Chequers, 18 June 1961
Secret
Europe and the Commonwealth
THE PRIME MINISTER said that the Meeting should first examine the reports prepared by officials on the implications of signing the Treaty of Rome, in order to identify the main problems which would arise if the United Kingdom applied to accede; they should consider, in the light of their discussion of the reports by officials, the line to be taken in the forthcoming discussions with Commonwealth Governments, and what other action was now necessary.
Commonwealth Free Entry
The Meeting had before them a note by the Secretaries (E.Q.(61) 18) covering a report by officials on the implications, for Commonwealth free entry, of signing the Treaty of Rome.2 The broad conclusions of the report were that, while satisfactory arrangements might be negotiated with the European Economic Community (EEC) for raw materials, tropical products, and perhaps manufactured goods from Canada, Australia and New Zealand; and, since complete and permanent free entry for Commonwealth temperate foodstuffs would be inconsistent with the common agricultural policy of the EEC, we would have to seek special arrangements which would serve to mitigate the damage which some Commonwealth countries, notably Canada, Australia and New Zealand, were bound to suffer.
THE COMMONWEALTH SECRETARY said that the United Kingdom must carry out in full its specific short-term commitments to Commonwealth countries. There seemed to be a reasonable prospect of ensuring this by special arrangements during the transitional period. The difficulties of preserving the Commonwealth’s traditional rights in the United Kingdom market in the longer term would be considerably greater. He doubted whether we could secure from the Six much more after the transitional period than the review proposed by officials, which would be based on a written provision recognising the value of the Commonwealth to the free world, and the dependence of other Commonwealth countries on trade with the United Kingdom. But the principles on which the review would be carried out would be of great importance and would have to be carefully drafted. There would have to be a clear obligation on the Community to see that the interests of the Commonwealth were safeguarded in the future. It would be difficult for the Commonwealth to accept such a review in place of their present rights in the United Kingdom market, but they might be brought to do so at the end of a long negotiation in which they had seen that we had done our utmost to secure the best possible terms for them. When the Meeting came to consider the line to be taken in the forthcoming discussions with Commonwealth Governments, he would suggest how the possibilities might be put to them at the present stage.
Discussion showed general agreement that provisions which safeguarded Commonwealth interests during the transitional period only would not be acceptable to Commonwealth countries or to public opinion in the United Kingdom. It would be necessary to secure permanent provision for at least some Commonwealth imports into the United Kingdom at broadly the present level of trade. There were many arrangements we could adduce in support of this. Some Commonwealth countries, e.g. New Zealand, were largely dependent on the United Kingdom market. It would not be in the political or the economic interests of the free world to deprive New Zealand of that market and allow them to collapse. The Six themselves had recognised that their common agricultural policy must take account of the Community’s external trade interests, and it would be in the interests of the industrialists of the Six that the earnings of their overseas customers were not unnecessarily depressed.
[ matter omitted ]
The crucial question would be the arrangements made for the Common Market period. What Commonwealth countries would secure as a result of the proposed review could not be left completely open. Our objective should be to secure transitional arrangements which maintained substantially the Commonwealth’s present position, and an understanding that those arrangements would continue except to the extent that it could be shown that changes were essential if the common agricultural and other policies of the Community were not to be frustrated. Even so, any changes would have to be of a kind that did not cause serious damage to the essential interests of Commonwealth countries.
Discussion then turned to the range of products for which we should seek to continue free entry into the United Kingdom. Although we would no doubt wish to start a negotiation on the basis of free entry in full on all commodities, we could not hope to secure this and would have to decide in the course of the negotiations which were the essential interests for which we were prepared to stand. In the case of manufactured goods for Canada, Australia and New Zealand, there seemed no chance of continuing unrestricted free entry. We should, however, try to safeguard the position of the under-developed Commonwealth in the United Kingdom market, and to obtain the best access we could for their exports to the rest of the Common Market. In the case of foodstuffs, our acceptance of the common agricultural policy would necessarily mean the end of unrestricted duty-free entry for the Commonwealth. We would have to try to secure that Commonwealth countries had opportunities for exports (either to the United Kingdom market or to the Common Market as a whole) broadly comparable with those they have enjoyed at present. The method would be changed, but the aim would be to see that producers’ incomes in Commonwealth countries did not diminish.
Even this aim, however, which would be difficult enough to negotiate with the Six, would not meet the aspirations of some of the Commonwealth countries, e.g. New Zealand, who saw in the present free entry arrangements the opportunity for a steady expansion of their exports. But it should be pointed out to them that their access to the United Kingdom market had already suffered as a result of the United Kingdom Government’s support policies3 and that, even if there were no question of our accession to the Common Market, the problems created by unrestricted imports of Commonwealth wheat and lamb might well necessitate some modification in our existing policies.
In the course of further discussion the following additional points were made–
(a) To the extent that we departed from unrestricted duty-free entry for Commonwealth goods, e.g. by the imposition of a levy on Australian wheat or the creation of reverse preferences against Canadian manufactured goods, we should be going back on our undertakings under the Ottawa agreements. The counterpart to these were the preferences we enjoyed in Commonwealth markets and we must expect to see them reduced or removed altogether.
(b) One way of safeguarding the Commonwealth position in the United Kingdom market would be to enter into bulk contracts, e.g. for Australian wheat. Although this would involve a return to State trading and in some cases the end of free markets, bulk purchase agreements with Commonwealth countries might not be unattractive politically.
(c) Third countries (e.g. the United States and Iron Curtain countries) would suffer most from a change in our traditional policy of free entry for foodstuffs. Where our trade was on a bilateral basis, United Kingdom exports would suffer. And there would be strong opposition from the United States to any attempt on our part to secure a preferential position for Commonwealth foodstuffs in the Common Market.
The Meeting–
(1) Agreed that, in any negotiation to accede to the Treaty of Rome, the United Kingdom should seek arrangements which–
(i) in the transitional period, would permit exports to the United Kingdom of Commonwealth goods of major significance (with the possible exception of manufactured goods from the developed countries of the Commonwealth) to be maintained at substantially the same levels as at present;
(ii) in the Common Market period, would continue unchanged except to the extent that it could be shown that changes (a) were necessary in order not to frustrate the purposes of the Community, and (b) would not damage the essential interests of Commonwealth countries.
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THE COMMONWEALTH SECRETARY said that the draft prepared by officials went further than he proposed to go in discussion with Commonwealth Governments. It would be fatal to try to get the agreement of Commonwealth Governments now as to what they would be prepared to accept if we acceded to the Treaty of Rome. After presenting to them the political case for accession, we should seek to get their views on what were the essential interests to be protected. We should not ask them to define the limits to any concessions or arrangements which might be made. This could only emerge in the course of negotiations. We should, in effect, ask them not to object to our exploring the possibilities by means of negotiation.
Discussion showed general agreement with this view. If we were to expose now what we thought we might reasonably secure in the negotiations, we should run the risk of seriously weakening our bargaining position. Moreover, if we tried to get the Commonwealth to agree to accept what we now thought might eventually be negotiated, we should risk doing serious damage to Commonwealth relations while there was still no assurance that we might negotiate satisfactory arrangements with the Six.
At the same time, it was important not to set the hopes of Commonwealth countries too high. They should be warned of the very serious difficulties in the way of continuing free entry for manufactured goods. In the case of foodstuffs it should be explained to them that it would probably be impossible to reconcile their existing unrestricted free entry with our acceptance of a common agricultural policy, but that we should aim to safeguard their position in the United Kingdom market by other means. Against this background, Commonwealth Governments would be asked to state what were their essential interests and how they considered they might be preserved.
In putting this to Commonwealth Governments, Ministers would have to say that the United Kingdom Government had not been able to make an assessment of what might be secured from the EEC. They had now formed the view that this could not be done without entering into negotiations. They wished to secure the agreement of Commonwealth countries to our doing so as the only way of finding out what arrangements we could get, and on the basis that no Government would be asked to commit itself until the outline of a possible agreement had emerged. Whether the negotiations with the EEC succeeded or not, it now seemed essential to enter into them. It would not be politically possible to announce, without negotiating, that in our judgment we could not get suitable terms. It was therefore now our intention to apply to accede to the Treaty of Rome. But we intended to carry through the negotiations only with the fullest regard for Commonwealth interests. We therefore wanted to know what their essential interests were, and would continue to keep in the closest touch with them throughout.
Summing up, THE PRIME MINISTER said that the first task was to bring Commonwealth Governments to accept the broad political and economic case for our joining the EEC. United Kingdom Ministers should tell them that it was now our intention to apply to accede to the Treaty of Rome in order to discover in the only practical way, by negotiation, what safeguards we could secure for Commonwealth trade. We wanted their agreement to our entering into negotiations and wanted them to tell us what were their essential interests which had to be safeguarded. It would be our intention to have the closest possible consultation with them throughout the negotiations.
Before United Kingdom Ministers went on their Commonwealth visits4 he would put before the Cabinet a summary of the line to be taken in discussions with Commonwealth Governments. He would also give some thought to the form of a statement to be made in parliament after the return of these Ministers from the Commonwealth.
The Meeting–
- Took note that the Prime Minister would circulate to the Cabinet a summary of the line to be taken in discussions with Commonwealth Governments.
- Took note that the Prime Minister would consider the terms of a statement to be made in Parliament after the return of Ministers from the Commonwealth.
1 Attended by Macmillan, Butler, Sandys, Lloyd, Macleod, Thorneycroft, Maudling, Soames and Heath.
2 Document 135.
3 That is, subsidies paid to UK farmers.
4 See Document 134 where Macmillan informs Menzies of the decision to despatch Duncan Sandys to visit Canberra in July 1961. Macmillan sent similar messages to the prime ministers of Canada and New Zealand, which were also included on Sandys’ itinerary. Other senior ministers were sent abroad to discuss the EEC problem with the remaining Commonwealth countries.
[UKNA: CAB 134/1821]