London, 21 March 1962
Confidential
Mr McEwen said that the Australian Government had always wished to be co-operative over the British negotiations with the European Economic Community. As they had made clear, even from before the British decision to seek membership, they saw real advantages in Britain having a closer relationship with Europe—provided that direct Australian interests were not too badly damaged in the process. They had always been realistic over what arrangements might be made to protect them and had not deluded themselves with dreams of continued unrestricted free entry. They attached great importance to really thorough and frank consultation over what could be secured and how.
2. Mr McEwen explained that he had been anxious to see Mr Heath before the ministerial meeting in Brussels on March 22nd, in order to ensure that Mr Heath fully appreciated the importance the Australian Government attached to being able to speak in the negotiations on matters concerning Australia. They believed they knew more than anyone else could what their interests were. The whole Australian community was fearful of the outcome of the negotiations, and the Government wished to be clearly seen to have had proper opportunities to put their case at the table. They had never sought to participate at the top political level.
3. Mr McEwen mentioned at this point that, although he had been able to see everyone he wanted to in Washington (including the President, Mr Dillon, Mr Ball, Mr Hodges and Mr Bundy), he had been disappointed by their failure to appreciate the actual nature and importance of Australian interests.
4. He went on to say that he was not asking that at the meeting in Brussels on 22nd March the ministers should formally approve an Australian right to attend Deputies’ meetings, nor that the matter should be approached on grounds of high principle. But he hoped that nothing would be done that would inhibit the Deputies from hearing an Australian exposition of Australian interests—probably from Dr Westerman—and later being free to invite Australian representatives to attend further meetings when matters of Australian concern were under discussion.
5. Mr McEwen added that there was no real danger of this leading to ‘mass meetings’: for example, only Australia and New Zealand had important interests in dairy products; only Australia and Canada in wheat; only Australia (of the independent Commonwealth countries) in sugar; only Australia in dried vine fruits.
6. Mr Heath explained that, while there had been differences of view between the British and Australian Governments over the timing of putting the request to the Six, the British had throughout supported the Australians on this. At the Brussels meeting on February 22nd it was clear that the Six found the request embarrassing.2 The Germans had been helpful, and (within limits) the Belgians; the Dutch and Italians and the Commission had been opposed. The Six had suggested compromises, which Mr Heath had not felt able to accept; the matter had then been referred to the Deputies, whose recommendation would be considered on 22nd March. He hoped that on 22nd March the ministers would agree that an Australian representative should make a full statement of Australian interests to the Deputies, and leave it open to the Deputies Working Party to invite further Australian participation subsequently if they thought it useful. In that way, Australian participation might grow naturally, rather as the part played in the negotiations by the European Commission had grown through force of circumstances.
7. But it must be recognised that the Six were concerned over the effects of establishing such a precedent. The Indians had already indicated that they would probably wish to follow suit. The Canadians and New Zealanders did not wish to, but domestic pressures on them might build up if Australia got the opportunity that was being sought. There might be others—the nil duties list of items and the question of association affected many Commonwealth countries. Non-Commonwealth countries were also pressing for the opportunity to take part, and the Six saw difficulty (though the British did not) in distinguishing between the Commonwealth and the rest.
8. Mr McEwen agreed that the meeting on 22nd March should not be pressed to approve the Australian request formally in full; but he hoped they would leave the Deputies free to fulfil it in practice—it would not be satisfactory to have it agreed that Dr Westerman could make a single exposition and nothing further. Mr Heath asked whether Mr McEwen wished Dr Westerman to be present at all Deputies’ meetings at which matters of interest to Australia were being discussed. Mr McEwen said he did wish that. Mr Heath replied that it would be very difficult to persuade the Six to agree. The Deputies’ idea was to leave the way open to themselves to call the Australian representative in when they thought it would be useful. The Six would consider that Mr McEwen’s wish opened the door to too many others.
9. Mr Heath warned Mr McEwen that when Dr Westerman had made his statement the representatives of the Six would no doubt respond politely before he left the room, but their real reactions would probably only emerge later. It would naturally be preferable for him to learn their real reactions direct rather than through the British. Mr McEwen said that the Six’s reactions to Dr Westerman’s initial presentation would be in general terms; later, on particular items, the Australian representatives (there might be others than Dr Westerman on some items) should be able to secure more detailed reactions. He thought it quite wrong that the Six should purport to judge whether the arrangements that were made would give adequate protection to Australian interests without hearing an Australian spokesman. Mr Heath pointed out that the Six’s prime concern was not with the adequacy of arrangements to protect Commonwealth interests, but to ensure that those arrangements did not derogate too far from the Treaty. The British aim was of course to get as much protection for the Commonwealth as possible. Mr McEwen commented that nevertheless the Six could not ignore the consequences of their decisions, or their effects on third countries like Australia or Uruguay. Mr Heath agreed and recalled that he had made this point in his Paris statement of October 10th.
10. Mr Heath said that one risk involved in Australian participation, especially if it led to the presence of other governments’ representatives also, was that any among the Six who wished to impede the negotiations could exploit such participation as a means to protract the negotiations. The continuation of the present strains would be damaging to the Commonwealth as a whole, and such exploitation must be guarded against. Another danger was psychological. Some of the Six still seemed to suppose that the British were trying to take all the Commonwealth into the EEC with them and thus to destroy it. Australian participation might be exploited as evidence of the impossibility of fitting Britain into the EEC because of the Commonwealth connection. Care would be necessary to avoid strengthening this myth. Mr McEwen agreed, but repeated that it would be desirable to spend a little extra time to ensure that ‘the Brazils of this world’ did not feel brushed aside.
11. Mr Heath said the British could not have fought harder in defence of Commonwealth interests. The Six now wanted practical suggestions. Mr McEwen would probably be told in Europe that the Six could not understand why the British had not got down to brass tacks. Mr McEwen said he agreed that the broad British statements had been sound on the Commonwealth. He was not in a position at present to assess the more precise British ideas in detail. They had now received the recent commodity notes, specially that on wheat. They had been pressed for very hurried comments. A couple of days was not long enough for effective consultation. He did not feel that the Australians had been adequately consulted as British thinking developed over the months after the September consultations.
12. Mr Heath said that the wheat paper, and the others, were on lines covered in the September consultations, though it might have been sharpened in the process of reduction to reasonable length on paper. Dr Westerman replied that in September officials had set up a number of alternative courses from which a satisfactory one might be chosen. After that there had been no further consultation regarding what method should be selected from that range of possibilities. Moreover, the wheat paper was unclear on various points, and the question of the adequacy of the proposed arrangements depended on the exact meaning of certain phrases. Mr McEwen added that he had only seen the paper since his arrival in London. He could not tell from it what the British objective was. There were words in it that might mean something satisfactory or something very frightening. The notice had been very short. Mr Heath said he would check whether British ideas had become firmer since the September consultations. But it would not be wise to put forward definite proposals too early in the negotiations. The right tactic was to make increasingly specific proposals as the negotiations proceeded—like the narrowing neck of a funnel.
13. Mr McEwen said what he wanted was to know what the British actually had in mind, especially on soft wheat (though the British must not suppose that an accommodation on wheat alone would satisfy Australia). He rehearsed the history—Britain leaving the International Wheat Agreement and eventually rejoining it; the hard fight over wheat at the time of the 1957 Trade Agreement negotiations; and most recently Britain ‘kicking the GATT Conference out of the room’.3 And now he had been given this paper to which he could not attach any precise meaning. What was the real British intention? What did they mean by ‘comparable outlets’ or ‘comparable opportunities’? Was it to be separate country quotas? Or a global quota, resulting in cut-throat competition between suppliers on price? What was intended on prices?
14. Mr Heath said that it would be necessary to find out what the Six would be prepared to agree to. So far the British had stated their claims high, and for eternity. The Six argued that this was unreasonable and pointed out that the British had never given such perpetual guarantees in their separate agreements. The details could only be worked out as it became possible to judge what the Six would accept. For example, the draft protocol proposed a Community approach to the problem; the Six might reject this and the next position would be a purely British approach. The specific proposals to be made would certainly be a matter for consultation with the Australians. Mr McEwen said that, unless the Australians knew what the British objectives actually were on wheat, consultation could not be effective. Would the British disclose them? Mr Heath assured him that they would do so, together with their assessments from time to time of what could realistically be expected to be secured.
15. Mr McEwen said that he was also surprised and concerned over the British proposals on industrial goods. In September Dr Westerman had suggested the ‘basket quotas’ approach.4 The British had seemed interested in it and had discussed it fully. Now, without further warning, they had swung all the way from claiming unrestricted free access to proposing to put forward a scheme resulting in the eventual full application of the common tariff. The Australian Government were in danger of serious embarrassment over this with their industries; they had agreed that representatives of industry should go to Brussels so as to be available for consultation with the Australian Government representatives there. Mr Heath replied that the British proposal on industrial goods had not been given to the Six; it had been given to the Commonwealth Governments concerned so that they could state their views on it. The British judgement in the light of indications received of the Six’s thinking, was that this was the best way to proceed; but they were consulting the Commonwealth countries concerned.
As Mr Heath had to leave at this point for another meeting, it was agreed to resume discussion at 2.45 p.m. The following paragraphs record what then took place.
16. Reverting to the question of industrial goods Mr Heath explained that the Six were preparing a paper setting out their proposals. We did not know their exact nature, but from what we did know it was clear that they would be much less favourable than our own suggestion. Our judgement was that it would be best to put our own suggestion forward in the negotiations but before deciding to do so we wanted Commonwealth Governments’ views. He emphasised that the negotiations were not between seven distinct parties, but between six on one side and one on the other. When the Six were not all of one mind their tendency was to settle for the Highest Common Factor acceptable to all. We saw tactical advantage in these circumstances in putting forward suggestions to which they would have to react.
17. Mr McEwen drew attention to the modest total value of the trade in question. He said that the Australians had never thought in terms of our being able to secure permanent and unrestricted maintenance of free entry. Accordingly they had advanced Dr Westerman’s proposal for ‘basket quotas’. They had no great objection to our talking about unlimited free entry to the Six as an opening move if we wished to, though it was always quite unrealistic. But then we had swung right across to abandoning duty free entry altogether after a few years’ time. We had not given the idea of basket quotas a run in the negotiations. Nor had we given the Australians proper opportunity for consultations about the progress of our own thinking on the subject. As a result he was now embarrassed over what to say to Australian industries about the representatives whom he had agreed they should send to Brussels.
18. Mr McEwen went on to explain that […] he regarded consultation between officials as perfectly real consultation. What was disturbing him was the evidence that we had not kept his officials fully in touch with our thinking in the formative stage.
19. In particular, he had been much concerned to learn from Dr Westerman on his arrival in London that there was in our view no certainty that the Six would accept a distinction between the treatment of industrial manufactures and that of processed foodstuffs, such as canned or dried fruits. He hoped we realised that this would be a very sore spot indeed for Australia, and that we would keep them fully in the picture of what we believed might be manageable, and let Dr Westerman argue it out with British officials.
20. Dr Westerman said he had discussed these matters with Sir Frank Lee at lunch. He gathered that our tactic had been to put in an unrealistically high opening demand (perhaps sometimes under Canadian pressure), and then when the Six turned us down to say we would revert to the matter later. Quite apart from the fact that, according to what he had been told in Europe, the Six regarded this as an unproductive approach, he urged that for us to move in one jump from claiming the continuance of unrestricted free entry all the way to accepting the application of the common tariff (subject to some delay in the steps towards it) made it difficult for the Australians to be constructive or helpful. And it was certainly embarrassing to the Australian Government in their relations with industry.
21. Mr Heath replied that the reason for the delay in settling some individual sectors of the negotiations was that we were anxious to avoid a piecemeal operation, and wanted to be able to see the shape of a fairly complete picture before settling individual questions. The Six’s long delays on agriculture had made this difficult, and we were at present concentrating on bringing agriculture along to catch up the rest. Mr McEwen said he recognised that, but felt that individual questions could be taken further before being dropped. Mr Heath said that no questions had been dropped.
22. Dr Westerman said that the Australian point was that if we would work frankly with them they believed they could help to devise compromise solutions that would be acceptable to the Six. Mr McEwen repeated that the Australian attitude was thoroughly realistic. He would like to feel that we trusted them. We could certainly rely on them to safeguard our confidences. But at present he did not feel that they were being allowed to share our thinking. If we wished to treat the Australian Government as opponents, well and good; but he would like to know.
23. Mr Heath said we certainly did not look on them as opponents. Relations between ourselves and them were excellent in both London and Brussels. He believed that they were being kept informed of proceedings in the negotiations and of the resulting progress of our own thinking. We were not withholding our ideas from them. We ourselves were working under high pressure at high speed, but once our ideas were formulated we let the Australians have them. He was concerned over how to keep up the momentum of the negotiations once questions of detail were reached, e.g. over cereals. It would only be possible if the Commonwealth really co-operated.
24. In reply to the question about the time-table, Mr Heath said that we could not have the negotiations dragging on indefinitely. They must be brought to a head in a reasonable time. He hoped the back of the work could be broken by the summer holidays, to avoid the delay that would ensue during August and early September. A British domestic problem arose over what must be settled before Parliament was consulted and what could be sorted out later. In the shorter term, he did not expect the 22nd March meeting to produce much of substance; procedural questions to be dealt with included Australian participation, the chairmanship and the future timetable. He expected that the ministers would meet again shortly before or after Easter so that the two sides could review the positions that had been reached on the various questions. Thereafter they would have to decide how to reach the ‘crunch’ and agree on solutions. He hoped that by July it would be possible to see a broad picture and assess whether overall agreement was possible or not. There might be outstanding points and some might be of real importance. These might then be thrashed out at a continuous and lengthy ministerial meeting. After that might come a Prime Ministers’ meeting, the Conservative Party Conference, a major debate in Parliament and so on.
25. Mr McEwen said that Mr Diefenbaker was certainly set on having a Prime Ministers’ Meeting.5 It had better not be so late in the day that he would consider it had only been convened to announce the British decision. He himself knew that British ministers thought it would be a mistake to call a meeting before there was any concrete proposition to discuss, but his own view was that it would be better not to hold a meeting at all than to hold it too late, when matters were too firm for the meeting to have any effect on them. What advice ought he to give Mr Menzies on timing?
26. Mr Heath said that he could not give any certain assessment on this. He had always supposed that the Prime Ministers would want to know the shape of what we could secure, and then discuss whether or not they could live with it. This would mean rather a late meeting. It might be possible to leave some questions still unsettled, but it would be difficult to go back and reopen the negotiations in order, for example, to get more financial aid for the African countries or a greater reduction in the duty on newsprint. Mr McEwen said that the Prime Ministers should address themselves to the situation as a whole, not to details of that kind. Mr Heath agreed that they would want to consider the outcome as a whole, and its repercussions on the Commonwealth connection as a whole. The question was to find the right time for that to be done. Sir Eric Harrison suggested that some Prime Ministers might be over-inclined to bring up points of detail. Mr Heath replied that the answer to that was to have had full preparatory consultation. Did Mr McEwen want him to do more on that head? He would do anything he could.
27. Mr McEwen said that he could only speak for Australia. They had a broader range of problems than any other Commonwealth country, and he believed a more constructive approach. They naturally wanted to protect their own interests, but they would not play tricks. He would like to feel that the British were ready to keep the Australian Government, e.g. through Dr Westerman, fully informed of our thinking as it progressed. We could rely on them to safeguard our confidences.
[ matter omitted ]
29. Reverting to wheat, Mr McEwen asked whether Mr Heath could not give any clue to what we believed we could reasonably hope to get for Australia—neither our opening bid nor our last fall-back position, but the sort ofthing we regarded as a realistic target. Could we, for example, stick to the 750,000 tons provided for in the Trade Agreement? (Mr McEwen denied that this was only a ‘best endeavours’ clause, claiming that the agreed minute was a definite commitment. He also said that we had of late been discharging our obligation pretty well.) Mr Heath asked whether he meant for ever. Mr McEwen replied that ‘for ever’ was too long a period to consider. But for the EEC negotiations the Australians would be at us to renegotiate the trade agreement and to continue the 750,000 tons clause for another five years. No doubt we should have views on the quantity. He thought that we ought to be aiming in the EEC negotiations at whatever quantity we would have been prepared to agree to in trade agreement negotiations. But in any case surely someone in London must know what our real target was. He was unable to understand why he could not be told what we really thought about this.
30. Mr Heath said he thought Mr McEwen’s suggested comparison with what we might be prepared to agree to in trade agreement negotiations was a reasonable and constructive one. But what we were at present seeking to do was to get the Six to agree to our general approach before getting down to figures. There were still unknown quantities on the Six’s side affecting the figures that could be aimed at. Mr McEwen said he could understand if we said we were aiming at 750,000 tons; or again, if we said that the French wanted to supply more of our needs and that the Australian sales would therefore be reduced—though he would want to argue that out with us. But he had been quite unable in his talks with British ministers to get any serious indication of our targets at all. He did not see how we could negotiate without having a target in mind.
31. Mr Heath repeated that the negotiations had not reached that stage. We were still seeking the Six’s agreement to the principle oflasting assurances for Commonwealth interests. Perhaps Mr McEwen looked on this as an unrealistic aim. Mr McEwen said that it might be a good negotiation tactic, but he hoped we were not negotiating points with the Australians. Mr Heath went on to explain that later on, after consultation with the Australian Government, we should be able to stake specific claims; and then to consult with them further over any changes. Dr Westerman said that once Sir Eric Roll put these ideas forward, the Six were bound to cross examine him on the meaning of comparable outlets’ and ‘competitive prices’. Surely he would have to have some target figures in mind. Mr Heath said that our object was to protect Commonwealth interests against infringement by EEC domestic operations.
32. Mr McEwen asked about the US reaction if we aimed at protecting Commonwealth interests by means of preferences within the levy system. Mr Heath said they might have to be asked whether they really wanted us to join the EEC or not.
33. On price, Mr McEwen asked how this would be determined, suppose the French did want to grab part of Australia’s market in Britain (the French talked more sweetly than that to the Australians themselves). Did Australia just have to face a cut-throat price war with other outside suppliers? Restrictions on access would be bad enough, but a price war would make it much worse. Mr Heath suggested that this was the reason for Australian support of the French proposals on cereals in the GATT. Mr McEwen agreed; otherwise the situation would be very difficult for Australia to accept, especially as the consumer would not be benefiting from the low prices the supplier was being paid. He sought open-minded discussion with the British on this question, for example between Sir Eric Roll and Dr Westerman. He could not go back to Australia and say everything was fine, because it was not. But he did not want to have to go back and say he was disappointed in us.
34. Mr Heath said that full discussions would be possible when Mr McEwen was back from Europe (returning to London on April 12th).
[ matter omitted ]
1 Also attended by Harrison, Westerman and James R.A. Bottomley from the CRO. McEwen had arrived in London on 20 March 1962 from North America for an extended period of meetings with British ministers and officials, and a visit to the European capitals.
2 Document 165.
3 McEwen was referring to a proposal put forward in the GATT in December 1961 by the French Minister of Finance and Economic Affairs, Wilfred Baumgartner, to deal with the full gamut of problems arising from world trade in temperate agriculture. The ‘Baumgartner Plan’ sought to replace the existing pattern of international agricultural trade with fixed worldwide commodity agreements, beginning with the all-important problem of wheat and coarse grains. In substance, the French proposed raising world grain prices to a level approximate to the CAP price, adopting an EEC-style levy system for this purpose. This would be accompanied by precise supply and access agreements between the major producing countries of any given item (in the case of wheat, for example, this would include the United States, Canada, Australia, Argentina and the EEC producers). These countries would effectively form a cartel for the disposal of world exports, thereby providing more stable and profitable markets for all producers. The problem of world surpluses would be dealt with by setting up an international body to purchase all unsold produce to be disposed of either as food aid to desperate Third World countries, or at concessional rates to developing countries. The cost of such a programme would be funded by a proportion of the extra income generated by higher food prices, and would therefore fall on Western consumers. The Australian response to the Baumgartner Plan was immediately enthusiastic. Throughout the 1950s, Australia had suffered a stark decline in its terms of trade due to the relative fall in international prices for agricultural commodities. McEwen had for many years decried the poor returns to Australian farmers, and had himself strongly advocated a more active role for the GATT in raising agricultural prices. These cries had generally fallen on deaf ears in the GATT which, in McEwen’s view, was more concerned with raising the living standards of industrial countries. Thus, when the Baumgartner proposal was put forward in the GATT in an attempt to deal with not only the lingering problem of price but also the more immediate problem of market access to the enlarged European Community, McEwen immediately expressed his support. The British, by contrast, in no way shared Australia’s enthusiasm for the Baumgartner proposals. As the world’s largest importer of agricultural foodstuffs, they stood to lose most from a worldwide increase in food prices. At a time when Britain was grappling with severe balance of payments difficulties, any substantial increase in the cost of food imports would impose an intolerable added burden. Thus, when the GATT Cereals Committee met in February 1962 to examine the proposal, the British flatly refused to countenance any solutions based on an artificial rise in world grain prices. In effect, this objection amounted to a veto against any further consideration of the Baumgartner Plan.
4 The idea of ‘basket quotas’ was formulated by the Australian Department of Trade as a means of dealing with a range of items, primarily manufactures, where the volume of trade was too small as a percentage of overall trade to warrant special quota arrangements, but significant enough to cause concerns for producers of those items. The idea was to group these various items into a single category, or ‘basket’, with a single quota to govern all items falling within the basket category. The idea was never given serious consideration in the Brussels negotiations—by their very nature they involved goods of only marginal importance seen from the British and European perspectives.
5 McEwen had met with the Canadian Prime Minister in Ottawa en route from Washington to London.
[UKNA: DO 159/57]