believe that that useful proposal will help us in spreading the mechanics of democracy around the world.

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In the context of the wider view of foreign policy that Britain should be pursuing, I must mention our relations with one or two specific countries. I start, as did the Foreign Secretary, with the current state of affairs in Iraq. I visited that country in the summer with the Bishop of Leicester, at the request of some Iraqi citizens living in this country, to assess the present scale of suffering of the Iraqi people as a result of the protracted dispute following the Gulf war and the impact of sanctions.

I believe that we would not have made the progress that we have made with Iraq had it not been for international pressure. I am not suggesting that international pressure should have been any less. However, the Americans in particular are in danger of obfuscating two entirely separate issues in the UN Security Council resolutions. The first dealt with the oil embargo and related specifically to weapons of mass destruction and efforts made by the United Nations commission under Rolf Ekeus to establish monitoring machinery in Iraq. Slowly and painfully, progress has been made. The commission has reported that all verification procedures are now in place, but we must wait some time to see if they work. That issue should be treated separately from the wider question of sanctions, which relates to issues such as recognition of Kuwait compensation and missing persons. I am glad that there has been progress with those issues too, even within the last couple of days. The Iraqi Government--admittedly, four years after the end of the Gulf war--have recognised the state of Kuwait, its boundaries and territorial integrity. It is necessary to recognise that, because of the effect of the Saddam regime in Iraq, there is real human suffering in that territory. We did not just go on a Cook's tour organised by the Government. We made our own inquiries, met the aid agencies and went to places without the Government's foreknowledge. The scale of human suffering in terms of the lack of medicines and food is very genuine.

The Foreign and Commonwealth Secretary cited the text of the resolution which enables Iraq to sell some oil, but it is necessary not to stick by all the detailed regulations which were contained in the final proposal of the United Nations Security Council, because there is no doubt that the bureaucracy involved is a clear transgression of national sovereignty. We should enter into dialogue with the Iraqi Government to make sure that the people of that country do not continue to suffer.

I have suggested, for example, that, on the issue of the Kuwaiti missing persons, if the Iraqi Government really believe what they say--that they have no Kuwaiti prisoners still in their prisons--they should open the prisons to inspection by the International Committee of the Red Cross. Such positive suggestions could be pushed forward, but it is difficult to do so while we have no diplomatic representation in Iraq. Fundamentally, I am arguing for a bit of carrot as well as a bit of stick in dealing with the Saddam regime, in the interests of the people there.

I now refer briefly to Hong Kong. The Foreign and Commonwealth Secretary mentioned that we were about to undertake a most extraordinary step--the transfer of 6 million people for whom we have been responsible into the hands of what is fundamentally a very autocratic regime which certainly does not meet any of the standards that I have set out. So be it; that will happen. We used to have an annual debate on Hong Kong, yet we have not even got around to debating the Select Committee on

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Foreign Affairs report on Hong Kong now that we have reached this delicate stage. We should have a debate on Hong Kong very soon. It is undoubtedly the case--it is the Governor's own view--that we were very late in paying attention to the development of democracy in Hong Kong, but, now that we have done it, it is regrettable that we have shackled Hong Kong with the commitment in the basic law not to have political ties with the outside world. If we are really to have two systems in one country--one democratic and one in accordance with the wishes of the People's Republic of China--it is right that people in Hong Kong should be free to associate with international political movements, be they Socialist International, Christian Democrat International, or Liberal International in our case.

In the meantime, while we are still responsible for the government of Hong Kong, I make one plea: we should devote as much attention as we can during our remaining tenure of Hong Kong to improving the environment. I remember when I first went there back in 1965 or 1966 as a very new Member of Parliament. I was rather shaken by the poor standard of the housing that we were building in our own colony. It has improved over the years, but it is undeniable that, over the decades, we have been rather negligent as a colonial administration in dealing with the problems of the environment and of pollution. The problem is now becoming very serious in Hong Kong, and not just aesthetically; it is beginning to pollute marine life, to the possible danger of the human beings who consume it. That issue should receive much greater attention as we come to the end of our period of tenure.

Let me refer next to Kenya. I do so because President Moi is visiting this country. If we consider the four standards that I have set out, we must say that, at the moment, Kenya is not adhering to any normal standard of good governance. The Kenyan human rights commission has documented nearly 300 cases of police torture this year. The election commission itself is not independent; it is appointed by the Government, something that we would not tolerate with the Boundary Commission in this country. Judges still receive instructions from the Government. Newspapers--either individual journalists or publications--are threatened. Members of Parliament need permits in order to hold public meetings in their constituencies, and 36 of the 85 opposition Members of Parliament were gaoled for lesser or greater times during 1993. The Bank of England, too, has failed to pursue the banks in this country which were involved in the Goldenberg scandal.

All those matters can be legitimately criticised. When people ask, "Why do you pick out Kenya?", the answer is that Kenya is a great friend of this country and that one is entitled to be more candid with friends than with enemies. The Prime Minister has raised one human rights issue with the President, but I hope that we will do more to make it clear that a new governor of the Bank of Kenya and a new Finance Minister do not constitute a return to good governance. More than two years ago, the Kenyan Attorney- General promised that there would be reviews of the constitution, and in particular some of the colonial legislation which is still in place. That has not happened yet. The opposition parties have not always been entirely helpful in the process, but we must say to the Kenyan Government that a lot more needs to be done.

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I could say the same--in the interests of time, I will not--on the subject of Nigeria, another friend of this country which at the moment is seriously in default of the standards of good government. I now refer to the arms trade. I take a rather different view from that of the Foreign and Commonwealth Secretary. I do not regard it as just a British issue. Regional conflicts around the world have been fuelled by the arms trade, from Bosnia to Angola. Just the other day, the Croatian Defence Minister said:

"What I need, I get. The arms market is saturated, so saturated you would pay three times the price if you got things legally." It is reported that

"Mr. Susak described buying arms in countries including Poland, Bulgaria and Russia as `an open market' and said Croatia was now providing the army of the Muslim-dominated Bosnian Government with anti-tank weapons and ammunition for mortars, cannons and machine guns."

An analyst of Jane's Defence Weekly has also pointed out: "They have obtained Russian-made rocket-propelled grenades from the former East Germany, Chinese anti-tank weapons from Pakistan and ammunition from Iran."

I am not talking purely about a British phenomenon. The arms trade is one of the perils of the world today. There are new entrants--sadly, among them is South Africa. There is evidence that the South Africans were supplying both sides in the Rwandan civil war right up until last year. We must take a grip on the arms trade as a subject on its own.

I know the counter-argument--the Foreign and Commonwealth Secretary almost hinted at it--that we must sell because, if we do not, somebody else will. That is, of course, the argument for a coherent European policy. Rather than having, as do some countries in the European Community, an arms embargo on Indonesia while we do not, an embargo on the sale of land mines while we do not, or other embargoes on Rwanda while we did not, there is a need for a coherent approach in the European Union on the issue if we are to have any hope of creating a common defence or foreign policy in future.

If we are to protect jobs at home--I hope that it is not suggested that the economy is in such a parlous state after 15 years of Conservative rule that we desperately need to keep the arms industry flourishing--we must be realistic and accept that the end of the cold war surely means a diminution in the demand for arms. Therefore, we should, as the Clinton Administration have done in the United States, do much more to encourage our own arms industries to diversify into other sectors.

A new Indonesian human rights commission was appointed by the Indonesian Government, and I met its members only two weeks ago. It is a good step forward, but it is a terrible regime. The Amnesty International report included some disturbing quotations in its 126 pages. After the massacre of 270 people in East Timor in November 1991, it quotes General Mantiri as saying:

"We don't regret anything. What happened was quite proper . . . They were opposing us, demonstrating, even yelling things against the government. To me that is identical with rebellion, so that is why we took firm action . . . I don't think there's anything strange in that."

Are we saying that we are so hard up that we have to sell arms to a country which takes that view of its own population?

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When we sell arms to capricious regimes, we find that they come back to haunt us. We had the recent case of Dr. Mahathir of Malaysia who suddenly announced one morning, because he did not like a report in The Sunday Times , that he would not do any future business with Britain. Far more worrying are the commitments that we have entered into in the past through our export credits guarantee provisions. In 1993, Britain was the fourth-largest seller of arms. The World Development Movement, which I congratulate on having raised the court case on the Pergau dam, has revealed that arms sales receive more Government support than other export sectors. Almost 80 per cent. of British arms sales go to third-world countries. The Government have increasingly boosted defence exports in the past decade. In 1980-81, the year after the Conservatives came to office, defence exports took 6.5 per cent. of all export credits. That has risen to 48 per cent. last year. That is an extraordinary expansion.

When things break down, as in the case of Iraq, what happens? Since the Gulf war, British taxpayers have had to bail out the banks and the companies who were involved in arms sales to Iraq to the tune of £652 million because the Iraqi Government have defaulted on paying debts; so the taxpayer has a right to question the sense of relying too much on the arms industry as part of our economic activity. Mr. Alan Clark said on the radio the other day that we should not worry about the nature of regimes and that selling arms was good business for Britain. It was all the old argument: "If we do not do it, someone else will." The Minister for Export Trade followed him on the programme and described him as a relic of empire. But at least Mr. Clark's view is refreshing, open and honest. I find that the Government's policy on the arms trade is wholly confused and sometimes duplicitous.

We welcome the references in the Gracious Speech to progress in the containment of nuclear weaponry, but it is a sobering thought that, since the end of the cold war, no one has been killed by nuclear weapons but hundreds of thousands of people have been killed or maimed around the world by conventional weaponry of one type or another, including landmines.

I believe that good governance, like charity, begins at home. I hope that during the rest of his time in office--however long that might be--the Foreign Secretary, who enjoys a considerable reputation not only in Britain but around the world, will use his efforts and Britain's unique position as a member of the Commonwealth, of the European Union and NATO to promote good governance as a major part of British foreign policy.

5.12 pm

Mr. David Howell (Guildford): I am glad to follow the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel). His interesting remarks, particularly on weapons proliferation, reinforce my view that the Foreign Affairs Select Committee is right to invest a great deal of time and effort in a study of weapons of mass destruction and their proliferation. It hopes to report to the House and contribute to the debate on which the right hon. Gentleman commented.

Although the hon. Member for Livingston (Mr. Cook) is not here, I welcome his arrival in foreign affairs debates. He has a very sharp mind and possibly a sharp

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tongue, too. I hope that we shall hear more comments from him. I enjoyed a certain amount of what he said, although I differ from him on some of the points that he made in opening. I know that it is early days for him in foreign affairs, but he seems to think that the world is divided into blocs. I beg him to get rid of that illusion. Of course, the politicians like to talk about the blocs of the European Union, the North American Free Trade Agreement, Asia and so on, but the hon. Gentleman will find as he travels round that all the forces of international finance, trade and investment are working immensely rapidly the other way.

The fine constructions of politicians about different blocs and how they will line up and trade with each other are being increasingly marginalised by the enormous interpenetration of trade, investment and, above all, capital. That makes nonsense of a regional concept and even of a regional financial concept of Europe. I shall come to that in a moment. The hon. Gentleman will learn that and see that globalisation has happened far faster than the bloc-makers and bloc-analysts imagine. That is yesterday's analysis of the world, not tomorrow's.

I am glad that foreign affairs has been promoted to Thursday in the debates on the Address. It used to be a Friday subject. That is good news. I hope that it is a recognition of the fact that foreign policy is not a separate, slightly eccentric category which ill-informed opinion pollsters put at the bottom of their list. When they find that they get fewer ticks for it, they conclude that foreign policy is of little interest compared with health, education, welfare and domestic issues. That does not reflect the reality, which perhaps the promotion of today's debate and certainly the Gracious Speech reflect, that the foreign policy context is beginning to condition everything. It conditions the most intimate domestic aspects of our lives, jobs and financial affairs. That needs to be taken into account by political leaders when they explain how they intend to face the problems of the future.

I listened yesterday to the new leader of the Labour party. He began with a good speech. For those of us who have been here a long time, it contained one or two distinctly Wilsonian phrases. It brought back memories of the Wilsonian generalities about what the Labour party would do in this situation or that. There was a lot of stuff about the need for safe communities, good schools, lower crime rates and the rest. Join the club. We all want those things. They make fine additions to the peroration of a speech, but they are not policy and they do not take account of the wider international context which the new Labour party leader must begin to bring into his thinking and his speeches.

Yesterday the Leader of the Opposition talked about a burst of growth. I should say perhaps more robustly than it has been said so far that that is not so this time. Much of the debate has not recognised what is happening to the British economy now. I am not all that proud of what is happening, in the sense that it should have happened before. For 30 years politicians, some of whom are in the Chamber at this moment, have made speeches in which they wished for sustained, inflation-free, export-led, investment-led growth in the British economy, the emergence of the pound as a strong currency, lower unemployment, higher productivity and so on. All those things are now occurring.

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I have to pinch myself when I hear some of the spotlessly non-partisan analyses that come from objective quarters. The performance of the British economy is described as a sustained, not a transient performance and one that is delivering remarkable results and a perky export performance. Apparently even the Government's deficit is now falling.

Many of the gurus are writing reports in which the word "surprised" occurs a great deal. That means that they forecast different things more along the lines of the forecasts of the hon. Members who speak for the Opposition. They said that it would all be low growth, high inflation, bad exports and rising unemployment. The gurus are all surprised that it has turned out the other way.

We are now delivering an economic performance that I wish we had achieved in the 1960s and 1970s. We had some export growth at times after various devaluations, but it all rotted away and evaporated in higher costs, lower productivity, strikes and all sorts of social difficulties. This time that is not happening. We have a highly responsible trade union movement. We have virtually no strikes. There are occasionally one or two, but they are very few.

Productivity is soaring and investment is pouring into the country to the point at which, as my right hon. Friend the Prime Minister said yesterday, we are taking 40 per cent. or possibly closer to 50 per cent. of the entire inward investment into Europe from countries in Asia and the United States. That is the reality of the international scene and the way in which the international economy is treating the British economy. That must be taken into account. One cannot simply ignore it and rant away about how terrible everything is, say that we must have more social spending here, there and everywhere and ask why the Government do not do it. That is an unrealistic stance. I hope that a little more realism will appear in the speeches of the Leader of the Opposition as he develops his style.

Mr. William Ross (Londonderry, East): The right hon. Gentleman described a very happy view of the British economy. To what aspects of Government policy, especially financial and economic policy, does he ascribe that happy turn of events?

Mr. Howell: The hon. Gentleman is tempting me. I shall certainly not pretend that Government policy in one country is totally responsible for all sorts of conditions, which as I explained are influenced by the global context. Nevertheless, the Government's present management of public finances is extremely prudent. They are creating the right monetary climate. We would all like short-term interest rates to be lower, but they are being managed with great skill, prudence and concern for the right monetary climate. The Government's deficit is falling and we are beginning to reap the benefits--years afterwards, as they always come much too slowly --of some of the labour market and social policy reforms of the past decade.

Mercifully, we have not become entangled in the outdated, overcentralised and uniform social overheads that are making investment in continental Europe extremely unattractive. We have taken a much more modern stance and we have not centralised our social provision in the way that the Opposition Front Bench team wants, for some reason that I do not understand.

Those improvements are to the credit of the Government, business men and others. On this island and in Northern Ireland, they are beginning to deliver an

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economic performance that politicians have been waffling on about for 30 years but have never managed to turn into a reality. Now it is happening.

Mr. Budgen: I entirely agree with my right hon. Friend, who has listed a persuasive catalogue of the Government's triumphs, all of which are true. Does he not think that he should mention 16 September 1992?

Mr. Howell: I did not mention the date, but I mentioned the event. Perhaps my hon. Friend did not hear. I mentioned devaluations, or at any rate adjustments to the exchange rate, which have played their part. I do not dispute that for a moment. The asperity of his question is a little unjustified. I am well aware of all those things. Perhaps that one incident had some effect, but it is not the entire reason why our present position is so very good.

A much wider issue is overshadowing the European Union debate. It lies behind whether we should subscribe to the social chapter and whether we should be able to deliver rising consumption, higher living standards and so forth in Europe. As my right hon. Friend the Member for Oxford, West and Abingdon (Mr. Patten) said in an excellent speech--I agreed with about 95 per cent. of it--that issue is the rising power and competitiveness of the dynamic Asian economies. They are proceeding at such a pace that those people who think that we have dealt with the Japanese challenge and that they are over the hill anyway are living in cloud cuckoo land. We are about to be confronted by a rising economic and competitive power--a power based on high technology and quality--and, what is more, a rising political power, which is already reflected in international institutions and will make anything that has gone before look mild. Far from arguing about which benefits should be enhanced, which social standards improved and which areas of consumption increased, policy makers in London and the rest of the Union should be preparing people for the fact that the name of the game is not benefits and improvement, but survival. Europe is confronting a problem that it has never before faced. It is a challenge to the lifestyle, values and intellectual hegemony of western European philosophical superiority, which we have never confronted before and for which most European electorates and most political debates, including this one, are completely unprepared.

Mr. Patten: I agree with my right hon. Friend's analysis, which was more elegant than my attempt to portray the threat presented by the tiger economies of the far east. Does he agree that it is because those economies want low non-labour costs that they are becoming so productive? It is because they are jumping over our technology to new technologies in a way that we could not have imagined. Most of all, it is because they are not obsessed with internal harmonisation mechanisms. For example, there is no search for a single currency in south-east Asia. They are looking outwards and progressively towards the realities of the economic world.

Mr. Howell: Asia is not a bloc. When those countries come together, as they did outside Jakarta recently, it is to call for free trade and not for blocism of any kind. Some of the other qualities that they are developing sound suspiciously like those qualities that we thought were a European monopoly--civic values, which my right hon.

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Friend mentioned, hard work, loyalty to the family, commitment to high savings, a total commitment to children's education both day and night and all the other values that one associates with the Protestant ethic, as well as a reluctance to move towards greater consumption. They have those values and they are beginning to deliver fantastic economic performances.

Let us consider some of the facts. By 2025, the gross national product of the east Asian powers will be the same as that of the European Union and the North Atlantic trade bloc combined. Throughout the recession, the national products of countries in eastern, central and parts of western Asia have been growing at more than 6 per cent. The export opportunities are vast. A fairly small economy such as Malaysia already imports more from the United States than the whole of eastern Europe and Russia. That is just the beginning. There will be a vast range of import potential for those countries. The Asian countries will not merely make products for export to us with their lower labour costs. They will provide vast import potential-- huge new markets that we must be agile enough to grasp.

The challenge will require a total change in our attitude to what is attainable and where we put our resources. When I visited Bombay recently I was impressed when major entrepreneurs told me that they intended to develop the highest quality steel products and steel alloys for export to world markets. They will do so at a cost that will be 25 per cent., at the most, of that of the cheapest equivalent steels produced in the European Union.

I do not know how we will cope with that competition and I do not think that anyone is prepared for it. We talk as if our steel industry were fine, but it is not. It is about to be challenged by competition of a type that we will have the greatest difficulty in meeting.

One must judge the debate and the Gracious Speech against that background-- the new realism about our needs in Europe and how on earth we can maintain or increase our competitiveness, rather than pile more benefits and costs upon ourselves. The speech by the Leader of the Opposition came out as yesterday's message. His concern was a centralised standard of social provision that would not even be laid down at national level but in Brussels. On such sensitive issues one would think that one would argue that social care and rules should be crafted as closely as possible to the shop floor and the people concerned. The idea that they should be crafted in Brussels and their support ever-enlarged seems totally inappropriate. It does not fit into the new context that candid political leaders should be explaining to their supporters.

The real European debate is how to increase our competitiveness, take the best from other cultures and see what we can learn from them. I mean the Confucian and Islamic cultures--especially the former, which is part of the culture that is providing the framework for some of the most successful economies on earth. I am not saying that we need to copy the Chinese or Indonesians on human rights; that would be crazy. But we need to take some of their values, just as the Japanese a century or more ago decided not to copy the west, but to take the best of our values and techniques and apply them and graft them on to their own culture. We need to do the reverse with equal vigour. If we go on in the mean time preaching our own European superiority and reacting to

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threats by putting up more protectionist barriers, we are all doomed. There will be constant failure and a decline in our living standards.

I would apply the same strictures about irrelevance to my hon. Friends who are getting worked up again about the increased contributions to the European budget. The position is different from that which prevailed at the time of the Maastricht treaty debate. I must confess--this may be a shock and a horror to some--that I felt that the cause of the Maastricht rebels in questioning the rush to political and monetary union which was embodied in the Maastricht treaty had some very commendable parts to it. I did not follow it myself, and I voted with the Government. But there was, and remains, an extremely valid argument that elements of that treaty were, in the words of my hon. Friend the Member for Worcestershire, South (Mr. Spicer) in his excellent book, "A Treaty Too Far".

But to use the same sort of language and thought in saying that the additional expenditure on the European Union budget requires the same degree of indignation is getting things badly out of proportion. If the anti-Maastrichteers want to concentrate on doing some useful unravelling of the bad side of Maastricht or halting federalist impulses, they should look at other aspects of the Edinburgh package. For instance, they could look at the fact that, unfortunately, we allowed half our aid programme to slide into the hands of international and multilateral funds; about 40 per cent. of the aid programme has gone to the European Community. That needs a certain amount of examination and I am glad that the Foreign Affairs Committee is about to put before the House a detailed analysis of some of the consequences of that. There is a cause for those concerned to fight.

Let us turn our minds, as others have suggested, to the agenda for the 1996 IGC. Let us make sure that we make an effective input to the so-called reflection group which began in the summer. We should propose arrangements for reforming the Commission and the Court of Justice, and for making subsidiarity a real political process. That means bringing political decisions to the House of Commons about what the Commission may be brewing up and turning into regulations before those things are dumped on our heads.

Let us develop the links with the European Parliament--which we are always talking about vaguely--into specific links which would enable the House to learn much earlier about the policy seeds and bulbs which will grow into the directives and regulations that cause so much dismay later. We are always saying that the European Parliament does not tell us. We scrutinise the legislation, but by then it is too late. We must get into these matters much earlier. That would be a far more useful diversion of energy for some of the much-vaunted rebels than rushing to the media every five minutes, telling them of the terrible things they are going to do.

I apply the same strictures to another line of thought that has developed in the European debate--that it is all hopeless and that we have been defeated before we start. The view is, of course, shared by extreme enthusiasts of a federal Europe, who say that there will be a German-French axis and a federal fix, and if we do not join immediately, we are doomed; and the extreme anti-Europeans, who are certain that there will be a Franco -German axis, that we are out of it and defeated,

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that we are not winning the argument and that we should cut our losses and get out of it altogether. There is a diagnostic alliance between the two wings which I believe to be completely wrong and defeatist.

We would do much better to develop confidently--now that we are Europe's most successful economy--our view of how the European agenda should unfold after 1996. If we do that, we will find that we have a wide range of allies in all the other countries of the European Union; including new members such as the former European Free Trade Area counties, the would-be members from the Visegrad countries and others. That requires vigour and confidence in the development of our view of Europe. I am glad that my right hon. Friend the Prime Minister has shown that, and I would like other Government Members and everyone concerned with the development of our policy in Europe to show it as well.

By the same tokens, and against the background of my recognition of the power of Asia, some of the ideas which right hon. and hon. Members are floating about beefing up the Atlantic community--my right hon. Friend the Member for Oxford, West and Abingdon (Mr. Patten) mentioned that--are, if I may say so, a little out of date. If one sits in Washington, or west of Washington, one is halfway into the Asian world, and one can recognise the enormous, dominating and increasing power of Asian investment, trade, standards, quality and design in 1,001 ways. I am not just talking about Japan, but about the old and new tigers as well.

The Atlantic community is of interest in developing NATO and I am glad to see that the United States is beginning to talk about expanding NATO and is not just sitting on its thumbs on the matter. My right hon. and learned Friend the Secretary of State for Defence, who will reply to the debate tonight, will no doubt have something to say on that, and there are ways in which we can strengthen, rather than weaken, transatlantic security arrangements. Interpreting the misunderstandings over Bosnia as a great rift between America and Europe is an absurd exaggeration, and I am sure that the matter can be carried forward.

The idea that there is an Atlantic community beyond security is too narrow, and we must concentrate on what we must do to develop further, as this country is doing with great success, our links with the great Asian economies which will dominate during the next 20, 30 or 40 years. It is a matter of great pride to me that this country is carving out a unique foreign policy with Japan. We have built a closeness of identity and understanding in all sorts of areas. Those areas may not appear in the script. They may not fit in with the view of blocs, or with the view of the right hon. Member for Tweeddale, Ettrick and Lauderdale that we must give priority to Europe, or with the idea of an Atlantic community. They happen to fit into the reality, and they are of vast benefit to this country, as well as to Japan.

The reality which we all face is not the marginal one of European budget contributions or whether we have a social charter. The reality is that the Asian challenge of competitiveness will overshadow everything. Our choice is either to give up and go for protection--Sir James Goldsmith is inclined to do that, and certain policy makers of influence in Europe are longing to put up the protectionist shutters--or to embrace the challenge and learn from the best of different cultures which, hitherto, we regarded with some patronage and a smiling

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superiority. We now see to our surprise that they can deliver up economic and industrial success, technology, learning and quality on a scale which we never dreamed about.

We had better get our skates on and understand how those cultures work and what we can take from them to prepare ourselves for the years of struggle ahead to remain competitive and to maintain even what we have in the way of a standard of living.

5.37 pm

Mr. Robert N. Wareing (Liverpool, West Derby): I agree with the right hon. Member for Guildford (Mr. Howell) that we should not look at the world in terms of blocks. May I remind him that my hon. Friend the Member for Livingston (Mr. Cook) emphasised the fact that the future of Britain cannot be outside Europe and the European Community?

Some of us held views contrary to that in the past. Many of us have changed our views in the intervening 20 years, and particularly in the past 15 years, because much of Britain's manufacturing base has been decimated despite the fact that resources are there. North sea oil revenues-- £124 billion of them--were available for investment, but they have been allowed to be whittled away by the Tory Government since their election in 1979. We might ask ourselves what the Germans or French would have done with those revenues. Whereas, 20 years ago, it was just conceivable that Britain might be the offshore Japan of Europe and go it alone, those days are long gone. We must accept that we must make our way in the world as part of the European Union. That does not mean, of course, that we should accept every institution of which Britain is a member, for example NATO. It was a child of the cold war. At that time many of us looked forward to the day when the Warsaw pact and NATO folded because it was no longer necessary to maintain those warring alliances. The Warsaw pact has gone, but the Gracious Speech still refers to NATO playing " a wider role in protecting stability throughout Europe." I must warn that I believe that NATO could be a source of instability in Europe if we seek to enlarge it in line with an enlarged European Union. We want that union to be enlarged by eventual membership of Scandinavian and eastern European countries, and even the Baltic states. If we were to propagate the view, however, that we wanted eastern European countries such as Hungary, Poland and Czechoslovakia--and perhaps Finland--to be members of NATO, that would be met with a swift reaction from Russia. We might then find ourselves back in the days of the cold war. For that reason it is important to develop the role of the Conference on Security and Co-operation in Europe. The summit at Budapest should be used to give the CSCE more power and influence in international relations. At least Russia is party to the CSCE; similarly its participation in Partnership for Peace is extremely welcome.

With the end of the cold war relationships have changed. The United States, for example, recently decided to defy a United Nations resolution by lifting its arms embargo against the warring factions in Bosnia. Although

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the Foreign Secretary does not want us to depart from the pan-Atlantic relationship within which we have worked since the second world war, I advise caution.

In common with many of my hon. Friends, I welcomed the election of President Clinton, but I must confess that now I am not so sure. I saw the wonderful work done by the American forces who were sent in to Somalia by President Bush. They saved people in Baidoua, Belet Yuen and other townships from starvation by getting food to them. Those troops carried out a highly successful operation in most dangerous circumstances, but then President Clinton decided that helicopter gunships were the answer to President Aidid. I look to Europe and not to those across the Atlantic to determine future British foreign policy.

One of the greatest dangers that lies ahead of us is the rise of Muslim fundamentalism, which is already apparent in Egypt and Algeria. In a decade from now, middle eastern countries, should they be ruled by rogue leaders, could launch missiles against this country, if they so wished. For that good reason it is important that we should achieve a common foreign and security policy not only with our present partners in the European Union but with those other countries that we hope will join it. We must also work with Russia, which is vital to the future of European security.

Security is not built on military alliances. We must ask ourselves why we have wars in places such as Rwanda. They are caused by poverty, disease and strife within communities. We must, similarly, guard against a rise of nationalist forces in Russia and eastern European countries. How do such forces become powerful? They are created by the divisions that arise in societies which throw their all behind the god of the market.

Whenever I meet visitors from Russia and eastern Europe, or go to those countries, I always warn people against a mad rush from the extremes of highly centralised, planned economies, such as that which existed under bureaucratic control in the former Soviet Union, to extreme Thatcherite market economies. I know that Conservative Members would not agree with my advice, but I always say to those people, "For God's sake, don't throw the baby out with the bath water." I remind them that not everything that existed in the former Soviet Union was a disaster. In 1956, for example, a White Paper was published--it prompted some discussion in the House--which showed that adult further education and university education was available to far more people in the Soviet Union and in the United States than in Britain.

Because of the loss of welfare provision and mass unemployment in east Germany, the recent elections in Germany were not only marked by gains made by the SPD--I was pleased about that--but by gains made by the PDS in the eastern La nder. For the same reason, parties which consist of former members of the Communist parties are coming into office in Lithuania, Poland and Hungary. I hope that those former Communist members have learnt from their mistakes, just as I hope that Conservative Members have learnt from the mistakes that they made during the Thatcherite period--a period that some of us still doubt has come to an end.

The Foreign Secretary referred to the Baltic states and their eventual membership of the European Union. I hope that that day is not far away, but we must remember that that will mean that Russians will live inside the European Union. It is therefore important to insist that when those

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countries apply for membership, their record on human rights for minorities in their countries should be absolutely without blemish. The Latvian Government, for example, must be told not to discriminate against the large Russian minority within their country. For example, a person who speaks Latvian fluently and who considers himself Latvian, not Russian, is still discriminated against and is denied certain rights because he served at one time in the Soviet army. It is that type of problem that leads to conflict, just as it did in the former Yugoslavia. The fact that we recognised Croatia, which was discriminating against its large Serb population not just in Krajina or the borderlands but in Zagreb itself, is the reason why there is now a war in Bosnia.

Although ethnic cleansing has by no means been all one-sided, our media should consider taking a more even-handed approach to the former Yugoslavia. A fortnight or so ago, the news was full of the offensive launched by the Muslim forces in Bosnia-Herzegovina, central Bosnia and around Bihac. It went almost without comment or criticism in the western media, which simply said that the Muslims were trying to get by military means what the Bosnian Serbs had refused to give them by not signing the contact group's plan. But the United Nations' resolution does not call for military action to reinforce the contact group's plan. Today, however, reports have appeared in our newspapers on the Serb counter offensive around Bihac, and President Izetbegovic who, a few weeks ago, was launching his offensive and gloating about how he occupied more territory inside Bosnia, is calling on the UN to take action. We should tell him that there will be no military action.

The Government have been right--I hope that no deals will be done in the future--to maintain their opposition to lifting the arms embargo, as the Americans have. For God's sake, let them not be persuaded, as they were by Herr Genscher on the recognition of Croatia, to lift the arms embargo. The humanitarian effort would undoubtedly come to a standstill if there were a large-scale influx of heavy armoury, as has been suggested, for the Muslim effort in Bosnia-Herzegovina. The Government have made it clear, and they should maintain their position clearly in the future, that our contingent in UNPROFOR will be withdrawn if the arms embargo is completely lifted.

I welcome the fact that some sanctions have been lifted against Yugoslavia- -that is to say, Serbian Montenegro--because it must be recognised that there are more than 200,000 refugees from Bosnia and Croatia, and they are not all Serbs. Anyone who visits refugee camps, as I have, in former Yugoslavia will see Muslims being tended by Serbs. It is not true to say that, in the Serbian-controlled part of Bosnia, there are no Muslims, and that Muslims are not living easily with their fellow Serbs. A degree of civilisation exists within an otherwise uncivilised part of the world.

Human rights is the most important issue in terms of our international policies. The rights of minorities, wherever they may be, should be put at the forefront. I agree entirely with the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel) on the arms trade. It is no use the Foreign Secretary telling the House that if we do not supply arms, somebody else will. It is no use him saying that the Opposition do not want to maintain the jobs of the workers whom we represent. Of course we do, but those workers would agree that that does not

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