Ottawa Summit Meeting
The Prime Minister (Mrs. Margaret Thatcher)
With permission, Mr. Speaker, I will make a statement about the Ottawa economic summit conference held on 20 and 21 July, which I attended with my noble Friend Lord Carringtonthe Foreign and Commonwealth Secretary and my right hon. and learned Friend Sir Geoffrey Howethe Chancellor of the Exchequer.
A declaration was issued on 21 July at the end of the conference. A statement on political questions, including the Middle East, East-West relations and Afghanistan, was made to the press by the Prime Minister of Canada on the evening of 20 July. A statement was released on hijacking and terrorism. Copies of all three documents have been placed in the Library of the House.
Five of the eight participants were attending an economic summit conference for the first time. It thus provided a particularly useful opportunity for an exchange of views on a wide range of issues. Unlike the two preceding conferences, this meeting was not dominated by a single subject. The participants were able, therefore, to cover many of the major problems, political as well as economic, facing the Western world.
The primary challenge we addressed in our discussions was the need to revitalise the economies of the industrial democracies, to meet the needs of our own people and strengthen world prosperity. We agreed that there was a prospect of moderate economic growth in the coming year, but that at present it promised little early relief from unemployment. We noted that interest rates had reached record levels in many countries and, if long sustained at these levels, would threaten productive investment. President Reagan stressed that the programme of public spending reductions at present before Congress could be expected to reduce interest rates in the United States once it took effect.
The Heads of State and of Government all agreed, in the words of the declaration, that
“The fight to bring down inflation and reduce unemployment must be our highest priority and that these linked problems must be tackled at the same time. We must continue to reduce inflation if we are to secure the higher investment and sustainable growth on which the durable recovery of employment depends. The balanced use of a range of policy instruments is required. We must involve our peoples in a greater appreciation of the need for change: change in expectations about growth and earnings, change in management and labour relations and practices, change in the pattern of industry, change in the direction and scale of investment, and change in energy use and supply.”
We recognised the need in most countries urgently to reduce public borrowing; where our circumstances permit or we are able to make changes within the limits of our budgets, we will increase support for productive investment and innovation. All accepted the role of the market in their economies. We agreed not to let transitional measures that may be needed to ease change become permanent forms of protection or subsidy. We saw low and stable monetary growth as essential to reducing inflation.
We also discussed relations with developing countries. Three points were made. First, we share with the developing countries many of the problems of the world economy: the need to develop energy resources, to encourage investment, to fight inflation and unemployment and to expand trade. Second, we welcome discussion with developing countries in whatever ways or groups may be useful. We all agreed to participate in preparations for [column 496]a process of global negotiations provided that we saw the possibility of real progress. Third, we need to direct the major portion of our aid to the poorer countries. The United Kingdom already does so.
On trade, we reaffirmed our commitment to an open multilateral trade system and our determination to resist protectionist pressures. We endorsed the proposal for a ministerial meeting of the GATT next year. We agreed to keep under close review the role played by the industrialised countries in the smooth functioning of the world trading system. This will provide us with the opportunity to pursue the particular problems that arise, for the North American as well as for the European countries, in trade with Japan.
As to political issues, we met in the shadow of the further outbreak of fierce fighting in the Middle East, where once again the unfortunate people of the Lebanon are bearing the brunt of a conflict that is not of their seeking. Whatever any of us may have thought about the causes, we were all agreed on the need for an urgent ceasefire in the Lebanon, for an end to the loss of innocent civilian life there, and above all for a solution to the conflict between Arab and Israeli from which the violence flows. We shall continue to use all our influence, both our own and as holders of the Presidency of the European Community, to these ends.
Finally, we discussed relations between East and West and the concern that we all felt about the Soviet military threat to Western interests. We were much heartened by the strength of common purpose that was apparent. Without exception, we agreed—and agreed with real determination—on the need to maintain a strong defence capability and to insist on the need for military balance. Hand in hand with that went our readiness to negotiate arms control agreements that would ensure genuine security at a lower level of weapons and a smaller expenditure of resources.
So in our discussion we linked the two elements necessary to the preservation of the free world and of the free market economy which sustains it: on the one hand, defence and the maintenance of peace, and, on the other, the health and soundness of the world economy. Altogether it was a most important and worthwhile meeting.
Mr. Michael Foot (Ebbw Vale)
I thank the right hon. Lady for her statement, although she seems to have achieved the astonishing feat of saying even less in it than there was in the communiqué. That took some doing. We have already had an exchange about the arms negotiations, and I am sorry that the right hon. Lady would not tell us the Government's attitude on the matter, nor whether she and her Government are trying to assist in speeding up those negotiations, as the German Chancellor and others are seeking to do.
The platitudes about foreign aid and the meeting in Mexico were even more pious than usual—if that is not an infringement of the word “pious” . Does the statement mean that the right hon. Lady will reverse the decisions taken by the Government on foreign aid hitherto? Will there be a statement on that, and on a real policy for the meeting in Mexico, during the debate tomorrow?
The first and most disappointing part of the right hon. Lady's statement was about the economic discussions. Was it really impossible for her to join those trying to do something about the high American interest rates? Must [column 497]she sit back and say nothing on that subject, or simply say “ditto” to President Reagan, when the German Chancellor, the French President and others are urgently seeking to do something about the problem?
Mr. Robert Atkins (Preston, North)
How does the right hon. Gentleman know my right hon. Friend said nothing?
Mr. Foot
I am asking the right hon. Lady whether she joined the German Chancellor and the French President in pressing for a reduction in American interest rates. Everyone in this country has an interest in that. As President Mitterrand has consistently emphasised, if those rates continue at their present level, the crisis here will be intensified.
Will the right hon. Lady acknowledge that there is much truth in what was said in The Times this morning on the subject, that neither in the communiqué nor in the press conference did the leaders do more than wring their hands? It was also suggested that, instead of a proper international plan, we should have crisis management, which means that there would be more and more crises. If that is all that the right hon. Lady contributed to the economic side of the summit, why did she not stay at home and read Lord Lever 's articles so that she might have been better instructed on the subject?
The Prime Minister
I am sorry that the right hon. Gentleman is so critical of the other six Heads of Government who were present at Ottawa, including the Chancellor of the Republic of Germany and the President of France, both of whom contributed to and signed the communiqué. Of course, their policies are very different from those of the right hon. Gentleman, and he is totally out of step with the other Socialist and Social Democratic countries of Europe.
With regard to arms negotiations, I have already given the right hon. Gentleman the answer. We all wish to negotiate from a position of strength and we agree that arms negotiations will start probably in November this year, when we are properly ready for them to start from a position of strength. I know that the right hon. Gentleman has given up all position on this matter and will go to Moscow—I understand that he will be going later—in the words of one of his predecessors,
“naked into the conference chamber.”
As for the question of the developing countries, the agenda is to be discussed by a meeting of Foreign Secretaries at the beginning of August in Mexico.
American interest rates were high for a considerable time before President Reagan came into office. His own policies have not yet got through Congress. When they have got through, it is expected that interest rates will be reduced.
Mr. Foot
Did the right hon. Lady agree or disagree with President Mitterrand's representations about the high American interest rates?
The Prime Minister
The right hon. Gentleman did not hear what President Mitterrand said. None of us likes high interest rates, but the American President was not criticised nearly as much as the right hon. Gentleman suggests, either by other Heads of Government or by the President of France, who recognised that when fears of inflation remain strong interest rates are likely to remain high.
[column 498]Mr. David Steel (Roxburgh, Selkirk and Peebles)
Is not the Prime Minister's phraseology about defence and disarmament strange? She talks about her determination to maintain our defences and only readiness to engage in disarmament talks. Should it not be the other way round—readiness to maintain our defences but real determination to press ahead with disarmament talks?
The Prime Minister
If I may say so, that is a very facile question. We on this side are not merely ready but determined to maintain our defences. We are ready and, if the right hon. Gentleman wishes, determined to enter into arms negotiations with NATO, taking the whole of NATO with us, we believe in about November.
Mr. Julian Amery (Brighton, Pavilion)
Does my right hon. Friend agree that, when the United States is making such an enormous effort to strengthen the defences of the free world, it hardly lies in the mouth of the Opposition to criticise its present economic policies? Will she point out to the Leader of the Opposition that the declarations from the national executive committee of the Labour Party on Europe, on defence and, indeed, on Ulster threaten a sinister divide—something we have not seen for many years—in the unity of this country?
The Prime Minister
I agree wholly with my right hon. Friend. Those who are not prepared to defend this country and, I believe, have an independent nuclear deterrent as a vital part of our defence are prepared to put our way of life at risk.
Several Hon. Members
rose——
Mr. Speaker
Order. I propose to allow these questions to run until 4 o'clock and then to move on to the Business Statement.
Mr. Jack Ashley (Stoke-on-Trent, South)
Did any of the other participants comment, politely or otherwise, on the British Government's deplorable record on aid to developing countries?
The Prime Minister
It is not a deplorable record—far from it. Indeed, it is higher than that of some of those who criticise us. Certainly the record of France and Germany is good. If the right hon. Gentleman adds to the total the private flows of capital from this country, he will find that our record is second to none. We have a very good record of giving most of our aid to the poorest countries, which, I am afraid, is not a fact with many other countries.
Mr. Dennis Walters (Westbury)
Bearing in mind not only the savagery of the Israeli bombing of Beirut but the grave threat to peace which that has brought with it and the danger of the continuation of Mr. Begin 's warmongering, did my right hon. Friend and her European colleagues agree to try to persuade President Reagan permantly to withhold the supply of offensive weapons, such as the F16s, to Israel?
The Prime Minister
No. President Reagan had already announced that he would defer delivery of the aircraft which were otherwise due. He pointed out that Mr. Habib was in the Middle East trying to secure a ceasefire. There has, of course, been a meeting of the Security Council calling for a ceasefire and a report within 48 hours. My right hon. and noble Friend Lord Carringtonthe Foreign Secretary, both in his capacity as our Foreign Secretary [column 499]and as President of the European Community, has called in the Israeli and Arab ambassadors to make our views known to them.
Mr. John Roper (Farnworth)
Paragraphs 19 and 20 of the communiqué refer to the related questions of food production being increased in the developing countries and world population growth. Will the Prime Minister ensure that her Administration's policies reflect those priorities in future?
The Prime Minister
A good deal of our aid goes to helping the developing countries to increase their food production. For example, we have given £100 million in aid to Sri Lanka to build a large dam which will provide not only electricity but irrigation. That will make many lands fertile which would otherwise have remained barren.
Mr. Peter Tapsell (Horncastle)
Is it not a fact that, despite these regular economic summits at which my right hon. Friend always plays such a constructive role, in practice the degree of co-operation on economic affairs between the countries concerned is much less than it used to be between 1946 and 1971? Although meetings of Heads of State are clearly valuable, would it not be a good idea to try to underpin them with new talks at a lower level among specialists, leading to a new Bretton Woods conference?
The Prime Minister
I think that we shall get stability of exchange rates only when there are much more stable economies and political factors in the Middle East. From time to time, a new Bretton Woods is mentioned. However, under present political conditions in the world, I do not envisage its happening. I read Lord Lever 's articles in The Times, and he certainly seems to be straining after that. But when I reach a part where he speaks about certain things becoming book entries, that does not give me confidence about the underlying stability of his proposals.
Mr. David Stoddart (Swindon)
Is the right hon. Lady aware that her answers about aid to underdeveloped countries are not at all satisfactory? Is she further aware that we should take her far more seriously if she would announce to the House now or in the near future that she will cancel this year's 15 per cent. cut in aid and the 15 per cent. cut in aid that will be made next year?
The Prime Minister
No. One is not able to do that. It is easy to plead for more expenditure. Our country already has a great deal of expenditure and one is just not able to put up the amount of Government aid to those countries.
We have an excellent record on private flows. One thing pointed out in the communiqué was that much more capital would go to the developing countries if they were able to provide a code of practice that would safeguard the investments. That would probably be one of the best ways of helping them.
Having an open economy, we also help very much in flows of trade, even though that sometimes gives us problems at home.
Mr. Iain Sproat (Aberdeen, South)
Can my right hon. Friend tell the House more about what was discussed at the summit about Western levels of trade with the Soviet Union and about the transfer by the West of strategic [column 500]technology to the Soviet Union which so often appears to allow the Soviet Union to increase its effective hostility against the West?
The Prime Minister
We discussed those matters and put a brief paragraph in the communiqué stating:
“We will undertake to consult to improve the present system of controls on trade in strategic goods and related technology with the USSR.”
We are concerned that sometimes technology may be sold to the USSR which enables the Russians to produce a level of weaponry which we then have to counter, and we should not have had to bear that expenditure if the original technology had not been sold to them in the first place.
Mr. David Winnick (Walsall, North)
Is it not humiliating for the Prime Minister that, under her leadership, the curse of mass unemployment has returned in the past two years? Moreover, Britain has experienced the worst street disorders and disturbances for 60 or 70 years.
The Prime Minister
The disorders and disturbances were not raised with me in any way with regard to the level of unemployment. As we pointed out, the countries that have the least problems with unemployment and inflation are the most efficient. Japan has absolutely no problems with inflation or unemployment. The Japanese Prime Minister pointed out that Japan has a self-disciplined society and that it is a matter of pride to the work force that the products are good and are delivered on time. He also pointed out that the Japanese have a very different system of labour relations and that they do not go on strike.
Mr. David Crouch (Canterbury)
Has my right hon. Friend seen reports that one of the main objectives of President Reagan in Ottawa was to retain for the United States the leadership of the West? Is she aware that many people in this country today feel that that leadership will be greatly impaired if the United States does not take positive action to stop the Israeli Prime Minister waging all-out war on Palestinian refugees?
The Prime Minister
Doubtless my hon. Friend will have heard the statement made by Mr. Weinberger this morning. Indeed, I think that he is conscious of the problems in the Middle East—as well all are—and of trying to bring about a ceasefire. Most of us agree that the Israeli raid on Beirut was wholly disproportionate to any made on Israel.
With regard to President Reagan and the leadership of the Western world, ultimately the United States is the guarantor of the freedom of Europe. We should make it clear that we understand and are grateful to the United States for that.
Mr. John Browne (Winchester)
Does my right hon. Friend agree that, with an annual oil payment to OPEC of about $170,000 million a year, the Western economies are suffering not from a normal cyclical recession from which mere reflation will extract them but from a fundamental, structural, economic collapse which demands a much deeper and more thorough examination and rebuilding of economies, including a major appraisal of the acceptance of new technology; the sources, uses and conservation of energy; and the whole philosophy of subjects such as financial indexation by Governments?
The Prime Minister
There has been a considerable change in the pattern of world trade, which has affected [column 501]all the economies of Europe, in that the newly developing countries are now producing efficiently and well many products that we used to regard as our own preserves. They are taking an advanced view with regard to the latest technologies. They are investing a much bigger proportion of their income than we are. For example, I think that in Japan about one-third of the profits—they are profits; they are not all taken out in wages—are ploughed back into the latest technologies. I agree with my hon. Friend that that means an enormous structural change and that we have been rather slow to adapt to it.
There are other financial problems. We have gone on increasing public expenditure, assuming that we should get growth, but that growth has not come about. That, too, has caused many financial problems. Ultimately, unless we diminish public expenditure in relation to output, there will not be enough money for private industry to invest to become competitive again.
Mr. Kevin McNamara (Kingston upon Hull, Central)
The right hon. Lady put her signature to a declaration that said:
“We are committed to maintaining substantial and, in many cases, growing levels of official development assistance” .
Are we in fact to increase our development assistance officially, and, if so, by how much? Or does the right hon. Lady's signature not mean anything?
The Prime Minister
But the communiqué did not commit us all to increased Government aid. I cannot promise increased Government aid this year. I hope that our excellent flows of private aid will continue and that they will increase from other countries, but that will happen only if the developing countries adopt a code of practice to safeguard those investments.
Mr. Stanley Newens (Harlow)
Does the Prime Minister agree that higher interest rates are likely to push the world further into economic depression and that, if the present high levels in the United States continue, other countries will be forced to raise their interest rates? In these circumstances, will she make clear what stand she took on this issue, or does she approve of what can only be described as beggar-my-neighbour interest rate policies?
The Prime Minister
No, I most certainly do not approve of such policies. I dislike high interest rates, and I am one of the first to recognise that high interest rates in the United States can have an impact on European economies. I point out to the hon. Gentleman that high interest rates existed in the United States for quite a time before the present Administration took office. They are trying to present policies to reduce public expenditure, which it is hoped will reduce the deficit and thus reduce inflationary pressures. Therefore, it is expected that when those policies are through—they are not yet through; they are before Congress—the high interest rates will come down.
Viscount Cranborne (Dorset, South)
Did my right hon. Friend and her colleagues discuss in any detail the impact of the volatility of exchange rates on the world economy? Is not that volatility to a larger extent a cause of instability, both economic and political, as well as an outward and visible sign of it?
The Prime Minister
I do not think that any of us likes the volatility of exchange rates. As a result of two world [column 502]recessions caused by sharp oil price increases, the vast sums of money that can now move round the world are far greater than any reserves that we may have to allow us to intervene to hold the exchange rate. If we were to try to intervene with our modest reserves, we should throw them all into the hands of the speculators, and nothing would be done to achieve the stability that we all desire. That is a fact of life that we have to recognise.
Mr. T. W. Urwin (Houghton-le-Spring)
During the discussions on the separate and disparate economies of democratic countries, was any reference made to the economy of a former European democracy, Turkey? Did the member States at the summit conference accept a collective responsibility to impress upon the military junta now operating in Turkey the importance of an early return to plural democracy?
The Prime Minister
On this occasion we did not discuss Turkey. On previous occasions we have got together to give aid to Turkey.
Mr. Michael Hamilton (Salisbury)
Did my right hon. Friend have an opportunity for private discussions with the Canadian Prime Minister, and did three-line Whips figure in those discussions?
The Prime Minister
I did not have a private discussion with the Canadian Prime Minister on the subject that I think my hon. Friend is raising.
Mr. Ernie Ross (Dundee, West)
In relation to the political issues discussed by the Heads of Government in Ottawa, has the Prime Minister had time today to see the statement made by the ex-Prime Minister of Israel, Mr. Rabin, in which he makes it clear that only political solutions exist? Will she now take the opportunity to instruct her right hon. and noble Friend the Foreign Secretary that the only initiative possible is an independent European initiative free from the Camp David accords?
The Prime Minister
We have always made it clear that the European initiative was complementary to the Camp David accords. Many of us take the view that the Middle East problem will not be solved without the considerable influence of the United States upon Israel.
Mr. John Bruce-Gardyne (Knutsford)
Did not the success of the conference have much to do with the sensible modesty of the expectations put upon it? Is it not enormously to the credit of my right hon. Friend and her colleagues that they eschewed the fatuous posturing of previous participants in such meetings, who seemed to believe that they could add a cubit to the world's stature by taking thought together?
The Prime Minister
These conferences started, I understand, simply as the seven Heads of Government meeting together quietly. They have developed into what I would call a circuit of summitry. Such a battery of journalists follows us that I must confess that it is a problem, because if some news is not given out it tends to be manufactured. However, I agree with my hon. Friend that it is a pity if Heads of Government cannot meet to discuss vital world issues without raising expectations that there will be some colossal pronouncement at the end. The problems remain; it is just that we get together to discuss them.