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Mr. James Wallace (Orkney and Shetland): Hon. Members in all parts of the House would agree with much that the Minister has said. He acknowledged that my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) was constructive in the way in which he moved the motion and gave credit to the Government where it was due. Is there anything in the motion that the Minister finds objectionable? If not, would it not be better for the House to speak with one voice?

Mr. McLeish: It is always a pity to undermine consensus by making a thought-provoking suggestion to a Minister at the Dispatch Box. I am in a mood, in a jocular way, to resist the hon. Gentleman's invitation. [Hon. Members: "Why?"] We will find out later. I am sure that my hon. Friend the Minister for Trade will continue in our easy-going style at the Dispatch Box.

In summary, we are clear that free trade has never meant a free-for-all. That is always a danger. There is plenty of scope for reflecting particular concerns about health and so on in any country's actions. However, a system of international rules must have objective reference points. That is why it is important to rely on scientific justifications, to avoid a free-for-all.

The WTO has the difficult task of balancing the interests of all its members, which are at different stages of development. That fact, together with concerns about access to third-country markets on a non-discriminatory basis and the ability of member countries to develop and improve living standards, will influence the future as it has the past.

The subject is complex. I hope that, in the House, we can co-operate to ensure that we move quickly to resolve the issues globally and for the communities that each of us represents in the United Kingdom.

7.53 pm

Mr. Christopher Chope (Christchurch): This is indeed an important debate. We heard interesting contributions from the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore), who introduced the debate, and from the Minister.

Global free trade must be in our economic and political interest. We as a nation have more to lose from protectionism and trade wars than the Americans or most of the continental Europeans. As we have heard, there are innocent victims in any trade war.

I was disappointed that the Minister did not say what would happen after 12 April. If the World Trade Organisation rules against the revised EU regime, what will be the approach of the EU and of the British Government? If the WTO rules in favour of the retaliatory action that the United States said it will undertake, what will be the approach of the EU and of the Government? I was worried when the Minister seemed to imply that compensation was a better option than compliance. Surely, if we are to make the WTO rules work, we should look for compliance before we look for compensation.

The Government have not taken the matter as seriously as they should have done, certainly in the earlier stages. When, on 23 February, my hon. Friend the Member for Woodspring (Dr. Fox), who speaks for the Conservatives on constitutional affairs, asked what contacts the Government had made directly with counterparts in the

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United States, and what contacts the Prime Minister had made with President Clinton on this serious subject, he was effectively told that there had been no contact at all.

We know that the Prime Minister is prepared to talk turkey with the President of the United States on issues affecting the President's personal life. It is a pity that the Prime Minister has not used his working relationship with the President to pursue the United Kingdom case in this important trade dispute. It was not until 4 March that the Secretary of State for Trade and Industry did anything.

Some Liberal Democrat Members have tended to simplify the issue. It is simplistic to say, as the right hon. and learned Member for North-East Fife (Mr. Campbell) did, that

"United States companies have 78 per cent. of the European banana market, compared with the Caribbean's 9 per cent, and that none of the bananas about which there is a dispute are actually grown in the United States",

but where does that take us in the context of global trading rules?

In opening the debate, the hon. Member for Tweeddale, Ettrick and Lauderdale called the United States an international bully-boy engaged in macho diplomacy. Such comments are hardly designed to improve relations. I agree with the hon. Gentleman that the WTO must be respected. As the Under-Secretary of State for Scotland, the hon. Member for Western Isles (Mr. Macdonald), said,

"The European Union banana regime is designed to comply with the World Trade Organisation regulations while honouring our commitments to those countries in Africa, the Pacific and the Caribbean with which we have relations through the Lome agreement. We stand by those commitments.--[Official Report, 23 February 1999; Vol. 326, c. 162-63.]

It has been common ground among British Ministers both before and since the change of Government that the commitment to traditional ACP suppliers, as confirmed in the current Lome convention, should be honoured, but there has always been a recognition that there might be different mechanisms for honouring that commitment.

As we know, the dispute goes back many years. Under the new WTO regime, unanimity is required for the report of a disputes panel to be overruled. The ruling of a disputes panel cannot be ignored. The WTO can justify retaliatory action against a country against which a ruling has been made. That is the problem facing us.

The WTO disputes panel reported as long ago as May 1997 its finding that the EU's banana import regime violated free trade rules on 19 counts. Significantly, as emphasised at the time by the Financial Times and other newspapers, the report did not target EU tariff preferences for Caribbean banana-producing countries, but focused on the EU licensing regime. The proportion of bananas that are coming from the Caribbean countries is irrelevant. The US and the WTO have accepted the tariff preferences that the EU has in place for the Caribbean banana producers.

In May 1997 the WTO panel ruling was confirmed, and in September 1997 it was confirmed on appeal. The EU was required to make its banana regime compatible with WTO rules by 1 January this year--quite a long period in which to do so. On 26 September 1997 the EU announced

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that it accepted the WTO ruling. It is important to remember that. As the then Minister of Agriculture, Fisheries and Food said,

"We have obligations under the WTO. We must find ways of revising the EU arrangements so that they conform with the rules."

The issue is whether that has been done.

We have not heard anything about the consumer, but the World bank estimates that the EU banana regime is costing consumers $2 billion a year and, that for every dollar, only 7.5 cents goes to the benefit of the former colonial producing countries. Going for a compensatory rather than a compliant regime would, I fear, result in the burden on the consumer becoming even greater.

In June 1998, a deal was agreed in the Council of Ministers. It was announced to the House on 3 July by the Minister of State, Ministry of Agriculture, Fisheries and Food. The United States and five Latin American countries argued that the EU's changes were merely cosmetic and that the WTO should reopen its disputes panel on that issue. The United States announced its intention to impose duties on products exported from Europe, arguing that that was justified under the WTO rules. The EU argued that the matter should be referred again to a disputes panel, to determine whether the revised EU regime was incompatible with those rules. As we know, in January 1999 Ecuador called for a disputes panel to rule on the compatibility of the revised regime.

The United States agreed not to impose duties before 3 March and the EU went to the WTO arbitrator for a ruling on whether the level of retaliation proposed by the United States was appropriate. We know that 12 April is decision day and we will find out then whether the revised EU banana regime is compatible with WTO rules, but we do not know what will be the reaction of the EU, or of the Government, to any findings which emerge. More information has been asked for and, I understand, is being provided, but, from a United Kingdom perspective, it is important to realise that those Caribbean arrangements are not the issue of dispute.

It is also worth reminding individuals in the United Kingdom who are caught up in the dispute--not least those people in the cashmere industry in Scotland--that two European countries, Denmark and the Netherlands, voted against the revised banana regime in summer 1998. As a result, they have earned themselves exclusion from the list of retaliatory duties proposed by the United States. If the Government had done likewise, the threat to the Scottish cashmere industry would never have materialised. Perhaps the Minister will respond to that point.

Mr. Bowen Wells (Hertford and Stortford): Does my hon. Friend know why the Netherlands and Denmark voted against the regime? The reason, if I may suggest it to him, is that the subsidiaries of Chiquita, which distribute central American bananas, have the entire Danish and Dutch markets to themselves.

Mr. Chope: My hon. Friend implies that there is something unjust about a large number of bananas being produced for market by three United States-controlled companies. I have to disagree with him if he is implying that there is something inherently unfair about that; in itself, it is not against the WTO rules. This dispute is not about those particular companies. My hon. Friend

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suggests that the behaviour of two other members of the EU is wholly motivated by their connections with those companies. Although I understand his concerns on that point, I certainly would not jump to such a conclusion without clear evidence.

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