London, 18 April 1962
Confidential
Britain, Australia and the European Economic Community
Mr Sandys opened the discussion by saying that it was clear that the problems involved by Australia’s wheat trade would not be solved during the present talks. However, they had been a most valuable analysis of the position and had brought about a better understanding, he hoped, on both sides. Certainly British Ministers were better acquainted with the Australian position and Mr McEwen’s arguments had made a profound impact upon them.
2. Summing up the British position, Mr Sandys said that British Ministers understood that Australia was not satisfied with the working of the 1957 Agreement and would like it to be accepted as the basis for any future arrangements. (Here Mr McEwen dissented, on the ground that what Australia wanted was something like the intention of the 1957 Agreement and not the de facto result of it).
3. Mr Sandys said that British Ministers could not agree to take comprehensive action against all subsidized wheat. Too many countries were involved in subsidizing wheat, and the British balance of payments, which we were struggling to maintain and on which the strength of sterling depended, was too important.
4. Nevertheless, the British Government recognised that Australia had a genuine problem. The British Government would think about this, and would like to be able to discuss it with Dr Westerman while he was in London, with a view to finding means of guarding Australia against disruption of the wheat market by unfair subsidization, which was not at the same time disastrous for our balance of payments. We would then put proposals to Mr McEwen in Canberra.
5. The immediate issue was what Dr Westerman and the British representatives should say in Brussels while this was being worked out.
6. The British Government thought it would be difficult to persuade the Six to accept as a starting point anything other than the present position as it had worked out since 1957. Despite that, they were prepared to accept that the negotiations should be started on the basis that Australia had a reasonable right to send 750,000 tons of wheat a year. They were prepared for Dr Westerman to say this in his statement and we would support him although we were not sure that the arguments in favour of doing this were good. We understood that Dr Westerman might indicate that he realized that the Six were expecting to expand their trade in Britain, but we were not sure whether he would say that Australia would be prepared to accept a lower figure than 750,000. He hoped, however, that to avoid the appearance of differences between Britain and Australia, Dr Westerman would avoid a precise reference to prices. We would be happy for him to say that Australia would expect to be protected against the disruption of the market by the subsidization of wheat on a large scale. He might ask the Six how they proposed to prevent this and open up discussion in such a way as to put the ball in the Six’s court and to get a better idea of how they proposed to operate their levy system.
7. The British representatives would be prepared to support Dr Westerman on quantity. They would also say that they would like to discuss with the Six how disruption by dumping could be prevented.
8. Mr Sandys said, however, that he must emphasize that anything on the lines of the Baumgartner plan1 would be unacceptable to Britain on balance of payments grounds and he urged that the Australian Government should avoid identifying themselves with it, since, if they did, we should then be obliged to dissociate ourselves from them on this matter. We hoped that Dr Westerman could say that the Baumgartner plan would pose difficulties for the big importers. Both Australian and British representatives might be prepared to say that they should welcome the exploration of the problems with the Six.
9. Mr McEwen said that it should be remembered that Dr Westerman would not have a great deal of time to continue discussions in London. As to the suggestion that he should take a given line in the first round of his talks, what chance was there of his having a further discussion? Would the British Government support the idea that Australia should have further opportunities of addressing the Six? If Dr Westerman’s presentation was to be a once-and-for-all opportunity he could not refrain from stating Australia’s problem as a whole. (The Lord Privy Seal interjected that we had it in mind to await developments on this point).
10. As to the Baumgartner plan, although Australia was not likely to subscribe to it in detail, it would be impossible for him to agree that he could not subscribe to it generally. The trouble was that Britain and Australia were in fundamentally different positions. Britain wanted to get the cheapest food and raw materials she could, Australia wanted to get a decent return for her products. As to further discussions with Dr Westerman, Mr McEwen reminded Mr Sandys that he, the Minister, was the person with whom to discuss matters of policy.
11. Mr Butler said he had listened to the exchanges and thought that what Mr McEwen said was unreasonable. He thought that we could begin discussions with the Six by seeking to examine with them means of avoiding disruption. As to the Baumgartner plan, the balance of payments problem was a gigantic one for us; on that point we and the Australians certainly disagreed but for the rest we could surely take a common line. Mr McEwen had admitted that the figure of 750,000 tons was only a starting point.
12. Mr McEwen said that he did not regard the Baumgartner plan as necessitating the establishment of a wheat price at French levels. That would ease the balance of payments difficulty for Britain. Nor could he concede that Britain’s balance of payments was so bad that she had to accept dumped wheat. Mr Sandys had said that Britain was not against world arrangements but the fact was that Britain would not agree to unreasonable prices. Mr Sandys said that the problem turned on how far Dr Westerman felt he had to go into a specific solution at this first presentation. Surely it was possible to get down to discussion with the Six without departing from common ground. Mr Butler emphasized that the British Government was altering its position from the one it had adopted at the beginning of Mr McEwen’s discussions. The British Government had more faith in the operation of the levy system in the Common Market than the Australian Government had. The Australian Government wanted that system adapted to guard against the disruption of the market by subsidized wheat and we should now be prepared to look into this and see ifwe could devise measures to meet Australia’s concern.
13. Mr McEwen said the words of the Agreement had not turned out to mean what he thought they meant. As to the present problem, he would feel happier if the British Government were willing to say, not that we should all examine means of achieving the desired end with regard to disruption but that Britain would try to induce the Six to agree to some appropriate measures. He did not want to weaken Britain’s bond in the negotiations but he was not free to suppress differences if they existed. One did not sell a policy by asking questions but by trying to get the Six to accept measures to avoid disruption. Mr Butler said that Ministers needed time to consult their colleagues. These were very important and serious talks. It was agreed that Dr Westerman should speak to the Six as suggested, and that Britain would then take up with the Six the method of avoiding disruption.
14. Mr Sandys said that the British Government had a number of ideas they would explore, though it would be premature to put them forward at the moment. They were not happy about Mr McEwen’s proposal for tackling this problem (e.g. by pegging the price of Australian wheat to French wheat) but Mr Sandys did not want to say there was no light at the end of the tunnel.
15. Dr Westerman said that in his presentation he had in mind to bring out that Australia had certain rights under the Anglo-Australian Trade Agreement and under the Ottawa Agreement for the unrestricted duty free entry of wheat. Moreover she had certain rights deriving from Article 12 of the 1957 Agreement regarding protection from dumping, and there was nothing to suggest that this did not apply to wheat. He would like to say that the United Kingdom Government accepted that in the light of their agreements they would agree that they would not want to see their entry into the Common Market producing a situation which prevented them from seeing that these obligations were maintained.
16. Mr Sandys said he thought it would be better if Dr Westerman confined himself to stating Australia’s position in terms in which the British representatives could support her, and leave the British representatives to state the British Government’s position.
17. Dr Westerman said that the measures which had been taken against the dumping of butter on the United Kingdom market had cost the British Government something of the order of ꌔ million. An arrangement could be devised which would cost no more and would protect Australia’s interests; but no arrangement could be devised which would cost the British Government nothing.
18. Mr Soames enquired whether, if the final solution gave Australia a sale of 650,000 tons at ꌥ per ton for, say, five years, Mr McEwen would regard this as a comparable outlet.
19. Mr McEwen said he would not. He required either freedom from any subsidized competition or an arrangement whereby Australian wheat was pegged to some anchor. One suggestion was that the anchor should be the target price inside the Community minus X, X being a figure for negotiation. As to the quantity, he proposed to ask for 750,000 tons, but he expected to be beaten back from that. He did not however want to be beaten back from a starting point of 650,000 tons.
20. There followed some discussion of what Mr McEwen would say in public about the present talks. Mr McEwen pointed out that Mr Menzies had committed him to reporting to Parliament in the week following Dr Westerman’s presentation viz. the week beginning 1st May. He could not say that he was satisfied with what the British Government were aiming for on what he had so far been told. He knew that they could not promise to secure Australia’s interests in the Common Market but they could promise to try. He had not been given such a promise in unequivocal terms. Mr Sandys said that Mr McEwen had such an undertaking. Of course the British Government were going to try to find a solution which would protect Australia against extreme forms of dumping.
21. Mr Heath pointed out that essentially the Australian price problem was irrelevant to the Common Market problem. It would be an enormous negotiating task to try to improve Australia’s position when our whole basis of approach to the negotiations was on a basis of securing comparable outlets.
22. Mr McEwen said he recognised that the avoidance of dumping would mean a burden on the British balance of payments. He would be satisfied if the British Government said that they were prepared to try to relieve Australia by assuming some of the cost consequences of avoiding a price based on subsidies. In the Australian Parliament he would not get away with vague assurances that the British understood Australia’s position, or that they were trying their best. If he himself had more confidence, that would be different, but he was troubled by the fact that after all these weeks, with the whole British Government machine to consider the matter, British Ministers were still saying that they did not know what the solution was.
23. Mr Sandys emphasized that the British Government were asking Mr McEwen to have a little more confidence. Mr McEwen’s arguments had made a considerable impact on them and they felt that there was a problem here for them to think about afresh. He asked Mr McEwen not to damage their position by public statements while they were thinking what they could do to help Australia. They thought that it was vital for Britain to enter the Common Market but they were not prepared to face a situation where it could be said that Australia’s vital interests had been sacrificed.
24. Dr Westerman said that he would like to emphasize that, although this meeting had been concerned with wheat, officials had had full and useful talks on other items on which they had reached a full understanding; it was possible that differences might arise in the light of developments, but at the moment there was no serious disagreement.
25. Mr McEwen said that he recognised that some of his concern had been transferred to British Ministers, and he gave an assurance that he would not speak in any mischievous manner. Mr Sandys said that British Ministers regarded the talks as having been extremely valuable, and he hoped that it could be said that they had been useful and constructive. They had preferred to say less as to what they were prepared to do, rather than to let Mr McEwen return to Australia with a misunderstanding of what he had been promised. They had to get their lines clear. Mr McEwen thanked the British for their support in getting Dr Westerman the right to speak at Brussels. He hoped that this presentation would be fruitful and that Britain would help if necessary to secure further hearings for the Australian representative. There was general agreement on C.A.P. items: as to factory goods, he preserved a faint hope that something could be done to help Australia’s exports. The British must do the best they could. As to wheat, he did not feel that it was a major hurdle in Anglo-Australian relations so long as British Ministers could take the policy decision that they were prepared to face the cost consequences of an arrangement to protect Australian wheat from subsidized competition, up to a reasonable quantity.
26. Mr McEwen then took his leave.
1 See note to Document 172.
[UKNA: DO 159/58]