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Below is Mr Major's statement during the 1993 Statement on the 1993 GATT Negotiations, on 16th December 1993.
The Prime Minister (Mr. John Major) With permission, Madam Speaker, I would like to make a statement on the successful conclusion of the world trade negotiations.
In Geneva yesterday, trade negotiators from 117 countries reached the most wide-ranging agreement ever. After seven years of long, hard and often fraught negotiations, it is a superb outcome. It is a result for which industry, commerce and consumers alike have pressed; it is a conclusion for which this Government have worked tirelessly through many crises, when protectionism threatened British markets and British jobs.
The new GATT settlement will help British industry by bringing down barriers to exports of manufactured goods and services. It will give manufacturers greater protection against piracy of their copyright, patents and designs. It will bring down prices for consumers—particularly of food, electronics and other manufactured goods; and it will strengthen the world trading system against unfair practices by individual countries.
Britain is the fifth largest exporter in the world of goods and commercial services. We export more per person than either the United States or Japan. Our markets are already among the most open. We stand, therefore, to be one of the biggest gainers from cuts in worldwide tariffs, quotas and other restrictions.
Sharp reductions in some very high tariffs in the United States and Japan will help Britain in strategic markets. The overall tariff reductions, across all countries of the world, will be around 40 per cent. An independent study by McGraw-Hill has indicated that a new GATT agreement could add up to 4 per cent. to our national output, generating up to 400,000 extra jobs over the next decade.
The European economies, as a group, are estimated to be the biggest single gainer; so the GATT deal can be expected to give a much-needed boost to confidence and recovery in our biggest export markets.
As late as last weekend, there was a real and frightening danger that negotiations might unravel. The world faced a choice between a retreat into protectionism, slump and higher unemployment, and free trade, growth and jobs. Happily, the right choice has been made. The director general of the CBI has rightly called this outcome ‘a momentous and welcome event".’ This Government have fought consistently to keep the negotiations going. It has been a long struggle. Last year, we faced the prospect not only of failure, but of a lurch into trade war between Europe and the United States.
Exports from Europe were threatened by new and punitive American tariffs. We were able to use our presidency of the European Community to get both sides back to the negotiating table and make progress on farm trade. We encouraged the new United States Administration to extend congressional authority in order to permit the GATT round to be concluded. We pressed for the agreement on tariffs at last summer's Tokyo summit —another crucial meeting and another crucial building block in the final result.
At this autumn's Commonwealth summit, we launched a special mission to all the key Governments of the developed world. This sent the clearest possible signal on behalf of one quarter of the world's population that free trade was a prize for developing countries too. Trade, more than aid, is the most certain route to economic development.
I believe that very great credit is due to Sir Leon Brittan, the European Community's negotiator; and to Peter Sutherland, the director general of GATT. But others have played a crucial part, including the United States negotiator, Micky Kantor. All three had the courage to take on their tasks at a time when it was far from certain that they would be rewarded by success.
Let me outline the main features of the agreement. First, excellent progress has been made on industrial goods but final details are still being worked out. A number of our largest export markets will move towards the total abolition of tariffs in industries which include pharmaceuticals, steel products and spirits. For example, the Scotch whisky industry, which already has exports totalling about £2 billion a year, will benefit from the complete abolition of Japanese tariffs.
Cuts in high United States tariffs on scientific equipment, chemicals, steel and ceramics, for example, will help in one of our biggest markets. Our textile manufacturers will gain from tariff cuts in the United States, and gain greater access to many economies along the Pacific rim.
Secondly, for the first time agriculture will be fully covered by GATT rules. Tariffs are being cut and subsidies reduced substantially, offering families in this country the prospect of lower prices of staple foods. In Europe, we have already begun the process of reducing farm production subsidies. Overall, those subsidies cost every family around £20 a week. The changes to the common agricultural policy which are already agreed, should—if passed on to the consumer—over a period lead to price cuts equal to 20p off a pound of beef or 6p off a pound of butter. Under the GATT agreement, other countries—notably, Japan and the United States—will now have to cut their agriculture tariff subsidies as well.
Thirdly, for the first time we have an international set of rules for free trade in services—the fastest growing sector of the world economy. Services account for two thirds of our output in the United Kingdom but only about one quarter of our exports; so, if we can break down barriers to trade, there is great potential for growth. The services covered range from insurance to consultancy. Many countries have made commitments on financial, telecommunication and transport services. This is only a start. Further negotiations with the United States must follow on maritime and financial services. But in the meantime we have maintained the City of London in a position in which it will attract new international business.
Fourthly, with regard to so-called intellectual property, the law of the jungle still rules in too much of the world. Expensive research and development by British pharmaceutical companies can be pirated—in effect, stolen—by countries which offer no protection for patents. The same is true of Britain's record industry, which estimates that as much as half of its market in the developing world is stolen by pirates. For the first time, we now have an agreed set of international rules on which we can begin to rely in our fight to give these industries the markets which they have a right to expect.
Free trade increases the need for businesses to be internationally competitive, but in Britain, we have world-class companies ready for the challenge. This new GATT settlement removes the threat of collapse in the world trade system—a system on which economic growth has been based for nearly half a century. It extends the benefits of trading rules into vast new areas of business. It brings further welcome reductions in tariffs on British goods. it is a platform for recovery, growth and jobs in Britain, the European Community and the rest of the world. I commend it to the House.
Mr. John Smith (Monklands, East) I thank the Prime Minister for his statement. The Opposition also welcome the successful conclusion of the Uruguay round. It has been a long and torturous negotiation, but the result, although long overdue, is an important step forward for the world economy. Having had responsibility for the Tokyo round, I know how difficult and detailed such negotiations can be.
Preserving an open and fair trading system is vital for growth, jobs and prosperity not just in this country but round the world. The dangers of beggar-my-neighbour protectionism must always be resisted.
The GATT agreement is, however, only a start. Does the Prime Minister agree that, for Britain to succeed, we must put far more effort into promoting our export performance in manufacturing and services? Will the Government recognise that following the deal, it is now even more vital that we invest in people and in their skills to ensure that we succeed in international trade by competing on the quality of the goods that we produce and the skills of our work force rather than on low wages and a self-defeating spiral of low skills and poor job security?
On the details of the Geneva agreement, I welcome the new agreements on intellectual property, which tackle the piracy of counterfeit goods and provide security for British companies that invest in the research and development of new products.
On the failure to reach a settlement on trade in financial services, is it the case that access to trade in those services in the United States will remain restricted? That is clearly a matter of considerable concern to the financial services industry in Britain. What steps do the Government intend to take to push forward negotiations to include financial services fully within the GATT framework?
On the environment, will the new Multilateral Trade Organisation be given a remit to recognise the importance in the modern world of linking economic development with environmental protection?
What changes have been made to the Blair house agreement to accommodate French agricultural interests? Can the Prime Minister assure the House that the deal in no way prejudices the urgent need to continue to reform and control the costs of the common agricultural policy? In relation to the proposed MTO, which will supersede the GATT secretariat, are we satisfied with the procedures for trade disputes? Can we be assured that the MTO will cover concerns for environmental protection and fair employment standards?
Does the Prime Minister agree that steps should also be taken to strengthen the role of the International Labour Organisation, and in particular to encourage enforcement of its conventions on fair labour standards and especially to help stamp out child labour? Although we welcome the benefits to consumers at the prospect of reduced tariffs on textile imports, surely no one in this country wants to buy products made by children in sweatshops that have no concern for basic human rights.
Although GATT offers important trading benefits for the developing world as a whole, do the Government recognise the special difficulties for Africa, which will probably gain little from this specific agreement? For that reason, can I urge the Government and the international community to do much more to reduce and write off the outstanding debts of the poorest countries? While trade is vital to the expansion of the world economy, can more be done to encourage new lending, investment and official aid so that all regions in the world can participate in the economic growth that we hope will occur?
The Prime Minister Let me deal with the specific points that the right hon. and learned Member for Monklands, East (Mr. Smith) has raised.
On the question of promoting exports, I am delighted to tell the right hon. and learned Gentleman that, at present, our exports are running at record levels. As he will know, we have provided more extensive and cheaper export cover to assist our export promotion. We have reorganised most of our overseas postings to ensure that greater assistance is given to British business men abroad.
A large number of trade missions have been led by senior Ministers and others in the Government, most of whom have come back with substantial order books. At the moment, we are examining what further measures can be taken to provide an even better service for our exporters in the future. I have no doubt that, with the reduction of tariffs overseas and the increased scope in services and in manufacturing, there is a remarkable opportunity for British companies, at a time when they are competitive and in a position to take advantage of that opportunity. We shall certainly proceed with that.
I share with the right hon. and learned Gentleman the regret that we did not get further on financial services, because it was not possible for the various countries to agree on a final conclusion. Some progress has been made. The sector is now covered by trade rules and there have been a number of major gains for United Kingdom companies. For example, United Kingdom banks and insurance companies will be guaranteed the right to do business in Canada on the same basis as United States and Canadian firms, although it is disappointing that a fuller result for that sector has not been achieved. We have fought hard to ensure that openness in the European Community market will be maintained and we won that battle in Brussels.
There is no question that development will be at the expense of the environment, and I do not believe that anyone seriously imagines that that will be a problem.
There were detailed renegotiations on Blair house at the margins some time ago. There were no changes to the Blair house agreement as a result of the European Community meeting over the weekend and expenditure on the common agricultural policy will be restrained under the ceilings that were agreed at the Edinburgh summit, in terms of the financial perspective of the Community.
I do not have any quarrel with the outcome on the trade dispute mechanism. I do not have the same affection for the ILO as the right hon. and learned Gentleman—that is a difference between us, as I am sure that he knows—but I share his views about child labour—[Interruption.] I am about to tell the right hon. and learned Gentleman precisely what has been done about it, if he will listen. The activities of child labour lead to dumping. In the Community we have powerful mechanisms to act against dumping and they were improved so that action could be taken more speedily at the Foreign Affairs Council yesterday, which was attended by my right hon. Friend the Foreign Secretary.
As for Africa, it is the view of the African states that this GATT round is of assistance to them. They made that perfectly clear at the Commonwealth conference where a large number of African states, both rich and poor— [Interruption.] Hon. Members may be interested to know that those members of the Commonwealth wholly support the outcome of the GATT round. The area of greatest difficulty, as the hon. Member for Hampstead and Highgate (Ms Jackson), who is not in her place, has said, is sub-Saharan Africa. As I said to the hon. Lady, if it turns out that the sub-Saharan countries face particular difficulty, our long historical connection means that we shall certainly do what we can to provide further assistance, both bilaterally and in other ways.
To ensure that they get further assistance with their debt, Opposition Members may be aware of the Trinidad terms initiative that I launched in 1989-90, which is by far the most generous write-off of debt that the world has ever seen. We have written off a large amount of debt under than and we are still pressing some people in the Paris Club to do so. I believe that we shall be successful. It is the view of the countries that benefit under those Trinidad terms that it is by far the most comprehensive and most generous write-off of capital and revenue debt that has ever been proposed and carried through.
Mr. Paul Channon (Southend, West) Is my right hon. Friend aware that it is a long time since the start of the negotiations, when I spent a happy week in Punta del Este with Mr. Alan Clark, among others? He has not yet described it in his diaries. May I congratulate my right hon. Friend and his colleagues on the achievements of the British delegation? I especially congratulate Sir Leon Brittan, as my right hon. Friend rightly did, and we must not forget Mr. Arthur Dunkel, who was the director general of GATT for many years, and who was a tremendous support in the early days of this round.
In agreeing with my right hon. Friend about the importance of the conclusions to trade throughout the world and to prosperity, may I ask him to say a little more about what will happen to financial services? At the start of the negotiations, the American delegation was among the keenest that there should be freedom of trade in financial services. What has happened? Are there now proposals to proceed with the negotiations at a later date in some other forum? What will happen on financial services? It must be very much in the interests of Britain, as well as of many other delegations, that the process should not come to an end and that further steps should be taken.
The Prime Minister I agree with my right hon. Friend about that point. He is right in his supposition that there will be further negotiations on financial services; I hope that they can be carried forward speedily. It is unsatisfactory that we did not get further on financial services on this occasion. Having voiced that disappointment, I believe that one should not lose sight of the fact that this is by far the widest and most comprehensive world trade settlement, with large areas previously not within GATT now brought within it. It provides for a much more liberal world trading system and it is the biggest single advance in free trade for many years.
My right hon. Friend speaks with some knowledge of the matter. He was Minister for Trade and President of the Council of Ministers during the early stages of the GATT round. I join in his congratulations to Sir Leon Brittan and to Arthur Dunkel. They can both be proud of what they have achieved.
Mr. Paddy Ashdown (Yeovil) The Prime Minister is right to say that this is a good day for the world and a good day for Britain. However, is it not the case that, for Britain to take advantage of increasingly open world markets, we shall have to do much more to build a high-value-added, high-investment, high-skill economy than has been done so far under this Government?
The Prime Minister is right to welcome the extensive debt write-off and the development assistance. However, if third-world countries are to have access to the opportunities that the end of the Uruguay round has presented, more attention will have to be paid to that area.
Many people will have greatly welcomed the Prime Minister's comment to the leader of the Labour party that he recognised that development damaged the environment. Does he, therefore, agree that almost the first task of the new Multilateral Trade Organisation should be seriously to consider environmental factors and the means by which we can incorporate environmental costs into the world trading system?
The Prime Minister The fact that our exports are growing at a remarkable rate while overseas markets are very flat, especially in the European Community, suggests that to an extent greater than that for which the right hon. Gentleman gives them credit, our British exports are adding substantial value and are penetrating markets deeply as a result. One illustration is the German market. It is in substantial decline at the moment, yet British exports to Germany have increased; we have taken a much larger share of a much smaller market. That is substantially because of our competitiveness and because of the high-value-added nature of so many British exports.
There is sometimes a tendency—I do not attribute this to the right hon.gentleman—to think especially of manufacturing in the old sense of large, labour-intensive manufacturing industries. In the constituencies of almost every hon. Member, there are now small, medium and high technology businesses which are, in essence, manufacturing industries. They now export around the world, not least to such places as Japan, against very stiff competition.