Speeches, etc.

Margaret Thatcher

HC Stmnt: [Bonn G7 Summit]

Document type: Speeches, interviews, etc.
Venue: House of Commons
Source: Hansard HC [78/623-36]
Editorial comments: 1531-1610.
Importance ranking: Major
Word count: 7331
Themes: Defence (arms control), Economic policy - theory and process, Employment, Industry, Monetary policy, Privatized & state industries, Public spending & borrowing, Trade, European Union (general), Foreign policy - theory and process, Foreign policy (Americas excluding USA), Foreign policy (Asia), Foreign policy (development, aid, etc), Foreign policy (Middle East), Foreign policy (USA), Foreign policy (USSR & successor states), Foreign policy (Western Europe - non-EU), Labour Party & socialism, Law & order, Terrorism
[column 623]

Economic Summit (Bonn)

The Prime Minister (Mrs. Margaret Thatcher)

With permission, Mr. Speaker, I shall make a statement about the economic summit which I attended in Bonn, accompanied by my right hon. and hon. Friend Sir Geoffrey Howethe Secretary of State for Foreign and Commonwealth Affairs and my right hon. Friend Nigel Lawsonthe Chancellor of the Exchequer.

Heads of State or Government of the United States, France, West Germany, Italy, Canada and Japan were present, accompanied by their Foreign and Finance or Economic Ministers, together with the President of the European Commission.

I have placed in the Library of the House copies of the economic declaration and of the political declaration to mark the 40th anniversary of the end of the Second World War.

I shall deal first with the political issues. As countries which once fought each other bitterly, we recalled the benefits of reconciliation and of 40 years of co-operation, and pledged ourselves to their continuance. We welcomed the opening of negotiations in Geneva on the reduction of nuclear arms, expressed our appreciation of the positive proposals of the United States, and urged the Soviet Union to act positively and constructively to achieve significant agreements.

Foreign Ministers discussed the middle east, southern Africa and central America. They condemned the continuing, brutal occupation of Afghanistan by Soviet troops, and of Cambodia by Vietnam.

On Britain's initiative we had a discussion of the growing problems posed by drugs, and we agreed to set in hand work on further co-operative measures to combat the vicious trade, which is the cause of so much human suffering. We also reaffirmed our determination to strengthen further the co-operation against terrorism agreed at the London summit last year.

On economic matters, the discussion and the communiqué reflected the similarity between the approaches and policies of all seven Governments. We recognised the further progress since our last meeting in keeping down inflation and strengthening the basis for economic growth. We also welcomed the fact that the recovery has begun to spread to the developing world.

Nevertheless, we recognised that our countries still face important challenges. Among other things we need to strengthen the ability of our economies to respond to new developments; to increase job opportunities; to combat protectionism; and to improve the stability of the world monetary system.

To sustain non-inflationary growth and to create higher employment, we agreed, first, to consolidate and enhance the progress made in bringing down inflation; and, secondly, to follow prudent and, where necessary, strengthened monetary and budgetary policies with a view to stable prices, lower interest rates and more productive investment. Each of our countries will exercise firm control over public spending in order to reduce budget deficits when excessive, and, where necessary, reduce the share of public spending in gross national product.

Thirdly, we agreed to work to remove obstacles to growth and encourage initiative and enterprise so as to release the creative energies of our peoples, while maintaining appropriate social policies for those in need. [column 624]

Fourthly, we agreed to promote greater adaptability and responsiveness in all markets, particularly for the labour market.

Fifthly, we agree to encourage training to improve occupational skills, particularly for the young.

Building on those common policies, each country indicated its specific priorities. For example, President Reagan emphasised his determination to achieve a substantial reduction in the United States' budget deficit. The Japanese Prime Minister undertook that his Government would make further progress in deregulating financial markets, promoting the international role of the yen, facilitating access to markets, and encouraging growth in imports. The United Kingdom will continue to work to reduce inflation, keep public spending under control, promote the development of small business and advanced technological industries, and encourage initiative and enterprise in the creation of new job opportunities.

On international trade, we agreed that protectionism does not solve problems, it creates them; that further progress in relaxing and dismantling trade restrictions is essential; that a new round of multilateral trade negotiations should begin as soon as possible, with the broadest possible participation; and that the preparations for the new round should begin with a meeting of GATT officials before the end of the summer. With the exception of France, we were agreed that the new GATT round should start in 1986. France was not prepared to commit herself to a date.

The discussions on international monetary questions, which began after the Williamsburg summit, will be completed next month, when the Group of Ten meets in Tokyo. It will put forward proposals for discussion in the interim committee of the IMF at its October meeting. We endorsed the case-by-case approach to the debt problems of the developing countries set out at the London summit.

We expressed our particular concern for the plight of African peoples suffering from famine and drought. While acknowledging the very substantial assistance provided not only by Governments but by private organisations and individual citizens, we instructed experts to report to the Foreign Ministers of the Seven at the end of September with proposals for further measures which might be necessary.

Particular concern was voiced about the practical distribution of food aid which has been so generously given, and the need for long-term policies of good husbandry to avoid creating more desert land. We also called on the Soviet Union and other Communist countries to assume their responsibilities in helping to relieve the suffering caused by famine and drought.

What was impressive in the summit discussions was the conviction of all represented there that lasting job opportunities can be created only if we maintain sound financial policies and open markets and remove disincentives and unhelpful regulations to foster a climate of more vigorous enterprise and initiative.

As the communiqué said,

“By pursuing these policies we will not only address our domestic problems, but at the same time contribute to an enduring growth of the world economy and a more balanced expansion of international trade.”

Mr. Neil Kinnock (Islwyn)

First, I warmly commend the collective pledge made by the powers at Bonn actively [column 625]to continue the reconciliation and co-operation which have benefited all countries in the past 40 years, whether they were former allies or former enemies.

Secondly, I support the Prime Minister in her continuing efforts to encourage international co-operation to combat drug trafficking and terrorism.

Thirdly, I warmly endorse the decision of the Prime Minister and five of her colleagues not to join President Reagan in his vindictive and dangerous policy of imposing a complete economic embargo on Nicaragua.

Fourthly, I must record deep disappointment that on economic issues the Bonn summit turned into yet another sit-tight summit. How many times will the Prime Minister register the need for monetary reform, the reduction of social inequality, the promotion of growth and trade, helping the poorest countries, and much else, and then, having recorded those challenges, dodge away from doing anything effective in any of those areas?

Specifically, does the Prime Minister recall that after the London summit, she told us that the summit seven, including Britain, would

“encourage multi-yearly rescheduling”

of the debts of poor countries, and that they would

“seek to maintain and wherever possible increase the flow of official aid to developing countries, particularly the poorest” ?

Against that background, why is it that in the ensuing 12 months the Governments of the summit countries have left rescheduling almost entirely to commercial institutions and have borne hardly any of the responsibilities themselves? Why is it that in that 12 months the British Government, under the right hon. Lady's leadership has, far from maintaining or increasing the flow of aid, cut the flow of official aid to the poorest countries in developing parts of the world?

The Prime Minister has told us that President Reagan emphasised his determination to achieve a substantial reduction in the United States' budget deficit. As the condition of the United States economy has been responsible for half of the growth rate in European economies in the past year, what effect does the right hon. Lady think the rapid reduction of the United States' budget deficit will have on our economy if there is no simultaneous compensating expansion of European economies, especially our own?

We have had another do-nothing summit this year. Will the right hon. Lady give us yet another do-nothing year when it comes to fighting unemployment at home and poverty and starvation abroad?

The Prime Minister

I note the strictures of the right hon. Gentleman on all Heads of State or Government, including those who share his political views and not mine. When they are in power, however, they pursue the same economic policies. The difference between them and the Socialists on the Opposition Benches is that a British Socialist Government promise everything, which takes them to the International Monetary Fund, while other Socialist parties, when in power, pursue much more conservative policies, both with a small c and a capital C. They do so because they are realistic. The right hon. Gentleman is extremely critical of his fellow Socialists who are Heads of State and of Socialist Governments.

I am glad that the right hon. Gentleman has welcomed the political statement and the statement on drug trafficking.

We were not asked to join the United States in imposing sanctions on Nicaragua. [column 626]

The right hon. Gentleman has talked of a sit-tight summit, but I have said that all Heads of State or Government are convinced that the policies that are being followed are the right ones. They will keep down inflation, and unless we try to do that we shall be doing great harm to employment prospects. Over the past year we have introduced the policies that were outlined in the Budget on training and for an increased community programme. These policies have not yet worked through, but they should provide more help to those who would otherwise be unemployed. About 600,000 more jobs have been created in the past six months. Britain is one of the few European countries that is creating more jobs.

There has been one agreement on multi-yearly rescheduling. There have not been more because such agreements require, first, the accord of the IMF. Normally, commercial banks do not lend unless there is agreement with the IMF to change policies, or a good prospect of it. That is the only proven policy to follow when one is lending through the banks other people's money.

We are one of the countries that gives aid priority to the poorest countries, even though these are not always the countries that will give us more jobs at home. Other countries do not always give such high priority in their total aid budgets to the poorer countries.

The right hon. Gentleman referred to the reduction in the United States' budget deficit. As a percentage of gross national product, that deficit is not nearly as high as some think. The net deficit is 4¼ per cent., taking into account the surpluses that are produced by the separate states. We must consider the deficit in terms of the savings ratio. It would be far more advantageous to the world if we all brought down interest rates. That would give us far more sustained expansion than the policy that is now being pursued. We hope that that will be the result of the United States reducing its deficit to something more in tune with its lower savings ratio.

Sir John Osborn (Sheffield, Hallam)

Is my right hon. Friend aware that the sixth parliamentary and scientific conference run by the Council of Europe will take place in Japan at the end of the month? To what extent will Japanese markets be opened up to other countries?

Secondly, what would be the impact of protectionism on our own economy? About 50 per cent. of Britain's GDP lies in imports and exports and a move towards protectionism would not be in our interests nor those of the western world generally.

The Prime Minister

I agree with my hon. Friend that it is much better for countries which rely on exports to try to open up the world's markets than to go for a policy of protectionism. Each and every one of us has some protectionist policies, but most of us felt that it would be far better to take them all to the next round of GATT and to bargain away some of our protectionism for a reduction in other people's protectionism. They would not all go at once, but that would be much better for those of us who depend on world trade. That applies to most developing countries, too.

With regard to the Japanese market, I think that Mr. Nakasone has realised far more than previous Prime Ministers the need to open up Japanese markets. I hope that we shall pursue the point vigorously through the European Economic Community. Some members of the [column 627]Community have much tougher limits on the import of, for example, Japanese cars than others. It is quite clear that we cannot go on keeping our markets open unless other countries keep theirs equally open.

Mr. Roy Jenkins (Glasgow, Hillhead)

Why does the Prime Minister, who used to be most sceptical and impatient about the value of summits, now appear to be satisfied with one that has almost certainly produced the most flatulent and platitudinous communiqué of the 11 in the series? Can the Prime Minister tell us of one beneficial and constructive thing which she thinks will happen as a result of the summit and which would not otherwise have taken place?

The Prime Minister

I think that this is the first summit in which each country pledged itself to take specific action. I cannot remember a previous communiqué in which each country set out separately what——

Mr. Jenkins

The 1978 summit.

The Prime Minister

The 1978 summit in Bonn was disastrous because it reflated and led to the higher unemployment and some of the higher inflation which followed. I think that the right hon. Gentleman will find that Germany would never follow that course of action. I note that the right hon. Gentleman said that the summit was platitudinous. Platitudes are platitudes because they are true. Therefore, he believes that the economic policy that we set out is true. I am grateful for his support.

Mr. Charles Morrison (Devizes)

Was further aid for population control in African countries considered at the summit? Was reference made to the unhelpful attitude of the American Administration, and was that Administration encouraged to become less dogmatic and more realistic in that regard?

The Prime Minister

We are considering further what best to do about aid to those countries. Particular concern was voiced about it not always being easy to distribute the amount of aid that is given, whether in food or other items such as medicines. We must look further into that. We were also anxious not only to give emergency food aid but to help those countries to develop their agricultural economies so that they might produce better aid for themselves. We are also anxious to help them to get grains which are suitable for dry zone areas and generally to help them in husbandry.

As for the United States, I remember that, at the recent United Nations summit in Geneva on help to the African countries, the United States was extremely generous in her allocation of aid to Ethiopia and Sudan.

Mr. Robert Sheldon (Ashton-under-Lyne)

Is the Prime Minister aware that few people expected much from the summit as summits increasingly resemble the futility of the inter-war economic conferences? Will she say more about Japan's trade practices? Is she aware that they increasingly look like economic domination, as they did in 1941, rather than economic co-operation? Should she not have resisted that even more strongly?

The Prime Minister

It was not possible to be stronger than I was on certain aspects of Japanese trade, nor is it possible to be stronger. The right hon. Gentleman is aware [column 628]that we have to pursue our trading arrangements with the outside world through the Community. I believe that M. Delors, the President of the Commission, will continue to pursue this matter as vigorously as we would wish.

Mr. Tim Rathbone (Lewes)

My right hon. Friend referred to the discussion about drug trafficking and the misuse of drugs. Will she elaborate further on that subject? Will there be room, on a pan-European and worldwide basis, to have joint activity in the same way that the Government have set up joint activity between Ministries in this country? Does my right hon. Friend come back from the summit with an awareness of the need for even greater spending, particularly on the education of young people about the threat of this horrible drug trafficking menace?

The Prime Minister

As my hon. Friend knows, there is already some co-operation, between countries, but I believe that it can be stepped up. It is particularly urgent now that there appear to be more supplies of cocaine, and sometimes success in one country in discovering cocaine and destroying it can mean that the cocaine is then directed to a different country. Therefore, we in Europe have to be very wary of what is happening, and do all that we can to stop it coming in.

As my hon. Friend knows, my right hon. and learned Friend Leon Brittanthe Home Secretary has issued a statement on what we are doing about reducing drug trafficking. He has also made it clear that he expects to introduce legislation to confiscate the assets of those who are convicted of drug trafficking so that, having suffered a prison sentence, they shall not nevertheless still be in possession of the enormous sums that are involved. My right hon. and learned Friend the Home Secretary and the several Departments will co-operate with other countries in doing everything that we can, and if it means more expenditure, we shall have to undertake it.

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

Is the Prime Minister satisfied that the approach of the summit to economic recovery was sufficiently urgent? Does she recall the recent reminder by Paul Volcker, chairman of the Federal Reserve Board, that over the past two years American expansion and the impact of higher imports were responsible for 70 per cent. of growth against only 40 per cent. of OECD output for the same reasons? Does not the right hon. Lady accept that that era is now ended, for there is unmistakable evidence of slowdown in the United States? Does she not agree with my right hon. Friend the Leader of the Opposition that the most urgent requirement of the summit was to come forward with a set of appropriate and compensating measures?

The Prime Minister

I tried to answer that in part in my reply to a previous question. Certainly last year there was a 9 per cent. increase in world trade. Half of it was attributable to more imports into the United States. As the hon. Gentleman said, that policy could not be sustained. The policy that led to the high dollar and double deficit could not be sustained, which is why, I believe, the President of the United States and Congress will have to take action to reduce the deficit. It would be of more benefit to the world if action were taken to reduce that deficit because of the expected impact on interest rates. It would be more profitable to world expansion to get lower interest rates all round because that is the way to get more [column 629]construction and more small businesses developing. If that policy were pursued, it would give a boost to growth. Hitherto, during the past year, there was an unsustained boost through the imports into the United States.

Mr. Patrick Cormack (Staffordshire, South)

In view of the fact that welcome reconciliation has presumably led to a much greater increase in mutual trust between nations, does my right hon. Friend think that it is time that Japan was made to bear the proper burden for its own defence? Would not that go a long way towards solving the problems that trouble us all?

The Prime Minister

We have to tackle Japan on an open trading basis. I do not think that it is right for one country to expect others to be open, make enormous profits from their openness, use those profits to undercut them in other markets, and still not take steps either to have home markets open or to redress the balance of trade by making major procurement purchases, which a Government can do, in aircraft and other such things from other countries overseas. My hon. Friend raises another matter—the defence of Japan—which would have considerable political implications. I would be slow to jump to the conclusion that he has reached, although I accept that Japan must take more responsibility for the defence of her maritime coast.

Mr. Tom Clarke (Monklands, West)

In her statement, the Prime Minister referred to the discussions between Foreign Ministers about the middle east, southern Africa, and central America. Was any progress made in stopping the flow of arms to those regions as well as on human rights?

The Prime Minister

I do not know whether they discussed that subject, but I expect that it came up in relation to one of those countries. As the hon. Gentleman is aware, it is not easy to stop the flow of arms to these regions, and some of the previous efforts have not been successful.

Viscount Cranborne (Dorset, South)

Apart from a ritual condemnation of the Soviet invasion of Afghanistan, did my right hon. Friend persuade her fellow summiteers of the value of a constructive policy to do something about the problem of that tragic country, particularly as she knows that there is a coherent policy available to her fellow Prime Ministers?

The Prime Minister

As my hon. Friend is aware, the United Nations has been making strenuous efforts to make arrangements that would ultimately result in the withdrawal of Soviet troops from Afghanistan. I am not very optimistic that that prospect will be achieved.

Mr. James Lamond (Oldham, Central and Royton)

If the Prime Minister has returned determined to redouble her efforts to make us more efficient, to shake out even more people from the labour market, to cut back on our social services and to try to catch a bigger share of the international market, and all the other leaders have decided to do the same, will we not all be running very fast to stand still in the same place?

The Prime Minister

We have not been quite as successful as some other countries, such as Germany, in securing extra export markets. One of the reasons is that Germany's unit labour costs are below ours and, although it is a high-wage economy, it is also a low-cost economy. [column 630]In any event, we are not on a zero sum. There is a good prospect for us to improve our own performance, which can only be done through management and the work force. We are not doing it at the expense of other people, except perhaps at the expense of those who have an enormous trade balance, such as Japan. We have to compete with Germany, France and Japan, and if the hon. Gentleman is not willing to compete, there is no hope for him and his party.

Mr. Michael Fallon (Darlington)

I thank my hon. Friend for raising with the Japanese delegation the disgraceful predatory pricing on the second Bosphorus bridge. Can she reassure me that we shall preserve bridge-building technology in the United Kingdom, and the hundreds of jobs in Darlington that depend upon it? Will she also assure me that everything possible will be done before the contract is signed to persuade the Japanese and Turkish Governments that it is in everybody's interest to ensure that at least the bridge section of this contract can be subcontracted to a British firm?

The Prime Minister

I know that my hon. Friend is as concerned as I am because he, with another of my hon. Friends, came to see me some time ago about the Bosphorus bridge. As he is aware, we were prepared to match the Japanese offer on the bridge, but we could not do it on the roads leading to the bridge. That led to the allocation of the contract to the Japanese. If there is any hope of our having the subcontracted bridge, I am sure that it will be pursued vigorously.

Mr. Russell Johnston (Inverness, Nairn and Lochaber)

The Prime Minister said that the middle east was discussed. Was there any sign of a new initiative from the United States? Does she agree that there is an urgent need for new initiatives if the situation in the middle east is not to deteriorate further?

The Prime Minister

As the hon. Gentleman will be aware, Ambassador Murphy has been in Jordan discussing with King Hussein the possibility of setting up a team of Palestinians to negotiate with King Hussein, directly with Israel. He has made one visit and I believe another is in the offing. There is no initiative beyond that because a great deal will depend on the success of what he is doing there.

Mr. John Browne (Winchester)

Is my right hon. Friend aware of the assertion that much of the United States' economic growth has been financed by Government borrowing, so far without any apparent inflation? Does she accept that much of this money was effectively siphoned off from investment funds from the non-United States economies, has raised world interest rates and has resulted in serious potential inflation inside the United States economy? Will she assure the House that she will not resort to any cosmetic, irresponsible and inflationary borrowing here at home?

The Prime Minister

No, and that was one conclusion of the summit: that we must not resort to inflationary borrowing, which would be highly damaging not only to the control of inflation but to the prospects of getting more jobs later. I agree with my hon. Friend's premise that, although much investment in the private sector has been financed from within the United States, that has left very little of a savings ratio to finance the deficit, which has been financed by drawing in capital from the world over. [column 631]That has kept interest rates artificially high. The greatest thing that could happen in the effort to obtain world expansion would be the lowering of interest rates, which I believe will follow if there is a sufficient reduction in the United States deficit.

Mr. Eric S. Heffer (Liverpool, Walton)

In addition to the nonsense that the Prime Minister has been talking about Japan, is she aware that on radio the other day, when she gave her first report of the summit meeting to the nation—I believe the programme is called “The World This Weekend” —she talked more nonsense when she suggested that the British people could solve their problems by creating their own businesses? How will the 4 million unemployed living on social security benefits be able to create their own businesses? Will the people who are now going bankrupt because of her Government's policies create their own businesses? Is it not time that she came into the real world and understood that the only way to deal with unemployment in a serious manner is by state and Government intervention?

The Prime Minister

Unless more small businesses are formed, we will not get more jobs. The alternative—this is what the hon. Gentleman proposes—would be to halve jobs and wages or split them proportionately. All that we could do under his proposal would be to shuffle round the amount we have and try to get more employment with it. He will know from the success of Japan and the United States, and from living in the real world, that new jobs come from the formation of new businesses. My right hon. Friend Tom Kingthe Secretary of State for Employment, who answered questions today before I did, said that Britain has 100,000 more new businesses today than it had in 1979. That is good, but it is not sufficient. If the hon. Gentleman is giving up all hope of an increase in new business and small business formation, he is giving up all hope of creating more jobs.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

Does my right hon. Friend accept that many of us were much heartened and warmed by the fact that she had come to an understanding with Mr. Nakasone of Japan? Does she also accept that, five years ago to the month, I was promised that we had come to a gentleman's agreement with Japan on trade, but that since then the deficit with Japan has increased by more than £20,000 million? Has not the time come to say clearly that gentleman's agreements must between gentleman, and that unless the Japanese come to a copper-bottomed agreement in the very near future we shall have to protect our industries as they have protected theirs? This country cannot continue selling its industry down the river to the Japanese.

The Prime Minister

Whatever the Japanese have done so far to try to secure more imports, they have not succeeded. They have not purchased abroad, at any rate not from Britain and some other countries, as many goods, such as aeroplanes, as they could, therefore, we were anxious to fix a date for a new round of GATT so that we could deal with such matters together in a much more effective forum than any other. Apart from that, we must pursue a policy through the European Community. Mr. Nakasone now knows how strongly not only Europe but the United States feels about it.

[column 632]

Mr. Frank Cook (Stockton, North)

I have listened with interest to the Prime Minister's comments on the views of Mr. Nakasone, and I was interested to hear her reply to the hon. Member for Darlington (Mr. Fallon). Will she reflect on her statement on BBC radio this morning, when she deplored the failure of Cleveland Bridge to acquire the contract for the Bosphorus bridge, not on the grounds that the offer was bad and the technology inadequate, but on the grounds of a last-minute injection of investment as a subsidy from the Japanese Government? During her reflection, will she also consider the fact that that nation gives similar subsidies to its shipbuilding, steel making, communications and transport industries? If, as she says now, new industries in Britain must do it without state intervention or aid, how does she expect Britain to compete with countries that do it all the time?

The Prime Minister

I deplore the fact that we did not get the Bosphorus bridge contract for two reasons. First, on the bridge itself, our bid was the lowest and, therefore, I believed that we should get it. When it came to matching an offer that anyone else made, we were prepared to do so for the bridge. However the contract was for the roads as well, and we could not match the Japanese offer there. The second reason why I deplored it was that it will cause the loss of jobs in an area where we could have done with jobs.

As to subsidies, may I point out to the hon. Gentleman that we give subsidies to shipbuilding—considerable subsidies. We give subsidies to steel—considerable subsidies. We give subsidies to railways—considerable subsidies. We give subsidies to coal mining—considerable subsidies. The Japanese are not the only people at it.

Mr. Richard Hickmet (Glanford and Scunthorpe)

In relation to the Bosphorus bridge contract, does my right hon. Friend agree that although she and her colleagues at the summit agreed that they did not wish to embark on a trade war, that is what the Japanese have done by their predatory pricing methods and by the way in which they dumped credit to secure the contract? The fact that they have offered $206 million over five years at 5 per cent. interest means that they are buying into our markets, jobs and industries and driving up our unemployment. Has not the time come, despite Mr. Nakasone 's smiling protestations, to say, “This must stop or your car imports to Britain will be reduced by 10 per cent.” ? Will she ask the Japanese to subcontract the bridge to Cleveland Bridge?

The Prime Minister

I understand why my hon. Friend feels even more strongly than the rest of us, because he also came to see me about the Bosphorus bridge contract, which will affect employment in his constituency. As I said, we did everything asked of us as a Government to help the company to obtain that contract. I know how strongly he feels about the Japanese, and I share his feelings. But I must make one point: we must be as efficient and as good in design as are the Japanese. We certainly were in relation to the bridge. If we were in relation to everything else, we should have had the video trade here which we did not have. We must be as good at design and efficiency as they are, and in addition we must have free and fair trading. Trading cannot be free unless it is fair.

[column 633]

Several Hon. Members


Mr. Speaker

Order. I must protect the rest of the business. There are two other statements and a Ten-minute Bill. I shall allow questions to continue until 4.15. I hope that all hon. Members who have been rising will be called to speak before then, provided everyone puts questions briefly.

Mr. Derek Foster (Bishop Auckland)

The Prime Minister must be aware that the Japanese have been promising to open their markets and increase their imports for many years. However, despite formidable pressure from international forces for long a time, there has been no progress. Why does not the right hon. Lady fight for British industry as effectively as the Japanese fight for theirs? If she had done so, the Bosphorus bridge contract would be ours.

The Prime Minister

We had the lowest tender on the bridge, which was due to the company, and the Government matched the Japanese offer on the bridge. We could not match it on the roads. We had hoped to get the bridge contract. The company did the job, and we did the job. We did not get the contract for the bridge because of the roads aspect.

I agree with the hon. Gentleman that, despite the strictures not only of Britain but of other countries, we have not yet made inroads into the Japanese market. In some cases, the Japanese have had better-designed and more efficient goods than we have. As the hon. Gentleman knows, we must pursue this matter, either through those who make the voluntary agreements on an industry-to-industry basis, or through the European Community. The Government will pursue it through the Community.

Mr. Nicholas Budgen (Wolverhampton, South-West)

As my right hon. Friend and the leaders of the principal European nations penned their splendid general denunciation of protectionism in other countries, did my right hon. Friend reflect that it was rather ironic that the farm Ministers did not even agree on a tiny reduction in cereal prices which had been decided upon a year ago?

The Prime Minister

As I said earlier, almost every country practises some aspects of protectionism. The common agricultural policy is certainly protectionist, but so are some aspects of America's trade and farming. These aspects must be discussed at the GATT meeting. We have had six working parties within GATT, one of which has been concerned with trying to free trade in agricultural products. Six of the seven leaders at Bonn wanted to set a date for the GATT conference, believing that that was the way in which we could all discuss protectionism and how to get rid of it and could bargain one aspect against another. Six of us were ready to set our names to a date; one was not. Nevertheless, I believe that there probably will be such a conference during 1986.

Mr. John Fraser (Norwood)

Despite the fact that we were not directly involved, did the Prime Minister point out to President Reagan the diplomatic folly, petulance and contradiction within the general tenor of the communiqué imposing a trade embargo against Nicaragua? Is it correct that the right hon. Lady has agreed to celebrate the 40th anniversary of Dr. Goebbels' downfall by telling us that she does not have the faintest idea when unemployment will be reduced?

[column 634]

The Prime Minister

The hon. Gentleman's second question was rather grotesque in the circumstances. I am surprised at the hon. Gentleman and some of his right hon. and hon. Friends. There is only one way to increase the numbers employed, and that is to increase the number of customers who are prepared to buy British goods. They will buy British goods when they are the best.

On Nicaragua, President Reagan had his own reasons for taking that action. The hon. Gentleman will recall that, during the Congress debate, there was a message and declaration from Nicaragua that, should help for the Contras stop, Nicaragua would be prepared to follow a genuinely plural political policy and to release documents from censorship. That can only mean that she had not done either until that proposal was made.

Mr. Nigel Forman (Carshalton and Wallington)

As we in Britain have one of the strongest national interests in maintaining an effective open trading system, will my right hon. Friend bear in mind between now and the next GATT round the vital importance of proceeding on a multilateral basis, since it is precisely because of the stitching up of the various bilateral agreements and understandings that we have arrived at so many of our present trading problems?

The Prime Minister

I totally agree, and that is why there are so many piecemeal aspects of protectionism. That is why six of the seven of us wanted to fix a new date for the GATT meeting. All we have done so far is to agree that there should be a preparatory meeting of officials to sort out the agenda and the modalities. We have agreed that that preparatory meeting should take place before the end of the summer. That is at least a step forward to securing the conference that most of us want.

Mr. D. N. Campbell-Savours (Workington)

Does the Prime Minister believe that the summit will lead to a reduction or to an increase in demands from American Congressmen and Senators for protectionist measures, especially the 20 per cent. import surcharge?

The Prime Minister

If we had all agreed to give a lead on a date in 1986—we could merely give a lead, because Britain is only one of the GATT countries—that would have been a good defence to the demands that would come from some parts of Congress. If the United States becomes more protectionist, it will not be the United States' problem; it will be our problem, Europe's problem and the problem of the developing countries. That was why we took the line we did. I regret that we were not successful in all seven of us agreeing, but at least six of us gave a firm clear lead because we wanted more open markets.

Mr. Harry Greenway (Ealing, North)

Was the latest Japanese trade deficit of £38 billion discussed round the table by the Heads of State? If so, what conclusions were drawn? What did the Japanese Prime Minister say about it?

The Prime Minister

As I said in my statement, the Japanese have said that they will do all that they can to open up their markets and get the value of the yen to a level more appropriate to Japan's excellent trading balance. I still think that the best way of achieving this is not only by discussion with the Japanese but by a GATT ministerial meeting.

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Mr. Peter Hardy (Wentworth)

A little while ago, spokesmen for the Japanese Government in Strasbourg complained that it was easier for Europe to sell to Japan than for Japan to sell within the Community. That might cause incredulity on both sides of the House, but as far as some member states of the Community are concerned that is true. How does that happen? Is it not clear that, while the Government are in power, Britain's commercial prospects have as much chance as a whale in Tokyo bay?

The Prime Minister

On selling to Europe, different systems apply in Europe—for example, the arrangements in place before the European Economic Community agreement was signed in 1956 have remained in place. That helps Italy especially because it had a small Japanese car quota and, therefore, still has a small quota of, I think, about 2,000. Our car quota with the Japanese is arranged between the motor industries. The arrangements in Germany, France and Britain differ because they are voluntary arrangements entered into between the car industries in each of our countries and the car industry in Japan. That is the only basis for them. Apart from that, we have to negotiate through the EEC. The Community states with low quotas are not exactly anxious to negotiate with the rest of us, because it might mean higher imports for them.

Mr. Edward Leigh (Gainsborough and Horncastle)

During the economic summit, did my right hon. Friend have a chance to discuss with President Mitterrand what happened when, as the brand new Socialist President of France in 1981, he attempted to do precisely what the Leader of the Opposition suggested earlier and, within two years, saw the French economy brought to its knees? Will my right hon. Friend suggest to President Mitterrand that he give a little teaching to his Socialist cousin just in case [column 636]the Leader of the Opposition is more interested in economic reality rather than fourth-form abuse wrapped up in a third-form perspective of history?

The Prime Minister

In view of the experiences which my hon. Friend enumerated, I believe that President Mitterrand would be a very good teacher. Unfortunately, I do not think that he would have a very good pupil in Neil Kinnockthe Leader of the Opposition.

Mr. Dennis Skinner (Bolsover)

Bearing in mind what has happened at previous summits, and especially this one, does the Prime Minister wish that she had kept to the strictures that she used to admonish a former Prime Minister when she said that these summits were a waste of time? Is she aware that, every time she has returned empty handed, unemployment has increased? Is it not a sad irony that, in this summit, 40 years after the building of the bridge over the River Kwai, the super Japanese, with an economy that the Prime Minister has idolised, have pinched the Bosphorus bridge project from underneath her nose by giving state aid? What an irony.

The Prime Minister

I do not think that the hon. Gentleman could have been listening to what I said, because otherwise he would have heard——

Mr. Skinner

I heard the right hon. Lady this morning.

The Prime Minister

I am delighted. It might by this time have penetrated the hon. Gentleman's mind. After all, we were both at grammar school, so we should both have equal understanding. May I therefore explain in words of one syllable, although the hon. Gentleman could cope with words of three or four syllables if only he would admit it, that the amount of aid which would have been given by this Government to the Bosphorus bridge project was equal to the amount given by the Japanese. I hope that the hon. Gentleman agrees that that was a very good thing to do.