EUROPEAN COUNCIL

(ROME MEETING)

The Prime Minister (Mr. James Callaghan)

I will, with permission, make a statement on the European Council meeting which took place in Rome on 25th and 26th March under my chairmanship. Rome was chosen for this meeting to mark the twentieth anniversary of the signature of the EEC Treaty.

The dominant theme of our talks was the need to find more effective ways to tackle the serious economic problems which confront the world, to prepare for the Downing Street summit in May, and to ensure that the Community itself responds positively to the challenge of unemployment and inflation.

As is the custom for the President of the Council, I met first with leaders of the European Trade Union Confederation. They expressed to me their concern about the problems of inflation and unemployment, which I reported to the Council. The Council agreed to hold a further tripartite conference in the first half of this year to bring together European Governments, employers and trade unions, and in the meantime agreed and published a statement on growth, inflation and unemployment. The Council will review progress over this whole area at its meeting in London in June.

The Council reviewed international financing problems and welcomed the efforts of Finance Ministers to develop a Community position for the IMF Interim Committee at the end of April. We asked the Commission and the European Investment Bank to focus particular attention on measures in three areas: first, to deal with specific employment problems, especially among youth and women; second, to encourage higher levels of investment; and third, to pull the economic performance of member States closer together. The Commission made clear in Rome that it would be ready to respond with positive ideas. [column 30]

An area in which all the Community countries face particularly acute difficulties is the steel industry. We need short-term measures to stabilise the market, and there is a clear requirement for structural reorganisation of the industry throughout the Community. The Commission made a number of proposals, which the European Council agreed should be given urgent attention, with a view to getting agreement on common action.

Turning to international affairs, we agreed on the need for a successful conclusion to the North-South dialogue, and moved forward an important step beyond the opening position on this subject previously agreed by Foreign Ministers on 8th March. We agreed that there should be commodity price stabilisation agreements, where appropriate, and a common fund. There will also be a study of export earnings stabilisation measures for developing countries and special action for the CIEC on aid.

We reviewed developments in our trade relations with Japan, and saw a need for further efforts to achieve the growth of trade on a balanced basis, which is the Community's aim. Trade with Japan raises questions of competition and of market access which are important factors in the Community's international trade relations as a whole.

We discussed our internal Community affairs, including the question of Community representation at the Downing Street summit. We agreed that the President of the Council and the President of the Commission should represent the Community at sessions which discuss questions which fall within the competence of the Community. I shall circulate texts of the formal statements in the Official Report.

Finally, I come to one point which has attracted considerable interest in this House. The Commission confirmed that it would make a full study and report on the idea of a European Foundation. There was general agreement with the suggestion of the Belgian and Italian Prime Ministers that it would be appropriate to link this proposal with the twentieth anniversary of the Treaty which we had celebrated in Rome.

Mrs. Thatcher

May I put three questions to James Callaghanthe Prime Minister arising out of his statement? First, will the right [column 31]hon. Gentleman take it that we very much welcome the result that Roy Jenkinsthe President of the Commission should represent the Community at the economic summit which is shortly to take place at Downing Street? Had this result not been achieved, it would undoubtedly have given rise to great concern among some of our European partners.

Second—this is a composite point—is the right hon. Gentleman aware that it is rather difficult to deduce from the statement precisely what is its practical effect? For example, in the section on economic measures he referred to measures “to pull the economic performance of member States closer together”

and

“to deal with specific employment problems” .

Does the right hon. Gentleman have any practical measures in mind, or are these merely objectives, and further conferences are to be called upon them? It looks to me as though this is a statement of objectives but no practical measures emerge. Similarly with the commodity price stabilisation agreements, it is easier to talk about objectives than it is to put practical schemes into effect. Precisely which key commodities will they start on?

Third, although the Prime Minister may say that this is not precisely within the terms of the EEC, were there any discussions on the steps proposed by Mr. Vance in Moscow about the revision of the SALT agreements? What he is proposing will, clearly, have an effect on our security. I am aware that it is outside the terms of the European Council itself is not within the terms of the Treaty.

The Prime Minister

On the question of the attendance of the President of the Commission, there was a feeling among the smaller members of the Community that the President of the Commission should be there when issues which directly concerned the Commission were discussed, and that was generally acceptable to all. There will obviously be items and matters that will be discussed at the Downing Street summit for which the Commission will not be present because there is no Community competence for them. [column 32]

As regards the right hon. Lady's general point, these meetings, which last for 24 hours or thereabouts, are not designed to achieve detailed negotiations. They are designed more to give political impetus, and they did so in one or two areas on this last occasion. For example, the idea of a common fund is something that had not been agreed, but we were able to give it a political thrust, and the Foreign Ministers will now carry that on.

I think that applies also to the right hon. Lady's questions about such matters as price stabilisation in relation to key commodities. Heads of Government and Heads of State do not go into that kind of detail. It is for the Foreign Ministers at the Council of Foreign Ministers to work out, commodity by commodity, the appropriate items on which there should be price stabilisation agreements or export stabilisation agreements.

In that connection, the Foreign Ministers will have to go into a lot of detail—for example, in relation to the fact that it is not intended that fully developed countries which possess raw materials should join in this particular project, which is basically for the benefit of developing countries. They will also have to look at the question of what substitutes for existing raw materials might come into play if stabilisation agreements take effect. These questions are much more technical, I think, than the Heads of Government would be expected to get down to.

Finally, on the question of the SALT agreements, as the right hon. Lady says, these matters are not within the competence of the Community. Ireland is not a member of NATO, so we do not discuss these matters in the sessions when we meet.

Mr. Thorpe

The Prime Minister will be aware that many of us regard this as progress having been made on many fronts. We particularly welcome the resolution of the question of the representation of the Community by the President of the Commission. It appears that credit for this should be shared between the President of France, who was prepared to move closer to the views of his eight partners, and the right hon. Gentleman himself as Chairman. He will be aware also that we welcome the [column 33]agreement to study the idea of a European Foundation, which I think the right hon. and learned Member for Hexham (Mr. Rippon) pioneered on the Order Paper.

I wish to ask the right hon. Gentleman three questions. First, is it the hope that there will be a common front by the Nine—[Interruption.] Some of us actually believe in Europe, and always have done.

Mr. Fairbairn

The Labour Party never has.

Mr. Thorpe

Remembering how Liberal votes saved the Tory legislation on the Common Market, may I ask whether it is the hope of the Nine that there will be a common front on stabilisation by the time of the North-South dialogue? Can we try to associate our American allies with any particular agreement in that regard?

Secondly, what is the time scale of the tripartite discussions? Will they take place by the summer? For how long will they be likely to go on? Will there be rapid decisions?

Finally, was there any discussion on the common agricultural policy?

The Prime Minister

I promise the right hon. Gentleman that the Conservatives will get over it, in time; they will learn to live with it. As regards the representation of the Community, I note what the right hon. Gentleman says, and I agree with him that this was a conference in which there was a desire to reach accommodation on a number of issues. That is why we were able to make progress.

As regards the European Foundation, I drew the attention of my colleagues to the fact that the motion on the Order Paper had been signed by more than half the total of right hon. and hon. Members of the House. I think that it was this, in part, which led the Commission to indicate that it would make a study of it and bring forward its proposals in due course.

As regards the CIEC, I think that it is now fair to say that there ought to be—I must choose my words carefully—a common front by the Nine on these matters affecting a common fund.

On the question of stabilisation, what we undertook there was to study the [column 34]prospect. There has been no agreement on this, although I think that people will look at it with a view to reaching agreement.

As regards the United States, from my talks with President Carter I assume that now that the Community has, as a whole, taken up a rather more forward position, it will be possible for us to get agreement with the United States, and that will help when the Eight meet the 19 countries later on.

As regards the CAP, there was no discussion on that because the Agriculture Ministers were meeting in Brussels, I believe, at that time.

The tripartite meeting between Governments, trade unions and employers will take place during the first half of this year.

Mr. English

Did my right hon. Friend give his colleagues the impression that there would be direct elections in May 1978, or did he ask them to consider any contingency plan for such elections being delayed?

The Prime Minister

We did not discuss it.

Mr. Donald Stewart

In view of the failure of the Community to live up to the promises made at the time of accession, will the Prime Minister give an undertaking that, where the statement refers to a structural reorganisation of the steel industry, any such reorganisation will not adversely affect the steel industry in Scotland with redundancies as it has done in the past?

The Prime Minister

My interests, although they include Scotland, are wider than Scotland, and I should like to extend what the right hon. Gentleman says to the United Kingdom. We have, of course, embarked on our structural reorganisation, and, because we have one nationalised industry here, it has been possible for us to look at it in a coherent way. Other industries in other countries where market forces more directly apply are perhaps not as far advanced in their restructuring as we are. It is in that direction that I think the Commission will be looking in order to see how far we can get one common pattern for Europe as a whole. Certainly, there is nothing in the Commission's proposals which would endanger [column 35]the British steel industry. Indeed, they may make it stronger.

Mr. Spearing

The Prime Minister mentioned a statement of intent about the common fund. He also mentioned specific funds for specific commodities. Does he not agree that those two ideas are distinct from the stabilisation of export revenues, which he also mentioned? Can he, therefore, confirm that the intent of the EEC is in the first two concepts rather than only in the latter?

The Prime Minister

Yes, Sir. I confirm that it is intended to cover all the three points that my hon. Friend mentions. I did not say—I want to draw this to the notice of my hon. Friend and the House— “the” common fund. I said “a” common fund. In other words, the agreement is not to any particular proposals which have been put forward and which have been widely espoused but to the concept of a common fund, and proposals will be put forward by the Nine of the basis of a fund as we see it.

The question of stabilisation is separate, as my hon. Friend correctly says, and we have undertaken to examine that, but not to the exclusion of a common fund or the other matters.

Mr. Powell

Is it not clear—not least from some of the subjects discussed at this meeting—that the Common Market is becoming less and less concerned with the promotion and widening of free trade and more and more with the creation and imposition of arbitrary and artificial price systems?

The Prime Minister

Yes, Sir, that is not an unfair comment, given the growth of world recession and unemployment. Therefore, when Heads of Government meet, they are concerned to talk about the impact of market forces upon the social health of their own countries. I have noticed a change in the nature of the discussions during the three years that I have been associated with the Community directly negotiating with others.

Mr. Rippon

May I express appreciation of the progress made in Rome towards the establishment of a European Foundation, to be linked with the celebration of the twentieth anniversary of the signing of the Treaty of Rome, and [column 36]express the hope that it will be a notable contribution towards fulfilling the objectives set out in Mr. Tindemans' report and the creation of a citizens' Europe?

The Prime Minister

The right hon. and learned Gentleman was, I believe, the original sponsor of the motion which I drew to the attention of my colleagues as Heads of Government. Certainly, Mr. Tindemans is owed a debt of gratitude for his part in putting it forward. I hope that we can get proposals from the Commission by the end of the year, and I shall certainly see that the right hon. and learned Gentleman, in common with the rest of the House, is kept fully informed of progress.

Mr. Molloy

Notwithstanding the defence element in the right hon. Lady's question, does not the Prime Minister agree that, if there is not early response to his plea for sensible co-operation among all the Western nations to prevent a recurrence of the blight imposed on ordinary people by inflation and unemployment, that could pose as great a threat as anything to the stability of Western civilisation?

The Prime Minister

I certainly believe that the continuance of long periods of unemployment on a wide scale could cause considerable social tensions in a number of Community countries, and, indeed, in countries outside the Community. That is why we have asked that special attention should be paid not only to the problems of growth as a whole, so that we can have greater growth in our economies, but also to particular problems, such as unemployment among young people and women, and the fact that in a number of countries, including our own, a large number of people will be coming on to the labour market during the next three or four years. About 500,000 extra people will be coming on to the labour market in this country alone.

Mr. Blaker

Is the Prime Minister aware that I welcome his statement as President that the Community will call on other countries—for example, Eastern Europe and the oil-producing countries—to make a greater contribution to development? Bearing in mind that at present the contribution to overseas aid of the Soviet Union represents only 0.03 [column 37]per cent. of its GNP, this is long overdue, at least in its case.

Has the Prime Minister or the Community any suggestion as to how this greater contribution might be made by those countries? Does the Community envisage, for example, that those countries might take part in the common fund?

The Prime Minister

I am obliged to the hon. Member. When he asks what the countries of Eastern Europe can do to increase the volume of their aid, I give the simple answer that they could help if they were not to supply so many guns but were to supply a little more of the fiscal needs of these countries. Indeed, a great deal of their aid at present is made up of armaments. It was this that was in the minds of the Heads of Government when they drew up their view of this matter.

In considering how such countries might be associated with these matters, we were not assuming that they would want to join in a common fund. We want to get this moving and not just use it as a propaganda exercise, but we do want Eastern Europe to understand that we expect it to contribute to the North-South dialogue directly.

Mr. Ioan Evans

Can my right hon. Friend say what further course of action is proposed to deal with the high rate of unemployment in the Common Market and to get the EEC out of the present economic recession?

The Prime Minister

I cannot do so in a sentence, for it is too complicated a matter. We would like to see faster growth in the economies of those countries which are in balance of payments surplus, and specific measures taken in relation to special groups. For example, if we could, as a European Community, agree that all young people should have either further training or further education to avoid their going into the dole queues, that in itself would be a considerable advantage.

Several Hon. Members

rose——

Mr. Speaker

Order. I hope to call the six hon. Members who have risen, but I can do so only if their questions are brief.

Mr. John Ellis

My right hon. Friend mentioned steel. Is he aware that certain [column 38]negotiations that are outstanding—for example, the coking coal agreement—will result in an imbalance or a detriment for this country? Will this be the subject of the discussions my right hon. Friend will be having about steel? If not, can he identify the areas with which those discussions will deal?

The Prime Minister

Yes, Sir. There will be discussions of this sort, and my right hon. Friend the Secretary of State for Energy will shortly be leaving for Brussels to begin them, especially on the question of coking coal aids.

Mr. Warren

Will the Prime Minister say whether the Heads of Government, in their consideration of the problems of Japanese penetration of the Common Market, discussed the need to balance the necessity for more employment for young people and the opportunity for accepting Japanese investment?

The Prime Minister

We did not actually put those considerations in juxta-position. We had in mind that there had been certain easements on the part of the Japanese—for example, in relation to car testing, tobacco distribution and pharmaceutical testing, and in the fact that they have increased the export price of their ships by 5 per cent. These are all moves in the right direction, but probably much more needs to be done if we are to get a balanced trade between the Community and Japan.

Mr. Spriggs

Is my right hon. Friend aware that hon. Members on both sides are pleased that he and his counterparts in Europe have discussed the employment of young people? But will he give the House an undertaking that he will not forget the age group 45 to 55, hundreds of thousands of whom are an asset to this country if used correctly? When discussions take place on the next occasion, will my right hon. Friend please discuss the employment of men and women in the 45 to 55 age group?

The Prime Minister

My hon. Friend is well known for his persistence in this matter, and I certainly shall not lose sight of it. All the proposals we made in this area, such as on youth unemployment, are subsidiary to the need for a greater measure of growth in our economies as a whole, and that is the [column 39]best thing that can help all the groups concerned.

Mr. Marten

Is the Prime Minister aware that this is the third or fourth European Council meeting which has shown great distress at all the unemployment, but simply nothing appears to have been done? Is there any chance of anything concrete being done after this meeting? For example, did the German Chancellor agree to some reflation to help the unemployment situation?

The Prime Minister

We expressed it in the form of a general formula. We did not put specific pressure on individual member States to reflate beyond the point at which inflation would take over. It is for them to judge this.

There is a difference of view as to how far certain countries can go, and that difference is unresolved. My own view is that we need a much faster rate of growth in the world. I think that the United States economy will grow faster this year, according to the latest forecast, than was expected a few months ago. That will be of help. I should like to see some other countries doing the same.

Mr. Stanbrook

Will the Prime Minister be wary of proposals to enhance the status of the President of the Commission, who is, after all, only the principal bureaucrat of the Community—its servant, and by no means its president? Is it not important to distinguish carefully and publicly between democratically elected leaders of the member countries and a mere official?

The Prime Minister

The Commission, under the treaties, has a special and legal place in the affairs of the Community, which goes beyond that of a civil service that advises political leaders. That place should be met and fulfilled. The President of the Community and the President of the Commission have their respective rôles. I shall attend as President of the Community as well as British Prime Minister, assuming that I am still here on 7th and 8th May.

Mr. Tim Renton

Does the Prime Minister agree that the West German economy is by far the most successful in the Community at the moment? During the summit meetings, has any of [column 40]Chancellor Schmidt 's robust support for a free enterprise system brushed off on the Prime Minister?

The Prime Minister

I find that we influence each other considerably. Both the free market system and the mixed economy, of which the hon. Gentleman is a fervent supporter—at least, I take it that he is a fervent supporter, as that is his party's doctrine—have their place. As the right hon. Member for Down, South (Mr. Powell), said, in the present recession the working of the free market economy is beginning to take second place to the needs that arise when there is large-scale unemployment which does not appear to respond to it.

Following is the information—

Growth, Inflation and Employment

The European Council considered the prospects for economic development within the Community and agreed that, in order to promote sustained economic recovery and mitigate the severe unemployment being experienced in Member countries, without risking the renewal of inflation, there is a need for intensified co-operation at the Community as well as the international level.

The European Council recognised that such action must in large part be undertaken on a world scale in which the Community has an important role to play. In this connection they noted first that Community Finance Ministers have reached a large measure of agreement on the views they will put forward on international financing problems at the meeting of the IMF Interim Committee in Washington at the end of April, and secondly that ways of encouraging a stronger, but still balanced, growth of world economic activity will be a major theme of the London Summit in early May.

The European Council further agreed in particular to seek action at the Community level in three directions: firstly to promote measures to help resolve specific labour market problems, especially in improving training and employment opportunities for young people and women: secondly to encourage higher levels of investment in the Member States: and thirdly to halt divergence and promote convergence in their economic performance. To this end, the European Council invited on the one hand the Commission, in particular by the better use of Community instruments, and on the other hand the Board of Governors of the European Investment Bank to seek ways of improving the effectiveness of their activities.

The European Council emphasised the importance of co-operation between the social partners in these matters and have agreed to the holding of a further tripartite conference in the first half of this year, at a date to be agreed, at which progress and possibilities could be reviewed. The European Council [column 41]agreed to reconsider progress on this range of problems at its own projected meeting in June.

The European Council agreed to conduct at its meeting at the end of the year an examination of the results obtained in the fields of growth, employment and the fight against inflation and to assess the Community's prospects of making progress towards Economic and Monetary Union.

Presidency Statement on the

NORTH/SOUTH DIALOGUE

We have agreed the basis of a common position.

We agreed that there should be commodity price stabilisation agreements where appropriate and that there should be a Common Fund. There will also be a study of export earnings stabilisation measures for developing countries and of special action for the CIEC on aid.

This will now be worked up in detail at the Council on 5th April and will be brought forward in the preparations for the CIEC Ministerial Meeting in Paris, in which the Community will co-ordinate its position with the other industrialised countries in the Group of Eight. This will be followed by detailed negotiations at the UNCTAD Conference.

The Community will call on other countries, for instance in Eastern Europe and oil producing countries, to make an adequate contribution in the development field.

Community Participation in the Downing Street Summit

The President of the Council and the President of the Commission will be invited to take part in those Sessions of the Downing Street Summit at which items which are within the competence of the Community are discussed. Examples of such items are negotiations about international trade and the North/South Dialogue.

Relations with Japan

The European Council, recalling its statement of 30th November 1976:

reaffirms the importance it attaches to maintaining good relations between the Community and Japan;

notes that some progress has been made over the past four months towards resolving certain specific trade problems;

observes however that not all the problems have yet been solved and considers that efforts have to be continued particularly with [column 42]a view to the sustained expansion of Community exports to Japan;

invites accordingly the responsible Community Institutions to continue the intensive discussions with the Japanese authorities with the aim of resolving outstanding difficulties as rapidly as possible.

The Situation in the Steel Sector

The European Council has considered the situation in the steel sector, on the basis of a communication from the Commission. This sector is experiencing a depression more serious than at any time in the history of the Coal and Steel Community. The Heads of State and Heads of Government have taken this opportunity to reaffirm their resolve to restore to the steel industry through the appropriate measures, the viability and competitiveness essential to the maintenance of a truly European industrial potential.

The European Council expresses its appreciation of the efforts being undertaken by the Commission to put forward at an early date practical proposals and initiatives for short-term remedial measures to stabilise the market, for a longer-term structural reorganisation of the European steel industry and for measures in the social field to assist workers adversely affected by such reorganisation.

The European Council expresses the wish that the Council of Ministers gives its urgent attention to the Commission's proposals and initiatives on these issues.