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European Communities (Spanish And Portuguese Accession) Bill Hl

Volume 468: debated on Tuesday 19 November 1985

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2.56 p.m.

My Lords, I beg to move that the Bill be now read a second time.

It gives me particular pleasure to introduce a Bill giving legal force in the United Kingdom to the instruments of accession of Spain and Portugal to the European Communities. The strict legal purpose of the Bill is to ensure that, once Spain and Portugal accede to the Community on 1st January 1986, the United Kingdom is able to honour in full the obligations undertaken in the Treaty of Accession between the applicant countries and the Communities. The Bill achieves this by amending the European Communities Act 1972 to provide that the Spanish and Portuguese treaties of accession to the EC, Euratom and the European Coal and Steel Community are included among the basic Community treaties referred to in Section 1 of the European Communities Act 1972.

It is a short and straightforward Bill that little reflects in its dry prose the political significance of the event. The south-western flank of the European Community is being completed. In future we shall be 12 democratic nations working together for a common purpose in a Community based on common ideals. As my right honourable friend the Prime Minister said when the negotiations were completed earlier this year, it is a great step for democracy and for Europe.

Britain has been a staunch supporter of the accession of Spain and Portugal. We warmly welcomed the Portuguese and Spanish applications for membership respectively in March and July of 1977. For Portugal, the application was made by the courageous fighter for democracy, Senhor Mario Soares, who eight years later was to be the principal Portuguese signatory of the accession treaty. For Spain, the application was made almost immediately after the ending of military rule and restoration of democracy with the first popular elections since the Civil War, prior even to parliamentary adoption of a new constitution. For both countries, membership of the European Community has been a political imperative. For the existing member states, their entry has been a means of consolidating democracy in Europe.

The accession process has lasted seven years. Long and hard negotiations have been necessary to find a mutually satisfactory means of integrating the two Iberian economies into the Community. There were different patterns of economic development to reconcile. Spain, with a protected economy and high tariff barriers, a large agricultural sector and highly successful horticulture and a substantial fisheries fleet, presented one set of problems; Portugal, with uneven industrial development and uncompetitive agriculture, another. The acceding countries wanted early access for their most competitive sectors. The existing member states argued for long transition in the same sectors and for early reduction in turn of trade barriers.

It has been a time of recession and high unemployment throughout Europe. But the political determination was there despite the practical difficulties, and the negotiations were brought to a successful conclusion in March. It was an indication of the will to succeed on all sides, and a tribute to the negotiating skills and determination of the Italian presidency, in particular those of Signor Andreotti, as President of the Council of Ministers. The Accession Treaty was signed at ceremonies in Lisbon and Madrid on 12th June, thus making it possible to meet the important target accession date of 1st January 1986.

My Lords, I turn to the outcome of the individual chapters of the negotiations with Spain and Portugal. In forming an assessment, it is of course important to remember that while the United Kingdom, like other member states, had important interests to protect. the Community could not try to impose terms on Spain and Portugal which would have destroyed their will to join. A balance had to be struck; all parties accept that it was a good balance, and I believe that the outcome is fully consistent with United Kingdom interests.

Negotiations on the arrangements for tariff dismantlement were long drawn out. Spain wanted a long transition to give her industry time to adjust. The Community argued for as short a period as possible to give early access to a long-protected market. While it was agreed to allow an overall industrial transition of seven years, the high Spanish tariffs allowed under the inequitable EC-Spain 1970 Agreement are to be cut by over half after the end of only three years, thus offering major opportunities to our exporters. In addition, under the special arrangements for cars, double the number, at much lower rate of duty than hitherto, can be exported to Spain from the first year of accession, with further improvements in subsequent years. Spanish introduction of VAT on 1 st January 1986 will replace the present tax system, which has added substantially to the resale value of imported goods and which has reduced the price of Spanish exports. Portugal will also benefit from seven years of industrial tariff transition; as an EFTA member, her import duties have not, however, been generally high. The Community textile industry will have time to adapt to the new competition from Spain and Portugal, since restrictions in this sector will continue for up to four years after accession.

The negotiations were hard fought but the result affords exciting new opportunities for our exporters, providing they are quick enough off the mark. Spain and Portugal collectively form a market of nearly 50 million consumers; they are countries of big cities, with growing electronic and aerospace industries, as well as tourism and agriculture. Large sectors of industry and agriculture in both countries will need to modernise and re-equip in order to become more competitive and thus will offer further opportunities, as will, for example, the information technology and energy conservation sectors. It is not a question of waiting until the end of the relatively short transitional period, but of acting now. If our businessmen do not act, then their competitors will take advantage of any lost opportunities.

The British Overseas Trade Board has conducted a major campaign to bring to the attention of United Kingdom business the new scope for exporting to the Spanish and Portuguese markets. In addition, I commend to your Lordships the booklets published by the Foreign Office and the Department of Trade and Industry the day after the Treaty was signed entitled Basic Facts on Spanish/Portuguese Accession. These set out the main elements of the agreements of potential interest to British exporters. Copies were placed in the Library of your Lordships' House on publication; more are available now in the Printed Paper Office.

Each successive enlargement has given rise to fears about the impact on Community agriculture, the dangers of adding to existing surpluses or creating new ones. Given the relative size of the Spanish agricultural sector, there has been particular concern also about the impact on existing Community horticultural producers and on the Community budget. The transitional arrangements agreed will protect the interests of British (and other Community) horticultural producers. Since Spain is a deficit producer for such products as milk, beef and cereals, British farmers will have export opportunities which will become increasingly attractive as tariffs are phased out. Portuguese agriculture, on the other hand, which is largely fragmented and uncompetitive, will be given time to adapt to Community competition by a long transitional period. The Community is making aid available to Portugal to help her develop the necessary agricultural infrastructure.

The acceding countries will not be exempt from community disciplines on production; the Dublin agreement on reform of the wine sector will apply to both Spain and Portugal and a milk quota has already been set for Spain. In the case of olive oil, it was agreed that the Commission would bring forward proposals for reform to include a guarantee threshold following accession, once it is established that a surplus exists or is likely. For these reasons, some of the more extreme pressures on the common agricultural policy and on the EC budget that might have been provoked by Spanish accession have been averted. Discussions on reform of the common agricultural policy, in the light of the Commission report on Perspectives for the Common Agricultural Policy, which calls for price cuts for the main surplus commodities, are continuing. The Government will continue to press for effective action to reduce surpluses and cut the budgetary cost of the CAP principally through price restraint.

Fisheries was one of the most difficult issues to be negotiated and among the last to be settled. The Spanish fleet is presently the fifth largest in the world. After Spain's accession, the Community fleet as a whole will be the world's second largest. It was therefore essential in the negotiations to protect limited stocks and maintain the balance of existing fishing opportunities under the Common Fisheries Policy, only so recently agreed. The outcome was broadly satisfactory. Spain and Portugal are incorporated into the common fisheries policy for its duration. But, with certain limited exceptions, Spanish and Portuguese access to EC waters is limited to those areas and species to which they currently have access. The number of Spanish and Portuguese vessels fishing in EC waters will continue to be strictly controlled and subject to strict reporting and monitoring requirements. The arrangements thus do not affect the effective fishing opportunities of United Kingdom fishermen.

In the light of the high unemployment rates in both acceding and existing member states, agreement was reached that there would be a transitional period of seven years for the free movement of labour, as was the case for Greece. Gibraltar and Spain have of course already given effect from 5th February to certain reciprocal EC arrangements in this field, under the agreement reached between my right honourable and learned friend the Foreign and Commonwealth Secretary and the then Spanish Foreign Minister at Brussels on 27th November 1984. But the 7-year transitional period will apply also between Gibraltar and Spain.

My Lords, I turn now to the institutions of the Community. This was not a difficult area in which to reach agreement. Spain will be entitled to nominate two commissioners and Portugal one. In the Council, Spain will have eight votes to Portugal's five: the new qualified majority necessary will be 54 votes. Spain and Portugal will hold their elections to the European Parliament no later than two years after accession.

When the negotiations began in 1979, it was clear that the financial costs of enlargement to the United Kingdom could have been very substantial. But the arrangements agreed at Fontainebleau have ensured that the United Kingdom will pay only 7 per cent. of any additional costs. It was important in the negotiations to ensure that Spain and Portugal themselves were not placed in an inequitable situation on accession, particularly since stringent transitional arrangements for agriculture meant that the two countries would be building up FEOGA receipts only slowly. The Community decided to follow the Greek precedent and establish a system of degressive refunds of their VAT or GNP contributions during a transitional period of seven years. Under these arrangements, it was intended that Spain's net budgetary position should be broadly neutral over the transitional period and Portugal should be a modest net beneficiary.

Absorption of these two new member states could have aggravated some of the problems facing the Community, had the member states not already embarked on a substantial programme of reform. The Fontainebleau agreement negotiated by this Government has provided for the necessary increase in own resources to deal with the costs of enlargement—the decision on own resources will come into effect once all member states have ratified the Accession Treaty. The Fontainebleau mechanism means that despite the increase in the Community VAT ceiling to 1.4 per cent., the United Kingdom's contribution will remain below 1.0 per cent. The successful negotiation of the budget discipline arrangements means that the framework now exists for curbing the headlong expansion of agricultural expenditure.

The Commission have made proposals for long-term reform of the common agricultural policy with price restraint for the main surplus commodities as a central feature. Quotas for milk production were agreed last year and will curb production. The last two rounds of agricultural price fixing have ensured that increases in agricultural spending have been on a declining trend. The wine ŕegime has been reformed and the olive oil ŕegime is to be reformed. The Community is considering at this moment arrangements to ensure that the traditional trade flows of its preferential partners around the Mediterranean basin are sustained.

The Community has long recognised the risk that a Community of Twelve could become unmanageable, that decision-making could be impaired and that the cohesion of the Community might be weakened. In this regard, enlargement has acted as a catalyst. These are the very matters we are considering at present in the inter-governmental conference. I described our approach in a recent debate on your Lordships' Select Committee on the European Community's admirable report on European Union. We are examining the proposals put forward to see whether they will lead to speedier, more efficient decision-making, to completion of the internal market, to a more competitive Europe and to a satisfactory balance among the institutions.

Let us all remember that enlargement is not just a matter of adaptation and learning to live together. Enlargement of the Community to twelve is a fact of major international significance. We are the world's largest trading bloc working together within the framework of a common external trade policy. Collectively we can make our weight felt against the industrial giants of the United States and Japan, whereas severally our voices would have little impact. We have a single voice in the multilateral trade negotiations that are so vital a feature of world trading relations, and we are jointly working for a new round of multilateral trade negotiations to avert the dangers of a slide into protectionism.

The Community includes some of the world's largest donors of aid, and the Lomé Convention enshrines a unique trade and aid partnership with 66 African, Caribbean and Pacific nations. The accession of Spain and Portugal will bring extra weight and expertise to the Community's actions in political co-operation, particularly in Africa and Latin America.

Even the founding fathers of the Community would have hesitated to predict that circumstances would have allowed us successfully to complete a second enlargement to include the restored democracies not only of Greece but now of Spain and Portugal. We all recognise and should pay tribute to the outstanding achievement of the people and the political leaders of Spain and Portugal, who have rejected the path of authoritarianism and military dictatorship and restored democracy. Spain and Portugal are countries with which we have had ties since the fourteenth century; they are part of our common European history.

Entry to the Community, adherence to the principles of the EC Treaty, and our common membership of NATO, in which we hope Spain like Portugal will play a full part, make us in the fullest sense partners together in the European venture. Our common aim is now to bring our collective energies to bear in order to make the Community work as well as possible.

I am sure that your Lordships will join me in giving a warm welcome to the accession of Spain and Portugal to the European Community. My Lords, I beg to move.

Moved, That the Bill be now read a second time.—( Baroness Young.)

3.15 p.m.

My Lords, we are very grateful to the noble Baroness for introducing this Bill and for her explanatory speech. It is a very small Bill, but it deals with a very large and complex subject and it opens a new and, if I may venture to say so, somewhat unpredictable chapter in the history of the European Community. We on this side of the House support the Bill and the accession of Spain and Portugal and we wish them well. We hope that the enlarged Community will develop successfully.

Over the years, political, economic and social arguments have been advanced for and against the existence and the enlargement of the Community. The issues have been extensively debated both in another place and here; for example, in 1973 and again in 1975. These arguments are well known and, as a member of a small European nation, the political arguments have always seemed to me to be preponderant.

It was clear from the start that there would be economic difficulties. Certainly it became very apparent from 1973 onwards that these would increase and, as the House will be aware, they have provided the recurring discords of the last 12 years or so. But these are a challenge to be met and overcome, and the concept of a wider and more cohesive European Community of 12 nations, as described by the noble Baroness—indeed, 14 nations if you count Scotland and Wales—is admirable. It may not be a super-power yet but it is a super-Community and its potential is enormous, if it can harness its undoubted genius and experience in a co-operative effort. We need not lose our national identities, but we can afford to lose a little chauvinism from time to time.

We must not, however, overlook or disregard the difficulties which exist now and which lie ahead, and the noble Baroness referred to one or two of these in her speech. The negotiations with Spain and Portugal, which have taken eight years and which we have followed carefully, have alerted us to the problems and we know that those of Portugal are quite substantially larger than those of Spain.

As the noble Baroness has indicated, the addition of nearly 50 million people involves a change in the institutions. The Parliament will be increased by 48 seats—there will be 60 for Spain and 24 for Portugal; Spain will be given eight votes in the Council and Portugal five and the Commission will increase from 14 to 17. There will, however, be certain immediate advantages to British industry and the noble Baroness has quite properly emphasised these. I hope that we shall make special efforts to maximise them.

The Government themselves have a responsibility, through the Foreign and Commonwealth Office and the Department of Trade and Industry, to ensure that as import duties come down—and the noble Baroness said that they will be down by half in three years and removed completely in seven years—our exporters are both competitive and enterprising. This is where new jobs can be created if we are quick enough off the mark. The special provisions for the motor-car industry, to which the noble Baroness referred, are potentially valuable and the United Kingdom's share of additional cars allowed into Spain next year will be 5,000, which is twice the current number, with further increases in successive years. This calls for smart and efficient sales, marketing and particularly after-sales service, which is something many, otherwise good industries in this country have been criticised for failing to provide.

Like the noble Baroness, I welcome the initiatives already taken by the British Overseas Trade Board which has offices throughout the country. I was also impressed by the excellent brochure it has produced giving the basic facts and statistics about the two countries. I hope that the Department of Trade and Industry, the Welsh Office and the Scottish Office are actively canvassing industries to ensure that no opportunity is lost, especially in areas of high unemployment. If I may divert for a moment, I know from a past office that the South Wales ports, which have been declining over many years, have enjoyed a very close relationship with the ports of northern Spain and of Portugal. There is no reason whatsoever why industry in South Wales should not look to these potential new markets and to the opportunities which they now present. I hope that the CBI and the TUC in Wales will be thinking very carefully of ways and means of profiting from the new markets which result from this accession.

We must not forget that enlargement is taking place against a background of economic recession, and policies which were thought right for a smaller Community will need revision in the larger and more varied grouping of twelve. I have referred to impending difficulties and the chief of these is probably in the industrial disparity between the new members and the great majority of the rest which are highly industrialised. For example, industry contributes some 20 per cent. to GDP in Spain compared with a Community average of 30 per cent., and her industrial productivity is about 40 per cent. less than that of the Community. The difference is obviously much greater in the case of Portugal. It should be remembered—I say this in fairness—that Spanish industry has made great strides in the past 20 years, and Spain is to be congratulated on those advances. But we must be very careful in this country not to think that we can allow our manufacturing industry to decline and to stagnate. That would be an unmitigated disaster for us as the Community develops.

There is also the belief in some quarters that the accession of the two new members will lead to a demand for greater protection. The Minister's view on this would be of interest. It is the case that Spain and Portugal will now have to open their markets to developing countries in line with the Community's preferential trade agreements. There could well be pressure from them in due course to raise the tariff barriers of the enlarged Community. In some parts of Britain we are concerned about the implications of the accession for the regions. Regions' accessibility to economic activity is of obvious importance. To put it crudely, this is why the South-East of England is better off than the North-West of England in relation to the Community. If we do not plan carefully, enlargement could exacerbate these difficulties. We need development programmes which will take account of regional disadvantages and we need to anticipate the effect of the accession of two comparatively poor countries upon the future prospects of peripheral areas such as the North-West, large parts of Scotland and Wales.

There are some observers who see the enlargement as likely to increase the disparities and the imbalances which continue to create strains upon the unity of the EC. We must at all costs strive to avoid the development of a strong economic and industrial Community heartland surrounded by a distant and backward periphery. The concentration of economic and industrial strength in one area has dangers for all of us. I do not look at this pessimistically; I say that we must consider the danger and work to avoid it. On the other hand, we should not overlook the possibility that there could be a gradual decline in the dominance of the Franco-German axis which has dictated the economic fortunes of the Community since its beginning. There could be a shift of power towards the South and the West, especially the South, from the rich to the poor as Mediterranean influence increases. This power will be reflected of course in the institutions of the Community which were dealt with by the noble Baroness in her speech.

I turn briefly to another problem, the common agricultural policy, which was mentioned by the noble Baroness. This has always been "the joker in the pack", and the recent debate in this House on a report of our sub-committee on agriculture showed that clearly once again. The gracious Speech said that the Government intend to work for the reform of the common agricultural policy, and the noble Baroness referred to that again. To talk about it is one thing, but experience shows that to achieve any revision or even a slight amendment is quite another matter. The fact is that the accession we are debating makes the reform even more urgent than it was before. The figures show that, as a result of the accession, the Community's farm acreage will increase by 30 per cent.; the farm labour force will grow by 25 per cent.; and the number of farms will rise by 32 per cent. On the other hand, the number of consumers will increase by about 18 per cent. These are figures to ponder as we look to the future.

The CAP now takes up two-thirds of the Community budget, and if there are no changes the additional burden of two countries, notwithstanding what the noble Baroness has just said, pretty well dominated by agriculture, could impose an intolerable strain unless something is done. So far we have no clear picture of what will happen. I am grateful to the noble Baroness for the explanation which she tried to give us, but I am not absolutely clear that the Government have a really persuasive reply to the problem that I have described.

Two things seem to be clear: what Spain and Portugal manage to achieve during their respective transition periods is crucial, and what the Community itself manages to achieve by way of reform, especially of the CAP, may well be decisive in terms of the survival of the Community. Here again a more flexible and ambitious operation of the regional development fund could provide one possible answer to the problem. I personally believe that a gradual and sensible switch away from the CAP to the regional development fund is one possible solution to the continuing problem which besets the EC.

We have had several exchanges in the House about fisheries, which is of acute interest and which the noble Baroness also mentioned. This is quite natural because of the historic importance of this industry to us as a nation. When I had responsibility for fisheries I had the privilege of giving our fishing industry a new policy which then received a general welcome. Since then the experiences of the cod war and the common fisheries policy have brought great changes. It is a completely new scene in a comparatively short space of time; and now, as the noble Baroness said, we have Spain with a fishing fleet almost as large as the total fleet of the rest of the Community put together. The transitional fisheries regime agreed with Spain is complex and I think it is much better than we thought was attainable at one stage in the negotiations. The noble Baroness referred to the need for imposing strict control. I fully agree with her. Without going into detail, it seems that the important requirements relate to enforcement and inspection, and that we and other Community countries will need to consider whether this sector needs strengthening. Perhaps when she replies the noble Baroness will tell us what steps the Government have in mind in order to do this.

Again, the position of Gibraltar after the new accession has concerned us from the start of the talks. As time passes there will no doubt be further ramifications. However, the atmosphere has improved greatly and the Foreign Secretary has reiterated that the wishes of the people of Gibraltar will be respected by Britain. No doubt we shall return to this rather sensitive area in future debates. However, it would be a mistake if we allowed this occasion to pass without saying that we have the future interests of Gibraltar very much in our minds at this time. We were also interested to read about the special arrangements which have been made for the Canary Islands.

In conclusion, I shall refer briefly to two or three other matters which I regard as being of importance. First, it is clear that a Community of 12 members will present more problems and will be harder to run, as previous enlargements have demonstrated. I sympathised entirely with the speech of the noble Baroness but she was if anything slightly euphoric on that point. I do not believe the future will be quite as easy as she hopes it will be. We understand that the debates on voting procedures are continuing and that the Government are prepared to go along with more majority voting. I hope that is true because the machinery really will get jammed unless a little common sense prevails. If the Community is to be effective, and if decisions are to be taken in reasonable time, then a more liberal attitude towards voting seems to be essential.

Secondly, we must not overlook the implications of accession for NATO. The Spanish Prime Minister has spoken of a possible referendum which might pull Spain out of the alliance. It would certainly be curious if Spain were to leave NATO at the same time that she joins the Community. However, I understand there are signs that other thoughts may intervene in Spain. I hope that reason will prevail at the end of the day.

Thirdly, the need for extradition arrangements between Spain and Britain now assumes greater significance. Perhaps the noble Baroness can tell the House whether discussions are proceeding on that subject. There are a number of British citizens who we in this country would very much like to see returning home for various reasons but who at the present time are enjoying the sunshine of Spain. A little thought needs to be given to the current state of this law and to the ways in which it could be improved in the light of the new situation created by this Bill.

We hope that all those matters will be resolved amicably and that enlargement will be a success. There are huge problems to be overcome—not least, if I may say so, in relation to the Portuguese economy. A sympathetic attitude to that fairly small and poor country is essential. The Community has embarked upon a great enterprise, and animated by compassion and a true spirit of co-operation it can become the major world element in the preservation of international peace and understanding. That is my belief. It is also my hope for a better future. That is why I have pleasure in supporting this Bill.

3.33 p.m.

My Lords, although this is a one clause Bill designed to give legal effect in the United Kingdom to the accession treaty of Spain and Portugal to the European Community, and is thus a routine measure, it would be a pity for it to slip through your Lordships' House this afternoon without any sense of occasion. The noble Baroness has already ensured through her speech that this will not happen. She has hailed it as an important event. We on these Benches agree with her and we welcome the Bill.

For the Spaniards, it is the culmination of a process that started under General Franco, without any hope of success at that time. However, that is merely recent history, as some sectors of liberal Spanish opinion have had European aspirations for 150 years. Indeed, Jeremy Bentham—an unlikely philosopher, one might think, to appeal to the Spanish temperament—was held in high esteem in some Spanish circles in the 19th century.

However, Spanish liberalism was not to flourish politically in that century, and Spain has remained preoccupied with her own traumas, loss of empire, civil war, and isolation from Europe until very recently. Even so, the old saying that Africa begins at the Pyrenees was never true. The rivers Ebro, Douro and Tagus were the successive historic boundaries between Christianity and Islam—never the Pyrenees, which were straddled by a common architectural and linguistic heritage in the Middle Ages, and by a common political structure when the writ of the Counts of Barcelona ran up to Albi and Toulouse and around the coast to Nice. My purpose is not to indulge in an historical ramble but to put this little Bill in a broader context.

Here it is also appropriate to congratulate the Spanish people on the achievement of a democratic constitution in 1978, guaranteed by a constitutional monarchy. There can be no doubt that the King of Spain has trodden an extremely difficult and sometimes hazardous path with great maturity and judgment. With each year that passes Spanish democracy has become more assured.

Even so, it is unwise to be complacent—especially in view of Spain's volatile history. It is to the great credit of the Community to have recognised that this democracy should be underwritten as firmly as possible and that 10 countries have shown the political will—and the noble Baroness referred to this political determination—that has led to the introduction of the Bill before the House today. There has clearly been an overriding political consideration, as the noble Lord, Lord Cledwyn, said. The economic difficulties have not been overlooked but they have been considered capable of solution and the larger view has prevailed.

That is not to say that areas of potential tension do not exist. The noble Lord, Lord Cledwyn, referrred to Gibraltar. It is to be hoped that the reopening of the land frontiers as a result of a process initiated by Lord Carrington at Lisbon will lead to a growth of mutual interest between the Gibraltarians and the inhabitants of the Llano de Gibraltar to which the Rock is physically attached. The Rock and the mainland were always symbiotic and the best way ahead is for them to become so again. The noble Lord, Lord Cledwyn, referred also to an improvement in the atmosphere and I think he is correct about that; and Spain will now of course have to keep the frontier open as a member of the Community.

In the economic and, in particular, the agricultural sphere there are some necessary disciplines to which Spain especially will find it painful to conform. The noble Baroness referred to some of those disciplines, and I understand that my noble friend Lord Kennet will be making mention of fisheries in particular. I myself know that the Spanish food processing industry is flexing its muscles, and this may give some cause for concern to our own processors.

In the industrial and manufacturing sphere, the picture is rather different. I ask your Lordships to pause before pronouncing the accession of Spain a threat to our industries. This summer I spent two months in and around Barcelona. Catalonia is the only region of Spain in which an industrial revolution really took place. Despite General Franco's drive to industrialise Madrid, and thus assure his power base, it remains the most commercially and industrially orientated part of the peninsula.

It has also been traditionally protectionist, demanding tariffs from Madrid to protect its textiles and other exports. If we fear import penetration by the deft and diligent Catalans, let there be no doubt that they are equally if not more apprehensive of market penetration by us. They believe that they are exposing themselves to competition which will spell the end of some of their smaller and more traditional industries when the first tranche of tariff reduction takes place after three years. Nevertheless, they have put their protectionist philosophy behind them and are determined to bite the bullet of competition because they see their future within Europe and not outside it. They are prepared to accept initial disadvantages in order to secure the political prize.

That situation is not without opportunities for us, as the noble Baroness has already said. I venture to suggest that it is an encouraging development for the cause of free trade and a step forward in the consolidation of Europe as an economic and political force of increasing weight in the world.

Portugal's accession is generally thought to present the Community with less of a problem of absorption. Portugal's low rent per capita will make her a modest net beneficiary during the transitional period—but that is what the Community is about and Portugal's democracy likewise deserves the same underpinning as that of Spain. On state visits and the like we are always reminded that Portugal is our oldest ally. As your Lordships will of course be aware, that dates from the alliance made by Ferdinand of Portugal with John of Gaunt in 1372 against Castile, of which Gaunt had claimed the throne by virtue of his marriage to the elder daughter of Peter the Cruel. As we know, this claim did not prosper. However, Portugal maintained her independence from Castile which she only lost for some 60 years as a result of her annexation by Philip II. She is a sturdy nation with whom we have longstanding links, not least through the port trade, and we are glad to welcome her on board.

I hope that the message which will go out from this short debate is that we warmly welcome both our new Iberian partners and wish them well. As I said at the outset, this Bill may be a formality, but its Second Reading is also a significant occasion and has, I believe, been recognised as such in your Lordships' House this afternoon. It puts paid, once and for all, to the notion that Africa begins at the Pyrenees.

3.40 p.m.

My Lords, I warmly weleome this Bill and I should like to pay tribute to Her Majesty's Government's wholehearted and unwavering support for Spanish and Portuguese accession to the Community. I propose to confine my remarks to Portugal, where I had the privilege of spending four-and-a-half years as Her Majesty's ambassador.

Portugal's application to join was made over eight-and-a-half years ago, in March 1977, some six months after I arrived in Lisbon. I suggested to the then Portuguese Government that it might be a long process, and so it proved, primarily, I think, because the Community needed time to reform, or try to reform, its budgetary and agricultural arrangements. I am glad, nevertheless, that the process has finally been completed.

The reasons for Portugal's determination to join the Community were primarily political. Having, like us, lost its maritime supremacy and its overseas empire, it saw no future in isolation and thought it best to become part of a Western European grouping. Like the noble Baroness, I also pay tribute to the special part that my friend Dr. Mario Soares played in swinging opinion in Portugal behind this option. A good many Portuguese tended, perhaps rashly, to believe that the economic aspects might take care of themselves. Others hoped that, having overthrown a dictatorship, staved off an attempt to instal a Communist régime, and established a genuine democracy, they would be given substantial help by their richer partners in Europe.

When I was there I took occasion to warn them that they would probably face many of the same problems that we had encountered. They import much of what they need from across the Atlantic. I explained that in fighting the battle of the budget we were also fighting their battle since, if nothing was done, they might easily find themselves, like us, being net contributors while much richer countries were recipients. I am therefore sorry that the arrangements we have negotiated with the Community to rectify our own position apply only to us and not to others, like Portugal, with the same problems. I hope it is indeed the case, as the explanatory memorandum says, that before and after the transitional period Portugal can expect to be a net beneficiary from the Community budget.

In this context I was concerned to read the remarks of the Common Market budget commissioner, Mr. Christopherson, in September, accusing member governments of breaking their promises to Spain and Portugal to neutralise the early costs of membership, by cutting back the draft budget. I see that the European Parliament has since sought to restore those cuts. I hope that on this matter we and our partners will keep our promises.

Portugal has many problems. There is the loss of revenue from African colonies and the lack of resources in mainland Portugal. Industrial investments in the past were in areas now in difficulty throughout Europe—two great shipbuilding yards, a steelworks and a textile industry. Like us, Portugal has a position on the edge of Europe—a Europe in which prosperity tends to drift from the fringe to the centre. I was particularly interested in what the noble Lord, Lord Cledwyn, said about that. The funds of the European Regional Development Fund and the European Investment Bank are not adequate to redress regional imbalances. Portugal has a very low GDP per capita—some 2,000 dollars compared with a Community average which is four times that. Nearly 30 per cent. of the population is in agriculture. What will happen if, as elsewhere in Europe, that percentage goes down drastically and countrymen drift in large numbers to the towns, looking for jobs and houses?

Portugal imports between one-half and three-quarters of its food. I know that there is to be a four-year grace period during which Portugal will not have to pay levies on its grain imports, but after that what will happen? Will the Portuguese, after 1990, be able to afford to pay the Community's high food prices? Portugal's productivity is low. It is about only half that of Spain. Her traditional products, like cork, port, table wine, minerals and wood pulp are already exported to available markets and cannot easily be expanded.

However, there are some encouraging aspects. When in Portugal I was deeply impressed by the way in which Portugal integrated into her population the enormous number of Portuguese refugees from Angola and Mozambique—the retornados. The textile industry has had good successes recently—last year I believe it exported textiles to the value of about £900 million. There are about three-quarters of a million Portuguese workers in France and elsewhere in Europe who send back substantial remittances; and Portugal is receiving about 500 million dollars from the Community to modernise her agriculture.

The danger for Portugal is, I believe, of being swamped by imports from Spain. Portuguese history has largely been a resistance to domination by Spain. Now Portugal will not be allowed to restrict Spanish industrial imports after 1988. The Portuguese, I know, recognise that they are going to have to make drastic changes if they are to benefit from Community membership, to modernise their industry, to build better roads—as they are now doing—and cut down their very large civil service. There is always the threat that if the experiment fails there may be damaging political repercussions. One in every five Portuguese votes for the Communist Party. This is still led by old, unimaginative, diehard Stalinists; but if it acquired more dynamic leadership—if there were to arise a Portuguese Gorbachev—it could be formidable, especially if Community membership was not a success and, instead of prosperity and progress, Portugal, like us, encountered unemployment and industrial decline.

For us the accession of Portugal is of particular importance. We have a unique relationship with Portugal going back many centuries. A British ambassador in Lisbon enjoys a very special position. The Portuguese are an exceedingly civilised people—something that is becoming quite rare in today's world. They are warm-hearted and kind; indeed, they are some of the nicest people in the world. They are among our closest and firmest friends. I think that it is enormously important that, once they are in the Community, we should regard it as our special task to help them to settle in and make a real success of their membership so that Portugal may be prosperous and stable and our own relationship with them may continue to flourish, as I am confident it will.

3.49 p.m.

My Lords, may I add my voice to those of other noble Lords speaking in support of this Bill. I had the privilege of representing Her Majesty's Government at the accession of King Carlos to the throne of Spain a week after the funeral of General Franco. Even then, as the noble Baroness said, there were thoughts and questions among the leaders within Spain on the possibility of Spain, at some stage, being able to enter the democratic Community of Europe. Therefore we must all be pleased with the stability of Spain despite its many difficulties, and that it has been able to pass the test and has now been accepted by the Community. In the same way that is true of Portugal.

Like the noble Lord, Lord Moran, I suspect that the difficulties of Portugal will be very much greater than those of Spain. But the noble Lord, Lord Cledwyn, was quite right when he said that first the accession of Greece and now that of Spain and Portugal will add very considerably to the strains within the Community. I put it a little more strongly than that. I think it will bring very considerable pressures, of which there are already signs, that the Community should develop into two strata: those countries which are strong not being held back and those which are unable to keep up with the speed of development of the stronger ones being allowed to find their own path and their own speed of development. I think that would be a major disaster to the whole concept of the Community, but that is a feeling today within the Community.

I think the noble Lord, Lord Cledwyn, is quite right to say that the Minister spoke with a touch of euphoria in regard to the potential changes which are being discussed by Ministers. There is no doubt at all that steps cannot be long delayed. I believe that the strains of which I spoke and the sense of frustration that one finds are such that unless there is a real step forward within the Community structure so that the Community is able to meet the very serious challenges that not only surround it but lie also within it, and unless it is seen that improvements are being made and new opportunities, particularly for employment, are being created, I suggest that a serious situation and a crisis of confidence could develop.

Therefore I say to the Government in the sincerest terms that I do not believe time is exactly on our side. I believe we are reaching the stage when we need acts of courage and trust in terms of the Community as we now see it. We should allow it to develop, particularly, as my noble friend Lord Cledwyn has suggested, in the field of majority voting. I believe that this is absolutely necessary if we are to overcome some of the serious logjams and also the deep frustrations that are to be found within the Community offices. So in welcoming Spain and Portugal to the Community I hope the Government will recognise how this changes the situation; that the problems which exist are now more serious and that time is certainly not on our side in rectifying those difficulties and finding a solution.

3.53 p.m.

My Lords, among those who have spoken in this short debate there has been unanimity in favour of this Bill and in welcoming Spain and Portugal into the Community. It is a very short Bill about a very long treaty, and that of course is the right way round. The governments concerned are to be congratulated on having produced a good treaty.

I should like for a moment to take up the remarks which the noble Lord, Lord Shepherd, has just made. I think we can all agree with him that there will be difficulties and that perhaps time is not on our side in our attempts to solve these difficulties, but I am sure that he will agree that the feeling in the Community will not in any way be anti-Spanish or anti-Portuguese.

My Lords, it will be a feeling about the difficult common task of absorbing two economies which are not only poorer than most of those which are already on board but also different from them. It can be done, and I agree with the noble Lord that it is urgent, but let me add a word of caution about the two tiers that he mentioned. I should have thought that we had too often been told that we were not good enough to be in the top tier and should form part of a second tier in the Community. We have been told that too often to wish it on anybody else. Our part in this should be to resist such proposals. It should be regarded not as a burden but as an honourable duty by the more wealthy countries in the Community to carry the poorer ones for part of the way. That is what "community" means.

Gibraltar has been touched upon briefly, and it is good that this matter is being satisfactorily resolved. There is a natural tendency in Parliament and the press in this country to forget about things when they come right or look like coming right. I should like to dwell for a moment on the amazing fact that a quarrel which for a couple of centuries has looked as if it might blow up at any time and which in the last two years has looked really quite menacing is now back where it belongs—on the table between civilised and moderate governments, who are awaiting with pleasure the day when it will partly solve itself by accession, but only partly. The whole House will wish the Foreign Secretary well when he goes to Madrid in March to carry this matter one stage further forward.

I understand that Spain is now taking a lot of trouble to find the right two commissioners, and for this the rest of the Community can be grateful to the Spanish Government and opposition. In the European Parliament the political Right in Spain is to join with our own Conservative Party in the European Democratic group—which I think will be pleasant for them and they will have some sensible allies—and the Spanish Socialist Party is to join the Socialist Group in the European Parliament, where they will clearly be an asset to what one might call the more constructive wing of that group.

Fisheries are another matter which has gone right and on which for that reason it is not incorrect to dwell for a moment. The treaty is ingenious. It allows Spain the same access that it had under its treaty with the Community as an extraneous country over the last few years, with two exceptions, one each way; that is to say, it may not fish in the picturesquely named "Irish Box" for 10 years, as it has done up to now, and on the other hand it may have 4,500 tonnes of hake more a year than it has been allowed so far. Together with the limitation on the number of boats which are fishing and the quota system, this looks like a good enough régime to last for the 10 years that it is billed to last. But we can be very glad to see that the review conference on this matter is scheduled for 1993—two years before the expiry of the fisheries régime. That is only realistic. It will be hard to negotiate a new one. In the meantime the governments concerned are to be congratulated on having learnt the lesson of our own accession to the Community when the fisheries problem was just swept under the carpet and it took 12 years of bitter wrangling, ill-will and even occasional violence before it was solved. We look like getting it right this time and that is good.

I come now to the main point. I share the feeling which has been expressed by several noble Lords that though the Government are right to be optimistic they are perhaps in danger—though we would not expect them to declare their hand fully—of being too optimistic about the CAP. Can we imagine, when the present support grants for cereals and certain other foodstuffs are extended to Spain and Portugal, and when Spanish and Portuguese agricultural producers, who are, by Community standards, so much in excess of the consumers—we have just had the figures for consumers—become fully subject to the cat's cradle of payments, repayments and re-repayments which occur at the internal frontiers of the Community, that it will then be possible to hold VAT at the present level of 1·4 per cent., a level which this country has not even reached? Can we imagine that it will be possible for us to continue to hold ours below the general ceiling of 1·4 per cent? Can we imagine that it will be possible for the general ceiling to remain as low as 1·4 per cent?

Is it not rather the case that probably next year, and almost certainly in 1987, there will be immense pressure on the Council of Ministers to get national agreement to a raising of that ceiling; either that or a beneficial pressure stronger than we have yet known for a proper and fundamental reform of the CAP and—if I may say, as it were, something un-Social Democrat and rather pro-Conservative—for a natural freeing of market forces? If things were to go that way, we should be glad of the difficulties which we shall face in the next two years because they will force us all in the richer part of Europe (in the North) to face the realities of this CAP.

The Government will also be bearing in mind—and I do not complain that they did not mention it—the fact that for reasons best known to itself the Council of Ministers has this year proposed a Community budget as if there will be only 10 countries in the Community in 1986, but of course there will be 12; and that makes it inevitable that there will be one or two supplementary budgets with all the wrangling that that always entails superimposed on the wrangling that will be natural to the enlargement itself.

That is the dark side. The good side is that all five countries on the European fringe of the Atlantic are now fairly and squarely democratic, and anchored in democracy; and the four peoples who invented the unitary sovereign nation state—the British, the French, the Spanish and the Portuguese—are now together in the first human experiment that there has ever been in going beyond absolute sovereignty: the European Community.

4.1 p.m.

My Lords, I believe that we have had a very good debate this afternoon. It has been a short one, but I have been much heartened by it. I think that there has been a unanimity of view on giving the Bill a fair wind to see it on the statute book in time for the accession of Spain and Portugal on 1 st January 1986.

Your Lordships' speeches have shown that this House not only gives full support to the accession of Spain and Portugal to the European Community but shares the Government's belief that that enlargement represents a real turning point in the history of Europe and a determination to make a success of the new Community of 12. First Greece, and now Spain and Portugal, have succeeded in throwing off military dictatorship and restoring democracy. In acceding to the European Community they are joining a unique adventure undertaken by European countries which share common ideals and which seek an ever closer union among their people.

Spain and Portugal have been part of our common history since the beginning of the modern age. Both countries have made an inestimable contribution to our heritage and the way in which we look at the world about us. Had it not been for the determination and courage of Iberian adventurers in the 15th century the world today might have assumed a different aspect. Now their voyage of exploration is of a different kind. Centuries of conflict among the nations of Europe, from which Spain and Portugal have not been spared, have given way to a firmly based commitment to build a new Europe in which such conflict will no longer be possible.

That commitment is no mere act of governments It reflects a profound belief of the peoples of Europe that our continent must never again suffer the ravages which two world wars inflicted on the first half of this century. That is the rock on which this enterprise is founded. We should not lose sight of that essential truth when our attention is drawn to the inevitable disputes and teething troubles that mark the creation and development of the European Community.

Your Lordships have asked a number of specific questions in the debate, and I should now like to try to answer them. I was most interested in the speech of the noble Lord, Lord Cledwyn of Penrhos. I think that I speak on behalf of everyone when I say how well he put the case for the Bill. He described the advantages to British industry and the opportunities for new jobs that are opened up by the increased markets which we hope British business will take, and we all echo his congratulations to the British Overseas Trade Board.

The noble Lord asked whether the enlargement might lead to a cut in United Kingdom receipts from the regional and social fund. We expect to continue to receive substantial sums from the structural funds, but we have to face the fact that Spain is a relatively poor country. Its GDP is 56 per cent. of the Community average and it has problems of unemployment and regional disparities. Portugal will be the poorest Community country. Its GDP is 24 per cent. of the Community average. We believe that it is important that both should benefit from the Community structural funds. Nevertheless, as I said, we shall continue to receive substantial funds. I was interested in the noble Lord's point about the advantages that may accrue to South Wales, as I am sure were many other noble Lords, with its links with ports in Spain and North Portugal. I hope that that will be possible.

The noble Lord also asked whether accession would lead to further protectionism in the Community with regard to third countries. I very much hope and expect that the Community will maintain its attachment to the principles of free trade. I have no reason to believe that in joining the Community Spain and Portugal intend to change that. The Community fully supports the launch of the new GATT round in order to maintain an open trading system and to avert a slide into protectionism.

The problems of the reform of the CAP were referred to by both the noble Lords, Lord Cledwyn and Lord Kennet. I should hate the noble Lord, Lord Kennet, to think the Government were over-optimistic about the problems of the reform of the CAP. We have had enough difficulties over the negotiations as it is. The Commission Green Paper is a valuable attempt to address the fundamental issues, and we agree with its argument that restrictive pricing is the best way to get the CAP under control by cutting costs and cutting surpluses.

The noble Lord, Lord Cledwyn, asked about Spanish extradition, an issue which he put most tactfully. The treaty which was signed on 22nd July we expect to be ready to ratify early in the New Year. The Spanish procedures are more complex. Spain has a written constitution which requires treaties to be voted on in the Cortes before ratification, but we hope that that will be done soon.

The noble Lord also touched on Gibraltar, which is a subject that we have discussed many times in your Lordships' House. He will know that the transitional arrangements, derogations and transitional periods agreed between Spain and the Community will apply equally to Gibraltar. For our part, we have stated our position on sovereignty quite clearly on many occasions.

The noble Lord, Lord Moran, to whom again I am sure we all listened with great interest, particularly as he is a former ambassador in Portugal, asked about aid for Portugal. I can confirm to him that the Community fully recognises the need to give particular help to Portugal. Quite apart from pre-accession aid of 400 mecu, the Community will also give Portugal 700 mecu aid post-accession over 10 years to help to develop agricultural structures, and a further 1,000 mecu loans under the new Community instrument.

The noble Lord, Lord Shepherd, raised a point that has been, I believe, of concern to your Lordships and has been raised before in the House about what has come to be known as a two-speed Europe. With enlargement, the Community's membership will, of course, be more diverse and its economic structures more varied. We do not rule out some flexibility of approach in the coming decade in areas where that makes sense, as already happens for some Community research programmes in which not all member states take part, to give an example. But this variable geometry, as it has come to be called, is a far cry from dividing the Community into distinctive groups operating on different rules. We do not see how this would be either practicable of justifiable.

Several of your Lordships suggested that perhaps in the remarks that I made I was too euphoric about the future. If I have spoken in those terms it is not only from a strong personal commitment to the Community but also from very strong belief that we should see the Community in more than just economic terms and in all the technical and complicated detail that is required to reach the position that we have now attained on this Bill. It is important, not only for all of us here but also for the coming generation, to be reminded of the great ideals that inspire the Community and, we hope, will still govern it.

In conclusion there is no doubt about the support given by this House to the Spanish and Portuguese accession. Spain and Portugal will be working with their partners in future to fulfil the objectives of the EC treaty. They will be working with us in future, in the words of the treaty, for common action to eliminate the barriers which divide Europe and for the pooling of resources to strengthen peace and liberty. It is right that Spain and Portugal should be with us in this great experiment. Today we welcome them.

On Question, Bill read a second time, and committed to a Committee of the Whole House.