REPORT BY ECONOMIC STEERING (EUROPE) COMMITTEE

London, 6 July 1960

Secret

The Six and the Seven: The Long–Term Objective

COVERING NOTE TO THE ANSWERS TO THE PRIME MINISTER’S
LIST OF QUESTIONS

Introduction

We attach replies to the questions circulated by the Prime Minister in his memorandum of 1st June (E.Q. (60) 29). They are in the form of fairly short answers with, in some cases, more detailed argument and explanation in annexes. We have altered the order of the questions where it made it easier to submit the answers to Ministers in consecutive form. We have also added two questions (Nos 8 and 9) which we thought might arise in Ministerial discussion as they did in our own.

Reservations

2. We must make two specific reservations which apply to most, if not all, of the answers:

(a) On many points the policies of the Six ( i.e. , the European Economic Community) are not yet firm, notably on matters left open in the Treaty of Rome. Consequently any answers given now might be considerably affected by the policies which will eventually be adopted; and

(b) If the United Kingdom were to join the Six, we should undoubtedly influence to a considerable extent the development of these policies. Our presence would also inevitably bring about changes in the structure of the Common Market as it exists to-day. But it is not possible to judge now how great our influence would be and how far therefore our presence would change the eventual outcome and consequently some of the answers we have given.

‘Joining’ and ‘Close Association’

3. We have not discussed in the answers what might be the difference—on particular issues—between joining the Community and close association with it.1 This is because we think that, if we were to seek to join the Six, the preceding negotiation would bring about modifications in the Treaty of Rome which would be likely to leave us in much the position we should reach if we sought ‘close association’ at the outset. There would be some difference in public presentation, but probably little in substance. The main substantial differences would be:

(a) ‘Close association’ might well take much longer to achieve than actual joining, and the price we should have to pay would be greater than we should have had to pay for the Free Trade Area, while we should not be members of the inner councils of the Six, and would thus not solve the political difficulties which we think will arise if we remain outside;

(b) Our willingness to join as a full member would give the other members of the Six a better chance to overcome any French reluctance to accept us; whatever their individual inclinations might be, they would find it much harder to secure French acceptance of any intermediate solution short of full United Kingdom membership, and

(c) The immediate impact on the Commonwealth would probably be less unfavourable if instead of actually joining the Community we entered into close association with it.

The Issues Involved

4. In what follows we set out some of the main issues which arise on the answers. But we have not attempted to summarise the answers, and many of the qualifications and reservations which appear in them are not repeated here. This covering note is therefore supplementary to the answers, but not a substitute.

Foreign Policy Considerations

5. In the first place, it is now apparent that there are strong reasons of foreign policy for our joining the Six. If the Six ‘succeed’, we should be greatly damaged politically if we were outside, and our influence in world affairs would be bound to wane; if we were inside, the influence we would wield in the world would be enhanced; while still retaining in some degree the right to speak on our own account, we should also be speaking as part of a European bloc. If, on the other hand, the Six ‘fail’, there would be great damage to Western interests, and the weakening of Europe which would follow would be a serious matter for the United Kingdom; it would be too late for us to go in to prevent failure when a breakdown was seen to be coming, but if we were already in, we could probably strengthen the European bloc and prevent its disintegration. Foreign policy considerations therefore require us to be in the inner councils of the Six.

Economic Advantages

6. In joining the Six, we should be participating in a vigorous and rapidly expanding market, and there would be good grounds for hoping that our commerce and industry would benefit. We could gain a great deal from larger scale production, specialisation, higher efficiency resulting from keener competition and the more rapid spread of technical skills and new developments. All this we should miss—to the detriment of our industry—if we remained outside. If we joined the inflow of new investment into the United Kingdom would be greater, and the outflow of capital to the Six might be less than if we remained outside. We should, however, only achieve these advantages and potentialities if we were fully competitive with the Six—which we must be whether we join the Common Market or stay outside it—and if the Government maintain appropriate economic policies at home.

What Joining the Common Market Means

7. We cannot join the Common Market on the cheap. Joining means taking two far-reaching decisions. First, we must accept that there will have to be political content in our action—we must show ourselves prepared to join with the Six in their institutional arrangements and in any development towards closer political integration. Without this we cannot achieve our foreign policy aims— see paragraph 5. Secondly, there must be a real intention to have a ‘common market’, and this implies that, in so far as the members of the market consider that production inside the market requires protection against outside production, this must also apply in our corner of the market; that is to say, in general we must accept the common tariff.

The Four Main Problems

8. Joining the Common Market raises four main problems. First, and most difficult of all, are the problems of our political and economic relations with the Commonwealth and the maintenance of free entry which goes wider than the Commonwealth. Secondly, there is the problem of agriculture and horticulture. Thirdly, there is our commitment to, and relationship with, the other countries in the European Free Trade Association (EFTA). Fourthly, there is the question of the reaction of the United States (and indeed other third countries outside the European bloc and outside the Commonwealth) ..

The Commonwealth and Free Entry

9. In the political field we believe that we could demonstrate to the Six the importance to them (if we were to join) of our maintaining the Commonwealth political relationship. We believe that we could show the value to the free world generally of our special relationship not only with the old Commonwealth countries, but also with the newer countries (notably India) and the emerging countries (for example Nigeria). The Six in general are well aware of the attachment of the British people to the Commonwealth concept.

10. It is in the economic field that we come up against what seems to us the really crucial issue in the problem of whether or not to join the Common Market. This arises from the existence of arrangements for the duty-free entry into the United Kingdom of a range of products which come mainly from the Commonwealth, but also from important third countries like the United States. At one extreme it seems that if we were to insist on the maintenance in full of these free entry arrangements (which are the basis of the whole Commonwealth preferential system), there can be no agreement with the Six, particularly as we could not then accept and take part in their common agricultural policy. At the other extreme, it seems inconceivable that we could accept the common tariff in full and thus give the Six more favourable treatment than the Commonwealth (‘reverse preferences’) on some products in which there is a strong Commonwealth interest. For example, it is unthinkable that we should apply the common tariff of 20 per cent against wheat from Canada and Australia—and the United States—while allowing French wheat in free of duty.

11. The Six would expect us to raise the problem of free entry, but we cannot judge whether we could negotiate an acceptable compromise solution. A possible line of approach—though one full of difficulties—is indicated in the following paragraphs.

12. It might be that we could accept the common tariff on manufactured goods without placing intolerable strains on the Commonwealth, provided that we could secure from the Six some easement of their restrictions on imports from the low-cost countries (though our attitude to Japanese goods would be a complicating factor). Even so, the granting of ‘reverse preferences’ in favour of the Six and against the Commonwealth would create serious resentment in some Commonwealth countries.

13. The treatment of raw materials would be a somewhat easier problem, a solution might be found on the basis of acceptance of the common tariff, or on the continuance of free entry coupled with compensation taxes, or possibly through arrangements on a commodity by commodity basis. To accept the common tariff on raw materials as well as on manufactured goods would be a further blow to the Commonwealth.

14. As regards foodstuffs, the problems of tropical products would probably be less difficult than those of temperate products.

15. As regards the forrner, our overseas territories and the overseas territories of the Six produce in general the same kind of things, and a broad bargain might be possible under which they would allow free entry to the produce of our overseas territories and we would allow free entry to the produce of theirs. Taken as a whole, such a bargain ought to be acceptable to the Commonwealth countries concerned, whether dependent or independent.

16. It is on temperate foodstuffs that the most difficult problems would arise. It seems out of the question that we could accept the common tariff or the other protective devices of the Six for these products, even from foreign sources, because of the impact on the Commonwealth, the damage to our trading relations with third countries—in the case of the United States a breakdown of the Trade Agreement—and the consequences for food prices here. The only possible way out might be to propose discussions with the Six, commodity by commodity, bringing in the Commonwealth countries concerned, the United States and perhaps other major foreign suppliers. But this would involve a most formidable programme of negotiations and at this stage it is impossible to say whether generally acceptable compromises would emerge.

Agriculture and Horticulture

17. If we joined the Six and accepted their common agricultural policy, our farmers as a whole might not suffer, though some sections would. But the common agricultural policy is radically different from our own, and farmers in the United Kingdom would need to be convinced that this new policy would not work out to their disadvantage. To join the Six while attempting to maintain existing free entry arrangements for foodstuffs would expose our farmers to the full force of world competition. Horticulture would involve difficulties of a different kind. It is not the present intention of the Six to use managed markets in horticulture, but since we rely on the tariff to protect our horticulturalists, these would be faced with increasing competition from the Continent from the outset. We might be able ( e.g. , through minimum price schemes) to mitigate the damage for some time, but in the longer term some sections at least of the industry would be bound to suffer.

European Free Trade Association

18. Her Majesty’s Government have given repeated assurances that they will abide by their commitments to the Seven and will only proceed in their dealings with the Six in consultation and accord with their partners. If it were to look as though we were not fully honouring these undertakings and were merely out to obtain the best possible arrangement for ourselves, we should be exposed to severe criticism on grounds of bad faith—and not only in the countries of the Seven. In practice, if we were to join the Community and if, as is possible, Denmark and Norway joined with us, it should prove practicable to negotiate an association providing for the avoidance of trade discrimination between the EEC thus enlarged and those EFTA countries who felt unable to enter the Community. The outcome might well be satisfactory, but the handling of the EFTA countries at the time when we presented our proposals to them, and when we entered into negotiations with the Six, would be very difficult indeed and call for the greatest care.

United States

19.If the Americans recognised that we were intending to enter Europe politically as well as economically, they could hardly object. Just as they have welcomed the move towards integration brought about by the Treaty of Rome, so they would probably welcome a move by us to integrate ourselves with the Six. In addition to their interest in the problem of free entry, however, they would dislike the larger bloc from the economic point of view, since it would entail increased discrimination against them. This dislike might be intensified if the arrangements for dealing with the problems of the overseas territories (dependent and independent—the Six’s and ours) led to the setting up of what looked like new preferential arrangements discriminating even further against the United States.

Tactics

20. On all current indications we do not think that circumstances will be favourable for discussions with the Six leading to a mutually acceptable settlement for some considerable time—at least 12 or 18 months. We do not therefore deal in this paper with questions of tactics and handling. They will, however, be of the greatest importance and may determine the nature of the settlement ( e.g. , whether we join the Community alone or as part of a wider move involving the other EFTA countries). These matters would need very full consideration. There would be questions of how and when, and in what order, the Commonwealth, the EFTA countries and others with an interest (notably the United States) were consulted, and the further questions of how the negotiations should take place and where. All these matters we leave over for the time being. But we do think it right to emphasise to Ministers at this time that, once they have decided on our policy and on the basis on which they are willing to negotiate, an essential step must be to ensure by some appropriate preliminary approach that the Six (and this really means France) would be willing to see us join or move to close association with them on terms which we could accept. To launch another initiative and receive a second rebuff would be disastrous.2

ANSWERS TO THE PRIME MINISTER’S QUESTIONS

Foreign Political Questions

QUESTION 1
Will the Six develop into a powerful and effective unit, both economically and politically, or will it break up or be weakened by internal dissention?

ANSWER

(a) It is not possible at this stage to be sure how powerful and effective the European Economic Community (EEC) will become, or what shape it will assume. So much will depend on what happens in France and Germany after the disappearance of de Gaulle and Adenauer.

(b) On the one hand there is a genuine sentiment in the peoples of the Six for closer European unity, even at the cost of surrendering considerable national individuality. This is likely to grow as the Six become more and more a going concern. It will be in the interests of the Governments of the Six to form a closer-knit community and they will be encouraged by the United States to do so. If things go according to plan, the Community should become a very important factor on the world scene—politically, economically and quite possibly militarily as well.

(c) But on the other hand if there is a crise de regime in France after de Gaulle’s disappearance or over Algeria, or if the Germans were, some years after Adenauer’s departure, to lose their morale and seek an accommodation with Russia, or if there were to be a major world economic recession, then the Community might well be greatly weakened. Furthermore, one cannot be sure that there will not be Franco-German rivalry for the leadership after the disappearance of de Gaulle and Adenauer, even though in other respects the Community is working very successfully.

(d) As long as General de Gaulle is in power, his concept of a ‘Union des Patries’ is likely to dominate. If the Community develops on these lines, its form may be described as that of a Confederation, rather than the political Federation which remains the objective of the Monnet school.3 It is more difficult to forecast how far Governments will hold to this concept after the General’s departure. There can be no certainty that the strength of the Federalist movement will not reassert itself effectively. But in any event it does not follow that a confederation would be less effective and powerful than a federation.

QUESTION 2
If it is going to succeed, is it desirable that the United Kingdom should be associated with it so that we can influence its policies?

ANSWER

(a) Yes. If the Community succeeds in becoming a really effective political and economic force, it will become the dominating influence in Europe and the only Western bloc approaching in influence the big Two—the USSR and the United States. The influence of the United Kingdom in Europe, if left outside, will correspondingly decrease. Though we may hope to retain something of a special position vis-a-vis the United States, the latter will inevitably tend to attach more and more weight to the views and interests of the Six rather than to those of the United Kingdom. The relative decline in the United Kingdom’s status will reduce our influence in the Commonwealth (see also Question 17) and with the uncommitted countries. Quite apart, therefore, from the economic damage which we shall suffer from the consolidation of the Six, if we try to remain aloof from them—bearing in mind that this will be happening simultaneously with the contraction of our overseas possessions—we shall run the risk of losing political influence and of ceasing to be able to exercise any claim to be a world Power.

(b) On the contrary if we were to be effectively associated with the Community, we should not only be able to benefit from its political and economic influence, but would have the opportunity to influence its policies. This would be particularly the case if, as is by no means impossible, France and Germany dispute for the leadership of the Community. If that should happen it might be the role of the United Kingdom to hold the balance between the two and exercise a degree of leadership in the process.

QUESTION 3
If it is going to fail, would this be such a setback for economic and political co-operation among the Western Allies and for world trade generally that we ought to go in to prevent failure?

ANSWER

(a) Yes. Whether failure would occasion a serious setback for world trade may be arguable. However, the collapse of the Community after it had been in existence for some years, would be a grave misfortune not only for Western Europe, but for NATO and the Western cause as a whole and therefore for the United Kingdom. It would greatly increase the risk of Western Germany breaking the ties with Western Europe and throwing Germany itself into the arms of the USSR. It would encourage the spread of neutralism in Europe and would seriously endanger the existence of NATO.

(b) If the United Kingdom were in a position at the critical moment to exert a powerful influence, these dangers might be overcome. But it must be doubted if the United Kingdom, after the consequences of some years of standing aloof from the Community, would be in such a position. The United Kingdom would be in a much stronger position to prevent the collapse of the Community or to limit its effects if it had been associated with [the] Six from an early date.

QUESTION 4
Alternatively, is the creation of a powerful bloc in Europe— ‘the third force’—likely to be dangerous in terms of world power politics?

ANSWER

A European ‘third force’ would only be dangerous if it pursued radically different policies from those of its allies. Such differences could only occur if the Community adopted a more aggressive or more conciliatory attitude towards the Soviet bloc. It does not seem possible that Western Europe in the foreseeable future could enjoy the military strength to contemplate adventures against the Russians except at the side of the United States and United Kingdom. Neutralism is a little less unlikely but for political and geographical reasons this too seems a remote possibility. The risks of neutralism in any individual country of the Six would certainly be much greater if the Community did not exist or were to disintegrate. There is, however, a possibility that the Six might pursue independent policies (possibly but not necessarily anti-American) which would not affect their basic loyalties but would have some of the disadvantages of neutralism.

QUESTION 5
Who of the Six is likely to control it or have the greatest influence over its policies?

ANSWER

The French will have the greatest influence in the next few years and may be able to retain it. But much will depend on the future of France after de Gaulle’s departure and upon developments in Germany. The Germans, particularly if there was a swing to the Right backed by the industrialists, might well make a determined challenge for the leadership.

QUESTION 6
How would our influence with the Six from outside compare with our influence if inside?

ANSWER

(a) The tendency, already noticeable, for the Six to reach decisions on questions of importance to them by discussion among themselves before meeting other countries in the various international bodies will no doubt grow as the Community develops. As this extends, as seems inevitable, to political consultation, we shall find ourselves increasingly excluded and therefore unable to exert effective influence during the formative stages of EEC policy-making. On matters directly affecting the Treaty of Rome this is already the position and we have already been the sufferers in the last few months from the growth of direct consultation between the Six and the United States. We may find a tendency for the United States and EEC increasingly to concert policy on major issues, political and economic, without proper regard for the views and interests of the United Kingdom.

(b) The best way of insuring against this would be so close an association with the Six that we take part, from the outset and at all stages, in policy discussions on particular problems. How far it would be possible to achieve this by an arrangement short of full membership is open to question. It would certainly be difficult to achieve it with complete success unless we were regarded by the Six as full and equal partners.

QUESTION 7
How will the development of the Six affect our relationship with the United States and our influence in the rest of the world?

ANSWER

(a) Although we could still hope to maintain something of a special position with the United States, more particularly perhaps in military matters, and would continue still to benefit from the ties of a common language, the general decline in our influence—especially in Europe—would inevitably encourage the United States to pay increasing importance to the views of the Community. The corollary is that if we were effectively associated with the Six we should not only improve our position with the United States but in some degree be able to act as an intermediary between the United States and the Community.

(b) As regards our influence in the rest of the world, this is partly covered by the answer to Question 2. lf we stayed aloof from the Six, the relative decline in our status would reduce our influence in the Commonwealth and with the uncommitted countries. We should run the risk of losing political influence and of ceasing to be able to exercise any claim to be a World Power. On the other hand, if we joined the Community, the initial reaction of the Commonwealth would be that this was turning away from them. Our influence with some of the uncommitted countries, e.g., in Africa and Asia might in the short term be diminished to the extent that we were felt to be even more closely associated with the colonial rearguard, viz., France and the Netherlands, although much would depend on developments in Algeria and what country might currently be the target of the ‘anti–colonialists’. In the longer term, our association with the Six should make us economically stronger and thus improve our capacity to wield influence through trade and aid—factors which will count a good deal with the uncommitted countries.

QUESTIONS 8
What would be the attitude of the United States to our joining the EEC?

ANSWER

(a) The initial reaction of the United States to our seeking membership of the EEC might well be one of mistrust of our intentions. But if it was made clear that we were seeking full membership and if—as we should hope—this was welcome to the other members of the Six, the United States Administration could hardly be seen to oppose the joint purpose of the Six and of ourselves. Furthermore, there would be political advantages for the United States to set against any economic disadvantages for them. Public opinion in the United States which favours the concept of a United Europe would in general be on our side. There would, however, be misgivings both inside and outside the Administration. On the economic side, American dislike of a larger bloc discriminating against United States exports would be strengthened. Some circles would be disturbed at the thought of their closest ally moving to some extent out of their sphere of influence. These fears would be mitigated by the hope that the accession of the United Kingdom to the Six would increase both the strength and reliability of Europe.

(b) Membership of all three European Communities (the European Coal and Steel Community and the European Atomic Energy Community as well as EEC) might endanger our bilateral agreement with the United States on atomic energy matters.

[ matter omitted ]

Trade And Economic Questions

QUESTION 10
What direct trade and economic advantages do we expect to gain from joining the Six?

ANSWER

(a) The industrial policy of the Six, in contrast to their agricultural policy, is competitive and expansionist. Joining the Six would give large potential trade and economic advantages for British industry. We should be joining an area which is economically the most rapidly expanding in the world and we can reasonably hope that our commerce and industry would be invigorated by this. We would be part of a single market of over 200 million people; and though we should still, compared with our European competitors, be slightly handicapped in much of the area by higher transport costs and different standards and specifications, we could gain much from more specialisation, larger-scale production, higher efficiency through greater competition and a more rapid spread of technical skills and new developments. The inflow of new investment from both inside and outside the area might be greater, and the outflow of capital to the Six might be less, than if we remained outside, with consequent benefit to our balance of payments. Finally, in its external trade, the area should be at once a competitive seller and an expanding buyer. With rising production, it would be possible, given the will, to invest more overseas and give greater aid to under-developed countries.

(b) But it should be emphasised that all the above advantages are potentialities that joining the Six might enable us to realise, not inevitable consequences of joining. If our economy and our exports are to grow faster in the future the main changes must come from within the United Kingdom. Even before union the exports of the Six were growing faster than ours. If we are to prosper, we shall have to be fully competitive with them—whether we are in the Common Market or not—and the removal of tariff barriers against the Six would force greater competitiveness on our industries. But the Government would still have to maintain appropriate economic policies at home.

(c) Whether we join the Six or not, we shall have to reduce the proportion of our output devoted to consumption, and increase the proportion which is invested or exported. If we join the Six and seek to secure the benefits of association with the Community, we shall have to be fully competitive with them and this may involve changes in our industrial structure which may be both more rapid and of a different character than would be the case if we stayed outside. While these changes were taking place, there would be greater need for mobility of labour in the United Kingdom, and some social hardship might be involved. In this connexion, however, we must remember that changes in the pattern of industry are taking place all the time, and that in an expanding economy they can be accomplished without undue difficulty. Moreover, we were ready to face industrial changes when we originally proposed a free trade area, although the changes required for the Common Market may be a little greater than those which a free trade area would have involved. If, on the other hand, we decide to stay out of the Common Market, we shall not be faced with these particular, short-term problems, at any rate in the same form. But neither will United Kingdom industry have the advantages of our association with the Six, and this may lead to stagnation and the country as a whole being the poorer for it.

QUESTION 11
What are the other important consequences of joining the Six?

ANSWER

(a) One of the objectives of the Six is the eventual free movement of labour within the area of the Community. If we join the Community, we must expect gradual pressure to adopt a more liberal attitude to this question, but how much more liberal cannot be forecast at this stage. In general, the present practice of the Six is less restrictive than ours, and we should find it difficult to resist pressure to fall into line with them. We should bear in mind that the movement of labour works both ways, and might conceivably be of advantage to us as a method of dealing with unemployment.
If we joined the Six, we should be accepting the objectives of the eventual free movement of capital, the removal of restrictions on services, such as banking and insurance, and the harmonisation of labour conditions (equal pay, for example), and of fiscal policies. The future significance of these objectives is quite uncertain, and the Six will certainly pursue them gradually. As members of the Community we should be in a position to exert our influence on what the actual policies should be.
In general, it seems fair to say that most of these possible developments offer potential advantages in the long run (and from some, such as banking and insurance, we should benefit in the short run as well), but they may give rise to some difficulties in the transitional period.

(b) There would be some change in the pattern of our trade, though how great it would be is impossible to say. There is already a tendency for the proportion of our trade with the Commonwealth to fall; this tendency would be increased, since we should both buy and sell more in the area of the Common Market. We should also expect to buy proportionately less from the United States and we might sell proportionately less to them as well.

(c) Very tentative estimates suggest that if we join the Six as full members, and accept the common agricultural policy without modification (but see the introductory note to Questions 13–15), the direct effect on the Retail Price Index might be to raise it by about 2 per cent—some increases in food prices being offset by some reductions in the prices of manufactures. There would be consequential indirect effects on wages and prices, but both direct and indirect effects would make themselves felt little by little over the lengthy transitional period. As a partial offset to the rise in the cost of living there would be the savings to the Exchequer from the abolition of the agricultural subsidies, and these could be used to reduce the level of taxation.

QUESTION 12
What value do we expect to gain from our preferential position in the markets of the Seven (bearing in mind possible adherents)? If we attempted to bring the Six and the Seven together, how much of this advantage might we lose through:

sharing the preferences with the Six;
the possible refusal of some members of the Seven, and any later adherents, to associate with the Six?

ANSWER

We expect to increase our export trade to the Seven (i.e., other EFTA countries) by a useful amount. The total market (over 90 millions including the United Kingdom) is big enough to give us in theory a major increase, and of course we dominate the market as the greatest industrial producer. in a way in which we could not hope to dominate the Six. On the other hand, the preferential advantages are small in the richest parts of the area. If we had to share our preferences with the Six we should lose most of our gains, though if the sharing were postponed for a couple of years we could dig in during that time and expect then to retain some of our gains.

[ matter omitted ]

Commonwealth Questions

QUESTION 16
To what extent does joining the Common Market put Commonwealth free entry and our Commonwealth preferences at risk? Of what value are they now, and how much of that value might we expect to keep over the next 10 or 20 years in either case? Would compensation taxes on some of our exports to the Six to allow for Commonwealth free entry be practicable? Could we negotiate any benefits for the Commonwealth in the markets of the Six to compensate for loss or reduction of free entry here?

ANSWER

(a) Joining the Common Market without any special exception would require us to apply the common tariff to all imports from the Commonwealth, so ending free entry (except for those raw materials where the common tariff is nil) and the preferences we give the Commonwealth, and replacing them by preferences for Europe against the Commonwealth.

(b) We should lose immediately such contractual rights as we have to preferences and all preferences themselves would disappear within a few years. They cover about 20 per cent of our total exports. The value varies but major exporting industries attach a good deal of importance to them. They are slowly declining in value and the decline will continue; if we do not by our own action ( e.g. , through our arrangements with the Six or because of substantial increases in our own agricultural output) hasten change, our preferences in Commonwealth countries will still be worth having even after 10 years.

(d) Commonwealth Governments would not be prepared to let us, in their absence, negotiate benefits in Europe to compensate them for loss or reduction of free entry here. The most important trade affected would be in agricultural items where the Six would be very unlikely to make any significant concession. There might be scope for negotiating benefits for tropical foodstuffs, and possibly for some raw materials and low cost manufactures, as part of an arrangement involving reciprocal benefits for the associated overseas territories of the Six.

(e) The difficulties for the Commonwealth world be reduced if free entry into the United Kingdom could be continued for basic foodstuffs. But this in turn would give rise to two problems. First, if free entry were confined to the Commonwealth, there would be very serious difficulties with the United States and other foreign countries, quite apart from the consequences for the cost of living. Secondly, the retention of free entry would remove any attraction the Common Market might have for United Kingdom farmers.

QUESTION 17
Is it politically possible to take a course which could be represented as turning away from the Commonwealth? Would it in fact be practicable to join the Six without substantially weakening the Commonwealth connexion?

ANSWER

The initial reaction in Commonwealth countries to our joining the Common Market would be difficult to dispel, and there would possibly be a continuing fear that we had altered our traditional policy and had turned away from them. Furthermore, in course of time the Common Market may develop into a federal European State, though such a development would be contrary to present trends among the Six. The closer the Six moved towards a federal State, the more difficult it would become for us—if we were members of the Community—to maintain our relationship with the Commonwealth, at any rate on its present basis.

The indirect political effect, i.e. , the political repercussions of the economic consequences, would depend on the extent to which the terms we were able to negotiate with the Six in fact damaged particular Commonwealth countries. Any withdrawal of free entry would create great difficulties with them. They would insist on re-negotiating their trade agreements with us, and we should stand to lose the preferences we enjoy in their markets. If we were unable to preserve free entry for foodstuffs, the economic consequences for the Commonwealth would be so serious as to endanger its very existence, particularly since we should be admitting imports of foodstuffs from Europe duty-free. On the other hand, if we remained outside a successful European common market our influence with the Commonwealth would be affected by the relative decline in our political status and economic strength. (See also the answer to Question 2.)

QUESTION 18
If the Commonwealth connexion were substantially weakened, how would this affect our influence in the world?

ANSWER

The Commonwealth association (including the use of sterling as a reserve and trading currency) is an important buttress of our position as a Power with worldwide interests and influence. lt goes some way to offset our loss of stature in the economic and military fields. Without it, or were it substantially weakened, our standing in the world would suffer and our ability to influence the policies of the United States be affected. A unique bridge between the West, i.e. , the older white countries of the Commonwealth, and the new countries of Asia and Africa would be broken. Our political influence with Asian and African countries might well diminish with consequent increased opportunities for the Communist Powers and a weakening of our trading potential in these parts of the world […]

Sovereignty Questions

QUESTION 19
To what extent would joining the Six require us to give up sovereignty, i.e., to give up such control as we still have over our domestic economic policies including agriculture and our social policies?

ANSWER

Between now and 1970 there would be some progressive loss of sovereignty in a number of matters affecting domestic policy, of which agriculture is likely to be an important example. It is difficult to say how much would be involved in any single field. The terms of application of the generally imprecise provisions of the Rome Treaty affecting the issues other than tariffs have still to be agreed between the Six in many cases. If we were to join the EEC at an early date we could take part in the formulation of these provisions, and influence the extent to which they affected freedom in domestic policy. The effects of any eventual loss of sovereignty would be mitigated:

by our participation in majority voting in the Council of Ministers and by our being able to influence the Commission’s preparatory work;
if resistance to Federalism on the part of some of the Governments continues, which our membership might be expected to encourage.

[ matter omitted ]

REPORT BY ECONOMIC STEERING (EUROPE) COMMITTEE

Date