Canberra, 13 February 1961
Possible Association of UK with the EEC: Cabinet Submission No. 9961
This is an ‘information’ paper by the Minister for Trade. It makes no recommendations although it does canvass (paragraphs 19 to 24 of the attachment) three possible courses Australia might take.
In general, we think the paper attached to the submission quite a well-written short account of where matters now stand in this field. And we would agree that, until there are further developments, it would be premature to try to reach conclusions on what Australian policy should be.
One point which is perhaps not given sufficient emphasis, although it is mentioned, is that, if the UK accepted a common tariff with the EEC countries on industrial products, other Commonwealth countries who are exporters or potential exporters of industrial products to the UK, would have to face the prospect not merely of receiving no preference in the UK on such products, but of being discriminated against by ‘reverse preferences’. In other words, industrial products from Commonwealth countries entering the UK would be subject to protective duties levied under the Common Tariff; whereas similar EEC goods would enter UK during the transition period at lower concessional rates and, at the end of the transition period, free of duty.
This is obviously something of immediate significance to Canada and other Commonwealth countries, such as India and Hong Kong, which already have a substantial trade in exports of manufactures to the UK.
Australia’s present exports of manufactures to UK are relatively small. But, in considering what our attitude to UK entering into the European Common Market should be, we cannot afford to take a short-term view. The UK move would not be a temporary one which could readily be reversed. It would mark a permanent change in economic relations both between UK and the other countries in the Common Market (perhaps in the end most of Western Europe), and also between UK and the rest of the Commonwealth.
We have, therefore, to think of the effects on Australia not merely over the next five or ten years but much further ahead, when the structure of Australia’s export trade may be very different from what it is at present. Manufactures are already beginning to play an increasing role in our exports and, if we were to think ahead say 25 years, it seems probable that by then Australia could be an important exporter of a wide range of industrial products.
The trend over recent years has been for trade among countries exporting industrial products to grow faster than trade between those countries and countries exporting primary products. It may at present seem far-fetched to think of Australia as an important supplier of manufactured goods to the United Kingdom; but, provided Australian-made goods are not discriminated against in the UK markets, there seems no reason why progress should not be made in that direction in the decades ahead.
Canada already sends quite a range of manufactured goods to the UK and, now that dollar discrimination has largely been removed, is looking to a large expansion of that trade. This consideration has played an important part in Canada’s opposition to the entry of the UK into the Common Market. Australia’s interests, taking the longer view, would seem to lie in the same direction.
Those in the UK who favour acceptance of a Common Tariff are apparently resigned to the fact that UK could hardly expect, in such circumstances, to continue to receive preferences on her industrial exports to the rest of the Commonwealth. But they do not seem to realise that it would be difficult for the outer Commonwealth countries to continue to accord even non-discriminatory m.f.n. treatment2 to UK goods, if the UK were discriminating against them over the whole range of industrial products.
1 Document 124.
2 The term ‘m.f.n. treatment’ refers to a status awarded by signatories to the General Agreement on Tariffs and Trade whereby the receiving nation is granted all trade advantages—such as low tariffs—that any other nation also receives.
[NAA: A4940, C3368 PART 1]