London, 20 July 1962
Secret
Commonwealth Temperate Foodstuffs
The treatment of temperate foodstuffs from the Commonwealth—particularly Canada, Australia and New Zealand—will be the most difficult—and in some ways the most important—issue to be tackled at the Ministerial meeting in Brussels which starts on 24th July. This note deals with the broad approach which we should adopt on this subject at this meeting and discusses the main ingredients of the solution which we should try to secure for the purposes of the vue d’ensemble which we must present to Commonwealth Prime Ministers.
2. The essential tests which any solution must satisfy are, of course, that it should be not merely negotiable with the Six, but also fair and reasonable for the Commonwealth. We cannot expect it to be acceptable to the Commonwealth—nothing short of something like the indefinite maintenance of the status quo would be that—but we must be able to present it to Parliament and public opinion here as an honourable discharge of our undertaking to safeguard essential Commonwealth interests in this field. These are the limits within which we are free to manoeuvre. It will not be easy to reach such a solution, but I believe that it can be done.
3. The Six break the problem down into four inter-locking parts—world-wide commodity agreements, an undertaking by the Community that their future price policy will be reasonable, transitional arrangements on a degressive basis up to 1970 and any remaining problems ofthe common market stage. I will take each of these four parts in turn.
4. There is not a great deal of difference between us and the Six about world-wide agreements. The main point, which they are disputing among themselves, is whether such agreements should cover access. In my view they should, and I would hope to secure a formula which would establish this. It may, however, be easier to secure the reference to access in the declaration on price policy which the Six have already said they are willing to make. In some ways this would be preferable because, whereas a reference to access in the context of international agreements would only bite if and when such agreements had been negotiated, a reference in the context of price policy would apply generally in all circumstances—and without limit of time. For this reason, though I would hope to cover access in both contexts, the price policy context seems to me the more important one to go for.
5. It is on the arrangements to be made for the transitional period until 1970 that we and the Six are at present furthest apart. The two main points at issue are the assurances to be given to the Commonwealth about access and the terms on which they will have to compete. The question of the future of Commonwealth preferences—where these exist also arises in this connection.
6. The Six are not prepared to continue preferences into the Common Market stage on the grounds that this would be discriminating against third countries. They are very worried about the idea of any permanent discrimination against e.g. the USA and Latin America. They are prepared to give the Commonwealth at any rate part of the preference that members will give each other during the transitional period. This however is much less than the preference the Commonwealth now enjoys e.g. for barley. Moreover, they would wish to see the existing Commonwealth preference tapered off or reduced to zero: their own preference is also to disappear over the transitional period.
7. It is clear that the Six will not agree to our joining the Community while retaining a permanent preferential system for the Commonwealth at their expense. There are signs that the Commonwealth are beginning to recognise this for themselves. Our task is to find a middle way between immediate and total abolition of the preferences and the permanent retention of the preferential system.
8. I hope to find this middle way by concentrating on securing fair and reasonable conditions of competition for the Commonwealth in the enlarged Community. This seems one of the essential elements in a square deal for the Commonwealth. Over the transitional period we should phase the existing preference down to reach nil by 1st January, 1970 when the intra-Community preference disappears (any opportunity for negotiating in the GATT for benefits from the USA for the Commonwealth should of course be exploited). This would mean that the Commonwealth would gradually have to give up their existing preference over the Community as well as vis-a-vis third countries, though not necessarily at the same rate.
9. The other main point at issue is access in terms of quantities. The Six seem to envisage no specific arrangements about this. Indeed, they do not accept that there is a real problem here. They maintain that the enlarged Community will continue to be a large net importer, particularly of cereals, and that, provided that they follow a reasonable price policy, as they are ready to declare their intention of doing, there is no need for us to worry about the level of production within the Community, or, by consequence, about the level of imports from the Commonwealth.
10. What they have failed to so far realise is that, whatever may happen in the future, we must secure now an arrangement which we can present to public opinion as a good discharge of the undertakings we have given to protect vital Commonwealth interests.
11. Our objective, therefore, must be to secure the agreement of the Six that we shall not be required to apply quantitative restrictions against the Commonwealth until Commonwealth exports to the United Kingdom in any year have reached traditional levels, e.g. the average of the last three years. This will be difficult to negotiate, partly because the Six will regard it as an unreasonable—and indeed unrealistic attempt to freeze existing patterns of trade, and partly because, if we have such a quantitative arrangement for the Commonwealth, the Germans may revert to their earlier demand for similar arrangements between them and their important overseas markets, e.g. the Argentine. The French are particularly sensitive on this point and fear that it would lead to the break-down of the common agriculture policy which French public opinion regards as the one benefit which makes membership of the Common Market economically worthwhile for France.
12. This again is a matter for negotiation, and it may be that the Six will at best concede a quantitative assurance for a more limited period. In this event we should have to insist on a general ‘insurance clause’ for the Commonwealth to the effect that, if there is a substantial decline in imports from traditional suppliers below traditional levels as a result of the common agricultural policy, the Community will consult with them and take appropriate measures to remedy the decline.
13. Much of the above approach applies only where there is a preference (e.g. coarse grains, dairy products and meat). But some of it applies also to Australian wheat where, although there is no preference, there is the ‘best endeavours clause’ in the Trade Agreement. There is also the possibility—which the Australians may yet revert to—of a long term contract. As regards Canadian wheat, we must secure the provisions for access outlined above, but, as there is no preference, they would not receive the benefit of the intra-Community preference. If the latter operated so as to impair fair and reasonable conditions of competition for Canada, the Six should be prepared to review the situation in consultation with Canada.
14. The above arrangements would also apply mutatis mutandis to dairy products, beef and veal and mutton and lamb. In these cases we must, in addition, try to secure agreement on our basic policy essentials, e.g. about harmonisation of prices within the enlarged Community, as set out in our commodity notes as recently approved by the Ministers primarily concerned. In the case of meat there is also the special obligation to grant Australia and New Zealand unrestricted entry until 1967, and this, of course, we must be able to fulfil. In the case of sugar, we must be able to discharge our contractual obligations under the Commonwealth Sugar Agreement which at present extends to 1969; and to combine the practice of renewing it annually until the Commonwealth Sugar Agreement is subsumed in a world-wide agreement.
15. The French Foreign Minister suggested to me on 17th July that there should be arrangements for annual consultations between the Community and the Commonwealth during the transitional period. This is a valuable idea and I shall make the most that I can out of it.
16. The fourth and last part of the problem is the arrangements for the period after 1970. The Six place great emphasis on world-wide commodity agreements, covering all the main supplying countries, but they recognize that these may not prove negotiable. In this event they are willing to negotiate with those countries—‘and notably those Commonwealth countries’—which are willing to conclude such agreements. This is a further insurance for the Commonwealth against a ‘precipice’ in 1970, but I still do not feel that it is enough. I therefore propose to seek the agreement of the Six that, in the event of commodity agreements proving impracticable—whether world-wide or of more limited geographical coverage—they will be prepared to negotiate Trade Agreements with Canada, Australia and New Zealand on the principle of what the Six have already agreed to do for India, Pakistan and Ceylon. Finally, I shall press for the ‘insurance policy’—with no time limit—referred to above (paragraph 12) providing for remedial action in the event of a substantial decline in trade below levels as a result of the operation of the common agricultural policy.
Conclusion
17. How far the above will be negotiable with the Six, and whether Parliament and public opinion here will regard it as a fair and reasonable deal for the Commonwealth must, of course, be matters of judgement. One thing is certain—that our room to manoeuvre is very narrow indeed and that to try to get significantly more for the Commonwealth than I have outlined above would not be negotiable with the Six.
18. I suggest that early next week we should send a message to the old Commonwealth countries telling them of our general approach to the forthcoming ministerial meeting, and the sort of picture which we expect will emerge in the vue d’ensemble.1
19. In this note I have concentrated on matters of substance. There is also the important question of how we handle this matter, at the Ministerial meeting on 25th July. I will let my colleagues have my ideas on this orally at our meeting on Monday.2
1 Document 194.
2 Document 193.
[UKNA: CAB 134/1515]