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7.33 pm
The Minister for Home Affairs and Devolution, Scottish Office (Mr. Henry McLeish): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
- "recognises the significance of the EU/US relationship and notes that the majority of that trade relationship runs smoothly; commends the efforts of the Government to secure the Transatlantic Economic
- Partnership Agreement last year; acknowledges the efforts of the Government to find a way through the bananas dispute so as to minimise the impact on British industry and in particular the cashmere industry; notes the current position on the hormones dispute; welcomes the Government's commitment to sustainable development; and endorses the Government's support for comprehensive multilateral trade negotiations to be launched in Seattle at the end of this year."
The hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) has put a reasonable case to the House about his local concerns and he expresses a view that is shared by hon. Members on all sides of the House, especially in relation to Scotland. However, it is important to remember early in the debate that this is an issue not only for Scotland, but for the United Kingdom and the European Union.
The EU-US trade relationship is substantial and strong. The EU and US are the world's largest two economies, and together they account for about 54 per cent. of world income. Even excluding trade within the EU, together they account for around 38 per cent. of world exports and 39 per cent. of world imports. In 1997, EU goods exports to the US were worth $160 billion, compared with imports from the US worth around $156 billion.
The bilateral trade balance has fluctuated between surplus and deficit over the previous five years. The US is by far the most important external export market for EU firms, accounting for nearly 20 per cent. of exports. In 1997, direct investment flows from the US to the EU amounted to $24 billion. The US is the most important source of external investment into the EU, accounting for over 50 per cent. of the total. In 1997, EU investment flows to the US were worth $42 billion, with the US accounting for over 40 per cent. of total EU direct investment overseas.
Those figures demonstrate the depth and significance of the relationship between the EU and the US, but the bilateral relationship is not the only reason why the EU and the US matter so much in the world trading system. Together, the EU and US are the twin pillars of that world trade system, and co-operate to advance our many shared interests in world trade, some which have been expressed by the hon. Member for Tweeddale, Ettrick and Lauderdale.
All in all, it is important to bear it in mind that the vast majority of that trade and investment between the EU and the US takes place freely and without any difficulty whatsoever. Although there are a number of important disputes, it is vital to keep those in their proper context, and to ensure that the relatively few--although admittedly important--disagreements do not colour the nature of the relationship as a whole.
The transatlantic economic partnership was negotiated under the UK presidency of the EU last year, and agreed at the EU-US summit in London in May 1998. The TEP builds on an already strong transatlantic trading relationship. It provides a range of opportunities to improve the bilateral trade relationship between the EU and the US. It provides also a formal opportunity for an
on-going dialogue to remove trade frictions and build confidence between the EU and the US. In addition to bilateral benefits, it provides a means of maintaining open markets and promoting the expansion of trade through the continued development and strengthening of the multilateral trade system.
The bilateral aspects of the TEP include substantial elements relating to services, where there is an opportunity for addressing sector-specific obstacles, and to agriculture, environment, food safety and biotechnology, with an agreement to establish proper dialogues to provide a system of early warning for potential disputes in each of those areas. Although those initiatives are at an early stage, they are important and we must build on them.
On electronic commerce, there will be further dialogue to ensure the elimination of unnecessary legal and regulatory barriers and the continued duty-free treatment of electronic transmissions. The TEP deals also with technical barriers to trade, and there is agreement to identify and implement jointly defined general principles for effective regulatory co-operation and to extend the current mutual recognition agreements to new sectors.
The issue highlighted by the hon. Member for Tweeddale, Ettrick and Lauderdale is the banana dispute, which is faced by the UK, along with many other EU member states. Acting through the European Commission, we have made a great effort to seek a solution to the banana dispute through the World Trade Organisation. I say again to the House--emphasising what my right hon. Friend the Secretary of State for Trade and Industry said on 4 March--that we view the US action of withholding liquidation on a range of EU products as deplorable. That action was completely unauthorised by the WTO and ignored the WTO arbitrator's appeal for discussions to continue without premature action. We have raised our objections at the highest levels. Only last week, my right hon. Friend the Secretary of State for Scotland lobbied the US Administration and the US Congress during his visit to Washington.
It is particularly unfortunate that the US action is directed against industries that are in no way connected with bananas. That is the source of the irritation that most people feel on this issue. There can be no justification for inflicting great damage on small, vulnerable businesses and communities, as the hon. Member for Tweeddale, Ettrick and Lauderdale pointed out. The US action has already stalled American orders for Scottish cashmere, and there is a real threat of job losses in the textile-dependent borders region. Of course, it is not only cashmere that is affected; biscuits, batteries, plastics, packaging, candles--to which the hon. Gentleman referred--bed linen and many other products are also on the US list.
Although the US argued that its higher tariffs will not apply until the WTO arbitrator rules and it is granted authorisation by the WTO, the effect of its action of 3 March is the same as if the higher duties were in place now. In view of the highly seasonal nature of the cashmere industry, where a high proportion of the industry's annual orders are being placed now for delivery later in the year, the Government announced that we would implement a scheme to guarantee the bonds requested by US customs in respect of cashmere knitwear.
I am pleased that the announcement was warmly welcomed by the industry and hon. Members on all sides of the House and, later in the debate, my hon. Friend the Minister for Trade will give details of the way in which we shall implement that commitment. The hon. Member for Tweeddale, Ettrick and Lauderdale sought clarification on that, and I pleased to say that my hon. Friend will provide that.
Even now, it is not too late for the US to reverse its decision on retaliation in the interests not only of the EU-US relationship but to safeguard the WTO. Recognising the importance of resolving this dispute and of safeguarding the WTO's dispute settlement system, the Government are, first, fully committed to implementing the WTO panel and arbitration outcomes, whatever they may be, without delay.
Mr. Archy Kirkwood (Roxburgh and Berwickshire):
Does the Minister understand that there is an opportunity between now and the dispute resolution panel's finding being published on 12 April to seek an accommodation between the United States and the European Union that would be acceptable to all parties, and that would be the end of the matter? Are the Government using every capable power that they have to hand to obtain for the EU a sufficient mandate to enable a deal to be struck with the US before 12 April?
Mr. McLeish:
I am pleased to give the hon. Gentleman that reassurance. I think that everything that can be done is being done by the Government to bring this matter to a conclusion. Clearly, we await the arbiter at the end of the process. There is then a meeting of the panel, and 12 April is a pretty important day. In the meantime, every conceivable step is being taken because of the importance of the issue not only to the cashmere industry, but to the principles that lie behind what is happening. Obviously, we expect our EU partners and the United States to take the same approach. We are hoping that, in the United Kingdom and elsewhere, there will be positive moves to try to resolve the matter.
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