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Mr. David Heath (Somerton and Frome): I wholly agree with the Secretary of State on trade liberalisation, but does he agree with me that free trade does not equate to the interests of American corporations? There must always be recognition of factors--social, environmental, and so on--that might mean that certain technologies are not appropriate to some countries. That protection must be available to those countries to use if they need to do so.
Mr. Byers: There is the flexibility to take those factors into account within the procedures laid down the by the World Trade Organisation, and we shall ensure, during the new round of discussions that starts later this year, that those factors can continue be taken into account.
I conclude on the subject of trade by making one point that is important in the light of recent events. I assure the House that we want improvements to be made to the
mechanisms for settling disputes, so that we can resolve differences without recourse to damaging retaliation. It will be in the interests of all of us to be able to avoid the difficulties that we have encountered in recent months.
Mr. Paterson:
I welcome the Secretary of State's comments on the benefits of world free trade. Does he consider that the unhappy episode over bananas could have been avoided if Britain had been a party to the North American Free Trade Agreement?
Mr. Byers:
I do not agree, because it would have meant that all sorts of pressures would have been applied, which would not have been helpful to our efforts in respect of the banana regime.
This debate comes at a difficult time for the Conservative party. The modern Tory party is a family at war, sitting around their newly acquired kitchen table in a kitchen that has, yet again, been redecorated in an attempt to freshen up their image. The photograph of grandmother was dumped in the skip outside, but hastily retrieved by the head of the household when he faced a family rebellion. After the past 10 days, the message that the Leader of the Opposition needs to learn is clear: "If you can't stand the heat, you'd better get out of the kitchen."
Mr. Paul Keetch (Hereford):
There were times during the past hour and three quarters when I wondered whether I would get in before the winding-up speeches. I begin with a word of warning to the Secretary of State: he should be careful about attacking the Leader of the Opposition. Some of us in this place believe he is doing a fine job and would like to see him remain in his position. I think the people of this country certainly recognise the Leader of the Opposition for what he is.
I want to explore what the motion means in terms of industry, job losses, youth unemployment and the new deal. Before I do so, I must admit that I think some parts of the motion are a bit rich. Liberal Democrat Members remember how the previous Government wrote off more than 2.5 million jobs in manufacturing over 18 years, so we find the Conservatives new concern for the unemployed rather stomach-turning.
The motion describes some of the problems in industry, but it fails to mention several difficulties that we believe are intrinsic to British industry at present--poor productivity, low investment in research and development and low skills levels.
Let us look at a few facts. The United Kingdom produces less per person than most other major economies. Our productivity gap of 40 per cent. with the
United States and more than 20 per cent. with France and Germany reflects a long-standing weakness in our economy. The United Kingdom invests less in research and development than our competitors. For example, the United States invests 50 per cent. more of its GDP in R and D than we do. The United States and Germany invest 40 per cent. more per worker in new capital equipment than the United Kingdom.
The skills gap in this country is fast becoming a yawning chasm. Some 22 per cent. of adults in the United Kingdom have poor literacy skills, which is twice as many as in Germany. Yet to listen to the Opposition, one would think that those problems began on 1 May 1997. The fact is that many of the weaknesses in the British economy date from the years of Tory mismanagement. While we are not totally happy with everything that the new Government are doing, we accept that they are trying to make a start.
Manufacturing industry is in recession and output is predicted to fall by between 1 per cent. and 1.5 per cent. in 1999. As a direct result, instead of remaining flat, unemployment is likely to rise by 250,000. In its latest press release published last Friday, the Trades Union Congress states:
For example, unemployment has risen by 3.7 per cent. in the north east of England in the past six months and by 3.3 per cent. in the west midlands. That area has lost nearly 4,000 jobs, but London and the south-east have gained more than 7,000 jobs in the same period. It is not just the traditional heavy industry or the metal-bashing areas of those regions that have been affected; light industry and manufacturing is also being hurt. The Secretary of State and the Minister for Employment, Welfare to Work and Equal Opportunities will know that the Thorn Lighting plant in Hereford may close, with the loss of 348 jobs. I accept the support that the Secretary of State and the Minister have offered, but we cannot afford to lose that kind of industry in a rural constituency.
Mention has also been made this afternoon of Siemens. I am sure that many hon. Members on both sides of the House have examples of company closures in their constituencies, and that trend must not be allowed to continue.
In the Prime Minister's constituency, and in the constituencies of 105 other Members of Parliament, more than 30 per cent. of workers are employed in the manufacturing sector. According to the TUC study, "Jobs in Jeopardy", the right hon. Gentleman can expect economic hardship to increase in his constituency over the next 12 months. The Chancellor sometimes claims that those problems are due to the collapse of the global market and the failures of Asia, Russia or Latin America. However, the fact is that the United Kingdom exports more to the Netherlands than to those areas combined. The Treasury's own figures reveal that our key export markets are growing by a rate of nearly 6 per cent. a year, but the UK's take-up of that new business is barely 0.5 per cent. In our key export markets, therefore, British business is losing opportunities for growth.
The reasons for that are clearly the high value of sterling and high interest rates. The value of sterling is today 10 per cent. higher than it was when the Government came into office, and with interest rates still 2.5 per cent. higher than those in the rest of Europe, the extra cost of investment adds to our lack of competitiveness. The Government know what they have to do: they must now set a time scale for British entry into the single European currency, which will remove the burdens of an over-valued pound and high interest rates.
Mr. Stevenson:
If, as I suspect, the hon. Gentleman is urging the Government to support immediate entry into the single currency, at what exchange rate does he think sterling should be locked in?
Mr. Keetch:
As the hon. Gentleman knows, we have to consider that matter very carefully, and I insist that the Treasury should now start to prepare for entry. Our concerns are that we have not started preparations and that we do not have the information to make the necessary assessments. That is why I and other hon. Members have called for a White Paper.
Mr. Bercow:
The point to which the hon. Gentleman refers is absolutely fundamental to an understanding of the issues and a recommendation for policy action. Does he believe that Britain should enter the euro on the basis of exchange rate mechanism mid-rates, and if not, what is his alternative? Is he not aware that all the countries that have entered in the first wave have done so at ERM mid-rates, and a specific derogation would be required if we were to enter on a different basis? I hope that the hon. Gentleman understands these issues.
Mr. Keetch:
We are now almost two hours into the debate and only Front-Bench Members have made speeches, so I do not want to be diverted into a debate about the euro. I signed an early-day motion proposed by the hon. Member for Stone (Mr. Cash) which called for more information on the issue, and Liberal Democrat Members have criticised the Government, as we criticised the previous Government, for not producing information about the euro.
"Britain is now a two speed two-nation economy. The slowdown in the coming year will further hit those areas with the greatest dependence on manufacturing. Manufacturing is moving into recession and the service area is continuing to expand."
The TUC calls it a two-speed economy, but, in a debate last year, I called it a Jekyll and Hyde economy. London and the south-east are becoming more prosperous while the north east and the west midlands are suffering.
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