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European Economic Community

Volume 886: debated on Monday 17 February 1975

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asked the Secretary of State for Trade if he will make a statement on his assessment of the trade-diversion and trade-creation effects on the United Kingdom balance of trade arising from United Kingdom membership of the EEC.

Although there has undoubtedly been a switch towards the EEC in the sources of our imports, particularly foodstuffs, I am not ready to make any overall assessment of the effect of membership of the Community on trade creation and trade diversion.

Does my right hon. Friend agree that there was general agreement on all sides, and indeed in the White Paper itself, that there would be trade-diversion effects which would lead to a loss in terms of Britain's balance of trade, but that those who advocated British membership of the EEC continued to argue that this would be more than offset by the trade creation within the EEC? Is it not rather strange reasoning that those advocates should now use the losses due to the trade-diversion effect as some justification for our massive deficit with the EEC?

There is a great deal of sense in what my hon. Friend has said. There is, however, a difficulty in any event over the period that we experience about isolating these two effects in so far as they ever could be separately identified and, further, doing it against the background of many other factors that are at work in our trade. It would be a worth while study, no doubt, but a very difficult one to make.

Will the Minister confirm that more than half the crude trade deficit with the EEC Eight last year was accounted for by the food and live animals sector? Has not that deficit increased because our food importers are buying cheaper food from Europe?

The hon. Gentleman should look carefully at the food items and distinguish those that may be cheaper in Europe than they were in the rest of the world during the year 1973–74 and those that were dearer. He must consider the mix of those two facts before reaching any conclusion. On the hon. Gentleman's first point about half the deficit—

No, almost certainly the hon. Gentleman is wrong about that. I think he will find that it is more like one-third.